Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2015 |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission and include the accounts of Wabtec and its majority owned subsidiaries. These condensed consolidated interim financial statements do not include all of the information and footnotes required for complete financial statements. In management’s opinion, these financial statements reflect all adjustments of a normal, recurring nature necessary for a fair presentation of the results for the interim periods presented. Results for these interim periods are not necessarily indicative of results to be expected for the full year. |
The Company operates on a four-four-five week accounting quarter, and the quarters end on or about March 31, June 30, September 30, and December 31. |
The notes included herein should be read in conjunction with the audited consolidated financial statements included in Wabtec’s Annual Report on Form 10-K for the year ended December 31, 2014. The December 31, 2014 information has been derived from the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. |
Revenue Recognition | Revenue Recognition Revenue is recognized in accordance with Accounting Standards Codification (“ASC”) 605 “Revenue Recognition”. Revenue is recognized when products have been shipped to the respective customers, title has passed and the price for the product has been determined. |
In general, the Company recognizes revenues on long-term contracts based on the percentage of completion method of accounting. The units-of-delivery method or other input-based or output-based measures, as appropriate, are used to measure the progress toward completion of individual contracts. Contract revenues and cost estimates are reviewed and revised at a minimum quarterly and adjustments are reflected in the accounting period as such amounts are determined. Provisions are made currently for estimated losses on uncompleted contracts. Unbilled accounts receivables were $170.0 million and $187.8 million, customer deposits were $106.9 million and $111.8 million, and provisions for loss contracts were $9.9 million and $7.1 million at March 31, 2015 and December 31, 2014, respectively. |
Certain pre-production costs relating to long-term production and supply contracts have been deferred and will be recognized over the life of the contracts. Deferred pre-production costs were $28.1 and $24.9 million at March 31, 2015 and December 31, 2014, respectively. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from the estimates. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates. |
Financial Derivatives and Hedging Activities | Financial Derivatives and Hedging Activities The Company periodically enters into foreign currency forward contracts to reduce the impact of changes in currency exchange rates. Forward contracts are agreements with a counter-party to exchange two distinct currencies at a set exchange rate for delivery on a set date at some point in the future. There is no exchange of funds until the delivery date. At the delivery date the Company can either take delivery of the currency or settle on a net basis. At March 31, 2015, the Company had no material foreign currency forward contracts. |
To reduce the impact of interest rate changes on a portion of its variable-rate debt, the Company has entered into two forward starting interest rate swap agreements with notional values of $150.0 million. As of March 31, 2015, the Company has recorded a current liability of $5.1 million and a corresponding offset in accumulated other comprehensive loss of $3.1 million, net of tax, related to this agreement. For further information regarding the forward starting interest rate swap agreements, see Footnote 6. |
Foreign Currency Translation | Foreign Currency Translation Assets and liabilities of foreign subsidiaries, except for the Company’s Mexican operations whose functional currency is the U.S. Dollar, are translated at the rate of exchange in effect on the balance sheet date while income and expenses are translated at the average rates of exchange prevailing during the year. Foreign currency gains and losses resulting from transactions and the translation of financial statements are recorded in the Company’s consolidated financial statements based upon the provisions of ASC 830 “Foreign Currency Matters.” The effects of currency exchange rate changes on intercompany transactions and balances of a long-term investment nature are accumulated and carried as a component of accumulated other comprehensive loss. The effects of currency exchange rate changes on intercompany transactions that are denominated in a currency other than an entity’s functional currency are charged or credited to earnings. |
Noncontrolling Interests | Non-controlling Interests In accordance with ASC 810, the Company has classified non-controlling interests as equity on our condensed consolidated balance sheets as of March 31, 2015 and December 31, 2014. Net income attributable to non-controlling interests for the three months ended March 31, 2015 and 2014 was not material. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU no. 2014-09, “Revenue from Contract with Customers.” The ASU will supersede most of the existing revenue recognition requirements in U.S. GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Pronouncement is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted. The Board voted to propose that the standard would take effect for reporting perionds beginning after December 15, 2017 and that early adoption would be allowed as of the original effective date. The Company is currently evaluating the impact the pronouncement will have on the consolidated financial statements and related disclosures. |
Other Comprehensive Income | Other Comprehensive Income Comprehensive income is defined as net income and all other non-owner changes in shareholders’ equity. |
The changes in accumulated other comprehensive loss by component, net of tax, for the three months ended March 31, 2015 are as follows: |
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| | | | | | | | | | Pension and | | | | | |
| | Foreign | | | | | | | post | | | | | |
| | currency | | | Derivative | | | retirement | | | | | |
In thousands | | translation | | | contracts | | | benefits plans | | | Total | |
Balance at December 31, 2014 | | $ | (94,450 | ) | | | (2,243 | ) | | | (62,793 | ) | | $ | (159,486 | ) |
Other comprehensive income (loss) before reclassifications | | | (87,931 | ) | | | (1,342 | ) | | | 2,400 | | | | (86,873 | ) |
Amounts reclassified from accumulated other | | | | | | | | | | | | | | | | |
comprehensive income | | | - | | | | 315 | | | | 459 | | | | 774 | |
Net current period other comprehensive income (loss) | | | (87,931 | ) | | | (1,027 | ) | | | 2,859 | | | | (86,099 | ) |
Balance at March 31, 2015 | | $ | (182,381 | ) | | $ | (3,270 | ) | | $ | (59,934 | ) | | $ | (245,585 | ) |
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Reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2015 are as follows: |
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| | Amount reclassified from | | | Affected line item in the | | | | | | | | | | |
| | accumulated other | | | Condensed Consolidated | | | | | | | | | | |
In thousands | | comprehensive income | | | Statements of Operations | | | | | | | | | | |
Amortization of defined pension and post retirement items | | | | | | | | | | | | | | | | |
Amortization of initial net obligation and prior service cost | | $ | (522 | ) | | Cost of sales | | | | | | | | | | |
Amortization of net loss | | | 1,196 | | | Cost of sales | | | | | | | | | | |
| | | 674 | | | Income from Operations | | | | | | | | | | |
| | | (215 | ) | | Income tax expense | | | | | | | | | | |
| | $ | 459 | | | Net income | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Derivative contracts | | | | | | | | | | | | | | | | |
Realized loss on derivative contracts | | $ | 463 | | | Interest expense, net | | | | | | | | | | |
| | | (148 | ) | | Income tax expense | | | | | | | | | | |
| | $ | 315 | | | Net income | | | | | | | | | | |
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