01—Abstract
Summary
Summary of the 10-K filed February 20, 2015. Cited figures are marked; the original filing is the authoritative source.
Westinghouse Air Brake Technologies Corporation, doing business as Wabtec Corporation, reported 2014 net sales of $3.04 billiona, up from $2.57 billion in 2013, and net income attributable to Wabtec shareholders of $351.7 million, up from $292.2 million.
Income from operations rose to $527.1 millionb, or 17.3% of sales, from $437.3 million, or 17.0%. The Freight Segment accounted for 57% of 2014 sales and the Transit Segment for 43%. Acquisitions contributed $229.4 million of sales growth, and the company completed several acquisitions in 2014 including Fandstan, Dia-Frag and C2CE, plus Railroad Controls L.P. in February 2015.
Aftermarket sales and services represented about 61% of total sales, and sales to customers outside the U.S. were about 50%. Year-end backlog was $2.32 billionc, compared with $1.69 billion at December 31, 2013. Operating cash flow rose to $472.4 million from $235.7 million, and cash and cash equivalents ended the year at $425.8 million.
Total debt was $521.2 milliond at year-end, including $250.0 million of 4.375% senior notes due 2023 and $270.0 million drawn on the revolving credit facility. Management flagged Positive Train Control (PTC) as a significant revenue driver, with about $290 million of 2014 revenue from PTC projects, and noted that the December 31, 2015 PTC deadline could be extended, which would affect industry spending. Key risks cited in the filing include customer concentration (top five customers were 17% of net sales), cyclicality in rail and transit markets, currency and interest rate exposure, asbestos litigation tied to subsidiary Railroad Friction Products Corporation, and labor agreements, with about 28% of employees unionized.
02—Key points
Key Highlights
- Net sales of $3,044.5 million in 2014, up 18.6% from $2,566.4 million in 2013.
- Net income attributable to Wabtec shareholders of $351.7 million, up 20.3% from $292.2 million; diluted EPS of $3.62 versus $3.01.
- Freight Segment sales of $1,731.5 million (up 23.8%) and Transit Segment sales of $1,313.0 million (up 12.4%).
- Year-end backlog of $2.32 billion, up from $1.69 billion at December 31, 2013; about 61% of 2014 sales came from aftermarket orders.
- Operating cash flow of $472.4 million in 2014, compared with $235.7 million in 2013, aided by lower working capital needs.
- Approximately $290 million of 2014 revenue from freight and transit Positive Train Control projects, tied to a PTC deadline of December 31, 2015 that could be extended.
- Acquisitions totaling $300.4 million in net cash paid in 2014, including Fandstan ($199.4 million) and Dia-Frag ($70.6 million), with Railroad Controls acquired in February 2015 for about $63.7 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Westinghouse Air Brake Technologies kept $0.12.
- Revenue$3.04B100.0%
- Cost of revenue−$2.11B69.3%
- Gross profit$936.0M30.7%
- Operating costs−$408.9M13.4%
- Operating income$527.1M17.3%
- Interest, other & tax−$175.4M5.8%
- Net income$351.7M11.6%
Where FY2014 revenue went
$3.04B- Cost of revenue: $2.11B, 69% of revenue
- Net income: $351.7M, 12% of revenue
- R&D: $61.9M, 2.0% of revenue
- SG&A: $324.5M, 11% of revenue
- Other operating costs: $22.4M, 0.7% of revenue
- Interest, other & tax: $175.4M, 5.8% of revenue
Kept 12% as net incomeR&D $61.9M · 2.0%Other operating costs $22.4M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 20, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $3.04B$2.57B | +18.6% |
| Cost of Revenue | $2.11B$1.80B | +17.0% |
| Gross Profit | $935.98M$764.03M | +22.5% |
| R&D Expenses | $61.89M$46.29M | +33.7% |
| SG&A Expenses | $324.54M$262.72M | +23.5% |
| Operating Expenses | $408.87M$326.72M | +25.1% |
| Operating Income | $527.11M$437.31M | +20.5% |
| Net Income | $351.68M$292.24M | +20.3% |
| EPS (Basic) | $3.66$3.05 | +20.0% |
| EPS (Diluted) | $3.62$3.01 | +20.3% |
| Shares Outstanding (Basic) | 95.78M95.46M | +0.3% |
| Shares Outstanding (Diluted) | 96.89M96.83M | +0.1% |
05—Questions
Frequently Asked Questions
How did Wabtec perform financially in 2014?
Net sales rose 18.6% to $3,044.5 million, income from operations increased 20.5% to $527.1 million, and net income attributable to Wabtec shareholders rose 20.3% to $351.7 million. Growth was driven by higher sales volume, acquisitions, and a lower effective tax rate of 30.8%, compared with 30.6% in 2013 per the filing's rate comparison.
What is the outlook for backlog and future demand?
Backlog was $2.32 billion at December 31, 2014, of which $1.50 billion was expected to be delivered in 2015 and $819.1 million thereafter. For 2015, management expects demand for new locomotives to be slightly lower than in 2014 and demand for new freight cars to be higher.
What are the main risks to the company's revenue?
The filing highlights reliance on a few key customers (top five at 17% of net sales), cyclical freight and transit markets, dependence on government transit funding, and the possibility that the PTC mandate deadline of December 31, 2015 is changed, which could reduce PTC-related revenue of about $290 million in 2014.
How leveraged is the company and what debt obligations does it have?
Total debt was $521.2 million at December 31, 2014, consisting of $250.0 million in 4.375% senior notes due 2023 and $270.0 million under the revolving credit facility. The $800 million 2013 Refinancing Credit Agreement expires December 19, 2018 and includes a minimum interest expense coverage ratio of 3.0 and a maximum debt to cash flow ratio of 3.25.
Is the company exposed to any material litigation?
Claims alleging asbestos-related bodily injury have been filed against the company, mostly against subsidiary Railroad Friction Products Corporation. Management believes the final resolution will not be material to the company's financial position, results of operations or cash flows, but states that the potential range of loss is not reasonably determinable.
06—Continue