Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

In the ordinary course of business, Wabtec is exposed to risks that increases in interest rates may adversely affect funding costs associated with its variable-rate debt. The Company’s variable rate debt represents 32% and 22% of total debt at December 31, 2019 and 2018, respectively. On an annual basis, a 1% change in the interest rate for variable rate debt at December 31, 2019, would increase or decrease interest expense by about $14 million.

Foreign Currency Exchange Rate Risk

The Company is exposed to certain risks associated with changes in foreign currency exchange rates to the extent our operations are conducted in currencies other than the U.S. dollar. For the year ended December 31, 2019, approximately 41% of Wabtec’s net sales were in the United States, 9% in Canada, 6% in India, 5% in the United Kingdom, 4% in Mexico, 4% in Germany, 4% in Australia, 4% in France, 4% in China, and 19% in other international locations. (See Note 21 of “Notes in Consolidated Financial Statements” included in Part IV, Item 15 of this report). To reduce the impact of changes in currency exchange rates, the Company has periodically entered into foreign currency forward contracts. Refer to “Financial Derivatives and Hedging Activities” in Note 2 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report for more information regarding foreign currency exchange risk.

Our market risk exposure is not substantially different from our exposure at December 31, 2019.