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Westinghouse Air Brake Technologies Annual Report, Year Ended Dec 31, 1998

Filing Date
Filed March 25, 1999
Period End
December 31, 1998
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 25, 1999. Cited figures are marked; the original filing is the authoritative source.

Westinghouse Air Brake Company, North America's largest manufacturer of value-added equipment for locomotives, railway freight cars and passenger transit vehicles, reported net sales of $670.9 milliona for 1998, up 18.9% from $564.4 million in 1997.

Income from operations rose to $104.7 millionb from $90.0 million, and net income was $41.7 million, or $1.62 diluted EPS, after a $3.3 million extraordinary charge for write-off of deferred financing costs. Diluted EPS before the extraordinary item was $1.75, up 20.7%. Growth was driven largely by acquisitions, including Rockwell's railroad electronics business for approximately $80.0 million in October 1998, with acquisitions contributing $63.7 million of incremental 1998 revenue.

The balance sheet shows total debt rising to $467.8 millionc from $364.9 million, and shareholders' equity remained negative at $(33.9) million. Net cash provided by operating activities fell to $42.1 million from $67.0 million, which the company attributed to higher receivables and inventories tied to growth and acquired businesses. Backlog reached $460.9 million at year-end 1998, up from $376.3 million, with $325.0 million attributable to passenger transit products.

Management expects 1999 freight car deliveries to be lower than 1998, though railroad OEM and aftermarket sales are expected to remain reasonably strong. Investors should note the company's leverage: it states it will remain leveraged to a significant extent, and in January 1999 it issued $75 milliond of additional 9 3/8% Senior Notes due 2005 to repay the unsecured credit facility, Comet notes and part of the RRE acquisition debt.

Management owns approximately 31% of common stock and the ESOP holds additional shares. A GE Harris patent infringement suit filed February 12, 1999 is at an early stage, and the company believes its technology does not infringe.

02—Key points

Key Highlights

  1. Net sales rose 18.9% to $670.9 million in 1998 from $564.4 million in 1997.
  2. Income from operations increased 16.3% to $104.7 million; gross margin was 32.7% versus 33.0% a year earlier.
  3. Net income was $41.7 million ($1.62 diluted EPS), including a $3.3 million extraordinary loss on debt extinguishment; EPS before extraordinary item was $1.75, up 20.7%.
  4. Backlog of firm orders was $460.9 million at December 31, 1998, versus $376.3 million a year earlier, with $325.0 million in passenger transit products.
  5. Operating cash flow declined to approximately $42 million from $67 million in 1997, driven by higher working capital tied to growth and acquisitions.
  6. Total debt increased to $467.8 million; shareholders' equity was a deficit of $(33.9) million at year-end 1998.
  7. Acquired Rockwell's railroad electronics business for approximately $80.0 million in October 1998, and the company issued $75 million of additional 9 3/8% Senior Notes in January 1999.

03—Questions

Frequently Asked Questions

  1. How much did Westinghouse Air Brake's revenue and earnings grow in 1998?

    Net sales grew 18.9% to $670.9 million, and income from operations grew 16.3% to $104.7 million. Net income was $41.7 million, or $1.62 per diluted share, compared with $37.3 million, or $1.42 per diluted share, in 1997. Before a $3.3 million extraordinary charge, diluted EPS was $1.75.

  2. What drove the increase in sales?

    The filing attributes approximately $43.2 million of the Railroad Group sales increase to acquisitions, and about $20.5 million of Transit Group growth to acquired businesses. Strong OEM freight car demand, with approximately 76,000 freight cars delivered in 1998 versus 50,000 in 1997, also contributed, partly offset by lower electronics sales following a 1997 federal monitoring mandate.

  3. How leveraged is the company and what are its debt obligations?

    Total debt was $467.8 million at December 31, 1998, up from $364.9 million. Shareholders' equity was a deficit of $(33.9) million. The company states it will remain leveraged to a significant extent. The January 1999 issuance of $75 million of 9 3/8% Senior Notes was used to repay $30 million of Rockwell acquisition debt, the $30 million unsecured credit facility and the remaining $10.2 million of Comet notes, and to reduce revolving credit borrowings.

  4. What are the main risks mentioned in the filing?

    Variable-rate debt of $308 million (including swap effects) represented 66% of total long-term debt at December 31, 1998, and a 100 basis point rate increase would reduce earnings by $2.2 million. Customer concentration within segments, the expected decline in 1999 freight car deliveries, the Year 2000 remediation program, and a GE Harris patent infringement suit filed February 12, 1999 are also disclosed.

04—Continue

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