What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-12 compared with 2024-02-14 · 125 added, 112 removed, 356 unchanged (40% of the section changed)

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In 2024, approximately 53% of the Company’s Net sales came from customers outside the U.S.

Wabtec’s long-term financial goals are to drive strong cash flow conversion, maintain a strong credit profile while minimizing our overall cost of capital, increase margins through strict attention to cost controls, drive improved efficiencies across the business, and increase revenues through a focused growth strategy, including product innovation and new technologies, global and market expansion, aftermarket products and services, and strategic acquisitions.

Wabtec’s long-term financial goals are to increase revenues through a focused growth strategy, including product innovation and new technologies, global and market expansion, aftermarket products and services, and strategic acquisitions, increase margins through strict attention to cost controls, drive improved efficiencies across the business, drive strong cash flow conversion, and maintain a strong credit profile while minimizing our overall cost of capital.

In addition, Management evaluates the Company’s current operational performance through measures such as safety, quality and on-time delivery.

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Business Update

During 2023, Wabtec continued to execute on our value creation framework by signing strategic orders for locomotive modernizations in North America that will span multiple years, new locomotives with a North American railroad, new locomotives in Brazil, long-term supply and maintenance agreement for brakes in India, and mining drive systems in high altitude applications.

We announced our largest certified pre-owned order for 69 locomotives for a North American customer and won a contract to supply pantograph and Passenger Information Systems for up to 504 transit cars.

Wabtec completed the strategic acquisition of L&M Radiator, Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers for the mining sector, and acquired the remaining 50% ownership interest in Lokomotiv Kurastyru Zauyty (LKZ), a locomotive manufacturing and assembly plant in Kazakhstan.

We delivered our 500th locomotive in Kazakhstan for the CIS region and our 500th locomotive to Indian Railways, which was a significant milestone in our 10-year contract.

Our senior unsecured debt was upgraded by Moody's, which reflects resiliency of the business, our balance sheet strength and strong cash generation.

Additionally, Wabtec rebranded our Digital Electronics product line to Digital Intelligence, a change that more accurately reflects the complete digital products and services portfolio offered to our customers.

The Digital Intelligence portfolio was also expanded with entry into the railcar telematics market.

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 $118 million has been incurred through December 31, 2023.

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

During the twelve months ended December 31, 2023, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $49 million which were 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.

Charges related to Integration 2.0 of

$46 million were recorded during the twelve months ended December 31, 2022, primarily for employee-related costs associated with site consolidations in Europe and costs related to the restructuring of North America distribution channels.

During 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, a multi-year locomotive order in Kazakhstan for over $400 million, international orders for new locomotives for $401 million across six customers, and multi-year orders for new locomotives in Africa for approximately $525 million.

Additionally, Wabtec won a long-term parts agreement with a Class I railroad for over $300 million, signed its first multi-year service contract with a customer in Brazil worth over $240 million, won signaling contracts with Transit customers in North America, and secured a long-term parts agreement with a customer in Asia.

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 multi-year strategic initiative to target incremental run rate synergies now estimated to be approximately $100 million by the end of 2026.

The scope of the review included 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.

During the twelve months ended December 31, 2024 and 2023, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $28 million and $49 million, respectively, primarily for employee-related costs and asset write downs associated with site consolidations in Europe.

The Company now expects to incur approximately $170 million of one-time restructuring charges related to Integration 2.0, of which approximately $146 million has been incurred through December 31, 2024.

Approved programs resulted in approximately 15 facility closures and impacted approximately 1,000 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 $28 million in the fourth quarter of 2023 for asset write downs related to Portfolio Optimization.

Wabtec now expects to incur approximately $70 million in net exit charges related to Portfolio Optimization, which will be predominately non-cash asset write downs.

For the years ended December 31, 2024 and 2023, Wabtec recorded charges of approximately $28 million primarily for asset write

downs related to Portfolio Optimization.

Total one-time restructuring charges related to Portfolio Optimization to date are approximately $56 million.

In February 2025, Wabtec announced Integration 3.0, a three-year strategic initiative to target incremental run rate synergies estimated to be between $100 million to $125 million by 2028.

The scope of the review includes consolidating our footprint via value chain improvement and facility rationalization, reducing headcount, expanding operating capacity in low-cost countries, and streamlining administrative and commercial activities.

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

The Company anticipates that it will incur charges of approximately $125 million to $155 million related to this initiative, of which approximately $80 million to $100 million are expected to be one-time restructuring charges.

Concurrently, Wabtec announced an additional Portfolio Optimization initiative for 2025 targeting approximately $100 million of low margin revenues.

The 2025 Portfolio Optimization actions are expected to result in approximately $40 million of net exit charges, primarily for non-cash asset write downs.

Estimates for these programs could change based on the specific programs approved or changes to the scope of the review.

Future macroeconomic volatility, supply chain disruptions and labor availability could cause component and raw material shortages resulting in an adverse effect on the timing of the Company’s revenue and cash flows.

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The Company utilizes various mitigating actions intended to lessen the impact of macroeconomic volatility.

These actions include implementing price escalations and surcharges, driving operational efficiencies through various cost mitigation efforts and discretionary spend management, strategically sourcing materials, reviewing and modifying distribution logistics, and accelerating integration synergies through Integration 2.0.

A portion of our workers are represented by labor unions.

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The Company continuously monitors its labor activity.

During the first quarter of 2024, Company Management determined that certain parts of the business would be better aligned with Management oversight in different product lines.

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.

Cyber Incident

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The Company also notified law enforcement and engaged legal counsel and other third-party incident response and cybersecurity professionals.

Based on the Company's assessment, the incident has not had a significant financial impact and the Company does not believe the incident will have a material impact on its business, operations or financial results.

Based on the Company's assessment, the incident did not have a significant financial impact and the Company does not believe the incident will have a material impact on its business, operations or financial results.

The Company maintains cyber insurance, subject to certain deductibles and policy limitations typical for its size and industry.

During 2024, the Company made four strategic acquisitions for a combined purchase price of approximately $168 million, net of cash acquired.

Two of the acquisitions are reported in the Transit Segment, one is reported in the Digital Intelligence product line of the Freight Segment and one is reported in the Components product line of the Freight Segment.

Each of the acquisitions in 2024 are individually and collectively immaterial.

During the fourth quarter of 2023, the Company purchased the remaining ownership shares of LKZ, a locomotive manufacturing and assembly company located in Kazakhstan for $111 million, at which time it became a wholly owned subsidiary of the Company.

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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.

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

During 2022, the Company made three strategic acquisitions in the Freight Segment for a combined purchase price of $89 million, net of cash acquired.

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.

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

The Company also made acquisitions during 2021 not listed above which are individually and collectively immaterial.

For additional information related to these acquisitions refer to Note 3 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report.

additional information related to these acquisitions refer to Note 3 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report.

On January 14, 2025, Wabtec announced a definitive agreement to acquire Evident’s Inspection Technologies division (Inspection Technologies), formerly part of the Scientific Solutions Division of Olympus Corporation, a global leader in Non-Destructive Testing, Remote Visual Inspection and Analytical Instruments solutions for mission critical assets, for $1.78 billion.

Inspection Technologies’ leading industry presence and innovative product portfolio is expected to significantly expand Wabtec's capabilities, adding advanced automated inspection capabilities, driving technology in a space where data acquisition, analytics and automation are critical.

Upon acquisition, Inspection Technologies will be reported within the Digital Intelligence product line of the Freight Segment.

The Company anticipates financing the acquisition with a combination of cash on hand, utilization of the Revolving Credit Facility and an additional term loan.

The transaction is subject to customary closing conditions and regulatory approvals, with the Company expecting to finalize the acquisition of Inspection Technologies by the end of the first half of 2025.

RESULTS OF OPERATIONS

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The discussion comparing our results for the year ended December 31, 2023 to the year ended December 31, 2022 is included within Management's Discussion and Analysis of Financial Condition and Results of Operation in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 14, 2024.

Net sales for the year ended December 31, 2023 increased by $1.32 billion, or 15.7%, to $9.68 billion compared to the same period in 2022.

Organic sales increased $1.20 billion which was attributable to both the Freight and Transit Segments.

Freight Segment organic sales increased by $864 million primarily driven by Services sales from higher parts sales and higher deliveries of locomotive modernizations and overhauls, Equipment sales from higher North American and international locomotive sales and increased mining sales, and Components sales due to a higher railcar build and growth in industrial end-markets.

Sales from acquisitions contributed $109 million in the Freight Segment.

Transit Segment organic sales increased by

$340 million primarily as a result of increased demand for Aftermarket and Original Equipment Manufacturing products driven by increased infrastructure investment.

Net sales for the year ended December 31, 2024 increased by $710 million, or 7.3%, to $10.39 billion compared to the same period in 2023.

Organic sales increased $662 million which was attributable to both the 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 engine overhauls and higher parts sales.

Transit sales increased primarily as a result of higher demand for Aftermarket and Original Equipment Manufacturing products and services driven by increased investments in sustainable infrastructure, fleet expansion and renewals and increased

passenger ridership levels.

Sales from acquisitions contributed $81 million, primarily in the Freight Segment, and unfavorable changes in foreign exchange decreased Net sales by $33 million.

Cost of sales

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

Cost of sales as a percentage of sales was 69.6% for the years ended December 31, 2023 and 2022.

Cost of sales for the years ended December 31, 2023 and 2022 included $38 million and $43 million, respectively, of restructuring costs primarily for footprint rationalization and headcount actions, primarily related to Integration 2.0.

Cost of sales as a percentage of Net sales was 67.6% and 69.6% for the years ended December 31, 2024 and 2023, respectively.

The improvement in gross margin is attributable to contract escalation clauses, favorable mix between the Freight and Transit segments, improved productivity, Integration 2.0 savings, and favorable fixed cost absorption.

Cost of sales for the years ended December 31, 2024 and 2023 included $37 million and $38 million, respectively, of restructuring costs, primarily for headcount actions and footprint rationalization related to Integration 2.0 and Portfolio Optimization.

Operating expenses

Total operating expenses increased $149 million, or 9.7%, for the year ended December 31, 2023 compared to the same period in 2022.

Operating expenses as a percentage of sales was 17.3% and 18.3% for the years ended December 31, 2023 and 2022, respectively.

Total operating expenses increased $79 million, or 4.7%, for the year ended December 31, 2024 compared to the same period in 2023, primarily due to the increase in Net sales.

Operating expenses as a percentage of Net sales was 16.9% and 17.3% for the years ended December 31, 2024 and 2023, respectively.

Selling, general and administrative expenses ("SG&A") increased $109 million for the year ended December 31, 2024 compared to the same period in 2023.

The increase is primarily from costs incurred to support the higher sales volume, higher employee compensation and benefit costs, and higher professional services spend.

Restructuring costs included in SG&A were $18 million and $9 million for the years ended December 31, 2023 and 2022, respectively, primarily for headcount actions and footprint rationalization programs, primarily related to Integration 2.0.

Engineering expense increased $9 million primarily due to investments in new technology and Amortization expense increased $30 million, due to Portfolio Optimization costs and increased expense from acquisitions.

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

Restructuring costs included in SG&A were $18 million for the years ended December 31, 2024 and 2023, primarily for headcount actions and footprint rationalization programs related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Engineering expenses decreased $12 million primarily due to the timing of investments in new technology, and Amortization expense decreased $18 million, primarily related to changes in accelerated amortization for business dispositions associated with Portfolio Optimization and lower amortization for the GE Transportation trade name.

Interest expense, net

Interest expense, net, increased $32 million to $218 million for the year ended December 31, 2023 over the same period in 2022 primarily attributable to higher effective interest rates and higher average overall debt balances in the current year.

Interest expense, net, decreased $17 million to $201 million for the year ended December 31, 2024 over the same period in 2023 primarily due to lower weighted average debt balances throughout the current year, partially offset by higher effective interest rates.

Other income, net

Other income, net, increased $15 million to $44 million for the year ended December 31, 2023 compared to the same period in 2022.

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.

The gain was partially offset by lower foreign exchange gains and lower equity income in the current year compared to the prior year.

Other income, net, decreased $42 million to $2 million for the year ended December 31, 2024 compared to the same period in 2023, primarily due to lower equity income during 2024 and a gain on equity interest in the prior year.

As a result of the change in ownership interest and obtaining control of LKZ in late 2023, Wabtec's previously held equity interest balance in LKZ was remeasured to fair value, resulting in a gain of approximately $35 million recorded to Other income, net in the prior year.

The effective income tax rate was 24.3% and 24.5% for the years ended December 31, 2024 and 2023, respectively.

The decrease in the effective tax rate in 2023 is primarily the result of earnings mix.

The year over year decrease was primarily due to changes in valuation allowances and audit closures, partially offset by a change in the jurisdictional mix of earnings and the non-recurrence of the non-taxable gain generated on the acquisition of LKZ in 2023.

See Note 11 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report for additional information.

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Total Net sales 7,468 6,923 545 7.9 %

6,962 6,012 950 15.8 %

Cost of sales:

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Foreign Exchange (32)

Changes in Sales by Product Line:

Changes in Net sales by Product Line:

Equipment 328

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2024 Net sales $ 7,468

Freight Segment organic sales increased by $864 million driven primarily by:

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

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

• Components sales from higher original equipment railcar build and increased market share for certain products due to product availability and increased demand for industrial products

Additionally, Freight Segment sales also benefited from our strategic acquisitions, primarily from L&M Radiator Inc., by $109 million.

Freight Segment organic sales increased by $499 million driven primarily by Equipment sales from higher North American and international locomotive sales and increased mining sales, and Services sales from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales.

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

acquired in the second quarter of 2023, by $78 million.

Cost of sales

Freight Segment Cost of sales increased $656 million and Cost of sales as a percentage of sales remained consistent at 68.5%.

The increase in Cost of sales was primarily driven by:

• Higher sales volume

• Manufacturing inefficiencies primarily related to the strike at our Erie facility

• Higher next generation product development costs in Digital Intelligence and Equipment

Partially offset by:

• Favorable mix within the Freight Segment product lines

• Benefits from structured cost actions

Cost of sales for the years ended December 31, 2023 and 2022 included $13 million and $15 million, respectively, of restructuring costs, primarily related to Integration 2.0 and Portfolio Optimization costs.

Freight Segment Cost of sales increased $203 million from higher sales volume, and Cost of sales as a percentage of Net sales decreased 2.3 percentage points.

The improvement in gross margin is attributable to contract escalation clauses, favorable mix within the Freight Segment product lines, improved productivity and Integration 2.0 savings.

Cost of sales for the year ended December 31, 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 years ended December 31, 2024 and 2023 included $18 million and $13 million, respectively, of restructuring costs, primarily related to Integration 2.0 and Portfolio Optimization.

Operating expenses

Operating expenses as a percentage of sales for the Freight Segment were 16.1% and 17.2% for the years ended December 31, 2023 and 2022, respectively.

Freight Segment operating expenses increased by $87 million primarily driven by:

• Higher SG&A expenses of $56 million resulting from higher costs to support increased sales volume, higher employee compensation and benefit costs and incremental expense from acquisitions

• Higher amortization expense of $28 million, due to Portfolio Optimization costs and increased expense from acquisitions

Freight Operating expenses for the year ended December 31, 2023 includes $28 million of restructuring costs related to Integration 2.0 and Portfolio Optimization.

Freight Segment Operating expenses as a percentage of Net sales were 14.7% and 16.1% for the years ended December 31, 2024 and 2023, respectively.

Freight Segment Operating expenses decreased by $15 million primarily driven by lower amortization expense of $26 million due to changes in accelerated amortization for business dispositions associated with Portfolio Optimization and lower amortization for the GE Transportation trade name, and lower Engineering expenses of $16 million due to the timing of investments in new technology.

This was partially offset by higher SG&A expenses of

$27 million resulting from higher costs to support increased sales volume, higher employee compensation and benefit costs and incremental expense from acquisitions.

Freight SG&A expenses for the years ended December 31, 2024 and 2023 included $3 million and $5 million, respectively, of restructuring costs related to Integration 2.0 in 2023 and Portfolio Optimization in 2024.

Transit Segment

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2023 Net sales $ 2,754

Acquisitions 3

Foreign Exchange (1)

Changes in Sales by Product Line:

Changes in Net sales by Product Line:

Original Equipment Manufacturing 42

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2024 Net sales $ 2,919

Transit segment organic sales increased $340 million driven by strong Aftermarket and Original Equipment Manufacturing sales primarily as a result of increased demand for heating, ventilation and air conditioning (HVAC) and brake systems, increased infrastructure investment, and the easing of supply chain disruptions.

Additionally, Transit sales in 2022 were unfavorably impacted by the previously disclosed cyber incident.

Favorable changes in foreign exchange rates also increased sales by $25 million.

Transit Segment organic sales increased $163 million driven by strong Aftermarket and Original Equipment Manufacturing sales.

Increased passenger ridership levels resulted in increased demand for services and products.

Additionally, increased investments in railway infrastructure, fleet expansion and renewals and sustainable transport initiatives also contributed to organic growth.

Cost of sales

Transit Segment Cost of sales increased by $255 million and Cost of sales as a percentage of sales decreased by 0.4 percentage points primarily due to higher sales volume partially offset by benefits from structured cost actions taken through prior years' restructuring and integration projects, including Integration 2.0.

Cost of sales for the years ended December 31, 2023 and 2022 included $25 million and $28 million, respectively, of restructuring costs, primarily related to Integration 2.0 for headcount actions and footprint rationalization in Europe.

Transit Segment Cost of sales increased by $85 million primarily from higher sales volume, and Cost of sales as a percentage of Net sales decreased by 1.2 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 prior years' restructuring and integration projects, primarily Integration 2.0.

Transit Cost of sales for the years ended December 31, 2024 and 2023 included $19 million and $25 million of restructuring costs, respectively, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Operating expenses

Operating expenses as a percentage of sales for the Transit Segment were 17.1% and 17.6% for the years ended December 31, 2023 and 2022, respectively.

Transit Segment operating expenses increased by $52 million primarily driven by:

• Higher SG&A expenses of $44 million to support higher sales volume and higher employee compensation and benefit costs, partially offset by benefits from structured cost actions taken through prior years' restructuring and integration projects, including Integration 2.0

• An increase in engineering expense of $6 million due to investments in new technology

Transit Operating expenses for the years ended December 31, 2023 and 2022, includes $15 million and $9 million, respectively, of restructuring costs primarily related to Integration 2.0 for footprint rationalization and headcount actions in Europe.

Operating expenses as a percentage of Net sales for the Transit Segment were 17.3% and 17.0% for the years ended December 31, 2024 and 2023, respectively.

Transit Segment Operating expenses increased by $37 million primarily driven by higher SG&A expenses of $25 million to support higher sales volume and higher employee compensation and benefit costs, higher Engineering expenses of $4 million due to increased investments in new technology, and higher Amortization expense of $8 million primarily due to accelerated amortization for business dispositions associated with Portfolio Optimization.

This was partially offset by benefits from structured cost actions taken through prior years' restructuring and integration projects, primarily Integration 2.0.

Transit SG&A expenses for the years ended December 31, 2024 and 2023 included $13 million of restructuring costs primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Liquidity and Capital Resources

Liquidity is provided by operating cash flows and borrowings under the Company’s Senior Notes and unsecured credit facility with a consortium of commercial banks.

Liquidity is provided by operating cash flows, borrowings under the 2022 Credit Agreement and the 2024 Credit Agreement, each with a consortium of commercial banks, and proceeds from the Company's Senior Notes.

Additionally, the Company utilizes the revolving receivables program and supply chain financing program described below, as well as other short-term financing agreements with certain banks, for added flexibility as part of our liquidity management strategy.

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Financing activities $ (1,371) $ (633)

Operating activities In 2023, cash provided by operating activities was $1,201 million, primarily from $1,298 million attributable to Net income and other changes in the related statements of income amounts.

This was partially offset by $(97) million of net cash used from increases in receivables due to higher sales, increases in inventory and accounts payable to support higher sales and timing of payments for expenses and receipts from customer deposits.

In 2022, cash provided by operating activities was $1,038 million, primarily from $1,147 million attributable to Net income and other changes in the related statements of income amounts, partially offset by $(109) million of net cash used from changes in working capital accounts to support increased demand.

Operating activities In 2024, cash provided by operating activities was $1,834 million compared to $1,201 million in 2023.

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

• $242 million from increased Net income;

• $161 million from favorable changes in Accounts receivables driven by $121 million of higher collections on receivables and $40 million of lower remittance for the Revolving Receivables Program;

• $128 million from changes in Accounts payable due to timing of payments;

• $(59) million from changes in Inventory to support higher sales;

• $38 million from changes in employee related benefit payments;

• approximately $150 million from changes in income tax accounts, including a tax refund in the current year.

Investing activities In 2024 and 2023, cash used for investing activities was $(343) million and $(492) million, respectively.

During 2024, Wabtec made four strategic acquisitions for net cash of $(168) million.

During 2024, Wabtec also used $(207) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes, received $19 million of net proceeds from dispositions of businesses, and received $13 million of proceeds from disposals of property, plant, and equipment.

During 2023, Wabtec acquired L&M Radiator, Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers, for net cash of approximately $(229) million and the remaining ownership shares of LKZ for net cash of approximately $(81) million.

During 2023, Wabtec also used $(186) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes.

During 2022, Wabtec made three strategic acquisitions for a combined purchase price of $(89) million and used $(149) million for additions to property, plant and equipment.

Financing activities In 2023, cash used for financing activities was $(633) million, which included $42 million from net changes in debt, $(409) million of stock repurchases, $(123) million of dividend payments, $(112) million of contingent consideration payments related to the GE Transportation acquisition, $(17) million of distributions to noncontrolling interest, and $(16) million of payments for income tax withholding on share-based compensation.

In 2022, cash used for financing activities was $(708) million which included $(30) million from net changes in debt, $(473) million of stock repurchases, $(111) million of dividend payments, and $(101) million of contingent consideration payments related to the GE Transportation acquisition.

During 2023, Wabtec also used $(186) million for additions to property, plant and equipment.

Financing activities In 2024, cash used for financing activities was $(1,371) million, which included $(64) million from net changes in debt, $(1,097) million of stock repurchases, $(140) million of dividend payments, $(42) million of contingent consideration payments related to the GE Transportation acquisition, $(25) million of payments for income tax withholding on share-based compensation, and $(6) million of distributions to noncontrolling interest.

In 2023, cash used for financing activities was $(633) million which included $42 million from net changes in debt, $(409) million of stock repurchases, $(123) million of dividend payments, $(112) million of contingent consideration payments related to the GE Transportation acquisition, $(17) million of distributions to noncontrolling interest, and $(16) million of payments for income tax withholding on share-based compensation .

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 (the "2034 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.

During the third quarter of 2023, the Company borrowed the full $250 million of availability under the Delayed Draw Term Loan and subsequently utilized the proceeds to redeem the outstanding 2023 Notes.

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.

Additionally, during 2023, the Company has also entered into $250 million of interest rate contracts to manage its net exposure to interest rate changes and its overall cost of borrowing.

These contracts may be utilized for future debt financing.

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.

The Company borrows and repays against the Revolving Credit Facility for added flexibility in liquidity to manage cash during the operating cycle.

The proceeds from borrowing and the repayments are shown within the "Proceeds from debt, net of issuance costs" and "Payments of debt" lines, respectively, presented in the Consolidated Statements of Cash Flows.

Additional information with respect to credit facilities and long-term debt is included in Note 9 of "Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report.

As of December 31, 2023, the Company held approximately $620 million of cash, cash equivalents, and restricted cash, of which approximately $190 million was held within the United States and approximately $430 million was held outside of the United States, primarily in India, Europe, Brazil, and Kazakhstan.

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

information with respect to credit facilities and long-term debt is included in Note 9 of "Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report.

As of December 31, 2024, the Company held approximately $715 million of cash, cash equivalents, and restricted cash, of which approximately $417 million was held within the United States and approximately $298 million was held outside of the United States, primarily in India, Europe, China and Brazil.

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 December 31, 2024, approximately $9 million of the Company's $715 million cash balance was classified as restricted cash.

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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.

Net cash (remitted)/received from the revolving receivables program was $(60) million and $60 million for the years ended December 31, 2023 and 2022, respectively.

Net cash remitted from the revolving receivables program was $(20) million and $(60) million for the years ended December 31, 2024 and 2023, respectively.

During the fourth quarter of 2024, the revolving receivables program agreement was amended to allow us to request loans from the financial institution secured by the receivables held in the program, up to the $350 million limit.

As a result, effective January 1, 2025 proceeds and repayments of loans under the program will be classified as Financing activities on our statement of cash flows and outstanding balances will be classified as debt on our balance sheet.

Additional information with respect to the Revolving Receivables Program is included in Note 2 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report.

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Additional information with respect to the Supply Chain Financing Program is included in Note 2 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report.

Intra-Quarter Uncommitted Money Market Line Credit Agreement

During the third quarter of 2024, the Company entered into an uncommitted bilateral money market line credit agreement which provides an aggregate borrowing capacity of $150 million, for general business purposes and working capital needs within a quarter.

Guarantor Summarized Financial Information

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171 171 — — —

Contingent consideration (6)

Total $ 5,528 $ 1,027 $ 1,932 $ 1,720 $ 849

(1) Purchase obligations represent non-cancelable contractual obligations at December 31, 2024.

In addition, the Company had approximately $1.3 billion of open purchase orders for which the related goods or services had not been received.

Although open purchase orders are considered enforceable and legally binding, their terms generally allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.

(2) Operating leases represent multi-year obligations for rental of facilities and equipment.

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The benefit payments are based on actuarial estimates using current assumptions for discount rates, expected return on long-term assets and rate of compensation increases.

The Company expects to contribute $2 million to pension plan investments in 2024.

(4) Interest payments on the Senior Notes and the amount borrowed under the Delayed Draw Term Loan as of December 31, 2023 are based on interest rates in effect as of December 31, 2023 and are calculated on debt with maturities that extend to 2028.

The Company does not expect material contributions to pension plan investments in 2025.

(4) Interest payments on the Senior Notes and the amounts borrowed under the 2024 and 2022 Credit Agreements as of December 31, 2024 are based on interest rates in effect as of December 31, 2024 and are calculated on debt with maturities that extend to 2034.

(5) Shareholder dividends are subject to approval by the Company’s Board of Directors, currently at an annual rate of approximately $171 million beginning in 2025.

(6) Contingent consideration represents the total remaining payable to General Electric (GE) resulting from the 2019 acquisition of GE Transportation.

The timing of the cash payments to GE is directly related to the future timing of tax benefits received by the Company and could change.

The above table does not reflect uncertain tax positions of $19 million, the timing of which are uncertain.

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• original equipment manufacturers’ program delays;

• demand for services in the freight and passenger rail industry;

• demand for our products and services;

• decreased demand for services in the freight and passenger rail industry;

• decreased demand for our products and services;

• orders either being delayed, canceled, not returning to historical levels, or being reduced, and/or economic conditions affecting the ability of our customers to pay timely for goods and services delivered;

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• increases in raw material costs;

• successful introduction of new products;

• challenges associated with the successful introduction of new products;

• product safety, quality and reliability;

• performance under material long-term contracts;

• labor availability and relations;

• labor availability constraints and labor relations challenges;

• the outcome of our existing or any future legal proceedings, including litigation involving our principal customers and any litigation with respect to environmental matters, asbestos-related matters, pension liabilities, warranties, product liabilities, competition and anti-trust matters or intellectual property claims;

• completion and integration of acquisitions;

• the development and use of new technology;

• our ability to successfully complete and integrate acquisitions;

• risks associated with the development and use of new technology;

• cybersecurity and data protection risks;

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• the actions of competitors;

• the outcome of negotiations with partners, suppliers, customers or others;

• adverse outcomes of negotiations with partners, suppliers, customers or others;

Political/governmental factors

• political stability in relevant areas of the world, including the impacts of war, conflicts, global military action, and acts of terrorism;

• political instability in relevant areas of the world, including the impacts of war, conflicts, global military action, and acts of terrorism;

• future regulation/deregulation of our customers and/or the rail industry;

• levels of governmental funding on transit projects, including for some of our customers;

• decreases in levels of governmental funding on transit projects, including for some of our customers;

• political developments and laws and regulations, including those related to Positive Train Control;

• federal and state income tax legislation;

• consequences of federal and state income tax legislation;

• sanctions imposed on countries and persons;

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The preparation of the financial statements in accordance with generally accepted accounting principles requires management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses.

Areas of uncertainty that require judgments, estimates and assumptions include the accounting for allowance for doubtful accounts, inventories, business combinations, goodwill and indefinite-lived intangible assets, warranty reserves, income taxes, and revenue recognition.

Critical areas of uncertainty that require judgments, estimates and assumptions include the accounting for allowance for doubtful accounts, inventories, business combinations, goodwill and indefinite-lived intangible assets, warranty reserves, income taxes, and revenue recognition.

Management uses historical experience and all available information to make these judgments and estimates, and actual results may differ from those estimates and assumptions that are used to prepare the Company’s financial statements at any given time.

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Inventory costs include material, labor and overhead.

The Company compares inventory components to prior year sales history, current backlog and anticipated future requirements.

The Company compares inventory components to prior year sales history, current backlog and

anticipated future requirements.

To the extent that inventory parts exceed estimated usage and demand, a reserve is recognized to reduce the carrying value of inventory.

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Business Combinations:

Description The Company accounts for business acquisitions in accordance with ASC 805, Business Combinations, which requires the purchase price of the acquired business to be allocated to tangible and intangible assets acquired and liabilities assumed based on the respective fair values.

Description The Company accounts for business acquisitions in accordance with Accounting Standard Codification ("ASC") 805, Business Combinations, which requires the purchase price of the acquired business to be allocated to tangible and intangible assets acquired and liabilities assumed based on the respective fair values.

The amount of purchase price which is in excess of the fair values of assets acquired and liabilities assumed is recognized as goodwill.

Judgments and Uncertainties Discounted cash flow models are used to estimate the fair values of acquired contract backlog, customer relationships, intellectual property intangibles and trade names.

Judgments and Uncertainties Discounted cash flow models are used to estimate the fair values of acquired intangible assets such as contract backlog, customer relationships, intellectual property, and trade names.

The significant assumptions used to estimate the value of the intangible assets include revenue growth rates, projected profit margins, discount rates, royalty rates, customer attrition rates, revenue obsolescence rates and market participant profit margins.

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Judgments and Uncertainties The estimate of our tax obligations are uncertain because management must use judgment to estimate the exposures associated with our various filing positions, as well as realization of our deferred tax assets.

ASC 740-10 establishes a recognition and measurement threshold to determine the amount of tax benefit that should be recognized related to uncertain tax positions.

establishes a recognition and measurement threshold to determine the amount of tax benefit that should be recognized related to uncertain tax positions.

Effect if Actual Results Differ From Assumptions Management uses its best judgment in the determination of these amounts.

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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 7. Management’s Discussion and Analysis