What changed in this filing

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Item 1. Financial Statements

2022-04-27 compared with 2021-10-27 · 195 added, 375 removed, 441 unchanged (56% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

In millions, except par value September 30,

In millions, except par value March 31,

2022 December 31,

Cash, cash equivalents and restricted cash $ 456.4 $ 598.7

Cash and cash equivalents $ 488 $ 473

Accounts receivable 998 1,085

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500.0 shares authorized:

226.9 and 226.9 shares issued and 186.8 and 188.9 outstanding at September 30, 2021 and December 31, 2020, respectively

226.9 and 226.9 shares issued and 182.9 and 185.8 outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 7,917 7,916

Treasury stock, at cost, 40.1 and 38.0 shares, at September 30, 2021 and December 31, 2020, respectively

Treasury stock, at cost, 44.0 and 41.1 shares, at March 31, 2022 and December 31, 2021, respectively

( 1,597 ) ( 1,306 )

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Unaudited Unaudited

Three Months Ended

September 30, Nine Months Ended

September 30,

In millions, except per share data 2022 2021

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Net income 150 115

Net (income) loss attributable to noncontrolling interest ( 1.2 ) ( 0.4 ) ( 3.9 ) 1.0

Net income attributable to noncontrolling interest ( 1 ) ( 3 )

Net income attributable to Wabtec shareholders $ 149 $ 112

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited Unaudited

Three Months Ended

September 30, Nine Months Ended

September 30,

In millions 2022 2021

Net income attributable to Wabtec shareholders $ 149 $ 112

Foreign currency translation (loss) gain ( 59.9 ) 53.8 ( 87.8 ) ( 98.4 )

Unrealized (loss) gain on derivative contracts ( 0.4 ) 2.8 ( 7.8 ) 1.8

Foreign currency translation gain (loss) 13 ( 62 )

Unrealized gain (loss) on derivative contracts 3 ( 8 )

Unrealized gain (loss) on pension benefit plans and post-retirement benefit plans 1 ( 3 )

Other comprehensive (loss) income before tax ( 55.9 ) 56.0 ( 95.6 ) ( 100.1 )

Income tax (expense) benefit related to components of Other comprehensive (loss) income ( 0.9 ) ( 0.5 ) 2.1 0.4

Other comprehensive (loss) income, net of tax ( 56.8 ) 55.5 ( 93.5 ) ( 99.7 )

Other comprehensive income (loss) before tax 17 ( 73 )

Income tax benefit related to components of Other comprehensive income (loss) — 3

Other comprehensive income (loss), net of tax 17 ( 70 )

Comprehensive income attributable to Wabtec shareholders $ 166 $ 42

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

In millions 2022 2021

1 unchanged sentence

Net income $ 150 $ 115

Adjustments to reconcile Net income to cash provided by (used for) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 122 120

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Purchase of property, plant and equipment ( 20 ) ( 27 )

Proceeds from disposal of assets and businesses 8.3 19.1

Proceeds from disposal of property, plant and equipment 2 6

Acquisitions of businesses, net of cash acquired — ( 401 )

1 unchanged sentence

Financing Activities

Proceeds from debt 4,328.6 2,936.0

Proceeds from debt, net of issuance costs 2,012 1,435

Payments of debt ( 1,817 ) ( 1,398 )

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Other financing activities ( 4 ) ( 5 )

Net cash used for financing activities ( 433.3 ) ( 360.8 )

Net cash (used for) provided by financing activities ( 133 ) 8

Effect of changes in currency exchange rates 5 7

Decrease in cash ( 142.3 ) ( 44.9 )

Cash, cash equivalents and restricted cash, beginning of period 598.7 604.2

Cash, cash equivalents and restricted cash, end of period $ 456.4 $ 559.3

Increase (decrease) in cash 15 ( 115 )

Cash and cash equivalents, beginning of period 473 599

Cash and cash equivalents, end of period $ 488 $ 484

The accompanying notes are an integral part of these statements.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

In millions, except 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

In millions 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, 2021 226.9 $ 2 $ 7,916 ( 41.1 ) $ ( 1,306 ) $ 4,055 $ ( 466 ) $ 38 $ 10,239

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Net income — — — — — 149 — 1 150

Other comprehensive loss, net of tax — — — — — — ( 69.9 ) — ( 69.9 )

Stock repurchase — — — — ( 1.2 ) — — — ( 1.2 )

Other — — — — — — — 0.3 0.3

Balance, March 31, 2021 226.9 $ 2.0 $ 7,883.9 ( 38.0 ) $ ( 1,011.1 ) $ 3,678.3 $ ( 409.0 ) $ 33.0 $ 10,177.1

Cash dividends ($ 0.12 dividend per share)

— — — — — ( 23.0 ) — — ( 23.0 )

Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax — — ( 1.1 ) 0.1 2.5 — — — 1.4

Stock based compensation — — 13.9 — — — — — 13.9

Net income — — — — — 124.8 — 0.4 125.2

Other comprehensive income, net of tax — — — — — — 17 — 17

Balance, June 30, 2021 226.9 $ 2.0 $ 7,896.7 ( 37.9 ) $ ( 1,008.6 ) $ 3,780.1 $ ( 375.8 ) $ 33.4 $ 10,327.8

Cash dividends ($ 0.12 dividend per share)

— — — — — ( 22.9 ) — — ( 22.9 )

Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax — — 0.8 0.1 1.5 — — — 2.3

Stock based compensation — — 8.1 — — — — — 8.1

Net income — — — — — 130.6 — 1.2 131.8

Other comprehensive loss, net of tax — — — — — — ( 56.8 ) — ( 56.8 )

Stock repurchase — — — ( 3.1 ) ( 296 ) — — — ( 296 )

Balance, September 30, 2021 226.9 $ 2.0 $ 7,905.6 ( 40.1 ) $ ( 1,206.2 ) $ 3,887.8 $ ( 432.6 ) $ 34.6 $ 10,191.2

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (CONTINUED)

Balance, March 31, 2022 226.9 $ 2 $ 7,917 ( 44.0 ) $ ( 1,597 ) $ 4,176 $ ( 449 ) $ 39 $ 10,088

Balance, December 31, 2020 226.9 $ 2 $ 7,881 ( 38.0 ) $ ( 1,010 ) $ 3,589 $ ( 339 ) $ 30 $ 10,153

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Stock based compensation — — 9 — — — — — 9

Net income (loss) — — — — — 111.6 — ( 0.4 ) 111.2

Net income — — — — — 112 — 3 115

Other comprehensive loss, net of tax — — — — — — ( 70 ) — ( 70 )

Stock repurchase — — — — ( 1 ) — — — ( 1 )

Other — — ( 4.3 ) — — — — ( 0.8 ) ( 5.1 )

Balance, March 31, 2021 226.9 $ 2 $ 7,884 ( 38.0 ) $ ( 1,011 ) $ 3,678 $ ( 409 ) $ 33 $ 10,177

Cash dividends ($ 0.12 dividend per share)

— — — — — ( 23.4 ) — — ( 23.4 )

Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax — — ( 0.6 ) 0.1 0.9 — — — 0.3

Stock based compensation — — ( 2.7 ) — — — — — ( 2.7 )

Net income (loss) — — — — — 86.8 — ( 1.0 ) 85.8

Other comprehensive income, net of tax — — — — — — 22.8 — 22.8

Other — — — — — — — 0.1 0.1

Balance, June 30, 2020 226.9 $ 2.0 $ 7,871.7 ( 36.6 ) $ ( 909.3 ) $ 3,419.0 $ ( 537.8 ) $ 35.0 $ 9,880.6

Cash dividends ($ 0.12 dividend per share)

— — — — — ( 22.8 ) — — ( 22.8 )

Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax — — 0.4 — ( 0.1 ) — — — 0.3

Stock based compensation — — 10.2 — — — — — 10.2

Net income — — — — — 128.0 — 0.5 128.5

Other comprehensive income, net of tax — — — — — — 55.6 — 55.6

Balance, September 30, 2020 226.9 $ 2.0 $ 7,882.3 ( 36.6 ) $ ( 909.4 ) $ 3,524.2 $ ( 482.2 ) $ 35.5 $ 10,052.4

The accompanying notes are an integral part of these statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021 (UNAUDITED)

Westinghouse Air Brake Technologies Corporation (“Wabtec” or the "Company") is one of the world’s largest providers of locomotives, value-added, technology-based equipment, systems and services for the global freight rail and passenger transit industries.

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022 (UNAUDITED)

Westinghouse Air Brake Technologies Corporation (“Wabtec” or the "Company") is one of the world’s largest providers of value-added, technology-based locomotives, equipment, systems, and services for the global freight rail and passenger transit industries.

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.

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 the first nine months of 2021, approximately 58 % of the Company’s revenues came from customers outside the United States.

In the first three months of 2022, approximately 60 % of the Company’s net sales came from customers outside the United States.

ACCOUNTING POLICIES

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In management’s opinion, these financial statements reflect all adjustments of a normal, recurring nature necessary for a fair presentation of the results for the interim periods presented.

Results for these interim periods are not necessarily indicative of results to be expected for the full year particularly in light of the ongoing COVID-19 pandemic that is continuing to impact our sales channels, supply chain, manufacturing operations, workforce, and other key aspects of our operations and the high degree of uncertainty regarding the pandemic's duration and severity, availability and effectiveness of vaccines, impact of variants of the disease, actions to control it, and the potential impact on global economic activity, global supply chain operations and our customers, suppliers, and end-markets.

Certain prior year amounts have been reclassified, where necessary, to conform to the current year presentation.

Results for these interim periods are not necessarily indicative of results to be expected for the full year particularly in light of the ongoing COVID-19 pandemic, supply chain disruptions, labor availability, broad-based inflation, and the impacts resulting from Russia's invasion of Ukraine.

These factors continue to impact our sales channels, supply chain, manufacturing operations, workforce, and other key aspects of our operations.

We are unable to reasonably predict the full impact of these factors due to the high degree of uncertainty regarding their duration and severity, their potential impact on global economic activity, and the impact that current and new sanctions may have on our business, global supply chain operations and our customers, suppliers, and end-markets.

For the year ended December 31, 2021, Wabtec had earnings of approximately $ 40 million attributable to customers in Russia, while earnings from customers in Ukraine and Belarus were no t significant.

As of March 31, 2022, Wabtec had approximately $ 16 million of assets related to Russian operations, which were primarily cash and inventory.

Assets related to Ukraine and Belarus operations are not significant.

The Company operates on a four-four-five week accounting quarter, and the quarters end on or about March 31, June 30, September 30 and December 31.

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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.

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.

Due to the nature of work required to be performed on the Company’s long-term projects, the estimation of total revenue and cost at completion is subject to many variables and requires significant judgment.

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complexity of the work to be performed;

performance of suppliers, customers and subcontractors that may be associated with the contract.

and the performance of suppliers, customers and subcontractors that may be associated with the contract.

We have a disciplined process where management reviews the progress of long term-projects periodically throughout the year.

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Remaining performance obligations represent the transaction price of firm customer orders subject to standard industry cancellation provisions and substantial scope-of-work adjustments.

As of September 30, 2021, the Company's remaining performance obligations were $ 21.1 billion.

As of March 31, 2022, the Company's remaining performance obligations were approximately $ 22.2 billion.

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

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.

Revolving Receivables Program The Company utilizes a revolving agreement to transfer up to $ 200 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 held receivables of $ 284.8 million at September 30, 2021 that are pledged as collateral under this agreement.

As customers pay their balances, we transfer additional receivables into the program, which resulted in our gross receivables sold exceeding collections reinvested for the periods presented.

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

At March 31, 2022 and 2021 the bankruptcy-remote subsidiary held receivables of $ 367 million and $ 260 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 September 30, 2021 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.

No obligation was recorded at March 31, 2022 or 2021 as the estimated expected credit losses on receivables sold is insignificant.

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

The Company has agreed to guarantee the performance of the Originators respective obligations under the revolving agreement.

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The following table sets forth a summary of receivables sold:

In millions Nine Months Ended

September 30, 2021 Nine Months Ended

September 30, 2020

In millions Three Months Ended

March 31, 2022 Three Months Ended

March 31, 2021

Gross receivables sold/cash proceeds received $ 312 $ 258

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The Company tests goodwill and indefinite-lived intangible assets for impairment at the reporting unit level and at least annually.

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 the carrying value may not be recoverable.

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 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 to be performed.

Accounting Standards Recently Adopted 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 is 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.

Accumulated Other Comprehensive Income (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 three months ended September 30, 2021 are as follows:

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

Balance at June 30, 2021 $ ( 288.1 ) $ ( 3.1 ) $ ( 84.6 ) $ ( 375.8 )

Other comprehensive (loss) income before reclassifications ( 59.9 ) ( 0.3 ) 2.7 ( 57.5 )

Amounts reclassified from Accumulated other comprehensive loss — — 0.7 0.7

Other comprehensive (loss) income, net ( 59.9 ) ( 0.3 ) 3.4 ( 56.8 )

Balance at September 30, 2021 $ ( 348.0 ) $ ( 3.4 ) $ ( 81.2 ) $ ( 432.6 )

The changes in Accumulated other comprehensive loss by component, net of tax, for the three months ended September 30, 2020 are as follows:

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

Balance at June 30, 2020 $ ( 460.8 ) $ ( 4.1 ) $ ( 72.9 ) $ ( 537.8 )

Other comprehensive income (loss) before reclassifications 53.8 2.2 ( 1.1 ) 54.9

Amounts reclassified from Accumulated other comprehensive loss — — 0.7 0.7

Other comprehensive income (loss), net 53.8 2.2 ( 0.4 ) 55.6

Balance at September 30, 2020 $ ( 407.0 ) $ ( 1.9 ) $ ( 73.3 ) $ ( 482.2 )

The changes in Accumulated other comprehensive loss by component, net of tax, for the nine months ended September 30, 2021 are as follows:

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

Accounting Standards Recently Issued In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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.

Accumulated Other Comprehensive Loss Comprehensive income comprises both net income and Other comprehensive income (loss) resulting from the change in equity from transactions and other events and circumstances from non-owner sources.

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the three months ended March 31, 2022 are as follows:

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

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

Other comprehensive loss before reclassifications ( 87.8 ) ( 5.8 ) ( 2.1 ) ( 95.7 )

Other comprehensive income before reclassifications 13 3 — 16

Amounts reclassified from Accumulated other comprehensive loss — — 1 1

Other comprehensive (loss) income, net ( 87.8 ) ( 5.8 ) 0.1 ( 93.5 )

Balance at September 30, 2021 $ ( 348.0 ) $ ( 3.4 ) $ ( 81.2 ) $ ( 432.6 )

The changes in Accumulated other comprehensive loss by component, net of tax, for the nine months ended September 30, 2020 are as follows:

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

Other comprehensive income, net 13 3 1 17

Balance at March 31, 2022 $ ( 383 ) $ ( 2 ) $ ( 64 ) $ ( 449 )

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the three months ended March 31, 2021 are as follows:

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

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

Other comprehensive (loss) income before reclassifications ( 98.4 ) 1.4 ( 4.8 ) ( 101.8 )

Other comprehensive loss before reclassifications ( 62 ) ( 6 ) ( 3 ) ( 71 )

Amounts reclassified from Accumulated other comprehensive loss — — 1 1

Other comprehensive (loss) income, net ( 98.4 ) 1.4 ( 2.6 ) ( 99.6 )

Balance at September 30, 2020 $ ( 407.0 ) $ ( 1.9 ) $ ( 73.3 ) $ ( 482.2 )

Other comprehensive loss, net ( 62 ) ( 6 ) ( 2 ) ( 70 )

Balance at March 31, 2021 $ ( 322 ) $ ( 3 ) $ ( 84 ) $ ( 409 )

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

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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:

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

Assets acquired

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Accounts receivable 23

Inventory 34.3

Other current assets 2

Property, plant and equipment 17

Goodwill 214.1

Other intangible assets 168

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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, as the Company has not completed its valuation of assets acquired and liabilities assumed.

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.

Intangible assets acquired include customer relationships and acquired technology 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.

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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 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.

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

The components of inventory, net of reserves, were:

In millions September 30,

In millions March 31,

2022 December 31,

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GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill by segment for the nine months ended September 30, 2021 is as follows:

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

In millions Freight Segment Transit Segment Total

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

Additions 214.1 — 214.1

Additions/adjustments 1 ( 2 ) ( 1 )

Foreign currency impact 17 ( 36 ) ( 19 )

Balance at September 30, 2021 $ 7,077.0 $ 1,527.7 $ 8,604.7

As of September 30, 2021 and December 31, 2020, the Company’s trade names had a net carrying amount of $ 646.9 million and $ 650.7 million, respectively.

Balance at March 31, 2022 $ 7,091 $ 1,476 $ 8,567

As of March 31, 2022 and December 31, 2021, the Company’s trade names had a net carrying amount of $ 621 million and $ 635 million, respectively.

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.

Intangible assets of the Company, other than goodwill and trade names, consist of the following:

In millions September 30,

In millions March 31,

2022 December 31,

Intellectual property, patents, and other intangibles, net of accumulated amortization of $ 301.1 and $ 223.7

$ 988.6 $ 1,007.6

Backlog, net of accumulated amortization of $ 342 and $ 309

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Customer relationships, net of accumulated amortization of $ 345 and $ 331

1,001.6 986.2

Acquired technology, net of accumulated amortization of $ 360 and $ 334

Total $ 3,011 $ 3,070

The weighted average remaining useful life of backlog, intellectual property, customer relationships and other intangible assets were 12 years, 11 years, 16 years and 8 years, respectively.

The weighted average remaining useful lives of backlog, customer relationships and acquired technology were 10 years, 17 years and 9 years, respectively.

The backlog intangible asset primarily consists of in-place long-term service agreements acquired by the Company in conjunction with the acquisition of GE Transportation in 2019.

Amortization expense for intangible assets was $ 72.5 million and $ 214.7 million for the three and nine months ended September 30, 2021, and $ 70.3 million and $ 211.6 million for the three and nine months ended September 30, 2020, respectively.

Amortization expense for intangible assets was $ 73 million and $ 70 million for the three months ended March 31, 2022 and 2021, respectively.

Amortization expense for the five succeeding years is estimated to be as follows:

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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 $ 149.4 million at September 30, 2021 and $ 101.0 million at December 31, 2020.

Noncurrent contract assets were $ 184 million at March 31, 2022 and $ 153 million at December 31, 2021.

Included in noncurrent contract assets are certain costs that are specifically related to a contract but do not directly contribute to the transfer of control of the tangible product being created, such as non-recurring engineering costs.

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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 $ 83.1 million at September 30, 2021 and $ 79.6 million at December 31, 2020.

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 sheets.

Noncurrent contract liabilities were $ 86 million at March 31, 2022 and $ 88 million at December 31, 2021.

These contract liabilities are not considered a significant financing component because they are used to meet working capital demands that can be higher in the early stages of a contract or revenue associated with the contract liabilities is expected to be recognized within one year.

Contract liabilities also include provisions for estimated losses from uncompleted contracts.

Provisions for loss contracts were $ 119.8 million and $ 108.9 million at September 30, 2021 and December 31, 2020, respectively.

These provisions for estimated losses are classified as current liabilities and included within the caption “Other accrued liabilities” on the consolidated balance sheets.

The change in the carrying amount of contract assets and contract liabilities for the nine months ended September 30, 2021 and 2020 is as follows:

Provisions for loss contracts were $ 106 million and $ 107 million at March 31, 2022 and December 31, 2021, respectively.

These provisions for

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

The change in the carrying amount of contract assets and contract liabilities for the three months ended March 31, 2022 and 2021 is as follows:

Contract Assets

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Balance at beginning of year $ 545 $ 544

Acquisitions — 4.1

Recognized in current year 165 233

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Foreign currency impact ( 2 ) ( 5 )

Balance at September 30

$ 556.1 $ 517.3

Balance at March 31

Contract Liabilities

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Foreign currency impact ( 4 ) ( 10 )

Balance at September 30 $ 759.8 $ 809.8

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

Balance at March 31 $ 816 $ 833

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.

Many of the Company's leases include rental escalation clauses, renewal options, and/or termination options that are factored into our determination of lease payments when appropriate.

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

The right-of-use assets are classified as non-current and included within the caption "Other noncurrent assets" on the consolidated balance sheets.

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

The right-of-use assets are classified as noncurrent and included within the caption "Other noncurrent assets" on the consolidated balance sheets.

The current portion of lease liabilities are classified under the caption "Other accrued liabilities," while the noncurrent portion of lease liabilities are classified under the caption "Other long-term liabilities" on the consolidated balance sheets.

Operating lease expense for the three months ended March 31, 2022 and 2021, was $ 15 million and $ 14 million, respectively.

New operating leases of $ 2 million were added during the three months ended March 31, 2022.

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:

Three Months Ended September 30, Nine Months Ended September 30,

In millions 2021 2020 2021 2020

Operating lease expense $ 15.3 $ 14.1 $ 43.8 $ 42.9

Finance lease expense amortization of leased assets 0.2 0.3 0.4 0.9

Short-term and variable lease expense 0.1 — 0.4 0.1

Sublease income ( 0.1 ) ( 0.1 ) ( 0.3 ) ( 0.3 )

Total $ 15.5 $ 14.3 $ 44.3 $ 43.6

Scheduled payments of lease liabilities are as follows:

In millions Operating Leases Finance

In millions Operating Leases

Remaining 2022 $ 43

2022 58.1 0.8 58.9

2023 51.9 0.5 52.4

2024 46.9 0.3 47.2

2025 40.3 0.2 40.5

Thereafter 114

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Present value of lease liabilities $ 304

The following table summarizes the remaining lease term and discount rate assumptions used to develop the present value of lease liabilities:

September 30, 2021 December 31, 2020

The following table summarizes the remaining lease term and discount rate assumptions used to develop the present value of operating lease liabilities:

2022 December 31, 2021

Weighted-average remaining lease term (years) 8.0 8.2

Operating leases 8.1 7.4

Finance leases 3.5 4.5

Weighted-average discount rate 2.3 % 2.3 %

Operating leases 2.4 % 2.7 %

Finance leases 1.4 % 1.4 %

LONG-TERM DEBT

Long-term debt consisted of the following:

Effective Interest Rate September 30, 2021 December 31, 2020

Effective Interest Rate Face Value March 31, 2022 December 31, 2021

In millions Book Value Fair Value 1

Book Value Fair Value 1

Senior Credit and 364 Day Facility 2 :

dollar-denominated Term Loans 3 , net of unamortized debt issuance costs of $ — and $ 0.9

— % — — 645.1 645.1

Multi-Currency Revolving loan facility 4 , net of unamortized debt issuance costs of $ 0.4 and $ 0.8

1.5 % — — — —

Senior Credit Facility:

Multi-Currency Revolving loan facility 2.7 % N/A $ 183 $ 183 $ — $ —

Senior Notes:

4.375 % Senior Notes, due 2023, net of unamortized discount and debt issuance costs of $ 0.5 and $ 0.7

4.375 % Senior Notes, due 2023

4.5 % $ 250 250 253 250 260

4.15 % Senior Notes, due 2024, net of unamortized discount and debt issuance costs of $ 3.3 and $ 4.3

4.15 % Senior Notes, due 2024

4.6 % $ 750 747 763 747 796

3.20 % Senior Notes, due 2025, net of unamortized discount and debt issuance costs of $ 3.6 and $ 4.4

3.20 % Senior Notes, due 2025

3.4 % $ 500 497 490 497 523

3.45 % Senior Notes, due 2026, net of unamortized discount and debt issuance costs of $ 1.1 and $ 1.3

3.45 % Senior Notes, due 2026

3.5 % $ 750 749 732 749 795

1.25 % Senior Notes (EUR), due 2027, net of unamortized discount and debt issuance costs of $ 8.0 and $ —

1.25 % Senior Notes (EUR), due 2027

1.5 % € 500 545 525 560 574

4.70 % Senior Notes, due 2028, net of unamortized discount and debt issuance costs of $ 7.4 and $ 8.2

4.70 % Senior Notes, due 2028

5.0 % $ 1,250 1,243 1,316 1,243 1,423

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See Note 13 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.

Multi-Currency Revolving loan facility includes total outstanding amounts drawn against 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.

For those debt securities that have a premium or discount at the time of issuance, the Company amortizes the amount through interest expense based on the maturity date or the first date the holders may require the Company to repurchase the debt securities, if applicable.

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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 September 30, 2021 and December 31, 2020, the Company had total combined unamortized discount and debt issuance costs of $ 24.3 million and $ 20.5 million, respectively.

Credit Facilities

As of March 31, 2022 and December 31, 2021, the Company had total combined unamortized discount and debt issuance costs of $ 21 million and $ 23 million, respectively.

Senior Credit Facility

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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 Alternate Base Rate ("ABR") or the London Interbank Offered Rate ("LIBOR") (each as defined in the Senior Credit Facility) plus applicable margin that is determined based on our credit ratings or the Company's Leverage (as defined in the Senior Credit Facility).

Under the Senior Credit Facility, we can elect to receive advances bearing interest based on either the Alternate Base Rate ("ABR"), the London Interbank Offered Rate ("LIBOR") 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 (as defined in the Senior Credit Facility).

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 (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 interest coverage ratio is defined as EBITDA (earnings before interest, taxes, depreciation, and amortization) to net interest expense (each as defined in the Senior Credit Facility) 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.

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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 September 30, 2021.

The following table presents availability under the Senior Credit Facility at September 30, 2021:

The Company was in compliance with all covenants in the Senior Credit Facility as of March 31, 2022.

The following table presents availability under the Senior Credit Facility at March 31, 2022:

In millions Senior Credit Facility

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Current Availability $ 1,014

364 Day Facility

On April 10, 2020 the Company entered into a $ 600 million 364 day credit facility (" 364 Day Facility") initially scheduled to mature in 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 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").

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"), 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 series of the Senior Notes may be redeemed 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.

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 US Notes and the Compnay'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 are senior to all existing and future subordinated indebtedness of the Company.

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

("Wabtec Netherlands") issued € 500.0 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, 2021.

The Company incurred approximately $ 4.3 million of deferred financing costs related to the issuance of the Euro Notes for total net proceeds of approximately $ 598.7 million after consideration of the discount.

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 are senior to all existing and future subordinated indebtedness of the Company.

The indentures under which the Senior Notes were issued contain covenants and restrictions which limit, subject to certain exceptions, certain sale and leaseback transactions with respect to principal properties, the incurrence of secured debt without equally and ratably securing the Senior Notes, and certain merger and consolidation transactions.

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 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 Euro Notes were issued by Wabtec Transportation Netherlands B.V.

and are fully and unconditionally guaranteed by the Company.

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.

STOCK-BASED COMPENSATION

As of September 30, 2021, the Company maintains employee stock-based compensation plans for stock options, restricted stock, and incentive stock units as governed by the 2011 Stock Incentive Compensation Plan, as amended and restated (the “2011 Plan”) and the 2000 Stock Incentive Plan, as amended (the “2000 Plan”).

The 2011 Plan has a term through May 15, 2030 and provides a maximum of 9.1 million shares for grants or awards, plus any shares which remain available under the 2000 Plan.

The amendment and restatement of the 2011 Plan was approved by stockholders of Wabtec on May 15, 2020.

As of March 31, 2022, the Company maintains employee stock-based compensation plans for stock options, restricted stock, and incentive stock units as governed by the 2011 Stock Incentive Compensation Plan, as amended and restated (the “2011 Plan”) and the 2000 Stock Incentive Plan, as amended (the “2000 Plan”).

The 2011 Plan has a term through May 15, 2030, and as of March 31, 2022 the number of shares available for future grants under the 2011 Plan was 6.1 million shares, which includes remaining shares available under the 2000 Plan.

The Company also maintains a 1995 Non-Employee Directors’ Fee and Stock Option Plan as amended and restated (“the Directors Plan”).

Stock-based compensation expense was $ 10.0 million and $ 12.0 million for the three months ended September 30, 2021 and 2020, respectively, and $ 34.2 million and $ 17.6 million for the nine months ended September 30, 2021 and 2020, respectively.

At September 30, 2021, unamortized compensation expense related to stock options, non-vested restricted shares and incentive stock units expected to vest totaled $ 44.1 million.

Stock-based compensation expense was $ 11 million and $ 8 million for the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, unamortized compensation expense related to stock options, non-vested restricted shares and incentive stock units expected to vest totaled $ 71 million.

Stock Options Stock options are granted to eligible employees at an exercise price equivalent to the stock's fair market value, which is the average of the high and low Wabtec stock price on the date of grant.

Under the 2011 Plan and the 2000 Plan, options granted prior to 2019 become exercisable over a four-year vesting period, while options granted in 2019 and after become exercisable over a three-year vesting period.

Both vesting periods expire 10 years from the date of grant.

The following table summarizes the Company’s stock option activity and related information for the 2011 Plan, the 2000 Plan and the Directors Plan for the nine months ended September 30, 2021:

New options granted become exercisable over a three-year vesting period.

Options expire 10 years from the date of grant.

No stock options were granted during the three months ended March 31, 2022.

The following table summarizes the Company’s stock option activity and related information for the 2011 Plan, the 2000 Plan and the Directors Plan for the three months ended March 31, 2022:

Options Weighted

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Outstanding at December 31, 2021 531,915 $ 75.40 6.5 $ 9

Granted 126,794 $ 81.21

Exercised ( 47,964 ) $ 68.54

Canceled ( 6,973 ) $ 75.85

Outstanding at September 30, 2021 579,083 $ 73.11 6.3 $ 9.0

Exercisable at September 30, 2021 336,940 $ 58.96 5.7 $ 9.4

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:

Nine Months Ended September 30, 2021

Dividend yield 0.60 %

Risk-free interest rate 0.81 %

Stock price volatility 36.1 %

Expected life (years) 5.0

The dividend yield is based on the Company’s dividend rate and the current market price of the underlying common stock at the date of grant.

Expected life in years is determined from historical stock option exercise data.

Expected volatility is based on the historical volatility of the Company’s stock.

The risk-free interest rate is based on the U.S.

Treasury bond rates for the expected life of the option.

Restricted Stock, Restricted Units and Incentive Stock Beginning in 2006, the Company adopted a restricted stock program.

As provided for under the 2011 Plan and 2000 Plan, eligible employees are granted restricted stock that generally vests over three or four years from the date of grant.

Outstanding at March 31, 2022 476,978 $ 75.47 6.3 $ 10

Exercisable at March 31, 2022 365,205 $ 74.31 6.1 $ 8

Restricted Stock, Restricted Units and Incentive Stock As provided for under the 2011 Plan and 2000 Plan, eligible employees are granted restricted stock that generally vests over three years from the date of grant.

Under the Directors Plan, restricted stock awards vest one year from the date of grant.

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

As of September 30, 2021, the Company estimates that it will achieve 33 %, 113 % and 100 % 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.

As of March 31, 2022, the Company estimates that it will achieve 121 %, 117 % and 100 % for the incentive stock awards expected to vest based on performance for the three-year periods ending December 31, 2022, 2023, and 2024, respectively, and has recorded incentive compensation expense accordingly.

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

Compensation expense for the non-vested restricted stock and incentive stock units is based on the average of the high and low Wabtec stock price on the date of grant and recognized over the applicable vesting period.

The following table summarizes the restricted stock activity and incentive stock units activity for the nine months ended September 30, 2021:

The following table summarizes the restricted stock activity and incentive stock units' activity for the three months ended March 31, 2022:

and Units Incentive

4 unchanged sentences

Vested ( 193,736 ) ( 43,039 ) $ 74.80

Adjustment for incentive stock awards expected to vest — 120,546 $ 74.32

Canceled ( 11,833 ) ( 16,606 ) $ 75.82

Outstanding at September 30, 2021 550,731 553,492 $ 77.63

The overall effective tax rate was 24.8 % and 26.0 % for the three and nine months ended September 30, 2021, respectively, and 26.7 % and 25.8 % for the three and nine months ended September 30, 2020, respectively.

The decrease in the quarterly effective tax rate is primarily the result of tax expense on internal restructuring activities incurred during the three months ended September 30, 2020 that did not recur in the three months ended September 30, 2021.

The increase in the year-to-date effective tax rate is primarily the result of withholding tax expense on intercompany dividends incurred during the nine months ended September 30, 2021.

As of September 30, 2021, the liability for income taxes associated with uncertain tax positions was $ 14.9 million, of which $ 13.3 million, if recognized, would favorably affect the Company’s effective income tax rate.

As of December 31, 2020, the liability for income taxes associated with unrecognized tax benefits was $ 16.4 million, of which $ 14.8 million, if recognized, would favorably affect the Company's effective tax rate.

At this time, the Company believes it is reasonably possible that unrecognized tax benefits of approximately $ 6.6 million may change within the next 12 months due to the expiration of statutory review periods and current examinations.

Outstanding at March 31, 2022 604,214 723,076 $ 84.00

The overall effective tax rate of 25.1 % for the three months ended March 31, 2022 differs from the U.S.

Federal statutory rate of 21.0% primarily due to the impact of state and foreign taxes .

EARNINGS PER SHARE

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Three Months Ended

September 30,

In millions, except per share data 2022 2021

Numerator for basic and diluted earnings per common share - net income attributable to Wabtec shareholders $ 130.6 $ 128.1

dividends declared - common shares and non-vested restricted stock ( 22.6 ) ( 22.8 )

Undistributed earnings 108.0 105.3

Percentage allocated to common shareholders (1) 99.8 % 99.8 %

dividends declared - common shares 22.6 22.8

Numerator for basic earnings per common share $ 130.4 $ 127.9

Numerator for diluted earnings per common share $ 130.4 $ 127.9

Denominator for basic earnings per common share - weighted average shares 187.6 189.8

Effect of dilutive securities:

Assumed conversion of dilutive stock-based compensation plans 0.4 0.4

Denominator for diluted earnings per common share - adjusted weighted average

shares and assumed conversion 188.0 190.2

Net income attributable to Wabtec shareholders per common share

Basic $ 0.69 $ 0.67

Diluted $ 0.69 $ 0.67

(1) Basic weighted-average common shares outstanding 187.6 189.8

Basic weighted-average common shares outstanding and non-vested restricted stock expected to vest 188.0 190.3

Percentage allocated to common shareholders 99.8 % 99.8 %

Nine Months Ended

September 30,

In millions, except per share data 2021 2020

Numerator for basic and diluted earnings per common share - net income attributable to Wabtec shareholders $ 367.8 $ 326.5

dividends declared - common shares and non-vested restricted stock ( 68.0 ) ( 68.7 )

Undistributed earnings 299.8 257.8

Percentage allocated to common shareholders (1) 99.8 % 99.7 %

dividends declared - common shares 67.9 68.5

Numerator for basic earnings per common share $ 367.1 $ 325.5

Numerator for diluted earnings per common share $ 367.1 $ 325.5

Denominator for basic earnings per common share - weighted average shares 188.2 190.1

Net income attributable to Wabtec shareholders $ 149 $ 112

Weighted average shares outstanding - basic 184.5 188.5

Effect of dilutive securities:

Assumed conversion of dilutive stock-based compensation plans 0.5 0.4

Denominator for diluted earnings per common share - adjusted weighted average

shares and assumed conversion 188.6 190.6

Weighted average shares outstanding - diluted 185.0 188.9

Net income attributable to Wabtec shareholders per common share

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Diluted $ 0.80 $ 0.59

(1) Basic weighted-average common shares outstanding 188.2 190.1

Basic weighted-average common shares outstanding and non-vested restricted stock expected to vest 188.6 190.6

Percentage allocated to common shareholders 99.8 % 99.7 %

The Company’s non-vested restricted stock contains rights to receive nonforfeitable 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 and excludes the dilutive impact of those shares from the denominator.

Approximately 0.1 million outstanding shares of Common Stock for the three and nine month period of 2021 were not included in the computation of quarterly or year-to-date diluted earnings per share because their exercise price exceeded the average market price of the Company's common stock.

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

Approximately 0.3 million outstanding shares of stock options for the three months ended March 31, 2021 were not included in the computation of quarterly diluted earnings per share because their exercise price exceeded the average market price of the Company's common stock.

The following table reconciles the changes in the Company’s product warranty reserve for the three months ended March 31, 2022 and 2021:

In millions 2022 2021

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Foreign currency impact/other ( 2 ) ( 7 )

Balance at September 30 $ 272.0 $ 264.8

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 mitigate these risk exposures through the use of derivatives such as cross-currency swaps, foreign currency forward contracts, interest rate swaps, commodity forwards and futures.

Balance at March 31

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;

and, 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 March 31, 2022 and December 31, 2021.

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.

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 March 31, 2022 and December 31, 2021, $ 110 million was classified as "Other accrued liabilities" on the Company's Consolidated Balance Sheets and $ 142 million and $ 141 million, respectively, was included within long-term liabilities classified as "Contingent consideration" on the Company's Consolidated Balance Sheets.

The fair value approximates the carrying value at March 31, 2022 and December 31, 2021.

Hedging Activities In the normal course of business, the Company is exposed to market risk 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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Foreign Currency Exchange Risk

The Company uses forward contracts to mitigate its foreign currency exchange rate exposure due to forecasted 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 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 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.

These contracts typically mature within two years .

For the three and nine months ended September 30, 2021 and 2020, 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.

For the three months ended March 31, 2022 and 2021, the amounts reclassified into income were not material.

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.

dollars and the functional currencies of our foreign subsidiaries, including euro, Indian rupee, British pound sterling, Australian dollars and several other foreign currencies.

Changes in 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 have certain foreign currency exchange rate risk management programs that use foreign currency forward contracts and cross-currency swaps.

These forward contracts and cross-currency swaps are generally used to offset the potential income statement effects from intercompany loans denominated in non-functional currencies.

These programs mitigate but do not entirely eliminate foreign currency exchange rate risk.

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.

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.

These programs reduce but do not eliminate foreign currency exchange rate risk entirely.

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 income, net.

The net loss related to these contracts was $ 0.2 million and $ 3.3 million for the three and nine months ended September 30, 2021, respectively, and a net gain of $ 3.1 million and $ 2.7 million for the three and nine months ended September 30, 2020, respectively.

The net loss related to these contracts was $ 1 million and $ 2 million for the three months ended March 31, 2022 and 2021, respectively.

These contracts typically 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 September 30, 2021:

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 March 31, 2022, which are included in "Other current assets" and "Other accrued 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 5.1 — 579.7 —

Other current liabilities 2 ( 2 ) — 14 —

Total $ 7 $ ( 1 ) $ 1,156 $ 272

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:

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, 2021, which are included in "Other current assets" and "Other accrued 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

2 unchanged sentences

Cross-currency Swaps

Other current liabilities ( 26.0 ) — 613.2 —

Other current assets 2 — — 14 —

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

1 unchanged sentence

The Company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rate changes and to reduce its overall cost of borrowing.

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 nine months ended September 30, 2021 and 2020 the amounts reclassified into income were not material.

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 three months ended March 31, 2022 and 2021 the amounts reclassified into income were not material.

Commodity Price Risk

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

For the nine months ended September 30, 2021 and 2020 the amounts recognized as income or expense 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 September 30, 2021 which are included in other current assets and liabilities on the consolidated balance sheet:

Fair Value Measurements at September 30, 2021 Using

Total Carrying

September 30,

2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other

Observable Inputs (Level 2) Significant

Inputs (Level 3)

Foreign Exchange Contracts

Other current assets $ 8.9 $ — $ 8.9 $ —

Other current liabilities — — — —

Cross-Currency Swap Agreement

Other current assets 5.1 — 5.1 —

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 mitigates 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 September 30, 2021 and December 31, 2020.

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 $ 219.8 million in long-term liabilities classified as "Contingent consideration" on the Company's consolidated balance sheet.

The fair value approximates the carrying value at September 30, 2021.

For the three months ended March 31, 2022 and 2021 the amounts recognized as income or expense were not material.

COMMITMENTS AND CONTINGENCIES

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

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

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

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.

Additionally, from time to time, the Company is involved in litigation related to claims arising out of the Company's operations in the ordinary course of business, including claims based on product liability, contracts, intellectual property or other causes of action.

Further information and detail on these claims are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

During the first nine months of 2021, there were no material changes to the information described in the Form 10-K related to claims arising from asbestos exposure or the Company's ordinary operations.

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").

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.

Our ultimate legal and financial liability with respect to these claims, as is the case with other pending litigation, cannot be estimated.

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

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.

Denver Regional Transit District ("RTD").

No damages have been asserted for the alleged late delivery of the TMDS, and no formal claim has been filed;

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

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

As of the date hereof, the Company is involved in no litigation that the Company believes will have a material adverse effect on its financial condition, results of operations or liquidity.

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The key factors used to identify these reportable segments are the organization and alignment of the Company’s internal operations, the nature of the products and services and customer type.

The Company’s business segments are:

Freight Segment primarily builds new locomotives, manufactures and services components for new and existing freight cars and locomotives, rebuilds freight locomotives, supplies railway electronics, positive train control equipment, signal design and engineering services and provides related heat exchange and cooling systems.

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

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, builds new commuter locomotives, refurbishes subway cars, provides heating, ventilation, and air conditioning equipment and doors for buses and subway cars.

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.

It also refurbishes subway cars and provides heating, ventilation, and air conditioning equipment and doors for buses and subway cars.

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

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

Since certain administrative and other operating expenses have not been allocated to business segments, the results in the following tables are not necessarily a measure computed in accordance with generally accepted accounting principles and may not be comparable to other companies.

Segment financial information for the three months ended September 30, 2021 is as follows:

In millions Freight

Segment Transit

Segment Corporate

Activities and

Elimination Total

Sales to external customers $ 1,295.0 $ 611.9 $ — $ 1,906.9

Intersegment sales/(elimination) 12.3 8.6 ( 20.9 ) —

Total sales $ 1,307.3 $ 620.5 $ ( 20.9 ) $ 1,906.9

Income (loss) from operations $ 195.2 $ 43.9 $ ( 22.1 ) $ 217.0

Interest expense and other, net — — ( 41.7 ) ( 41.7 )

Income (loss) before income taxes $ 195.2 $ 43.9 $ ( 63.8 ) $ 175.3

Segment financial information for the three months ended September 30, 2020 is as follows:

In millions Freight

Segment Transit

Segment Corporate

Activities and

Elimination Total

Sales to external customers $ 1,237.3 $ 627.8 $ — $ 1,865.1

Intersegment sales/(elimination) 10.9 7.8 ( 18.7 ) —

Total sales $ 1,248.2 $ 635.6 $ ( 18.7 ) $ 1,865.1

Income (loss) from operations $ 160.2 $ 64.1 $ ( 17.6 ) $ 206.7

Interest expense and other, net — — ( 31.3 ) ( 31.3 )

Income (loss) before income taxes $ 160.2 $ 64.1 $ ( 48.9 ) $ 175.4

Segment financial information for the nine months ended September 30, 2021 is as follows:

Segment financial information for the three months ended March 31, 2022 is as follows:

In millions Freight

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Income (loss) before income taxes $ 189 $ 65 $ ( 54 ) $ 200

Segment financial information for the nine months ended September 30, 2020 is as follows:

Segment financial information for the three months ended March 31, 2021 is as follows:

In millions Freight

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Three Months Ended

September 30, Nine Months Ended

September 30,

In millions 2022 2021

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Three Months Ended

September 30, Nine Months Ended

September 30,

In millions 2022 2021

Foreign currency (loss) gain $ ( 3.5 ) $ 6.4 $ 7.4 $ ( 7.7 )

Foreign currency gain $ 3 $ 9

Equity income — 3

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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-Q

Item 1. Financial Statements