01—Abstract
Summary
Summary of the 10-K filed February 19, 2021. Cited figures are marked; the original filing is the authoritative source.
Westinghouse Air Brake Technologies Corporation, doing business as Wabtec Corporation, reported 2020 total net sales of $7.56 billiona, down from $8.20 billion in 2019, as COVID-19 reduced locomotive equipment sales, services volumes and transit production.
Net income attributable to Wabtec shareholders rose to $414.4 millionb from $326.7 million, and diluted earnings per share were $2.17 versus $1.84. Income from operations increased to $744.5 million from $663.1 million, helped by GE Transportation integration synergies, lower SG&A and lower engineering expense, though the filing notes cost of sales excluding charges rose as a percentage of sales in the Freight Segment. Cash flow and balance sheet data show operating cash flow of $783.7 million, down from $1,015.5 million, with total debt of $4.2 billion at December 31, 2020, including $3.5 billion of senior notes.
Backlog was $21.6 billionc at year end, with $5.5 billion expected to be delivered in 2021. The company stated that it expects COVID-19 to continue to have a materially adverse impact on its operations and business results into 2021. On February 11, 2021, the board increased the stock repurchase authorization to $500 million.
The filing describes two segments: Freight, which accounted for about 67%d of 2020 net sales, and Transit, about 33%. Aftermarket parts and services represented about 60% of total net sales, and about 58% of net sales came from customers outside the United States. Key risks disclosed include customer concentration, cyclicality of rail and transit spending, the GE Transportation integration, COVID-19 supply chain disruption, and leverage covenants under the Senior Credit Facility.
02—Key points
Key Highlights
- Total net sales fell to $7,556.1 million in 2020 from $8,200.0 million in 2019, with an organic decrease of $1,140.3 million attributed largely to COVID-19 effects.
- Net income attributable to Wabtec shareholders increased to $414.4 million from $326.7 million, and diluted EPS rose to $2.17 from $1.84.
- Income from operations rose to $744.5 million from $663.1 million, and the company expects approximately $250 million in annual run-rate operating synergies from the GE Transportation acquisition before 2022.
- Backlog was $21.6 billion at December 31, 2020, of which $5.5 billion is expected to be delivered in 2021.
- Operating cash flow declined to $783.7 million from $1,015.5 million, and total debt was $4.2 billion at year end.
- Aftermarket parts and services represented about 60% of 2020 net sales, and about 58% of net sales were to customers outside the U.S.
- The board increased the share repurchase authorization to $500 million on February 11, 2021, and quarterly dividends are at an annual rate of about $90.7 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Westinghouse Air Brake Technologies kept $0.05.
- Revenue$7.56B100.0%
- Cost of revenue−$5.42B71.7%
- Gross profit$2.14B28.3%
- Operating costs−$1.39B18.4%
- Operating income$745.0M9.9%
- Interest, other & tax−$333.0M4.4%
- Net income$412.0M5.5%
Where FY2020 revenue went
$7.56B- Cost of revenue: $5.42B, 72% of revenue
- SG&A: $948.0M, 13% of revenue
- Net income: $412.0M, 5.5% of revenue
- R&D: $162.0M, 2.1% of revenue
- Other operating costs: $282.0M, 3.7% of revenue
- Interest, other & tax: $333.0M, 4.4% of revenue
Kept 5.5% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 19, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $7.56B$8.20B | −7.9% |
| Cost of Revenue | $5.42B$5.92B | −8.5% |
| Gross Profit | $2.14B$2.28B | −6.2% |
| R&D Expenses | $162.00M$210.00M | −22.9% |
| SG&A Expenses | $948.00M$1.17B | −18.8% |
| Operating Expenses | $1.39B$1.61B | −13.8% |
| Operating Income | $745.00M$663.00M | +12.4% |
| Net Income | $412.00M$327.00M | +26.0% |
| EPS (Basic) | $2.18$1.91 | +14.1% |
| EPS (Diluted) | $2.17$1.84 | +17.9% |
| Shares Outstanding (Basic) | 189.90M170.50M | +11.4% |
| Shares Outstanding (Diluted) | 190.40M177.30M | +7.4% |
05—Questions
Frequently Asked Questions
How did COVID-19 affect Wabtec's 2020 results?
The filing states that COVID-19 had a materially adverse impact on operations and business results for 2020, reducing locomotive equipment sales, freight carbuilds, services volumes, and transit production and ridership. Organic net sales declined by $1,140.3 million, and the company expects a continued materially adverse impact into 2021.
How much debt does Wabtec carry and what are its covenants?
Total debt was $4.2 billion at December 31, 2020, including $3.5 billion of senior notes and $0.7 billion of term loans and revolver borrowings. The Senior Credit Facility requires an EBITDA-to-interest coverage ratio of at least 3.00 to 1.00 and a leverage ratio of 3.25 to 1.00 or less, and the company stated it was in compliance at year end.
What is Wabtec's backlog and when will it convert to revenue?
Backlog was $21.6 billion at December 31, 2020, with $5.5 billion expected to be delivered in 2021 and $16.1 billion in later years. The filing notes that aftermarket orders, about 60% of 2020 net sales, typically carry lead times under 30 days and are not included in backlog.
How concentrated is Wabtec's customer base?
The company's top five customers accounted for about 24% of 2020 net sales, and no single customer represented 10% or more of consolidated net sales. The filing also notes that top customers can change from year to year.
06—Continue