Westinghouse Air Brake Technologies 10-Q 2024-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2024

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 October 18, 2024, there were 171,889,624 shares of common stock, par value $.01 per share, of the registrant outstanding.

WESTINGHOUSE AIR BRAKE

TECHNOLOGIES CORPORATION

September 30, 2024

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, 2023, filed with the Securities and Exchange Commission on February 14, 2024.

OVERVIEW

Wabtec is a global provider of value-added, technology-based locomotives, equipment, systems, and services for the freight rail and passenger transit industries, as well as the mining, marine and industrial markets. Our highly engineered products, which are intended to enhance safety, improve productivity and reduce maintenance costs for customers, can be found on most locomotives, freight cars, passenger transit cars and buses around the world. Our core products and services are essential in the safe and efficient operation of freight rail and passenger transit vehicles. Wabtec is a global company with operations in over 50 countries and our products can be found in more than 100 countries throughout the world. In the first nine months of 2024, approximately 52% of the Company’s Net sales came from customers outside the United States.

Business Update

During the first nine months of 2024, Wabtec continued to execute on our value creation framework by signing several key agreements including: a multi-year Tier 4 locomotive order in North America for over $600 million, a multi-year locomotive order in Kazakhstan for over $400 million, and a multi-year order for new locomotives in Africa. Additionally, Wabtec won a long-term parts agreement with a Class I railroad for over $300 million, signed its first multi-year service contract with a customer in Brazil worth over $240 million, and secured a long-term parts agreement with a customer in Asia. Operationally, Wabtec began commercial operations for its Green Friction braking solution in Paris and launched the next generation of railcar movers with its Shuttlewagon Commander NXT. Additionally, as a result of Wabtec's strong revenue and profitable growth over the past few years, rating agencies have made the following changes to our credit ratings: both Fitch Ratings and S&P Global Ratings upgraded Wabtec's credit rating from BBB- to BBB with a Stable outlook, and Moody's updated Wabtec's outlook to positive from stable.

During the first quarter of 2022, Wabtec announced Integration 2.0, a 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. 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 $140 million has been incurred through September 30, 2024. Total estimated initiative charges could change based on the specific programs approved or changes to the scope of the review. During the three and nine months ended September 30, 2024, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $10 million and $22 million, respectively, and $13 million and $30 million for the three and nine months ended September 30, 2023, 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 up to 1,100 employees.

In addition to Integration 2.0, Wabtec is focused on exiting various low margin product offerings through Portfolio Optimization to improve profitability while reducing manufacturing complexity. Wabtec expects to incur approximately $85 million in net exit charges related to Portfolio Optimization, which will be predominately non-cash asset write downs. Wabtec recorded charges of approximately $8 million and $13 million during the three and nine months ended September 30, 2024, respectively, for asset write downs related to Portfolio Optimization. No charges related to Portfolio Optimization were recorded during the nine months ended September 30, 2023. Total one-time restructuring charges related to Portfolio Optimization to date are approximately $41 million.

Future macroeconomic volatility, supply chain disruptions and labor availability could cause component and raw material shortages resulting in an adverse effect on the timing of the Company’s revenue and cash flows. Additionally, broad-based inflation, metals, energy and other commodity costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations all continue to impact our results. The Company utilizes various mitigating actions intended to lessen the impact of macroeconomic volatility. 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.

During the first quarter of 2024, Company Management determined that certain parts of the business would be better aligned with Management oversight in different product lines. These changes were immaterial to the individual product lines and segments affected, and historical amounts have been reclassified to conform to the current period presentation.

RESULTS OF OPERATIONS

Consolidated Results

THIRD QUARTER 2024 COMPARED TO THIRD QUARTER 2023

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 September 30, 2024 from the three months ended September 30, 2023:

Net sales

Net sales for the three months ended September 30, 2024 increased by $113 million, or 4.4%, to $2.66 billion compared to the same period in 2023. Organic sales increased $114 million which was attributable to both the Freight and Transit Segments. Freight Services sales increased from higher deliveries of locomotive modernizations and engine overhauls. Digital Intelligence sales increased due to higher international sales, including Positive Train Control ("PTC"), on-board locomotive solutions, and digital mining products. Freight Equipment sales decreased from lower locomotive deliveries, partially offset by increased mining sales. Transit sales increased from higher demand for Original Equipment Manufacturing and Aftermarket products driven by increased investments in sustainable infrastructure.

Cost of sales

Cost of sales for the three months ended September 30, 2024 increased by $25 million, or 1.4%, to $1.78 billion compared to the same period in 2023. The increase is primarily due to the increase in Net sales. Cost of sales as a percentage of Net sales was 67.0% and 69.0% for the three months ended September 30, 2024 and 2023, respectively. The improvement in gross margin is attributable to favorable mix within the Freight segment, strong productivity and the impacts of Integration 2.0. Costs of sales for the three months ended September 30, 2024 and 2023 included $7 million and $13 million, respectively, of restructuring costs, primarily for headcount actions and footprint rationalization related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Operating expenses

Total operating expenses increased $25 million, or 5.9%, for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to the increase in Net sales and higher restructuring costs. Operating expenses as a percentage of sales was 16.8% and 16.5% for the three months ended September 30, 2024 and 2023, respectively. Selling, general and administrative expenses ("SG&A") increased $23 million for the three months ended September 30, 2024 compared to the same period in 2023. The increase is primarily from costs incurred to support the higher sales volume and higher employee compensation and benefit costs, partially offset by the impacts of Integration 2.0. Restructuring costs included in SG&A were $5 million for the three months ended September 30, 2024, primarily for headcount actions and footprint rationalization programs related to Integration 2.0 and Portfolio Optimization. There were no restructuring amounts recorded in SG&A for the three months ended September 30, 2023.

Interest expense, net

Interest expense, net, decreased $8 million to $52 million for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to lower average debt balances in the current period.

Other (expense) income, net

Other (expense) income, net, decreased $13 million from $10 million to $(3) million for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to higher foreign exchange losses and lower equity income.

Income taxes

The effective income tax rate was 24.2% and 24.5% for the three months ended September 30, 2024 and 2023, respectively. The year over year decrease was primarily driven by a change in the jurisdictional mix of earnings for the three months ended September 30, 2024 and audit closures.

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 third quarter of 2024 from the third quarter of 2023:

Net sales

Freight Segment organic sales increased by $58 million driven primarily by Services sales from higher deliveries of locomotive modernizations and engine overhauls and Digital Intelligence due to higher international sales, including PTC, on-board locomotive solutions, and digital mining products. Equipment sales decreased from lower locomotive deliveries, partially offset by increased mining sales.

Cost of sales

Freight Segment Cost of sales decreased $15 million, and Cost of sales as a percentage of Net sales decreased 2.6 percentage points. The improvement in gross margin is attributable to favorable mix within the Freight Segment product lines and strong productivity. Cost of sales for the three months ended September 30, 2023 was also impacted by manufacturing inefficiencies related to labor negotiations at our Erie facility. Cost of sales for each of the three months ended September 30, 2024 and 2023 included $2 million of restructuring costs, respectively, primarily related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Operating expenses

Freight Segment operating expenses decreased by $1 million primarily driven by lower professional services spend and a reduction in research and development costs, partially offset by higher SG&A expenses resulting from higher costs to support increased sales volume, higher employee compensation and benefit costs and incremental expense from acquisitions. Freight Segment operating expenses for the three months ended September 30, 2023 were also impacted by labor negotiations at our Erie facility. Freight SG&A expenses for the three months ended September 30, 2024 included $2 million of restructuring costs, primarily related to Portfolio Optimization. The amounts recorded in the three months ended September 30, 2023 were not significant.

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 third quarter of 2024 from the third quarter of 2023:

Net sales

Transit Segment organic sales increased by $56 million driven by strong Original Equipment Manufacturing and Aftermarket sales primarily as a result of increased demand for products and services and increased investments in sustainable infrastructure. Changes in foreign exchange rates also increased sales by $8 million.

Cost of sales

Transit Segment Cost of sales increased by $40 million, primarily due to higher sales volume. Costs of sales as a percentage of sales decreased by 1.0 percentage points. The increase in gross margin was attributable to benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects, partially offset by unfavorable mix within the Transit Segment. Transit Cost of sales for the three months ended September 30, 2024 and 2023 included $5 million and $11 million of restructuring costs, respectively, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Operating expenses

Transit Segment operating expenses increased by $15 million as compared to the prior year. Higher SG&A expenses to support higher sales volume and higher employee compensation and benefit costs were partially offset by benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects. Transit SG&A expenses for the three months ended September 30, 2024 included $3 million of restructuring costs, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0. The amounts recorded in the three months ended September 30, 2023 were not significant.

FIRST NINE MONTHS OF 2024 COMPARED TO FIRST NINE MONTHS OF 2023

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 nine months ended September 30, 2024 from the nine months ended September 30, 2023:

Net sales

Net sales for the nine months ended September 30, 2024 increased by $653 million, or 9.1%, to $7.80 billion compared to the same period in 2023. Organic sales increased $597 million which was attributable to both the Freight and Transit Segments. Freight Equipment sales increased from higher North American and international locomotive sales and increased mining sales. Freight Services sales increased from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales. Transit sales increased from higher demand for Original Equipment Manufacturing and Aftermarket products driven by increased investments in sustainable infrastructure. Sales from acquisitions contributed $72 million in the Freight Segment and unfavorable changes in foreign exchange rates decreased sales by $16 million.

Cost of sales

Cost of sales for the nine months ended September 30, 2024 increased by $264 million, or 5.3%, to $5.24 billion compared to the same period in 2023. The increase is primarily due to the increase in Net sales. Cost of sales as a percentage of Net sales was 67.1% and 69.5% for the nine months ended September 30, 2024 and 2023, respectively. The improvement in gross margin is attributable to improved pricing, favorable mix between the Freight and Transit segments, improved productivity and favorable fixed cost absorption. Cost of sales for the nine months ended September 30, 2024 and 2023 included $19 million and $25 million, respectively, of restructuring costs, primarily for headcount actions and footprint rationalization related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Operating expenses

Total operating expenses increased $72 million, or 5.9%, for the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to the increase in Net sales. Operating expenses as a percentage of sales was 16.6% and 17.1% for the nine months ended September 30, 2024 and 2023, respectively. SG&A expenses increased $72 million for the nine months ended September 30, 2024 compared to the same period in 2023. The increase is primarily from costs incurred to support the higher sales volume and higher employee compensation and benefit costs, partially offset by the impacts of Integration 2.0. Restructuring costs included in SG&A were $11 million and $7 million for the nine months ended September 30, 2024 and 2023, respectively, primarily for headcount actions and footprint rationalization programs related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Interest expense, net

Interest expense, net, decreased $15 million to $148 million for the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to lower average debt balances in the current period, partially offset by higher effective interest rates.

Other (expense) income, net

Other (expense) income, net, decreased $18 million from $17 million to $(1) million for the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to lower equity income.

Income taxes

The effective income tax rate was 24.1% and 25.1% for the nine months ended September 30, 2024 and 2023, respectively. The year over year decrease was primarily driven by higher discrete equity compensation tax deductions for the nine months ended September 30, 2024, audit closures, and a change in the jurisdictional mix of earnings.

Freight Segment

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

The following table shows the major components of the change in Net sales for the Freight Segment in the first nine months of 2024 from the first nine months of 2023:

Net sales

Freight Segment organic sales increased by $486 million driven primarily by Services sales from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales, and Equipment sales from higher North American and international locomotive sales and increased mining sales. Additionally, Freight Segment sales also benefited from acquisitions by $72 million, primarily from our strategic acquisition of L&M Radiator, Inc.

Cost of sales

Freight Segment Cost of sales increased $198 million from higher sales volume, and Cost of sales as a percentage of Net sales decreased 3.0 percentage points. The improvement in gross margin is attributable to improved pricing, favorable mix within the Freight Segment product lines and improved productivity. Cost of sales for the nine months ended September 30, 2023 was also impacted by manufacturing inefficiencies related to labor negotiations at our Erie facility and costs related to next generation product development in Digital Intelligence. Cost of sales for the nine months ended September 30, 2024 and 2023 included $10 million and $8 million, respectively, of restructuring costs, primarily related to Integration 2.0 in both years and Portfolio Optimization in 2024.

Operating expenses

Freight Segment operating expenses increased by $13 million primarily driven by higher SG&A expenses resulting from higher costs to support increased sales volume, higher employee compensation and benefit costs and incremental expense from acquisitions. Freight SG&A expenses for the nine months ended September 30, 2024 included $2 million of restructuring costs, primarily related to Portfolio Optimization. The amounts recorded in the nine months ended September 30, 2024 were not significant.

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 nine months of 2024 from the first nine months of 2023:

Net sales

Transit Segment organic sales increased by $111 million driven by strong Original Equipment Manufacturing and Aftermarket sales primarily as a result of increased demand for products and services and increased investments in sustainable infrastructure.

Cost of sales

Transit Segment Cost of sales increased by $66 million primarily from higher sales volume, and Costs of sales as a percentage of sales decreased by 0.7 percentage points. The increase in gross margin is primarily attributable to favorable mix within the Transit Segment and the benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects. Transit Cost of sales for the nine months ended September 30, 2024 and 2023 included $9 million and $17 million of restructuring costs, respectively, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Operating expenses

Transit Segment operating expenses increased by $20 million as compared to the prior year. Higher SG&A expenses to support higher sales volume and higher employee compensation and benefit costs were partially offset by benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects. Transit SG&A expenses for the nine months ended September 30, 2024 and 2023 included $9 million and $6 million of restructuring costs, respectively, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Liquidity and Capital Resources

Liquidity is provided by operating cash flows and borrowings under the 2022 Credit Agreement and the 2024 Credit Agreement, each with a consortium of commercial banks, and proceeds from the Company’s Senior Notes. 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 nine months of 2024, cash provided by operating activities was $1,111 million compared to $515 million in the first nine months of 2023. Significant changes to the sources and (uses) of cash for the nine month periods include the following:

• $246 million from increased Net income;

• $137 million from changes in Accounts payable due to timing of payments;

• $122 million from favorable changes in Accounts receivables driven by $202 million of higher collections on receivables, partially offset by $(80) million of higher remittance for the Revolving Receivables Program; and,

• $86 million from changes in Inventory primarily from the inventory build during the first nine months of 2023 due to a strike at the manufacturing facility in Erie, Pennsylvania, as well as supply chain disruptions.

Investing activities In the first nine months of 2024 and 2023, cash used for investing activities was $(106) million and $(336) million, respectively. During the first nine months of 2024, Wabtec used $(123) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes, received $17 million of proceeds from dispositions of businesses, received $13 million of proceeds from disposals of property, plant and equipment, and used $(13) million for acquisitions. During the first nine 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 $(229) million and used $(109) million for additions to property, plant, and equipment.

Financing activities In the first nine months of 2024, cash used for financing activities was $(1,209) million which included $(62) million from net changes in debt, $(974) million in stock repurchases, $(106) million of dividend payments, $(42) million of contingent consideration payments related to the GE Transportation acquisition, $(24) million of payments for income tax withholding on share-based compensation, and $(6) million for distributions to noncontrolling interest. In the first nine months of 2023, cash used for financing activities was $(323) million, which included $49 million from net changes in debt, $(252) million in stock repurchases, $(92) million of dividend payments, $(16) million of payments for income tax withholding on share-based compensation, and $(12) million for distributions to noncontrolling interest.

During the first quarter of 2024, the Company entered into the 2024 Credit Agreement for a term loan of $225 million. Also during the first quarter of 2024, the Company issued $500 million of Senior Notes due in 2034. Proceeds from the 2034 Notes, combined with the proceeds from the term loan under the 2024 Credit Agreement and cash on hand, were utilized to repay the outstanding amount of 2024 Notes at maturity.

As of September 30, 2024, the Company held approximately $410 million of cash, cash equivalents and restricted cash, of which approximately $9 million was held within the United States and approximately $401 million was held outside of the United States, primarily in India, Brazil, Europe and China. While repatriation of some cash held outside the United States may be restricted by local laws, most of the Company’s foreign cash could be repatriated to the United States net of any tax impacts. As of September 30, 2024, approximately $9 million of the Company's $410 million of cash balance was classified as restricted.

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

Revolving Receivables Program

The Company utilizes a revolving receivables facility to sell up to $350 million of certain receivables through our bankruptcy-remote subsidiary to a financial institution on a recurring basis in exchange for cash equal to the gross receivables sold. As customers pay their balances, we transfer additional receivables into the program, which could result in our gross receivables sold being higher or lower than customer collections remitted to the financial institution for any applicable periods. Net cash proceeds included in cash from operations from the revolving receivables program were $75 million and $155 million for the nine months ended September 30, 2024 and 2023, 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 suppliers' voluntary participation, does not receive an economic benefit from the financial institutions, and no assets are pledged under the arrangements. The arrangements do not change the payable terms negotiated by the Company and our vendors and does not result in a change in the classification of amounts due as Accounts payable in the Condensed Consolidated Balance Sheets. Additional information with respect to the Supply Chain Financing Program is included in Note 2 of "Notes to Condensed Consolidated Financial Statements" included in Part I, Item 1 of this report.

Intra-Quarter Uncommitted Money Market Line Credit Agreement

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

Guarantor Summarized Financial Information

The obligations under the US Notes issued by Westinghouse Air Brake Technologies Corporation (the "Parent Company") have been fully and unconditionally guaranteed by certain of the Parent Company's U.S. subsidiaries ("Guarantor Subsidiaries"). 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 Wabtec Netherlands, as the Issuer of the Euro Notes, and the Parent Company, as the parent Guarantor, with the subsidiaries of Westinghouse Air Brake Technologies Corp., other than Wabtec Netherlands, none of which are guarantors of the Euro Notes.

Company Stock Repurchase Plan

On February 9, 2024, the Board of Directors reauthorized its stock repurchase program to refresh the amount available for stock repurchases to $1 billion of the Company’s outstanding shares. This new stock repurchase authorization supersedes the previous authorization of $750 million, of which approximately $333 million remained at the reauthorization date. No time limit was set for the completion of the program which conforms to the requirements under the 2022 Credit Agreement and the 2024 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 September 30, 2024, approximately $123 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;

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

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

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, conflicts, global military action, and acts of terrorism;

• 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 other weather conditions;

• epidemics, pandemics, 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, health crises or other external factors;

Statements in this Quarterly Report on Form 10-Q apply only as of the date on which such statements are made, and except as required by law, we undertake no obligation to update any statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. 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, 2023.

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, 2023. In particular, judgment is used in areas such as accounts receivable and the allowance for doubtful accounts, inventories, business combinations, goodwill and indefinite-lived intangible assets, warranty reserves, income taxes, and revenue recognition. There have been no significant changes in the related accounting policies since December 31, 2023.

Contractual Obligations

During the first quarter of 2024, the Company entered into the 2024 Credit Agreement for a term loan of $225 million which is scheduled to mature on March 14, 2029. Also during the first quarter of 2024, the Company issued $500 million of Senior Notes due in 2034. Proceeds from the 2034 Notes, combined with the proceeds from the term loan under the 2024 Credit Agreement and cash on hand, were utilized to repay the outstanding amount of 2024 Notes at maturity. As a result of these transactions, contractual obligations related the repayment of Long-term debt for 2029 and beyond has increased to $725 million.

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

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, 2023. Our exposure to market risk has not changed materially since December 31, 2023. 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 September 30, 2024. 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 September 30, 2024, 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, 2023.

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 September 30, 2024:

(1) On February 9, 2024, the Board of Directors reauthorized its stock repurchase program to refresh the amount available for stock repurchases to $1 billion of the Company’s outstanding shares. This new stock repurchase authorization supersedes the previous authorization of $750 million, of which approximately $333 million remained at the reauthorization date. No time limit was set for the completion of the program which conforms to the requirements under the 2022 Credit Agreement, the 2024 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 September 30, 2024, approximately $123 million was remaining under the stock repurchase plan.

Item 4. MINE SAFETY DISCLOSURES

Not Applicable

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 third quarter ended September 30, 2024.

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.