Westinghouse Air Brake Technologies(WAB) - 2018 Q4 - Annual Report

Financial Performance - Net sales for 2018 reached $4,363,547, an increase of 12.4% from $3,881,756 in 2017[134]. - Gross profit for 2018 was $1,233,885, representing a gross margin of approximately 28.3%[134]. - Net income attributable to Wabtec shareholders was $294,944, up 12.5% from $262,261 in 2017[134]. - Wabtec's net sales for 2018 reached $4.36 billion, a 12.4% increase from $3.88 billion in 2017[158]. - Net income attributable to Wabtec shareholders for 2018 was $300.34 million, a 14.5% increase from $262.26 million in 2017[160]. - Wabtec's gross profit for 2018 was $1.23 billion, up from $1.07 billion in 2017, indicating improved operational efficiency[158]. Debt and Financing - The company has total debt of $3,856.9 million as of December 31, 2018, which includes a $1.2 billion Revolving Credit Facility and a $350 million Refinancing Term Loan[103]. - The total debt increased to $3,856,873 in 2018, compared to $1,870,528 in 2017, indicating a significant rise in leverage[134]. - The Company issued $750.0 million of Senior Notes due in 2026 at 99.965% of face value, with an interest rate of 3.45% per annum, payable semi-annually[199]. - The Company issued $500.0 million of Floating Rate Senior Notes due 2021 at 100% of face value, with interest accruing at three-month Libor plus 105 basis points, payable quarterly[199]. - The Company issued $750.0 million of 4.150% Senior Notes due 2024 at 99.805% of face value, with interest payable semi-annually[199]. - The Company issued $1,250.0 million of 4.70% Senior Notes due 2028 at 99.889% of face value, with interest payable semi-annually[199]. - The Company has a $1.2 billion revolving credit facility maturing on June 8, 2023, and a $350.0 million term loan maturing on June 8, 2021[206]. - The weighted average interest rate on the Company's variable rate debt was 3.68% as of December 31, 2018[210]. - Overall interest expense increased by $34.4 million in 2018, primarily due to interest associated with the proposed GE Transportation transaction[172]. Market and Competition - Approximately 67% of the company's consolidated net sales were derived from international customers for the fiscal year ended December 31, 2018[73]. - The company faces significant competition in a global marketplace, with price competition limiting its ability to increase prices[62]. - The global market for railway products and services was over $100 billion, expected to grow at a CAGR of 2.6% through 2023[139]. - The company is exposed to risks associated with international operations, including currency fluctuations and political instability[74]. - The company faces risks from economic conditions, demand fluctuations, and competitive factors in the rail industry[222]. Operations and Manufacturing - The company owns approximately 500,000 square feet of manufacturing and warehouse space in Rothbury, MI, and has multiple other facilities across the U.S. and internationally, totaling over 4 million square feet[111]. - The company has a significant presence in international markets, with facilities in Brazil, Canada, the UK, China, India, Germany, Italy, and South Africa, indicating a diverse operational footprint[112]. - The company has a focus on expanding its manufacturing capabilities, with several facilities dedicated to freight and transit segments, indicating a strategic emphasis on these markets[111][112]. - The company has a diverse range of manufacturing uses across its facilities, including office, service, and transit, which supports its multifaceted business model[111][112]. - The integration of recent acquisitions may not yield anticipated operating synergies or improvements in market position[106]. Acquisitions and Growth Strategy - The company intends to pursue acquisitions, joint ventures, and alliances to improve market position, which involves inherent risks[63]. - The merger with GE Transportation was completed on February 25, 2019, with a cash payment of $2.875 billion for certain assets[146][147]. - The company acquired 100% ownership of Faiveley Transport for $1.51 billion, enhancing its position in the railway industry with annual sales of about $1.2 billion[156]. - Acquisitions contributed an additional $134.7 million to net sales in 2018, reflecting the company's growth strategy[160]. Risks and Compliance - The company is subject to various environmental laws and regulations, which may result in significant compliance costs[79]. - Future climate change regulations could increase operating costs and affect product demand[82]. - The company faces risks related to cybersecurity attacks that could compromise sensitive customer information and disrupt business operations[86]. - Labor shortages and disputes could adversely affect operations and profitability, potentially leading to revenue loss[90]. - The company is dependent on key customers, and any loss of these customers could materially affect its business and financial condition[61]. - The company has encountered counterfeit products that may negatively impact brand value, despite efforts to protect intellectual property[84]. - The company is subject to restrictions on the sale of Wabtec common stock held by GE, with obligations to divest certain shares within specified timeframes[149]. Financial Health and Projections - Wabtec's long-term financial goals include generating cash flow from operations exceeding net income and maintaining a strong credit profile[136]. - The company anticipates that general global economic conditions will impact sales and operations, necessitating potential adjustments to financial strategies[145]. - Cash provided by operations in 2018 was $314.7 million, an increase from $188.8 million in 2017, attributed to favorable working capital performance[190]. - Cash used in investing activities was $147.3 million in 2018, significantly lower than $1,033.5 million in 2017, with major components including $93.3 million for property, plant, and equipment[192]. - Cash provided by financing activities in 2018 was $1,978.1 million, including $2.5 billion in proceeds from new borrowings[193]. Shareholder Information - The company has not repurchased any shares during 2018, leaving $137.8 million remaining under its stock repurchase authorization, which was amended to $350 million in February 2016[132]. - As of February 20, 2019, the company had 96,613,310 shares of common stock outstanding, held by 452 holders of record, reflecting a stable shareholder base[130]. - The annual dividend payment to shareholders is approximately $46.4 million, subject to Board approval[217].