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8-K - FORM 8-K - WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPd517510d8k.htm

Exhibit 99.1

 

LOGO    News Release

Wabtec Reports Results For 2017 4Q and Full Year,Issues 2018 Financial Guidance

WILMERDING, PA, Feb. 20, 2018 – Wabtec Corporation (NYSE: WAB) today reported results for the 2017 fourth quarter and full year, and issued 2018 financial guidance.

2017 Summary

In the fourth quarter of 2017, Wabtec had sales of $1.08 billion and GAAP earnings per diluted share of 51 cents. Excluding certain items related to the integration of Faiveley Transport (see discussion and reconciliation table below), the company had adjusted earnings per diluted share of 90 cents.

For the full year of 2017, Wabtec had sales of $3.88 billion and GAAP earnings per diluted share of $2.72. Excluding certain items related to the integration of Faiveley Transport (see discussion and reconciliation table below), the company had adjusted earnings per diluted share of $3.43.

2018 Financial Guidance

In 2018, Wabtec expects sales to be about $4.1 billion and adjusted earnings per diluted share to be about $3.80 excluding expected restructuring and integration charges. The company’s operating margin target for the full year is about 13.5 percent, and its effective tax rate for the full year is expected to be about 23.5 percent. For the year, Wabtec expects cash flow from operations to exceed net income. The company expects adjusted earnings per diluted share in the first quarter of 2018 to be similar to its adjusted earnings per diluted share in the fourth quarter of 2017.

Raymond T. Betler, Wabtec’s president and chief executive officer, said: “After a year of transition in 2017, during which we made excellent progress on the Faiveley integration and continued to invest in our worldwide growth opportunities, we are confident the company is positioned for improved performance in 2018. We have a record backlog, we’re seeing improvements in the freight aftermarket, and our Wabtec Excellence Program provides the fuel to increase margins over time. We are committed to achieving our 2018 plan and excited about Wabtec’s long-term growth prospects.”

2017 Fourth Quarter Consolidated Results

 

    Sales were $1.08 billion, a 42 percent increase compared to the year-ago quarter. The increase was driven by sales from acquisitions of $219 million, organic sales growth of $80 million and a benefit from changes in foreign currency exchange rates of $17 million.

 

    Income from operations was $91 million including expenses of $24 million for contract adjustments to reflect higher-than-expected costs to complete certain contracts and $18 million for restructuring and integration actions. Excluding these expenses, the company’s operating margin was 12.4 percent, lower than expected mainly due to a negative product mix and higher project costs in the U.K.

 

    Net interest expense was $18 million, and other income was $1.2 million mainly due to net, non-cash foreign currency exchange rate gains.

 

    Income tax expense was $25 million for an effective tax rate of 33.5 percent. In the quarter, the company recorded the following impact from the U.S. tax reform bill that was enacted in December 2017: a $55 million expense for the repatriation tax, and a $47 million benefit from a reduction in deferred tax liabilities; this resulted in a net expense from U.S. tax reform in the fourth quarter of $8 million. Excluding the impact of U.S. tax reform, the company’s effective tax rate in the fourth quarter was 22.9 percent.

 

LOGO

 

Tim Wesley    Phone: 412.825.1543    Wabtec Corporation
   E-mail: twesley@wabtec.com    1001 Air Brake Avenue
   Website: www.wabtec.com    Wilmerding, PA 15148


LOGO    News Release

 

 

    Earnings per diluted share were 51 cents including the following: Expenses of 18 cents per diluted share for the contract adjustments, expenses of 13 cents per diluted share for the restructuring and integration actions, and expenses of 8 cents per diluted share for the impact of U.S. tax reform. Excluding these items, adjusted earnings per diluted share were 90 cents. (See reconciliation table below.)

2017 Fourth Quarter Segment Results

 

    In the Transit segment, sales increased 70 percent and income from operations increased 41 percent compared to the year-ago fourth quarter. The sales increase was driven by sales from acquisitions of $192 million, organic sales growth of $88 million and a benefit from changes in foreign currency exchange rates of $13 million. Income from operations included expenses for contract adjustments and restructuring and integration of $35 million. Excluding these expenses, adjusted income from operations increased 191 percent and the segment’s adjusted operating margin was 9.5 percent.

 

    In the Freight segment, sales increased 7 percent and income from operations increased 1 percent. The sales increase was driven by sales from acquisitions of $27 million and a benefit from changes in foreign currency exchange rates of $4 million, which more than offset an organic sales decrease of $9 million. Income from operations included expenses for contract adjustments and restructuring and integration of $6 million. Excluding these expenses, adjusted income from operations increased 11 percent and the segment’s adjusted operating margin was 20.5 percent.

2017 Fourth Quarter Cash From Operations, Backlog and Other Information

 

    Cash from operations was $162 million for the fourth quarter, the highest quarter of the year, due in part to a reduction in working capital.

 

    At Dec. 31, the company had cash of $233 million and debt of $1.87 billion.

 

    During the quarter, the company’s total, multi-year backlog increased 2 percent compared to the third quarter, to a record $4.6 billion. The company’s 12-month backlog, a subset of the total, increased 3 percent compared to the third quarter, to a record $2.31 billion. New orders included train control contracts worth about $140 million to provide equipment, project management and aftermarket services for various customers.

 

    In the fourth quarter, Wabtec acquired Melett, a manufacturer of turbochargers; AM General, a manufacturer of fire protection and extinguishing systems; and Axiom Rail Components, a supplier of bogies and adaptable suspension systems. Combined, the companies have annual sales of about $85 million.

2017 Full Year Consolidated Results

 

    Sales were $3.88 billion, a 32 percent increase compared to 2016. The sales increase was driven by sales from acquisitions of $1.18 billion, which more than offset a decrease in organic sales of $227 million and a decrease of $5 million from changes in foreign currency exchange rates.

 

    Income from operations was $422 million including expenses of $44 million for contract adjustments and $41 million for restructuring and integration actions. Excluding these expenses, the company’s operating margin was 13.1 percent.

 

    Net interest expense was $69 million, and other expense was $1 million, mainly due to net, non-cash foreign currency exchange rate losses.

 

    Income tax expense was $90 million for an effective tax rate of 25.5 percent. Excluding the impact of U.S. tax reform, the company’s effective tax rate was 23.3 percent.

 

LOGO

Tim Wesley    Phone: 412.825.1543    Wabtec Corporation
   E-mail: twesley@wabtec.com    1001 Air Brake Avenue
   Website: www.wabtec.com    Wilmerding, PA 15148


LOGO    News Release

 

 

    Earnings per diluted share were $2.72 including the following: Expenses of 32 cents per diluted share for the contract adjustments, expenses of 30 cents per diluted share for the restructuring and integration actions, and expenses of 9 cents per diluted share mainly for the impact of various tax items, including U.S. tax reform. Excluding these items, adjusted earnings per diluted share were $3.43. (See reconciliation table.)

2017 Full Year Segment Results

 

    In the Transit segment, sales increased 79 percent and income from operations increased 10 percent compared to the prior year. The sales increase was driven by sales from acquisitions of $1.04 billion and organic sales growth of $68 million, which more than offset a decrease of $6 million from changes in foreign currency exchange rates. Income from operations included expenses for contract adjustments and restructuring and integration of $65 million. Excluding these expenses, adjusted income from operations increased 48 percent and the segment’s adjusted operating margin was 10.1 percent.

 

    In the Freight segment, sales decreased 9 percent and income from operations decreased 23 percent. The sales decrease was driven by an organic sales decrease of $295 million, which more than offset sales from acquisitions of $148 million and a benefit from changes in foreign currency exchange rates of $1 million. Income from operations included expenses for contract adjustments and restructuring and integration of $15 million. Excluding these expenses, adjusted income from operations decreased 19 percent and the segment’s adjusted operating margin was 20 percent.

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 revenues 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 and profitability 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. An audio replay of the call will also be available by calling 412-317-0088 (passcode: 466#).

 

LOGO

Tim Wesley    Phone: 412.825.1543    Wabtec Corporation
   E-mail: twesley@wabtec.com    1001 Air Brake Avenue
   Website: www.wabtec.com    Wilmerding, PA 15148


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016

(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     Fourth
Quarter
2017
    Fourth
Quarter
2016
    For the
Year Ended
2017
    For the
Year Ended
2016
 

Net sales

   $ 1,075,538     $ 759,982     $ 3,881,756     $ 2,931,188  

Cost of sales

     (807,098     (540,793     (2,816,443     (2,006,949
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     268,440       219,189       1,065,313       924,239  

Gross profit as a % of Net Sales

     25.0     28.8     27.4     31.5

Selling, general and administrative expenses

     (144,145     (130,687     (511,898     (371,805

Engineering expenses

     (23,655     (19,104     (95,166     (71,375

Amortization expense

     (9,477     (6,598     (36,516     (22,698
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     (177,277     (156,389     (643,580     (465,878

Operating expenses as a % of Net Sales

     16.5     20.6     16.6     15.9

Income from operations

     91,163       62,800       421,733       458,361  

Income from operations as a % of Net Sales

     8.5     8.3     10.9     15.6

Interest expense, net

     (17,679     (26,664     (68,704     (42,561

Other (expense) income, net

     1,200       (3,076     (966     (2,963
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations before income taxes

     74,684       33,060       352,063       412,837  

Income tax expense

     (24,997     13,268       (89,773     (99,433
  

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

     33.5     -40.1     25.5     24.1

Net Income

     49,687       46,328       262,290       313,404  

Less: Net (Gain) Loss attributable to noncontrolling interest

     (739     (8,517     (29     (8,517
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Wabtec shareholders

   $ 48,948     $ 37,811     $ 262,261     $ 304,887  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings Per Common Share

        

Basic

        

Net income attributable to Wabtec shareholders

   $ 0.51     $ 0.42     $ 2.74     $ 3.37  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

        

Net income attributable to Wabtec shareholders

   $ 0.51     $ 0.42     $ 2.72     $ 3.34  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding

        

Basic

     95,714       89,445       95,453       90,359  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     96,368       90,228       96,125       91,141  
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment Information

        

Freight Net Sales

   $ 363,629     $ 341,364     $ 1,396,588     $ 1,543,098  

Freight Income from Operations

   $ 68,275     $ 67,465     $ 264,603     $ 344,455  

Freight Operating Margin

     18.8     19.8     18.9     22.3

Transit Net Sales

   $ 711,909     $ 418,618     $ 2,485,168     $ 1,388,090  

Transit Income from Operations

   $ 32,645     $ 23,125     $ 188,546     $ 171,446  

Transit Operating Margin

     4.6     5.5     7.6     12.4

Backlog Information (Note: 12-month is a
sub-set of total)

        
     December 31, 2017     September 30, 2017              

Freight Total

   $ 549,188     $ 610,686      

Transit Total

   $ 4,050,460     $ 3,920,280      
  

 

 

   

 

 

     

Wabtec Total

   $ 4,599,648     $ 4,530,966      
  

 

 

   

 

 

     

Freight 12-Month

   $ 423,805     $ 419,659      

Transit 12-Month

   $ 1,891,079     $ 1,822,208      
  

 

 

   

 

 

     

Wabtec 12-Month

   $ 2,314,884     $ 2,241,867      
  

 

 

   

 

 

     


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

     Unaudited         
     December 31, 2017      December 31, 2016  

In thousands

             

Cash and cash equivalents

   $ 233,401      $ 398,484  

Receivables, net

     1,166,787        942,508  

Inventories

     742,634        658,510  

Current assets - other

     122,291        868,129  
  

 

 

    

 

 

 

Total current assets

     2,265,113        2,867,631  

Property, plant and equipment, net

     573,972        518,376  

Goodwill

     2,460,103        2,078,765  

Other intangibles, net

     1,204,432        1,053,860  

Other long term assets

     76,360        62,386  
  

 

 

    

 

 

 

Total assets

   $ 6,579,980      $ 6,581,018  
  

 

 

    

 

 

 

Current liabilities

   $ 1,573,330      $ 1,446,639  

Long-term debt

     1,823,303        1,762,967  

Long-term liabilities - other

     354,815        394,587  
  

 

 

    

 

 

 

Total liabilities

     3,751,448        3,604,193  

Shareholders’ equity

     2,808,868        2,205,977  

Non-controlling interest

     19,664        770,848  
  

 

 

    

 

 

 

Total shareholders’ equity

   $ 2,828,532      $ 2,976,825  
  

 

 

    

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 6,579,980      $ 6,581,018  
  

 

 

    

 

 

 


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Unaudited  
     Twelve Months Ended December 31,  
     2017     2016  

In thousands

            

Net cash provided by operating activities

   $ 188,811     $ 450,530  

Net cash used in investing activities

     (275,729     (775,065

Net cash (used in) provided by financing activities

     (97,431     522,971  

Effect of changes in currency exchange rates

     19,266       (26,143
  

 

 

   

 

 

 

(Decrease) increase in cash

     (165,083     172,293  

Cash, beginning of period

     398,484       226,191  
  

 

 

   

 

 

 

Cash, end of period

   $ 233,401     $ 398,484  
  

 

 

   

 

 

 


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)    Fourth Quarter 2017  
     Gross
Profit
     Operating
Expenses
    Income from
Operations
     Interest &
Other Exp
    Tax     Net Income      Noncontrolling
Interest
    Wabtec
Net Income
     EPS  

Reported Results

   $ 268.4      $ (177.3   $ 91.2      $ (16.5   $ (25.0   $ 49.7      $ (0.7   $ 49.0      $ 0.51  

Integration & Restructuring costs

     6.0        11.7       17.7        —         (4.9     12.8        —         12.8      $ 0.13  

Contract Adjustments

     24.1        —         24.1        —         (6.6     17.5        —         17.5      $ 0.18  

Q4 Non-recurring Tax Adjustments

     —          —         —          —         7.9       7.9        —         7.9      $ 0.08  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Adjusted Results

   $ 298.5      $ (165.6   $ 133.0      $ (16.5   $ (28.6   $ 87.9      $ (0.7   $ 87.2      $ 0.90  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Fully Diluted Shares Outstanding

                         96.4  
                      

 

 

 

Wabtec Corporation    

Reconciliation of Reported Results to Adjusted Results    

 

(in millions)   Year-to-Date 2017  
    Gross
Profit
    Operating
Expenses
    Income from
Operations
    Interest &
Other Exp
    Tax     Net Income     Noncontrolling
Interest
    Wabtec
Net Income
    EPS  

Reported Results

  $ 1,065.3     $ (643.6   $ 421.7     $ (69.7   $ (89.8   $ 262.3     $ —       $ 262.3     $ 2.72  

Integration & Restructuring costs

    11.8       29.7       41.5       (2.2     (10.6     28.6       —         28.6     $ 0.30  

Tax on Opening Balance Sheet Adjustments

    —         —         —         —         3.0       3.0       —         3.0     $ 0.03  

Contract Adjustments

    44.5       —         44.5       —         (13.7     30.8       —         30.8     $ 0.32  

Q4 Non-recurring Tax Adjustments

    —         —         —         —         7.9       7.9       —         7.9     $ 0.08  

Noncontrolling Interest Adjustment

    —         —         —         —             (1.9     (1.9   $ (0.02
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Results

  $ 1,121.6     $ (613.9   $ 507.7     $ (71.9   $ (103.3   $ 332.5     $ (1.9   $ 330.6     $ 3.43  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fully Diluted Shares Outstanding

                    96.1