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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, 2002
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 November 12, 2002, 43,440,841 shares of Common Stock of the
registrant were issued and outstanding.
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WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
SEPTEMBER 30, 2002 FORM 10-Q
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
2002 and December 31, 2001 3
Condensed Consolidated Statements of Operations for the
three and nine months ended September 30, 2002 and 2001 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2002 and 2001 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Position and
Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
Item 4. Controls and Procedures 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
Certification 19
2
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
SEPTEMBER 30 DECEMBER 31
In thousands, except shares and par value 2002 2001
- ----------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 18,040 $ 53,949
Accounts receivable 103,772 106,527
Inventories 97,128 104,930
Other current assets 29,371 30,288
--------- ---------
Total current assets 248,311 295,694
Property, plant and equipment 321,842 318,188
Accumulated depreciation (162,573) (150,493)
--------- ---------
Property, plant and equipment, net 159,269 167,695
OTHER ASSETS
Goodwill, net 109,450 198,788
Other intangibles, net 41,586 44,348
Other noncurrent assets 46,819 23,427
--------- ---------
Total other assets 197,855 266,563
--------- ---------
Total Assets $ 605,435 $ 729,952
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 819 $ 782
Accounts payable 64,503 75,150
Customer deposits 9,272 10,314
Accrued income taxes 15,701 43,741
Other accrued liabilities 55,088 56,234
--------- ---------
Total current liabilities 145,383 186,221
Long-term debt 210,785 241,088
Reserve for postretirement and pension benefits 28,622 27,544
Other long-term liabilities 23,554 29,828
--------- ---------
Total liabilities 408,344 484,681
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 100,000,000 shares authorized: 65,447,867
shares issued and 43,420,072 and 43,152,546 outstanding at September
30, 2002 and December 31, 2001, respectively 654 654
Additional paid-in capital 272,357 272,674
Treasury stock, at cost, 22,027,796 and 22,295,322 shares, respectively (273,900) (277,489)
Retained earnings 226,490 278,569
Deferred compensation 278 538
Accumulated other comprehensive income (loss) (28,788) (29,675)
--------- ---------
Total shareholders' equity 197,091 245,271
--------- ---------
Total Liabilities and Shareholders' Equity $ 605,435 $ 729,952
========= =========
3
The accompanying notes are an integral part of these statements.
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED UNAUDITED
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
In thousands, except per share data 2002 2001 2002 2001
- --------------------------------------------------------------------------------------------------------------------------
Net sales $ 161,422 $ 185,854 $ 518,555 $ 595,276
Cost of sales (118,138) (138,072) (385,135) (432,504)
--------- --------- --------- ---------
Gross profit 43,284 47,782 133,420 162,772
Selling, general and administrative expenses (22,170) (23,744) (69,124) (70,264)
Restructuring charges -- (1,571) -- (3,531)
Engineering expenses (8,532) (8,321) (25,113) (25,145)
Amortization expense (1,412) (3,214) (4,246) (9,833)
--------- --------- --------- ---------
Total operating expenses (32,114) (36,850) (98,483) (108,773)
Income from operations 11,170 10,932 34,937 53,999
Other income and expenses
Interest expense (3,092) (7,997) (13,981) (27,336)
Other expense, net (317) (114) (1,822) (1,616)
--------- --------- --------- ---------
Income from continuing operations before income taxes 7,761 2,821 19,134 25,047
Income tax (expense) benefit (2,716) 996 (6,697) (6,783)
--------- --------- --------- ---------
Income from continuing operations 5,045 3,817 12,437 18,264
Discontinued operations, net of tax
Income from discontinued operations 48 2,576 229 6,451
Loss on sale of discontinued operations -- -- (529) --
--------- --------- --------- ---------
Total discontinued operations 48 2,576 (300) 6,451
--------- --------- --------- ---------
Income before extraordinary item and cumulative effect of
accounting change 5,093 6,393 12,137 24,715
Loss on early extinguishment of debt, net of tax (1,203) -- (1,203) --
--------- --------- --------- ---------
Income before cumulative effect of accounting change 3,890 6,393 10,934 24,715
Cumulative effect of accounting change for goodwill, net of tax -- -- (61,663) --
--------- --------- --------- ---------
Net income (loss) $ 3,890 $ 6,393 $ (50,729) $ 24,715
========= ========= ========= =========
4
EARNINGS PER COMMON SHARE
Basic
Income from continuing operations $ 0.12 $ 0.09 $ 0.29 $ 0.43
Income (loss) from discontinued operations -- 0.06 (0.01) 0.15
--------- --------- --------- ---------
Income before extraordinary item and cumulative effect 0.12 0.15 0.28 0.58
of accounting change
Loss on early extinguishment of debt, net of tax (0.03) -- (0.03) --
--------- --------- --------- ---------
Income before cumulative effect of accounting change 0.09 0.15 0.25 0.58
Cumulative effect of accounting change for goodwill, net
of tax -- -- (1.42) --
--------- --------- --------- ---------
Net income/(loss) $ 0.09 $ 0.15 $ (1.17) $ 0.58
========= ========= ========= =========
Diluted
Income from continuing operations $ 0.12 $ 0.09 $ 0.29 $ 0.42
Income (loss) from discontinued operations -- 0.06 (0.01) 0.15
--------- --------- --------- ---------
Income before extraordinary item and cumulative effect 0.12 0.15 0.28 0.57
of accounting change
Loss on early extinguishment of debt, net of tax (0.03) -- (0.03) --
--------- --------- --------- ---------
Income before cumulative effect of accounting change 0.09 0.15 0.25 0.57
Cumulative effect of accounting change for goodwill, net
of tax -- -- (1.41) --
--------- --------- --------- ---------
Net income/(loss) $ 0.09 $ 0.15 $ (1.16) $ 0.57
========= ========= ========= =========
Weighted average shares outstanding
Basic 43,361 42,999 43,267 42,923
Diluted 43,615 43,304 43,587 43,205
--------- --------- --------- ---------
The accompanying notes are an integral part of these statements.
4
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
NINE MONTHS ENDED
SEPTEMBER 30
In thousands 2002 2001
- ------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net (loss)/income $ (50,729) $ 24,715
Adjustments to reconcile net (loss)/income to net cash provided by operations:
Depreciation and amortization 19,267 25,284
Results of discontinued operations, net of tax 300 (6,451)
Cumulative effect of accounting change for goodwill 61,663 --
Loss on early extinguishment of debt 1,203 --
Loss on sale of product line -- 521
Other, primarily non-cash restructuring related charges -- 160
Discontinued operations (11) (871)
Changes in operating assets and liabilities, net
of acquisition and disposition of product line
Accounts receivable 3,568 25,982
Inventories 9,071 10,338
Accounts payable (10,291) (8,923)
Accrued income taxes (28,067) 7,034
Accrued liabilities and customer deposits (1,992) (12,628)
Other assets and liabilities (3,612) 21,765
--------- ---------
Net cash provided by operating activities 370 86,926
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net (8,442) (11,838)
Cash received from disposition of discontinued operations 1,400 --
Cash received from disposition of product line -- 4,120
Cash paid for acquisition of product line (1,654) (743)
Discontinued operations (53) 531
--------- ---------
Net cash used for investing activities (8,749) (7,930)
FINANCING ACTIVITIES
Borrowings/(repayments) of loans under credit agreement 146,000 (84,500)
Repayments of other borrowings (175,469) (634)
Purchase of treasury stock -- (585)
Proceeds from the issuance of treasury stock for stock options and
other benefit plans 3,012 2,790
Cash dividends (1,350) (1,258)
--------- ---------
Net cash used for financing activities (27,807) (84,187)
Effect of changes in currency exchange rates 277 (819)
--------- ---------
Decrease in cash (35,909) (6,010)
Cash, beginning of year 53,949 6,071
--------- ---------
Cash, end of period $ 18,040 $ 61
========= =========
The accompanying notes are an integral part of these statements.
6
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002 (UNAUDITED)
1. BUSINESS
Westinghouse Air Brake Technologies Corporation (the "Company", "Wabtec") is one
of North America's largest manufacturers 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. Our major product offerings include
electronic controls and monitors, air brakes, heat transfer and cooling
equipment, switcher and commuter locomotives, couplers, door panels and
controls, draft gears and friction products. The Company aggressively pursues
technological advances with respect to both new product development and product
enhancements.
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 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, 2001. The December 31, 2001 information has
been derived from the Company's December 31, 2001 Annual Report on Form 10-K.
REVENUE RECOGNITION Revenue is recognized in accordance with Staff Accounting
Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." Wabtec
recognizes revenue upon the passage of title, ownership and risk of loss to the
customer.
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 quarterly, at a minimum, and adjustments are reflected in
the accounting period as known. Provisions are made for estimated losses on
uncompleted contracts as known, if necessary.
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. On an ongoing basis, management reviews its estimates based on
currently available information. Changes in facts and circumstances may result
in revised estimates.
FINANCIAL DERIVATIVES AND HEDGES ACTIVITY The Company has adopted Statement of
Financial Accounting Standards ("SFAS") No. 133, as amended by SFAS 138,
"Accounting for Derivative Instruments and Hedging Activities" effective January
1, 2001. In the application, the Company has concluded its interest rate swap
contracts qualify for "special cash flow hedge accounting" which permit
recording the fair value of the swap and corresponding adjustment to other
comprehensive income (loss) on the balance sheet.
RECENT ACCOUNTING PRONOUNCEMENTS In August 2001, the Financial Accounting
Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets." Under its provisions, all tangible long-lived assets,
whether to be held and used or to be disposed of by sale or other means, will be
tested for recoverability whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. SFAS No. 144 is effective for
fiscal years beginning after December 15, 2001. The Company adopted SFAS 144 in
the third quarter of 2001, prior to the time it was required.
In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections", was issued. The
Statement updates, clarifies and simplifies existing accounting pronouncements.
While the technical corrections to existing pronouncements are not substantive
in nature, in some instances, they may change accounting practice. The
provisions of this standard related to SFAS No. 13 are effective for
transactions occurring after May 15, 2002. All other provisions of this standard
must be applied for financial statements issued on or after May 15, 2002. The
application
7
of SFAS No. 145 did not have a material effect on the Company's financial
statements or results of operations.
In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146
nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity,"
under which a liability for an exit cost was recognized at the date of an
entity's commitment to an exit plan. SFAS No. 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized at fair value
when the liability is incurred. The provisions of this statement are effective
for exit or disposal activities that are initiated after December 31, 2002. The
Company has not completed the process of evaluating the impact that will result
from adopting it.
OTHER COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is defined as net
income and all nonowner changes in shareholders' equity. The Company's
accumulated other comprehensive income (loss) consists of foreign currency
translation adjustments, unrealized gains and losses on derivatives designated
and qualified as cash flow hedges and pension related adjustments. Total
comprehensive income (loss) for the three and nine months ended September 30
was:
THREE MONTHS ENDED
SEPTEMBER 30
In thousands 2002 2001
- ---------------------------------------------------- ----------
Net income $ 3,890 $ 6,393
Foreign currency
translation (3,146) (2,470)
Unrealized gain/(loss) on hedges, net
of tax 324 (824)
------- -------
Total comprehensive income $ 1,068 $ 3,099
- ---------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30
In thousands 2002 2001
- --------------------------------------------------------------
Net (loss)/income $ (50,729) $ 24,715
Foreign currency
translation (15) (4,870)
Unrealized gain/(loss) on hedges, net
of tax 902 (2,497)
--------- --------
Total comprehensive (loss)/income $ (49,842) $ 17,348
- --------------------------------------------------------------
The components of accumulated other comprehensive income (loss) consisted of the
following at September 30, 2002 and December 31, 2001:
SEPTEMBER 30 DECEMBER 31
In thousands 2002 2001
- ----------------------------------------------------------------
Foreign currency translation $(20,667) $(20,652)
Unrealized loss on hedges, net of
tax (1,642) (2,544)
Additional minimum pension
liability, net of tax (6,479) (6,479)
-------- --------
Total comprehensive loss $(28,788) $(29,675)
- ----------------------------------------------------------------
3. DISCONTINUED OPERATIONS
On November 1, 2001, the Company completed the sale of certain assets to GE
Transportation Systems (GETS) for $238 million in cash. The assets sold
primarily include locomotive aftermarket products and services for which Wabtec
is not the original equipment manufacturer.
In accordance with SFAS 144, the operating results of these businesses, along
with other small non-core businesses that the Company decided to exit in the
fourth quarter of 2001, have been classified as discontinued operations for all
years presented and are summarized for the three and nine months ended September
30, as follows:
THREE MONTHS ENDED
SEPTEMBER 30
In thousands 2002 2001
- -----------------------------------------------------------------
Net sales $2,309 $42,678
Income before income taxes 74 3,963
Income tax expense 26 1,387
------ -------
Income from discontinued operations $ 48 $ 2,576
- -----------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30
In thousands 2002 2001
- ------------------------------------------------------------------
Net sales $8,970 $141,469
Income before income taxes 352 9,924
Income tax expense 123 3,473
------ ---------
Income from discontinued operations $ 229 $ 6,451
- ------------------------------------------------------------------
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. The components of inventory, net of reserves, were:
SEPTEMBER 30 DECEMBER 31
In thousands 2002 2001
- ----------------------------------------------------------------
Raw materials $61,829 $60,013
Work-in-process 28,405 34,265
Finished goods 6,894 10,652
------- --------
Total inventory $97,128 $104,930
- ----------------------------------------------------------------
5. INTANGIBLES
The Company has adopted SFAS No. 142, "Goodwill and Other Intangible Assets"
effective January 1, 2002. Under its provisions, all goodwill and other
intangible assets with indefinite lives are no longer amortized under a
straight-line basis of estimated useful life. Instead, they will be subject to
8
assessments for impairment by applying a fair-value-based test. The Company has
completed the Phase I and Phase II assessments and has written down the value of
goodwill on its balance sheet by $90 million ($83.2 million for the freight
group and $6.8 million for the transit group), resulting in a non-cash after-tax
charge of $61.7 million, retroactively reflected, as required by SFAS 142, as of
January 1, 2002. The fair value of these reporting units were determined using a
combination of discounted cash flow analysis and market multiples based upon
historical and projected financial information. Goodwill still remaining on the
balance sheet is $109.5 million.
Intangible assets of the Company, other than goodwill, consist of the following:
SEPTEMBER DECEMBER
In thousands 2002 2001
- ------------------------------------------------------------------
Patents, tradenames/trademarks and other,
net of accumulated amortization
of $42,086 and $40,417 (3-40 years) $36,295 $38,048
Covenants not to compete, net of
accumulated amortization of $16,325 and
$15,326 (5 years) 1,818 2,827
Intangible pension asset 3,473 3,473
------- -------
Total $41,586 $44,348
- ------------------------------------------------------------------
Amortization expense for intangible assets was $1.4 and $4.2 million for the
three and nine months ended September 30, 2002. Estimated amortization expense
for the remainder of 2002 and the five succeeding years are as follows (in
thousands):
2002 (remainder) $1,391
2003 5,239
2004 3,903
2005 2,962
2006 2,297
2007 2,084
The changes in the carrying amount of goodwill by segment for the nine months
ended September 30, 2002 are as follows:
FREIGHT TRANSIT
In thousands GROUP GROUP TOTAL
- ---------------------------------------------------------------
Balance at December 31, 2001 $175,085 $23,703 $198,788
Goodwill acquired 664 - 664
Goodwill written off (83,179) (6,823) (90,002)
-------- ------- --------
Balance at September 30, 2002 $ 92,570 $16,880 $109,450
- ---------------------------------------------------------------
Actual results of continuing operations for the three and nine months ended
September 30, 2002 and pro forma results of continuing operations for the same
period of 2001 had we applied the non-amortization provisions of SFAS No. 142 in
these periods are as follows:
THREE MONTHS ENDED
SEPTEMBER 30
In thousands, except per share amounts 2002 2001
- ----------------------------------------------------------------
Reported income from continuing
operations $ 5,045 $3,817
Add: goodwill amortization, net of tax - 1,190
------- ------
Adjusted income from continuing
operations $ 5,045 $5,007
Basic earnings per share
Reported income from continuing
operations $ 0.12 $ 0.09
Goodwill amortization - 0.03
------- ------
Adjusted income from continuing
operations $ 0.12 $ 0.12
Diluted earnings per share
Reported income from continuing
operations $ 0.12 $ 0.09
Goodwill amortization - 0.03
------- ------
Adjusted income from continuing
operations $ 0.12 $ 0.12
- ----------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30
In thousands, except per share amounts 2002 2001
- ---------------------------------------------------------------
Reported income from continuing
operations $12,437 $18,264
Add: goodwill amortization, net of tax - 3,381
------- -------
Adjusted income from continuing
operations $12,437 $21,645
Basic earnings per share
Reported income from continuing
operations $ 0.29 $ 0.43
Goodwill amortization - 0.08
------- -------
Adjusted income from continuing
operations $ 0.29 $ 0.51
Diluted earnings per share
Reported income from continuing
operations $ 0.29 $ 0.42
Goodwill amortization - 0.08
------- ------
Adjusted income from continuing
operations $ 0.29 $ 0.50
- ---------------------------------------------------------------
6. EARNINGS PER SHARE
The computation of earnings per share from continuing operations is as follows:
9
THREE MONTHS ENDED
SEPTEMBER 30
In thousands, except per share 2002 2001
- ---------------------------------------------------------------
BASIC EARNINGS PER SHARE
Income from continuing
operations applicable to
common shareholders $ 5,045 $ 3,817
Divided by
Weighted average shares
outstanding 43,361 42,999
Basic earnings from continuing
operations per share $ 0.12 $ 0.09
- ---------------------------------------------------------------
DILUTED EARNINGS PER SHARE
Income from continuing
operations applicable to
common shareholders $ 5,045 $ 3,817
Divided by sum of the
Weighted average shares
outstanding 43,361 42,999
Conversion of dilutive stock
options 254 305
------- -------
Diluted shares outstanding 43,615 43,304
Diluted earnings from continuing
operations per share $ 0.12 $ 0.09
- ---------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30
In thousands, except per share 2002 2001
- ----------------------------------------------------------------
BASIC EARNINGS PER SHARE
Income from continuing
operations applicable to
common shareholders $12,437 $18,264
Divided by
Weighted average shares
outstanding 43,267 42,923
Basic earnings from continuing
operations per share $ 0.29 $ 0.43
- ----------------------------------------------------------------
DILUTED EARNINGS PER SHARE
Income from continuing
operations applicable to
common shareholders $12,437 $18,264
Divided by sum of the
Weighted average shares
outstanding 43,267 42,923
Conversion of dilutive stock
options 320 282
------- -------
Diluted shares outstanding 43,587 43,205
Diluted earnings from continuing
operations per share $ 0.29 $ 0.42
- ----------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
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 expired at various dates through 2000, except for
those claims, which were timely asserted, which 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's and its affiliates' operations do not use and their products do
not contain any asbestos. Asbestos actions have been filed against the Company
and certain of its affiliates. Consistent with the experience of others, the
number of claims have increased in recent years. However, it is important to
note that these asbestos claims involve products sold prior to the 1990
formation of the Company. The Company and its affiliates have not incurred any
significant costs related to these asbestos claims. The claims are covered by
insurance or are subject to indemnity from the companies who manufactured or
sold the products in question. Management believes that these claims will not be
material; and accordingly, the financial statements do not reflect any costs or
reserves for such claims.
The Company is subject to a number of other commitments and contingencies as
described in its Annual Report on Form 10-K for the Year Ended December 31,
2001. During the first three quarters of 2002, there were no material changes to
the information described in Note 18 therein.
Also, as described in Note 18 of the Form 10-K, 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 Industries (Boise, Idaho)
facility. In compliance with the Permit, the Company has completed the first
phase of an accelerated plan for the treatment of contaminated groundwater, and
continues onsite and offsite monitoring for the amount of hazardous
constituents. At September 30, 2002, the Company has accrued $888,000
representing the estimated remaining costs for remediation. The Company was in
compliance with the Permit at September 30, 2002.
8. SEGMENT INFORMATION
Wabtec has two reportable segments - the Freight Group and the Transit Group.
Although approximately 52% of the Company's sales are to the aftermarket, a
substantial portion of the Freight Group's operations and revenue base is
generally dependent on the capital replacement cycles of the large North
American-based railroad companies for locomotives and freight cars. The Transit
Group's operations are dependent on the
10
budgeting and expenditure appropriation process of federal, state and local
governmental units for mass transit needs. 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.
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, on-board electronic components and train coupler equipment.
Revenues are derived from OEM sales and locomotive overhauls, aftermarket sales
and from freight car repairs and services.
TRANSIT GROUP consists of products for passenger transit vehicles (typically
subways, commuter rail and buses) that include braking, coupling, and monitoring
systems, climate control and door equipment that are engineered to meet
individual customer specifications. Revenues are derived from OEM and
aftermarket sales as well as from repairs and services.
The Company evaluates its business segments' operating results based on income
from operations before 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, 2002 is
as follows:
FREIGHT TRANSIT CORPORATE
In thousands GROUP GROUP ACTIVITIES RESTRUCTURING TOTAL
- ------------------------------------------------------------------------------------------------------
Sales to external customers $ 107,087 $ 54,335 -- -- $ 161,422
Intersegment sales/(elimination) 1,755 172 (1,927) -- --
--------- --------- --------- -------- ---------
Total sales $ 108,842 $ 54,507 $ (1,927) -- $ 161,422
========= ========= ========= ======== =========
Income from operations $ 11,312 $ 5,379 $ (5,521) -- $ 11,170
Interest expense and other -- -- (3,409) -- (3,409)
--------- --------- --------- -------- ---------
Income before income taxes $ 11,312 $ 5,379 $ (8,930) -- $ 7,761
========= ========= ========= ======== =========
Segment financial information for the three months ended September 30, 2001 is
as follows:
FREIGHT TRANSIT CORPORATE
In thousands GROUP GROUP ACTIVITIES RESTRUCTURING TOTAL
- --------------------------------------------------------------------------------------------------------
Sales to external customers $ 115,580 $ 70,274 -- -- $ 185,854
Intersegment sales/(elimination) 2,425 189 (2,614) -- --
--------- --------- --------- --------- ---------
Total sales $ 118,005 $ 70,463 $ (2,614) -- $ 185,854
========= ========= ========= ========= =========
Income from operations $ 10,095 $ 7,744 $ (5,336) $ (1,571) $ 10,932
Interest expense and other -- -- (8,111) -- (8,111)
--------- --------- --------- --------- ---------
Income before income taxes $ 10,095 $ 7,744 $ (13,447) $ (1,571) $ 2,821
========= ========= ========= ========= =========
Segment financial information for the nine months ended September 30, 2002 is as
follows:
FREIGHT TRANSIT CORPORATE
In thousands GROUP GROUP ACTIVITIES RESTRUCTURING TOTAL
- ------------------------------------------------------------------------------------------------------
Sales to external customers $ 322,454 $ 196,101 -- -- $ 518,555
Intersegment sales/(elimination) 7,223 398 (7,621) -- --
--------- --------- --------- ------- ---------
Total sales $ 329,677 $ 196,499 $ (7,621) -- $ 518,555
========= ========= ========= ======= =========
Income from operations $ 32,339 $ 18,634 $ (16,036) -- $ 34,937
Interest expense and other -- -- (15,803) -- (15,803)
--------- --------- --------- ------- ---------
Income before income taxes $ 32,339 $ 18,634 $ (31,839) -- $ 19,134
========= ========= ========= ======= =========
11
Segment financial information for the nine months ended September 30, 2001 is as
follows:
FREIGHT TRANSIT CORPORATE
In thousands GROUP GROUP ACTIVITIES RESTRUCTURING TOTAL
- --------------------------------------------------------------------------------------------------------
Sales to external customers $ 375,542 $ 219,734 -- -- $ 595,276
Intersegment sales/(elimination) 8,350 634 (8,984) -- --
--------- --------- --------- --------- ---------
Total sales $ 383,892 $ 220,368 $ (8,984) -- $ 595,276
========= ========= ========= ========= =========
Income from operations $ 48,548 $ 23,686 $ (14,704) $ (3,531) $ 53,999
Interest expense and other -- -- (28,952) -- (28,952)
--------- --------- --------- --------- ---------
Income before income taxes $ 48,548 $ 23,686 $ (43,656) $ (3,531) $ 25,047
========= ========= ========= ========= =========
9. RESTRUCTURING CHARGES
In 2001, the Company completed a merger and restructuring plan with charges
totaling $71 million pre-tax, with approximately $49 million of the charge
expensed in 1999, $20 million in 2000 and $2 million in 2001. The plan involved
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.
As of September 30, 2002, $768,000 of the merger and restructuring charge was
still remaining as accrued on the balance sheet as part of other accrued
liabilities. The table below identifies the significant components of the charge
and reflects the accrual balance at that date.
LEASE
IMPAIRMENTS
AND
ASSET
In thousands WRITEDOWNS SEVERANCE OTHER TOTAL
- ------------------------------------------------------------------------------------------------
Beginning balance, January 1, 2002 $ 2,458 $ 525 $ 169 $ 3,152
Amounts paid (1,690) (525) (169) (2,384)
------- ------- ------- -------
Balance at September 30, 2002 $ 768 $ -- $ -- $ 768
- ------------------------------------------------------------------------------------------------
The lease impairment charges and asset writedowns are associated with the
Company's closing of several plants, the consolidation of the corporate
headquarters, and the Company's evaluation of certain assets where projected
cash flows from such assets over their remaining lives are estimated to be less
than their carrying values.
The Company began and completed a new restructuring plan for the Transit rail
business in 2001. The restructuring plan involved operational realignment and
related workforce reductions. The charges to complete the restructuring plan
totaled $2 million pre-tax. The Company estimates synergies from the plan will
yield approximately $3 million of annual pre-tax cost savings partially in 2002
and then beyond, with such benefits realized through reduced cost of sales and
reduced selling, general and administrative expenses.
10. EXTRAORDINARY ITEM
In July 2002, the Company redeemed $175 million of Senior Notes at par (face)
through the use of cash on hand and additional borrowings under its credit
agreement.
In connection with the July 2002 redemption, the Company wrote off approximately
$2.7 million of previously capitalized costs relating to the Senior Notes. The
Company also recognized $852,000 of unamortized bond discount relating to the
Senior Notes. This resulted in a net of tax charge of $1.2 million or $0.03 per
diluted share in the period ended September 30, 2002, which has been reflected
as an extraordinary item.
12
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 2001 Annual Report on Form 10-K.
OVERVIEW
In November 2001, Wabtec sold certain assets to GE Transportation Systems (GETS)
for $238 million in cash. The assets sold primarily include locomotive
aftermarket products and services for which Wabtec is not the original equipment
manufacturer. The results for these businesses, along with other small non-core
businesses that the Company has decided to exit, are classified as discontinued
operations throughout this report. Prior period results were restated for the
discontinued operations format.
Net income from continuing operations for the first nine months of 2002 and 2001
was $12.4 million or $0.29 per diluted share and $18.3 million or $0.42 per
diluted share. The results for the first nine months of 2001 included a $3.5
million restructuring-related charge and $2 million of research and development
tax credits. Without the effect of the aforementioned items, net income from
continuing operations for the first nine months of 2001 would have been $18.6
million or $0.43 per diluted share. Net sales from continuing operations
decreased to $518.6 million in the first nine months of 2002 as compared to
$595.3 million in the same period in 2001. Operating margins of continuing
operations for the first nine months of 2002 decreased to 6.7% as compared to
9.1% in the same period in 2001. The drop in net income was essentially volume
and mix related.
Reported net loss for the first nine months of 2002 was $50.7 million, or $1.16
per diluted share, as compared to net income of $24.7 million, or $0.57 per
diluted share in the same period in 2001. The results for the first nine months
of 2002 included a $61.7 million, net of tax, write off of goodwill in
accordance with SFAS No. 142, a $1.2 million, net of tax, loss on early
extinguishment of debt and a $300,000, net of tax, loss from discontinued
operations, while 2001 included $6.5 million, net of tax, of income from
discontinued operations.
THIRD QUARTER 2002 COMPARED TO THIRD QUARTER 2001
The following table sets forth the Company's net sales by business segment:
THREE MONTHS ENDED
SEPTEMBER 30
-----------------------
In thousands 2002 2001
- ---------------------------------------------------------------
Freight Group $107,087 $115,580
Transit Group 54,335 70,274
-------- --------
Net sales $161,422 $185,854
- ---------------------------------------------------------------
Net sales for the third quarter of 2002 decreased $24.4 million, or 13.1%, to
$161.4 million as compared to the prior year period. Both the Freight Group and
Transit Group had lower sales. The Freight Group's decreased sales reflected
lower sales of components for new freight cars and locomotives. In the quarter,
industry deliveries of new freight cars decreased to 4,925 units as compared to
7,175 in the same period in 2001. The Transit Group's decreased sales were
primarily due to the completion of a contract to supply components for New York
City subway cars.
Gross profit decreased to $43.3 million in the third quarter of 2002 compared to
$47.8 million in the same period of 2001. Gross profit is dependent on a number
of factors including pricing, sales volume and product mix. Gross profit, as a
percentage of sales, was 26.8% compared to 25.7% in the same period of 2001.
(Gross profit was 25.2% in the second quarter of 2002.) The increase in gross
profit percentage is primarily due to favorable product mix and cost reductions.
The decrease in gross profit dollars is primarily attributed to the decrease in
sales volumes.
After excluding goodwill amortization (due to the required adoption of Financial
Accounting Standard 142, goodwill is no longer amortized) of $1.8 million and
restructuring charges of $1.6 million in the third quarter of 2001, operating
expenses improved by $1.4 million in the third quarter of 2002 as compared to
the same period of 2001, due to a decrease in selling, general and
administrative expenses.
Operating income totaled $11.2 million (or 6.9% of sales) in the third quarter
of 2002 compared with $10.9 million (or 5.9% of sales) in the same period in
2001. Higher operating income resulted from decreased operating expenses in the
third quarter of 2002. (See Note 8 - "Notes to Condensed Consolidated Financial
Statements" regarding segment-specific information, included elsewhere in this
report).
Interest expense decreased 61.3% in the third quarter of 2002 as compared to the
prior year quarter primarily due to a substantial decrease in debt and interest
rates.
The effective income tax rate was 35% in both the third quarter of 2002 and
2001.
13
NINE MONTH PERIOD OF 2002 COMPARED TO NINE MONTH PERIOD OF 2001
The following table sets forth the Company's net sales by business segment:
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------
In thousands 2002 2001
- ---------------------------------------------------------------
Freight Group $322,454 $375,542
Transit Group 196,101 219,734
-------- --------
Net sales $518,555 $595,276
- ---------------------------------------------------------------
Net sales for the first nine months of 2002 decreased $76.7 million, or 12.9%,
to $518.6 million as compared to the prior year period. Both the Freight Group
and Transit Group had lower sales. The Freight Group's decreased sales reflected
lower sales of components for new freight cars and locomotives. In the first
nine months, industry deliveries of new freight cars decreased to 12,935 units
as compared to 27,227 in the same period in 2001. In the first nine months,
industry deliveries of new locomotives decreased to 699 units as compared to 827
in the same period in 2001. The Transit Group's decreased sales were primarily
due to the completion of a contract to supply components for New York City
subway cars.
Gross profit decreased to $133.4 million in the first nine months of 2002
compared to $162.8 million in the same period of 2001. Gross profit is dependent
on a number of factors including pricing, sales volume and product mix. Gross
profit, as a percentage of sales, was 25.7% compared to 27.3% in the same period
of 2001. The decrease in gross profit is primarily attributed to the decrease in
sales volumes, an unfavorable product mix and pricing pressures.
After excluding goodwill amortization (due to the required adoption of Financial
Accounting Standard 142, goodwill is no longer amortized) of $5.2 million and
restructuring charges of $3.5 million in the first nine months of 2001,
operating expenses improved $1.6 million in the first nine months of 2002 as
compared to the same period of 2001, due to a decrease in selling, general and
administrative expenses.
Operating income totaled $34.9 million (or 6.7% of sales) in the first nine
months of 2002 compared with $54 million (or 9.1% of sales) in the same period
in 2001. Lower operating income resulted from $76.7 million less in sales
volumes and overall changes to product mix. (See Note 8 - "Notes to Condensed
Consolidated Financial Statements" regarding segment-specific information,
included elsewhere in this report).
Interest expense decreased 48.9% in the first nine months of 2002 as compared to
the prior year period primarily due to a substantial decrease in debt and
interest rates.
The effective income tax rate was 35% for the first nine months of 2002 and
2001.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is provided primarily by operating cash flow and borrowings under the
Company's unsecured credit facility with a consortium of commercial banks
("credit agreement"). The following is a summary of selected cash flow
information and other relevant data.
NINE MONTHS ENDED
SEPTEMBER 30
------------------------
In thousands 2002 2001
- ---------------------------------------------------------------
Cash provided (used) by:
Operating activities:
Income taxes $(28,067) $ 7,034
Other operating activities 28,437 79,892
Investing activities (8,749) (7,930)
Financing activities (27,807) (84,187)
Earnings before interest, taxes,
depreciation and amortization
(EBITDA) 54,204 79,259
Cash provided by operations other than income taxes in the first nine months of
2002 was $28.4 million compared to $79.9 million in the same period a year ago.
EBITDA was the main provider of cash from operations in the first nine months of
2002. Planned income tax payments of approximately $30 million due to the fourth
quarter 2001 net gain from the sale of certain businesses to GETS were the
primary use of cash from operations for the first nine months of 2002.
Cash used for investing activities was $8.7 million in the first nine months of
2002 as compared to $7.9 million a year ago. In the first nine months of 2002,
cash received from the sale of a product line was $1.4 million, compared to $4.1
million in the first nine months of 2001. In the first nine months of 2002, $1.7
million was paid to acquire the minority interest of a business that the Company
did not already own as compared to $743,000 for a new product line in the same
period of 2001. Capital expenditures in the first nine months of 2002 were $10.2
million compared to $16 million in the same period a year ago. The majority of
capital expenditures for these periods relates to upgrades to dies and fixtures
and replacement of existing equipment to improve the overall cost savings
through efficiencies.
Cash used by financing activities was $27.8 million in the first nine months of
2002 versus $84.2 million in the same period a year ago. The Company reduced
long-term debt by approximately $29.5 million in the first nine months of 2002
compared to $85.1 million in the same period a year ago.
The following table sets forth the Company's outstanding indebtedness at
September 30, 2002. The revolving credit agreement and other term loan interest
rates are variable and dependent on market conditions.
14
SEPTEMBER 30 DECEMBER 31
In thousands 2002 2001
- ------------------------------------------------------------------
Revolving credit agreement $206,000 $ 60,000
9.375% Senior notes due 2005 - 175,000
5.5% Industrial revenue bond due 2008 5,074 5,556
Other 530 1,314
-------- --------
Total $211,604 $241,870
Less-current portion 819 782
-------- --------
Long-term portion $210,785 $241,088
- ------------------------------------------------------------------
Credit Agreement
The Company's credit agreement provides a $275 million five-year revolving
credit facility expiring in 2004 and a 364-day $100 million convertible
revolving credit facility through 2004 which is to be reconfirmed in November
2002. At September 30, 2002, the Company had available borrowing capacity, net
of letters of credit, of approximately $146.4 million, subject to certain
financial covenant restrictions.
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 were also 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 Notes were redeemed at par (face) on July 8, 2002 through the use of
cash on hand and additional borrowings under the credit agreement. This
redemption resulted in an extraordinary loss.
The Company believes, based on current levels of operations and forecasted
earnings that cash flow and liquidity will be sufficient to fund its working
capital and capital equipment needs as well as meeting the 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.
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; and
Transaction or Commercial Factors
- the outcome of negotiations with partners, governments, suppliers,
customers or others.
15
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.
CRITICAL ACCOUNTING POLICIES
A summary of the Company's significant accounting policies is included in Note 2
to the audited consolidated financial statements contained in the Annual Report
on Form 10-K for the year ended December 31, 2001. Management believes that the
application of these policies on a consistent basis enables the Company to
provide the users of the financial statements with useful and reliable
information about the Company's operating results and financial condition.
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make judgments, estimates
and assumptions regarding uncertainties that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities and the
reported amounts of revenues and expenses. Areas of uncertainty that require
judgments, estimates and assumptions include the accounting for derivatives,
environmental and tax matters as well as the annual testing of goodwill for
impairment. Management uses historical experience and all available information
to make these judgments and estimates and actual results will inevitably differ
from those estimates and assumptions that are used to prepare the Company's
financial statements at any given time. Despite these inherent limitations,
management believes that Management's Discussion and Analysis and the financial
statements and footnotes provide a meaningful and fair perspective of the
Company.
RECENT ACCOUNTING PRONOUNCEMENTS
See Notes 2 and 5 of "Notes to Condensed Consolidated Financial Statements"
included elsewhere in this report.
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 financing costs associated with its
variable-rate debt. After considering the effects of interest rate swaps,
further described below, the Company's variable-rate debt represents 69% of
total long-term debt at September 30, 2002. Management has entered into
pay-fixed, receive-variable interest rate swap contracts that partially mitigate
the impact of variable-rate debt interest rate increases. An instantaneous 100
basis point increase in interest rates would reduce the Company's annual
earnings by $949,000, assuming no additional intervention strategies by
management.
See Note 2 of the Company's Notes to Condensed Consolidated Financial Statements
for the Quarterly Period Ended September 30, 2002 included herein for discussion
of swap contracts. These swap contracts are not expected to have a material
effect on the Company's financial condition, results of operations or liquidity.
FOREIGN CURRENCY EXCHANGE RISK
The Company occasionally 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, 2002, the Company had no such 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 2002, approximately 76%
of Wabtec's net sales are in the United States, 7% in Canada, 2% in Mexico, and
15% in other international locations, primarily Europe. At September 30, 2002,
the Company does not believe changes in foreign currency exchange rates
represent a material risk to results of operations, financial position, or
liquidity.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Wabtec's Chief Executive Officer and Chief Financial Officer have evaluated the
Company's disclosure controls and procedures as of November 12, 2002, and they
concluded that these controls and procedures are effective.
Changes in Internal Controls
There are no significant changes in internal controls or in other factors that
could significantly affect these controls subsequent to November 12, 2002.
LEGAL PROCEEDINGS AND COMMITMENTS AND CONTINGENCIES
There have been no material changes to report regarding the Company's
commitments and contingencies as described in Note 18 of the Company's Annual
Report on Form 10-K for the Year Ended December 31, 2001.
16
EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are being filed with this report:
3.1 Restated Certificate of Incorporation of the Company dated January
30, 1995, as amended March 30, 1995, filed as an exhibit to the
Company's Registration Statement on Form S-1 (No. 33-90866), and
incorporated herein by reference.
3.2 Restated By-Laws of the Company, effective November 19, 1999,
filed as part of the Company's Registration Statement on Form S-4
(No. 333-88903, and incorporated herein by reference.
(b) None.
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: November 14, 2002
18
CERTIFICATION
I, Gregory T.H. Davies, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Westinghouse Air Brake
Technologies Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ GREGORY T.H. DAVIES
- -----------------------------
Name: Gregory T.H. Davies
Title: President & Chief Executive Officer
19
CERTIFICATION
I, Robert J. Brooks, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Westinghouse Air Brake
Technologies Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ ROBERT J. BROOKS
- ---------------------------
Name: Robert J. Brooks
Title: Chief Financial Officer
20
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, the undersigned officers
of Wabtec Corporation (the "Company"), hereby certify, to the best of their
knowledge, that the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002 (the "Report") fully complies with the requirements of
Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934
and that the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
By: /s/ GREGORY T. H. DAVIES
----------------------------------
Gregory T. H. Davies
President & Chief Executive Officer
Date: November 14, 2002
By: /s/ ROBERT J. BROOKS
----------------------------------
Robert J. Brooks
Chief Financial Officer
Date: November 14, 2002
21
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION AND METHOD OF FILING
------- --------------------------------
3.1 Restated Certificate of Incorporation of the Company dated January
30, 1995, as amended March 30, 1995, filed as an exhibit to the
Company's Registration Statement on Form S-1 (No. 33-90866), and
incorporated herein by reference
3.2 Restated By-Laws of the Company, effective November 19, 1999,
filed as part of the Company's Registration Statement on Form S-4
(No. 333-88903), and incorporated herein by reference
22