Westinghouse Air Brake Technologies(WAB) - 2021 Q1 - Quarterly Report

Financial Performance - Total net sales for Q1 2021 decreased by $100 million, or 5.2%, to $1.83 billion compared to Q1 2020[120] - The Freight Segment net sales decreased by $115 million, primarily due to lower locomotive equipment sales in North America[120] - The Transit Segment net sales decreased by $31 million, mainly due to COVID-19 related production delays, partially offset by favorable foreign currency exchange rate changes of $46 million[120] - Gross profit for Q1 2021 was $534.2 million, down from $578.7 million in Q1 2020[119] - Net income attributable to Wabtec shareholders for Q1 2021 was $112.4 million, compared to $111.6 million in Q1 2020[119] - Freight Segment net sales decreased by $118 million, or 9.0%, to $1.2 billion for the three months ended March 31, 2021, primarily due to lower locomotive equipment sales[129] - Transit Segment net sales increased by $18 million, or 2.9%, to $647 million for the three months ended March 31, 2021, despite an organic sales decrease of $31 million due to COVID-19 disruptions[134] Market and Growth Outlook - Approximately 64% of the company's revenues in Q1 2021 came from customers outside the United States[102] - The accessible global market for railway products and services is over $120 billion, expected to grow at a compounded annual growth rate of 2.3% through 2025[108] - Wabtec's long-term financial goals include driving strong cash flow conversion and increasing margins through cost controls and product innovation[105] Operational Challenges - The company continues to face uncertainties due to the COVID-19 pandemic, impacting sales channels and supply chain operations[103] - Wabtec is committed to supporting the safe and efficient operation of the freight rail and passenger transit industries during the pandemic[104] Cost and Expenses - Cost of sales for the three months ended March 31, 2021 decreased by $55 million, or 4.1%, to $1.3 billion compared to the same period in 2020, with cost of sales as a percentage of sales increasing to 70.6% from 69.9%[122] - Total operating expenses decreased by $19 million in the first three months of 2021 compared to the same period in 2020, with operating expenses as a percentage of sales remaining at 18.7%[123] - Interest expense, net, decreased by $6 million in the first three months of 2021 due to lower overall average debt balances[124] - Other income was $14 million in the first three months of 2021, compared to an expense of $15 million in the same period of 2020, primarily driven by foreign exchange gains[125] - The effective income tax rate increased to 27.5% for the three months ended March 31, 2021, up from 25.5% in 2020, mainly due to withholding tax expenses[126] Cash Flow and Investments - Cash provided by operating activities was $292 million in the first three months of 2021, compared to cash used for operations of $82 million in the same period of 2020[138] - Cash used for investing activities was $422 million in the first three months of 2021, with $401 million allocated for the acquisition of Nordco[139] - As of March 31, 2021, the Company held approximately $484 million in cash and cash equivalents, with $445 million held outside the United States[141] Balance Sheet and Liabilities - Current assets decreased from $1,092.3 million on December 31, 2020, to $888.6 million on March 31, 2021, a decline of approximately 18.6%[149] - Current liabilities decreased slightly from $1,408.8 million to $1,384.2 million, a reduction of about 1.8%[149] - Long-term debt increased from $3,779.6 million to $3,911.3 million, an increase of approximately 3.5%[149] Shareholder and Market Risks - The company has a stock repurchase authorization of $500 million, with approximately $292.2 million remaining from the previous authorization[153] - The company is subject to various risks, including prolonged unfavorable economic conditions and fluctuations in demand for freight cars and related products[156] - The company has not made significant changes in accounting policies since December 31, 2020, with critical areas including accounts receivable and revenue recognition[159] - The company is focused on the successful introduction of new products and the completion of acquisitions, including Faiveley Transport and GE Transportation Business[160] - The company’s exposure to market risk has not changed materially since December 31, 2020, particularly regarding interest rate and foreign currency exchange risk[161] - The company may repurchase shares depending on market conditions and capital needs, with no set time limit for the completion of the program[153]