Wabtec Corporation (NYSE: WAB) today reported earnings per
diluted share of $0.54 and adjusted earnings per diluted share of
$1.06 in the 2019 second quarter (see reconciliation table). The
company generated GAAP cash from operations of $413 million for the
quarter and raised its 2019 GAAP cash from operations guidance to
about $900 million. Wabtec also updated its full-year guidance for
sales of about $8.3 billion and adjusted earnings per diluted share
to between $4.10 to $4.20.
Rafael Santana, Wabtec’s president and chief executive officer,
said: “Our second quarter results demonstrate a solid operating
performance, with strong cash from operations and margin
improvement, enabling significant debt reduction. In light of
conditions in the North American freight market, we have
accelerated our cost reductions and synergy initiatives. We are
already beginning to reap strategic benefits from the merger of
Wabtec and GE Transportation, completed just a few months ago.
“We are confident the company’s diverse business model, focus on
aftermarket and services, technology capabilities and global
presence will generate long-term growth. We believe our efforts to
improve costs, including a synergy target of $250 million by year
four following the merger, will drive significant, long-term value
for our customers and shareholders.”
2019 Second Quarter Consolidated Results
- GAAP sales were $2.24 billion; adjusted sales were $2.25
billion including accounting policy harmonization. The increase
compared to the year-ago quarter resulted mainly from sales from GE
Transportation.
- Income from operations was $201 million and adjusted income
from operations was $320 million (14.2% of adjusted sales).
Adjusted income from operations excluded pre-tax expenses of $119
million related to the GE Transportation merger, as follows: $89
million for one-time, non-cash purchase price accounting charges
and $31 million for transaction and restructuring costs (see
reconciliation table). In addition to the expenses noted above, the
company also had pre-tax expense of $56 million for non-cash,
recurring purchase price accounting charges related to GE
Transportation merger which is not added back to adjusted income
from operations.
- Net interest expense was $59 million, with adjusted net
interest expense of $55 million.
- Income tax expense was $41 million for an effective tax rate of
28.7%. Excluding the net tax benefit from transaction costs related
to the GE Transportation merger, adjusted income tax expense was
$65 million for an adjusted effective tax rate of about 24.5%.
- Earnings per diluted share were $0.54 and adjusted earnings per
diluted share were $1.06 (see reconciliation table). Adjusted
earnings per diluted share excluded after-tax expenses of $0.52 per
diluted share related to the GE Transportation merger, as follows:
$0.35 for one-time, non-cash purchase price accounting charges;
$0.14 for transaction and restructuring costs; and $0.03 for
increased tax expense for non-deductible transaction costs (see
reconciliation table). In addition to the expenses noted above, the
company also had after-tax expense of $0.22 per diluted share for
non-cash, recurring purchase price accounting charges which is not
added back to adjusted earnings per diluted share.
- EBITDA, which Wabtec defines as income from operations plus
depreciation and amortization, was $308 million and adjusted EBITDA
was $428 million. Adjusted EBITDA excluded pre-tax expenses of $119
million related to the GE Transportation merger, as follows: $89
million for one-time, non-cash purchase price accounting charges
and $31 million for transaction and restructuring costs (see
reconciliation table).
2019 Second Quarter Segment Results
- Freight segment sales increased by 262% or $1.08 billion; the
increase resulted from acquisitions of $1.1 billion which more than
offset an organic decrease of $34 million and unfavorable changes
in foreign currency exchange rates of $6 million. Freight segment
income from operations of $152 million was reduced by $99 million
due to the merger-related expenses noted above. Excluding those
expenses, income from operations as a percent of sales was
16.6%.
- Transit segment sales increased by 6% or $43 million; the
increase resulted from organic sales growth of $81 million and
acquisitions of $3 million, which was partially offset by
unfavorable changes in foreign currency exchange rates of $41
million. Income from operations as a percent of sales was 9.6%
mainly due to operating leverage from higher sales.
Cash Flow Summary
- The company generated cash from operations of $413 million for
the second quarter compared to cash from operations of $44 million
in the year-ago quarter, with the increase resulting from improved
working capital performance and increased customer deposits. In the
2019 second quarter, cash from operations was reduced by about $20
million as a result of costs related to the GE Transportation
merger.
- At June 30, the company had cash and cash equivalents of $461
million and debt of $4.63 billion. Total debt was about $330
million lower than at March 31 due to repayment of debt during the
quarter.
Backlog
- At June 30, Wabtec’s total, multi-year backlog was $22.6
billion, and its 12-month backlog was $5.9 billion, slightly lower
than at March 31 as increased aftermarket and transit orders were
more than offset by the timing of OEM orders and changes in foreign
currency exchange rates.
2019 Financial Guidance and Pro Forma Financial
Information
- Wabtec updated 2019 GAAP sales guidance of about $8.3 billion,
GAAP income from operations guidance of about $800 million and GAAP
earnings per diluted share guidance to between $2.20 to $2.30 due
to refined estimates for purchase price accounting charges and
transaction and restructuring costs. Wabtec updated guidance for
EBITDA, which Wabtec defines as income from operations plus
depreciation and amortization, of about $1.3 billion.
- Wabtec updated 2019 adjusted sales guidance of about $8.3
billion, adjusted EBITDA, of about $1.6 billion, and adjusted
income from operations of about $1.2 billion. Wabtec also updated
its guidance for adjusted earnings per diluted share between $4.10
to $4.20. The adjusted guidance excludes estimated expenses for the
GE Transportation merger for transaction and restructuring costs,
one-time purchase price accounting charges, and non-cash accounting
policy harmonization. Excluding these expenses, the company’s
adjusted operating margin target for the full year is about 14% and
its effective tax rate for the full year is expected to be about
24%. This guidance also includes a net synergy benefit of about $20
million for 2019.
- In addition to the expenses noted above, the company also
expects after-tax expense of about $0.80 per diluted share for
non-cash, recurring purchase price accounting charges which are not
added back to adjusted earnings per share.
- For the year, Wabtec expects GAAP cash flow from operations to
be about $900 million including expenses of about $100 million
related to the GE Transportation merger.
Update on General Electric Company Stock Ownership
- Wabtec issued 47.8 million shares to GE in the GE
Transportation merger, 25.3 million of which GE sold in the market
in the second quarter of 2019. GE has informed Wabtec that it is
considering seeking to liquidate the balance of its stock holdings
in the current quarter, subject to market conditions. While there
can be no assurance that this will happen or the timing, Wabtec
believes it would be beneficial to the Company.
Conference Call Information
Wabtec will host a call with analysts and investors at 10 a.m.,
ET, today. To listen via webcast, go to Wabtec’s new website at
www.WabtecCorp.com and click on “Events & Presentations” in the
“Investor Relations” section, or to the old Wabtec website at
www.wabtec.com and click on “Webcasts” in the “Investor Relations”
section. Also, an audio replay of the call will be available by
calling 412-317-0088 (passcode: 466#).
About Wabtec Corporation
Wabtec Corporation is a leading global provider of equipment,
systems, digital solutions and value-added services for freight and
transit rail. Drawing on nearly four centuries of collective
experience across Wabtec, GE Transportation and Faiveley Transport,
the company has unmatched digital expertise, technological
innovation, and world-class manufacturing and services, enabling
the digital-rail-and-transit ecosystems. Wabtec is focused on
performance that drives progress, creating transportation solutions
that move and improve the world. The freight portfolio features a
comprehensive line of locomotives, software applications and a
broad selection of mission-critical controls systems, including
Positive Train Control (PTC). The transit portfolio provides highly
engineered systems and services to virtually every major rail
transit system around the world, supplying an integrated series of
components for buses and all train-related market segments that
deliver safety, efficiency and passenger comfort. Along with its
industry-leading portfolio of products and solutions for the rail
and transit industries, Wabtec is a leader in mining, marine, and
industrial solutions. Based in Wilmerding, PA, Wabtec has
approximately 27,000 employees in facilities throughout the world.
Visit: www.WabtecCorp.com or www.wabtec.com
Information about non-GAAP 2019 Financial Guidance and
Forward-Looking Statements
Wabtec’s earnings release and 2019 financial guidance mention
certain non-GAAP financial performance measures, including adjusted
sales, adjusted operating margin, EBITDA, adjusted EBITDA, adjusted
income from operations and adjusted earnings per diluted share.
Wabtec defines EBITDA as income from operations plus depreciation
and amortization. While Wabtec believes these are useful
supplemental measures for investors, they are not presented in
accordance with GAAP. Investors should not consider non-GAAP
measures in isolation or as a substitute for net income, cash flows
from operations, or any other items calculated in accordance with
GAAP. In addition, the non-GAAP financial measures included in this
presentation have inherent material limitations as performance
measures because they add back certain expenses incurred by the
company to GAAP financial measures, resulting in those expenses not
being taken into account in the applicable non-GAAP financial
measure. Because not all companies use identical calculations,
Wabtec’s presentation of non-GAAP financial measures may not be
comparable to other similarly titled measures of other companies.
Included in this release are reconciliation tables that provide
details about how adjusted results relate to GAAP results.
This communication contains “forward-looking” statements as that
term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended by the Private Securities Litigation Reform Act of 1995,
including statements regarding the acquisition by Wabtec of GE
Transportation (the “transaction”) and statements regarding
Wabtec’s expectations about future sales and earnings. All
statements, other than historical facts, including statements
regarding the expected benefits of the transaction, including
future financial and operating results, the tax consequences of the
GE Transportation transaction, and the combined company’s plans,
objectives, expectations and intentions; legal, economic and
regulatory conditions; and any assumptions underlying any of the
foregoing, are forward-looking statements. Forward-looking
statements concern future circumstances and results and other
statements that are not historical facts and are sometimes
identified by the words “may,” “will,” “should,” “potential,”
“intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,”
“overestimate,” “underestimate,” “believe,” “could,” “project,”
“predict,” “continue,” “target” or other similar words or
expressions. Forward-looking statements are based upon current
plans, estimates and expectations that are subject to risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those indicated
or anticipated by such forward-looking statements. The inclusion of
such statements should not be regarded as a representation that
such plans, estimates or expectations will be achieved. Important
factors that could cause actual results to differ materially from
such plans, estimates or expectations include, among others, (1)
unexpected costs, charges or expenses resulting from GE
Transportation merger; (2) uncertainty of the expected financial
performance of the combined company; (3) failure to realize the
anticipated benefits of the transaction, including as a result of
integrating GE Transportation into Wabtec; (4) the ability of the
combined company to implement its business strategy; (5)
difficulties and delays in achieving revenue and cost synergies of
the combined company; (6) inability to retain and hire key
personnel; (7) evolving legal, regulatory and tax regimes; (8)
changes in general economic and/or industry specific conditions,
including the impacts of tax and tariff programs, industry
consolidation and changes in the financial condition or operating
strategies of our customers; (9) changes in the expected timing of
projects; (10) a decrease in freight or passenger rail traffic;
(11) an increase in manufacturing costs; (12) actions by third
parties, including government agencies; and (13) other risk factors
as detailed from time to time in Wabtec’s reports filed with the
SEC, including Wabtec’s annual report on Form 10-K, periodic
quarterly reports on Form 10-Q, periodic current reports on Form
8-K and other documents filed with the SEC. The foregoing list of
important factors is not exclusive. Any forward-looking statements
speak only as of the date of this communication. Wabtec does not
undertake any obligation to update any forward-looking statements,
whether as a result of new information or development, future
events or otherwise, except as required by law. Readers are
cautioned not to place undue reliance on any of these
forward-looking statements.
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE AND SIX
MONTHS ENDED JUNE 30, 2019 AND 2018 (AMOUNTS IN THOUSANDS
EXCEPT PER SHARE DATA) (UNAUDITED)
Second
Second
For the
For the
Quarter
Quarter
Six Months
Six Months
2019
2018
2019
2018
Net sales
$ 2,236,284
$ 1,111,680
$ 3,829,901
$ 2,167,857
Cost of sales
(1,621,608)
(787,713)
(2,826,208)
(1,533,009)
Gross profit
614,676
323,967
1,003,693
634,848
Gross profit as a % of Net Sales
27.5%
29.1%
26.2%
29.3%
Selling, general and administrative expenses
(290,959)
(171,157)
(550,682)
(318,358)
Engineering expenses
(57,120)
(19,388)
(91,665)
(41,437)
Amortization expense
(65,960)
(9,899)
(93,402)
(20,251)
Total operating expenses
(414,039)
(200,444)
(735,749)
(380,046)
Operating expenses as a % of Net Sales
18.5%
18.0%
19.2%
17.5%
Income from operations
200,637
123,523
267,944
254,802
Income from operations as a % of Net
Sales
9.0%
11.1%
7.0%
11.8%
Interest expense, net
(58,560)
(31,920)
(103,129)
(52,204)
Other income (expense), net
2,177
2,171
(6,051)
4,757
Income from operations before income
taxes
144,254
93,774
158,764
207,355
Income tax expense
(41,400)
(10,503)
(59,923)
(36,627)
Effective tax rate
28.7%
11.2%
37.7%
17.7%
Net income
102,854
83,271
98,841
170,728
Less: Net loss attributable to noncontrolling interest
1,381
1,145
922
2,054
Net income attributable to Wabtec
shareholders
$ 104,235
$ 84,416
$ 99,763
$ 172,782
Earnings Per Common Share Basic
Net income attributable to Wabtec
shareholders
$ 0.58
$ 0.88
$ 0.66
$ 1.80
Diluted
Net income attributable to Wabtec
shareholders
$ 0.54
$ 0.87
$ 0.61
$ 1.79
Basic
177,348
95,992
149,553
95,867
Diluted
191,453
96,575
162,155
96,471
Segment Information Freight Net Sales
$ 1,493,949
$ 412,258
$ 2,370,383
$ 791,812
Freight Income from Operations
$ 151,978
$ 84,347
$ 227,188
$ 153,969
Freight Operating Margin
10.2%
20.5%
9.6%
19.4%
Transit Net Sales
$ 742,335
$ 699,422
$ 1,459,518
$ 1,376,045
Transit Income from Operations
$ 71,211
$ 57,975
$ 130,144
$ 126,059
Transit Operating Margin
9.6%
8.3%
8.9%
9.2%
Backlog Information (Note: 12-month is a sub-set of
total) June 30, 2019
March 31, 2019 Freight Total
$ 18,765,452
$ 19,466,111
Transit Total
3,847,812
3,795,200
Wabtec Total
$ 22,613,264
$ 23,261,311
Freight 12-Month
$ 3,793,877
$ 4,061,260
Transit 12-Month
2,058,914
2,048,707
Wabtec 12-Month
$ 5,852,791
$ 6,109,967
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited June 30, 2019
December 31, 2018
In thousands Cash and cash
equivalents
$ 461,371
$ 580,908
Restricted cash
-
1,761,446
Receivables, net
1,707,409
1,146,778
Inventories
1,881,791
844,886
Current assets - other
178,569
115,649
Total current assets
4,229,140
4,449,667
Property, plant and equipment, net
1,646,097
563,737
Goodwill
8,150,671
2,396,544
Other intangibles, net
4,364,356
1,129,880
Other long term assets
552,329
109,406
Total assets
$ 18,942,593
$ 8,649,234
Current liabilities
$ 3,211,315
$ 1,646,690
Long-term debt
4,528,768
3,792,774
Long-term liabilities - other
1,367,353
340,695
Total liabilities
9,107,436
5,780,159
Shareholders' equity
9,801,760
2,865,131
Non-controlling interest
33,397
3,944
Total shareholders' equity
$ 9,835,157
$ 2,869,075
Total Liabilities and Shareholders'
Equity
$ 18,942,593
$ 8,649,234
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Six Months Ended June
30,
2019
2018
In thousands Net cash provided
by operating activities
$ 443,924
$ 67,904
Net cash used for investing activities
(3,040,364)
(69,100)
Net cash provided by financing activities
726,108
22,764
Effect of changes in currency exchange rates
(10,651)
(9,395)
(Decrease) increase in cash
(1,880,983)
12,173
Cash, cash equivalents, and restricted cash, beginning of period
2,342,354
233,401
Cash, cash equivalents, and restricted cash, end of period
$ 461,371
$ 245,574
Set forth below is the calculation of the non-GAAP performance
measures included in this press release. We believe that these
measures provide useful supplemental information to assess our
operating performance and to evaluate period-to-period comparisons.
Non-GAAP financial measures should be viewed in addition to, and
not as an alternative for, Wabtec's reported results prepared in
accordance with GAAP.
Wabtec Corporation
Reconciliation of Reported
Results to Adjusted Results
(in millions)
Second Quarter 2019 Actual Results
Gross
Operating
Income from
Interest &
Noncontrolling
Wabtec
Net
Sales
Profit
Expenses
Operations
Other
Exp
Tax
Net
Income
Interest
Net
Income
EPS
Consolidated Q2 Actual As Reported
$ 2,236.3
$ 614.7
$ (414.0)
$ 200.6
$ (56.4)
$ (41.4)
$ 102.8
$ 1.4
$ 104.2
$ 0.54
Restructuring & Transaction costs
-
-
31.4
31.4
3.5
(8.4)
26.5
-
26.5
$ 0.14
One-time PPA
-
89.0
-
89.0
-
(21.5)
67.5
-
67.5
$ 0.35
Policy Harmonization
17.0
(10.0)
9.0
(1.0)
-
0.2
(0.8)
-
(0.8)
$ (0.00)
Tax on Transaction Costs
-
-
-
-
-
5.7
5.7
-
5.7
$ 0.03
Adjusted Results
$ 2,253.3
$ 693.7
$ (373.6)
$ 320.0
$ (52.9)
$ (65.4)
$ 201.7
$ 1.4
$ 203.1
$ 1.06
Fully Diluted Shares Outstanding
191.5
Wabtec Corporation Reconciliation of
Reported Results to Adjusted Results (in millions)
Year-to-Date 2019 Actual Results
Gross
Operating
Income from
Interest &
Noncontrolling
Wabtec
Net
Sales
Profit
Expenses
Operations
Other
Exp
Tax
Net
Income
Interest
Net
Income
EPS
Reported Results
$ 3,829.9
$ 1,003.7
$ (735.7)
$ 267.9
$ (109.2)
$ (59.9)
$ 98.8
$ 0.9
$ 99.7
$ 0.61
Restructuring & Transaction costs
-
-
90.3
90.3
17.9
(26.2)
82.0
-
82.0
$ 0.50
One-time PPA
-
169.0
-
169.0
-
(40.9)
128.1
-
128.1
$ 0.79
Policy Harmonization
64.0
4.0
9.0
13.0
-
(3.1)
9.9
-
9.9
$ 0.06
Tax on Transaction Costs
-
-
-
-
-
23.7
23.7
-
23.7
$ 0.15
Adjusted Results
$ 3,893.9
$ 1,176.7
$ (636.4)
$ 540.2
$ (91.3)
$ (106.4)
$ 342.5
$ 0.9
$ 343.4
$ 2.11
Fully Diluted Shares Outstanding
162.2
Set forth below is the calculation of the non-GAAP performance
measures included in this press release. We believe that these
measures provide useful supplemental information to assess our
operating performance and to evaluate period-to-period comparisons.
Non-GAAP financial measures should be viewed in addition to, and
not as an alternative for, Wabtec's reported results prepared in
accordance with GAAP.
Wabtec Corporation2019 Q2 EBITDA Reconciliation (in
millions) EBITDA (Income from Income from
Operations plus Depreciation Operations Depreciation Amortization &
Amortization) Consolidated Q2 Actual As
Reported
$ 200.6
$ 41.8
$ 66.0
$ 308.4
Transaction and Restructuring Costs
31.4
-
-
31.4
One-time PPA Charges
89.0
-
-
89.0
Policy Harmonization
(1.0)
-
-
(1.0)
Adjusted Results
$ 320.0
$ 41.8
$ 66.0
$ 427.8
Set forth below is a reconciliation of the 2019 guidance to the
adjusted guidance included in this press release. We believe that
the adjusted guidance provides useful supplemental information to
assess our forecasted results. Non-GAAP financial measures should
be viewed in addition to, and not as an alternative for, Wabtec's
guidance presented in accordance with GAAP.
Wabtec Corporation Reconciliation of Guidance to Adjusted
Guidance * (in billions) EBITDA (Income from
Income from Depreciation Operations plus
Depreciation Revenue Operations &
Amortization & Amortization) 2019
Guidance
$ 8.3
$ 0.8
$ 0.5
$ 1.3
Transaction and Restructuring Costs
-
0.1
-
0.1
One-time PPA Charges
-
0.2
-
0.2
Policy Harmonization
0.1
0.1
-
0.1
2019 Adjusted Guidance
$ 8.3
$ 1.2
$ 0.5
$ 1.6
* Net Income and Earnings Per Diluted Share ("EPS")
will be impacted by a variety of uncertainties including revisions
to purchase price accounting, final transaction costs, and mix of
operations affecting accounting harmonization. The Company does not
further reconcile Income from Operations to Net Income due to the
inherent difficulty, without unreasonable efforts, in forecasting
and quantifying with reasonable accuracy the foregoing significant
items required for the reconciliation. On a GAAP basis, Net Income
is estimated to range from $390 million to $410 million, with an
EPS range of $2.20 to $2.30. On an adjusted basis, Net Income is
estimated to range from $725 million to $740 million, and EPS of
$4.10 to $4.20.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190730005413/en/
Wabtec Investor Contact Kristine Kubacki, CFA /
Kristine.Kubacki@wabtec.com / 412-450-2033 Wabtec
Media Contact Deia Campanelli /
Deia.Campanelli@wabtec.com / 773-297-0482
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