XML 133 R14.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

ACQUISITIONS | 12 Months Ended
--- | ---
Dec. 31, 2019
Business Combinations [Abstract] |
ACQUISITIONS | ACQUISITIONS General Electric Transportation Wabtec, General Electric Company ("GE"), GE Transportation, a Wabtec company formerly known as Transportation System Holdings Inc. ("SpinCo"), which was a newly formed wholly owned subsidiary of GE, and Wabtec US Rail Holdings, Inc. ("Merger Sub"), which was a newly formed wholly owned subsidiary of the Company, entered into the Original Merger Agreement on May 20, 2018, and GE, SpinCo, Wabtec and Wabtec US Rail, Inc. ("Direct Sale Purchaser") entered into the Original Separation Agreement on May 20, 2018, which together provided for the combination of Wabtec and GE Transportation. The Original Merger Agreement and Original Separation Agreement were subsequently amended on January 25, 2019 and the Merger was completed on February 25, 2019. As part of the Merger, certain assets of GE Transportation, including the equity interests of certain pre-Transaction subsidiaries of GE that compose part of GE Transportation, were sold to Direct Sale Purchaser for a cash payment of $2.875 billion, and Direct Sale Purchaser assumed certain liabilities of GE Transportation in connection with this purchase (the "Direct Sale"). Thereafter, GE transferred the SpinCo business to SpinCo and its subsidiaries (to the extent not already held by SpinCo and its subsidiaries), and SpinCo issued to GE shares of SpinCo Class A preferred stock, SpinCo Class B preferred stock, SpinCo Class C preferred stock and additional shares of SpinCo common stock. Following this issuance of additional SpinCo common stock to GE, and immediately prior to the Distribution (as defined below), GE owned 8,700,000,000 shares of SpinCo common stock, 15,000 shares of SpinCo Class A preferred stock, 10,000 shares of SpinCo Class B preferred stock and one share of SpinCo Class C preferred stock, which constituted all of the outstanding stock of SpinCo. Following the Direct Sale, GE distributed the distribution shares of SpinCo in a spin-off transaction to its stockholder (the "Distribution"). Immediately after the Distribution, Merger Sub merged with and into SpinCo (the "Merger"), whereby the separate corporate existence of Merger Sub ceased and SpinCo continued as the surviving company and a wholly owned subsidiary of Wabtec (except with respect to shares of SpinCo Class A preferred stock held by GE). In the Merger, subject to adjustment in accordance with the Merger Agreement, each share of SpinCo common stock converted into the right to receive a number of shares of Wabtec common stock based on the common stock exchange ratio set forth in the Merger Agreement and the share of SpinCo Class C preferred stock was converted into the right to receive (a) 10,000 shares of Wabtec convertible preferred stock and (b) a number of shares of Wabtec common stock equal to 9.9% of the fully-diluted pro forma Wabtec shares. Immediately prior to the Merger, Wabtec paid $10.0 million in cash to GE in exchange for all of the shares of SpinCo Class B preferred stock. Upon consummation of the Merger, Wabtec issued 46,763,975 shares of common stock to the holders of GE common stock, 19,018,207 shares of common stock to GE and 10,000 shares of preferred stock to GE and made a cash payment to GE of $2.885 billion. As a result and calculated based on Wabtec’s outstanding common stock on a fully-diluted, as-converted and as-exercised basis, as of February 25, 2019, approximately 49.2% of the outstanding shares of Wabtec common stock was held collectively by GE and holders of GE common stock (with 9.9% held by GE directly in shares of Wabtec common stock and 15% underlying the shares of Wabtec convertible preferred stock held by GE) and approximately 50.8% of the outstanding shares of Wabtec common stock would be held by pre-Merger Wabtec stockholders, in each case calculated on a fully-diluted, as-converted and as-exercised basis. Following the Merger, GE also retained 15,000 shares of SpinCo Class A non-voting preferred stock, and Wabtec held 10,000 shares of SpinCo Class B non-voting preferred stock. After the Merger, SpinCo, which is Wabtec’s wholly owned subsidiary (except with respect to shares of SpinCo Class A preferred stock held by GE), and Direct Sale Purchaser, which also is Wabtec’s wholly owned subsidiary, together, SpinCo and Direct Sale Purchaser own and operate the post-transaction GE Transportation. All shares of the Company’s common stock, including those issued in the Merger, are listed on the NYSE under the Company’s current trading symbol “WAB.” On the date of the Distribution, GE and SpinCo, directly or through subsidiaries entered into additional agreements relating to, among other things, intellectual property, employee matters, tax matters, research and development and transition services. On May 6, 2019, GE completed the sale of approximately 8,780 shares of Wabtec's Series A Preferred stock which converted upon the sale to 25,300,000 shares of Wabtec's common stock. On August 9, 2019, GE completed a sale of the remaining shares of Series A Preferred Stock outstanding which converted to approximately 3,515,500 shares of common stock, as well as 16,969,656 shares of common stock owned directly by GE. Finally, on September 12, 2019, GE completed a sale of all of its remaining shares of common stock of Wabtec, approximately 2,048,515 shares. In conjunction with these secondary offerings, the Company waived the requirements under the shareholders agreement for GE to maintain certain ownership levels of Wabtec's stock following the closing date of the Merger. The Company did not receive any proceeds from the sale of any of these shares. Total future consideration to be paid by Wabtec to GE includes a fixed payment of $470.0 million, which is directly related to the timing of tax benefits expected to be realized by Wabtec as a result of the acquisition of GE Transportation. This payment is considered contingent consideration because the timing of cash payments to GE is directly related to the future timing of tax benefits received by the Company as a result of the acquisition of GE Transportation. The estimated total value of the consideration to be paid by Wabtec in the acquisition transactions is approximately $10.3 billion, including the cash paid for the Direct Sales Assets, equity transferred for SpinCo, contingent consideration, assumed debt and net of cash acquired. The consideration is based on the Company’s closing share price of $73.36 on February 22, 2019 and the fair value of the contingent consideration. The fair values of the assets acquired and liabilities assumed were determined using the income, cost and market approaches. Discounted cash flow models were used to estimate the fair values of acquired contract backlog, customer relationships, intellectual property intangibles, and below-market customer contracts liabilities. The fair value measurements were primarily based on significant inputs that are not observable in the market and are considered Level 3. The December 31, 2019 consolidated balance sheet includes the assets and liabilities of GE Transportation, which have been initially measured at fair value. The noncontrolling interest includes equity interests in GE Transportation's Brazil operations held by third parties on the date of acquisition. At the time of acquisition, quotable market prices of the noncontrolling interest existed; therefore, the noncontrolling interest in the GE Transportation Brazil operations were measured using a Level 1 input. In April 2019, the Company acquired the noncontrolling interest in GE Transportation's Brazil operations for $56.2 million which approximated the fair value assigned to the noncontrolling interest on the date of acquisition. The remaining noncontrolling interest value was determined based on inputs that are not observable in the market and are considered Level 3. The following table summarizes the preliminary fair value of the GE Transportation assets acquired and liabilities assumed:
In millions |  |
Assets acquired |  |
Cash and cash equivalents |  | $ | 177.6 |
Accounts receivable |  | 515.5 |
Inventories |  | 1,189.2 |
Other current assets |  | 71.5 |
Property, plant, and equipment |  | 1,089.6 |
Goodwill |  | 5,987.5 |
Trade names |  | 55.0 |
Customer relationships |  | 550.0 |
Intellectual property |  | 1,180.0 |
Backlog |  | 1,440.0 |
Other noncurrent assets |  | 330.3 |
Total assets acquired |  | 12,586.2 |
Liabilities assumed |  |  |
Current liabilities |  | 1,587.5 |
Contingent consideration |  | 440.0 |
Other noncurrent liabilities |  | 652.9 |
Total liabilities assumed |  | 2,680.4 |
Net assets acquired |  | 9,905.8 |
Noncontrolling interest |  | $ | 86.8 |
These estimates are preliminary in nature; however the Company is in the final stages of completing the purchase price allocation and does not expect the final allocation to differ materially from the preliminary allocation included in the table above. Any necessary adjustments will be finalized within one year from the date of acquisition. During the year ended December 31, 2019, the estimated fair value current liabilities and other noncurrent liabilities decreased $92.1 million and increased $129.1 million, respectively, primarily due to estimate revisions for long term contracts and deferred tax liabilities. The revisions to the initial estimates were based on information that existed at the date of acquisition. Substantially all of the accounts receivable acquired are expected to be collectible. Trade names, customer relationships, patents and backlog intangible assets are all subject to amortization. Contingent liabilities assumed as part of the transaction were not material. The contingent liabilities are related to legal and tax matters. Contingent liabilities are recorded at fair value in purchase accounting, aside from those pertaining to uncertainty in income taxes which are an exception to the fair value basis of accounting. Included in other noncurrent liabilities are approximately $504.7 million of customer contracts whose terms are unfavorable compared to market terms at the date of consummation of the GE Transportation acquisition. Goodwill was calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired, and represents the future economic benefits, including synergies, and assembled workforce, that are expected to be achieved as a result of the consummation of the acquisition of GE Transportation. A majority of the purchased goodwill is expected to be deductible for tax purposes. The goodwill has been allocated to the Freight segment. Included in the Company's consolidated statement of income for the year ended December 31, 2019 is $3.8 billion of revenues and $358.0 million of operating income from GE Transportation. Costs related to the acquisition of GE Transportation were approximately $63.0 million for the year ended December 31, 2019 and are included in selling, general and administrative expenses on the consolidated statements of income. Other Acquisitions The Company made the following acquisition operating as a business unit or component of a business unit in the Transit Segment: •On March 22, 2018, the Company acquired Annax GmbH ("Annax"), a leading supplier of public address and passenger information systems for transit vehicles, for a purchase price of approximately $45.2 million, net of cash acquired and including contingent consideration, resulting in final goodwill of $38.5 million, none of which will be deductible for tax purposes. A payment of $10.1 million was made in the three months ended June 30, 2019 related to contingent consideration associated with the purchase of Annax. The following table summarizes the final estimated fair value of the assets acquired and liabilities assumed at the date of acquisition for Annax:
|  | Annax
|  | March 22, 2018
In millions |  |
Current assets, net of cash acquired |  | $ | 32.8 |
Property, plant & equipment |  | 0.7 |
Goodwill |  | 38.5 |
Other intangible assets |  | 11.7 |
Total assets acquired |  | 83.7 |
Total liabilities assumed |  | (55.1) |
Net assets acquired |  | $ | 28.6 |
The $11.7 million of total acquired other intangible assets includes $3.8 million assigned to trade names and $7.5 million assigned to customer relationships. The trade names were determined to have indefinite useful lives, while the customer relationships’ average useful lives are 20 years. The Company also made smaller acquisitions not listed above which are individually and collectively immaterial. The following unaudited pro forma financial information presents income statement results as if the acquisitions listed above had occurred January 1, 2018:
|  | For the year ended December 31, |  |
In millions |  | 2019 |  | 2018
Net sales |  | $ | 8,675.6 |  |  | $ | 8,030.5 |
Gross profit |  | 2,528.3 |  |  | 2,102.8 |
Net income attributable to Wabtec shareholders |  | 485.1 |  |  | 234.8 |
Diluted earnings per share |  |  |  |  |  |
As Reported |  | $ | 1.84 |  |  | $ | 3.05 |
Pro forma |  | $ | 2.53 |  |  | $ | 1.22 |
The historical consolidated financial information of the Company and the acquisitions detailed above have been adjusted in the pro forma information to give effect to pro forma events that are (1) directly attributable to the transactions, (2) factually supportable and (3) expected to have a continuing impact on the combined results. Pro forma data may not be indicative of the results that would have been obtained had these acquisitions occurred at the beginning of the periods presented, nor is it intended to be a projection of future results.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration