John Olin
Executive Vice President and Chief Financial Officer at Westinghouse Air Brake Technologies
Thanks, Rafael, and hello, everyone. Turning to Slide 7. I will review our second quarter results in more detail. Our second quarter results played out largely as we expected. We expected both revenue and earnings growth to be over shared versus our full year growth expectations, but slightly tempered from our first quarter results. The primary driver of our first half results growing faster than our expected second half results is due to a shift in the combined production of our new locomotives and mods to the first half of this year from the second half in an effort to more evenly load our manufacturing production across the four quarters.
It is also important to note that we expect our second half revenue and margin to grow, but at a more tempered pace than we experienced in the first half. Within the second half, we do expect to grow revenue and earnings year-over-year in each quarter. However, we expect the third quarter's growth to be greater than the fourth quarter's growth. Sales for the second quarter were $2.64 billion, which reflects a 9.8% increase versus the prior year. Sales growth in the quarter was driven by the Freight segment, especially by equipment and components.
For the quarter, GAAP operating income was $430 million, driven by higher sales, improved gross margin and an unrelenting focus on continuous improvement in productivity. Adjusted operating margin in Q2 was 19.3%, up 2.9 percentage points versus the prior year. This increase was driven by improved gross margin of 2.9 percentage points. GAAP earnings per diluted share were $1.64, which was up 54.7% versus the second quarter a year ago. During the quarter, we had net pretax charges of $6 million for restructuring which were primarily related to our Integration 2.0 and our portfolio optimization initiative to further integrate and streamline Webtech's operations.
As you may recall, Integration 2.0 is expected to drive $75 million to $90 million of run rate savings by 2025. And our portfolio optimization initiative will eliminate roughly $110 million of low-margin nonstrategic revenue, while reducing manufacturing complexity. In the quarter, adjusted earnings per diluted share was $1.96, up 39% versus prior year. Overall, Wabtec delivered another strong quarter, demonstrating the underlying strength of the business.
Turning to Slide 8. Let's review our product lines in more detail. Second quarter consolidated sales were up 9.8% as we expected. Our quarter results were driven by solid growth across all our business groups and further aided by a year-over-year increase in the combined new loco and mods as we have shifted our production and deliveries or to the first half versus the second half in order to more appropriately balance or level load our factories, thereby allowing us to be more consistent with our labor staffing improve our quality and to gain manufacturing efficiencies.
Equipment sales were up 36.4% from last year's second quarter, driven by robust deliveries of new locomotives and increased sales of mining equipment. Component sales were up 17.5% versus last year, largely driven by increased sales of industrial products, higher international sales and the acquisition of L&M in late Q2 of 2023, partially offset by lower North American railcar build.
Digital Intelligence sales were up 2.1% from last year, where we continue to experience growth in international sales aided by higher PTC revenues, partially offset by lower revenues in our North American market. Our services sales grew 2.3%. Sales growth was driven primarily by higher year-over-year overhauls and parts sales. Our customers continue to recognize the superior performance, reliability and availability of our fleet.
In our Transit segment, sales were up 2.0%. During the quarter, we saw our aftermarket revenue grow 10%. On a constant currency basis, sales grew 3.4%. The momentum in the Transit segment remains positive as secular drivers such as urbanization and decarbonization, accelerate the need for investments in sustainable infrastructure.
Moving to Slide 9. GAAP gross margin was 33.1%, which was up 2.9 percentage points from last year. Adjusted gross margin was also up 2.9 percentage points during the quarter. In addition to the higher sales, gross margin benefited from favorable mix between segments. Mix within the Freight segment was also favorable despite higher combined new locomotives and modernizations in the quarter.
Foreign currency exchange was a headwind to revenue as well as gross profit and operating margin in the quarter. During the quarter, we also benefited from favorable fixed cost absorption, increased productivity and benefits from Integration 2.0 as well as lapping last year's start of the Aerie strike in late Q2 of 2023. Our team continues to execute well by driving operational productivity and lean benefits.
Now turning to Slide 10. For the second quarter, GAAP operating margin was 16.3%, which was up 3.4 percentage points versus last year. Adjusted operating margin improved 2.9 percentage points to 19.3%. GAAP and adjusted SG&A expenses were up versus prior year, but largely flat as a percentage of revenues. Engineering expense was $57 million, moderately higher than Q2 last year. We continue to invest engineering resources in current business opportunities. But more importantly, we are investing in our future as an industry leader in decarbonization and digital technologies that improve our customers' productivity, capacity utilization and safety.
Now let's take a look at segment results on Slide 11, starting with the Freight segment. As I already discussed, Freight segment sales were up 13.1% during the quarter, GAAP segment operating income was $391 million for an operating margin of 20.4%, up 4.5 percentage points versus last year. GAAP operating income included $5 million of restructuring costs primarily related to Integration 2.0 and portfolio optimization.
Adjusted operating income for the Freight segment was $462 million, up 34.3% versus prior year. Adjusted operating margin in the Freight segment was 24.1%, up 3.8 percentage points from the prior year. The increase was driven by improved gross margin behind strong operational execution, favorable mix, Integration 2.0 savings and as we lap last year's manufacturing inefficiencies caused by the strike in Aerie. At the same time, SG&A and engineering expenses were lower as a percentage of revenue. Finally, segment 12-month backlog was $5.50 billion, up 4.0% from the same period a year ago. The multiyear backlog was $17.93 billion, down 2.0% from the prior year.
Turning to Slide 12. Transit segment sales were 2.0% at $724 million. When adjusting for foreign currency, transit sales were up 3.4%. GAAP operating income was $82 million. Restructuring costs related to Integration 2.0 were $5 million in Q2. Adjusted segment operating income was $91 million. Adjusted operating income as a percent of revenue was 12.7%, up 1.6 percentage points from last year driven by Integration 2.0 savings and favorable mix. Finally, Transit segment 12-month backlog for the quarter was $1.83 billion, down 5.0% versus a year ago. The decrease on a year-over-year basis was expected due to our focus on being more selective on the orders that we add to backlog, thereby expecting to drive improved long-term profitability.
Now let's turn to our financial position on Slide 13. Second quarter cash flow was another highlight for the quarter with operating cash coming in at $235 million. During the quarter, cash flow benefited from higher earnings and improved working capital, partially offset by a reduction of $230 million of securitization borrowings. We continue to expect greater than 90% cash conversion for the full year.
Our balance sheet and financial position continue to be very strong as evidenced by: first, our liquidity position, which ended the quarter at $2.09 billion. And our net debt leverage ratio was 1.6 times at the end of the second quarter, which was lower versus the same quarter a year ago at 2.4 times debt leverage. We continue to allocate capital in a disciplined and balanced way to maximize returns for our shareholders. During the quarter, we purchased $200 million of our shares and paid $35 million in dividends.
With that, I'd like to turn the call back over to Rafael to talk about our 2024 financial guidance.
