What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-22 compared with 2025-10-22 · 104 added, 277 removed, 231 unchanged (62% of the section changed)

1 unchanged sentence

The following discussion should be read in conjunction with the information in the unaudited condensed consolidated financial statements and notes thereto included herein and Westinghouse Air Brake Technologies Corporation’s Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in its Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission on February 13, 2026.

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 core products and services are essential in the safe and efficient operation of freight rail, passenger transit vehicles and other modes of transportation.

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

In the first three months of 2026, approximately half of the Company’s Net sales came from customers outside the United States.

Business Update

On July 1, 2025, Wabtec completed the previously announced acquisition of Evident’s Inspection Technologies division ("Inspection Technologies"), formerly part of the Scientific Solutions Division of Olympus Corporation, for approximately $1.788 billion.

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.

On July 7, 2025, the Company announced a definitive agreement to acquire Frauscher Sensor Technology Group, GmbH ("Frauscher"), a global market leader in train detection, wayside object control solutions and axle counting systems, for approximately € 675 million.

The acquisition positions Wabtec for accelerated, profitable growth, and further strengthens the Company’s product portfolio by adding highly attractive and complementary railway signaling technologies.

Additionally, during the first quarter of 2025, Wabtec announced a definitive agreement to acquire Dellner Couplers for approximately € 890 million.

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 and provides synergies by complementing our core transit systems portfolio.

Both announced acquisitions are subject to customary closing conditions and regulatory approval.

Transaction costs incurred during the three and nine months ended September 30, 2025 related to completed and announced acquisitions were approximately $9 million and $44 million, respectively.

On September 22, 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, during the third quarter of 2025, the first Simandou locomotives reached Guinea, marking the first exports from the Company's India locomotive facility.

During the first nine months of 2025, the Freight Segment 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 the three months ended September 30, 2025, the Transit Segment signed $140 million in new Transit brake orders.

Additionally, during the first nine months of 2025, the Transit Segment signed 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.

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.

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.

The acquisition subsequently closed on February 10, 2026 for approximately $1.053 billion.

Additionally, during the first quarter of 2026, Wabtec secured a multi-year, multi-billion dollar mining contract for drive systems and aftermarket parts, won a multi-year modernization order in the U.S.

for $210 million, and signed a $54 million Transit brake and couplers order, which contributed to the overall increase in backlog of $3.4 billion from December 31, 2025 to $30.8 billion at March 31, 2026.

We also began executing the first EVO modernization build to support the commercial rollout to the installed base.

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 nine months of 2025, Wabtec incurred $21 million of restructuring costs primarily for employee-related costs 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.

During the first three months of 2026 and 2025, Wabtec incurred $5 million and $9 million, respectively, of restructuring costs primarily for employee-related costs on programs under these initiatives.

In addition, Transaction costs incurred during the three months ended March 31, 2026 and 2025 related to recent acquisitions were approximately $13 million and $10 million, respectively.

Future macroeconomic volatility, changes to tariffs and trade policies, impacts from regional conflicts and war, 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, 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 strategic initiatives.

The Company has experienced increased tariff costs which unfavorably impacted our cash from operations for the nine months ended September 30, 2025.

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.

The Company has experienced increased tariff costs which unfavorably impacted our operating results and cash from operations for the three months ended March 31, 2026.

Although we do not expect a material impact to our results of operations in 2026 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.

RESULTS OF OPERATIONS

Consolidated Results

THIRD QUARTER 2025 COMPARED TO THIRD QUARTER 2024

FIRST QUARTER 2026 COMPARED TO FIRST QUARTER 2025

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

Three Months Ended

September 30,

In millions 2026 2025

15 unchanged sentences

Interest expense, net (71) (46)

Other expense, net (1) (3)

Other income (expense), net 23 (2)

Income before income taxes 469 426

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Net income attributable to Wabtec shareholders $ 362 $ 322

The following table shows the major components of the change in Net sales in the three months ended September 30, 2025 from the three months ended September 30, 2024:

The following table shows the major components of the change in Net sales in the three months ended March 31, 2026 from the three months ended March 31, 2025:

In millions Freight Segment Transit Segment Total

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

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

Acquisitions 184 41 225

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Organic 20 40 60

Third Quarter 2025 Net sales $ 2,093 $ 793 $ 2,886

Net sales for the three months ended September 30, 2025 increased by $223 million, or 8.4%, to $2.89 billion compared to the same period in 2024.

First Quarter 2026 Net sales $ 2,115 $ 835 $ 2,950

Net sales for the three months ended March 31, 2026 increased by $340 million, or 13.0%, to $2.95 billion compared to the same period in 2025.

Organic sales increased $60 million which was attributable to both the Freight and Transit Segments.

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

Freight Services sales decreased from lower deliveries of locomotive modernizations and engine overhauls.

Freight sales increased primarily due to higher North American and international locomotive deliveries and higher mining sales, partially offset by lower deliveries of locomotive modernizations and engine overhauls and the exit of a low margin Digital project.

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.

Sales from acquisitions contributed $134 million, primarily from Inspection Technologies in the Freight Segment, and favorable changes in foreign exchange increased Net sales by $23 million.

Sales from acquisitions contributed $225 million, and favorable changes in foreign exchange increased Net sales by $68 million.

Cost of sales

Cost of sales for the three months ended September 30, 2025 increased by $101 million, or 5.7%, to $1.88 billion compared to the same period in 2024.

Cost of sales for the three months ended March 31, 2026 increased by $179 million, or 10.5%, to $1.89 billion compared to the same period in 2025.

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

Cost of sales as a percentage of Net sales was 65.3% and 67.0% for the three months ended September 30, 2025 and 2024, respectively.

The improvement in gross margin is attributable to strong productivity and cost management, Integration 2.0 and 3.0 savings, and the exit of low margin business offerings through Portfolio Optimization, partially offset by unfavorable mix within the Freight Segment.

Cost of sales for the three months ended September 30, 2025 included $24 million of costs related to purchase price accounting for the step-up of Inspection Technologies inventory to fair value on the date of acquisition.

Cost of sales for the three months ended September 30, 2025 and 2024 included $2 million and $7 million, respectively, of costs related to restructuring initiatives.

Cost of sales as a percentage of Net sales was 64.0% and 65.5% for the three months ended March 31, 2026 and 2025, respectively.

The improvement in gross margin is attributable to productivity and cost management, savings from restructuring initiatives, and accretion from recent acquisitions, partially offset by unfavorable mix within the Freight Segment.

Cost of sales for the three months ended March 31, 2026 included $23 million of costs related to purchase price accounting for the step-up of inventory related to acquisitions to fair value on the date of acquisition.

Cost of sales for the three months ended March 31, 2026 and 2025 both included $3 million of costs related to restructuring initiatives.

Operating expenses

Total operating expenses increased $64 million, or 14.3%, for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to the increase in Selling, general and administrative expenses ("SG&A").

Operating expenses as a percentage of sales were 17.7% and 16.8% for the three months ended September 30, 2025 and 2024, respectively.

SG&A increased $57 million for the three months ended September 30, 2025 compared to the same period in 2024.

The increase is primarily from incremental expense from acquisitions, transaction costs associated with completed and announced acquisitions, and costs incurred to support the higher sales volume, partially offset by the impacts of Integration 2.0 and 3.0.

Transaction costs associated with completed and announced acquisitions included in SG&A were $9 million for three months ended September 30, 2025.

SG&A for the three months ended September 30, 2025 and 2024 included $4 million and $5 million, respectively, of costs related to restructuring initiatives.

Engineering expenses increased $9 million due to incremental expense from acquisitions.

Total operating expenses increased $118 million, or 27.7%, for the three months ended March 31, 2026 compared to the same period in 2025.

Selling, general and administrative expenses ("SG&A") increased $94 million for the three months ended March 31, 2026 compared to the same period in 2025.

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

Transaction costs associated with acquisitions included in SG&A were $13 million and $10 million for three months ended March 31, 2026 and 2025, respectively.

SG&A for the three months ended March 31, 2026 and 2025 included $2 million and $5 million, respectively, of costs related to restructuring initiatives.

Engineering expenses increased $10 million and Amortization expense increased $14 million both due to incremental expense from acquisitions.

Interest expense, net

Interest expense, net, increased $13 million to $65 million for the three months ended September 30, 2025 compared to 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 expense, net

Other expense, net decreased $2 million to $1 million for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to lower foreign exchange losses, partially offset by a loss on mark-to-market derivatives in the current period associated with the anticipated acquisitions of Dellner Couplers and Frauscher.

The effective income tax rate was 26.4% and 24.2% for the three months ended September 30, 2025 and 2024, respectively.

The year over year increase in the effective rate was primarily driven by audit closures that occurred during the third quarter of 2024 and the jurisdictional mix of earnings.

Interest expense, net, increased $25 million to $71 million for the three months ended March 31, 2026 compared to the same period in 2025, due to higher average overall debt balances in the current period, primarily related to acquisitions.

Other income (expense), net

Other income (expense), net increased $25 million for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to foreign exchange gains in the current period.

The effective income tax rate was 22.7% and 23.2% for the three months ended March 31, 2026 and 2025, respectively.

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

Freight Segment

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Three Months Ended

September 30,

In millions 2026 2025 Change % Change

11 unchanged sentences

Income from operations (% of Net sales) 21.3 % 22.1 % (0.8)

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

Third Quarter 2024 Net sales $ 1,930

The following table shows the major components of the change in Net sales for the Freight Segment in the first quarter of 2026 from the first quarter of 2025:

First Quarter 2025 Net sales $ 1,901

Acquisitions 184

6 unchanged sentences

Components (23)

Third Quarter 2025 Net sales $ 2,093

Freight Segment organic sales increased by $41 million driven primarily by Equipment sales from higher North American locomotive deliveries.

This was partially offset by decreased Services sales from lower deliveries of locomotive modernizations and engine overhauls, decreased Digital Intelligence sales from softness in the North American market, and decreased Components sales from lower North America rail car build and lower maintenance of way sales.

Sales from acquisitions contributed $128 million, primarily from Inspection Technologies, and favorable changes in foreign exchange increased sales by $1 million.

First Quarter 2026 Net sales $ 2,115

Freight Segment organic sales increased by $20 million driven primarily by Equipment sales from higher North American and international locomotive deliveries and higher mining sales.

This was partially offset by decreased Services sales from lower deliveries of locomotive modernizations and engine overhauls, decreased Digital Intelligence sales driven by the exit of a low margin project, and decreased Components sales from lower North America rail car build, partially offset by strong industrial demand.

Sales from acquisitions contributed $184 million, primarily from Inspection Technologies and Frauscher, and favorable changes in foreign exchange increased sales by $20 million.

Cost of sales

Freight Segment Cost of sales increased $111 million, primarily due to higher sales volume, and Cost of sales as a percentage of Net sales decreased 1.3 percentage points.

The improvement in gross margin is attributable to strong productivity and cost management and the exit of low margin business offerings through Portfolio Optimization, partially offset by unfavorable mix within the Freight Segment.

Cost of sales for the three months ended September 30, 2025 and 2024 included $1 million and $2 million, respectively, of costs related to restructuring initiatives.

The improvement in gross margin is attributable to productivity and cost management and accretion from recent acquisitions, partially offset by unfavorable mix within the Freight Segment and the exit of a low margin Digital project.

Cost of sales for the three months ended March 31, 2026 included $20 million of costs related to purchase price accounting for the step-up of inventory related to acquisitions to fair value on the date of acquisition.

Cost of sales for the three months ended March 31, 2026 and 2025 both included $2 million of costs related to restructuring initiatives.

Operating expenses

Freight Segment Operating expenses as a percentage of Net sales were 16.0% and 14.8% for the three months ended September 30, 2025 and 2024, respectively.

Freight Segment Operating expenses increased by $53 million, primarily driven by higher SG&A costs from higher costs to support increased sales volume and incremental SG&A and engineering expenses from acquisitions.

Freight Segment Operating expenses increased by $73 million, and Operating expenses as a percentage of Net sales increased 2.0 percentage points.

The increase in Freight Segment Operating expenses is primarily driven by incremental expense from acquisitions.

Transit Segment

1 unchanged sentence

Three Months Ended

September 30,

In millions 2026 2025 Change % Change

6 unchanged sentences

Income from operations (% of Net sales) 14.5 % 12.7 % 1.8

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

Third Quarter 2024 Net sales $ 733

The following table shows the major components of the change in Net sales for the Transit Segment in the first quarter of 2026 from the first quarter of 2025:

First Quarter 2025 Net sales $ 709

Acquisitions 41

4 unchanged sentences

Original Equipment Manufacturing 17

Third Quarter 2025 Net sales $ 793

First Quarter 2026 Net sales $ 835

Transit Segment organic sales increased by $40 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 $6 million, and favorable changes in foreign exchange rates increased sales by $22 million.

Sales from the Dellner Couplers acquisition contributed $41 million, and favorable changes in foreign exchange rates increased sales by $48 million.

Cost of sales

Transit Segment Cost of sales increased by $68 million, primarily due to higher sales volume, and Cost of sales as a percentage of Net sales decreased by 2.4 percentage points.

The increase in gross margin was attributable to increased productivity and the benefits from structured cost actions taken through Integration 2.0 and 3.0.

Transit Segment Cost of sales for the three months ended September 30, 2025 and 2024 included $1 million and $5 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Transit Segment Operating expenses as a percentage of Net sales were 17.2% and 17.4% for the three months ended September 30, 2025 and 2024, respectively.

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

Higher SG&A expenses to support higher sales volume were partially offset by benefits from structured cost actions taken through Integration 2.0 and 3.0.

Transit SG&A expenses for the three months ended September 30, 2025 and 2024 included $2 million and $3 million, respectively, of costs related to restructuring initiatives.

FIRST NINE MONTHS OF 2025 COMPARED TO FIRST NINE MONTHS OF 2024

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

Nine Months Ended

September 30,

In millions 2025 2024

Sales of goods $ 6,808 $ 6,323

Sales of services 1,394 1,481

Total Net sales 8,202 7,804

Cost of sales:

Cost of goods (4,548) (4,413)

Cost of services (814) (822)

Total Cost of sales (5,362) (5,235)

Gross profit 2,840 2,569

Operating expenses:

Selling, general and administrative expenses (1,029) (915)

Engineering expenses (155) (155)

Amortization expense (219) (224)

Total Operating expenses (1,403) (1,294)

Income from operations 1,437 1,275

Other income and expenses:

Interest expense, net (157) (148)

Other income (expense), net 21 (1)

Income before income taxes 1,301 1,126

Income tax expense (322) (272)

Net income 979 854

Net income attributable to noncontrolling interest (11) (10)

Net income attributable to Wabtec shareholders $ 968 $ 844

The following table shows the major components of the change in Net sales in the nine months ended September 30, 2025 from the nine months ended September 30, 2024:

In millions Freight Segment Transit Segment Total

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

Acquisitions 161 23 184

Portfolio Optimization (Divestitures/Exits) (34) (17) (51)

Foreign Exchange (36) 27 (9)

Organic 148 126 274

First Nine Months of 2025 Net sales $ 5,913 $ 2,289 $ 8,202

Net sales for the nine months ended September 30, 2025 increased by $398 million, or 5.1%, to $8.20 billion compared to the same period in 2024.

Organic sales increased $274 million which was attributable to both the Freight and Transit Segments.

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

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

Freight Components sales decreased due to lower North America rail car build, lower maintenance of way sales, and the exit of low margin business offerings through Portfolio Optimization.

Sales from acquisitions contributed $184 million, primarily from Inspection Technologies in the Freight Segment, and unfavorable changes in foreign exchange rates decreased Net sales by $9 million.

Cost of sales

Cost of sales for the nine months ended September 30, 2025 increased by $127 million, or 2.4%, to $5.36 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 65.4% and 67.1% for the nine months ended September 30, 2025 and 2024, respectively.

Cost of sales for the nine months ended September 30, 2025 included $24 million of costs related to purchase price accounting for the step-up of Inspection Technologies inventory to fair value on the date of acquisition.

Cost of sales for the nine months ended September 30, 2025 and 2024 included $8 million and $19 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Total operating expenses increased $109 million, or 8.4%, for the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to the increase in SG&A.

Operating expenses as a percentage of sales were 17.1% and 16.6% for the nine months ended September 30, 2025 and 2024, respectively.

SG&A expenses increased $114 million for the nine months ended September 30, 2025 compared to the same period in 2024.

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 Integration 2.0 and 3.0.

Transaction costs associated with completed and announced acquisitions included in SG&A were $44 million for the nine months ended September 30, 2025.

SG&A for the nine months ended September 30, 2025 and 2024 included $12 million and $11 million, respectively, of costs related to restructuring initiatives.

Interest expense, net

Interest expense, net, increased $9 million to $157 million for the nine months ended September 30, 2025 compared to 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 (expense), net

Other income (expense), net, increased $22 million to $21 million for the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to a $30 million net gain on mark-to-market derivatives in the current period associated with the anticipated acquisitions of Dellner Couplers and Frauscher, partially offset by lower equity income and higher foreign exchange losses.

The effective income tax rate was 24.8% and 24.1% for the nine months ended September 30, 2025 and 2024, respectively.

The year over year increase in the effective tax rate was primarily driven by audit closures that occurred during the third quarter of 2024, non-deductible transaction related expenses in the current year 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,

In millions 2025 2024 Change % Change

Sales of goods $ 4,524 $ 4,200 $ 324 7.7 %

Sales of services 1,389 1,474 (85) (5.8) %

Total Net sales 5,913 5,674 239 4.2 %

Cost of sales:

Cost of goods (2,970) (2,889) 81 2.8 %

Cost of services (811) (818) (7) (0.9) %

Total Cost of sales (3,781) (3,707) 74 2.0 %

Cost of sales (% of Net sales) 63.9 % 65.3 % (1.4)

Gross profit 2,132 1,967 165 8.4 %

Operating expenses (883) (818) 65 7.9 %

Income from operations $ 1,249 $ 1,149 $ 100 8.7 %

Income from operations (% of Net sales) 21.1 % 20.2 % 0.9

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

First Nine Months of 2024 Net sales $ 5,674

Acquisitions 161

Portfolio Optimization (Divestitures/Exits) (34)

Foreign Exchange (36)

Organic changes in Net sales by Product Line:

Equipment 109

Components (31)

Digital Intelligence (18)

First Nine Months of 2025 Net sales $ 5,913

Freight Segment organic sales increased by $148 million driven primarily by Equipment sales from higher North American locomotive deliveries and Services sales from higher deliveries of locomotive modernizations and engine overhauls.

This was partially offset by decreased Components sales from lower North America rail car build, lower maintenance of way sales, and the exit of low margin business offerings through Portfolio Optimization.

Sales from acquisitions contributed $161 million, primarily from Inspection Technologies, and unfavorable changes in foreign exchange decreased sales by $36 million.

Cost of sales

Freight Segment Cost of sales increased by $74 million, primarily due to higher sales volume, and Cost of sales as a percentage of Net sales decreased 1.4 percentage points.

The improvement in gross margin is attributable to strong productivity and cost management, Portfolio Optimization and Integration 2.0 and 3.0.

Cost of sales for the nine months ended September 30, 2025 and 2024 included $5 million and $10 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Freight Segment Operating expenses as a percentage of Net sales were 14.9% and 14.4% for the nine months ended September 30, 2025 and 2024, respectively.

Freight Segment Operating expenses increased by $65 million, primarily driven by higher SG&A expenses resulting from higher costs to support increased sales volume, higher employee compensation and benefit costs and incremental expense from acquisitions.

Transit Segment

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

Nine Months Ended

September 30,

In millions 2025 2024 Change % Change

Net sales $ 2,289 $ 2,130 $ 159 7.5 %

Cost of sales (1,581) (1,528) 53 3.5 %

Cost of sales (% of Net sales) 69.1 % 71.8 % (2.7)

Gross profit 708 602 106 17.6 %

Operating expenses (394) (367) 27 7.4 %

Income from operations $ 314 $ 235 $ 79 33.6 %

Income from operations (% of Net sales) 13.7 % 11.0 % 2.7

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

First Nine Months of 2024 Net sales $ 2,130

Acquisitions 23

Portfolio Optimization (Divestitures/Exits) (17)

Foreign Exchange 27

Organic changes in Net sales by Product Line:

Original Equipment Manufacturing 64

Aftermarket 62

First Nine Months of 2025 Net sales $ 2,289

Transit Segment organic sales increased by $126 million driven by strong Original Equipment Manufacturing and Aftermarket 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 $23 million, and favorable changes in foreign exchange rates increased sales by $27 million.

Cost of sales

Transit Segment Cost of sales increased by $53 million, primarily due to higher sales volume, and Costs of sales as a percentage of Net sales decreased by 2.7 percentage points.

The increase in gross margin is primarily attributable to increased productivity and the benefits from structured cost actions taken through Integration 2.0 and 3.0.

Transit Cost of sales for the nine months ended September 30, 2025 and 2024 included $3 million and $9 million, respectively, of costs related to restructuring initiatives.

The increase in gross margin was attributable to increased productivity and the benefits from structured cost actions taken through restructuring initiatives.

Operating expenses

Transit Segment Operating expenses as a percentage of Net sales were 17.2% for both the nine months ended September 30, 2025 and 2024.

Transit Segment Operating expenses increased by $27 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 3.0.

Transit SG&A expenses for the nine months ended September 30, 2025 and 2024 included $10 million and $9 million, respectively, of costs related to restructuring initiatives.

Transit Segment Operating expenses increased by $27 million and as a percentage of Net sales increased by 0.6 percentage points.

Higher SG&A expenses to support higher sales volume and incremental Operating expenses from acquisitions were partially offset by benefits from structured cost actions taken through restructuring initiatives.

Transit SG&A expenses for the three months ended March 31, 2026 and 2025 included $2 million and $4 million, respectively, of costs related to restructuring initiatives.

Liquidity and Capital Resources

Liquidity is provided by operating cash flows, borrowings under the 2025 Credit Agreement 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.

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

Nine Months Ended

September 30,

Three Months Ended

In millions 2026 2025

3 unchanged sentences

Financing activities $ 656 $ (172)

Operating activities In the first nine months of 2025, cash provided by operating activities was $767 million compared to $1,111 million in the first nine months of 2024.

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

• $125 million from increased Net income, partially offset by $(30) million for a non-cash gain on mark-to-market derivatives;

• $(276) million from changes in receivables driven by higher sales and the timing of collections from customers;

• $(113) million from changes in inventory due to increased raw material costs and tariffs and to support higher sales;

• $(65) million from changes to employee related benefit payments.

Investing activities In the first nine months of 2025 and 2024, cash used for investing activities was $(1,887) million and $(106) million, respectively.

During the first nine months of 2025, Wabtec used $(1,755) million for acquisitions, primarily for Inspection Technologies, and used $(138) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes.

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

Financing activities In the first nine months of 2025, cash provided by financing activities was $907 million, which included $1,235 million from net changes in debt, $(148) million in stock repurchases, $(130) million of dividend payments, $(39) 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 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.

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 and $750 million of Senior Notes due in 2035.

Proceeds from the 2030 Notes and cash on hand were utilized to repay the outstanding amount of the 2025 Notes 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.

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 of September 30, 2025, the Company held approximately $528 million of cash, cash equivalents and restricted cash, of which approximately $45 million was held within the United States and approximately $483 million was held outside of the United States, primarily in Europe, India, Brazil, and China.

Operating activities In the first three months of 2026, cash provided by operating activities was $199 million compared to $191 million in the first three months of 2025.

The increase was primarily driven by higher net income, partially offset by increased working capital requirements.

Net income was $363 million, an increase of $36 million compared to the prior year period.

Non‑cash adjustments, including depreciation and amortization of $139 million and stock‑based compensation of $22 million, further supported cash provided by operating activities and increased year over year, primarily due to incremental non‑cash expense from acquisitions and higher equity‑based compensation.

These sources of cash were partially offset by changes in working capital.

The increase in Receivables decreased cash from operations by $305 million, compared to a decrease in cash from operations of $226 million in the prior year period, driven by higher sales and the timing of collections from customers.

The decrease in Customer deposits decreased cash from operations by $64 million, compared to a $31 million increase in cash from operations in the prior year, from changes in the timing of customer deposits.

Other operating activities decreased cash from operations by $12 million, compared to an $83 million decrease in cash from operations in the prior year, primarily from changes in other accrued expenses due to the timing of payments.

Investing activities In the first three months of 2026 and 2025, cash used for investing activities was $(1,105) million and $(44) million, respectively.

During the first three months of 2026, Wabtec used $(1,062) million for acquisitions, primarily for Dellner Couplers, and used $(46) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes.

During the first three months of 2025, Wabtec used $(44) million for additions to property, plant, and equipment.

Financing activities In the first three months of 2026, cash provided by financing activities was $656 million, which included $1,012 million from net changes in debt, $(242) million in stock repurchases, $(53) million of dividend payments, and $(53) million of payments for income tax withholding on share-based compensation.

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.

As of March 31, 2026, the Company held approximately $531 million of cash, cash equivalents and restricted cash, which was primarily held outside of the United States, mainly in Europe, South Africa, India, and Brazil.

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

As of September 30, 2025, approximately $28 million of the Company's $528 million cash balance was classified as restricted.

As of March 31, 2026, approximately $10 million of the Company's cash balance was classified as restricted, primarily for cash held in escrow related to acquisitions.

The Company's goal is to maintain an investment-grade credit profile, which supports access to diverse sources of liquidity and favorably impacts borrowing costs.

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

As of March 31, 2026, 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

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.

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 utilizes its Revolving Receivables Program to request borrowings from a financial institution against certain collateralized receivables for up to $450 million.

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

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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 nine months ended September 30, 2025, the Company borrowed and repaid $800 million and $600 million, respectively, against the collateralized receivables.

There were no receivables sold during the nine months ended September 30, 2025.

Net cash proceeds included in cash from operations from the Revolving Receivables Program was $75 million for the nine months ended September 30, 2024.

During the three months ended March 31, 2026, the Company borrowed $445 million against the collateralized receivables.

There were no repayments against the collateralized receivables during the three months ended March 31, 2026.

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

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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The Company does not provide any guarantees under these arrangements, does not have an economic interest in our suppliers' voluntary participation, does not receive an economic benefit from the financial institutions, and no assets are pledged under the arrangements.

The arrangements do not change the payable terms negotiated by the Company and our vendors and does not result in a change in the classification of amounts due as Accounts payable in the Condensed Consolidated Balance Sheets.

The arrangements do not change the payable terms negotiated by the Company and our vendors and do not result in a change in the classification of amounts due as Accounts payable in the Condensed Consolidated Balance Sheets.

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

Intra-Quarter Uncommitted Money Market Line Credit Agreement

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

Uncommitted Money Market Line Credit Agreement

Total Available Liquidity

The components of total available liquidity were as follows:

In millions September 30,

In millions March 31,

2026 December 31,

Cash and cash equivalents

Cash and cash equivalents, excluding restricted cash $ 521 $ 764

Revolving Credit Facility 1,573 2,000

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Total Available Liquidity $ 2,094 $ 3,207

On July 1, 2025, Wabtec acquired Inspection Technologies for approximately $1.788 billion, which was financed through a combination of cash on hand, proceeds from the 2035 Notes, and borrowings under other sources of available liquidity.

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

In addition, on July 7, 2025, Wabtec announced a definitive agreement to acquire Frauscher Sensor Technology Group, with a purchase price of approximately €675 million.

In connection with the announced definitive agreements to acquire Dellner Couplers and Frauscher, the Company entered into foreign exchange contracts for a notional amount of €890 million to mitigate foreign currency exposure associated with the acquisitions.

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

The Company believes that its existing cash balances, cash generated from operations, available borrowings under its credit facilities, and access to the capital markets will be sufficient to meet its working capital needs, planned capital expenditures, debt service requirements, dividends, share repurchases, and other known cash requirements for at least the next twelve months.

Guarantor Summarized Financial Information

Westinghouse Air Brake Technologies Corporation (the “Parent Company”) has issued 3.20% Senior Notes due 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”).

Westinghouse Air Brake Technologies Corporation (the “Parent Company”) has issued 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.

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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 (i) intercompany balances and transactions among the Parent Company and Guarantor Subsidiaries and (ii) equity in earnings from and investments in any subsidiary that is not a Guarantor Subsidiary.

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 subsidiary 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.

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Parent Company and Guarantor Subsidiaries

In millions Nine Months Ended September 30, 2025

In millions Three Months Ended March 31, 2026

Net sales $ 1,554

Gross profit $ 249

Net income attributable to Wabtec shareholders $ 294

Net loss attributable to Wabtec shareholders $ (100)

Summarized Balance Sheet

Parent Company and Guarantor Subsidiaries

In millions September 30, 2025 December 31, 2024

In millions March 31, 2026 December 31, 2025

Current assets $ 1,117 $ 1,434

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Parent Company and Guarantor Subsidiaries

In millions Nine Months Ended September 30, 2025

In millions Three Months Ended March 31, 2026

Net sales to non-guarantor subsidiaries $ 227

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Parent Company and Guarantor Subsidiaries

In millions September 30, 2025

In millions March 31, 2026

Amount due to non-guarantor subsidiaries $ 8,076

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Issuer and Parent Company (Guarantor)

In millions Nine Months Ended September 30, 2025

In millions Three Months Ended March 31, 2026

Net sales $ 144

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Issuer and Parent Company (Guarantor)

In millions September 30, 2025 December 31, 2024

In millions March 31, 2026 December 31, 2025

Current assets $ 169 $ 508

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Issuer and Parent Company (Guarantor)

In millions Nine Months Ended September 30, 2025

In millions Three Months Ended March 31, 2026

Net sales to non-guarantor subsidiaries $ 2

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Issuer and Parent Company (Guarantor)

In millions September 30, 2025

In millions March 31, 2026

Amount due to non-guarantor subsidiaries $ 9,280

Contractual Obligations

During the second quarter of 2025, the Company entered into the 2025 Credit Agreement and utilized the Term Loan Facility, which will mature on April 23, 2030 to refinance (i) $250 million of the outstanding Delayed Draw Term Loan that was scheduled to mature August 15, 2027 under the 2022 Credit Agreement and (ii) $225 million of the outstanding term loan that was scheduled to mature March 14, 2029 under the 2024 Credit Agreement.

Also during the second quarter of 2025, the Company issued $500 million of 2030 Notes and $750 million of 2035 Notes.

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

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.

As a result of the foregoing, as of September 30, 2025, contractual obligations related to the repayment of long-term debt decreased for 2026-2027 from $1,520 million to $1,270 million, and for 2028-2029 from $1,475 million to $1,250 million, and increased for 2030 and beyond from $500 million to $2,475 million.

Company Stock Repurchase Plan

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 conformed to the requirements under the 2022 Credit Agreement and the 2024 Credit Agreement, and complies with the requirements under the 2025 Credit Agreement and the indentures for the Senior Notes currently outstanding.

On February 6, 2026, the Board of Directors reauthorized the stock repurchase program and refreshed the amount available for stock repurchases to $1.2 billion of the Company’s outstanding shares.

This new stock repurchase authorization supersedes the previous authorization of $1.0 billion, of which approximately $760 million remained at the reauthorization date.

No time limit was set for the completion of the program, which conforms to the requirements under the agreements governing the Company's credit facilities 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, 2025, approximately $852 million was remaining under the stock repurchase plan.

As of March 31, 2026, approximately $975 million was remaining under the stock repurchase plan.

Forward Looking Statements

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A summary of critical accounting estimates is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

In particular, judgment is used in areas such as accounts receivable and the allowance for doubtful accounts, inventories, business combinations, goodwill and indefinite-lived intangible assets, warranty reserves, income taxes, and revenue recognition.

In particular, judgment is used in areas such as inventories, business combinations, goodwill and indefinite-lived intangible assets, warranty reserves, income taxes, and revenue recognition.

There have been no significant changes in the related accounting policies since December 31, 2025.

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