What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-07-27 compared with 2023-04-26 · 183 added, 90 removed, 545 unchanged (33% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

In millions, except par value March 31,

In millions, except par value June 30,

2023 December 31,

28 unchanged sentences

500.0 shares authorized and 226.9 shares issued:

179.8 and 181.2 outstanding at March 31, 2023 and December 31, 2022, respectively

179.1 and 181.2 outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 7,949 7,953

Treasury stock, at cost, 47.1 and 45.7 shares, at March 31, 2023 and December 31, 2022, respectively

Treasury stock, at cost, 47.8 and 45.7 shares, at June 30, 2023 and December 31, 2022, respectively

( 2,014 ) ( 1,769 )

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Unaudited Unaudited

Three Months Ended

June 30, Six Months Ended

In millions, except per share data 2023 2022 2023 2022

30 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited Unaudited

Three Months Ended

June 30, Six Months Ended

In millions 2023 2022 2023 2022

Net income attributable to Wabtec shareholders $ 191 $ 166 $ 360 $ 315

Foreign currency translation gain 25 13

Foreign currency translation (loss) gain ( 1 ) ( 195 ) 24 ( 182 )

Unrealized gain on derivative contracts 13 — 18 3

Unrealized gain on pension benefit plans and post-retirement benefit plans 1 1

Other comprehensive income before tax 31 17

Unrealized (loss) gain on pension benefit plans and post-retirement benefit plans ( 3 ) 4 ( 2 ) 5

Other comprehensive income (loss) before tax 9 ( 191 ) 40 ( 174 )

Income tax expense related to components of other comprehensive income ( 2 ) ( 1 ) ( 3 ) ( 1 )

Other comprehensive income, net of tax 30 17

Comprehensive income attributable to Wabtec shareholders $ 199 $ 166

Other comprehensive income (loss), net of tax 7 ( 192 ) 37 ( 175 )

Comprehensive income (loss) attributable to Wabtec shareholders $ 198 $ ( 26 ) $ 397 $ 140

The accompanying notes are an integral part of these statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

In millions 2023 2022

1 unchanged sentence

Net income $ 366 $ 319

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

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

Depreciation and amortization 246 240

9 unchanged sentences

Other assets and liabilities ( 15 ) ( 46 )

Net cash (used for) provided by operating activities ( 25 ) 161

Net cash provided by operating activities 90 424

Investing Activities

Acquisitions of businesses, net of cash acquired ( 223 ) ( 69 )

Purchase of property, plant and equipment ( 70 ) ( 50 )

7 unchanged sentences

Payment of income tax withholding on share-based compensation ( 15 ) ( 1 )

Distribution to noncontrolling interest ( 12 ) —

Other financing activities ( 3 ) ( 1 )

Net cash used for financing activities ( 72 ) ( 133 )

Net cash provided by (used for) financing activities 30 ( 256 )

Effect of changes in currency exchange rates 3 ( 23 )

15 unchanged sentences

Balance, March 31, 2023 226.9 $ 2 $ 7,940 ( 47.1 ) $ ( 1,941 ) $ 4,715 $ ( 631 ) $ 49 $ 10,134

Cash dividends ($ 0.17 dividend per share)

— — — — — ( 31 ) — — ( 31 )

Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax — — ( 3 ) 0.1 3 — — — —

Stock based compensation — — 12 — — — — — 12

Net income — — — — — 191 — 2 193

Other comprehensive income, net of tax — — — — — — 7 — 7

Stock repurchase — — — ( 0.8 ) ( 76 ) — — — ( 76 )

Distribution to noncontrolling interest — — — — — — — ( 12 ) ( 12 )

Balance, June 30, 2023 226.9 $ 2 $ 7,949 ( 47.8 ) $ ( 2,014 ) $ 4,875 $ ( 624 ) $ 39 $ 10,227

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

7 unchanged sentences

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

Cash dividends ($ 0.15 dividend per share)

— — — — — ( 27 ) — — ( 27 )

Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax — — ( 1 ) 0.1 4 — — — 3

Stock based compensation — — 10 — — — — — 10

Net income — — — — — 166 — 3 169

Other comprehensive loss, net of tax — — — — — — ( 192 ) — ( 192 )

Stock repurchase — — — ( 1.1 ) ( 103 ) — — — ( 103 )

Balance, June 30, 2022 226.9 $ 2 $ 7,926 ( 45.0 ) $ ( 1,696 ) $ 4,314 $ ( 641 ) $ 42 $ 9,947

The accompanying notes are an integral part of these statements.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 (UNAUDITED)

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023 (UNAUDITED)

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

4 unchanged sentences

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 three months of 2023, approximately 55 % of the Company’s net sales came from customers outside the United States.

In the first six months of 2023, approximately 55 % of the Company’s Net sales came from customers outside the United States.

ACCOUNTING POLICIES

6 unchanged sentences

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.

As of March 31, 2023, Wabtec had approximately $ 14 million of assets related to Russian operations, which were primarily cash and inventory.

As of June 30, 2023, Wabtec had approximately $ 8 million of cash related to Russian operations which will be utilized to settle remaining obligations in Russia.

During the second quarter of 2023, based on changes in facts and circumstances, management determined that assets related to Russian operations, excluding cash, were not expected to be recoverable and, as a result, a charge of approximately $ 3 million was recorded.

Assets related to Ukraine and Belarus operations are no t significant.

11 unchanged sentences

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

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

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.

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

customer agreements.

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

The company may also use the output method which recognizes revenue based on direct measurements of the value transferred to the customer.

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

15 unchanged sentences

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

As of March 31, 2023, the Company's remaining performance obligations were approximately $ 22.1 billion.

As of June 30, 2023, the Company's remaining performance obligations were approximately $ 22.3 billion.

The Company expects to recognize revenue of approximately 30 % of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

6 unchanged sentences

Neither the Company (except for the bankruptcy-remote consolidated subsidiary referenced above) nor the Originators guarantees the collectability of the receivables under the revolving agreements.

At March 31, 2023 and 2022 the bankruptcy-remote subsidiary held receivables of $ 585 million and $ 367 million, respectively, which are included in the Company's Condensed Consolidated Balance Sheets.

The receivables held by the bankruptcy-remote subsidiary collateralize the outstanding receivables sold, which was $ 225 million and $ 175 million at March 31, 2023 and 2022, respectively.

At June 30, 2023 and December 31, 2022, the bankruptcy-remote subsidiary held receivables of $ 599 million and $ 458 million, respectively, which are included in the Company's Condensed Consolidated Balance Sheets.

The receivables held by the bankruptcy-remote subsidiary collateralize the outstanding receivables sold, which were $ 235 million and $ 80 million at June 30, 2023 and December 31, 2022, respectively.

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

No obligation was recorded at March 31, 2023 or December 31, 2022 as the estimated expected credit losses on receivables sold is insignificant.

No obligation was recorded at June 30, 2023 or December 31, 2022 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 following table sets forth a summary of receivables sold:

In millions Three Months Ended

March 31, 2023 Three Months Ended

March 31, 2022

In millions Six Months Ended

June 30, 2023 Six Months Ended

June 30, 2022

Gross receivables sold/cash proceeds received $ 1,216 $ 864

1 unchanged sentence

Net cash proceeds received $ 155 $ 180

Restricted Cash At March 31, 2023 and December 31, 2022, the Company classified cash of $ 7 million as restricted for cash held in escrow related to a 2022 acquisition.

Restricted Cash At June 30, 2023 and December 31, 2022, the Company classified cash of $ 7 million as restricted for cash held in escrow related to a 2022 acquisition.

Depreciation Expense Depreciation of property, plant and equipment related to the manufacturing of products or services provided is included in Cost of goods or Cost of services.

16 unchanged sentences

The arrangements do not change the payable terms negotiated by the Company and our vendors, which range between net 45 and net 180 days, and does not result in a change in the classification of amounts due as Accounts payable in the Condensed Consolidated Balance Sheets.

Suppliers utilized the program to accelerate receipt of payment from these financial institutions for $ 334 million and $ 296 million of the Company's outstanding Accounts payable as of March 31, 2023 and December 31, 2022, respectively.

Suppliers utilized the program to accelerate receipt of payment from these financial institutions for $ 341 million and $ 296 million of the Company's outstanding Accounts payable as of June 30, 2023 and December 31, 2022, respectively.

The supplier invoices included under the program require payment in full to the financial institutions consistent with the Company’s normal terms and conditions as agreed upon with the vendor.

Accumulated Other Comprehensive Loss Comprehensive income (loss) comprises both Net income and Other comprehensive (loss) income 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, 2023 and 2022 are as follows:

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the three months ended June 30, 2023 and 2022 are as follows:

Foreign currency translation Derivative contracts Pension and postretirement benefit plans Total

In millions 2023 2022 2023 2022 2023 2022 2023 2022

Balance at March 31 $ ( 571 ) $ ( 383 ) $ ( 5 ) $ ( 2 ) $ ( 55 ) $ ( 64 ) $ ( 631 ) $ ( 449 )

Other comprehensive (loss) income before reclassifications ( 1 ) ( 195 ) 9 — ( 1 ) 3 7 ( 192 )

Amounts reclassified from Accumulated other comprehensive loss — — — — — — — —

Other comprehensive (loss) income, net ( 1 ) ( 195 ) 9 — ( 1 ) 3 7 ( 192 )

Balance at June 30 $ ( 572 ) $ ( 578 ) $ 4 $ ( 2 ) $ ( 56 ) $ ( 61 ) $ ( 624 ) $ ( 641 )

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the six months ended June 30, 2023 and 2022 are as follows:

Foreign currency translation Derivative contracts Pension and postretirement benefit plans Total

In millions 2023 2022 2023 2022 2023 2022 2023 2022

Balance at beginning of year $ ( 596 ) $ ( 396 ) $ ( 9 ) $ ( 5 ) $ ( 56 ) $ ( 65 ) $ ( 661 ) $ ( 466 )

Other comprehensive income before reclassifications 25 13 4 3 — — 29 16

Other comprehensive income (loss) before reclassifications 24 ( 182 ) 13 3 ( 1 ) 3 36 ( 176 )

Amounts reclassified from Accumulated other comprehensive loss — — — — 1 1 1 1

Other comprehensive income, net 25 13 4 3 1 1 30 17

Balance at March 31 $ ( 571 ) $ ( 383 ) $ ( 5 ) $ ( 2 ) $ ( 55 ) $ ( 64 ) $ ( 631 ) $ ( 449 )

Other comprehensive income (loss), net 24 ( 182 ) 13 3 — 4 37 ( 175 )

Balance at June 30 $ ( 572 ) $ ( 578 ) $ 4 $ ( 2 ) $ ( 56 ) $ ( 61 ) $ ( 624 ) $ ( 641 )

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

During the second quarter of 2023, the Company acquired L&M Radiator, Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers for the mining sector, for a purchase price of approximately $ 239 million.

The following table summarizes the preliminary fair value of the L&M Radiator, Inc.

assets acquired and liabilities assumed:

Assets acquired

Cash and cash equivalents $ 16

Accounts receivable 20

Other current assets 1

Property, plant and equipment 31

Other intangible assets 88

Other noncurrent assets 1

Total assets acquired 285

Liabilities assumed

Current liabilities 16

Noncurrent liabilities 30

Total liabilities assumed 46

Net assets acquired $ 239

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

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

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

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.

These estimates are preliminary in nature and subject to adjustments,

which could be material as the Company has not completed its valuation of acquired assets and liabilities.

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

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

The purchased goodwill is no t expected to be deductible for tax purposes.

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.

During the twelve months ended December 31, 2022, the Freight Segment made three strategic acquisitions for a combined purchase price of $ 89 million.

2 unchanged sentences

The components of inventory, net of reserves, were:

In millions March 31,

In millions June 30,

2023 December 31,

9 unchanged sentences

Foreign currency impact 15 25 40

Balance at March 31, 2023 $ 7,100 $ 1,440 $ 8,540

As of March 31, 2023 and December 31, 2022, the Company’s trade names had a net carrying amount of $ 603 million and $ 602 million, respectively.

Balance at June 30, 2023 $ 7,209 $ 1,448 $ 8,657

As of June 30, 2023 and December 31, 2022, the Company’s trade names had a net carrying amount of $ 626 million and $ 602 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:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

In millions Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

3 unchanged sentences

Total $ 4,047 $ ( 1,314 ) $ 2,733 $ 3,972 $ ( 1,172 ) $ 2,800

At March 31, 2023 the weighted average remaining useful lives of backlog, customer relationships and acquired technology were 9 years, 16 years and 8 years, respectively.

At June 30, 2023 the weighted average remaining useful lives of backlog, customer relationships and acquired technology were 9 years, 16 years and 8 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.

Amortization expense for intangible assets was $ 75 million and $ 73 million for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense for intangible assets was $ 73 million and $ 148 million for the three and six months ended June 30, 2023, respectively, and $ 72 million and $ 145 million for the three and six months ended June 30, 2022, respectively.

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

3 unchanged sentences

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 Condensed Consolidated Balance Sheets.

Noncurrent contract assets were $ 187 million at March 31, 2023 and $ 162 million at December 31, 2022.

Noncurrent contract assets were $ 176 million at June 30, 2023 and $ 162 million at December 31, 2022.

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.

2 unchanged sentences

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 Condensed Consolidated Balance Sheets.

Noncurrent contract liabilities were $ 120 million at March 31, 2023 and $ 86 million at December 31, 2022.

Noncurrent contract liabilities were $ 106 million at June 30, 2023 and $ 86 million at December 31, 2022.

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 $ 97 million and $ 98 million at March 31, 2023 and December 31, 2022, respectively.

Provisions for loss contracts were $ 97 million and $ 98 million at June 30, 2023 and December 31, 2022, respectively.

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

The change in the carrying amount of contract assets and contract liabilities for the three months ended March 31, 2023 and 2022 is as follows:

The change in the carrying amount of contract assets and contract liabilities for the six months ended June 30, 2023 and 2022 is as follows:

Contract Assets

1 unchanged sentence

Balance at beginning of year $ 706 $ 545

Acquisitions/adjustments ( 2 ) —

Recognized in current year 358 284

Reclassified to accounts receivable ( 208 ) ( 225 )

Acquisitions/adjustments ( 2 ) 28

Foreign currency impact 5 ( 20 )

Balance at March 31

Balance at June 30

Contract Liabilities

4 unchanged sentences

Current year amounts reclassified to revenue ( 149 ) ( 169 )

Acquisitions 1 12

Foreign currency impact 4 ( 17 )

Balance at March 31 $ 914 $ 816

Balance at June 30 $ 934 $ 826

The Company leases certain property, buildings and equipment.

5 unchanged sentences

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.

Operating lease expense was $ 16 million and $ 15 million for the three months ended March 31, 2023 and 2022, respectively.

New operating leases of $ 14 million and $ 2 million were added during the three months ended March 31, 2023 and 2022, respectively.

Operating lease expense was $ 16 million and $ 32 million for the three and six months ended June 30, 2023, respectively, and $ 14 million and $ 29 million for the three and six months ended June 30, 2022, respectively.

New operating leases of $ 6 million and $ 20 million were added during the three and six months ended June 30, 2023, respectively, and $ 22 million and $ 24 million for the three and six months ended June 30, 2022, respectively.

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

12 unchanged sentences

Long-term debt consisted of the following:

Effective Interest Rate Face Value March 31, 2023 December 31, 2022

Effective Interest Rate Face Value June 30, 2023 December 31, 2022

In millions Book Value Fair Value 1

25 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, the Company had total combined unamortized discount and debt issuance costs of $ 19 million and $ 21 million, respectively.

As of June 30, 2023 and December 31, 2022, the Company had total combined unamortized discount and debt issuance costs of $ 18 million and $ 21 million, respectively.

Credit Agreement

15 unchanged sentences

The Leverage Ratio is defined as Net Debt as of the last day of such fiscal quarter to EBITDA for the four quarters then ended.

Additionally, the Company may submit a request for an increased maximum Leverage Ratio in contemplation of a Material Acquisition.

Additionally, the Company may

submit a request for an increased maximum Leverage Ratio in contemplation of a Material Acquisition.

All terms are as defined in the Restated Credit Agreement.

The Company was in compliance with all financial covenants in the Restated Credit Agreement as of March 31, 2023.

The following table presents availability under the Restated Credit Agreement at March 31, 2023:

The Company was in compliance with all financial covenants in the Restated Credit Agreement as of June 30, 2023.

The following table presents availability under the Restated Credit Agreement at June 30, 2023:

Maximum Revolving Credit Facility Availability $ 1,500

7 unchanged sentences

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.

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 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.

Beginning September 15, 2023, the effective interest rates for the 2024 Notes and the 2028 Notes will each be reduced by 0.25 % due to a favorable change in Wabtec's corporate bond rating.

During the second quarter of 2022, the Company redeemed $ 25 million of principal from the 2024 Notes plus a premium and the related accrued interest.

6 unchanged sentences

STOCK-BASED COMPENSATION

As of March 31, 2023, 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 10, 2027, and as of March 31, 2023, the number of shares available for future grants under the 2011 Plan was approximately 4.9 million shares.

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 10, 2027, and as of June 30, 2023, the number of shares available for future grants under the 2011 Plan was approximately 4.9 million shares.

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 $ 12 million and $ 11 million for the three months ended March 31, 2023 and 2022, respectively.

At March 31, 2023, unamortized compensation expense related to stock options, non-vested restricted shares and incentive stock units expected to vest is approximately $ 90 million.

Stock-based compensation expense was $ 14 million and $ 26 million for the three and six months ended June 30, 2023, respectively, and $ 12 million and $ 23 million for the three and six months ended June 30, 2022, respectively.

At June 30, 2023, unamortized compensation expense related to stock options, non-vested restricted shares and incentive stock units expected to vest is approximately $ 80 million.

Stock Options Stock options are granted to eligible employees and directors at an exercise price equal to 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 become exercisable over a three-year vesting period and expire 10 years from the date of grant.

No stock options were granted during the three months ended March 31, 2023 or during the twelve months ended December 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, 2023:

No stock options were granted during the six months ended June 30, 2023 or the twelve months ended December 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 six months ended June 30, 2023:

Options Weighted

6 unchanged sentences

Canceled ( 1,319 ) $ 78.94

Outstanding at March 31, 2023 379,291 $ 77.67 5.8 $ 9

Exercisable at March 31, 2023 343,239 $ 77.48 5.7 $ 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.

Outstanding at June 30, 2023 366,121 $ 77.71 5.5 $ 12

Exercisable at June 30, 2023 330,639 $ 77.50 5.5 $ 11

Restricted Stock, Restricted Stock 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.

5 unchanged sentences

Quarterly, the Company reviews and updates performance estimates based on actual performance results and current projections.

Based on the Company’s performance for each three-year period then ended, the incentive stock units can vest and be awarded ranging from 0 % to 200 % of the initial

incentive stock units granted.

Based on the Company’s performance for each three-year period then ended, the incentive stock units can vest and be awarded ranging from 0 % to 200 % of the initial incentive stock units granted.

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 March 31, 2023, the Company estimates that it will achieve 125 %, 120 % and 100 % for the incentive stock awards expected to vest based on performance for the three-year periods ending December 31, 2023, 2024, and 2025, respectively, and has recorded incentive compensation expense accordingly.

As of June 30, 2023, the Company estimates that it will achieve 125 %, 122 % and 101 % for the incentive stock awards expected to vest based on performance for the three-year periods ending December 31, 2023, 2024, and 2025, respectively, and has recorded incentive compensation expense accordingly.

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

1 unchanged sentence

Expense for incentive stock units is updated as necessary based on the Company's performance.

The following table summarizes the restricted stock activity and related information for the 2011 Plan, the 2000 Plan, and Directors Plan, and incentive stock units activity and related information for the 2011 Plan and the 2000 Plan with related information for the three months ended March 31, 2023:

and Units Incentive

6 unchanged sentences

Canceled ( 12,198 ) ( 1,938 ) $ 89.08

Outstanding at March 31, 2023 804,085 659,821 $ 92.92

The overall effective tax rate of 25.5 % for the three months ended March 31, 2023 differs from the U.S.

Outstanding at June 30, 2023 801,603 669,137 $ 93.13

The overall effective tax rate of 25.5 % for the three and six months ended June 30, 2023 differs from the U.S.

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

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

In millions, except per share data 2023 2022 2023 2022

7 unchanged sentences

Diluted $ 1.06 $ 0.91 $ 2.00 $ 1.71

The following table reconciles the changes in the Company’s product warranty reserve for the three months ended March 31, 2023 and 2022:

The following table reconciles the changes in the Company’s product warranty reserve for the six months ended June 30, 2023 and 2022:

In millions 2023 2022

2 unchanged sentences

Warranty claim payments ( 48 ) ( 49 )

Acquisitions — 3

Foreign currency impact/other 1 ( 10 )

Balance at March 31

Balance at June 30

FAIR VALUE MEASUREMENT AND DERIVATIVE INSTRUMENTS

9 unchanged sentences

The Company’s cash, cash equivalents and restricted cash 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, cash equivalents and restricted cash approximated the carrying value at March 31, 2023 and December 31, 2022.

The fair value of cash, cash equivalents and restricted cash approximated the carrying value at June 30, 2023 and December 31, 2022.

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, 2023 and December 31, 2022, $ 105 million was classified as "Other accrued liabilities" on the Company's Condensed Consolidated Balance Sheets and $ 48 million and $ 47 million, respectively, was included within long-term liabilities classified as "Contingent consideration" on the Company's Condensed Consolidated Balance Sheets.

The fair value approximates the carrying value at March 31, 2023 and December 31, 2022.

At June 30, 2023 and December 31, 2022, $ 105 million was classified as "Other accrued liabilities" on the Company's Condensed Consolidated Balance Sheets and $ 48 million and $ 47 million, respectively, was included within long-term liabilities classified as "Contingent consideration" on the Company's Condensed Consolidated Balance Sheets.

The fair value approximates the carrying value at June 30, 2023 and December 31, 2022.

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.

8 unchanged sentences

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

For the three months ended March 31, 2023 and 2022, the amounts reclassified into income were not material.

For the three and six months ended June 30, 2023 and 2022, 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.

3 unchanged sentences

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.

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.

1 unchanged sentence

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 gain related to these contracts was $ 1 million for the three months ended March 31, 2023 and the net loss related to these contracts was $ 1 million for the three months ended March 31, 2022.

The net gain related to these contracts was $ 1 million and $ 2 million for the three and six months ended June 30, 2023, and the net loss related to these contracts was $ 7 million and $ 8 million for the three and six months ended June 30, 2022, respectively.

These contracts typically mature within one year .

The following table summarizes the assets, liabilities, gross notional amounts, fair values, and fair value hierarchy classification of the designated and non-designated hedges discussed in the above sections as of March 31, 2023, which are included in other current assets and liabilities on the Condensed Consolidated Balance Sheets:

The following table summarizes the assets, liabilities, gross notional amounts, fair values, and fair value hierarchy classification of the designated and non-designated hedges discussed in the above sections as of June 30, 2023, which are included in other current assets and liabilities on the Condensed Consolidated Balance Sheets:

Fair Value Gross Notional Amount

17 unchanged sentences

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, 2023 and 2022 the amounts reclassified into income were not material.

For the six months ended June 30, 2023 and 2022 the amounts reclassified into income were not material.

Commodity Price Risk

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

For the three months ended March 31, 2023 and 2022 the amounts recognized as income or expense were not material.

For the six months ended June 30, 2023 and 2022 the amounts recognized as income or expense were not material.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

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.

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.

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.

15 unchanged sentences

On February 10, 2023, the court issued a decision in favor of RTD, denying DTC's damages claim.

DTC has filed a Notice of Appeal.

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

5 unchanged sentences

Freight Segment builds, rebuilds, upgrades, and overhauls locomotives, services locomotives and freight cars, and provides a range of component and digital solutions for customers in the freight and transit rail, mining, and marine industries.

Wabtec manufactures and services components for new and existing freight cars and locomotives, supplies railway electronics, positive train control equipment, signal design and engineering services, maintenance of way, and provides heat exchange and cooling systems for locomotives and power generation equipment.

It also manufactures and services components for new and existing freight cars and locomotives, supplies railway electronics, positive train control equipment, signal design and engineering services, maintenance of way, and provides heat exchange and cooling systems for locomotives and power generation equipment.

Customers include large, publicly traded railroads, leasing companies, manufacturers of original equipment such as locomotives and freight cars, and utilities, and also serves companies in the mining, marine, and industrial markets.

6 unchanged sentences

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

Segment financial information for the three months ended March 31, 2023 is as follows:

Segment financial information for the three months ended June 30, 2023 is as follows:

In millions Freight

9 unchanged sentences

Income (loss) before income taxes $ 271 $ 66 $ ( 78 ) $ 259

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

Segment financial information for the three months ended June 30, 2022 is as follows:

In millions Freight

9 unchanged sentences

Income (loss) before income taxes $ 233 $ 50 $ ( 56 ) $ 227

Segment financial information for the six months ended June 30, 2023 is as follows:

In millions Freight Segment Transit Segment Corporate Activities and Elimination Total

Sales to external customers $ 3,274 $ 1,327 $ — $ 4,601

Intersegment sales/(elimination) 30 22 ( 52 ) —

Total sales $ 3,304 $ 1,349 $ ( 52 ) $ 4,601

Income (loss) from operations $ 498 $ 135 $ ( 45 ) $ 588

Interest expense and other, net — — ( 96 ) ( 96 )

Income (loss) before income taxes $ 498 $ 135 $ ( 141 ) $ 492

Segment financial information for the six months ended June 30, 2022 is as follows:

In millions Freight Segment Transit Segment Corporate Activities and Elimination Total

Sales to external customers $ 2,812 $ 1,163 $ — $ 3,975

Intersegment sales/(elimination) 25 17 ( 42 ) —

Total sales $ 2,837 $ 1,180 $ ( 42 ) $ 3,975

Income (loss) from operations $ 422 $ 115 $ ( 34 ) $ 503

Interest expense and other, net — — ( 76 ) ( 76 )

Income (loss) before income taxes $ 422 $ 115 $ ( 110 ) $ 427

Sales to external customers by product line are as follows:

Three Months Ended

June 30, Six Months Ended

In millions 2023 2022 2023 2022

12 unchanged sentences

Three Months Ended

June 30, Six Months Ended

In millions 2023 2022 2023 2022

Foreign currency gain $ 2 $ 3

Foreign currency (loss) gain $ ( 8 ) $ ( 2 ) $ ( 6 ) $ 1

Equity income 10 7 11 7

6 unchanged sentences

The Company anticipates that it will incur one-time restructuring charges related to Integration 2.0 of approximately $ 135 million to $ 165 million.

During three months ended March 31, 2023, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $ 9 million, of which approximately $ 4 million was included in Cost of goods sold and approximately $ 5 million was included in Selling, general and administrative expenses on the Condensed Consolidated Statements of Income.

A summary of restructuring charges related to the Integration 2.0 initiative is as follows:

In millions Three Months Ended

June 30, 2023 Six Months Ended

June 30, 2023

Freight Segment:

Cost of goods sold $ 1 $ 2

Selling, general and administrative expenses 1 2

Total Freight Segment $ 2 $ 4

Transit Segment:

Cost of goods sold $ 3 $ 6

Selling, general and administrative expenses 3 5

Amortization expense — 2

Total Transit Segment $ 6 $ 13

Total Integration 2.0 restructuring charges $ 8 $ 17

These charges are primarily for employee-related costs and asset write downs associated with site consolidations in Europe.

Approximately $ 7 million is related to actions in the Transit Segment and approximately $ 2 million is related to actions in the Freight Segment.

No significant charges related to Integration 2.0 were recorded during the three months ended March 31, 2022.

Total one-time restructuring charges related to Integration 2.0 to date are approximately $ 86 million, which includes amounts recorded in the fourth quarter 2021 and the year ended December 31, 2022, primarily for similar actions in Europe.

Programs approved to date are expected to result in approximately 15 facility closures and impact approximately 1,100 employees.

Cash payments made during three months ended March 31, 2023 or 2022 were not material.

Cash payments made during three and six months ended June 30, 2023 or 2022 were no t material.

No significant programs related to Integration 2.0 were initiated during the three and six months ended June 30, 2022.

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