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Item 2. Management’s Discussion and Analysis

2025-04-23 compared with 2024-10-23 · 119 added, 244 removed, 213 unchanged (63% 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 nine months of 2024, approximately 52% of the Company’s Net sales came from customers outside the United States.

In the first three months of 2025, approximately 51% of the Company’s Net sales came from customers outside the United States.

Business Update

During the first nine 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, a multi-year locomotive order in Kazakhstan for over $400 million, and a multi-year order for new locomotives in Africa.

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, 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 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.

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 $140 million has been incurred through September 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 and nine months ended September 30, 2024, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $10 million and $22 million, respectively, and $13 million and $30 million for the three and nine months ended September 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 $8 million and $13 million during the three and nine months ended September 30, 2024, respectively, for asset write downs related to Portfolio Optimization.

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

Total one-time restructuring charges related to Portfolio Optimization to date are approximately $41 million.

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.

During the first quarter of 2025, Wabtec announced definitive agreements to acquire Evident’s Inspection Technologies division (Inspection Technologies), formerly part of the Scientific Solutions Division of Olympus Corporation, for approximately $1.78 billion, and Dellner Couplers for approximately $960 million.

Inspection Technologies is a global leader in Non-Destructive Testing, Remote Visual Inspection and Analytical Instruments solutions for mission critical assets.

Inspection Technologies' industry presence and innovative product portfolio will significantly expand Wabtec's capabilities and complement the existing product portfolio of Digital Intelligence.

Dellner Couplers is a global leader in highly engineered safety-critical train connection systems and services for passenger rail rolling stock.

The acquisition brings highly attractive and complementary technologies to the Transit business and provides synergies by complementing our core transit systems portfolio.

Both acquisitions are subject to customary closing conditions and regulatory approvals.

Transaction costs incurred during the first quarter of 2025 related to these acquisitions were approximately $10 million.

Wabtec is focused on driving operational efficiency and improving profitability while reducing manufacturing complexity.

As a result, there are restructuring initiatives, including Integration 3.0, Portfolio Optimization and Integration 2.0, aimed at achieving these focus areas.

During the first three months of 2025, Wabtec incurred $9 million of restructuring costs related to programs under these initiatives, primarily for employee-related costs.

During the first quarter of 2025, Wabtec signed a $140 million new locomotive order with a North American Class I railroad, signed new locomotive, mining and service orders in the Asia-Pacific region totaling $127 million, signed two multi-year transit platform door contracts valued at $85 million, and secured a $47 million order to provide brakes and couplers for servicing a North American customer.

Wabtec also continued to drive recurring revenue in the global market by winning a new service contract in Kazakhstan worth $299 million.

Additionally, in March of 2025, Moody's upgraded the Senior Notes ratings to Baa2 from Baa3 and changed the outlook to stable from positive, and S&P Global Ratings reaffirmed Wabtec's credit rating at BBB with a Stable outlook.

Future macroeconomic volatility, changes to tariffs and trade policies, supply chain disruptions, and labor availability could cause an impact on revenue and cost increases resulting in an adverse effect on the Company’s operating results.

Additionally, broad-based inflation, metals, energy and other commodity costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations all continue to impact our results.

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.

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.

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 our strategic initiatives.

During the first quarter of 2025, Company Management determined that certain businesses within the Services product line would be better aligned with Management oversight in the Components product line.

As such, Sales by product line for 2024 and 2023 have been recast to conform to the current period presentation.

These changes were within the Freight Segment and had no impact on Total Freight Segment Sales, Gross profit, or Income from operations.

RESULTS OF OPERATIONS

Consolidated Results

THIRD QUARTER 2024 COMPARED TO THIRD QUARTER 2023

FIRST QUARTER 2025 COMPARED TO FIRST QUARTER 2024

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

Three Months Ended

September 30,

In millions 2025 2024

15 unchanged sentences

Interest expense, net (46) (47)

Other (expense) income, net (3) 10

Income before income taxes 378 320

Income tax expense (92) (78)

Net income 286 242

Net income attributable to noncontrolling interest (3) (2)

Net income attributable to Wabtec shareholders $ 283 $ 240

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

In millions Freight Segment Transit Segment Total

Third Quarter 2023 Net sales $ 1,881 $ 669 $ 2,550

Acquisitions 2 — 2

Foreign Exchange (11) 8 (3)

Organic 58 56 114

Third Quarter 2024 Net sales $ 1,930 $ 733 $ 2,663

Net sales for the three months ended September 30, 2024 increased by $113 million, or 4.4%, to $2.66 billion compared to the same period in 2023.

Organic sales increased $114 million which was attributable to both the Freight and Transit Segments.

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

Digital Intelligence sales increased due to higher international sales, including Positive Train Control ("PTC"), on-board locomotive solutions, and digital mining products.

Freight Equipment sales decreased from lower locomotive deliveries, partially offset by increased mining sales.

Transit sales increased from higher demand for Original Equipment Manufacturing and Aftermarket products driven by increased investments in sustainable infrastructure.

Cost of sales

Cost of sales for the three months ended September 30, 2024 increased by $25 million, or 1.4%, to $1.78 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 67.0% and 69.0% for the three months ended September 30, 2024 and 2023, respectively.

The improvement in gross margin is attributable to favorable mix within the Freight segment, strong productivity and the impacts of Integration 2.0.

Costs of sales for the three months ended September 30, 2024 and 2023 included $7 million and $13 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 $25 million, or 5.9%, for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to the increase in Net sales and higher restructuring costs.

Operating expenses as a percentage of sales was 16.8% and 16.5% for the three months ended September 30, 2024 and 2023, respectively.

Selling, general and administrative expenses ("SG&A") increased $23 million for the three months ended September 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 $5 million for the three months ended September 30, 2024, primarily for headcount actions and footprint rationalization programs related to Integration 2.0 and Portfolio Optimization.

There were no restructuring amounts recorded in SG&A for the three months ended September 30, 2023.

Interest expense, net

Interest expense, net, decreased $8 million to $52 million for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to lower average debt balances in the current period.

Other (expense) income, net

Other (expense) income, net, decreased $13 million from $10 million to $(3) million for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to higher foreign exchange losses and lower equity income.

The effective income tax rate was 24.2% and 24.5% for the three months ended September 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 September 30, 2024 and audit closures.

Freight Segment

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

Three Months Ended

September 30,

In millions 2024 2023 Change % Change

Sales of goods $ 1,440 $ 1,382 $ 58 4.2 %

Sales of services 490 499 (9) (1.8) %

Total Net sales 1,930 1,881 49 2.6 %

Cost of sales:

Cost of goods (987) (991) (4) (0.4) %

Cost of services (270) (281) (11) (3.9) %

Total Cost of sales (1,257) (1,272) (15) (1.2) %

Cost of sales (% of Net sales) 65.0 % 67.6 % (2.6)

Gross profit 673 609 64 10.5 %

Operating expenses (283) (284) (1) (0.4) %

Income from operations $ 390 $ 325 $ 65 20.0 %

Income from operations (% of Net sales) 20.2 % 17.3 % 2.9

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

Third Quarter 2023 Net sales $ 1,881

Acquisitions 2

Foreign Exchange (11)

Organic changes in Net sales by Product Line:

Equipment (100)

Digital Intelligence 22

Third Quarter 2024 Net sales $ 1,930

Freight Segment organic sales increased by $58 million driven primarily by Services sales from higher deliveries of locomotive modernizations and engine overhauls and Digital Intelligence due to higher international sales, including PTC, on-board locomotive solutions, and digital mining products.

Equipment sales decreased from lower locomotive deliveries, partially offset by increased mining sales.

Cost of sales

Freight Segment Cost of sales decreased $15 million, and Cost of sales as a percentage of Net sales decreased 2.6 percentage points.

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

Cost of sales for the three months ended September 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 September 30, 2024 and 2023 included $2 million of restructuring costs, respectively, primarily related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Operating expenses

Freight Segment operating expenses decreased by $1 million primarily driven by lower professional services spend and a reduction in research and development costs, partially offset 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.

Freight Segment operating expenses for the three months ended September 30, 2023 were also impacted by labor negotiations at our Erie facility.

Freight SG&A expenses for the three months ended September 30, 2024 included $2 million of restructuring costs, primarily related to Portfolio Optimization.

The amounts recorded in the three months ended September 30, 2023 were not significant.

Transit Segment

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

Three Months Ended

September 30,

In millions 2024 2023 Change % Change

Net sales $ 733 $ 669 $ 64 9.6 %

Cost of sales (526) (486) 40 8.2 %

Cost of sales (% of Net sales) 71.8 % 72.8 % (1.0)

Gross profit 207 183 24 13.1 %

Operating expenses (128) (113) 15 13.3 %

Income from operations $ 79 $ 70 $ 9 12.9 %

Income from operations (% of Net sales) 10.8 % 10.3 % 0.5

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

Third Quarter 2023 Net sales $ 669

Foreign Exchange 8

Organic changes in Net sales by Product Line:

Aftermarket 16

Original Equipment Manufacturing 40

Third Quarter 2024 Net sales $ 733

Transit Segment organic sales increased by $56 million driven by strong Original Equipment Manufacturing and Aftermarket sales primarily as a result of increased demand for products and services and increased investments in sustainable infrastructure.

Changes in foreign exchange rates also increased sales by $8 million.

Cost of sales

Transit Segment Cost of sales increased by $40 million, primarily due to higher sales volume.

Costs of sales as a percentage of sales decreased by 1.0 percentage points.

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

Transit Cost of sales for the three months ended September 30, 2024 and 2023 included $5 million and $11 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 $15 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 the three months ended September 30, 2024 included $3 million of restructuring costs, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

The amounts recorded in the three months ended September 30, 2023 were not significant.

FIRST NINE MONTHS OF 2024 COMPARED TO FIRST NINE MONTHS OF 2023

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

Nine Months Ended

September 30,

In millions 2024 2023

Sales of goods $ 6,323 $ 5,631

Sales of services 1,481 1,520

Total Net sales 7,804 7,151

Cost of sales:

Cost of goods (4,413) (4,132)

Cost of services (822) (839)

Total Cost of sales (5,235) (4,971)

Gross profit 2,569 2,180

Operating expenses:

Selling, general and administrative expenses (915) (843)

Engineering expenses (155) (157)

Amortization expense (224) (222)

Total Operating expenses (1,294) (1,222)

Income from operations 1,275 958

Other income and expenses:

Interest expense, net (148) (163)

Other (expense) income, net (1) 17

Other expense, net (2) (2)

Income before income taxes 426 363

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Net income attributable to Wabtec shareholders $ 322 $ 272

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

The following table shows the major components of the change in Net sales in the three months ended March 31, 2025 from the three months ended March 31, 2024:

In millions Freight Segment Transit Segment Total

First Nine Months of 2023 Net sales $ 5,134 $ 2,017 $ 7,151

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

Acquisitions 15 8 23

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Organic 88 45 133

First Nine Months of 2024 Net sales $ 5,674 $ 2,130 $ 7,804

Net sales for the nine months ended September 30, 2024 increased by $653 million, or 9.1%, to $7.80 billion compared to the same period in 2023.

First Quarter 2025 Net sales $ 1,901 $ 709 $ 2,610

Net sales for the three months ended March 31, 2025 increased by $113 million, or 4.5%, to $2.61 billion compared to the same period in 2024.

Organic sales increased $133 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 from higher demand for Original Equipment Manufacturing and Aftermarket products driven by increased investments in sustainable infrastructure.

Sales from acquisitions contributed $72 million in the Freight Segment and unfavorable changes in foreign exchange rates decreased sales by $16 million.

Freight Equipment sales decreased primarily due to lower locomotive deliveries.

Transit sales increased from higher demand for Original Equipment Manufacturing and Aftermarket products driven by increased investments in sustainable infrastructure, fleet expansion and renewals and increased passenger ridership levels.

Sales from acquisitions contributed $23 million, and unfavorable changes in foreign exchange decreased Net sales by $43 million.

Cost of sales

Cost of sales for the nine months ended September 30, 2024 increased by $264 million, or 5.3%, to $5.24 billion compared to the same period in 2023.

Cost of sales for the three months ended March 31, 2025 increased by $28 million, or 1.7%, to $1.71 billion compared to the same period in 2024.

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

Cost of sales as a percentage of Net sales was 67.1% and 69.5% for the nine months ended September 30, 2024 and 2023, respectively.

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

Cost of sales for the nine months ended September 30, 2024 and 2023 included $19 million and $25 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 65.5% and 67.3% for the three months ended March 31, 2025 and 2024, respectively.

The improvement in gross margin is attributable to favorable mix within the Freight Segment, strong productivity, Integration 2.0 savings, and proactive cost management.

Costs of sales for the three months ended March 31, 2025 and 2024 included $3 million and $6 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Total operating expenses increased $72 million, or 5.9%, for the nine months ended September 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 16.6% and 17.1% for the nine months ended September 30, 2024 and 2023, respectively.

SG&A expenses increased $72 million for the nine months ended September 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 $11 million and $7 million for the nine months ended September 30, 2024 and 2023, respectively, primarily for headcount actions and footprint rationalization programs related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Total operating expenses increased $23 million, or 5.7%, for the three months ended March 31, 2025 compared to the same period in 2024, primarily due to the increase in Net sales, higher employee compensation and benefit costs and transaction costs associated with announced acquisitions.

Operating expenses as a percentage of sales were 16.3% and 16.2% for the three months ended March 31, 2025 and 2024, respectively.

Selling, general and administrative expenses ("SG&A") increased $26 million for the three months ended March 31, 2025 compared to the same period in 2024.

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

Transaction costs associated with announced acquisitions included in SG&A were $10 million for three months ended March 31, 2025.

SG&A for the three months ended March 31, 2025 and 2024 included $5 million and $3 million, respectively, of costs related to restructuring initiatives.

Interest expense, net

Interest expense, net, decreased $15 million to $148 million for the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to lower average debt balances in the current period, partially offset by higher effective interest rates.

Other (expense) income, net

Other (expense) income, net, decreased $18 million from $17 million to $(1) million for the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to lower equity income.

The effective income tax rate was 24.1% and 25.1% for the nine months ended September 30, 2024 and 2023, respectively.

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

Interest expense, net, decreased $1 million to $46 million for the three months ended March 31, 2025 compared to the same period in 2024, primarily due to changes in the mix of outstanding debt.

Other expense, net

Other expense, net was $2 million for the three months ended March 31, 2025 and 2024, primarily due to foreign exchange losses, partially offset by equity income.

The effective income tax rate was 23.2% and 23.6% for the three months ended March 31, 2025 and 2024, respectively.

The year over year decrease in the effective rate was driven by higher discrete equity compensation tax deductions and 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:

Nine Months Ended

September 30,

Three Months Ended

In millions 2025 2024 Change % Change

11 unchanged sentences

Income from operations (% of Net sales) 22.1 % 20.2 % 1.9

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

First Nine Months of 2023 Net sales $ 5,134

The following table shows the major components of the change in Net sales for the Freight Segment in the first quarter of 2025 from the first quarter of 2024:

First Quarter 2024 Net sales $ 1,824

Acquisitions 15

4 unchanged sentences

Digital Intelligence 7

First Nine Months of 2024 Net sales $ 5,674

Freight Segment organic sales increased by $486 million driven primarily by Services sales from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales, and Equipment sales from higher North American and international locomotive sales and increased mining sales.

Additionally, Freight Segment sales also benefited from acquisitions by $72 million, primarily from our strategic acquisition of L&M Radiator, Inc.

First Quarter 2025 Net sales $ 1,901

Freight Segment organic sales increased by $88 million driven primarily by Services sales from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales.

Equipment sales decreased primarily due to lower locomotive deliveries.

Components sales decreased primarily from lower North America rail car build.

Sales from acquisitions contributed $15 million, and unfavorable changes in foreign exchange decreased sales by $26 million.

Cost of sales

Freight Segment Cost of sales increased $17 million from higher sales volume, and Cost of sales as a percentage of Net sales decreased 1.7 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 nine months ended September 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 nine months ended September 30, 2024 and 2023 included $10 million and $8 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, improved productivity and proactive cost management.

Cost of sales for the three months ended March 31, 2025 and 2024 included $2 million and $3 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Freight Segment operating expenses increased by $13 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.

Freight SG&A expenses for the nine months ended September 30, 2024 included $2 million of restructuring costs, primarily related to Portfolio Optimization.

The amounts recorded in the nine months ended September 30, 2024 were not significant.

Freight Segment Operating expenses as a percentage of Net sales were 14.0% for the three months ended March 31, 2025 and 2024.

Freight Segment Operating expenses increased by $8 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, partially offset by a reduction in research and development costs and lower amortization expense for intangibles associated with the GE Transportation acquisition.

Transit Segment

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

Nine Months Ended

September 30,

Three Months Ended

In millions 2025 2024 Change % Change

6 unchanged sentences

Income from operations (% of Net sales) 12.7 % 11.0 % 1.7

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

First Nine Months of 2023 Net sales $ 2,017

The following table shows the major components of the change in Net sales for the Transit Segment in the first quarter of 2025 from the first quarter of 2024:

First Quarter 2024 Net sales $ 673

Acquisitions 8

Foreign Exchange (17)

2 unchanged sentences

Original Equipment Manufacturing 16

First Nine Months of 2024 Net sales $ 2,130

First Quarter 2025 Net sales $ 709

Transit Segment organic sales increased by $45 million driven by strong Original Equipment Manufacturing and Aftermarket sales primarily as a result of increased demand for products and services and increased investments in sustainable infrastructure.

Sales from acquisitions contributed $8 million, and unfavorable changes in foreign exchange rates decreased sales by $17 million.

Cost of sales

Transit Segment Cost of sales increased by $66 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 nine months ended September 30, 2024 and 2023 included $9 million and $17 million of restructuring costs, respectively, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Transit Segment Cost of sales increased by $11 million, primarily due to higher sales volume, and Cost of sales as a percentage of sales decreased by 2.1 percentage points.

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

Transit Segment Cost of sales for the three months ended March 31, 2025 and 2024 included $1 million and $3 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Transit Segment Operating expenses as a percentage of Net sales were 17.6% and 17.2% for the three months ended March 31, 2025 and 2024, respectively.

Transit Segment Operating expenses increased by $9 million as compared to the prior year.

Transit SG&A expenses for the nine months ended September 30, 2024 and 2023 included $9 million and $6 million of restructuring costs, respectively, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Transit SG&A expenses for the three months ended March 31, 2025 and 2024 included $4 million and $3 million, respectively, of costs related to restructuring initiatives.

Liquidity and Capital Resources

Liquidity is provided by operating cash flows and 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.

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.

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

Nine Months Ended

September 30,

Three Months Ended

In millions 2025 2024

3 unchanged sentences

Financing activities $ (172) $ (289)

Operating activities In the first nine months of 2024, cash provided by operating activities was $1,111 million compared to $515 million in the first nine months of 2023.

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

Operating activities In the first three months of 2025, cash provided by operating activities was $191 million compared to $334 million in the first three months of 2024.

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

• $50 million from increased Net income;

• $137 million from changes in Accounts payable due to timing of payments;

• $122 million from favorable changes in Accounts receivables driven by $202 million of higher collections on receivables, partially offset by $(80) million of higher remittance for the Revolving Receivables Program;

• $86 million from changes in Inventory primarily from the inventory build during the first nine months of 2023 due to a strike at the manufacturing facility in Erie, Pennsylvania, as well as supply chain disruptions.

Investing activities In the first nine months of 2024 and 2023, cash used for investing activities was $(106) million and $(336) million, respectively.

During the first nine months of 2024, Wabtec used $(123) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes, received $17 million of proceeds from dispositions of businesses, received $13 million of proceeds from disposals of property, plant and equipment, and used $(13) million for acquisitions.

During the first nine 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 $(229) million and used $(109) million for additions to property, plant, and equipment.

Financing activities In the first nine months of 2024, cash used for financing activities was $(1,209) million which included $(62) million from net changes in debt, $(974) million in stock repurchases, $(106) million of dividend payments, $(42) million of contingent consideration payments related to the GE Transportation acquisition, $(24) million of payments for income tax withholding on share-based compensation, and $(6) million for distributions to noncontrolling interest.

In the first nine months of 2023, cash used for financing activities was $(323) million, which included $49 million from net changes in debt, $(252) million in stock repurchases, $(92) million of dividend payments, $(16) million of payments for income tax withholding on share-based compensation, and $(12) million for distributions to noncontrolling interest.

• $(347) million from changes in receivables driven by changes in the Revolving Receivables Program and the timing of collections from customers;

• $176 million from changes in the timing of customer deposits.

Investing activities In the first three months of 2025 and 2024, cash used for investing activities was $(44) million and $(19) million, respectively.

During the first three months of 2025, Wabtec used $(44) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes.

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

During the first quarter of 2025, Wabtec announced definitive agreements to acquire Inspection Technologies and Dellner Couplers, with purchase prices of approximately $1.78 billion and $960 million, respectively.

Wabtec intends to finance these acquisitions using cash on hand, together with a mix of short- and long-term borrowings.

Financing activities In the first three months of 2025, cash used for financing activities was $(172) million which included $4 million from net changes in debt, $(98) million in stock repurchases, $(43) million of dividend payments, and $(34) million of payments for income tax withholding on share-based compensation.

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.

On April 23, 2025, the Company amended and restated the 2022 and 2024 credit agreements, which increased the amount available under the Revolving Credit Facility to $2 billion, combined the term loans outstanding at March 31, 2025 into a single $475 million term loan and added a new delayed draw term loan for $250 million.

The new delayed draw term loan is available for borrowings for fifteen months.

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

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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 September 30, 2024, the Company held approximately $410 million of cash, cash equivalents and restricted cash, of which approximately $9 million was held within the United States and approximately $401 million was held outside of the United States, primarily in India, Brazil, Europe and China.

As of March 31, 2025, the Company held approximately $698 million of cash, cash equivalents and restricted cash, of which approximately $294 million was held within the United States and approximately $404 million was held outside of the United States, primarily in Europe, India, 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 September 30, 2024, approximately $9 million of the Company's $410 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 March 31, 2025, approximately $9 million of the Company's $698 million cash balance was held in escrow related to recent acquisitions and was classified as restricted.

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

Revolving Receivables Program

The Company utilizes a revolving receivables facility to sell up to $350 million of certain receivables through our bankruptcy-remote subsidiary to a financial institution on a recurring basis in exchange for cash equal to the gross receivables sold.

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 $75 million and $155 million for the nine months ended September 30, 2024 and 2023, respectively.

Effective January 1, 2025, the Company utilizes its Revolving Receivables Program to request borrowings from a financial institution against certain collateralized receivables for up to $350 million.

The Company collateralizes certain receivables through our bankruptcy-remote subsidiary on a recurring basis.

As customers pay their balances, we transfer additional receivables into the program.

Borrowings and repayments under the Revolving Receivables Program are included within Proceeds from debt and Payments of debt within the Financing activities section of the Condensed Consolidated Statement of Cash Flows.

Prior to January 1, 2025, the Company utilized its Revolving Receivables Program to sell certain receivables for up to $350 million on a recurring basis.

Net cash proceeds received from the sale of receivables in exchange for cash equal to the gross receivables sold are included in cash from operations within the Condensed Consolidated Statement of Cash Flows.

During the three months ended March 31, 2025, the Company borrowed and repaid $175 million against the collateralized receivables.

There were no receivables sold during the three months ended March 31, 2025.

Net cash proceeds from receivables sold included in cash from operations was $210 million for the three months ended March 31, 2024.

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.

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Parent Company and Guarantor Subsidiaries

In millions Nine Months Ended September 30, 2024

In millions Three Months Ended March 31, 2025

Net sales $ 1,532

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Parent Company and Guarantor Subsidiaries

In millions September 30, 2024 December 31, 2023

In millions March 31, 2025 December 31, 2024

Current assets $ 1,447 $ 1,604

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Parent Company and Guarantor Subsidiaries

In millions Nine Months Ended September 30, 2024

In millions Three Months Ended March 31, 2025

Net sales to non-guarantor subsidiaries $ 243

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Parent Company and Guarantor Subsidiaries

In millions September 30, 2024

In millions March 31, 2025

Amount due to non-guarantor subsidiaries $ 12,459

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Issuer and Guarantor

In millions Nine Months Ended September 30, 2024

In millions Three Months Ended March 31, 2025

Net sales $ 136

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Issuer and Guarantor

In millions September 30, 2024 December 31, 2023

In millions March 31, 2025 December 31, 2024

Current assets $ 548 $ 546

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Issuer and Guarantor

In millions Nine Months Ended September 30, 2024

In millions Three Months Ended March 31, 2025

Net sales to non-guarantor subsidiaries $ 9

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Issuer and Guarantor

In millions September 30, 2024

In millions March 31, 2025

Amount due to non-guarantor subsidiaries $ 8,403

Company Stock Repurchase Plan

On February 9, 2024, the Board of Directors reauthorized its stock repurchase program to refresh the amount available for stock repurchases to $1 billion of the Company’s outstanding shares.

This new stock repurchase authorization supersedes the previous authorization of $750 million, of which approximately $333 million remained at the reauthorization date.

No time limit was set for the completion of the program which conforms to the requirements under the 2022 Credit Agreement and the 2024 Credit Agreement and the indentures for the Senior Notes currently outstanding.

On December 3, 2024, the Board of Directors authorized an additional $1.0 billion to the Company's existing stock repurchase program for stock repurchases of the Company’s outstanding shares.

This new authorization provides an additional $1.0 billion that became available for repurchases after the remaining availability as of December 3, 2024 was expended.

No time limit was set for the completion of the program which conforms to the requirements under the 2022 Credit Agreement, the 2024 Credit Agreement and the indentures for the Senior Notes currently outstanding.

The Company may repurchase shares in the future at any time, depending upon market conditions, our capital needs and other factors.

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 September 30, 2024, approximately $123 million was remaining under the stock repurchase plan.

As of March 31, 2025, approximately $902 million was remaining under the stock repurchase plan.

Forward Looking Statements

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• changes in general economic and/or industry specific conditions, including the impacts of tax and tariff programs, inflation, supply chain disruptions, foreign currency exchange, and industry consolidation;

• the impacts of significant recent shifts in trade policies, including the imposition of tariffs, retaliatory tariff measures, and subsequent modifications or suspensions thereof, and market reactions to such policies and resulting trade disputes;

• prolonged unfavorable economic and industry conditions in the markets served by us, including North America, South America, Europe, Australia, Asia and Africa;

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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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There have been no significant changes in the related accounting policies since December 31, 2024.

Contractual Obligations

During the first quarter of 2024, the Company entered into the 2024 Credit Agreement for a term loan of $225 million which is scheduled to mature on March 14, 2029.

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 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.

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.

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