What changed in this filing

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Item 1. Financial Statements

2024-07-24 compared with 2024-04-24 · 156 added, 95 removed, 632 unchanged (28% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

In millions, except par value March 31,

In millions, except par value June 30,

2024 December 31,

27 unchanged sentences

500.0 shares authorized and 226.9 shares issued:

176.8 and 177.8 outstanding at March 31, 2024 and December 31, 2023, respectively

175.6 and 177.8 outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 7,981 7,977

Treasury stock, at cost, 50.1 and 49.1 shares, at March 31, 2024 and December 31, 2023, respectively

Treasury stock, at cost, 51.3 and 49.1 shares, at June 30, 2024 and December 31, 2023, respectively

( 2,545 ) ( 2,171 )

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Unaudited Unaudited

Three Months Ended

June 30, Six Months Ended

In millions, except per share data 2024 2023 2024 2023

15 unchanged sentences

Interest expense, net ( 49 ) ( 55 ) ( 96 ) ( 103 )

Other (expense) income, net ( 2 ) 5

Other income, net 4 2 2 7

Income before income taxes 385 259 748 492

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited Unaudited

Three Months Ended

June 30, Six Months Ended

In millions 2024 2023 2024 2023

2 unchanged sentences

Unrealized gain on derivative contracts — 13 13 18

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

Change in unrealized loss on pension and post-retirement benefit plans

( 5 ) ( 3 ) ( 4 ) ( 2 )

Other comprehensive (loss) income before tax ( 54 ) 9 ( 128 ) 40

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

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

Other comprehensive (loss) income, net of tax ( 53 ) 7 ( 130 ) 37

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

In millions 2024 2023

1 unchanged sentence

Net income $ 568 $ 366

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

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

Depreciation and amortization 241 246

2 unchanged sentences

Net loss on disposal of property, plant and equipment 2 3

Changes in operating assets and liabilities, net of acquisitions:

Changes in operating assets and liabilities, net of acquisitions and dispositions:

Accounts receivable and unbilled accounts receivable ( 146 ) ( 150 )

4 unchanged sentences

Other assets and liabilities 103 ( 15 )

Net cash provided by (used for) operating activities 334 ( 25 )

Net cash provided by operating activities 569 90

Investing Activities

1 unchanged sentence

Proceeds from disposal of property, plant and equipment 20 —

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

Net cash used for investing activities ( 57 ) ( 293 )

5 unchanged sentences

Payment of income tax withholding on share-based compensation ( 23 ) ( 15 )

Distribution to noncontrolling interest ( 1 ) ( 12 )

Other financing activities 5 ( 3 )

Net cash used for financing activities ( 289 ) ( 72 )

Net cash (used for) provided by financing activities ( 523 ) 30

Effect of changes in currency exchange rates ( 14 ) 3

Increase (decrease) in cash 19 ( 124 )

Decrease in cash ( 25 ) ( 170 )

Cash, cash equivalents and restricted cash, beginning of period 620 541

13 unchanged sentences

Balance, March 31, 2024 226.9 $ 2 $ 7,967 ( 50.1 ) $ ( 2,345 ) $ 5,505 $ ( 667 ) $ 42 $ 10,504

Cash dividends ($ 0.20 dividend per share)

— — — — — ( 35 ) — — ( 35 )

Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax — — — 0.1 2 — — — 2

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

Net income — — — — — 289 — 2 291

Other comprehensive loss, net of tax — — — — — — ( 53 ) — ( 53 )

Stock repurchase — — — ( 1.3 ) ( 202 ) — — — ( 202 )

Distribution to noncontrolling interest — — — — — — — ( 1 ) ( 1 )

Balance, June 30, 2024 226.9 $ 2 $ 7,981 ( 51.3 ) $ ( 2,545 ) $ 5,759 $ ( 720 ) $ 43 $ 10,520

In millions Common Stock Shares Common Stock Amount Additional Paid-in Capital Treasury Stock Shares Treasury Stock Amount Retained Earnings Accumulated Other Comprehensive Loss Non-controlling Interest Total

8 unchanged sentences

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

Cash dividends ($ 0.17 dividend per share)

— — — — — ( 31 ) — — ( 31 )

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

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

Net income — — — — — 191 — 2 193

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

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

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

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

The accompanying notes are an integral part of these statements.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024 (UNAUDITED)

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024 (UNAUDITED)

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

4 unchanged sentences

Wabtec is a global company with operations in over 50 countries and our products can be found in more than 100 countries throughout the world.

In the first three months of 2024, approximately 50 % of the Company’s Net sales came from customers outside the United States.

In the first six months of 2024, approximately 50 % of the Company’s Net sales came from customers outside the United States.

ACCOUNTING POLICIES

38 unchanged sentences

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

As of March 31, 2024, the Company's remaining performance obligations were approximately $ 22.1 billion.

As of June 30, 2024, the Company's remaining performance obligations were approximately $ 22.1 billion.

The Company expects to recognize revenue of approximately 33 % of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

6 unchanged sentences

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

At March 31, 2024 and December 31, 2023, the bankruptcy-remote subsidiary held receivables of $ 531 million and $ 674 million, respectively, which are included in the Company's Condensed Consolidated Balance Sheets.

The receivables held by the bankruptcy-remote subsidiary collateralize the outstanding receivables sold, which were $ 230 million and $ 20 million at March 31, 2024 and December 31, 2023, respectively.

At June 30, 2024 and December 31, 2023, the bankruptcy-remote subsidiary held receivables of $ 695 million and $ 674 million, respectively, which are included in the Company's Condensed Consolidated Balance Sheets.

The receivables held by the bankruptcy-remote subsidiary collateralize the outstanding receivables sold, which were $ 20 million at December 31, 2023.

There were no receivables outstanding under the facility at June 30, 2024.

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

No obligation was recorded at March 31, 2024 or December 31, 2023 as the estimated expected credit losses on receivables sold is insignificant.

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

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

The following table sets forth a summary of receivables sold and the resulting impact of net cash proceeds included in cash from operations:

In millions Three Months Ended

March 31, 2024 Three Months Ended

March 31, 2023

In millions Six Months Ended

June 30, 2024 Six Months Ended

June 30, 2023

Gross receivables sold/cash proceeds received $ 812 $ 1,216

Customer collections remitted to financial institution ( 832 ) ( 1,061 )

Net cash proceeds received included in cash from operations $ 210 $ 145

Restricted Cash At March 31, 2024 and December 31, 2023, the Company classified cash of $ 5 million as restricted for cash held in escrow related to a 2022 acquisition.

Net cash proceeds (remitted) received included in cash from operations $ ( 20 ) $ 155

Restricted Cash At June 30, 2024 and December 31, 2023, the Company classified cash of $ 5 million as restricted for cash held in escrow related to a 2022 acquisition.

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

24 unchanged sentences

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

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the three months ended March 31, 2024 and 2023 are as follows:

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the three months ended June 30, 2024 and 2023 are as follows:

Foreign currency translation Derivative contracts Pension and postretirement benefit plans Total

In millions 2024 2023 2024 2023 2024 2023 2024 2023

Balance at March 31 $ ( 629 ) $ ( 571 ) $ 17 $ ( 5 ) $ ( 55 ) $ ( 55 ) $ ( 667 ) $ ( 631 )

Other comprehensive (loss) income before reclassifications ( 49 ) ( 1 ) — 9 ( 1 ) ( 1 ) ( 50 ) 7

Amounts reclassified from Accumulated other comprehensive loss — — — — ( 3 ) — ( 3 ) —

Other comprehensive (loss) income, net ( 49 ) ( 1 ) — 9 ( 4 ) ( 1 ) ( 53 ) 7

Balance at June 30 $ ( 678 ) $ ( 572 ) $ 17 $ 4 $ ( 59 ) $ ( 56 ) $ ( 720 ) $ ( 624 )

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the six months ended June 30, 2024 and 2023 are as follows:

Foreign currency translation Derivative contracts Pension and postretirement benefit plans Total

In millions 2024 2023 2024 2023 2024 2023 2024 2023

Balance at beginning of year $ ( 541 ) $ ( 596 ) $ 7 $ ( 9 ) $ ( 56 ) $ ( 56 ) $ ( 590 ) $ ( 661 )

2 unchanged sentences

Other comprehensive (loss) income, net ( 137 ) 24 10 13 ( 3 ) — ( 130 ) 37

Balance at March 31 $ ( 629 ) $ ( 571 ) $ 17 $ ( 5 ) $ ( 55 ) $ ( 55 ) $ ( 667 ) $ ( 631 )

Balance at June 30 $ ( 678 ) $ ( 572 ) $ 17 $ 4 $ ( 59 ) $ ( 56 ) $ ( 720 ) $ ( 624 )

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

2 unchanged sentences

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

Suppliers utilized the program to accelerate receipt of payment from these financial institutions for $ 317 million and $ 305 million of the Company's outstanding Accounts payable as of March 31, 2024 and December 31, 2023, respectively.

Suppliers utilized the program to accelerate receipt of payment from these financial institutions for $ 345 million and $ 305 million of the Company's outstanding Accounts payable as of June 30, 2024 and December 31, 2023, 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.

43 unchanged sentences

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.

3 unchanged sentences

The components of inventory, net of reserves, were:

In millions March 31,

In millions June 30,

2024 December 31,

9 unchanged sentences

Foreign currency impact ( 29 ) ( 47 ) ( 76 )

Balance at March 31, 2024 $ 7,279 $ 1,451 $ 8,730

As of March 31, 2024 and December 31, 2023, the Company’s trade names had a net carrying amount of $ 600 million and $ 612 million, respectively.

The Company believes these intangibles have indefinite lives, with the exception of the right to use the GE Transportation trade name, to which the Company had assigned a useful life of 5 years.

As of March 31, 2024, the GE Transportation trade name has been fully amortized.

Balance at June 30, 2024 $ 7,267 $ 1,439 $ 8,706

As of June 30, 2024 and December 31, 2023, the Company’s trade names had a net carrying amount of $ 597 million and $ 612 million, respectively.

The Company believes these intangibles have indefinite lives, with the exception of the right to use the GE Transportation trade name, to which the Company had assigned a useful life of 5 years and has been fully amortized.

Intangible assets of the Company, other than goodwill and trade names, consist of the following:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

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

3 unchanged sentences

Total $ 4,022 $ ( 1,588 ) $ 2,434 $ 4,047 $ ( 1,454 ) $ 2,593

At March 31, 2024 the weighted average remaining useful lives of backlog, customer relationships and acquired technology were 8 years, 15 years and 7 years, respectively.

At June 30, 2024 the weighted average remaining useful lives of backlog, customer relationships and acquired technology were 8 years, 15 years and 7 years, respectively.

The backlog intangible asset primarily consists of in-place long-term service agreements acquired by the Company in conjunction with the acquisition of GE Transportation.

Amortization expense for intangible assets was $ 74 million and $ 75 million for the three months ended March 31, 2024 and 2023, respectively.

Amortization expense for intangible assets was $ 71 million and $ 145 million for the three and six months ended June 30, 2024, respectively, and $ 73 million and $ 148 million for the three and six months ended June 30, 2023, respectively.

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

3 unchanged sentences

The current portion of the contract assets are classified as current assets under the caption “Unbilled accounts receivable” while the noncurrent contract assets are classified as other assets under the caption "Other noncurrent assets" on the Condensed Consolidated Balance Sheets.

Noncurrent contract assets were $ 163 million at March 31, 2024 and $ 154 million at December 31, 2023.

Noncurrent contract assets were $ 167 million at June 30, 2024 and $ 154 million at December 31, 2023.

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

1 unchanged sentence

The current portion of contract liabilities are classified as current liabilities under the caption “Customer deposits” while the noncurrent contract liabilities are classified as noncurrent liabilities under the caption "Other long-term liabilities" on the Condensed Consolidated Balance Sheets.

Noncurrent contract liabilities were $ 179 million at March 31, 2024 and $ 174 million at December 31, 2023.

Noncurrent contract liabilities were $ 311 million at June 30, 2024 and $ 174 million at December 31, 2023.

These contract liabilities are not considered a significant financing component because they are used to meet working capital demands that can be higher in the early stages of a contract or revenue associated with the contract liabilities is expected to be recognized within one year.

Contract liabilities also include provisions for estimated losses from uncompleted contracts.

Provisions for loss contracts were $ 98 million and $ 104 million at March 31, 2024 and December 31, 2023, respectively.

Provisions for loss contracts were $ 92 million and $ 104 million at June 30, 2024 and December 31, 2023, respectively.

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

The change in the carrying amount of contract assets and contract liabilities for the three months ended March 31, 2024 and 2023 is as follows:

The change in the carrying amount of contract assets and contract liabilities for the six months ended June 30, 2024 and 2023 is as follows:

Contract Assets

5 unchanged sentences

Foreign currency impact ( 8 ) 5

Balance at March 31

Balance at June 30

Contract Liabilities

4 unchanged sentences

Current year amounts reclassified to revenue ( 359 ) ( 149 )

Acquisitions — 1

Foreign currency impact ( 20 ) 4

Balance at March 31 $ 922 $ 914

Balance at June 30 $ 1,049 $ 934

The Company leases certain property, buildings and equipment.

5 unchanged sentences

As most of the Company's leases do not provide a readily stated discount rate, the Company must estimate the rate to discount lease payments using its incremental borrowing rate.

Operating lease expense was $ 16 million for each of the three month periods ended March 31, 2024 and 2023.

New operating leases of $ 14 million were added during each of the three month periods ended March 31, 2024 and 2023.

Operating lease expense was $ 16 million and $ 32 million for each of the three and six months ended June 30, 2024 and 2023, respectively.

New operating leases of $ 18 million and $ 32 million were added during the three and six months ended June 30, 2024, respectively, and $ 6 million and $ 20 million for the three and six months ended June 30, 2023, respectively.

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

7 unchanged sentences

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

2024 December 31,

June 30, 2024 December 31, 2023

Weighted-average remaining lease term (years) 7.3 7.8

2 unchanged sentences

Long-term debt consisted of the following:

Effective Interest Rate Face Value March 31, 2024 December 31, 2023

Effective Interest Rate Face Value June 30, 2024 December 31, 2023

In millions Book Value Fair Value 1

28 unchanged sentences

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

As of March 31, 2024 and December 31, 2023, the Company had total combined unamortized discount and debt issuance costs of $ 19 million and $ 15 million, respectively.

As of June 30, 2024 and December 31, 2023, the Company had total combined unamortized discount and debt issuance costs of $ 18 million and $ 15 million, respectively.

Credit Agreements

7 unchanged sentences

The borrowing rate for the 2024 Credit Agreement is a variable rate assessed periodically in accordance with the terms of the 2024 Credit Agreement.

At March 31, 2024, the interest rate was 6.8 %.

At June 30, 2024, the interest rate was 6.7 %.

Under the 2024 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.

The Interest Coverage Ratio is defined as EBITDA (earnings before interest, taxes, depreciation, and amortization) to Interest Expense for the four quarters then ended.

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

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

The Interest Coverage Ratio is calculated using an earnings metric as defined in the agreement compared to Interest Expense for the four quarters then ended.

The Leverage Ratio is defined as net debt (total debt, net of up to $ 300 million of unrestricted cash) as of the last day of such fiscal quarter to the defined earnings metric for the four quarters then ended.

Additionally, the Company may effect an increase in the maximum Leverage Ratio in contemplation of a Material Acquisition.

All terms are as defined in the 2024 Credit Agreement.

1 unchanged sentence

On August 15, 2022, the Company entered into a new unsecured credit agreement (the "2022 Credit Agreement").

The 2022 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 2022 Credit Agreement.

The 2022 Credit Agreement 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 $ 250 million delayed draw term loan

facility (the “Delayed Draw Term Loan”), all pursuant to the terms and conditions of the 2022 Credit Agreement.

The 2022 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.

8 unchanged sentences

The borrowing rate for the Delayed Draw Term Loan is a variable rate reassessed periodically in accordance with the terms of the 2022 Credit Agreement.

At March 31, 2024, the interest rate was 6.8 %.

At June 30, 2024, the interest rate was 6.7 %.

Under the 2022 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.

The Interest Coverage Ratio is defined as EBITDA (earnings before interest, taxes, depreciation, and amortization) to Interest Expense for the four quarters then ended.

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

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

The Interest Coverage Ratio is calculated using an earnings metric as defined in the agreement compared to Interest Expense for the four quarters then ended.

Additionally, the Company may effect an increase in the maximum Leverage Ratio in contemplation of a Material Acquisition.

All terms are as defined in the 2022 Credit Agreement.

The following table presents availability under the 2022 Credit Agreement at March 31, 2024:

The following table presents availability under the 2022 Credit Agreement at June 30, 2024:

In millions Revolving Credit Facility Delayed Draw Term Loan Total

3 unchanged sentences

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

The Company was in compliance with all financial covenants in the 2022 Credit Agreement and the 2024 Credit Agreement as of March 31, 2024.

The Company was in compliance with all financial covenants in the 2022 Credit Agreement and the 2024 Credit Agreement as of June 30, 2024.

The Company or its subsidiaries may issue senior notes from time to time.

8 unchanged sentences

The 2034 Notes will mature on March 11, 2034.

Proceeds from the 2034 Notes, combined with the proceeds from the term loan under the 2024 Credit Agreement and cash on hand, were utilized to redeem the outstanding amount of 2024 Notes.

Proceeds from the 2034 Notes, combined with the proceeds from the term loan under the 2024 Credit Agreement and cash on hand, were utilized to repay the outstanding amount of 2024 Notes at maturity.

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.

3 unchanged sentences

The Euro Notes were issued by Wabtec Transportation Netherlands B.V.

and are fully and unconditionally guaranteed by the Company.

and are fully and unconditionally guaranteed by the Parent Company.

The Company is in compliance with the restrictions and covenants in the indentures under which the Senior Notes were issued and expects that these restrictions and covenants will not be any type of limiting factor in executing our operating activities.

1 unchanged sentence

The Company maintains employee stock-based compensation plans for stock options, restricted stock, and incentive stock units as governed by the 2011 Stock Incentive Compensation Plan, as amended and restated (the “2011 Plan”) and the 2000 Stock Incentive Plan, as amended (the “2000 Plan”).

The 2011 Plan has a term through May 10, 2027, and as of March 31, 2024, the number of shares available for future grants under the 2011 Plan was approximately 4.4 million shares.

The 2011 Plan has a term through May 10, 2027, and as of June 30, 2024, the number of shares available for future grants under the 2011 Plan was approximately 4.4 million shares.

The Company also maintains a 1995 Non-Employee Directors’ Fee and Stock Option Plan as amended and restated (“the Directors Plan”).

Stock-based compensation expense was $ 17 million and $ 12 million for the three months ended March 31, 2024 and 2023, respectively.

At March 31, 2024, unamortized compensation expense related to stock options, non-vested restricted shares and incentive stock units expected to vest is approximately $ 109 million.

Stock-based compensation expense was $ 17 million and $ 34 million for the three and six months ended June 30, 2024, respectively, and $ 14 million and $ 26 million for the three and six months ended June 30, 2023, respectively.

At June 30, 2024, unamortized compensation expense related to stock options, non-vested restricted shares and incentive stock units expected to vest is approximately $ 95 million.

Stock Options Stock options can be granted to eligible employees and directors at an exercise price equal to fair market value, which is the average of the high and low Wabtec stock price on the date of grant.

1 unchanged sentence

There were no stock options granted in the periods presented.

At March 31, 2024, there were 273,210 shares exercisable.

At June 30, 2024, there were 234,421 shares issuable pursuant to exercisable stock options.

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

2 unchanged sentences

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 modifier can increase or decrease the payment by 10%.

The RTSR modifier can increase or decrease the payment by 10 % or 20 % depending on plan year.

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 incentive stock units that are expected to vest based on the Company’s estimate for meeting those established performance targets.

As of March 31, 2024, the Company estimates that it will achieve 153 %, 136 % and 100 % 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, 2024, 2025, and 2026, respectively, and has recorded incentive compensation expense accordingly.

As of June 30, 2024, the Company estimates that it will achieve 153 %, 149 % and 133 % 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, 2024, 2025, and 2026, respectively, and has recorded incentive compensation expense accordingly.

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

1 unchanged sentence

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

The following table summarizes the restricted stock, restricted stock unit and incentive stock unit activity and related information for the three months ended March 31, 2024:

The following table summarizes the restricted stock, restricted stock unit and incentive stock unit activity and related information for the six months ended June 30, 2024:

and Units Incentive

6 unchanged sentences

Canceled ( 35,437 ) ( 18,352 ) $ 103.38

Outstanding at March 31, 2024 787,238 649,506 $ 111.68

The overall effective tax rate for the three months ended March 31, 2024 and 2023 was 23.6 % and 25.5 %, respectively.

The year over year decrease was primarily driven by higher discrete equity compensation tax deductions for the three months ended March 31, 2024.

Outstanding at June 30, 2024 766,929 647,342 $ 112.83

The overall effective tax rate for the three and six months ended June 30, 2024 was 24.5 % and 24.1 %, respectively.

The overall effective tax rate for both the three and six months ended June 30, 2023 was 25.5 %.

The year over year decrease in the effective rate for the three month period ended June 30, 2024 was primarily driven by a change in the jurisdictional mix of earnings.

Additionally, the year over year decrease in the effective tax rate for the six month period ended June 30, 2024 was impacted by higher discrete equity compensation tax deductions.

EARNINGS PER SHARE

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

In millions, except per share data 2024 2023 2024 2023

7 unchanged sentences

Diluted $ 1.64 $ 1.06 $ 3.17 $ 2.00

The following table reconciles the changes in the Company’s product warranty reserve for the three months ended March 31, 2024 and 2023:

The following table reconciles the changes in the Company’s product warranty reserve for the six months ended June 30, 2024 and 2023:

In millions 2024 2023

3 unchanged sentences

Foreign currency impact/other ( 4 ) 1

Balance at March 31

Balance at June 30

FAIR VALUE MEASUREMENT AND DERIVATIVE INSTRUMENTS

9 unchanged sentences

The Company’s cash, cash equivalents and restricted cash are highly liquid investments purchased with an original maturity of three months or less and are considered Level 1 on the fair value valuation hierarchy.

The fair value of cash, cash equivalents and restricted cash approximated the carrying value at March 31, 2024 and December 31, 2023.

The fair value of cash, cash equivalents and restricted cash approximated the carrying value at June 30, 2024 and December 31, 2023.

The Senior Notes are considered Level 2 based on the fair value valuation hierarchy.

Contingent consideration related to the GE Transportation acquisition is considered Level 3 based on the fair value valuation hierarchy.

At March 31, 2024 and December 31, 2023, $ 42 million was classified as "Other accrued liabilities" on the Company's Condensed Consolidated Balance Sheets.

The fair value approximates the carrying value at March 31, 2024 and December 31, 2023.

At June 30, 2024 and December 31, 2023, $ 42 million was classified as "Other accrued liabilities" on the Company's Condensed Consolidated Balance Sheets.

The fair value approximates the carrying value at June 30, 2024 and December 31, 2023.

Hedging Activities In the normal course of business, the Company is exposed to market risk related to interest rates, commodity prices and foreign currency exchange rate fluctuations, which may adversely affect our operating results and financial position.

8 unchanged sentences

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

For the three months ended March 31, 2024 and 2023, the amounts reclassified into income were not material.

For the three and six months ended June 30, 2024 and 2023, the amounts reclassified into income were not material.

The Company has also established balance sheet risk management and net investment hedging programs to protect its balance sheet against foreign currency exchange rate volatility.

7 unchanged sentences

These foreign exchange contracts are accounted for on a full mark to market basis through earnings, with gains and losses recorded as a component of Other income, net.

The net gains and losses related to these contracts were not material for the three months ended March 31, 2024 and 2023.

The net gains and losses related to these contracts were not material for the three and six months ended June 30, 2024 and 2023.

These contracts typically mature within one year .

4 unchanged sentences

2024, the Company utilized all outstanding interest rate hedge contracts to help manage interest expense for the 2034 Notes.

F or the three months ended March 31, 2024 and 2023, the amounts reclassified into income were not material.

F or the three and six months ended June 30, 2024 and 2023, the amounts reclassified into income were not material.

Commodity Price Risk

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

For the three months ended March 31, 2024 and 2023, the amounts recognized as income or expense were not material.

The following table summarizes the assets, liabilities, gross notional amounts, fair values, and fair value hierarchy classification of the designated and non-designated hedges discussed in the above sections as of March 31, 2024, which are included in other current assets and liabilities on the Condensed Consolidated Balance Sheets:

For the three and six months ended June 30, 2024 and 2023, the amounts recognized as income or expense were not material.

The following table summarizes the assets, liabilities, gross notional amounts, fair values, and fair value hierarchy classification of the designated and non-designated hedges discussed in the above sections as of June 30, 2024, which are included in other current assets and liabilities on the Condensed Consolidated Balance Sheets:

Fair Value Gross Notional Amount

64 unchanged sentences

These changes were immaterial to the individual product lines and segments affected, and historical amounts have been reclassified to conform to the current period presentation.

Segment financial information for the three months ended March 31, 2024 is as follows:

Segment financial information for the three months ended June 30, 2024 is as follows:

In millions Freight

9 unchanged sentences

Income (loss) before income taxes $ 391 $ 82 $ ( 88 ) $ 385

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

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

In millions Freight

9 unchanged sentences

Income (loss) before income taxes $ 269 $ 68 $ ( 78 ) $ 259

Segment financial information for the six months ended June 30, 2024 is as follows:

In millions Freight

Segment Transit

Segment Corporate

Activities and

Elimination Total

Sales to external customers $ 3,744 $ 1,397 $ — $ 5,141

Intersegment sales/(elimination) 25 21 ( 46 ) —

Total sales $ 3,769 $ 1,418 $ ( 46 ) $ 5,141

Income (loss) from operations $ 759 $ 156 $ ( 73 ) $ 842

Interest expense and other, net — — ( 94 ) ( 94 )

Income (loss) before income taxes $ 759 $ 156 $ ( 167 ) $ 748

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

In millions Freight

Segment Transit

Segment Corporate

Activities and

Elimination Total

Sales to external customers $ 3,253 $ 1,348 $ — $ 4,601

Intersegment sales/(elimination) 29 22 ( 51 ) —

Total sales $ 3,282 $ 1,370 $ ( 51 ) $ 4,601

Income (loss) from operations $ 495 $ 138 $ ( 45 ) $ 588

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

Income (loss) before income taxes $ 495 $ 138 $ ( 141 ) $ 492

Sales to external customers by product line are as follows:

Three Months Ended

June 30, Six Months Ended

In millions 2024 2023 2024 2023

9 unchanged sentences

Total Transit Segment $ 724 $ 710 $ 1,397 $ 1,348

OTHER (EXPENSE) INCOME, NET

The components of Other (expense) income, net are as follows:

OTHER INCOME, NET

The components of Other income, net are as follows:

Three Months Ended

June 30, Six Months Ended

In millions 2024 2023 2024 2023

Foreign currency (loss) gain ( 4 ) $ 2

Foreign currency loss $ ( 1 ) $ ( 8 ) $ ( 5 ) $ ( 6 )

Equity income 1 10 2 11

Expected return on pension assets/amortization 2 1 4 3

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

Total Other (expense) income, net $ ( 2 ) $ 5

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

Total Other income, net $ 4 $ 2 $ 2 $ 7

RESTRUCTURING

3 unchanged sentences

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

Three Months Ended

Three Months Ended June 30, Six Months Ended June 30,

In millions 2024 2023 2024 2023

2 unchanged sentences

Selling, general and administrative expenses — 1 — 2

Other income, net ( 4 ) — ( 4 ) —

Total Freight Segment $ ( 1 ) $ 2 $ — $ 4

6 unchanged sentences

Total one-time restructuring charges related to Integration 2.0 to date are approximately $ 130 million, which includes amounts recorded beginning in the fourth quarter 2021, and are primarily for employee-related costs and asset write downs associated with site consolidations in Europe.

Cash payments made during the three months ended March 31, 2024 were approximately $ 22 million.

Cash payments made during the three months ended March 31, 2023 were no t material.

Cash payments made during the three and six months ended June 30, 2024 were approximately $ 8 million and $ 30 million, respectively.

Cash payments made during the three and six months ended June 30, 2023 were no t 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 $ 3 million during the three months ended March 31, 2024 for asset write downs related to Portfolio Optimization.

No charges related to Portfolio Optimization were recorded during the three months ended March 31, 2023.

Wabtec recorded charges of approximately $ 2 million and $ 5 million during the three and six months ended June 30, 2024, respectively, primarily for asset write downs related to Portfolio Optimization.

No charges related to Portfolio Optimization were recorded during the three and six months ended June 30, 2023.

Total one-time restructuring charges related to Portfolio Optimization to date are approximately $ 33 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements