<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 June 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 July 31, 1999
- ---------------------------- ----------------------------
Common stock, $.01 par value 27,046,110
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MOTIVEPOWER INDUSTRIES, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 1999
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 3
30, 1999 and 1998 (Unaudited)
Condensed Consolidated Balance Sheets at June 30, 1999 (Unaudited) and December 31, 4
1998
Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended 5
June 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 23
Item 6. Exhibits and Reports on Form 8-K 23
Signature 24
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MOTIVEPOWER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
(In thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 98,663 $ 88,461 $ 205,937 $ 171,314
Cost of sales (70,977) (67,125) (150,728) (128,622)
--------- --------- --------- ---------
Gross profit 27,686 21,336 55,209 42,692
Selling, general and administrative expenses (11,518) (10,144) (24,236) (20,497)
--------- --------- --------- ---------
Operating income 16,168 11,192 30,973 22,195
Investment income 243 279 614 558
Interest expense (2,416) (1,314) (4,610) (2,527)
Other income 217 1,855 183 1,945
Foreign exchange (loss) gain (31) 241 (569) 829
--------- --------- --------- ---------
Income before income taxes and extraordinary item 14,181 12,253 26,591 23,000
Income tax expense (4,974) (4,383) (9,506) (8,010)
--------- --------- --------- ---------
Income before extraordinary item 9,207 7,870 17,085 14,990
Extraordinary loss on extinguishment of debt, net of
income tax benefit of $265 -- -- -- (472)
--------- --------- --------- ---------
Net income $ 9,207 $ 7,870 $ 17,085 $ 14,518
========= ========= ========= =========
EARNINGS PER COMMON SHARE - BASIC:
Income before extraordinary item $ .34 $ .29 $ .63 $ .56
Extraordinary item -- -- -- (.02)
--------- --------- --------- ---------
Net income $ .34 $ .29 $ .63 $ .54
========= ========= ========= =========
Weighted average common shares outstanding 27,053 26,751 27,019 26,730
EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Income before extraordinary item $ .33 $ .28 $ .61 $ .54
Extraordinary item -- -- -- (.02)
--------- --------- --------- ---------
Net income $ .33 $ .28 $ .61 $ .52
========= ========= ========= =========
Weighted average common shares outstanding 28,187 27,957 28,159 27,891
</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 JUNE 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998
(In thousands except per share data)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
ASSETS 1999 1998
----------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,508 $ 5,660
Receivables from customers:
Billed, net of allowance for doubtful accounts of $653 and $673, respectively 54,440 54,428
Unbilled 977 2,831
Inventories 104,759 92,993
Deferred income taxes 7,308 6,765
Income tax receivable -- 5,216
Other 5,393 4,230
--------- ---------
Total current assets 179,385 172,123
Locomotive lease fleet, net 1,147 1,189
Property, plant and equipment:
Land 2,512 2,420
Buildings and improvements 51,988 50,997
Machinery and equipment 101,483 94,143
--------- ---------
Property, plant and equipment, cost 155,983 147,560
Less accumulated depreciation 61,177 54,492
--------- ---------
Property, plant and equipment, net 94,806 93,068
Underbillings - MPI de Mexico 28,129 26,775
Goodwill and other intangibles, net 87,724 63,593
Other 14,726 14,450
--------- ---------
Total assets $ 405,917 $ 371,198
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 564 $ 549
Accounts payable - trade 28,785 34,293
Accrued expenses and other current liabilities 28,822 30,919
Income taxes payable 215 --
Revolving credit agreement borrowings -- 10,000
Advances from customers 359 1,174
--------- ---------
Total current liabilities 58,745 76,935
Long-term debt 131,963 95,249
Commitments and contingencies 17,182 19,205
Deferred income taxes 500 559
Other 1,401 1,321
--------- ---------
Total liabilities 209,791 193,269
--------- ---------
Stockholders' Equity:
Common stock, par value $.01 per share 260 179
Additional paid-in capital 207,523 206,434
Deficit (6,169) (23,156)
Accumulated other comprehensive income (5,213) (5,105)
Deferred compensation 5,766 4,113
--------- ---------
202,167 182,465
Less - Treasury stock, at cost 6,041 4,536
--------- ---------
Total stockholders' equity 196,126 177,929
--------- ---------
Total liabilities and stockholders' equity $ 405,917 $ 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 SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
Operating Activities
- --------------------
<S> <C> <C> <C> <C>
Net income $ 9,207 $ 7,870 $ 17,085 $ 14,518
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
Depreciation 2,892 1,961 5,735 3,614
Amortization 1,009 757 1,980 1,583
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 1,198 3,696 7,919 (4,506)
Inventories (5,220) (3,928) (6,198) (12,336)
Underbillings - MPI de Mexico (1,261) 658 (1,354) 5,234
Accounts payable and accrued expenses (8,395) 7,682 (12,226) 324
Advances from customers 77 461 (815) 899
Other, net 360 (201) 910 3,884
-------- -------- -------- --------
Net cash (used in) provided by operating activities (133) 18,956 13,036 13,686
-------- -------- -------- --------
Investing Activities
- --------------------
Payment for purchase of G&G Locotronics -- -- (17,770) --
Payment for purchase of Q-Tron -- -- (14,854) --
Purchase of property, plant and equipment (2,599) (8,549) (6,368) (14,722)
Other, net (439) 2,997 (196) 3,035
-------- -------- -------- --------
Net cash used in investing activities (3,038) (5,552) (39,188) (11,687)
-------- -------- -------- --------
Financing Activities
- --------------------
Increase in intangibles (137) -- (841) --
Net (repayments) borrowings under credit facilities (1,637) (12,000) 26,729 (11,674)
Proceeds from exercise of stock options including tax-related
benefit 105 122 1,089 287
Other, net 178 -- 23 --
-------- -------- -------- --------
Net cash (used in) provided by financing activities (1,491) (11,878) 27,000 (11,387)
-------- -------- -------- --------
Net (decrease) increase in cash and cash equivalents (4,662) 1,526 848 (9,388)
Cash and cash equivalents at beginning of period 11,170 5,983 5,660 16,897
-------- -------- -------- --------
Cash and cash equivalents at end of period $ 6,508 $ 7,509 $ 6,508 $ 7,509
======== ======== ======== ========
Supplemental Disclosures of Cash Flow Information
Interest paid $ 2,046 $ 1,490 $ 3,982 $ 1,866
Income taxes paid, net 4,754 4,083 4,798 3,424
</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. FINANCIAL STATEMENTS
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 June 30, 1999 and the results of its operations
and its cash flows for the three and six months ended June 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 six months ended June 30, 1999 are not
necessarily indicative of the results to be expected for the full year.
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.
On June 2, 1999, the Company agreed to merge with Westinghouse Air Brake
Company ("WABCO"). The Company will be the surviving corporation. Upon
shareholder approval, each share of WABCO common stock will be converted into
1.3 shares of the Company's common stock. The merger is intended to be a
tax-free reorganization for federal income tax purposes. The Company intends 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 August 23, 1999. The Company has filed an S-4 which
became effective on July 22, 1999. Please refer to that document for further
details regarding the proposed merger.
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.
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.
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.
6
<PAGE> 7
2. COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax effects, are
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
(In thousands)
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $ 9,207 $ 7,870 $ 17,085 $ 14,518
Foreign currency translation adjustment 108 -- (108) --
-------- -------- -------- --------
Comprehensive income $ 9,315 $ 7,870 $ 16,977 $ 14,518
======== ======== ======== ========
</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.
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------- -------
(In thousands)
<S> <C> <C>
Cores $17,419 $11,854
Raw materials 52,245 46,646
Work in progress 11,114 14,411
Finished goods 23,981 20,082
-------- -------
$104,759 $92,993
======== =======
</TABLE>
Approximately $39.1 million and $38.3 million of total inventories at
June 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 $2.1 million and $1.9 million at June
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
4. 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 June 30, 1999, the Company had
$125.5 million drawn under its LIBOR option at an effective annual interest rate
of 5.8%.
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 June 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 June
30, 1999 as $137 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 June 30, 1999 were as
follows: 1999 - $277,000; 2000 - $577,000; 2001 - $610,000; 2002- $644,000; 2003
- - $680,000 thereafter - $129.7 million.
5. 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 June 30, 1999, using a discount rate
of 5.25%, 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 June 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.
6. 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 June 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 $ 32,358 $ 73,988 $106,346 $ 44,213 $ 53,270 $ 97,483
Intercompany sales 1,029 6,654 7,683 2,104 6,918 9,022
Operating income 6,655 11,203 17,858 7,333 6,631 13,964
</TABLE>
9
<PAGE> 10
Following is unaudited condensed segment financial information for the
six months ended June 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 $ 66,222 $153,448 $219,670 $ 83,207 $105,279 $188,486
Intercompany sales 1,317 12,416 13,733 3,878 13,294 17,172
Operating income 11,654 23,827 35,481 13,955 14,249 28,204
Segment assets 122,793 267,684 390,477 134,711 148,322 283,033
</TABLE>
The following reconciles segment information presented above to the unaudited
condensed consolidated financial statements:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- --------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
NET SALES:
Gross sales from segments $ 106,346 $ 97,483 $ 219,670 $ 188,486
Intercompany sales elimination
(7,683) (9,022) (13,733) (17,172)
--------- --------- --------- ---------
Net sales
$ 98,663 $ 88,461 $ 205,937 $ 171,314
========= ========= ========= =========
OPERATING INCOME:
Segment operating income $ 17,858 $ 13,964 $ 35,481 $ 28,204
Unallocated corporate expenses (1,690) (2,772) (4,508) (6,009)
--------- --------- --------- ---------
Operating income
$ 16,168 $ 11,192 $ 30,973 $ 22,195
========= ========= ========= =========
ASSETS:
Segment assets
$ 390,477 $ 283,033
Corporate assets, including domestic deferred income taxes
17,814 8,821
--------- ---------
Total assets
$ 408,291 $ 291,854
========= =========
</TABLE>
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<PAGE> 11
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 and joint ventures with other global rail industry
suppliers.
SIGNIFICANT EVENTS
During the quarter ended June 30, 1999, the Company has been party to
the following transactions and events:
- On June 2, 1999, the Company agreed to merge with Westinghouse Air
Brake Company ("WABCO"). The Company will be the surviving
corporation. Upon shareholder approval, each share of WABCO common
stock will be converted into 1.3 shares of the Company's common
stock. The merger is intended to be a tax-free reorganization for
federal income tax purposes. The Company intends 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 August 23, 1999.
- On June 9, 1999, the Company announced that it had received an
order to manufacture 50 low-horsepower switcher locomotives for
the Electro-Motive Division of General Motors for approximately
$35 million.
- On June 15, 1999, the Company announced that its MPI de Mexico
subsidiary had been awarded a $5 million dollar contract to
overhaul 12 locomotives for Ferromex, a joint venture that
operates the Pacific North region of the Mexican rail system and
25% of the Mexico City terminal and short line.
11
<PAGE> 12
- On June 22, 1999, the Company announced that it had received $7
million worth of orders from Egyptian National Railways, which
owns and operates the largest fleet of locomotives in North Africa
and the Middle East regions. The order includes remanufactured
traction motors and locomotive replacement parts.
- On June 25, 1999, the Company announced that its Boise Locomotive
subsidiary was awarded a $21 million contract to overhaul 25
commuter locomotives for the Massachusetts Bay Transportation
Authority. The agreement includes an option for the overhaul of 12
additional units in 2001.
12
<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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales (71.9) (75.9) (73.2) (75.1)
----- ----- ----- -----
Gross profit 28.1 24.1 26.8 24.9
Selling, general and administrative expenses (11.7) (11.5) (11.8) (12.0)
----- ----- ----- -----
Operating income 16.4 12.6 15.0 12.9
Investment income 0.2 0.3 0.3 0.3
Interest expense (2.4) (1.4) (2.2) (1.4)
Other income 0.2 2.1 0.1 1.1
Foreign exchange (loss) gain (0.1) 0.3 (0.3) 0.5
----- ----- ----- -----
Income before income taxes and extraordinary item 14.3 13.9 12.9 13.4
Income tax expense (5.0) (5.0) (4.6) (4.6)
----- ----- ----- -----
Income before extraordinary item 9.3 8.9 8.3 8.8
Extraordinary item -- -- -- (0.3)
----- ----- ----- -----
Net income 9.3% 8.9% 8.3% 8.5%
===== ===== ===== =====
</TABLE>
CONSOLIDATED UNAUDITED OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
------------------------------------------
1999 1998 %CHANGE
-------- -------- -----------
(In thousands)
<S> <C> <C> <C>
Net sales $ 98,663 $ 88,461 11.5%
Gross profit 27,686 21,336 29.8%
Selling, general and administrative expenses (11,518) (10,144) 13.5%
Operating income 16,168 11,192 44.5%
Net income 9,207 7,870 17.0%
</TABLE>
13
<PAGE> 14
Net sales for the second quarter of 1999 were $98.7 million, compared
to $88.5 million for the second quarter of 1998, an increase of 11.5% The
increase in net sales is attributed to a 45.3% increase in sales in the
Components Group partially offset by a 25.6% decrease in the Locomotive Group.
Included in the Components Group in 1999 were net sales of approximately $19.6
million from the companies acquired in November 1998 and January 1999.
Gross profit for the second quarter of 1999 was $27.7 million or 28.1%
of net sales, compared to $21.3 million or 24.1% of net sales for the second
quarter of 1998. The second quarter of 1998 was unfavorably impacted by $1.7
million of expenses for relocation and startup of certain facilities in the
Components Group. Excluding these expenses, the Company's gross margin was 26.1%
for the second quarter of 1998. The increase in gross profit is primarily the
result of ongoing cost reductions and efficiency improvements on long-term
contracts in Mexico, reduced warranty expense, a favorable product mix, and
efficiencies being realized from the 1998 capital expenditures.
Selling, general and administrative expenses for the second quarter of
1999 were $11.5 million, compared to $10.1 million for the second quarter of
1998. The increase is attributed to expenses of approximately $2.4 million from
the companies acquired in November 1998 and January 1999. Excluding these
expenses, selling, general and administrative expenses declined as a percentage
of net sales compared to the second quarter of 1998 due to the Company's
continuing focus on cost controls and lower incentive-related expenses based on
subsidiary operating performance.
Interest expense for the second quarter of 1999 was $2.4 million,
compared to $1.3 million for the second 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 $31,000 in the second
quarter of 1999, compared to a foreign exchange gain of $241,000 in the second
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 gain (loss)
on pretax income, income tax expense for the second quarter of 1999 was $5
million, or 35% of pre-tax income, compared to $4.4 million or 36.5% of pre-tax
income for the second quarter 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.
14
<PAGE> 15
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------------------
1999 1998 % CHANGE
--------- --------- -----------
(In thousands)
<S> <C> <C> <C>
Net sales $ 205,937 $ 171,314 20.2%
Gross profit 55,209 42,692 29.3%
Selling, general and administrative expenses (24,236) (20,497) 18.2%
Operating income 30,973 22,195 39.5%
Income before extraordinary item 17,085 14,990 14.0%
Net income 17,085 14,518 17.7%
</TABLE>
Net sales for the first half of 1999 were $205.9 million, compared to
$171.3 million for the first half of 1998, an increase of 20.2%. The increase in
net sales is attributed to a 53.3% increase in sales in the Components Group
partially offset by an 18.2% decrease in the Locomotive Group. Included in the
Components Group in 1999 were net sales of approximately $40.3 million from
companies acquired in November 1998 and January 1999.
Gross profit for the first half of 1999 was $55.2 million or 26.8% of
net sales compared to $42.7 million or 24.9% of net sales for the first half of
1998. The first half of 1998 was favorably impacted by a gain of $1.2 million
related to a 1994 contract contingency that expired and was unfavorably impacted
by $2.3 million of expenses for the relocation of certain production facilities
in the Components Group. Excluding these impacts, the Company's gross margin for
the first half of 1998 was 25.6%. The increase in gross profit is primarily the
result of ongoing cost reduction and efficiency improvements on long-term
contracts in Mexico, reduced warranty expense, a favorable product mix and
efficiencies being realized from the 1998 capital expenditures.
Selling, general and administrative expenses for the first half of 1999
were $24.2 million, compared to $20.5 million for the first half of 1998. The
increase is primarily attributed to expenses of $4.8 million from companies
acquired in November 1998 and January 1999. Excluding these expenses, selling,
general and administrative expenses declined as a percentage of net sales
compared to the first half of 1998 due to the Company's continuing focus on cost
controls and lower incentive-related expenses based on subsidiary operating
performance.
Interest expense for the first half of 1999 was $4.6 million, compared
to $2.5 million for the first half 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 half of 1999 was $183,000, compared to $1.9
million for the first half of 1998. The decrease is due to the Company selling
its remaining investment in Argentina during the second quarter of 1998.
The Company realized a foreign exchange loss of $569,000 in the first
half of 1999, compared to a foreign exchange gain of $829,000 in the first half
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.
15
<PAGE> 16
Locomotive Group
- ----------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------ ----------------------------------------
1999 1998 % CHANGE 1999 1998 % CHANGE
------- ------- -------- ------- ------- ---------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $31,329 $42,109 (25.6)% $64,905 $79,330 (18.2)%
Operating income 6,655 7,333 (9.2)% 11,654 13,955 (16.5)%
</TABLE>
The decrease in net sales for the second quarter and first half of 1999
compared to the second quarter and first half of 1998 is the result of lower
sales of locomotive overhauls to Class I railroads in the U.S. at Boise
Locomotive, offset partially by increased sales volume of overhauls and third
party work at MPI de Mexico.
The decrease in operating income for the second quarter of 1999
compared to the second quarter of 1998 is due to lower sales volume at Boise
Locomotive offset partially by ongoing cost reductions and efficiency
improvements on long-term contracts at MPI de Mexico.
The decrease in operating income for the first half of 1999 compared to
the first half of 1998 is due to the first half of 1998 including a $1.2 million
non-recurring gain related to a 1994 contract contingency that expired in the
first quarter of 1998. Excluding this non-recurring gain, operating income
decreased 9% due to lower sales volume at Boise Locomotive offset partially by
ongoing cost reductions and efficiency improvements on long-term contracts at
MPI de Mexico.
The Company continues to observe some indications of near-term softness
in the North American freight market. However, the Company remains very
optimistic about its long-term prospects and competitive position.
Components Group
- ----------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------------- ---------------------------------------
1999 1998 % CHANGE 1999 1998 % CHANGE
-------- -------- -------- -------- ----------- --------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 67,334 $ 46,352 45.3% $141,032 $ 91,984 53.3%
Operating income 11,203 6,631 68.9% 23,827 14,249 67.2%
</TABLE>
The increase in net sales for the second quarter and first half of 1999
compared to the second quarter and first half of 1998 is primarily the result of
net sales from the companies acquired in November 1998 and January 1999 which
approximated $19.6 million in the second quarter of 1999 and $40.3 million in
the first half of 1999.
Operating income increased in the second quarter and first half of 1999
compared to the second quarter and first half of 1998 primarily due to the
acquisitions noted above, reduced warranty expense, a favorable product mix, and
efficiencies being realized from the 1998 capital expenditure projects which
were largely within the Components Group. The 1998 second quarter also included
$1.7 million of facility relocation expenses, while the first half of 1998
included $2.3 million of facility relocation expenses. Excluding these expenses,
operating income increased 34.5% for the second quarter of 1999, compared to the
second quarter of 1998, and 44.0% for the first half of 1999 compared to the
first half of 1998.
16
<PAGE> 17
The Company has observed some indications of near-term softness in the
original equipment manufacturer's market. However, the Company remains
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 six months ended June 30, 1999 has totaled
$6.4 million, primarily for equipment upgrades and maintenance-type items. The
Company anticipates that capital spending in 1999 will be approximately $11
million to $13 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)
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
(In thousands)
<S> <C> <C>
Revolver $125,500 $ 98,500
Industrial revenue bonds 7,027 7,298
-------- --------
Total debt 132,527 105,798
Less cash and cash equivalents 6,508 5,660
-------- --------
Net debt $126,019 $100,138
======== ========
</TABLE>
The Company's net debt increased in the first half 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 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.
17
<PAGE> 18
The following table summarizes the net changes in cash flows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Net cash provided by (used in):
Operating activities $ 13,036 $ 13,686
Investing activities (39,188) (11,687)
Financing activities 27,000 (11,387)
-------- --------
Net increase (decrease) in cash and cash equivalents $ 848 $ (9,388)
======== ========
Cash and cash equivalents at end of period $ 6,508 $ 7,509
======== ========
</TABLE>
Net cash provided by operating activities totaled $13 million for the
first half of 1999, compared to $13.7 million for the first half of 1998. Cash
provided by operations in the first half of 1999 was primarily the result of the
Company's net income of $17.1 million, depreciation and amortization of $7.7
million and a decrease in receivables from customers of $7.9 million. These
sources of cash were partially offset by an increase in inventory of $6.2
million, a decrease in accounts payable and accrued expenses of $12.2 million
and other net changes of $1.3 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 core inventory in the Locomotive Group in
anticipation of sales to be completed in the second half 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 $39.2 million for the
first half of 1999 compared to $11.7 million for the first half of 1998. The
increase in cash used in investing activities in the first half of 1999 is due
primarily to the acquisitions of G&G Locotronics and Q-Tron for $32.6 million
and capital expenditures of $6.4 million.
Net cash provided by financing activities totaled $27 million for the
first half of 1999 compared to net cash used in financing activities of $11.4
million in the first half of 1998. The increase in net cash provided by
financing activities in the first half 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 June 30, 1999, these anticipated purchases totaled $230
million. The Company's multi-year backlog, including contract commitments, was
$929 million at June 30, 1999, compared to $811 million at June 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 June 30, 1999 and June 30, 1998 and the expected year
of recognition is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999
--------------------------------------------------------
1999 2000 OTHER YEARS TOTAL BACKLOG
-------- -------- ----------- -------------
(In thousands)
<S> <C> <C> <C> <C>
Locomotive $ 60,210 $106,575 $484,547 $651,332
Components 46,267 1,391 525 48,183
-------- -------- -------- --------
Total $106,477 $107,966 $485,072 $699,515
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------------------------------------------
1999 2000 OTHER YEARS TOTAL BACKLOG
-------- -------- ----------- -------------
(In thousands)
<S> <C> <C> <C> <C>
Locomotive $ 86,080 $ 79,408 $560,357 $725,845
Components 29,369 782 -- 30,151
-------- -------- -------- --------
Total $115,449 $ 80,190 $560,357 $755,996
======== ======== ======== ========
</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
process of completing the test and audit phase and has begun developing 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 mission critical systems is
nearing completion and no significant issues have been discovered. The
non-mission critical software applications are also being tested as considered
appropriate. The Company has
19
<PAGE> 20
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 June 30, 1999, the Company has not uncovered any
significant problems with respect to its detailed testing program. The focus is
now on remediating non-mission critical systems. The Company expects that the
remediation and testing of all mission critical and non-mission critical systems
will be completed in the third quarter of 1999. The Company is also in the
remediation and testing phase for its own date sensitive products. The vast
majority of the Company's products were already, or have been upgraded to be,
Year 2000 compliant. The Company expects to complete the remediation and testing
of all products by August 31, 1999. 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 92% of the critical suppliers and
has found no significant Year 2000 issues. The remaining 8% 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 $800,000 in completing the items
noted above as of June 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, cost 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, a contingency plan is to be finalized by August 31,
1999. As the results of the Company's test and audit phase of the Year 2000
Program begin to materialize, the Company has started developing the overall
contingency plan. The plan has been divided into six primary sections: (1)
critical suppliers; (2) shop equipment; (3) mission critical applications; (4)
products; (5) banks; and (6) facilities. The plan will address specific actions
to be taken in the event of issues occurring in any of these six 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. or Mexican 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; a strengthening or a weakening
of the U.S. dollar and/or a change in the availability of letters of credit in
targeted foreign markets; 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
The Company was 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 denied 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 cylinder liners to potential Samyoung
customers.
On July 17, 1999, judgement was rendered in favor of the Company and the
Company was awarded $500,000 in damages and $300,000 in legal fees. The
Company will record the settlement when received.
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 April 27, 1999, 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 John C. Pope and Nicholas J. Stanley to the
Board of Directors for a term of three years. A summary of the
voting results is as follows:
John C. Pope Nicholas J. Stanley
------------ -------------------
For 14,366,392 14,366,026
Abstain 143,675 144,041
2. The appointment of Deloitte & Touche LLP as the Company's
independent auditors. A summary of the voting results is as
follows:
For 14,196,291
Against 276,124
Abstain 6,298
22
<PAGE> 23
3. The reincorporation of the Company as a Pennsylvania
corporation. A summary of the voting results is as follows:
For 9,553,219
Against 3,770,925
Abstain 15,145
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 six months
ended June 30, 1999.
99.0 Consent of James V. Napier.
REPORTS ON FORM 8-K
1. A current report on Form 8-K (Item 5) dated May 14, 1999 to report
the approval by stockholders of the reincorporation of the Company
from a Delaware to a Pennsylvania corporation.
2. A current report on Form 8-K (Item 5) dated June 3, 1999 to announce
the signing of a merger agreement between the Company and
Westinghouse Air Brake Company.
23
<PAGE> 24
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: August 16, 1999
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS CONSOLIDATED SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH
31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,508
<SECURITIES> 0
<RECEIVABLES> 56,070
<ALLOWANCES> 653
<INVENTORY> 104,759
<CURRENT-ASSETS> 179,385
<PP&E> 155,983
<DEPRECIATION> 61,177
<TOTAL-ASSETS> 405,917
<CURRENT-LIABILITIES> 58,745
<BONDS> 131,963
0
0
<COMMON> 260
<OTHER-SE> 195,866
<TOTAL-LIABILITY-AND-EQUITY> 405,917
<SALES> 205,937
<TOTAL-REVENUES> 205,937
<CGS> 150,728
<TOTAL-COSTS> 150,728
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,610
<INCOME-PRETAX> 26,591
<INCOME-TAX> 9,506
<INCOME-CONTINUING> 17,085
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,085
<EPS-BASIC> 0.63
<EPS-DILUTED> 0.61
</TABLE>
<PAGE> 1
EXHIBIT 99.0
CONSENT OF JAMES V. NAPIER
I hereby consent to being named as a person who will become a director of
MotivePower Industries, Inc., a Pennsylvania corporation ("MotivePower") in
connection with the consummation of the merger (the "Merger") contemplated by
the Agreement and Plan of Merger, dated as of June 2, 1999, among MotivePower
and Westinghouse Air Brake Company, a Delaware corporation, in the Registration
Statement on Form S-4 to be filed by MotivePower with the Securities and
Exchange Commission in connection with the Merger (the "Registration
Statement"), and to the filing of this consent as an exhibit to the Registration
Statement.
Signature: /s/ James V. Napier
----------------------
James V. Napier
