01—Abstract
Summary
Summary of the 10-K filed February 14, 2024. Cited figures are marked; the original filing is the authoritative source.
Westinghouse Air Brake Technologies Corporation (Wabtec Corporation) reported 2023 net sales of $9.68 billiona, up from $8.36 billion in 2022, with the increase driven by organic growth of $1.20 billion across both segments.
Income from operations rose to $1.27 billionb from $1.01 billion, and net income attributable to Wabtec shareholders was $815 million, or $4.53 per diluted share, compared with $633 million, or $3.46 per diluted share, in 2022. The Freight Segment accounted for approximately 72% of net sales and the Transit Segment for approximately 28%. Aftermarket parts and services represented approximately 60% of total net sales, and total backlog was approximately $22 billion at December 31, 2023.
Cash provided by operating activities was $1.20 billionc in 2023, versus $1.04 billion in 2022. The company repurchased $409 million of stock and paid $123 million in dividends, and ended the year with total debt of $4.1 billion, primarily Senior Notes. Cash, cash equivalents and restricted cash were $620 million.
In February 2024 the Board reauthorized its stock repurchase program to $1 billiond. Management highlighted the Integration 2.0 restructuring initiative, which targets incremental run-rate synergies of $75 million to $90 million in 2025, and Portfolio Optimization, with expected net exit charges of approximately $85 million. The filing also discloses a Progress Rail antitrust lawsuit filed in 2023 that seeks, among other relief, an order requiring Wabtec to divest GE Transportation; the company intends to vigorously defend the case.
02—Key points
Key Highlights
- Net sales rose to $9.68 billion in 2023 from $8.36 billion in 2022, including $1.20 billion of organic growth and $109 million from acquisitions in the Freight Segment.
- Net income attributable to Wabtec shareholders increased to $815 million ($4.53 diluted EPS) from $633 million ($3.46 diluted EPS).
- Income from operations increased to $1.27 billion from $1.01 billion, and gross profit rose to $2.94 billion from $2.54 billion.
- Aftermarket parts and services represent approximately 60% of total net sales, and total backlog was approximately $22 billion at December 31, 2023.
- Operating cash flow was $1.20 billion in 2023, and the company returned capital through $409 million of stock repurchases and $123 million of dividends.
- Total debt was $4.1 billion at December 31, 2023, primarily Senior Notes; the Board reauthorized a $1 billion stock repurchase program on February 9, 2024.
- A Progress Rail antitrust lawsuit filed in the third quarter of 2023 seeks, among other relief, an order requiring divestiture of GE Transportation; Wabtec intends to vigorously defend the case.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Westinghouse Air Brake Technologies kept $0.09.
- Revenue$9.68B100.0%
- Cost of revenue−$6.73B69.6%
- Gross profit$2.94B30.4%
- Operating costs−$1.68B17.3%
- Operating income$1.27B13.1%
- Interest, other & tax−$441.0M4.6%
- Net income$825.0M8.5%
Where FY2023 revenue went
$9.68B- Cost of revenue: $6.73B, 70% of revenue
- Net income: $825.0M, 8.5% of revenue
- R&D: $218.0M, 2.3% of revenue
- SG&A: $1.14B, 12% of revenue
- Other operating costs: $321.0M, 3.3% of revenue
- Interest, other & tax: $441.0M, 4.6% of revenue
Kept 8.5% as net incomeNet income $825.0M · 8.5%R&D $218.0M · 2.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 14, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $9.68B$8.36B | +15.7% |
| Cost of Revenue | $6.73B$5.82B | +15.6% |
| Gross Profit | $2.94B$2.54B | +15.9% |
| R&D Expenses | $218.00M$209.00M | +4.3% |
| SG&A Expenses | $1.14B$1.03B | +10.7% |
| Operating Expenses | $1.68B$1.53B | +9.7% |
| Operating Income | $1.27B$1.01B | +25.2% |
| Net Income | $825.00M$641.00M | +28.7% |
| EPS (Basic) | $4.54$3.46 | +31.2% |
| EPS (Diluted) | $4.53$3.46 | +30.9% |
| Shares Outstanding (Basic) | 178.80M182.20M | −1.9% |
| Shares Outstanding (Diluted) | 179.50M182.80M | −1.8% |
05—Questions
Frequently Asked Questions
How did Wabtec's revenue and profitability change in 2023?
Total net sales increased to $9.68 billion from $8.36 billion, and income from operations rose to $1.27 billion from $1.01 billion. Net income attributable to Wabtec shareholders was $815 million, compared with $633 million in 2022. Diluted earnings per share were $4.53, up from $3.46.
What drove the growth in net sales?
Organic sales increased $1.20 billion, with the Freight Segment contributing $864 million, driven mainly by Services sales from higher parts sales and locomotive modernizations and overhauls, and Equipment sales from higher locomotive and mining sales. The Transit Segment contributed $340 million of organic growth, driven by Aftermarket and Original Equipment Manufacturing demand. Acquisitions added $109 million in the Freight Segment.
How much debt does Wabtec carry and how is it structured?
Total debt was $4.1 billion at December 31, 2023, primarily Senior Notes. The current portion of long-term debt was $781 million. The company borrowed the full $250 million Delayed Draw Term Loan in 2023 and used the proceeds to redeem its 4.375% Senior Notes due 2023. The Restated Credit Agreement requires an interest coverage ratio of at least 3.0 to 1.0 and a leverage ratio of 3.5 or less, and the company was in compliance as of year-end.
What are the main restructuring and cost initiatives?
Integration 2.0 is a three-year initiative targeting incremental run-rate synergies of $75 million to $90 million in 2025, with one-time charges of $135 million to $165 million; about $118 million had been incurred through December 31, 2023. Portfolio Optimization involves exiting low-margin product offerings, with expected net exit charges of approximately $85 million, predominantly non-cash asset write-downs.
What material legal matters should investors be aware of?
Progress Rail, a Caterpillar Inc. company, sued Wabtec in the U.S. District Court for the District of Delaware in the third quarter of 2023, alleging antitrust, breach of contract, unfair competition and misrepresentation claims. It seeks an order requiring divestiture of GE Transportation, unspecified treble damages and attorneys' fees. The case is at an early stage, and Wabtec intends to vigorously defend it. Separately, Xorail's dispute with Denver Transit Constructors is described in the filing, and the company states that it is involved in no litigation it believes will have a material adverse effect.
06—Continue