What changed in this filing

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Item 9A. Controls and Procedures

2022-02-17 compared with 2021-02-19 · 352 added, 394 removed, 1177 unchanged (39% of the section changed)

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Management’s Report on Internal Control over Financial Reporting

Management’s Report on Internal Control Over Financial Reporting appears on page 46.

Management’s Report on Internal Control Over Financial Reporting appears on page 51 and is incorporated by reference herein.

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

Ernst & Young LLP's attestation report on internal control over financial reporting appears on page 49.

Ernst & Young LLP's attestation report on internal control over financial reporting appears on page 54 and is incorporated by reference herein.

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

Items 10 through 14.

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Information relating to the executive officers of the Company is set forth in Part I.

Wabtec has adopted a Code of Business Conduct and Ethics which is applicable to our executive officers.

Wabtec has adopted a Code of Business Conduct and Ethics which is applicable to all of our employees, including our executive officers.

This Code of Business Conduct and Ethics is posted on our website at www.wabteccorp.com .

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Management’s Reports to Westinghouse Air Brake Technologies Corporation Shareholders

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

42 , Pittsburgh, Pennsylvania )

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

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2.2 Amendment No.

1 to Share holder 's Agreement among Financiere Faiveley S.A., Famille Faiveley Participations, Francois Faiveley, Erwan Faiveley, and Wabtec Corporation dated as of dated as of October 24, 2016

1 to Shareholder's Agreement among Financiere Faiveley S.A., Famille Faiveley Participations, Francois Faiveley, Erwan Faiveley, and Wabtec Corporation dated as of dated as of October 24, 2016

2.3 Employee Matters Agreement among General Electric Company, Transportation Systems Holdings Inc., Westinghouse Air Brake Technologies Corporation and Wabtec US Rail, Inc.

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4.18 Description of Wabtec Common Stock registered pursuant to Section 12 of the Securities Act of 1934

4.19 Base Indenture, dated as of June 3, 2021, among Wabtec Transportation Netherlands B.V., as issuer, Westinghouse Air Brake Technologies Corporation, as guarantor, and U.S.

Bank National Association, as T rustee

4.20 First Supplemental Indenture, dated as of June 3, 2021, among Wabtec Transportation Netherlands B.V., as issuer, Westinghouse Air Brake Technologies Corporation, as guarantor, and U.S.

Bank National Association, as T rustee

4.21 Form of 1.250% Notes due 2027 (included in Exhibit 4.20 hereof).

10.1 Agreement of Sale and Purchase of the North American Operations of the Railway Products Group, an operating division of American Standard Inc.

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10.9 Stock Purchase Agreement, by and among the Company, Standard Car Truck Company and Robclif, Inc., dated September 12, 2008

10.10 Form of Employment Continuation Agreement entered into by the Company with Rafael San tana, David L.

10.10 Form of Employment Continuation Agreement entered into by the Company with Rafael Santana, David L.

DeNinno, Patrick D.

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and the other borrowing subsidiaries party thereto, the lenders party thereto and PNC Bank, National Association, as Administrative Agent

10.17 Second Amendment to Credit Agreement, dated as of April 22, 2021, among Westinghouse Air Brake Technologies Corporation, Wabtec Netherlands B.V.

and the other borrowing subsidiaries party thereto, the lenders party thereto and, PNC Bank, National Association, as Administrative Agent

10.18 Third Amendment to Credit Agreement, dated as of December 29, 2021, among Westinghouse Air Brake Technologies Corporation, Wabtec Netherlands B.V.

and the other borrowing subsidiaries party thereto, the lenders party thereto, and PNC Bank, National Association, as Administrative Agent

10.19 Westinghouse Air Brake Technologies Corporation Deferred Compensation Plan for Executives, dated October 21, 2021

10.20 Separation Agreement between Stephane Rambaud-Measson and Westinghouse Air Brake Technologies Corporation, dated as of February 13, 2019

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Betler and Westinghouse Air Brake Technologies Corporation, dated as of April 24, 2019

10.19 Sev erance Agreement of Rafael Santana dated as of May 26, 2020

10.22 Severance Agreement of Rafael Santana dated as of May 26, 2020

10.23 Transition Agreement of Scott Wahlstrom dated as of November 25, 2020

10.24 Employment Continuation Agreement of John A.

Olin, dated September 14, 2021

10.25 Transition Agreement of Patrick A.

Dugan, dated as of September 9, 2021

21.0 List of subsidiaries of the Company

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26 Filed as an exhibit to the Company's Current Report on Form 8-K (File No 033-90866), dated May 7, 2020.

27 Filed as an exhibit to the Company's Current Report on Form 8-K (File No 033-90866), dated June 2, 2021

28 Filed as an exhibit to the Company's Current Report on Form 8-K (File No 033-90866), dated April 28, 2021

29 Filed as an exhibit to the Company's Current Report on Form 8-K (File No 033-90866), dated January 5, 2022

30 Filed as an exhibit to the Company's Current Report on Form 8-K (File No 033-90866), dated October 21, 2021

31 Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (File No.

033-90866), for the period ended September 30, 2021.

32 Filed as an exhibit to the Company’s Annual Report on Form 10-K (File No.

033-90866), dated February 19, 2021.

33 Filed as an exhibit to the Company's Registration Statement on Form S-8 (File No.

033-90866), dated March 2, 2012.

* Management contract or compensatory plan.

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In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, Management has conducted an assessment, including testing, using the criteria in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (COSO).

The Company’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting standards.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has excluded Nordco from its assessment of internal controls over financial reporting as of December 31, 2021 because the Company acquired Nordco effective March 31, 2021.

Nordco is a subsidiary whose total assets and customer revenues represents 2.5% and 1.8%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

Based on its assessment, Management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2021, based on criteria in Internal Control-Integrated Framework issued by the COSO.

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Our audit procedures also included, among others, evaluating the significant assumptions and the accuracy and completeness of the underlying data used in management's calculations.

This included, for example, inspection of the executed contract and testing management's cost estimates by comparing the inputs to the Company’s historical data or experience for similar contracts, the performance of sensitivity analysis and the performance of retrospective review analysis of prior management cost estimates to actual costs incurred for completed contracts.

This included, for example, inspection of the executed contracts and testing management's cost estimates by comparing the inputs to the Company’s historical data or experience for similar contracts, the performance of sensitivity analysis and the performance of retrospective review analysis of prior management cost estimates to actual costs incurred for completed contracts.

In addition, for a sample of contracts, we involved our construction and engineering specialists to assist in our evaluation of management’s cost estimates at completion.

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In our opinion, Westinghouse Air Brake Technologies Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Nordco, which is included in the 2021 consolidated financial statements of the Company and constituted 2.5% of total assets as of December 31, 2021 and 1.8% of net sales for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Nordco.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, cash flows and shareholders’ equity for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15.(2) and our report dated February 17, 2022 expressed an unqualified opinion thereon.

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CONSOLIDATED BALANCE SHEETS

In millions, except shares and par value 2020 2019

Current Assets

In millions, except par value 2021 2020

Cash and cash equivalents $ 473 $ 599

Accounts receivable 1,085 969

Unbilled accounts receivables 443.2 514.0

Unbilled accounts receivable 392 443

Inventories 1,689 1,642

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Goodwill 8,587 8,485

Other intangibles, net 3,869.2 4,104.0

Other intangible assets, net 3,705 3,869

Other noncurrent assets 833 619

Total other assets 12,973.1 13,096.3

Total noncurrent assets 14,622 14,574

Total Assets $ 18,454 $ 18,454

Liabilities and Shareholders’ Equity

Current Liabilities

Accounts payable $ 1,012 $ 909

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Total Liabilities 8,215 8,301

Commitment and Contingencies (Note 19)

Convertible preferred stock, $ .01 par value;

1.0 shares authorized, no shares issued and outstanding, at December 31, 2020 and 2019

Commitments and Contingencies (Note 18)

Common stock, $ .01 par value;

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Interest expense, net ( 177 ) ( 199 ) ( 219 )

Other income (expense), net 11.6 2.8 6.4

Other income, net 38 11 3

Income before income taxes 737 557 447

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Net income 565 412 327

Net loss attributable to noncontrolling interest 2.1 0.2 3.2

Net (income) loss attributable to noncontrolling interest ( 7 ) 2 —

Net income attributable to Wabtec shareholders $ 558 $ 414 $ 327

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Net income attributable to Wabtec shareholders $ 558 $ 414 $ 327

Foreign currency translation gain (loss) 48.4 ( 106.4 ) ( 207.3 )

Unrealized gain (loss) on derivative contracts 7.8 ( 4.3 ) ( 5.3 )

Unrealized loss on pension benefit plans and post-retirement benefit plans ( 14.3 ) ( 21.5 ) ( 3.8 )

Other comprehensive income (loss) before tax 41.9 ( 132.2 ) ( 216.4 )

Income tax benefit related to components of other comprehensive income 1.6 6.2 4.8

Other comprehensive income (loss), net of tax 43.5 ( 126.0 ) ( 211.6 )

Foreign currency translation (loss) gain ( 136 ) 48 ( 106 )

Unrealized (loss) gain on derivative contracts ( 10 ) 8 ( 4 )

Unrealized gain (loss) on pension benefit plans and post-retirement benefit plans 21 ( 14 ) ( 22 )

Other comprehensive (loss) income before tax ( 125 ) 42 ( 132 )

Income tax (expense) benefit related to components of other comprehensive (loss) income ( 2 ) 2 6

Other comprehensive (loss) income, net of tax ( 127 ) 44 ( 126 )

Comprehensive income attributable to Wabtec shareholders $ 431 $ 458 $ 201

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Net income $ 565 $ 412 $ 327

Adjustments to reconcile net income to cash provided by operations:

Adjustments to reconcile net income to net cash provided by operations:

Depreciation and amortization 491 473 401

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Deferred income taxes 88 29 ( 27 )

Loss on disposal of property, plant and equipment 9.6 15.9 0.9

(Gain) Loss on disposal of property, plant and equipment ( 4 ) 10 16

Changes in operating assets and liabilities, net of acquisitions

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Acquisitions of business, net of cash acquired ( 435 ) ( 40 ) ( 2,996 )

Other — — ( 14.1 )

Net cash used for investing activities ( 540 ) ( 155 ) ( 3,178 )

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Effect of changes in currency exchange rates ( 6 ) ( 15 ) ( 37 )

(Decrease) increase in cash ( 5.5 ) ( 1,738.1 ) 2,108.9

Cash, cash equivalents and restricted cash, beginning of year 604.2 2,342.3 233.4

Cash, cash equivalents and restricted cash, end of year $ 598.7 $ 604.2 $ 2,342.3

Decrease in cash ( 126 ) ( 5 ) ( 1,738 )

Cash and cash equivalents, beginning of year 599 604 2,342

Cash and cash equivalents, end of year $ 473 $ 599 $ 604

The accompanying notes are an integral part of these statements.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Stock Additional

Paid-in Treasury

Stock Treasury

Stock Retained Accumulated

Other Non-controlling

In millions, except share and per share data Shares Amount Capital Shares Amount Earnings Comprehensive Loss Interest Total

In millions, except share and per share data Common

Stock Shares Common

Stock Amount Additional Paid-in Capital Treasury

Stock Shares Treasury

Stock Amount Retained Earnings Accumulated

Other Comprehensive Loss Non-controlling Interest Total

Balance, December 31, 2018 132,349,534 $ 1 $ 915 ( 35,734,588 ) $ ( 816 ) $ 3,023 $ ( 257 ) $ 4 $ 2,870

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Net income — — — — — 327 — — 327

Other comprehensive income, net of tax — — — — — — ( 211.6 ) — ( 211.6 )

Stock issued for Faiveley Transport Acquisition — — — — — — — ( 12.6 ) ( 12.6 )

Other comprehensive loss, net of tax — — — — — — ( 126 ) — ( 126 )

Acquisition of GE Transportation 94,597,646 1 6,939 — — — — 31 6,971

Other — — — — — — — 2 2

Balance, December 31, 2019 226,947,180 2 7,877 ( 35,247,987 ) ( 807 ) 3,268 ( 383 ) 37 9,994

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Net income (loss) — — — — — 414 — ( 2 ) 412

Other comprehensive loss, net of tax — — — — — — ( 126.0 ) — ( 126.0 )

Acquisition of GE Transportation 94,598 0.7 6,939.0 — — — — 30.6 6,970.3

Other owner changes — — — — — — — 2.8 2.8

Other comprehensive income (loss), net of tax — — — — — — 44 ( 1 ) 43

Stock repurchase — — — ( 3,127,698 ) ( 207 ) — — — ( 207 )

Other — — ( 4 ) — — — — ( 4 ) ( 8 )

Balance, December 31, 2020 226,947,180 2 7,881 ( 38,059,697 ) ( 1,010 ) 3,589 ( 339 ) 30 10,153

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Stock repurchase — — — ( 3,329,003 ) ( 300 ) — — — ( 300 )

Other owner changes — — ( 4.8 ) — — — — ( 3.3 ) ( 8.1 )

Other — — — — — — — 1 1

Balance, December 31, 2021 226,947,180 $ 2 $ 7,916 ( 41,144,159 ) $ ( 1,306 ) $ 4,055 $ ( 466 ) $ 38 $ 10,239

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Our highly engineered products, which are intended to enhance safety, improve productivity and reduce maintenance costs for customers, can be found on most locomotives, freight cars, passenger transit cars and buses around the world.

Our products enhance safety, improve productivity and reduce maintenance costs for customers, and many of our core products and services are essential in the safe and efficient operation of freight rail and passenger transit vehicles.

Our core products and services are essential in the safe and efficient operation of freight rail and passenger transit vehicles.

Wabtec is a global company with operations in over 50 countries and our products can be found in more than 100 countries throughout the world.

In 2021, approximately 60 % of the Company’s net sales came from customers outside the U.S.

On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus, known as COVID-19, as a global pandemic.

Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibit many employees from going to work.

The COVID-19 pandemic had a materially adverse impact on our operations and business results for the years ended December 31, 2021, and 2020 which is discussed in more detail in the Results of Operations section in Part II, Item 7 of this report.

COVID-19 has continued to impact our sales channels, supply chain, manufacturing operations, workforce, and other key aspects of our operations.

Our top concern is, and remains, the health and well-being of our employees around the world.

To date, COVID-19 has surfaced in nearly all regions around the world and has impacted our sales channels, supply chain, manufacturing operations, workforce, and other key aspects of our operations.

The outbreak and preventive measures taken to help curb the spread, including temporary plant closures in China, India, Italy and other countries where outbreaks and stay-at-home orders were most prevalent, had an adverse impact on our operations and business results for the year ended December 31, 2020.

The outbreak and preventive measures taken to help curb the spread, including temporary plant closures during 2020 in China, India, Italy and other countries where outbreaks and stay-at-home orders were most prevalent, had an adverse impact on our operations and business results.

Supply chain disruptions and labor availability have caused component and chip shortages resulting in an adverse effect on the timing of the Company’s revenue generation.

Additionally, broad-based inflation, escalation of metals and commodities costs, transportation and logistics costs and labor costs have all resulted from the COVID-19 pandemic.

The Company has implemented various mitigating actions to lessen the impact of supply chain disruptions caused by the COVID-19 pandemic.

These actions include price escalations in long-term contracts, implementing price surcharges, driving operational efficiencies through various cost mitigation efforts and discretionary spend management, strategic sourcing alignments, and accelerating integration synergies where possible.

The Company expects to continue to realize these increased costs over the next few quarters.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The remaining arrangements are treated as operating leases.

Right-of-use lease assets are classified as long-term assets under the caption "Other noncurrent assets" and lease liabilities are classified under the captions "Other accrued liabilities' and "Other long-term liabilities."

Goodwill and Intangible Assets Goodwill and other intangible assets with indefinite lives are not amortized.

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The Company performs its annual impairment test during the fourth quarter after the annual forecasting process is completed, and also tests for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Periodically, Management of the Company assesses whether or not an indicator of impairment is present that would necessitate an impairment analysis be performed.

Periodically,

Management of the Company assesses whether or not an indicator of impairment is present that would necessitate an impairment analysis be performed.

Equity Method Investments The Company invests in privately-held companies which are accounted for using the equity method.

The equity method is applied in situations where the Company has the ability to exercise significant influence, but not

control, over the investee.

Equity method investments are classified as other assets under the caption "Other noncurrent assets" on the consolidated balance sheet.

The equity method is applied in situations where the Company has the ability to exercise significant influence, but not control, over the investee.

Equity method investments are classified as other assets under the caption "Other noncurrent assets" on the Consolidated Balance Sheets .

Equity method investments were $ 96 million and $ 100 million at December 31, 2021 and 2020, respectively.

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Financial Derivatives and Hedging Activities In the normal course of business, the Company is exposed to interest rate, commodity price and foreign currency exchange rate fluctuations.

At times, the Company limits these risks through the use of derivatives such as cross-currency swaps, foreign currency forward contracts, interest rate swaps, commodity forwards and futures.

At times, the Company limits these risks through the use of derivatives such as cross-currency swaps, foreign currency forward contracts, interest rate swaps, commodity swaps and options.

In accordance with the Company's policy, derivatives are only used for hedging purposes.

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The effects of currency exchange rate changes on intercompany transactions that are denominated in a currency other than an entity’s functional currency are charged or credited to earnings.

Foreign exchange transaction losses recognized in other income, net were $ 8.2 million, $ 13.5 million and $ 5.7 million for 2020, 2019 and 2018, respectively.

Foreign exchange transaction gains (losses) recognized in Other income, net were $ 8 million, $( 8 ) million and $( 14 ) million for 2021, 2020 and 2019, respectively.

Noncontrolling Interests In accordance with ASC 810, the Company has classified noncontrolling interests as equity on our consolidated balance sheets as of December 31, 2021 and 2020.

Net loss attributable to noncontrolling interests was not material for the years ended December 31, 2020, 2019 and 2018, respectively.

Revenue Recognition The Company accounts for Revenue under ASC 606 “Revenue from Contracts with Customers.” This guidance provides a five-step analysis of transactions to determine when and how revenue is recognized and requires entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer.

Net (income) loss attributable to noncontrolling interests was not material for the years ended December 31, 2021, 2020 and 2019.

Revenue Recognition The Company accounts for Revenue under ASC 606 Revenue from Contracts with Customers .

This guidance provides a five-step analysis of transactions to determine when and how revenue is recognized and requires entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer.

A majority of the Company’s revenues are derived from performance obligations that are satisfied at a point in time when control passes to the customer which is generally at the time of shipment in accordance with agreed upon delivery terms.

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Additionally, the Company has customer agreements involving the creation or enhancement of an asset that the customer controls which also require revenue to be recognized over time.

Generally, the Company uses an input method for determining the amount of revenue, cost and gross margin to recognize over time for these customer agreements.

Generally, the

Company uses an input method for determining the amount of revenue, cost and gross margin to recognize over time for these customer agreements.

The input methods used for these agreements include costs of material and labor, both of which give an accurate representation of the progress made toward complete satisfaction of a particular performance obligation.

Contract revenues and cost estimates are reviewed and revised periodically through the year and adjustments are reflected in the

accounting period as such amounts are determined.

Contract revenues and cost estimates are reviewed and revised periodically throughout the year and adjustments are reflected in the accounting period as such amounts are determined.

Additional information with respect to contract assets and liabilities is included in Note 8.

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Types of variable consideration the Company typically has include volume discounts, prompt payment discounts, price escalation clauses, liquidating damages, and performance bonuses.

Sales returns and allowances are also estimated and recognized in the same period the related revenue is recognized, based upon the Company’s experience.

Sales returns and allowances are also estimated and recognized in the same period the related revenue is recognized, based upon the Company’s experience and future expectations.

Remaining performance obligations represent the allocated transaction price of unsatisfied or partially unsatisfied performance obligations.

As of December 31, 2020, the Company's remaining performance obligations were $ 20.8 billion.

As of December 31, 2021, the Company's remaining performance obligations were approximately $ 22 billion.

The Company expects to recognize revenue of approximately 25 % of remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

SEC regulations require that revenue categories that exceed 10% of total revenue are presented separately on the company's Statement of income.

As such, the Company has displayed sales of goods and sales of services, and the related cost, in line with those regulations.

Additionally, those regulations also require that goods are to include all sales of tangible products, and services must include all other sales.

In Note 20 we refer to sales of both goods, such as spare parts and equipment upgrades, and related services, such as monitoring, maintenance and repairs, as sales in our Services product line.

Revolving Receivables Program In May 2020, the Company entered into a revolving agreement to transfer up to $ 150 million of certain receivables of certain subsidiaries of the Company (the "Originators") through our bankruptcy-remote subsidiary to a financial institution on a recurring basis in exchange for cash equal to the gross receivables transferred.

The bankruptcy remote subsidiary is a separate legal entity with its own creditors, and its assets are not available to pay creditors of the Company or any other affiliates of the Company.

During the first quarter of 2021, the Company amended its revolving agreement to increase the amount of certain receivables that can be transferred from $ 150 million to $ 200 million.

As customers pay their balances, we transfer additional receivables into the program, resulting in our gross receivables sold exceeding net cash flow impacts (e.g., collect and reinvest).

The sold receivables are fully guaranteed by our bankruptcy-remote subsidiary which holds additional receivables of $ 114.0 million and unbilled receivables of $ 19.7 million at December 31, 2020 that are pledged as collateral under this agreement.

The transfers are recorded at fair value of the proceeds received and obligations assumed less derecognized receivables.

No obligation was recorded at December 31, 2020 as the estimated expected credit losses on receivables sold is insignificant.

The sold receivables are fully guaranteed by our bankruptcy-remote subsidiary that are pledged as collateral under this agreement.

At December 31, 2021, and 2020 the bankruptcy-remote subsidiary held receivables of $ 324 million and $ 114 million, respectively.

The transfers are recorded at the fair value of the proceeds received and obligations assumed less derecognized receivables.

No obligation was recorded at December 31, 2021 or 2020 as the estimated expected credit losses on receivables sold is insignificant.

Our maximum exposure to loss related to these receivables transferred is limited to the amount outstanding.

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The following table sets forth a summary of receivables sold:

In millions Twelve Months Ended December 31, 2020

In millions Twelve Months Ended

December 31, 2021 Twelve Months Ended

December 31, 2020

Gross receivables sold/cash proceeds received $ 1,319 $ 852

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Preferred Stock The Company’s authorized capital stock includes 1,000,000 shares of preferred stock.

The Board of Directors has the authority to issue the preferred stock and to fix the designations, powers, preferences and rights of the shares of each such class or series, including dividend rates, conversion rights, voting rights, terms of redemption and liquidation preferences, without any further vote or action by the Company’s shareholders.

The rights and preferences of the preferred

stock would be superior to those of the common stock.

The Board of Directors has the authority to issue the preferred stock and to fix the designations, powers, preferences and rights of the shares

of each such class or series, including dividend rates, conversion rights, voting rights, terms of redemption and liquidation preferences, without any further vote or action by the Company’s shareholders.

The rights and preferences of the preferred stock would be superior to those of the common stock.

At December 31, 2021 and 2020 there was no preferred stock issued or outstanding.

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Accounting Standards Adopted in 2021

On January 1, 2020, the Company adopted the following Accounting Standard Updates (ASU) issued by the Financial Accounting Standard Board (FASB), none of which had a material impact on the Company’s Consolidated Financial Statements:

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments;

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment.

In March 2020, the SEC amended Rules 3-10 and 3-16 of Regulation S-X regarding financial disclosure requirements for registered debt offerings involving subsidiaries as either issuers or guarantors and affiliates whose securities are pledged as collateral.

This new guidance narrows the circumstances that require separate financial statements of subsidiary issuers and guarantors and streamlines the alternative disclosures required in lieu of those statements.

The final rule also allows for simplified disclosures to be included within Management’s Discussion and Analysis.

This rule is effective January 4, 2021 with early adoption permitted.

The Company elected to early adopt this rule during the three months ended June 30, 2020.

Accounting Standards to be Adopted in Future Years

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, “Income Taxes:

Simplifying the Accounting for Income Taxes.” The amendments in this update simplify the accounting for certain income tax transactions by removing specific exceptions to the general principles in Topic 740, Income Taxes.

This guidance is effective for fiscal years beginning after December 15, 2020 with early adoption permitted.

The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes:

Simplifying the Accounting for Income Taxes .

The amendments in this update simplify the accounting for certain income tax transactions by removing specific exceptions to the general principles in Accounting Standards Codification ("ASC") 740, "Income Taxes." This guidance was effective for fiscal years beginning after December 15, 2020 with early adoption permitted.

The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Accounting Standards Issued in 2021

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

The amendments in this update provide specific guidance on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts in a business combination and address how to determine whether a contract liability is recognized by the acquirer in a business combination.

The amendments in this update will be effective for Wabtec on January 1, 2023 and will be applied prospectively to business combinations occurring on or after the effective date.

On March 31, 2021, the Company acquired Nordco, a leading North American supplier of new, rebuilt and used maintenance of way equipment.

Nordco's products and services portfolio includes mobile railcar movers and ultrasonic rail flaw detection technologies.

The purchase price paid for 100 % ownership of Nordco was approximately $ 410 million.

The following table summarizes the preliminary fair value of the Nordco assets acquired and liabilities assumed:

Assets acquired

Cash and cash equivalents $ 5

Accounts receivable 23

Other current assets 2

Property, plant and equipment 17

Other intangible assets 168

Other noncurrent assets 12

Total assets acquired 475

Liabilities assumed

Current liabilities 19

Noncurrent liabilities 46

Total liabilities assumed 65

Net assets acquired $ 410

The fair values of the assets acquired and liabilities assumed were determined using the income, cost and market approaches.

Discounted cash flow models were used to estimate the fair values of acquired intangibles.

The fair value measurements were primarily based on significant inputs that are not observable in the market and are considered Level 3 in the fair value hierarchy.

These estimates are preliminary in nature and subject to adjustments, which could be material.

Any necessary adjustments will be finalized within one year from the date of acquisition;

adjustments to date have not been significant.

Intangible assets acquired include customer relationships and intellectual property that are subject to amortization, and trade names that were assigned an indefinite life and are not subject to amortization.

Contingent liabilities assumed as part of the transaction were not material.

Goodwill was calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired, and represents the assembled workforce and the future economic benefits, including synergies, that are expected to be achieved as a result of the acquisition.

The purchased goodwill is not expected to be deductible for tax purposes.

The results of this business since the date of acquisition are reported within the Freight segment and the Services product line.

The pro forma impact on Wabtec’s sales and results of operations, including the pro forma effect of events that are directly attributable to the acquisition, was not significant.

General Electric Transportation

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As part of the Merger, certain assets of GE Transportation, including the equity interests of certain pre-Transaction subsidiaries of GE that compose part of GE Transportation, were sold to Direct Sale Purchaser for a cash payment of $ 2.875 billion, and Direct Sale Purchaser assumed certain liabilities of GE Transportation in connection with this purchase (the "Direct Sale").

Thereafter, GE transferred the SpinCo business to SpinCo and its subsidiaries (to the extent not already held by SpinCo and its subsidiaries), and SpinCo issued to GE shares of SpinCo Class A preferred stock, SpinCo Class B preferred stock, SpinCo Class C preferred stock and additional shares of SpinCo common stock.

stock, SpinCo Class C preferred stock and additional shares of SpinCo common stock.

Following this issuance of additional SpinCo common stock to GE, and immediately prior to the Distribution (as defined below), GE owned 8,700,000,000 shares of SpinCo common stock, 15,000 shares of SpinCo Class A preferred stock, 10,000 shares of SpinCo Class B preferred stock and one share of SpinCo Class C preferred stock, which constituted all of the outstanding stock of SpinCo.

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The Company did not receive any proceeds from the sale of any of these shares.

Total future consideration to be paid by Wabtec to GE includes a fixed payment of $ 470.0 million, of which $ 115.4 million was paid in 2020, which is directly related to the timing of tax benefits expected to be realized by Wabtec as a result of the acquisition of GE Transportation.

This payment is considered contingent consideration because the timing of cash payments to GE is directly related to the future timing of tax benefits received by the Company as a result of the acquisition of

GE Transportation.

Total future consideration to be paid by Wabtec to GE included a fixed payment of $ 470 million, of which $ 99 million and $ 115 million were paid during 2021 and 2020, respectively, which is directly related to the timing of tax benefits expected to be realized by Wabtec as a result of the acquisition of GE Transportation.

The estimated total value of the consideration to be paid by Wabtec in the acquisition transactions is approximately $ 10.3 billion, including the cash paid for the Direct Sales Assets, equity transferred for SpinCo, contingent consideration, assumed debt and net of cash acquired.

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The goodwill has been allocated to the Freight segment.

Costs related to the acquisition and integration of GE Transportation were approximately $ 47.5 million and $ 63.0 million for the years ended December 31, 2020 and 2019, respectively, and are included in selling, general and administrative expenses on the consolidated statements of income.

The Company also made smaller acquisitions not listed above which are individually and collectively immaterial.

Costs related to the acquisition and integration of GE Transportation were approximately $ 3 million, $ 48 million and $ 63 million for the years ended December 31, 2021, 2020 and 2019, respectively, and are included in Selling, general and administrative expenses on the Consolidated Statements of Income.

The following unaudited pro forma consolidated financial information presents income statement results as if the GE Transportation acquisition had occurred January 1, 2018:

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Pro forma data may not be indicative of the results that would have been obtained had the GE Transportation acquisition occurred at the beginning of the periods presented, nor is it intended to be a projection of future results.

The Company also made smaller acquisitions not listed above which are individually and collectively immaterial.

SUPPLEMENTAL CASH FLOW DISCLOSURES

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Land and improvements 96 98

Construction in progress 89 99

Property, plant and equipment 2,403 2,373

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For 2021, the Company opted to proceed directly to the quantitative impairment test for all reporting units with goodwill.

The discounted cash flow approach and the market approach were used to estimate the fair value of each reporting unit using a weighting of 75 % and 25 %, respectively.

The discounted cash flow method and the market approach were used to estimate the fair value of each reporting unit using a weighting of 75 % and 25 %, respectively.

The discounted cash flow model requires several assumptions including future sales growth, EBIT (earnings before interest and taxes) margins, capital expenditures, a discount rate and a terminal revenue growth rate (the revenue growth rate for the period beyond the years forecasted by the reporting units) for each reporting unit.

The market approach requires several assumptions including EBITDA (earnings before interest, taxes, depreciation and amortization) multiples for comparable companies that operate in the same markets as the Company’s reporting units.

For 2020, the discounted cash flow approach was given more weight compared to the market approach due to a relatively reduced amount of publicly available data from companies with comparable operations to those of Wabtec;

however, both valuation approaches resulted in a conclusion that the estimated fair value of all three of the Company's reporting units was in excess of their respective carrying value, which resulted in a conclusion that no impairment existed.

For 2021, the discounted cash flow method was given more weight compared to the market approach due to a relatively reduced amount of publicly available data from companies with comparable operations to those of Wabtec;

however, both valuations resulted in a conclusion that the estimated fair value of all three of the Company's reporting units was in excess of their respective carrying value, which resulted in a conclusion that no impairment existed.

Additionally, the Company proceeded directly to the quantitative impairment test for some trade names with indefinite lives.

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The judgment and assumptions include the identification of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, Wabtec specific events, share price trends and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact.

The change in the carrying amount of goodwill by segment for the year ended December 31, 2020 is as follows:

Freight Transit

In millions Segment Segment Total

The change in the carrying amount of goodwill by segment is as follows:

In millions Freight

Segment Transit

Segment Total

Balance at December 31, 2019 $ 6,877 $ 1,484 $ 8,361

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Balance at December 31, 2020 $ 6,872 $ 1,613 $ 8,485

Additions 214 15 229

Foreign currency impact ( 13 ) ( 114 ) ( 127 )

Balance at December 31, 2021 $ 7,073 $ 1,514 $ 8,587

As of December 31, 2021 and 2020, the Company’s trade names had a net carrying amount of $ 635 million and $ 651 million, respectively, and the Company believes these intangibles have indefinite lives, with the exception of the right to use the GE Transportation trade name, to which the Company has assigned a useful life of 5 years.

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Backlog, net of accumulated amortization of $ 309 and $ 206

1,224.7 1,342.1

Customer relationships, net of accumulated amortization of $ 331 and $ 276

986.2 1,029.9

Total $ 3,070 $ 3,218

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Contract assets include unbilled amounts resulting from sales under long-term contracts where revenue is recognized over time and revenue exceeds the amount that can be billed to the customer based on the terms of the contract.

The current portion of the contract assets are classified as current assets under the caption “Unbilled accounts receivable” while the noncurrent contract assets are classified as other assets under the caption "Other noncurrent assets" on the consolidated balance sheet.

Noncurrent contract assets were $ 153 million and $ 101 million at December 31, 2021 and 2020, respectively.

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Contract liabilities include customer deposits that are made prior to the incurrence of costs related to a newly agreed upon contract and advanced customer payments that are in excess of revenue recognized.

The current portion of contract liabilities are classified as current liabilities under the caption “Customer deposits” while the noncurrent contract liabilities are classified as noncurrent liabilities under the caption "Other long-term liabilities" on the consolidated balance sheet.

Noncurrent contract liabilities were $ 88 million and $ 80 million at December 31, 2021 and 2020, respectively.

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Provisions for loss contracts were $ 107 million and $ 109 million at December 31, 2021 and 2020, respectively.

These provisions for estimated

losses are classified as current liabilities and included within the caption “Other accrued liabilities” on the consolidated balance sheet.

These provisions for estimated losses are classified as current liabilities and included within the caption “Other accrued liabilities” on the Consolidated Balance Sheets.

The following table reconciles the changes in the Company’s contract assets and liabilities as follows:

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Long-term debt consisted of the following:

Effective 2020 2019

In millions Interest Rate Book Value Fair Value 1

Book Value Fair Value 1

Rate 2021 2020

In millions Face

Senior Credit and 364 Day Facility 2 :

dollar-denominated Term Loans, net of unamortized debt issuance costs of $ 0.9 and $ 1.1

2.2 % 645.1 645.1 684.7 684.7

Multi-Currency Revolving loan facility net of unamortized debt issuance costs of $ 0.8 and $ 0.9

— % — — 231.5 231.5

dollar-denominated Term Loans 3

— % N/A $ — $ — $ 645 $ 645

Multi-Currency Revolving loan facility 1.5 % N/A — — — —

Senior Notes:

Floating Senior Notes, due 2021, net of unamortized debt issuance costs of $ 0.0 and $ 2.0

4.375 % Senior Notes, due 2023

4.5 % $ 250 250 260 249 267

4.375 % Senior Notes, due 2023, net of unamortized discount and debt issuance costs of $ 0.7 and $ 0.9

4.15 % Senior Notes, due 2024

4.6 % $ 750 747 796 746 817

4.15 % Senior Notes, due 2024, net of unamortized debt issuance costs of $ 4.3 and $ 5.7

3.20 % Senior Notes, due 2025

3.4 % $ 500 497 523 496 533

3.20 % Senior Notes, due 2025, net of unamortized debt issuance costs of $ 4.4 and $ 0.0

3.45 % Senior Notes, due 2026

3.5 % $ 750 749 795 749 820

3.45 % Senior Notes, due 2026, net of unamortized debt issuance costs of $ 1.3 and $ 1.5

1.25 % Senior Notes (EUR), due 2027

1.5 % € 500 560 574 — —

4.70 % Senior Notes, due 2028, net of unamortized discount and debt issuance costs of $ 8.2 and $ 9.3

4.70 % Senior Notes, due 2028

5.0 % $ 1,250 1,243 1,423 1,242 1,472

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Total 4,058 4,383 4,239 4,667

Less - current portion 447.2 447.2 95.7 95.7

current portion 2 2 447 447

Long-term portion $ 4,056 $ 4,381 $ 3,792 $ 4,220

See Note 17 for information on the fair value measurement of the Company's long-term debt.

During the second quarter of 2021, the Company repaid all outstanding term loan borrowings and related interest under the Senior Credit Facility and the 364 Day Facility.

dollar-denominated Term Loans includes the total outstanding balance of term loans denominated in U.S.

dollars from the Senior Credit Facility and the 364 Day Facility.

Variances between Face Value and Book Value are the result of unamortized discounts and debt issuance fees.

The Company borrows and repays against the Multi-Currency Revolving loan facility for added flexibility in liquidity to manage cash during the operating cycle.

The proceeds from borrowing and the repayments are included within the Financing Activities section of the Consolidated Statements of Cash Flows.

As of December 31, 2021, the annual repayment requirements for debt obligations are as follows:

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Additionally, the Company has debt issuance costs related to certain financing transactions which are also amortized through interest expense.

As of December 31, 2020 and 2019, the Company had total unamortized debt issuance costs of $ 20.5 million and $ 21.3 million, respectively.

At December 31, 2020, the weighted average interest rate on the Company's variable debt was 2.3 %

As of December 31, 2021 and 2020, the Company had total unamortized debt issuance costs and discounts of $ 23 million and $ 21 million, respectively.

At December 31, 2021, the weighted average interest rate on the Company's available variable debt facilities was 1.5 %.

Credit Facilities

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and (ii) a multi-currency revolving loan facility, providing for an equivalent in U.S.

dollars of up to $ 1,200.0 million in multi-currency revolving loans (inclusive of swingline loans of up to $ 75.0 million and letters of credit of up to $ 450.0 million (the "Revolving Credit Facility")).

dollars of up to $ 1,200 million in multi-currency revolving loans (inclusive of swingline

loans of up to $ 75 million and letters of credit of up to $ 450 million (the "Revolving Credit Facility")).

The Revolving Credit Facility will mature on June 8, 2023.

Under the Senior Credit Facility, we can elect to receive advances bearing interest based on either the ABR rate or the LIBOR rate (each as defined in the Senior Credit Facility) plus applicable margin that is determined based on our credit ratings

or the Company's Leverage.

Under the Senior Credit Facility, we can elect to receive advances bearing interest based on either the ABR rate, the LIBOR rate or the adjusted risk free rate (each as defined in the Senior Credit Facility) plus applicable margin that is determined based on our credit ratings or the Company's Leverage.

The agreement contains affirmative, negative and financial covenants, and events of default customary for facilities of this type.

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Leverage Ratio 2

The interest coverage ratio is defined as EBITDA, as defined in the Credit Agreement and Term Loan Agreement, to net interest expense for the four quarters then ended.

The leverage ratio is defined as net debt as of the last day of such fiscal quarter to EBITDA, as defined in the Amendment Credit Agreement and Term Loan Agreement, for the four quarters then ended.

The company was in compliance with all covenants in the Senior Credit Facility as of December 31, 2020.

364-Day Facility

On April 10, 2020 the Company entered into a new $ 600 million 364 day credit facility ("364 Day Facility") maturing April 2021 with a group of banks which includes a $ 144.0 million revolving credit facility ("364 Day Revolver") and a $ 456.0 million term loan ("364 Term Loan").

The agreement calls for interest at either a LIBOR-based rate, or a rate based on the prime lending rate of the agent bank, at the Company's option.

The agreement contains affirmative, negative and financial covenants, and events of default customary for facilities of this type and substantially similar to our existing Senior Credit Facility.

The obligations under the 364 Day Facility are guaranteed by certain of the Company's U.S.

subsidiaries, as guarantors.

On June 12, 2020 the Company amended the 364 Day Facility maturity to July 9, 2021.

The interest coverage ratio is defined as EBITDA (earnings before interest, taxes, depreciation, and amortization), as defined in the Senior Credit Facility, to net interest expense for the four quarters then ended.

The leverage ratio is defined as net debt as of the last day of such fiscal quarter to EBITDA, as defined in the Senior Credit Facility for the four quarters then ended.

The Senior Credit Facility was amended in the second quarter of 2021 so the Company may increase the maximum leverage ratio to (x) 3.75 to 1.00 at the end of the fiscal quarter in which the Nordco acquisition was consummated and each of the three fiscal quarters immediately following such fiscal quarter and (y) 3.50 to 1.00 at the end of each of the fourth and fifth full fiscal quarters after the consummation of the Nordco acquisition upon the Company's request.

The Company has not requested any increase in the leverage ratio at this time.

The Company was in compliance with all covenants in the Senior Credit Facility as of December 31, 2021.

The following table presents availability under the Revolving Facilities:

(in millions) Revolving Credit Facility 364 Day Revolver

(in millions) Revolving Credit Facility

Maximum Availability $ 1,200

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Current Availability $ 1,197

The "Senior Notes" comprises our 4.375 % Senior Notes due 2023, 4.15 % Senior Notes due 2024, 3.20 % Senior Notes due 2025, 3.45 % Senior Notes due 2026 and 4.70 % Senior Notes due 2028.

Interest on the fixed-rate Senior Notes is payable semi-annually.

The Company may redeem each series of the notes at any time in whole or from time to time in part in accordance with the provisions of the indenture, under which such series of notes was issued.

364-Day Facility

On April 10, 2020 the Company entered into a new $ 600 million 364 day credit facility (" 364 Day Facility") maturing April 2021 with a group of banks which included a $ 144 million revolving credit facility (" 364 Day Revolver") and a $ 456 million term loan (" 364 Term Loan").

The agreement called for interest at either a LIBOR-based rate, or a rate based on the prime lending rate of the agent bank, at the Company's option.

The agreement contained affirmative, negative and financial covenants, and events of default customary for facilities of this type and substantially similar to our existing Senior Credit Facility.

The obligations under the 364 Day Facility were guaranteed by certain of the Company's U.S.

subsidiaries, as guarantors.

On June 12, 2020, the Company amended the 364 Day Facility maturity to July 9, 2021.

On June 3, 2021, the Company repaid all outstanding borrowings and related interest, effectively retiring the facility.

The Company or its subsidiaries may issue senior notes from time to time.

These notes are comprised of our 4.375 % Senior Notes due 2023 (the "2023 Notes"), 4.15 % Senior Notes due 2024 (the "2024 Notes"), 3.20 % Senior Notes due 2025 (the "2025 Notes"), 3.45 % Senior Notes due 2026 (the "2026 Notes"), 1.25 % Senior Notes (EUR) due 2027 (the "Euro Notes" discussed below), and 4.70 % Senior Notes due 2028 (the "2028 Notes").

The 2023 Notes, 2024 Notes, 2025 Notes, 2026 Notes and 2028 Notes are the “US Notes”, and collectively with the Euro Notes, the “Senior Notes.” Interest on the US Notes is payable semi-annually and interest on the Euro Notes is paid annually.

Each series of the Senior Notes may be redeemed any time in whole or from time to time in part in accordance with the provisions of the indenture, under which such series of notes was issued.

Each of the Senior Notes may be redeemed at a redemption price of 100 % of the principal amount plus a specified make-whole premium and accrued interest.

The Senior Notes are senior unsecured obligations of the Company and rank pari passu with all existing and future senior debt and senior to all existing and future subordinated indebtedness of the Company.

The US Notes and the Company's guarantee of the Euro Notes are senior unsecured obligations of the Company and rank pari passu with all existing and future senior debt and senior to all existing and future subordinated indebtedness of the Company.

On June 3, 2021, Wabtec Transportation Netherlands B.V.

("Wabtec Netherlands") issued € 500 million of 1.25 % Senior Notes due in 2027, which are fully and unconditionally guaranteed by the Company.

The Euro Notes were issued at 99.267 % of face value.

Interest on the Euro Notes accrues at a rate of 1.25 % per annum and is payable annually beginning December 3,

The Company incurred approximately $ 4 million of deferred financing costs related to the issuance of the Euro Notes for total net proceeds of approximately $ 599 million after consideration of the discount.

On June 29, 2020, the Company issued $ 500 million of 3.20 % Senior Notes due in 2025 (the "2025 Notes").

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Interest on the 2025 Notes accrues at a rate of 3.20 % per annum and is payable semi-annually on June 15 and December 15 of each year beginning December 15, 2020.

The proceeds were used to redeem the Floating Rate Senior Notes due 2021.

The proceeds were used to redeem outstanding variable rate debt.

The Company incurred $ 2 million of deferred financing costs related to the issuance of the 2025 Notes.

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The covenants do not require the Company to maintain any financial ratios or specified levels of net worth or liquidity.

The US Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of the Company's subsidiaries that is a guarantor under the Senior Credit Facility.

The Company is in compliance with the restrictions and covenants in the indentures under which the Senior Notes were issued and expects that these restrictions and covenants will not be any type of limiting factor in executing our operating activities.

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The Company's Consolidated Balance Sheets reflect cash, net of bank overdrafts, under all pooling arrangements.

Letters of Credit

In the ordinary course of its business, the Company issues letters of credit related to commercial products.

The outstanding amount, including the letters of credit issues under the credit facility, were $ 736.6 million and $ 714.0 million at December 31, 2020 and 2019, respectively.

Letters of Credit and Bank Guarantees

In the ordinary course of its business, the Company arranges for certain types of bank guarantees and letters of credit, such as performance bonds, bid bonds and financial guarantees, that are issued by certain banks and insurance companies to support customer contracts.

The outstanding amount, including the letters of credit issued under the credit facility, were $ 791 million and $ 737 million at December 31, 2021 and 2020, respectively.

EMPLOYEE BENEFIT PLANS

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Benefits paid 3 3 13 14

Acquisition — — — ( 5.0 )

Actuarial loss ( 3.7 ) ( 2.9 ) ( 22.4 ) ( 32.4 )

Actuarial gain (loss) 2 ( 4 ) 15 ( 22 )

Effect of currency rate changes — — 9 ( 18 )

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Benefits paid ( 3 ) ( 3 ) ( 13 ) ( 14 )

Settlements — — ( 2.9 ) ( 0.4 )

Acquisition — — — 1.2

Other — — 4.8 —

Settlements and other — — ( 3 ) 2

Effect of currency rate changes — — ( 5 ) 11

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Net amount recognized $ 1 $ ( 7 ) $ ( 49 ) $ ( 80 )

Amounts recognized in accumulated other comprehensive income (loss) before tax consist of:

Amounts recognized in Accumulated other comprehensive loss, before tax consist of:

Prior service cost — — ( 1 ) ( 1 )

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Information for pension plans with accumulated benefit obligations in excess of Plan assets:

Projected benefit obligation $ ( 42.9 ) $ ( 41.1 ) $ ( 316.0 ) $ ( 283.1 )

Accumulated benefit obligation ( 41.8 ) ( 40.2 ) ( 303.9 ) ( 272.6 )

Fair value of plan assets 36.0 34.3 222.4 193.9

Projected benefit obligation N/A $ ( 43 ) $ ( 107 ) $ ( 316 )

Accumulated benefit obligation N/A ( 42 ) ( 97 ) ( 304 )

Fair value of plan assets N/A 36 41 222

Information for pension plans with projected benefit obligations in excess of plan assets:

Projected benefit obligation $ ( 42.9 ) $ ( 41.1 ) $ ( 317.4 ) $ ( 284.4 )

Fair value of plan assets 36.0 34.3 223.7 195.1

Projected benefit obligation N/A $ ( 43 ) $ ( 112 ) $ ( 317 )

Accumulated benefit obligation N/A ( 42 ) ( 101 ) ( 305 )

Fair value of plan assets N/A 36 45 224

Components of Net Periodic Benefit Costs

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Expected return on plan assets ( 1 ) ( 1 ) ( 2 ) ( 13 ) ( 12 ) ( 12 )

Amortization of initial net obligation and prior service cost — — — 0.1 0.1 —

Amortization of net loss 1 1 1 4 3 3

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Net periodic benefit cost $ 1 $ 1 $ 1 $ — $ 1 $ 1

Interest cost is recorded in Interest expense, net on the Consolidated Statements of Income.

Expected return on plan assets, Amortization of net loss, and Settlement and curtailment losses recognized are recorded within Other expense, net on the Consolidated Statements of Income.

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income during 2021 are as follows:

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International

Net loss arising during the year $ ( 1.6 ) $ ( 10.7 )

Effect of exchange rates — ( 4.0 )

Amortization or curtailment recognition of prior service cost — 0.1

Amortization or settlement recognition of net loss 1.0 3.2

Total recognized in other comprehensive income $ ( 0.6 ) $ ( 11.4 )

Total recognized in net periodic benefit cost and other comprehensive income $ 1.3 $ 12.1

Net gain arising during the year $ 2 $ 13

Effect of exchange rates and other — 2

Total benefit recognized in Other comprehensive income $ 2 $ 15

Total benefit recognized in Net periodic benefit cost and Other comprehensive income $ 1 $ 15

The weighted average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed.

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The expected return on plan assets is based on historical performance as well as expected future rates of return on plan assets considering the current investment portfolio mix and the long-term investment strategy.

As of December 31, 2020, the following table represents the amounts included in other comprehensive loss that are expected to be recognized as components of periodic benefit costs in 2021.

In millions U.S.

International

Prior service cost — 0.1

Net actuarial loss 1.1 3.5

The amounts of net actuarial loss and prior service cost included in other comprehensive loss expected to be recognized as components of periodic benefit costs in 2022 are not material.

Pension Plan Assets

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The investment policies permit variances from the targets within certain parameters.

The plan assets consist primarily of equity security funds, debt security funds, and temporary cash and cash equivalent investments.

The plan assets consist primarily of equity security funds, debt security funds, insurance contracts, and temporary cash and cash equivalent investments.

The assets held in these funds are generally actively managed and are valued at the net asset value per share multiplied by the number of shares held as of the measurement date.

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Equity security funds $ 10 $ 19 $ 87 $ 75

Debt security funds and other 15.8 16.3 213.8 191.3

Cash and cash equivalents 1.6 1.6 16.6 7.7

Debt security funds 27 16 194 198

Insurance Contracts — — 15 15

Cash and cash equivalents and other 3 1 11 17

Fair value of plan assets $ 40 $ 36 $ 307 $ 305

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Equity $ — $ 10 $ — $ — $ 10

Debt Securities and other — 6.2 9.6 — 15.8

Debt Securities — 15 12 — 27

Cash and cash equivalents — 3 — — 3

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Equity 7 20 60 — 87

Debt Securities and other — 3.2 194.9 — 198.1

Debt Securities — 4 190 — 194

Insurance Contracts — — 5 10 15

Cash and cash equivalents — 9.0 7.8 — 16.8

Cash and cash equivalents and other — 6 5 — 11

Total $ 7 $ 58 $ 272 $ 10 $ 347

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Insurance Contracts — — 5 10 15

Cash and cash equivalents — 7.0 0.7 — 7.8

Cash and cash equivalents and other — 9 8 — 17

Total $ 6 $ 60 $ 265 $ 10 $ 341

The following table presents a reconciliation of Level 3 assets:

In millions Total

Balance at December 31, 2018 $ 9.9

Net purchases, issuances, and settlements 0.2

Actual return of plan assets 0.3

Transfers ( 5.8 )

Effect of currency rate changes —

Balance at December 31, 2019 $ 4.6

Net purchases, issuances, and settlements —

Actual return of plan assets 1.9

Transfers 5.1

Effect of currency rate changes 0.4

Balance at December 31, 2020 $ 12.0

There were no material changes to the Level 3 assets during 2020 and 2021.

The Company’s funding methods are based on governmental requirements and differ from those methods used to recognize pension expense.

The Company expects to contribute $ 7.3 million to the international plan and does not expect to make a contribution to the U.S.

plan during 2021.

The Company expects to contribute $ 3 million to the international pension plan and does not expect to make a contribution to the U.S.

pension plan during 2022.

Benefit payments expected to be paid to plan participants are as follows:

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Defined Contribution Plans

The Company also participates in certain defined contribution plans and multiemployer pension plans.

Costs recognized under these plans are summarized as follows:

For the year ended

In millions 2020 2019 2018

Multi-employer pension and health & welfare plans $ 0.2 $ 0.9 $ 1.0

401(k) savings and other defined contribution plans 54.6 55.7 27.9

Total $ 54.8 $ 56.6 $ 28.9

The Company participates in certain defined contribution plans.

Costs recognized during 2021, 2020, and 2019 were approximately $ 55 million each year.

The 401(k) savings plan is a participant directed defined contribution plan that holds shares of the Company’s stock as one of the investment options.

At December 31, 2020 and 2019, the plan held on behalf of its participants about 409,104 shares with a market value of $ 29.9 million, and 431,744 shares with a market value of $ 33.6 million, respectively.

Additionally, the Company has stock option based benefit and other plans further described in Note 13.

At December 31, 2021 and 2020, the plan held on behalf of its participants approximately 387,000 shares with a market value of $ 36 million, and approximately 409,000 shares with a market value of $ 30 million, respectively.

The Company is responsible for filing consolidated U.S., foreign and combined, unitary or separate state income tax returns.

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Income before income taxes $ 737 $ 557 $ 447

The consolidated provision for income taxes included in the Consolidated Statement of Income consisted of the following:

The consolidated provision for income taxes included in the Consolidated Statements of Income consisted of the following:

For the year ended

In millions 2021 2020 2019

Current taxes

Current tax expense (benefit)

Federal $ ( 81 ) $ 6 $ 5

1 unchanged sentence

Foreign 138 93 141

115.5 147.6 81.2

Deferred taxes

Deferred tax expense (benefit)

Federal 87 36 20

1 unchanged sentence

Foreign ( 9 ) ( 5 ) ( 50 )

29.4 ( 27.3 ) ( 5.3 )

Total provision $ 172 $ 145 $ 120

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Research and development credit ( 0.8 ) ( 1.3 ) ( 1.7 )

tax rate change — — ( 0.6 )

tax reform provision (benefit) 1.3 2.0 ( 1.4 )

net operating loss carryback ( 3.4 ) — —

Changes in valuation allowance 3.0 ( 2.0 ) 3.5

tax reform provision 0.7 1.3 2.0

Transaction costs related to acquisitions 0.1 — 1.0

1 unchanged sentence

Effective rate 23.2 % 26.0 % 26.9 %

The decrease in the effective tax rate in 2020 is primarily the result of non-deductible transaction related expenses incurred during 2019 as a result of the GE Transportation acquisition that did not recur in 2020, a decrease in the estimated liabilities resulting from provisions of the Tax Cuts and Jobs Act that were recognized in 2019 and a decrease in foreign tax expense primarily due to favorable changes in the mix of foreign earnings, partially offset by an increase in state income tax expense recognized in 2020.

The decrease in the effective tax rate is primarily the result of filing amended federal and state income tax returns in 2021.

The Company amended the 2019 federal tax return to incorporate changes in tax regulations which generated a net operating loss that was carried back to tax years 2014 to 2016, which were at a higher federal tax rate.

Other, net includes the impact of amended state returns reflecting changes in apportioned state income.

These amendments resulted in a current year tax benefit.

In addition, there was a decrease in the US tax reform provision resulting from the provisions of the Tax Cut and Jobs Act, a decrease in state tax expense and a decrease in foreign tax expense due to mix of taxable income which were partially offset by an increase in valuation allowances.

Components of deferred tax assets and liabilities were as follows:

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Net operating loss carry forwards 102 83

Other 46.6 18.8

Gross deferred income tax assets 509 451

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Net deferred income tax liability $ 221 $ 104

A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

As of December 31, 2020, the valuation allowance for certain foreign deferred tax asset carryforwards was $ 41.7 million primarily in Brazil, China, Denmark, France, the Netherlands and South Africa.

Net operating loss carry-forwards in the amount of $ 312.6 million expire in various periods from December 31, 2021 to December 31, 2040.

A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

As of December 31, 2021, the valuation allowance for certain foreign deferred tax asset carryforwards was $( 64 ) million primarily in China, Denmark, France, the Netherlands, South Africa, and the United States.

The increase in valuation allowance in 2021 is primarily related to state net operating loss carry-forwards that are not expected to be realized.

The Company has net operating loss carry-forwards in the amount of $ 311 million, of which $ 192 million are indefinite lived, $ 66 million expire within ten years and $ 53 million expire in various periods between December 31, 2032 to December 31, 2041.

As of December 31, 2021, the liability for income taxes associated with unrecognized tax benefits was $ 32 million, of which $ 18 million, if recognized, would favorably affect the Company’s effective income tax rate.

As of December 31, 2019, the liability for income taxes associated with unrecognized tax benefits was $ 17.2 million, all of which, if recognized, would favorably affect the Company’s effective tax rate.

As of December 31, 2020, the liability for income taxes associated with unrecognized tax benefits was $ 16 million, of which $ 15 million, if recognized, would favorably affect the Company’s effective income tax rate.

A reconciliation of the beginning and ending amount of the liability for income taxes associated with unrecognized tax benefits follows:

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The Company includes interest and penalties related to unrecognized tax benefits in income tax expense.

As of December 31, 2020, the total interest and penalties accrued was approximately $ 4.5 million.

As of December 31, 2019, the total interest and penalties accrued was approximately $ 4.0 million.

As of December 31, 2021 and 2020, the total interest and penalties accrued was approximately $ 5 million.

With limited exception, the Company is no longer subject to examination by various U.S.

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In millions, except per share data 2021 2020 2019

Numerator for basic and diluted earnings per common share - net income attributable to Wabtec shareholders $ 414.4 $ 326.7 $ 294.9

dividends declared - common shares and non-vested restricted stock ( 92.5 ) ( 80.3 ) ( 46.3 )

Undistributed earnings 321.9 246.4 248.6

Percentage allocated to common shareholders (1) 99.7 % 99.7 % 99.7 %

320.9 245.7 247.9

dividends declared - common shares 92.3 80.0 46.3

dividends declared - preferred shares — ( 0.4 ) —

Numerator for basic earnings per common share $ 413.2 $ 325.3 $ 294.2

Net income attributable to Wabtec common shareholders - basic $ 556 $ 413 $ 325

dividends declared - preferred shares — — 1

Numerator for diluted earnings per common share $ 413.2 $ 325.3 $ 294.2

Denominator for basic earnings per common share - weighted average shares 189.9 170.5 96.0

Net income attributable to Wabtec common shareholders - diluted $ 556 $ 413 $ 326

Weighted average shares outstanding - basic 187.7 189.9 170.5

Effect of dilutive securities:

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Assumed conversion of dilutive stock-based compensation plans 0.4 0.5 0.4

Denominator for diluted earnings per common share - adjusted weighted average shares and assumed conversion 190.4 177.3 96.5

Weighted average shares outstanding - diluted 188.1 190.4 177.3

Net income per common share attributable to Wabtec shareholders

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Diluted $ 2.96 $ 2.17 $ 1.84

(1) Basic weighted-average common shares outstanding 189.9 170.5 96.0

Basic weighted-average common shares outstanding and non-vested restricted stock expected to vest 190.4 171.0 96.3

Percentage allocated to common shareholders 99.7 % 99.7 % 99.7 %

Options to purchase approximately 403,000 , 312,000 , and 135,000 shares of Common Stock were outstanding in 2020, 2019 and 2018, respectively, but were not included in the computation of diluted earnings because their exercise price exceeded the average market price of the Company's common stock.

The Company’s non-vested restricted stock contains rights to receive non-forfeitable dividends, and thus are participating securities requiring the two-class method of computing earnings per share.

The calculation of earnings per share for common stock shown above excludes the income attributable to the non-vested restricted stock from the numerator resulting in a variance between net income used in the numerator and Net income attributable to Wabtec shareholders shown within the Consolidated Statements of Income.

Additionally, the weighted average share counts in the denominator excludes the dilutive impact of the respective non-vested restricted stock.

Approximately 0.4 million, and 0.3 million outstanding shares of Common Stock for the years ended December 31, 2020 and 2019, respectively, were not included in the computation of year-to-date diluted earnings per share because their exercise price exceeded the average market price of the Company's common stock.

STOCK-BASED COMPENSATION PLANS

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Under the Directors Plan options issued become exercisable over a three-year vesting period and expire ten years from the date of grant, and restricted stock issued under the plan vests one year from the date of grant.

As compensation for directors’ fees for the years ended December 31, 2020, 2019 and 2018, the Company issued a total of 23,152 , 15,729 and 12,960 shares, respectively, of restricted stock to non-employee directors.

The amount of restricted stock issued to non-employee directors as compensation for directors’ fees was as follows:

18,142 shares for 2021;

23,152 shares for 2020;

and 15,729 shares for 2019.

The total number of shares issued under the Directors Plan as of December 31, 2021 was 951,175 shares.

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The Company recognized associated tax benefits related to the stock-based compensation plans of $ 1 million, $ 2 million and $ 1 million for the respective periods.

Included in the stock-based compensation expense for 2020 above is $ 2.4 million of expense related to stock options, $ 17.2 million related to non-vested

restricted stock, $ 4.7 million related to restricted stock units, $ 1.2 million related to units issued for Directors’ fees and $ 6.0 million of expense reversal related to incentive stock units.

Included in the stock-based compensation expense for 2021 above is $ 3 million of expense related to stock options, $ 13 million related to non-vested restricted stock, $ 6 million related to restricted stock units, $ 1 million related to units issued for Directors’ fees and $ 23 million of expense related to incentive stock units.

At December 31, 2021, unamortized compensation expense related to those stock options, non-vested restricted shares and incentive stock units expected to vest totaled $ 38 million and will be recognized over a weighted period of 1.3 years.

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Options outstanding at December 31, 2021 were as follows:

Options Weighted

Contractual Number of

Currently Weighted Average

Range of exercise prices Number of

Outstanding Weighted Average

Life Number of

Exercisable Weighted Average

Exercise Price of

Options Currently

Range of exercise prices Outstanding Outstanding Life Exercisable Exercisable

Under $ 35.00

35.00 - 50.00

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531,915 $ 75.40 6.5 308,591 $ 73.39

552,669 $ 69.82 336,114 $ 58.52

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

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The incentive stock units included in the table below represent the number of shares that are expected to vest based on the Company’s estimate for meeting those established performance targets.

As of December 31, 2020, the Company estimates that it will achieve 41 %, 0 % and 100 % for the incentive stock units expected to vest based on performance for the three year periods ending December 31, 2020, 2021, and 2022, respectively, and has recorded incentive compensation expense accordingly.

As of December 31, 2021, the Company estimates that it will achieve 33 %, 121 % and 117 % for the incentive stock awards expected to vest based on performance for the three year periods ending December 31, 2021, 2022, and 2023, respectively, and has recorded incentive compensation expense accordingly.

If estimates of the number of these stock units expected to vest changes in a future accounting period, cumulative compensation expense could increase or decrease and will be recognized in the current period for the elapsed portion of the vesting period and would change future expense for the remaining vesting period.

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Outstanding at December 31, 2021 507,698 607,101 $ 78.06

OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss were:

In millions 2020 2019

Foreign currency translation loss $ ( 260.2 ) $ ( 308.6 )

Unrealized gain (loss) on derivative contracts, net of tax of $ 0.8 and $ 0

Unrealized loss on pension and post-retirement benefit plans, net of tax of $ 27.0 and $ 24.7

( 81.3 ) ( 70.7 )

Total accumulated other comprehensive loss $ ( 339.1 ) $ ( 382.6 )

The changes in accumulated other comprehensive loss by component, net of tax, for the year-ended December 31, 2020 are as follows:

ACCUMULATED OTHER COMPREHENSIVE LOSS

Comprehensive income comprises both net income and the change in equity from transactions and other events and circumstances from non-owner sources.

The changes in Accumulated other comprehensive loss by component, net of tax, for the years ended December 31, 2021, 2020, and 2019 are as follows:

In millions Foreign currency translation Derivative contracts Pension and post retirement benefit plans Total

Balance at December 31, 2018 $ ( 202 ) $ — $ ( 55 ) $ ( 257 )

Other comprehensive income before reclassifications 48.4 5.7 ( 13.5 ) 40.6

Amounts reclassified from accumulated other comprehensive income — — 2.9 2.9

Net current-period other comprehensive income 48.4 5.7 ( 10.6 ) 43.5

Other comprehensive loss before reclassifications ( 106 ) ( 3 ) ( 19 ) ( 128 )

Amounts reclassified from Accumulated other comprehensive loss — — 2 2

Other comprehensive loss, net ( 106 ) ( 3 ) ( 17 ) ( 126 )

Balance at December 31, 2019 $ ( 308 ) $ ( 3 ) $ ( 72 ) $ ( 383 )

Reclassifications out of accumulated other comprehensive loss for the year-ended December 31, 2020 are as follows:

In millions Amount reclassified from accumulated other comprehensive income Affected line item in the Condensed Consolidated Statements of Operations

Amortization of defined pension and post retirement items

Amortization of initial net obligation and prior service cost $ ( 1.5 ) Other income (expense), net

Amortization of net loss (gain) 5.4 Other income (expense), net

3.9 Other income (expense), net

( 1.0 ) Income tax expense

$ 2.9 Net income

The changes in accumulated other comprehensive loss by component, net of tax, for the year-ended December 31, 2019 are as follows:

In millions Foreign currency translation Derivative contracts Pension and post retirement benefit plans Total

Other comprehensive income (loss) before reclassifications 48 6 ( 13 ) 41

Amounts reclassified from Accumulated other comprehensive loss — — 3 3

Other comprehensive income (loss), net 48 6 ( 10 ) 44

Balance at December 31, 2020 $ ( 260 ) $ 3 $ ( 82 ) $ ( 339 )

Other comprehensive income before reclassifications ( 106.4 ) ( 3.2 ) ( 18.5 ) ( 128.1 )

Amounts reclassified from accumulated other comprehensive income — — 2.1 2.1

Net current-period other comprehensive income ( 106.4 ) ( 3.2 ) ( 16.4 ) ( 126.0 )

Other comprehensive (loss) income before reclassifications ( 136 ) ( 8 ) 13 ( 131 )

Amounts reclassified from Accumulated other comprehensive loss — — 4 4

Other comprehensive (loss) income, net ( 136 ) ( 8 ) 17 ( 127 )

Balance at December 31, 2021 $ ( 396 ) $ ( 5 ) $ ( 65 ) $ ( 466 )

Reclassifications out of accumulated other comprehensive loss for the year-ended December 31, 2019 are as follows:

In millions Amount reclassified from accumulated other comprehensive income Affected line item in the Condensed Consolidated Statements of Operations

Amortization of defined pension and post retirement items

Amortization of initial net obligation and prior service cost $ ( 1.5 ) Other income (expense), net

Amortization of net loss (gain) 4.4 Other income (expense), net

2.9 Other income (expense), net

( 0.8 ) Income tax expense

$ 2.1 Net income

The Company leases property and equipment under finance and operating leases.

Amounts reclassified from Accumulated other comprehensive loss are recognized in "Other income, net" with the tax impact recognized in "Income tax expense" on the Consolidated Statements of Income.

The Company leases certain, property, buildings and equipment.

For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments.

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The Company does not separate lease and non-lease components.

As most of the Company's leases do not provide a readily stated discount rate, the Company must estimate our incremental borrowing rate to discount lease payments.

Operating lease expense for the years ended December 31, 2021, 2020, and 2019 were $ 59 million, $ 57 million, and $ 54 million, respectively.

New operating leases of $ 80 million and $ 68 million were added during the years ended December 31, 2021 and 2020, respectively.

Wabtec does not have material financing leases, short-term or variable leases or sublease income.

As most of the Company's leases do not provide a readily stated discount rate, the Company must estimate the rate to discount lease payments using its incremental borrowing rate.

The Company has established discount rates by geographic region ranging from 1 % to 9 %.

The components of lease expense are as follows:

For the year ended December 31,

In millions 2020 2019

Operating lease expense $ 57.3 $ 54.4

Finance lease expense amortization of leased assets 1.2 1.1

Short-term and variable lease expense 0.1 0.6

Sublease income ( 0.4 ) ( 0.5 )

Total $ 58.2 $ 55.6

Scheduled payments of lease liabilities are as follows:

In millions Operating Leases Finance

2021 $ 56.4 $ 0.4 $ 56.8

2022 50.1 0.2 50.3

2023 43.4 0.2 43.6

2024 37.9 0.2 38.1

2025 32.4 0.1 32.5

Scheduled payments of Operating lease liabilities are as follows:

In millions Operating Leases

Thereafter 113

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Operating leases 8.2 7.4

Finance leases 4.5 5.2

Weighted-average discount rate

Operating leases 2.3 % 2.7 %

Finance leases 1.4 % 1.4 %

The following table reconciles the changes in the Company’s product warranty reserve as follows:

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Balance at end of year $ 259 $ 279

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

Hedging Activities In the normal course of business, we are exposed to interest rate, commodity price and foreign currency exchange rate fluctuations.

At times, we limit these risks through the use of derivatives such as cross-currency swaps, foreign currency forward contracts, interest rate swaps, commodity forwards and futures.

FAIR VALUE MEASUREMENT AND DERIVATIVE INSTRUMENTS

ASC 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value and explains the related disclosure requirements.

ASC 820 indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability and defines fair value based upon an exit price model.

Valuation Hierarchy.

ASC 820 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value.

This hierarchy prioritizes the inputs into three broad levels as follows.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company’s cash and cash equivalents are highly liquid investments purchased with an original maturity of three months or less and are considered Level 1 on the fair value valuation hierarchy.

The fair value of cash and cash equivalents approximated the carrying value at December 31, 2021 and December 31, 2020.

The Company’s defined benefit pension plan assets consist primarily of equity security funds, debt security funds, insurance contracts, and temporary cash and cash equivalent investments.

These investments are comprised of a number of investment funds that invest in a diverse portfolio of assets including equity securities, corporate and governmental bonds, and money markets.

Trusts are valued at the net asset value (“NAV”) as determined by their custodian.

NAV represents the accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the total shares outstanding at the reporting dates (see Note 10).

The Senior Notes are considered Level 2 based on the fair value valuation hierarchy.

Contingent consideration related to the GE Transportation acquisition is considered Level 3 based on the fair value valuation hierarchy.

At December 31, 2021 and 2020, $ 110 million and $ 130 million, respectively, were classified as "Other accrued liabilities" on the Company's Consolidated Balance Sheets and $ 141 million and $ 218 million, respectively, were included within long-term liabilities shown as "Contingent consideration" on the Company's Consolidated Balance Sheets.

The fair value approximates the carrying value at December 31, 2021 and 2020.

Hedging Activities In the normal course of business, the Company is exposed to market risks related to interest rates, commodity prices and foreign currency exchange rate fluctuations, which may adversely affect our operating results and financial position.

At times, we limit these risks through the use of derivatives such as cross-currency swaps, foreign currency forward contracts, interest rate swaps, commodity swaps and options.

These hedging contracts are valued using broker quotations, or market transactions in either the listed or over-the counter markets.

As such, these derivative instruments are classified within level 2.

In accordance with our policy, derivatives are only used for hedging purposes.

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The Company uses forward contracts to hedge forecasted foreign currency denominated sales of finished goods and future settlement of foreign currency denominated assets and liabilities.

Derivatives used to hedge forecasted transactions and

specific cash flows associated with foreign currency denominated financial assets and liabilities that meet the criteria for hedge accounting are designated as cash flow hedges.

The effective portion of gains and losses is deferred as a component of accumulated other comprehensive income and is recognized in earnings at the time the hedged item affects earnings, in the same line item as the underlying hedged item.

Derivatives used to hedge firm commitments relevant to sales and purchases and forecasted transactions to be realized with high probability that meet the criteria for hedge accounting are designated as cash flow hedges.

The effective portion of gains and losses is deferred as a component of Accumulated other comprehensive loss and is recognized in earnings at the time the hedged item affects earnings, in the same line item as the underlying hedged item.

For the years ended December 31, 2021, 2020 and 2019, the amounts reclassified into income were not material.

The Company has established revenue hedging, balance sheet risk management and net investment hedging programs to protect against volatility of future foreign currency cash flows and changes in fair value caused by volatility in foreign exchange rates.

The Company has also established balance sheet risk management and net investment hedging programs to protect its balance sheet against foreign currency exchange rate volatility.

We conduct our business worldwide in U.S.

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Changes in these foreign currency exchange rates could have a material adverse impact on our financial results that are reported in U.S.

We are also exposed to foreign currency exchange rate risk related to our foreign subsidiaries, including intercompany loans denominated in non-functional currencies and net purchases and sales in non-functional currencies.

We are also exposed to foreign currency exchange rate risk related to our foreign subsidiaries, including intercompany loans denominated in non-functional currencies.

We hedge these exposures using foreign currency swap contracts and cross-currency swaps to offset the potential income statement effects on intercompany loans denominated in non-functional currencies.

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The Company enters into certain derivative contracts in accordance with its risk management strategy that do not meet the criteria for hedge accounting, but which have the impact of largely mitigating foreign currency exposure.

These foreign exchange contracts are accounted for on a full mark to market basis through earnings, with gains and losses recorded as a component of other expense, net.

The net loss related to these contracts was $ 0.9 million for the twelve months ended December 31, 2020.

These contracts are scheduled to mature within one year .

The following table summarizes the gross notional amounts and fair values of the designated and non-designated hedges discussed in the above sections as of December 31, 2020:

These foreign exchange contracts are accounted for on a full mark to market basis through earnings, with gains and losses recorded as a component of Other income, net.

The net (loss) gain related to these contracts were $( 5 ), $( 1 ) and $ 2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

These contracts typically mature within one year .

The following table summarizes the assets, liabilities, gross notional amounts, fair values, and fair value hierarchy classification of the designated and non-designated hedges discussed in the above sections as of December 31, 2021, which are included in other current assets and liabilities on the Consolidated Balance Sheets:

Fair Value Gross Notional Amount

In millions Designated Non-Designated Designated Non-Designated

In millions Level Designated Non-Designated Designated Non-Designated

Foreign Exchange Contracts

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Other current assets 2 — — 14 —

Other current liabilities ( 26.0 ) — 613.2 —

Total $ 7 $ ( 2 ) $ 1,254 $ 289

The following table summarizes the gross notional amounts and fair values of the designated and non-designated hedged discussed in the above sections as of December 31, 2019:

The following table summarizes the assets, liabilities, gross notional amounts, fair values, and fair value hierarchy classification of the designated and non-designated hedges discussed in the above sections as of December 31, 2020, which are included in other current assets and liabilities on the Consolidated Balance Sheets:

Fair Value Gross Notional Amount

In millions Designated Non-Designated Designated Non-Designated

In millions Level Designated Non-Designated Designated Non-Designated

Foreign Exchange Contracts

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Cross-currency Swaps

Other current assets — — — —

Other current liabilities 2 ( 26 ) — 613 —

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The Company does not use leveraged swaps and, in general, does not leverage any of its investment activities that would put principal capital at risk.

For the twelve months ended December 31, 2020 the amounts reclassified into income were not material.

For the years ended December 31, 2021, 2020 and 2019, the amounts reclassified into income were not material.

Commodity Price Risk

The Company may use commodity forward contracts and futures to manage its exposure to commodity price changes and to reduce its overall cost of manufacturing.

For the twelve months ended December 31, 2020 the amounts reclassified into income were not material.

FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value and explains the related disclosure requirements.

Valuation Hierarchy.

ASC 820 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value.

This hierarchy prioritizes the inputs into three broad levels as follows.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2020, which are included in other current assets and liabilities on the Consolidated Balance sheet:

Fair Value Measurements at December 31, 2020 Using

Total Carrying

December 31, Quoted Prices in

Active Markets for

Identical Assets Significant Other

Observable Inputs Significant

In millions 2020 (Level 1) (Level 2) (Level 3)

Foreign Exchange Contracts

Other Current Assets 9.7 — 9.7 —

Other Current Liabilities 5.4 — 5.4 —

Cross-Currency Swap Agreement

Other Current Liabilities 26.0 — 26.0 —

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2019, which are included in other current assets and liabilities on the Consolidated Balance sheet

Fair Value Measurements at December 31, 2019 Using

Total Carrying

December 31, Quoted Prices in

Active Markets for

Identical Assets Significant Other

Observable Inputs Significant

In millions 2019 (Level 1) (Level 2) (Level 3)

Foreign Exchange Contracts

Other Current Assets 12.6 12.6 —

Other Current Liabilities 9.8 9.8 —

Cross-Currency Swap Agreement

Other Current Liabilities 9.4 9.4 —

As a result of our global operating activities, the Company is exposed to market risks from changes in foreign currency exchange rates, which may adversely affect our operating results and financial position.

When deemed appropriate, the Company minimizes these risks through entering into foreign currency forward contracts.

The foreign currency forward contracts are valued using broker quotations, or market transactions in either the listed or over-the counter markets.

As such, these derivative instruments are classified within level 2.

The Company’s cash and cash equivalents are highly liquid investments purchased with an original maturity of three months or less and are considered Level 1 on the fair value valuation hierarchy.

The fair value of cash and cash equivalents approximated the carrying value at December 31, 2020 and December 31, 2019.

The Company’s defined benefit pension plan

assets consist primarily of equity security funds, debt security funds and temporary cash and cash equivalent investments.

These investments are comprised of a number of investment funds that invest in a diverse portfolio of assets including equity securities, corporate and governmental bonds, and money markets.

Trusts are valued at the net asset value (“NAV”) as determined by their custodian.

NAV represents the accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the total shares outstanding at the reporting dates.

The Senior Notes are considered Level 2 based on the fair value valuation hierarchy.

Contingent consideration related to the GE Transportation acquisition is considered Level 3 based on the fair value valuation hierarchy and includes $ 130.0 million classified as "Other accrued liabilities" on the Company's consolidated balance sheet and $ 218.1 million in long-term liabilities classified as "Contingent consideration" on the Company's consolidated balance sheet.

The fair value approximates the carrying value at December 31, 2020.

The Company may use commodity forward swaps to manage its exposure to commodity price changes and to reduce its overall cost of manufacturing.

For the years ended December 31, 2021, 2020 and 2019, the amounts reclassified into income were not material.

COMMITMENTS AND CONTINGENCIES

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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.

Under terms of the purchase agreement and related documents for the 1990 acquisition, Ingersoll Rand, the successor-in-interest to American Standard, Inc.

(“Ingersoll”), has indemnified the Company for certain items including, among other things, certain environmental claims the Company asserted prior to 2000.

If Ingersoll was unable to honor or meet these indemnifications, the Company would be responsible for such items.

In the opinion of Management, Ingersoll currently has the ability to meet its indemnification obligations.

Claims have been filed against the Company and certain of its affiliates in various jurisdictions across the United States by persons alleging bodily injury as a result of exposure to asbestos-containing products.

Most of these claims have been made against our wholly owned subsidiary, Railroad Friction Products Corporation (“RFPC”), and the vast majority of the claims, including all of the RFPC claims, are submitted to insurance carriers for defense and indemnity, or to non-affiliated companies that retain the liabilities for the asbestos-containing products at issue.

The vast majority of the claims are submitted to insurance carriers for defense and indemnity, or to non-affiliated companies that retain the liabilities for the asbestos-containing products at issue.

We cannot, however, assure that all of these claims will be fully covered by insurance, or that the indemnitors or insurers will remain financially viable.

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A limited number of claims are not covered by insurance, nor are they subject to indemnity from non-affiliated parties.

Wabtec has incurred defense, administrative and indemnity costs in connection with these actions, but these costs have not been material, and the Company has no information that would suggest these costs would become material in the foreseeable future.

Based on the Company’s history in resolving all asbestos claims over the last twenty years, Management believes that the costs of the Company’s asbestos-related cases will not be material to the Company’s overall financial position, results of operations and cash flows.

Management believes that the costs of the Company’s asbestos-related cases will not be material to the Company’s overall financial position, results of operations and cash flows.

Xorail, Inc., a wholly owned subsidiary of the Company (“Xorail”), has received notices from Denver Transit Constructors (“DTC”) alleging breach of contract related to the operating of constant warning wireless crossings, and late delivery of the Train Management & Dispatch System (“TMDS”) for the Denver Eagle P3 Project, which is owned by the Denver Regional Transit District ("RTD").

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the trial has been completed, included post-trial submission.

No decision is expected until March or April 2021.

On April 3, 2018, the Company and Knorr-Bremse AG entered into a consent decree with the United States Department of Justice resolving allegations that the Company and Knorr-Bremse AG had maintained unlawful agreements not to compete for each other’s employees.

The allegations also related to Faiveley Transport before it was acquired by the Company in

November 2016.

No monetary fines or penalties were imposed on the Company.

The Company elected to settle this matter with the Department of Justice to avoid the cost and distraction of litigation.

Putative class action lawsuits thereafter were filed in several different federal district courts naming the Company and Knorr as defendants in connection with the allegations contained in the consent decree.

The lawsuits seek unspecified damages on behalf of employees of the Company (including Faiveley Transport) and Knorr allegedly caused by the defendants’ actions.

A federal Multi-District Litigation (MDL) Panel consolidated the cases in the Western District of Pennsylvania, and on October 12, 2018, a consolidated class action complaint was filed in the Western District of PA with five named plaintiffs.

On August 13, 2019, the Company was notified that co-defendant Knorr-Bremse settled with plaintiffs.

On January 21, 2020, following Court-sponsored early mediation, the Company entered into a Memorandum of Understanding with plaintiffs, agreeing to settle all claims in the case.

In March 2020, the Court issued preliminary approval of the agreed settlement terms and amount.

In December 2020, payments were distributed to class members.

From time to time the Company is involved in litigation relating to claims arising out of its operations in the ordinary course of business.

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The change in the Company’s reportable segments was effective in the fourth quarter of 2019 and is reflected below.

The Company believes these changes better present Management's new view of the business.

The Company believes these changes better present Management's view of the business.

The Company’s business segments are:

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Customers include large, publicly traded railroads, leasing companies, manufacturers of original equipment such as locomotives and freight cars, and utilities.

to sales of both goods, such as spare parts and equipment upgrades, and related services, such as monitoring, maintenance and repairs, as sales in our Services product line.

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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Corporate activities include general corporate expenses, elimination of intersegment transactions, interest income and expense and other unallocated charges.

The changes to the asset groups comprising the Freight and Transit segments have been reflected through retrospective revision of prior period segment information.

Segment financial information for 2021 is as follows:

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Interest expense and other, net — — ( 188 ) ( 188 )

Income (loss) before income taxes $ 642.9 $ 214.4 $ ( 410.5 ) $ 446.8

Income (loss) from operations before income taxes $ 584 $ 230 $ ( 257 ) $ 557

Depreciation and amortization $ 393 $ 67 $ 13 $ 473

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Total $ 7,822 $ 7,556 $ 8,200 $ 1,497 $ 1,601

Net sales by product line are as follows:

Net sales to external customers by product line are as follows:

In millions 2021 2020 2019

Freight Segment:

Services $ 2,430 $ 2,068 $ 1,991

Equipment 1,302 1,531 1,700

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Digital Electronics 640 664 677

Services 2,068.1 1,991.1 123.2

Total Freight Segment sales $ 5,239 $ 5,082 $ 5,441

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In millions 2021 2020 2019

Foreign currency loss $ ( 8.2 ) $ ( 13.5 ) $ ( 5.7 )

Foreign currency gain (loss) $ 8 $ ( 8 ) $ ( 14 )

Equity income 20 10 8

Expected return on pension assets/amortization 9 10 10

Other miscellaneous (expense) income 0.1 ( 1.7 ) 1.2

Other miscellaneous income (expense) 1 ( 1 ) ( 1 )

Total Other income, net $ 38 $ 11 $ 3

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President and Chief Executive Officer and Director (Principal Executive Officer)

By / S / P ATRICK D.

By / S / J OHN A.

February 17, 2022

Executive Vice President Finance and Chief Financial Officer (Principal Financial Officer)

Executive Vice President and Chief Financial Officer (Principal Financial Officer)

By / S / J OHN A.

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February 17, 2022

By / S / E RWAN F AIVELEY

By / S / B YRON F OSTER

February 17, 2022

Erwan Faiveley,

Byron Foster,

By / S / L EE B.

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February 17, 2022

Signature and Title

By / S / B RIAN P.

5 unchanged sentences

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 9A. Controls and Procedures