WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORP

Previous wording

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.

Current wording

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 three months of 2025, approximately 51% of the Company’s Net sales came from customers outside the United States.

Previous wording

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.

Current wording

Future macroeconomic volatility, changes to tariffs and trade policies, supply chain disruptions, and labor availability could cause an impact on revenue and cost increases resulting in an adverse effect on the Company’s operating results. Additionally, broad-based inflation, metals, energy and other commodity costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations all continue to impact our results. The Company utilizes various mitigating actions intended to lessen the impact of macroeconomic volatility. These actions include implementing price escalations and surcharges, driving operational efficiencies through various cost mitigation efforts and discretionary spend management, strategically sourcing materials, reviewing and modifying distribution logistics, and accelerating integration synergies through our strategic initiatives.

Previous wording

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.

Current wording

During the first quarter of 2025, Company Management determined that certain businesses within the Services product line would be better aligned with Management oversight in the Components product line. As such, Sales by product line for 2024 and 2023 have been recast to conform to the current period presentation. These changes were within the Freight Segment and had no impact on Total Freight Segment Sales, Gross profit, or Income from operations.

Previous wording

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.

Current wording

Net sales for the three months ended March 31, 2025 increased by $113 million, or 4.5%, to $2.61 billion compared to the same period in 2024. Organic sales increased $133 million which was attributable to both the Freight and Transit Segments. Freight Services sales increased from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales. Freight Equipment sales decreased primarily due to lower locomotive deliveries. Transit sales increased from higher demand for Original Equipment Manufacturing and Aftermarket products driven by increased investments in sustainable infrastructure, fleet expansion and renewals and increased passenger ridership levels. Sales from acquisitions contributed $23 million, and unfavorable changes in foreign exchange decreased Net sales by $43 million.

Previous wording

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.

Current wording

Cost of sales for the three months ended March 31, 2025 increased by $28 million, or 1.7%, to $1.71 billion compared to the same period in 2024. The increase is primarily due to the increase in Net sales. Cost of sales as a percentage of Net sales was 65.5% and 67.3% for the three months ended March 31, 2025 and 2024, respectively. The improvement in gross margin is attributable to favorable mix within the Freight Segment, strong productivity, Integration 2.0 savings, and proactive cost management. Costs of sales for the three months ended March 31, 2025 and 2024 included $3 million and $6 million, respectively, of costs related to restructuring initiatives.

Previous wording

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.

Current wording

Total operating expenses increased $23 million, or 5.7%, for the three months ended March 31, 2025 compared to the same period in 2024, primarily due to the increase in Net sales, higher employee compensation and benefit costs and transaction costs associated with announced acquisitions. Operating expenses as a percentage of sales were 16.3% and 16.2% for the three months ended March 31, 2025 and 2024, respectively. Selling, general and administrative expenses ("SG&A") increased $26 million for the three months ended March 31, 2025 compared to the same period in 2024. The increase is primarily from costs incurred to support the higher sales volume, partially offset by the impacts of Integration 2.0. Transaction costs associated with announced acquisitions included in SG&A were $10 million for three months ended March 31, 2025. SG&A for the three months ended March 31, 2025 and 2024 included $5 million and $3 million, respectively, of costs related to restructuring initiatives.

Previous wording

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.

Current wording

The effective income tax rate was 23.2% and 23.6% for the three months ended March 31, 2025 and 2024, respectively. The year over year decrease in the effective rate was driven by higher discrete equity compensation tax deductions and the jurisdictional mix of earnings.

Previous wording

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:

Current wording

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

Previous wording

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.

Current wording

Freight Segment organic sales increased by $88 million driven primarily by Services sales from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales. Equipment sales decreased primarily due to lower locomotive deliveries. Components sales decreased primarily from lower North America rail car build. Sales from acquisitions contributed $15 million, and unfavorable changes in foreign exchange decreased sales by $26 million.

Previous wording

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.

Current wording

Freight Segment Cost of sales increased $17 million from higher sales volume, and Cost of sales as a percentage of Net sales decreased 1.7 percentage points. The improvement in gross margin is attributable to favorable mix within the Freight Segment product lines, improved productivity and proactive cost management. Cost of sales for the three months ended March 31, 2025 and 2024 included $2 million and $3 million, respectively, of costs related to restructuring initiatives.

Previous wording

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.

Current wording

Freight Segment Operating expenses as a percentage of Net sales were 14.0% for the three months ended March 31, 2025 and 2024. Freight Segment Operating expenses increased by $8 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, partially offset by a reduction in research and development costs and lower amortization expense for intangibles associated with the GE Transportation acquisition.

Previous wording

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:

Current wording

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

Previous wording

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.

Current wording

Transit Segment organic sales increased by $45 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. Sales from acquisitions contributed $8 million, and unfavorable changes in foreign exchange rates decreased sales by $17 million.

Previous wording

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.

Current wording

Transit Segment Cost of sales increased by $11 million, primarily due to higher sales volume, and Cost of sales as a percentage of sales decreased by 2.1 percentage points. The increase in gross margin was attributable to favorable mix within the Transit Segment, increased productivity and the benefits from structured cost actions taken through prior years' restructuring and integration projects, primarily Integration 2.0. Transit Segment Cost of sales for the three months ended March 31, 2025 and 2024 included $1 million and $3 million, respectively, of costs related to restructuring initiatives.

Previous wording

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.

Current wording

Transit Segment Operating expenses as a percentage of Net sales were 17.6% and 17.2% for the three months ended March 31, 2025 and 2024, respectively. Transit Segment Operating expenses increased by $9 million as compared to the prior year. Higher SG&A expenses to support higher sales volume 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 March 31, 2025 and 2024 included $4 million and $3 million, respectively, of costs related to restructuring initiatives.

Previous wording

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:

Current wording

Liquidity is provided by operating cash flows, 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:

Previous wording

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:

Current wording

Operating activities In the first three months of 2025, cash provided by operating activities was $191 million compared to $334 million in the first three months of 2024. Significant changes to the sources and (uses) of cash for the three month periods include the following:

Previous wording

•$246 million from increased Net income;

Current wording

•$50 million from increased Net income;

Previous wording

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.

Current wording

Investing activities In the first three months of 2025 and 2024, cash used for investing activities was $(44) million and $(19) million, respectively. During the first three months of 2025, Wabtec used $(44) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes. During the first three months of 2024, Wabtec used $(31) million for additions to property, plant, and equipment and received $12 million of proceeds from disposals of property, plant and equipment.

Previous wording

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.

Current wording

Financing activities In the first three months of 2025, cash used for financing activities was $(172) million which included $4 million from net changes in debt, $(98) million in stock repurchases, $(43) million of dividend payments, and $(34) million of payments for income tax withholding on share-based compensation. In the first three months of 2024, cash used for financing activities was $(289) million, which included $(58) million from net changes in debt, $(175) million in stock repurchases, $(36) million of dividend payments, and $(23) million of payments for income tax withholding on share-based compensation.

Previous wording

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.

Current wording

As of March 31, 2025, the Company held approximately $698 million of cash, cash equivalents and restricted cash, of which approximately $294 million was held within the United States and approximately $404 million was held outside of the United States, primarily in Europe, India, Brazil 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 March 31, 2025, approximately $9 million of the Company's $698 million cash balance was held in escrow related to recent acquisitions and was classified as restricted.

Previous wording

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.

Current wording

During the three months ended March 31, 2025, the Company borrowed and repaid $175 million against the collateralized receivables. There were no receivables sold during the three months ended March 31, 2025. Net cash proceeds from receivables sold included in cash from operations was $210 million for the three months ended March 31, 2024. 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.

Previous wording

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.

Current wording

On December 3, 2024, the Board of Directors authorized an additional $1.0 billion to the Company's existing stock repurchase program for stock repurchases of the Company’s outstanding shares. This new authorization provides an additional $1.0 billion that became available for repurchases after the remaining availability as of December 3, 2024 was expended. No time limit was set for the completion of the program which 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 March 31, 2025, approximately $902 million was remaining under the stock repurchase plan.

Previous wording

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

Current wording

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

Previous wording

•demand for our products and services;

Current wording

•decreased demand for our products and services;

Previous wording

•successful introduction of new products;

Current wording

•challenges associated with the successful introduction of new products;

Previous wording

•the development and use of new technology; or

Current wording

•risks associated with the development and use of new technology; or

Previous wording

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

Current wording

•adverse outcomes of negotiations with partners, suppliers, customers or others;

Previous wording

•political stability in relevant areas of the world, including the impacts of war, conflicts, global military action, and acts of terrorism;

Current wording

•political instability in relevant areas of the world, including the impacts of war, conflicts, global military action, and acts of terrorism;

Previous wording

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

Current wording

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

Previous wording

•federal and state income tax legislation;

Current wording

•consequences of federal and state income tax legislation;