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Wabtec Reports Operating Results (10-Q)

November 09, 2011 | About:
10qk

10qk

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Wabtec (WAB) filed Quarterly Report for the period ended 2011-09-30.

Wabtec has a market cap of $3.31 billion; its shares were traded at around $68.57 with a P/E ratio of 20.2 and P/S ratio of 2.2. The dividend yield of Wabtec stocks is 0.2%. Wabtec had an annual average earning growth of 17% over the past 10 years.

Highlight of Business Operations:

Net sales increased by $123.2 million to $498.9 million from $375.7 million for the three months ended September 30, 2011 and 2010, respectively. The increase is due to higher sales of $96.7 million from increased demand for freight original equipment and aftermarket products and sales related to acquisitions of $23.7 million. Partially offsetting this increase was lower sales of $16.1 million from the completion of certain transit locomotive build contracts and lower sales from certain transit original equipment contracts. The Company realized a net sales increase of $10.1 million and an income from operations increase of $1.7 million due to favorable effects of foreign exchange. Net income for the three months ended September 30, 2011 was $46.6 million or $0.96 per diluted share. Net income for the three months ended September 30, 2010 was $30.5 million or $0.63 per diluted share. Net income increased due to higher sales volume and operating margins, partially offset by increased operating expenses.

Net sales increased by $319.2 million to $1,433.0 million from $1,113.8 million for the nine months ended September 30, 2011 and 2010, respectively. The increase is due to higher sales of $242.7 million from increased demand for freight original equipment, electronics, and aftermarket products, sales related to acquisitions of $94.9 million and $18.2 million from increased demand for transit electronics. Partially offsetting this increase was lower sales of $72.7 million from the completion of certain transit locomotive build contracts and lower sales from certain transit original equipment contracts. The Company realized a net sales increase of $29.6 million and an income from operations increase of $4.3 million due to favorable effects of foreign exchange. Net income for the nine months ended September 30, 2011 was $123.9 million or $2.56 per diluted share. Net income for the nine months ended September 30, 2010 was $92.1 million or $1.92 per diluted share. Net income increased due to higher sales volume, partially offset by increased operating expenses.

percentage of sales from approximately 19% for the nine months ended September 30, 2010 to 15% in the same period of 2011. Transit Group raw material costs increased as a percentage of sales from approximately 42% for the nine months ended September 30, 2010 to 43% in the same period of 2011. Transit Group labor costs increased as a percentage of sales from approximately 11% for the nine months ended September 30, 2010 to 13% in the same period of 2011, and overhead costs decreased as a percentage of sales from approximately 18% for the nine months ended September 30, 2010 to 17% in the same period of 2011. In general, raw material costs as a percentage of sales increased reflecting the higher mix of revenue generated from freight original equipment sales and aftermarket services, which carries a higher raw material component as cost of sales. Overhead costs vary as a percentage of sales depending on product mix and changes in sales volume. The provision for warranty expense is generally established for specific losses, along with historical estimates of customer claims as a percentage of sales, which can cause variability in warranty expense between quarters. Warranty expense was $6.2 million lower for the first nine months of 2011 compared to the same period of 2010 because of the completion of certain transit contracts, which required creating initial warranty reserves. Gross profit increased to $423.1 million for the nine months ended September 30, 2011 compared to $331.1 million in the same period of 2010, for the reasons discussed above. Accordingly, for the first nine months of 2011, gross profit, as a percentage of sales, was 29.5% compared to 29.7%, for the first nine months of 2010.

Selling, general, and administrative expenses increased $43.9 million in the first nine months of 2011 compared to the same period of 2010 because of an $18.1 million charge for a court ruling, $9.3 million of expenses from acquisitions, $8.9 million of incentive and non-cash compensation and $3.2 million of other certain one-time charges, partially offset by a benefit of $2.4 million from a settlement related to a prior acquisition. Engineering expense decreased by $2.6 million in the first nine months of 2011 compared to the same period of 2010 as the Company focused engineering resources on completing original equipment contracts which caused the related engineering costs to be charged to cost of sales. Amortization expense increased in the first nine months of 2011 compared to the same period in 2010 due to amortization of intangibles associated with acquisitions. Total operating expenses were 15.7% and 16.1% of sales for the first nine months of 2011 and 2010, respectively.

Operating activities In the first nine months of 2011 and 2010, cash provided by operations was $100.0 million and $75.3 million, respectively. In comparison to first nine months of 2010, cash provided by operations in 2011 resulted from higher net income and higher non-cash items, partially offset by a net increase in working capital. In 2011, accounts receivable increased by $80.3 million, primarily due to higher sales, and inventory increased by $63.4 million from the prior year. Accounts payable decreased by $3.7 million. All other operating assets and liabilities, net, provided cash of $72.2 million due primarily to a $44.9 million increase in customer deposits for certain contracts, the accrual of $18.1 million for a court ruling and the payment timing of certain accrued liabilities. In 2010, accounts receivable increased by $46.0 million and inventory increased by $2.3 million from the prior year. Accounts payable decreased by $5.8 million. All other operating assets and liabilities, net, used cash of $8.3 million due primarily to the payment timing of certain accrued liabilities.

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