UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
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 0-23802
MOTIVEPOWER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 82-0461010
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Reedsdale Street, Pittsburgh, PA 15233
(Address of principal executive offices) (Zip Code)
(412) 237-2250
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No_____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1997
Common stock, $.01 par value 17,602,168
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MOTIVEPOWER INDUSTRIES, INC.
Quarterly Report on Form 10-Q for the
Three and Six Months Ended June 30, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements PAGE
Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 1997 and 1996 3
Consolidated Balance Sheets at June 30, 1997
and December 31, 1996 4
Condensed Consolidated Statements of Cash Flows for the Three and Six
Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 19
Item 3. Defaults upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MOTIVEPOWER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Thousands of dollars except share data)
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ......................... $ 73,813 $ 66,581 $ 143,471 $ 136,236
Cost of sales ..................... (54,498) (53,696) (108,331) (109,565)
------------ ------------ ------------ ------------
Gross profit ...................... 19,315 12,885 35,140 26,671
General and administrative expense (10,039) (7,623) (18,801) (15,847)
------------ ------------ ------------ ------------
Operating income .................. 9,276 5,262 16,339 10,824
Interest income ................... 114 661 303 1,243
Interest expense .................. (1,161) (2,641) (2,466) (5,647)
Other income ...................... 835 765 796 1,428
Foreign exchange (loss) gain ...... (41) 36 (156) 54
------------ ------------ ------------ ------------
Income before income taxes ........ 9,023 4,083 14,816 7,902
Income tax expense ................ (3,614) (1,646) (5,930) (2,881)
------------ ------------ ------------ ------------
Net income ........................ $ 5,409 $ 2,437 $ 8,886 $ 5,021
============ ============ ============ ============
Weighted average shares outstanding 18,356,500 17,562,793 18,205,095 17,562,793
Primary earnings per share ........ $ .29 $ .14 $ .49 $ .29
Weighted average shares outstanding 18,536,820 17,562,793 18,536,820 17,562,793
Fully diluted earnings per share .. $ .29 $ .14 $ .48 $ .29
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
<CAPTION>
MOTIVEPOWER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
At June 30, 1997 and December 31, 1996
(Thousands of dollars except share data)
(Unaudited)
June 30, December 31,
ASSETS 1997 1996
--------- ---------
Current Assets:
<S> <C> <C>
Cash and cash equivalents ............................ $ 11,016 $ 5,236
Receivables from customers:
Billed, net of allowance for doubtful
accounts of $265 and $284, respectively .......... 36,159 25,754
Unbilled .......................................... 1,434 468
Inventories .......................................... 77,874 78,438
Deferred income taxes ................................ 5,527 4,635
Other current assets ................................. 2,296 2,638
--------- ---------
Total current assets ........................... 134,306 117,169
Locomotive lease fleet, net .......................... 1,668 2,083
Property, plant and equipment:
Land .............................................. 1,992 1,737
Buildings and improvements ........................ 33,765 32,679
Machinery and equipment ........................... 56,052 53,211
--------- ---------
Property, plant and equipment - at cost ........... 91,809 87,627
Less - accumulated depreciation ................... (47,066) (43,644)
--------- ---------
Property, plant and equipment - net .................. 44,743 43,983
Underbillings - MPI de Mexico ........................ 23,721 19,561
Deferred income taxes ................................ 13,045 15,348
Goodwill and intangibles ............................. 24,363 24,637
Other ................................................ 11,042 11,263
--------- ---------
Total assets ................................... $ 252,888 $ 234,044
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt .................... $ 9,604 $ 11,626
Accounts payable - trade ............................. 18,314 13,470
Accrued expenses and other current liabilities ....... 34,565 28,236
Income taxes payable ................................. 3,669 1,957
Revolving credit borrowings .......................... -- 22,431
Advances from customers .............................. 2,814 --
--------- ---------
Total current liabilities ...................... 68,966 77,720
Long-term debt ....................................... 36,931 15,535
Commitments and contingencies ........................ 15,007 18,394
Other ................................................ 1,432 1,415
--------- ---------
Total liabilities .............................. 122,336 113,064
--------- ---------
Stockholders' Equity:
Common Stock, par value $.01 per share,
authorized 55,000,000 shares;
issued 17,602,168 shares at June 30, 1997
and 17,562,793 shares at December 31, 1996 ........ 176 176
Additional paid-in capital ........................ 203,320 201,661
Deficit ........................................... (66,742) (75,629)
Cumulative translation adjustments, net of tax .... (5,105) (5,105)
Deferred compensation ............................. (1,097) (123)
--------- ---------
Total stockholders' equity ..................... 130,552 120,980
--------- ---------
Total liabilities and stockholders' equity ........... $ 252,888 $ 234,044
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
<CAPTION>
MOTIVEPOWER INDUSTRIES, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Thousands of dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
Operating Activities
<S> <C> <C> <C> <C>
Net income ........................................................ $ 5,409 $ 2,437 $ 8,886 $ 5,021
-------- -------- -------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation ...................................................... 1,915 2,346 3,366 3,285
Amortization ...................................................... 816 827 1,637 1,707
Receivables from customers ........................................ 2,211 1,178 (11,371) (5,362)
Inventories ....................................................... (1,423) 420 564 4,691
Underbillings - MPI de Mexico ..................................... (3,462) (7,269) (4,160) (5,014)
Accounts payable and accrued expenses ............................. 7,147 7,698 10,589 746
Advances from customers ........................................... -- 10,311 2,814 17,671
Other, net ........................................................ (178) 638 1,763 3,208
-------- -------- -------- --------
Net cash provided by operating activities ......................... 12,435 18,586 14,088 25,953
-------- -------- -------- --------
Investing Activities
Additions to property, plant and equipment ........................ (2,776) (359) (4,126) (1,313)
Proceeds from sale of locomotive lease fleet, net ................. -- 9,917 -- 10,056
Other, net ........................................................ 394 235 238 743
-------- -------- -------- --------
Net cash (used in) provided by investing activities ............... (2,382) 9,793 (3,888) 9,486
-------- -------- -------- --------
Financing Activities
Increase in intangibles ........................................... (341) (82) (1,363) (220)
Net repayments of debt ............................................ (2,310) (31,038) (3,057) 37,100)
-------- -------- -------- --------
Net cash used in financing activities ............................. (2,651) (31,120) (4,420) (37, 320)
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents .............. 7,402 (2,741) 5,780 (1,881)
Cash and cash equivalents at beginning of period .................. 3,614 6,556 5,236 5,696
-------- -------- -------- --------
Cash and cash equivalents at end of period ........................ $ 11,016 $ 3,815 $ 11,016 $ 3,815
======== ======== ======== ========
Supplemental Disclosures of Cash Flow Information
Interest paid ..................................................... $ 1,031 $ 177 $ 1,134 $ 273
Income taxes paid, net ............................................ 1,189 65 2,934 61
</TABLE>
The accompanying notes are an integral part of the financial statements.
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MOTIVEPOWER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements
Basis of Presentation: The financial statements included herein are unaudited.
In the opinion of management, these statements include all adjustments
consisting of only normal, recurring adjustments necessary for a fair
presentation of the financial position of MotivePower Industries, Inc. and
subsidiaries (the "Company") at June 30, 1997 and the results of their
operations and their cash flows for the three and six month periods ended June
30, 1997 and 1996. These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended December 31, 1996 included in Form 10-K. The results of
operations for the six months ended June 30, 1997 are not necessarily indicative
of the results to be expected for the full year.
Certain reclassifications have been made to the 1996 financial statements
to conform to the 1997 presentation.
Earnings Per Share: In February 1997 Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" ("SFAS 128") was issued. SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier adoption is not permitted. The adoption
of SFAS 128 is not expected to materially affect the Company's calculations of
earnings per share and will have no impact on the Company's financial position
or results of operations.
Employee stock options, are considered common stock equivalents and are
reflected in earnings per share calculations when their effect, using the
treasury stock method, is dilutive.
Comprehensive Income: In June 1997 Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130") was issued. SFAS
130 is effective for financial statements issued for periods beginning after
December 15, 1997. The adoption of SFAS 130 will have no impact on the Company's
financial position or results of operations.
Segment Information: In June 1997 Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131") was issued. SFAS 131 is effective for financial
statements issued for periods beginning after December 15, 1997. The Company has
not yet determined the effect of this standard.
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2. Inventories
Inventories consist of the following:
June 30, December 31,
1997 1996
-------- --------
(In thousands)
Raw materials .................. $ 39,853 $ 50,699
Work in progress ............... 22,167 13,912
Finished goods ................. 15,854 13,827
-------- --------
$ 77,874 $ 78,438
======== ========
Approximately $30 million and $34 million of total inventories at June
30, 1997 and December 31, 1996, respectively, were valued on the LIFO cost
method. The excess current replacement cost of these inventories over the stated
LIFO value was $992,000 and $902,000 at June 30, 1997 and December 31, 1996,
respectively. Two of the Company's domestic subsidiaries value inventory on the
LIFO basis.
3. Indebtedness
On February 27, 1997, the Company and a syndicate of lenders led by
Bank of America NT and SA entered into a Second Amended and Restated Credit
Agreement to replace the Company's Restated Agreement with BankAmerica Business
Credit. The facility consists of a $20 million amortizing term loan and a $55
million revolving credit line including a $15 million letter of credit
sub-facility. The entire $75 million facility is for a term of four years and is
collateralized by substantially all of the domestic assets of the Company.
Interest rate spreads charged under the new facility will reset at the end of
each quarter based on the ratio of the Company's quarter-ending debt to trailing
12-month cash flow. Both base rate and LIBOR borrowings are available, at the
Company's discretion. Interest rates range from LIBOR plus 0.5% to LIBOR plus
2.0%, and base rate to base rate plus 1.0%. For the first six months of the
facility, interest rates may not go below LIBOR plus 1.0% for LIBOR-based
borrowings, and the base rate for base rate borrowings.
On May 23, 1997, the Company and a syndicate of lenders led by Bank of
America NT and SA entered into Amendment No.1 to the Second Amended and Restated
Credit Agreement. The amendment increases the limit on the issuance of
performance bonds from $10 million to $30 million, increases the limit on the
issuance of letters of credit in support of performance bonds from $2.5 million
to $10 million and increases the limit on the aggregate amount of letters of
credit from $15 million to $20 million.
4. Commitments and Contingencies
The Company has commitments and performance guarantees arising from
locomotive remanufacturing contracts and maintenance agreements, and warranties
from the sale of new locomotives, remanufactured locomotives and components for
locomotives and engines.
Environmental: The Company is subject to a RCRA Part B Closure Permit (the
"Permit") issued by the Environmental Protection Agency and the Idaho Department
of Health and Welfare, Division of Environmental Quality relating to the
monitoring and treatment of groundwater contamination on, and adjacent to, the
Company's Boise Locomotive facility. In compliance with the Permit, the Company
has drilled wells onsite to retrieve and treat contaminated groundwater, and
onsite and offsite to monitor the amount of hazardous constituents. The Company
has estimated the expected aggregate undiscounted
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costs to be incurred over the next 24 years, adjusted for inflation at 3% per
annum, to be $4.8 million, based on the Permit's Corrective Action Plan, and
$4.4 million for contingent additional Permit compliance requirements related to
off-site groundwater contamination. The discounted liability at June 30, 1997,
using a discount rate of 6.5%, was $2.1 million based on the Permit's Corrective
Action Plan, and $2 million for contingent additional Permit compliance
requirements related to offsite groundwater contamination. The estimated outlays
for each of the five succeeding years from 1997 to 2001 are: $253,000, $260,000,
$268,000, $317,000, and $284,000. The Company was in compliance with the Permit
at December 31, 1996 and June 30, 1997.
Legal Proceedings: In December 1995, Morrison Knudsen, the Company and certain
of Morrison Knudsen's directors and officers were named as defendants in a
complaint (the "Pilarczyk Lawsuit") filed in the United States District Court
for the Northern District of New York by plaintiffs who were principals in
and/or held substantial stock in TMS, Inc. ("TMS"), a New York corporation
acquired by Morrison Knudsen on December 30, 1992. The complaint, which seeks
five million dollars in damages, alleges among other things, violations of
Section 10(b), Rule 10b-5 and Section 20(a) of the Securities Exchange Act of
1934, breach of contract, unjust enrichment, negligent misrepresentation and
common law fraud during Morrison Knudsen's acquisition of TMS in 1992.
Plaintiffs assert that the Company, which was not formed by Morrison Knudsen
until 1993, is fully responsible for the acts of Morrison Knudsen. However, the
actions complained of occurred before the Company was formed and the Company did
not assume such liabilities of Morrison Knudsen. A motion to dismiss, filed in
April 1996 on behalf of all defendants to the Pilarczyk Lawsuit, was granted on
May 19, 1997. On June 10, 1997 plaintiffs appealed the dismissal in the U.S.
District Court, Northern District of New York. The Company with the advice of
outside counsel, believes the causes of action in the Pilarczyk Lawsuit relating
to the Company are without merit. The Company intends to make appropriate
requests to the court to seek to require the plaintiff to pay the Company's
legal fees and costs.
The Company is engaged in a commercial dispute with a former supplier,
Samyoung Machinery Industrial Co. and Samyoung (America), Inc. (collectively,
"Samyoung"). The Company filed suit on April 16, 1996 alleging delivery of
defective product and seeking damages in excess of $1 million. Samyoung denies
that the product was defective and countersued to recover $300,000 under the
contract, and $10 million for trade libel and interference with prospective
economic relationships as a result of the Company allegedly making false
disparaging statements concerning the diesel engine assembly liners to
customers. The Company, with the advice of outside counsel, believes that
Samyoung's claims are without merit, and, to date, no evidence supporting
Samyoung's counterclaims has come to light through the discovery being conducted
by the parties. The Company intends to vigorously prosecute its own claims and
defend against Samyoung's counterclaims.
On June 25, 1997, Theodore E. Nelson ("Nelson"), President and former 51%
owner of Touchstone Company ("Touchstone"), a wholly-owned subsidiary of the
Company which was purchased by M.K. Corporation, the Company's former parent on
February 1, 1994 filed suit, seeking an unspecified amount of damages, against
Touchstone, Inc. (sic), MotivePower Industries, Inc. and Michael Wolf (President
of MotivePower Industries, Inc.) in the Chancery Court of Tennessee, Madison
County, Tennessee. Nelson disputes the amount of bonus or other monies earned by
him under his employment agreement with Touchstone. The complaint lists a
variety of causes of action including civil conspiracy, breach of contract,
breach of duty of good faith and fair dealing, misrepresentation, promissory
fraud, and tortious interference with contract and seeks compensatory, punitive
and treble damages and attorney's fees in unspecified amounts. The Company, with
the advice of outside counsel, believes that Nelson's claims are without merit.
The Company intends to vigorously defend against Nelson's claims. In addition,
because Nelson's employment agreement with Touchstone expires in January 1999,
the Company initiated a management transition program at Touchstone in the
second quarter. Under this program, the Company has added a new vice president
of sales and marketing, and has begun to search for Nelson's successor.
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In the ordinary course of its business, the Company is involved in legal
proceedings incident to the normal conduct of its business, including contract
claims and employee matters.
5. Subsequent Event
On July 24, 1997 Touchstone sold its existing production facilities in
Jackson, Tennessee for $1.1 million and concurrently entered into a short-term
lease of the same facilities through March 1998, at which time a manufacturing
facility currently in the early stages of construction is expected to be
available for occupancy. The sale of the facilities was made at book value.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL
The Company manufactures products for rail and other power-related
industries. Through its subsidiaries, the Company manufactures and distributes
engineered locomotive components; provides locomotive fleet maintenance and
overhauls, and diesel engine overhauls; manufactures new, environmentally
friendly, switcher, commuter and mid-range locomotives up to 4,000 horsepower;
and manufactures components for power, marine and industrial markets.
The Company recorded net income of $5.4 million, or 29 cents per share, on
sales of $73.8 million in the second quarter of 1997 compared to net income of
$2.4 million, or 14 cents per share, on sales of $66.6 million in the second
quarter of 1996. For the six months ended June 30, 1997 the Company recorded net
income of $8.9 million or 49 cents per share, on sales of $143.5 million
compared to net income of $5 million, or 29 cents per share on sales of $136.2
million for the six months ended June 30, 1996. The increase in profits in both
periods of 1997 is the result of higher sales volume, improved gross margins
resulting from cost reductions, productivity improvements and product mix, and
substantially lower corporate interest expense due to debt reduction and lower
financing costs.
As the Company continues to focus on operating improvements, management has
identified the following six growth opportunities for the future: 1) outsourcing
by the railroads as they look to become more efficient in light of the recent
mergers; 2) expanding privatization of the Mexican market and opportunities to
enhance maintenance capabilities in Mexico; 3) international sales targeting
specifically the Pacific Rim, Latin America, Central Europe and the Mid-East for
component parts and original equipment locomotives; 4) new products in
traditional markets and new markets for traditional products as the Company
explores expanded applications of its proven products; 5) alliances with
Original Equipment Manufacturers combining skills to improve both products and
service; and 6) acquisitions that contribute to earnings and complement the
existing product base.
This document contains certain statements regarding the company's goals and
expectations, including statements that suggest the Company will increase
revenues and earnings, and otherwise improve its business operations. Statements
such as these, and other statements that discuss the future of the Company or
the rail industry, are forward-looking statements. The Company's actual results
could differ materially from the results suggested in any forward-looking
statement. Factors that could cause or contribute to these material differences
include, but are not limited to, the following:
--Continued consolidation by U.S. and Canadian railroads, which could
cause them to reduce purchases of goods and services;
--Changes in the Mexican government's railroad privatization efforts;
--A general decline in the U.S. or Mexican economy;
--A decrease in NAFTA rail traffic as measured by revenue ton-miles;
--The company's inability to secure new or retain existing domestic
contracts;
--The company's inability to grow through strategic alliances, joint
ventures or acquisitions.
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RESULTS OF OPERATIONS
The following table sets forth the percentage of sales represented by
certain items in the Company's Consolidated Statements of Operations:
Three Months Six Months
Ended Ended
June 30, June 30,
--------------- ---------------
1997 1996 1997 1996
----- ----- ----- -----
Net sales .............................. 100.0% 100.0% 100.0% 100.0%
Cost of sales .......................... (73.8) (80.6) (75.5) (80.4)
----- ----- ----- -----
Gross profit ........................... 19.4 24.5 19.6 --
26.2
General and administrative expense ..... (13.6) (11.5) (13.1) (11.6)
----- ----- ----- -----
Operating income ....................... 12.6 7.9 11.4 8.0
Interest income ........................ .2 1.0 .2 .9
Interest expense ....................... (1.6) (4.0) (1.7) (4.2)
Other income ........................... 1.1 1.1 .5 1.1
Foreign exchange gain (loss) ........... (.1) .1 (.1) --
----- ----- ----- -----
Income before income taxes ............. 12.2 6.1 10.3 5.8
Income tax expense ..................... (4.9) (2.4) (4.1) (2.1)
----- ----- ----- -----
Net income ............................. 7.3% 3.7% 6.2% 3.7%
===== ===== ===== =====
Consolidated Operations
Three Months Ended June 30
Net sales for the three months ended June 30, 1997 were $73.8 million,
compared to $66.6 million for the three months ended June 30, 1996, an increase
of 10.9%. Excluding sales from divested operations, the sales increase for the
three months ended June 30, 1997 was 19.9%. The increase in sales is primarily
attributed to higher domestic market shares and increased international sales in
the Components Group, and the expansion of the Company's Mexican contract in the
Locomotive Group.
Gross profit for the three months ended June 30, 1997 was $19.3 million or
26%, compared to $12.9 million, or 19%, for the three months ended June 30,
1996. The increase in gross profit is attributed to the increased sales volume,
continuing cost reductions, productivity improvements and a favorable product
mix.
General and administrative expense for the three months ended June 30, 1997
was $10 million compared to $7.6 million for the three months ended June 30,
1996. The increase is primarily attributed to performance-based,
incentive-related expenses for bonus programs ($1.2 million), and stock option
and stock appreciation rights programs ($400,000), which are contingent upon the
achievement of certain financial objectives, as well as certain one-time
expenses for legal matters and for moving to the New York Stock Exchange.
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Interest income for the three months ended June 30, 1997 was $114,000
compared to $661,000 for the three months ended June 30, 1996. The decrease is
primarily attributed to a decrease in funds invested at MPI de Mexico.
Interest expense for the three months ended June 30, 1997 was $1.2 million
compared to $2.6 million for the three months ended June 30, 1996. The decrease
is attributed to a reduction in the borrowings under the Company's domestic
credit facility, the redemption in September 1996 of $56.6 million of debt owed
to the Company's former majority shareholder, and a decrease in the interest
rate paid on domestic borrowings. These decreases were partially offset by
increased borrowings under the Mexican credit facility, supporting the Company's
investment program at MPI de Mexico.
Other income for the three months ended June 30, 1997 was $835,000,
compared to $765,000 for the three months ended June 30, 1996. For both periods,
this other income represents amounts received from the Company's investments in
Argentina. Due to the uncertain financial strength of the other parties
involved, the Company recognizes income only when funds are actually received.
A foreign exchange loss of $41,000 was realized for the three months ended
June 30, 1997 compared to a foreign exchange gain of $36,000 for the three
months ended June 30, 1996, as a result of fluctuations in the valuation of the
Mexican peso.
Income tax expense for three months ended June 30, 1997 was $3.6 million,
compared to $1.6 million for the three months end June 30, 1996. The increase in
the expense is directly related to the increased pre-tax income between periods.
The Company has formed a Foreign Sales Corporation (FSC), and anticipates that
future periods tax expense will be reduced.
Six Months Ended June 30
Net sales for the six months ended June 30, 1997 were $143.5 million,
compared to $136.2 million for the six months ended June 30, 1996, an increase
of 5.3%. Excluding sales from divested operations, the sales increase for the
six months ended June 30, 1997 was 14.3%. The increase in sales is attributed to
increased international sales in the Components Group, and increases in
locomotive maintenance sales at both Boise Locomotive and MPI de Mexico.
Gross profit for the six months ended June 30, 1997 was $35.1 million, or
24%, compared to $26.7 million or 20%, for the three months ended June 30, 1996.
The gross profit improvement is attributed to increased sales volume, a
favorable product mix, continuing cost reductions and productivity improvements.
General and administrative expense for the six months ended June 30, 1997
was $18.8 million, compared to $15.8 million for the six months ended June 30,
1996. The increase is primarily attributed to approximately $1.6 million of
expenses related to stock appreciation rights and stock options, in addition to
approximately $1.8 million of performance-related incentive expenses.
Interest income for the six months ended June 30, 1997 was $303,000,
compared to $1.2 million for the six months ended June 30, 1996. The decrease is
primarily attributed to a decrease in funds invested at MPI de Mexico.
Interest expense for the six months ended June 30, 1997 was $2.5 million,
compared to $5.6 million for the six months ended June 30, 1996. The decrease is
attributed to decreased domestic borrowings, the redemption in September 1996 of
$56.6 million of debt owed to the Company's former majority shareholder and a
decrease in the interest rate charged on domestic borrowings. These decreases
were partially offset by increased borrowings under the Mexican credit facility.
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Other income for the six months ended June 30, 1997 was $796,000 compared
to $1.4 million for the six months ended June 30, 1996. For both periods, this
other income represents amounts received from the Company's investments in
Argentina. Due to the uncertain financial strength of the other parties
involved, the Company recognizes income only when funds are actually received.
A foreign exchange loss of $156,000 was realized for the six months ended
June 30, 1997, compared to a foreign exchange gain of $54,000 for the six months
ended June 30, 1996, as a result of fluctuations in the value of the Mexican
peso.
Income tax expense for the six months ended June 30, 1997 was $5.9 million,
compared to $2.9 million for the six months ended June 30, 1996. The increase in
the expense is directly related to the increased pre-tax income between periods.
COMPONENTS GROUP
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
(In thousands)
1997 1996 1997 1996
-------- -------- -------- --------
Net sales ...................... $ 38,479 $ 35,979 $ 80,256 $ 77,958
Less: divested operations ...... -- (3,161) -- (6,129)
-------- -------- -------- --------
Adjusted net sales ............. $ 38,479 $ 32,818 $ 80,256 $ 71,829
======== ======== ======== ========
Percentage change .............. 17% 12%
Operating income ............... $ 7,205 $ 5,102 $ 14,872 $ 11,358
Less: divested operations ...... -- (126) -- (322)
-------- -------- -------- --------
Adjusted operating income ...... $ 7,205 $ 4,976 $ 14,872 $ 11,036
======== ======== ======== ========
Percentage change .............. 45% 35%
The increase in adjusted net sales for the three months ended June 30, 1997
compared to June 30, 1996 is primarily attributed to increased sales at Motor
Coils, Engine Systems and Power Parts in both the international and domestic
markets. The increase in adjusted operating income for the three months ended
June 30, 1997, compared to June 30, 1996 is primarily attributed to the
increased sales volume, cost reductions and production efficiencies at the
operating entities.
The increase in adjusted net sales for the six months ended June 30, 1997
compared to the six months ended June 30, 1996 is primarily attributed to
increased sales at Motor Coils, Engine Systems and Power Parts in both the
international and domestic markets. The increase in adjusted operating income
for the six months ended June 30, 1997 compared to the six months ended June 30,
1996 is primarily attributed to the increased sales volume, cost reductions and
production efficiencies at the operating entities.
13
<PAGE>
LOCOMOTIVE GROUP
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
(In thousands)
1997 1996 1997 1996
-------- -------- -------- --------
Net sales ...................... $ 35,334 $ 30,601 $ 63,215 $ 58,278
Less: divested operations ...... -- (1,881) -- (4,633)
-------- -------- -------- --------
Adjusted net sales ............. $ 35,334 $ 28,720 $ 63,215 $ 53,645
======== ======== ======== ========
Percentage change .............. 23% 18%
Operating income ............... $ 6,061 $ 2,508 $ 9,378 $ 4,815
Less: divested operations ...... -- (390) -- (1,321)
-------- -------- -------- --------
Adjusted operating income ...... $ 6,061 $ 2,118 $ 9,378 $ 3,494
======== ======== ======== ========
Percentage change .............. 186% 168%
The increase in adjusted net sales for the three months ended June 30, 1997
compared to June 30, 1996 is primarily attributed to increased sales at MPI de
Mexico resulting from sales increases under the base contract and additional
non-contract work. The increase in adjusted operating income for the three
months ended June 30, 1997 compared to June 30, 1996 is primarily attributed to
the increased sales volume at MPI de Mexico, a favorable product mix at Boise
Locomotive and cost reductions at both locations.
The increase in adjusted net sales for the six months ended June 30, 1997
compared to June 30, 1996 is primarily attributed to sales increases at Boise
Locomotive principally in locomotive overhauls and sales increases at MPI de
Mexico resulting from sales increases under the base contract and additional
non-contract work. The increase in adjusted operating income for the six months
ended June 30, 1997 compared to June 30, 1996 is primarily attributed to the
sales volume increases, and product mix at Boise Locomotive and operating
efficiencies, and cost reductions at both Boise Locomotive and MPI de Mexico
FINANCIAL CONDITION AND LIQUIDITY
In February 1997, the Company entered into a restated domestic credit
agreement which provides $20 million of term loan borrowings and a $55 million
revolving credit line. In addition to providing increased borrowing capacity,
the credit agreement also provides for a reduction in interest rates as compared
to the Company's previous credit facility.
In February 1997 the Board of Directors of the Company approved the funds to
construct a new facility and relocate the Company's Touchstone operations. The
total project has been estimated at $5 million. As of June 30, 1997 the Company
had purchased the facility site and was in negotiations with contractors over
final construction-related costs. The project is expected to break ground by
August 15, 1997, with the anticipated completion date April 1998. The Company
intends to fund the project through local Industrial Revenue Bonds. On or about
August 11, 1997, the Company intends to repurchase the outstanding I.R.B. debt
on its current Touchstone facilities which is $1,350,000 plus accrued interest.
On July 11, 1997, the Company paid $389,000 plus accrued interest to the bond
holder as its final payment in the 1982 bond issue.
14
<PAGE>
On July 3, 1997 the Company entered into a 90-day outright forward foreign
exchange transaction with a domestic bank in an effort to protect Company assets
in Mexico against a possible currency devaluation.
The table below highlights the debt and cash position of the Company at the
dates indicated.
June 30, 1997 June 30, 1996
------------- -------------
(In thousands)
Domestic-revolver $ - $ 17,520
Domestic-term loan 20,000 -
Morrison Knudsen debt - 52,095
MPI de Mexico credit facility 24,787 11,273
Other domestic debt 1,748 2,130
-------- --------
Total debt $ 46,535 $ 83,018
======== ========
Cash and equivalents $ 11,016 $ 3,815
======== ========
With the revised domestic credit agreement, the Company's cash position
and the Company's profitable operating results, management believes that its
financing is adequate to support its normal operations and capital spending
requirements. This is a forward-looking statement, and factors such as a
decrease in rail traffic, a reduction in railroads' capital and maintenance
spending plans with regard to their locomotive fleets, or the Company's
inability to retain existing contracts and/or obtain new contract awards are
among the factors which could affect the Company's financing needs.
The following table summarizes the net changes in cash flows.
Six Months Ended
June 30,
--------------------------
1997 1996
----------- -----------
(In thousands)
Net cash provided by (used in)
Operating activities $ 14,088 $ 25,953
Investing activities (3,888) 9,486
Financing activities (4,420) (37,320)
----------- -----------
Net increase (decrease) in cash and equivalents $ 5,780 $ (1,881)
=========== ===========
Cash and equivalents at end of period $ 11,016 $ 3,815
=========== ===========
15
<PAGE>
Net cash provided by operating activities totaled $14.1 million for the
first six months of 1997 compared to $26 million for the first six months of
1996. The first six months of 1996 were favorably affected by $17.7 million of
advances from customers associated with the production of switcher locomotives
at Boise Locomotive. Total working capital for the first six months of 1997
decreased by $199,000, with increases in receivables being offset by
corresponding increases in payables and accrued expenses. Depreciation and
amortization for the first six months of 1997 totaled $5 million.
Net cash used in investing activities totaled $3.9 million for the first
six months of 1997 compared to net cash provided from investing activities of
$9.5 million in the first six months of 1996. The first six months of 1996 were
favorably affected by $10.1 million of proceeds from the sale of the locomotive
lease fleet. The majority of the 1997 activity relates to additions to property,
plant and equipment, with the largest expenditures being made at MPI de Mexico.
The Company expects additions to property, plant and equipment in 1997 to be
significantly greater than 1996 as a result of the construction of a new
facility at Touchstone and contractual obligations for fixed asset additions at
MPI de Mexico. Actual capital expenditures could vary based on availability of
capital, interest rate increases and changes in market conditions.
Net cash used in financing activities totaled $4.4 million for the first
six months of 1997, compared to $37.3 million for the first six months of 1996.
The 1996 activity is principally the pay down of debt by the Company as part of
its restructuring plan. The 1997 activity is the pay down of debt with cash
generated by operations and an increase in intangible assets, principally bank
fees, paid in connection with the closing of the new domestic credit facility.
SIGNIFICANT EVENTS
During the quarter ended June 30, 1997, MotivePower Industries was awarded
the following contracts through its subsidiaries:
- Motor Coils Manufacturing Company was awarded $4.2 million worth of
international contracts to supply locomotive traction motors and related
components. The orders include a $2.7 million contract with the Egyptian
National Railway, and $1.5 million of contracts with Croatia, Brazil,
Australia and Venezuela. It is expected that these orders will be
completed in 1997.
- Motor Coils Manufacturing Company was awarded renewal of a two-year
contract to supply traction motors, gears and related components to the
Union Pacific Railroad. The total value of the contract is expected to
exceed $50 million.
- Boise Locomotive Company was awarded a contract to overhaul 24
locomotives for approximately $10 million. The locomotives are scheduled
to be leased to the Burlington Northern Santa Fe Corporation by a third
party under a separate agreement.
- Power Parts Company was awarded a two-year contract renewal for inventory
and just-in-time delivery services of locomotive parts for Union Pacific
Railroad. The value of the contract is $6 million.
On April 23, 1997 the Board of Directors of MotivePower Industries approved
a $2.7 million investment in state-of-the-art automation technology for its
Engine Systems Company subsidiary. The new equipment and systems will reduce
costs and work-in-process inventories, increase productivity and open up
production space for new product lines. The Company intends to fund the purchase
of the equipment through working capital.
16
<PAGE>
On May 2, 1997, the Company announced that Motor Coils Manufacturing
Company would vacate two redundant leased facilities in Pittsburgh, Pennsylvania
by year-end, and modernize and consolidate these operations into other existing
facilities, thereby expecting to reduce its work force by approximately 40
employees. These actions are expected to save approximately $1 million annually,
based on current sales volumes.
On June 24, 1997 MotivePower Industries announced that it would apply for
listing on the New York Stock Exchange (NYSE). Since going public in April 1994,
the Company's stock has traded on Nasdaq. The Company expects to begin trading
on the NYSE in the third quarter of 1997, under the symbol "MPO."
On July 24, 1997 Touchstone sold its existing production facilities in
Jackson, Tennessee for $1.1 million and concurrently entered into a short-term
lease of the same facilities through March 1998, at which time a manufacturing
facility currently in the early stages of construction is expected to be
available for occupancy. The sale of the facilities was made at book value.
PRO-FORMA INFORMATION
The following table highlights certain operating line items exclusive of
Alert Manufacturing and Supply Company and Power Parts Sign Company which were
sold in July 1996 and October 1996, respectively, and the portion of the
Locomotive Lease Fleet sold in 1996.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
June 30, 1997 June 30, 1996
--------------- ----------------------------------------
(In thousands)
As reported As reported Adjustments As adjusted
<S> <C> <C> <C> <C>
Net sales ................. $73,813 $66,581 ($5,042) $61,539
Gross profit .............. $19,315 $12,885 ($ 947) $11,938
Operating income .......... $ 9,276 $ 5,262 ($ 516) $ 4,746
</TABLE>
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
--------------- ----------------------------------------
(In thousands)
As reported As reported Adjustments As adjusted
<S> <C> <C> <C> <C>
Net sales ................. $143,471 $136,236 ($10,762) $125,474
Gross profit .............. $ 35,140 $ 26,671 ($ 2,464) $ 24,207
Operating income .......... $ 16,339 $ 10,824 ($ 1,643) $ 9,181
</TABLE>
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Legal Proceedings: In December 1995, Morrison Knudsen, the Company and
certain of Morrison Knudsen's directors and officers were named as defendants in
a complaint (the "Pilarczyk Lawsuit") filed in the United States District Court
for the Northern District of New York by plaintiffs who were principals in
and/or held substantial stock in TMS, Inc. ("TMS"), a New York corporation
acquired by Morrison Knudsen on December 30, 1992. The complaint, which seeks
five million dollars in damages, alleges among other things, violations of
Section 10(b), Rule 10b-5 and Section 20(a) of the Securities Exchange Act of
1934, breach of contract, unjust enrichment, negligent misrepresentation and
common law fraud during Morrison Knudsen's acquisition of TMS in 1992.
Plaintiffs assert that the Company, which was not formed by Morrison Knudsen
until 1993, is fully responsible for the acts of Morrison Knudsen. However, the
actions complained of occurred before the Company was formed and the Company did
not assume such liabilities of Morrison Knudsen. A motion to dismiss, filed in
April 1996 on behalf of all defendants to the Pilarczyk Lawsuit, was granted on
May 19, 1997. On June 10, 1997 plaintiffs appealed the dismissal in the U.S.
District Court, Northern District of New York. The Company with the advice of
outside counsel, believes the causes of action in the Pilarczyk Lawsuit relating
to the Company are without merit. The Company intends to make appropriate
requests to the court to seek to require the plaintiff to pay the Company's
legal fees and costs.
The Company is engaged in a commercial dispute with a former supplier,
Samyoung Machinery Industrial Co. and Samyoung (America), Inc. (collectively,
"Samyoung"). The Company filed suit on April 16, 1996 alleging delivery of
defective product and seeking damages in excess of $1 million. Samyoung denies
that the product was defective and countersued to recover $300,000 under the
contract, and $10 million for trade libel and interference with prospective
economic relationships as a result of the Company allegedly making false
disparaging statements concerning the diesel engine assembly liners to
customers. The Company, with the advice of outside counsel, believes that
Samyoung's claims are without merit, and, to date, no evidence supporting
Samyoung's counterclaims has come to light through the discovery being conducted
by the parties. The Company intends to vigorously prosecute its own claims and
defend against Samyoung's counterclaims.
On June 25, 1997, Theodore E. Nelson ("Nelson"), President and former 51%
owner of Touchstone Company ("Touchstone"), a wholly-owned subsidiary of the
Company which was purchased by MK Corporation, the Company's former parent on
February 1, 1994 filed suit, seeking an unspecified amount of damages, against
Touchstone, Inc. (sic), MotivePower Industries, Inc. and Michael Wolf (President
of MotivePower Industries, Inc.) in the Chancery Court of Tennessee, Madison
County, Tennessee. Nelson disputes the amount of bonus or other monies earned by
him under his employment agreement with Touchstone. The complaint lists a
variety of causes of action including civil conspiracy, breach of contract,
breach of duty of good faith and fair dealing, misrepresentation, promissory
fraud, and tortious interference with contract and seeks compensatory, punitive
and treble damages and attorney's fees in unspecified amounts. The Company, with
the advice of outside counsel, believes that Nelson's claims are without merit.
The Company intends to vigorously defend against Nelson's claims. In addition,
because Nelson's employment agreement with Touchstone expires in January 1999,
the Company initiated a management transition program at Touchstone in the
second quarter. Under this program, the Company has added a new vice president
of sales and marketing, and has begun to search for Nelson's successor.
In the ordinary course of its business, the Company is involved in legal
proceedings incident to the normal conduct of its business, including contract
claims and employee matters.
18
<PAGE>
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 24, 1997, the annual meeting of the shareholders of the Company
was held, at which the shareholders voted on and approved the following matters:
1. The election of Gilbert E. Carmichael, Ernesto Fernandez Hurtado and
Michael A. Wolf to the Board of Directors for a term of three years. A summary
of the voting results is as follows:
Gilbert E. Carmichael Ernesto Fernandez Hurtado Michael A. Wolf
For 11,369,942 11,367,770 11,406,470
Withheld 119,661 121,833 83,133
Lee B. Foster II and James P. Miscoll continue as directors with
terms expiring in 1998. John C. Pope and Nicholas J. Stanley
continue as directors with terms expiring in 1999.
2. The appointment of Deloitte & Touche LLP as the Company's independent
auditors. A summary of the voting results is as follows:
For 11,410,632
Against 6,624
Abstain 72,347
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
Exhibit 10.1 Amendment No. 1 Dated As Of May 23, 1997 To Second Amended and
Restated Credit Agreement Dated As Of February 27, 1997
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1997.
19
<PAGE>
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.
MOTIVEPOWER INDUSTRIES INC.
By: /s/ William D. Grab
--------------------
William D. Grab
Vice President, Controller and
Principal Accounting Officer
Date: August 8, 1997
20
<PAGE>
AMENDMENT NO. 1 DATED
AS OF MAY 23, 1997
TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF FEBRUARY 27, 1997
THIS AMENDMENT NO. 1 (this "Amendment") is entered into as of May 23,
1997, among MotivePower Industries, Inc., a Delaware corporation (the
"Borrower"), the financial institutions signatory to the hereinafter defined
Credit Agreement (collectively, the "Lenders"), and Bank of America National
Trust and Savings Association, as Agent for the Lenders (the "Agent").
RECITALS:
A. The Borrower, the Agent and the Lenders are party to that certain
Second Amended and Restated Credit Agreement dated as of February 27, 1997 (as
so amended herein, the "Credit Agreement"). Unless otherwise specified herein,
capitalized terms used in this Amendment shall have the meanings ascribed to
them in the Credit Agreement.
B. The Borrower, the Agent and the Lenders wish to amend the Credit
Agreement pursuant to the terms as set forth herein with respect to a) aggregate
amount of performance bonds the Borrower may have outstanding at any time; (b)
the aggregate amount of letters of credit the Borrower may have outstanding in
support of or in respect of any surety contracts, Surety Instruments or
performance bonds at any time; and (c) the aggregate amount of letters of credit
the Borrower may have outstanding at any time.
C. Now, Therefore, the parties hereto agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT.
1.1 Section 1.1 of the Credit Agreement. The definition of
"Unused Letter of Credit Subfacility" in Section 1.1 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Unused Letter of Credit Subfacility" means an amount equal to
$20,000,000 minus the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit plus (b) the aggregate unpaid
reimbursement obligations with respect to all Letters of Credit.
<PAGE>
1.2 Section 2.01(c)(ii)(4) of the Credit Agreement.
Section 2.01(c)(ii)(4) of the Credit Agreement is hereby amended in
its entirety to read as follows:
"(4) if the stated amount of all Letters of Credit (including
the one proposed to be issued) supporting or issued in respect of any
performance bonds, surety contracts or Surety Instruments of any kind
exceeds $10,000,000;"
1.3 Section 7.08(e) of the Credit Agreement. Section
7.08(e) of the Credit Agreement is hereby amended in its entirety
to read as follows:
"(e) Contingent Obligations of the Borrower with respect to
performance bonds or surety contracts of any kind provided that such
performance bonds or surety contracts are issued in connection with
Contractual Obligations to reconstruct railroad locomotives which
provide aggregate total consideration and payments to the Borrower and
its Subsidiaries not in excess of $30,000,000 in the aggregate (whether
or not progress payments have been made thereunder or such amounts are
then due and owing) and are issued pursuant to contracts and agreements
in form and substance and from an issuer or surety reasonably
satisfactory to the Agent, and in any event such issuer or surety shall
not be permitted to take a Lien on any property or assets of the
Borrower or its Subsidiaries other than the Inventory and Accounts
(excluding cash payments not made directly to such issuer or surety)
directly identifiable to the contract being supported by such surety or
performance bond; and"
2. REPRESENTATION AND WARRANTIES. To induce the Agent and
the Lenders to enter into this Amendment, the Borrower represents
and warrants that:
2.1 Authorization. The Borrower is duly authorized to execute
and deliver this Amendment and to perform its obligations under the Credit
Agreement, as amended hereby.
2.2 No Conflicts. The execution and delivery of this
Amendment, and the performance by the Borrower of its obligations under the
Credit Agreement, as amended hereby, do not and will not conflict with any
provision of law or of the charter or by-laws of the Borrower or of any
agreement binding upon the Borrower.
2.3 Validity and Binding Effect. The Credit Agreement,
as amended hereby, is, a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its
-2-
<PAGE>
terms, except as enforceability may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity limiting the availability
of equitable remedies.
3. CONDITIONS PRECEDENT TO AMENDMENTS. The amendments
contemplated by Section 1 hereof are subject to the satisfaction of
each of the following conditions precedent:
3.1 Documentation. The Borrower shall have delivered to the
Agent all of the following, each duly executed and, dated the date hereof, in
form and substance satisfactory to the Agent:
(a) Certificate. A certificate of the president or
chief financial officer of the Borrower as to the matters set out
in Sections 3.2 and 3.3 hereof.
(b) Other. Such other documents as the Agent may
reasonably request.
3.2 No Default. As of the closing date hereof, no
Default or Event of Default shall have occurred and be continuing.
3.3 Representations and Warranties. As of the closing date
hereof, the representations and warranties in Article V of the Credit Agreement
and in Section 2 of this Amendment shall be true and correct as though made on
such date.
4. GENERAL.
4.1 Expenses. The Borrower agrees to pay the Agent upon demand
for all reasonable expenses, including reasonable Attorneys' Costs, incurred by
the Agent in connection with the preparation, negotiation and execution of this
Amendment, and any document required to be furnished therewith.
4.2 Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF ILLINOIS; PROVIDED THAT THE
AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
4.3 Successors. This Amendment shall be binding upon inure to
the benefit of the parties hereto and their respective successors and assigns.
-3-
<PAGE>
4.4 Confirmation of the Credit Agreement. Except as amended
hereby, the Credit Agreement shall remain in full force and effect and is hereby
ratified and confirmed in all respects.
4.5 References to the Credit Agreement. Each reference in the
Credit Agreement to "this Credit Agreement," "hereunder," "hereof," or words of
like import, and each reference to the Credit Agreement in any and all
instruments or documents provided for in the Credit Agreement or delivered or to
be delivered thereunder or in connection therewith, shall, except where the
context otherwise requires, be deemed a reference to the Credit Agreement as
amended hereby.
* * *
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first written above.
MOTIVEPOWER INDUSTRIES, INC., as
Borrower
By:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
and a Lender
By:
Title:
ABN AMRO BANK, N.V., as a Lender
By:
Title:
THE BANK OF NEW YORK, as a Lender
By:
Title:
-5-
<PAGE>
CORESTATES BANK, N.A., as a Lender
By:
Title:
CREDIT LYONNAIS NEW YORK BRANCH, as
a Lender
By:
Title:
DG BANK DEUTSCHE GENOSSENSCHAFTS
BANK, as a Lender
By:
Title:
MELLON BANK, N.A., as a Lender
By:
Title:
NATIONAL BANK OF CANADA, as a
Lender
By:
Title:
By:
Title:
-6-
<PAGE>
NATIONAL CITY BANK, as a Lender
By:
Title:
PNC BANK, N.A., as a Lender
By:
Title:
-7-
<PAGE>
IN WITNESS WHEREOF, the undersigned have accepted and agreed
to this Amendment as of the date first above written.
Motor Coils Manufacturing Company
By:
Title:
Engine Systems Company, Inc.
By:
Title:
Clark Industries Company
By:
Title:
Power Parts Company
By:
Title:
Touchstone Company
By:
Title:
MotivePower Investments Limited
By:
Title:
Boise Locomotive Company
By:
Title:
MotivePower Foreign Sales
Corporation
By:
Title:
-8-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the year ended December 31, 1996 and is
qualified in its entirety by reference to such financial statements
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1996
<PERIOD-END> Jun-30-1997
<CASH> 11016
<SECURITIES> 0
<RECEIVABLES> 37858
<ALLOWANCES> 265
<INVENTORY> 77874
<CURRENT-ASSETS> 134306
<PP&E> 91809
<DEPRECIATION> 47066
<TOTAL-ASSETS> 252888
<CURRENT-LIABILITIES> 68966
<BONDS> 36931
0
0
<COMMON> 176
<OTHER-SE> 130376
<TOTAL-LIABILITY-AND-EQUITY> 252888
<SALES> 143471
<TOTAL-REVENUES> 143471
<CGS> 108331
<TOTAL-COSTS> 108331
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2466
<INCOME-PRETAX> 14816
<INCOME-TAX> 5930
<INCOME-CONTINUING> 8886
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8886
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.48
</TABLE>
