01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
Westinghouse Air Brake Technologies Corporation (doing business as Wabtec Corporation) reported 2011 net sales of $1,967.6 milliona, up from $1,507.0 million in 2010, and net income attributable to Wabtec shareholders of $170.1 million, or $3.51 per diluted share, compared with $123.1 million, or $2.56 per diluted share, in 2010.
The Freight Group accounted for 61% of 2011 sales and the Transit Group for 39%. Aftermarket sales were about 57% of total sales, and sales to customers outside the U.S. were about 47%. Income from operations rose to $270.7 millionb, or 13.8% of sales, from $202.8 million, or 13.5%, in 2010.
Management attributed the growth to higher freight sales volume, acquisitions contributing $128.3 millionc of sales, and favorable foreign exchange, partly offset by an $18.1 million charge related to a court ruling in the Faiveley litigation. Backlog stood at about $1.55 billion at December 31, 2011, up from $1.08 billion a year earlier. Operating cash flow was $248.6 million, compared with $176.1 million in 2010, and cash rose to $285.6 million at year-end.
Total debt was $395.9 milliond, consisting of $150.0 million of 6.875% senior notes due 2013 and $245.0 million drawn on the revolving credit facility. In November 2011 the company replaced its prior facilities with a $600 million five-year revolving credit agreement that expires in November 2016. The filing identifies positive train control (PTC) as a significant growth driver, with about $125 million of 2011 sales tied to PTC projects.
It also notes risks including customer concentration (top five customers accounted for 17% of net sales), international operations, asbestos litigation involving subsidiary RFPC, and possible changes to the PTC deadline. Management stated that asbestos-related cases are not expected to be material.
02—Key points
Key Highlights
- Net sales rose 30.6% to $1,967.6 million in 2011 from $1,507.0 million in 2010, with acquisitions contributing $128.3 million.
- Net income attributable to Wabtec shareholders was $170.1 million, or $3.51 per diluted share, up from $123.1 million, or $2.56 per diluted share, in 2010.
- Freight Group sales increased 54.2% to $1,210.1 million, while Transit Group sales increased 4.9% to $757.6 million.
- Backlog was about $1.55 billion at December 31, 2011, compared with $1,078.6 million a year earlier; about 57% of 2011 sales came from aftermarket orders.
- Operating cash flow increased to $248.6 million from $176.1 million, and year-end cash was $285.6 million against total debt of $395.9 million.
- The company completed multiple acquisitions in 2010 and 2011 with a combined investment of $235.8 million, and entered a new $600 million revolving credit agreement in November 2011.
- About $125 million of 2011 revenue came from positive train control (PTC) projects, and the filing notes a House committee proposal to extend the PTC deadline from December 31, 2015 to December 31, 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Westinghouse Air Brake Technologies kept $0.09.
- Revenue$1.97B100.0%
- Cost of revenue−$1.40B71.0%
- Gross profit$570.4M29.0%
- Operating costs−$299.7M15.2%
- Operating income$270.7M13.8%
- Interest, other & tax−$100.6M5.1%
- Net income$170.1M8.6%
Where FY2011 revenue went
$1.97B- Cost of revenue: $1.40B, 71% of revenue
- SG&A: $247.5M, 13% of revenue
- Net income: $170.1M, 8.6% of revenue
- R&D: $37.2M, 1.9% of revenue
- Other operating costs: $15.0M, 0.8% of revenue
- Interest, other & tax: $100.6M, 5.1% of revenue
Kept 8.6% as net incomeOther operating costs $15.0M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $1.97B$1.51B | +30.6% |
| Cost of Revenue | $1.40B$1.06B | +32.1% |
| Gross Profit | $570.42M$449.08M | +27.0% |
| R&D Expenses | $37.19M$40.20M | −7.5% |
| SG&A Expenses | $247.53M$195.89M | +26.4% |
| Operating Expenses | $299.72M$246.27M | +21.7% |
| Operating Income | $270.70M$202.81M | +33.5% |
| Interest Expense | $15.39M$15.98M | −3.7% |
| Net Income | $170.15M$123.10M | +38.2% |
| EPS (Basic) | $1.77$2.57 | −31.1% |
| EPS (Diluted) | $1.76$2.56 | −31.2% |
| Shares Outstanding (Basic) | 95.64M47.60M | +100.9% |
| Shares Outstanding (Diluted) | 96.66M48.01M | +101.3% |
05—Questions
Frequently Asked Questions
What drove the increase in Wabtec's 2011 sales and earnings?
Net sales increased $460.6 million to $1,967.6 million. The filing attributes $355.8 million of the increase to higher freight group sales, mainly from freight original equipment, electronics and aftermarket products, and $128.3 million to acquisitions. Partly offsetting these gains, transit sales declined $87.4 million due to the completion of certain transit locomotive build contracts. Net income rose to $170.1 million, or $3.51 per diluted share, on higher sales volume and operating margins.
How exposed is Wabtec to a few large customers?
The filing states that the top five customers accounted for 17% of 2011 net sales, including General Electric Transportation, Eversholt (formerly HSBC) Rail (UK), CSX Transportation, Electro Motive (or CAT), and Union Pacific. No single customer represented 10% or more of consolidated sales.
What is the status of the Faiveley litigation and its financial impact?
A U.S. jury awarded the plaintiffs $18.1 million, and the court entered a final verdict of $18.1 million plus interest. The company recorded an $18.1 million charge in the second quarter of 2011 and has appealed the verdict, with the appeal pending. The filing also describes a separate $3.9 million royalty payment under a 2009 arbitration award.
How much debt does Wabtec carry and when does it mature?
Total debt was $395.9 million at December 31, 2011, including $150.0 million of 6.875% senior notes due in 2013 and $245.0 million drawn on the revolving credit facility. The 2011 Refinancing Credit Agreement provides a $600 million five-year revolving facility expiring November 7, 2016, with about $306.1 million of available borrowing capacity at year-end, subject to financial covenants.
What are the main risks highlighted in the filing?
Key risks include prolonged unfavorable economic and market conditions, dependence on key customers, strong price competition, risks from acquisitions and integration, international operations exposure (about 47% of 2011 sales were outside the U.S.), cyclical rail and transit markets, asbestos litigation involving subsidiary RFPC, and the possibility that changes to the PTC mandate could reduce revenues.
06—Continue