What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-10-25 compared with 2023-07-27 · 127 added, 100 removed, 628 unchanged (27% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

In millions, except par value June 30,

In millions, except par value September 30,

2023 December 31,

28 unchanged sentences

500.0 shares authorized and 226.9 shares issued:

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

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

Additional paid-in capital 7,965 7,953

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

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

( 2,013 ) ( 1,769 )

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

In millions, except per share data 2023 2022 2023 2022

32 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

In millions 2023 2022 2023 2022

Net income attributable to Wabtec shareholders $ 240 $ 160 $ 600 $ 475

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

Foreign currency translation loss ( 106 ) ( 170 ) ( 82 ) ( 352 )

Unrealized gain on derivative contracts 21 — 39 3

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 )

Unrealized gain on pension benefit plans and post-retirement benefit plans 3 6 1 11

Other comprehensive loss before tax ( 82 ) ( 164 ) ( 42 ) ( 338 )

Income tax expense related to components of other comprehensive income ( 7 ) ( 3 ) ( 10 ) ( 4 )

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

Other comprehensive loss, net of tax ( 89 ) ( 167 ) ( 52 ) ( 342 )

Comprehensive income (loss) attributable to Wabtec shareholders $ 151 $ ( 7 ) $ 548 $ 133

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

In millions 2023 2022

27 unchanged sentences

Other financing activities — ( 1 )

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

Net cash used for financing activities ( 323 ) ( 395 )

Effect of changes in currency exchange rates ( 5 ) ( 43 )

24 unchanged sentences

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

Cash dividends ($ 0.17 dividend per share)

— — — — — ( 30 ) — ( 30 )

Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax — — 2 — 1 — — — 3

Stock based compensation — — 14 — — — — — 14

Net income — — — — — 240 — 2 242

Other comprehensive loss, net of tax — — — — — — ( 89 ) — ( 89 )

Balance, September 30, 2023 226.9 $ 2 $ 7,965 ( 47.8 ) $ ( 2,013 ) $ 5,085 $ ( 713 ) $ 41 $ 10,367

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

16 unchanged sentences

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

Cash dividends ($ 0.15 dividend per share)

— — — — — ( 28 ) — — ( 28 )

Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax — — 1 — — — — — 1

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

Net income — — — — — 160 — 3 163

Other comprehensive loss, net of tax — — — — — — ( 167 ) — ( 167 )

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

Balance, September 30, 2022 226.9 $ 2 $ 7,937 ( 45.0 ) $ ( 1,697 ) $ 4,447 $ ( 808 ) $ 44 $ 9,925

The accompanying notes are an integral part of these statements.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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 six months of 2023, approximately 55 % of the Company’s Net sales came from customers outside the United States.

In the first nine 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 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.

As of September 30, 2023, Wabtec had approximately $ 2 million of cash related to Russian operations which will be utilized to settle remaining obligations in Russia.

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.

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.

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

As of September 30, 2023, the Company's remaining performance obligations were approximately $ 21.4 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 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.

At September 30, 2023 and December 31, 2022, the bankruptcy-remote subsidiary held receivables of $ 745 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 September 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 June 30, 2023 or December 31, 2022 as the estimated expected credit losses on receivables sold is insignificant.

No obligation was recorded at September 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 Six Months Ended

June 30, 2023 Six Months Ended

June 30, 2022

In millions Nine Months Ended

September 30, 2023 Nine Months Ended

September 30, 2022

Gross receivables sold/cash proceeds received $ 2,030 $ 1,281

1 unchanged sentence

Net cash proceeds received $ 155 $ 205

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.

Restricted Cash At September 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.

12 unchanged sentences

The amendments will require increased interim and annual disclosures be provided on current and comparable reporting periods presented in annual and interim company filings.

Supply Chain Financing Program

The Company has entered into supply chain financing arrangements with third-party financial institutions to provide our vendors with enhanced payment options while providing the Company with added working capital flexibility.

1 unchanged sentence

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 $ 341 million and $ 296 million of the Company's outstanding Accounts payable as of June 30, 2023 and December 31, 2022, respectively.

Suppliers utilized the program to accelerate receipt of payment from these financial institutions for $ 317 million and $ 296 million of the Company's outstanding Accounts payable as of September 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 June 30, 2023 and 2022 are as follows:

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the three months ended September 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:

Other comprehensive (loss) income, net ( 106 ) ( 170 ) 16 — 1 3 ( 89 ) ( 167 )

Balance at September 30 $ ( 678 ) $ ( 748 ) $ 20 $ ( 2 ) $ ( 55 ) $ ( 58 ) $ ( 713 ) $ ( 808 )

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

Foreign currency translation Derivative contracts Pension and postretirement benefit plans Total

1 unchanged sentence

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

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

Other comprehensive (loss) income before reclassifications ( 82 ) ( 352 ) 29 3 — 6 ( 53 ) ( 343 )

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

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

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

Other comprehensive (loss) income, net ( 82 ) ( 352 ) 29 3 1 7 ( 52 ) ( 342 )

Balance at September 30 $ ( 678 ) $ ( 748 ) $ 20 $ ( 2 ) $ ( 55 ) $ ( 58 ) $ ( 713 ) $ ( 808 )

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.

20 unchanged sentences

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.

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 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.

3 unchanged sentences

The components of inventory, net of reserves, were:

In millions June 30,

In millions September 30,

2023 December 31,

9 unchanged sentences

Foreign currency impact ( 1 ) ( 19 ) ( 20 )

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.

Balance at September 30, 2023 $ 7,186 $ 1,404 $ 8,590

As of September 30, 2023 and December 31, 2022, the Company’s trade names had a net carrying amount of $ 612 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:

June 30, 2023 December 31, 2022

September 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 $ 4,033 $ ( 1,378 ) $ 2,655 $ 3,972 $ ( 1,172 ) $ 2,800

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.

At September 30, 2023 the weighted average remaining useful lives of backlog, customer relationships and acquired technology were 9 years, 16 years and 7 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 $ 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 intangible assets was $ 74 million and $ 222 million for the three and nine months ended September 30, 2023, respectively, and $ 73 million and $ 218 million for the three and nine months ended September 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 $ 176 million at June 30, 2023 and $ 162 million at December 31, 2022.

Noncurrent contract assets were $ 196 million at September 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 $ 106 million at June 30, 2023 and $ 86 million at December 31, 2022.

Noncurrent contract liabilities were $ 200 million at September 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 June 30, 2023 and December 31, 2022, respectively.

Provisions for loss contracts were $ 90 million and $ 98 million at September 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 six months ended June 30, 2023 and 2022 is as follows:

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

Contract Assets

5 unchanged sentences

Foreign currency impact ( 4 ) ( 36 )

Balance at June 30

Balance at September 30

Contract Liabilities

6 unchanged sentences

Foreign currency impact ( 6 ) ( 33 )

Balance at June 30 $ 934 $ 826

Balance at September 30 $ 969 $ 880

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 $ 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.

Operating lease expense was $ 16 million and $ 48 million for the three and nine months ended September 30, 2023, respectively, and $ 15 million and $ 44 million for the three and nine months ended September 30, 2022, respectively.

New operating leases of $ 7 million and $ 27 million were added during the three and nine months ended September 30, 2023, respectively, and $ 34 million and $ 58 million for the three and nine months ended September 30, 2022, respectively.

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

7 unchanged sentences

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

September 30,

2023 December 31,

3 unchanged sentences

Long-term debt consisted of the following:

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

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

In millions Book Value Fair Value 1

2 unchanged sentences

Revolving Credit Facility 7.2 % $ 25 $ 25 $ 25 $ — $ —

Delayed Draw Term Loan 6.8 % $ 250 250 250 — —

Senior Notes:

21 unchanged sentences

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

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.

As of September 30, 2023 and December 31, 2022, the Company had total combined unamortized discount and debt issuance costs of $ 16 million and $ 21 million, respectively.

Credit Agreement

12 unchanged sentences

Obligations under the Restated Credit Agreement have been guaranteed by certain of the Company’s subsidiaries.

During the third quarter of 2023, the Company borrowed the full $ 250 million of availability from the Delayed Draw Term Loan and utilized the proceeds to redeem the 4.375 % Senior Notes, due 2023.

The borrowing rate for the Delayed Draw Term Loan is a variable rate reassessed periodically in accordance with the terms of the Restated Credit Agreement.

Under the Restated Credit Agreement, the Company has agreed to maintain an Interest Coverage Ratio of at least 3.0 to 1.0, and a Leverage Ratio not to exceed 3.5 to 1.0.

1 unchanged sentence

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 June 30, 2023.

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

Maximum Revolving Credit Facility Availability $ 1,500

Delayed Draw Term Loan 250

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

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

In millions Revolving Credit Facility Delayed Draw Term Loan Total

Maximum Availability $ 1,500 $ 250 $ 1,750

Outstanding Borrowings ( 25 ) ( 250 ) ( 275 )

7 unchanged sentences

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.

Beginning September 15, 2023, the effective interest rates for the 2024 Notes and the 2028 Notes were each reduced by 0.25 % due to a favorable change in Wabtec's corporate credit rating and the rating of the aforementioned notes.

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.

7 unchanged sentences

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 2011 Plan has a term through May 10, 2027, and as of September 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 $ 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-based compensation expense was $ 16 million and $ 42 million for the three and nine months ended September 30, 2023, respectively, and $ 12 million and $ 35 million for the three and nine months ended September 30, 2022, respectively.

September 30, 2023, unamortized compensation expense related to stock options, non-vested restricted shares and incentive stock units expected to vest is approximately $ 66 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 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:

No stock options were granted during the nine months ended September 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 nine months ended September 30, 2023:

Options Weighted

6 unchanged sentences

Canceled ( 1,751 ) $ 79.50

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

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

Outstanding at September 30, 2023 324,807 $ 78.28 5.5 $ 9

Exercisable at September 30, 2023 289,263 $ 77.95 5.5 $ 8

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.

8 unchanged sentences

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 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.

As of September 30, 2023, the Company estimates that it will achieve 129 %, 129 % and 107 % 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 six months ended June 30, 2023:

and Units Incentive

6 unchanged sentences

Canceled ( 20,644 ) ( 6,542 ) $ 91.57

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.

Outstanding at September 30, 2023 779,571 697,486 $ 93.48

The overall effective tax rate for the three and nine months ended September 30, 2023 was 24.5 % and 25.1 %, respectively.

These rates differ 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

September 30, Nine Months Ended

September 30,

In millions, except per share data 2023 2022 2023 2022

7 unchanged sentences

Diluted $ 1.33 $ 0.88 $ 3.33 $ 2.59

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

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

In millions 2023 2022

4 unchanged sentences

Foreign currency impact/other ( 1 ) ( 16 )

Balance at June 30

Balance at September 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 June 30, 2023 and December 31, 2022.

The fair value of cash, cash equivalents and restricted cash approximated the carrying value at September 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 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.

At September 30, 2023 and December 31, 2022, $ 105 million was classified as "Other accrued liabilities" on the Company's Condensed Consolidated Balance Sheets and $ 49 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 September 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 and six months ended June 30, 2023 and 2022, the amounts reclassified into income were not material.

For the three and nine months ended September 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.

7 unchanged sentences

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 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.

The net gain related to these contracts was $ 9 million and $ 11 million for the three and nine months ended September 30, 2023, and the net loss related to these contracts was $ 3 million and $ 11 million for the three and nine months ended September 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 June 30, 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 September 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 six months ended June 30, 2023 and 2022 the amounts reclassified into income were not material.

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

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

COMMITMENTS AND CONTINGENCIES

8 unchanged sentences

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.

During the third quarter of 2023, a competitor of the Company, Progress Rail (“Progress”), which is a Caterpillar Inc.

company, sued the Company in Delaware federal court asserting antitrust, breach of contract, unfair competition law, and misrepresentation claims.

The complaint challenges the Wabtec-GE Transportation merger and contends that since the merger, Wabtec has unlawfully monopolized the markets for long-haul freight locomotives, Tier IV long-haul freight locomotives, and energy management systems by, among other things, failing to ensure that Progress’ products are interoperable with Wabtec’s locomotives and cab electronics.

The case is currently at an early stage.

Progress seeks an order requiring Wabtec to divest GE Transportation, unspecified treble damages for its alleged lost profits from reduced sales of locomotive and cab systems, and attorneys’ fees and costs.

It also asks the court to enjoin Wabtec from engaging in the conduct and require the Company to comply with its agreements with Progress.

Wabtec intends to vigorously defend itself against this lawsuit and believes that it has meritorious defenses to the claims asserted by Progress.

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").

2 unchanged sentences

With regard to the wireless crossing issue, as of September 8, 2017, DTC alleged that total damages were $ 37 million through July 31, 2017 and were continuing to accumulate.

The majority of the damages stems from a delay in approval of the wireless crossing system by the Federal Railway Administration ("FRA") and the Public Utility Commission ("PUC"), resulting in the use of flaggers at all of the crossings pending approval of the wireless crossing system and certification of the crossings.

all of the crossings pending approval of the wireless crossing system and certification of the crossings.

DTC has alleged that the delay is due to Xorail's failure to achieve constant warning times for the crossings in accordance with the approval requirements imposed by the FRA and PUC.

23 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 June 30, 2023 is as follows:

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

In millions Freight

9 unchanged sentences

Income (loss) before income taxes $ 327 $ 68 $ ( 75 ) $ 320

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

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

In millions Freight

9 unchanged sentences

Income (loss) before income taxes $ 233 $ 53 $ ( 69 ) $ 217

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

Segment financial information for the nine months ended September 30, 2023 is as follows:

In millions Freight Segment Transit Segment Corporate Activities and Elimination Total

5 unchanged sentences

Income (loss) before income taxes $ 825 $ 203 $ ( 216 ) $ 812

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

Segment financial information for the nine months ended September 30, 2022 is as follows:

In millions Freight Segment Transit Segment Corporate Activities and Elimination Total

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

In millions 2023 2022 2023 2022

12 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

In millions 2023 2022 2023 2022

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

Foreign currency loss $ ( 3 ) $ ( 6 ) $ ( 9 ) $ ( 5 )

Equity income 12 6 23 13

Expected return on pension assets/amortization 2 2 5 7

Other miscellaneous expense, net ( 1 ) — ( 1 ) ( 2 )

Other miscellaneous (expense) income, net ( 1 ) 2 ( 2 ) —

Total Other income, net $ 10 $ 4 $ 17 $ 15

5 unchanged sentences

In millions Three Months Ended

June 30, 2023 Six Months Ended

June 30, 2023

September 30, 2023 Nine Months Ended

September 30, 2023

Freight Segment:

8 unchanged sentences

Total Integration 2.0 restructuring charges $ 13 $ 30

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

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.

Total one-time restructuring charges related to Integration 2.0 to date are approximately $ 99 million, which includes amounts recorded beginning in the fourth quarter 2021, and are primarily for employee-related costs and asset write downs associated with site consolidations 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 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.

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

No significant programs related to Integration 2.0 were initiated during the three and nine months ended September 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