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Westinghouse Air Brake Technologies Annual Report, Year Ended Dec 31, 1997

Filing Date
Filed March 20, 1998
Period End
December 31, 1997
Security
WAB
In the record · 2016–202610-K1110-Q338-K132

WAB filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 132 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Mar ’17Mar ’17
  2. Leadership change8-K · Jul ’19Jul ’19
  3. Leadership change8-K · Aug ’21Aug ’21
  4. Material agreement8-K · May ’25May ’25

01—Abstract

Summary

Summary of the 10-K filed March 20, 1998. Cited figures are marked; the original filing is the authoritative source.

Westinghouse Air Brake Company (WABCO), headquartered in Wilmerding, Pennsylvania, reported net sales of $564.4 milliona for 1997, up 24.5% from $453.5 million in 1996, with net income of $37.3 million ($1.42 diluted EPS) versus $32.7 million ($1.15) a year earlier.

The company describes itself as North America's largest manufacturer of value-added equipment for locomotives, railway freight cars and passenger transit vehicles. Growth was driven by acquisitions (Vapor, Stone, Thermo King, HP, Futuris) and new products; the acquisitions contributed $85.5 millionb of the sales increase. The transit segment grew to $174.3 million in sales, and backlog reached $376.3 million at year-end 1997 ($295.1 million of it transit), rising to $400.1 million as of February 28, 1998.

Balance sheet and capital structure are the key investor watch items. Total debt was $364.9 millionc at December 31, 1997, and shareholders' equity was a deficit of $(79.3) million, reflecting the 1997 repurchase of 4 million shares from SIH for $44 million plus about $2 million in fees, funded by borrowings. Operating cash flow was $67.0 million in 1997, and gross capital expenditures were $29.6 million, with about $28 million expected for 1998.

The company states that it will remain leveraged to a significant extent and that its debt service obligations will continue to be substantial. Environmental and legal exposures are described as largely indemnified by American Standard Inc. and covered by an insurance policy from Manville Corporation, with a $12.5 milliond aggregate limit. Management reports no pending litigation expected to have a material adverse effect.

02—Key points

Key Highlights

  1. Net sales rose 24.5% to $564.4 million in 1997; acquisitions contributed $85.5 million of the increase.
  2. Net income was $37.3 million, or $1.42 per diluted share, up from $32.7 million, or $1.15 per diluted share, in 1996.
  3. Transit product line sales reached $174.3 million in 1997, up from $96.2 million in 1996, and year-end transit backlog was $295.1 million.
  4. Total backlog was $400.1 million as of February 28, 1998, versus $376.3 million at December 31, 1997.
  5. Total debt was $364.9 million at year-end 1997, and shareholders' equity was a deficit of $(79.3) million.
  6. Operating cash flow was $67.0 million in 1997, and 1998 capital expenditures are expected to approximate $28 million.
  7. International sales were about 12% of 1997 revenue, compared with 3% in 1994, and the company opened a sales office in Beijing.

03—Questions

Frequently Asked Questions

  1. How did WABCO perform financially in 1997?

    Net sales increased 24.5% to $564.4 million from $453.5 million, and income from operations rose 12.9% to $90.0 million. Net income increased 14.1% to $37.3 million, and diluted EPS rose 23.5% to $1.42. Gross margin declined to 33.0% from 33.8%, which the company attributed mainly to lower initial margins at recently acquired businesses.

  2. What drove the growth in sales?

    Acquisitions accounted for $85.5 million of the sales increase, including Vapor (acquired in 1996), Stone, Thermo King and HP. Increased volume in the Electronics, Transit and Friction businesses also contributed. Transit sales grew from $96.2 million to $174.3 million, while freight car sales were $195.2 million versus $192.1 million.

  3. What does the company's balance sheet look like?

    Total assets were $410.9 million and total debt was $364.9 million at December 31, 1997. Shareholders' equity was a deficit of $(79.3) million, down from $(76.2) million, after the $44 million share repurchase from SIH in March 1997. The company states that it will remain leveraged to a significant extent and its debt service obligations will continue to be substantial.

  4. What are the main risks and contingencies disclosed?

    The filing discloses that the company's credit agreement limits dividends, and that the company's indebtedness includes $100 million of 9.375% senior notes due 2005 and a term loan maturing in 2002. Environmental and asbestos-related claims relating to the 1990 acquisition are indemnified by American Standard Inc., with insurance from Manville Corporation covering up to $12.5 million. Management reports no litigation expected to have a material adverse effect.

  5. What is the company's market position and customer base?

    WABCO states it holds more than 50% market share for its primary braking equipment in North America. In 1997, about 50% of net sales came from aftermarket sales of replacement parts, repair services and upgrades, and no single customer accounted for more than 10% of sales.

04—Continue

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