UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

____________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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)

____________________________________


Delaware									25-1615902
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

30 Isabella Street Pittsburgh, Pennsylvania									15212
(Address of principal executive offices)									(Zip code)

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:


Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	WAB	New York Stock Exchange

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.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Emerging growth company

☐

Smaller reporting company

☐

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 27, 2022,~~April 21, 2023, there were ~~181,867,864~~179,869,569 shares of common stock, par value $.01 per share, of the registrant outstanding.

WESTINGHOUSE AIR BRAKE

TECHNOLOGIES CORPORATION

~~September 30, 2022~~March 31, 2023

FORM 10-Q

TABLE OF CONTENTS


		Page
	PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements - (Unaudited)	3
	Condensed Consolidated Balance Sheets as of ~~September~~March 31, 2023 ~~30, 2022~~ and December 31, ~~2021~~20 2 2	3
	Condensed Consolidated Statements of Income for the three ~~and~~ ~~nine~~months ended ~~September~~March 31 , 202 3 ~~30, 2022~~ and ~~2021~~20 2 2	4
	Condensed Consolidated Statements of Comprehensive Income for the three ~~and~~ ~~nine~~ months ended ~~September~~March 31 , 202 3 ~~30, 2022~~ and ~~2021~~20 2 2	5
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September~~March 31, 2023 ~~30, 2022~~ and ~~2021~~20 2 2	6
	Condensed Consolidated Statements of Shareholders' Equity for the three ~~and~~ ~~nine~~ months ended ~~September~~ ~~30, 2022~~March 31 , 202 3 and ~~2021~~20 2 2	7
	Notes to Condensed Consolidated Financial Statements	98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2422
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4235
Item 4.	Controls and Procedures	4235
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	4336
Item 1A.	Risk Factors	4336
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4336
Item 4.	Mine Safety Disclosures	4436
Item 6.	Exhibits	4437
	Signatures	4538

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


		Unaudited					Unaudited
In millions, except par value	In millions, except par value	September 30, 2022		December 31, 2021		In millions, except par value	March 31, 2023		December 31, 2022
Assets	Assets					Assets
Assets	Assets					Assets
Cash and cash equivalents		$	514	$	473
Cash, cash equivalents and restricted cash						Cash, cash equivalents and restricted cash	$	417	$	541
Accounts receivable	Accounts receivable	1,004		1,085		Accounts receivable	956		975
Unbilled accounts receivable	Unbilled accounts receivable	458		392		Unbilled accounts receivable	620		544
Inventories		2,023		1,689
Inventories, net						Inventories, net	2,228		2,034
Other current assets	Other current assets	200		193		Other current assets	275		233
Total current assets	Total current assets	4,199		3,832		Total current assets	4,496		4,327
Property, plant and equipment, net	Property, plant and equipment, net	1,402		1,497		Property, plant and equipment, net	1,422		1,429
Goodwill	Goodwill	8,361		8,587		Goodwill	8,540		8,508
Other intangible assets, net	Other intangible assets, net	3,410		3,705		Other intangible assets, net	3,333		3,402
Other noncurrent assets	Other noncurrent assets	890		833		Other noncurrent assets	878		850
Total noncurrent assets	Total noncurrent assets	14,063		14,622		Total noncurrent assets	14,173		14,189
Total Assets	Total Assets	$	18,262	$	18,454	Total Assets	$	18,669	$	18,516
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity
Liabilities	Liabilities					Liabilities
Accounts payable	Accounts payable	$	1,206	$	1,012	Accounts payable	$	1,353	$	1,301
Customer deposits	Customer deposits	691		629		Customer deposits	697		772
Accrued compensation	Accrued compensation	278		335		Accrued compensation	295		300
Accrued warranty	Accrued warranty	208		228		Accrued warranty	222		215
Current portion of long-term debt	Current portion of long-term debt	251		2		Current portion of long-term debt	975		251
Other accrued liabilities	Other accrued liabilities	694		704		Other accrued liabilities	623		628
Total current liabilities	Total current liabilities	3,328		2,910		Total current liabilities	4,165		3,467
Long-term debt	Long-term debt	3,824		4,056		Long-term debt	3,189		3,751
Accrued postretirement and pension benefits	Accrued postretirement and pension benefits	63		77		Accrued postretirement and pension benefits	58		57
Deferred income taxes	Deferred income taxes	287		288		Deferred income taxes	333		326
Contingent consideration	Contingent consideration	143		141		Contingent consideration	48		47
Other long-term liabilities	Other long-term liabilities	692		743		Other long-term liabilities	742		721
Total Liabilities	Total Liabilities	8,337		8,215		Total Liabilities	8,535		8,369
Commitments and contingencies (Note 14)	Commitments and contingencies (Note 14)					Commitments and contingencies (Note 14)
Equity	Equity					Equity
Common stock, $.01 par value; 500.0 shares authorized and 226.9 shares issued: 181.9 and 185.8 outstanding at September 30, 2022 and December 31, 2021, respectively		2		2
Common stock, $.01 par value; 500.0 shares authorized and 226.9 shares issued: 179.8 and 181.2 outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, $.01 par value; 500.0 shares authorized and 226.9 shares issued: 179.8 and 181.2 outstanding at March 31, 2023 and December 31, 2022, respectively	2		2
Additional paid-in capital	Additional paid-in capital	7,937		7,916		Additional paid-in capital	7,940		7,953
Treasury stock, at cost, 45.0 and 41.1 shares, at September 30, 2022 and December 31, 2021, respectively		(1,697)		(1,306)
Treasury stock, at cost, 47.1 and 45.7 shares, at March 31, 2023 and December 31, 2022, respectively						Treasury stock, at cost, 47.1 and 45.7 shares, at March 31, 2023 and December 31, 2022, respectively	(1,941)		(1,769)
Retained earnings	Retained earnings	4,447		4,055		Retained earnings	4,715		4,577
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(808)		(466)		Accumulated other comprehensive loss	(631)		(661)
Total Westinghouse Air Brake Technologies Corporation shareholders’ equity	Total Westinghouse Air Brake Technologies Corporation shareholders’ equity	9,881		10,201		Total Westinghouse Air Brake Technologies Corporation shareholders’ equity	10,085		10,102
Noncontrolling interest	Noncontrolling interest	44		38		Noncontrolling interest	49		45
Total Equity	Total Equity	9,925		10,239		Total Equity	10,134		10,147
Total Liabilities and Equity	Total Liabilities and Equity	$	18,262	$	18,454	Total Liabilities and Equity	$	18,669	$	18,516

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


		Unaudited				Unaudited					Unaudited
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions, except per share data	In millions, except per share data	2022		2021		2022		2021		In millions, except per share data	2023		2022

Net sales:	Net sales:									Net sales:
Sales of goods	Sales of goods	$	1,625	$	1,489	$	4,714	$	4,562	Sales of goods	$	1,684	$	1,505
Sales of services	Sales of services	456		418		1,342		1,187		Sales of services	510		422
Total net sales	Total net sales	2,081		1,907		6,056		5,749		Total net sales	2,194		1,927
Cost of sales:	Cost of sales:									Cost of sales:
Cost of goods	Cost of goods	(1,200)		(1,075)		(3,431)		(3,368)		Cost of goods	(1,257)		(1,084)
Cost of services	Cost of services	(233)		(229)		(737)		(664)		Cost of services	(272)		(248)
Total cost of sales	Total cost of sales	(1,433)		(1,304)		(4,168)		(4,032)		Total cost of sales	(1,529)		(1,332)
Gross profit	Gross profit	648		603		1,888		1,717		Gross profit	665		595
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative expenses	Selling, general and administrative expenses	(260)		(269)		(757)		(766)		Selling, general and administrative expenses	(263)		(238)
Engineering expenses	Engineering expenses	(54)		(44)		(149)		(124)		Engineering expenses	(51)		(45)
Amortization expense	Amortization expense	(73)		(73)		(218)		(215)		Amortization expense	(75)		(73)
Total operating expenses	Total operating expenses	(387)		(386)		(1,124)		(1,105)		Total operating expenses	(389)		(356)
Income from operations	Income from operations	261		217		764		612		Income from operations	276		239
Other income and expenses:	Other income and expenses:									Other income and expenses:
Interest expense, net	Interest expense, net	(48)		(42)		(135)		(135)		Interest expense, net	(48)		(43)
Other income, net	Other income, net	4		—		15		25		Other income, net	5		4
Income before income taxes	Income before income taxes	217		175		644		502		Income before income taxes	233		200
Income tax expense	Income tax expense	(54)		(43)		(162)		(130)		Income tax expense	(60)		(50)
Net income	Net income	163		132		482		372		Net income	173		150
Less: Net income attributable to noncontrolling interest	Less: Net income attributable to noncontrolling interest	(3)		(1)		(7)		(4)		Less: Net income attributable to noncontrolling interest	(4)		(1)
Net income attributable to Wabtec shareholders	Net income attributable to Wabtec shareholders	$	160	$	131	$	475	$	368	Net income attributable to Wabtec shareholders	$	169	$	149

Earnings Per Common Share	Earnings Per Common Share									Earnings Per Common Share
Basic	Basic									Basic
Net income attributable to Wabtec shareholders	Net income attributable to Wabtec shareholders	$	0.88	$	0.69	$	2.60	$	1.95	Net income attributable to Wabtec shareholders	$	0.94	$	0.80
Diluted	Diluted									Diluted
Net income attributable to Wabtec shareholders	Net income attributable to Wabtec shareholders	$	0.88	$	0.69	$	2.59	$	1.95	Net income attributable to Wabtec shareholders	$	0.93	$	0.80

Weighted average shares outstanding	Weighted average shares outstanding									Weighted average shares outstanding
Basic	Basic	181.3		187.6		182.6		188.2		Basic	179.9		184.5
Diluted	Diluted	181.9		188.0		183.1		188.6		Diluted	180.6		185.0

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited
Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2022 2021 2022 2021
Net income attributable to Wabtec shareholders $ 160 $ 131 $ 475 $ 368
Foreign currency translation loss (170) (60) (352) (88)
Unrealized gain (loss) on derivative contracts — — 3 (8)
Unrealized gain on pension benefit plans and post-retirement benefit plans 6 4 11 —
Other comprehensive loss before tax (164) (56) (338) (96)
Income tax (expense) benefit related to components of other comprehensive loss (3) (1) (4) 2
Other comprehensive loss, net of tax (167) (57) (342) (94)
Comprehensive (loss) income attributable to Wabtec shareholders $ (7) $ 74 $ 133 $ 274


	Unaudited
	Three Months Ended March 31,
In millions	2023		2022

Net income attributable to Wabtec shareholders	$	169	$	149
Foreign currency translation gain	25		13
Unrealized gain on derivative contracts	5		3
Unrealized gain on pension benefit plans and post-retirement benefit plans	1		1
Other comprehensive income before tax	31		17
Income tax expense related to components of other comprehensive income	(1)		—
Other comprehensive income, net of tax	30		17
Comprehensive income attributable to Wabtec shareholders	$	199	$	166

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


		Unaudited					Unaudited
		Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022

Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	482	$	372	Net income	$	173	$	150
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used for) provided by operating activities:						Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	359		368		Depreciation and amortization	123		122
Stock-based compensation expense	Stock-based compensation expense	30		34		Stock-based compensation expense	10		10
Below market intangible amortization	Below market intangible amortization	(39)		(36)		Below market intangible amortization	(12)		(12)
Net loss on disposal of property, plant and equipment	Net loss on disposal of property, plant and equipment	5		7		Net loss on disposal of property, plant and equipment	3		2
Changes in operating assets and liabilities, net of acquisitions
Changes in operating assets and liabilities, net of acquisitions:						Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable and unbilled accounts receivable	Accounts receivable and unbilled accounts receivable	(39)		35		Accounts receivable and unbilled accounts receivable	(51)		93
Inventories	Inventories	(401)		(32)		Inventories	(188)		(137)
Accounts payable	Accounts payable	232		41		Accounts payable	47		48
Accrued income taxes	Accrued income taxes	43		29		Accrued income taxes	(25)		16
Accrued liabilities and customer deposits	Accrued liabilities and customer deposits	37		(11)		Accrued liabilities and customer deposits	(79)		(66)
Other assets and liabilities	Other assets and liabilities	(81)		(48)		Other assets and liabilities	(26)		(65)
Net cash provided by operating activities		628		759
Net cash (used for) provided by operating activities						Net cash (used for) provided by operating activities	(25)		161
Investing Activities	Investing Activities					Investing Activities
Purchase of property, plant and equipment	Purchase of property, plant and equipment	(82)		(78)		Purchase of property, plant and equipment	(32)		(20)
Acquisitions of businesses, net of cash acquired		(69)		(405)

Proceeds from disposal of property, plant and equipment	Proceeds from disposal of property, plant and equipment	2		8		Proceeds from disposal of property, plant and equipment	—		2
Net cash used for investing activities	Net cash used for investing activities	(149)		(475)		Net cash used for investing activities	(32)		(18)
Financing Activities	Financing Activities					Financing Activities
Proceeds from debt, net of issuance costs	Proceeds from debt, net of issuance costs	4,567		4,329		Proceeds from debt, net of issuance costs	1,302		2,012
Payments of debt	Payments of debt	(4,474)		(4,491)		Payments of debt	(1,148)		(1,817)
Repurchase of stock	Repurchase of stock	(400)		(200)		Repurchase of stock	(178)		(296)
Cash dividends	Cash dividends	(83)		(69)		Cash dividends	(31)		(28)
Payment of income tax withholding on share-based compensation						Payment of income tax withholding on share-based compensation	(14)		(2)
Other financing activities	Other financing activities	(5)		(2)		Other financing activities	(3)		(2)
Net cash used for financing activities	Net cash used for financing activities	(395)		(433)		Net cash used for financing activities	(72)		(133)
Effect of changes in currency exchange rates	Effect of changes in currency exchange rates	(43)		6		Effect of changes in currency exchange rates	5		5
Increase (decrease) in cash		41		(143)
Cash and cash equivalents, beginning of period		473		599
Cash and cash equivalents, end of period		$	514	$	456
(Decrease) increase in cash						(Decrease) increase in cash	(124)		15
Cash, cash equivalents and restricted cash, beginning of period						Cash, cash equivalents and restricted cash, beginning of period	541		473
Cash, cash equivalents and restricted cash, end of period						Cash, cash equivalents and restricted cash, end of period	$	417	$	488

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


In millions	In millions	Common Stock Shares	Common Stock Amount		Additional Paid-in Capital		Treasury Stock Shares	Treasury Stock Amount		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interest		Total		In millions	Common Stock Shares	Common Stock Amount		Additional Paid-in Capital		Treasury Stock Shares	Treasury Stock Amount		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interest		Total
Balance, December 31, 2021		226.9	$	2	$	7,916	(41.1)	$	(1,306)	$	4,055	$	(466)	$	38	$	10,239
Cash dividends ($0.15 dividend per share)		—	—		—		—	—		(28)		—		—		(28)
Balance, December 31, 2022																		Balance, December 31, 2022	226.9	$	2	$	7,953	(45.7)	$	(1,769)	$	4,577	$	(661)	$	45	$	10,147
Cash dividends ($0.17 dividend per share)																		Cash dividends ($0.17 dividend per share)	—	—		—		—	—		(31)		—		—		(31)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		(9)		0.2	5		—		—		—		(4)		Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		(23)		0.3	6		—		—		—		(17)
Stock based compensation	Stock based compensation	—	—		10		—	—		—		—		—		10		Stock based compensation	—	—		10		—	—		—		—		—		10
Net income	Net income	—	—		—		—	—		149		—		1		150		Net income	—	—		—		—	—		169		—		4		173
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—		—	—		—		17		—		17		Other comprehensive income, net of tax	—	—		—		—	—		—		30		—		30
Stock repurchase	Stock repurchase	—	—		—		(3.1)	(296)		—		—		—		(296)		Stock repurchase	—	—		—		(1.7)	(178)		—		—		—		(178)

Balance, March 31, 2022		226.9	$	2	$	7,917	(44.0)	$	(1,597)	$	4,176	$	(449)	$	39	$	10,088
Cash dividends ($0.15 dividend per share)		—	—		—		—	—		(27)		—		—		(27)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax		—	—		(1)		0.1	4		—		—		—		3
Stock based compensation		—	—		10		—	—		—		—		—		10
Net income		—	—		—		—	—		166		—		3		169
Other comprehensive loss, net of tax		—	—		—		—	—		—		(192)		—		(192)
Stock repurchase		—	—		—		(1.1)	(103)		—		—		—		(103)
Balance, March 31, 2023																		Balance, March 31, 2023	226.9	$	2	$	7,940	(47.1)	$	(1,941)	$	4,715	$	(631)	$	49	$	10,134

Balance, June 30, 2022		226.9	$	2	$	7,926	(45.0)	$	(1,696)	$	4,314	$	(641)	$	42	$	9,947
Cash dividends ($0.15 dividend per share)		—	—		—		—	—		(28)		—				(28)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax		—	—		1		—	—		—		—		—		1
Stock based compensation		—	—		10		—	—		—		—		—		10
Net income		—	—		—		—	—		160		—		3		163
Other comprehensive loss, net of tax		—	—		—		—	—		—		(167)		—		(167)
Stock repurchase		—	—		—		—	(1)		—		—		—		(1)

Balance, September 30, 2022		226.9	$	2	$	7,937	(45.0)	$	(1,697)	$	4,447	$	(808)	$	44	$	9,925

~~The accompanying notes are an integral part of these statements.~~

~~WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION~~

~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY~~

~~(Unaudited)~~


In millions, except per share data		Common Stock Shares	Common Stock Amount		Additional Paid-in Capital		Treasury Stock Shares	Treasury Stock Amount		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interest		Total
Balance, December 31, 2020		226.9	$	2	$	7,881	(38.0)	$	(1,010)	$	3,589	$	(339)	$	30	$	10,153
Cash dividends ($0.12 dividend per share)		—	—		—		—	—		(23)		—		—		(23)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax		—	—		(6)		—	—		—		—		—		(6)
Stock based compensation		—	—		9		—	—		—		—		—		9
Net income		—	—		—		—	—		112		—		3		115
Other comprehensive loss, net of tax		—	—		—		—	—		—		(70)		—		(70)
Stock repurchase		—	—		—		—	(1)		—		—		—		(1)
Balance, March 31, 2021		226.9	$	2	$	7,884	(38.0)	$	(1,011)	$	3,678	$	(409)	$	33	$	10,177
Cash dividends ($0.12 dividend per share)		—	—		—		—	—		(23)		—		—		(23)

Balance, December 31, 2021																		Balance, December 31, 2021	226.9	$	2	$	7,916	(41.1)	$	(1,306)	$	4,055	$	(466)	$	38	$	10,239
Cash dividends ($0.15 dividend per share)																		Cash dividends ($0.15 dividend per share)	—	—		—		—	—		(28)		—		—		(28)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		(1)		0.1	2		—		—		—		1		Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		(9)		0.2	5		—		—		—		(4)
Stock based compensation	Stock based compensation	—	—		14		—	—		—		—		—		14		Stock based compensation	—	—		10		—	—		—		—		—		10
Net income	Net income	—	—		—		—	—		125		—		—		125		Net income	—	—		—		—	—		149		—		1		150
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—		—	—		—		33		—		33		Other comprehensive income, net of tax	—	—		—		—	—		—		17		—		17
Stock repurchase																		Stock repurchase	—	—		—		(3.1)	(296)		—		—		—		(296)
Balance, March 31, 2022																		Balance, March 31, 2022	226.9	$	2	$	7,917	(44.0)	$	(1,597)	$	4,176	$	(449)	$	39	$	10,088

Balance, June 30, 2021		226.9	$	2	$	7,897	(37.9)	$	(1,009)	$	3,780	$	(376)	$	33	$	10,327
Cash dividends ($0.12 dividend per share)		—	—		—		—	—		(23)		—		—		(23)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax		—	—		1		0.1	2		—		—		—		3
Stock based compensation		—	—		8		—	—		—		—		—		8
Net income		—	—		—		—	—		131		—		1		132
Other comprehensive loss, net of tax		—	—		—		—	—		—		(57)		—		(57)
Stock repurchase		—	—		—		(2.3)	(199)		—		—		—		(199)
Balance, September 30, 2021		226.9	$	2	$	7,906	(40.1)	$	(1,206)	$	3,888	$	(433)	$	34	$	10,191

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2022~~MARCH 31, 2023 (UNAUDITED)

1. BUSINESS

Except as the context otherwise requires, all references to “we”, “our”, “us”, the “Company” and “Wabtec” refer to Westinghouse Air Brake Technologies Corporation ~~(“Wabtec” or~~and its consolidated subsidiaries. References to the ~~"Company")~~“Parent Company” refer to Westinghouse Air Brake Technologies Corporation alone. 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 ~~nine~~three months of ~~2022,~~2023, approximately 55% of the Company’s net sales came from customers outside the United States.

2. ACCOUNTING POLICIES

Basis of Presentation The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America and the rules and regulations of the Securities and Exchange Commission and include the accounts of Wabtec and its subsidiaries in which Wabtec has a controlling interest. These condensed consolidated interim financial statements do not include all of the information and footnotes required for complete financial statements. In management’s opinion, these financial statements reflect all adjustments of a normal, recurring nature necessary for a fair presentation of the results for the interim periods presented. Certain prior year amounts have been reclassified, where necessary, to conform to the current year presentation.

Results for these interim periods are not necessarily indicative of results to be expected for the full year particularly in light of ongoing volatility in the ~~ongoing COVID-19 pandemic,~~macroeconomic environment caused by supply chain disruptions, labor availability, broad-based inflation, and the impacts resulting from Russia's invasion of Ukraine. These factors continue to impact our sales channels, supply chain, manufacturing operations, workforce, and other key aspects of our operations. We are unable to reasonably predict the full impact of these factors due to the high degree of uncertainty regarding their duration and severity, their potential impact on global economic activity, and the impact that current and new sanctions may have on our business, global supply chain operations and our customers, suppliers, and end-markets.

~~For the year ended December 31, 2021, Wabtec had earnings of approximately $40 million attributable to customers in Russia, while earnings from customers in Ukraine and Belarus were not significant.~~ As of ~~September 30, 2022,~~March 31, 2023, Wabtec had approximately ~~$16~~$14 million of assets related to Russian operations, which were primarily cash and inventory. Assets related to Ukraine and Belarus operations are not significant.

The Company operates on a four-four-five week accounting quarter, and the quarters end on or about March 31, June 30, September 30, and December 31.

The notes included herein should be read in conjunction with the audited consolidated financial statements included in Wabtec’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. The December 31, ~~2021~~2022 information has been derived from the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Use of Estimates The preparation of financial statements in conformity with GAAP in the United States requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from the estimates. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

Revenue Recognition A majority of the Company’s revenues are derived from performance obligations that are satisfied at a point in time when control passes to the customer. The remaining revenues are earned over time. Generally, for performance obligations satisfied at a point in time control passes at the time of shipment in accordance with agreed upon delivery terms.

The Company also has long-term customer agreements involving the design and production of highly engineered products that require revenue to be recognized over time because these products have no alternative use without significant economic loss and the agreements contain an enforceable right to payment including a reasonable profit margin from the customer in the event of contract termination. Additionally, the Company has customer agreements involving the creation or enhancement of an asset that the customer controls which also require revenue to be recognized over time. Generally, the Company uses an input method for determining the amount of revenue, cost and gross margin to recognize over time for these customer agreements. The input methods used for these agreements include costs of material and labor, both of which give an

accurate representation of the progress made toward complete satisfaction of a particular performance obligation. Contract

revenues and cost estimates are reviewed and revised periodically throughout the year and adjustments are reflected in the accounting period as such amounts are determined.

Due to the nature of work required to be performed on the Company’s long-term projects, the estimation of total revenue and cost at completion is subject to many variables and requires significant judgment. Contract estimates related to long-term projects are based on various assumptions to project the outcome of future events that could span several years. These assumptions include cost of materials; labor availability and productivity; complexity of the work to be performed; and the performance of suppliers, customers and subcontractors that may be associated with the contract. We have a disciplined process where management reviews the progress of long term-projects periodically throughout the year. As part of this process, management reviews information including key contract matters, progress towards completion, identified risks and opportunities and any other information that could impact the Company’s estimates of revenue and costs. After completing this analysis, any adjustments to net sales, cost of goods sold, and the related impact to operating income are recognized as necessary in the period they become known.

Generally, the Company’s revenue contains a single performance obligation for each distinct good or service; however, a single contract may have multiple performance obligations comprising multiple promises to customers. When there are multiple performance obligations, revenue is allocated based on the relative stand-alone selling price. Pricing is defined in our contracts on a line item basis and includes an estimate of variable consideration when required by the terms of the individual customer contract. Types of variable consideration the Company typically has include volume discounts, prompt payment discounts, price escalation clauses, liquidating damages and performance bonuses. Sales returns and allowances are also estimated and recognized in the same period the related revenue is recognized, based upon the Company’s ~~experience.~~experience and future expectations.

Remaining performance obligations represent the allocated transaction price of ~~firm customer orders subject to standard industry cancellation provisions and substantial scope-of-work adjustments.~~unsatisfied or partially unsatisfied performance obligations. As of ~~September 30, 2022,~~March 31, 2023, the Company's remaining performance obligations were approximately ~~$22.2~~$22.1 billion. The Company expects to recognize revenue of approximately ~~25%~~30% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

Revolving Receivables Program The Company utilizes a revolving facility to sell up to $350 million of certain receivables of the Company and certain of its subsidiaries (the "Originators"). The Originators contribute receivables to our bankruptcy-remote subsidiary, which sells the receivables to a financial institution on a recurring basis in exchange for cash equal to the gross receivables sold. During the third quarter of 2022, the Company amended its revolving receivables facility to increase the amount of certain receivables that can be sold to such financial institution from $200 million to up to $350 million. The bankruptcy remote subsidiary is a separate legal entity with its own creditors, and its assets are not available to pay creditors of the Company or any other affiliates of the Company. As customers pay their balances, we transfer additional receivables into the program, which ~~results~~could result in our gross receivables sold ~~exceeding~~being higher or lower than collections reinvested for any applicable period. The sold receivables are fully guaranteed by our bankruptcy-remote subsidiary, which holds additional receivables that are pledged as collateral under this facility. The Company has agreed to guarantee the performance of the Originators respective obligations under the revolving agreement. Neither the Company (except for the bankruptcy-remote consolidated subsidiary referenced above) nor the Originators guarantees the collectability of the receivables under the revolving agreements.

At ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ the bankruptcy-remote subsidiary held receivables of ~~$634~~$585 million and ~~$285~~$367 million, respectively, which are included in the Company's Condensed Consolidated Balance Sheets. The receivables held by the bankruptcy-remote subsidiary collateralize the outstanding receivables sold, which was $225 million and $175 million at March 31, 2023 and 2022, respectively. The transfers are recorded at the fair value of the proceeds received and obligations assumed less derecognized receivables. No obligation was recorded at ~~September 30,~~March 31, 2023 or December 31, 2022 ~~or 2021~~ as the estimated expected credit losses on receivables sold is insignificant. Our maximum exposure to losses related to these receivables transferred is limited to the amount outstanding.

The following table sets forth a summary of receivables sold:


In millions	In millions	Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021		In millions	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Gross receivables sold/cash proceeds received	Gross receivables sold/cash proceeds received	$	1,281	$	959	Gross receivables sold/cash proceeds received	$	519	$	312
Collections reinvested under revolving receivables agreement	Collections reinvested under revolving receivables agreement	(1,076)		(875)		Collections reinvested under revolving receivables agreement	(374)		(157)
Net cash proceeds received	Net cash proceeds received	$	205	$	84	Net cash proceeds received	$	145	$	155

Restricted Cash At March 31, 2023 and December 31, 2022, the Company classified cash of $7 million as restricted for cash held in escrow related to a 2022 acquisition.

Depreciation Expense Depreciation of property, plant and equipment related to the manufacturing of products or services provided is included in Cost of goods or Cost of services. Depreciation of other property, plant and equipment that is not attributable to the manufacturing of products or services provided is included in Selling, general and administrative expenses or Engineering expenses ~~depending on how~~to the extent the property, plant, and equipment is ~~used.~~used for research and development purposes.

Goodwill and Intangible Assets Goodwill and other intangible assets with indefinite lives are not amortized. Other intangibles (with definite lives) are amortized on a straight-line basis over their estimated economic lives. Amortizable

intangible assets are reviewed for impairment when indicators of impairment are present. The Company tests goodwill and indefinite-lived intangible assets for impairment at the reporting unit level and at least annually. The Company performs its annual impairment test during the fourth quarter after the annual forecasting process is completed, and also tests for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Periodically, management of the Company assesses whether or not an indicator of impairment is present that would necessitate an impairment analysis to be performed.

Accounting Standards Recently ~~Issued~~Adopted In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Obligations. The amendments in this update outline specific quantitative and qualitative disclosure requirements for entities that use supplier finance programs in connection with the purchase of goods or services. The amendments in this update do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. The amendments in this update ~~will be~~were effective for Wabtec's reporting periods beginning January 1, 2023, ~~and~~except for the amendments on roll forward information which will be effective for reporting periods beginning January 1, 2024. The amendments will require increased interim and annual disclosures be provided on current and comparable reporting periods presented in annual and interim company filings.

~~In October 2021,~~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 ~~FASB issued ASU 2021-08,~~ ~~Business Combinations (Topic 805): Accounting for Contract Assets~~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 ~~Contract Liabilities from Contracts with Customers.~~no assets are pledged under the arrangements. The ~~amendments in this update provide specific guidance on how to recognize~~arrangements do not change the payable terms negotiated by the Company and ~~measure acquired contract assets~~our vendors, which range between net 45 and ~~contract liabilities from revenue contracts~~net 180 days, and does not result in a ~~business combination~~change in the classification of amounts due as Accounts payable in the Condensed Consolidated Balance Sheets. Suppliers utilized the program to accelerate receipt of payment from these financial institutions for $334 million and ~~address how to determine whether a contract liability is recognized by~~$296 million of the ~~acquirer in a business combination. The amendments in this update will be effective for Wabtec on January 1,~~Company's outstanding Accounts payable as of March 31, 2023 and ~~will be applied prospectively~~December 31, 2022, respectively. The supplier invoices included under the program require payment in full to ~~business combinations occurring on or after~~ the ~~effective date.~~financial institutions consistent with the Company’s normal terms and conditions as agreed upon with the vendor.

Accumulated Other Comprehensive Loss Comprehensive income (loss) comprises both ~~net~~Net income and Other comprehensive (loss) income resulting from the change in equity from transactions and other events and circumstances from non-owner sources.

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ are as follows:
Foreign currency translation Derivative contracts Pension and postretirement benefit plans Total
In millions 2022 2021 2022 2021 2022 2021 2022 2021
Balance at June 30 $ (578) $ (288) $ (2) $ (3) $ (61) $ (85) $ (641) $ (376)
Other comprehensive (loss) income, net (170) (60) — — 3 3 (167) (57)
Balance at September 30 $ (748) $ (348) $ (2) $ (3) $ (58) $ (82) $ (808) $ (433)

~~The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the nine months ended September 30, 2022 and 2021 are as follows:~~


		Foreign currency translation				Derivative contracts				Pension and postretirement benefit plans				Total					Foreign currency translation				Derivative contracts				Pension and postretirement benefit plans				Total
In millions	In millions	2022		2021		2022		2021		2022		2021		2022		2021		In millions	2023		2022		2023		2022		2023		2022		2023		2022
Balance at beginning of year	Balance at beginning of year	$	(396)	$	(260)	$	(5)	$	3	$	(65)	$	(82)	$	(466)	$	(339)	Balance at beginning of year	$	(596)	$	(396)	$	(9)	$	(5)	$	(56)	$	(65)	$	(661)	$	(466)
Other comprehensive (loss) income before reclassifications		(352)		(88)		3		(6)		6		(2)		(343)		(96)
Other comprehensive income before reclassifications																		Other comprehensive income before reclassifications	25		13		4		3		—		—		29		16
Amounts reclassified from Accumulated other comprehensive loss	Amounts reclassified from Accumulated other comprehensive loss	—		—		—		—		1		2		1		2		Amounts reclassified from Accumulated other comprehensive loss	—		—		—		—		1		1		1		1
Other comprehensive (loss) income, net		(352)		(88)		3		(6)		7		—		(342)		(94)
Balance at September 30		$	(748)	$	(348)	$	(2)	$	(3)	$	(58)	$	(82)	$	(808)	$	(433)
Other comprehensive income, net																		Other comprehensive income, net	25		13		4		3		1		1		30		17
Balance at March 31																		Balance at March 31	$	(571)	$	(383)	$	(5)	$	(2)	$	(55)	$	(64)	$	(631)	$	(449)

Amounts reclassified from Accumulated other comprehensive loss are recognized in "Other income, net" with the tax impact recognized in "Income tax ~~expense."~~expense" on the Condensed Consolidated Statements of Income.

1110

3. ACQUISITIONS

~~Nordco~~

~~On March~~During the twelve months ended December 31, 2021, the Company acquired Nordco, a leading North American supplier of new, rebuilt and used maintenance of way equipment. Nordco's products and services portfolio includes mobile railcar movers and ultrasonic rail flaw detection technologies. The purchase price paid for 100% ownership of Nordco was approximately $410 million.

~~The following table summarizes the fair value of the Nordco assets acquired and liabilities assumed:~~


~~In millions~~
~~Assets acquired~~
~~Cash and cash equivalents~~	$	5
~~Accounts receivable~~	23
~~Inventory~~	34
~~Other current assets~~	2
~~Property, plant and equipment~~	17
~~Goodwill~~	~~215~~
~~Other intangible assets~~	~~168~~
~~Other noncurrent assets~~	12
~~Total assets acquired~~	~~476~~
~~Liabilities assumed~~
~~Current liabilities~~	20
~~Noncurrent liabilities~~	46
~~Total liabilities assumed~~	66
~~Net assets acquired~~	$	~~410~~

The fair values of the assets acquired and liabilities assumed were determined using the income, cost and market approaches. Discounted cash flow models were used to estimate the fair values of acquired intangibles. The fair value measurements were primarily based on significant inputs that are not observable in the market and are considered Level 3 in the fair value hierarchy. Intangible assets acquired include customer relationships and acquired technology that are subject to amortization, and trade names that were assigned an indefinite life and are not subject to amortization. Contingent liabilities assumed as part of the transaction were not material.

Goodwill was calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired, and represents the assembled workforce and the future economic benefits, including synergies, that are expected to be achieved as a result of the acquisition. The purchased goodwill is not expected to be deductible for tax purposes. The results of this business since the date of acquisition are reported within the Services product line of2022, the Freight ~~Segment. The pro forma impact on Wabtec’s sales and results of operations, including the pro forma effect of events that are directly attributable to the acquisition, was not significant.~~

~~During the second quarter of 2022 the Company~~Segment made ~~two~~three strategic acquisitions for a combined purchase price of ~~$69 million within~~$89 million. Two of the acquisitions are reported in the Digital ~~Electronics~~Intelligence product line and one is reported in the Services product line. Each of the ~~Freight Segment which are individually and collectively immaterial. The Company also made~~ acquisitions in ~~prior periods not listed above which~~2022 are individually and collectively immaterial.

4. INVENTORIES

The components of inventory, net of reserves, were:


In millions	In millions	September 30, 2022		December 31, 2021		In millions	March 31, 2023		December 31, 2022
Raw materials	Raw materials	$	856	$	757	Raw materials	$	995	$	878
Work-in-progress	Work-in-progress	534		316		Work-in-progress	510		515
Finished goods	Finished goods	633		616		Finished goods	723		641
Total inventories	Total inventories	$	2,023	$	1,689	Total inventories	$	2,228	$	2,034

5. GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill by segment is as follows:


In millions	In millions	Freight Segment		Transit Segment		Total		In millions	Freight Segment		Transit Segment		Total
Balance at December 31, 2021		$	7,073	$	1,514	$	8,587
Balance at December 31, 2022								Balance at December 31, 2022	$	7,085	$	1,423	$	8,508
Additions/adjustments	Additions/adjustments	24		(2)		22		Additions/adjustments	7		—		7
Foreign currency impact	Foreign currency impact	(40)		(208)		(248)		Foreign currency impact	8		17		25
Balance at September 30, 2022		$	7,057	$	1,304	$	8,361
Balance at March 31, 2023								Balance at March 31, 2023	$	7,100	$	1,440	$	8,540

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company’s trade names had a net carrying amount of ~~$568~~$603 million and ~~$635~~$602 million, respectively. The Company believes these intangibles have indefinite lives, with the exception of the right to use the GE Transportation trade name, to which the Company has assigned a useful life of 5 years.

Intangible assets of the Company, other than goodwill and trade names, consist of the following:
In millions September 30,
2022 December 31,
2021
Backlog, net of accumulated amortization of $391 and $309 $ 1,035 $ 1,114
Customer relationships, net of accumulated amortization of $359 and $331 904 979
Acquired technology, net of accumulated amortization of $412 and $334 903 977
Total $ 2,842 $ 3,070


	March 31, 2023						December 31, 2022
In millions	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Backlog	$	1,427	$	(443)	$	984	$	1,425	$	(415)	$	1,010
Customer relationships	1,277		(382)		895		1,274		(362)		912
Acquired technology	1,272		(421)		851		1,273		(395)		878
Total	$	3,976	$	(1,246)	$	2,730	$	3,972	$	(1,172)	$	2,800

At ~~September 30, 2022~~March 31, 2023 the weighted average remaining useful lives of backlog, customer relationships and acquired technology were 109 years, 16 years and 98 years, respectively. The backlog intangible asset primarily consists of in-place long-term service agreements acquired by the Company in conjunction with the acquisition of GE ~~Transportation in 2019.~~Transportation. Amortization expense for intangible assets was ~~$73~~$75 million and ~~$218~~$73 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, and $73 million and $215 million for the three and nine months ended September 30, 2021,~~ respectively.

Amortization expense for the five succeeding years is estimated to be as follows:


In millions	In millions			In millions
Remainder of 2022		$	73
2023		$	291
Remainder of 2023				Remainder of 2023	$	219
2024	2024	$	282	2024	$	283
2025	2025	$	265	2025	$	266
2026	2026	$	261	2026	$	262
2027				2027	$	257

6. CONTRACT ASSETS AND CONTRACT LIABILITIES

Contract assets include unbilled amounts resulting from sales under long-term contracts where revenue is recognized over time and revenue exceeds the amount that can be billed to the customer based on the terms of the contract. The current portion of the contract assets are classified as current assets under the caption “Unbilled accounts receivable” while the noncurrent contract assets are classified as other assets under the caption "Other noncurrent assets" on the ~~consolidated balance sheets.~~Condensed Consolidated Balance Sheets. Noncurrent contract assets were ~~$198~~$187 million at ~~September 30, 2022~~March 31, 2023 and ~~$153~~$162 million at December 31, ~~2021.~~2022. Included in noncurrent contract assets are certain costs that are specifically related to a contract but do not directly contribute to the transfer of control of the tangible product being created, such as non-recurring engineering costs. The Company has elected to use the practical expedient and does not consider unbilled amounts anticipated to be paid within one year as significant financing components.

Contract liabilities include customer deposits that are made prior to the incurrence of costs related to a newly agreed upon contract and advanced customer payments that are in excess of revenue recognized. The current portion of contract liabilities are classified as current liabilities under the caption “Customer deposits” while the noncurrent contract liabilities are classified as noncurrent liabilities under the caption "Other long-term liabilities" on the ~~consolidated balance sheets.~~Condensed Consolidated Balance Sheets. Noncurrent contract liabilities were ~~$79~~$120 million at ~~September 30, 2022~~March 31, 2023 and ~~$88~~$86 million at December 31, ~~2021.~~2022. These contract liabilities are not considered a significant financing component because they are used to meet working capital demands that can be higher in the early stages of a contract or revenue associated with the contract liabilities is expected to be recognized within one year. Contract liabilities also include provisions for estimated losses from uncompleted contracts. Provisions for loss

contracts were ~~$110~~$97 million and ~~$107~~$98 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. These provisions for estimated losses are classified as current liabilities and included within the caption “Other accrued liabilities” on the ~~consolidated balance sheets.~~Condensed Consolidated Balance Sheets.

The change in the carrying amount of contract assets and contract liabilities for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ is as follows:


		Contract Assets					Contract Assets
In millions	In millions	2022		2021		In millions	2023		2022
Balance at beginning of year	Balance at beginning of year	$	545	$	544	Balance at beginning of year	$	706	$	545
Acquisitions		28		—
Acquisitions/adjustments						Acquisitions/adjustments	(2)		—
Recognized in current year	Recognized in current year	463		442		Recognized in current year	235		165
Reclassified to accounts receivable	Reclassified to accounts receivable	(344)		(424)		Reclassified to accounts receivable	(135)		(140)
Foreign currency impact	Foreign currency impact	(36)		(6)		Foreign currency impact	3		(2)
Balance at September 30		$	656	$	556
Balance at March 31						Balance at March 31	$	807	$	568

		Contract Liabilities					Contract Liabilities
In millions	In millions	2022		2021		In millions	2023		2022
Balance at beginning of year	Balance at beginning of year	$	824	$	832	Balance at beginning of year	$	956	$	824
Acquisitions		12		2

Recognized in current year	Recognized in current year	768		477		Recognized in current year	271		231
Amounts in beginning balance reclassified to revenue	Amounts in beginning balance reclassified to revenue	(348)		(387)		Amounts in beginning balance reclassified to revenue	(250)		(191)
Current year amounts reclassified to revenue	Current year amounts reclassified to revenue	(343)		(154)		Current year amounts reclassified to revenue	(70)		(44)
Foreign currency impact	Foreign currency impact	(33)		(10)		Foreign currency impact	7		(4)
Balance at September 30		$	880	$	760
Balance at March 31						Balance at March 31	$	914	$	816

7. LEASES

The Company leases certain property, buildings and equipment. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments. Many of the Company's leases include rental escalation clauses, renewal options, and/or termination options that are factored into our determination of lease payments when appropriate. The ~~Company does not separate lease and non-lease components. The~~ right-of-use assets are classified as noncurrent and included within the caption "Other noncurrent assets" on the ~~consolidated balance sheets.~~Condensed Consolidated Balance Sheets. The current portion of lease liabilities are classified under the caption "Other accrued liabilities," while the noncurrent portion of lease liabilities are classified under the caption "Other long-term liabilities" on the ~~consolidated balance sheets.~~

Operating lease expense was $15 million and $44 million for the three and nine months ended September 30, 2022, respectively, and $16 million and $44 million for the three and nine months ended September 30, 2021, respectively. New operating leases of $34 million and $58 million were added during the three and nine months ended September 30, 2022, respectively. WabtecCondensed Consolidated Balance Sheets. The Company does not ~~have material financing leases, short-term or variable leases or sublease income.~~

separate lease and non-lease components. As most of the Company's leases do not provide a readily stated discount rate, the Company must estimate the rate to discount lease payments using its incremental borrowing rate. ~~The Company has established discount rates by geographic region ranging from 1% to 9%.~~

Operating lease expense was $16 million and $15 million for the three months ended March 31, 2023 and 2022, respectively. New operating leases of $14 million and $2 million were added during the three months ended March 31, 2023 and 2022, respectively. Wabtec does not have material financing leases, short-term or variable leases or sublease income.

Scheduled payments of lease liabilities are as follows:


In millions	In millions	Operating Leases		In millions	Operating Leases
Remaining 2022		$	14
2023		56
Remaining 2023				Remaining 2023	$	47
2024	2024	50		2024	56
2025	2025	43		2025	49
2026	2026	36		2026	40
2027				2027	30
Thereafter	Thereafter	139		Thereafter	140
Total lease payments	Total lease payments	338		Total lease payments	362
Less: Present value discount	Less: Present value discount	(26)		Less: Present value discount	(26)
Present value of lease liabilities	Present value of lease liabilities	$	312	Present value of lease liabilities	$	336

The following table summarizes the remaining lease term and discount rate assumptions used to develop the present value of operating lease liabilities:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Weighted-average remaining lease term (years)	Weighted-average remaining lease term (years)	8.4		8.2		Weighted-average remaining lease term (years)	8.3		8.3
Weighted-average discount rate	Weighted-average discount rate	2.3	%	2.3	%	Weighted-average discount rate	2.3	%	2.3	%

8. LONG-TERM DEBT

Long-term debt consisted of the following:


		Effective Interest Rate		Face Value			September 30, 2022						December 31, 2021						Effective Interest Rate				Face Value			March 31, 2023						December 31, 2022
In millions	In millions					Book Value			Fair Value1			Book Value			Fair Value1	In millions						Book Value				Fair Value1			Book Value			Fair Value1
Restated Credit Agreement:	Restated Credit Agreement:																					Restated Credit Agreement:
Revolving Credit Facility	Revolving Credit Facility	4.8	%	$	122		$	118		$	122		$	—		$	—	Revolving Credit Facility		6.9		%		$	155		$	155		$	155		$	—		$	—
Senior Notes:	Senior Notes:																	Senior Notes:
4.375% Senior Notes, due 2023	4.375% Senior Notes, due 2023	4.5	%	$	250		250			248			250			260		4.375% Senior Notes, due 2023	4.5		%		$	250		250			249			250			248
4.15% Senior Notes, due 2024	4.15% Senior Notes, due 2024	4.6	%	$	725		723			713			747			796		4.15% Senior Notes, due 2024	4.6		%		$	725		724			715			723			714
3.20% Senior Notes, due 2025	3.20% Senior Notes, due 2025	3.4	%	$	500		497			468			497			523		3.20% Senior Notes, due 2025	3.4		%		$	500		498			477			498			471
3.45% Senior Notes, due 2026	3.45% Senior Notes, due 2026	3.5	%	$	750		749			680			749			795		3.45% Senior Notes, due 2026	3.5		%		$	750		749			708			749			699
1.25% Senior Notes (EUR), due 2027	1.25% Senior Notes (EUR), due 2027	1.5	%	€	500		484			396			560			574		1.25% Senior Notes (EUR), due 2027	1.5		%		€	500		536			474			529			455
4.70% Senior Notes, due 2028	4.70% Senior Notes, due 2028	5.0	%	$	1,250		1,244			1,161			1,243			1,423		4.70% Senior Notes, due 2028	5.0		%		$	1,250		1,244			1,232			1,244			1,201
Other Borrowings	Other Borrowings						10			10			12			12		Other Borrowings								8			11			9			13
Total	Total						4,075			3,798			4,058			4,383		Total								4,164			4,021			4,002			3,801
Less: current portion	Less: current portion						251			249			2			2		Less: current portion								(975)			(965)			(251)			(249)
Long-term portion	Long-term portion						$	3,824		$	3,549		$	4,056		$	4,381	Long-term portion								$	3,189		$	3,056		$	3,751		$	3,552

1. See Note 13 for information on the fair value measurement of the Company's long-term debt.

Variances between Face Value and Book Value are the result of unamortized discounts and debt issuance ~~fees.~~fees as well as foreign exchange on the Euro Notes. Amortization of discounts and debt issuance fees are included in the calculation of Effective Interest Rate.

For those debt securities that have a premium or discount at the time of issuance, the Company amortizes the amount through interest expense based on the maturity date or the first date the holders may require the Company to repurchase the debt securities, if applicable. A premium would result in a decrease in interest expense, and a discount would result in an increase in interest expense in future periods. Additionally, the Company has debt issuance costs related to certain financing transactions which are also amortized through interest expense. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had total combined unamortized discount and debt issuance costs of ~~$22~~$19 million and ~~$23~~$21 million, respectively.

Credit Agreement

On June 8, 2018, the Company entered into a credit agreement (“Original Credit Agreement”) consisting of (i) term loans denominated in euros and U.S. dollars ("Term Loans") and (ii) a multi-currency revolving loan facility, providing for an equivalent in U.S. dollars of up to $1.2 billion. On August 15, 2022, the Company entered into a new unsecured credit agreement ("Restated

Credit Agreement"), which amended, restated and replaced the Original Credit Agreement. The Restated Credit Agreement is with a syndicate of lenders and provides for borrowings consisting of (i) a multi-currency revolving credit facility, providing for an equivalent in U.S. dollars of up to $1.5 billion (the “Revolving Credit Facility”) and (ii) a new $250 million delayed draw term loan facility (the “Delayed Draw Term Loan”), all pursuant to the terms and conditions of the Restated Credit Agreement (which are substantially similar with the terms of the Original Credit Agreement). The Restated Credit Agreement allows the Company to request, at prevailing market rates, an aggregate amount not to exceed $750 million, (a) increases to the borrowing commitments under the Revolving Credit Facility and/or (b) new incremental term loan commitments. The agreement contains affirmative, negative and financial covenants, and events of default customary for facilities of this type.

The Revolving Credit Facility matures on August 15, 2027. The Delayed Draw Term Loan is available for borrowings until February 15, 2024 and any borrowings under the Delayed Draw Term Loan will mature on August 15, 2027. Amounts borrowed and repaid under the Delayed Draw Term Loan may not be reborrowed. The applicable interest rate for borrowings under the Restated Credit Agreement includes a base rate (per the Interest Election terms of the agreement) plus an interest rate spread up to 1.75% based on the lower of the pricing corresponding to (i) the Company’s financial leverage or (ii) the Company’s public rating. Obligations under the Restated Credit Agreement have been guaranteed by certain of the Company’s subsidiaries.

Under the Restated Credit Agreement, the Company has agreed to maintain an Interest Coverage Ratio of at least 3.0 to 1.0, and a Leverage Ratio not to exceed 3.5 to 1.0. The Interest Coverage Ratio is defined as EBITDA (earnings before interest, taxes, depreciation, and amortization) to Interest Expense for the four quarters then ended. The Leverage Ratio is defined as Net Debt as of the last day of such fiscal quarter to EBITDA for the four quarters then ended. Additionally, the Company may submit a request for an increased maximum Leverage Ratio in contemplation of a Material Acquisition. All terms are as defined in the Restated Credit Agreement.

The Company was in compliance with all financial covenants in the Restated Credit Agreement as of ~~September 30, 2022.~~March 31, 2023.

The following table presents availability under the Restated Credit Agreement at ~~September 30, 2022:~~March 31, 2023:


In millions
Maximum Revolving Credit Facility Availability	$	1,500
Delayed Draw Term Loan	250
Outstanding Borrowings	~~(122)~~(155)
Letters of Credit Under Credit Agreement	~~(3)~~(1)
Current Availability	$	~~1,625~~1,594

Senior Notes

The Company or its subsidiaries may issue senior notes from time to time. These notes are comprised of our 4.375% Senior Notes due 2023 (the "2023 Notes"), 4.15% Senior Notes due 2024 (the "2024 Notes"), 3.20% Senior Notes due 2025 (the "2025 Notes"), 3.45% Senior Notes due 2026 (the "2026 Notes"), 1.25% Senior Notes (EUR) due 2027 (the "Euro Notes"), and 4.70% Senior Notes due 2028 (the "2028 Notes"). The 2023 Notes, 2024 Notes, 2025 Notes, 2026 Notes and 2028 Notes are the “US Notes”, and collectively with the Euro Notes, the “Senior Notes.” Interest on the US Notes is payable semi-annually and interest on the Euro Notes is paid annually. Each series of the Senior Notes may be redeemed at any time in whole or from time to time in part in accordance with the provisions of the indenture, under which such series of notes was issued. Each of the Senior Notes may be redeemed at a redemption price of 100% of the principal amount plus a specified

make-whole premium and accrued interest. The US Notes and the Company's guarantee of the Euro Notes are senior unsecured obligations of the Company and rank pari passu with all existing and future senior debt, and are senior to all existing and future subordinated indebtedness of the Company.

During the second quarter of 2022, the Company redeemed $25 million of principal from the 2024 Notes plus a premium and the related accrued interest.

The indentures under which the Senior Notes were issued contain covenants and restrictions which limit, subject to certain exceptions, certain sale and leaseback transactions with respect to principal properties, the incurrence of secured debt without equally and ratably securing the Senior Notes, and certain merger and consolidation transactions. The covenants do not require the Company to maintain any financial ratios or specified levels of net worth or liquidity. The US Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of the Company's subsidiaries that is a guarantor under the ~~Senior~~Restated Credit ~~Facility.~~Agreement. The Euro Notes were issued by Wabtec Transportation Netherlands B.V. and are fully and unconditionally guaranteed by the Company.

The Company is in compliance with the restrictions and covenants in the indentures under which the Senior Notes were issued and expects that these restrictions and covenants will not be any type of limiting factor in executing our operating activities.

9. STOCK-BASED COMPENSATION

As of ~~September 30, 2022,~~March 31, 2023, the Company maintains employee stock-based compensation plans for stock options, restricted stock, and incentive stock units as governed by the 2011 Stock Incentive Compensation Plan, as amended and restated (the “2011 Plan”) and the 2000 Stock Incentive Plan, as amended (the “2000 Plan”). The 2011 Plan has a term through May ~~15, 2030,~~10, 2027, and as of ~~September 30, 2022~~March 31, 2023, the number of shares available for future grants under the 2011 Plan was approximately ~~5.3~~4.9 million shares. The Company also maintains a 1995 Non-Employee Directors’ Fee and Stock Option Plan as amended and restated (“the Directors Plan”).

Stock-based compensation expense was $12 million and ~~$35~~$11 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, and $10 million and $34 million for the three and nine months ended September 30, 2021,~~ respectively. At ~~September 30, 2022,~~March 31, 2023, unamortized compensation expense related to stock options, non-vested restricted shares and incentive stock units expected to vest ~~totaled $57~~is approximately $90 million.

Stock Options Stock options are granted to eligible employees and directors at an exercise price ~~equivalent~~equal to ~~the stock's~~ fair market value, which is the average of the high and low Wabtec stock price on the date of grant. ~~New~~Under the 2011 Plan and the 2000 Plan, options ~~granted~~ become exercisable over a three-year vesting ~~period. Options~~period and expire 10 years from the date of grant. No stock options were granted during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 or during the twelve months ended December 31, 2022.

The following table summarizes the Company’s stock option activity and related information for the 2011 Plan, the 2000 Plan and the Directors Plan for the ~~nine~~three months ended ~~September 30, 2022:~~March 31, 2023:
Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual Life Aggregate
Intrinsic value
(in millions)
Outstanding at December 31, 2021 531,915 $ 75.40 6.5 $ 9
Exercised (55,944) $ 74.64
Canceled (21,052) $ 74.59
Outstanding at September 30, 2022 454,919 $ 75.53 5.8 $ 3
Exercisable at September 30, 2022 347,995 $ 74.44 5.6 $ 3


	Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic value (in millions)
Outstanding at December 31, 2022	399,938	$	77.32	5.9	$	11
Exercised	(20,534)	$	70.91
Canceled	(113)	$	80.52
Outstanding at March 31, 2023	379,291	$	77.67	5.8	$	9
Exercisable at March 31, 2023	343,239	$	77.48	5.7	$	8

Restricted Stock, Restricted Units and Incentive Stock As provided for under the 2011 Plan and 2000 Plan, eligible employees are granted restricted stock that generally vests over three years from the date of grant. Under the Directors Plan, restricted stock awards vest one year from the date of grant. The restricted stock units are liability-classified equity awards as they can be settled in cash.

In addition, the Company has issued incentive stock units to eligible employees that vest upon attainment of certain cumulative three-year performance goals. Significant judgments and estimates are used in determining the estimated three-year performance, which is then used to estimate the total shares expected to vest over the three year vesting cycle and corresponding expense based on the grant date fair value of the award. When determining the estimated three-year performance, the Company utilizes a combination of historical actual results, budgeted results and forecasts. Upon the initial grant of a performance cycle, the Company estimates the three-year performance at 100%. Quarterly, the Company reviews and updates performance estimates based on actual performance results and current projections. Based on the Company’s performance for each three-year period then ended, the incentive stock units can vest ~~with underlying shares of common stock being~~and be awarded ~~in an amount~~ ranging from 0% to 200% of the ~~amount of~~ initial

incentive stock units granted. The incentive stock units included in the table below represent the number of incentive stock units that are expected to vest based on the Company’s estimate for meeting those established performance targets. As of ~~September 30, 2022,~~March 31, 2023, the Company estimates that it will achieve ~~135%~~125%, 120% and ~~106%~~100% for the incentive stock awards expected to vest based on performance for the three-year periods ending December 31, ~~2022,~~ 2023, 2024, and ~~2024,~~2025, respectively, and has recorded incentive compensation expense accordingly. If the ~~estimate~~estimates of the number of these incentive stock units expected to vest changes in a future accounting period, cumulative compensation expense could increase or decrease ~~resulting in recognition~~and will be recognized in the current period for the elapsed portion of the vesting period and would change future expense for the remaining vesting period.

Compensation expense for the non-vested restricted stock and incentive stock units is based on the ~~average~~closing price of the ~~high and low Wabtec~~Company's common stock ~~price~~ on the date of grant and recognized over the applicable vesting period.

Expense for incentive stock units is updated as necessary based on the Company's performance.

The following table summarizes the restricted stock activity and related information for the 2011 Plan, the 2000 Plan, and Directors Plan, and incentive stock ~~units'~~units activity and related information for the ~~nine~~2011 Plan and the 2000 Plan with related information for the three months ended ~~September 30, 2022:~~March 31, 2023:


		Restricted Stock and Units	Incentive Stock Units	Weighted Average Grant Date Fair Value			Restricted Stock and Units	Incentive Stock Units	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2021		507,698	607,101	$	78.06
Outstanding at December 31, 2022						Outstanding at December 31, 2022	689,420	744,844	$	84.73
Granted	Granted	449,076	176,657	$	91.16	Granted	325,578	187,172	$	105.24
Vested	Vested	(213,043)	(43,039)	$	74.98	Vested	(207,628)	(264,577)	$	81.42
Adjustment for incentive stock awards expected to vest	Adjustment for incentive stock awards expected to vest	—	26,222	$	84.10	Adjustment for incentive stock awards expected to vest	—	(6,090)	$	84.50
Canceled	Canceled	(37,548)	(38,313)	$	75.69	Canceled	(3,285)	(1,528)	$	85.39
Outstanding at September 30, 2022		706,183	728,628	$	84.56
Outstanding at March 31, 2023						Outstanding at March 31, 2023	804,085	659,821	$	92.92

10. INCOME TAXES

The overall effective tax rate of ~~24.7% and 25.1%~~25.5% for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 differs from the U.S. federal statutory rate of 21.0% primarily due to the impact of state and foreign taxes.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law. This act includes a new book minimum tax on certain large corporations and an excise tax on corporate stock buybacks among other provisions. This act has not had, and is not expected to have, a material impact on our consolidated financial position, results of operations, or cash flows.

11. EARNINGS PER SHARE

The computation of basic and diluted earnings per share for Net income attributable to Wabtec shareholders is as follows:
Three Months Ended
September 30, Nine Months Ended
September 30,
In millions, except per share data 2022 2021 2022 2021
Numerator
Net income attributable to Wabtec shareholders $ 160 $ 131 $ 475 $ 368
Denominator
Weighted average shares outstanding - basic 181.3 187.6 182.6 188.2
Effect of dilutive securities:
Assumed conversion of dilutive stock-based compensation plans 0.6 0.4 0.5 0.4
Weighted average shares outstanding - diluted 181.9 188.0 183.1 188.6
Net income attributable to Wabtec shareholders per common share
Basic $ 0.88 $ 0.69 $ 2.60 $ 1.95
Diluted $ 0.88 $ 0.69 $ 2.59 $ 1.95

Approximately 0.1 million outstanding shares of stock options for the three and nine months ended September 30, 2021 were not included in the computation of diluted earnings per share because their exercise price exceeded the average market price of the Company's common stock.


	Three Months Ended March 31,
In millions, except per share data	2023		2022
Numerator
Net income attributable to Wabtec shareholders	$	169	$	149
Denominator
Weighted average shares outstanding - basic	179.9		184.5
Effect of dilutive securities:
Assumed conversion of dilutive stock-based compensation plans	0.7		0.5
Weighted average shares outstanding - diluted	180.6		185.0
Net income attributable to Wabtec shareholders per common share
Basic	$	0.94	$	0.80
Diluted	$	0.93	$	0.80

12. WARRANTIES

The following table reconciles the changes in the Company’s product warranty reserve for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


In millions	In millions	2022		2021		In millions	2023		2022
Balance at beginning of year	Balance at beginning of year	$	259	$	279	Balance at beginning of year	$	242	$	259
Acquisitions		3		2

Warranty expense	Warranty expense	55		85		Warranty expense	27		27
Warranty claim payments	Warranty claim payments	(65)		(85)		Warranty claim payments	(21)		(30)
Foreign currency impact/other	Foreign currency impact/other	(16)		(9)		Foreign currency impact/other	1		(2)
Balance at September 30		$	236	$	272
Balance at March 31						Balance at March 31	$	249	$	254

13. FAIR VALUE MEASUREMENT AND DERIVATIVE INSTRUMENTS

ASC 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value and explains the related disclosure requirements. ASC 820 indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability and defines fair value based upon an exit price model.

Valuation Hierarchy. ASC 820 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as ~~follows:~~follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or ~~liabilities;~~liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial ~~instrument; and,~~instrument. Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company’s cash, ~~and~~ cash equivalents and restricted cash are highly liquid investments purchased with an original maturity of three months or less and are considered Level 1 on the fair value valuation hierarchy. The fair value of cash, ~~and~~ cash equivalents and restricted cash approximated the carrying value at ~~September 30, 2022~~March 31, 2023 and December 31, 2021. The Company’s defined benefit pension plan assets consist primarily of equity security funds, debt security funds, insurance contracts, and temporary cash and cash equivalent investments. These investments are comprised of a number of investment funds that invest in a diverse portfolio of assets including equity securities, corporate and governmental bonds, and money markets. Trusts are valued at the net asset value (“NAV”) as determined by their custodian. NAV represents the accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the total shares outstanding at the reporting dates.2022. The Senior Notes are considered Level 2 based on the fair value valuation hierarchy. Contingent consideration related to the GE Transportation acquisition is considered Level 3 based on the fair value valuation hierarchy. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, $110~~2022, $105 million was classified as "Other accrued liabilities" on the Company's Condensed Consolidated Balance Sheets and ~~$143~~$48 million and ~~$141~~$47 million, respectively, was included within long-term liabilities classified as "Contingent consideration" on the Company's Condensed Consolidated Balance Sheets. The fair value approximates the carrying value at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Hedging Activities In the normal course of business, the Company is exposed to market risk related to interest rates, commodity prices and foreign currency exchange rate fluctuations, which may adversely affect our operating results and financial position. At times, we limit these risks through the use of derivatives such as cross-currency swaps, foreign currency forward contracts, interest rate swaps, commodity swaps and options. These hedging contracts are valued using broker quotations, or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within level 2. In accordance with our policy, derivatives are only used for hedging purposes. We do not use derivatives for trading or speculative purposes.

Foreign Currency Exchange Risk

The Company uses forward contracts to hedge forecasted foreign currency denominated sales of finished goods and future settlement of foreign currency denominated assets and liabilities. Derivatives used to hedge firm commitments relevant to sales and purchases and forecasted transactions to be realized with high probability that meet the criteria for hedge accounting are designated as cash flow hedges. The effective portion of gains and losses is deferred as a component of Accumulated other comprehensive loss and is recognized in earnings at the time the hedged item affects earnings, in the same line item as the underlying hedged item. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the amounts reclassified into income were not material.

The Company has also established balance sheet risk management and net investment hedging programs to protect its balance sheet against foreign currency exchange rate volatility. We conduct our business worldwide in U.S. dollars and the functional currencies of our foreign subsidiaries, including euro, Indian rupee, British pound sterling, Australian dollars and several other foreign currencies. Changes in these foreign currency exchange rates could have a material adverse impact on our financial results that are reported in U.S. dollars. We are also exposed to foreign currency exchange rate risk related to our foreign subsidiaries, including intercompany loans denominated in non-functional currencies. We hedge these exposures using

foreign currency swap contracts and cross-currency swaps to offset the potential income statement effects on intercompany loans denominated in non-functional currencies. These programs reduce but do not eliminate foreign currency exchange rate risk entirely.

The Company enters into certain derivative contracts in accordance with its risk management strategy that do not meet the criteria for hedge accounting, but which have the impact of largely mitigating foreign currency exposure. These foreign exchange contracts are accounted for on a full mark to market basis through earnings, with gains and losses recorded as a

component of Other income, net. The net gain related to these contracts was $1 million for the three months ended March 31, 2023 and the net loss related to these contracts was ~~$3 million and $11~~$1 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively, and a net loss of $3 million for the nine months ended September 30, 2021.~~March 31, 2022. These contracts typically mature within one year.

The following table summarizes the assets, liabilities, gross notional amounts, fair values, and fair ~~values~~value hierarchy classification of the designated and non-designated hedges discussed in the above sections as of ~~September 30, 2022,~~March 31, 2023, which are included in ~~"Other~~other current ~~assets"~~assets and ~~"Other accrued liabilities"~~liabilities on the Condensed Consolidated Balance Sheets:


			Fair Value				Gross Notional Amount						Fair Value				Gross Notional Amount
In millions	In millions	Level	Designated		Non-Designated		Designated		Non-Designated		In millions	Level	Designated		Non-Designated		Designated		Non-Designated
Foreign Exchange Contracts	Foreign Exchange Contracts										Foreign Exchange Contracts
Other current assets	Other current assets	2	$	4	$	—	$	458	$	234	Other current assets	2	$	8	$	2	$	433	$	114
Other current liabilities	Other current liabilities	2	(2)		—		539		—		Other current liabilities	2	(10)		(2)		648		181
Cross-currency Swaps
Other current liabilities		2	—		—		12		—
Interest Rate Contracts											Interest Rate Contracts
Other current assets											Other current assets	2	—		—		50		—
Total	Total		$	2	$	—	$	1,009	$	234	Total		$	(2)	$	—	$	1,131	$	295

The following table summarizes the assets, liabilities, gross notional amounts, fair values, and fair ~~values~~value hierarchy classification of the designated and non-designated hedges discussed in the above sections as of December 31, ~~2021,~~2022, which are included in ~~"Other~~other current ~~assets"~~assets and ~~"Other accrued liabilities"~~liabilities on the Condensed Consolidated Balance Sheets:


			Fair Value				Gross Notional Amount						Fair Value				Gross Notional Amount
In millions	In millions	Level	Designated		Non-Designated		Designated		Non-Designated		In millions	Level	Designated		Non-Designated		Designated		Non-Designated
Foreign Exchange Contracts	Foreign Exchange Contracts										Foreign Exchange Contracts
Other current assets	Other current assets	2	$	8	$	—	$	627	$	—	Other current assets	2	$	8	$	3	$	278	$	156
Other current liabilities	Other current liabilities	2	(1)		(2)		613		289		Other current liabilities	2	(11)		(3)		769		152
Cross-currency Swaps
Other current assets		2	—		—		14		—

Total	Total		$	7	$	(2)	$	1,254	$	289	Total		$	(3)	$	—	$	1,047	$	308

Interest Rate Risk

The Company may use interest rate ~~swap~~hedge contracts on certain investing and borrowing transactions to manage its net exposure to interest rate changes and to ~~reduce~~manage its overall cost of borrowing. Accordingly, the Company has entered into interest rate hedges to manage interest rate risk for a portion of future expected debt transactions. The Company does not use leveraged swaps and, in general, does not leverage any of its investment activities that would put principal capital at risk. For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ the amounts reclassified into income were not material.

Commodity Price Risk

The Company may use commodity forward ~~contracts and futures~~swaps to ~~mitigate~~manage its exposure to commodity price changes and to reduce its overall cost of manufacturing. For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ the amounts recognized as income or expense were not material.

14. COMMITMENTS AND CONTINGENCIES

The Company is subject to a variety of environmental laws and regulations governing discharges to air and water, the handling, storage and disposal of hazardous or solid waste materials and the remediation of contamination associated with releases of hazardous substances. The Company believes its operations currently comply in all material respects with all of the various environmental laws and regulations applicable to our business; however, there can be no assurance that environmental requirements will not change in the future or that we will not incur significant costs to comply with such requirements.

Claims have been filed against the Company and certain of its affiliates in various jurisdictions across the United States by persons alleging bodily injury as a result of exposure to asbestos-containing products. The vast majority of the claims are submitted to insurance carriers for defense and indemnity, or to non-affiliated companies that retain the liabilities for the

asbestos-containing products at issue. We cannot, however, assure that all of these claims will be fully covered by insurance, or that the indemnitors or insurers will remain financially viable. Our ultimate legal and financial liability with respect to these claims, as is the case with other pending litigation, cannot be estimated. A limited number of claims are not covered by insurance, nor are they subject to indemnity from non-affiliated parties. Management believes that the costs of the Company’s asbestos-related cases will not be material to the Company’s overall financial position, results of operations and cash flows.

Xorail, Inc., a wholly owned subsidiary of the Company (“Xorail”), has received notices from Denver Transit Constructors (“DTC”) alleging breach of contract related to the operating of constant warning wireless crossings, and late delivery of the Train Management & Dispatch System (“TMDS”) for the Denver Eagle P3 Project, which is owned by the Denver Regional Transit District ("RTD"). No damages have been asserted for the alleged late delivery of the TMDS, and no formal claim has been filed; Xorail has successfully completed a remediation plan concerning the TMDS issues. With regard to the wireless crossing issue, as of September 8, 2017, DTC alleged that total damages were $37 million through July 31, 2017 and were continuing to accumulate. The majority of the damages stems from a delay in approval of the wireless crossing system by the Federal Railway Administration ("FRA") and the Public Utility Commission ("PUC"), resulting in the use of flaggers at all of the crossings pending approval of the wireless crossing system and certification of the crossings. DTC has alleged that the delay is due to Xorail's failure to achieve constant warning times for the crossings in accordance with the approval requirements imposed by the FRA and PUC. Xorail has denied DTC's assertions, stating that its system satisfied the contractual requirements. Xorail has worked with DTC to modify its system and implement the FRA's and PUC's previously undefined approval requirements; the FRA and PUC have both approved modified wireless crossing system, and as of August 2018, DTC completed the process of certifying the crossings and eliminated the use of flaggers. DTC has not updated its claim notices or alleged damages against Xorail, nor have they filed any formal claim against Xorail. On September 21, 2018, DTC filed a complaint against RTD in Colorado state court for breach of contract related to non-payments and the costs for the flaggers, asserting a change-in-law arising from the FRA/PUC’s new certification requirements. ~~DTC’s complaint generally supports Xorail’s position and does not name or implicate Xorail.~~ DTC's claim against RTD proceeded to trial on September 21, ~~2020;~~2020. On February 10, 2023, the ~~trial has been completed, including post-trial submissions.~~court issued a decision in favor of RTD, denying DTC's damages claim.

From time to time the Company is involved in litigation relating to claims arising out of its operations in the ordinary course of business. As of the date hereof, the Company is involved in no litigation that the Company believes will have a material adverse effect on its financial condition, results of operations or liquidity.

15. SEGMENT INFORMATION

~~Wabtec~~The Company has two reportable segments—the Freight Segment and the Transit Segment. The key factors used to identify these reportable segments are the organization and alignment of the Company’s internal operations, the nature of the products and services and customer type. The Company's business segments are:

Freight Segment ~~primarily~~ builds, ~~new~~rebuilds, upgrades, and overhauls locomotives, services locomotives and freight cars, and provides a range of component and digital solutions for customers in the freight and transit rail, mining, and marine industries. Wabtec manufactures and services components for new and existing freight cars and ~~locomotives, rebuilds freight~~ locomotives, supplies railway electronics, positive train control equipment, signal design and engineering services, maintenance of way, and provides ~~related~~ heat exchange and cooling ~~systems.~~systems for locomotives and power generation equipment. Customers include large, publicly traded railroads, leasing companies, manufacturers of original equipment such as locomotives and freight cars, and ~~utilities.~~utilities, and also serves companies in the mining, marine, and industrial markets. We refer to sales of both goods, such as spare parts and equipment upgrades, and related services, such as monitoring, maintenance and repairs, as sales in our Services product line.

Transit Segment primarily manufactures and services components for new and existing passenger transit vehicles, typically regional trains, high speed trains, subway cars, light-rail vehicles and buses. It also refurbishes subway cars and provides heating, ventilation, and air conditioning equipment and doors for buses and subway cars. Customers include public transit authorities and municipalities, leasing companies and manufacturers of subway cars and buses around the world.

The Company evaluates its business segments’ operating results based on income from operations. Intersegment sales are accounted for at prices that are generally established by reference to similar transactions with unaffiliated customers. Corporate activities include general corporate expenses, elimination of intersegment transactions, interest income and expense, and other unallocated charges.

Segment financial information for the three months ended ~~September 30, 2022~~March 31, 2023 is as follows:


In millions	In millions	Freight Segment		Transit Segment		Corporate Activities and Elimination		Total		In millions	Freight Segment		Transit Segment		Corporate Activities and Elimination		Total
Sales to external customers	Sales to external customers	$	1,531	$	550	$	—	$	2,081	Sales to external customers	$	1,566	$	628	$	—	$	2,194
Intersegment sales/(elimination)	Intersegment sales/(elimination)	13		7		(20)		—		Intersegment sales/(elimination)	14		11		(25)		—
Total sales	Total sales	$	1,544	$	557	$	(20)	$	2,081	Total sales	$	1,580	$	639	$	(25)	$	2,194
Income (loss) from operations	Income (loss) from operations	$	233	$	53	$	(25)	$	261	Income (loss) from operations	$	227	$	69	$	(20)	$	276
Interest expense and other, net	Interest expense and other, net	—		—		(44)		(44)		Interest expense and other, net	—		—		(43)		(43)
Income (loss) before income taxes	Income (loss) before income taxes	$	233	$	53	$	(69)	$	217	Income (loss) before income taxes	$	227	$	69	$	(63)	$	233

Segment financial information for the three months ended ~~September 30, 2021~~March 31, 2022 is as follows:

In millions Freight
Segment Transit
Segment Corporate
Activities and
Elimination Total
Sales to external customers $ 1,295 $ 612 $ — $ 1,907
Intersegment sales/(elimination) 12 8 (20) —
Total sales $ 1,307 $ 620 $ (20) $ 1,907
Income (loss) from operations $ 195 $ 44 $ (22) $ 217
Interest expense and other, net — — (42) (42)
Income (loss) before income taxes $ 195 $ 44 $ (64) $ 175

~~Segment financial information for the nine months ended September 30, 2022 is as follows:~~
In millions Freight
Segment Transit
Segment Corporate
Activities and
Elimination Total
Sales to external customers $ 4,343 $ 1,713 $ — $ 6,056
Intersegment sales/(elimination) 38 24 (62) —
Total sales $ 4,381 $ 1,737 $ (62) $ 6,056
Income (loss) from operations $ 655 $ 168 $ (59) $ 764
Interest expense and other, net — — (120) (120)
Income (loss) before income taxes $ 655 $ 168 $ (179) $ 644

~~Segment financial information for the nine months ended September 30, 2021 is as follows:~~


In millions	In millions	Freight Segment		Transit Segment		Corporate Activities and Elimination		Total		In millions	Freight Segment		Transit Segment		Corporate Activities and Elimination		Total
Sales to external customers	Sales to external customers	$	3,814	$	1,935	$	—	$	5,749	Sales to external customers	$	1,322	$	605	$	—	$	1,927
Intersegment sales/(elimination)	Intersegment sales/(elimination)	37		25		(62)		—		Intersegment sales/(elimination)	13		8		(21)		—
Total sales	Total sales	$	3,851	$	1,960	$	(62)	$	5,749	Total sales	$	1,335	$	613	$	(21)	$	1,927
Income (loss) from operations	Income (loss) from operations	$	510	$	159	$	(57)	$	612	Income (loss) from operations	$	189	$	65	$	(15)	$	239
Interest expense and other, net	Interest expense and other, net	—		—		(110)		(110)		Interest expense and other, net	—		—		(39)		(39)
Income (loss) before income taxes	Income (loss) before income taxes	$	510	$	159	$	(167)	$	502	Income (loss) before income taxes	$	189	$	65	$	(54)	$	200

Sales to external customers by product line are as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2022		2021		2022		2021		In millions	2023		2022
Freight Segment
Freight Segment:										Freight Segment:
Services	Services	$	669	$	583	$	2,046	$	1,767	Services	$	707	$	666
Equipment	Equipment	443		335		1,098		925		Equipment	393		274
Components	Components	232		222		695		649		Components	279		229
Digital Electronics		187		155		504		473
Digital Intelligence										Digital Intelligence	187		153
Total Freight Segment	Total Freight Segment	$	1,531	$	1,295	$	4,343	$	3,814	Total Freight Segment	$	1,566	$	1,322

Transit Segment
Transit Segment:										Transit Segment:
Original Equipment Manufacturer	Original Equipment Manufacturer	$	264	$	287	$	815	$	894	Original Equipment Manufacturer	$	282	$	292
Aftermarket	Aftermarket	286		325		898		1,041		Aftermarket	346		313
Total Transit Segment	Total Transit Segment	$	550	$	612	$	1,713	$	1,935	Total Transit Segment	$	628	$	605

16. OTHER INCOME, NET

The components of Other income, net are as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2022		2021		2022		2021		In millions	2023		2022
Foreign currency (loss) gain		$	(6)	$	(4)	$	(5)	$	7
Foreign currency gain										Foreign currency gain	$	2	$	3
Equity income	Equity income	6		4		13		11		Equity income	1		—
Expected return on pension assets/amortization	Expected return on pension assets/amortization	2		2		7		7		Expected return on pension assets/amortization	2		3
Other miscellaneous income (expense), net		2		(2)		—		—
Other miscellaneous expense, net										Other miscellaneous expense, net	—		(2)
Total Other income, net	Total Other income, net	$	4	$	—	$	15	$	25	Total Other income, net	$	5	$	4

2320

17. RESTRUCTURING

During the first quarter of 2022, Wabtec announced a three-year strategic initiative (“Integration 2.0”) to review and consolidate our operating footprint, reduce headcount, streamline the end-to-end manufacturing process, restructure the North America distribution channels, expand operations in low-cost countries, and simplify the business through systems enablement. Through this initiative, Management will also evaluate additional capital investments to further simplify and streamline the business. The Company anticipates that it will incur one-time restructuring charges related to Integration 2.0 of approximately $135 million to $165 million.

During three months ended March 31, 2023, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $9 million, of which approximately $4 million was included in Cost of goods sold and approximately $5 million was included in Selling, general and administrative expenses on the Condensed Consolidated Statements of Income. These charges are primarily for employee-related costs and asset write downs associated with site consolidations in Europe. Approximately $7 million is related to actions in the Transit Segment and approximately $2 million is related to actions in the Freight Segment. No significant charges related to Integration 2.0 were recorded during the three months ended March 31, 2022.

Total one-time restructuring charges related to Integration 2.0 to date are approximately $78 million, which includes amounts recorded in the fourth quarter 2021 and the year ended December 31, 2022, primarily for similar actions in Europe. Programs approved to date are expected to result in approximately 15 facility closures and impact approximately 1,100 employees. Cash payments made during three months ended March 31, 2023 or 2022 were not material.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, ~~2021,~~2022, filed with the Securities and Exchange Commission on February ~~17, 2022.~~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 ~~nine~~three months of ~~2022,~~2023, approximately 55% of the Company’s net sales came from customers outside the United States.

Business Update

~~The unfavorable global economic conditions driven~~During the first quarter of 2023, Wabtec continued to execute on our value creation framework by ~~the impacts~~signing a strategic order for new locomotives in Brazil, securing a key order for mining drive systems in high altitude applications and delivering our 500th locomotive to Indian Railways - a significant milestone in our 10-year contract. Our senior unsecured debt was upgraded by Moody's, which reflects resiliency of the ~~COVID-19 pandemic~~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 by 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 $78 million has been incurred through March 31, 2023. Total estimated initiative charges could change based on the specific programs approved or changes to the scope of the review. During three months ended March 31, 2023, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $9 million, 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 three months ended March 31, 2022.

The Company continues to navigate macroeconomic volatility which is impacting our supply chain, ~~disruptions, and further intensified by the Russian invasion~~results of ~~Ukraine, continue to have an adverse impact on our~~ operations and business results. Impacts for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021,~~ are discussed in more detail in the Results of Operations section below. Supply chain disruptions and labor availability have caused component, raw material and chip shortages resulting in an adverse effect on the timing of the Company’s revenue ~~generation.~~and cash flows. Additionally, broad-based inflation, ~~escalation of diesel,~~ metals, energy and other commodity costs, transportation and logistics costs, ~~and~~ 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. ~~For the year ended December 31, 2021, Wabtec had earnings of approximately $40 million attributable to customers in Russia, while earnings from customers in Ukraine and Belarus were not significant.~~ As of ~~September 30, 2022,~~March 31, 2023, Wabtec had approximately ~~$16~~$14 million of assets related to Russian operations, which were primarily cash and inventory. Management has determined, based on information currently available, that these assets are expected to be recoverable and therefore no impairment ~~was recorded during the first nine months of 2022.~~has been recorded. This will continue to be monitored and may result in a future impairment charge based on changes in the situation. 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 ~~has implemented~~utilizes various mitigating actions intended to lessen the impact of ~~these unfavorable economic conditions.~~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 ~~where possible.~~through Integration 2.0. The Company expects to continue to incur increased costs in future quarters. Management will continue to monitor the evolving situations but, as a result of the numerous uncertainties surrounding the COVID-19 pandemic, recent supply chain disruptions and the Russian invasion of Ukraine, we are unable to specifically predict the extent and length of time that our business may be negatively impacted. We also face the possibility that additional actions may be taken by governmental authorities and private industry, or government policies may become more restrictive in response to the COVID-19 pandemic, especially if COVID-19 transmission rates increase in certain areas. Changes in trade regulations and sanctions including retaliatory measures, advancements or changes in the conflict in Ukraine, the impact of variants of COVID-19, actions taken in response to COVID-19 including curtailing operations

A portion of our ~~plants, or significant adverse impacts to our customers, suppliers, distribution channels~~workers are represented by labor unions. For 2023, the United Electrical, Radio and ~~operating locations, could result~~Machine Workers of America (UE), Locals 506 and 618 collective bargaining agreement, covering approximately 1,400 locomotive manufacturing workers in ~~material adverse impacts to the business, including impairment charges from changes in estimates.~~Erie, Pennsylvania, expires on June 9, 2023. Negotiations with UE will officially begin on April 27, 2023. 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, which is ongoing.~~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, ~~to date and on the information currently known,~~ 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.

~~Integration 2.0~~

During the first quarter of 2022, Wabtec announced a three-year strategic review expected to target incremental run rate synergies estimated to be between $75 million and $90 million by 2025. The scope of the review will include 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 in the future to execute on decisions resulting from the review, currently estimated to be approximately $135 million to $165 million. The estimate could change based on the specific programs approved or changes to the scope of the review. No significant programs related to Integration 2.0 were initiated during the nine months ended September 30, 2022.

2523

RESULTS OF OPERATIONS

Consolidated Results

~~THIRD~~FIRST QUARTER ~~2022~~2023 COMPARED TO ~~THIRD~~FIRST QUARTER ~~2021~~2022

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


		Three Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Net sales:	Net sales:					Net sales:
Sales of goods	Sales of goods	$	1,625	$	1,489	Sales of goods	$	1,684	$	1,505
Sales of services	Sales of services	456		418		Sales of services	510		422
Total net sales		2,081		1,907
Total Net sales						Total Net sales	2,194		1,927
Cost of sales:	Cost of sales:					Cost of sales:
Cost of goods	Cost of goods	(1,200)		(1,075)		Cost of goods	(1,257)		(1,084)
Cost of services	Cost of services	(233)		(229)		Cost of services	(272)		(248)
Total cost of sales	Total cost of sales	(1,433)		(1,304)		Total cost of sales	(1,529)		(1,332)
Gross profit	Gross profit	648		603		Gross profit	665		595
Operating expenses:	Operating expenses:					Operating expenses:
Selling, general and administrative expenses	Selling, general and administrative expenses	(260)		(269)		Selling, general and administrative expenses	(263)		(238)
Engineering expenses	Engineering expenses	(54)		(44)		Engineering expenses	(51)		(45)
Amortization expense	Amortization expense	(73)		(73)		Amortization expense	(75)		(73)
Total operating expenses	Total operating expenses	(387)		(386)		Total operating expenses	(389)		(356)
Income from operations	Income from operations	261		217		Income from operations	276		239
Other income and expenses:	Other income and expenses:					Other income and expenses:
Interest expense, net	Interest expense, net	(48)		(42)		Interest expense, net	(48)		(43)
Other income, net	Other income, net	4		—		Other income, net	5		4
Income before income taxes	Income before income taxes	217		175		Income before income taxes	233		200
Income tax expense	Income tax expense	(54)		(43)		Income tax expense	(60)		(50)
Net income	Net income	163		132		Net income	173		150
Less: Net income attributable to noncontrolling interest	Less: Net income attributable to noncontrolling interest	(3)		(1)		Less: Net income attributable to noncontrolling interest	(4)		(1)
Net income attributable to Wabtec shareholders	Net income attributable to Wabtec shareholders	$	160	$	131	Net income attributable to Wabtec shareholders	$	169	$	149

The following table shows the major components of the change in Net sales in the three months ended ~~September 30, 2022~~March 31, 2023 from the three months ended ~~September 30, 2021:~~March 31, 2022:


In millions	In millions	Freight Segment		Transit Segment		Total		In millions	Freight Segment		Transit Segment		Total
Third Quarter 2021 Net Sales		$	1,295	$	612	$	1,907
First Quarter 2022 Net sales								First Quarter 2022 Net sales	$	1,322	$	605	$	1,927
Acquisitions	Acquisitions	18		1		19		Acquisitions	21		—		21
Foreign Exchange	Foreign Exchange	(21)		(78)		(99)		Foreign Exchange	(21)		(35)		(56)
Organic	Organic	239		15		254		Organic	244		58		302
Third Quarter 2022 Net Sales		$	1,531	$	550	$	2,081
First Quarter 2023 Net sales								First Quarter 2023 Net sales	$	1,566	$	628	$	2,194

Net sales

Net sales for the three months ended ~~September 30, 2022~~March 31, 2023 increased by ~~$174~~$267 million, or ~~9.1%~~13.9%, to ~~$2.08~~$2.19 billion compared to the same period in ~~2021. Freight Segment organic~~2022. Organic sales increased ~~$239~~$302 million ~~driven~~which was primarily by Equipment sales from higher international locomotive deliveries and higher mining equipment sales, and Services sales from higher locomotive modernizations and a larger active locomotive fleet. In addition, Components sales increased dueattributable to a higher railcar build and increased railcars in operation, and Digital sales increased due to higher demand for on-board locomotive products and network optimization software. Transit Segment organic sales increased $15 million primarily due to higher demand for OEM and

~~Aftermarket products. Sales from acquisitions contributed $19 million to the change in net sales and unfavorable exchange rates, primarily in the Transit Segment, decreased sales by $99 million.~~

~~Cost of sales~~

Cost of sales for the three months ended September 30, 2022 increased by $129 million, or 9.9%, to $1.43 billion compared to the same period in 2021. Cost of sales as a percentage of sales was 68.9% and 68.4% for the three months ended September 30, 2022 and 2021, respectively, representing a 0.5 percentage point increase. The increase can be attributed to increased materials, transportation and labor costs and an unfavorable product mix partially offset by improved productivity and decreased restructuring cost. Cost of sales for the three months ended September 30, 2022 and 2021 included $5 million and $23 million, respectively, of restructuring costs, primarily for headcount actions and footprint rationalization.

~~Operating expenses~~

Total operating expenses increased $1 million, or 0.3%, for the three months ended September 30, 2022 compared to the same period in 2021. Operating expenses as a percentage of sales was 18.6% and 20.2% for the three months ended September 30, 2022 and 2021, respectively. Selling, general and administrative expenses ("SG&A") decreased $9 million due to lower restructuring and transaction costs. Restructuring and transaction costs included in SG&A were $4 million and $12 million for the three months ended September 30, 2022 and 2021, respectively, and were primarily for headcount actions and footprint rationalization programs. Engineering expenses increased $10 million primarily due to investments in new technology. Amortization expense remained flat year over year.

~~Interest expense, net~~

~~Interest expense, net, increased $6 million for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to higher effective interest rates in the current period.~~

~~Other income, net~~

~~Other income, net, increased to $4 million of income for the three months ended September 30, 2022 driven by higher equity income in the current year.~~

~~Income taxes~~

The effective income tax rate was 24.7% and 24.8% for the three months ended September 30, 2022 and 2021, respectively. The decrease in the quarterly effective tax rate is primarily the result of a more favorable earnings mix for the period ended September 30, 2022.

~~Freight Segment~~

~~The following table shows our Consolidated Statements of Operations for our Freight Segment for the periods indicated:~~
Three Months Ended
September 30,
In millions 2022 2021
Net sales:
Sales of goods $ 1,079 $ 883
Sales of services 452 412
Total net sales 1,531 1,295
Cost of sales:
Cost of goods (804) (626)
Cost of services (230) (225)
Total cost of sales (1,034) (851)
Gross profit 497 444
Operating expenses (264) (249)
Income from operations ($) $ 233 $ 195
Income from operations (% of net sales) 15.2 % 15.1 %

~~The following table shows the major components of the change in net sales for~~ the Freight Segment ~~in the third quarter of 2022 from the third quarter of 2021:~~


~~In millions~~
~~Third Quarter 2021 Net Sales~~	$	~~1,295~~
~~Acquisitions~~	18
~~Foreign Exchange~~	~~(21)~~
~~Changes in Sales by Product Line:~~
~~Equipment~~	~~113~~
~~Services~~	89
~~Components~~	19
~~Digital Electronics~~	18
~~Third Quarter 2022 Net Sales~~	$	~~1,531~~

~~Net sales~~

~~Freight Segment sales increased~~driven by ~~$236 million, or 18.2%, to $1.53 billion, compared to the same period in 2021.~~an increase across all product lines. Equipment sales increased due to higher international locomotive ~~deliveries~~sales and ~~higher mining equipment sales,~~ Services sales increased from ~~higher locomotive modernizations and~~ a larger active locomotive fleet, Components sales increased due to a higher railcar build and increased railcars in operation, and Digital sales increased due to higher demand for on-board locomotive products and network optimization software. Sales from acquisitions contributed $18 million to the change in net sales and the effects of unfavorable foreign exchange rates decreased sales by $21 million.

~~Cost of sales~~

Freight Segment cost of sales for the three months ended September 30, 2022 increased by $183 million, or 21.5%, to $1.03 billion, compared to the same period in 2021. The increase is primarily due to the increase in sales and increased materials, transportation and labor costs. Cost of sales as a percentage of sales was 67.5% and 65.8% for the three months ended September 30, 2022 and 2021, respectively, representing a 1.7 percentage point increase driven by an unfavorable product mix and the increased costs discussed above. Cost of sales for the three months ended September 30, 2022 included restructuring costs of $4 million primarily for headcount actions. Cost of sales for the three months ended September 30, 2021 included transaction costs of $1 million primarily related to the acquisition of Nordco.

~~Operating expenses~~

Freight Segment operating expenses increased $15 million, or 6.0%, for the three months ended September 30, 2022 compared to the same period in 2021. SG&A increased $2 million due to incremental expense from acquisitions. SG&A for the three months ended September 30, 2022 includes $1 million of restructuring costs, compared to $2 million for the same period in 2021. Engineering expenses increased $13 million primarily due to investments in new technology. Amortization expense increased $1 million due to acquisitions.

~~Transit Segment~~

~~The following table shows our Consolidated Statements of Operations for our Transit Segment for the periods indicated:~~
Three Months Ended
September 30,
In millions 2022 2021
Net sales $ 550 $ 612
Cost of sales (399) (454)
Gross profit 151 158
Operating expenses (98) (114)
Income from operations ($) $ 53 $ 44
Income from operations (% of net sales) 9.6 % 7.2 %

~~The following table shows the major components of the change in net sales for the Transit Segment in the third quarter of 2022 from the third quarter of 2021:~~


~~In millions~~
~~Third Quarter 2021 Net Sales~~	$	~~612~~
~~Acquisitions~~	1
~~Foreign Exchange~~	~~(78)~~
~~Changes in Sales by Product Line:~~
~~Original Equipment Manufacturing~~	5
~~Aftermarket~~	10
~~Third Quarter 2022 Net Sales~~	$	~~550~~

~~Net sales~~

Transit Segment sales for the three months ended September 30, 2022 decreased by $62 million, or 10.1%, to $550 million compared to the same period in 2021. The effects of unfavorable foreign exchange rates decreased sales by $78 million. Transit Segment organic sales increased by $15 million due to increased demand and an increase in government transportation spending partially offset by ~~the carryover effects~~lower deliveries of ~~the cyber incident in the second quarter.~~

~~Cost of sales~~

Transit Segment cost of sales for the three months ended September 30, 2022 decreased by $55 million, or 12.1%, to $399 million compared to the same period in 2021. The decrease is primarily due to the decrease in sales discussed above along with a decrease in restructuring cost in the current year. Cost of sales as a percentage of sales was 72.5% and 74.2% for the three months ended September 30, 2022 and 2021, respectively, representing a 1.7 percentage point decrease. This can be attributed to improved productivity, higher pricing, the exit of low margin businesses in the United Kingdom, and prior year structured cost actions taken through restructuring programs, partially offset by increased materials, transportation and labor costs and inefficiencies associated with the cyber incident. Cost of sales for the three months ended September 30, 2022 and 2021 includes $1 million and $22 million, respectively, of restructuring costs, primarily for footprint rationalization in Europe and headcount actions.

~~Operating expenses~~

Transit Segment operating expenses decreased $16 million, or 14.0%, for the three months ended September 30, 2022 compared to the same period in 2021. SG&A decreased $14 million for the three months ended September 30, 2022 compared to the same period in 2021 due to the effects of foreign exchange rates and lower employee compensation and benefit costs. SG&A for the three months ended September 30, 2022 and 2021 includes $2 million and $5 million of restructuring costs, respectively, primarily for footprint rationalization and related headcount actions. Additionally, engineering and amortization expenses remained consistent year over year.

~~FIRST NINE MONTHS OF 2022 COMPARED TO FIRST NINE MONTHS OF 2021~~

~~The following table shows our Consolidated Statements of Operations for the periods indicated.~~
Nine Months Ended
September 30,
In millions 2022 2021
Net sales:
Sales of goods $ 4,714 $ 4,562
Sales of services 1,342 1,187
Total net sales 6,056 5,749
Cost of sales:
Cost of goods (3,431) (3,368)
Cost of services (737) (664)
Total cost of sales (4,168) (4,032)
Gross profit 1,888 1,717
Operating expenses:
Selling, general and administrative expenses (757) (766)
Engineering expenses (149) (124)
Amortization expense (218) (215)
Total operating expenses (1,124) (1,105)
Income from operations 764 612
Other income and expenses:
Interest expense, net (135) (135)
Other income, net 15 25
Income before income taxes 644 502
Income tax expense (162) (130)
Net income 482 372
Less: Net income attributable to noncontrolling interest (7) (4)
Net income attributable to Wabtec shareholders $ 475 $ 368

~~The following table shows the major components of the change in sales in the nine months ended September 30, 2022 from the nine months ended September 30, 2021:~~
In millions Freight Segment Transit Segment Total
First Nine Months of 2021 Net Sales $ 3,814 $ 1,935 $ 5,749
Acquisitions 62 3 65
Foreign Exchange (41) (171) (212)
Organic 508 (54) 454
First Nine Months of 2022 Net Sales $ 4,343 $ 1,713 $ 6,056

~~Net sales~~

Net sales for the nine months ended September 30, 2022 increased by $307 million, or 5.3%, to $6.06 billion compared to the same period in 2021. Freight Segment organic sales increased $508 million driven primarily by Services sales from higher locomotive ~~modernizations and a larger active locomotive fleet.~~modernizations. In addition, ~~Equipment sales increased due to higher international locomotive deliveries and higher mining equipment sales, and~~ Components sales increased due to a higher railcar build, increased railcars in operation, and growth in industrial ~~end-markets.~~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 ~~decreased $54~~increased by $58 million primarily ~~due to supply chain issues caused~~as a result of increased demand for Aftermarket products driven by ~~the COVID-19 pandemic and the prior year exit of low margin~~

~~businesses and contracts in the United Kingdom.~~increased infrastructure investment. Sales from acquisitions contributed ~~$65~~$21 million ~~primarily~~ in the Freight Segment and unfavorable changes in foreign exchange rates ~~primarily in the Transit Segment,~~ decreased sales by ~~$212~~$56 million.

Cost of sales

Cost of sales for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 increased by ~~$136~~$197 million, or ~~3.4%~~14.8%, to ~~$4.17~~$1.53 billion compared to the same period in ~~2021.~~2022. The increase is primarily due to the increase in ~~sales and increased materials, labor and transportation costs, partially offset due to favorable product mix between operating segments and product lines.~~sales. Cost of sales as a percentage of net sales was ~~68.8%~~69.7% and ~~70.1%~~69.1% for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, representing a 1.3 percentage point decrease.~~respectively. The ~~decrease as a percentage of sales can be attributed~~increase was due to ~~favorable~~unfavorable product mix between business groups and higher ~~pricing and strong productivity and lower restructuring cost,~~next generation product development costs in Digital Intelligence. These increases were partially offset by operational efficiencies resulting in favorable productivity and higher absorption rates, benefits from structured cost actions taken through Integration 2.0 and prior years restructuring and integration projects, and the ~~increase in the costs described above. Cost~~effects of foreign exchange rates. Costs of sales for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ included ~~$12~~$4 million and ~~$48~~$5 million, respectively, of restructuring costs, primarily for headcount actions and footprint ~~rationalization.~~rationalization, with the amounts in 2023 being related to Integration 2.0.

Operating expenses

Total operating expenses increased ~~$19~~$33 million, or ~~1.7%~~9.3%, for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021.~~2022. Operating expenses as a percentage of sales was ~~18.6%~~17.7% and ~~19.2%~~18.4% for the ~~nine~~for the three months ended ~~September 30,~~March 31, 2023 and 2022, respectively. Selling, general and ~~2021, respectively.~~ administrative expenses ("SG~~&A decreased $9~~&A") increased $25 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 compared to the same period in ~~2021 due~~2022. The increase is primarily from costs incurred to support the ~~impacts of foreign exchange rates~~higher sales volume and ~~lower restructuring~~higher employee compensation and ~~transaction~~benefit costs, partially offset by ~~higher technology costs and incremental expense from acquisitions.~~the effects of foreign exchange rates. Restructuring ~~and transaction~~ costs included in SG&A were $8$5 million and ~~$32~~$2 million for the ~~nine~~for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, and were primarily for headcount actions and footprint rationalization ~~programs.~~programs, with the amounts in 2023 primarily related to Integration 2.0. Engineering ~~expenses~~expense increased ~~$25~~$6 million primarily due to investments in new ~~technology and incremental expense from acquisitions. Amortization expense increased $3 million primarily due to the acquisition of Nordco.~~technology.

Interest expense, net

Interest expense, net, ~~remained consistent~~increased $5 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021.~~

~~Other income, net~~

~~Other income, net, was $15 million of income for the nine months ended September 30,~~ 2022 ~~compared~~primarily due to ~~$25 million of income in the same period of 2021 primarily driven by a foreign exchange loss of $5 million~~higher effective interest rates in the current ~~year as compared to a gain of $7 million in the prior year.~~period.

Income taxes

The effective income tax rate was ~~25.1%~~25.5% and ~~26.0%~~25.1% for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The ~~decrease~~increase in the quarterly effective tax rate is primarily the result of a ~~more favorable~~change in the mix of earnings ~~mix for~~across jurisdictions.

On August 16, 2022, the ~~nine months ended September 30, 2022.~~Inflation Reduction Act of 2022 was signed into law. This act includes a new book minimum tax on certain large corporations and an excise tax on corporate stock buybacks among other provisions. This act has not had, and is not expected to have, a material impact on our consolidated financial position, results of operations, or cash flows.

3225

Freight Segment

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


		Nine Months Ended September 30,							Three Months Ended March 31,
In millions	In millions	2022			2021			In millions	2023			2022			Change		% Change
Net sales:	Net sales:							Net sales:
Sales of goods	Sales of goods	$	3,014		$	2,646		Sales of goods	$	1,060		$	904		$	156	17.3	%
Sales of services	Sales of services	1,329			1,168			Sales of services	506			418			88		21.1	%
Total net sales		4,343			3,814
Total Net sales								Total Net sales	$	1,566		$	1,322		$	244	18.5	%
Cost of sales:	Cost of sales:							Cost of sales:
Cost of goods	Cost of goods	(2,203)			(1,951)			Cost of goods	$	(817)		$	(653)		$	164	25.1	%
Cost of services	Cost of services	(726)			(650)			Cost of services	(269)			(245)			24		9.8	%
Total cost of sales	Total cost of sales	(2,929)			(2,601)			Total cost of sales	$	(1,086)		$	(898)		$	188	20.9	%
Cost of Sales (% of net sales)								Cost of Sales (% of net sales)	69.4		%	67.9		%	1.5

Gross profit	Gross profit	1,414			1,213			Gross profit	$	480		$	424		$	56	13.2	%

Operating expenses	Operating expenses	(759)			(703)			Operating expenses	$	(253)		$	(235)		$	18	7.7	%

Income from operations ($)		$	655		$	510
Income from operations								Income from operations	$	227		$	189		$	38	20.1	%
Income from operations (% of net sales)	Income from operations (% of net sales)	15.1		%	13.4		%	Income from operations (% of net sales)	14.5		%	14.3		%	0.2

The following table shows the major components of the change in net sales for the Freight Segment in the first ~~nine months~~quarter of ~~2022~~2023 from the first ~~nine months~~quarter of ~~2021:~~2022:


In millions
First ~~Nine Months of 2021~~Quarter 2022 Net ~~Sales~~sales	$	~~3,814~~1,322
Acquisitions	6221
Foreign Exchange	~~(41)~~(21)
~~Changes~~Organic changes in ~~Sales~~Net sales by Product Line:
~~Services~~	~~242~~
Equipment	~~184~~124
Components	6657
Services	44
Digital ~~Electronics~~Intelligence	1619
First ~~Nine Months of 2022~~Quarter 2023 Net ~~Sales~~sales	$	~~4,343~~1,566

Net sales

Freight Segment organic sales increased by ~~$529~~$244 million ~~or 13.9%, to $4.34 billion, compared to the same period~~driven primarily by:

•Equipment sales from higher international locomotive sales

•Components sales from higher original equipment railcar build, more railcars in ~~2021.~~ operation and growth in industrial end-markets

•Services sales ~~increased~~ from ~~higher locomotive modernizations and~~ a larger active locomotive fleet, ~~Equipment~~partially offset by lower deliveries of locomotive modernizations

•Digital Intelligence sales ~~increased~~ due to higher demand for on-board locomotive and mining solutions and technology upgrades and international locomotive deliveries and higher mining equipment sales, and Components sales increased due to a higher railcar build and increased railcars in operation. Sales from acquisitions, contributed $62 million and the effects of unfavorable foreign exchange rates decreased sales by $41 million.PTC sales.

Cost of sales

Freight Segment ~~cost~~Cost of sales ~~for the nine months ended September 30, 2022~~ increased ~~by $328~~$188 million ~~or 12.6%, to $2.93 billion, compared to the same period in 2021. The increase is primarily due to the increase in sales~~ and ~~increased materials, transportation and labor costs.~~ Cost of sales as a percentage of Net sales ~~was 67.4% and 68.2% for~~increased 1.5 percentage points due to:

•Higher sales volume

•Unfavorable mix within the ~~nine months ended September 30, 2022 and 2021, respectively, representing a 0.8 percentage point decrease which benefited from~~Freight Segment product lines

•Higher next generation product development costs in Digital Intelligence

Partially offset by:

•Operational efficiencies resulting in favorable ~~product mix, increased pricing, improved~~ productivity and ~~synergy savings.~~ higher absorption rates

Cost of sales for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021 includes $7~~included $1 million and $6$2 million, respectively, of restructuring ~~and transaction~~ costs, primarily for headcount ~~actions. The nine months ended September 30, 2021 also included transaction costs~~actions and footprint rationalization, with the amounts in 2023 related to ~~the Nordco acquisition.~~

Integration 2.0.

Operating expenses

Freight Segment operating expenses increased ~~$56 million, or 8.0%, for the nine months ended September 30, 2022 compared to the same period in 2021. SG&A increased $23~~by $18 million primarily ~~due~~driven by:

•Higher Selling, general and administrative expenses of $14 million resulting from higher costs to ~~incremental expense from acquisitions~~support increased sales volume and higher ~~technology costs, partially offset by a decrease in restructuring~~employee compensation and transaction costs. Restructuring and transaction costs included in SG&A for the nine months ended September 30, 2022 were $1 million compared to $11 million for the same period in 2021 primarily for headcount actions as part of the integration of GE Transportation. Engineering expenses increased $29 million primarily due tobenefits

•Higher investments in new technology ~~and incremental~~increasing Engineering expense ~~from acquisitions. Amortization expense increased~~by $4 million ~~due to acquisitions.~~

3427

Transit Segment

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


		Nine Months Ended September 30,							Three Months Ended March 31,
In millions	In millions	2022			2021			In millions	2023			2022			Change		% Change
Net sales	Net sales	$	1,713		$	1,935		Net sales	$	628		$	605		$	23	3.8	%
Cost of sales	Cost of sales	(1,239)			(1,432)			Cost of sales	$	(443)		$	(434)		$	9	2.1	%
Cost of sales (% of net sales)								Cost of sales (% of net sales)	70.5		%	71.7		%	(1.2)

Gross profit	Gross profit	474			503			Gross profit	$	185		$	171		$	14	8.2	%

Operating expenses	Operating expenses	(306)			(344)			Operating expenses	$	(116)		$	(106)		$	10	9.4	%

Income from operations ($)		$	168		$	159
Income from operations								Income from operations	$	69		$	65		$	4	6.2	%
Income from operations (% of net sales)	Income from operations (% of net sales)	9.8		%	8.2		%	Income from operations (% of net sales)	11.0		%	10.7		%	0.3

The following table shows the major components of the change in net sales for the Transit Segment in the first ~~nine months~~quarter of ~~2022~~2023 from the first ~~nine months~~quarter of ~~2021:~~2022:


In millions
First ~~Nine Months of 2021~~Quarter 2022 Net ~~Sales~~sales	$	~~1,935~~605
~~Acquisitions~~	3
Foreign Exchange	~~(171)~~(35)
~~Changes~~Organic changes in ~~Sales~~Net sales by Product Line:
Original Equipment Manufacturing	~~(16)~~(3)
Aftermarket	~~(38)~~61
First ~~Nine Months of 2022~~Quarter 2023 Net ~~Sales~~sales	$	~~1,713~~628

Net sales

Transit Segment organic sales increased by $58 million primarily as a result of increased demand for ~~the nine months ended September 30, 2022 decreased~~Aftermarket products driven by ~~$222 million, or 11.5%, to $1.71 billion compared to the same period~~increased infrastructure investment, partially offset by a decrease in ~~2021, with unfavorable foreign exchange rates reducing sales $171 million. Sales of~~ Original Equipment Manufacturing decreased due to supply chain issues caused by the COVID-19 pandemic partially offset by higher demand and an increase in government transportation spending. Aftermarket sales decreased from lower maintenance and overhauls driven by the prior year exit of low margin businesses and contracts in the United Kingdom, as well as supply chain issues caused by the COVID-19 pandemic. Additionally, both Original Equipment Manufacturing and Aftermarket sales were impacted by a manufacturing disruption caused by the second quarter cyber incident.sales.

Cost of sales

Transit Segment ~~cost~~Cost of sales ~~for the nine months ended September 30, 2022 decreased~~increased by ~~$193~~$9 million ~~or 13.5%, to $1.24 billion compared to the same period in 2021.~~ due to:

•Higher sales volume

Partially offset by:

•Improved sales mix

•Operational efficiencies driven by structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects

•The ~~decrease is primarily due to the decrease in sales discussed above and decreased restructuring costs.~~ effects of foreign exchange rates

Cost of sales as a percentage of sales ~~was 72.3% and 74.0%~~decreased due to the same reasons discussed above. Transit Cost of sales for both the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 includes $3 million of restructuring costs, primarily for footprint rationalization and ~~2021, respectively, representing a 1.7 percentage point decrease. This can be attributed~~headcount actions in Europe, with the amounts in 2023 related to ~~improved productivity,~~Integration 2.0.

Operating expenses

Transit Segment operating expenses increased by $10 million primarily from higher ~~pricing, the exit~~SG&A of ~~low margin businesses in the United Kingdom,~~$7 million and ~~prior year~~higher Amortization expense of $2 million driven by:

•Higher Selling, general and administrative expenses to support higher sales volume

•Higher employee compensation and benefit costs

•Increased restructuring costs

Partially offset by:

•Benefits from structured cost actions taken through restructuring ~~programs, partially offset by increased metals, transportation and labor costs. Cost~~actions

•The effects of ~~sales~~foreign currency

Transit Operating expenses for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021 included $5~~includes $4 million and ~~$43~~$1 million, respectively, of restructuring costs, primarily for ~~headcount actions and~~ footprint rationalization ~~in Europe.~~

~~Operating expenses~~

Transit Segment operating expenses decreased $38 million, or 11.0%, for the nine months ended September 30, 2022 compared to the same period in 2021. SG&A decreased $33 million due to the decrease in sales, the effects of foreign exchange rates and ~~decreased restructuring cost. SG&A for the nine months ended September 30, 2022 and 2021 included $5 million and $12 million, respectively, of restructuring costs, primarily for~~ headcount actions in ~~Europe. Additionally, engineering and amortization expenses remained consistent year over year.~~Europe, with the amounts in 2023 related to Integration 2.0.

3529

Liquidity and Capital Resources

Liquidity is provided ~~primarily~~ by operating cash ~~flow~~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 for added flexibility as part of our liquidity management strategy. The following is a summary of selected cash flow information and other relevant data:


		Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Cash provided by (used for):
Cash (used for) provided by:						Cash (used for) provided by:
Operating activities	Operating activities	$	628	$	759	Operating activities	$	(25)	$	161
Investing activities	Investing activities	$	(149)	$	(475)	Investing activities	$	(32)	$	(18)
Financing activities	Financing activities	$	(395)	$	(433)	Financing activities	$	(72)	$	(133)

Operating activities In the first ~~nine~~three months of ~~2022,~~2023, cash used for operating activities was $(25) million compared to cash provided by operating activities ~~was $628 million compared to $759~~of $161 million in the first ~~nine~~three months of ~~2021.~~2022, resulting in a decrease of $186 million. Significant changes to the sources and (uses) of cash ~~for~~causing the ~~nine month periods~~decrease include the following:

•$9225 million attributable to higher Net income and other changes in the related statements of income amounts;

•$~~(252)~~(196) million from net changes in working capital primarily driven by: ~~$(369) million unfavorable change in inventory primarily from proactive inventory build-ups ahead of expected growth and in response to supply chain challenges, $(74)~~$(144) million related to changes in receivables due to timing and volume of sales and the net change in the Revolving Receivables Program, and ~~$191~~$(51) million unfavorable change in ~~accounts payable, primarily due to the timing of payments to suppliers;~~inventory;

•$~~(100) million from higher employee related benefit payments, inclusive of payments related to severance accruals; and,~~

•~~$156~~(72) million from changes in the timing of customer ~~deposits.~~deposits; and,

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

Investing activities In the first ~~nine~~three months of ~~2022~~2023 and ~~2021,~~2022, cash used for investing activities was ~~$(149)~~$(32) million and ~~$(475)~~$(18) million, respectively. The ~~major components of the~~ cash outflow in ~~2022 were $(82)~~2023 was the result of $(32) million in additions to property, plant and equipment for investments in our facilities and manufacturing processes ~~and $(69) million for strategic acquisitions. This compares to $(78)~~compared with $(20) million in additions to property, plant, and equipment ~~and $(405) million in net cash paid for acquisitions~~ in the first ~~nine~~three months of ~~2021. Additional information with respect to acquisitions is included in Note 3 of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this report.~~2022.

Financing activities In the first ~~nine~~three months of 2023, cash used for financing activities was $(72) million which included $154 million from net changes in debt, $(178) million in stock repurchases, $(31) million of dividend payments, and $(14) million of payments for income tax withholding on share-based compensation. In the first three months of 2022, cash used for financing activities was ~~$(395)~~$(133) million, which included ~~$93~~$195 million from net changes in debt, ~~$(400)~~$(296) million in stock repurchases, ~~and $(83)~~$(28) million of dividend ~~payments. In the first nine months of 2021, cash used for financing activities was $(433) million, which included $(162) million in net repayments of debt, $(200) million in stock repurchases~~payments, and ~~$(69)~~$(2) million of ~~dividend payments.~~payments for income tax withholding on share-based compensation.

~~During the second quarter of 2022, the Company redeemed $25 million of principal from the 2024 Notes plus a premium and the related accrued interest.~~

On August 15, 2022, the Company amended, restated and replaced the then-existing credit agreement. The Restated Credit Agreement updated the multi-currency revolving loan facility from $1.2 billion to $1.5 billion and added a new Delayed Draw Term Loan of up to $250 million. Additional information with respect to credit facilities and long-term debt is included in Note 8 of the "Notes to Condensed Consolidated Financial Statements" included in Part I, Item 1 of this report.

As of ~~September 30, 2022,~~March 31, 2023, the Company held approximately ~~$514~~$417 million of cash and cash equivalents, of which approximately $1$7 million was held within the United States and approximately ~~$513~~$410 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.

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 ~~facility~~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 ~~results~~could result in our gross receivables sold ~~exceeding~~being higher or lower than collections reinvested for any applicable periods. Net cash proceeds from the revolving receivables program were ~~$205~~$145 million and ~~$84~~$155 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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, ~~and~~ does not receive an economic benefit from the financial ~~institutions.~~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~~Accounts payable in the ~~consolidated balance sheets.~~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 ~~and Senior Credit Facility~~ 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,~~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.

On January 1, 2022, the Company completed an internal legal entity reorganization that resulted in changes to the subsidiaries and operating divisions serving as guarantors under the Company's US Notes and Senior Credit Facility. As such, certain prior year amounts have been reclassified, where necessary, to conform to the current year presentation in line with the legal reorganization. Refer to Exhibit 22.1 for the updated list of guarantor subsidiaries.

The following tables present summarized financial information of the ~~parent~~Parent Company and the guarantor subsidiaries on a combined ~~basis for the Company's US Notes and Senior Credit Facility.~~basis. The combined summarized financial information eliminates intercompany balances and transactions among the ~~parent~~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


	Unaudited
	Westinghouse Air Brake Technologies Corp. and Guarantor Subsidiaries
In millions	~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023
Net sales	$	~~3,431~~1,328
Gross profit	$	~~829~~355
Net income attributable to Wabtec shareholders	$	~~288~~172

Summarized Balance Sheet


		Unaudited					Unaudited
		Westinghouse Air Brake Technologies Corp. and Guarantor Subsidiaries					Westinghouse Air Brake Technologies Corp. and Guarantor Subsidiaries
In millions	In millions	September 30, 2022		December 31, 2021		In millions	March 31, 2023		December 31, 2022
Current assets	Current assets	$	1,189	$	1,057	Current assets	$	1,314	$	1,328
Noncurrent assets	Noncurrent assets	$	2,435	$	2,344	Noncurrent assets	$	2,395	$	2,384
Current liabilities	Current liabilities	$	1,683	$	1,414	Current liabilities	$	2,696	$	1,881
Long-term debt	Long-term debt	$	3,329	$	3,483	Long-term debt	$	2,640	$	3,209
Other non-current liabilities	Other non-current liabilities	$	612	$	592	Other non-current liabilities	$	612	$	551

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The following is a description of the transactions between the combined ~~Westinghouse Air Brake Technologies Corp.~~Parent Company and guarantor subsidiaries with non-guarantor subsidiaries.


	Unaudited
	Westinghouse Air Brake Technologies Corp. and Guarantor Subsidiaries
In millions	~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023
Net sales to non-guarantor subsidiaries	$	~~590~~240
Purchases from non-guarantor subsidiaries	$	~~1,030~~413

	Unaudited
	Westinghouse Air Brake Technologies Corp. and Guarantor Subsidiaries
In millions	~~September 30, 2022~~March 31, 2023
Amount due from/(to) non-guarantor subsidiaries	$	~~(6,601)~~(6,814)

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.

On January 1, 2022, the Company completed an internal legal entity reorganization that resulted in changes to the operating divisions serving as the parent guarantor under the Company's Euro Notes. As such, certain prior year amounts have been reclassified, where necessary, to conform to the current year presentation in line with the legal reorganization.

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~~Parent Company guarantor.

Summarized Statement of Income


	Unaudited
	Issuer and Guarantor
In millions	~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023
Net sales	$	~~311~~132
Gross profit	$	4631
Net income attributable to Wabtec shareholders	$	~~(237)~~(77)

Summarized Balance Sheet


		Unaudited					Unaudited
		Issuer and Guarantor					Issuer and Guarantor
In millions	In millions	September 30, 2022		December 31, 2021		In millions	March 31, 2023		December 31, 2022
Current assets	Current assets	$	162	$	217	Current assets	$	173	$	264
Noncurrent assets	Noncurrent assets	$	762	$	770	Noncurrent assets	$	765	$	770
Current liabilities	Current liabilities	$	646	$	479	Current liabilities	$	1,422	$	733
Long-term debt	Long-term debt	$	3,815	$	4,044	Long-term debt	$	3,178	$	3,740
Other non-current liabilities	Other non-current liabilities	$	204	$	207	Other non-current liabilities	$	116	$	128

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The following is a description of the transactions between the combined ~~Westinghouse Air Brake Technologies Corp.~~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.


	Unaudited
	Issuer and Guarantor
In millions	~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023
Net sales to non-guarantor subsidiaries	$	2411
Purchases from non-guarantor subsidiaries	$	5941

	Unaudited
	Issuer and Guarantor
In millions	~~September 30, 2022~~March 31, 2023
Amount due from/(to) non-guarantor subsidiaries	$	~~(8,138)~~(7,690)

Company Stock Repurchase Plan

On February ~~10, 2022,~~14, 2023, the Board of Directors ~~increased~~reauthorized its stock repurchase ~~authorization~~program to ~~increase~~refresh the amount available for stock repurchases to $750 million of the Company’s outstanding shares. This new stock repurchase authorization ~~superseded~~supersedes the previous authorization of ~~$500~~$750 million, of which approximately ~~$155~~$232 million ~~remained.~~remained at the reauthorization date. No time limit was set for the completion of the program which conforms to the requirements under the ~~Senior~~Restated Credit ~~Facility~~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, 2022,~~March 31, 2023, approximately ~~$395~~$663 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 ~~any combination~~economic conditions affecting the ability of ~~the foregoing;~~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;~~credit or difficulty in obtaining debt or equity financing; or

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•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;

•~~hiring and retention of key personnel;~~

•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;

~~COVID-19 factors~~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 ~~severity and duration of the pandemic;~~COVID-19 pandemic), or similar public health crises;

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

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

•supply chain and sourcing ~~disruptions;~~

•~~ability~~disruptions as a result of ~~our customers to pay timely for goods~~natural hazards and ~~services delivered;~~

•health ~~of our employees;~~

•~~ability to retain and recruit talented employees; or~~

•~~difficulty in obtaining debt or equity financing;~~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, ~~2021 and the risk factor added in Part II, Item 1A of this report on Form 10-Q.~~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, ~~2021.~~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, ~~business combinations,~~ warranty reserves, ~~stock-based compensation,~~ income taxes, and revenue recognition. There have been no significant changes in the related accounting policies since December 31, ~~2021.~~

~~Contractual Obligations~~

During the second quarter of 2022, the Company redeemed $25 million of principal from the 2024 Notes plus a premium and the related accrued interest. As a result, contractual obligations related to the repayment of Long-term debt for 2023-2024 were reduced from $1,012 million to $987 million.2022.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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, ~~2021.~~2022. Our exposure to market risk has not changed materially since December 31, ~~2021.~~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.

Item 4. CONTROLS AND PROCEDURES

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, 2022.~~March 31, 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 ~~September 30, 2022,~~March 31, 2023, that has materially affected, or is reasonably likely to materially affect, Wabtec’s internal control over financial reporting.

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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.

Item 1A. RISK FACTORS

In response to the Russian invasion of Ukraine and the impact of the conflict on the Company and the global markets, the Company is providing the below additional risk factor. Other than the below, thereThere 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, ~~2021.~~

~~The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations.~~

Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks such as those arising from the current conflict between Russia and Ukraine, may adversely affect our business and results of operations. The broader consequences of this conflict, which may include further sanctions, embargoes, regional instability, and geopolitical shifts; disruptions to transportation and distribution routes, or strategic decisions to alter certain routes; potential retaliatory action by the Russian government against companies, including us, including nationalization of foreign businesses and/or assets in Russia; increased tensions between the United States and countries in which we operate; and the extent of the conflict’s effect on our business and results of operations as well as the global economy, cannot be predicted.

Additionally, Wabtec has operations and a strategic joint venture in Kazakhstan that have continued operating but have incurred supply, distribution and currency impacts as an indirect result from the Russian invasion of Ukraine. To date, the operations in Kazakhstan have not been significantly impacted by the ongoing conflict outside of the overall unfavorable impact to economic conditions; however, the future impact to these operations cannot be predicted.

To the extent the current conflict between Russia and Ukraine adversely affects our business, particularly in Russia and Kazakhstan, it may also have the effect of heightening many other risks disclosed in our Annual Report, any of which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation and business spending; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; our ability to maintain or increase our prices, our ability to implement and execute our business strategy, disruptions in global supply chains, our exposure to foreign currency fluctuations, and constraints, volatility, or disruption in the capital markets, difficulty staffing and managing impacted operations, and the recoverability of assets in the region.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 ~~September 30, 2022:~~March 31, 2023:
Issuer Purchases of Common Stock
In millions, except shares and price per share Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (1) Maximum Dollar Value of Shares That May Yet Be Purchased Under the Programs (1)
July 2022 11,214 $ 81.73 11,214 $ 395
August 2022 — $ — — $ 395
September 2022 — $ — — $ 395
Total quarter ended September 30, 2022 11,214 $ 81.73 11,214 $ 395


Issuer Purchases of Common Stock
In millions, except shares and price per share	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (1)	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Programs (1)
January 2023	545,838	$	101.82	545,838	$	267
February 2023	527,095	$	104.13	527,095	$	729
March 2023	656,689	$	100.98	656,689	$	663
Total quarter ended March 31, 2023	1,729,622	$	102.20	1,729,622	$	663

(1) On February ~~10, 2022,~~14, 2023, the Board of Directors ~~increased~~reauthorized its stock repurchase ~~authorization~~program to ~~increase~~refresh the amount available for stock repurchases to $750 million of the Company’s outstanding shares. This new stock repurchase authorization ~~superseded~~supersedes the previous authorization of ~~$500~~$750 million, of which approximately ~~$155~~$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 ~~Senior~~Restated Credit ~~Facility~~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, 2022,~~March 31, 2023, approximately ~~$395~~$663 million was remaining under the stock repurchase plan.

Item 4. MINE SAFETY DISCLOSURES

Not Applicable

Item 6. EXHIBITS

The following exhibits are being filed with this report:


~~10.1~~3.1			~~Amendment~~Amended and ~~Restatement Agreement, dated as~~Restated Bylaws of ~~August 15, 2022, among~~ Westinghouse Air Brake Technologies Corporation ~~Wabtec Transportation Netherlands BV,~~(as am ended on February 10, 2023) (incorporated by reference to the other loan parties hereto, the lenders party thereto, the issuing banks thereto, the swingline lender and PNC Bank, National Association as administrative agent (including the Amended and Restated Credit Agreement, as Annex I thereto).Current Report on Form 8-K filed February 14, 2023)

22.1			List of Subsidiary Guarantors

31.1			Rule 13a-14(a) Certification of Chief Executive Officer.

31.2			Rule 13a-14(a) Certification of Chief Financial Officer.

32.1			Section 1350 Certification of Chief Executive Officer and Chief Financial Officer.

101.INS			XBRL Instance Document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document.

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104			Cover Page Interactive Data File (embedded within the Inline XBRL document)

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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.


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

By:			/s/ JOHN A. OLIN
			John A. Olin
			Executive Vice President and Chief Financial Officer

(Duly Authorized Officer and Principal Financial Officer)

DATE:			~~November 1, 2022~~April 26, 2023

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