What changed in this filing

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Item 1A. Risk Factors

2024-02-14 compared with 2023-02-15 · 30 added, 58 removed, 269 unchanged (25% of the section changed)

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Our business operates in a highly competitive industry.

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

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.

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.

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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 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.

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.

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Failure to take adequate steps to mitigate the likelihood or potential impact of disruptions, or to effectively manage such events if they occur, particularly when a product is sourced from a single supplier or location, could adversely affect our business or financial results.

Due to the ongoing impacts and uncertainty of continued impacts of the COVID-19 pandemic and the global government actions to contain it, some of our supply chains, particularly in China, India, the U.S., and Europe, have been, and continue to be, impacted.

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

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

In the aftermath of the disruptions caused by the COVID-19 pandemic, various disruptive forces have continued to impact some of our supply chains, particularly in China, India, the U.S., and Europe.

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

Additionally, broad-based inflation, escalation of diesel, utilities, energy, metals and other commodities costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations have persisted.

There can be no assurance that there will not be further, or deeper, supply chain disruptions, or that the steps we are taking to mitigate such disruptions will be effective or achieve their desired results in a timely fashion.

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The integration of our recently completed acquisitions may not result in anticipated improvements in market position or the realization of anticipated operating synergies or may take longer to realize than expected.

Although we believe that our recent acquisitions will improve our market position and realize positive operating results, including operating synergies, operating expense reductions and overhead cost savings, we cannot be assured that these improvements will be obtained or the timing of such improvements.

improvements will be obtained or the timing of such improvements.

The management and acquisition of businesses involves substantial risks, any of which may result in a material adverse effect on our business and results of operations, including:

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• impairment of assets.

The effects of COVID-19 and other potential future public health crises, epidemics, pandemics or similar events on our business, operating results and cash flows are uncertain.

We face a wide variety of risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19.

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 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.

Our operations may be further impacted by the COVID-19 pandemic if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, travel restrictions or absenteeism;

steps the company has taken to protect health and well-being;

government actions;

facility closures;

work slowdowns or stoppages;

inadequate supplies or resources (such as reliable personal protective equipment, testing and vaccines);

or other circumstances related to COVID-19.

Governments around the world have taken steps to mitigate some of the more severe anticipated economic effects, but there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion.

The COVID-19 pandemic has resulted in operational and supply chain disruptions for us and our customers and may further adversely affect operations and the operations of our customers and suppliers.

Accordingly, COVID-19 had a materially adverse impact on our operations and business results for the years ended December 31, 2021, and 2020.

Supply chain disruptions and shortages in labor availability have caused component and chip shortages, which have resulted in adverse effects on the timing of our revenue generation.

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

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.

There is no certainty that such measures will be sufficient to mitigate the continued risks posed by the pandemic.

The COVID-19 pandemic and related volatility in financial markets and deterioration of national and global economic conditions could affect our business and operations in a variety of ways.

For example, we have experienced and could experience further operational disruptions and financial losses as a result of the following:

• a decrease in demand for our products as a result of COVID-19 and cost control measures implemented by our customers;

• delays in orders or delivery of orders, the occurrence of which negatively impacts our cash conversion cycle and ability to convert our backlog into cash;

• inability to collect full or partial payments from customers due to deterioration in customer liquidity, including customer bankruptcies;

• 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.

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

While we do not currently anticipate any material impairments on our assets as a result of COVID-19, future changes in expectations for sales, earnings and cash flows related to intangible assets and goodwill below our current projections could cause these assets to be impaired.

We continue to work with our stakeholders (including customers, employees, suppliers and local communities) in an effort to address responsibly this global pandemic.

We continue to monitor the situation, to assess further possible implications to our employees, business, supply chain and customers, and to take certain actions in an effort to mitigate various adverse consequences.

However, uncertainty around general global economic and market conditions, exacerbated by the COVID-19 pandemic, will have an impact on our sales and operations in 2023 and beyond.

We expect that the longer the COVID-19 pandemic, including its economic disruption, continues, the greater the adverse impact on our business operations, financial performance and results of operations could be.

Given the tremendous uncertainties and variables, we cannot at this time predict the impact of the global COVID-19 pandemic, or any future pandemic, but any one could have a material adverse impact on our business, financial position, results of operations and/or cash flows.

The effects of potential future public health crises, epidemics, pandemics or similar events on our business, operating results and cash flows are uncertain.

We face a wide variety of risks related to health epidemics, pandemics and similar outbreaks.

As was evidenced by the COVID-19 pandemic, public health crises have the potential to dramatically impact the global health and economic environment and to trigger significant economic volatility and operational uncertainty.

While our operations have generally stabilized since the peak of the COVID-19 pandemic, future public health emergencies, which could include a resurgence of COVID-19, and unpredictable responses by authorities around the world could negatively impact our global operations, customers and suppliers.

Any future public health crises, epidemics, pandemics or similar events could result in disruptions to our operations, including higher rates of employee absenteeism and supply chain disruptions, decreased demand for our products, volatility in financial markets, and overall deterioration of national and global economic conditions.

Given the tremendous uncertainties and variables associated with public health crises, we cannot predict the impact of such events, but any one could have a material adverse impact on our business, financial position, results of operations and/or cash flows.

RISKS RELATED TO INTERNATIONAL OPERATIONS

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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/Commonwealth of Independent States ("CIS"), Macedonia, Mexico, the Netherlands, Poland, 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"), the Republic of North 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:

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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.

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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.

Regional and international conflicts, such as the ongoing conflict between Russia and Ukraine and turmoil in the Mideast Region, 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, may adversely affect our business and results of operations.

Regional and international conflicts could have a wide range of negative consequences, including causing damage or disruption to international commerce, disruptions to transportation and distribution routes, volatility in commodity markets, supply chain disruptions, business disruptions (including labor shortages), foreign currency dislocations or broader regional instability.

For example, 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;

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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.

Additionally, Wabtec has operations 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.

To the extent a regional or international conflict 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;

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We are unable to predict what impact these or other regulatory changes may have, if any, on our business or the industry as a whole.

We cannot assure that costs incurred to comply with any new standards or regulations will not be material to our business, results of operations and financial condition.

We cannot assure that

costs incurred to comply with any new standards or regulations will not be material to our business, results of operations and financial condition.

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

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Failure to comply with environmental laws and regulations could have significant consequences on our business and results of operations, including the imposition of substantial fines and sanctions for violations, injunctive relief (including requirements that we limit or cease operations at affected facilities), and reputational risk.

In addition, certain of our products are subject to extensive, and increasingly stringent, statutory and regulatory requirements governing, e.g.

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

Environmental Protection Agency,

the European Union and other regulatory agencies around the world.

In addition, certain of our products are subject to extensive, and increasingly stringent, statutory and regulatory requirements governing attributes, such as emissions and noise, including standards imposed by the U.S.

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.

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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.

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.

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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.

The incidents 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.

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• limit our ability to borrow additional funds;

• result in higher borrowing costs impacting our financial results upon refinancing any of our maturing debt.

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.

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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 3.5 or less.

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 by Net Debt as of the last day of such fiscal quarter to EBITDA for the four quarters then ended, of 3.5 or less.

All terms are as defined in the Restated Credit Agreement.

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In addition, the indentures require that we offer to repurchase our outstanding Senior Notes upon the occurrence of certain change of control triggering events.

UNRESOLVED STAFF COMMENTS

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