OREANDA-NEWS. Wabtec Corporation (NYSE:WAB) today reported results for the 2016 second quarter, including the following:

  • Second quarter sales were $724 million, with higher sales in the Transit Group more than offset by lower sales in the Freight Group.  Freight Group sales were affected mainly by lower revenues from train control-related equipment and services, a decrease in rail traffic volumes, and lower industry deliveries of new freight cars and locomotives.  Changes in foreign exchange rates reduced total net sales by $9 million compared to the year-ago quarter. 
  • Income from operations was $133 million, or 18.4 percent of sales, compared to
    18.4 percent in the year-ago quarter.  Despite lower sales, the company’s operating margin remained the same mainly due to the benefits of cost-reduction initiatives and improved performance in the Transit Group.
  • Earnings per diluted share were $1.00. Excluding expenses of about 5 cents per diluted share related to the pending acquisition of Faiveley Transport, adjusted earnings per diluted share were $1.05.
  • The company generated strong cash flow from operations of $134 million in the second quarter and $209 million in the first half of the year.  At June 30, 2016, the company had cash of $303 million, an additional $206 million of cash held in escrow for the Faiveley Transport acquisition and debt of $744 million.

Based on its first half results and outlook for the rest of the year, Wabtec updated its full-year 2016 guidance as follows:  Revenues are now expected to be down about 10 percent compared to 2015, and earnings per diluted share are now expected to be between $4.00-$4.20.  This guidance does not include any further costs for restructuring activities or expenses related to the Faiveley Transport acquisition.  Wabtec expects the acquisition to be completed in the fourth quarter, depending on the timing of regulatory approvals.  Faiveley Transport is a global supplier of high added value integrated systems for the railway industry with annual revenues of about $1.2 billion.  

Raymond T. Betler, Wabtec’s president and chief executive officer, said:  “Our Transit business is performing well, with revenue growth, improved profitability and a strong backlog.  Our Freight business, however, continues to be affected by overall rail industry conditions and the sluggish global economy.  In this environment we are focused on controlling what we can by aggressively reducing costs, generating cash and investing in our growth opportunities, including acquisitions.  As demonstrated by our first half operating margin of 18.4 percent and cash from operations at 14 percent of revenues, we are managing the business well in these market conditions.”

 
WABTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
           
           
  Second Second   For the For the
  Quarter Quarter   Six Months Six Months
    2016     2015       2016     2015  
           
Net sales $   723,601   $   847,028     $   1,495,632   $   1,665,622  
Cost of sales $   (486,212 )     (579,264 )       (1,003,063 )     (1,142,503 )
  Gross profit     237,389       267,764         492,569       523,119  
  Gross profit as a % of Net Sales   32.8 %   31.6 %     32.9 %   31.4 %
           
Selling, general and administrative expenses     (80,610 )     (88,992 )       (170,361 )     (173,763 )
Engineering expenses     (18,029 )     (17,750 )       (35,982 )     (34,613 )
Amortization expense     (5,466 )     (5,162 )       (10,761 )     (10,463 )
  Total operating expenses     (104,105 )     (111,904 )       (217,104 )     (218,839 )
  Operating expenses as a % of Net Sales   14.4 %   13.2 %     14.5 %   13.1 %
           
  Income from operations     133,284       155,860         275,465       304,280  
  Income from operations as a % of Net Sales   18.4 %   18.4 %     18.4 %   18.3 %
           
Interest expense, net     (4,969 )     (4,041 )       (9,840 )     (8,347 )
Other income(expense), net     (1,229 )     (1,887 )       (1,075 )     (4,753 )
  Income from operations before income taxes      127,086       149,932         264,550       291,180  
           
Income tax expense     (36,601 )     (48,428 )       (79,902 )     (93,512 )
  Effective tax rate   28.8 %   32.3 %     30.2 %   32.1 %
           
  Net income attributable to Wabtec shareholders $   90,485   $   101,504     $   184,648   $   197,668  
                           
Earnings Per Common Share          
Basic          
  Net income attributable to Wabtec shareholders $   1.00   $   1.05     $   2.03   $   2.05  
                           
Diluted                          
  Net income attributable to Wabtec shareholders $   1.00   $   1.04     $   2.02   $   2.03  
                           
Weighted average shares outstanding          
  Basic     89,846       96,338         90,832       96,066  
  Diluted     90,559       97,435         91,628       97,112  
                           
Net Sales by Segment          
Freight Group $   397,067   $   534,674     $   839,736   $   1,046,561  
Transit Group     326,534       312,354         655,896       619,061  
  Total $   723,601   $   847,028     $   1,495,632   $   1,665,622