Good morning, and welcome to the Wabtec Second Quarter 2015 Earnings Release Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Tim Wesley, VP of Investor Relations. Please, sir, go ahead.

Thank you, Zhonda. Good morning, everybody. Welcome to our 2015 second quarter earnings call. Let me introduce the rest of the Wabtec team who are here in the room with me; Al Neupaver, our Executive Chairman; Ray Betler, our President and CEO; our CFO, Pat Dugan; and John Mastalerz, our Corporate Controller. We’re going to make our prepared remarks as usual, and then be happy to answer your questions. Of course during the call, we will make forward-looking statements. So, we ask that you please review our press release today for the appropriate disclaimers. Al?

Thanks, Tim. Good morning, everyone. We had an excellent operating performance in the second quarter with sales of $847 million and record earnings of $1.04 per diluted share. Our operating margin continued to expand nicely and was at 18.4%. And our backlog increased by 5%. The business is performing well, thanks to our diversified business model, our strategic growth initiatives and the power of our Wabtec Performance System. We continue to be optimistic and excited about the long-term opportunities in our key freight and transit rail markets. These markets are large and global and they will continue to grow over time. And as they do, we are positioned well to benefit from these opportunities. Today, we also affirmed our 2015 guidance, with full year earnings per diluted share expected to be about $4.10 based on sales growth of about 10% for the year. If you do the math, this guidance implies that our second half will be better than our first, both top and bottom line. Keep in mind that this guidance for the year has about $145 million in FX headwinds for revenues and about $20 million in EBIT. Our guidance also assumes the following: modest growth in the global economy, taking into account current conditions in all of our key markets; top line growth coming mostly from our freight group with more than half of its growth coming from organic initiatives. Most of the growth in our transit group will be offset by headwinds from foreign exchange rates. We expect continued operating margin expansion, no changes in foreign exchange rates from the current levels. And tax rate of about 32% for the year. This was slightly higher than we expected due to a greater percentage of sales coming from within the United States, which has a higher tax rate in some of our international locations. Being only half way through the year, we may find some of our assumptions to be a bit conservative. As always, we will be disciplined when it comes to controlling costs, focused on generating cash to invest in growth opportunities and ready to respond if market conditions change. Ray, can you talk a little bit about our current market and growth strategies?

Sure, thank you Al. Good morning everyone. Before I talk about our freight and transit markets, I’d like to take just a minute to talk about another market, the stock market. On Tuesday, Wabtec celebrated its 20th anniversary on the New York Stock Exchange. We have the honor of ringing and closing the bell on behalf of more than 13,000 Wabtec employees. We try to take a very humble approach in our daily jobs and in the public, but I would like to point out just a few numbers. When Bill Kassling took this company public in 1995, the company had sales of $425 million, net income of $34 million and about 2,300 employees with most of our operations in the US. Under Bill’s leadership and Al’s strategic vision and leadership, our sales now exceed $3 billion. Our net income last year surpassed $350 million, with about half of our sales outside the US. And of course, many of you know that we are the only US company on any exchange whose year-end stock prices increased year-on-year for 14 consecutive years. So it’s been a good 20 years on the New York Stock Exchange and we look forward to many more. Now, let’s focus on freight rail. In NAFTA, freight rail traffic is flat so far this year as an increase of 3.5% in intermodal has been offset by 3.3% decrease in general merchandise and carloadings. We still expect OEM rolling stock deliveries in 2015 to be above the long-term average. We expect about 1,300 locomotives to be delivered this year compared to about 1,450 in 2014. The freight car market remains strong with a more diverse backlog of car types than in recent years. Based on the second quarter deliveries of about 22,000 cars, the current backlog extends through…

Thank you Ray. Starting with our income statement, our sales for the second quarter were $847 million, 16% higher than last year's quarter; this includes the negative impact of about $45 million or about 5% from changes in foreign exchange rates when compared to the prior-year quarter. Of our recorded increase of sales for the quarter, about 25% was from organic growth. Excluding the impact of FX, sales growth would have been about 50/50 organic and from acquisitions. Looking at our segments, freight sales increased 30%, again excluding the impact of FX, it would have been about 33% increase, freight segment's sales growth was from increases in our electronics business, our freight car components, and from locomotive rebuilds and also from acquisitions. Transit segment sales decreased 2% as acquisitions mostly offset the negative impact and effective changes in the FX rate. When you exclude this FX impact, transit sales would have been up about 7%. For 2015, we expect to see revenues increase in our freight segment, while transit is expected to be flat due to the same FX impact. Looking at our operating income for the quarter, it was a record $156 million or 18.4% of sales. FX had a negative impact of about $6.4 million on EBIT, which reduced our reported operating margin by about 70 basis points. In 2014, our second quarter operating margin was 18.1% and we finished last year at 17.3%, so we have continued to find ways to improve despite these FX headwinds. Interest expense for the quarter was $4 million, slightly less than a year ago quarter. In our other expense and income, we had an expense of about $1.9 million in the quarter and that's mainly from non-cash foreign currency translation losses. For the most part, we have natural hedges for transactions…

Thanks Pat, and thanks Ray. Once again we had a good performance in the second quarter. As we look at the rest of the year, we see ongoing challenges including global economic uncertainty and FX headwinds. Based on our second quarter performance and performance year-to-date and our outlook for the rest of the year, we affirm our EPS guidance of about $4.10 on revenue growth of about 10%. That guidance implies that our second half will be better than our first. We are pleased with our strategic progress and the long-term growth opportunities we see. We continue to benefit from our strong team of employees and management, our diverse business model and the Wabtec Performance System which provides the tools we need to generate cash and reduce cost. With that we'll be happy to answer your questions.

[Operator Instructions] Our first question comes from Allison Poliniak with Wells Fargo, please go ahead.

Hi guys good morning.

Hi Allison.

Could you talk a little bit more about transit, it seems like there is a lot of puts and takes in the U.S. as well as internationally, was there a difference in terms of revenue growth this quarter or how you're looking out at the balance of the year between say U.S. versus international?

I think in general Allison, the transit business is lumpy, you know that and we've said that all along, it's not going to change, it's lumpy in terms of its financing coming from projects, the time it takes to bring a project to the market, the time it takes to negotiate and win the project and execute it. So, we're winning our share of transit projects, I think we're doing reasonably well in the transit area, the Boston project is a nice win for us, the San Francisco Muni project, we haven't lost any big projects. So, I think what you're seeing is, is basically a reflection of the market. We can't change the market obviously, we just have to position ourselves to be able to respond to it.

Thank you. Yeah. I guess, I mean, I think Pat you said 7% growth, I mean is the USLP saying, I mean, it’s a surprise that it was as strong as that on an organic basis?

Yeah. We have several businesses that are performing well. It's clearly -- it ends up looking more flat than reality, because of the impact to FX, a lot of these projects we have and the businesses underlying them are in international locations. So I think we continue to execute and do well and enjoy that business and growth in the area.

Yeah. And Allison, if I could add, I'll just give you some specific numbers here. If you look at Transit and compare 2014 second quarter to 2015 second quarter, the impact on revenues from FX in Transit was about $32 million negatively and acquisitions accounted for $46 million positively and I think what we're seeing is that exactly what Ray has said in that there are some projects that we're winning that these project revenues are probably -- they can be as much as 12 to 18 months out before we get them ramped up and I think we’re confident in the fact that our Transit business is on the right track. We’re making progress, we’re winning contracts, but if you go back, I think if you took a look at a snapshot 12 to 18 months ago, there probably wasn't a lot of projects that we announced at that time and that's what we mean by lumpiness. The other thing that you find and that we really think is an important aspect of the business diversity that we have is the fact generally when the economy is well, it's the freight market that drives our growth. When you get into a recessionary type of period, it's those stainless packages and the investment in the infrastructure that generally drives growth and that's exactly what we’re seeing right now. So I think it's very predictable, the good news is these contract wins that we have coming down the road, I think if you take a look at the backlog, that backlog really grew from Transit, not necessarily freight new projects and 5% growth when I think, Pat, you said that we had a headwind of about $69 million from FX. So -- and you would add another 3%, 4% to that, that's a nice jump in backlog, it’s a record backlog in transit that we have right now. So we’re pretty positive about it, but stability is the main theme and progress is being made. I think that's the message we’re trying to send out today.

That's helpful, thank you so much.

Our next question comes from Matt Brooklier with Longbow Research. Please go ahead.

Hey, thanks. Good morning. So question on Fandstan, you’re growing the business for I think a little bit over a year now, just curious to hear your thoughts on -- if your thoughts have changed in terms of its potential earnings contribution in ‘15 and then also if your thoughts have changed in terms of its longer-term margin potential?

Let me just start out. I think when we acquired the business, what we said is our goal was to get this business up to what our average is in the Transit business and I think that what we’re reporting today is progress on that only after one year. Typically in an acquisition, we find to get to where we expect to be. It's a three-year program and I would say that right now, what Ray is important is that we’re really probably ahead of schedule right now. Ray, do you want to add a little to that?

Yeah. I think, Matt, we've done a lot of -- I don't want to get into all the details, but we've done a lot of things in the Fandstan business. It's very international business. In Europe, we’ve leaned out a couple of the bigger operations, we've made a lot of progress there. We continue to do that, as we always do, continue to improve those plants and operations. On the Asian side, we’re consolidating and rationalizing facilities over there and focusing on those operations in parallel and we’re winning business in Asia on the Transit side through Fandstan that otherwise we would not have had the opportunity to do. So it's kind of a [indiscernible] in terms of a good story, we’re picking up business and we’re also improving our operating margins and as we all said, I definitely see continued improvement. We committed that we will get this business to at least Transit levels, but I think we’re going to get there quicker than we had hoped and I believe there is opportunity to even go beyond that down the road.

Okay, that's great to hear. And then you mentioned PTC revenue in the quarter was about $100 million. Can you give us a little bit of color in terms of how that broke up between freight and Transit?

Yeah. In this particular quarter, a majority of that was freight and probably about 60%, 65% was freight. Up to this point, we've seen that I think on an ongoing basis, we've reported that it’s about 50% Freight, 25% Transit and 25% international. This particular quarter was stronger in the freight category. Going forward, the MRS program, which is a majority of our international sales -- as that program is coming to an end, so you’re going to see those percentages change as we go forward. So this is not unexpected.

So Matt, just let me may be pitch in a little -- a little story here makes our Head of Corporate Development look like a genius, Mark Cox. Yeah. We acquired RCL as you know. We have bid on four [ph] at East Coast, the PTC project there and we ended up winning – we bid through Xorail, our existing business. RCL has bid independently before we acquired them. We acquired them and we had an opportunity -- we lost that bid in Xorail, we had an opportunity to revisit the bid through RCL and we won that business. So it's those kinds of complementary wins that really have strengthened our business and continue to allow us to grow PTC sales.

Okay. And then just given the first half of PTC revenue, given your unchanged kind of growth guidance for the year, it would imply that PTC sequentially is going to be down over the next two quarters. Just curious to hear if there is anything in particular driving that that's potentially and we know the freight rails are a little bit -- well ahead of schedule versus Transit. Just curious to see if there are any drivers or we’re just trying to be conservative?

I would not read into those numbers. I think that -- as normally, we try to be conservative and there are always some questions on when these expenditures come in PTC, some of them are project related, so they’re milestone related, and can you book it or can you not book it. We continue to think that revenues will continue to increase, growing year-on-year by 15%, 20%, that's a pretty healthy clip. So, I would not read into the actual calculation.

Okay, excellent. Thank you for the time.

Thank you.

Our next question comes from Scott Group with Wolfe Research. Please go ahead.

Hey. Thanks. Good morning, guys.

Good morning, Scott.

So the Transit projects you're talking about, when do you expect the revenue in this to start ramping up?

Go ahead Ray. When is the revenue going to start ramping up on the projects, say the three that we mentioned today?

Okay. So Boston and San Francisco Muni are new projects, Scott. So, normally the design period, we call COD, customer order development, that design period is about 18 months to two years. So we won't see that revenue until about two years out. On the cost of projects, which I mentioned 160 million in South Africa, that project actually is a project that we have mentioned several times in the past and we won that. We started working on that project probably three years ago, we won that project, we were selected for that project about, I don’t know, about a year ago and kind of officially booked the project after that. That project, we’ve started to deliver in South Africa and again it will be extrapolated over a ten-year period, pretty even revenues after this first year.

Okay. So it feels like to me that maybe next year is a year where Transit accelerates and potentially freight at least on the rail car part has some pressure. Is that still an environment where you think you can see, from a consolidated standpoint, margin expansion and kind of this -- maintain this kind of good run rate of earnings growth? I know it's early, but just directionally curious on your thoughts.

First of all, we probably are not in a position to give guidance for 2016. So we will not. However, any time that the mix changes where there is a greater percentage of Transit that has lower margins, then they would be under pressure. But keep in mind, the opportunity that we have for improving margins really come from Wabtec performance system, our budgeting process and even as you – some of this Transit business is from acquisitions, which gives us an opportunity for margin expansion. And if you go back to the last recession and the 2009, 2010 period, you would see that our Transit margins, I think, they went up as high as 15%. I don't know the exact number, but I think it went that high when in generally, I think we've reported earlier this year, probably in the 12% range. So I hope that answers your question, but we really can't give you any guidance into ’16. We just haven't done that analysis at this point.

No, no, that makes sense. And then just last question maybe, Al, can you talk about the acquisition pipeline that you're seeing, is it growing, shrinking, bigger deals, smaller deals and kind of maybe your level of confidence and the ability to do a deal or two in the back half of the year?

Yeah. The pipeline is very active right now and what drives that a lot of times and these are ideal acquisition candidates because I think anyone would admit that things are pretty darn good and especially in the freight market right now. And that's primarily in North America and people that have a private business or a private equity business, I think that you will see that if they are going to put the business up for sale, it will generally come in this period where – I’m not saying that there is a downturn ahead, I am just saying that business is pretty darn good and it’s hard to get much better in the freight markets. So there is a tremendous amount of activity that’s going on. We are very active in looking at businesses and we feel strongly that we will get our share of businesses. And as we’ve always said, Scott, is that it makes us a little different than other businesses that do a lot of acquisitions. We have a balance sheet that puts us in a situation where we could be opportunistic. We are going to continue to look for those opportunities to utilize that balance sheet.

Okay, thank you, guys. I appreciate it.

Thanks, Scott.

Our next question comes from Justin Long with Stephens. Please go ahead.

Thanks. Good morning, guys.

Good morning, Justin.

First question I wanted to ask, the North American rails have been scrambling or they were scrambling to add locomotives last year as volumes ramped. Now it seems like we are pulling back some of these locomotives into storage as volumes have softened. Can you talk about how this volatility and re-aligning resources is impacting your business? How much of a needle mover is all of that to your aftermarket revenue?

It’s not a great – the OEM locomotive business, if you look at it, it’s not that much different than the railcar portion of our business which is probably in less than 10% of our total revenue. I think what you are saying is something that we are seeing, but we are not hearing about much cancellations related to those orders of locomotives and we’ve not seen a great reduction up to this point. When we went into the year we pretty well maintained the assumption and that assumption was that we would, from a peak of 1,400 locomotives, we would expect to see about 1,300 delivered. And what could drive some of that is the international opportunities. Maybe you want to comment, Ray.

Yeah. And Justin, on the aftermarket side for locomotives, we do have the service business in our service centers and it’s pretty steady. We are not seeing now really any slowdown there and we have long term, not long term compared to transit contracts that we have long term aftermarket overhaul projects. So those projects are solid, they are not being cut back and that’s a backlog business for us that is supporting businesses like motorparts.

Okay, great. That’s helpful. And, Ray, maybe along those same lines, you mentioned discussions regarding long term aftermarket contracts for service and maintenance. It sounded to me like that – those were maybe in North America, but could you just expand a little bit more on that opportunity and what the contract structure would look like?

Yeah. We are negotiating long-term contracts with all the suppliers, starting that discussion where if there is phases of negotiation and that’s being done in North America as well as internationally.

Okay. And maybe one last one to follow up on the question on acquisition, the balance sheet seems to be in a pretty healthy spot right now. Could you comment on where you would be willing to take leverage for the right deal? And are there big deals that you are looking at in that pipeline or would most of these transactions you are looking at would be smaller?

Yeah, first of all, we really don’t comment on any particulars that we can’t, but I think we’ve always said that we are comfortable doing 2.5 times EBITDA type of leverage with the company which would be ideal. So that’s probably is -- Pat, I don’t know if you want comment at all.

This question we get asked an awful lot, especially in terms of our rating agencies, what our financial policy is. I think that that ratio would be a maximum amount that we would work towards making sure that we deleverage very quickly afterwards any opportunity that we would pursue.

Okay, great. I appreciate the time today, guys.

Okay, thanks.

Our next question comes from Art Hatfield with Raymond James. Please go ahead.

Thank you. Good morning, everyone. Hey, Pat, can you comment, you talked a lot about FX, but can you kind of give, if you can, a breakdown of where your currency exposure is like, say, is it 50% euro or whatnot? Do you have any –

Yeah, I would say that a majority of it is, and Pat will give you specifics, but it is primarily euro and the pound.

Yeah, it’s – our largest kind of concentration of overseas business is in UK, so we have pound exposure and then we’ve expanded significantly in Europe with especially with like the acquisition of Fandstan. But we do have some, so that’s euro, but we do have pretty healthy business groupings in Australia and in Brazil.

Yeah, if you look at the percentage of our revenues, we talk about 20% or so being in the UK and Europe and about 5%, less than 5% in Brazil, less than 5% in Australia and China, it’s even less than – so that gives you – if you look at the revenue, I think it will give you a percentage on how that shakes up.

So revenue in those markets would be the same, it’s not that you have dollar denominated contracts in any of those markets that would change those?

No.

That’s fine. That clarifies that, then I can just look at the revenue numbers. I have that, but thank you for that. I didn’t have a chance to look yet, but did you guys notice that there was and what the time frame was for a PTC extension in that Senate bill that passed last night?

Well, I don’t know exactly what was passed, but what was agreed to between the two top people, I think it was Boxer and McConnell, it was three year. And I don’t know if that got passed and we just don’t know. And, boy, it’s a long way from -- I’ll just warn you, sometimes we’ve seen this especially when the extension goes to December and there is no deadline, I’d be real careful.

Yeah, I know. Yeah, I am a Cubs fan, I see this stuff every year. Same stuff that always goes back. Just a couple other ones. I will take this one first on acquisitions. Any thoughts on maybe changing your stance and I honestly I haven’t talked about it in a while but using your equity as currency in the acquisition market?

Everything is on an individual basis and an opportunistic basis, so, no, there is nothing [indiscernible].

Okay. Just lastly, and looking at things and looking at SG&A, the growth in SG&A over the last couple of years, in ’14 it was about 24%. It looks like it’s about in the first half of this year it’s ballpark 21% growth and both those numbers outpaced the revenue growth over the same time period. And I know that’s, Al, you don’t and Ray, I am sure you guys never want to see and I know Pat feel this way, want to see expenses growing faster than revenue. Can you comment, as we think about that growth in SG&A, how much of that was from adding infrastructure through acquisitions and how should we think about kind of this normal inflation in that and are there opportunities now that Fandstan is a year in that we start to see maybe reductions in SG&A or a real material slowdown in the growth of that number?

Why don’t you take that, Pat?

Yeah, sure. So just couple of the numbers. When you look at the SG&A increase from the second quarter of last year, you see that the majority of the increase is related to acquisitions and so there is always opportunities to continue to look at these costs, lean them out, consolidate operations and get an improvement. But I think you will also have to kind of take a look at this in terms of quarter over quarter comparisons. There are some discrete items and some fluctuations. First quarter was better than the second quarter of 2015, but – and everything was better than the fourth quarter of 2014. So I think a normal kind of run rate on a go-forward is roughly equivalent to what we did here in the second quarter, absent any additional acquisitions and we are constantly looking at these things in order to improve our margin. And you can see that we have had that margin expansion over these years.

Hey, Art, I will throw in some quick math here, some old statistics and I was a pretty good math student, so but don’t hold me to these numbers, because if I go to the total operating expenses in 2007, I guess 13.9%. I go in ’10, it was up to 16.3% because of the drop in revenues due to the session. I go to ’13, I get 12.7% and if I go to ’15, what are we talking about?

13.2%

13.2%.

Total operating expenses.

Yeah, total operating -- yeah, I am just looking at SG&A, Al. I get the total, you are doing a good job there, but I just wanted to kind of get – understand the SG&A and how much is acquisition related and how – once, if you go through a period where you don’t make acquisitions kind of what is the good run rate. I think Pat did answer that for me.

Okay. As long as you’re pleased with the answer, but we are pretty focused on that number and actually we’ve been accused at times of not supporting growth and an important aspect is that as we continue to grow, there are SG&A and there are engineering expenses that – and that’s our number one use of our cash that we generate and we want internal growth. So but at the same time we want to manage that so that our contribution margin on incremental business is going to be increasing as we go forward.

Absolutely. No, I agree. I just wanted to make sure I was understanding SG&A correctly and I think I do that.

Okay, very good.

Our next question comes from Kristine Kubacki with Avondale Partners. Please go ahead.

Hey, good morning, everybody. Most of my questions have been answered. I just wanted, Ray, you’ve always been such a good insight into the market in China. I was wondering if you could talk a little bit about the dynamics of what’s going on there, obviously consolidation in some of the competitors over there or actually customers. So I was wondering if you could give us kind of how you are feeling about that market given some of the slowdown in the macro as well.

On China, Kristine, integration of CSR and CNR is finished. It’s finished in the sense that it’s started. The new company is operating as an integrated company. The people and leadership positions are making decisions under the new company. There is two dynamics. One is inside China. Inside China, the overall market is I would say continues to be relatively flat. It’s relatively slow compared to what it’s been in past years. We continue to pick up business through our joint ventures both inside and outside of China. We continue to focus on rationalizing and improving the operations there just like anywhere else in the world. The Boston project that we won was the project that the Chinese vehicle manufacturers out of CNR won. So, that’s now under the new integrated CR organization. And we’re seeing more and more I’d say action on the part of the Chinese industry to come out of China and compete internationally. So, they won business in the Middle East, they won business in the US, they’re pursuing business in Europe and they won business in Africa and South America. We’re on -- we’re involved with projects on platforms in South America. We’re now on the first order in North America and we will continue to try to work with them both inside and outside of China. It is a dynamic process. Industry is going to continue to evolve. I think what fundamentally we’re seeing is more aggressive approach by the Chinese to take over more and more of the market share in China from western companies.

It’s very helpful. I appreciate the time, thank you guys.

Thank you.

Our next question comes from Cleo Zagrean with Macquarie. Please go ahead.

Good morning and thank you. My first question relates to the North American market. We’re coming back to this over and over, but can you help frame for us your exposure to this cycle in freight car orders and volume trends? How would you expose to volume versus just the sheer new pre-investment [ph] infrastructure? Could we see maybe a silver lining in that if railroads are focusing more on network efficiency, they’re spending more to offset weak volume trends, any help you can give us into how share volumes versus railroads focus on efficiency plays into your spending for direct sales or aftermarket would be very helpful.

Okay, Cleo, as you know, we stated time and time again that our focus as a corporation and really when you look at the 20-year history from back to 1991 when Company was taken private, the focus is on efficiency productivity and safety of the railroads. So, that emphasis by the railroads and globally we think is a compelling trend that will continue on our markets and we will benefit from that. When you look at the actual markets themselves, there is two aspects. One is the railcar build and the other is the volume and the volumes are basically flat and the backlog for railcars although if you look at the backlogs get down on it, 6000 cars, I think a high of 142 to 136 [ph], 100,000, there is a hefty backlog, it’s going to continue well into beyond 12 months. I don’t know if you want to add anything to that Ray.

I think we know how to manage through the cycle. That’s why we diversified our product brand and that’s why we continue to look for opportunities to further diversify it. And operational efficiency is kind of our core focus. So, while customers are looking to improve their operational efficiencies, they reduce costs to leverage technologies. Our focus is to serve them and to support them in doing that. We have the ability to do that through a lot of the installed base that we’ve already delivered and we’re working on new product innovations that would be able to further support them. So, we realized, Cleo that you have to continue to improve. Our customers have to continue to improve and a lot of that improvement is cost improvement to reduce our cost structure. So, we -- you have opportunities in that overall initiative.

Thank you, and my second question relates to Europe. Rail infrastructure investment there trailed investment in roads. With overall infrastructure investments are showing some correlation with the crisis weakening in recent years, now do you expect that to continue like rail sort of betrayal or infrastructure to take a back seat given other political priorities there or can we actually see the opposite case where there is a need for catchup regardless of traffic trends? And if you could remind us the mix of your business between government and private sector railroads would be helpful. Thank you.

Wow, okay. If you look at the investment in infrastructure, as we’ve said, there is always temporary I’d say a period where you invest more or less but the compelling trend is that if you don’t invest in the infrastructure, then the economy can’t grow, no matter where it’s at. So, during crisis periods, you may see a little bit of [ph] pricing but over the long-term, which has always been our focus, you’re going to see it grow. So, I think that’s answer to your question. When we look at the amount of government spending versus private spending in the rail sector, it’s different in country to country from territory to territory, but in general, throughout the world, most of the transit businesses are funded by public -- I mean, by government money and municipalities. And I think that there is a similar investment in the freight business as well. It’s infrastructure played by the government. I don’t know if that answers all of your questions, but I think that generally is how we view those markets.

I was wondering most of the cities in Europe if we should look at public budgets rather than private traffic trends as the main driver for your opportunities to grow there -- for the market to grow. I know you have the share opportunity.

I think you have to look at that. That’s the spending. It’s not private, it’s generally public spending. However, again, you can’t go very long without spending money on infrastructure. And if you do --

Appreciate it. Thank you very much.

Our next question comes from Willard Milby with BBT Capital Markets. Please go ahead.

Hey, good morning everybody, thanks for taking my call. Just wanted to talk a little bit about I guess mix between freight and transit as we look at revenue growth here. Just kind of as I look at Q2 and Q1 with FX impact the transit, do we kind of expect that to be a good run rate for the second half of this year now that we’ve lost the Fandstan I guess bump that we saw last year with acquisitions?

Yeah, I think the run rates is probably going to be indicative of the run rate that transit projects normally average about three years in length. So, you don’t see a lot of perturbation on a quarter-by-quarter basis.

All right, great, thanks. And sorry one more here. Back to the SG&A, past several years, we kind of seen a bump in the Q4 SG&A. I didn’t know if that was specific to each year having some acquisitions related cause in the matter or there is something else that we just kind of looking back three or four years, it always a pretty significant bump between Q3 and Q4 SG&A. Didn’t know if you’ve had any comment around that.

Yeah, I don’t think there is any correlation that would be pertinent.

Yeah, just a little more feedback. I think you do have -- you’ll end up with full year -- full quarter impact of SG&A due to any kind of midyear acquisition, but we also tend to have some timing of discrete items. Coming to my mind right off the top of the head is some healthcare accruals will come through, things like that but it benefits. It’s just really a handful of things that all kind of come through. And then our fourth quarter, we have couple of extra days on the quarter. So, it could be a lot of different things.

All right, fair enough. And just looking at your organic growth here, I think it was 6.5% in Q1 and 4% this most recent quarter. Are we expecting that kind of low-single digit through remainder of this year or how should we think about organic growth in the remainder of this year as it adds to the 10% revenue target?

I think on average though, still half of the -- at least half of the growth has come from organic. So, it’s probably -- and I think growth quarter-on-quarter, if you look at quarter-on-quarter, we were up almost 16%. On a year-to-year basis, I think that 50-50 is probably what we’ll see going forward.

Okay. So, it’s still in the upward single digit on that kind of in line with what we saw last year? No slowdown is a relative question.

Right.

Okay. All right, those are my questions. Thanks for the time.

Thank you. Have a great day.

[Operator Instructions] Okay, this concludes our question-and-answer session. I’d like to turn the conference back over to Mr. Al Neupaver for any closing remarks.

Thank you very much. We’ll talk to you next quarter. Thank you.