What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-13 compared with 2025-02-12 · 137 added, 131 removed, 350 unchanged (43% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

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

Our core products and services are essential in the safe and efficient operation of freight rail and passenger transit vehicles.

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

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 2025, approximately half of the Company’s Net sales came from customers outside the United States.

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, to increase margins through strict attention to cost controls, to drive improved efficiencies across the business, to drive strong cash flow conversion, and to 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 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 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.

During the fourth quarter of 2025, Wabtec signed $2.2 billion in new locomotive orders in North America, which included $1.3 billion for locomotive modernizations and $0.9 billion for new locomotives.

Also during the fourth quarter, Digital Intelligence secured $75 million of PTC and KinetiX orders in key international markets.

In the third quarter of 2025, Wabtec announced an agreement with National Company Kazakhstan Temir Zholy ("KTZ"), the national railway of Kazakhstan, to deliver Evolution Series locomotives and provide long-term service support.

The multi-national order, valued by the Company at approximately $4.2 billion, marks the largest locomotive agreement in Wabtec's history.

Wabtec also continued to drive recurring revenue in the global market by winning a new service contract in Kazakhstan worth $299 million earlier in 2025.

Additionally in the Freight Segment, the first Simandou locomotives reached Guinea, marking the first exports from the Company's India locomotive facility.

We also 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, and signed a $125 million ultra class mining order.

During 2025, the Transit Segment signed $140 million in new Transit brake orders, two multi-year transit platform door contracts valued at $85 million and a $47 million order to provide brakes and couplers for servicing a North American customer, among many other orders.

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.

In February 2025, Wabtec announced Integration 3.0, a three-year strategic initiative to target incremental run rate synergies currently estimated to be between $115 million to $140 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.

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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.

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

In addition to Integration 3.0, there are other ongoing restructuring initiatives, including Portfolio Optimization and Integration 2.0, focused on driving operational efficiency and improving

profitability while reducing manufacturing complexity.

For the years ended December 31, 2025 and 2024, Wabtec incurred $75 million and $65 million, respectively, of restructuring costs primarily for employee-related costs and asset write downs on programs under these initiatives.

Future macroeconomic volatility, changes to tariffs and trade policies, supply chain disruptions, and labor availability, amongst other things, could cause a negative 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.

The Company utilizes various mitigating actions intended to lessen the impact of macroeconomic volatility, including the impact of current tariffs.

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 restructuring programs.

A portion of our workers are represented by labor unions.

The United Electrical, Radio and Machine Workers of America (UE), Locals 506 and 618 collective bargaining agreement, covering approximately 1,400 locomotive manufacturing workers in Erie, Pennsylvania, expired on June 9, 2023.

Negotiations with UE officially began on April 27, 2023 and an agreement between the Company and the UE was not reached before the contract expired.

On June 22, 2023, the UE voted against ratification of the Company's proposed agreement and authorized a strike.

The Company and the UE subsequently reached an agreement that was ratified by the UE on August 31, 2023, ending the labor strike.

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

As previously announced, on June 26, 2022, we detected a cyber security incident which impacted the Company’s network.

The Company promptly activated incident response protocols, which included shutting down certain systems, and commenced an investigation of the incident.

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 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.

The Company has experienced increased tariff costs which unfavorably impacted our cash from operations for the year ended December 31, 2025.

Although we did not experience a material impact to our results of operations in 2025 because of mitigation efforts, due to the volatility of trade policies, we are unable to reasonably predict the future impact.

During the first quarter of 2025, 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.

On July 1, 2025, the Company acquired Inspection Technologies for approximately $1.788 billion.

Inspection Technologies was formerly part of the Scientific Solutions Division of Olympus Corporation, a global leader in nondestructive testing, remote visual inspection and analytical instruments solutions for mission critical assets.

On December 1, 2025, the Company acquired Frauscher, a global market leader in train detection, wayside object control solutions and axle counting systems, for approximately $792 million.

Also during 2025, the Freight Segment completed two additional acquisitions which were individually and collectively immaterial.

Also during the first quarter of 2025, Wabtec announced a definitive agreement to acquire Dellner Couplers, a global leader in highly engineered safety-critical train connection systems and services for passenger rail rolling stock, for approximately €890 million.

The acquisition subsequently closed on February 10, 2026.

Transaction costs incurred for the year ended December 31, 2025 related to completed and announced acquisitions were approximately $49 million.

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

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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.

During the fourth quarter of 2023, the Company purchased the remaining ownership shares of Locomotiv Kurastyru Zuayty ("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.

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

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, 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.

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.

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.

RESULTS OF OPERATIONS

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Acquisitions 328 27 355

Portfolio Optimization (Divestitures/Exits) (36) (36) (72)

Foreign Exchange (31) 64 33

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Organic sales increased $464 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.

Freight sales increased primarily due to higher North American locomotive deliveries and higher parts sales.

Transit sales increased from 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.

from acquisitions contributed $355 million, primarily from Inspection Technologies in the Freight Segment, and favorable changes in foreign exchange increased Net sales by $33 million.

Cost of sales

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Cost of sales as a percentage of Net sales was 65.9% and 67.6% for the years ended December 31, 2025 and 2024, 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.

The improvement in gross margin is attributable to strong productivity and cost management, savings from restructuring initiatives, and the exit of low margin business offerings through Portfolio Optimization.

Cost of sales for the year ended December 31, 2025 included $53 million of costs related to purchase price accounting for the step-up of Inspection Technologies and Frauscher inventories to fair value on the respective dates of acquisition.

Cost of sales for the years ended December 31, 2025 and 2024 included $12 million and $37 million, respectively, of costs related to restructuring initiatives.

Operating expenses

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.

Total Operating expenses increased $256 million, or 14.6%, for the year ended December 31, 2025 compared to the same period in 2024.

Selling, general and administrative expenses ("SG&A") increased $242 million for the year ended December 31, 2025 compared to the same period in 2024.

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.

The increase is primarily from costs incurred to support the higher sales volume, transaction costs associated with completed and announced acquisitions, incremental expense from acquisitions, and higher employee compensation and benefit costs, partially offset by the impacts of restructuring initiatives.

Transaction costs associated with completed and announced acquisitions included in SG&A were $49 million for the year ended December 31, 2025.

SG&A for the year ended December 31, 2025 included $60 million of costs related to restructuring initiatives, including a $38 million loss on disposition of a business associated with Portfolio Optimization.

SG&A for the year ended December 31, 2024 included $18 million of costs related to restructuring initiatives.

Engineering expenses increased $17 million primarily due to incremental expense from acquisitions and increased investments in new technology.

Interest expense, net

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.

Interest expense, net, increased $24 million to $225 million for the year ended December 31, 2025 over the same period in 2024, primarily due to higher average overall debt balances in the current period, primarily related to the Inspection Technologies acquisition.

Other income, net

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.

Other income, net, increased $22 million to $24 million for the year ended December 31, 2025 compared to the same period in 2024, primarily due to a $19 million net gain on mark-to-market derivatives in the current period associated with the acquisition of Frauscher and anticipated acquisition of Dellner Couplers and lower foreign exchange losses, partially offset by lower equity income.

The effective income tax rate was 25.7% and 24.3% for the years ended December 31, 2025 and 2024, respectively.

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.

The year over year increase in the effective tax rate was primarily driven by changes in jurisdictional mix of earnings and the non-deductible loss generated from the divestiture of a business as part of the Portfolio Optimization initiative.

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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Acquisitions 328

Portfolio Optimization (Divestitures/Exits) (36)

Foreign Exchange (31)

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2025 Net sales

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.

Freight Segment organic sales increased by $307 million driven primarily by Equipment sales from higher North American locomotive deliveries and Services sales from higher parts sales.

Components sales were flat as higher sales of industrial products were offset by decreased rail car build in North America.

This was partially offset by decreased Digital Intelligence sales, attributable to softness in the North American market.

Sales from acquisitions contributed $328 million, primarily from Inspection Technologies, and unfavorable changes in foreign exchange decreased sales by $31 million.

Cost of sales

Freight Segment Cost of sales increased $256 million from higher sales volume, and Cost of sales as a percentage of Net sales decreased 1.5 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.

The improvement in gross margin is attributable to strong productivity and cost management, savings from restructuring initiatives and the exit of low margin business offerings through Portfolio Optimization.

Cost of sales for the years ended December 31, 2025 and 2024 included $6 million and $18 million, respectively, of costs related to restructuring initiatives.

Operating expenses

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.

Freight Segment Operating expenses increased by $167 million, and operating expenses as a percentage of sales increased 1.1 percentage points, of which $134 million was related to incremental expense from acquisitions.

expenses for the year ended December 31, 2025 included $47 million of costs related to restructuring initiatives, including a $38 million loss on disposition of a business associated with Portfolio Optimization.

Freight SG&A expenses for the year ended December 31, 2024 included $3 million of costs related to restructuring initiatives.

SG&A expenses also increased due to higher costs to support increased sales volume and higher employee compensation and benefit costs.

Transit Segment

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Acquisitions 27

Portfolio Optimization (Divestitures/Exits) (36)

Foreign Exchange 64

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2025 Net sales $ 3,131

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.

Transit Segment organic sales increased $157 million driven by strong Aftermarket and Original Equipment Manufacturing sales primarily as a result of increased demand for products and services due to fleet expansion and renewals, increased passenger ridership levels and increased investments in sustainable infrastructure.

Sales from acquisitions contributed $27 million, and favorable changes in foreign exchange rates increased sales by $64 million.

Cost of sales

Transit Segment Cost of sales increased by $84 million primarily from higher sales volume, and Cost of sales as a percentage of Net sales decreased by 2.1 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.

The increase in gross margin is primarily attributable to favorable mix within the Transit Segment, increased productivity and the benefits from Integration 2.0 and 3.0 and Portfolio Optimization.

Transit Cost of sales for the years ended December 31, 2025 and 2024 included $6 million and $19 million, respectively, of costs related to restructuring initiatives.

Operating expenses

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.

Transit Segment Operating expenses increased by $44 million and as a percentage of sales increased 0.2 percentage points.

The increase in SG&A expenses was primarily to support higher sales volume and higher employee compensation and benefit costs, partially offset by benefits from Integration 2.0 and 3.0.

Transit SG&A expenses for the years ended December 31, 2025 and 2024 included $11 million and $13 million, respectively, of costs related to restructuring initiatives.

Transit Segment Engineering expenses increased by $11 million due to increased investments in new technology.

Liquidity and Capital Resources

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.

Liquidity is provided by operating cash flows, borrowings under our credit facilities, 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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• $116 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;

• $(65) million from changes in inventory due to increased raw material costs, tariffs and in support of higher sales;

• $(62) 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.

• $(36) million from changes in accounts payable due to the timing of payments.

Investing activities In 2025 and 2024, cash used for investing activities was $(2,747) million and $(343) million, respectively.

During 2025, Wabtec acquired Inspection Technologies for net cash of approximately $(1,729) million and Frauscher for net cash of approximately $(765) million.

During 2025, Wabtec also used $(260) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes, made two additional strategic acquisitions for net cash of $(26) million and received $20 million upon settlement of foreign currency contracts associated with the Frauscher acquisition.

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.

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.

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

Financing activities In 2025, cash provided by financing activities was $1,031 million, which included $1,484 million from net changes in debt, $(223) million of stock repurchases, $(173) million of dividend payments, $(40) million of payments for income tax withholding on share-based compensation, and $(6) million of distributions to noncontrolling interest.

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.

During the fourth quarter of 2025, the Company entered into the 2025 Term Credit Agreement for a term loan of $500 million, which was utilized for general corporate purposes, including as part of funding for the Frauscher acquisition.

During the second quarter of 2025, the Company entered into the 2025 Credit Agreement, which amended and restated the 2022 Credit Agreement and refinanced the 2024 Credit Agreement.

The 2025 Credit Agreement increased the amount available under the Revolving Credit Facility to $2.0 billion and provided a Term Loan Facility of $725 million.

The Term Loan Facility was utilized to refinance (i) $250 million of the outstanding Delayed Draw Term Loan under the 2022 Credit Agreement and (ii) $225 million of the outstanding term loan under the 2024 Credit Agreement.

During the third quarter of 2025, the remaining $250 million under the Term Loan Facility was drawn and utilized as part of funding for the Inspection Technologies acquisition.

Also during the second quarter of 2025, the Company issued $500 million of Senior Notes due in 2030 (the "2030 Notes") and $750 million of Senior Notes due in 2035 (the "2035 Notes").

Proceeds from the 2030 Notes and cash on hand were utilized to repay the outstanding amount of 3.20% Senior Notes due 2025 at maturity.

Proceeds from the 2035 Notes were utilized as part of funding for the Inspection Technologies acquisition.

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

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.

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.

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, 2025, the Company held approximately $789 million of cash, cash equivalents, and restricted cash, of which approximately $198 million was held within the United States and approximately $591 million was held outside of the United States, primarily in Europe, South Africa, India 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 December 31, 2025, approximately $25 million of the Company's $789 million cash balance was classified as restricted cash.

The Company's goal is to maintain an investment-grade credit profile.

Rating agencies that are engaged by the Company periodically update our credit ratings as events occur.

As of December 31, 2025, the long-term credit ratings assigned to the Company were BBB with a stable outlook by Fitch Ratings, Baa2 with a stable outlook by Moody's Investors Service, and BBB with a stable outlook by S&P Global Ratings.

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.

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 period.

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.

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

During the third quarter of 2025, the Company amended the Revolving Receivables Program to increase its availability from $350 million to up to $450 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, net of issuance costs and Payments of debt within the Financing activities section of the Consolidated Statements 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 Consolidated Statements of Cash Flows.

During the year ended December 31, 2025, the Company borrowed and repaid $1,202 million against the collateralized receivables.

There were no receivables sold during the year ended December 31, 2025.

Net cash payments included in cash from operations from the Revolving Receivables Program was $(20) million for the year ended December 31, 2024.

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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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.

Total Available Liquidity

For the year ended

In millions 2025 2024

Cash and cash equivalents $ 764 $ 706

Revolving Credit Facility 2,000 1,500

Revolving Receivables Program 443 350

Total Available Liquidity $ 3,207 $ 2,556

On March 18, 2025, Wabtec announced a definitive agreement to acquire Dellner Couplers, with a purchase price of approximately €890 million.

The transaction subsequently closed on February 10, 2026, and was funded with a combination of cash on hand and borrowings under other sources of available liquidity.

In connection with the completed acquisition of Frauscher and the announced definitive agreement to acquire Dellner Couplers, the Company entered into foreign exchange contracts for a notional amount of €1,290 million to mitigate foreign currency exposure associated with the acquisitions.

As part of the acquisition of Frauscher, the Company utilized foreign exchange forward contracts with a notional value of €690 million.

Guarantor Summarized Financial Information

The obligations under the US Notes issued by Westinghouse Air Brake Technologies Corporation (the "Parent Company") have been fully and unconditionally guaranteed by certain of the Parent Company's U.S.

subsidiaries ("Guarantor Subsidiaries").

Westinghouse Air Brake Technologies Corporation (the “Parent Company”) has issued 3.20% Senior Notes due 2025 (retired in May 2025), 3.45% Senior Notes due 2026, 4.70% Senior Notes due 2028, 4.90% Senior Notes due 2030, 5.611% Senior Notes due 2034, and 5.50% Senior Notes due 2035 (collectively, the “US Notes”).

The obligations under the US Notes issued by the Parent Company have been fully and unconditionally guaranteed by certain of the Parent Company's U.S.

subsidiaries ("Guarantor Subsidiaries"), currently comprising GE Transportation, a Wabtec Company, RFPC Holding Corp., Transportation IP Holdings, LLC, Transportation Systems Services Operations Inc., Wabtec Components LLC, Wabtec Holding LLC, Wabtec Railway Electronics Holdings, LLC, Wabtec Transportation Systems, LLC and Wabtec US Rail, Inc..

Each guarantor is 100% owned by the Parent Company, with the exception of GE Transportation, a Wabtec Company, which has 15,000 shares outstanding of Class A Non-Voting Preferred Stock held by General Electric Company.

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The following tables present summarized financial information of the Parent Company and the Guarantor Subsidiaries on a combined basis.

The combined summarized financial information eliminates intercompany balances and transactions among the Parent Company and guarantor subsidiaries and equity in earnings and investments in any guarantor subsidiaries or non-guarantor subsidiaries.

The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the issuer and guarantor subsidiaries.

The combined summarized financial information eliminates (i) intercompany balances and transactions among the Parent Company and Guarantor Subsidiaries and (ii) equity in earnings from and investments in any subsidiaries that is not a Guarantor Subsidiary.

The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the Parent Company, as the issuer of the US Notes, and Guarantor Subsidiaries.

Summarized Statement of Income

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Gross profit $ 1,048

Net income attributable to Wabtec shareholders $ 788

Net loss attributable to Wabtec shareholders $ (42)

Summarized Balance Sheet

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The combined summarized financial information eliminates all intercompany balances and transactions among Wabtec Netherlands and the Parent Company as well as all equity in earnings from and investments in any subsidiary of the Parent Company, other than Wabtec Netherlands, which we refer to below as the Non-Guarantor Subsidiaries.

The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the issuer and Parent Company guarantor.

The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for Wabtec Netherlands, as the issuer of the Euro Notes, and Parent Company guarantor.

Summarized Statement of Income

Issuer and Guarantor

Issuer and Parent Company (Guarantor)

In millions Year Ended December 31, 2025

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Summarized Balance Sheet

Issuer and Guarantor

Issuer and Parent Company (Guarantor)

In millions December 31, 2025 December 31, 2024

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The following is a description of the transactions between the combined Wabtec Netherlands, as the Issuer of the Euro Notes, and the Parent Company, as the parent Guarantor, with the subsidiaries of Westinghouse Air Brake Technologies Corp., other than Wabtec Netherlands, none of which are guarantors of the Euro Notes.

Issuer and Guarantor

Issuer and Parent Company (Guarantor)

In millions Year Ended December 31, 2025

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Purchases from non-guarantor subsidiaries $ 122

Issuer and Guarantor

Issuer and Parent Company (Guarantor)

In millions December 31, 2025

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The Company does not expect material contributions to pension plan investments in 2026.

(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.

(4) Interest payments on the Senior Notes and the amounts borrowed under the 2025 Term Credit Agreement and 2025 Credit Agreement as of December 31, 2025 are based on interest rates in effect as of December 31, 2025 and are calculated on debt with maturities that extend to 2035.

(5) Shareholder dividends are subject to approval by the Company’s Board of Directors, currently at an annual rate of approximately $212 million beginning in 2026.

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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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• availability of credit or difficulty in obtaining debt or equity financing;

• changes in market consensus as to what attributes are required for projects to be considered "green" or "sustainable" or negative perceptions regarding determinations in such regard with respect to our Green Finance Framework or ESG strategy;

• changes in the ESG topics that have the highest relative priority for Wabtec's external stakeholders;

• changes in the sustainability topics that have the highest relative priority for Wabtec's external stakeholders;

Operating factors

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• impacts of climate change, including evolving climate change policy;

• disruptive natural hazards, including earthquakes, fires, floods, tornadoes, hurricanes or weather conditions;

• disruptive natural hazards, including earthquakes, fires, floods, tornadoes, hurricanes or other weather conditions;

• epidemics, pandemics, or similar public health crises;

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• shutdown of one or more of our operating facilities as a result of natural hazards and health crises;

• supply chain and sourcing disruptions as a result of natural hazards and health crises;

• supply chain and sourcing disruptions as a result of natural hazards, health crises or other external factors;

Statements in this Form 10-K apply only as of the date on which such statements are made, and except as required by law, we undertake no obligation to update any statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

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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.

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.

Critical areas of uncertainty that require judgments, estimates and assumptions include the accounting for 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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Management believes that the application of these policies on a consistent basis enables the Company to provide the users of the financial statements with useful and reliable information about the Company’s operating results and financial condition.

Accounts Receivable and Allowance for Doubtful Accounts:

Description The Company provides an allowance for doubtful accounts to cover anticipated losses on uncollectible accounts receivable.

Judgments and Uncertainties The allowance for doubtful accounts receivable reflects our best estimate of expected losses inherent in our receivable portfolio determined on the basis of historical experience, relevant credit forecast information, changes to customer's solvency and other currently available evidence.

Effect if Actual Results Differ From Assumptions If our estimates regarding the collectability of troubled accounts, and/or our actual losses within our receivable portfolio exceed our estimated losses, we may be exposed to the expense of increasing our allowance for doubtful accounts and loss of cash flows.

Description Inventories are stated at the lower of cost or net realizable value and are reviewed to ensure that an adequate provision is recognized for excess, slow moving and obsolete inventories, and net realizable value reserves.

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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.

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

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.

Also, specific reserves are established for known inventory obsolescence, a decline in market value, or loss of a customer with specific inventory.

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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