What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-24 compared with 2024-04-24 · 207 added, 76 removed, 244 unchanged (54% of the section changed)

5 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.

Business Update

During the first three months of 2024, Wabtec continued to execute on our value creation framework by signing a long term parts agreement with a customer in Asia, securing a multi-year order for new locomotives in Africa and launching the next generation of railcar movers with its Shuttlewagon Commander NXT.

Additionally, as a result of Wabtec's strong revenue and profitability growth over the past few years, S&P Global Ratings upgraded Wabtec's credit rating from BBB- to BBB and has maintained the Stable outlook.

Moody's also updated Wabtec's outlook to positive from stable.

During the first six months of 2024, Wabtec continued to execute on our value creation framework by signing several key agreements including:

a multi-year Tier 4 locomotive order in North America for over $600 million, Wabtec's first multi-year service contract with a customer in Brazil worth over $240 million, a long term parts agreement with a customer in Asia, and a multi-year order for new locomotives in Africa.

Operationally, Wabtec began commercial operations for its Green Friction braking solution in Paris and launched the next generation of railcar movers with its Shuttlewagon Commander NXT.

Additionally, as a result of Wabtec's strong revenue and profitable growth over the past few years, rating agencies have made the following changes to our credit ratings:

both Fitch Ratings and S&P Global Ratings upgraded Wabtec's credit rating from BBB- to BBB with a Stable outlook, and Moody's updated Wabtec's outlook to positive from stable.

During the first quarter of 2022, Wabtec announced Integration 2.0, a three-year strategic initiative to target incremental run rate synergies estimated to be between $75 million and $90 million in 2025.

The scope of the review includes consolidating our operating footprint, reducing headcount, streamlining the end-to-end manufacturing process, restructuring the North America distribution channels, expanding operations in low-cost countries and simplifying the business through systems enablement, including the source-to-pay process.

Management will also consider additional capital investments to further simplify and streamline the business.

The Company anticipates that it will incur one-time restructuring charges of approximately $135 million to $165 million related to this initiative, of which approximately $126 million has been incurred through March 31, 2024.

The Company anticipates that it will incur one-time restructuring charges of approximately $135 million to $165 million related to this initiative, of which approximately $130 million has been incurred through June 30, 2024.

Total estimated initiative charges could change based on the specific programs approved or changes to the scope of the review.

During the three months ended March 31, 2024 and 2023, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $8 million and $9 million, respectively, primarily for employee-related costs and asset write downs associated with site consolidations in Europe.

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

During the three and six months ended June 30, 2024, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $4 million and $12 million, respectively, and $8 million and $17 million for the three and six months ended June 30, 2023, respectively, primarily for employee-related costs and asset write downs associated with site consolidations in Europe.

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

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, for asset write downs related to Portfolio Optimization.

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

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

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Consolidated Results

FIRST QUARTER 2024 COMPARED TO FIRST QUARTER 2023

SECOND QUARTER 2024 COMPARED TO SECOND QUARTER 2023

The following table shows our Condensed Consolidated Statements of Operations for the periods indicated.

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Interest expense, net (49) (55)

Other (expense) income, net (2) 5

Other income, net 4 2

Income before income taxes 385 259

3 unchanged sentences

Net income attributable to Wabtec shareholders $ 289 $ 191

The following table shows the major components of the change in Net sales in the three months ended March 31, 2024 from the three months ended March 31, 2023:

The following table shows the major components of the change in Net sales in the three months ended June 30, 2024 from the three months ended June 30, 2023:

In millions Freight Segment Transit Segment Total

First Quarter 2023 Net sales $ 1,556 $ 638 $ 2,194

Second Quarter 2023 Net sales $ 1,697 $ 710 $ 2,407

Acquisitions 34 — 34

1 unchanged sentence

Organic 197 24 221

First Quarter 2024 Net sales $ 1,824 $ 673 $ 2,497

Net sales for the three months ended March 31, 2024 increased by $303 million, or 13.8%, to $2.50 billion compared to the same period in 2023.

Second Quarter 2024 Net sales $ 1,920 $ 724 $ 2,644

Net sales for the three months ended June 30, 2024 increased by $237 million, or 9.8%, to $2.64 billion compared to the same period in 2023.

Organic sales increased $221 million which was attributable to both Freight and Transit Segments.

Freight Equipment sales increased from higher North American and international locomotive sales and increased mining sales.

Components sales increased due to higher international railcar sales and growth in industrial end-markets.

Freight Services sales increased from higher deliveries of locomotive modernizations and overhauls and higher parts sales.

Transit sales increased from higher demand for Aftermarket and Original Equipment products driven by increased infrastructure investment.

Sales from acquisitions contributed $36 million in the Freight Segment and favorable changes in foreign exchange rates increased sales by $5 million, primarily in the Transit Segment.

Transit sales increased from higher demand for Aftermarket products driven by increased infrastructure investment, partially offset by lower Original Equipment sales.

Sales from acquisitions contributed $34 million in the Freight Segment and unfavorable changes in foreign exchange rates decreased sales by $18 million from both the Freight and Transit Segments.

Cost of sales

Cost of sales for the three months ended March 31, 2024 increased by $153 million, or 10.0%, to $1.68 billion compared to the same period in 2023.

Cost of sales for the three months ended June 30, 2024 increased by $86 million, or 5.1%, to $1.77 billion compared to the same period in 2023.

The increase is primarily due to the increase in net sales.

Cost of sales as a percentage of net sales was 67.3% and 69.7% for the three months ended March 31, 2024 and 2023, respectively.

The improvement in gross margin is attributable to improved pricing, favorable mix between Freight and Transit segments, and slightly favorable input costs.

Costs of sales for the three months ended March 31, 2024 and 2023 included $6 million and $4 million, respectively, of restructuring costs, primarily for headcount actions and footprint rationalization related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Cost of sales as a percentage of net sales was 67.0% and 69.9% for the three months ended June 30, 2024 and 2023, respectively.

The improvement in gross margin is attributable to favorable mix within and between the Freight and Transit segments, strong productivity and favorable fixed cost absorption.

Costs of sales for the three months ended June 30, 2024 and 2023 included $6 million and $8 million, respectively, of restructuring costs, primarily for headcount actions and footprint rationalization related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Operating expenses

Total operating expenses increased $14 million, or 3.6%, for the three months ended March 31, 2024 compared to the same period in 2023, primarily due to the increase in net sales.

Operating expenses as a percentage of sales was 16.2% and 17.7% for the three months ended March 31, 2024 and 2023, respectively.

Selling, general and administrative expenses ("SG&A") increased $18 million for the three months ended March 31, 2024 compared to the same period in 2023.

Total operating expenses increased $33 million, or 8.0%, for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to the increase in net sales.

Operating expenses as a percentage of sales was 16.8% and 17.1% for the three months ended June 30, 2024 and 2023, respectively.

Selling, general and administrative expenses ("SG&A") increased $31 million for the three months ended June 30, 2024 compared to the same period in 2023.

The increase is primarily from costs incurred to support the higher sales volume and higher employee compensation and benefit costs, partially offset by the impacts of Integration 2.0.

Restructuring costs included in SG&A were $4 million and $5 million for the three months ended March 31, 2024 and 2023, respectively, primarily for headcount actions and footprint rationalization programs related to Integration 2.0.

Restructuring costs included in SG&A were $3 million and $2 million for the three months ended June 30, 2024 and 2023, respectively, primarily for headcount actions and footprint rationalization programs related to Integration 2.0.

Interest expense, net

Interest expense, net, decreased $1 million to $47 million for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to lower average overall debt balances in the current period, partially offset by higher effective interest rates.

Other (expense) income, net

Other (expense) income, net, decreased $7 million to $(2) million for the three months ended March 31, 2024 compared to the same period in 2023, primarily due to unfavorable foreign exchange rates.

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

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

Interest expense, net, decreased $6 million to $49 million for the three months ended June 30, 2024 compared to the same period in 2023 primarily due to lower average overall debt balances in the current period, partially offset by higher effective interest rates.

Other income, net

Other income, net, increased $2 million to $4 million for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to lower foreign exchange losses, partially offset by lower equity income.

The effective income tax rate was 24.5% and 25.5% for the three months ended June 30, 2024 and 2023, respectively.

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

Freight Segment

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Income from operations (% of net sales) 20.4 % 15.9 % 4.5

The following table shows the major components of the change in Net sales for the Freight Segment in the first quarter of 2024 from the first quarter of 2023:

First Quarter 2023 Net sales $ 1,556

The following table shows the major components of the change in Net sales for the Freight Segment in the second quarter of 2024 from the second quarter of 2023:

Second Quarter 2023 Net sales $ 1,697

Acquisitions 34

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Digital Intelligence 7

First Quarter 2024 Net sales $ 1,824

Second Quarter 2024 Net sales $ 1,920

Freight Segment organic sales increased by $197 million driven primarily by:

• Equipment sales from higher North America and international locomotive sales and increased mining sales, and

• Equipment sales from higher North America and international locomotive sales and increased mining sales,

• Components sales from higher international railcar sales and growth in industrial end-markets, and

• Services sales from higher deliveries of locomotive modernizations and overhauls and higher parts sales

Additionally, Freight Segment sales also benefited from our recently completed strategic acquisition of L&M Radiator, Inc.

Additionally, Freight Segment sales also benefited from our strategic acquisition of L&M Radiator, Inc.

by $34 million.

1 unchanged sentence

Freight Segment Cost of sales increased $92 million from higher sales volume, and Cost of sales as a percentage of Net sales decreased 3.0 percentage points.

The improvement in gross margin is attributable to improved pricing, favorable mix within the Freight Segment product lines, and slightly favorable input costs.

Cost of sales for the three months ended March 31, 2024 and 2023 included $3 million and $1 million, respectively, of restructuring costs, primarily related to Integration 2.0 in both years and Portfolio Optimization in 2024.

The improvement in gross margin is attributable to favorable mix within the Freight Segment product lines, strong productivity and favorable fixed cost absorption.

Cost of sales for the three months ended June 30, 2023 was also impacted by manufacturing inefficiencies related to labor negotiations at our Erie facility.

Cost of sales for each of the three months ended June 30, 2024 and 2023 included $5 million of restructuring costs, primarily related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Operating expenses

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Income from operations (% of net sales) 11.3 % 9.6 % 1.7

The following table shows the major components of the change in Net sales for the Transit Segment in the first quarter of 2024 from the first quarter of 2023:

First Quarter 2023 Net sales $ 638

The following table shows the major components of the change in Net sales for the Transit Segment in the second quarter of 2024 from the second quarter of 2023:

Second Quarter 2023 Net sales $ 710

Foreign Exchange (10)

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Original Equipment Manufacturing (15)

First Quarter 2024 Net sales $ 673

Transit Segment organic sales increased by $31 million driven by strong Aftermarket and Original Equipment Manufacturing sales primarily as a result of increased demand for products and services, increased infrastructure investment, and the easing of supply chain disruptions.

Favorable changes in foreign exchange rates also increased sales by $4 million.

Second Quarter 2024 Net sales $ 724

Transit Segment organic sales increased by $24 million driven by strong Aftermarket sales primarily as a result of increased demand for products and services and increased infrastructure investment.

This increase was partially offset by a decrease in Original Equipment Manufacturing sales.

Changes in foreign exchange rates also decreased sales by $10 million.

Cost of sales

Transit Segment Cost of sales increased by $32 million primarily from higher sales volume, and Costs of sales as a percentage of sales increased by 1.2 percentage points.

The decrease in gross margin is primarily attributable to higher input costs and unfavorable mix within the Transit Segment, partially offset by benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects.

Transit Cost of sales for the three months ended March 31, 2024 and 2023 includes $3 million of restructuring costs, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Transit Segment Cost of sales decreased by $6 million, and Costs of sales as a percentage of sales decreased by 2.3 percentage points primarily from favorable mix within the Transit product lines, partially offset by higher sales volume.

The increase in gross margin was also attributable to benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects.

Transit Cost of sales for the three months ended June 30, 2024 and 2023 includes $1 million and $3 million of restructuring costs, respectively, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Operating expenses

Transit Segment operating expenses decreased by $1 million as compared to the prior year.

Higher SG&A expenses to support higher sales volume and higher employee compensation and benefit costs were more than offset by benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects.

Transit Operating expenses for the three months ended March 31, 2024 and 2023 includes $4 million of restructuring costs, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Transit Segment operating expenses increased by $6 million as compared to the prior year.

Higher SG&A expenses to support higher sales volume and higher employee compensation and benefit costs were partially offset by benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects.

Transit SG&A expenses for each of the three months ended June 30, 2024 and 2023 include $3 million of restructuring costs, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

FIRST SIX MONTHS OF 2024 COMPARED TO FIRST SIX MONTHS OF 2023

The following table shows our Condensed Consolidated Statements of Operations for the periods indicated.

Six Months Ended

In millions 2024 2023

Sales of goods $ 4,152 $ 3,583

Sales of services 989 1,018

Total net sales 5,141 4,601

Cost of sales:

Cost of goods (2,901) (2,657)

Cost of services (551) (556)

Total cost of sales (3,452) (3,213)

Gross profit 1,689 1,388

Operating expenses:

Selling, general and administrative expenses (597) (548)

Engineering expenses (105) (104)

Amortization expense (145) (148)

Total operating expenses (847) (800)

Income from operations 842 588

Other income and expenses:

Interest expense, net (96) (103)

Other income, net 2 7

Income before income taxes 748 492

Income tax expense (180) (126)

Net income 568 366

Net income attributable to noncontrolling interest (7) (6)

Net income attributable to Wabtec shareholders $ 561 $ 360

The following table shows the major components of the change in Net sales in the six months ended June 30, 2024 from the six months ended June 30, 2023:

In millions Freight Segment Transit Segment Total

First Six Months of 2023 Net sales $ 3,253 $ 1,348 $ 4,601

Acquisitions 70 — 70

Foreign Exchange (7) (6) (13)

Organic 428 55 483

First Six Months of 2024 Net sales $ 3,744 $ 1,397 $ 5,141

Net sales for the six months ended June 30, 2024 increased by $540 million, or 11.7%, to $5.14 billion compared to the same period in 2023.

Organic sales increased $483 million which was attributable to both Freight and Transit Segments.

Freight Equipment sales increased from higher North American and international locomotive sales and increased mining sales.

Freight Services sales increased from higher deliveries of locomotive modernizations and overhauls and higher parts sales.

Transit sales increased from higher demand for Aftermarket products driven by increased infrastructure investment, partially offset by lower Original Equipment sales.

Sales from acquisitions contributed $70 million in the Freight Segment and unfavorable changes in foreign exchange rates decreased sales by $13 million.

Cost of sales

Cost of sales for the six months ended June 30, 2024 increased by $239 million, or 7.4%, to $3.45 billion compared to the same period in 2023.

The increase is primarily due to the increase in net sales.

Cost of sales as a percentage of net sales was 67.2% and 69.8% for the six months ended June 30, 2024 and 2023, respectively.

The improvement in gross margin is attributable to improved pricing, favorable mix between the Freight and Transit segments and improved productivity.

Cost of sales for both the six months ended June 30, 2024 and 2023 included $12 million of restructuring costs, primarily for headcount actions and footprint rationalization related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Operating expenses

Total operating expenses increased $47 million, or 5.9%, for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to the increase in net sales.

Operating expenses as a percentage of sales was 16.5% and 17.4% for the six months ended June 30, 2024 and 2023, respectively.

Selling, general and administrative expenses ("SG&A") increased $49 million for the six months ended June 30, 2024 compared to the same period in 2023.

The increase is primarily from costs incurred to support the higher sales volume and higher employee compensation and benefit costs, partially offset by the impacts of Integration 2.0.

Restructuring costs included in SG&A were $6 million and $7 million for the six months ended June 30, 2024 and 2023, respectively, primarily for headcount actions and footprint rationalization programs related to Integration 2.0.

Interest expense, net

Interest expense, net, decreased $7 million to $96 million for the six months ended June 30, 2024 compared to the same period in 2023 primarily due to lower average overall debt balances in the current period, partially offset by higher effective interest rates.

Other income, net

Other income, net, decreased $5 million to $2 million for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to lower equity income.

The effective income tax rate was 24.1% and 25.5% for the six months ended June 30, 2024 and 2023, respectively.

The year over year decrease was primarily driven by higher discrete equity compensation tax deductions for the six months ended June 30, 2024 and a change in the jurisdictional mix of earnings.

Freight Segment

The following table shows our Condensed Consolidated Statements of Operations for our Freight Segment for the periods indicated:

Six Months Ended

In millions 2024 2023 Change % Change

Sales of goods $ 2,760 $ 2,242 $ 518 23.1 %

Sales of services 984 1,011 (27) (2.7) %

Total net sales 3,744 3,253 491 15.1 %

Cost of sales:

Cost of goods (1,902) (1,687) 215 12.7 %

Cost of services (548) (550) (2) (0.4) %

Total cost of sales (2,450) (2,237) 213 9.5 %

Cost of Sales (% of net sales) 65.4 % 68.8 % (3.4)

Gross profit 1,294 1,016 278 27.4 %

Operating expenses (535) (521) 14 2.7 %

Income from operations $ 759 $ 495 $ 264 53.3 %

Income from operations (% of net sales) 20.3 % 15.2 % 5.1

The following table shows the major components of the change in Net sales for the Freight Segment in the first six months of 2024 from the first six months of 2023:

First Six Months of 2023 Net Sales $ 3,253

Acquisitions 70

Foreign Exchange (7)

Organic changes in Net sales by Product Line:

Equipment 275

Components 12

Digital Intelligence (3)

First Six Months of 2024 Net Sales $ 3,744

Freight Segment organic sales increased by $428 million driven primarily by:

• Equipment sales from higher North America and international locomotive sales and increased mining sales, and

• Services sales from higher deliveries of locomotive modernizations and overhauls and higher parts sales

Additionally, Freight Segment sales also benefited from our strategic acquisition of L&M Radiator, Inc.

by $70 million.

Cost of sales

Freight Segment Cost of sales increased $213 million from higher sales volume, and Cost of sales as a percentage of Net sales decreased 3.4 percentage points.

The improvement in gross margin is attributable to improved pricing, favorable mix within the Freight Segment product lines and improved productivity.

Cost of sales for the six months ended June 30, 2023 was also impacted by manufacturing inefficiencies related to labor negotiations at our Erie facility and costs related to next generation product development in Digital Intelligence.

Cost of sales for the six months ended June 30, 2024 and 2023 included $8 million and $6 million, respectively, of restructuring costs, primarily related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Operating expenses

Freight Segment operating expenses increased by $14 million primarily driven by higher SG&A expenses resulting from higher costs to support increased sales volume, higher employee compensation and benefit costs and incremental expense from acquisitions.

Transit Segment

The following table shows our Condensed Consolidated Statements of Operations for our Transit Segment for the periods indicated:

Six Months Ended

In millions 2024 2023 Change % Change

Net sales $ 1,397 $ 1,348 $ 49 3.6 %

Cost of sales (1,002) (976) 26 2.7 %

Cost of sales (% of net sales) 71.7 % 72.4 % (0.7)

Gross profit 395 372 23 6.2 %

Operating expenses (239) (234) 5 2.1 %

Income from operations $ 156 $ 138 $ 18 13.0 %

Income from operations (% of net sales) 11.2 % 10.3 % 0.9

The following table shows the major components of the change in Net sales for the Transit Segment in the first six months of 2024 from the first six months of 2023:

First Six Months of 2023 Net Sales $ 1,348

Foreign Exchange (6)

Organic changes in Net sales by Product Line:

Aftermarket 57

Original Equipment Manufacturing (2)

First Six Months of 2024 Net Sales $ 1,397

Transit Segment organic sales increased by $55 million driven by strong Aftermarket sales primarily as a result of increased demand for products and services and increased infrastructure investment, partially offset by lower Original Equipment Manufacturing sales.

Unfavorable changes in foreign exchange rates also decreased sales by $6 million.

Cost of sales

Transit Segment Cost of sales increased by $26 million primarily from higher sales volume, and Costs of sales as a percentage of sales decreased by 0.7 percentage points.

The increase in gross margin is primarily attributable to favorable mix within the Transit Segment and the benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects.

Transit Cost of sales for the six months ended June 30, 2024 and 2023 includes $4 million and $6 million of restructuring costs, respectively, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Operating expenses

Transit Segment operating expenses increased by $5 million as compared to the prior year.

Transit SG&A expenses for the six months ended June 30, 2024 and 2023 includes $6 million and $5 million of restructuring costs, respectively, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Liquidity and Capital Resources

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The following is a summary of selected cash flow information and other relevant data:

Three Months Ended

Six Months Ended

In millions 2024 2023

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Financing activities $ (523) $ 30

Operating activities In the first three months of 2024, cash provided by operating activities was $334 million compared to cash used for operating activities of $(25) million in the first three months of 2023.

Significant changes to the sources and (uses) of cash for the three month periods include the following:

Operating activities In the first six months of 2024, cash provided by operating activities was $569 million compared to $90 million in the first six months of 2023.

Significant changes to the sources and (uses) of cash for the six month periods include the following:

• $202 million from increased Net income;

• $172 million from favorable changes in accounts receivable driven by the timing of collections from customers and a net $65 million increase in the utilization of the Revolving Receivables Program;

• $103 million from changes in inventory.

Investing activities In the first three months of 2024 and 2023, cash used for investing activities was $(19) million and $(32) million, respectively.

During the first three months of 2024, Wabtec used $(31) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes and received $12 million of proceeds from disposals of property, plant and equipment.

During the first three months of 2023, Wabtec used $(32) million for additions to property, plant, and equipment.

Financing activities In the first three months of 2024, cash used for financing activities was $(289) million which included $(58) million from net changes in debt, $(175) million in stock repurchases, $(36) million of dividend payments, and $(23) million of payments for income tax withholding on share-based compensation.

In the first three months of 2023, cash used for financing activities was $(72) million, which included $154 million from net changes in debt, $(178) million in stock repurchases, $(31) million of dividend payments, and $(14) million of payments for income tax withholding on share-based compensation.

During the first quarter of 2024, the Company entered in the 2024 Credit Agreement for a term loan of $225 million.

• $128 million from changes in Inventory primarily from the inventory build during the first six months of 2023 in anticipation of a strike at the manufacturing facility in Erie, Pennsylvania, as well as supply chain disruptions;

• $98 million from changes in Accounts payable due to timing of payments;

• $4 million from favorable changes in accounts receivables driven by $179 million of higher collections on receivables, mostly offset by $(175) million of higher remittance for the Revolving Receivables Program;

• $(96) million from changes in the timing of customer deposits expected to be consumed in one year;

• approximately $115 million from changes in long term deposits from customers.

Investing activities In the first six months of 2024 and 2023, cash used for investing activities was $(57) million and $(293) million, respectively.

During the first six months of 2024, Wabtec used $(77) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes and received $20 million of proceeds from disposals of property, plant and equipment.

During the first six months of 2023, Wabtec acquired L&M Radiator Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers, for net cash of approximately $(223) million and used $(70) million for additions to property, plant, and equipment.

Financing activities In the first six months of 2024, cash used for financing activities was $(523) million which included $(58) million from net changes in debt, $(375) million in stock repurchases, $(71) million of dividend payments, and $(23) million of payments for income tax withholding on share-based compensation.

In the first six months of 2023, cash provided by financing activities was $30 million, which included $374 million from net changes in debt, $(252) million in stock repurchases, $(62) million of dividend payments, $(15) million of payments for income tax withholding on share-based compensation, and $(12) million for distributions to noncontrolling interest.

During the first quarter of 2024, the Company entered into the 2024 Credit Agreement for a term loan of $225 million.

Also during the first quarter of 2024, the Company issued $500 million of Senior Notes due in 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.

As of March 31, 2024, the Company held approximately $639 million of cash, cash equivalents and restricted cash, of which approximately $249 million was held within the United States and approximately $390 million was held outside of the United States, primarily in India, Europe, Brazil, and China.

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.

As of June 30, 2024, the Company held approximately $595 million of cash, cash equivalents and restricted cash, of which approximately $210 million was held within the United States and approximately $385 million was held outside of the United States, primarily in India, Europe, Brazil, and China.

While repatriation of some cash held outside the United States may be restricted by local laws, most of the Company’s foreign cash could be repatriated to the United States net of any tax impacts.

As of March 31, 2024, approximately $5 million of the Company's $639 million of cash balance was classified as restricted.

We or our affiliates may, from time to time, seek to retire or purchase outstanding debt through negotiated or open-market cash purchases, exchanges, or otherwise, and such transactions, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

As of June 30, 2024, approximately $5 million of the Company's $595 million of cash balance was classified as restricted.

may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Revolving Receivables Program

1 unchanged sentence

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 periods.

Net cash proceeds included in cash from operations from the revolving receivables program were $210 million and

$145 million for the three months ended March 31, 2024 and 2023, respectively.

Net cash (payments) proceeds included in cash from operations from the revolving receivables program were $(20) million and $155 million for the six months ended June 30, 2024 and 2023, respectively.

Additional information with respect to the Revolving Receivables Program is included in Note 2 of "Notes to Condensed Consolidated Financial Statements" included in Part I, Item 1 of this report.

15 unchanged sentences

Parent Company and Guarantor Subsidiaries

In millions Three Months Ended March 31, 2024

In millions Six Months Ended June 30, 2024

Net sales $ 3,094

3 unchanged sentences

Parent Company and Guarantor Subsidiaries

In millions March 31, 2024 December 31, 2023

In millions June 30, 2024 December 31, 2023

Current assets $ 1,528 $ 1,513

5 unchanged sentences

Parent Company and Guarantor Subsidiaries

In millions Three Months Ended March 31, 2024

In millions Six Months Ended June 30, 2024

Net sales to non-guarantor subsidiaries $ 518

1 unchanged sentence

Parent Company and Guarantor Subsidiaries

In millions March 31, 2024

In millions June 30, 2024

Amount due to non-guarantor subsidiaries $ 9,731

9 unchanged sentences

Issuer and Guarantor

In millions Three Months Ended March 31, 2024

In millions Six Months Ended June 30, 2024

Net sales $ 283

3 unchanged sentences

Issuer and Guarantor

In millions March 31, 2024 December 31, 2023

In millions June 30, 2024 December 31, 2023

Current assets $ 451 $ 493

5 unchanged sentences

Issuer and Guarantor

In millions Three Months Ended March 31, 2024

In millions Six Months Ended June 30, 2024

Net sales to non-guarantor subsidiaries $ 23

1 unchanged sentence

Issuer and Guarantor

In millions March 31, 2024

In millions June 30, 2024

Amount due to non-guarantor subsidiaries $ 11,046

5 unchanged sentences

Purchases of shares may be made by open market purchases or privately negotiated purchases and may be made pursuant to Rule 10b5-1 plan or otherwise.

As of March 31, 2024, approximately $923 million was remaining under the stock repurchase plan.

As of June 30, 2024, approximately $723 million was remaining under the stock repurchase plan.

Forward Looking Statements

58 unchanged sentences

Also during the first quarter of 2024, the Company issued $500 million of Senior Notes due in 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.

As a result of these transactions, contractual obligations related the repayment of Long-term debt for 2029 and beyond has increased to $725 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 2. Management’s Discussion and Analysis