Financial Analysis

"ACQUISITIONS On February 10, 2026, Wabtec acquired Dellner Couplers, a global leader in highly engineered safety-critical train connection systems and services for passenger rail rolling stock, for approximately $1.053 billion. The acquisition brings highly attractive and complementary technologies to Wabtec and strengthens its portfolio of mission-critical passenger rail systems. Dellner Couplers reports within the Transit Segment. The acquisition was funded with a combination of cash on hand and borrowings under other sources of available liquidity. The following table summarizes the preliminary fair value of the Dellner Couplers assets acquired and liabilities assumed: In millions Assets acquired Cash and cash equivalents $ 17 Accounts receivable 58 Inventory 77 Other current assets 36 Property, plant and equipment 53 Goodwill 475 Other intangible assets 531 Other noncurrent assets 9 Total assets acquired 1,256 Liabilities assumed Current liabilities 76 Noncurrent liabilities 127 Total liabilities assumed 203 Net assets acquired $ 1,053 On December 1, 2025, Wabtec acquired Frauscher Sensor Technology Group GmbH (""Frauscher""), a global market leader in train detection, wayside object control solutions and axle counting systems for approximately $792 million. The acquisition strengthens the Companys product portfolio by adding highly attractive and complementary railway signaling technologies. Frauscher reports within the Digital Intelligence product line of the Freight S …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

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 t …

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"LONG-TERM DEBT Long-term debt consisted of the following: Effective Interest Rate Face Value June 30, 2026 December 31, 2025 In millions Book Value Fair Value 1 Book Value Fair Value 1 2025 Credit Agreement: Revolving Credit Facility 4.4 % N/A $ 638 $ 638 $ $ Term Loan Facility, due 2030 4.9 % $ 725 721 725 721 725 2025 Term Credit Agreement: Term Loan, due 2026 4.8 % $ 500 500 500 500 500 Senior Notes: 3.45% Senior Notes, due 2026 3.5 % $ 750 750 748 750 746 1.25% Senior Notes (EUR), due 2027 1.5 % 500 568 555 583 575 4.70% Senior Notes, due 2028 4.8 % $ 1,250 1,248 1,252 1,247 1,266 4.90% Senior Notes, due 2030 5.1 % $ 500 496 505 496 512 5.611% Senior Notes, due 2034 5.7 % $ 500 496 516 496 526 5.50% Senior Notes, due 2035 5.6 % $ 750 743 769 743 783 Revolving Receivables Program 4.5 % N/A 400 400 Other Borrowings 11 11 5 5 Total 6,571 6,619 5,541 5,638 Less: current portion (1,656) (1,654) (1,250) (1,246) Long-term portion $ 4,915 $ 4,965 $ 4,291 $ 4,392 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 as well as foreign exchange on the Euro Notes and euro denominated borrowings under the Revolving Credit Facility. The Company has debt issuance costs related to certain financing transactions which are also amortized through interest expense. As of June 30, 2026 and December 31, 2025, the Company had total combined unamort …

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"STOCK-BASED COMPENSATION 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, and as of June 30, 2026, the number of shares available for future grants under the 2011 Plan was approximately 3.3 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 $32 million and $62 million for the three and six months ended June 30, 2026, respectively, and $24 million and $44 million for the three and six months ended June 30, 2025, respectively. At June 30, 2026, unamortized compensation expense related to stock options, non-vested restricted shares and incentive stock units expected to vest was approximately $152 million. Stock Options Stock options can be granted to eligible employees and directors at an exercise price equal to fair market value, which is the average of the high and low Wabtec stock price on the date of grant. Options become exercisable over a three-year vesting period and expire 10 years from the date of grant. There were no stock options granted in the periods presented. At June 30, 2026, there were 82,616 shares issuable pursuant to exercisable stock options. Rest …

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GOODWILL AND INTANGIBLE ASSETS The change in the carrying amount of goodwill by segment is as follows: In millions Freight Segment Transit Segment Total Balance at December 31, 2025 $ 8,567 $ 1,649 $ 10,216 Additions/adjustments 8 475 483 Foreign currency impact (23) (73) (96) Balance at June 30, 2026 $ 8,552 $ 2,051 $ 10,603 As of June 30, 2026 and December 31, 2025, the Companys trade names had a net carrying amount of $897 million and $851 million, respectively. The Company believes these intangibles have indefinite lives. Intangible assets of the Company, other than goodwill and trade names, consist of the following: June 30, 2026 December 31, 2025 In millions Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Backlog $ 1,367 $ (665) $ 702 $ 1,311 $ (613) $ 698 Customer relationships 2,263 (592) 1,671 2,000 (550) 1,450 Acquired technology 1,664 (812) 852 1,570 (731) 839 Total $ 5,294 $ (2,069) $ 3,225 $ 4,881 $ (1,894) $ 2,987 At June 30, 2026, the weighted average remaining useful lives of backlog, customer relationships and acquired technology were 7 years, 17 years and 7 years, respectively. The backlog intangible asset primarily consists of in-place long-term agreements acquired by the Company in conjunction with past acquisitions. Amortization expense for intangible assets was $91 million and $178 million for the three and six months ended June 30, 2026, respectively, and $69 million a …

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INCOME TAXES The following table presents the overall effective tax rate for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Overall Effective Tax Rate 23.4 % 24.8% 23.1% 24.0% The year over year decrease in the effective rate for the three months ended June 30, 2026 was primarily driven by prior period audit settlements. The year over year decrease in the effective tax rate for the six months ended June 30, 2026 was primarily driven by prior period audit settlements and higher discrete equity compensation tax deductions.

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"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 right-of-use assets are classified as noncurrent and included within the caption ""Other noncurrent assets"" on the 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 Condensed Consolidated Balance Sheets. The Company does not 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. Operating lease expense was $20 million and $41 million for the three and six months ended June 30, 2026, respectively, and $17 million and $33 million for the three and six months ended June 30, 2025, respectively. New operating leases of $4 million and $10 million were added during the three and six months ended June 30, 2026, respectively, and $27 million and $35 million for the three and six months ended June 30, 2025, respectively. …

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"Accounting Standards Recently Issued In November 2024, the Financial Accounting Standards Board (""FASB"") issued Accounting Standards Update (""ASU"") 2024-03, Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . The amendments in this update require entities to disclose disaggregated information about certain costs and expenses in commonly presented income statement expense captions. The amendments will require increased interim and annual footnote disclosures either prospectively or retrospectively for reporting periods presented in interim and annual company filings. The amendments in this update do not affect the recognition, measurement, or financial statement presentation of income statement expenses and will be effective for Wabtec's annual reporting periods beginning January 1, 2027 and interim reporting periods beginning January 1, 2028. The Company is assessing the extent of the impact of the amendments on its future filings."

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RESTRUCTURING Wabtec is focused on driving operational efficiency and improving profitability while reducing manufacturing complexity. As a result, there are key strategic initiatives aimed at achieving these focus areas. Integration 3.0 Integration 3.0 is a multi-year strategic initiative to further consolidate our footprint, reduce complexity and streamline manufacturing, engineering, administrative, and commercial activities. The Company anticipates that it will incur one-time restructuring charges related to Integration 3.0 of approximately $80 million to $100 million. Net charges to date of $43 million were primarily for employee-related costs. A summary of restructuring charges related to the Integration 3.0 initiative is as follows: Three Months Ended June 30, Six Months Ended June 30, In millions 2026 2025 2026 2025 Freight Segment: Cost of goods sold $ $ 1 $ 1 $ 2 Selling, general and administrative expenses 1 1 1 Total Freight Segment $ $ 2 $ 2 $ 3 Transit Segment: Cost of goods sold $ 2 $ 1 $ 3 $ 3 Selling, general and administrative expenses 1 1 5 Total Transit Segment $ 2 $ 2 $ 4 $ 8 Corporate: Selling, general and administrative expenses $ 2 $ $ 1 $ Total Integration 3.0 restructuring charges, net $ 4 $ 4 $ 7 $ 11 Portfolio Optimization Wabtec is focused on exiting various low margin product offerings through Portfolio Optimization to improve profitability while reducing manufacturing complexity. There were no material charges or cash payments during the three a …

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"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 Condensed Consolidated Balance Sheets. Noncurrent contract assets were $138 million at June 30, 2026 and $121 million at December 31, 2025. 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 Condensed Consolidated Balance Sheets. Noncurrent contract liabilities were $342 million at June 30, 2026 and $259 million at December 31, 2025. These contract liabilities are not considered a significant financ …

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"SEGMENT INFORMATION The Company has two reportable segmentsthe Freight Segment and the Transit Segment. The key factors used to identify these reportable segments are the organization and alignment of the Companys internal operations, the nature of the products and services and customer type. The Company's business segments are: Freight Segment builds, 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. It also manufactures and services components for new and existing freight cars and locomotives, supplies railway electronics, positive train control equipment, signal design and engineering services, maintenance of way, and provides heat exchange and cooling 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, and also serves companies in the mining, marine, and industrial markets and applications. 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 and train connection systems for new and existing passenger transit vehicles, typically regional trains, high spe …

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"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 Managements 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 macroeconomic environment caused by supply chain disruptions, labor availability, broad-based inflation, tariffs and trade negotiations, and the impacts from regional conflicts and war. 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, the …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing