Westinghouse Air Brake Technologies 10-Q 2023-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 2023

OR

For the transition period from to

Commission file number: 033-90866

WESTINGHOUSE AIR BRAKE TECHNOLOGIES

CORPORATION

(Exact name of registrant as specified in its charter)

412-825-1000

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of July 21, 2023, there were 179,130,334 shares of common stock, par value $.01 per share, of the registrant outstanding.

WESTINGHOUSE AIR BRAKE

TECHNOLOGIES CORPORATION

June 30, 2023

FORM 10-Q

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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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, 2022, filed with the Securities and Exchange Commission on February 15, 2023.

OVERVIEW

Wabtec is one of the world’s largest providers of value-added, technology-based locomotives, equipment, systems, and services for the global 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 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 six months of 2023, approximately 55% of the Company’s net sales came from customers outside the United States.

Business Update

During the six months of 2023, Wabtec continued to execute on our value creation framework by signing strategic orders for 30 new locomotives with a North American railroad, new locomotives in Brazil, and mining drive systems in high altitude applications. We announced our largest certified pre-owned order for 69 locomotives for a North American customer and won a contract to supply pantograph and Passenger Information Systems for up to 504 Stadler cars. Wabtec completed the strategic acquisition of L&M Radiator, Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers for the mining sector. We delivered our 500th locomotive to Indian Railways which was a significant milestone in our 10-year contract. Our senior unsecured debt was upgraded by Moody's, which reflects resiliency of the business, our balance sheet strength and strong cash generation. Additionally, Wabtec rebranded our Digital Electronics product line to Digital Intelligence; a change that more accurately reflects the complete digital products and services portfolio offered to our customers.

During the first quarter of 2022, Wabtec announced Integration 2.0, a three-year strategic initiative to target incremental run rate synergies estimated to be between $75 million and $90 million in 2025. The scope of the review includes consolidating our operating footprint, reducing headcount, streamlining the end-to-end manufacturing process, restructuring the North America distribution channels, expanding operations in low-cost countries and simplifying the business through systems enablement, including the source-to-pay process. Management will also consider additional capital investments to further simplify and streamline the business. The Company anticipates that it will incur one-time restructuring charges of approximately $135 million to $165 million related to this initiative, of which approximately $86 million has been incurred through June 30, 2023. Total estimated initiative charges could change based on the specific programs approved or changes to the scope of the review. During the three and six months ended June 30, 2023, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $8 million and $17 million, respectively, primarily for employee-related costs and asset write downs associated with site consolidations in Europe. Programs approved to date are expected to result in approximately 15 facility closures and impact approximately 1,100 employees. No significant charges related to Integration 2.0 were recorded during the six months ended June 30, 2022.

The Company continues to navigate macroeconomic volatility which is impacting our supply chain, results of operations and business results. Impacts for the three and six months ended June 30, 2023 and 2022 are discussed in more detail in the Results of Operations section below. Future supply chain disruptions and labor availability could cause component and raw material shortages resulting in an adverse effect on the timing of the Company’s revenue and cash flows. 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 Russian invasion of Ukraine and the resultant sanctions related to Russia and Belarus have further impacted our supply and distribution channels and caused significant price inflation which had, and are expected to continue to have, adverse effects on Wabtec’s business results. During the second quarter of 2023, based on changes in facts and circumstances, management determined that assets related to Russian operations, excluding cash, were not expected to be recoverable and, as a result, a charge of approximately $3 million was recorded. As of June 30, 2023, Wabtec had approximately $8 million of cash related to Russian operations which will be utilized to settle remaining obligations in Russia. Management determined that inventory related to operations in Ukraine were not expected to be recoverable and were written off resulting in an insignificant charge during the first quarter of 2022. Remaining assets related to Ukraine and those in Belarus were not significant.

The Company utilizes various mitigating actions intended to lessen the impact of macroeconomic volatility. These actions include implementing price escalations and surcharges, driving operational efficiencies through various cost mitigation

efforts and discretionary spend management, strategically sourcing materials, reviewing and modifying distribution logistics, and accelerating integration synergies through Integration 2.0.

A portion of our workers are represented by labor unions. The United Electrical, Radio and Machine Workers of America (UE), Locals 506 and 618 collective bargaining agreement, covering approximately 1,400 locomotive manufacturing workers in Erie, Pennsylvania, expired on June 9, 2023. Negotiations with UE officially began on April 27, 2023 and an agreement between the Company and the UE was not reached before the contract expired. On June 22, 2023, the UE voted against ratification of the Company's proposed agreement and authorized a strike. The Company and the UE are continuing negotiations with the assistance of a federal mediator. The Company continuously monitors its labor activity.

Cyber Incident

As previously announced, on June 26, 2022, we detected a cyber security incident which impacted the Company’s network. The Company promptly activated incident response protocols, which included shutting down certain systems, and commenced an investigation of the incident. The Company also notified law enforcement and engaged legal counsel and other third-party incident response and cybersecurity professionals.

Based on the Company's assessment, the incident has not had a significant financial impact and the Company does not believe the incident will have a material impact on its business, operations or financial results. The Company maintains cyber insurance, subject to certain deductibles and policy limitations typical for its size and industry.

RESULTS OF OPERATIONS

Consolidated Results

SECOND QUARTER 2023 COMPARED TO SECOND QUARTER 2022

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

The following table shows the major components of the change in Net sales in the three months ended June 30, 2023 from the three months ended June 30, 2022:

Net sales

Net sales for the three months ended June 30, 2023 increased by $359 million, or 17.5%, to $2.41 billion compared to the same period in 2022. Organic sales increased $355 million which was attributable to both Freight and Transit Segments driven by an increase across all product lines. Services sales increased from higher deliveries of locomotive modernizations and higher parts sales. Components sales increased from higher original equipment railcar build and increased market share for certain products due to product availability and growth in industrial end-markets. Equipment sales increased from higher locomotive sales and Digital Intelligence sales increased due to higher demand for on-board locomotive solutions and international Positive Train Control (PTC) sales. Transit sales increased from higher demand for Original Equipment and Aftermarket products driven by increased infrastructure investment. Sales from acquisitions contributed $11 million in the Freight Segment and unfavorable changes in foreign exchange rates decreased sales by $7 million.

Cost of sales

Cost of sales for the three months ended June 30, 2023 increased by $281 million, or 20.0%, to $1.68 billion compared to the same period in 2022. The increase is primarily due to the increase in sales. Cost of sales as a percentage of net sales was 69.9% and 68.5% for the three months ended June 30, 2023 and 2022, respectively. The increase was due to unfavorable product mix between and within business groups, manufacturing inefficiencies primarily related to labor, and higher restructuring costs, partially offset by benefits from structured cost actions taken through Integration 2.0 and prior years’ restructuring and integration projects. Costs of sales for the three months ended June 30, 2023 and 2022 included $8 million and $2 million, respectively, of restructuring costs, primarily for headcount actions and footprint rationalization, with the amounts in 2023 primarily being related to Integration 2.0. The amounts in 2023 also include the write off of non-cash assets in Russia that were determined to not be recoverable in the second quarter.

Operating expenses

Total operating expenses increased $30 million, or 7.9%, for the three months ended June 30, 2023 compared to the same period in 2022. Operating expenses as a percentage of sales was 17.1% and 18.6% for the three months ended June 30, 2023 and 2022, respectively. Selling, general and administrative expenses ("SG&A") increased $26 million for the three months ended June 30, 2023 compared to the same period in 2022. The increase is primarily from costs incurred to support the higher sales volume, higher employee compensation and benefit costs and higher professional services spend, partially offset by the impacts of Integration 2.0 and prior years’ restructuring actions. Restructuring costs included in SG&A were $2 million for both the three months ended June 30, 2023 and 2022, and were primarily for headcount actions and footprint rationalization programs, with the amounts in 2023 primarily related to Integration 2.0. Engineering expense increased $3 million primarily due to investments in new technology.

Interest expense, net

Interest expense, net, increased $11 million for the three months ended June 30, 2023 compared to the same period in 2022 primarily due to higher average overall debt balances and higher effective interest rates in the current period.

Other Income, net

Other income, net, decreased $5 million for the three months ended June 30, 2023 compared to the same period in 2022 primarily due to higher foreign exchange losses in the current year compared to the prior year.

Income taxes

The effective income tax rate for the three months ended June 30, 2023 was 25.5% consistent with the same period in 2022.

Freight Segment

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

The following table shows the major components of the change in Net sales for the Freight Segment in the second quarter of 2023 from the second quarter of 2022:

Net sales

Freight Segment organic sales increased across all product lines by $216 million driven primarily by:

• Services sales from higher deliveries of locomotive modernizations and higher parts sales

• Components sales from higher original equipment railcar build and increased market share for certain products due to product availability and growth in industrial end-markets

• Equipment sales from higher locomotive sales

• Digital Intelligence sales due to higher demand for on-board locomotive solutions and international PTC sales

Cost of sales

Freight Segment Cost of sales increased $170 million and Cost of sales as a percentage of Net sales increased 1.4 percentage points due to:

• Higher sales volume

• Unfavorable mix within the Freight Segment product lines

• Manufacturing inefficiencies primarily related to labor negotiations at our Erie facility

• Higher restructuring costs

Cost of sales for the three months ended June 30, 2023 and 2022 included $5 million and $1 million, respectively, of restructuring costs, with the amounts in 2023 primarily related to the write off of non-cash assets in Russia that were determined to not be recoverable in the second quarter.

Operating expenses

Freight Segment operating expenses increased by $10 million primarily driven by:

• Higher SG&A expenses of $6 million resulting from higher costs to support increased sales volume and higher professional services spend

• Higher employee compensation and benefit costs

• Higher investments in new technology increasing Engineering expense by $2 million

Transit Segment

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

The following table shows the major components of the change in Net sales for the Transit Segment in the second quarter of 2023 from the second quarter of 2022:

Net sales

Transit Segment organic sales increased by $139 million driven by strong Original Equipment Manufacturing and Aftermarket sales primarily as a result of increased demand for original equipment door, heating, ventilation and air conditioning (HVAC) and brake systems and increased infrastructure investment. Additionally, sales for the second quarter of 2022 were negatively impacted by a manufacturing disruption caused by a cyber incident which decreased net sales by approximately 5%.

Cost of sales

Transit Segment Cost of sales increased by $111 million and Costs of sales as a percentage of sales increased by 1.3 percentage points primarily due to:

• Higher sales volume

• Unfavorable mix within product lines

• Increased manufacturing costs

• Higher restructuring costs

Partially offset by:

• Benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects

Transit Cost of sales for the three months ended June 30, 2023 and 2022 includes $3 million and $1 million, respectively, of restructuring costs, primarily for footprint rationalization and headcount actions in Europe, with the amounts in 2023 related to Integration 2.0.

Operating expenses

Transit Segment operating expenses increased by $14 million primarily driven by:

• Higher SG&A expenses of $11 million to support higher sales volume and higher employee compensation and benefit costs

• Higher Engineering expenses of $3 million for investments in new technology

Partially offset by:

• Benefits from structured cost actions taken through restructuring actions

Transit Operating expenses for the three months ended June 30, 2023 and 2022 includes $3 million and $2 million, respectively, of restructuring costs, primarily for footprint rationalization and headcount actions in Europe, with the amounts in 2023 related to Integration 2.0.

FIRST SIX MONTHS OF 2023 COMPARED TO FIRST SIX MONTHS OF 2022

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

The following table shows the major components of the change in Net sales in the six months ended June 30, 2023 from the six months ended June 30, 2022:

Net sales

Net sales for the six months ended June 30, 2023 increased by $626 million, or 15.7%, to $4.60 billion compared to the same period in 2022. Organic sales increased $657 million which was primarily attributable to both the Freight and Transit Segments driven by an increase across all product lines. Equipment sales increased due to higher locomotive and mining sales and Services sales increased from a larger active locomotive fleet and higher deliveries of locomotive modernizations. In addition, Components sales increased due to a higher railcar build, increased railcars in operation, and growth in industrial end-markets, and Digital Intelligence sales increased due to higher demand for on-board locomotive and mining solutions, international Positive Train Control (PTC) sales and technology upgrades. Transit Segment organic sales increased by $197 million primarily as a result of increased demand for Aftermarket and Original Equipment Manufacturing products driven by increased infrastructure investment. Sales from acquisitions contributed $32 million in the Freight Segment and unfavorable changes in foreign exchange rates decreased sales by $63 million.

Cost of sales

Cost of sales for the six months ended June 30, 2023 increased by $478 million, or 17.5%, to $3.2 billion compared to the same period in 2022. The increase is primarily due to the increase in sales. Cost of sales as a percentage of net sales was 69.8% and 68.8% for the six months ended June 30, 2023 and 2022, respectively. The increase was due to unfavorable product mix between and within business groups, higher next generation product development costs in Digital Intelligence, manufacturing inefficiencies primarily related to labor, and increased restructuring costs in the current year, partially offset by benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects, and the effects of foreign exchange rates. Costs of sales for the six months ended June 30, 2023 and 2022 included $12 million and $7 million, respectively, of restructuring costs, primarily for headcount actions and footprint rationalization, with the amounts in 2023 being related to Integration 2.0. The amounts in 2023 also include the write-off of non-cash assets in Russia that were determined to not be recoverable in the second quarter.

Operating expenses

Total operating expenses increased $63 million, or 8.5%, for the six months ended June 30, 2023 compared to the same period in 2022. Operating expenses as a percentage of sales was 17.4% and 18.5% for the six months ended June 30, 2023 and 2022, respectively. SG&A increased $51 million primarily from costs incurred to support the higher sales volume, higher employee compensation and benefit costs, and higher professional services spend, partially offset by the effects of foreign exchange rates. Restructuring costs included in SG&A were $7 million and $4 million for the six months ended June 30, 2023 and 2022, respectively, and were primarily for headcount actions and footprint rationalization programs, with the amounts in 2023 primarily related to Integration 2.0. Engineering expenses increased $9 million primarily due to investments in new technology. Amortization expense increased $3 million primarily due to accelerated amortization related to restructuring actions.

Interest expense, net

Interest expense, net, increased $16 million for the six months ended June 30, 2023 compared to the same period in 2022 primarily due to higher average overall debt balances and higher effective interest rates in the current period.

Other Income, net

Other income, net, decreased $4 million for the six months ended June 30, 2023 compared to the same period in 2022 primarily due to higher foreign exchange losses in the current year compared to the prior year.

Income taxes

The effective income tax rate was 25.5% and 25.3% for the six months ended June 30, 2023 and 2022, respectively. The increase in the quarterly effective tax rate is primarily the result of a change in the mix of earnings across jurisdictions.

Freight Segment

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

The following table shows the major components of the change in Net sales for the Freight Segment in the first six months of 2023 from the first six months of 2022:

Net sales

Freight Segment organic sales increased across all product lines by $460 million driven primarily by:

• Equipment sales increased due to higher locomotive and mining sales

• Services sales increased from a larger active locomotive fleet which drives higher parts and services sales, and higher deliveries of locomotive modernizations

• Components sales increased due to a higher railcar build, increased railcars in operation, and growth in industrial end-markets

• Digital Intelligence sales increased due to higher demand for on-board locomotive and mining solutions, international Positive Train Control (PTC) sales and technology upgrades

Cost of sales

Freight Segment Cost of sales increased $358 million and Cost of sales as a percentage of sales increased 1.4 percentage points due to:

• Higher sales volume

• Unfavorable mix within the Freight Segment product lines

• Higher next generation product development costs in Digital Intelligence

• Operational inefficiencies, including increased costs from labor negotiations at our Erie operations

• Higher restructuring costs

Cost of sales for the six months ended June 30, 2023 and 2022 included $6 million and $3 million, respectively, of restructuring costs, primarily for headcount actions and footprint rationalization, with a portion of the amounts in 2023 related to Integration 2.0. The amounts in 2023 also include the write-off of non-cash assets in Russia that were determined to not be recoverable in the second quarter.

Operating expenses

Freight Segment operating expenses increased by $28 million primarily driven by:

• Higher Selling, general and administrative expenses of $20 million resulting from higher costs to support increased sales volume and higher employee compensation and benefits costs

• Higher investments in new technology increasing Engineering expense by $6 million

Transit Segment

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

The following table shows the major components of the change in net sales for the Transit Segment in the first six months of 2023 from the first six months of 2022:

Net sales

Transit Segment organic sales increased by $197 million primarily driven by strong Aftermarket and Original Equipment Manufacturing sales primarily as a result of increased infrastructure investment and demand for original equipment door, HVAC and brake systems.

Cost of sales

Transit Segment Cost of sales increased by $120 million and Cost of sales as a percentage of sales increased by 0.1 percentage points due to:

• Higher sales volume

• Unfavorable mix within product lines

• Increased manufacturing costs

• Higher restructuring costs

Partially offset by:

• Benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects

• The effects of foreign exchange rates

Transit Cost of sales for the six months ended June 30, 2023 and 2022 includes $6 million and $4 million, respectively, of restructuring costs, primarily for footprint rationalization and headcount actions in Europe, with the amounts in 2023 related to Integration 2.0.

Operating expenses

Transit Segment operating expenses increased by $24 million primarily driven by:

• Higher SG&A expenses of $19 million to support higher sales volume and higher employee compensation and benefit costs

• Higher Engineering expenses of $4 million for investments in new technology

Partially offset by:

• Benefits from structured cost actions taken through restructuring actions

• The effects of foreign currency

Transit Operating expenses for the six months ended June 30, 2023 and 2022 includes $7 million and $3 million, respectively, of restructuring costs, primarily for footprint rationalization and headcount actions in Europe, with the amounts in 2023 related to Integration 2.0.

Liquidity and Capital Resources

Liquidity is provided by operating cash flows and borrowings under the Company’s Senior Notes and unsecured credit facility with a consortium of commercial banks. 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:

Operating activities In the first six months of 2023, cash provided by operating activities was $90 million compared to $424 million in the first six months of 2022, resulting in a decrease of $334 million. Significant changes to the sources and (uses) of cash causing the decrease include the following:

• $54 million attributable to higher Net income and other changes in the related statements of income amounts;

• $(377) million from net changes in working capital primarily driven by: $(195) million related to changes in receivables due to timing and volume of sales and the net change in the Revolving Receivables Program, $(190) million unfavorable change in Accounts payable and $8 million of favorable change in Inventory;

• $(45) million from changes in the timing of customer deposits; and,

• $52 million from changes to employee related benefit payments.

Investing activities In the first six months of 2023 and 2022, cash used for investing activities was $(293) million and $(117) million, respectively. During the first six months of 2023, Wabtec acquired L&M Radiator Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers, for net cash of approximately $(223) million, and expended $(70) million in additions to property, plant and equipment for investments in our facilities and manufacturing processes. During the first six months of 2022, Wabtec made two strategic acquisitions for a combined purchase price of $(69) million and expended $(50) million for additions to property, plant, and equipment.

Financing activities In the first six months of 2023, cash provided by financing activities was $30 million which included $374 million from net changes in debt, $(252) million in stock repurchases, $(62) million of dividend payments, $(15) million of payments for income tax withholding on share-based compensation, and $(12) million for distributions to noncontrolling interest. In the first six months of 2022, cash used for financing activities was $(256) million, which included $200 million from net changes in debt, $(399) million in stock repurchases, $(55) million of dividend payments, and $(1) million of payments for income tax withholding on share-based compensation.

As of June 30, 2023, the Company held approximately $371 million of cash, cash equivalents and restricted cash, of which approximately $13 million was held within the United States and approximately $358 million was held outside of the United States, primarily in India, Europe, China, 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.

Beginning September 15, 2023, the effective interest rates for the 2024 Notes and the 2028 Notes will each be reduced by 0.25% due to a favorable change in Wabtec's corporate bond rating. Additionally, Management is evaluating options to refinance the $250 million of Senior Notes due on August 15, 2023, including the option to utilize the Delayed Draw Term Loan in the Restated Credit Agreement. During 2023, the Company has also entered into $250 million of interest rate contracts to manage its net exposure to interest rate changes and its overall cost of borrowing. These contracts may be utilized for future bond refinancing.

We or our affiliates may, from time to time, seek to retire or purchase outstanding debt through negotiated or open-market cash purchases, exchanges, or otherwise, and such transactions, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Revolving Receivables Program

The Company utilizes a revolving receivables facility to sell up to $350 million of certain receivables through our bankruptcy-remote subsidiary to a financial institution on a recurring basis in exchange for cash equal to the gross receivables sold. As customers pay their balances, we transfer additional receivables into the program, which could result in our gross receivables sold being higher or lower than collections reinvested for any applicable periods. Net cash proceeds from the revolving receivables program were $155 million and $180 million for the six months ended June 30, 2023 and 2022, respectively. 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.

Supply Chain Financing Program

The Company has entered into supply chain financing arrangements with third-party financial institutions to provide our vendors with enhanced payment options while providing the Company with added working capital flexibility. The Company does not provide any guarantees under these arrangements, does not have an economic interest in our supplier's 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. 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.

Guarantor Summarized Financial Information

The obligations under the Parent Company's US Notes have been fully and unconditionally guaranteed by certain of the Parent Company's U.S. subsidiaries. Each guarantor is 100% owned by the Parent Company, with the exception of GE Transportation, a Wabtec Company, which has 15,000 shares outstanding of Class A Non-Voting Preferred Stock held by General Electric Company. The Euro Notes are issued by Wabtec Transportation Netherlands B.V. ("Wabtec Netherlands") and are fully and unconditionally guaranteed by the Parent Company.

The following tables present summarized financial information of the Parent Company and the guarantor subsidiaries on a combined basis. The combined summarized financial information eliminates intercompany balances and transactions among the Parent Company and guarantor subsidiaries and equity in earnings and investments in any guarantor subsidiaries or non-guarantor subsidiaries. The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the issuer and guarantor subsidiaries.

Summarized Statement of Income

Summarized Balance Sheet

The following is a description of the transactions between the combined Parent Company and guarantor subsidiaries with non-guarantor subsidiaries.

Summarized Financial Information—Euro Notes

The obligations under Wabtec Netherlands’ Euro Notes are fully and unconditionally guaranteed by the Parent Company. Wabtec Netherlands is a wholly-owned, indirect subsidiary of the Parent Company. Wabtec Netherlands is a holding company and does not have any independent operations. Its assets consist of its investments in subsidiaries, which are separate and distinct legal entities that are not guarantors of the Euro Notes and have no obligations to pay amounts due under Wabtec Netherlands’ obligations.

The following tables present summarized financial information of Wabtec Netherlands, as the Issuer of the Euro Notes, and the Parent Company, as the parent Guarantor, on a combined basis. The combined summarized financial information eliminates all intercompany balances and transactions among Wabtec Netherlands and the Parent Company as well as all equity in earnings from and investments in any subsidiary of the Parent Company, other than Wabtec Netherlands, which we refer to below as the Non-Guarantor Subsidiaries. The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the issuer and Parent Company guarantor.

Summarized Statement of Income

Summarized Balance Sheet

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

Company Stock Repurchase Plan

On February 14, 2023, the Board of Directors reauthorized its stock repurchase program to refresh the amount available for stock repurchases to $750 million of the Company’s outstanding shares. This new stock repurchase authorization supersedes the previous authorization of $750 million, of which approximately $232 million remained at the reauthorization date. No time limit was set for the completion of the program which conforms to the requirements under the Restated Credit Agreement and the indentures for the Senior Notes currently outstanding. The Company may repurchase shares in the future at any time, depending upon market conditions, our capital needs and other factors. Purchases of shares may be made by open market purchases or privately negotiated purchases and may be made pursuant to Rule 10b5-1 plan or otherwise. As of June 30, 2023, approximately $588 million was remaining under the stock repurchase plan.

Forward Looking Statements

We believe that all statements other than statements of historical facts included in this report, including certain statements under “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure that our assumptions and expectations are correct.

These forward-looking statements are subject to various risks, uncertainties and assumptions about us, including, among other things:

Economic and industry conditions

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

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

• decline in demand for freight cars, locomotives, passenger transit cars, buses and related products and services;

• reliance on major original equipment manufacturer customers;

• original equipment manufacturers’ program delays;

• demand for services in the freight and passenger rail industry;

• demand for our products and services;

• orders either being delayed, canceled, not returning to historical levels or being reduced, and/or economic conditions affecting the ability of our customers to pay timely for goods and services delivered;

• consolidations in the rail industry;

• continued outsourcing by our customers;

• industry demand for faster and more efficient braking equipment;

• fluctuations in interest rates and foreign currency exchange rates;

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

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

Operating factors

• supply disruptions;

• technical difficulties;

• changes in operating conditions and costs;

• increases in raw material costs;

• successful introduction of new products;

• performance under material long-term contracts;

• labor availability and relations;

• the outcome of our existing or any future legal proceedings, including litigation involving our principal customers and any litigation with respect to environmental matters, asbestos-related matters, pension liabilities, warranties, product liabilities, competition and anti-trust matters or intellectual property claims;

• completion and integration of acquisitions;

• the development and use of new technology; or

• cybersecurity and data protection risks;

Competitive factors

• the actions of competitors; or

• the outcome of negotiations with partners, suppliers, customers or others;

Political/governmental factors

• political stability in relevant areas of the world, including the impacts of war and conflicts;

• future regulation/deregulation of our customers and/or the rail industry;

• levels of governmental funding on transit projects, including for some of our customers;

• political developments and laws and regulations, including those related to Positive Train Control;

• federal and state income tax legislation;

• sanctions imposed on countries and persons; or

• the outcome of negotiations with governments;

Natural hazards / health crises

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

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

• epidemics, pandemics (including the COVID-19 pandemic), or similar public health crises;

• deterioration of general economic conditions as a result of natural hazards or health crises;

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

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

Statements in this Quarterly Report on Form 10-Q apply only as of the date on which such statements are made, and we undertake no obligation to update any statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Reference is also made to the risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Critical Accounting Estimates

A summary of critical accounting estimates is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In particular, judgment is used in areas such as accounts receivable and the allowance for doubtful accounts, inventories, business combinations, goodwill and indefinite-lived intangibles, warranty reserves, income taxes, and revenue recognition. There have been no significant changes in the related accounting policies since December 31, 2022.

See "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A of Part II of our Annual Report on Form 10-K for the year ended December 31, 2022. Our exposure to market risk has not changed materially since December 31, 2022. Refer to Note 13 - Fair Value Measurement and Derivative Instruments of "Notes to Condensed Consolidated Financial Statements" included in Part I, Item 1 of this report for additional information regarding interest rate and foreign currency exchange risk.

Wabtec’s principal executive officer and its principal financial officer have evaluated the effectiveness of Wabtec’s “disclosure controls and procedures,” (as defined in Exchange Act Rule 13a-15(e)) as of June 30, 2023. Based upon their evaluation, the principal executive officer and principal financial officer concluded that Wabtec’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by Wabtec in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by Wabtec in such reports is accumulated and communicated to Wabtec’s Management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There was no change in Wabtec’s “internal control over financial reporting” (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, Wabtec’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Additional information with respect to legal proceedings is included in Note 14 of “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this report.

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes the Company's stock repurchase activity for the three months ended June 30, 2023:

(1) On February 14, 2023, the Board of Directors reauthorized its stock repurchase program to refresh the amount available for stock repurchases to $750 million of the Company’s outstanding shares. This new stock repurchase authorization supersedes the previous authorization of $750 million, of which approximately $232 million remained at the reauthorization date. No time limit was set for the completion of the program which conforms to the requirements under the Restated Credit Agreement and the indentures for the Senior Notes currently outstanding. The Company may repurchase shares in the future at any time, depending upon market conditions, our capital needs and other factors. Purchases of shares may be made by open market purchases or privately negotiated purchases and may be made pursuant to Rule 10b5-1 plan or otherwise. As of June 30, 2023, approximately $588 million was remaining under the stock repurchase plan.

None of Wabtec's Directors or Officers have adopted, terminated, or materially modified any trading plans, whether or not the plan was intended to qualify for the affirmative defense under Rule 10b5-1, during the second quarter ended June 30, 2023.

Item 4. MINE SAFETY DISCLOSURES

Not Applicable

The following exhibits are being filed with this report:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.