Item 1. BUSINESS

General

Westinghouse Air Brake Technologies Corporation, doing business as Wabtec Corporation, is a Delaware corporation with headquarters at 30 Isabella Street in Pittsburgh, Pennsylvania. Our telephone number is 412-825-1000, and our website is located at www.wabteccorp.com. All references to “we”, “our”, “us”, the “Company” and “Wabtec” refer to Westinghouse Air Brake Technologies Corporation and its consolidated subsidiaries. George Westinghouse founded the original Westinghouse Air Brake Co. in 1869 when he invented the air brake. Westinghouse Air Brake Company (“WABCO”) was formed in 1990 when it acquired certain assets and operations from American Standard, Inc., now known as Trane (“Trane”). The Company went public on the New York Stock Exchange in 1995.

Throughout the years, the Company has made a number of strategic acquisitions leading the Company to where it is today. These have primarily included:

• the 1999 merger with MotivePower Industries, Inc. whereby the Company adopted its current name of Westinghouse Air Brake Technologies Corporation, or Wabtec;

• the 2017 acquisition of Faiveley Transport, S.A. (“Faiveley Transport”), a leading provider of value-added, integrated systems and services, primarily for the global transit rail market. Based in France, the Faiveley Transport business has roots to 1919 and made Wabtec a leader in manufacturing pantographs, automatic door mechanisms, air conditioning systems, railway braking systems and couplers; and

• the 2019 acquisition of GE Transportation, a business unit of General Electric Company. This brought a global technology leader and supplier of locomotives, equipment, services and digital solutions to the rail, mining, marine, stationary power and drilling industries into Wabtec.

As a result of several strategic acquisitions, as well as other smaller acquisitions, and organic growth, Wabtec is now one of the world’s largest providers of locomotives, value-added, technology-based equipment, systems and services for the global freight rail and passenger transit industries with approximately 27,000 employees and operations in over 50 countries. We believe we hold a leading market share for many of our core product lines globally. 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.

Through both internal growth as well as acquisitions, Wabtec has positioned itself with the following strategic benefits:

• Increased diversity of revenues by product, geography and market. Comprehensive product offerings spanning the freight rail and passenger transit industries, as well as products in the bus, mining and marine, and discrete industrial markets help Wabtec to balance the cyclical nature of the global rail business.

• Significant Operating Synergies and Improved Financial Profile. The consummation of the GE Transportation acquisition is leading to operating synergies across all of Wabtec. As a result, we expect to generate approximately $250 million in annual run-rate operating synergies, driven by cost and revenue opportunities, before 2022. This will enhance Wabtec’s margins and revenue growth opportunities with strong free cash flow generation to enable strategic deleveraging through debt reduction and earnings growth.

• Increased technical and engineering expertise. Particularly with the onboarding of Faiveley Transport and GE Transportation, Wabtec's technical capabilities and product development efforts are strengthened.

• Increased Scale and Diversification of Wabtec’s Freight Product Portfolio. Wabtec is now one of the world’s largest providers of locomotives, freight car components, technology-enabled equipment, systems and services for the locomotive and freight rail industries.

• Broadened product line and international presence in the transit market. Wabtec now offers a comprehensive, broad and diversified portfolio of products to the transit rail industries throughout the world.

• Complementary Digital and Electronics Technologies. Wabtec now has a comprehensive digital portfolio and leading engineering and technical intellectual property, which provides electronics and digital technologies to meet growing demand for train intelligence and network optimization.

• Enhanced Aftermarket and Services Opportunities. Wabtec has an installed base of more than 22,500 locomotives and content on virtually all North American locomotives and freight cars, as well as a diverse offering of Transit locomotives and cars both internationally and domestically, which enables significant opportunities in the higher-margin aftermarket parts and services business and mitigates the exposure to cycles.

Industry Overview

The Company primarily serves the global freight rail and passenger transit industries. As such, our operating results are largely dependent on the level of activity, financial condition and capital spending plans of freight railroads and passenger transit agencies around the world, and transportation equipment manufacturers who serve those markets. Many factors influence these industries, including general economic conditions; traffic volumes, as measured by freight carloadings and passenger ridership; government spending on public transportation; and investment in new technologies. In general, trends such as increasing urbanization and growth in developing markets, a focus on sustainability and environmental awareness, increasing investment in technology solutions, an aging equipment fleet, and growth in global trade are expected to drive continued investment in freight rail and passenger transit.

According to the 2020 bi-annual edition of a market study by UNIFE, the Association of the European Rail Industry, the accessible global market for railway products and services is more than $120 billion and is expected to grow at a compounded annual growth rate of 2.3% through 2025. As the long-term effects of COVID-19 are still uncertain, UNIFE included a second, less likely scenario in which the recovery is more moderate. This alternative scenario shows a compounded annual growth rate of 0.9% through 2025 for the total accessible market. The three largest geographic markets, which represented about 85% of the total accessible market, were Europe, North America and Asia Pacific. UNIFE projected above-average growth rates in Latin America, Eastern Europe, North America, and Africa/Middle East, with the more mature markets of Western Europe, North America, and Asia Pacific accounting for the largest share of absolute growth. UNIFE said trends such as urbanization, digitalization, legislative action and government support, and an increased focus on energy and environmental issues continue to drive investment. The largest product segments of the market were rolling stock, services and infrastructure, which represent almost 90% of the accessible market. UNIFE projected spending growth in all product segments, with turnkey management projects, rolling stock, and infrastructure to grow fastest. UNIFE estimated that the global installed base of diesel and electric locomotives was about 118,200 units, with about 32% in Asia Pacific, about 25% in North America and about 18% in Russia-CIS (Commonwealth of Independent States). Wabtec estimates that about 3,000 new locomotives were delivered worldwide in 2020. UNIFE estimated the global installed base of freight cars was about 5.2 million, with about 35% in North America, about 24% in Russia-CIS, and about 24% in Asia Pacific. Wabtec estimates that about 155,000 new freight cars were delivered worldwide in 2020. UNIFE estimated the global installed base of passenger transit vehicles to be about 620,000 units, with about 45% in Asia Pacific, about 31% in Europe and about 10% in Russia-CIS. Wabtec estimates that about 32,000 new passenger transit vehicles were ordered worldwide in 2020.

In Europe, the majority of the rail system serves the passenger transit market, which is expected to continue growing as energy and environmental policies encourage continued investment in public mass transit, and modal shift from car to rail, although this growth may be stunted in the near-term as a result of the COVID-19 pandemic. According to UNIFE, Germany, France, and the United Kingdom were the largest Western European transit markets, representing about two-thirds of industry spending in the European Union. UNIFE projected the accessible Western European rail market to grow at about 2.0% annually, led by investments in new rolling stock in France and Germany. About 75% of freight traffic in Europe is hauled by truck, while rail accounts for about 19%. The largest freight markets in Europe are Germany, Poland and the United Kingdom. In recent years, the European Commission has adopted a series of measures designed to increase the efficiency of the European rail network by standardizing operating rules and certification requirements. UNIFE believes that adoption of these measures should have a positive effect on ridership and investment in public transportation over time.

In North America, railroads carry about 40% of intercity freight, as measured by ton-miles, which is more than any other mode of transportation. Through direct ownership and operating partnerships, U.S. railroads are part of an integrated network that includes railroads in Canada and Mexico, forming what is regarded as the world’s most-efficient and lowest-cost freight rail service. There are more than 600 railroads operating in North America, with the largest railroads, referred to as “Class I”, accounting for more than 90% of the industry’s revenues. The railroads carry a wide variety of commodities and goods, including coal, metals, minerals, chemicals, grain, and petroleum. These commodities represent about 50% of total rail carloads, with intermodal carloads accounting for the rest. Railroads operate in a competitive environment, especially with the trucking industry, and are always seeking ways to improve safety, cost and reliability. New technologies offered by Wabtec and others in the industry can provide some of these benefits. Demand for our freight related products and services in North America is driven by a number of factors, including rail traffic, and production of new locomotives and new freight cars. In the U.S., the passenger transit industry is dependent largely on funding from federal, state and local governments, and from fare box revenues. Demand for North American passenger transit products is driven by a number of factors, including government funding, deliveries of new subway cars and buses, and ridership. The U.S. federal government provides money to local transit authorities, primarily to fund the purchase of new equipment and infrastructure for their transit systems.

Growth in the Asia Pacific market has been driven mainly by the continued urbanization of China and India, and by continued investments in freight rail rolling stock and infrastructure in Australia to serve its mining and natural resources markets. India is making significant investments in rolling stock and infrastructure to modernize its rail system; for example, Wabtec is delivering on a 1,000-unit locomotive contract with Indian Railways.

Other key geographic markets include Russia-CIS and Africa-Middle East. With about 1.3 million freight cars and about 21,000 locomotives, Russia-CIS is among the largest freight rail markets in the world, and it’s expected to invest in both freight and transit rolling stock. PRASA, the Passenger Rail Agency of South Africa, is expected to continue to invest in new transit cars and new locomotives. According to UNIFE, most emerging markets were expected to grow at above-average rates as global trade led to increased freight volumes and urbanization led to increased demand for efficient mass-transportation systems. It is still uncertain as to how the COVID-19 pandemic will impact the expected growth in these emerging markets, especially in the near-term. As this growth occurs, Wabtec expects to have additional opportunities to provide products and services in these markets.

In its study, UNIFE also said it expected increased investment in digitalization, automation, and predictive maintenance through artificial intelligence, all of which would improve efficiency in the global rail industry. UNIFE expects these trends to increase the overall attractiveness of the rail sector as these trends are expected to lead to significant cost savings, allowing rail to be more competitive in comparison to other modes of transportation. Wabtec offers products and services to help customers make ongoing investments in these initiatives.

Business Segments and Products

We provide our products and services through two principal business segments, the Freight Segment and the Transit Segment, both of which have different market characteristics and business drivers. The Freight Segment primarily manufactures and provides aftermarket parts and services for new locomotives; provides components for new and existing locomotives and freight cars; builds new commuter locomotives; supplies rail control and infrastructure products including electronics, positive train control equipment, signal design and engineering services; provides a comprehensive suite of software-enabled solutions designed to improve customer efficiency and productivity in the transportation and mining industries; overhauls locomotives; and provides heat exchangers and cooling systems for rail and other industrial markets. Customers include large, publicly traded railroads, leasing companies, manufacturers of original equipment such as locomotives and freight cars, and utilities. We are the largest global manufacturer of diesel-electric locomotives for freight railroads producing mission-critical products and solutions that help railroads reduce operating costs, decrease fuel use, minimize downtime and comply with emissions standards. As a result of the large base of approximately 22,500 locomotives currently in use, Wabtec's services product lines of rebuilding, remanufacturing, maintaining, and exchanging locomotives and components in the aftermarkets provides a significant, recurring revenue stream. In 2020, the Freight Segment accounted for approximately 67% of Wabtec’s total net sales, with about 55% of its net sales in the U.S. In 2020, about 63% of the Freight Segment’s net sales were in the aftermarket.

The Transit Segment primarily manufactures and services components for new and existing passenger transit vehicles, typically regional trains, high speed trains, subway cars, light-rail vehicles and buses; supplies rail control and infrastructure products including electronics, signal design and engineering services; and refurbishes passenger transit vehicles. Customers include public transit authorities and municipalities, leasing companies, and manufacturers of passenger transit vehicles and buses around the world. In 2020, the Transit Segment accounted for approximately 33% of our total net sales, with about 15% of its net sales in the U.S. Approximately half of the Transit Segment’s net sales are in the aftermarket with the remainder in the original equipment market. Geographically, Faiveley Transport significantly strengthened Wabtec’s presence in the European and Asia Pacific transit markets.

Following is a summary of our leading products in both aftermarket and original equipment across both of our business segments in 2020:

Equipment:

• Diesel-electric locomotives for freight railroads

• Engines, electric motors and premium propulsion systems used in locomotives, mining, marine, stationary power and drilling applications

• Marine and mining products

Digital & Electronic Products:

• Positive Train Control equipment and electronically controlled pneumatic braking products

• Railway electronics, including event recorders, monitoring equipment and end of train devices

• Signal design and engineering services

• Train performance such as distributed locomotive power, train 'cruise control', and train remote control

• Transport intelligence such as Industrial/mobile Internet of Things (IoT) hardware & software, edge-to-cloud, on and off-board analytics & rules, asset performance management

• Transport logistics such as rail transportation management, shipper transportation management, port visibility and optimization

• Network optimization such as rail network scheduling, dispatch, and optimization, intermodal, terminal management and optimization, rail yard management and optimization

Components:

• Freight car trucks and braking equipment and related components for Freight applications

• Draft gears, couplers and slack adjusters

• Air compressors and dryers

• Heat exchangers and cooling products for locomotives and power generation equipment

• Track and switch products

• New commuter and switcher locomotives

Services:

• Freight locomotive overhaul and refurbishment

• Master service agreements for locomotive and car maintenance

• Transit locomotive and car overhaul

• Unit exchange of locomotive components

Transit Products:

• Railway braking equipment and related components for Transit applications, including high-speed passenger transit vehicles

• Friction products, including brake shoes, discs and pads

• Heating, ventilation and air conditioning equipment

• Doors for buses and subway cars

• Platform screen doors

• Pantographs

• Window assemblies

• Couplers

• Accessibility lifts and ramps for buses and subway cars

• Traction motors

We have become a leader in the freight rail and passenger transit industries by capitalizing on the strength of our existing products, technological capabilities and new product innovations, and by our ability to harden products to protect them from severe conditions, including extreme temperatures and high-vibration environments. Supported by our technical staff of more than 5,000 engineers and specialists, we have extensive experience in a broad range of product lines, which enables us to provide comprehensive, systems-based solutions for our customers.

In recent years, we have introduced a number of significant new products, including Positive Train Control (“PTC”) equipment that encompasses onboard digital data and global positioning communication protocols. We are making additional investments in this technology which we believe will provide customers with opportunities to improve safety and efficiency, in part through data analytics solutions. Other new products include HVAC inverter integrated solutions, brake discs and brake controls, platform doors and gates, and door controllers. In addition, we are continuing to develop Energy Management Solutions for railroads to further reduce fuel consumption and emissions. These developments include the design of a battery electric locomotive that will be integrated with other diesel electric locomotives in a train. This hybrid consist, under the control of our Trip Optimizer software, will significantly reduce fuel consumption as well as having the ability to operate in a low emission state while in populated areas. We are also considering development of locomotives for transit services to operate in a zero emissions environment (such as a tunnel) for extended periods of time.

For additional information on our business segments, see Note 20 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report.

Competitive Strengths

Our key strengths include:

• Iconic Legacy and Strong Reputation with a History of over 150 Years of Innovation****.** The rail industry has been in operation for over 150 years and we have been at the forefront of shaping and transforming the rail landscape through various innovations and technologies. Dating back to 1869 and George Westinghouse’s invention of the air brake, we are an established leader in the rail industry for freight and passenger transit vehicles. For over 110 years, GE Transportation has served the worldwide rail industry, which is a critical component of the global transportation system and the global economy, with an installed base of more than 22,500 locomotives worldwide. Faiveley Transport, founded in 1919, has a long history and is a market leader for its core products, including pantographs, automatic door mechanisms and air conditioning systems. We have leveraged our leading positions by focusing on research and engineering to expand beyond pneumatic braking components to supplying integrated parts and assemblies from a full locomotive through the end of the train. We are a recognized leader in the development and production of electronic recording, measuring and communications systems, positive train control equipment, highly engineered compressors and heat exchangers for locomotives, and a leading manufacturer of freight car components, including electronic braking equipment, draft gears, trucks, brake shoes and electronic end-of-train devices. We are also a leading provider of braking equipment; heating, ventilation and air conditioning equipment; door assemblies and platform screen doors; lifts and ramps; couplers and current collection equipment, such as pantographs, for passenger transit vehicles.

• Breadth of product offering with a stable mix of original equipment market (OEM) and aftermarket business****.** Our product portfolio is one of the broadest in the rail industry, as we offer a wide selection of quality parts, components and assemblies across the entire train and worldwide. We provide our products in both the original equipment market and the aftermarket. Our substantial installed base of products with end-users such as the railroads and the passenger transit authorities is a significant competitive advantage for providing products and services to the aftermarket because these customers often look to purchase safety- and performance-related replacement parts from the original equipment components supplier. In addition, as OEMs and railroad operators attempt to modernize fleets with new products designed to improve and maintain safety and efficiency, these products must be designed to be interoperable with existing equipment. In 2020, net sales of aftermarket parts and services represented about 60% of total net sales.

• Market Leader with Longstanding Customer Partnerships in a Critical Infrastructure Sector.** For more than a century, rail has been a cornerstone of the global transportation system, and thus, the economy. Rail remains one of the most cost-effective, energy-efficient modes of transport, both domestically and internationally. As the largest global producer of diesel-electric locomotives, we have a significant market share both in North America and globally.

• Leading design and engineering capabilities****.** We believe a hallmark of our relationship with our customers has been our leading design and engineering practice, which has assisted in the improvement and modernization of global railway equipment. We believe both our customers and government authorities value our technological capabilities and commitment to innovation, as we seek not only to enhance the efficiency and profitability of our customers, but also to improve the overall safety of the railways through continuous improvement of product performance. The Company designs, develops and manufactures critical components and systems for the rail, mining and marine industries, which include proprietary propulsion systems, engine platforms and controls technology. These innovative and differentiated solutions serve as the building blocks for the rail, mining and marine industries, and help keep our global customers at the forefront of advancing technologies. When coupled with our advanced digital analytic capabilities, our solutions help drive increased energy management, performance and reliability to our products. To that end, we have assembled a wide range of patented products, which we believe provides us with a competitive advantage.

• Leading the Digital Transformation of Wabtec’s Industries****.** Our early investment in data analytics and software has allowed us to become a strategic partner for customers looking to derive new value from assets and digitally transform their operations. Through these initiatives, the transportation industry, from mine to port, from shipper to receiver, from port to intermodal terminals to main line locomotives and railcars and across train yards and operation centers, has evolved to include digital solutions. The breadth of our Digital and Electronic solutions gives customers confidence in our ability to address their current and future needs.

• Experience with industry regulatory requirements***.* The freight rail and passenger transit industries are governed by various government agencies and regulators in each country and region. These groups mandate rigorous manufacturer certification, new product testing and approval processes that we believe are difficult for new entrants to meet cost-effectively and efficiently without the scale and extensive experience we possess. Certification processes are lengthy, and often require local presence and expertise. In addition, each transit agency places a high degree of importance on vehicle customization, which requires experience and technical expertise to meet ever-evolving specifications.

• Streamlined Cost Structure and Operational Excellence Provide Operating Leverage and Support Wabtec’s Growth***.* Wabtec’s lean manufacturing and continuous improvement initiatives have been a part of the Company’s culture for

more than 25 years and have enabled Wabtec to manage successfully through cycles in the rail supply market. We are continuing to expand our Operating Excellence focus in driving productivity and delighting customers. Our Operating Excellence Program leverages the breadth and depth of our One Wabtec expertise across the organization in sharing of best practice, instilling a culture of learning, problem solving, continuous improvement, and driving standard operating practices. This, coupled with our overall manufacturing and supply base footprint initiatives, will drive increased flexibility and improved responsiveness to our customer needs while driving margin improvement through productivity.

Business strategy

We strive to generate sufficient cash to invest in our growth strategies and to build on what we consider to be a leading position as a low-cost producer in the industry while maintaining world-class product quality, technology and customer responsiveness. We continuously strive to improve quality, delivery and productivity, and to reduce costs utilizing global sourcing and supply chain management. These practices enable us to streamline processes, improve product reliability and customer satisfaction, reduce product cycle times and respond more rapidly to market developments. We also rely on functional experts within the Company across various disciplines to train, coach and share best practices throughout the corporation, while benchmarking against best-in-class competitors and peers. Over time, we expect to continue to increase operating margins, improve cash flow and strengthen our ability to invest in the following growth strategies:

• Product innovation and new technologies****.** We continue to emphasize innovation and development funding to create new products and capabilities, such as the battery electric locomotive and vehicle monitoring and data analytics. We have a multi-year initiative to build on our existing expertise and technologies in the digital and electronics areas. In addition, we invest in developing enhancements and new features to existing products, such as brake discs and heat exchangers. We are focusing on technological advances, especially in the areas of electronics, braking products and other on-board equipment, as a means to deliver new product growth. We seek to provide customers with incremental technological advances that offer immediate benefits with cost-effective investments.

• Global and market expansion.** We believe that international markets represent a significant opportunity for future growth. In 2020, net sales to non-U.S. customers were approximately $4.4 billion. We intend to increase international sales through direct sales of existing products to current and new customers, by developing specific new products for application in new geographic markets, by making strategic acquisitions, and through joint ventures with railway suppliers which have a strong presence in their local markets. In transit, we are focused on mature markets such as Europe and emerging markets such as India. In freight, we are targeting markets that operate significant fleets of U.S.-style locomotives and freight cars, including Australia, Brazil, China, India, Russia, South Africa, and other select areas within Europe and South America. In addition, we have opportunities to increase the sale of certain products that we currently manufacture for the rail industry into other industrial markets, such as mining, off-highway and energy. These products include heat exchangers and friction materials.

• Aftermarket products and services****.** Historically, aftermarket sales are less cyclical than OEM sales because a certain level of aftermarket maintenance and service work must be performed, even during an industry slowdown. In 2020, net sales of aftermarket parts and services represented about 60% of total net sales. As a long time supplier of original equipment, we have an extensive installed base of equipment in the field, which generates recurring aftermarket sales. Wabtec provides aftermarket parts and services for its components, and we seek to expand this business with customers who currently perform the work in-house. In this way, we expect to benefit as transit authorities and railroads outsource certain maintenance and overhaul functions.

• Acquisitions, joint ventures and alliances****.** We continue to invest in acquisitions, joint ventures and alliances using a disciplined, selective approach and rigorous financial criteria. These transactions are expected to meet our financial criteria and contribute to growth strategies of product innovation and new technologies, global expansion, and aftermarket products and services. We believe these expansion strategies will help Wabtec to grow profitably, expand geographically, and dampen the impact from potential cycles in the North American freight rail industry.

Recent Acquisitions and Joint Ventures

See Note 3 of the Notes to Consolidated Financial Statements included in Part IV, Item 5 of this report for additional information about our recent acquisitions and joint ventures.

Backlog

The Company’s backlog was about $21.6 billion at December 31, 2020. For 2020, about 60% of total net sales came from aftermarket orders, which typically carry lead times of less than 30 days and are not included in backlog for a significant period of time.

The Company’s contracts are subject to standard industry cancellation provisions, including cancellations on short notice or upon completion of designated stages. Generally, if a customer were to cancel a contract we would have an enforceable right to payment for work completed up to the date of cancellation which would include a reasonable profit margin. Substantial scope-of-work adjustments are common. For these and other reasons, completion of the Company’s backlog may be delayed or canceled. The railroad industry, in general, has historically been subject to fluctuations due to overall economic conditions and the level of use of alternative modes of transportation.

The rollforward of the Company's backlog of firm customer orders and the expected year of completion are as follows:

in millions						Freight Segment						Transit Segment						Consolidated
Balance at December 31, 2019						$	18,945.3					$	3,486.4					$	22,431.7
New orders						$	4,255.2					$	2,522.5					$	6,777.7
Less: net sales						$	(5,082.3)					$	(2,473.8)					$	(7,556.1)
Adjustments / foreign exchange						$	(231.1)					$	169.0					$	(62.1)
Balance at December 31, 2020						$	17,887.1					$	3,704.2					$	21,591.3
Expected Delivery
2021						$	3,586.3					$	1,934.4					$	5,520.7
Other years						$	14,300.8					$	1,769.8					$	16,070.6

The Company saw no significant cancellations of backlog during the year ended December 31, 2020 despite the unprecedented pandemic caused by COVID-19 and its effects on locomotive parkings, carbuilds, and transit ridership levels. However, the economic slowdown that was caused by COVID-19 did have some impact on the timing of orders in backlog as the delivery of goods and services previously expected to be completed in the current year has been pushed out to future years.

Engineering and Development

To execute our strategy to develop new products, we invest in a variety of engineering and development activities. For the fiscal years ended December 31, 2020, 2019 and 2018, we invested $162.1 million, $209.9 million and $87.5 million, respectively, on product development and improvement activities. Significant incremental engineering expense is incurred with the execution of original equipment customer contracts. Across the corporation we have established multiple Centers of Competence, which have specialized, technical expertise in various disciplines and product areas.

Our engineering and development program includes investments in data analytics, train control and other new technologies, with an emphasis on developing products that enhance safety, productivity and efficiency for our customers. For example, we have developed advanced cooling systems that enable lower emissions from diesel engines used in rail and other industrial markets. Sometimes we conduct specific research projects in conjunction with universities, customers and other industry suppliers.

We use our Product Development System to develop and monitor new product programs. The system requires the product development team to follow consistent steps throughout the development process, from concept to launch, to ensure the product will meet customer expectations and internal profitability targets.

Intellectual Property

We have about 6,000 active patents worldwide and on average file for approximately 300 new patents each year. We also rely on a combination of trade secrets and other intellectual property laws, nondisclosure agreements and other protective measures to establish and protect our proprietary rights in our intellectual property. We also follow the product development practices of our competitors to monitor any possible patent infringement by them, and to evaluate their strategies and plans.

Certain trademarks, among them the name WABCO®, were acquired or licensed from American Standard Inc., now known as Trane, in 1990 at the time of our acquisition of the North American operations of the Railway Products Group of Trane. Other trademarks have been developed through the normal course of business or acquired as a part of our ongoing merger and acquisition program.

We have entered into a variety of license agreements as licensor and licensee. We do not believe that any single license agreement is of material importance to our business or either of our business segments as a whole.

We have issued licenses to the two sole suppliers of railway air brakes and related products in Japan, Nabtesco and Mitsubishi Electric Company. The licensees pay annual license fees to us and also assist us by acting as liaisons with key

Japanese passenger transit vehicle builders for projects in North America. We believe that our relationships with these licensees are beneficial to our core transit business and customer relationships in North America.

Customers

We provide products and services for more than 500 customers worldwide. Our customers include passenger transit authorities and railroads throughout North America, Europe, Asia Pacific, South Africa and South America; manufacturers of transportation equipment, such as locomotives, freight cars, passenger transit vehicles and buses; and companies that own, lease, and maintain such equipment.

Top customers can change from year to year. For the fiscal year ended December 31, 2020, our top five customers accounted for approximately 24% of net sales. No one customer represents 10% or more of consolidated net sales. We believe that we have strong relationships with all of our key customers.

Competition

We hold a leading market share for many of our core product lines globally, although market shares vary by product lines and geographies. We operate in a highly competitive marketplace. Price competition is strong because we have a relatively small number of customers and they are very cost-conscious. In addition to price, competition is based on product performance and technological leadership, quality, reliability of delivery, and customer service and support.

Our principal competitors vary across product lines and geographies. Within North America, New York Air Brake Company, a subsidiary of the German air brake producer Knorr-Bremse AG (“Knorr”) and Amsted Rail Company, Inc., a subsidiary of Amsted Industries Corporation, are our principal overall Original Equipment Manufacturer ("OEM") competitors. Our competition for locomotive, freight and passenger transit service and repair is mostly from the railroads’ and passenger transit authorities’ in-house operations, Electro-Motive Diesel, a division of Caterpillar, and Knorr. We believe our key strengths, which include leading market positions in core products, breadth of product offering with a stable mix of OEM and aftermarket business, leading design and engineering capabilities, significant barriers to entry and an experienced management team, enable us to compete effectively in this marketplace. Outside of North America, Knorr is our main competitor, although not in every product line or geography. In addition, our competitors often include smaller, local suppliers in most international markets. Depending on the product line and geography, we can also compete with our customers, such as CRRC Corporation Limited, a China-based manufacturer of rolling stock.

Employees

Human Capital

At Wabtec, we believe performance drives progress, and are committed to developing sustainable transportation solutions that move and improve the world. We are committed to driving an inclusive culture and integrating our talent and capabilities across the enterprise. As a company, we believe that protecting the health and safety of our people and the environment is the responsibility of everyone at Wabtec, especially during a global pandemic.

Our headquarters are in Pittsburgh, Pennsylvania and we have offices and facilities in over 50 countries around the globe. As of December 31, 2020, we have a global workforce of approximately 27,000.

Diversity and Inclusion

Wabtec is committed to ensuring a diverse and inclusive workplace that respects and seeks the unique talents, experiences and viewpoints of all our employees. We strive to create an inclusive workplace where employees can be themselves. In 2019, women constituted approximately 16% of our global workforce and approximately 18% of our salaried employees. Our U.S. employee base was comprised of approximately 19% of people of color in 2019. We also announced our goals of 20% female representation globally, 25% female representation among salaried employees, 30% representation among people of color across the total U.S. workforce and 25% representation among people of color across U.S. salaried employees by 2030.

Training and Development

We continually invest in our employees’ career growth and provide employees with a wide range of development opportunities, including face-to-face, virtual, social and self-directed learning, mentoring and coaching programs. We have invested in training courses through Wabtec’s Learning Management System (LMS).

Our two-year Leadership, Expertise, Advancement and Development (LEAD) program is the primary path for university graduates into Wabtec. LEAD is a two-year program that offers an immersive learning experience in the fields of engineering, operations, finance and IT along with extensive leadership training designed to build the next generation of leaders. On average, there are 100 participants in the LEAD program that rotate between business units every six months to work on strategic projects and assignments, gain exposure to senior leadership and build their global professional network. Approximately 20

percent of Wabtec’s Equipment and Services engineering and operations leaders are graduates of LEAD. We are focused on growing this program to support our global talent pipeline.

Health and Safety

When it comes to employee safety, our commitment is to provide safe work environments for our employees and to meet or exceed environmental, health, and safety (EHS) laws and regulations in the places where we operate. In 2020, the company relaunched the Environment, Health, and Safety component of the Wabtec Management System (known as the “EHS WMS”) to strengthen our management system approach to addressing EHS risks and promote the consistent implementation of best practices across all our global manufacturing and services sites, regardless of how local laws are implemented or enforced. The EHS WMS establishes standard expectations in 13 core competency areas, including leadership and accountability, regulatory applicability review, EHS processes and systems, risk assessment, safety defenses, exposure defenses, environmental defenses and contractor management. Operational sites are measured against these EHS program expectations. In addition, the company’s EHS WMS is directly aligned to accepted international standards, such as ISO 14001 for Environmental and ISO 45001 for Occupational Health and Safety.

COVID-19

The pandemic has reinforced the importance of keeping Wabtec employees safe and healthy while keeping essential rail services and the global economy moving. When the pandemic began, Wabtec launched its COVID-19 Crisis Management Team, which met daily to focus on three key elements: protecting our people, serving our customers, and ensuring business continuity. Manufacturing and office locations were required to implement risk assessment methodologies and rethink work practices to allow for remote working or social distancing, develop new procedures for workplace entry, strengthen site-level crisis management teams and implement new tools for rapid communication with site employees. Site leaders and people managers were trained on techniques for communicating transparently and navigating complex business decisions during a crisis.

Compensation and Benefits

We remain committed to a strong pay-for performance philosophy that aligns individual performance, behaviors and business results with individual rewards. To deliver on that commitment, we utilize market data to benchmark to the external market, and consider factors such as an employee’s role and experience, the location of the job and performance when determining compensation.

We provide our employees resources to help them succeed. We offer a wide range of benefits including healthcare and wellness benefits, retirement benefits, an Employee Assistance Program, Employee Resource Groups to build diverse communities at Wabtec, and paid time off.

Regulation

In the course of our operations, we are subject to various regulations and standards of governments and other agencies in the U.S. and around the world. These entities typically govern equipment, safety and interoperability standards for freight rail rolling stock and passenger transit, oversee a wide variety of rules and regulations governing safety and design of equipment, and evaluate certification and qualification requirements for suppliers. New products generally must undergo testing and approval processes that are rigorous and lengthy. As a result of these regulations and requirements, we must usually obtain and maintain certifications in a variety of jurisdictions and countries. The governing bodies include the FRA and the Association of American Railroads ("AAR") in the U.S., and the International Union of Railways (“UIC”) and the European Railway Agencies in Europe. Also, in Europe, the European Committees for Standardization continually draft new European standards which cover, for example, the Reliability, Availability, Maintainability and Safety of railways systems. To guarantee interoperability in Europe, the European Union for Railway Agencies is responsible for defining and implementing Technical Standards of Interoperability, which covers areas such as infrastructure, energy, rolling stock, telematic applications, traffic operation and management subsystems, noise pollution and waste generation, protection against fire and smoke, and system safety.

Most countries and regions in which Wabtec does business have similar rule-making bodies. In Russia, a GOST-R certificate of conformity is mandatory for all products related to the safety of individuals in Russian territory. In China, any product or system sold on the Chinese market must have been certified in accordance with national standards. In the local Indian market, most products are covered by regulations patterned after AAR and UIC standards.

Effects of Seasonality

Our business is not typically seasonal. Third quarter results may be affected by the timing of services performed under our locomotive maintenance contracts and vacation and scheduled plant shutdowns at several of our major customers. Fourth quarter results may be affected by the timing of spare parts and service orders placed by transit agencies worldwide. Quarterly results can also be affected by the timing of projects in backlog and by project delays.

Environmental Matters

Additional information on environmental matters is included in Note 19 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report.

Available Information

We maintain a website at www.wabteccorp.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as the annual report to stockholders and other information, are available free of charge on this site. The Internet site and the information contained therein or connected thereto are not incorporated by reference into this Form 10-K. The following are also available free of charge on this site and are available in print to any shareholder who requests them: Our Corporate Governance Guidelines, the charters of our Audit, Compensation and Nominating and Corporate Governance Committees, our Code of Conduct, which is applicable to all employees, our Code of Ethics for Senior Officers, which is applicable to our executive officers, our Policies on Related Party Transactions and Conflict Minerals, and our Sustainability Report.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following table provides information on our executive officers as of February 19, 2021.

Officers						Age						Position
Rafael Santana						49						President and Chief Executive Officer
David L. DeNinno						65						Executive Vice President, General Counsel and Secretary
Patrick D. Dugan						54						Executive Vice President Finance and Chief Financial Officer
Nicole Theophilus						50						Executive Vice President and Chief Human Resources Officer
Eric Gebhardt						52						Chief Technology Officer
Michael E. Fetsko						56						President, Freight and Industrial Components
Pascal Schweitzer						44						President, Global Freight Services
Rogerio Mendonca						48						President, Equipment
Nalin Jain						51						President, Digital Electronics
Lillian Leroux						49						President, Transit
John A. Mastalerz						54						Senior Vice President of Finance and Chief Accounting Officer
Gina Trombley						50						Senior Vice President, Sales & Marketing & Chief Commercial Officer - Americas
Greg Sbrocco						52						Senior Vice President, Global Operations

Rafael Santana was named President and Chief Executive Officer of the Company effective July 1, 2019. Previously, he served as Executive Vice President from February 2019 to July 2019. Mr. Santana was President and Chief Executive Officer of GE Transportation since November 2017. Mr. Santana has held several global leadership positions since joining GE in 2000, including roles in the Transportation, Power and Oil and Gas businesses. Prior to being named President and Chief Executive Officer of GE Transportation, Mr. Santana was President and Chief Executive Officer of GE in Latin America. He also served as President and Chief Executive Officer of GE Oil and Gas Turbomachinery Solutions and had roles as Chief Executive Officer for GE Gas Engines and Chief Executive Officer for GE Energy in Latin America.

David L. DeNinno was named Executive Vice President, General Counsel and Secretary of the Company effective December 2016. Previously, Mr. DeNinno served as Senior Vice President, General Counsel and Secretary since February 2012. Previously, Mr. DeNinno served as a partner at K&L Gates LLP since May 2011 and prior to that with Reed Smith LLP.

Patrick D. Dugan was named Executive Vice President and Chief Financial Officer effective December 2016. Previously Mr. Dugan served as Senior Vice President and Chief Financial Officer since January 2014. Previously, Mr. Dugan was Senior Vice President, Finance and Corporate Controller from January 2012 until November 2013. He originally joined Wabtec in 2003 as Vice President, Corporate Controller. Prior to joining Wabtec, Mr. Dugan served as Vice President and Chief Financial Officer of CWI International, Inc. from December 1996 to November 2003. Prior to 1996, Mr. Dugan was a Manager with PricewaterhouseCoopers LLP.

Nicole Theophilus was named Executive Vice President & Chief Human Resource Officer in October 2020. Prior to joining Wabtec, Ms. Theophilus served most recently as Chief Human Resource Officer of West Corporation. Previously she served as Executive Vice President and Chief Human Resource Officer, Vice President of Human Resources and Vice President and Chief Employment Counsel of ConAgra Corporation. Prior to 2006, Ms. Theophilus was a partner with the law firm Husch Blackwell.

Eric Gebhardt was named Chief Technology Officer in October 2020. Prior to joining Wabtec, Mr. Gebhardt served as Managing Director of KCK-US. He also served in a variety of roles with General Electric including Chief Technology Officer of GE Power, Chief Product Management Officer for GE Energy Connections, Chief Platforms and Operations Officer for Current, and Chief Technology Officer for GE Oil & Gas.

Michael E. Fetsko was named President, Freight and Industrial Components effective January 2017. Previously, Mr. Fetsko served as Vice President and Group Executive from January 2014. He joined Wabtec in July of 2011 as Vice President, Freight Pneumatics. Prior to joining Wabtec, Mr. Fetsko served in various executive management roles with Bombardier Transportation. Prior to Bombardier, Mr. Fetsko served in various management roles with two different environmental engineering firms.

Pascal Schweitzer was named President, Global Freight Services on February 25, 2019. Previously Mr. Schweitzer was the Vice President—Services of GE Transportation since April 2017. He served as General Manger – Europe – Power Services for GE Power from November 2015 through April 2017 and prior to that several positions with Alstom Power.

Rogerio Mendonca was named President, Freight Equipment on February 1, 2021. Previously Mr. Mendonca served as Vice President for Baker Hughes. Prior to that he served as President of GE Transportation in Latin America and in several roles leading up to that including Commercial Director and Service Operations General Manager.

Nalin Jain was named President, Digital Electronics business effective December 2020. Mr. Jain had served as President, Global Equipment since May 2019 and previously as President & CEO, International Markets since Aug 2017 for GE Transportation. Prior to that, Mr. Jain had multiple leadership roles of increasing responsibility with GE Aviation and GE Transportation, since September 2005. Mr. Jain served as Director Global Partnerships with Bombardier Inc since July 2002 and prior to that he worked for Saint Gobain.

Lilian Leroux was named President, Transit effective March 2019. Previously he served as Group President—Brakes & Safety from January 2017 to October 2019. Prior to that, Mr. Leroux held various executive management roles with Faiveley Transport, starting in January 2001.

John A. Mastalerz was named Senior Vice President of Finance and Chief Accounting Officer in February 2020. Previously, Mr. Mastalerz served as Senior Vice President, Corporate Controller and Principal Accounting Officer from July 2017 to February 2020 and as Vice President and Corporate Controller from January 2014 to July 2017. Prior to joining Wabtec, Mr. Mastalerz served in various executive management roles with the H.J. Heinz Company from January 2001 to December 2013, most recently as Corporate Controller and Principal Accounting Officer. Prior to 2001, Mr. Mastalerz was a Senior Manager with PricewaterhouseCoopers LLP.

Gina Trombley was named Senior Vice President, Sales & Marketing & Chief Commercial Officer - Americas, effective September 8, 2020. Prior to joining Wabtec, Ms. Trombley served in various executive roles at Bombardier Transportation from 2017 to 2019, most recently as Vice President of Services and previously as Vice President Sales for Bombardier Transport - Americas. Ms. Trombley also held progressive commercial and marketing leadership roles at Parsons and GE Transportation.

Greg Sbrocco was named Senior Vice President, Global Operations, effective February 25, 2019. Prior to this, Mr. Sbrocco was Global Supply Chain Leader for GE Transportation. Mr. Sbrocco had been with GE since 1992 when he joined as an Environmental Engineer for the GE Energy business. During his tenure with GE, Mr. Sbrocco held several leadership roles in GE Energy, GE Oil and Gas, and GE Transportation.