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Rail News: Rail Industry Trends

Updates from Wabtec, Portec Rail Products, Timken, CIT Group and Invensys Rail

• Yesterday, Wabtec Corp. reported third-quarter results, posting income from operations of $46 million, or 13.8 percent of sales, compared with 13.2 percent of sales in the year-ago quarter, The operating margin increase was “due to cost-reduction initiatives and other benefits from the Wabtec Performance System,” the company said in a prepared statement. But sales decreased to $330.4 million, down 16.6 percent compared with sales from the same 2008 period, primarily because of lower sales in the Freight Group, which has been “affected negatively” by sharply lower rail traffic levels. For the year, company officials expect revenue to be about 12 percent lower than 2008’s total; previously, the company expected revenue to be down about 10 percent. “Market conditions continued to be very difficult in the third quarter for our freight rail business, while the Transit Group remained stable,” said Wabtec President and Chief Executive Officer Albert Neupaver. “Even in this environment, we still improved margins and generated strong cash flow.”

• Portec Rail Products Inc. also reported third-quarter financials yesterday, including unaudited net income of $2 million, a 21.4 percent decline compared with the same 2008 period. The company reported net sales of $24.3 million, down 17.9 percent. For the year’s first nine months, the company recorded unaudited net income of $5.4 million, a 14.4 percent drop-off compared with the same 2008 period, and net sales of $73 million, a 13.8 percent decline. “Despite the economic challenges we continue to face, we still believe that there are opportunities for our products and services in our established markets and in new markets,” said President and CEO Richard Jarosinski in a prepared statement. “We have some product groups, such as friction management and wayside data management systems, that have demonstrated their ability to assist our customers in reducing operating expenses by extending asset life and reducing fuel costs.”

• The Timken Co. yesterday reported third-quarter sales of $763.6 million, a decrease of 43 percent compared the same period a year ago — a decline that reflects weaker demand in many of the company’s end markets and lower surcharges, which were partially offset by improved pricing, the company said in a prepared statement. Timken incurred a third-quarter loss of $50.1 million, including a loss of $30.8 million from the Needle Roller Bearings business, the assets of which Timken recently signed an agreement to sell to JTKET Corp. for $330 million. Continuing operations incurred a loss of $19.3 million compared with income of $123.9 million a year ago. Excluding special items, net income was $5.2 million, including a loss of $2.3 million from discontinued operations. “This quarter’s performance is more about how we’re managing the business than a shift in marketplace trends,” said President and CEO James Griffith. “Without the benefit of improved volume, we’re yielding better results from structural changes we’ve made.”

• CIT Group Inc. expanded its current $3 billion senior secured credit facility by an additional $4.5 billion. The new tranche will be used to refinance a portion of the company’s existing secured indebtedness, which may come due as a result of the restructuring, and for general corporate purposes. The company also addressed a commitment letter received on Oct. 27 from Carl Icahn to provide CIT a new $4.5 billion term loan. “Although Mr. Icahn and his advisors had been in discussions with the company for several days and were fully aware of CIT’s deadline, they provided the company less than one hour to review and accept his commitment letter,” according to an Oct. 28 statement.  “Additionally, despite several requests from the company for information and multiple deadline extensions, the company has yet to receive a signed credit agreement and evidence of Mr. Icahn’s ability to fund the commitment.” The board of CIT, whose holdings include full-service rail-car and locomotive lessor CIT Rail, determined that “the best interests of the company and its stakeholders would be served by proceeding with the credit facility provided by a diverse group of lenders.”

• Invensys Rail plans to open a “Global Centre of Excellence for Communication-Based Train Control” (CBTC) in central London. “Key international project wins,” including last week’s $420.6 million contract to upgrade the signaling and automatic train control systems on lines 8, 10 and 11 of São Paulo’s Metro system, helped prompt the decision to establish an office to provide “centralized CBTC expertise,” President and CEO James Drummond said in a prepared statement. “We feel that this new location will add significant value to our services."

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More News from 10/30/2009