<PAGE> 1
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 SEPTEMBER 30, 1999
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)
Pennsylvania 82-0461010
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Gateway Center 14th Floor, Pittsburgh, PA 15222
- --------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(412) 201-1101
----------------------------------------------------
(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 November 5, 1999
---------------------------- -------------------------------
Common stock, $.01 par value 27,138,210
<PAGE> 2
MOTIVEPOWER INDUSTRIES, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Income for the Three and Nine Months Ended 3
September 30, 1999 and 1998 (Unaudited)
Condensed Consolidated Balance Sheets at September 30, 1999 (Unaudited) and December 4
31, 1998
Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended 5
September 30, 1999 and 1998 (Unaudited)
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signature 23
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MOTIVEPOWER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(In thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 88,410 $ 87,406 $ 294,347 $ 258,720
Cost of sales (68,024) (68,324) (218,752) (196,946)
--------- --------- --------- ---------
Gross profit 20,386 19,082 75,595 61,774
Selling, general and administrative expenses (9,644) (8,898) (33,880) (29,395)
--------- --------- --------- ---------
Operating income 10,742 10,184 41,715 32,379
Investment income 239 360 853 918
Interest expense (2,525) (1,212) (7,136) (3,739)
Other income -- 677 183 2,622
Foreign exchange (loss) gain (205) 1,242 (774) 2,071
--------- --------- --------- ---------
Income before income taxes and extraordinary item 8,251 11,251 34,841 34,251
Income tax expense (2,959) (3,539) (12,465) (11,549)
--------- --------- --------- ---------
Income before extraordinary item 5,292 7,712 22,376 22,702
Extraordinary loss on extinguishment of debt, net of income
tax benefit of $265 -- -- -- (472)
--------- --------- --------- ---------
Net income $ 5,292 $ 7,712 $ 22,376 $ 22,230
========= ========= ========= =========
EARNINGS PER COMMON SHARE - BASIC:
Income before extraordinary item $ .20 $ .29 $ .83 $ .85
Extraordinary item -- -- -- (.02)
--------- --------- --------- ---------
Net income $ .20 $ .29 $ .83 $ .83
========= ========= ========= =========
Weighted average common shares outstanding 27,135 26,775 27,058 26,745
EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Income before extraordinary item $ .19 $ .28 $ .80 $ .81
Extraordinary item -- -- -- (.02)
--------- --------- --------- ---------
Net income $ .19 $ .28 $ .80 $ .79
========= ========= ========= =========
Weighted average common shares outstanding 28,004 27,912 28,046 27,899
</TABLE>
The accompanying notes are an integral part of
the condensed consolidated financial statements.
3
<PAGE> 4
MOTIVEPOWER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998
(In thousands except per share data)
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 7,935 $ 5,660
Receivables from customers:
Billed, net of allowance for doubtful accounts of $670 and $673, respectively 55,953 54,428
Unbilled 705 2,831
Inventories 105,308 92,993
Deferred income taxes 7,531 6,765
Income tax receivable -- 5,216
Other 9,436 4,230
--------- ---------
Total current assets 186,868 172,123
Locomotive lease fleet, net 1,126 1,189
Property, plant and equipment:
Land 2,512 2,420
Buildings and improvements 48,209 50,997
Machinery and equipment 106,769 94,143
--------- ---------
Property, plant and equipment, cost 157,490 147,560
Less accumulated depreciation 64,312 54,492
--------- ---------
Property, plant and equipment, net 93,178 93,068
Underbillings - MPI de Mexico 27,318 26,775
Goodwill and other intangibles, net 86,105 63,593
Other 14,573 14,450
--------- ---------
Total assets $ 409,168 $ 371,198
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 572 $ 549
Accounts payable - trade 32,711 34,293
Accrued expenses and other current liabilities 27,357 30,919
Income taxes payable 96 --
Revolving credit agreement borrowings -- 10,000
Advances from customers 1,193 1,174
--------- ---------
Total current liabilities 61,929 76,935
Long-term debt 123,317 95,249
Commitments and contingencies 16,751 19,205
Deferred income taxes 2,978 559
Other 1,692 1,321
--------- ---------
Total liabilities 206,667 193,269
--------- ---------
Stockholders' Equity:
Common stock, par value $.01 per share 263 179
Additional paid-in capital 208,357 206,434
Deficit (870) (23,156)
Accumulated other comprehensive income (5,168) (5,105)
Deferred compensation 6,255 4,113
--------- ---------
208,837 182,465
Less - Treasury stock, at cost 6,336 4,536
--------- ---------
Total stockholders' equity 202,501 177,929
--------- ---------
Total liabilities and stockholders' equity $ 409,168 $ 371,198
========= =========
</TABLE>
The accompanying notes are an integral part of
the condensed consolidated financial statements.
4
<PAGE> 5
MOTIVEPOWER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Activities
- --------------------
Net income $ 5,292 $ 7,712 $ 22,376 $ 22,230
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation 3,144 1,946 8,879 5,560
Amortization 990 823 2,970 2,406
Extraordinary loss on extinguishment of debt, net of tax -- -- -- 472
Changes in operating assets and liabilities exclusive of effects
of 1999 purchase of G&G Locotronics and Q-Tron:
Receivables from customers (1,241) (6,864) 6,678 (11,370)
Inventories (549) (5,522) (6,747) (17,858)
Underbillings - MPI de Mexico 811 (286) (543) 4,948
Accounts payable and accrued expenses 2,462 (4,879) (9,806) (4,555)
Advances from customers 834 (70) 19 829
Other, net (1,706) 1,722 (2,099) 5,606
-------- -------- -------- --------
Net cash provided by (used in) operating activities 10,037 (5,418) 21,727 8,268
-------- -------- -------- --------
Investing Activities
- --------------------
Payment for purchase of G&G Locotronics -- -- (17,770) --
Payment for purchase of Q-Tron -- -- (13,512) --
Purchase of property, plant and equipment (1,496) (5,911) (7,822) (20,633)
Other, net 444 (447) 248 2,588
-------- -------- -------- --------
Net cash used in investing activities (1,052) (6,358) (38,856) (18,045)
-------- -------- -------- --------
Financing Activities
- --------------------
Increase in intangibles (3) (265) (883) (265)
Net (repayments) borrowings under credit facilities (8,638) 16,272 18,091 4,598
Proceeds from exercise of stock options 1,038 137 2,128 424
Other, net 45 -- 68 --
-------- -------- -------- --------
Net cash (used in) provided by financing activities (7,558) 16,144 19,404 4,757
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,427 4,368 2,275 (5,020)
Cash and cash equivalents at beginning of period 6,508 7,509 5,660 16,897
-------- -------- -------- --------
Cash and cash equivalents at end of period $ 7,935 $ 11,877 $ 7,935 $ 11,877
======== ======== ======== ========
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Interest paid $ 2,176 $ 677 $ 6,158 $ 2,543
Income taxes paid, net 426 2,424 5,224 5,848
</TABLE>
The accompanying notes are an integral part of
the condensed consolidated financial statements.
5
<PAGE> 6
MOTIVEPOWER INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BUSINESS
The Company is a leader in the manufacturing and distribution of
products for rail and other power-related industries. Through its subsidiaries,
the Company manufactures and distributes engineered locomotive components and
parts; provides locomotive and freight car fleet maintenance; overhauls and
remanufactures locomotives and diesel engines; manufactures environmentally
friendly, switcher, commuter and mid-range DC and AC traction, diesel-electric
and liquefied natural gas locomotives up to 4,000 horsepower; and manufactures
components and software for power, marine and industrial markets. The Company's
primary customers are freight and passenger railroads, including every Class I
railroad in North America.
2. ACCOUNTING POLICIES
The condensed consolidated financial statements included herein are
unaudited. In the opinion of management, these statements include all
adjustments, consisting of normal, recurring adjustments, necessary for a fair
presentation of the financial position of MotivePower Industries, Inc. and
subsidiaries (the "Company") at September 30, 1999 and the results of its
operations and its cash flows for the three and nine months ended September 30,
1999 and 1998. These condensed consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and notes
thereto for the year ended December 31, 1998 included in the Company's 1998 Form
10-K. The results of operations for the three and nine months ended September
30, 1999 are not necessarily indicative of the results to be expected for the
full year.
The Company operates on a four, four, five-week accounting quarter. The
Company's quarters end on or about March 31, June 30, and September 30. The
Company's fiscal year ends December 31.
Certain reclassifications have been made to the 1998 condensed
consolidated financial statements to conform to the 1999 presentation.
On February 16, 1999, the Company's Board of Directors approved a
three-for-two common stock split in the form of a 50 percent stock dividend
effective April 2, 1999. Shareholders of record as of March 17, 1999 received
one additional share of stock for each two shares they owned. All share and
per-share amounts in the accompanying condensed consolidated statements of
income have been restated to give effect to the stock split.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: In June 1998, Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activity," was issued. SFAS No. 133, as amended by SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of Effective Date of FASB Statement No. 133 - an amendment of FASB
Statement No. 133" is effective for financial statements for fiscal quarters of
fiscal years beginning after June 15, 2000. The Company has not yet determined
the effect of this standard on its financial statements.
3. PENDING MERGER
On June 2, 1999, the Company agreed to merge with Westinghouse Air Brake Company
("WABCO"). On September 27, 1999, the Company and WABCO signed a revised merger
agreement. Under the revised agreement, WABCO will be the surviving corporation.
Upon shareholder approval, each share of the Company's common stock will be
converted into .66 shares of WABCO's common stock. The merger is intended to be
a tax-free reorganization for federal income tax purposes. It is WABCO's intent
to account for the merger using the pooling of interests accounting method.
Completion of the merger is
6
<PAGE> 7
subject to various conditions, including approval of the merger by the
stockholders of the Company and WABCO at special meetings of shareholders
scheduled for November 19, 1999. WABCO has filed a proxy statement on Form S-4
which became effective on October 18, 1999. Please refer to that document for
further details regarding the proposed merger.
4. COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax effects, are
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------- ---------------------
(In thousands)
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $5,292 $7,712 $22,376 $22,230
Foreign currency translation adjustment 45 -- (63) --
------ ------ ------- -------
Comprehensive income $5,337 $7,712 $22,313 $22,230
====== ====== ======= =======
</TABLE>
SFAS No. 130, "Reporting Comprehensive Income," was effective for
fiscal years beginning after December 15, 1997. With the Company's acquisition
of Q-Tron in January 1999, the Company is required to report the translation
adjustment relating to Q-Tron (whose functional currency is the Canadian dollar)
as a component of comprehensive income, as defined by SFAS 130. Prior to the
acquisition of Q-Tron, the Company's comprehensive income equaled net income.
5. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------- -------
(In thousands)
<S> <C> <C>
Cores $ 22,430 $11,854
Raw materials 48,999 46,646
Work in progress 12,306 14,411
Finished goods 21,573 20,082
-------- --------
$105,308 $92,993
======== ========
</TABLE>
Approximately $37.9 million and $38.3 million of total inventories at
September 30, 1999 and December 31, 1998, respectively, were valued on the
last-in first-out ("LIFO") cost method. The excess of current replacement cost
of these inventories over the stated LIFO value was $2.2 million and $1.9
million at September 30, 1999 and December 31, 1998, respectively. Costs for
other inventories have been determined principally by the first-in first-out
method. The Company defines cores as inventory designated for unit exchange
programs.
7
<PAGE> 8
6. INDEBTEDNESS
On March 2, 1999, MotivePower amended and restated the terms of its
revolving credit facilities with a syndicate of 12 lenders led by ABN AMRO Bank
as agent. The amendment increased the amount of the credit line from $200
million to $350 million, available as a five-year $175 million revolving credit
facility, and a 364-day $175 million revolving credit facility, which the
Company may renew annually with the approval of the lenders.
The facilities provide for revolving borrowings at a variable margin
over the London Interbank Offered Rate ("LIBOR"), or at Prime Rate, at the
Company's option. The margin over LIBOR at which the Company may borrow is
adjusted each fiscal quarter based on the ratio obtained when the Company's debt
at the end of the quarter is divided by the Company's cash flow over the past
four quarters, as measured by earnings before interest and income taxes, plus
depreciation and amortization ("EBITDA"). At September 30, 1999, the Company had
$117 million drawn under its LIBOR option at an effective annual interest rate
of 6.5%.
The Company's maximum borrowings under the facilities are limited to
the lesser of $350 million or 3.5 times trailing 12-month EBITDA. At September
30, 1999, the Company's gross availability under its domestic credit facilities
was approximately $276 million. After deducting outstanding debt and other
reserves, the Company has calculated its net available domestic borrowing
capacity on September 30, 1999 as $145 million.
On July 15, 1998, a domestic subsidiary of the Company entered into a
10-year $7.5 million debt obligation. This obligation consists of an Industrial
Revenue Bond ("IRB") and bears interest at a rate of 5.5%.
Maturities under long-term obligations at September 30, 1999 were as
follows: 1999 - $139,000; 2000 - $577,000; 2001 - $610,000; 2002- $644,000; 2003
- - $680,000 thereafter - $121.2 million.
7. 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 costs to be incurred over the
next 23 years, adjusted for inflation at 3% per annum, to be $4 million, based
on the Permit's Corrective Action Plan, and $3.7 million for contingent
additional Permit compliance requirements related to offsite groundwater
contamination. The discounted liability at September 30, 1999, using a discount
rate of 6%, was $2.2 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 1999 to 2003 are: $245,000; $290,000; $260,000; $268,000,
and $276,000. The Company was in compliance with the Permit at September 30,
1999.
8
<PAGE> 9
Legal Proceedings: The Company is involved in legal proceedings incident to the
normal conduct of its business, including contract claims and employee matters.
Although the outcome of any pending legal proceeding cannot be predicted with
certainty, management believes that such legal proceedings are adequately
provided for in the condensed consolidated financial statements and that the
proceedings, individually and in the aggregate, will not have a material adverse
effect on the consolidated operations or financial condition of the Company.
8. REPORTABLE SEGMENTS
The Company has two reportable segments: the Locomotive Group and the
Components Group. The reportable segments are comprised of strategic business
units which offer different products and services. The Locomotive Group provides
locomotive and freight car fleet maintenance; overhauls locomotives, freight
cars and diesel engines; and manufactures environmentally friendly switcher,
commuter and mid-range DC and AC traction, diesel-electric and liquefied natural
gas locomotives up to 4,000 horsepower. The Components Group manufactures and
distributes primarily aftermarket, or replacement, new and remanufactured
components and parts, for freight and passenger railroads, including every Class
I Railroad in North America, metropolitan transit and commuter rail authorities,
original equipment manufacturers, industrial power-related markets and other
customers internationally.
The Company evaluates segment performance based primarily on operating
income, excluding unusual items. The Company accounts for intercompany sales and
transfers as if the sales or transfers were to third parties at current market
prices.
Following is unaudited condensed segment financial information for the
three months ended September 30, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
1999 1998
----------------------------------------------- ----------------------------------------------
Locomotive Components Total Locomotive Components Total
------------- -------------- ------------- ------------- ------------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Gross sales $29,481 $66,845 $96,326 $46,806 $49,677 $96,483
Intercompany sales 1,540 6,376 7,916 2,856 6,221 9,077
Operating income 3,681 7,592 11,273 8,475 4,353 12,828
</TABLE>
9
<PAGE> 10
Following is unaudited condensed segment financial information for the
nine months ended September 30, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
1999 1998
----------------------------------------------- ------------------------------------------------
Locomotive Components Total Locomotive Components Total
------------- ------------- ------------- ------------- ------------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Gross sales $ 95,703 $220,293 $315,996 $130,013 $154,956 $284,969
Intercompany sales 2,856 18,793 21,649 6,733 19,516 26,249
Operating income 15,335 31,418 46,753 22,430 18,602 41,032
Segment assets 124,997 265,395 390,392 142,628 153,002 295,630
</TABLE>
The following reconciles segment information presented above to the unaudited
condensed consolidated financial statements:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- --------------------------
1999 1998 1999 1998
------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
NET SALES:
Gross sales from segments $96,326 $ 96,483 $ 315,996 $ 284,969
Intercompany sales elimination (7,916) (9,077) (21,649) (26,249)
------- --------- --------- ---------
Net sales $88,410 $ 87,406 $ 294,347 $ 258,720
======= ========= ========= =========
OPERATING INCOME:
Segment operating income $11,273 $ 12,828 $ 46,753 $ 41,032
Unallocated corporate expenses (531) (2,644) (5,038) (8,653)
------- --------- --------- ---------
Operating income $10,742 $ 10,184 $ 41,715 $ 32,379
======= ========= ========= =========
ASSETS:
Segment assets $ 390,392 $ 295,630
Corporate assets, including domestic deferred income taxes 18,776 8,679
--------- ---------
Total assets $ 409,168 $ 304,309
========= =========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GENERAL
MotivePower Industries' business strategy is to grow and continue to
strengthen its core businesses, including manufacturing and distributing
engineered locomotive components, software and parts; providing locomotive fleet
maintenance; overhauling and remanufacturing locomotives, freight cars and
diesel engines; and manufacturing environmentally friendly switcher, commuter
and mid-range DC and AC traction, diesel-electric and liquefied natural gas
locomotives up to 4,000 horsepower. The Company is looking to expand further
into other niche power, marine and industrial markets by growing the existing
business in these markets and by modifying certain existing products to fit new
applications.
The Company believes that it has six primary opportunities for growth,
or "growth engines":
(1) capitalize on the NAFTA railroads' desire to outsource non-transportation
functions such as running locomotive maintenance and repair projects by
continuing to improve quality and by reducing product cycle times; (2) continue
to grow its Mexican market share and operations by expanding current
capabilities; (3) expand sales of components in targeted non-NAFTA markets, such
as South America, China, the Middle East and the Pacific Rim; (4) develop new
products for the rail industry and expand sales of similar components into
non-rail markets; (5) acquire companies that provide products or services that
complement the Company's current capabilities either geographically or
technically, or that expand the Company's product line; and (6) develop
alliances with customers and joint ventures with other global rail industry
suppliers.
SIGNIFICANT EVENTS
During the quarter ended September 30, 1999, and subsequently, the
Company has been party to the following significant transactions and events:
- On August 25, 1999, the Company announced that its Boise Locomotive
Company subsidiary had received an order valued at $5 million to
remanufacture seven SD40-3 locomotives for Transtar, Inc.'s Bessemer
and Lake Erie Railroad in Greenville, Pennsylvania.
- On September 16, 1999, the Company announced that Bay State Transit
Services LLC had signed a five-year, $175 million contract with the
Massachusetts Bay Transportation Authority (MBTA) to provide rail
equipment maintenance for MBTA's commuter rail line in Boston. Bay
State Transit Services LLC is a joint venture of Boise Locomotive
Company and Herzog Transit Services Inc. Boise Locomotive, a wholly
owned subsidiary of the Company, owns 75 percent of the joint
venture company.
- On September 20, 1999, the Company announced that its MPI de Mexico
subsidiary had established a third location for the maintenance and
repair of freight cars along an important short-line railroad in the
north central region of Mexico.
- On September 24, 1999, the Company announced that its MPI de Mexico
subsidiary had signed a 14-year contract worth approximately $16
million with Electro-Motive de Mexico (EMM) to provide daily
maintenance of 75 SD70MAC, high-horsepower locomotives that are
being provided by EMM to Transportation Ferroviavia Mexicana. EMM is
a subsidiary of General Motors' Electro-Motive Division.
- On September 27, 1999, the Company announced the signing of a
revised merger agreement with Westinghouse Air Brake ("WABCO").
WABCO will be the surviving corporation. Upon shareholder approval,
each share of the Company, will be converted into .66 shares of
WABCO common stock. The merger is intended to be a tax-free
reorganization for federal
11
<PAGE> 12
income tax purposes. It is WABCO's intent to account for the merger
using the pooling of interests accounting method. Completion of the
merger is subject to various conditions, including approval of the
merger by the stockholders of the Company and WABCO, at special
meetings of shareholders scheduled for November 19, 1999.
- On October 8, 1999, the Company set a record date of October 20,
1999, for notice of and the right to vote at the Company's special
meeting of stockholders, at which stockholders will consider and
vote upon the proposed merger of Motive Power Industries into
Westinghouse Air Brake.
- On October 19, 1999, the Company announced that its Boise Locomotive
Company subsidiary had received a follow-up order to build two more
new commuter locomotives, valued at nearly $4 million, from the San
Joaquin Rail Commission in Stockton, California. Delivery is
scheduled for the second half of 2000.
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<PAGE> 13
RESULTS OF OPERATIONS
The following table sets forth the percentage of net sales represented
by certain items in the Company's Unaudited Condensed Consolidated Statements of
Income:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -----------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales (76.9) (78.2) (74.3) (76.1)
----- ----- ----- -----
Gross profit 23.1 21.8 25.7 23.9
Selling, general and administrative expenses (10.9) (10.2) (11.5) (11.4)
----- ----- ----- -----
Operating income 12.2 11.6 14.2 12.5
Investment income 0.3 0.4 0.3 0.4
Interest expense (2.9) (1.4) (2.4) (1.5)
Other income -- 0.8 -- 1.0
Foreign exchange (loss) gain (0.3) 1.4 (0.3) 0.8
----- ----- ----- -----
Income before income taxes and extraordinary item 9.3 12.8 11.8 13.2
Income tax expense (3.3) (4.0) (4.2) (4.4)
----- ----- ----- -----
Income before extraordinary item 6.0 8.8 7.6 8.8
Extraordinary item -- -- -- (0.2)
----- ----- ----- -----
Net income 6.0% 8.8% 7.6% 8.6%
===== ===== ===== =====
</TABLE>
CONSOLIDATED UNAUDITED OPERATIONS
The following table sets forth the percent change in certain items in the
Company's Unaudited Condensed Statements of Income:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------
1999 1998 % CHANGE
--------------- -------------- ---------------
(In thousands)
<S> <C> <C> <C>
Net sales $88,410 $87,406 1.1%
Gross profit 20,386 19,082 6.8%
Selling, general and administrative expenses (9,644) (8,898) 8.4%
Operating income 10,742 10,184 5.5%
Net income 5,292 7,712 (31.4)%
</TABLE>
13
<PAGE> 14
Net sales for the third quarter of 1999 were $88.4 million, compared to
$87.4 million for the third quarter of 1998, an increase of 1.1% The increase in
net sales is attributed to a 39.1% increase in sales in the Components Group
partially offset by a 36.4% decrease in sales in the Locomotive Group caused by
a general softness in the overhaul market as well as various order and contract
delays. Included in the Components Group in 1999 were net sales of approximately
$15 million from the three companies acquired in November 1998 and January 1999.
Gross profit for the third quarter of 1999 was $20.4 million, or 23.1%
of net sales, compared to $19.1 million, or 21.8% of net sales, for the third
quarter of 1998. The third quarter of 1998 was unfavorably impacted by $2.3
million of expenses for relocation and startup of certain facilities in the
Components Group. Excluding these expenses, the Company's gross margin was 24.4%
for the third quarter of 1998. The decrease in the gross profit is due to lower
sales in the Locomotive Group which, in turn, impacted pull through sales and
gross profit in the Components Group; and the product mix at MPI de Mexico where
the planned reduction of overhauls on the base contract has been replaced with
lower-margin overhauls to third parties.
Selling, general and administrative expenses for the third quarter of
1999 were $9.6 million, compared to $8.9 million for the third quarter of 1998.
The increase is attributed to expenses of approximately $2.3 million from the
three companies acquired in November 1998 and January 1999, which was partially
offset by the Company's continuing focus on cost controls and lower
incentive-related expenses based on subsidiary operating performance.
Interest expense for the third quarter of 1999 was $2.5 million,
compared to $1.2 million for the third quarter of 1998. Increased borrowings on
the Company's credit facilities to fund acquisitions, capital expenditures and
working capital requirements, were partially offset by decreased borrowings on
the Company's higher-rate Mexican credit facility which was prepaid in the
fourth quarter of 1998.
The Company realized a foreign exchange loss of $205,000 in the third
quarter of 1999, compared to a foreign exchange gain of $1.2 million in the
third quarter of 1998. Both the loss and the gain are the results of
fluctuations in the value of the Mexican peso, and the Company's net peso
position during the period. The Company continually monitors its net peso
position in determining its hedging strategies.
Excluding the effects of the foreign exchange remeasurement (loss) gain
on pretax income, income tax expense for the third quarter of 1999 was $3
million, or 35% of pre-tax income, compared to $3.5 million, or 35.4% of pre-tax
income, for the third quarter of 1998.
14
<PAGE> 15
The following table sets forth the percent change in certain items in the
Company's Unaudited Condensed Statements of Income:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------
1999 1998 % CHANGE
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Net sales $294,347 $258,720 13.8%
Gross profit 75,595 61,774 22.4%
Selling, general and administrative expenses (33,880) (29,395) 15.3%
Operating income 41,715 32,379 28.8%
Income before extraordinary item 22,376 22,702 (1.4%)
Net income 22,376 22,230 0.7%
</TABLE>
Net sales for the first nine months of 1999 were $294.3 million,
compared to $258.7 million for the first nine months of 1998, an increase of
13.8%. The increase in net sales is attributed to a 48.8% increase in sales in
the Components Group partially offset by a 24.7% decrease in sales in the
Locomotive Group caused by a general softness in the overhaul market as well as
various order and contract delays. Included in the Components Group in 1999 were
net sales of approximately $55.2 million from the three companies acquired in
November 1998 and January 1999.
Gross profit for the first nine months of 1999 was $75.6 million, or
25.7% of net sales, compared to $61.8 million, or 23.9% of net sales, for the
first nine months of 1998. The first nine months of 1998 included a gain of $1.2
million related to a 1994 contract contingency that expired; and $4.6 million of
expenses for the relocation and start-up of certain production facilities in the
Components Group and production inefficiencies associated with the renewal of a
union contract at Motor Coils. Excluding these items, the Company's gross margin
for the first nine months of 1998 was 25.2%. The increase in gross profit is
primarily the result of ongoing cost reductions and efficiency improvements,
reduced warranty expense, and efficiencies being realized from the 1998 capital
expenditures. This was partially offset by the effect of lower sales in the
Locomotive Group which in turn impacted pull through sales and gross profit in
the Components Group along with the product mix at MPI de Mexico where the
planned reduction of overhauls on the base contract have been replaced with
lower-margin overhauls to third parties.
Selling, general and administrative expenses for the first nine months
of 1999 were $33.9 million, compared to $29.4 million for the first nine months
of 1998. The increase is primarily attributed to expenses of $7 million from the
three companies acquired in November 1998 and January 1999 which is partially
offset by the Company's continuing focus on cost controls and lower
incentive-related expenses based on subsidiary operating performance.
Interest expense for the first nine months of 1999 was $7.1 million,
compared to $3.7 million for the first nine months of 1998. Increased borrowings
on the Company's credit facilities to fund acquisitions, capital expenditures
and working capital requirements, were partially offset by decreased borrowings
on the Company's higher-rate Mexican credit facility which was prepaid in the
fourth quarter of 1998.
Other income for the first nine months of 1999 was $183,000, compared
to $2.6 million for the first nine months of 1998. The decrease is due to the
Company selling its remaining investment in Argentina during the second quarter
of 1998.
15
<PAGE> 16
The Company realized a foreign exchange loss of $774,000 in the first
nine months of 1999, compared to a foreign exchange gain of $2.1 million in the
first nine months of 1998. Both the gain and the loss are the results of
fluctuations in the valuation of the Mexican peso, and its effect on the
Company's net peso position during the period. The Company continually monitors
its net peso position in determining its hedging strategies.
Excluding the effects of the foreign exchange remeasurement (loss) gain
on pretax income, income tax expense for the first nine months of 1999 was $12.5
million, or 35% of pre-tax income, compared to $11.5 million, or 35.9% of
pre-tax income, for the first nine months of 1998. The decrease in income tax
expense as a percentage of pre-tax income is primarily attributed to a reduced
income tax rate in Mexico resulting from international tax planning strategies.
Locomotive Group
- ----------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------- ------------------------------------------------
1999 1998 % CHANGE 1999 1998 % CHANGE
------------ ----------- -------------- ------------ ------------- --------------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $27,941 $43,950 (36.4)% $92,847 $123,280 (24.7)%
Operating income 3,681 8,475 (56.6)% 15,335 22,430 (31.6)%
</TABLE>
The decrease in net sales for the third quarter and first nine months
of 1999 compared to the third quarter and first nine months of 1998 is the
result of lower sales of locomotive overhauls to Class I railroads in the U.S.
at Boise Locomotive and a decrease in overhauls and third party work at MPI de
Mexico.
The decrease in operating income for the third quarter and first nine
months of 1999 compared to the third quarter and first nine months of 1998 is
primarily the result of lower sales volume along with the product mix at MPI de
Mexico where the planned reduction of overhauls on the base contract have been
replaced with lower-margin overhauls to third parties. Operating income for the
first nine months of 1998 was favorably impacted by a $1.2 million gain on the
expiration of a 1994 contract contingency.
The Company continues to observe some indications of near-term softness
in the North American freight market, affecting primarily heavy overhauls of
locomotives. However, the Company remains very optimistic about its long-term
prospects and competitive position.
Components Group
- ----------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------- -------------------------------------------------
1999 1998 % CHANGE 1999 1998 % CHANGE
------------ ----------- -------------- ------------- ------------- --------------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $60,469 $43,456 39.1% $201,500 $135,440 48.8%
Operating income 7,592 4,353 74.4% 31,418 18,602 68.9%
</TABLE>
The increase in net sales for the third quarter and first nine months
of 1999 compared to the third quarter and first nine months of 1998 is primarily
the result of net sales from the three companies
16
<PAGE> 17
acquired in November 1998 and January 1999 which approximated $15 million in the
third quarter of 1999 and $55.2 million in the first nine months of 1999.
Operating income increased in the third quarter and first nine months
of 1999 compared to the third quarter and first nine months of 1998 primarily
due to the acquisitions noted above, ongoing cost reductions and efficiency
improvements, reduced warranty expense, and efficiencies being realized from the
1998 capital expenditure projects which were largely within the Components
Group. The 1998 third quarter also included $2.3 million of facility relocation
expenses, while the first nine months of 1998 included $4.6 million of facility
relocation expenses and production inefficiencies associated with the renewal of
a union contract at Motor Coils. Excluding these expenses, operating income
increased 14.1% for the third quarter of 1999, compared to the third quarter of
1998, and 35.4% for the first nine months of 1999 compared to the first nine
months of 1998.
The Company has observed some indications of near-term softness in the
original equipment manufacturer's market. However, the Company remains very
optimistic about its long-term prospects and competitive position.
FINANCIAL CONDITION AND LIQUIDITY
On March 2, 1999, the Company amended and restated the terms of its
revolving credit facilities with a syndicate of 12 lenders led by ABN AMRO Bank
as agent. The amendment increased the amount of the credit line from $200
million to $350 million, available as a five-year $175 million revolving credit
facility, and a 364-day $175 million revolving credit facility, which the
Company may renew annually with the approval of the lenders. Under the new
facilities the Company may issue up to $35 million in letters of credit.
Capital spending for the nine months ended September 30, 1999 has
totaled $7.8 million, primarily for equipment upgrades and maintenance-type
items. The Company anticipates that capital spending in 1999 will be
approximately $10.5 million to $11.5 million. The Company is continuing to
monitor spending in 1999 and will closely monitor global economic indicators
before proceeding with projects which the Company believes can be delayed until
the year 2000.
The table below highlights the debt and cash position of the Company at the
dates noted:
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, 1999 DECEMBER 31, 1998
----------------- -----------------
(In thousands)
<S> <C> <C>
Revolver $117,000 $ 98,500
Industrial revenue bonds 6,889 7,298
-------- --------
Total debt 123,889 105,798
Less cash and cash equivalents 7,935 5,660
-------- --------
Net debt $115,954 $100,138
======== ========
</TABLE>
The Company's net debt increased in the first nine months of 1999 due
primarily to the acquisition of G&G Locotronics and Q-Tron in January 1999. With
the Company's credit facilities, the Company's cash position and the Company's
profitable operating results, management believes that its
17
<PAGE> 18
financing is adequate to support its normal operations, capital spending and
contemplated acquisitions (excluding the pending WABCO merger). 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:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Net cash provided by (used in):
Operating activities $ 21,727 $ 8,268
Investing activities (38,856) (18,045)
Financing activities 19,404 4,757
-------- --------
Net increase (decrease) in cash and cash equivalents $ 2,275 $ (5,020)
======== ========
Cash and cash equivalents at end of period $ 7,935 $ 11,877
======== ========
</TABLE>
Net cash provided by operating activities totaled $21.7 million for the
first nine months of 1999, compared to $8.3 million for the first nine months of
1998. Cash provided by operations in the first nine months of 1999 was primarily
the result of the Company's net income of $22.4 million, depreciation and
amortization of $11.8 million and a decrease in receivables from customers of
$6.7 million. These sources of cash were partially offset by an increase in
inventory of $6.7 million, a decrease in accounts payable and accrued expenses
of $9.8 million and other net changes of $2.7 million. The decrease in
receivables is primarily due to the timing of sales in the Locomotive Group. The
increase in inventory is primarily due to the purchase of locomotive core
inventory in the Locomotive Group in anticipation of sales to be completed in
the fourth quarter of 1999 and 2000. The decrease in accounts payable and
accrued expenses is primarily due to the timing of expenses.
Net cash used in investing activities totaled $38.9 million for the
first nine months of 1999 compared to $18 million for the first nine months of
1998. The increase in cash used in investing activities in the first nine months
of 1999 is due primarily to the acquisitions of G&G Locotronics and Q-Tron for
$31.3 million and capital expenditures of $7.8 million.
Net cash provided by financing activities totaled $19.4 million for the
first nine months of 1999 compared to $4.8 million for the first nine months of
1998. The increase in net cash provided by financing activities for the first
nine months of 1999 is due to increased borrowings under the Company's credit
facilities to fund the acquisitions of G&G Locotronics and Q-Tron, and to fund
capital expenditures and working capital requirements.
18
<PAGE> 19
BACKLOG
The Company defines backlog as future sales commitments which
constitute a binding agreement between the Company and the customer. Examples
include signed contracts and purchase orders. The Company is the preferred
supplier of certain components to certain customers, having received notice of
the customers' estimate of anticipated purchases. Because these notices are not
binding commitments, the Company does not include these amounts in backlog
calculations. At September 30, 1999, these anticipated purchases totaled $64
million. The Company's multi-year backlog, including contract commitments, was
$917 million at September 30, 1999, compared to $793 million at September 30,
1998.
The Company's multi-year locomotive fleet maintenance contracts account
for the majority of the Locomotive Group backlog. Multi-year fleet maintenance
contracts are expected to continue to produce additional sales of components and
parts.
The backlog as of September 30, 1999 and September 30, 1998 and the
expected year of recognition is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------------------------
1999 2000 OTHER YEARS TOTAL BACKLOG
---- ---- ----------- -------------
(In thousands)
<S> <C> <C> <C> <C>
Locomotive $ 30,950 $147,629 $629,376 $807,955
Components 31,211 13,149 524 44,884
-------- -------- -------- --------
Total $ 62,161 $160,778 $629,900 $852,839
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------------------------------------------
1999 2000 OTHER YEARS TOTAL BACKLOG
---- ---- ----------- -------------
(In thousands)
<S> <C> <C> <C> <C>
Locomotive $ 64,683 $ 80,473 $560,338 $705,494
Components 30,178 5,525 -- 35,703
-------- -------- -------- --------
Total $ 94,861 $ 85,998 $560,338 $741,197
======== ======== ======== ========
</TABLE>
INFORMATION TECHNOLOGY AND YEAR 2000 COMPLIANCE
The Company is currently engaged in a $7.2 million, multi-year
information technology upgrade and business improvement project. This project,
which encompasses all of the Company's subsidiaries, includes a thorough review
of manufacturing material flow and administrative business processes. Where
appropriate, hardware and software upgrades are being applied. To manage the
improved processes and systems moving forward, additional training,
implementation support and hiring of staff are being provided. The Company
expects that the project will improve working capital through improved material
management and production planning and control, in addition to cost reductions
for communications and other related expenses.
As part of its project, the Company is addressing the Year 2000
compliance issue. The Company has developed a four-step approach regarding the
Year 2000 compliance issue. The steps are to: (1) assess; (2) remediate; (3)
test and audit; and (4) develop a contingency plan. The Company is using both
internal and external resources to execute its plan. The Company is in the final
stages of completing the test and audit phase and continues to refine the
contingency plan. The Company's Year 2000 test and audit phase is divided into
three primary areas: mission critical application software, non-mission critical
software, and shop floor (manufacturing) equipment. All mission critical
business systems have been upgraded to software release levels that, per the
vendor, are Year 2000 compliant. Testing of these
19
<PAGE> 20
mission critical systems has been completed and no significant issues have been
discovered. The non-mission critical software applications are also being tested
as considered appropriate. The Company has also completed a detailed testing
program for all shop equipment that was identified as mission critical
equipment. The vast majority of this equipment has been certified Year 2000
compliant by the equipment manufacturer and verified by the Company. As of
September 30, 1999, the Company has not uncovered any significant problems with
respect to its detailed testing program. The Company is also completing the
remediation and testing phase for its own date sensitive products. In addition
to the Company's internal activities, the Company is in the process of
contacting key material suppliers, vendors and customers to determine their
readiness with respect to the year 2000. The Company developed a compliance
questionnaire, which was circulated to its key material suppliers, vendors and
customers in the third quarter of 1998. Suppliers have been divided into
critical and non-critical suppliers. The majority of the non-critical suppliers
have been assessed and the Company feels there are no significant Year 2000
related issues remaining with this supplier group. The Company has received
responses from 97% of the critical suppliers and has found no significant Year
2000 issues. The remaining 3% of the critical suppliers are being addressed by
attempted discussions with the suppliers and the development of the contingency
plan. In some cases, critical suppliers are being replaced due to the Company's
opinion that a supplier is presenting a higher risk to the Company than the
Company is willing to accept. The Company is also developing a contingency plan
for each critical supplier regardless of their compliance status. Specifically,
one of the four following actions are being taken for each of the critical
suppliers: (1) generate a second source of supply; (2) replace the supplier; (3)
increase inventory levels to cover potential delivery issues; and (4) on-site
verification that the supplier will not pose a risk to the Company.
The Company has estimated that as part of its $7.2 million information
technology upgrade project, approximately $1.1 million is specifically Year 2000
related. The Company has expended approximately $900,000 in completing the items
noted above as of September 30, 1999. These costs have been and are expected to
continue to be funded out of the Company's operating cash flow. The Company is
expensing as incurred all costs related specifically to Year 2000 activities;
however, costs associated with new systems and the Company's information
technology upgrade are being capitalized in accordance with the Company's
accounting policies. The Company continually reviews its cost estimates for the
Year 2000 project and makes changes as deemed necessary.
The Company's Year 2000 plan only contemplates its current group of
subsidiaries and does not consider future acquisition candidates or the pending
merger with WABCO. These acquisitions, if completed, will be evaluated
separately from the Company's current Year 2000 plan. Though the Company expects
to be Year 2000 compliant, the Company has developed a draft of the overall
contingency plan and is currently reviewing the document with each of its
Subsidiaries. The Contingency Plan, has been divided into seven primary
sections: (1) critical suppliers; (2) shop equipment; (3) mission critical
applications; (4) products; (5) banks; (6) facilities and utilities, and (7)
transportation. The plan will address specific actions to be taken in the event
of issues occurring in any of these seven areas. Despite the Company's efforts
and contingency plans, the most reasonably likely worst case scenario of a Year
2000 failure by the Company or its key suppliers, vendors or customers would
likely be a slowdown of the Company's manufacturing operations at one or more of
the Company's subsidiaries and/or an inability of the Company to process orders
and meet customer delivery schedules.
The foregoing discussion regarding the Year 2000 involves management's
current assessment and estimates with respect to the Company's Year 2000 efforts
which include inherent risks and uncertainties whereby the actual results could
differ materially from the discussion above. Various factors could cause actual
plans and results to differ materially from those contemplated by such
assessments and estimates and, as such, non-compliant computer systems and/or
non-compliant suppliers, vendors or customers could have a material adverse
effect on the Company's results of operations and financial condition.
20
<PAGE> 21
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains 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: a slowdown
in the U.S., Mexican and international economies or the freight and industrial
segments thereof; a decrease in North American Free Trade Agreement ("NAFTA")
rail traffic; continued rail consolidation by U.S. and Canadian railroads, which
could cause them to reduce purchases of goods and services; the Company's
ability to timely and efficiently implement productivity improvement plans; the
Company's ability to maintain current favorable relations with its labor unions;
and the Company's ability to successfully implement its information technology
upgrade and business improvement project, including "Year 2000" compliance. The
Company assumes no obligation to update these forward-looking statements or
advise of changes in the assumptions on which they were based.
21
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
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 August 23, 1999, a special meeting of shareholders was
held, at which shareholders voted on and approved the
following matter:
"The approval and adoption of the Agreement and Plan of
Merger, dated June 2, 1999, between Westinghouse Air Brake
Company and MotivePower Industries, Inc."
For 18,978,507
Against 67,215
Abstain 14,899
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS:
27.01 Article 5 Financial Data Schedule as of and for the nine months
ended September 30, 1999.
REPORTS ON FORM 8-K
1. A current report on Form 8-K dated August 18, 1999 to announce that
joint Westinghouse Air Brake and MotivePower 1999 earnings would be
less than had been indicated at the announcement of the merger.
2. A current report on Form 8-K dated September 28, 1999 to announce
the signing of a revised merger agreement between the Company and
Westinghouse Air Brake Company.
3. A current report on Form 8-K dated October 15, 1999 to announce
earnings for the quarter ended September 30, 1999.
22
<PAGE> 23
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/ David L. Bonvenuto
-------------------------------
David L. Bonvenuto
Vice President, Controller and
Principal Accounting Officer
Date: November 10, 1999
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS CONSOLIDATED SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 7,935
<SECURITIES> 0
<RECEIVABLES> 57,328
<ALLOWANCES> 670
<INVENTORY> 105,308
<CURRENT-ASSETS> 186,868
<PP&E> 157,490
<DEPRECIATION> 64,312
<TOTAL-ASSETS> 409,168
<CURRENT-LIABILITIES> 61,929
<BONDS> 123,317
0
0
<COMMON> 263
<OTHER-SE> 202,238
<TOTAL-LIABILITY-AND-EQUITY> 409,168
<SALES> 294,347
<TOTAL-REVENUES> 294,347
<CGS> 218,752
<TOTAL-COSTS> 218,752
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,136
<INCOME-PRETAX> 34,841
<INCOME-TAX> 12,465
<INCOME-CONTINUING> 22,376
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,376
<EPS-BASIC> 0.83
<EPS-DILUTED> 0.80
</TABLE>
