# WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORP (WAB) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/943452/000162828025005100/wab-20241231.htm
Accession: 0001628280-25-005100
Filing date: 2025-02-12
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/WAB/
All MD&A years: /company/WAB/mda/
Previous year: /company/WAB/mda/fy2023/ (FY 2023)
Next year: /company/WAB/mda/fy2025/ (FY 2025)

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Wabtec is a global provider of value-added, technology-based locomotives, equipment, systems and services for the freight rail and passenger transit industries, as well as the mining, marine, and industrial markets. Our highly engineered products, which are intended to enhance safety, improve productivity and reduce maintenance costs for customers, can be found on most locomotives, freight cars, passenger transit cars, and buses around the world. Our core products and services are essential in the safe and efficient operation of freight rail and passenger transit vehicles. Wabtec is a global company with operations in over 50 countries, and our products can be found in more than 100 countries throughout the world. In 2024, approximately 53% of the Company’s Net sales came from customers outside the U.S.

Wabtec’s long-term financial goals are to increase revenues through a focused growth strategy, including product innovation and new technologies, global and market expansion, aftermarket products and services, and strategic acquisitions, increase margins through strict attention to cost controls, drive improved efficiencies across the business, drive strong cash flow conversion, and maintain a strong credit profile while minimizing our overall cost of capital. In addition, Management evaluates the Company’s current operational performance through measures such as safety, quality and on-time delivery.

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

The Company monitors a variety of factors and statistics to gauge market activity. Freight rail markets around the world are driven primarily by overall economic conditions and activity, while Transit markets are driven primarily by government funding and passenger ridership. Changes in these market drivers can cause fluctuations in demand for Wabtec's products and services.

Business Update

During 2024, Wabtec continued to execute on our value creation framework by signing several key agreements including: a multi-year Tier 4 locomotive order in North America for over $600 million, a multi-year locomotive order in Kazakhstan for over $400 million, international orders for new locomotives for $401 million across six customers, and multi-year orders for new locomotives in Africa for approximately $525 million. Additionally, Wabtec won a long-term parts agreement with a Class I railroad for over $300 million, signed its first multi-year service contract with a customer in Brazil worth over $240 million, won signaling contracts with Transit customers in North America, and secured a long-term parts agreement with a customer in Asia. Operationally, Wabtec began commercial operations for its Green Friction braking solution in Paris and launched the next generation of railcar movers with its Shuttlewagon Commander NXT. Additionally, as a result of Wabtec's strong revenue and profitable growth over the past few years, rating agencies have made the following changes to our credit ratings: both Fitch Ratings and S&P Global Ratings upgraded Wabtec's credit rating from BBB- to BBB with a Stable outlook, and Moody's updated Wabtec's outlook to positive from stable.

During the first quarter of 2022, Wabtec announced Integration 2.0, a multi-year strategic initiative to target incremental run rate synergies now estimated to be approximately $100 million by the end of 2026. The scope of the review included 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. During the twelve months ended December 31, 2024 and 2023, the Company incurred one-time restructuring charges for programs included in the initiative of approximately $28 million and $49 million, respectively, primarily for employee-related costs and asset write downs associated with site consolidations in Europe. The Company now expects to incur approximately $170 million of one-time restructuring charges related to Integration 2.0, of which approximately $146 million has been incurred through December 31, 2024. Approved programs resulted in approximately 15 facility closures and impacted approximately 1,000 employees.

In addition to Integration 2.0, Wabtec is focused on exiting various low margin product offerings through Portfolio Optimization to improve profitability while reducing manufacturing complexity. Wabtec now expects to incur approximately $70 million in net exit charges related to Portfolio Optimization, which will be predominately non-cash asset write downs. For the years ended December 31, 2024 and 2023, Wabtec recorded charges of approximately $28 million primarily for asset write

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downs related to Portfolio Optimization. Total one-time restructuring charges related to Portfolio Optimization to date are approximately $56 million.

In February 2025, Wabtec announced Integration 3.0, a three-year strategic initiative to target incremental run rate synergies estimated to be between $100 million to $125 million by 2028. The scope of the review includes consolidating our footprint via value chain improvement and facility rationalization, reducing headcount, expanding operating capacity in low-cost countries, and streamlining administrative and commercial activities. Management will also consider additional capital investments to further simplify and streamline the business. The Company anticipates that it will incur charges of approximately $125 million to $155 million related to this initiative, of which approximately $80 million to $100 million are expected to be one-time restructuring charges. Concurrently, Wabtec announced an additional Portfolio Optimization initiative for 2025 targeting approximately $100 million of low margin revenues. The 2025 Portfolio Optimization actions are expected to result in approximately $40 million of net exit charges, primarily for non-cash asset write downs. Estimates for these programs could change based on the specific programs approved or changes to the scope of the review.

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

A portion of our workers are represented by labor unions. The United Electrical, Radio and Machine Workers of America (UE), Locals 506 and 618 collective bargaining agreement, covering approximately 1,400 locomotive manufacturing workers in Erie, Pennsylvania, expired on June 9, 2023. Negotiations with UE officially began on April 27, 2023 and an agreement between the Company and the UE was not reached before the contract expired. On June 22, 2023, the UE voted against ratification of the Company's proposed agreement and authorized a strike. The Company and the UE subsequently reached an agreement that was ratified by the UE on August 31, 2023, ending the labor strike. The Company continuously monitors its labor activity.

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

Cyber Incident

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

Based on the Company's assessment, the incident did not have 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.

ACQUISITIONS

During 2024, the Company made four strategic acquisitions for a combined purchase price of approximately $168 million, net of cash acquired. Two of the acquisitions are reported in the Transit Segment, one is reported in the Digital Intelligence product line of the Freight Segment and one is reported in the Components product line of the Freight Segment. Each of the acquisitions in 2024 are individually and collectively immaterial.

During the fourth quarter of 2023, the Company purchased the remaining ownership shares of LKZ, a locomotive manufacturing and assembly company located in Kazakhstan for $111 million, at which time it became a wholly owned subsidiary of the Company. Prior to this purchase, Wabtec owned 50% of LKZ as a joint venture partner and accounted for its interest as an equity method investment. During the second quarter of 2023, the Company acquired L&M Radiator, Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers for the mining sector, for a purchase price of approximately $245 million.

During 2022, the Company made three strategic acquisitions in the Freight Segment for a combined purchase price of $89 million, net of cash acquired. Two of the acquisitions are reported in the Digital Intelligence product line and one is reported in the Services product line. Each of the acquisitions in 2022 are individually and collectively immaterial. For

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additional information related to these acquisitions refer to Note 3 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report.

On January 14, 2025, Wabtec announced a definitive agreement to acquire Evident’s Inspection Technologies division (Inspection Technologies), formerly part of the Scientific Solutions Division of Olympus Corporation, a global leader in Non-Destructive Testing, Remote Visual Inspection and Analytical Instruments solutions for mission critical assets, for $1.78 billion. Inspection Technologies’ leading industry presence and innovative product portfolio is expected to significantly expand Wabtec's capabilities, adding advanced automated inspection capabilities, driving technology in a space where data acquisition, analytics and automation are critical. Upon acquisition, Inspection Technologies will be reported within the Digital Intelligence product line of the Freight Segment. The Company anticipates financing the acquisition with a combination of cash on hand, utilization of the Revolving Credit Facility and an additional term loan. The transaction is subject to customary closing conditions and regulatory approvals, with the Company expecting to finalize the acquisition of Inspection Technologies by the end of the first half of 2025.

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RESULTS OF OPERATIONS

Consolidated Results

2024 COMPARED TO 2023

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

[[GREPCENT_TABLE]]
[["","","For the year ended December 31,"],["In millions","","2024","","2023"],["Net sales:"],["Sales of goods","","$","8,434","","","$","7,647"],["Sales of services","","1,953","","","2,030"],["Total Net sales","","10,387","","","9,677"],["Cost of sales:"],["Cost of goods","","(5,918)","","","(5,581)"],["Cost of services","","(1,103)","","","(1,152)"],["Total Cost of sales","","(7,021)","","","(6,733)"],["Gross profit","","3,366","","","2,944"],["Operating expenses:"],["Selling, general and administrative expenses","","(1,248)","","","(1,139)"],["Engineering expenses","","(206)","","","(218)"],["Amortization expense","","(303)","","","(321)"],["Total Operating expenses","","(1,757)","","","(1,678)"],["Income from operations","","1,609","","","1,266"],["Other income and expenses:"],["Interest expense, net","","(201)","","","(218)"],["Other income, net","","2","","","44"],["Income before income taxes","","1,410","","","1,092"],["Income tax expense","","(343)","","","(267)"],["Net income","","1,067","","","825"],["Less: Net income attributable to noncontrolling interest","","(11)","","","(10)"],["Net income attributable to Wabtec shareholders","","$","1,056","","","$","815"]]
[[/GREPCENT_TABLE]]

The following table shows the major components of the change in Net sales in 2024 from 2023:

[[GREPCENT_TABLE]]
[["In millions","","Freight Segment","","Transit Segment","","Total"],["2023 Net sales","","$","6,923","","","$","2,754","","","$","9,677"],["Acquisitions","","78","","","3","","","81"],["Foreign Exchange","","(32)","","","(1)","","","(33)"],["Organic","","499","","","163","","","662"],["2024 Net sales","","$","7,468","","","$","2,919","","","$","10,387"]]
[[/GREPCENT_TABLE]]

The following discussion compares our results for the year ended December 31, 2024 to the year ended December 31, 2023. The discussion comparing our results for the year ended December 31, 2023 to the year ended December 31, 2022 is included within Management's Discussion and Analysis of Financial Condition and Results of Operation in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 14, 2024.

Net sales

Net sales for the year ended December 31, 2024 increased by $710 million, or 7.3%, to $10.39 billion compared to the same period in 2023. Organic sales increased $662 million which was attributable to both the Freight and Transit Segments. Freight Equipment sales increased from higher North American and international locomotive sales and increased mining sales. Freight Services sales increased from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales. Transit sales increased primarily as a result of higher demand for Aftermarket and Original Equipment Manufacturing products and services driven by increased investments in sustainable infrastructure, fleet expansion and renewals and increased

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passenger ridership levels. Sales from acquisitions contributed $81 million, primarily in the Freight Segment, and unfavorable changes in foreign exchange decreased Net sales by $33 million.

Cost of sales

Cost of sales for the year ended December 31, 2024 increased by $288 million, or 4.3%, to $7.02 billion compared to the same period in 2023. The increase is primarily due to the increase in Net sales. Cost of sales as a percentage of Net sales was 67.6% and 69.6% for the years ended December 31, 2024 and 2023, respectively. The improvement in gross margin is attributable to contract escalation clauses, favorable mix between the Freight and Transit segments, improved productivity, Integration 2.0 savings, and favorable fixed cost absorption. Cost of sales for the years ended December 31, 2024 and 2023 included $37 million and $38 million, respectively, of restructuring costs, primarily for headcount actions and footprint rationalization related to Integration 2.0 and Portfolio Optimization.

Operating expenses

Total operating expenses increased $79 million, or 4.7%, for the year ended December 31, 2024 compared to the same period in 2023, primarily due to the increase in Net sales. Operating expenses as a percentage of Net sales was 16.9% and 17.3% for the years ended December 31, 2024 and 2023, respectively. Selling, general and administrative expenses ("SG&A") increased $109 million for the year ended December 31, 2024 compared to the same period in 2023. The increase is primarily from costs incurred to support the higher sales volume, higher employee compensation and benefit costs and higher professional fees related to acquisitions, partially offset by the impacts of Integration 2.0. Restructuring costs included in SG&A were $18 million for the years ended December 31, 2024 and 2023, primarily for headcount actions and footprint rationalization programs related to Integration 2.0 in both years and Portfolio Optimization in 2024. Engineering expenses decreased $12 million primarily due to the timing of investments in new technology, and Amortization expense decreased $18 million, primarily related to changes in accelerated amortization for business dispositions associated with Portfolio Optimization and lower amortization for the GE Transportation trade name.

Interest expense, net

Interest expense, net, decreased $17 million to $201 million for the year ended December 31, 2024 over the same period in 2023 primarily due to lower weighted average debt balances throughout the current year, partially offset by higher effective interest rates.

Other income, net

Other income, net, decreased $42 million to $2 million for the year ended December 31, 2024 compared to the same period in 2023, primarily due to lower equity income during 2024 and a gain on equity interest in the prior year. As a result of the change in ownership interest and obtaining control of LKZ in late 2023, Wabtec's previously held equity interest balance in LKZ was remeasured to fair value, resulting in a gain of approximately $35 million recorded to Other income, net in the prior year.

Income taxes

The effective income tax rate was 24.3% and 24.5% for the years ended December 31, 2024 and 2023, respectively. The year over year decrease was primarily due to changes in valuation allowances and audit closures, partially offset by a change in the jurisdictional mix of earnings and the non-recurrence of the non-taxable gain generated on the acquisition of LKZ in 2023. See Note 11 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report for additional information.

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Freight Segment

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

[[GREPCENT_TABLE]]
[["","","For the year ended December 31,"],["In millions","","2024","","2023","","Change","","% Change"],["Net sales:"],["Sales of goods","","$","5,524","","","$","4,906","","","$","618","","","12.6","%"],["Sales of services","","1,944","","","2,017","","","(73)","","","(3.6)","%"],["Total Net sales","","7,468","","","6,923","","","545","","","7.9","%"],["Cost of sales:"],["Cost of goods","","(3,848)","","","(3,600)","","","248","","","6.9","%"],["Cost of services","","(1,097)","","","(1,142)","","","(45)","","","(3.9)","%"],["Total Cost of sales","","(4,945)","","","(4,742)","","","203","","","4.3","%"],["Cost of sales (% of Net sales)","","66.2","%","","68.5","%","","(2.3)"],["Gross profit","","2,523","","","2,181","","","342","","","15.7","%"],["Operating expenses","","(1,101)","","","(1,116)","","","(15)","","","(1.3)","%"],["Income from operations ($)","","$","1,422","","","$","1,065","","","$","357","","","33.5","%"],["Income from operations (% of Net sales)","","19.0","%","","15.4","%","","3.6"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["In millions"],["2023 Net sales","","$","6,923"],["Acquisitions","","78"],["Foreign Exchange","","(32)"],["Changes in Net sales by Product Line:"],["Services","","132"],["Equipment","","328"],["Components","","23"],["Digital Intelligence","","16"],["2024 Net sales","","$","7,468"]]
[[/GREPCENT_TABLE]]

Net sales

Freight Segment organic sales increased by $499 million driven primarily by Equipment sales from higher North American and international locomotive sales and increased mining sales, and Services sales from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales. Additionally, Freight Segment sales also benefited from our strategic acquisitions, primarily from L&M Radiator Inc. acquired in the second quarter of 2023, by $78 million.

Cost of sales

Freight Segment Cost of sales increased $203 million from higher sales volume, and Cost of sales as a percentage of Net sales decreased 2.3 percentage points. The improvement in gross margin is attributable to contract escalation clauses, favorable mix within the Freight Segment product lines, improved productivity and Integration 2.0 savings. Cost of sales for the year ended December 31, 2023 was also impacted by manufacturing inefficiencies related to labor negotiations at our Erie facility and costs related to next generation product development in Digital Intelligence. Cost of sales for the years ended December 31, 2024 and 2023 included $18 million and $13 million, respectively, of restructuring costs, primarily related to Integration 2.0 and Portfolio Optimization.

Operating expenses

Freight Segment Operating expenses as a percentage of Net sales were 14.7% and 16.1% for the years ended December 31, 2024 and 2023, respectively. Freight Segment Operating expenses decreased by $15 million primarily driven by lower amortization expense of $26 million due to changes in accelerated amortization for business dispositions associated with Portfolio Optimization and lower amortization for the GE Transportation trade name, and lower Engineering expenses of $16 million due to the timing of investments in new technology. This was partially offset by higher SG&A expenses of

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$27 million resulting from higher costs to support increased sales volume, higher employee compensation and benefit costs and incremental expense from acquisitions. Freight SG&A expenses for the years ended December 31, 2024 and 2023 included $3 million and $5 million, respectively, of restructuring costs related to Integration 2.0 in 2023 and Portfolio Optimization in 2024.

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Transit Segment

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

[[GREPCENT_TABLE]]
[["","","For the year ended December 31,"],["In millions","","2024","","2023","","Change","","% Change"],["Net sales","","$","2,919","","","$","2,754","","","$","165","","","6.0","%"],["Cost of sales","","(2,076)","","","(1,991)","","","85","","","4.3","%"],["Cost of sales (% of Net sales)","","71.1","%","","72.3","%","","(1.2)"],["Gross profit","","843","","","763","","","80","","","10.5","%"],["Operating expenses","","(505)","","","(468)","","","37","","","7.9","%"],["Income from operations ($)","","$","338","","","$","295","","","$","43","","","14.6","%"],["Income from operations (% of Net sales)","","11.6","%","","10.7","%","","0.9"]]
[[/GREPCENT_TABLE]]

The following table shows the major components of the change in Net sales for the Transit Segment in 2024 from 2023:

[[GREPCENT_TABLE]]
[["In millions"],["2023 Net sales","","$","2,754"],["Acquisitions","","3"],["Foreign Exchange","","(1)"],["Changes in Net sales by Product Line:"],["Original Equipment Manufacturing","","42"],["Aftermarket","","121"],["2024 Net sales","","$","2,919"]]
[[/GREPCENT_TABLE]]

Net sales

Transit Segment organic sales increased $163 million driven by strong Aftermarket and Original Equipment Manufacturing sales. Increased passenger ridership levels resulted in increased demand for services and products. Additionally, increased investments in railway infrastructure, fleet expansion and renewals and sustainable transport initiatives also contributed to organic growth.

Cost of sales

Transit Segment Cost of sales increased by $85 million primarily from higher sales volume, and Cost of sales as a percentage of Net sales decreased by 1.2 percentage points. The increase in gross margin is primarily attributable to favorable mix within the Transit Segment and the benefits from structured cost actions taken through prior years' restructuring and integration projects, primarily Integration 2.0. Transit Cost of sales for the years ended December 31, 2024 and 2023 included $19 million and $25 million of restructuring costs, respectively, primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

Operating expenses

Operating expenses as a percentage of Net sales for the Transit Segment were 17.3% and 17.0% for the years ended December 31, 2024 and 2023, respectively. Transit Segment Operating expenses increased by $37 million primarily driven by higher SG&A expenses of $25 million to support higher sales volume and higher employee compensation and benefit costs, higher Engineering expenses of $4 million due to increased investments in new technology, and higher Amortization expense of $8 million primarily due to accelerated amortization for business dispositions associated with Portfolio Optimization. This was partially offset by benefits from structured cost actions taken through prior years' restructuring and integration projects, primarily Integration 2.0. Transit SG&A expenses for the years ended December 31, 2024 and 2023 included $13 million of restructuring costs primarily for footprint rationalization and headcount actions in Europe related to Integration 2.0.

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Liquidity and Capital Resources

Liquidity is provided by operating cash flows, borrowings under the 2022 Credit Agreement and the 2024 Credit Agreement, each with a consortium of commercial banks, and proceeds from the Company's Senior Notes. Additionally, the Company utilizes the revolving receivables program and supply chain financing program described below, as well as other short-term financing agreements with certain banks, for added flexibility as part of our liquidity management strategy. The following is a summary of selected cash flow information and other relevant data:

[[GREPCENT_TABLE]]
[["","","For the year ended December 31,"],["In millions","","2024","","2023"],["Cash provided by (used for):"],["Operating activities","","$","1,834","","","$","1,201"],["Investing activities","","$","(343)","","","$","(492)"],["Financing activities","","$","(1,371)","","","$","(633)"]]
[[/GREPCENT_TABLE]]

 Operating activities In 2024, cash provided by operating activities was $1,834 million compared to $1,201 million in 2023. Significant changes to the sources and (uses) of cash for the twelve month periods include the following:

•$242 million from increased Net income;

•$161 million from favorable changes in Accounts receivables driven by $121 million of higher collections on receivables and $40 million of lower remittance for the Revolving Receivables Program;

•$128 million from changes in Accounts payable due to timing of payments;

•$(59) million from changes in Inventory to support higher sales;

•$38 million from changes in employee related benefit payments; and,

•approximately $150 million from changes in income tax accounts, including a tax refund in the current year.

Investing activities In 2024 and 2023, cash used for investing activities was $(343) million and $(492) million, respectively. During 2024, Wabtec made four strategic acquisitions for net cash of $(168) million. During 2024, Wabtec also used $(207) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes, received $19 million of net proceeds from dispositions of businesses, and received $13 million of proceeds from disposals of property, plant, and equipment. During 2023, Wabtec acquired L&M Radiator, Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers, for net cash of approximately $(229) million and the remaining ownership shares of LKZ for net cash of approximately $(81) million. During 2023, Wabtec also used $(186) million for additions to property, plant and equipment.

Financing activities In 2024, cash used for financing activities was $(1,371) million, which included $(64) million from net changes in debt, $(1,097) million of stock repurchases, $(140) million of dividend payments, $(42) million of contingent consideration payments related to the GE Transportation acquisition, $(25) million of payments for income tax withholding on share-based compensation, and $(6) million of distributions to noncontrolling interest. In 2023, cash used for financing activities was $(633) million which included $42 million from net changes in debt, $(409) million of stock repurchases, $(123) million of dividend payments, $(112) million of contingent consideration payments related to the GE Transportation acquisition, $(17) million of distributions to noncontrolling interest, and $(16) million of payments for income tax withholding on share-based compensation .

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

During the third quarter of 2023, the Company borrowed the full $250 million of availability under the Delayed Draw Term Loan and subsequently utilized the proceeds to redeem the outstanding 2023 Notes. Beginning September 15, 2023, the effective interest rates for the 2024 Notes and the 2028 Notes were each reduced by 0.25% due to a favorable change in Wabtec's corporate credit rating and the rating of the aforementioned notes.

The Company borrows and repays against the Revolving Credit Facility for added flexibility in liquidity to manage cash during the operating cycle. The proceeds from borrowing and the repayments are shown within the "Proceeds from debt, net of issuance costs" and "Payments of debt" lines, respectively, presented in the Consolidated Statements of Cash Flows. Additional

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information with respect to credit facilities and long-term debt is included in Note 9 of "Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report.

As of December 31, 2024, the Company held approximately $715 million of cash, cash equivalents, and restricted cash, of which approximately $417 million was held within the United States and approximately $298 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. As of December 31, 2024, approximately $9 million of the Company's $715 million cash balance was classified as restricted cash.

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

Revolving Receivables Program

The Company utilizes a revolving receivables facility to sell up to $350 million of certain receivables through our bankruptcy-remote subsidiary to a financial institution on a recurring basis in exchange for cash equal to the gross receivables sold. As customers pay their balances, we transfer additional receivables into the program, which could result in our gross receivables sold being higher or lower than customer collections remitted to the financial institution for any applicable period. Net cash remitted from the revolving receivables program was $(20) million and $(60) million for the years ended December 31, 2024 and 2023, respectively. During the fourth quarter of 2024, the revolving receivables program agreement was amended to allow us to request loans from the financial institution secured by the receivables held in the program, up to the $350 million limit. As a result, effective January 1, 2025 proceeds and repayments of loans under the program will be classified as Financing activities on our statement of cash flows and outstanding balances will be classified as debt on our balance sheet. Additional information with respect to the Revolving Receivables Program is included in Note 2 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report.

Supply Chain Financing Program

The Company has entered into supply chain financing arrangements with third-party financial institutions to provide our vendors with enhanced payment options while providing the Company with added working capital flexibility. The Company does not provide any guarantees under these arrangements, does not have an economic interest in our supplier's voluntary participation, does not receive an economic benefit from the financial institutions, and no assets are pledged under the arrangements. The arrangements do not change the payable terms negotiated by the Company and our vendors and does not result in a change in the classification of amounts due as accounts payable in the Consolidated Balance Sheets. Additional information with respect to the Supply Chain Financing Program is included in Note 2 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report.

Intra-Quarter Uncommitted Money Market Line Credit Agreement

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

Guarantor Summarized Financial Information

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

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

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Summarized Statement of Income

[[GREPCENT_TABLE]]
[["","","Unaudited"],["","","Parent Company and Guarantor Subsidiaries"],["In millions","","Year Ended December 31, 2024"],["Net sales","","$","5,948"],["Gross profit","","$","2,399"],["Net income attributable to Wabtec shareholders","","$","788"]]
[[/GREPCENT_TABLE]]

Summarized Balance Sheet

[[GREPCENT_TABLE]]
[["","","Unaudited"],["","","Parent Company and Guarantor Subsidiaries"],["In millions","","December 31, 2024","","December 31, 2023"],["Current assets","","$","1,604","","","$","1,513"],["Noncurrent assets","","$","2,049","","","$","2,196"],["Current liabilities","","$","2,242","","","$","2,443"],["Long-term debt","","$","2,962","","","$","2,739"],["Other non-current liabilities","","$","697","","","$","662"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","Unaudited"],["","","Parent Company and Guarantor Subsidiaries"],["In millions","","Year Ended December 31, 2024"],["Net sales to non-guarantor subsidiaries","","$","875"],["Purchases from non-guarantor subsidiaries","","$","1,170"],["","","Unaudited"],["","","Parent Company and Guarantor Subsidiaries"],["In millions","","December 31, 2024"],["Amount due to non-guarantor subsidiaries","","$","13,697"]]
[[/GREPCENT_TABLE]]

Summarized Financial Information—Euro Notes

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

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

Summarized Statement of Income

[[GREPCENT_TABLE]]
[["","","Unaudited"],["","","Issuer and Guarantor"],["In millions","","Year Ended December 31, 2024"],["Net sales","","$","577"],["Gross profit","","$","90"],["Net loss attributable to Wabtec shareholders","","$","(209)"]]
[[/GREPCENT_TABLE]]

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Summarized Balance Sheet

[[GREPCENT_TABLE]]
[["","","Unaudited"],["","","Issuer and Guarantor"],["In millions","","December 31, 2024","","December 31, 2023"],["Current assets","","$","546","","","$","493"],["Noncurrent assets","","$","646","","","$","651"],["Current liabilities","","$","1,014","","","$","1,272"],["Long-term debt","","$","3,479","","","$","3,287"],["Other non-current liabilities","","$","49","","","$","84"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","Unaudited"],["","","Issuer and Guarantor"],["In millions","","Year Ended December 31, 2024"],["Net sales to non-guarantor subsidiaries","","$","46"],["Purchases from non-guarantor subsidiaries","","141"],["","","Unaudited"],["","","Issuer and Guarantor"],["In millions","","December 31, 2024"],["Amount due to non-guarantor subsidiaries","","$","8,449"]]
[[/GREPCENT_TABLE]]

Contractual Obligations and Off-Balance Sheet Arrangements

The Company is obligated to make future payments under various contracts such as purchase, debt and lease agreements and has certain contingent commitments. The Company has grouped these contractual obligations and off-balance sheet arrangements into operating activities, financing activities, and investing activities in the same manner as they are classified in the Statement of Consolidated Cash Flows to provide a better understanding of the nature of the obligations and arrangements and to provide a basis for comparison to historical information. The table below provides a summary of contractual obligations and off-balance sheet arrangements as of December 31, 2024:

[[GREPCENT_TABLE]]
[["In millions","","Total","","2025","","2026-27","","2028-29","","2030+"],["Operating activities:"],["Purchase obligations (1)","","$","119","","","$","117","","","$","2","","","$","\u2014","","","$","\u2014"],["Operating leases (2)","","345","","","63","","","101","","","67","","","114"],["Pension and postretirement benefit payments (3)","","214","","","20","","","41","","","44","","","109"],["Interest payments (4)","","684","","","156","","","268","","","134","","","126"],["Financing activities:"],["Long-term debt","","3,995","","","500","","","1,520","","","1,475","","","500"],["Dividends to shareholders (5)","","171","","","171","","","\u2014","","","\u2014","","","\u2014"],["Total","","$","5,528","","","$","1,027","","","$","1,932","","","$","1,720","","","$","849"]]
[[/GREPCENT_TABLE]]

(1)Purchase obligations represent non-cancelable contractual obligations at December 31, 2024.

(2)Operating leases represent multi-year obligations for rental of facilities and equipment.

(3)Pension and postretirement benefit payments includes expected payments to participants out of plan assets and corporate assets. The benefit payments are based on actuarial estimates using current assumptions for discount rates, expected return on long-term assets and rate of compensation increases. The Company does not expect material contributions to pension plan investments in 2025.

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(4)Interest payments on the Senior Notes and the amounts borrowed under the 2024 and 2022 Credit Agreements as of December 31, 2024 are based on interest rates in effect as of December 31, 2024 and are calculated on debt with maturities that extend to 2034.

(5)Shareholder dividends are subject to approval by the Company’s Board of Directors, currently at an annual rate of approximately $171 million beginning in 2025.

The above table does not reflect uncertain tax positions of $19 million, the timing of which are uncertain. Refer to Note 11 of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report for additional information on uncertain tax positions. Additionally, the Company arranges for certain types of bank guarantees and letters of credit, such as performance bonds, bid bonds and financial guarantees, that are issued by certain banks and insurance companies to support customer contracts. At December 31, 2024, the total value of these bank guarantees and letters of credit were $931 million and expire on various dates through 2034. Amounts include interest payments based on contractual terms and the Company’s current interest rate.

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;

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

•decreased demand for our products and services;

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

•consolidations in the rail industry;

•continued outsourcing by our customers;

•industry demand for faster and more efficient braking equipment;

•fluctuations in interest rates and foreign currency exchange rates;

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

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

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

Operating factors

•supply disruptions;

•technical difficulties;

•changes in operating conditions and costs;

•increases in raw material costs;

•challenges associated with the successful introduction of new products;

•product safety, quality and reliability;

•performance under material long-term contracts;

•labor availability constraints and labor relations challenges;

•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;

•our ability to successfully complete and integrate acquisitions;

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

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•cybersecurity and data protection risks;

Competitive factors

•the actions of competitors; or

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

Political/governmental factors

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

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

•decreases in 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;

•consequences of federal and state income tax legislation;

•sanctions imposed on countries and persons; or

•the outcome of negotiations with governments;

Natural hazards / health crises

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

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

•epidemics, pandemics, or similar public health crises;

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

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

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

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

Critical Accounting Estimates

The preparation of the financial statements in accordance with generally accepted accounting principles requires management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Critical areas of uncertainty that require judgments, estimates and assumptions include the accounting for allowance for doubtful accounts, inventories, business combinations, goodwill and indefinite-lived intangible assets, warranty reserves, income taxes, and revenue recognition. Management uses historical experience and all available information to make these judgments and estimates, and actual results may differ from those estimates and assumptions that are used to prepare the Company’s financial statements at any given time. Despite these inherent limitations, management believes that Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and the financial statements and related footnotes provide a meaningful and fair perspective of the Company.

A summary of the Company’s significant accounting policies is included in Note 2 in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report. Management believes that the application of these policies on a consistent basis enables the Company to provide the users of the financial statements with useful and reliable information about the Company’s operating results and financial condition.

Accounts Receivable and Allowance for Doubtful Accounts:

Description The Company provides an allowance for doubtful accounts to cover anticipated losses on uncollectible accounts receivable.

Judgments and Uncertainties  The allowance for doubtful accounts receivable reflects our best estimate of expected losses inherent in our receivable portfolio determined on the basis of historical experience, relevant credit forecast information, changes to customer's solvency and other currently available evidence.

Effect if Actual Results Differ From Assumptions  If our estimates regarding the collectability of troubled accounts, and/or our actual losses within our receivable portfolio exceed our estimated losses, we may be exposed to the expense of increasing our allowance for doubtful accounts and loss of cash flows.

Inventories:

Description Inventories are stated at the lower of cost or net realizable value and are reviewed to ensure that an adequate provision is recognized for excess, slow moving and obsolete inventories, and net realizable value reserves.

Judgments and Uncertainties Cost is determined primarily using the first-in, first-out (FIFO) method. Inventory costs include material, labor and overhead. The Company compares inventory components to prior year sales history, current backlog and

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anticipated future requirements. To the extent that inventory parts exceed estimated usage and demand, a reserve is recognized to reduce the carrying value of inventory. Also, specific reserves are established for known inventory obsolescence, a decline in market value, or loss of a customer with specific inventory.

Effect if Actual Results Differ From Assumptions If the market value or demand for our products were to decrease due to changing market conditions, the Company could be at risk of incurring write-downs to adjust inventory value to a net realizable value lower than stated cost. If our estimates regarding sales and backlog requirements are inaccurate, we may be exposed to the expense of increasing our reserves for slow moving and obsolete inventory.

Business Combinations:

Description The Company accounts for business acquisitions in accordance with Accounting Standard Codification ("ASC") 805, Business Combinations, which requires the purchase price of the acquired business to be allocated to tangible and intangible assets acquired and liabilities assumed based on the respective fair values. The amount of purchase price which is in excess of the fair values of assets acquired and liabilities assumed is recognized as goodwill.

Judgments and Uncertainties Discounted cash flow models are used to estimate the fair values of acquired intangible assets such as contract backlog, customer relationships, intellectual property, and trade names. The significant assumptions used to estimate the value of the intangible assets include revenue growth rates, projected profit margins, discount rates, royalty rates, customer attrition rates, revenue obsolescence rates and market participant profit margins. These significant assumptions are forward-looking and could be affected by future economic and market conditions.

Effect if Actual Results Differ From Assumptions Different assumptions may result in materially different values for assets acquired and liabilities assumed, which may impact the Company's financial position and future results of operations, including potential future impairment charges.

Goodwill and Indefinite-Lived Intangible Assets:

Description Goodwill represents the excess of cost over the fair value of the net assets acquired in a business combination. Indefinite-lived intangible assets primarily represent certain trade names acquired in a business combination that were determined to have indefinite useful lives. Goodwill and indefinite-lived intangibles are required to be tested for impairment at least annually. The Company performs its annual impairment tests during the fourth quarter and more frequently when indicators of impairment are present. The Company reviews goodwill for impairment at the reporting unit level. The Company has identified three reporting units for purposes of testing goodwill for impairment. Two reporting units exist within the Freight segment and the Transit segment is also a reporting unit. The evaluation of impairment involves comparing the current fair value of the business to the recorded value including goodwill.

Judgments and Uncertainties A number of significant assumptions and estimates are involved in the application of the impairment test, including the identification of macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance. We also consider Wabtec-specific events and share price trends and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such amount.

Effect if Actual Results Differ From Assumptions Management considers historical experience and all available information at the time the fair values of its reporting units are estimated. However, actual amounts realized may differ from those used to evaluate the impairment of goodwill and indefinite lived intangible assets. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to impairment losses that could be material to our results of operations.

Warranty Reserves:

Description The Company provides warranty reserves to cover expected costs from repairing or replacing products with durability, quality or workmanship issues occurring during established warranty periods.

Judgments and Uncertainties In general, reserves are provided for as a percentage of sales, based on historical experience. In addition, specific reserves are established for known warranty issues and their estimable losses.

Effect if Actual Results Differ From Assumptions If actual results are not consistent with the assumptions and judgments used to calculate our warranty liability, the Company may be exposed to the expense of increasing our reserves for warranty expense.

Income Taxes:

Description Wabtec records an estimated liability for income and other taxes based on what it determines will likely be paid in various tax jurisdictions in which it operates in accordance with ASC 740-10 Accounting for Income Taxes and Accounting for Uncertainty in Income Taxes.

Judgments and Uncertainties The estimate of our tax obligations are uncertain because management must use judgment to estimate the exposures associated with our various filing positions, as well as realization of our deferred tax assets. ASC 740-10

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establishes a recognition and measurement threshold to determine the amount of tax benefit that should be recognized related to uncertain tax positions.

Effect if Actual Results Differ From Assumptions Management uses its best judgment in the determination of these amounts. However, the liabilities ultimately realized and paid are dependent on various matters including the resolution of the tax audits in the various affected tax jurisdictions and may differ from the amounts recorded. An adjustment to the estimated liability would be recorded through income in the period in which new information changes the expected outcome of an uncertain tax position. A deferred tax valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Revenue Recognition:

Description Revenue is recognized in accordance with ASC 606 Revenue from Contracts with Customers. The Company recognizes a portion of its revenues on 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. 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 method used for these agreements recognizes revenue based on our efforts to satisfy the performance obligation and includes costs of material and labor, both of which give an accurate representation of the progress made toward complete satisfaction of a particular performance obligation. The Company may also use the output method which recognizes revenue based on direct measurements of the value transferred to the customer.

Judgments and Uncertainties Accounting for long-term customer agreements involves a judgmental process of estimating the total sales and costs for each contract, which results in the development of estimated profit margin percentages. 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. Factors that influence these estimates include inflationary trends, foreign exchange rates, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Generally, pricing is defined in our contracts but may include an estimate of variable consideration when required by the terms of the individual customer contract. Types of variable consideration that the Company typically has include volume discounts, prompt payment discounts, price escalation clauses, liquidating damages, and performance bonuses.

Effect if Actual Results Differ From Assumptions Should market conditions and customer demands dictate changes to our standard shipping terms, the Company may be impacted by longer than typical revenue recognition cycles. The development of expected contract costs and contract profit margin percentages involves procedures and personnel in all areas that provide financial or production information on the status of contracts. Due to the significance of judgments in the estimation process, it is likely that materially different revenue and cost amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions/estimates, inflation or deflation, foreign currency exchange rates, supplier performance, or other circumstances may adversely or positively affect financial performance in future periods. Some of our contracts are expected to be completed in a loss position. Provisions are made currently for estimated losses on uncompleted contracts and are updated as necessary.