01—Abstract
Summary
Summary of the 10-K filed February 27, 2009. Cited figures are marked; the original filing is the authoritative source.
Westinghouse Air Brake Technologies Corporation (Wabtec), which does business as Wabtec Corporation, reported 2008 net sales of $1,574.7 milliona, up from $1,360.1 million in 2007, and net income of $130.6 million, or $2.67 per diluted share, versus $109.6 million, or $2.23 per diluted share, a year earlier.
Income from operations rose to $212.5 millionb (13.5% of sales) from $179.7 million (13.2%). Growth was driven by brake products, transit authority contracts, remanufacturing, heat exchangers, acquisitions and international expansion. The Transit Group grew to $801.2 million in sales, slightly exceeding the Freight Group's $773.5 million.
Aftermarket sales represented about 53% of total 2008 sales, which the filing describes as less cyclical than original equipment sales. Cash flow from operations was $159.4 millionc, but investing activities used $417.4 million, mainly for the Standard Car Truck acquisition ($302.9 million net of cash received) and POLI S.p.A. ($82.3 million).
Total debt rose to $387.1 milliond from $150.3 million, funded by a new 2008 Refinancing Credit Agreement with a $300 million revolver and a $200 million term loan, and cash fell to $141.8 million from $234.7 million. The company repurchased $45.8 million of stock during 2008. Backlog was $1.06 billion at December 31, 2008, with $565.6 million expected to deliver in 2009.
Key risks flagged in the filing include exposure to cyclical freight and transit markets, dependence on key customers (top five accounted for 27% of net sales), asbestos claims at subsidiary RFPC that management believes will not be material, and the pending Faiveley Transport arbitration in which Faiveley alleged $128 million in damages, which the company calls grossly overstated. Management expects freight conditions to slow in 2009 and plans cost reductions including plant consolidations and workforce reductions.
02—Key points
Key Highlights
- Net sales rose to $1,574.7 million in 2008 from $1,360.1 million in 2007, with net income of $130.6 million ($2.67 diluted EPS) versus $109.6 million ($2.23).
- Aftermarket sales were about 53% of 2008 total sales, a base the filing describes as less cyclical than original equipment sales.
- Transit Group sales reached $801.2 million (up from $625.9 million) and surpassed Freight Group sales of $773.5 million.
- Acquisitions totaled roughly $398 million net of cash acquired, including Standard Car Truck ($302.9 million) and POLI S.p.A. ($82.3 million).
- Total debt increased to $387.1 million from $150.3 million after a new $300 million revolver and $200 million term loan under the 2008 Refinancing Credit Agreement.
- Backlog stood at $1.06 billion at December 31, 2008, with $565.6 million expected to be delivered in 2009.
- Management expects slower freight conditions in 2009 and plans cost reductions including plant consolidations and workforce reductions; the Faiveley arbitration claim of $128 million remains pending.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Westinghouse Air Brake Technologies kept $0.08.
- Revenue$1.57B100.0%
- Cost of revenue−$1.15B72.9%
- Gross profit$427.2M27.1%
- Operating costs−$214.7M13.6%
- Operating income$212.5M13.5%
- Interest, other & tax−$82.0M5.2%
- Net income$130.6M8.3%
Where FY2008 revenue went
$1.57B- Cost of revenue: $1.15B, 73% of revenue
- Net income: $130.6M, 8.3% of revenue
- R&D: $39.0M, 2.5% of revenue
- SG&A: $170.6M, 11% of revenue
- Interest, other & tax: $82.0M, 5.2% of revenue
Kept 8.3% as net incomeNet income $130.6M · 8.3%R&D $39.0M · 2.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 27, 2009Financial Statements
| Revenue | $1.57B |
| Cost of Revenue | $1.15B |
| Gross Profit | $427.19M |
| R&D Expenses | $38.98M |
| SG&A Expenses | $170.60M |
| Operating Expenses | $214.67M |
| Operating Income | $212.52M |
| Net Income | $130.55M |
| EPS (Basic) | $2.69 |
| EPS (Diluted) | $2.66 |
| Shares Outstanding (Basic) | 48.23M |
| Shares Outstanding (Diluted) | 48.85M |
05—Questions
Frequently Asked Questions
How did Wabtec's profitability change in 2008?
Income from operations increased to $212.5 million (13.5% of sales) from $179.7 million (13.2% of sales) in 2007. Net income rose to $130.6 million, or $2.67 per diluted share, from $109.6 million, or $2.23 per diluted share. The filing attributes the improvement primarily to sales increases.
What drove the growth in net sales?
The filing cites internal growth from brake products ($55.3 million), transit authority contracts ($36.8 million), remanufacturing, overhaul and build of locomotives ($21.8 million) and heat exchangers ($16.6 million). Acquisitions contributed $59.3 million and international expansion added $18 million, partly offset by a $12.2 million foreign exchange decrease.
How is Wabtec funding its acquisitions and what is its debt position?
Total debt was $387.1 million at December 31, 2008, up from $150.3 million. The 2008 Refinancing Credit Agreement provides a $300 million five-year revolver and a $200 million five-year term loan, both expiring in January 2013. The $150 million 6 7/8% senior notes due 2013 remain outstanding. Available bank borrowing capacity was about $242.7 million, net of $57.3 million of letters of credit.
What legal and contingent risks does the filing disclose?
Asbestos bodily-injury claims are mostly directed at subsidiary RFPC, and management believes their final resolution will not be material. The Faiveley Transport arbitration seeks monetary damages, and Faiveley alleged $128 million in damages. The company calls that claim grossly overstated and says it does not believe it has material legal liability. The Federal Court appeal was argued February 9, 2009, and the arbitration panel's second hearing is scheduled for April 2009.
What is the outlook for 2009 according to management?
Management expects conditions to slow in freight rail and to remain generally stable in passenger transit. Demand for new freight cars is expected to be lower, while transit ridership and federal funding are expected to support demand. Wabtec plans cost actions including plant consolidations, workforce reductions and general spending cuts, and expects these will not affect its strategic growth investments.
06—Continue