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Rail News Home Financials

4/23/2004



Rail News: Financials

As expected, Wabtec's first-quarter sales up, net income down


The first quarter played out pretty much as Wabtec Corp. execs expected it would. The company posted lower net income — but higher sales — than the same period last year, and Wabtec officials continue to be confident about the company's '04 (and beyond) outlook.

For the quarter ended March 31, the producer of technology-based products and services for the rail industry recorded net income of $4.8 million, a 15.7 percent decrease compared with net income of $5.7 million for the same 2003 period. Wabtec's first-quarter gross margin was 25.2 percent, a 4 percent decline compared with 26.7 percent during the same 2003 period. Higher manufacturing costs due to higher steel prices, and the negative impact of foreign currency exchange rates on the company's Canadian operations, didn't help; "inefficiencies" related to the closing and relocation of an electronics plant from Canada to the United States didn't, either. Meanwhile, company officials plan to come up with ways to rectify a ramp-up of low-margin rail door contracts in the Transit Group. Possible solutions include price increases, and productivity and efficiency initiatives.

Nevertheless, the company posted solid sales growth during the quarter. Sales were 11 percent higher than the prior-year quarter: Freight Group sales increased 9 percent, mainly due to higher freight-car component sales in North America and electronics component sales in the United Kingdom, and Transit Group sales jumped 16 percent, mainly due to increased rail-door assemblies sales.

Earlier this year, Wabtec officials projected 2004 sales of $750 million, with increases of between 5 percent and 10 percent in both the Freight and Transit groups. The projection still holds.

"We currently expect to meet our earnings goal for the year," Wabtec Chairman William Kassling in an April 23 prepared statement. "Our view is based on several positive indicators in the North American freight rail market, including growth in rail traffic, and strong orders for new freight cars and locomotives."

How strong? Based on first-quarter freight-car orders of about 18,000 units, Wabtec prognosticators expect 2004 deliveries to clock in at about 41,000, higher than their original estimate of 36,000.

"This gives us confidence that our 2004 revenues will slightly exceed our original forecast of about $750 million," Kassling said. "Looking beyond 2004, we remain bullish about our prospects as we continue to implement our strategic growth plans."

For the quarter, debt (net of cash) increased to $132 million (34 percent of total capital) compared with $179 million (46 percent of total capital) at the same time last year. Net debt increased since year-end due to higher receivables and inventory, Wabtec officials said.







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