What changed in this filing

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Item 1. Business

2022-02-17 compared with 2021-02-19 · 224 added, 151 removed, 296 unchanged (56% of the section changed)

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Our telephone number is 412-825-1000, and our website is located at www.wabteccorp.com .

All references to “we”, “our”, “us”, the “Company” and “Wabtec” refer to Westinghouse Air Brake Technologies Corporation and its consolidated subsidiaries.

Except as the context otherwise requires, all references to “we”, “our”, “us”, the “Company” and “Wabtec” refer to Westinghouse Air Brake Technologies Corporation and its consolidated subsidiaries.

George Westinghouse founded the original Westinghouse Air Brake Co.

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This brought a global technology leader and supplier of locomotives, equipment, services and digital solutions to the rail, mining, marine, stationary power and drilling industries into Wabtec.

As a result of several strategic acquisitions, as well as other smaller acquisitions, and organic growth, Wabtec is now one of the world’s largest providers of locomotives, value-added, technology-based equipment, systems and services for the global freight rail and passenger transit industries with approximately 27,000 employees and operations in over 50 countries.

As a result of those strategic acquisitions, as well as other smaller acquisitions and organic growth, Wabtec is now one of the world’s largest providers of locomotives, value-added, technology-based equipment, systems and services for the global freight rail and passenger transit industries with approximately 25,000 employees, excluding contingent workers, and operations in over 50 countries.

We believe we hold a leading market share for many of our core product lines globally.

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The consummation of the GE Transportation acquisition is leading to operating synergies across all of Wabtec.

As a result, we expect to generate approximately $250 million in annual run-rate operating synergies, driven by cost and revenue opportunities, before 2022.

As a result, we achieved over $250 million in annual run-rate operating synergies, driven by cost and revenue opportunities.

This will enhance Wabtec’s margins and revenue growth opportunities with strong free cash flow generation to enable strategic deleveraging through debt reduction and earnings growth.

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• Increased scale and diversification of Wabtec’s Freight product portfolio .

Wabtec is now one of the world’s largest providers of locomotives, freight car components, technology-enabled equipment, systems and services for the locomotive and freight rail industries.

Wabtec is one of the world’s largest providers of locomotives, freight car components, technology-enabled equipment, systems and services for the locomotive and freight rail industries.

• Broadened product line and international presence in the transit market.

Wabtec now offers a comprehensive, broad and diversified portfolio of products to the transit rail industries throughout the world.

Wabtec offers a comprehensive, broad and diversified portfolio of products to the transit rail industries throughout the world.

• Complementary Digital and Electronics technologies .

Wabtec now has a comprehensive digital portfolio and leading engineering and technical intellectual property, which provides electronics and digital technologies to meet growing demand for train intelligence and network optimization.

Wabtec has a comprehensive digital portfolio and leading engineering and technical intellectual property, which provides electronics and digital technologies to meet growing demand for train intelligence and network optimization.

• Enhanced Aftermarket and Services opportunities .

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In general, trends such as increasing urbanization and growth in developing markets, a focus on sustainability and environmental awareness, increasing investment in technology solutions, an aging equipment fleet, and growth in global trade are expected to drive continued investment in freight rail and passenger transit.

According to the 2020 bi-annual edition of a market study by UNIFE, the Association of the European Rail Industry, the accessible global market for railway products and services is more than $120 billion and is expected to grow at a compounded annual growth rate of 2.3% through 2025.

As the long-term effects of COVID-19 are still uncertain, UNIFE included a second, less likely scenario in which the recovery is more moderate.

This alternative scenario shows a compounded annual growth rate of 0.9% through 2025 for the total accessible market.

The three largest geographic markets, which represented about 85% of the total accessible market, were Europe, North America and Asia Pacific.

UNIFE projected above-average growth rates in Latin America, Eastern Europe, North America, and Africa/Middle East, with the more mature markets of Western Europe, North America, and Asia Pacific accounting for the largest share of absolute growth.

UNIFE said trends such as urbanization, digitalization, legislative action and government support, and an increased focus on energy and environmental issues continue to drive investment.

The largest product segments of the market were rolling stock, services and infrastructure, which represent almost 90% of the accessible market.

UNIFE projected spending growth in all product segments, with turnkey management projects, rolling stock, and infrastructure to grow fastest.

UNIFE estimated that the global installed base of diesel and electric locomotives was about 118,200 units, with about 32% in Asia Pacific, about 25% in North America and about 18% in Russia-CIS (Commonwealth of Independent States).

Wabtec estimates that about 3,000 new locomotives were delivered worldwide in 2020.

UNIFE estimated the global installed base of freight cars was about 5.2 million, with about 35% in North America, about 24% in Russia-CIS, and about 24% in Asia Pacific.

Wabtec estimates that about 155,000 new freight cars were delivered worldwide in 2020.

UNIFE estimated the global installed base of passenger transit vehicles to be about 620,000 units, with about 45% in Asia Pacific, about 31% in Europe and about 10% in Russia-CIS.

Wabtec estimates that about 32,000 new passenger transit vehicles were ordered worldwide in 2020.

In Europe, the majority of the rail system serves the passenger transit market, which is expected to continue growing as energy and environmental policies encourage continued investment in public mass transit, and modal shift from car to rail, although this growth may be stunted in the near-term as a result of the COVID-19 pandemic.

According to UNIFE, Germany, France, and the United Kingdom were the largest Western European transit markets, representing about two-thirds of industry spending in the European Union.

UNIFE projected the accessible Western European rail market to grow at about 2.0% annually, led by investments in new rolling stock in France and Germany.

About 75% of freight traffic in Europe is hauled by truck, while rail accounts for about 19%.

The largest freight markets in Europe are Germany, Poland and the United Kingdom.

In recent years, the European Commission has adopted a series of measures designed to increase the efficiency of the European rail network by standardizing operating rules and certification requirements.

UNIFE believes that adoption of these measures should have a positive effect on ridership and investment in public transportation over time.

The Association of the European Rail Industry, UNIFE, advocates for and represents European train builders and rail suppliers.

UNIFE publishes a biennial market study that provides an overview of the market in its current form and a forecast of its future development in different regions and market segments.

According to the 2020 biennial edition of the study, the accessible global market for railway products and services is more than $120 billion and is expected to grow in the medium- and long-term at an average annual growth rate of 2.3% through 2025, despite an 8% COVID-induced decline in 2020.

The 2020 study also concluded that the rail sector had grown 3.6% annually since 2017, supporting the appeal of rail transport for all sectors from urban metro to commercial freight.

The three largest geographic markets, which represented about 85% of the total accessible market, were Europe, North America and Asia Pacific, all of which are projected to continue to grow.

In Europe, only 19% of freight traffic is rail while the majority of the rail system serves the passenger transit market, which is expected to continue growing as energy and environmental policies encourage continued investment in public mass transit, and modal shift from car to rail, although this growth may be stunted in the near-term as a result of the COVID-19 pandemic.

In North America, railroads carry about 40% of intercity freight, as measured by ton-miles, which is more than any other mode of transportation.

Through direct ownership and operating partnerships, U.S.

railroads are part of an integrated network that includes railroads in Canada and Mexico, forming what is regarded as the world’s most-efficient and lowest-cost freight rail service.

North America’s rail network is regarded as the world’s most-efficient and lowest-cost freight rail service.

There are more than 600 railroads operating in North America, with the largest railroads, referred to as “Class I”, accounting for more than 90% of the industry’s revenues.

The railroads carry a wide variety of commodities and goods, including coal, metals, minerals, chemicals, grain, and petroleum.

These commodities represent about 50% of total rail carloads, with intermodal carloads accounting for the rest.

Railroads operate in a competitive environment, especially with the trucking industry, and are always seeking ways to improve safety, cost and reliability.

New technologies offered by Wabtec and others in the industry can provide some of these benefits.

Demand for our freight related products and services in North America is driven by a number of factors, including rail traffic, and production of new locomotives and new freight cars.

In the U.S., the passenger transit industry is dependent largely on funding from federal, state and local governments, and from fare box revenues.

Demand for North American passenger transit products is driven by a number of factors, including government funding, deliveries of new subway cars and buses, and ridership.

federal government provides money to local transit authorities, primarily to fund the purchase of new equipment and infrastructure for their transit systems.

Growth in the Asia Pacific market has been driven mainly by the continued urbanization of China and India, and by continued investments in freight rail rolling stock and infrastructure in Australia to serve its mining and natural resources markets.

India is making significant investments in rolling stock and infrastructure to modernize its rail system

for example, Wabtec is delivering on a 1,000-unit locomotive contract with Indian Railways.

Other key geographic markets include Russia-CIS and Africa-Middle East.

With about 1.3 million freight cars and about 21,000 locomotives, Russia-CIS is among the largest freight rail markets in the world, and it’s expected to invest in both freight and transit rolling stock.

PRASA, the Passenger Rail Agency of South Africa, is expected to continue to invest in new transit cars and new locomotives.

According to UNIFE, most emerging markets were expected to grow at above-average rates as global trade led to increased freight volumes and urbanization led to increased demand for efficient mass-transportation systems.

It is still uncertain as to how the COVID-19 pandemic will impact the expected growth in these emerging markets, especially in the near-term.

As this growth occurs, Wabtec expects to have additional opportunities to provide products and services in these markets.

According to UNIFE, most emerging markets, including Russia-CIS (Commonwealth of Independent States) and Africa-Middle East, are expected to grow at above-average rates as global trade leads to increased freight volumes and urbanization leads to increased demand for efficient mass-transportation systems.

With about 1.3 million freight cars and about 21,000 locomotives, Russia-CIS is among the largest freight rail markets in the world.

The COVID-19 pandemic has impacted the expected growth in these emerging markets.

As growth occurs, Wabtec expects to have additional opportunities to provide products and services in these markets.

New technologies offered by Wabtec can provide solutions to improve safety, cost and reliability of rail, as well as support the modernization of the global rail fleets.

In its study, UNIFE also said it expected increased investment in digitalization, automation, and predictive maintenance through artificial intelligence, all of which would improve efficiency in the global rail industry.

UNIFE expects these trends to increase the overall attractiveness of the rail sector as these trends are expected to lead to significant cost savings, allowing rail to be more competitive in comparison to other modes of transportation.

Wabtec offers products and services to help customers make ongoing investments in these initiatives.

Business Segments and Products

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As a result of the large base of approximately 23,000 locomotives currently in use, Wabtec's services product lines of rebuilding, remanufacturing, maintaining, and exchanging locomotives and components in the aftermarkets provides a significant, recurring revenue stream.

In 2020, the Freight Segment accounted for approximately 67% of Wabtec’s total net sales, with about 55% of its net sales in the U.S.

In 2020, about 63% of the Freight Segment’s net sales were in the aftermarket.

In 2021, the Freight Segment accounted for approximately 67% of Wabtec’s total net sales, with approximately 57% of its net sales in the U.S.

In 2021, approximately 68% of the Freight Segment’s net sales were in the aftermarket.

The 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;

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Customers include public transit authorities and municipalities, leasing companies, and manufacturers of passenger transit vehicles and buses around the world.

In 2020, the Transit Segment accounted for approximately 33% of our total net sales, with about 15% of its net sales in the U.S.

In 2021, the Transit Segment accounted for approximately 33% of our total net sales, with approximately 14% of its net sales in the U.S.

Approximately half of the Transit Segment’s net sales are in the aftermarket with the remainder in the original equipment market.

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Following is a summary of our leading products in both aftermarket and original equipment across both of our business segments in 2021:

• Diesel-electric locomotives for freight railroads

• Diesel-electric and battery powered locomotives for freight and transit

• Engines, electric motors and premium propulsion systems used in locomotives, mining, marine, stationary power and drilling applications

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Digital & Electronic Products:

• Positive Train Control equipment and electronically controlled pneumatic braking products

• Positive Train Control ("PTC") equipment and electronically controlled pneumatic braking products

• Railway electronics, including event recorders, monitoring equipment and end of train devices

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• Train performance such as distributed locomotive power, train 'cruise control', and train remote control

• Transport intelligence such as Industrial/mobile Internet of Things (IoT) hardware & software, edge-to-cloud, on and off-board analytics & rules, asset performance management

• Transport logistics such as rail transportation management, shipper transportation management, port visibility and optimization

• Network optimization such as rail network scheduling, dispatch, and optimization, intermodal, terminal management and optimization, rail yard management and optimization

• Transport intelligence such as Industrial/mobile Internet of Things (IoT) hardware & software, edge-to-cloud, on and off-board analytics & rules, and asset performance management

• Transport logistics such as rail transportation management, shipper transportation management, and port visibility and optimization

• Network optimization such as rail network scheduling, dispatch and optimization, intermodal, terminal management and optimization, and rail yard management and optimization

• Freight car trucks and braking equipment and related components for Freight applications

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• New commuter and switcher locomotives

• Freight locomotive overhaul and refurbishment

• Freight locomotive overhaul, modernizations and refurbishment

• Master service agreements for locomotive and car maintenance

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Supported by our technical staff of more than 5,700 engineers and specialists, we have extensive experience in a broad range of product lines, which enables us to provide comprehensive, systems-based solutions for our customers.

In recent years, we have introduced a number of significant new products, including Positive Train Control (“PTC”) equipment that encompasses onboard digital data and global positioning communication protocols.

We have continued to develop Energy Management Solutions for railroads to further reduce fuel consumption and emissions.

These developments include the design of a battery electric locomotive that will be integrated with other diesel electric locomotives in a train.

This hybrid consist, under the control of our Trip Optimizer software, will significantly reduce fuel consumption and have the ability to operate in a low emission state while in populated areas.

In 2021, Wabtec and a Class I completed a three month pilot of a battery electric locomotive which reduced fuel consumption and greenhouse gas emissions by an average of 11% in a revenue service train.

In recent years, we have also introduced a number of significant new products, including PTC equipment that encompasses onboard digital data and global positioning communication protocols.

We are making additional investments in this technology which we believe will provide customers with opportunities to improve safety and efficiency, in part through data analytics solutions.

Other new products include HVAC inverter integrated solutions, brake discs and brake controls, platform doors and gates and door controllers.

In addition, we are continuing to develop Energy Management Solutions for railroads to further reduce fuel consumption and emissions.

These developments include the design of a battery electric locomotive that will be integrated with other diesel electric locomotives in a train.

This hybrid consist, under the control of our Trip Optimizer software, will significantly reduce fuel consumption as well as having the ability to operate in a low emission state while in populated areas.

We are also considering development of locomotives for transit services to operate in a zero emissions environment (such as a tunnel) for extended periods of time.

For additional information on our business segments, see Note 19 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report.

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We have leveraged our leading positions by focusing on research and engineering to expand beyond pneumatic braking components to supplying integrated parts and assemblies from a full locomotive through the end of the train.

We are a recognized leader in the development and production of electronic recording, measuring and communications systems, positive train control equipment, highly engineered compressors and heat exchangers for locomotives, and a leading manufacturer of freight car components, including electronic braking equipment, draft gears, trucks, brake shoes and electronic end-of-train devices.

We are a recognized leader in the development and production of electronic recording, measuring and communications systems, PTC equipment, highly engineered compressors and heat exchangers for locomotives, and a leading manufacturer of freight car components, including electronic braking equipment, draft gears, trucks, brake shoes and electronic end-of-train devices.

We are also a leading provider of braking equipment;

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In addition, as OEMs and railroad operators attempt to modernize fleets with new products designed to improve and maintain safety and efficiency, these products must be designed to be interoperable with existing equipment.

In 2020, net sales of aftermarket parts and services represented about 60% of total net sales.

• Market Leader with Longstanding Customer Partnerships in a Critical Infrastructure Sector.

For more than a century, rail has been a cornerstone of the global transportation system, and thus, the economy.

Rail remains one of the most cost-effective, energy-efficient modes of transport, both domestically and internationally.

As the largest global producer of diesel-electric locomotives, we have a significant market share both in North America and globally.

Sales of aftermarket parts and services have historically represented approximately 60% of our total net sales.

• Leading design and engineering capabilities .

We believe a hallmark of our relationship with our customers has been our leading design and engineering practice, which has assisted in the improvement and modernization of global railway equipment.

We believe a hallmark of our relationship with our customers has been our leading design and engineering practice, which has assisted in the improvement and modernization of global

railway equipment.

We believe both our customers and government authorities value our technological capabilities and commitment to innovation, as we seek not only to enhance the efficiency and profitability of our customers, but also to improve the overall safety of the railways through continuous improvement of product performance.

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To that end, we have assembled a wide range of patented products, which we believe provides us with a competitive advantage.

• Leading the Digital Transformation of Wabtec’s Industries .

• Market leader in decarbonizing the rail industry.

Today, rail represents the cleanest, most energy efficient, and safest mode of moving freight and people on land.

As global demands for growth increase, current trends indicate that freight and passenger rail activity will more than double by 2050, leading to an increased demand for sustainable transportation of people and goods.

These converging forces highlight the critical interplay between market dynamics, the need for decarbonization and Wabtec’s business strategy.

We are advancing our sustainability priorities both through our own commitments to our people, communities, and planet, as well as by innovating next generation technologies that reduce emissions, energy consumption and waste, and increase fuel efficiency for our customers through advancements in our equipment and digital solutions.

We are helping our customers reduce their overall carbon footprint through the development of low-emitting locomotives like our Tier 4 and battery-electric locomotives, Trip Optimizer, Green Air and Green Friction products, and the use of alternative fuels such as biodiesel, renewable diesel, and hydrogen.

• Driving the digital transformation of the rail industry .

Our early investment in data analytics and software has allowed us to become a strategic partner for customers looking to derive new value from assets and digitally transform their operations.

Through these initiatives, the transportation industry, from mine to port, from shipper to receiver, from port to intermodal terminals to main line locomotives and railcars and across train yards and operation centers, has evolved to include digital solutions.

Through these initiatives, our digital solutions have helped to transform many distribution channels in the transportation industry including mine to ports, from shipper to receiver, from port to intermodal terminals to main line locomotives and railcars and across train yards and operation centers.

The breadth of our Digital and Electronic solutions gives customers confidence in our ability to address their current and future needs.

• Strategic partnerships with longstanding customers and other key stakeholders.

For more than a century, rail has been a cornerstone of the global transportation system, and thus, the economy.

Rail remains one of the most cost-effective, energy-efficient modes of transport, both domestically and internationally.

As the largest global producer of diesel-electric locomotives, we have a significant market share both in North America and globally.

We listen to our key stakeholders and focus on areas where Wabtec can enable the most meaningful impact for our customers, communities, and the world.

Transformational change requires collaboration, so we are committed to accelerating progress by partnering with customers, government leaders, corporations, universities and other key stakeholders.

For example, we have partnered with a customer, a leading short line and regional freight railroad, as well as a leading artificial intelligence and robotics institution to create technologies that will decarbonize freight rail transport, improve freight safety, and generate greater rail network utilization.

We also have collaborated with a global transportation company focused on the development and commercialization of battery technology and hydrogen fuel cell systems for Wabtec locomotives.

By working together with these partners and others, we are developing advanced solutions for the industry to realize the zero-emission rail network of the future.

• Experience with industry regulatory requirements.

The freight rail and passenger transit industries are governed by various government agencies and regulators in each country and region.

These groups mandate rigorous manufacturer certification, new product testing and approval processes that we believe are difficult for new entrants to meet cost-effectively and efficiently without the scale and extensive experience we possess.

These groups mandate rigorous manufacturer certification and a new product testing and approval processes that we believe are difficult for new entrants to meet cost-effectively and efficiently without the scale and extensive experience we possess.

Certification processes are lengthy, and often require local presence and expertise.

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• Streamlined cost structure and operational excellence provide operating leverage and support Wabtec’s growth.

Wabtec’s lean manufacturing and continuous improvement initiatives have been a part of the Company’s culture for

more than 25 years and have enabled Wabtec to manage successfully through cycles in the rail supply market.

Wabtec’s lean manufacturing and continuous improvement initiatives have been a part of the Company’s culture for more than 25 years and have enabled Wabtec to manage successfully through cycles in the rail supply market.

We are continuing to expand our Operating Excellence focus in driving productivity and delighting customers.

Our Operating Excellence Program leverages the breadth and depth of our One Wabtec expertise across the organization in sharing of best practice, instilling a culture of learning, problem solving, continuous improvement, and driving standard operating practices.

This, coupled with our overall manufacturing and supply base footprint initiatives, will drive increased flexibility and improved responsiveness to our customer needs while driving margin improvement through productivity.

Our Operating Excellence Program leverages the breadth and depth of our One Wabtec expertise across the organization in sharing of best practices, instilling a culture of learning, problem solving, continuous improvement, and driving standard operating practices.

This, coupled with our overall manufacturing and supply base footprint optimization initiatives, will drive increased flexibility and improved responsiveness to our customer needs while driving margin improvement through productivity.

Business Strategy

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These practices enable us to streamline processes, improve product reliability and customer satisfaction, reduce product cycle times and respond more rapidly to market developments.

We also rely on functional experts within the Company across various disciplines to train, coach and share best practices throughout the corporation, while benchmarking against best-in-class competitors and peers.

We also rely on functional experts within the Company across various disciplines to train, coach and share best practices throughout the Company, while benchmarking against best-in-class competitors and peers.

Over time, we expect to continue to increase operating margins, improve cash flow and strengthen our ability to invest in the following growth strategies:

• Product innovation and new technologies .

We continue to emphasize innovation and development funding to create new products and capabilities, such as the battery electric locomotive and vehicle monitoring and data analytics.

• Accelerate innovation of scalable technologies .

We continue to emphasize innovation and development funding to create new products and capabilities to increase customer productivity, efficiency, capacity, utilization and safety, such as the battery electric locomotive, vehicle monitoring and data analytics.

We will continue to lead the way with technologies that use less energy, reduce weight and size, and increase recyclability.

We plan to invest in bringing new technologies to market for our customers.

A significant portion of our investment will be focused on three customer-centric areas of innovation:

zero-emissions operations, automation and digitization and advanced supply chain visibility.

These investments will position our customers for success and make these technologies the standard going forward.

We have a multi-year initiative to build on our existing expertise and technologies in the digital and electronics areas.

In addition, we invest in developing enhancements and new features to existing products, such as brake discs and heat exchangers.

We are focusing on technological advances, especially in the areas of electronics, braking products and other on-board equipment, as a means to deliver new product growth.

We are focusing on technological advances, especially in the areas of electronics, battery power and alternative fuels, braking products and other on-board equipment, as a means to deliver new product growth.

We seek to provide customers with incremental technological advances that offer immediate benefits with cost-effective investments.

• Global and market expansion.

• Grow and refresh expansive installed base.

We are a leading transportation and component manufacturer with a significant installed base with expansive product and service capabilities.

We have over 23,000 locomotives in service, the majority of which are equipped with Digital technologies, like Positive Train Control.

We have components on rail cars in over 100 countries and over 45,000 railway vehicles equipped with Wabtec braking systems.

We intend to increase sales through direct sales of existing products to current and new customers, by developing specific new products for application in new geographic markets, by making strategic acquisitions and through joint ventures with railway suppliers which have a strong presence in their local markets.

We believe that international markets represent a significant opportunity for future growth.

In 2020, net sales to non-U.S.

customers were approximately $4.4 billion.

We intend to increase international sales through direct sales of existing products to current and new customers, by developing specific new products for application in new geographic markets, by making strategic acquisitions, and through joint ventures with railway suppliers which have a strong presence in their local markets.

In Transit, we are focused on mature markets such as Europe and emerging markets such as India.

In freight, we are targeting markets that operate significant fleets of U.S.-style locomotives and freight cars, including Australia, Brazil, China, India, Russia, South Africa, and other select areas within Europe and South America.

In Freight, we are targeting markets that operate significant fleets of U.S.-style locomotives and freight cars, including Australia, Brazil, China, Egypt, India, Russia, South Africa and other select areas within Europe and South America.

In addition, we have opportunities to increase the sale of certain products that we currently manufacture for the rail industry into other industrial markets, such as mining, off-highway and energy.

These products include heat exchangers and friction materials.

• Aftermarket products and services .

Historically, aftermarket sales are less cyclical than OEM sales because a certain level of aftermarket maintenance and service work must be performed, even during an industry slowdown.

In 2020, net sales of aftermarket parts and services represented about 60% of total net sales.

As a long time supplier of original equipment, we have an extensive installed base of equipment in the field, which generates recurring aftermarket sales.

• Lead the decarbonization of rail.

We have taken significant steps to decarbonize global transport and make our world safer, smarter and greener.

Today, rail represents the cleanest, most energy efficient and safest mode of moving freight and people on land.

These converging forces highlight the critical interplay between market dynamics, the need for decarbonization and Wabtec’s business strategy.

Wabtec is leading the transition to a more utilized, efficient, and low-carbon rail network.

Alternative clean energy technologies are critical in the fight against climate change and reducing greenhouse gas emissions.

• Expand high-margin recurring revenue streams.

Our expansive installed base allows us to generate strong recurring revenues with replacement parts and components, digital solutions, overhauls and modernizations.

Aftermarket sales are typically done at higher margins and are less cyclical than OEM sales because a certain level of aftermarket maintenance and service work must be performed, even during an industry slowdown.

Sales of aftermarket parts and services have historically represented approximately 60% of total net sales.

As a long time supplier of original equipment, we have an extensive installed base of equipment in the field and growing this installed base further will expand our recurring aftermarket sales.

Wabtec provides aftermarket parts and services for its components, and we seek to expand this business with customers who currently perform the work in-house.

In this way, we expect to benefit as transit authorities and railroads outsource certain maintenance and overhaul functions.

• Acquisitions, joint ventures and alliances .

We continue to invest in acquisitions, joint ventures and alliances using a disciplined, selective approach and rigorous financial criteria.

These transactions are expected to meet our financial criteria and contribute to growth strategies of product innovation and new technologies, global expansion, and aftermarket products and services.

We believe these expansion strategies will help Wabtec to grow profitably, expand geographically, and dampen the impact from potential cycles in the North American freight rail industry.

• Drive continuous operational improvement .

We are focused on continuous improvement to drive cost competitiveness, effectively deploy capital and accelerate Lean.

Lean is a set of principles that emphasize customer focus, elimination of waste, high quality growth and ruthless prioritization of work to improve safety, quality, delivery

Lean is being embedded in our culture and is fundamental to how we execute our strategy.

We are using Lean principles to help examine processes and continuously improve them by solving problems at their root cause.

Our Lean transformation model focuses on driving process improvements and management systems to maximize the flow of value produced for the customer, remove waste, empower employees and optimize the enterprise.

These principles are also rigorously applied to sustainability and safety.

Recent Acquisitions and Joint Ventures

See Note 3 of the Notes to Consolidated Financial Statements included in Part IV, Item 5 of this report for additional information about our recent acquisitions and joint ventures.

The Company’s backlog was about $21.6 billion at December 31, 2020.

For 2020, about 60% of total net sales came from aftermarket orders, which typically carry lead times of less than 30 days and are not included in backlog for a significant period of time.

The Company’s backlog was approximately $22 billion at December 31, 2021.

For 2021, approximately 60% of total net sales came from aftermarket orders, which typically carry lead times of less than 30 days and are not included in backlog for a significant period of time.

The Company’s contracts are subject to standard industry cancellation provisions, including cancellations on short notice or upon completion of designated stages.

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The Company saw no significant cancellations of backlog during the year ended December 31, 2021 despite the unprecedented pandemic caused by COVID-19 and its effects on locomotive parkings, carbuilds, and transit ridership levels.

However, the economic slowdown that was caused by COVID-19 did have some impact on the timing of orders in backlog as the delivery of goods and services previously expected to be completed in the current year has been pushed out to future years.

However, the economic slowdown and disruptions that were caused by COVID-19 did impact the timing of some orders in backlog as in certain cases the delivery of goods and services previously expected to be completed in the current year has been pushed out to future years.

Engineering and Development

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Intellectual Property

We have about 6,000 active patents worldwide and on average file for approximately 300 new patents each year.

We have approximately 6,000 active patents worldwide and on average file for approximately 300 new patents each year.

We also rely on a combination of trade secrets and other intellectual property laws, nondisclosure agreements and other protective measures to establish and protect our proprietary rights in our intellectual property.

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We do not believe that any single license agreement is of material importance to our business or either of our business segments as a whole.

We have issued licenses to the two sole suppliers of railway air brakes and related products in Japan, Nabtesco and Mitsubishi Electric Company.

The licensees pay annual license fees to us and also assist us by acting as liaisons with key

Japanese passenger transit vehicle builders for projects in North America.

We believe that our relationships with these licensees are beneficial to our core transit business and customer relationships in North America.

We provide products and services for more than 500 customers worldwide.

Our customers include passenger transit authorities and railroads throughout North America, Europe, Asia Pacific, South Africa and South America;

Our customers include passenger transit authorities and railroads throughout North America, Europe, Asia Pacific, Africa and South America;

manufacturers of transportation equipment, such as locomotives, freight cars, passenger transit vehicles and buses;

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Our principal competitors vary across product lines and geographies.

Within North America, New York Air Brake Company, a subsidiary of the German air brake producer Knorr-Bremse AG (“Knorr”) and Amsted Rail Company, Inc., a subsidiary of Amsted Industries Corporation, are our principal overall Original Equipment Manufacturer ("OEM") competitors.

Our competition for locomotive, freight and passenger transit service and repair is mostly from the railroads’ and passenger transit authorities’ in-house operations, Electro-Motive Diesel, a division of Caterpillar, and Knorr.

We believe our key strengths, which include leading market positions in core products, breadth of product offering with a stable mix of OEM and aftermarket business, leading design and engineering capabilities, significant barriers to entry and an experienced management team, enable us to compete effectively in this marketplace.

We believe our key strengths, which include leading market positions in core products, including sustainable technologies, breadth of product offering with a stable mix of OEM and aftermarket business, leading design and engineering capabilities, significant barriers to entry, strategic partnerships and operational excellence, coupled with an experienced management team, enable us to compete effectively in this marketplace.

Outside of North America, Knorr is our main competitor, although not in every product line or geography.

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Depending on the product line and geography, we can also compete with our customers, such as CRRC Corporation Limited, a China-based manufacturer of rolling stock.

Sustainability

Wabtec is committed to sustainable value creation.

Our sustainability strategy is to contribute to a better, more sustainable world through our unique business offerings, leading technologies and sustainable business practices.

Our strategy helps us capitalize on market opportunities and reduce safety and environmental risks, while creating value for our customers, employees and other stakeholders.

Wabtec utilizes three Strategic Sustainability Principles to execute our sustainability strategy:

• Innovating with Purpose.

We are committed to developing responsible and sustainable products that minimize the impact on the planet.

• Driving Responsible Operations.

We are committed to providing safe work environments and products that enable productive and efficient use of resources.

• Empowering People and Communities.

We are committed to driving an inclusive culture grounded in integrity, committed to the development of and investment in the communities where our teams live and work.

As we develop and refine our sustainability strategy, it is important that we listen to our key stakeholders and focus on areas where Wabtec can enable the most meaningful impact for our customers, communities and the world.

In 2021, we conducted a comprehensive Environmental, Social and Governance (ESG) assessment that included internal and external

stakeholder involvement, to identify key ESG issues of focus for the Company.

Based on the assessment, the following topics had the highest relative priority to Wabtec and its external stakeholders and are aligned to our overall sustainability strategy and action plans:

Topic Definition Alignment to Wabtec Strategic Sustainability Principles

Greenhouse gas (GHG) emissions Reducing GHG emissions across Wabtec’s value chain and helping Wabtec partners across their value chain reduce GHG emissions.

This includes reducing major sources of indirect emissions during the procurement and processing of raw materials, during manufacturing and the operation of our facilities, and during product distribution and end use.

• Innovating with Purpose

• Driving Responsible Operations

Energy & renewables Supporting policies and organizational partners that contribute to the renewable energy transition.

Contributing to the success of the energy transition by improving the energy efficiency of Wabtec’s products and operations.

Integrating renewables into Wabtec’s products and operations and enabling the adoption of new and emerging renewable energy solutions.

• Innovating with Purpose

• Driving Responsible Operations

Innovation & technology Capitalizing on opportunities related to new product advancements and innovations that include the adoption of emerging technology to help address key societal and transportation sector challenges.

Developing a resilient business model capable of meeting societal expectations for continuous improvement.

• Innovating with Purpose

• Empowering People

and Communities

Business Ethics & Compliance Upholding ethics and integrity in every aspect of Wabtec’s business by ensuring transparency in all financial practices.

Complying with all applicable national and local laws and regulations by promoting practices and policies that encourage reporting instances of non-compliance and by implementing corrective actions that prevent recurrence.

Preventing bribery, corruption, and anti-competitive behavior.

Promoting ethics and compliance throughout Wabtec’s value chain, especially among suppliers.

• Driving Responsible Operations

• Empowering People

and Communities

Data privacy & cybersecurity Investing in cybersecurity measures and adapting to business risks presented by technology and digitization.

Protecting Wabtec’s proprietary information and intellectual property.

Ensuring the responsible management and use of data, including data from customers, employees, and suppliers.

Protecting data collected by Wabtec products.

• Innovating with Purpose

During 2021, Wabtec adopted its Green Finance Framework.

Following the release of the Green Financing Framework, the Company issued its inaugural "green bond" – a €500 million issuance in the European bond market.

The Company intends to utilize green financing instruments as part of its overall capital resources strategy to support the transition to a low-carbon transportation future and meet the sustainable transportation needs of growing cities around the world.

Projects supported by green financing will largely target the objective of climate change mitigation by focusing on the efficiency of freight rail systems and public transport, as well as on the provision of energy-efficient customer solution services.

Focus areas include:

• Clean transportation

• Eco-efficient and/or circular economy adapted products, production technologies and processes

• Renewable energy

• Pollution prevention and control

• Energy efficiency

Cybersecurity Framework

Cybersecurity and data protection are important considerations in the design and production of Wabtec products, projects, and services.

Information technology is used and relied upon extensively by our business.

We collect, process, and retain sensitive and confidential customer information, including proprietary business information, personal data and other information, some of which may be subject to privacy and security laws, regulations and/or customer-imposed data protection controls.

To address risks related to cybersecurity and privacy, Wabtec seeks to leverage industry cybersecurity practices that have been developed by organizations such as National Institute of Standards and Technology (NIST) and the International Standardization Organization (ISO) and also engages external independent advisors.

Wabtec’s Data Protection Plan describes the technical, physical and administrative controls used to protect the confidentiality, integrity, and availability of information provided to and managed by Wabtec.

Cybersecurity is addressed and discussed regularly with our Chief Information Officer, the Audit Committee and Board of Directors.

Wabtec also maintains SOC 1 Type 2 certification for select digital products, as well as cyber liability insurance coverage.

We also regularly evaluate our response readiness, including disaster recovery plans and business continuity considerations in the case of a cyber incident.

Finally, Wabtec engages in regular security awareness training to highlight and educate its employees on how to identify and mitigate cybersecurity risks at the individual level.

Wabtec is committed to transparency on ESG topics, including the opportunities and challenges we encounter as we work to enhance performance and conduct business in a responsible manner.

In 2020, we established ESG goals around innovation, operations, safety, and people.

We report our progress on these goals annually in our published Sustainability Report, which can be found on our website at www.wabteccorp.com/sustainability .

The content referred to on any website referred to in this annual report, including the Sustainability Report, is not incorporated by reference into this Form 10-K.

Wabtec developed an ESG governance framework to provide oversight for our climate action strategy.

This structure starts with Wabtec's Board of Directors and its committees who oversee the execution of the Company’s ESG strategy as part of their oversight of Wabtec’s overall business.

In particular, the Nominating and Corporate Governance Committee assists the Board in its oversight of Wabtec’s sustainability strategy and execution against key goals, as well as the review of climate-related risks and opportunities.

To further facilitate the Board’s engagement and oversight, climate was added as a risk category in Wabtec’s enterprise risk management process.

Human Capital

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Our headquarters are in Pittsburgh, Pennsylvania and we have offices and facilities in over 50 countries around the globe.

As of December 31, 2020, we have a global workforce of approximately 27,000.

As of December 31, 2021, we have a global workforce of approximately 25,000 employees, excluding contingent workers.

Diversity and Inclusion

Wabtec is committed to ensuring a diverse and inclusive workplace that respects and seeks the unique talents, experiences and viewpoints of all our employees.

Wabtec has a Diversity and Inclusion Council, led by members of Wabtec’s executive leadership team, who oversee global diversity and inclusion policies and initiatives.

We strive to create an inclusive workplace where employees can be themselves.

In 2019, women constituted approximately 16% of our global workforce and approximately 18% of our salaried employees.

employee base was comprised of approximately 19% of people of color in 2019.

We also announced our goals of 20% female representation globally, 25% female representation among salaried employees, 30% representation among people of color across the total U.S.

workforce and 25% representation among people of color across U.S.

salaried employees by 2030.

Our Board of Directors also plays a critical role in creating an organization that prioritizes, supports, and invests in diversity, inclusion, and equity.

Over the last two years, Wabtec has named three diverse

members to its Board.

Currently, 40% of Wabtec’s Board is diverse (gender;

race/ethnicity), and over 18% of Wabtec’s global senior management are female and roughly 18% are people of color based in the U.S.

In 2020, women constituted approximately 16% of our global workforce and approximately 18% of our salaried employees and people of color constituted approximately 20% of our U.S.

salaried workforce and approximately 24% of the total U.S.

Training and Development

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We have invested in training courses through Wabtec’s Learning Management System (LMS).

In 2021, Wabtec partnered with a third-party to provide diversity and inclusion training.

Over 4,000 employees participated in the training, which was coupled with tools and resources for people leaders to help make diversity and inclusion part of a long-term conversation rather than a one-time training.

Our two-year Leadership, Expertise, Advancement and Development (LEAD) program is the primary path for university graduates into Wabtec.

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On average, there are 100 participants in the LEAD program that rotate between business units every six months to work on strategic projects and assignments, gain exposure to senior leadership and build their global professional network.

Approximately 20

percent of Wabtec’s Equipment and Services engineering and operations leaders are graduates of LEAD.

We are focused on growing this program to support our global talent pipeline.

We are focused on strengthening this program to support our global talent pipeline.

Health and Safety

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In 2020, the Company relaunched the Environment, Health, and Safety component of the Wabtec Management System (known as the “EHS WMS”) to strengthen our management system approach to addressing EHS risks and promote the consistent implementation of best practices across all our global manufacturing and services sites, regardless of how local laws are implemented or enforced.

The EHS WMS establishes standard expectations in 13 core competency areas, including leadership and accountability, regulatory applicability review, EHS processes and systems, risk assessment, safety defenses, exposure defenses, environmental defenses and contractor management.

and contractor management.

Operational sites are measured against these EHS program expectations.

In addition, the Company’s EHS WMS is directly aligned to accepted international standards, such as ISO 14001 for Environmental and ISO 45001 for Occupational Health and Safety.

With zero fatalities and over 80 operational sites with zero recordable injuries, 2020 marked the 13th consecutive year of injury rate reductions across Wabtec's vast operations.

In 2021, Wabtec continued its commitment to safety and launched a four week EHS leadership training course aimed at building the toolkits of front-line supervisors and plant managers.

The course was designed to establish a common understanding of Wabtec’s EHS tools and terminology, initiate a partnership between the plant manager and their EHS leader on a personal action plan, connect plant managers to the broader network of global leaders, and encourage decision making at the site level that is informed by an understanding of EHS impacts and of legal and compliance responsibilities.

In 2021, over 120 leaders from 26 countries attended the training.

The pandemic has reinforced the importance of keeping Wabtec employees safe and healthy while keeping essential rail services and the global economy moving.

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Most countries and regions in which Wabtec does business have similar rule-making bodies.

In Russia, a GOST-R certificate of conformity is mandatory for all products related to the safety of individuals in Russian territory.

For example, in Russia, a GOST-R certificate of conformity is mandatory for all products related to the safety of individuals in Russian territory.

In China, any product or system sold on the Chinese market must have been certified in accordance with national standards.

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Effects of Seasonality

Our business is not typically seasonal.

Our business has limited seasonality.

Third quarter results may be affected by the timing of services performed under our locomotive maintenance contracts and vacation and scheduled plant shutdowns at several of our major customers.

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Environmental Matters

Additional information on environmental matters is included in Note 19 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report.

The Company is subject to a variety of environmental laws and regulations governing discharges to air and water, the handling, storage and disposal of hazardous or solid waste materials and the remediation of contamination associated with

releases of hazardous substances.

The Company believes its operations currently comply in all material respects with all of the various environmental laws and regulations applicable to our business;

however, there can be no assurance that environmental requirements will not change in the future or that we will not incur significant costs to comply with such requirements.

Available Information

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DeNinno 66 Executive Vice President, General Counsel and Secretary

Dugan 54 Executive Vice President Finance and Chief Financial Officer

Olin 61 Executive Vice President and Chief Financial Officer

Nicole Theophilus 51 Executive Vice President and Chief Human Resources Officer

Eric Gebhardt 52 Chief Technology Officer

Eric Gebhardt 53 Executive Vice President and Chief Technology Officer

Gina Trombley 51 Executive Vice President, Sales & Marketing & Chief Commercial Officer - Americas

Greg Sbrocco 53 Executive Vice President, Global Operations

Fetsko 57 President, Freight and Industrial Components

Pascal Schweitzer 44 President, Global Freight Services

Rogerio Mendonca 48 President, Equipment

Pascal Schweitzer 45 President, Freight Services

Rogerio Mendonca 49 President, Freight Equipment

Nalin Jain 52 President, Digital Electronics

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Mastalerz 55 Senior Vice President of Finance and Chief Accounting Officer

Gina Trombley 50 Senior Vice President, Sales & Marketing & Chief Commercial Officer - Americas

Greg Sbrocco 52 Senior Vice President, Global Operations

Rafael Santana was named President and Chief Executive Officer of the Company effective July 1, 2019.

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DeNinno served as a partner at K&L Gates LLP since May 2011 and prior to that with Reed Smith LLP.

Dugan was named Executive Vice President and Chief Financial Officer effective December 2016.

Previously Mr.

Dugan served as Senior Vice President and Chief Financial Officer since January 2014.

Previously, Mr.

Dugan was Senior Vice President, Finance and Corporate Controller from January 2012 until November 2013.

He originally joined Wabtec in 2003 as Vice President, Corporate Controller.

Olin was named Executive Vice President and Chief Financial Officer effective October 1, 2021.

Prior to joining Wabtec, Mr.

Dugan served as Vice President and Chief Financial Officer of CWI International, Inc.

from December 1996 to November 2003.

Prior to 1996, Mr.

Dugan was a Manager with PricewaterhouseCoopers LLP.

Olin served as the Senior Vice President and Chief Financial Officer of Harley-Davidson, where he was instrumental in driving strategic change amidst significant market disruption, including reshaping the company.

Prior to Harley-Davidson, Mr.

Olin served as Controller of Kraft Foods' Cheese Division, and had 12 years of financial leadership at Kraft, Oscar Mayer Foods, and Miller Brewing Company.

Olin also held positions with financial services and specialized consulting firms including Ernst and Whinney (now Ernst and Young).

Nicole Theophilus was named Executive Vice President & Chief Human Resource Officer in October 2020.

Prior to joining Wabtec, Ms.

Theophilus served most recently as Chief Human Resource Officer of West Corporation.

Previously she served as Executive Vice President and Chief Human Resource Officer, Vice President of Human Resources and Vice President and Chief Employment Counsel of ConAgra Corporation.

Theophilus served most recently as Chief Human Resource Officer of West Corporation from March 2016 through February 201.

Previously she served as Executive Vice President and Chief Human Resource Officer, Vice President of Human Resources and Vice President and Chief Employment Counsel of ConAgra Corporation, where she was employed from 2006 through 2015.

Prior to 2006, Ms.

Theophilus was a partner with the law firm Husch Blackwell.

Eric Gebhardt was named Chief Technology Officer in October 2020.

Eric Gebhardt was named Executive Vice President and Chief Technology Officer in October 2020.

Prior to joining Wabtec, Mr.

Gebhardt served as Managing Director of KCK-US.

He also served in a variety of roles with General Electric including Chief Technology Officer of GE Power, Chief Product Management Officer for GE Energy Connections, Chief Platforms and Operations Officer for Current, and Chief Technology Officer for GE Oil & Gas.

Gebhardt served as Managing Director of KCK-US from May 2019 through September 2020.

He also served in a variety of roles with General Electric including Chief Technology Officer of GE Power from August 2017 through January 2019, Chief Product Management Officer for GE Energy Connections from February 2017 through August 2017, Chief Platforms and Operations Officer for Current from January 2016 through January 2017, and Chief Technology Officer for GE Oil & Gas from October 2012 through December 2015.

Gina Trombley was named Executive Vice President, Sales & Marketing & Chief Commercial Officer - Americas, effective September 8, 2020.

Prior to joining Wabtec, Ms.

Trombley served in various executive roles at Bombardier Transportation from 2017 to 2019, most recently as Vice President of Services and previously as Vice President Sales for Bombardier Transport - Americas.

Trombley also held progressive commercial and marketing leadership roles at Parsons and GE Transportation.

Greg Sbrocco was named Executive Vice President, Global Operations in February 2019.

Prior to this, Mr.

Sbrocco was Global Supply Chain Leader for GE Transportation since September 2014.

Sbrocco had been with GE since 1992 when he

joined as an Environmental Engineer for the GE Energy business.

During his tenure with GE, Mr.

Sbrocco held several leadership roles in GE Energy, GE Oil and Gas, and GE Transportation.

Fetsko was named President, Freight and Industrial Components effective January 2017.

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Fetsko served in various management roles with two different environmental engineering firms.

Pascal Schweitzer was named President, Global Freight Services on February 25, 2019.

Pascal Schweitzer was named President, Freight Services in February 2019.

Previously Mr.

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He served as General Manger – Europe – Power Services for GE Power from November 2015 through April 2017 and prior to that several positions with Alstom Power.

Rogerio Mendonca was named President, Freight Equipment on February 1, 2021.

Rogerio Mendonca was named President, Freight Equipment in February 2021.

Previously Mr.

Mendonca served as Vice President for Baker Hughes.

Prior to that he served as President of GE Transportation in Latin America and in several roles leading up to that including Commercial Director and Service Operations General Manager.

Mendonca served as Vice President for Baker Hughes from July 2017.

Prior to that he served as President of GE Transportation in Latin America from April 2016 through July 2017 and in several roles leading up to that including Commercial Director and Service Operations General Manager.

Nalin Jain was named President, Digital Electronics business effective December 2020.

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Mastalerz was a Senior Manager with PricewaterhouseCoopers LLP.

Gina Trombley was named Senior Vice President, Sales & Marketing & Chief Commercial Officer - Americas, effective September 8, 2020.

Prior to joining Wabtec, Ms.

Trombley also held progressive commercial and marketing leadership roles at Parsons and GE Transportation.

Greg Sbrocco was named Senior Vice President, Global Operations, effective February 25, 2019.

Prior to this, Mr.

Sbrocco was Global Supply Chain Leader for GE Transportation.

Sbrocco had been with GE since 1992 when he joined as an Environmental Engineer for the GE Energy business.

During his tenure with GE, Mr.

Sbrocco held several leadership roles in GE Energy, GE Oil and Gas, and GE Transportation.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business