What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-14 compared with 2023-02-15 · 244 added, 172 removed, 1021 unchanged (29% of the section changed)

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has excluded L&M Radiator, Inc.

and Lokomotiv Kurastyru Zauyty (LKZ) from its assessment of internal controls over financial reporting as of December 31, 2023 because the Company acquired L&M Radiator, Inc.

effective June 15, 2023, and LKZ effective December 22, 2023.

L&M Radiator, Inc.

and LKZ are both subsidiaries whose total assets represent 1.6% and 2.1%, respectively, and customer revenues represents 0.8% and 0.0%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

Based on its assessment, Management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2023, based on criteria in Internal Control-Integrated Framework issued by the COSO.

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Our audit procedures also included, among others, evaluating the significant assumptions and the accuracy and completeness of the underlying data used in management's calculations.

This included, for example, inspection of the executed contracts and testing management's cost estimates by comparing the inputs to the Company’s historical data or experience for similar contracts, the performance of sensitivity analysis and the performance of retrospective review analysis of prior management cost estimates to actual costs incurred for completed contracts.

This included, for example, inspection of the executed contract and testing management's cost estimates by comparing the inputs to the Company’s historical data or experience for similar contracts, the performance of sensitivity analysis and the performance of retrospective review analysis of prior management cost estimates to actual costs incurred for completed contracts.

In addition, for a sample of contracts, we involved our construction and engineering specialists to assist in our evaluation of management’s cost estimates at completion.

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In our opinion, Westinghouse Air Brake Technologies Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

As indicated in the accompanying Management's Report on Internal Control over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of L&M Radiator, Inc.

and Lokomotiv Kurastyru Zauyty (LKZ), which are included in the 2023 consolidated financial statements of the Company and constituted 1.6% and 2.1% of total assets respectively, as of December 31, 2023 and 0.8% and 0.0% of net sales respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of L&M Radiator, Inc.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, cash flows and shareholders’ equity for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(2) and our report dated February 14, 2024 expressed an unqualified opinion thereon.

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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Net income 825 641 565

Net (income) loss attributable to noncontrolling interest ( 8 ) ( 7 ) 2

Net income attributable to noncontrolling interest ( 10 ) ( 8 ) ( 7 )

Net income attributable to Wabtec shareholders $ 815 $ 633 $ 558

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Net income attributable to Wabtec shareholders $ 815 $ 633 $ 558

Foreign currency translation (loss) gain ( 200 ) ( 136 ) 48

Unrealized (loss) gain on derivative contracts ( 5 ) ( 10 ) 8

Unrealized gain (loss) on pension benefit plans and post-retirement benefit plans 11 21 ( 14 )

Other comprehensive (loss) income before tax ( 194 ) ( 125 ) 42

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

Other comprehensive (loss) income, net of tax ( 195 ) ( 127 ) 44

Foreign currency translation gain (loss) 55 ( 200 ) ( 136 )

Unrealized gain (loss) on derivative contracts 22 ( 5 ) ( 10 )

Unrealized gain on pension benefit plans and post-retirement benefit plans — 11 21

Other comprehensive income (loss) before tax 77 ( 194 ) ( 125 )

Income tax expense related to components of other comprehensive loss ( 6 ) ( 1 ) ( 2 )

Other comprehensive income (loss), net of tax 71 ( 195 ) ( 127 )

Comprehensive income attributable to Wabtec shareholders $ 886 $ 438 $ 431

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Investing Activities

Purchase of property, plant and equipment ( 149 ) ( 130 ) ( 136 )

Acquisitions of businesses, net of cash acquired ( 308 ) ( 89 ) ( 435 )

Purchase of property, plant and equipment ( 186 ) ( 149 ) ( 130 )

Proceeds from disposal of property, plant and equipment 2 3 25

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Payment of contingent consideration on acquisitions ( 112 ) ( 101 ) ( 99 )

Distribution to noncontrolling interest ( 17 ) — —

Payment of income tax withholding on share-based compensation ( 16 ) ( 7 ) ( 7 )

Other financing activities 2 14 6

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Effect of changes in currency exchange rates 3 ( 27 ) ( 6 )

Increase (decrease) in cash, cash equivalents and restricted cash 68 ( 126 ) ( 5 )

Increase (decrease) in cash 79 68 ( 126 )

Cash, cash equivalents and restricted cash, beginning of year 541 473 599

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

In millions, except per share data Common

In millions Common

Stock Shares Common

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Stock based compensation — — 41 — — — — — 41

Net income (loss) — — — — — 414 — ( 2 ) 412

Other comprehensive income (loss), net of tax — — — — — — 44 ( 1 ) 43

Net income — — — — — 558 — 7 565

Other comprehensive loss, net of tax — — — — — — ( 127 ) — ( 127 )

Stock repurchase — — — ( 3.3 ) ( 300 ) — — — ( 300 )

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Net income — — — — — 815 — 10 825

Other comprehensive loss, net of tax — — — — — — ( 195 ) — ( 195 )

Other comprehensive income, net of tax — — — — — — 71 — 71

Stock repurchase — — — ( 3.9 ) ( 412 ) — — — ( 412 )

Distribution to noncontrolling interest — — — — — — — ( 17 ) ( 17 )

Other — — — — — — — ( 1 ) ( 1 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Wabtec is one of the world’s largest providers of value-added, technology-based locomotives, equipment, systems, and services for the global freight rail and passenger transit industries as well as the mining, marine and industrial markets.

Wabtec is a global provider of value-added, technology-based locomotives, equipment, systems, and services for the freight rail and passenger transit industries as well as the mining, marine and industrial markets.

Our highly engineered products, which are intended to enhance safety, improve productivity and reduce maintenance costs for customers, can be found on most locomotives, freight cars, passenger transit cars and buses around the world.

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

The unfavorable global economic conditions driven by the impacts of the pandemic, supply chain disruptions and labor shortages, and the Russian invasion of Ukraine continue to have an adverse impact on our operations and business results.

During 2020, the pandemic caused temporary plant closures in China, India, Italy, and other countries where outbreaks and stay-at-home orders were most prevalent, which had an adverse impact on our operations and business results.

Supply chain disruptions and labor availability 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 commodity costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations all continue to impact our results.

The Company has implemented various mitigating actions to lessen the impact of these unfavorable economic conditions including price escalations in long-term contracts, price surcharges, operational efficiencies, cost mitigation efforts and discretionary spend management, strategic sourcing alignments, and accelerating integration synergies where possible, including Integration 2.0 discussed in Note 21.

Additionally, the Company has proactively built-up inventory ahead of expected growth, including from new orders signed in 2022, and in response to supply chain challenges to minimize further interruption on customer orders.

For the year ended December 31, 2021, prior to the Russian invasion of Ukraine and the resulting imposition of various sanctions against Russia and Belarus, Wabtec had earnings of approximately $ 40 million attributable to customers in Russia, while earnings from customers in Ukraine and Belarus were no t significant.

As of December 31, 2022 and 2021, Wabtec had approximately $ 14 million and $ 20 million of assets, respectively, related to Russian operations, which were primarily cash and inventory that are expected to be recoverable.

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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generally accepted accounting principles.

Sales between subsidiaries are billed at prices consistent with sales to third parties and are eliminated in consolidation.

Sales between subsidiaries are eliminated in consolidation.

Cash Equivalents and Restricted Cash Cash equivalents are highly liquid investments purchased with an original maturity of three months or less.

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The Company performs its annual impairment test during the fourth quarter after the annual forecasting process is completed, and also tests for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

The Company will perform either a qualitative or quantitative test for goodwill, performing a quantitative test for each identified reporting unit at least every three years.

Periodically, Management of the Company assesses whether or not an indicator of impairment is present that would necessitate an impairment analysis be performed.

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Foreign currency forward contracts are agreements with a counterparty to exchange two distinct currencies at a set exchange rate for delivery on a set date at some point in the future.

There is no exchange of funds until the delivery date.

At the delivery date, the Company can either take delivery of the currency or settle on a net basis.

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Noncontrolling Interests In accordance with ASC 810, the Company has classified noncontrolling interests as equity on our Consolidated Balance Sheets.

Net (income) loss attributable to noncontrolling interests was not material for the years ended December 31, 2022, 2021 and 2020.

Net income attributable to noncontrolling interests was not material for the years ended December 31, 2023, 2022 and 2021.

Revenue Recognition The Company accounts for Revenue under ASC 606 Revenue from Contracts with Customers .

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

As part of this process, management reviews information including key contract matters, progress towards completion, identified risks and opportunities and any other information that could impact the Company’s estimates of revenue and costs.

As part of this process, management reviews information including key contract matters, progress towards completion, identified risks and

opportunities and any other information that could impact the Company’s estimates of revenue and costs.

After completing this analysis, any adjustments to net sales, cost of goods sold, and the related impact to operating income are recognized as necessary in the period they become known.

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The bankruptcy remote subsidiary is a separate legal entity with its own creditors, and its assets are not available to pay creditors of the Company or any other affiliates of the Company.

As customers pay their balances, we transfer additional receivables into the program, which could result in our gross receivables sold being higher or lower than collections reinvested for any applicable period.

As customers pay their balances, we transfer additional receivables into the program, which could result in our gross receivables sold being higher or lower than customer collections remitted to the financial institution for any applicable period.

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

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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.

Since the original program was entered into in May of 2020, the Company has completed several amendments to the agreed upon transfer limit.

During 2021, the Company could transfer up to $ 200 million of certain receivables.

during 2021, the Company could transfer up to $ 200 million of certain receivables;

during 2022, the Company could transfer up to $ 350 million of certain receivables.

During 2022, the program was amended to increase the transfer limit up to $ 350 million of certain receivables.

At December 31, 2023, and 2022 the bankruptcy-remote subsidiary held receivables of $ 674 million and $ 458 million, respectively, which are included in the Company's Consolidated Balance Sheets.

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

No obligation was recorded at December 31, 2022 or 2021 as the estimated expected credit losses on

receivables sold is insignificant.

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

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

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Gross receivables sold/cash proceeds received $ 2,617 $ 1,761 $ 1,319

Collections reinvested under revolving receivables agreement ( 1,701 ) ( 1,372 ) ( 779 )

Net cash proceeds received (remitted) $ 60 $( 53 ) $ 73

Customer collections remitted to financial institution ( 2,677 ) ( 1,701 ) ( 1,372 )

Net cash proceeds (remitted) received $( 60 ) $ 60 $( 53 )

Pre-Production Costs Certain pre-production costs relating to long-term production and supply contracts have been deferred and will be recognized over the life of the contracts.

Deferred pre-production costs were $ 64 million and $ 86 million at December 31, 2022 and 2021, respectively.

Deferred pre-production costs were $ 61 million and $ 64 million at December 31, 2023 and 2022, respectively which are included in Other noncurrent assets on the Consolidated Balance Sheets.

Preferred Stock The Company’s authorized capital stock includes 1,000,000 shares of preferred stock.

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Significant Customers and Concentrations of Credit Risk The Company’s trade receivables are primarily from rail and transit industry original equipment manufacturers, Class I railroads, railroad carriers and commercial companies that utilize rail cars in their operations, such as utility and chemical companies, as well as companies in the mining, marine and industrial markets.

No one customer accounted for more than 10% of the Company’s consolidated net sales in 2022, 2021 or 2020.

No one customer accounted for more than 10% of the Company’s consolidated net sales in the periods presented.

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

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Changes in facts and circumstances may result in revised estimates.

Accounting Standards Recently Issued

In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Accounting Standards Recently Issued In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The amendments in this update are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

In addition to the current requirements, the amendments specify additional information be provided about the chief operating decision maker (CODM) as well as disaggregated expense categories, to the extent that the CODM utilizes such data in deciding how to allocate resources.

The amendments in this update do not affect the recognition, measurement, or financial statement presentation of expenses, and will be effective for Wabtec's annual reporting periods beginning January 1, 2024 and interim reporting periods beginning January 1, 2025.

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

The Company is assessing the extent of the impact of the amendments on our filings.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The amendments in this update require entities to disclose on an annual basis specific categories within the income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

The amendments in this update also require enhanced disaggregation of disclosures about income taxes paid and income tax expense, among other changes.

The amendments in this update do not affect the recognition, measurement, or financial statement presentation of income taxes and will be effective for Wabtec's annual reporting periods beginning January 1, 2025.

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

The Company is assessing the extent of the impact of the amendments on our filings.

Accounting Standards Recently Adopted In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Obligations.

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The amendments in this update do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs.

The amendments in this update will be effective for Wabtec's reporting periods beginning January 1, 2023, except for the amendment on roll forward information which will be effective for reporting periods beginning January 1, 2024.

The amendments in this update were effective for Wabtec's reporting periods beginning January 1, 2023, except for the amendment on roll forward information which will be effective for reporting periods beginning January 1, 2024.

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

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

The amendments in this update provide specific guidance on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts in a business combination and address how to determine whether a contract liability is recognized by the acquirer in a business combination.

The amendments in this update will be effective for Wabtec on January 1, 2023 and will be applied prospectively to business combinations occurring on or after the effective date.

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.

The Company does not provide any guarantees under these arrangements, does not have an economic interest in our supplier's voluntary participation, does not receive an economic benefit from the financial institutions, and no assets are pledged under the arrangements.

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 Consolidated Balance Sheets.

Suppliers utilized the program to accelerate receipt of payment from these financial institutions for $ 305 million and $ 296 million of the Company's outstanding Accounts payable as of December 31, 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.

On December 22, 2023, the Company purchased the remaining ownership shares of Lokomotiv Kurastyru Zauyty (LKZ), a locomotive manufacturing and assembly company located in Kazakhstan, at which time it became a wholly owned subsidiary of the Company.

Prior to this purchase, Wabtec owned 50 % of LKZ as a joint venture partner and accounted for its ownership interest as an equity method investment.

Total purchase price for the remaining 50 % interest was $ 111 million.

As a result of the change in ownership interest and obtaining control of LKZ, Wabtec's previously held equity interest balance was remeasured to fair value, resulting in a gain of approximately $ 35 million recorded to Other income, net.

Upon acquisition, Wabtec ceased accounting for the investment using the equity method and recognized 100 % of LKZ's identifiable assets and liabilities, and LKZ's results of operations and cash flows are fully consolidated subsequent to the acquisition date.

The following table summarizes the fair value of 100 % of the LKZ assets acquired and liabilities assumed:

Assets acquired

Cash and cash equivalents $ 30

Accounts receivable 6

Property, plant and equipment 36

Other noncurrent assets 3

Total assets acquired 281

Liabilities assumed

Current liabilities 21

Noncurrent liabilities 3

Total liabilities assumed 24

Net assets acquired $ 257

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

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 of expanding our global operations expected to be achieved as a result of the acquisition.

The purchased goodwill is not expected to be deductible for tax purposes.

The results of this business since the date of acquisition are reported within the Equipment product line of the Freight Segment.

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 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 $ 245 million.

The following table summarizes the 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 43

Other intangible assets 89

Other noncurrent assets 1

Total assets acquired 301

Liabilities assumed

Current liabilities 16

Noncurrent liabilities 40

Total liabilities assumed 56

Net assets acquired $ 245

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 are preliminary and subject to change.

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 not expected to be deductible for tax purposes.

The results of this business since the date of acquisition are reported within the Components product line of the Freight Segment.

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 2022, the Freight Segment made three strategic acquisitions for a combined purchase price of $ 89 million.

Two of the acquisitions are reported in the Digital Electronics product line and one is reported in the Services product line.

Two of the acquisitions are reported in the Digital Intelligence product line and one is reported in the Services product line.

Each of the acquisitions in 2022 are individually and collectively immaterial.

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

On March 31, 2021, the Company acquired Nordco, a leading North American supplier of new, rebuilt and used maintenance of way equipment.

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Net cash paid $ 308 $ 89 $ 435

At December 31, 2022, Wabtec had restricted cash of $ 7 million, primarily from cash in escrow related to a 2022 acquisition.

At December 31, 2023 and December 31, 2022, Wabtec had restricted cash of $ 5 million and $ 7 million, respectively, primarily from cash in escrow related to a 2022 acquisition.

The components of inventory, net of reserves, were:

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Goodwill and indefinite lived intangible assets are reviewed annually during the fourth quarter for impairment.

For 2022, the Company elected to proceed directly to the quantitative impairment test for all reporting units with goodwill.

The discounted cash flow method and the market approach were used to estimate the fair value of each reporting unit using a

weighting of 75 % and 25 %, respectively.

The Company has identified three reporting units for purposes of testing goodwill for impairment.

Two reporting units exist within the Freight segment (the "Freight" and "Components" reporting units) and the Transit segment is also a reporting unit.

In 2023, management elected to first assess qualitative factors to determine whether a quantitative goodwill impairment test is necessary for the Components reporting unit.

During the assessment, management evaluated all relevant events and facts that may impact the fair value or carrying value of the reporting unit's goodwill and concluded that it was not more likely than not that the estimated fair values were less than the carrying values;

therefore, no further analysis was required.

For the Freight and Transit reporting units, management elected to proceed directly to the quantitative impairment test.

The discounted cash flow method and the market approach were used to estimate the fair value of each reporting unit using a weighting of 75 % and 25 %, respectively.

The discounted cash flow model requires several assumptions including future sales growth, EBIT (earnings before interest and taxes) margins, capital expenditures, a discount rate and a terminal revenue growth rate (the revenue growth rate for the period beyond the years forecasted by the reporting units) for each reporting unit.

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For 2023, the discounted cash flow method was given more weight compared to the market approach due to variables between the operations of the guideline companies used in the analysis and Wabtec's operations, such as different reporting unit sizes, growth and business characteristics.

However, both valuations resulted in a conclusion that the estimated fair value of all three of the Company's reporting units was in excess of their respective carrying value, which resulted in a conclusion that no impairment existed.

However, both valuations resulted in a conclusion that the estimated fair values of the Freight and Transit reporting units were in excess of their respective carrying value, and no impairment existed.

Additionally, the Company proceeded directly to the quantitative impairment test for certain trade names with indefinite lives.

The fair value of all material trade names subject to the quantitative impairment test exceeded its respective carrying value, resulting in a conclusion that no impairment existed.

For trade names not subject to the quantitative testing, the Company elected to perform a qualitative trade name impairment assessment and determined from the qualitative assessment that it was not more likely than not that the estimated fair values of the trade names were less than their carrying values;

For 2023, the Company's Portfolio Optimization resulted in approximately $ 14 million in accelerated trade name amortization expense, recorded in "Amortization expense" on the Consolidated Statements of Income.

For the remaining trade names subject to the quantitative impairment test, the fair value exceeded each respective carrying value, resulting in a conclusion that no impairment existed.

For 2022, the fair value of all material trade names subject to the quantitative impairment test exceeded its respective carrying value, resulting in a conclusion that no impairment existed.

For trade names not subject to quantitative testing in 2023 and 2022, the Company elected to perform a qualitative impairment assessment, resulting in a conclusion that it was not more likely than not that the estimated fair values of the trade names were less than their carrying values;

therefore, no further analysis was required.

In assessing the qualitative factors to determine whether it is more likely than not that the fair value of a trade name is less than its carrying amount, the Company assessed relevant events and circumstances that may impact the fair value and the carrying amount of the trade name.

The identification of relevant events and circumstances and how these may impact a trade name’s fair value or carrying amount involve significant judgments and assumptions.

The assessment of qualitative factors used in determining whether it is more likely than not that the fair value of a trade name is less than its carrying amount involves significant judgments and assumptions.

The judgment and assumptions include the identification of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, Wabtec specific events, share price trends and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact.

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Additions 215 — 215

Disposals ( 4 ) — ( 4 )

Foreign currency impact 16 45 61

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Noncurrent contract assets were $ 154 million and $ 162 million at December 31, 2023 and 2022, respectively.

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

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.

The Company has elected to use the practical expedient and not consider unbilled amounts anticipated to be paid within one year as significant financing components.

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Noncurrent contract liabilities were $ 174 million and $ 86 million at December 31, 2023 and 2022, respectively.

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 and revenue associated with the contract liabilities is expected to be recognized within one year.

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.

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Balance at beginning of year $ 706 $ 545

Acquisitions 28 —

Recognized in current year 692 730

Reclassified to accounts receivable ( 723 ) ( 581 )

Acquisitions/adjustments ( 2 ) 28

Foreign currency impact 5 ( 16 )

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Balance at beginning of year $ 956 $ 824

Acquisitions 13 2

Recognized in current year 1,380 1,067

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Current year amounts reclassified to revenue ( 593 ) ( 528 )

Acquisitions 1 13

Foreign currency impact 3 ( 10 )

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Revolving Credit Facility 7.6 % N/A $ — $ — $ — $ —

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

Senior Notes:

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See Note 17 for information on the fair value measurement of the Company's long-term debt.

Variances between Face Value and Book Value are the result of unamortized discounts and debt issuance costs.

Variances between Face Value and Book Value are the result of unamortized discounts and debt issuance costs as well as foreign exchange on the Euro Notes.

Amortization of discounts and debt issuance fees are included in the calculation of Effective Interest Rate.

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As of December 31, 2023, the annual repayment requirements for debt obligations are as follows:

Thereafter 1,250

Total $ 4,084

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The Restated Credit Agreement is with a syndicate of lenders and provides for borrowings consisting of (i) a multi-currency revolving credit facility, providing for an equivalent in U.S.

dollars of up to $ 1.5 billion (the “Revolving Credit Facility”) and (ii) a new $ 250 million delayed draw term loan facility (the “Delayed Draw Term Loan”), all pursuant to the terms and conditions of the Restated Credit Agreement (which are substantially similar with the terms of the Original Credit Agreement).

Credit Agreement allows the Company to request, at prevailing market rates, an aggregate amount not to exceed $ 750 million, (a) increases to the borrowing commitments under the Revolving Credit Facility and/or (b) new incremental term loan commitments.

Restated Credit Agreement (which are substantially similar with the terms of the Original Credit Agreement).

The Restated Credit Agreement allows the Company to request, at prevailing market rates, an aggregate amount not to exceed $ 750 million, (a) increases to the borrowing commitments under the Revolving Credit Facility and/or (b) new incremental term loan commitments.

The agreement contains affirmative, negative and financial covenants, and events of default customary for facilities of this type.

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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.

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The following table presents availability under the Restated Credit Agreement as of December 31, 2023:

(In millions) Revolving Credit Facility

Maximum Revolving Credit Facility Availability $ 1,500

Delayed Draw Term Loan 250

In millions Revolving Credit Facility Delayed Draw Term Loan Total

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

Outstanding Borrowings — ( 250 ) ( 250 )

Letters of Credit Under Credit Agreement ( 3 )

Current Availability $ 1,500 $ — $ 1,500

364 -Day Facility

During 2020 and 2021 the Company utilized a $ 600 million 364 day credit facility ("364 Day Facility") with a group of banks which included a $ 144 million revolving credit facility and a $ 456 million term loan.

During 2021 the Company utilized a $ 600 million 364 day credit facility ("364 Day Facility") with a group of banks which included a $ 144 million revolving credit facility and a $ 456 million term loan.

On June 3, 2021, the Company repaid all outstanding borrowings and related interest, effectively retiring the facility.

5 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 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 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.

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The Company incurred approximately $ 4 million of deferred financing costs related to the issuance of the Euro Notes for total net proceeds of approximately $ 599 million after consideration of the discount.

On June 29, 2020, the Company issued $ 500 million of 3.20 % Senior Notes due in 2025 (the "2025 Notes").

The 2025 Notes were issued at 99.892 % of face value.

Interest on the 2025 Notes accrues at a rate of 3.20 % per annum and is payable

semi-annually on June 15 and December 15 of each year beginning December 15, 2020.

The proceeds were used to redeem outstanding variable rate debt.

The Company incurred $ 2 million of deferred financing costs related to the issuance of the 2025 Notes.

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

The covenants do not require the Company to maintain any financial ratios or specified levels of net worth or liquidity.

The US Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of the Company's subsidiaries that is a guarantor under the Senior Credit Facility.

The US Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of the Company's subsidiaries that is a guarantor under the Restated Credit Agreement.

The Euro Notes were issued by Wabtec Netherlands and are fully and unconditionally guaranteed by the Company.

11 unchanged sentences

The Company sponsors defined benefit pension plans that cover certain U.S.

and international employees, primarily United Kingdom, Canadian and German employees, which provide benefits of stated amounts for each year of service of the employee.

and international employees, primarily in the United Kingdom, Canada and Germany, which provide benefits of stated amounts for each year of service of the employee.

The Company uses a December 31 measurement date for the plans.

11 unchanged sentences

Benefits paid 4 3 14 15

Actuarial gain 8 2 86 15

Acquisition ( 29 ) — — —

Actuarial (loss) gain — 8 ( 5 ) 86

Effect of currency rate changes — — ( 10 ) 28

7 unchanged sentences

Settlements and other — — ( 1 ) ( 1 )

Acquisition 26 — — —

Effect of currency rate changes — — 8 ( 25 )

33 unchanged sentences

Amortization of net loss — 1 1 3 2 4

Settlement and curtailment losses recognized — — — ( 1 ) 1 —

Net periodic benefit cost (income) $ 1 $ 1 $ 1 $ ( 2 ) $ — $ 1

Settlement and curtailment (gains) losses recognized ( 1 ) — — — ( 1 ) 1

Net periodic benefit (income) cost $ ( 1 ) $ 1 $ 1 $ 7 $ ( 2 ) $ —

Interest cost is recorded in Interest expense, net on the Consolidated Statements of Income.

Expected return on plan assets, Amortization of net loss, and Settlement and curtailment losses recognized are recorded within Other income (expense), net on the Consolidated Statements of Income.

Expected return on plan assets, Amortization of net loss, and Settlement and curtailment losses recognized are recorded within Other income, net on the Consolidated Statements of Income.

Service cost is considered a component of employee compensation and is recorded within Cost of sales or Selling, general and administrative expenses depending on the plan participants relative job function.

Amounts recognized in Other comprehensive income during 2022 for other changes in plan assets and benefit obligations are as follows:

In millions U.S.

International

Net gain arising during the year $ ( 2 ) $ ( 4 )

Effect of exchange rates and other — ( 7 )

Total benefit recognized in Other comprehensive income $ ( 2 ) $ ( 11 )

Total net benefit recognized in Net periodic benefit cost and Other comprehensive income $ ( 1 ) $ ( 13 )

Amounts recognized in Other comprehensive income during 2023 for other changes in plan assets and benefit obligations are not material.

The amounts of net actuarial loss and prior service cost included in Other comprehensive loss expected to be recognized as components of periodic benefit costs in 2024 are not material.

The weighted average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed.

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The expected return on plan assets is based on historical performance as well as expected future rates of return on plan assets considering the current investment portfolio mix and the long-term investment strategy.

The amounts of net actuarial loss and prior service cost included in other comprehensive loss expected to be recognized as components of periodic benefit costs in 2023 are not material.

Pension Plan Assets

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The investment policies permit variances from the targets within certain parameters.

The plan assets consist primarily of equity security funds, debt security funds, insurance contracts, and temporary cash and cash equivalent investments.

The assets held in these funds are generally actively managed and are valued at the net asset value per share multiplied by the number of shares held as of the measurement date.

(See Note 17 “Fair Value Measurement” included herein).

The plan assets consist primarily of equity security funds, debt security funds, insurance contracts, and cash and cash equivalent investments.

The assets held in these funds are generally actively managed and are valued at the net asset value per share multiplied by the number of shares held as of the measurement

(See Note 17).

Plan assets by asset category at December 31, 2023 and 2022 are as follows:

7 unchanged sentences

Fair value of plan assets $ 55 $ 31 $ 211 $ 201

plan has a target asset allocation of 13 % equity securities and 87 % debt securities.

plan has a target asset allocation of 11 % equity securities, 88 % debt securities and 1 % in other investments.

The International plan has a target asset allocation of 10 % equity securities, 15 % debt securities and 75 % in other investments.

1 unchanged sentence

Rebalancing of the asset allocation occurs on a quarterly basis.

The Company’s defined benefit pension plan assets consist primarily of equity security funds, debt security funds, insurance contracts, and temporary cash and cash equivalent investments.

These investments are comprised of a number of investment funds that invest in a diverse portfolio of assets including equity securities, corporate and governmental bonds, and money markets.

Trusts are valued at the net asset value (“NAV”) as determined by their custodian.

NAV represents the accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the total shares outstanding at the reporting dates.

The following tables summarize our pension plan assets measured at fair value on a recurring basis by fair value hierarchy level (See Note 17):

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The Company’s funding methods are based on governmental requirements and differ from those methods used to recognize pension expense.

The Company expects to contribute $ 2 million to the international pension plan and does not expect to make a contribution to the U.S.

The Company expects to contribute $ 2 million to certain international pension plans and does not expect to make a contribution to the U.S.

pension plan during 2024.

11 unchanged sentences

The Company participates in certain defined contribution plans.

Costs of approximately $ 55 million were recognized during 2022, 2021 and 2020 each year.

Costs of approximately $ 60 million were recognized during 2023 and $ 55 million was recognized during 2022 and 2021, respectively.

The 401(k) savings plan is a participant directed defined contribution plan that holds shares of the Company’s stock as one of the investment options.

16 unchanged sentences

Foreign 148 137 138

Deferred tax expense (benefit)

Deferred tax (benefit) expense

Federal ( 50 ) 29 87

State — 10 ( 2 )

Foreign ( 9 ) 7 ( 9 )

7 unchanged sentences

Research and development credit ( 0.6 ) ( 0.8 ) ( 0.8 )

Non-taxable gain on acquisition ( 0.8 ) — —

net operating loss carryback — — ( 3.4 )

Changes in valuation allowance ( 2.0 ) 3.0 ( 2.0 )

Changes in valuation allowances 1.0 ( 2.0 ) 3.0

tax reform provision 0.6 0.1 0.7

1 unchanged sentence

Effective rate 24.5 % 25.0 % 23.2 %

The increase in effective tax rate from 2021 to 2022 was primarily from the absence of benefit from the 2021 amended federal and state income tax return filing mentioned below and higher foreign taxes, partially offset by the change in valuation allowance.

The decrease in the effective tax rate from 2020 to 2021 was primarily the result of filing amended federal and state income tax returns during 2021.

The Company amended the 2019 federal tax return to incorporate changes in tax regulations which generated a net operating loss that was carried back to tax years 2014 to 2016, which were at a higher federal tax rate.

Other, net includes the impact of amended state returns reflecting changes in apportioned state income.

These amendments resulted in a tax benefit during 2021.

In addition, there was a decrease in the U.S.

tax reform provision resulting from the provisions of the Tax Cut and Jobs Act, a decrease in state tax expense and a decrease in foreign tax expense due to mix of taxable income which were partially offset by an increase in valuation allowances.

The decrease in effective tax rate from 2022 to 2023 was primarily due to a change in mix of foreign earnings, changes in valuation allowances, and the non-taxable gain generated on the acquisition of LKZ.

The increase in effective tax rate from 2021 to 2022 was primarily due to the absence of benefit from amended federal and state income tax returns that were filed in 2021 and higher foreign taxes, partially offset by the change in valuation allowance.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law.

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A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

As of December 31, 2022, the valuation allowance for certain foreign deferred tax asset carryforwards was $ 46 million, primarily in China, Denmark, France, the Netherlands, South Africa, and the United States.

The decrease in valuation allowances in 2022 is primarily related to the utilization of state net operating loss carry-forwards.

As of December 31, 2023, the valuation allowance for certain deferred tax asset carryforwards was $ 58 million, primarily in the United States, South Africa, China, the Netherlands, and Denmark.

The increase in valuation allowances in 2023 is primarily related to state net operating loss carry-forwards that are not expected to be realized.

The Company has net operating loss carry-forwards in the amount of $ 430 million, of which $ 228 million are indefinite lived, $ 90 million expire within ten years and $ 112 million expire in various periods between December 31, 2034 to December 31, 2043.

8 unchanged sentences

Balance at end of year

$ 40 $ 33 $ 32

The Company includes interest and penalties related to unrecognized tax benefits in income tax expense.

As of December 31, 2022 and 2021, the total interest and penalties accrued was approximately $ 5 million.

As of December 31, 2023 and 2022, the total interest and penalties accrued was approximately $ 13 million and $ 5 million, respectively.

An audit of Company’s U.S.

5 unchanged sentences

EARNINGS PER SHARE

The computation of earnings per share from operations is as follows:

The computation of basic and diluted earnings per share for Net income attributable to Wabtec shareholders is as follows:

For the Year Ended

8 unchanged sentences

Diluted $ 4.53 $ 3.46 $ 2.96

Approximately 0.4 million outstanding shares of Common Stock for the year ended December 31, 2020 was not included in the computation of year-to-date diluted earnings per share because their exercise price exceeded the average market price of the Company's common stock.

STOCK-BASED COMPENSATION PLANS

11 unchanged sentences

Associated tax benefits related to the stock-based compensation plans for the years ended December 31, 2023, 2022 and 2021 were not material.

Included in the stock-based compensation expense for 2022 above is $ 2 million of expense related to stock options, $ 19 million related to non-vested restricted stock, $ 8 million related to restricted stock units, $ 1 million related to units issued for Directors’ fees, and $ 19 million of expense related to incentive stock units.

Included in the stock-based compensation expense for 2023 above is $ 23 million of expense related to non-vested restricted stock, $ 22 million of expense related to incentive stock units, $ 12 million related to restricted stock units, $ 1 million related to stock options, and $ 1 million related to units issued for Directors’ fees.

The restricted stock units are liability-classified equity awards as they can be settled in cash.

2 unchanged sentences

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.

The following table summarizes the Company’s stock option activity and related information for the 2011 Plan, the 2000 Plan and Directors Plan for the years ended December 31:

The following table summarizes the Company’s stock option activity and related information for the years ended December 31.

There were no stock options granted during the years ended December 31, 2023 or 2022.

Options Weighted

8 unchanged sentences

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

Granted 126,794 $ 81.21 —

Exercised ( 116,590 ) $ 68.57

13 unchanged sentences

309,825 $ 78.41 5.3 275,198 $ 78.06

172,824 $ 84.42 6.4 101,267 $ 86.70

399,938 $ 77.32 5.9 293,952 $ 76.45

There were no stock options granted during the year ended December 31, 2022.

The following weighted-average assumptions were used to estimate the fair value of each grant on the date of grant using the Black-Scholes option-pricing model for the years ended December 31, 2021 and 2020:

For the year ended

Dividend yield 0.60 % 0.60 %

Risk-free interest rate 0.8 % 1.5 %

Stock price volatility 36.1 % 28.1 %

Expected life (years) 5.0 5.0

Weighted average fair value of options granted during the year $ 25.01 $ 21.05

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

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

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

The risk-free interest rate is based on the 7 years U.S.

Treasury bond rates for the expected life of the option.

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

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

In addition, the Company has issued incentive stock units to eligible employees that vest upon attainment of certain cumulative three-year performance goals.

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

In addition, the Company has issued incentive stock units to eligible employees that vest upon attainment of certain cumulative three-year performance goals, including a Relative Total Stockholder Return (RTSR) modifier.

The RTSR can modify the payment up or down by 10%.

Significant judgments and estimates are used in determining the estimated three-year performance, which is then used to estimate the total shares expected to vest over the three year vesting cycle and corresponding expense based on the grant date fair value of the award.

4 unchanged sentences

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

As of December 31, 2022, the Company estimates that it will achieve 132 %, 125 % and 110 % for the incentive stock awards expected to vest based on performance for the three year periods ending December 31, 2022, 2023, and 2024, respectively, and has recorded incentive compensation expense accordingly.

As of December 31, 2023, the Company estimates that it will achieve 145 %, 139 % and 116 % for the incentive stock awards expected to vest, inclusive of the RTSR modifier, based on the estimated performance for the three year periods ending December 31, 2023, 2024, and 2025, respectively, and has recorded incentive compensation expense accordingly.

If estimates of the number of these 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 years ended December 31:

The following table summarizes the restricted stock and incentive stock units activity and related information for the years ended December 31:

and Units Incentive

18 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

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

The changes in Accumulated other comprehensive loss by component, net of tax, for the years ended December 31, 2023, 2022, and 2021 are as follows:

1 unchanged sentence

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

Other comprehensive income (loss) before reclassifications 48 6 ( 13 ) 41

Amounts reclassified from Accumulated other comprehensive loss — — 3 3

Other comprehensive income (loss), net 48 6 ( 10 ) 44

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

Other comprehensive (loss) income before reclassifications ( 136 ) ( 8 ) 13 ( 131 )

6 unchanged sentences

Balance at December 31, 2022 $ ( 596 ) $ ( 9 ) $ ( 56 ) $ ( 661 )

Other comprehensive income (loss) before reclassifications 55 16 ( 2 ) 69

Amounts reclassified from Accumulated other comprehensive loss — — 2 2

Other comprehensive income, net 55 16 — 71

Balance at December 31, 2023 $ ( 541 ) $ 7 $ ( 56 ) $ ( 590 )

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

4 unchanged sentences

Operating lease expense for the years ended December 31, 2023, 2022, and 2021 was $ 64 million, $ 60 million, and $ 59 million, respectively.

During 2022 and 2021, new operating leases of $ 80 million were added during each year.

During 2023 and 2022, new operating leases of $ 37 million and $ 80 million, respectively, were added during the year.

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.

13 unchanged sentences

Balance at beginning of year $ 242 $ 259

Acquisitions 3 2

Warranty expense 95 79

Warranty claim payments ( 93 ) ( 91 )

Foreign currency impact ( 8 ) ( 14 )

Acquisitions — 3

Foreign currency impact/other 4 ( 8 )

Balance at end of year $ 248 $ 242

10 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 December 31, 2022 and December 31, 2021.

The Company’s defined benefit pension plan assets consist primarily of equity security funds, debt security funds, insurance contracts, and temporary cash and cash equivalent investments.

These investments are comprised of a number of investment funds that invest in a diverse portfolio of assets including equity securities, corporate and governmental bonds, and money markets.

Trusts are valued at the net asset value (“NAV”) as determined by their custodian.

NAV represents the accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the total shares outstanding at the reporting dates (see Note 10).

The fair value of cash, cash equivalents and restricted cash approximated the carrying value at December 31, 2023 and 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 December 31, 2022 and 2021, $ 105 million and $ 110 million, respectively, were classified as "Other accrued liabilities" on the Company's Consolidated Balance Sheets and $ 47 million and $ 141 million, respectively, were included within long-term liabilities shown as "Contingent consideration" on the Company's Consolidated Balance Sheets.

At December 31, 2023 and 2022, $ 42 million and $ 105 million, respectively, were classified as "Other accrued liabilities" and at December 31, 2022, $ 47 million was included within long-term liabilities shown as "Contingent consideration" on the Company's Consolidated Balance Sheets.

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

19 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 (loss) related to these contracts were $ 1 , $( 5 ) and $( 1 ) million for the years ended December 31, 2022, 2021 and 2020, respectively.

The net gains and losses related to these contracts were not material for the years ended December 31, 2023, 2022 and 2021.

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 December 31, 2022, which are included in other current assets and liabilities on the Consolidated Balance Sheets:

Interest Rate Risk

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

Accordingly, the Company has entered into interest rate hedges to manage interest rate risk for a portion of future expected debt transactions.

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 years ended December 31, 2023, 2022 and 2021, 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 years ended December 31, 2023, 2022 and 2021, the amounts reclassified into income were not material.

included in Other current assets and liabilities on the Consolidated Balance Sheets:

Fair Value Gross Notional Amount

3 unchanged sentences

Other current liabilities 2 ( 12 ) ( 3 ) 655 200

Interest Rate Contracts

Other current assets 2 10 — 250 —

Total $ 4 $ — $ 1,224 $ 310

5 unchanged sentences

Other current liabilities 2 ( 11 ) ( 3 ) 769 152

Cross-currency Swaps

Other current assets 2 — — 14 —

Total $ ( 3 ) $ — $ 1,047 $ 308

Interest Rate Risk

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

The Company does not use leveraged swaps and, in general, does not leverage any of its investment activities that would put principal capital at risk.

For the years ended December 31, 2022, 2021 and 2020, 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 years ended December 31, 2022, 2021 and 2020, the amounts reclassified into income 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 the U.S.

District Court for the District of Delaware 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").

3 unchanged sentences

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.

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.

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.

Xorail has denied DTC's assertions, stating that its system satisfied the contractual requirements.

1 unchanged sentence

the FRA and PUC have both approved modified wireless crossing system, and as of August 2018, DTC completed the process of certifying the crossings and eliminated the use of flaggers.

DTC has not updated its notices against Xorail, nor have they filed any formal claim against Xorail.

DTC has not updated its claim notices or alleged damages against Xorail, nor have they filed any formal claim against Xorail.

On September 21, 2018, DTC filed a complaint against RTD in Colorado state court for breach of contract related to non-payments and the costs for the flaggers, asserting a change-in-law arising from the FRA/PUC’s new certification requirements.

1 unchanged sentence

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.

7 unchanged sentences

Segment financial information for 2023 is as follows:

In million Freight Segment Transit Segment Corporate Activities and Elimination Total

In millions Freight Segment Transit Segment Corporate Activities and Elimination Total

Sales to external customers $ 6,962 $ 2,715 $ — $ 9,677

14 unchanged sentences

Interest expense and other, net — — ( 157 ) ( 157 )

Income (loss) from operations before income taxes $ 717 $ 238 $ ( 218 ) $ 737

Income (loss) before income taxes $ 864 $ 231 $ ( 241 ) $ 854

Depreciation and amortization $ 399 $ 60 $ 20 $ 479

19 unchanged sentences

South America 346 336 301 47 37

United Kingdom 213 300 314 40 45

Germany 347 339 383 54 59

France 346 273 286 58 52

United Kingdom 248 213 300 44 40

Italy 183 163 196 37 33

Switzerland 73 88 83 2 2

Other Europe 520 458 515 60 52

3 unchanged sentences

China 286 244 228 28 29

Kazakhstan / Russia / CIS 457 399 412 39 3

Other Asia / Middle East 240 183 177 — —

1 unchanged sentence

Other Africa 109 119 72 3 3

Kazakhstan / Russia / CIS 399 412 313 3 3

Total $ 9,677 $ 8,362 $ 7,822 $ 1,485 $ 1,429

5 unchanged sentences

Components 1,157 936 867

Digital Electronics 729 640 664

Digital Intelligence 773 729 640

Total Freight Segment sales $ 6,962 $ 6,012 $ 5,239

7 unchanged sentences

In millions 2023 2022 2021

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

Foreign currency (loss) gain $ ( 20 ) $ 6 $ 8

Equity income 25 17 20

Expected return on pension assets/amortization 7 7 9

Other miscellaneous (expense) income ( 1 ) 1 ( 1 )

Other miscellaneous income (expense) 32 ( 1 ) 1

Total Other income, net $ 44 $ 29 $ 38

See Note 3 for additional information.

RESTRUCTURING

2 unchanged sentences

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

During 2022, the Company incurred one-time charges related to the initiative of approximately $ 46 million, of which approximately $ 39 million was included in Cost of goods sold and approximately $ 7 million was included in Selling, general and administrative expenses on the Consolidated Statements of Income.

These charges are primarily for employee-related costs associated with site consolidations in Europe, and costs related to the restructuring of the North America distribution channels.

Approximately $ 32 million is related to actions in the Transit segment and approximately $ 14 million is related to actions in the Freight segment.

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

For the year ended

In millions 2023 2022

Freight Segment:

Cost of goods sold $ 4 $ 13

Selling, general and administrative expenses 5 1

Total Freight Segment $ 9 $ 14

Transit Segment:

Cost of goods sold $ 25 $ 26

Selling, general and administrative expenses 13 6

Amortization expense 2 —

Total Transit Segment $ 40 $ 32

Total Integration 2.0 restructuring charges $ 49 $ 46

Total charges related to Integration 2.0 to date are approximately $ 118 million which includes amounts recorded in the fourth quarter 2021 for similar actions in Europe.

Cash payments made during 2023 were approximately $ 39 million, primarily for employee related costs.

Cash payments made during 2022 were not material.

In addition to Integration 2.0, Wabtec is focused on exiting various low margin product offerings through Portfolio Optimization to improve profitability while reducing manufacturing complexity.

Wabtec expects to incur approximately $ 85 million in net exit charges related to Portfolio Optimization, which will be predominately non-cash asset write downs.

Wabtec recorded charges of approximately $ 28 million in the fourth quarter of 2023 for asset write downs related to Portfolio Optimization.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

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 8. Financial Statements and Supplementary Data