What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-02-15 compared with 2022-02-17 · 58 added, 33 removed, 269 unchanged (25% of the section changed)

9 unchanged sentences

Our business operates in a highly competitive industry.

We operate in a global, competitive marketplace and face substantial competition from a limited number of established competitors, some of which may have greater financial resources than we do, may have a more extensive low-cost sourcing strategy and presence in low-cost regions than we do or may receive significant governmental support.

strategy and presence in low-cost regions than we do, or may receive significant governmental support.

Price competition is strong and, coupled with the existence of a number of cost-conscious customers with significant negotiating power, has historically limited our ability to increase prices.

29 unchanged sentences

Instability in the global economy, negative conditions in the global credit markets, volatility in the industries that our products serve, changes in legislative policy, adverse changes in the financial condition of our customers, adverse changes in the availability of raw materials and supplies, or un-remedied contract breaches could possibly lead to contract termination or cancellations of orders in our backlog or request for deferred deliveries of our backlog orders, each of which could adversely affect our cash flows and results of operations.

For example, although the Company saw no material cancellations of backlog during the year ended December 31, 2021, the economic slowdown that was caused by COVID-19 did impact the timing of some orders in backlog as the delivery of goods and services previously expected to be completed in the current year were pushed out to subsequent periods.

For example, although the economic slowdown caused by COVID-19 did not result in any material cancellations of the Company's backlog, it did impact the timing of some orders in backlog as, in certain cases, the delivery of goods and services were pushed out from their original timelines.

Equipment failures, interruptions, delays in deliveries or extensive damage to our facilities, supply chains, distribution systems or information technology systems, could adversely affect our business.

37 unchanged sentences

Since first reported in late 2019, the COVID-19 pandemic has dramatically impacted the global health and economic environment, including millions of confirmed cases, business slowdowns or shutdowns, government challenges and market volatility of an unprecedented nature.

Although we have, to date, managed to continue most of our operations, we cannot predict the future course of events nor can we assure that this global pandemic, including its economic impact, will not have a material adverse impact on our business, financial position, results of operations and/or cash flows.

Although we have, to date, managed to continue our operations, we cannot predict the future course of events nor can we assure that this global pandemic, including its economic impact, will not have a material adverse impact on our business, financial position, results of operations and/or cash flows.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance remains uncertain and will depend on future pandemic related developments, including the duration of the pandemic, any potential subsequent waves of COVID-19 and new strains of the virus, the effectiveness, distribution and acceptance of COVID-19 vaccines, and related government actions to prevent and manage disease spread, all of which are uncertain and cannot be predicted.

11 unchanged sentences

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 and have adversely impacted our business.

W e expect COVID-19 to continue to have a materially adverse impact on our operations and business results into 2022.

The spread of COVID-19, and the emergence of new strains of the virus, have caused us to modify our business practices and to implement significant proactive measures to protect the health and safety of employees, and we may take further actions as may be required by government authorities or as we determine are appropriate under the circumstances.

6 unchanged sentences

• a shutdown of one or multiple of our manufacturing facilities due to government restrictions or illness in connection with COVID-19.

The continued spread of COVID-19 has also led to disruption and volatility in the global capital markets, which depending on future developments may make it more costly or difficult for us to obtain debt or equity financing, including to refinance our existing debt, or to identify or execute on investment opportunities, in each case on terms and within time periods acceptable to us.

acceptable to us.

We are also monitoring the impacts of COVID-19 on the fair value of our assets.

6 unchanged sentences

RISKS RELATED TO INTERNATIONAL OPERATIONS

A growing portion of our sales may be derived from our international operations, which exposes us to certain risks inherent in doing business on an international level.

A significant portion of our sales may be derived from our international operations, which exposes us to certain risks inherent in doing business on an international level.

For the fiscal year ended December 31, 2022, approximately 55% of our consolidated net sales were to customers outside of the United States.

We intend to continue to expand our international operations, including in emerging markets, in the future.

Our global headquarters for the Transit group is located in France, and we conduct other international operations through a variety of wholly and majority-owned subsidiaries and joint ventures, including in Australia, Austria, Brazil, Canada, China, Czech Republic, France, Germany, India, Italy, Kazakhstan, Macedonia, Mexico, the Netherlands, Poland, Russia, Spain, South Africa, Turkey, and the United Kingdom.

Our global headquarters for the Transit group is located in France, and we conduct other international operations through a variety of wholly and majority-owned subsidiaries and joint ventures, including in Australia, Austria, Brazil, Canada, China, Czech Republic, France, Germany, India, Italy, Kazakhstan/Commonwealth of Independent States ("CIS"), Macedonia, Mexico, the Netherlands, Poland, Spain, South Africa, Turkey, and the United Kingdom.

As a result, we are subject to various risks, any one of which could have a material adverse effect on those operations and on our business as a whole, including:

11 unchanged sentences

• economic, political and social instability;

• potential reputational harm associated with doing business in certain countries;

• possible local catastrophes, such as natural disasters and epidemics;

1 unchanged sentence

Our exposure to the risks associated with international operations may intensify if our international operations expand in the future.

We may incur increased costs due to fluctuations in interest rates and foreign currency exchange rates

We may incur increased costs or margin degradation due to fluctuations in interest rates and foreign currency exchange rates.

In the ordinary course of business, we are exposed to increases in interest rates that may adversely affect funding costs associated with variable-rate debt and changes in foreign currency exchange rates.

5 unchanged sentences

dollars in our consolidated financial statements.

We may seek to minimize these risks through the use of interest rate swap contracts and currency hedging agreements.

We may seek to minimize these risks through the use of interest rate swap contracts and

currency hedging agreements.

There can be no assurance that any of these measures will be effective.

1 unchanged sentence

We have substantial operations located in emerging markets, and are subject to regulatory, economic, social and political uncertainties in such markets.

We have substantial operations located in emerging markets, such as Brazil, India, Kazakhstan, the Russian Federation and Ukraine.

We have substantial operations located in emerging markets, such as Brazil, India, and Kazakhstan.

Operations in such emerging markets are inherently risky due to a number of regulatory, economic, social and political uncertainties.

4 unchanged sentences

Such disruptions could interrupt our business operations and significantly harm our results of operations, financial condition and cash flows.

The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations.

Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks such as those arising from the current conflict between Russia and Ukraine, has and may continue to adversely affect our business and results of operations.

The broader consequences of this conflict, which may include further sanctions, embargoes, regional instability, and geopolitical shifts;

disruptions to transportation and distribution routes, or strategic decisions to alter certain routes;

potential retaliatory action by the Russian government against companies, including us, including nationalization of foreign businesses and/or assets in Russia;

increased tensions between the United States and countries in which we operate;

and the extent of the conflict’s effect on our business and results of operations as well as the global economy, cannot be predicted.

Additionally, Wabtec has operations and a strategic joint venture in Kazakhstan that have continued operating but have incurred supply, distribution and currency impacts as an indirect result from the Russian invasion of Ukraine.

To date, the operations in Kazakhstan have not been significantly impacted by the ongoing conflict outside of the overall unfavorable impact to economic conditions;

however, the future impact to these operations cannot be predicted.

To the extent the current conflict between Russia and Ukraine adversely affects our business, particularly in Russia and Kazakhstan, it may also have the effect of heightening many other risks disclosed in this Annual Report, any of which could materially and adversely affect our business and results of operations.

Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation and business spending;

disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion;

adverse changes in international trade policies and relations;

our ability to maintain or increase our prices, our ability to implement and execute our business strategy, disruptions in global supply chains, our exposure to foreign currency fluctuations, and constraints, volatility, or disruption in the capital markets, difficulty staffing and managing impacted operations, and the recoverability of assets in the region.

RISKS RELATED TO MACRO-ECONOMIC CONDITIONS AND POLICIES

2 unchanged sentences

To the extent that these factors result in continued instability of capital markets, shortages of raw materials or component parts, longer sales cycles, deferral or delay of customer orders or an inability to market our products effectively, our business and results of operations could be materially adversely affected.

We may be exposed to raw material shortages, supply shortages and fluctuations in raw material, energy and commodity prices.

We may be exposed to raw material shortages, supply shortages, fluctuations in raw material, energy and commodity prices, and inflationary pressure.

We purchase energy, steel, aluminum, copper, rubber and rubber-based materials, chemicals, polymers and other key manufacturing inputs from outside sources, and traditionally have not had long-term pricing contracts with our pure raw material suppliers.

The costs of these raw materials have been volatile historically and are influenced by factors that are outside our control.

The costs of these raw materials have been volatile historically and are influenced by factors that are outside our control, including inflationary pressure.

If we are unable to pass increases in the costs of our raw materials on to our customers, experience a lag in our ability to pass increases to our customers, or operational efficiencies are not achieved, our operating margins and results of operations may be materially adversely affected.

22 unchanged sentences

Despite our policies, procedures and compliance programs, our internal controls and compliance systems may not be able to protect us from prohibited acts willfully committed by our employees, agents or business partners that would violate such applicable laws and regulations.

Any such improper acts could

damage our reputation, subject us to civil or criminal judgments, fines or penalties, and could otherwise disrupt our business, and as a result, could materially adversely impact our business, results of operations and financial condition.

In addition, our manufacturing operations are subject to safety, operations, maintenance and mechanical standards, rules and regulations enforced by various federal and state agencies and industry organizations both domestically and internationally.

Any such improper acts could damage our reputation, subject us to civil or criminal judgments, fines or penalties, and could otherwise disrupt our business, and as a result, could materially adversely impact our business, results of operations and financial condition.

In addition, our manufacturing operations and products are subject to safety, operations, maintenance and mechanical standards, rules and regulations enforced by various federal and state agencies and industry organizations both domestically and internationally.

Our business may be adversely impacted by new rules and regulations or changes to existing rules or regulations, which could require additional maintenance or substantial modification or refurbishment of certain of our products or could make such products obsolete or require them to be phased out prior to their useful lives.

2 unchanged sentences

We are subject to a variety of environmental laws and regulations.

We are subject to a variety of increasingly stringent environmental laws and regulations governing discharges to air and water, substances in products, the handling, storage and disposal of hazardous or solid waste materials and the remediation of contamination associated with releases of hazardous substances.

We are subject to a variety of increasingly stringent environmental laws and regulations governing air emissions, discharges into water, chemical substances in products, the use, handling, storage, and disposal of hazardous substances or waste materials, as well as the remediation of contamination associated with releases of hazardous substances.

We have incurred, and will continue to incur, both operating and capital costs to comply with environmental laws and regulations, including costs associated with the clean-up and investigation of some of our current and former properties and offsite disposal locations.

4 unchanged sentences

, emissions and noise, including standards imposed by the U.S.

Environmental Protection Agency, the European Union and other regulatory agencies around the world.

Environmental Protection Agency,

the European Union and other regulatory agencies around the world.

We have made, and will continue to make, significant capital and research expenditures relating to compliance with these standards.

2 unchanged sentences

Future climate change regulation could result in increased operating costs, affect the demand for our products or affect the ability of our critical suppliers to meet our needs.

Management believes it is reasonably likely that the scientific and political attention to issues concerning the existence and extent of climate change, and the role of human activity in it, will continue, with the potential for further regulation that affects the company’s operations.

The potential challenges posed by evolving climate change policy and prospective legislation are heavily dependent on the nature and degree of climate change legislation and the extent to which it applies to our industry.

The potential challenges posed by evolving climate change policy and prospective legislation are heavily dependent on the nature and degree of such legislation and the extent to which it applies to our industry.

Although uncertain, these developments could increase costs or reduce the demand for the products the company sells.

The company’s production and processing operations typically result in emissions of greenhouse gases.

The Company’s manufacturing and service operations typically result in emissions of greenhouse gases.

Likewise, emissions arise from midstream and downstream operations, including operations of our locomotives and other products.

1 unchanged sentence

International agreements, domestic legislation and regulatory measures to limit greenhouse gas emissions are currently in various phases of discussion or implementation.

While we are carefully monitoring developments and reviewing the challenges associated with alternative proposals, at this time, we cannot predict the ultimate impact of climate change and climate change legislation on our operations.

Further, when or if these impacts may occur cannot be assessed until legislative policy is more developed and specific legislative proposals begin to take shape.

While we are carefully monitoring developments, at this time, we cannot predict the ultimate impact of climate change and climate change legislation on our operations.

Any laws or regulations that may be adopted to restrict or reduce emissions of greenhouse gas could require us to incur increased operating costs and could have an adverse effect on demand for our products.

14 unchanged sentences

The possibility exists for these types of warranty claims to result in costly product recalls, significant repair costs and damage to our reputation.

Expectations relating to environmental, social and governance considerations expose us to potential liabilities, increased costs, reputational harm, and other adverse effects on our business.

Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate action and greenhouse gas emissions, supply chain due diligence, human capital management, and diversity, equity and inclusion.

We make statements about our ESG goals and initiatives through information provided in reports that we file or furnish with the Securities and

Exchange Commission, on our website, in press statements, and in other communications, including through our Sustainability Reports.

Our response to these ESG considerations and the implementation of these goals and initiatives involves risks and uncertainties, including those described under “Forward-Looking Statements,” and such response may be impacted by factors that are outside our control.

In addition, some stakeholders may disagree with our goals and initiatives and the focus of stakeholders may change and evolve over time.

Stakeholders also may have different views on the relative prioritization of the Company's ESG focus, including differing views of regulators in various jurisdictions in which we operate.

Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition, and stock price.

RISKS RELATED TO DATA SECURITY AND INTELLECTUAL PROPERTY

15 unchanged sentences

If we are sued for intellectual property infringement, we may incur significant expenses investigating and defending such claims, even if we prevail.

We face cybersecurity and data protection risks relating to cyber-attacks and information technology failures that could cause loss of confidential information and other business disruptions.

We face cyber-security and data protection risks relating to cyber-attacks and information technology failures that could cause loss of confidential information and other business disruptions.

We rely extensively on the security, stability, and availability of technology systems in our business.

3 unchanged sentences

Accordingly, our business may be adversely impacted by disruptions to our own or third-party information technology infrastructure, which could result from cybersecurity incidents, including, but not limited to, unauthorized access to the Company’s information technology systems, data access or acquisition, and/or encryption of the Company’s environment.

For instance, one of our vendors publicly disclosed vulnerabilities in its operating system that we use for certain Wabtec products.

For instance, during 2021, one of our vendors publicly disclosed vulnerabilities in its operating system that we use for certain Wabtec products.

Additionally, during 2022, the Company detected a cyber-security incident which impacted the Company’s network.

The Company promptly activated incident response protocols and completed a thorough investigation.

The incident did not have a material impact on our business, operations or financial results.

A successful exploitation of our own or our vendors’ information technology infrastructure could result in service interruptions, safety hazards, misappropriation of confidential information, process failures, security breaches or other operational difficulties.

Such an event could result in decreased revenues and increased capital, insurance or operating costs, including the increased costs of security to protect the

Company’s infrastructure, among other results.

Such an event could result in decreased revenues and increased capital, insurance or operating costs, including the increased costs of security to protect the Company’s infrastructure, among other results.

Insurance maintained by the Company to protect against loss of business and other related consequences resulting from cyber incidents may not be sufficient to cover all damages.

27 unchanged sentences

• limit our ability to borrow additional funds.

Moreover, our Credit Agreement and the indentures governing our senior notes permit us to incur substantial additional indebtedness, which may further contribute to, or exacerbate the impact of, the foregoing impacts.

The indentures for our outstanding senior notes and our Credit Agreement contain various covenants that limit our management’s discretion in the operation of our businesses.

Our Credit Agreement subjects us to customary (i) affirmative covenants, including requirements with respect to certain reporting obligations on us and our subsidiaries, and (ii) negative covenants, including limitations on:

Moreover, our Restated Credit Agreement and the indentures governing our Senior Notes permit us to incur substantial additional indebtedness, which may further contribute to, or exacerbate the impact of, the foregoing impacts.

The indentures for our outstanding Senior Notes and our Restated Credit Agreement contain various covenants that limit our management’s discretion in the operation of our businesses.

Our Restated Credit Agreement subjects us to customary (i) affirmative covenants, including requirements with respect to certain reporting obligations on us and our subsidiaries, and (ii) negative covenants, including limitations on:

indebtedness;

6 unchanged sentences

and use of proceeds.

In addition, we are required to maintain (i) a ratio of EBITDA to interest expense of at least 3.00 to 1.00 over each period of four consecutive fiscal quarters ending on the last day of a fiscal quarter and (ii) a Leverage Ratio, calculated as of the last day of a fiscal quarter for a period of four consecutive fiscal quarters, of 3.25 to 1.00 or less;

provided that, in the second quarter of 2021, the Credit Agreement was amended so that we may, upon our request, increase the maximum Leverage Ratio to (x) 3.75 to 1.00 at the end of the fiscal quarter in which our acquisition of Nordco 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 such acquisition.

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

All terms are as defined in the Restated Credit Agreement.

The indentures under which our 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.

2 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 1A. Risk Factors