Westinghouse Air Brake Technologies(WAB) - 2025 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS This section presents Westinghouse Air Brake Technologies Corporation's unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, cash flow statements, and shareholders' equity statements, along with detailed notes explaining accounting policies, acquisitions, debt, and other financial components for the periods ended September 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets show the company's financial position as of September 30, 2025, and December 31, 2024, reflecting an increase in total assets and liabilities, primarily driven by acquisitions and debt financing Balance Sheet Highlights (in millions) | Metric | Sep 30, 2025 | Dec 31, 2024 | | :-------------------------------- | :----------- | :----------- | | Total Assets | $21,527 | $18,702 | | Total Liabilities | $10,432 | $8,569 | | Total Equity | $11,095 | $10,133 | - Goodwill increased to $9,853 million from $8,710 million, and Other intangible assets, net increased to $3,546 million from $2,934 million, largely due to acquisitions[9] - Long-term debt increased to $5,034 million from $3,480 million, reflecting increased borrowings[9] Condensed Consolidated Statements of Income The Condensed Consolidated Statements of Income show growth in net sales and net income for both the three and nine months ended September 30, 2025, compared to the prior year, indicating improved operational performance Consolidated Income Statement Highlights (Three Months Ended September 30, in millions, except per share data) | Metric | 2025 | 2024 | Change (%) | | :------------------------------------- | :--- | :--- | :--------- | | Total Net Sales | $2,886 | $2,663 | 8.4% | | Gross Profit | $1,002 | $880 | 13.9% | | Income from Operations | $491 | $433 | 13.4% | | Net Income Attributable to Wabtec Shareholders | $310 | $283 | 9.5% | | Diluted EPS | $1.81 | $1.63 | 11.0% | Consolidated Income Statement Highlights (Nine Months Ended September 30, in millions, except per share data) | Metric | 2025 | 2024 | Change (%) | | :------------------------------------- | :--- | :--- | :--------- | | Total Net Sales | $8,202 | $7,804 | 5.1% | | Gross Profit | $2,840 | $2,569 | 10.5% | | Income from Operations | $1,437 | $1,275 | 12.7% | | Net Income Attributable to Wabtec Shareholders | $968 | $844 | 14.7% | | Diluted EPS | $5.64 | $4.80 | 17.5% | Condensed Consolidated Statements of Comprehensive Income The Condensed Consolidated Statements of Comprehensive Income show the total comprehensive income, including net income and other comprehensive income (loss) components such as foreign currency translation and changes in pension plans, for the three and nine months ended September 30, 2025, and 2024 Comprehensive Income Highlights (Three Months Ended September 30, in millions) | Metric | 2025 | 2024 | | :------------------------------------------ | :--- | :--- | | Net income attributable to Wabtec shareholders | $310 | $283 | | Other comprehensive (loss) income, net of tax | $(43) | $113 | | Comprehensive income attributable to Wabtec shareholders | $267 | $396 | Comprehensive Income Highlights (Nine Months Ended September 30, in millions) | Metric | 2025 | 2024 | | :------------------------------------------ | :--- | :--- | | Net income attributable to Wabtec shareholders | $968 | $844 | | Other comprehensive income (loss), net of tax | $242 | $(17) | | Comprehensive income attributable to Wabtec shareholders | $1,210 | $827 | Condensed Consolidated Statements of Cash Flows The Condensed Consolidated Statements of Cash Flows indicate a significant increase in cash used for investing activities in the first nine months of 2025, primarily due to acquisitions, while financing activities shifted from a net use to a net provision of cash Cash Flow Highlights (Nine Months Ended September 30, in millions) | Activity | 2025 | 2024 | | :-------------------------------------- | :--- | :--- | | Net cash provided by operating activities | $767 | $1,111 | | Net cash used for investing activities | $(1,887) | $(106) | | Net cash provided by (used for) financing activities | $907 | $(1,209) | | Decrease in cash | $(187) | $(210) | - Acquisitions of businesses, net of cash acquired, significantly increased cash used for investing activities to $(1,755) million in 2025 from $(13) million in 2024[170] - Net cash provided by financing activities shifted from a use of $(1,209) million in 2024 to a provision of $907 million in 2025, primarily due to increased debt proceeds[171] Condensed Consolidated Statements of Shareholders' Equity The Condensed Consolidated Statements of Shareholders' Equity illustrate changes over the nine months ended September 30, 2025, and 2024, reflecting impacts from net income, cash dividends, stock-based compensation, and a significant treasury stock retirement in Q1 2025 - Total Westinghouse Air Brake Technologies Corporation shareholders' equity increased to $11,048 million at September 30, 2025, from $10,091 million at December 31, 2024[9] - Treasury stock, at cost, decreased significantly from $(3,273) million at December 31, 2024, to $(115) million at September 30, 2025, primarily due to the retirement of 55 million shares of treasury stock in the first quarter of 2025[9][46] - Retained earnings decreased from $6,185 million at December 31, 2024, to $3,719 million at September 30, 2025, largely due to the treasury stock retirement[9][46] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering critical accounting policies, significant transactions like acquisitions and debt issuances, and other financial information essential for a comprehensive understanding of the company's financial position and performance 1. BUSINESS Wabtec is a global provider of technology-based locomotives, equipment, systems, and services for the freight rail, passenger transit, mining, marine, and industrial markets, with approximately half of its net sales derived from international customers - Wabtec operates globally in over 50 countries, with products found in more than 100 countries[22] - Approximately half of the Company's Net sales in the first nine months of 2025 came from customers outside the United States[22] 2. ACCOUNTING POLICIES This section outlines the basis of presentation for the unaudited condensed consolidated interim financial statements, key accounting estimates, revenue recognition policies, and recent accounting standard updates, emphasizing the impact of macroeconomic volatility on interim results - The financial statements are prepared in accordance with GAAP and SEC rules, reflecting normal, recurring adjustments, but interim results are not necessarily indicative of full-year results due to macroeconomic volatility[23][24] - Remaining performance obligations were approximately $25.6 billion as of September 30, 2025, with about 32% expected to be recognized over the next 12 months[31] - Effective January 1, 2025, the Revolving Receivables Program changed from selling receivables to requesting borrowings against collateralized receivables, increasing availability from $350 million to $450 million in Q3 2025[32] - New accounting standards issued include ASU 2024-03 (Disaggregation of Income Statement Expenses, effective Jan 1, 2027) and ASU 2025-06 (Internal-Use Software, effective Jan 1, 2028)[40][41] 3. ACQUISITIONS Wabtec completed the acquisition of Evident's Inspection Technologies division for approximately $1.788 billion on July 1, 2025, and announced definitive agreements to acquire Frauscher Sensor Technology Group and Dellner Couplers, expanding its capabilities and market presence in critical railway technologies - On July 1, 2025, Wabtec acquired Evident's Inspection Technologies division for approximately $1.788 billion, enhancing its Digital Intelligence product line within the Freight Segment[48] - Wabtec announced definitive agreements to acquire Frauscher Sensor Technology Group GmbH for approximately €675 million and Dellner Couplers for approximately €890 million, both subject to customary closing conditions and regulatory approvals[51][52] - Transaction costs related to completed and announced acquisitions were approximately $9 million for the three months and $44 million for the nine months ended September 30, 2025[53] 4. INVENTORIES The company's total inventories, net, increased to $2,747 million at September 30, 2025, from $2,314 million at December 31, 2024, with increases across raw materials, work-in-progress, and finished goods Inventory Components (in millions) | Component | Sep 30, 2025 | Dec 31, 2024 | | :---------------- | :----------- | :----------- | | Raw materials | $1,128 | $977 | | Work-in-progress | $826 | $587 | | Finished goods | $793 | $750 | | Total inventories | $2,747 | $2,314 | 5. GOODWILL AND INTANGIBLE ASSETS Goodwill and other intangible assets increased significantly due to acquisitions, with estimated amortization expense for definite-lived intangibles detailed for current and future periods - Goodwill increased to $9,853 million at September 30, 2025, from $8,710 million at December 31, 2024, with additions/adjustments of $949 million primarily from acquisitions[56] - Other intangible assets (net carrying amount) increased to $2,758 million at September 30, 2025, from $2,339 million at December 31, 2024[57] Amortization Expense for Intangible Assets (in millions) | Period | Amortization Expense | | :------------------------------------ | :------------------- | | Three months ended Sep 30, 2025 | $77 | | Nine months ended Sep 30, 2025 | $219 | | Estimated remainder of 2025 | $79 | | Estimated 2026 | $310 | 6. CONTRACT ASSETS AND CONTRACT LIABILITIES Contract assets and liabilities, representing unbilled revenue and customer deposits/advances, both increased for the nine months ended September 30, 2025, reflecting ongoing long-term contract activities Changes in Contract Assets and Liabilities (Nine Months Ended September 30, in millions) | Metric | 2025 | 2024 | | :-------------------------------- | :--- | :--- | | Contract Assets (Balance at Sep 30) | $727 | $726 | | Contract Liabilities (Balance at Sep 30) | $1,213 | $975 | - Noncurrent contract liabilities decreased to $187 million at September 30, 2025, from $389 million at December 31, 2024[60] 7. LEASES Operating lease expense for the nine months ended September 30, 2025, was $52 million, with new operating leases totaling $117 million added during the period. The present value of lease liabilities is $388 million Operating Lease Expenses (in millions) | Period | Operating Lease Expense | | :------------------------------------ | :---------------------- | | Three months ended Sep 30, 2025 | $19 | | Nine months ended Sep 30, 2025 | $52 | - New operating leases of $117 million were added during the nine months ended September 30, 2025, a significant increase from $40 million in the prior year[64] - The present value of lease liabilities is $388 million, with a weighted-average remaining lease term of 8.8 years and a weighted-average discount rate of 3.5% as of September 30, 2025[65] 8. LONG-TERM DEBT The company's long-term debt increased to $5,285 million at September 30, 2025, driven by a new $2.0 billion Revolving Credit Facility, a $725 million Term Loan Facility, and the issuance of $1.25 billion in new Senior Notes, primarily to fund acquisitions and refinance existing debt. The company remains in compliance with all financial covenants Long-Term Debt (Book Value, in millions) | Date | Total Long-Term Debt | | :----------------- | :------------------- | | Sep 30, 2025 | $5,285 | | Dec 31, 2024 | $3,980 | - On April 23, 2025, the company entered into a new 2025 Credit Agreement, providing a $2.0 billion Revolving Credit Facility and a $725 million Term Loan Facility, which refinanced previous agreements[70] - In May 2025, the company issued $500 million of 4.90% Senior Notes due 2030 and $750 million of 5.50% Senior Notes due 2035, with proceeds used for the Inspection Technologies acquisition and repayment of 2025 Notes[77][78] - The company was in compliance with all financial covenants in the 2025 Credit Agreement as of September 30, 2025[74] 9. STOCK-BASED COMPENSATION Stock-based compensation expense for the nine months ended September 30, 2025, was $68 million, with approximately $105 million in unamortized expense remaining. The company estimates high vesting percentages for incentive stock awards for the next three years Stock-Based Compensation Expense (in millions) | Period | Expense | | :------------------------------------ | :------ | | Three months ended Sep 30, 2025 | $24 | | Nine months ended Sep 30, 2025 | $68 | - As of September 30, 2025, unamortized compensation expense related to stock options, non-vested restricted shares, and incentive stock units was approximately $105 million[83] - The company estimates achieving 188%, 200%, and 139% for incentive stock awards expected to vest for the three-year periods ending December 31, 2025, 2026, and 2027, respectively[86] 10. INCOME TAXES The effective income tax rate increased for both the three and nine months ended September 30, 2025, primarily due to prior year audit closures, jurisdictional mix of earnings, and non-deductible transaction-related expenses. The company is evaluating new tax legislation but does not expect a material impact Overall Effective Tax Rate | Period | 2025 | 2024 | | :----------------------- | :--- | :--- | | Three months ended Sep 30 | 26.4% | 24.2% | | Nine months ended Sep 30 | 24.8% | 24.1% | - The year-over-year increase in the effective tax rate was primarily driven by audit closures in Q3 2024, the jurisdictional mix of earnings, and non-deductible transaction-related expenses in 2025[88][161] - The company is evaluating the impacts of the One Big Beautiful Bill Act (OBBBA) signed July 4, 2025, but does not expect a material impact on its consolidated financial statements[89] 11. EARNINGS PER SHARE Basic and diluted earnings per share increased for both the three and nine months ended September 30, 2025, with non-vested restricted stock treated as participating securities in the calculation Earnings Per Common Share Attributable to Wabtec Shareholders | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :----- | :------ | :------ | :------ | :------ | | Basic | $1.81 | $1.63 | $5.66 | $4.81 | | Diluted | $1.81 | $1.63 | $5.64 | $4.80 | - Non-vested restricted stock, which contains rights to receive non-forfeitable dividends, is treated as participating securities, allocating approximately 0.3% of Net income attributable to Wabtec shareholders[91] 12. WARRANTIES The company's product warranty reserve increased to $286 million at September 30, 2025, from $274 million at the beginning of the year, with warranty expense and claim payments for the nine-month period being $83 million and $82 million, respectively Product Warranty Reserve Reconciliation (Nine Months Ended September 30, in millions) | Metric | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Balance at beginning of year | $274 | $248 | | Warranty expense | $83 | $84 | | Warranty claim payments | $(82) | $(63) | | Balance at September 30 | $286 | $271 | 13. FAIR VALUE MEASUREMENT AND DERIVATIVE INSTRUMENTS The company uses derivative instruments, including foreign currency and interest rate hedges, to manage market risks, with foreign exchange contracts related to anticipated acquisitions resulting in a net gain of $30 million for the nine months ended September 30, 2025 - The company uses derivatives (cross-currency swaps, foreign currency forward contracts, interest rate swaps, commodity swaps) for hedging purposes, not speculation, to manage market risks[96] - Foreign exchange contracts related to the announced acquisitions of Dellner Couplers and Frauscher resulted in a net loss of $(2) million for Q3 2025 and a net gain of $30 million for the nine months ended September 30, 2025[100][118] Fair Value of Derivative Instruments (Sep 30, 2025, in millions) | Type | Fair Value (Net) | | :----------------------- | :--------------- | | Foreign Exchange Contracts | $31 | | Interest Rate Contracts | $0 | 14. COMMITMENTS AND CONTINGENCIES The company is involved in various legal proceedings, including an antitrust lawsuit by Progress Rail (where antitrust claims were dismissed) and a $58 million breach of contract claim by Denver Transit Constructors against its subsidiary Xorail. Management believes asbestos-related costs will not be material - The U.S. District Court dismissed antitrust claims against Wabtec by Progress Rail on June 12, 2025, but other claims (breach of contract, unfair competition, defamation, false advertising) remain[106] - Xorail, a wholly-owned subsidiary, faces a $58 million claim from Denver Transit Constructors for alleged breach of contract related to a wireless crossing system, which Xorail denies[107] - Management believes that the costs of the company's asbestos-related cases will not be material to its overall financial position, results of operations, and cash flows[105] 15. SEGMENT INFORMATION Wabtec operates in two reportable segments: Freight and Transit. Both segments showed increased sales and gross profit for the three and nine months ended September 30, 2025, driven by acquisitions and organic growth, with improved gross margins due to productivity and cost management Freight Segment Performance (Q3 2025 vs Q3 2024, in millions) | Metric | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Sales to external customers | $2,093 | $1,930 | 8.4% | | Gross profit | $750 | $673 | 11.4% | | Income from operations | $414 | $390 | 6.2% | Transit Segment Performance (Q3 2025 vs Q3 2024, in millions) | Metric | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Sales to external customers | $793 | $733 | 8.2% | | Gross profit | $252 | $207 | 21.7% | | Income from operations | $115 | $79 | 45.6% | Freight Segment Performance (9M 2025 vs 9M 2024, in millions) | Metric | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Sales to external customers | $5,913 | $5,674 | 4.2% | | Gross profit | $2,132 | $1,967 | 8.4% | | Income from operations | $1,249 | $1,149 | 8.7% | Transit Segment Performance (9M 2025 vs 9M 2024, in millions) | Metric | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Sales to external customers | $2,289 | $2,130 | 7.5% | | Gross profit | $708 | $602 | 17.6% | | Income from operations | $314 | $235 | 33.6% | 16. OTHER (EXPENSE) INCOME, NET Other (expense) income, net, showed a net gain of $21 million for the nine months ended September 30, 2025, primarily driven by a $30 million net gain on mark-to-market derivatives related to anticipated acquisitions, partially offset by foreign currency losses Other (Expense) Income, Net (in millions) | Period | 2025 | 2024 | | :------------------------------------ | :--- | :--- | | Three months ended Sep 30 | $(1) | $(3) | | Nine months ended Sep 30 | $21 | $(1) | - The nine-month gain was primarily due to a $30 million net gain on mark-to-market derivatives associated with the anticipated acquisitions of Dellner Couplers and Frauscher[118][160] 17. RESTRUCTURING Wabtec is pursuing multi-year restructuring initiatives, including Integration 3.0, Portfolio Optimization, and Integration 2.0, to enhance operational efficiency and profitability. These initiatives have incurred significant charges to date, primarily for employee-related costs and asset write-downs - Integration 3.0 is a multi-year strategic initiative with anticipated one-time restructuring charges of $80 million to $100 million, with approximately $24 million recorded to date[120] - Portfolio Optimization, aimed at exiting low-margin product offerings, resulted in net charges of approximately $3 million during the nine months ended September 30, 2025[122] - Integration 2.0 has incurred approximately $147 million of its anticipated $170 million in one-time restructuring charges to date[123] Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides an in-depth analysis of Wabtec's financial condition and operational results, covering recent business updates, detailed performance comparisons for consolidated and segment-specific results, liquidity, capital resources, and critical accounting estimates. It highlights strategic acquisitions, significant new orders, and ongoing restructuring efforts amidst macroeconomic challenges OVERVIEW Wabtec's overview highlights its global leadership in rail and transit technologies, recent strategic acquisitions (Inspection Technologies, Frauscher, Dellner Couplers), and record-breaking orders (e.g., $4.2 billion with KTZ). The company is focused on operational efficiency through restructuring initiatives, while actively mitigating macroeconomic challenges like inflation and supply chain disruptions - Wabtec completed the acquisition of Evident's Inspection Technologies division for $1.788 billion on July 1, 2025, enhancing its Digital Intelligence portfolio[127] - Announced definitive agreements to acquire Frauscher Sensor Technology Group (€675 million) and Dellner Couplers (€890 million) to strengthen railway signaling and train connection systems[128] - Secured a $4.2 billion locomotive agreement with National Company Kazakhstan Temir Zholy (KTZ), marking the largest locomotive agreement in Wabtec's history, alongside other significant orders in Freight and Transit segments[130][131] - Ongoing restructuring initiatives (Integration 3.0, Portfolio Optimization, Integration 2.0) incurred $21 million in costs during the first nine months of 2025, aimed at operational efficiency and profitability[132] - The company is implementing mitigation actions, such as price escalations, cost management, and strategic sourcing, to lessen the impact of macroeconomic volatility, including inflation and supply chain disruptions[133][134] RESULTS OF OPERATIONS This section provides a detailed analysis of the company's consolidated and segment-specific financial performance for the three and nine months ended September 30, 2025, compared to the same periods in 2024, highlighting key drivers of revenue and profit changes Consolidated Results (Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024) Consolidated net sales increased by 8.4% to $2.89 billion in Q3 2025, driven by acquisitions and organic growth in both Freight and Transit segments. Gross profit improved by 13.9% due to strong productivity and cost management, despite increased operating expenses from acquisitions and higher sales volume Consolidated Financial Performance (Q3 2025 vs Q3 2024, in millions) | Metric | 2025 | 2024 | Change (%) | | :------------------------------------- | :--- | :--- | :--------- | | Total Net Sales | $2,886 | $2,663 | 8.4% | | Gross Profit | $1,002 | $880 | 13.9% | | Income from Operations | $491 | $433 | 13.4% | - Net sales increased by $223 million (8.4%), with acquisitions contributing $134 million (primarily from Inspection Technologies) and organic sales increasing by $79 million[138][139] - Gross margin improved from 67.0% to 65.3% of Net sales, attributable to strong productivity, cost management, and restructuring savings, partially offset by unfavorable mix within the Freight Segment[140] Freight Segment (Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024) The Freight Segment's net sales increased by 8.4% to $2.09 billion in Q3 2025, driven by acquisitions and higher North American locomotive deliveries, partially offset by decreased Services and Digital Intelligence sales. Gross margin improved due to productivity and Portfolio Optimization, despite increased operating expenses Freight Segment Performance (Q3 2025 vs Q3 2024, in millions) | Metric | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Total Net Sales | $2,093 | $1,930 | 8.4% | | Gross profit | $750 | $673 | 11.4% | | Income from operations | $414 | $390 | 6.2% | - Acquisitions contributed $128 million to Freight Segment sales, while organic sales increased by $41 million, primarily from higher North American locomotive deliveries in Equipment sales[146] - Gross margin improved, with Cost of sales as a percentage of Net sales decreasing by 0.8 percentage points to 64.2%, driven by strong productivity and the exit of low-margin business offerings[145][147] Transit Segment (Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024) The Transit Segment's net sales increased by 8.2% to $793 million in Q3 2025, driven by strong organic growth in Aftermarket and Original Equipment Manufacturing sales due to increased demand and investments. Gross margin significantly improved by 3.5 percentage points, reflecting increased productivity and benefits from restructuring initiatives Transit Segment Performance (Q3 2025 vs Q3 2024, in millions) | Metric | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Total Net Sales | $793 | $733 | 8.2% | | Gross profit | $252 | $207 | 21.7% | | Income from operations | $115 | $79 | 45.6% | - Organic sales increased by $38 million, driven by strong Aftermarket and Original Equipment Manufacturing sales due to fleet expansion, renewals, and increased passenger ridership[151] - Gross margin improved, with Cost of sales as a percentage of Net sales decreasing by 3.5 percentage points to 68.3%, attributable to increased productivity and benefits from Integration 2.0 and 3.0[150][152] Consolidated Results (Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024) Consolidated net sales for the first nine months of 2025 increased by 5.1% to $8.20 billion, driven by organic growth in both segments and acquisitions. Gross profit rose by 10.5% due to improved productivity and restructuring savings, while operating expenses increased due to higher sales volume and acquisition-related costs Consolidated Financial Performance (9M 2025 vs 9M 2024, in millions) | Metric | 2025 | 2024 | Change (%) | | :------------------------------------- | :--- | :--- | :--------- | | Total Net Sales | $8,202 | $7,804 | 5.1% | | Gross Profit | $2,840 | $2,569 | 10.5% | | Income from Operations | $1,437 | $1,275 | 12.7% | - Net sales increased by $398 million (5.1%), with organic sales contributing $274 million and acquisitions adding $184 million (primarily Inspection Technologies)[155][156] - Gross margin improved from 67.1% to 65.4% of Net sales, attributable to strong productivity, cost management, and Integration 2.0 and 3.0 savings[157] Freight Segment (Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024) The Freight Segment's net sales for the first nine months of 2025 increased by 4.2% to $5.91 billion, driven by acquisitions and organic growth in Equipment and Services, partially offset by declines in Components and Digital Intelligence. Gross margin improved by 1.4 percentage points due to productivity and restructuring benefits Freight Segment Performance (9M 2025 vs 9M 2024, in millions) | Metric | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Total Net Sales | $5,913 | $5,674 | 4.2% | | Gross profit | $2,132 | $1,967 | 8.4% | | Income from operations | $1,249 | $1,149 | 8.7% | - Acquisitions contributed $161 million to Freight Segment sales, while organic sales increased by $148 million, primarily from higher North American locomotive deliveries and locomotive modernizations[163] - Gross margin improved, with Cost of sales as a percentage of Net sales decreasing by 1.4 percentage points to 63.9%, attributable to strong productivity, Portfolio Optimization, and Integration 2.0 and 3.0[162][164] Transit Segment (Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024) The Transit Segment's net sales for the first nine months of 2025 increased by 7.5% to $2.29 billion, primarily from strong organic growth in Original Equipment Manufacturing and Aftermarket sales. Gross margin improved by 2.7 percentage points due to increased productivity and benefits from restructuring initiatives Transit Segment Performance (9M 2025 vs 9M 2024, in millions) | Metric | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Sales to external customers | $2,289 | $2,130 | 7.5% | | Gross profit | $708 | $602 | 17.6% | | Income from operations | $314 | $235 | 33.6% | - Organic sales increased by $126 million, driven by strong Original Equipment Manufacturing and Aftermarket sales due to increased demand for products and services, fleet expansion, and sustainable infrastructure investments[167] - Gross margin improved, with Cost of sales as a percentage of Net sales decreasing by 2.7 percentage points to 69.1%, primarily attributable to increased productivity and benefits from Integration 2.0 and 3.0[166][168] Liquidity and Capital Resources Wabtec's liquidity is supported by operating cash flows, credit agreements, and Senior Notes. Cash provided by operating activities decreased in the first nine months of 2025, while cash used for investing activities significantly increased due to acquisitions. Financing activities shifted to a net cash provision, driven by new debt issuances and credit facilities Cash Flow Summary (Nine Months Ended September 30, in millions) | Activity | 2025 | 2024 | | :-------------------------------------- | :--- | :--- | | Cash provided by operating activities | $767 | $1,111 | | Cash used for investing activities | $(1,887) | $(106) | | Cash provided by (used for) financing activities | $907 | $(1,209) | - Cash used for investing activities significantly increased to $(1,887) million in 2025, primarily due to $(1,755) million for acquisitions, notably Inspection Technologies[170] - Cash provided by financing activities was $907 million in 2025, a shift from $(1,209) million used in 2024, driven by $1,235 million from net changes in debt, including new credit agreements and Senior Notes[171][172][173] - Total available liquidity increased to $2,750 million at September 30, 2025, from $2,556 million at December 31, 2024, including $500 million in cash and $2.0 billion from the Revolving Credit Facility[183] Guarantor Summarized Financial Information This section provides summarized financial information for Westinghouse Air Brake Technologies Corporation (Parent Company) and its U.S. Guarantor Subsidiaries, which fully and unconditionally guarantee the US Senior Notes, in accordance with SEC reporting requirements Summarized Statement of Income (Parent Company and Guarantor Subsidiaries, 9M 2025, in millions) | Metric | Amount | | :---------------------------------- | :----- | | Net sales | $4,663 | | Gross profit | $802 | | Net income attributable to Wabtec shareholders | $294 | Summarized Balance Sheet (Parent Company and Guarantor Subsidiaries, in millions) | Metric | Sep 30, 2025 | Dec 31, 2024 | | :-------------------- | :----------- | :----------- | | Current assets | $1,395 | $1,624 | | Noncurrent assets | $3,434 | $3,500 | | Current liabilities | $2,118 | $2,278 | | Long-term debt | $4,450 | $2,962 | | Other non-current liabilities | $571 | $738 | - The US Notes issued by the Parent Company are fully and unconditionally guaranteed by certain U.S. subsidiaries[188] Summarized Financial Information—Euro Notes This section presents summarized financial information for Wabtec Netherlands (issuer of Euro Notes) and the Parent Company (guarantor), eliminating intercompany transactions and non-guarantor subsidiaries, as required by SEC regulations Summarized Statement of Income (Issuer and Parent Company, 9M 2025, in millions) | Metric | Amount | | :---------------------------------- | :----- | | Net sales | $436 | | Gross profit | $103 | | Net loss attributable to Wabtec shareholders | $(223) | Summarized Balance Sheet (Issuer and Parent Company, in millions) | Metric | Sep 30, 2025 | Dec 31, 2024 | | :-------------------- | :----------- | :----------- | | Current assets | $282 | $546 | | Noncurrent assets | $659 | $646 | | Current liabilities | $689 | $1,014 | | Long-term debt | $5,033 | $3,479 | | Other non-current liabilities | $48 | $49 | - The Euro Notes issued by Wabtec Transportation Netherlands B.V. are fully and unconditionally guaranteed by the Parent Company[188][195] Contractual Obligations Recent refinancing activities, including the 2025 Credit Agreement and new Senior Notes, have significantly altered the company's long-term debt maturity profile, decreasing obligations in the near-to-medium term (2026-2029) and increasing them for 2030 and beyond - Contractual obligations for long-term debt decreased for 2026-2027 (from $1,520 million to $1,270 million) and 2028-2029 (from $1,475 million to $1,250 million)[202] - Contractual obligations for long-term debt increased for 2030 and beyond (from $500 million to $2,475 million) due to the 2025 Credit Agreement and new Senior Notes[202] Company Stock Repurchase Plan The Board of Directors authorized an additional $1.0 billion for the company's stock repurchase program in December 2024. As of September 30, 2025, approximately $852 million remained available under the plan, with no repurchases occurring during the third quarter - An additional $1.0 billion was authorized for the company's stock repurchase program on December 3, 2024[203] - As of September 30, 2025, approximately $852 million remained available under the stock repurchase plan[203][218] - No shares were purchased under the stock repurchase program during the three months ended September 30, 2025[218] Forward Looking Statements This section advises that the report contains forward-looking statements based on current expectations, which are subject to various risks and uncertainties across economic, operating, competitive, political, and natural hazard factors. The company undertakes no obligation to update these statements - Forward-looking statements are based on current expectations and projections and are subject to various risks and uncertainties[204][205] - Key risk categories include economic and industry conditions (e.g., tariffs, inflation, supply chain), operating factors (e.g., demand decline, raw material costs, acquisitions), competitive factors, political/governmental factors, and natural hazards/health crises[205][206][207][208] Critical Accounting Estimates The company refers to its Annual Report on Form 10-K for a summary of critical accounting estimates, noting that there have been no significant changes in related accounting policies since December 31, 2024 - Critical accounting estimates include accounts receivable, inventories, business combinations, goodwill and indefinite-lived intangible assets, warranty reserves, income taxes, and revenue recognition[209] - No significant changes in related accounting policies have occurred since December 31, 2024[209] Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section refers to the Annual Report on Form 10-K for detailed disclosures on market risk, stating that the company's exposure has not materially changed since December 31, 2024, and directs to Note 13 for additional information on interest rate and foreign currency exchange risk - No material changes in market risk factors have occurred since December 31, 2024[210] - Additional information regarding interest rate and foreign currency exchange risk is provided in Note 13 of the financial statements[210] Item 4. CONTROLS AND PROCEDURES Wabtec's principal executive and financial officers evaluated the effectiveness of disclosure controls and procedures as of September 30, 2025, concluding they are effective. No material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2025[211] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2025[212] PART II—OTHER INFORMATION Item 1. LEGAL PROCEEDINGS This section refers to Note 14 of the financial statements for additional information regarding the company's legal proceedings - Additional details on legal proceedings are available in Note 14 of the financial statements[215] Item 1A. RISK FACTORS The company states that there have been no material changes in its risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes in risk factors have occurred since the Annual Report on Form 10-K for December 31, 2024[216] Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section summarizes the company's stock repurchase activity for the three months ended September 30, 2025, indicating no repurchases during this period and approximately $852 million remaining under the authorized plan - No shares were purchased under the stock repurchase program during the three months ended September 30, 2025[218] - Approximately $852 million remained available under the stock repurchase plan as of September 30, 2025[218] Item 4. MINE SAFETY DISCLOSURES This item is not applicable to Westinghouse Air Brake Technologies Corporation - This item is not applicable[219] Item 5. OTHER INFORMATION No Wabtec Directors or Officers adopted, terminated, or materially modified any trading plans during the third quarter ended September 30, 2025 - No trading plan changes by Directors or Officers occurred during the third quarter ended September 30, 2025[219] Item 6. EXHIBITS This section lists the exhibits filed with the report, including various certifications, XBRL documents, and a list of subsidiary guarantors - Exhibits include Rule 13a-14(a) Certifications of Chief Executive Officer and Chief Financial Officer, Section 1350 Certification, XBRL Instance Document, and a List of Subsidiary Guarantors[220] Signatures The report was duly signed on behalf of Westinghouse Air Brake Technologies Corporation by John A. Olin, Executive Vice President and Chief Financial Officer, on October 22, 2025 - The report was signed by John A. Olin, Executive Vice President and Chief Financial Officer, on October 22, 2025[222]