Segment Information (Q3)

9 Months Ended

12 Months Ended

Sep. 30, 2018

Dec. 31, 2017

17. SEGMENT INFORMATION

Wabtec has two reportable segments—the Freight Segment and the Transit Segment. The key factors used to identify these reportable segments are the organization and alignment of the Company’s internal operations, the nature of the products and services, and customer type. The business segments are:

Freight Segment primarily manufactures and services components for new and existing freight cars and locomotives, builds new switcher locomotives, rebuilds freight locomotives, supplies railway electronics, positive train control equipment, signal design and engineering services, and provides related heat exchange and cooling systems. Customers include large, publicly traded railroads, leasing companies, manufacturers of original equipment such as locomotives and freight cars, and utilities.

Transit Segment primarily manufactures and services components for new and existing passenger transit vehicles, typically regional trains, high speed trains, subway cars, light-rail vehicles and buses, builds new commuter locomotives, refurbishes subway cars, provides heating, ventilation, and air conditioning equipment, and doors for buses and subways. Customers include public transit authorities and municipalities, leasing companies, and manufacturers of subway cars and buses around the world.

The Company evaluates its business segments’ operating results based on income from operations. Intersegment sales are accounted for at prices that are generally established by reference to similar transactions with unaffiliated customers. Corporate activities include general corporate expenses, elimination of intersegment transactions, interest income and expense and other unallocated charges. Since certain administrative and other operating expenses have not been allocated to business segments, the results in the following tables are not necessarily a measure computed in accordance with generally accepted accounting principles and may not be comparable to other companies.

Segment financial information for the three months ended September 30, 2018 is as follows:



In thousands	Freight Segment		Transit Segment		Corporate Activities and Elimination			Total
Sales to external customers	$	391,577	$	686,237	$	—		$	1,077,814
Intersegment sales/(elimination)		13,510		4,738		(18,248	)		—
Total sales	$	405,087	$	690,975	$	(18,248	)	$	1,077,814
Income (loss) from operations	$	79,420	$	60,735	$	(14,976	)	$	125,179
Interest expense and other, net		—		—		(22,512	)		(22,512	)
Income (loss) from operations before income taxes	$	79,420	$	60,735	$	(37,488	)	$	102,667

Segment financial information for the three months ended September 30, 2017 is as follows:



In thousands	Freight Segment		Transit Segment		Corporate Activities and Elimination			Total
Sales to external customers	$	340,185	$	617,746	$	—		$	957,931
Intersegment sales/(elimination)		8,376		4,494		(12,870	)		—
Total sales	$	348,561	$	622,240	$	(12,870	)	$	957,931
Income (loss) from operations	$	61,424	$	47,358	$	(7,116	)	$	101,666
Interest expense and other, net		—		—		(20,481	)		(20,481	)
Income (loss) from operations before income taxes	$	61,424	$	47,358	$	(27,597	)	$	81,185

Segment financial information for the nine months ended September 30, 2018 is as follows:



In thousands	Freight Segment		Transit Segment		Corporate Activities and Elimination			Total
Sales to external customers	$	1,183,389	$	2,062,282	$	—		$	3,245,671
Intersegment sales/(elimination)		44,211		11,611		(55,822	)		—
Total sales	$	1,227,600	$	2,073,893	$	(55,822	)	$	3,245,671
Income (loss) from operations	$	233,390	$	186,794	$	(40,203	)	$	379,981
Interest expense and other, net		—		—		(69,959	)		(69,959	)
Income (loss) from operations before income taxes	$	233,390	$	186,794	$	(110,162	)	$	310,022

Segment financial information for the nine months ended September 30, 2017 is as follows:



In thousands	Freight Segment		Transit Segment		Corporate Activities and Elimination			Total
Sales to external customers	$	1,032,959	$	1,773,259	$	—		$	2,806,218
Intersegment sales/(elimination)		27,602		16,253		(43,855	)		—
Total sales	$	1,060,561	$	1,789,512	$	(43,855	)	$	2,806,218
Income (loss) from operations	$	195,811	$	155,383	$	(21,659	)	$	329,535
Interest expense and other, net		—		—		(52,156	)		(52,156	)
Income (loss) from operations before income taxes	$	195,811	$	155,383	$	(73,815	)	$	277,379

Sales by product line are as follows:



	Three Months Ended September 30,
In thousands	2018		2017
Specialty Products & Electronics	$	408,806	$	335,143
Transit Products		258,419		276,913
Brake Products		222,152		177,165
Remanufacturing, Overhaul & Build		134,726		132,018
Other		53,711		36,692
Total sales	$	1,077,814	$	957,931



	Nine Months Ended September 30,
In thousands	2018		2017
Specialty Products & Electronics	$	1,229,753	$	975,006
Transit Products		814,823		789,096
Brake Products		655,350		550,181
Remanufacturing, Overhaul & Build		397,626		387,634
Other		148,119		104,301
Total sales	$	3,245,671	$	2,806,218

20. SEGMENT INFORMATION

The Company evaluates its business segments’ operating results based on income from operations. Intersegment sales are accounted for at prices that are generally established by reference to similar transactions with unaffiliated customers. Corporate activities include general corporate expenses, elimination of intersegment transactions, interest income and expense and other unallocated charges. Since certain administrative and other operating expenses and other items have not been allocated to business segments, the results in the following tables are not necessarily a measure computed in accordance with generally accepted accounting principles and may not be comparable to other companies.

Segment financial information for 2017 is as follows:

In thousands	Freight Segment		Transit Segment		Corporate Activities and Elimination			Total
Sales to external customers	$	1,396,588	$	2,485,168	$	—		$	3,881,756
Intersegment sales/(elimination)		37,630		21,548		(59,178	)		—
Total sales	$	1,434,218	$	2,506,716	$	(59,178	)	$	3,881,756
Income (loss) from operations	$	264,276	$	188,219	$	(31,416	)	$	421,079
Interest expense and other, net		—		—		(69,016	)		(69,016	)
Income (loss) from operations before income taxes	$	264,276	$	188,219	$	(100,432	)	$	352,063
Depreciation and amortization	$	43,721	$	57,441	$	2,086		$	103,248
Capital expenditures		33,921		50,762		4,783			89,466
Segment assets		3,504,289		7,562,122		(4,486,431	)		6,579,980

Segment financial information for 2016 is as follows:

In thousands	Freight Segment		Transit Segment		Corporate Activities and Elimination			Total
Sales to external customers	$	1,543,098	$	1,388,090	$	—		$	2,931,188
Intersegment sales/(elimination)		39,519		9,393		(48,912	)	$	—
Total sales	$	1,582,617	$	1,397,483	$	(48,912	)	$	2,931,188
Income (loss) from operations	$	343,578	$	170,569	$	(57,540	)	$	456,607
Interest expense and other, net		—		—		(43,770	)		(43,770	)
Income (loss) from operations before income taxes	$	343,578	$	170,569	$	(101,310	)	$	412,837
Depreciation and amortization	$	36,519	$	31,545	$	1,731		$	69,795
Capital expenditures		22,726		20,987		6,503			50,216
Segment assets		2,949,668		6,720,302		(3,088,952	)		6,581,018

Segment financial information for 2015 is as follows:

In thousands	Freight Segment		Transit Segment		Corporate Activities and Elimination			Total
Sales to external customers	$	2,054,715	$	1,235,283	$	—		$	3,307,998
Intersegment sales/(elimination)		35,372		10,895		(46,267	)		—
Total sales	$	2,090,087	$	1,264,178	$	(46,267	)	$	3,307,998
Income (loss) from operations	$	483,284	$	151,631	$	(26,061	)	$	608,854
Interest expense and other, net		—		—		(23,486	)		(23,486	)
Income (loss) from operations before income taxes	$	483,284	$	151,631	$	(49,547	)	$	585,368
Depreciation and amortization	$	36,834	$	26,196	$	1,704		$	64,734
Capital expenditures		24,715		22,996		1,717			49,428
Segment assets		2,708,724		2,202,614		(1,681,825	)		3,229,513

The following geographic area data as of and for the years ended December 31, 2017, 2016 and 2015, respectively, includes net sales based on product shipment destination and long-lived assets, which consist of plant, property and equipment, net of depreciation, resident in their respective countries:

	Net Sales						Long-Lived Assets
In thousands	2017		2016		2015		2017		2016		2015
United States	$	1,323,781	$	1,362,255	$	1,754,924	$	211,608	$	205,895	$	171,362
United Kingdom		356,493		322,563		368,505		57,668		54,215		63,694
Canada		279,013		206,258		204,674		5,822		5,156		4,876
France		237,454		66,287		45,565		57,849		33,636		7,194
Germany		208,817		98,364		92,422		71,709		57,902		31,642
China		178,137		106,357		100,586		36,388		42,672		12,256
Mexico		160,029		183,583		190,034		9,117		8,766		8,839
Italy		142,037		45,771		38,164		30,329		27,253		15,170
India		137,837		24,161		12,345		12,519		1,271		1,946
Australia		136,127		82,099		86,809		10,483		8,039		8,424
Brazil		69,378		51,493		84,595		13,184		13,227		9,318
Other international		652,653		381,997		329,375		57,296		60,344		18,472
Total	$	3,881,756	$	2,931,188	$	3,307,998	$	573,972	$	518,376	$	353,193

Export sales from the Company’s United States operations were $448.0 million, $470.5 million and $508.4 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Sales by product are as follows:

In thousands	2017		2016		2015
Specialty Products & Electronics	$	1,350,727	$	1,374,580	$	1,733,881
Brake Products		749,959		588,081		627,552
Remanufacturing, Overhaul & Build		522,275		559,284		606,624
Transit Products		1,112,340		276,124		189,581
Other		146,455		133,119		150,360
Total sales	$	3,881,756	$	2,931,188	$	3,307,998