Wabtec Reports Results For 3Q, Updates Guidance
WILMERDING, PA, Oct. 24, 2017 – Wabtec Corporation (NYSE: WAB) today reported results for the third quarter and updated its financial guidance for 2017.
2017 Third Quarter Consolidated Results
- Sales were $958 million, a 42 percent increase compared to the year-ago quarter, as sales from acquisitions, mainly in the Transit Group, more than offset slightly lower organic sales. Changes in foreign exchange rates increased sales by $7 million compared to the year-ago quarter.
- Income from operations was $102 million including expenses of $20 million for contract adjustments and $6 million for restructuring and integration actions. Excluding these expenses, the company’s operating margin was 13.4 percent, slightly better than its adjusted operating margin in the first half of the year.
- Net interest expense was $18 million, reflecting a higher debt balance due mainly to the Faiveley Transport acquisition in late 2016.
- Other expense was $2.9 million, mainly due to a non-cash foreign exchange loss.
- Income tax expense was $13 million including a benefit of $10 million related to adjustments of foreign deferred tax liabilities. Excluding the tax benefit, the effective tax rate was 28 percent.
- Earnings per diluted share were 70 cents including expenses of 18 cents per diluted share for the contract adjustments and restructuring and integration actions. Excluding these items, adjusted earnings per diluted share were 88 cents.
2017 Third Quarter Segment Results
- In the Transit segment, sales increased 97 percent and income from operations decreased 7 percent compared to the year-ago third quarter. Transit sales increased by $304 million, primarily due to sales from acquisitions of $290 million. Changes in foreign exchange rates increased sales by $5 million. Income from operations included expenses for contract adjustments and restructuring and integration of $18 million. Excluding these expenses, adjusted income from operations increased 29 percent, with an operating margin of 10.7 percent.
- In the Freight segment, sales decreased 6 percent and income from operations decreased 21 percent. Freight sales decreased by $22 million, primarily due to lower sales from original equipment rail products. Acquisitions increased sales by $41 million and changes in foreign exchange rates increased sales by $2 million. Income from operations included expenses for contract adjustments and restructuring and integration of $7 million. Excluding these expenses, adjusted income from operations decreased 12 percent, with an operating margin of 20.2 percent.
Cash Flow Summary
- Cash from operations was $40 million for the third quarter. For the first nine months of 2017, cash from operations decreased compared to the same period of 2016 mainly due to an increase in working capital.
- At Sept. 30, the company had cash of $228 million and debt of $1.9 billion. Total debt was 6 percent lower than at the end of the second quarter.
Backlog and Other Information
- During the quarter, the company’s total, multi-year backlog increased 2 percent compared to the second quarter, to a record $4.5 billion. The company’s 12-month backlog, a subset of the total, increased 5 percent to a record $2.2 billion. Recent new orders include projects in all major markets around the world and in all major product categories, including contracts worth more $100 million to supply a variety of components and systems for the new generation of double deck trains for Paris.
- Following the end of the quarter, Wabtec acquired AM General Contractor, a manufacturer of fire protection and extinguishing systems, mainly for transit rail cars. Based in Europe, AM has annual sales of about $25 million.
2017 Guidance Update
Based on its year-to-date results and fourth quarter forecast, Wabtec expects revenues for the year to be about $3.8 billion and earnings per diluted share to be between $3.45-$3.50 excluding expenses for restructuring, integration and contract adjustments. The company’s adjusted operating margin target in the fourth quarter is about 15 percent.
Raymond T. Betler, Wabtec’s president and chief executive officer, said: “Excluding the contract adjustments and restructuring and integration expenses, our third quarter results were in line with our expectations. Although we have faced challenging market conditions this year, we have also seen many positive developments, too. During the third quarter our transit business once again grew its record backlog, winning orders throughout our major geographic markets and product categories. Our freight revenues and backlog have remained mostly flat for the past four quarters, indicating a level of stability, and we are seeing a slight pick-up in the aftermarket. We expect a strong finish to the year based on our existing backlog and increasing synergies.
“In addition, we have continued to make meaningful progress in the Faiveley integration, combining the best technologies, processes and practices from each company, less than one year after completing the acquisition. Last week, we presented to our Board of Directors our first strategic plan with Faiveley as part of Wabtec, and it was received enthusiastically. Based on this plan, we’re excited about our worldwide growth opportunities and our ability to drive margin improvement through the application of lean principles and the Wabtec Excellence Program.”
Wabtec Corporation (www.wabtec.com) is a leading global provider of equipment, systems and value-added services for transit and freight rail. Through its subsidiaries, the company manufactures a range of products for locomotives, freight cars and passenger transit vehicles. The company also builds new switcher and commuter locomotives, and provides aftermarket services. The company has facilities located throughout the world.
This release contains forward-looking statements, such as statements regarding the company’s expectations about future sales and earnings. Actual results could differ materially from the results suggested in any forward-looking statement. Factors that could cause or contribute to these material differences include, but are not limited to, an economic slowdown in the markets we serve; changes in the expected timing of projects; a decrease in freight or passenger rail traffic; an increase in manufacturing costs; and other factors contained in the company’s filings with the Securities and Exchange Commission. The company assumes no obligation to update these statements or advise of changes in the assumptions on which they are based.
Wabtec will host a call with analysts and investors at 10 a.m., eastern time, today. To listen via webcast, go to www.wabtec.com and click on “Webcasts” in the “Investor Relations” section.