<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, 2000
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 1-13782
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 25-1615902
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1001 AIR BRAKE AVENUE
WILMERDING, PENNSYLVANIA 15148 (412) 825-1000
(Address of principal executive offices) (Registrant's telephone number)
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 and (2) has been subject to such filing
requirements for at least the past 90 days. Yes X No .
--- ---
As of October 23, 2000, 42,870,232 shares of Common Stock of the
registrant were issued and outstanding.
================================================================================
<PAGE> 2
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
SEPTEMBER 30, 2000 FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations for the
three months and nine months ended September 30, 2000 and
1999 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Position and
Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
2
<PAGE> 3
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 30 DECEMBER 31
In thousands, except shares and par value 2000 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 11,117 $ 7,056
Accounts receivable 208,714 179,734
Inventories 218,096 211,396
Other current assets 33,879 39,062
---------- ---------
Total current assets 471,806 437,248
Property, plant and equipment 403,597 395,687
Accumulated depreciation (189,347) (172,996)
---------- ---------
Property, plant and equipment, net 214,250 222,691
OTHER ASSETS
Contract underbillings 24,994 27,710
Goodwill, net 228,169 233,760
Other intangibles, net 39,993 43,287
Other noncurrent assets 27,719 31,980
---------- ---------
Total other assets 320,875 336,737
---------- ---------
Total Assets $1,006,931 $ 996,676
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 741 $ 743
Accounts payable 88,001 87,388
Accrued merger and restructuring costs 5,388 8,705
Customer deposits 23,109 31,827
Accrued income taxes 6,947 5,155
Accrued interest 6,578 2,470
Other accrued liabilities 61,286 57,924
---------- ---------
Total current liabilities 192,050 194,212
Long-term debt 571,853 567,844
Reserve for postretirement and pension benefits 20,967 19,918
Other long-term liabilities 32,922 32,824
---------- ---------
Total liabilities 817,792 814,798
SHAREHOLDERS' EQUITY
Preferred stock, 1,000,000 shares authorized, no shares issued -- --
Common stock, $.01 par value; 100,000,000 shares authorized:
65,447,867 shares issued and 43,007,032 outstanding at September 30, 2000
and 51,529,331 outstanding at December 31, 1999 654 654
Additional paid-in capital 272,541 318,357
Treasury stock, at cost, 22,440,835 and 13,918,536 shares, respectively (282,334) (201,711)
Unearned ESOP shares, at cost, 8,366,076 shares at December 31, 1999 -- (125,491)
Retained earnings 214,396 194,772
Deferred compensation 2,832 6,595
Accumulated other comprehensive income (loss) (18,950) (11,298)
---------- ---------
Total shareholders' equity 189,139 181,878
---------- ---------
Total Liabilities and Shareholders' Equity $1,006,931 $ 996,676
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
In thousands, except per share data 2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 255,163 $ 260,881 $ 763,186 $ 852,003
Cost of sales (187,587) (182,321) (551,847) (593,357)
------------------------------------------------------------------
Gross profit 67,576 78,560 211,339 258,646
Selling, general and administrative expenses (28,894) (26,167) (86,090) (90,783)
Restructuring charges (11,452) -- (19,391) --
Engineering expenses (7,813) (8,796) (24,100) (27,332)
Amortization expense (3,584) (3,877) (10,850) (10,694)
------------------------------------------------------------------
Total operating expenses (51,743) (38,840) (140,431) (128,809)
Income from operations 15,833 39,720 70,908 129,837
Other income and expenses
Interest expense (11,812) (11,273) (33,843) (33,747)
Other income (expense), net (1,619) (486) 3,514 (738)
------------------------------------------------------------------
Income before income taxes and extraordinary item 2,402 27,961 40,579 95,352
Income tax expense (5,931) (10,150) (19,675) (34,854)
------------------------------------------------------------------
(Loss) income before extraordinary item (3,529) 17,811 20,904 60,498
Extraordinary loss on extinguishment of debt, net of tax -- -- -- (469)
------------------------------------------------------------------
Net (loss) income $ (3,529) $ 17,811 $ 20,904 $ 60,029
==================================================================
EARNINGS PER COMMON SHARE
Basic
(Loss) income before extraordinary item $ (0.08) $ 0.41 $ 0.48 $ 1.40
Extraordinary item -- -- -- (0.01)
------------------------------------------------------------------
Net (loss) income $ (0.08) $ 0.41 $ 0.48 $ 1.39
==================================================================
Diluted
(Loss) income before extraordinary item $ (0.08) $ 0.40 $ 0.48 $ 1.36
Extraordinary item -- -- -- (0.01)
------------------------------------------------------------------
Net (loss) income $ (0.08) $ 0.40 $ 0.48 $ 1.35
==================================================================
Weighted average shares outstanding
Basic 43,415 43,528 43,352 43,307
Diluted 43,439 44,612 43,433 44,470
------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED
SEPTEMBER 30
In thousands 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 20,904 $ 60,029
Adjustments to reconcile net income to cash provided by operations:
Extraordinary loss on extinguishment of debt -- 469
Depreciation and amortization 31,654 31,471
Provision for ESOP contribution 1,315 3,273
Gain on sale of product line (4,375) --
Write-off deferred income tax asset 5,067 --
Other, primarily non-cash restructuring related charges 1,895 --
Changes in operating assets and liabilities, net
of acquisitions
Accounts receivable (32,409) 16,858
Inventories (8,979) (13,173)
Accounts payable 2,143 (23,211)
Accrued income taxes 2,103 5,188
Accrued liabilities and customer deposits (3,041) (3,333)
Other assets and liabilities 9,595 (9,597)
--------------------------
Net cash provided by operating activities 25,872 67,974
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net (17,833) (25,516)
Acquisitions of businesses, net of cash acquired (650) (32,242)
Cash received from disposition of product line 5,500 --
Other -- 248
--------------------------
Net cash (used for) investing activities (12,983) (57,510)
FINANCING ACTIVITIES
Proceeds from (repayments of) credit agreements 22,200 (42,615)
Proceeds from senior notes offering -- 75,000
Repayments of other borrowings (18,193) (40,717)
Purchase of treasury stock (10,361) --
Cash dividends (1,277) (741)
Proceeds from exercise of stock options and other stock based benefit plans 3,922 4,194
Other -- 58
--------------------------
Net cash (used for) financing activities (3,709) (4,821)
Effect of changes in currency exchange rates (5,119) 796
--------------------------
Increase in cash 4,061 6,439
Cash, beginning of year 7,056 8,983
--------------------------
Cash, end of period $ 11,117 $ 15,422
==========================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 (UNAUDITED)
1. BUSINESS
Westinghouse Air Brake Technologies Corporation (the "Company", "Wabtec") is
North America's largest manufacturer of value-added equipment for locomotives,
railway freight cars and passenger transit vehicles. Our major products are
intended to enhance safety, improve productivity and reduce maintenance costs
for our customers and include electronic controls and monitors, air brakes,
traction motors, cooling equipment, turbochargers, low-horsepower locomotives,
couplers, door controls, draft gears and brake shoes. The Company aggressively
pursues technological advances with respect to both new product development and
product enhancements.
The Company has two reporting segments: Freight Group and Transit Group.
Although approximately 60% of the Company's sales are to the aftermarket, a
significant portion of the Freight Group's operations and revenue base is
generally dependent on the capital replacement cycles for locomotives and
freight cars of the large North American-based railroad companies. The Transit
Group's operations are dependent on the budgeting and expenditure appropriation
process of federal, state and local governmental units for mass transit needs
established by public policy.
2. ACCOUNTING POLICIES
BASIS OF PRESENTATION The unaudited condensed consolidated interim financial
statements have been prepared in accordance with generally accepted accounting
principles and the rules and regulations of the Securities and Exchange
Commission and include the accounts of Wabtec and its majority owned
subsidiaries. These condensed interim financial statements do not include all of
the information and footnotes required for complete financial statements. In
management's opinion, these financial statements reflect all adjustments, which
are of a normal, recurring nature, necessary for a fair presentation of the
results for the interim periods presented. Results for these interim periods are
not necessarily indicative of results to be expected for the full year. Certain
prior period amounts have been reclassified, where necessary, to conform to the
current period presentation.
The Company operates on a four-four-five week accounting quarter, and
accordingly, the quarters end on or about March 31, June 30, September 30 and
December 31.
The notes included herein should be read in conjunction with the audited
consolidated financial statements included in Wabtec's Annual Report on Form
10-K for the year ended December 31, 1999.
REVENUE RECOGNITION Revenue is recognized when products have been shipped to the
respective customers and the price for the product has been determined.
The Company recognizes revenues on long-term contracts based on the percentage
of completion method of accounting. Contract revenues and cost estimates are
reviewed and revised at a minimum quarterly and adjustments are reflected in the
accounting period as known. Provisions are made currently for estimated losses
on uncompleted contracts.
Costs and estimated earnings in excess of billings ("underbillings") and
billings in excess of costs and estimated earnings ("overbillings") on the
contract in progress are recorded on the balance sheet and are classified as
non-current.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual amounts could differ from the
estimates.
OTHER COMPREHENSIVE INCOME Comprehensive income is defined as net income and all
nonowner changes in shareholders' equity. The Company's accumulated other
comprehensive income (loss) consists entirely of foreign currency translation
adjustments. Total comprehensive income (loss) for the three months and nine
months ended September 30, 2000 and 1999 was $(3.6) million and $18.4 million,
and $13.3 million and $63 million, respectively.
3. MERGERS AND ACQUISITIONS
On November 19, 1999, Westinghouse Air Brake Company (WABCO) merged with
MotivePower Industries, Inc. (MotivePower) to form Wabtec. The Company issued
approximately 18 million shares of the Company's Common Stock to former
MotivePower shareholders and reserved approximately 2 million shares for the
contingent exercise of stock options. The transaction was accounted for by the
pooling-of-interests accounting method. Accordingly, the condensed consolidated
financial statements have been restated giving effect to this transaction as if
it had occurred as of the beginning of the earliest period presented.
The combined results of the Company and separate results of WABCO and
MotivePower for the three months and nine months ended September 30, 1999 were
as follows:
6
<PAGE> 7
Three months ended September 30, 1999:
<TABLE>
<CAPTION>
EXTRAORDINARY NET
In thousands SALES ITEM INCOME
-----------------------------------------------------------
<S> <C> <C> <C>
WABCO $172,471 -- $12,519
MotivePower 88,410 -- 5,292
--------------------------------------
Combined $260,881 -- $17,811
-----------------------------------------------------------
</TABLE>
Nine months ended September 30, 1999:
<TABLE>
<CAPTION>
EXTRAORDINARY NET
In thousands SALES ITEM INCOME
-----------------------------------------------------------
<S> <C> <C> <C>
WABCO $557,656 $(469) $37,652
MotivePower 294,347 -- 22,377
--------------------------------------
Combined $852,003 $(469) $60,029
-----------------------------------------------------------
</TABLE>
During 2000 and 1999, the Company completed the following acquisitions:
i) In January 1999, the Company acquired certain assets of G&G Locotronics, a
privately held designer of high voltage electrical cabinets and control
stands for locomotives, for total consideration of $17.8 million.
ii) In January 1999, the Company acquired 100% of the Common Stock of Q-Tron,
Ltd., a privately held designer and manufacturer of locomotive electronics
equipment, for total consideration of $14.9 million.
iii) In February 1999, the Company acquired the mass transit electrical inverter
and converter product line of AGC System & Technologies, Inc. of Canada for
approximately $960,000.
iv) In July 2000, the Company purchased certain assets of Iron Fireman, a
manufacturer of transportation boiler equipment for $650,000.
These acquisitions were accounted for under the purchase method. Accordingly,
the results of operations of the applicable acquisition are included in the
Company's financial statements prospectively from the acquisition date.
4. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined under
the first-in, first-out (FIFO) method. Inventory costs include material, labor
and overhead. Cores inventory is defined as inventory units designated for unit
exchange programs. The components of inventory, net of reserves, were:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
In thousands 2000 1999
------------------------------------------------------------------
<S> <C> <C>
Cores $29,901 $29,999
Raw materials 101,931 99,948
Work-in-process 53,476 47,319
Finished goods 32,788 34,130
----------------------------
Total inventory $218,096 $211,396
------------------------------------------------------------------
</TABLE>
5. EARNINGS PER SHARE
The computation of earnings per share is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
In thousands, except per share 2000 1999
-----------------------------------------------------------------
<S> <C> <C>
BASIC EARNINGS PER SHARE
(Loss) income before
extraordinary item applicable
to common shareholders $(3,529) $17,811
Divided by
Weighted average shares
outstanding 43,415 43,528
Basic earnings (loss) per share
before extraordinary item $ (0.08) $ 0.41
-----------------------------------------------------------------
DILUTED EARNINGS PER SHARE
(Loss) income before
extraordinary item applicable
to common shareholders $(3,529) $17,811
Divided by sum of
Weighted average shares
outstanding 43,415 43,528
Conversion of dilutive stock
options 24 1,084
------------------------
Diluted shares outstanding 43,439 44,612
Diluted earnings (loss) per
share before extraordinary
item $ (0.08) $ 0.40
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
In thousands, except per share 2000 1999
------------------------------------------------------------------
<S> <C> <C>
BASIC EARNINGS PER SHARE
Income before extraordinary item
applicable to common
shareholders $20,904 $60,498
Divided by
Weighted average shares
outstanding 43,352 43,307
Basic earnings per share before
extraordinary item $ 0.48 $ 1.40
------------------------------------------------------------------
DILUTED EARNINGS PER SHARE
Income before extraordinary item
applicable to common
shareholders $20,904 $60,498
Divided by sum of
Weighted average shares
outstanding 43,352 43,307
Conversion of dilutive stock
options 81 1,163
------- -------
Diluted shares outstanding 43,433 44,470
Diluted earnings per share
before extraordinary item $ 0.48 $ 1.36
------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
6. COMMITMENTS AND CONTINGENCIES
The Company is subject to a RCRA Part B Closure Permit ("the Permit") issued by
the Environmental Protection Agency (EPA) 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 MotivePower
Company 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 discounted liability at September 30, 2000, using a discount
rate of 6% for remediation costs to be approximately $4 million, which has been
accrued. The Company was in compliance with the Permit at September 30, 2000.
Under the terms of the purchase agreement and related documents for the 1990
Acquisition, American Standard, Inc. ("ASI"), has indemnified the Company for
certain items including, among others, environmental claims. The indemnification
provisions of the agreement expire at various dates through 2000, except those
claims which are timely asserted continue until resolved. If ASI was unable to
honor or meet these indemnifications, the Company would be responsible for such
items. In the opinion of management, ASI currently has the ability to meet its
indemnification obligations.
The Company, through one of its operating subsidiaries, has been named, along
with other parties, as a Potentially Responsible Party (PRP) under the North
Carolina Inactive Sites Response Act because of an alleged release or threat of
release of hazardous substances at the "Old James Landfill" site in North
Carolina. The Company believes unreimbursed costs, if any, associated with the
cleanup activities at this site will not be material and as a result of the
indemnification provisions referred to above and a related insurance policy
which expires January 2002, the Company has not established a reserve for such
costs.
The Company's operations do not use and its products do not contain any
asbestos. Asbestos actions have been filed against the Company, RFPC and Vapor
Corporation. These cases involve products manufactured prior to the time the
Company acquired the RFPC stocks and Vapor assets and while the Company was
under prior ownership. With respect to the actions filed against the Company,
ASI is responsible for administering, defending and paying any liability
associated with claims filed through March 2000. Thereafter, the Company is
covered by insurance. With respect to the actions filed against RFPC, the claims
are covered by insurance. With respect to the actions filed against Vapor
Corporation, the Company has indemnity for liability and defense costs from the
prior owner of the Vapor assets. The Company is not involved with, nor has it
incurred any costs related to, these asbestos claims, other than minimal
processing costs. Management believes that these claims will not be material;
and accordingly, the financial statements do not reflect any costs or reserves
for such claims.
On February 12, 1999, GE Harris Railway Electronics, LLC and GE Harris Railway
Electronic Services, LLC (collectively, "GE Harris") brought suit against the
Company for alleged patent infringement and unfair competition related to a
communications system installed in Company products. GE Harris is seeking to
prohibit the Company from future infringement and is seeking damages. While this
lawsuit is in the discovery stages, the Company has discussed settlement
alternatives with GE Harris. However, no definitive settlement has been
concluded.
7. EMPLOYEE STOCK OWNERSHIP PLAN TERMINATION
The Westinghouse Air Brake Company Employee Stock Ownership Plan and Trust
(ESOP) terminated August 1, 2000. Cash contributions will be made to the
Company's existing defined contribution 401(k) plan as opposed to Company Common
Stock previously contributed to ESOP participants. In connection with the
termination of the ESOP, the Company anticipates making additional discretionary
cash contributions to former ESOP participants over the next three years, for
which the Company estimates the costs to be $2 million in each of the years.
Additionally, the Company incurred a third quarter 2000 $5.1 million non-cash
charge for the write-off of the related deferred tax asset. This charge is
reported within the caption "Income tax expense" in the statement of operations.
8. SEGMENT INFORMATION
Wabtec has two reportable segments - the Freight Group and the Transit Group.
The key factors used to identify these reportable segments are the organization
and alignment of the Company's internal operations, the nature of the products
and services, and customer type. Financial information for these segments has
been restated in conjunction with the operational realignment of our
organization pursuant to the merger of WABCO and MotivePower. The business
segments are:
FREIGHT GROUP manufactures products and provides services geared to the
production and operation of freight cars and locomotives, including braking
control equipment, engines, traction motors, on-board electronic components and
train coupler equipment. Revenues are derived from aftermarket and OEM component
sales, locomotive overhauls and from freight car repairs and services.
TRANSIT GROUP consists of products for passenger transit vehicles (typically
subways, rail and buses) that include braking, monitoring, climate control and
door equipment engineered to meet individual customer specifications. Revenues
are derived from OEM component sales and aftermarket sales as well as from
repairs and services.
8
<PAGE> 9
The Company evaluates its business segments' operating results based on income
from operations before merger and restructuring charges. Corporate activities
include general corporate expenses, elimination of intersegment transactions,
interest income and expense and other unallocated charges. Since certain
administrative and other operating expenses and other items have not been
allocated to business segments, the results in the following tables are not
necessarily a measure computed in accordance with generally accepted accounting
principles and may not be comparable to other companies.
Segment financial information for the three months ended September 30, 2000 is
as follows:
<TABLE>
<CAPTION>
FREIGHT TRANSIT CORPORATE
In thousands GROUP GROUP ACTIVITIES RESTRUCTURING TOTAL
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to external customers $184,313 $70,850 -- -- $255,163
Intersegment sales/(elimination) 2,376 149 (2,525) -- --
---------------------------------------------------------------------
Total sales 186,689 70,999 (2,525) -- 255,163
=====================================================================
Income from operations 27,596 6,701 (7,012) (11,452) 15,833
Interest expense and other -- -- (13,431) -- (13,431)
---------------------------------------------------------------------
Income before income taxes and extraordinary item $ 27,596 $ 6,701 $(20,443) $(11,452) $ 2,402
=====================================================================
</TABLE>
Segment financial information for the three months ended September 30, 1999 is
as follows:
<TABLE>
<CAPTION>
FREIGHT TRANSIT CORPORATE
In thousands GROUP GROUP ACTIVITIES RESTRUCTURING TOTAL
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to external customers $203,170 $57,711 -- -- $260,881
Intersegment sales/(elimination) 2,939 -- (2,939) -- --
---------------------------------------------------------------------
Total sales 206,109 57,711 (2,939) -- 260,881
=====================================================================
Income from operations 39,167 5,477 (4,924) -- 39,720
Interest expense and other -- -- (11,759) -- (11,759)
---------------------------------------------------------------------
Income before income taxes and extraordinary item $ 39,167 $ 5,477 $(16,683) -- $27,961
=====================================================================
</TABLE>
Segment financial information for the nine months ended September 30, 2000 is as
follows:
<TABLE>
<CAPTION>
FREIGHT TRANSIT CORPORATE
In thousands GROUP GROUP ACTIVITIES RESTRUCTURING TOTAL
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to external customers $559,039 $204,147 -- -- $763,186
Intersegment sales/(elimination) 8,410 400 (8,810) -- --
---------------------------------------------------------------------
Total sales 567,449 204,547 (8,810) -- 763,186
=====================================================================
Income from operations 86,018 20,162 (15,881) (19,391) 70,908
Interest expense and other -- -- (30,329) -- (30,329)
---------------------------------------------------------------------
Income before income taxes and extraordinary item $ 86,018 $ 20,162 $(46,210) $(19,391) $ 40,579
=====================================================================
</TABLE>
Segment financial information for the nine months ended September 30, 1999 is as
follows:
<TABLE>
<CAPTION>
FREIGHT TRANSIT CORPORATE
In thousands GROUP GROUP ACTIVITIES RESTRUCTURING TOTAL
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to external customers $677,945 $174,058 -- -- $852,003
Intersegment sales/(elimination) 8,402 532 (8,934) -- --
---------------------------------------------------------------------
Total sales 686,347 174,590 (8,934) -- 852,003
=====================================================================
Income from operations 130,821 14,736 (15,720) -- 129,837
Interest expense and other -- -- (34,485) -- (34,485)
---------------------------------------------------------------------
Income before income taxes and extraordinary item $130,821 $ 14,736 $(50,205) -- $ 95,352
=====================================================================
</TABLE>
9
<PAGE> 10
9. RESTRUCTURING CHARGES
The Company estimates the charges to complete its merger and restructuring plan
will now total in the range of $76 million to $78 million pre-tax, due to an
acceleration and refinement of the plan, with approximately $70 million of the
charge previously expensed. The Company incurred additional
restructuring-related charges of approximately $20 million in the nine months
ended September 30, 2000 and expects to incur an additional $6 million to $8
million of restructuring-related expenses in the fourth quarter of 2000.
The $20 million charge included the following actions:
o Plant closings and plant relocation costs.
o Employee severance and relocation payments related to closing certain
plants and consolidating others.
In the nine month period ended September 30, 2000, the Company has expended
approximately $23 million for merger and restructuring activities comprising of
the $20 million current year charge and $3 million for payments made on the
remaining 1999 accrual further discussed below.
As of September 30, 2000, $5.4 million of the $50 million merger and
restructuring-related charge incurred in 1999 remained accrued on the balance
sheet. The table below identifies the significant components of the accrual:
<TABLE>
<CAPTION>
TRANSACTION
COSTS, SEVERANCE
AND TERMINATION LEASE
In thousands BENEFITS IMPAIRMENTS OTHER TOTAL
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1999 $ 2,119 $5,738 $ 848 $ 8,705
Amounts paid (2,045) (781) (491) (3,317)
----------------------------------------------------------------
Balance at September 30, 2000 $ 74 $4,957 $ 357 $ 5,388
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The remaining transaction, severance and termination benefits accrual is for
health care benefits for approximately 9 employees, expected to be completed in
2001 as planned. This accrual represents the calculation of the severance
package based on the employee's salary and tenure with the Company. The lease
impairment charges relate to the relocation of the corporate headquarters, and
the Company's evaluation of certain assets. The other category represents other
related costs that have been incurred and not yet paid as of September 30, 2000.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the information in
the unaudited condensed consolidated financial statements and notes thereto
included herein and Westinghouse Air Brake Technologies Corporation's Financial
Statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in its 1999 Annual Report on Form 10-K.
OVERVIEW
Net income for the first nine months of 2000 was $20.9 million, or $0.48 per
diluted share, as compared to $60 million, or $1.35 per diluted share in the
same period of 1999. The results for the first nine months of 2000 include a $20
million restructuring-related charge, a $1.4 million foreign exchange loss, a
$4.4 million gain on the disposition of a product line and a $5.1 million
write-off of a deferred tax asset relating to the termination of the ESOP.
Without the effect of the items aforementioned, net income would have been $37.4
million or $0.86 per diluted share. Net sales decreased 10.4% in the first nine
months of 2000 as compared to the same period in 1999. Operating margins in the
first nine months of 2000 decreased to 9.3% as compared to 15.2% in the first
nine months of 1999. After excluding the restructuring-related charges that
affect operating income, operating margins in the first nine months of 2000
would have been 12%.
MERGER AND RESTRUCTURING PLAN
The Company previously announced a merger and restructuring plan pursuant to the
merger of the Company and MotivePower Industries, Inc., which is anticipated to
yield synergies of $20 million pre-tax in 2000 and produce an ongoing annualized
benefit of $25 million pre-tax, by year-end 2000. The Company expects the
benefits to be realized through reduced cost of sales and reduced selling,
general and administrative expenses. The merger and restructuring plan involves
the elimination of duplicate facilities and excess capacity, operational
realignment and related workforce reductions, and the evaluation of certain
assets as to their perceived ongoing benefit to the Company. The Company
estimates the charges to complete the merger and restructuring plan will now
total in the range of $76 million to $78 million pre-tax, due to an acceleration
and refinement of the plan, with approximately $70 million of the charge
previously expensed. The Company expects the remaining charge of $6 million to
$8 million to occur in the fourth quarter of 2000.
The accrual on the balance sheet is discussed in greater detail in Note 9 to
"Notes to Condensed Consolidated Financial Statements" included in this report.
THIRD QUARTER 2000 COMPARED TO THIRD QUARTER 1999
The following table sets forth the Company's net sales by business segment:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
----------------------------
In thousands 2000 1999
-----------------------------------------------------------------
<S> <C> <C>
Freight Group $184,313 $203,170
Transit Group 70,850 57,711
----------------------------
Net sales $255,163 $260,881
-----------------------------------------------------------------
</TABLE>
Net sales for the third quarter of 2000 decreased $5.7 million, or 2.2%, to
$255.2 million. This decrease was attributable to decreased OEM freight car and
locomotive component sales volumes and lower locomotive overhauls, both within
the Freight Group. Sales volumes within the Freight Group reflect a softening
OEM market for freight cars, with 12,782 freight cars delivered in the third
quarter of 2000 compared to 16,385 in the same period of 1999. Partially
offsetting these decreases were higher Transit Group sales.
Gross profit decreased to $67.6 million in the third quarter of 2000 compared to
$78.6 million in the same period of 1999. Gross margin is dependent on a number
of factors including sales volume and product mix. Gross margin, as a percentage
of sales, was 26.5% compared to 30.1% in 1999. This decrease is a result of
changes to sales mix primarily from increased OEM component sales of Transit
Group products at lower margins as compared to the Company's historical results,
and manufacturing inefficiencies principally related to merger integration
efforts (in total, approximately $5 million). The balance is attributed to the
effect of the decrease in sales volume (approximately $2 million) and to a
lesser extent, pricing pressures relating to an overall decline in the freight
car and locomotive components market.
Total operating expenses as a percentage of net sales were 20.3% in the third
quarter of 2000 and 14.9% in the same period a year ago. After excluding the
third quarter 2000 $11 million restructuring charge, operating expenses would
have been 15.8% of net sales. Without the restructuring charge, operating
expenses increased $1.5 million in the comparison. This increase is due to
higher legal and consulting fees, partially offset by the benefits derived from
cost reduction programs and synergies from the merger.
Operating income totaled $15.8 million (or 6.2% of sales) in the third quarter
of 2000 compared with $39.7 million (or 15.2% of sales) in the same period of
1999. After excluding the restructuring-related charges that affect operating
income, operating income would have been $28.9 million (or 11.3% of sales).
Lower operating income resulted from decreased sales volumes in the Freight
Group and overall changes to product mix. (See Note 8 - "Notes to Condensed
Consolidated Financial
11
<PAGE> 12
Statements" regarding segment-specific information, included elsewhere in this
report).
Interest expense increased 4.8 % in the third quarter of 2000 as compared to the
prior year quarter primarily due to an increase in interest rates.
Other expense includes approximately $1.4 million recorded in the third quarter
of 2000 representing a foreign exchange loss as compared to a $241,000 foreign
exchange loss in the prior year period.
As discussed earlier in Note 7 - "Notes to Condensed Consolidated Financial
Statements" regarding the termination of the ESOP, included elsewhere in this
report, income tax expense in the third quarter 2000 includes a $5.1 million non
cash charge for the write-off of deferred tax benefits relating to the
termination of the ESOP. Nevertheless, the effective tax rate remained
substantially the same in the comparison.
NINE MONTH PERIOD OF 2000 COMPARED TO NINE MONTH PERIOD OF 1999
A number of events have occurred over the comparative period that impacted the
Company's results of operations and financial condition including:
o Expected decreases in component sales due to a slowdown in North American
freight car and locomotive deliveries, and a downturn in the locomotive
overhaul market.
o Improved sales and backlog in the transit business due to increased
governmental spending for transit equipment.
The following table sets forth the Company's net sales by business segment:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------------
In thousands 2000 1999
-----------------------------------------------------------------
<S> <C> <C>
Freight Group $559,039 $677,945
Transit Group 204,147 174,058
----------------------------
Net sales $763,186 $852,003
-----------------------------------------------------------------
</TABLE>
Net sales for the first nine months of 2000 decreased $88.9 million, or 10.4%,
to $763.2 million. This decrease was attributable to decreased OEM freight car
and locomotive component sales volumes and lower locomotive overhauls, both
within the Freight Group. Sales volumes within the Freight Group reflect a
softening OEM market for freight cars, with 43,828 freight cars delivered in the
first nine months of 2000 compared to 56,827 in the same period of 1999. In
2000, the Company expects the OEM freight car and locomotive industries to
deliver approximately 50,000 and 1,100 new freight cars and locomotives,
respectively. Partially offsetting these decreases were higher Transit Group
sales.
Gross profit decreased to $211.3 million in the first nine months of 2000
compared to $258.6 million in the same period of 1999. Gross margin, as a
percentage of sales, was 27.7% compared to 30.4% in 1999. Gross margin is
dependent on a number of factors including sales volume and product mix.
Overall, this decrease is attributed to the effect of a decrease in sales volume
(approximately $36 million). The balance is a result of changes to sales mix
primarily from increased OEM component sales of Transit Group products at lower
margins as compared to the Company's historical results, and manufacturing
inefficiencies principally related to merger integration efforts.
Total operating expenses as a percentage of net sales were 18.4% in the first
nine months of 2000 as compared to 15.1% in the same period a year ago. After
excluding the nine month period of 2000 restructuring charges of $19.4 million,
operating expenses would have been 15.9% of net sales. Without the restructuring
charge, operating expenses decreased $7.8 million, in the comparison. This
reduction was primarily due to continuing cost reduction programs and synergies
from the merger.
Operating income totaled $70.9 million (or 9.3% of sales) in the first nine
months of 2000 compared with $129.8 million (or 15.2% of sales) in the same
period of 1999. After excluding restructuring-related charges that effect
operating income, operating income would have been $91.9 million (or 12% of
sales). Lower operating income resulted from decreased sales volumes in the
Freight Group and overall changes to product mix. (See Note 8 - "Notes to
Condensed Consolidated Financial Statements" regarding segment-specific
information, included elsewhere in this report).
In February 2000, the Company disposed of a product line for $5.5 million in
cash and recognized a gain of $4.4 million, which is reported as other income.
Other expense of approximately $1.4 million in 2000 represents a foreign
exchange loss as compared to a $1 million a foreign exchange loss in the prior
year period.
In the first nine months of 2000, the effective tax rate improved to an annual
rate of 36% from 36.6% a year ago, primarily from additional benefits through
our Foreign Sales Corporation. As discussed earlier in Note 7 - "Notes to
Condensed Consolidated Financial Statements" regarding the termination of the
ESOP, included elsewhere in this report, income tax expense in the nine month
period ending September 30, 2000 includes a $5.1 million non cash charge for the
write-off of deferred tax benefits relating to the termination of the ESOP.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is provided primarily by operating cash flow and borrowings under the
Company's credit facilities with a consortium of commercial banks ("credit
agreement"). The following is a summary of selected cash flow information and
other relevant data.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
---------------------------
In thousands 2000 1999
--------------------------------------------------------------------------
<S> <C> <C>
Cash provided (used) by:
Operating activities $ 25,872 $ 67,974
Investing activities-business
acquisitions (650) (32,242)
Investing activities-sale of
product line 5,500 --
Investing activities-other (17,833) (25,268)
Financing activities (3,709) (4,821)
Earnings before interest, taxes,
depreciation and amortization
(EBITDA) 102,562 161,308
Adjusted EBITDA (before
restructuring-related charges) 123,553 161,308
--------------------------------------------------------------------------
</TABLE>
Operating cash flow in the first nine months of 2000 was $25.9 million compared
to $68 million in the same period a year ago. Working capital increased 15.1%
since December 31, 1999, primarily due to an increase in accounts receivable and
inventories. During the first nine months of 2000, cash outlays for
restructuring-related activities were approximately $23 million and are reported
as a reduction to cash provided by operating activities. Excluding these cash
outlays, cash provided by operating activities would have been approximately $49
million.
Cash used for investing activities declined in the first nine months of 2000 to
$13 million from $57.5 million a year ago. In the first nine months of 2000,
cash received from the sale of a product line was $5.5 million. In the first
nine months of 1999, $32.2 million was used for certain business acquisitions.
Capital expenditures were $17.8 million and $25.5 million in the first nine
months of 2000 and 1999, respectively. The majority of capital expenditures for
these periods relates to upgrades to existing equipment, replacement of existing
equipment and purchases of new equipment due to expansion of Wabtec's
operations, where the Company believes overall cost savings can be achieved
through increasing efficiencies. The Company expects 2000 capital expenditures
for equipment purchased for similar purposes to approximate $25 million to $28
million.
Cash used for financing activities was $3.7 million in the first nine months of
2000 versus $4.8 million in the same period a year ago. In the first nine months
of 2000, the Company increased long-term debt by approximately $4 million.
Through September 30, 2000, the Company repurchased $10 million of its own
Common Stock. The Company issued $75 million of senior notes in the first
quarter of 1999 to repay amounts outstanding on certain unsecured bank term debt
and repaid a portion of the Company's previous revolving credit facility.
Historically, the Company has financed the purchase of significant businesses
utilizing cash flow generated from operations and amounts available under its
credit facilities. In addition, the issuance of the 1999 Notes increased the
Company's liquidity by reducing its outstanding revolving credit borrowings and
thereby increasing its available borrowing capacity.
The Company estimates the charges at completion of the merger and restructuring
plan will total approximately $76 million to $78 million pre-tax with
approximately $70 million of the charge expensed to date.
The Company has recently adopted a plan by which it may purchase up to $75
million of Company Common Stock through open market purchases, utilizing
primarily cash generated from operations and equity forward contracts.
Based on anticipated cash flow provided by operations, forecasted results and
credit available under the credit agreement, the Company believes it will be
able to make planned capital expenditures, make required debt payments, and to
fund working capital requirements and other cash needs for the foreseeable
future, including 2001.
The following table sets forth the Company's outstanding indebtedness and
average interest rates at September 30, 2000. The revolving credit note and
other term loan interest rates are variable and dependent on market conditions.
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
In thousands 2000 1999
-----------------------------------------------------------------
<S> <C> <C>
Credit agreement, 7.9% $390,200 $368,000
9 3/8% Senior notes 175,000 175,000
Pulse note, 9.5% -- 16,990
5.5% Industrial revenue
bond due 2008 6,315 6,749
Other 1,079 1,848
-------------------------
Total 572,594 568,587
Less-current portion 741 743
-------------------------
Long-term portion $571,853 $567,844
-----------------------------------------------------------------
</TABLE>
Credit Agreement
In November 1999, in connection with the merger, WABCO terminated its then
existing secured credit agreement and refinanced the then existing unsecured
MotivePower credit agreement with a consortium of commercial banks. This
unsecured credit agreement provides for a $275 million five-year revolving
credit facility and a 364-day $275 million
13
<PAGE> 14
convertible revolving credit facility. At September 30, 2000, the Company had
available borrowing capacity, of approximately $135 million.
9 3/8% Senior Notes Due June 2005
In June 1995, the Company issued $100 million of 9.375% Senior Notes due in 2005
(the "1995 Notes"). In January 1999, the Company issued an additional $75
million of 9.375% Senior Notes which are due in 2005 (the "1999 Notes"; the 1995
Notes and the 1999 Notes are collectively, the "Notes"). The 1999 Notes were
issued at a premium resulting in an effective rate of 8.5%. The terms of the
1995 Notes and the 1999 Notes are substantially the same, and the 1995 Notes and
the 1999 Notes were issued pursuant to indentures that are substantially the
same. The issuance of the 1999 Notes improved the Company's financial liquidity
by i) using a portion of the proceeds to repay a short-term, $30 million loan
associated with the Rockwell acquisition that bore interest at 9.56%; ii) using
a portion of the proceeds to repay variable-rate revolving credit borrowings
thereby increasing amounts available under the revolving credit facility; and
iii) repaying the remaining unpaid principal of a $10.2 million loan from a
prior acquisition. As a result of this issuance, the Company wrote off
previously capitalized debt issuance costs of $469,000, net of tax, or
approximately $.01 per diluted share, in the first quarter of 1999.
Pulse Note
As partial payment for the Pulse acquisition, the Company issued a $17 million
note due January 31, 2004, with interest in 1999 at 9.5%. In January 2000, this
note was repaid.
Principal repayments of outstanding loan balances are due at various intervals
until maturity.
Nevertheless, the Company will remain leveraged to a significant extent and its
debt service obligations will continue to be substantial. The debt of the
Company requires the dedication of a substantial portion of future cash flows to
the payment of principal and interest on indebtedness, thereby reducing funds
available for capital expenditures and future business opportunities that the
Company believes are available. The Company believes cash flow and liquidity
will be sufficient to meet its debt service requirements. If the Company's
sources of funds were to fail to satisfy the Company's cash requirements, the
Company may need to refinance its existing debt or obtain additional financing.
There is no assurance that such new financing alternatives would be available,
and, in any case, such new financing, if available, would be expected to be more
costly and burdensome than the debt agreements currently in place.
RECENT ACCOUNTING PRONOUNCEMENTS
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.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition ("SAB 101"), to provide
guidance on the recognition, presentation and disclosure of revenue in financial
statements. SAB 101 does not change existing literature on revenue recognition,
but rather explains and clarifies the SEC staff's general framework for revenue
recognition. The Company believes the adoption of this standard will not have a
material effect on the reported results.
FORWARD LOOKING STATEMENTS
We believe that all statements other than statements of historical facts
included in this report, including certain statements under "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," may constitute forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. Although we believe that our assumptions made in connection with
the forward-looking statements are reasonable, we cannot assure you that our
assumptions and expectations are correct.
These forward-looking statements are subject to various risks, uncertainties and
assumptions about us, including, among other things:
Economic and Industry Conditions
- materially adverse changes in economic or industry conditions generally
or in the markets served by us, including North America, South America,
Europe, Australia and Asia;
- demand for services in the freight and passenger rail industry;
- consolidations in the rail industry;
- demand for our products and services;
- continued outsourcing by our customers;
- demand for freight cars, locomotives, passenger transit cars and buses;
- industry demand for faster and more efficient braking equipment;
- fluctuations in interest rates.
Operating Factors
- supply disruptions;
- technical difficulties;
- changes in operating conditions and costs; - successful introduction of
new products;
- labor relations;
- completion and integration of additional acquisitions;
- the development and use of new technology.
Competitive Factors
- the actions of competitors.
Political/Governmental Factors
- political stability in relevant areas of the world;
- future regulation/deregulation of our customers and/or the rail
industry;
- governmental funding for some of our customers;
- political developments and laws and regulations, such as forced
divestiture of assets, restrictions on production, imports or exports,
price controls, tax increases and retroactive tax claims, expropriation
of property, cancellation of contract rights, and environmental
regulations.
14
<PAGE> 15
Transaction or Commercial Factors
- the outcome of negotiations with partners, governments, suppliers,
customers or others; and
- our ability to complete the integration of the Westinghouse Air Brake
and MotivePower businesses so to achieve the stated synergies.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK In the ordinary course of business, Wabtec is exposed to
risks that increases in interest rates may adversely affect funding costs
associated with $281 million of variable-rate debt (considering the effects of
existing interest rate swaps), which represents 49% of total long-term debt at
September 30, 2000. The Company has recently entered into several new interest
rate swap agreements which combined together with previously existing swaps,
currently total $110 million in notional value. At September 30, 2000, an
instantaneous 100 basis point increase in interest rates would reduce the
Company's net income annually by approximately $1.8 million, net of tax,
assuming no additional intervention strategies by management.
FOREIGN CURRENCY EXCHANGE RISK The Company periodically enters into several
types of financial instruments for the purpose of managing its exposure to
foreign currency exchange rate fluctuations in countries in which the Company
has significant operations. As of September 30, 2000, the Company had no
material instruments outstanding.
Wabtec is also subject to certain risks associated with changes in foreign
currency exchange rates to the extent its operations are conducted in currencies
other than the U.S. dollar. For the first nine months of 2000, approximately 73%
of net sales are in the United States, 11% in Canada, 6% in Mexico and 10% in
other international locations, primarily Europe. At September 30, 2000, the
Company does not believe changes in foreign currency exchanges rates represent a
material risk to results of operations, financial position or liquidity.
LEGAL PROCEEDINGS AND COMMITMENTS AND CONTINGENCIES
On February 12, 1999, GE Harris Railway Electronics, LLC and GE Harris Railway
Electronic Services, LLC (collectively, "GE Harris") brought suit against the
Company for alleged patent infringement and unfair competition related to a
communications system installed in Company products. GE Harris is seeking to
prohibit the Company from future infringement and is seeking damages. While this
lawsuit is in the discovery stages, the Company has discussed settlement
alternatives with GE Harris. However, no definitive settlement has been
concluded.
There were no other significant changes to report regarding the Company's
commitments and contingencies.
15
<PAGE> 16
EXHIBITS AND REPORTS ON FORM 8-K
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------------------------------------------------------------------------------
<S> <C>
27 Financial Data Schedule as of and for the Nine Months ended September 30, 2000
</TABLE>
There were no Current Reports on Form 8-K filed during the quarter
ended September 30, 2000.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WESTINGHOUSE AIR BRAKE TECHNOLOGIES
CORPORATION
By: /s/ ROBERT J. BROOKS
-----------------------------------
Robert J. Brooks
Chief Financial Officer
Date: October 31, 2000
17
