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What changed in Wabtec's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Wabtec's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+259 added−300 removedSource: 10-K (2024-02-14) vs 10-K (2023-02-15)

Top changes in Wabtec's 2023 10-K

259 paragraphs added · 300 removed · 206 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

92 edited+12 added−33 removed61 unchanged
Biggest changeThe following is a summary of our leading products in both aftermarket and original equipment across both of our business segments: Equipment: • Diesel-electric, battery, and liquid natural gas powered locomotives for freight and transit • Engines, electric motors and premium propulsion systems used in locomotives, mining, marine, stationary power and drilling applications • Marine and mining products 4 Digital & Electronic Products: • Positive Train Control ("PTC") equipment and electronically controlled pneumatic braking products • Railway electronics, including event recorders, monitoring equipment and end of train devices • Signal design and engineering services • Train performance such as distributed locomotive power, train 'cruise control', and train remote control • Transport intelligence such as Industrial/mobile Internet of Things (IoT) hardware & software, edge-to-cloud, on and off-board analytics & rules, and asset performance management • Transport logistics such as rail transportation management, shipper transportation management, and port visibility and optimization • Network optimization such as rail network scheduling, dispatch and optimization, intermodal, terminal management and optimization, and rail yard management and optimization Components: • Freight car trucks and braking equipment and related components for Freight applications • Draft gears, couplers and slack adjusters • Air compressors and dryers • Heat exchangers and cooling products for locomotives and power generation equipment • Track and switch products • New commuter and switcher locomotives • Turbochargers for industrial and aftermarket vehicle applications Services: • Freight locomotive overhaul, modernizations and refurbishment • Master service agreements for locomotive and car maintenance • Transit locomotive and car overhaul • Unit exchange of locomotive components • Maintenance of way equipment and services Transit Products: • Railway and freight braking equipment and related components, including high-speed passenger transit vehicles • Friction products, including brake shoes, discs and pads • Heating, ventilation and air conditioning equipment • Access doors and platform screen doors • Pantographs and third rail collectors • Energy measuring systems • Auxiliary power converter and battery charging • Antifire systems • Passenger information systems and CCTV • Signaling and railway electric relays • Sanitation systems • Doors, window assemblies, accessibility lifts and ramps for buses • Electric charging solutions for buses and electric ferries We are a leader in the freight rail and passenger transit industries by capitalizing on the strength of our existing products, technological capabilities and new product innovations, and by our ability to harden products to protect them from severe 5 conditions, including extreme temperatures and high-vibration environments.
Biggest changeThe following is a summary of our primary products and services in both aftermarket and original equipment across both of our business segments: Equipment: • Diesel-electric, battery, and liquid natural gas powered locomotives for freight and transit • Engines, electric motors and premium propulsion systems used in locomotives, mining, marine, stationary power and drilling applications • Marine and mining products Digital Intelligence Products: • Positive Train Control ("PTC") equipment and electronically controlled pneumatic braking products • Railway electronics, including event recorders, monitoring equipment and end of train devices • Signal design and engineering services • Train performance such as distributed locomotive power, train 'cruise control', and train remote control • Transport intelligence such as Industrial/mobile Internet of Things (IoT) hardware & software, edge-to-cloud, on and off-board analytics & rules, and asset performance management • Transport logistics such as rail and shipper transportation management and port visibility and optimization • Network optimization such as rail network scheduling, dispatch and optimization, intermodal, terminal management and optimization, and rail yard management and optimization Components: • Freight car trucks and braking equipment and related components for Freight applications • Air compressors and dryers • Heat transfer components and systems for diesel and gas engine cooling, generator and transformer coolers and high temperature applications • Track and switch products • New commuter and switcher locomotives • Turbochargers for industrial and aftermarket vehicle applications Services: • Freight locomotive overhauls, modernizations and refurbishment • Master service agreements for locomotive and car maintenance • Transit locomotive and car overhaul • Unit exchange of locomotive components • Maintenance of way equipment and services Transit Products: • Railway and freight braking equipment and related components, including high-speed passenger transit vehicles • Friction products, including brake shoes, discs and pads • Heating, ventilation and air conditioning equipment • Access doors and platform screen doors • Pantographs 4 • Auxiliary power converter and battery charging • Passenger information systems and closed-circuit television • Signaling and railway electric relays • Doors, window assemblies, accessibility lifts, ramps and electric charging solutions for buses Wabtec is utilizing a flexible and growing portfolio of freight rail and passenger transit products and innovative technologies to support customers’ sustainability goals and targets.
Consistent with the 2020 UNIFE study, increased investment in infrastructure improvements, digitalization and automation is expected, all of which would improve efficiency in the global rail industry. Business Segments and Products We provide our products and services through two principal business segments, the Freight Segment and the Transit Segment, both of which have different market characteristics and business drivers.
Consistent with the UNIFE study, increased investment in infrastructure improvements, digitalization and automation is expected, all of which would improve efficiency in the global rail industry. Business Segments and Products We provide our products and services through two principal business segments, the Freight Segment and the Transit Segment, both of which have different market characteristics and business drivers.
On average, there are 100 participants in the LEAD program that rotate between business units every six months to 11 work on strategic projects and assignments, gain exposure to senior leadership and build their global professional network. We are focused on strengthening this program to support our global talent pipeline.
On average, there are 100 participants in the LEAD program that rotate between business units every six months to work on strategic projects and assignments, gain exposure to senior leadership and build their global professional network. We are focused on strengthening this program to support our global talent pipeline.
Through these initiatives, our digital solutions have helped to transform many distribution channels in the transportation industry including mine to ports, from shipper to receiver, from port to intermodal terminals to main 6 line locomotives and railcars and across train yards and operation centers.
Through these initiatives, our digital solutions have helped to transform many distribution channels in the transportation industry including mine to ports, from shipper to receiver, from port to intermodal terminals to main line locomotives and railcars and across train yards and operation centers.
Sales of aftermarket parts and services typically represent approximately 60% of total net sales. As a long time supplier of original equipment, we have an extensive installed base of equipment in operation and growing this installed base further will expand our recurring aftermarket sales.
Sales of aftermarket parts and services represent approximately 60% of total net sales. As a long-time supplier of original equipment, we have an extensive installed base of equipment in operation and growing this installed base further will expand our recurring aftermarket sales.
Focus areas include: • Clean transportation • Eco-efficient and/or circular economy adapted products, production technologies and processes • Renewable energy 10 • Pollution prevention and control • Energy efficiency During 2022, Wabtec issued the 2022 Green Bond Report.
Focus areas include: • Clean transportation • Eco-efficient and/or circular economy adapted products, production technologies and processes • Renewable energy • Pollution prevention and control • Energy efficiency During 2022, Wabtec issued the 2022 Green Bond Report.
Available free of charge on this site are: our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as the annual report to stockholders, our Green Bond Report (www.wabteccorp.com/investor-relations/green-finance-framework), our Sustainability Report (www.wabteccorp.com/sustainability), and other information.
Available free of charge on this site are: our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as the annual report to stockholders, our Green Bond Report (https://ir.wabteccorp.com/investor-relations/green-finance-framework), our Sustainability Report (www.wabteccorp.com/sustainability), and other information.
Each site is responsible for developing a risk reduction plan to drive site or project-level actions related to risk reduction, employee engagement, and continuous EHS improvement. Monthly EHS operating reviews with the Executive Vice President for Global Operations are used to review operational risks at the enterprise-level, develop strategic initiatives, and communicate key performance indicators to senior management.
Monthly EHS operating reviews with the Executive Vice President for Global Operations are used to review operational risks at the enterprise-level, develop strategic initiatives, and communicate key performance indicators to senior management. Each site is responsible for developing a risk reduction plan to drive site or project-level actions related to risk reduction, compliance assurance, employee engagement, and continuous EHS improvement.
As global demands for growth increase, current trends indicate that freight and passenger rail activity will more than double by 2050, leading to an increased demand for sustainable transportation of people and goods. These converging forces highlight the critical interplay between market dynamics, the need for decarbonization and Wabtec’s business strategy.
As global demands for growth increase, current trends suggest that freight and passenger rail activity will more than double by 2050, leading to an increased demand for sustainable transportation of people and goods. These converging forces highlight the critical interplay between market dynamics, the need for decarbonization and Wabtec’s business strategy.
We are focused on continuous improvement to drive cost competitiveness, effectively deploy capital and accelerate Lean. Lean is a set of principles that emphasize customer focus, elimination of waste, high quality growth and ruthless prioritization of work to improve safety, quality, delivery and cost. Lean is being embedded in our culture and is fundamental to how we execute our strategy.
We are focused on continuous improvement to drive cost competitiveness, effectively deploy capital and accelerate Lean. Lean is a set of principles that emphasize customer focus, elimination of waste, high quality growth and relentless prioritization of work to improve safety, quality, delivery and cost. Lean is being embedded in our culture and is fundamental to how we execute our strategy.
Our substantial installed base of products with end-users such as the railroads and the passenger transit authorities is a significant competitive advantage for providing products and services to the aftermarket because these customers often look to purchase safety- and performance-related replacement parts from the original equipment components supplier.
Our substantial installed base of products with end-users, such as the railroads and the passenger transit authorities, is a significant competitive advantage for providing products and services to the aftermarket because these customers often look to purchase safety- and performance-related replacement parts and technology upgrades from the original equipment components supplier.
Prior to 2006, Ms. Theophilus was a partner with the law firm Husch Blackwell. Eric Gebhardt was named Executive Vice President and Chief Technology Officer in October 2020. Prior to joining Wabtec, Mr. Gebhardt served as Managing Director of KCK-US from May 2019 through September 2020.
Prior to 2006, Ms. Theophilus was a partner with the law firm Husch Blackwell. Eric Gebhardt was named Executive Vice President and Chief Technology Officer in October 2020. Prior to joining Wabtec, Mr. Gebhardt served as Managing Director of KCK-US, a Deleware corporation, from May 2019 through September 2020.
Gina Trombley was named Executive Vice President, Sales & Marketing & Chief Commercial Officer - Americas, effective September 8, 2020. Prior to joining Wabtec, Ms. Trombley served in various executive roles at Bombardier Transportation from 2017 to 2019, most recently as Vice President of Services and previously as Vice President Sales for Bombardier Transport - Americas. Ms.
Gina Trombley was named Executive Vice President, Sales & Marketing & Chief Commercial Officer - Americas, effective September 8, 2020. Prior to joining Wabtec, Ms. Trombley served in various executive roles at Bombardier Transportation from 2017 to August 2020, most recently as Vice President of Services and previously as Vice President Sales for Bombardier Transport - Americas. Ms.
The Freight Segment primarily manufactures new locomotives; provides aftermarket parts and services to existing locomotives; provides components to new and existing freight cars; builds new commuter locomotives; supplies rail control and infrastructure products including electronics, positive train control equipment, signal design and engineering services; provides a comprehensive suite of software-enabled solutions designed to improve customer efficiency and productivity in the transportation and mining industries; overhauls locomotives; and provides heat exchangers and cooling systems for rail and other industrial markets.
The Freight Segment primarily manufactures new and modernized locomotives; provides aftermarket parts and services to existing locomotives; provides components to new and existing freight cars; builds new commuter locomotives; supplies rail control and infrastructure products including electronics, positive train control equipment, signal design and engineering services; provides a comprehensive suite of 3 software-enabled solutions designed to improve customer safety, efficiency and productivity in the transportation and mining industries; overhauls locomotives; and provides heat exchangers and cooling systems for rail and other industrial markets.
We are focusing on technological advances, especially in the areas of electronics, battery power and alternative fuels, braking products and other on-board equipment, as a means to deliver new product growth. We seek to provide customers with incremental technological advances that offer immediate benefits with cost-effective investments. • Grow and refresh expansive installed base.
We are focusing on technological advances, especially in the areas of electronics, battery power and alternative fuels, including hydrogen technologies, braking products and other on-board equipment, as a means to deliver new product growth. We seek to provide customers with incremental technological advances that offer immediate benefits with cost-effective investments. • Grow and refresh expansive installed base.
The Company’s total backlog was approximately $22 billion at December 31, 2022. The Company’s contracts are subject to standard industry cancellation provisions, including cancellations on short notice or upon completion of designated stages.
The Company’s total backlog was approximately $22 billion at December 31, 2023. The Company’s contracts are subject to standard industry cancellation provisions, including cancellations on short notice or upon completion of designated stages.
Training and Development We continually invest in our employees’ career growth and provide employees with a wide range of development opportunities, including face-to-face, virtual, social and self-directed learning, mentoring and coaching programs. We have invested in training courses through Wabtec’s Learning Management System ("LMS"). In 2021, Wabtec partnered with a third-party to provide diversity and inclusion training.
Training and Development We continually invest in our employees’ career growth and provide employees with a wide range of development opportunities, including face-to-face, virtual, social and self-directed learning, mentoring and coaching programs. We have invested in training courses through Wabtec’s Learning Management System ("LMS"). In 2023, Wabtec again partnered with a third-party to provide diversity and inclusion training.
Within North America, New York Air Brake Company, a subsidiary of the German air brake producer Knorr-Bremse AG (“Knorr”) and Amsted Rail Company, Inc., a subsidiary of Amsted Industries Corporation, are our principal overall OEM competitors. Our primary competition for locomotives is Electro-Motive Diesel, a division of Caterpillar.
Within North America, New York Air Brake Company, a subsidiary of the German air brake producer Knorr-Bremse AG (“Knorr”) and Amsted Rail Company, Inc., a subsidiary of Amsted Industries Corporation, are our principal overall OEM competitors. Our primary competition for locomotives is Electro-Motive Diesel, owned by a subsidiary of Caterpillar.
Kubacki was on Wall Street from January 2004 to April 2019 as a sell-side equity analyst covering industrials and served as Executive Director and Senior Analyst for the transportation, logistics and equipment sector at Mizuho Securities USA from June 2017 to April 2019, as well as Director of Equity Research for the global industrial equipment industry at CLSA from July 2016 to March 2017.
Kubacki was on Wall Street from January 2004 to April 2019 as a sell-side equity analyst covering industrials and served as Executive Director and Senior Analyst for the transportation, logistics and equipment sector at Mizuho Securities USA from June 2017 to April 2019, as well as Director of Equity Research for the global industrial equipment industry at CLSA from July 2016 to March 2017. prior to her role at CLSA, Ms.
This course instills Wabtec’s EHS expectations of its Operational Leaders by providing an awareness of EHS impacts and legal and compliance responsibilities, practical tips for achieving and maintaining EHS excellence, and ideas for cultivating a positive culture and engaging employees to take ownership for EHS. As of 2022, approximately 175 leaders from over 25 countries have attended the training.
This course instills Wabtec’s EHS expectations of its Operational Leaders by providing an awareness of EHS impacts and legal and compliance responsibilities, practical tips for achieving and maintaining EHS excellence, and ideas for cultivating a positive culture and engaging employees to take ownership for EHS. As of 2023, approximately 185 leaders from over 25 countries have attended the training.
The breadth of our Digital and Electronic solutions gives customers confidence in our ability to address their current and future needs. • Strategic partnerships with longstanding customers and other key stakeholders. We listen to our key stakeholders and focus on areas where Wabtec can enable the most meaningful impact for our customers, communities, and the world.
The breadth of our Digital Intelligence solutions gives customers confidence in our ability to address their current and future needs with the latest digital technologies. • Strategic partnerships with longstanding customers and other key stakeholders. We listen to our key stakeholders and focus on areas where Wabtec can enable the most meaningful impact for our customers, communities, and the world.
As a result of these regulations and requirements, we must usually obtain and 12 maintain certifications in a variety of jurisdictions and countries. The governing bodies include the FRA and the Association of American Railroads ("AAR") in the U.S., and the International Union of Railways (“UIC”) and the European Railway Agencies in Europe.
As a result of these regulations and requirements, we must usually obtain and maintain certifications in a variety of jurisdictions and countries. The governing bodies include the Federal Railroad Administration ("FRA") and the Association of American Railroads ("AAR") in the U.S., and the International Union of Railways (“UIC”) and the European Railway Agencies in Europe.
We are advancing our sustainability priorities both through our own commitments to our people, communities, and planet, as well as by innovating next generation technologies that reduce emissions, energy consumption and waste, and increase fuel efficiency for our customers through advancements in our equipment and digital solutions. • Driving the digital transformation of the rail industry .
Wabtec is advancing our sustainability priorities both through our own commitments to our people, communities, and planet, as well as by innovating next generation technologies that reduce emissions, energy consumption and waste, and increase fuel efficiency for our customers through advancements in our equipment and digital solutions. 5 • Driving the digital transformation of the rail industry.
Engineering and Development To execute our strategy to develop new products, we invest in a variety of engineering and development activities. For the fiscal years ended December 31, 2022, 2021 and 2020, we invested $209 million, $176 million and $162 million, respectively, in engineering for product development and improvement activities.
Engineering and Development To execute our strategy to develop new products, we invest in a variety of engineering and development activities. For the fiscal years ended December 31, 2023, 2022 and 2021, we invested $218 million, $209 million and $176 million, respectively, in engineering for product development and improvement activities.
Mastalerz 56 Senior Vice President of Finance and Chief Accounting Officer Kristine Kubacki 48 Vice President, Investor Relations Rafael Santana was named President and Chief Executive Officer of the Company effective July 1, 2019. Previously, he served as Executive Vice President from February 2019 to July 2019. Mr.
Mastalerz 57 Senior Vice President of Finance and Chief Accounting Officer Kristine Kubacki 49 Vice President, Investor Relations Rafael Santana was named President and Chief Executive Officer of the Company effective July 1, 2019. Previously, he served as Executive Vice President from February 2019 to July 2019. Mr.
As of December 31, 2022, we have a global workforce of approximately 27,000 employees, excluding contingent workers. A portion of our workers are represented by labor unions. For 2023, 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, expires on June 9, 2023.
As of December 31, 2023, we have a global workforce of approximately 29,000 employees, excluding contingent workers. 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.
We have a multi-year initiative to build on our existing expertise and technologies in the digital and electronics areas. In addition, we invest in developing enhancements and new features to existing products, such as brake discs and heat exchangers.
We have a multi-year initiative to build on our existing expertise and technologies in the Digital Intelligence space. In addition, we invest in developing enhancements and new features to existing products, such as brake discs and heat exchangers.
Our early investment in data analytics and software has allowed us to become a strategic partner for customers looking to derive new value from assets and digitally transform their operations.
Our early investment in data analytics and software has allowed us to become a strategic partner for customers looking to derive new value from existing assets, digitally transform their operations and enhance their network optimization.
The following are also available free of charge on this site and are available in print to any shareholder who requests them: Our Corporate Governance Guidelines, the charters of our Audit, Compensation and Nominating and Corporate Governance Committees, our Code of Conduct, which is applicable to all employees, our Code of Ethics for Senior Officers, which is applicable to our executive officers, our Policies on Related Party Transactions and Conflict Minerals. 13 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table provides information on our executive officers as of February 15, 2023.
The following are also available free of charge on this site and are available in print to any shareholder who requests them: Our Corporate Governance Guidelines, the charters of our Audit, Compensation and Talent Management and Governance and Sustainability Committees, our Code of Conduct, which is applicable to all employees, our Code of Ethics for Senior Officers, which is applicable to our executive officers, our Policies on Related Party Transactions and Conflict Minerals. 13 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table provides information on our executive officers as of February 14, 2024.
The system requires the product development team to follow consistent steps throughout the development process, from concept to launch, to ensure the product will meet customer expectations and internal profitability targets. Intellectual Property We have approximately 6,000 active patents worldwide and on average file for approximately 300 new patents each year.
The system requires the product development team to follow consistent steps throughout the development process, from concept to launch, to ensure the product will meet customer expectations and internal profitability targets. Intellectual Property We have more than 6,500 active patents worldwide and file for approximately 300 new patents each year.
Our sustainability strategy is to contribute to a better, more sustainable world through our unique business offerings, leading technologies and sustainable business practices. Our strategy helps us capitalize on market opportunities and reduce safety and environmental risks, while creating value for our customers, employees and other stakeholders.
Environmental, Social and Governance Sustainability Wabtec is committed to sustainable value creation. Our sustainability strategy is to contribute to a better, more sustainable world through our unique business offerings, technologies and sustainable business practices. Our strategy helps us capitalize on market opportunities and reduce safety and environmental risks, while creating value for our customers, employees and other stakeholders.
In Transit, we are focused on mature markets such as Europe and emerging markets such as India. In Freight, we are targeting markets that operate significant fleets of North American-style locomotives and freight cars, including Australia, Brazil, China, Egypt, India, South Africa and other select areas within Europe, Asia and South America.
In Transit, we are focused on mature markets such as Europe and emerging markets such as India. In Freight, we are targeting markets that operate significant fleets of locomotives and freight cars, including Australia, Brazil, Egypt, India, South Africa, Kazakhstan, and other select areas within Europe, Asia 6 and South America.
We are a leading transportation and component manufacturer with a significant installed base with expansive product and service capabilities. We have over 23,000 locomotives in service, the majority of which are equipped with Digital technologies, like Positive Train Control.
We are a transportation and component manufacturer with a significant installed base with expansive product and service capabilities. We have nearly 24,000 locomotives in service, the majority of which are equipped with Digital Intelligence technologies, like Positive Train Control.
As a result of the large base of more than 23,000 locomotives currently in use, Wabtec's Services product lines of modernizing, rebuilding, remanufacturing, maintaining, and exchanging locomotives and components in the aftermarkets provides a significant, recurring revenue stream.
As a result of the large base of nearly 24,000 locomotives currently in use, Wabtec's Services product lines of modernizing, rebuilding and overhauling, remanufacturing, maintaining, and exchanging locomotives and components in the aftermarkets provides a significant, recurring revenue stream.
Officers Age Position Rafael Santana 51 President and Chief Executive Officer David L. DeNinno 67 Executive Vice President, General Counsel and Secretary John A.
Officers Age Position Rafael Santana 52 President and Chief Executive Officer David L. DeNinno 68 Executive Vice President, General Counsel and Secretary John A.
Olin 62 Executive Vice President and Chief Financial Officer Nicole Theophilus 52 Executive Vice President and Chief Human Resources Officer Eric Gebhardt 54 Executive Vice President and Chief Technology Officer Gina Trombley 52 Executive Vice President, Sales & Marketing & Chief Commercial Officer - Americas Greg Sbrocco 54 Executive Vice President, Global Operations Michael E.
Olin 63 Executive Vice President and Chief Financial Officer Nicole Theophilus 53 Executive Vice President and Chief Human Resources Officer Eric Gebhardt 55 Executive Vice President and Chief Technology Officer Gina Trombley 53 Executive Vice President, Sales & Marketing & Chief Commercial Officer - Americas Greg Sbrocco 55 Executive Vice President, Global Operations Michael E.
We plan to invest in bringing new technologies to market for our customers. A significant portion of our investment will be focused on three customer-centric areas of innovation: zero-emissions operations, automation and digitization and advanced supply chain visibility. These investments will position our customers for success and make these technologies the standard going forward.
A significant portion of our investment is expected to be focused on three customer-centric areas of innovation: zero-emissions operations, automation and digitization and advanced supply chain visibility. These investments will position our customers for success and make these technologies the standard going forward.
In 2022, the Freight Segment accounted for approximately 72% of Wabtec’s total net sales, with approximately 56% of its net sales in the U.S. In 2022, approximately 66% of the Freight Segment’s net sales were in the aftermarket.
In 2023, the Freight Segment accounted for approximately 72% of Wabtec’s total net sales, with approximately 58% of its net sales in the U.S. and approximately 66% of the Freight Segment’s net sales were in the aftermarket.
Industry Overview The Company primarily serves the global freight rail and passenger transit industries. As such, our operating results are largely dependent on the level of activity, financial condition and capital spending plans of freight railroads and passenger transit agencies around the world, and transportation equipment manufacturers who serve those markets.
As such, our operating results are largely dependent on the level of activity, financial condition and capital spending plans of freight railroads and passenger transit agencies around the world, and transportation equipment manufacturers who serve those markets.
Ms. Kubacki prior to her role at CLSA spent nearly nine years covering the industrial sector at Avondale Partners, as well as operations management, process design and supply chain management positions at Procter and Gamble.
Kubacki spent nearly nine years covering the industrial sector at Avondale Partners, as well as operations management, process design and supply chain management positions at Procter and Gamble.
Customers include public transit authorities and municipalities, leasing companies, and manufacturers of passenger transit vehicles and buses around the world. In 2022, the Transit Segment accounted for approximately 28% of our total net sales, with approximately 17% of its net sales in the U.S.
Customers include public transit authorities and municipalities, leasing companies, and manufacturers of passenger transit vehicles and buses around the world. In 2023, the Transit Segment accounted for approximately 28% of our total net sales, with approximately 19% of its net sales in the U.S. Approximately 55% of the Transit Segment’s net sales are in the aftermarket.
We provide our employees resources to help them succeed. We offer a wide range of benefits including healthcare and wellness benefits, retirement benefits, an Employee Assistance Program, Employee Resource Groups to build diverse and inclusive communities at Wabtec, and paid time off.
We provide our employees resources to help them be mentally, physically and financially well. We offer a wide range of benefits including healthcare and wellness (physical and mental) benefits, retirement benefits, paid time off, an employee assistance program, and seven employee resource groups to build diverse and inclusive communities at Wabtec.
Based on the assessment, we identified topics with the highest relative priority to Wabtec and its external stakeholders that are aligned to our overall sustainability strategy and action plans: Topic Definition Alignment to Wabtec Strategic Sustainability Principles Greenhouse gas (GHG) emissions Reducing GHG emissions across Wabtec’s value chain and helping Wabtec partners across their value chain reduce GHG emissions.
Accordingly, we identified the following Environmental, Social and Governance ("ESG") topics with the highest relative priority to Wabtec and its external stakeholders, which are aligned to our overall sustainability strategy and action plans: Topic Definition Alignment to Wabtec Strategic Sustainability Principles Greenhouse gas (GHG) emissions Reducing GHG emissions across Wabtec’s value chain and helping Wabtec partners across their value chain reduce GHG emissions.
For the fiscal year ended December 31, 2022, our top five customers accounted for approximately 30% of net sales. No one customer represents 10% or more of consolidated net sales. We believe that we have strong relationships with all of our key customers.
For the fiscal year ended December 31, 2023, our top five customers accounted for approximately 30% of net sales. No one customer represents 10% or more of consolidated net sales. We believe that we have strong relationships with all of our key customers. 8 Competition We operate in a highly competitive marketplace.
Nalin Jain was named President, Digital Electronics business effective December 2020. Mr. Jain had served as President, Global Equipment since May 2019 and previously as President & CEO, International Markets since Aug 2017 for GE Transportation. Prior to that, Mr. Jain had multiple leadership roles of increasing responsibility with GE Aviation and GE Transportation, since September 2005. Mr.
Jain had served as President, Global Equipment since May 2019 and previously as President & CEO, International Markets since August 2017 for GE Transportation. Prior to that, Mr. Jain had multiple leadership roles of increasing responsibility with GE Aviation and GE Transportation, since September 2005. Mr.
For additional information on our business segments, see Note 19 of “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report. Competitive Strengths Our key strengths include: • Iconic legacy and strong reputation with a history of over 150 years of innovation .
For additional information on our business segments, see Note 19 of “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report. Competitive Strengths Through both organic growth and strategic acquisitions, Wabtec has developed the following competitive strengths: • Iconic legacy and strong reputation with a history of over 150 years of innovation .
Our two-year Leadership, Expertise, Advancement and Development ("LEAD") program is the primary path for university graduates into Wabtec. LEAD is a two-year program that offers an immersive learning experience in the fields of engineering, operations, finance and IT along with extensive leadership training designed to build the next generation of leaders.
LEAD is a two-year program that offers an immersive learning experience in the fields of engineering, operations, finance and IT along with extensive leadership training designed to build the next generation of leaders.
Rogerio Mendonca was named President, Freight Equipment in February 2021. Previously Mr. Mendonca served as Vice President for Baker Hughes from July 2017. Prior to that he served as President of GE Transportation in Latin America from April 2016 through July 2017 and in several roles leading up to that including Commercial Director and Service Operations General Manager.
Mendonca served as Vice President for Baker Hughes from July 2017. Prior to that he served as President of GE Transportation in Latin America from April 2016 through July 2017 and in several roles leading up to that including Commercial Director and Service Operations General Manager. Nalin Jain was named President, Digital Intelligence business effective December 2020. Mr.
Environmental Matters The Company's operations and products are subject to a variety of environmental laws and regulations governing air emissions, discharges into water, the use, handling, storage, and disposal of hazardous substances and waste materials, as well as the remediation of contamination associated with releases of hazardous substances.
Quarterly results can also be affected by the timing of projects in backlog and by project delays. 12 Environmental Matters The Company's operations and products are subject to a variety of environmental laws and regulations governing air emissions, discharges into water, the use, handling, storage, and disposal of hazardous substances and waste materials, as well as the remediation of contamination associated with releases of hazardous substances.
In 2022, Wabtec continued its EHS leadership training course aimed at building the toolkits of general managers and plant managers to empower them as critical stewards of our EHS culture.
We remain steadfast in our commitment to protecting our people and driving toward EHS excellence. Wabtec also continued its EHS leadership training course aimed at building the toolkits of general managers and plant managers to empower them as critical stewards of our EHS culture.
We also rely on a combination of trade secrets and other intellectual property laws, nondisclosure agreements and other protective measures to establish and protect our proprietary rights in our intellectual property.
We actively review our patent procurement processes and make adjustments as appropriate to the business environment. We also rely on a combination of trade secrets and other intellectual property laws, nondisclosure agreements and other protective measures to establish and protect our proprietary rights in our intellectual property.
This report describes our Green Bond Program and summarizes the full utilization of the green bond proceeds and allocation of the expenditures to our five focus areas. See "Available Information," below .
This report describes our Green Bond Program and summarizes the full utilization of the green bond proceeds and allocation of the expenditures to our five focus areas. See "Available Information," below . ESG Governance Wabtec developed an ESG governance framework to provide oversight for our climate action strategy.
In addition to price, competition is based on product performance and technological leadership, quality, reliability of delivery, and customer service and support. Our principal competitors vary across product lines and geographies.
Price competition is strong because we have a relatively small number of customers and they are very cost-conscious. In addition to price, competition is based on product performance and technological leadership, quality, reliability of delivery, and customer service and support. Our principal competitors vary across product lines and geographies.
Negotiations with UE will begin in 2023. The Company continuously monitors its labor activity. Diversity and Inclusion Wabtec is committed to ensuring a diverse and inclusive workplace that respects and seeks the unique talents, experiences and viewpoints of all our employees.
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. Diversity and Inclusion Wabtec is committed to ensuring a diverse and inclusive workplace that respects and seeks the unique talents, experiences and viewpoints of all our employees.
We are committed to driving an inclusive culture grounded in integrity, committed to the development of and investment in the communities where our teams live and work.
We are committed to driving an inclusive culture grounded in integrity, committed to the development of and investment in the communities where our teams live and work. 9 As we refine our sustainability strategy, we believe it is important to listen to our key stakeholders.
Leroux held various executive management roles with Faiveley Transport, starting in January 2001. John A. Mastalerz was named Senior Vice President of Finance and Chief Accounting Officer in February 2020. Previously, Mr.
Previously he served as President, Transit from March 2019 to April 2023 and Group President—Brakes & Safety from January 2017 to October 2019. Prior to that, Mr. Leroux held various executive management roles with Faiveley Transport, starting in January 2001. John A. Mastalerz was named Senior Vice President of Finance and Chief Accounting Officer in February 2020. Previously, Mr.
As a result of those strategic acquisitions, as well as other smaller acquisitions and organic growth, Wabtec is now one of the world’s largest providers of value-added, technology-based locomotives, equipment, systems and services for the global freight rail and passenger transit industries, and also serves customers in the mining, marine, and industrial markets.
As a result of those strategic acquisitions, as well as other smaller acquisitions and organic growth, Wabtec is a global provider of value-added, technology-based locomotives, equipment, systems and services for the freight rail and passenger transit industries, and the mining, marine, and industrial markets. Wabtec has approximately 29,000 employees, excluding contingent workers, and operations in over 50 countries.
In 2022, Wabtec continued this partnership, refining the program to our company-wide initiatives. Over 5,000 employees have participated in the training, which was coupled with tools and resources for people leaders to help make diversity and inclusion part of a long-term conversation rather than a one-time training.
Over 10,000 employees have participated in the training, which was coupled with tools and resources for people leaders to help make diversity and inclusion part of a long-term conversation rather than a one-time training. Our Leadership, Expertise, Advancement and Development ("LEAD") program is the primary path for university graduates into Wabtec.
These converging forces highlight the critical interplay between market dynamics, the need for decarbonization and Wabtec’s business strategy. Wabtec is leading the transition to a more utilized, efficient, and low-carbon rail network. Alternative clean energy technologies are critical in the fight against climate change and reducing greenhouse gas emissions.
Wabtec is helping customers transition to a more utilized, efficient, and low-carbon rail network. Alternative clean energy technologies are critical in the fight against climate change and reducing greenhouse gas emissions.
Through these enhanced incident learning efforts, our Operations and EHS teams are partnering to eliminate and reduce hazards and risks within Wabtec’s operations, which is fundamental to improved EHS performance. With zero fatalities and over 65 operational sites with zero recordable injuries, 2022 saw a 10% injury rate reduction across Wabtec's operations as compared with 2021.
Through these efforts, our Operations and EHS teams are partnering to eliminate and reduce hazards and risks within Wabtec’s operations, which is fundamental to improved EHS performance. While we had zero fatalities and over 70 operational sites with zero recordable injuries across Wabtec’s operations in 2023, our total recordable injury rate slightly increased by 6% compared with 2022.
Wabtec developed an ESG governance framework to provide oversight for our climate action strategy. This structure starts with Wabtec's Board of Directors and its committees who oversee the execution of the Company’s ESG strategy as part of their oversight of Wabtec’s overall business.
This framework starts with Wabtec's Board of Directors who oversee the execution of the Company’s ESG strategy as part of their oversight of Wabtec’s overall business, risks and opportunities.
Fetsko 58 President, Freight and Industrial Components Pascal Schweitzer 46 President, Freight Services Rogerio Mendonca 50 President, Freight Equipment Nalin Jain 53 President, Digital Electronics Lillian Leroux 51 President, Transit John A.
Fetsko 59 President, Freight and Industrial Components Alicia Hammersmith 53 President, Freight Services Rogerio Mendonca 51 President, Freight Equipment Nalin Jain 54 President, Digital Intelligence Pascal Schweitzer 47 President, Transit Lillian Leroux 52 Chief Strategy and Sustainability Officer John A.
Jain served as Director Global Partnerships with Bombardier Inc since July 2002 and prior to that he worked for Saint Gobain. Lilian Leroux was named President, Transit effective March 2019. Previously he served as Group President—Brakes & Safety from January 2017 to October 2019. Prior to that, Mr.
Jain served as Director Global Partnerships with Bombardier Inc since July 2002 and prior to that he worked for Saint Gobain. Pascal Schweitzer was named President, Transit in April 2023. Previously, Mr. Schweitzer served as President, Freight Services from February 2019 to April 2023 and Vice President—Services of GE Transportation from April 2017 to February 2019.
Comprehensive product and service offerings spanning the freight rail and passenger transit industries, as well as products in the bus, mining, marine, and discrete industrial markets help Wabtec to balance the cyclical nature of the global rail business. • Significant operating synergies and improved financial profile .
Our comprehensive product portfolio and service offerings span the freight rail and passenger transit industries, as well as the bus, mining, marine, and industrial markets, which help Wabtec balance the cyclical nature of the global rail business. We provide our products in both the original equipment market and the aftermarket.
We continue to emphasize innovation and development funding to create new products and capabilities to increase customer productivity, efficiency, capacity, utilization and safety, such as the battery electric locomotive, vehicle monitoring and data analytics. We will continue to lead the way with technologies that use less energy, reduce weight and size, and increase recyclability.
We continue to emphasize innovation and development funding to create new products and capabilities to increase customer productivity, efficiency, capacity, utilization and safety, such as the battery electric locomotive, hydrogen powered locomotive, vehicle monitoring and data analytics. We plan to invest in bringing new technologies to market for our customers.
In particular, the Board established the Environmental, Social and Governance Subcommittee ("ESG Subcommittee") of the Nominating and Corporate Governance Committee to support and provide oversight of Wabtec’s sustainability strategy and ongoing commitment to ESG matters relevant to Wabtec, including complying with all applicable laws and regulations affecting the health and safety of our employees and stakeholders, as well as protection of the environment (including climate) and other public policy matters.
The Board of Directors delegates certain ESG responsibilities to committees and has established an Environmental, Social and Governance Subcommittee ("ESG Subcommittee") to support and provide oversight of Wabtec’s sustainability strategy and ongoing commitment to ESG matters relevant to Wabtec, including complying with all applicable laws and regulations affecting the health and safety of our employees and stakeholders, as well as protection of the environment (including climate) and other public policy matters. 10 The ESG governance framework is supported by Wabtec's broader enterprise risk management process, which is Wabtec's primary vehicle for assessing and managing operational, strategic, financial, and compliance risk.
In addition, we have opportunities to increase the sale of certain products that we currently manufacture for the rail industry into other industrial markets, such as mining, off-highway and energy. • Lead the decarbonization of rail. We have taken significant steps to decarbonize global transport and make our world safer, smarter and greener.
In addition, we have opportunities to increase the sale of certain products that we currently manufacture for the rail industry into other industrial markets, such as mining, off-highway and energy. • Lead the decarbonization of rail. Today, rail represents the cleanest, most energy efficient and safest mode of moving freight and people on land.
Outside of North America, Knorr is our main competitor, although not in every product line or geography. In addition, our competitors often include smaller, local suppliers in most international markets.
Outside of North America, Knorr is our main competitor, although not in every product line or geography. In addition, our competitors often include smaller, local suppliers in most international markets. Depending on the product line and geography, we can also compete with our customers, such as CRRC Corporation Limited, a China-based manufacturer of rolling stock.
We are the largest global manufacturer of diesel-electric locomotives for freight railroads producing mission-critical products and solutions that help railroads reduce operating costs, decrease fuel use, minimize downtime and comply with emissions standards.
Customers include large, publicly traded railroads, leasing companies, manufacturers of original equipment such as locomotives and freight cars, utilities, and companies in the mining, marine, and industrial markets. We are a global manufacturer of diesel-electric locomotives for freight railroads producing essential products and solutions that help railroads reduce operating costs, decrease fuel use, minimize downtime and comply with emissions standards.
For example, we have partnered with a customer, a leading short line and regional freight railroad, as well as a leading artificial intelligence and robotics institution to create technologies that will further decarbonize freight rail transport, improve freight safety, and generate greater rail network utilization.
Transformational change requires collaboration, so we are committed to accelerating progress by partnering with customers, government leaders, corporations, universities, and other key stakeholders. For example, we have partnered with a customer, as well as an artificial intelligence and robotics institution to create technologies that will further decarbonize freight rail transport, improve freight safety, and generate greater rail network utilization.
We focus on driving continuous operational improvement across the organization by sharing best practices, instilling a culture of learning, problem solving and continuous improvement, and driving standard operating practices. This culture is illustrated by the launch of Integration 2.0 in 2022.
We focus on driving continuous operational improvement across the organization by sharing best practices, instilling a culture of learning, problem solving and constant improvement, and driving standard operating practices. Wabtec is also focused on earnings growth through expanding high-margin recurring revenue streams.
Pascal Schweitzer was named President, Freight Services in February 2019. Previously Mr. Schweitzer was the Vice President—Services of GE Transportation since April 2017. He served as General Manger – Europe – Power Services for GE Power from November 2015 through April 2017 and prior to that several positions with Alstom Power.
He also served as General Manager – Europe – Power Services for GE Power from November 2015 through April 2017 and prior to that several positions with Alstom Power. Lilian Leroux was named Chief Strategy and Sustainability officer in April 2023.
In 2021, women constituted approximately 17% of our global workforce and approximately 19% of our salaried employees, and people of color constituted approximately 20% of our U.S. salaried workforce and approximately 24% of the total U.S. workforce.
Women constituted approximately 17% of our global workforce and approximately 20% of our salaried employees, and people of color constituted approximately 25% of the total U.S. workforce. Wabtec's Board is considered 44% diverse based on gender, race/ethnicity.
Wabtec has an installed base of more than 23,000 locomotives and content on virtually all North American locomotives and freight cars, as well as a diverse offering of Transit 3 locomotives and cars both internationally and domestically, which enables significant opportunities in the higher-margin aftermarket parts and services business and mitigates the exposure to cycles.
Wabtec has an installed base of nearly 24,000 locomotives, as well as a diverse offering of Transit locomotives and cars both internationally and domestically. Our significant installed base enables opportunities in the aftermarket parts and services business. • Leading design and engineering capabilities.
Finally, Wabtec engages in regular security awareness training to highlight and educate its employees on how to identify and mitigate cybersecurity risks at the individual level. Regulation In the course of our operations, we are subject to various regulations and standards of governments and other agencies in the U.S. and around the world.
Regulation In the course of our operations, we are subject to various regulations and standards of governments and other agencies in the U.S. and around the world.
We also rely on functional experts within the Company across various disciplines to train, coach and share best practices throughout the Company, while benchmarking against best-in-class competitors and peers. Over time, we expect to continue to increase operating margins, improve cash flow and strengthen our ability to invest in the following growth strategies: • Accelerate innovation of scalable technologies .
Over time, we intend to continue to increase operating margins, improve cash flow and strengthen our ability to invest in the following growth strategies: • Accelerate innovation of scalable technologies .
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. Through both internal growth as well as acquisitions, Wabtec has positioned itself with the following strategic strengths: • Diversity of revenues by product, geography and market.
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. Industry Overview The Company primarily serves the global freight rail and passenger transit industries.
The size of Wabtec's operations enables the Company to achieve economies of scale, in addition to using best-cost locations for executing on operational decisions. • Complementary Digital and Electronics technologies .
Additionally, Wabtec is a provider of technology-enabled locomotives and equipment, freight car components, systems, and services for the freight rail and passenger transit industries. The size of Wabtec's operations enables the Company to achieve economies of scale, in addition to using best-cost locations for executing on operational decisions.
We are also a leading provider of braking equipment; heating, ventilation and air conditioning equipment; door assemblies and platform screen doors; lifts and ramps; couplers and current collection equipment, such as pantographs, for passenger transit vehicles. • Breadth of product offering with a stable mix of original equipment market (OEM) and aftermarket business .
We are also a service provider for freight rail and passenger transit vehicles. • Breadth of product offering with a stable mix of original equipment market (OEM) and aftermarket business .
Sales of aftermarket parts and services typically represent approximately 60% of our total net sales. • Leading design and engineering capabilities . We believe a hallmark of our relationship with our customers has been our leading design and engineering practice, which has assisted in the improvement and modernization of global railway equipment.
We believe a hallmark of our relationship with our customers has been our leading design and engineering practice, which has assisted in the improvement and modernization of global railway equipment. Wabtec's engineers and technical capabilities support continued focus on innovative product development and efforts to achieve scalable technologies.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

32 edited+7 added−15 removed110 unchanged
Biggest changeSupply chain disruptions and labor availability have caused component and chip shortages resulting in an adverse effect on the timing of the Company’s revenue generation. Additionally, broad-based inflation, escalation of metals and commodities costs, transportation and logistics costs and labor costs have all resulted from the COVID-19 pandemic.
Biggest changeIn the aftermath of the disruptions caused by the COVID-19 pandemic, various disruptive forces have continued to impact some of our supply chains, particularly in China, India, the U.S., and Europe. Supply chain disruptions and labor availability constraints have caused component, raw material and chip shortages resulting in an adverse effect on the timing of the Company’s revenue generation.
The management and acquisition of businesses involves substantial risks, any of which may result in a material adverse effect on our business and results of operations, including: 17 • the uncertainty that an acquired business will achieve anticipated operating results; • significant expenses to integrate; • diversion of management’s attention from business operations to integration matters; • departure of key personnel from the acquired business; • effectively managing entrepreneurial spirit and decision-making; • integration of different information systems; • unanticipated costs and exposure to unforeseen liabilities; and • impairment of assets.
The management and acquisition of businesses involves substantial risks, any of which may result in a material adverse effect on our business and results of operations, including: • the uncertainty that an acquired business will achieve anticipated operating results; • significant expenses to integrate; • diversion of management’s attention from business operations to integration matters; • departure of key personnel from the acquired business; • effectively managing entrepreneurial spirit and decision-making; • integration of different information systems; • unanticipated costs and exposure to unforeseen liabilities; and • impairment of assets.
Our global headquarters for the Transit group is located in France, and we conduct other international operations through a variety of wholly and majority-owned subsidiaries and joint ventures, including in Australia, Austria, Brazil, Canada, China, Czech Republic, France, Germany, India, Italy, Kazakhstan/Commonwealth of Independent States ("CIS"), Macedonia, Mexico, the Netherlands, Poland, Spain, South Africa, Turkey, and the United Kingdom.
Our global headquarters for the Transit group is located in France, and we conduct other international operations through a variety of wholly and majority-owned subsidiaries and joint ventures, including in Australia, Austria, Brazil, Canada, China, Czech Republic, France, Germany, India, Italy, Kazakhstan/Commonwealth of Independent States ("CIS"), the Republic of North Macedonia, Mexico, the Netherlands, Poland, Spain, South Africa, Turkey, and the United Kingdom.
We are unable to predict what impact these or other regulatory changes may have, if any, on our business or the industry as a whole. We cannot assure that costs incurred to comply with any new standards or regulations will not be material to our business, results of operations and financial condition.
We are unable to predict what impact these or other regulatory changes may have, if any, on our business or the industry as a whole. We cannot assure that 20 costs incurred to comply with any new standards or regulations will not be material to our business, results of operations and financial condition.
If we are unable to pass increases in the costs of our raw materials on to our customers, experience a lag in our ability to pass increases to our customers, or operational efficiencies are not achieved, our operating margins and results of operations may be materially adversely affected. 20 Our businesses compete globally for key production inputs.
If we are unable to pass increases in the costs of our raw materials on to our customers, experience a lag in our ability to pass increases to our customers, or operational efficiencies are not achieved, our operating margins and results of operations may be materially adversely affected. Our businesses compete globally for key production inputs.
A disruption or compromise of the Company’s technology systems, even for short periods of time, could have a material adverse effect. 23 RISKS RELATED TO HUMAN CAPITAL Labor shortages and labor disputes may have a material adverse effect on our operations and profitability. We depend on skilled labor in our manufacturing and other businesses.
A disruption or compromise of the Company’s technology systems, even for short periods of time, could have a material adverse effect. RISKS RELATED TO HUMAN CAPITAL Labor shortages and labor disputes may have a material adverse effect on our operations and profitability. We depend on skilled labor in our manufacturing and other businesses.
Moreover, our Restated Credit Agreement and the indentures governing our Senior Notes permit us to incur substantial additional indebtedness, which may further contribute to, or exacerbate the impact of, the foregoing impacts. The indentures for our outstanding Senior Notes and our Restated Credit Agreement contain various covenants that limit our management’s discretion in the operation of our businesses.
Moreover, our Restated Credit Agreement and the indentures governing our Senior Notes permit us to incur substantial additional indebtedness, which may further contribute to, or exacerbate the impact of, the foregoing impacts. 23 The indentures for our outstanding Senior Notes and our Restated Credit Agreement contain various covenants that limit our management’s discretion in the operation of our businesses.
As a result of our dependence on our key customers, we could experience a material adverse effect on our business, results of operations and financial condition if we lost any one or more of our key customers or if there is a reduction in their demand for our products. Our business operates in a highly competitive industry.
As a result of our dependence on our key customers, we could experience a material adverse effect on our business, results of operations and financial condition if we lost any one or more of our key customers or if there is a reduction in their demand for our products. 15 Our business operates in a highly competitive industry.
We operate in a global, competitive marketplace and face substantial competition from a limited number of established competitors, some of which may have greater financial resources than we do, may have a more extensive low-cost sourcing 15 strategy and presence in low-cost regions than we do, or may receive significant governmental support.
We operate in a global, competitive marketplace and face substantial competition from a limited number of established competitors, some of which may have greater financial resources than we do, may have a more extensive low-cost sourcing strategy and presence in low-cost regions than we do, or may receive significant governmental support.
We may seek to minimize these risks through the use of interest rate swap contracts and 19 currency hedging agreements. There can be no assurance that any of these measures will be effective. Material changes in interest or exchange rates could result in material losses to us.
We may seek to minimize these risks through the use of interest rate swap contracts and currency hedging agreements. There can be no assurance that any of these measures will be effective. Material changes in interest or exchange rates could result in material losses to us.
Although we believe that our recent acquisitions will improve our market position and realize positive operating results, including operating synergies, operating expense reductions and overhead cost savings, we cannot be assured that these improvements will be obtained or the timing of such improvements.
Although we believe that our recent acquisitions will improve our market position and realize positive operating results, including operating synergies, operating expense reductions and overhead cost savings, we cannot be assured that these 17 improvements will be obtained or the timing of such improvements.
Our business may be adversely impacted by unintentional technology disruptions, including those resulting from programming errors, employee operational errors, software defects, and product vulnerabilities. We also provide technological products integral to train operation.
Our business may be adversely impacted by unintentional technology disruptions, including those resulting from programming errors, employee operational errors, software defects, and product vulnerabilities. 22 We also provide technological products integral to train operation.
Our exposure to the risks associated with international operations may intensify if our international operations expand in the future. We may incur increased costs or margin degradation due to fluctuations in interest rates and foreign currency exchange rates.
Our exposure to the risks associated with international operations may intensify if our international operations expand in the future. 18 We may incur increased costs or margin degradation due to fluctuations in interest rates and foreign currency exchange rates.
We make statements about our ESG goals and initiatives through information provided in reports that we file or furnish with the Securities and 22 Exchange Commission, on our website, in press statements, and in other communications, including through our Sustainability Reports.
We make statements about our ESG goals and initiatives through information provided in reports that we file or furnish with the Securities and Exchange Commission, on our website, in press statements, and in other communications, including through our Sustainability Reports.
In addition, the indentures require that we offer to repurchase our outstanding Senior Notes upon the occurrence of certain change of control triggering events. 24 Item 1B. UNRESOLVED STAFF COMMENTS None.
In addition, the indentures require that we offer to repurchase our outstanding Senior Notes upon the occurrence of certain change of control triggering events. Item 1B. UNRESOLVED STAFF COMMENTS None.
RISKS RELATED TO INTERNATIONAL OPERATIONS A significant portion of our sales may be derived from our international operations, which exposes us to certain risks inherent in doing business on an international level. For the fiscal year ended December 31, 2022, approximately 55% of our consolidated net sales were to customers outside of the United States.
RISKS RELATED TO INTERNATIONAL OPERATIONS A significant portion of our sales may be derived from our international operations, which exposes us to certain risks inherent in doing business on an international level. For the fiscal year ended December 31, 2023, approximately 55% of our consolidated net sales were to customers outside of the United States.
The incident did not have a material impact on our business, operations or financial results. A successful exploitation of our own or our vendors’ information technology infrastructure could result in service interruptions, safety hazards, misappropriation of confidential information, process failures, security breaches or other operational difficulties.
The incidents did not have a material impact on our business, operations or financial results. A successful exploitation of our own or our vendors’ information technology infrastructure could result in service interruptions, safety hazards, misappropriation of confidential information, process failures, security breaches or other operational difficulties.
In addition, we are required to maintain (i) a ratio of EBITDA to interest expense of at least 3.00 to 1.00 over each period of four consecutive fiscal quarters ending on the last day of a fiscal quarter and (ii) a Leverage Ratio, calculated as of the last day of a fiscal quarter for a period of four consecutive fiscal quarters, of 3.5 or less.
In addition, we are required to maintain (i) a ratio of EBITDA to interest expense of at least 3.00 to 1.00 over each period of four consecutive fiscal quarters ending on the last day of a fiscal quarter and (ii) a Leverage Ratio, calculated by Net Debt as of the last day of such fiscal quarter to EBITDA for the four quarters then ended, of 3.5 or less.
Additionally, Wabtec has operations and a strategic joint venture in Kazakhstan that have continued operating but have incurred supply, distribution and currency impacts as an indirect result from the Russian invasion of Ukraine.
Additionally, Wabtec has operations in Kazakhstan that have continued operating but have incurred supply, distribution and currency impacts as an indirect result from the Russian invasion of Ukraine.
Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation and business spending; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; our ability to maintain or increase our prices, our ability to implement and execute our business strategy, disruptions in global supply chains, our exposure to foreign currency fluctuations, and constraints, volatility, or disruption in the capital markets, difficulty staffing and managing impacted operations, and the recoverability of assets in the region.
Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation and business spending; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; our ability to maintain or increase our prices, our ability to implement and execute our business strategy, disruptions in global supply chains, our exposure to foreign currency fluctuations, and constraints, volatility, or disruption in the capital markets, difficulty staffing and managing impacted operations, and the recoverability of assets in the region. 19 RISKS RELATED TO MACRO-ECONOMIC CONDITIONS AND POLICIES Prolonged unfavorable economic and market conditions could adversely affect our business.
In addition, certain of our products are subject to extensive, and increasingly stringent, statutory and regulatory requirements governing, e.g. , emissions and noise, including standards imposed by the U.S. Environmental Protection Agency, 21 the European Union and other regulatory agencies around the world.
In addition, certain of our products are subject to extensive, and increasingly stringent, statutory and regulatory requirements governing attributes, such as emissions and noise, including standards imposed by the U.S. Environmental Protection Agency, the European Union and other regulatory agencies around the world.
For example, our indebtedness could: • increase our vulnerability to general adverse economic and industry conditions; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • place us at a disadvantage compared to competitors that have less debt; and • limit our ability to borrow additional funds.
For example, our indebtedness could: • increase our vulnerability to general adverse economic and industry conditions; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, and other general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • place us at a disadvantage compared to competitors that have less debt; • limit our ability to borrow additional funds; and, • result in higher borrowing costs impacting our financial results upon refinancing any of our maturing debt.
At December 31, 2022, we had total debt of $4.0 billion, primarily related to Senior Notes. Being indebted could have important consequences to us.
At December 31, 2023, we had total debt of $4.1 billion, primarily related to Senior Notes. Being indebted could have important consequences to us.
The effects of COVID-19 and other potential future public health crises, epidemics, pandemics or similar events on our business, operating results and cash flows are uncertain. We face a wide variety of risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19.
The effects of potential future public health crises, epidemics, pandemics or similar events on our business, operating results and cash flows are uncertain. We face a wide variety of risks related to health epidemics, pandemics and similar outbreaks.
To the extent the current conflict between Russia and Ukraine adversely affects our business, particularly in Russia and Kazakhstan, it may also have the effect of heightening many other risks disclosed in this Annual Report, any of which could materially and adversely affect our business and results of operations.
To the extent a regional or international conflict adversely affects our business, particularly in Russia and Kazakhstan, it may also have the effect of heightening many other risks disclosed in this Annual Report, any of which could materially and adversely affect our business and results of operations.
Such disruptions could interrupt our business operations and significantly harm our results of operations, financial condition and cash flows. The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations.
Such disruptions could interrupt our business operations and significantly harm our results of operations, financial condition and cash flows. Regional and international conflicts, such as the ongoing conflict between Russia and Ukraine and turmoil in the Mideast Region, may adversely affect our business and results of operations.
RISKS RELATED TO MACRO-ECONOMIC CONDITIONS AND POLICIES Prolonged unfavorable economic and market conditions could adversely affect our business. Unfavorable general economic and market conditions in the United States and internationally, particularly in our key end markets, could have a negative impact on our sales and operations.
Unfavorable general economic and market conditions in the United States and internationally, particularly in our key end markets, could have a negative impact on our sales and operations.
Given the tremendous uncertainties and variables, we cannot at this time predict the impact of the global COVID-19 pandemic, or any future pandemic, but any one could have a material adverse impact on our business, financial position, results of operations and/or cash flows.
Given the tremendous uncertainties and variables associated with public health crises, we cannot predict the impact of such events, but any one could have a material adverse impact on our business, financial position, results of operations and/or cash flows.
For example, although the economic slowdown caused by COVID-19 did not result in any material cancellations of the Company's backlog, it did impact the timing of some orders in backlog as, in certain cases, the delivery of goods and services were pushed out from their original timelines. 16 Equipment failures, interruptions, delays in deliveries or extensive damage to our facilities, supply chains, distribution systems or information technology systems, could adversely affect our business.
For example, although the economic slowdown caused by COVID-19 did not result in any material cancellations of the Company's backlog, it did impact 16 the timing of some orders in backlog as, in certain cases, the delivery of goods and services were pushed out from their original timelines.
In addition, although in some cases we may be indemnified by non-affiliated entities that retain liabilities in connection with specific matters, there can be no assurance that these indemnitors will remain financially viable and capable of satisfying their obligations.
In addition, although in some cases we may be indemnified by non-affiliated entities that retain liabilities in connection with specific matters, there can be no assurance that these indemnitors will remain financially viable and capable of satisfying their obligations. 21 Any litigation, even a claim without merit, could result in substantial costs and diversion of resources and could have a material adverse effect on our business and results of operations.
Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks such as those arising from the current conflict between Russia and Ukraine, has and may continue to adversely affect our business and results of operations.
Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, may adversely affect our business and results of operations.
Any litigation, even a claim without merit, could result in substantial costs and diversion of resources and could have a material adverse effect on our business and results of operations. Our manufacturer’s warranties or product liability may expose us to potentially significant claims. We warrant the workmanship and materials of many of our products.
Our manufacturer’s warranties or product liability may expose us to potentially significant claims. We warrant the workmanship and materials of many of our products.
Removed
Due to the ongoing impacts and uncertainty of continued impacts of the COVID-19 pandemic and the global government actions to contain it, some of our supply chains, particularly in China, India, the U.S., and Europe, have been, and continue to be, impacted.
Added
Equipment failures, interruptions, delays in deliveries or extensive damage to our facilities, supply chains, distribution systems or information technology systems, could adversely affect our business.
Removed
Since first reported in late 2019, the COVID-19 pandemic has dramatically impacted the global health and economic environment, including millions of confirmed cases, business slowdowns or shutdowns, government challenges and market volatility of an unprecedented nature.
Added
Additionally, broad-based inflation, escalation of diesel, utilities, energy, metals and other commodities costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations have persisted.
Removed
Although we have, to date, managed to continue our operations, we cannot predict the future course of events nor can we assure that this global pandemic, including its economic impact, will not have a material adverse impact on our business, financial position, results of operations and/or cash flows.
Added
As was evidenced by the COVID-19 pandemic, public health crises have the potential to dramatically impact the global health and economic environment and to trigger significant economic volatility and operational uncertainty.
Removed
The extent of the impact of the COVID-19 pandemic on our operational and financial performance remains uncertain and will depend on future pandemic related developments, including the duration of the pandemic, any potential subsequent waves of COVID-19 and new strains of the virus, the effectiveness, distribution and acceptance of COVID-19 vaccines, and related government actions to prevent and manage disease spread, all of which are uncertain and cannot be predicted.
Added
While our operations have generally stabilized since the peak of the COVID-19 pandemic, future public health emergencies, which could include a resurgence of COVID-19, and unpredictable responses by authorities around the world could negatively impact our global operations, customers and suppliers.
Removed
Our operations may be further impacted by the COVID-19 pandemic if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, travel restrictions or absenteeism; steps the company has taken to protect health and well-being; government actions; facility closures; work slowdowns or stoppages; inadequate supplies or resources (such as reliable personal protective equipment, testing and vaccines); or other circumstances related to COVID-19.
Added
Any future public health crises, epidemics, pandemics or similar events could result in disruptions to our operations, including higher rates of employee absenteeism and supply chain disruptions, decreased demand for our products, volatility in financial markets, and overall deterioration of national and global economic conditions.
Removed
Governments around the world have taken steps to mitigate some of the more severe anticipated economic effects, but there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion.
Added
Regional and international conflicts could have a wide range of negative consequences, including causing damage or disruption to international commerce, disruptions to transportation and distribution routes, volatility in commodity markets, supply chain disruptions, business disruptions (including labor shortages), foreign currency dislocations or broader regional instability.
Removed
The COVID-19 pandemic has resulted in operational and supply chain disruptions for us and our customers and may further adversely affect operations and the operations of our customers and suppliers. Accordingly, COVID-19 had a materially adverse impact on our operations and business results for the years ended December 31, 2021, and 2020.
Added
For example, the current conflict between Russia and Ukraine, has and may continue to adversely affect our business and results of operations.
Removed
Supply chain disruptions and shortages in labor availability have caused component and chip shortages, which have resulted in adverse effects on the timing of our revenue generation. Additionally, broad-based inflation, escalation of metals and commodities costs, transportation and logistics costs and labor costs have all resulted from the COVID-19 pandemic and have adversely impacted our business.
Removed
The spread of COVID-19, and the emergence of new strains of the virus, have caused us to modify our business practices and to implement significant proactive measures to protect the health and safety of employees, and we may take further actions as may be required by government authorities or as we determine are appropriate under the circumstances.
Removed
There is no certainty that such measures will be sufficient to mitigate the continued risks posed by the pandemic. The COVID-19 pandemic and related volatility in financial markets and deterioration of national and global economic conditions could affect our business and operations in a variety of ways.
Removed
For example, we have experienced and could experience further operational disruptions and financial losses as a result of the following: • a decrease in demand for our products as a result of COVID-19 and cost control measures implemented by our customers; • delays in orders or delivery of orders, the occurrence of which negatively impacts our cash conversion cycle and ability to convert our backlog into cash; • inability to collect full or partial payments from customers due to deterioration in customer liquidity, including customer bankruptcies; • a shutdown of one or multiple of our manufacturing facilities due to government restrictions or illness in connection with COVID-19.
Removed
The continued spread of COVID-19 has also led to disruption and volatility in the global capital markets, which depending on future developments may make it more costly or difficult for us to obtain debt or equity financing, including to refinance our existing debt, or to identify or execute on investment opportunities, in each case on terms and within time periods 18 acceptable to us.
Removed
We are also monitoring the impacts of COVID-19 on the fair value of our assets. While we do not currently anticipate any material impairments on our assets as a result of COVID-19, future changes in expectations for sales, earnings and cash flows related to intangible assets and goodwill below our current projections could cause these assets to be impaired.
Removed
We continue to work with our stakeholders (including customers, employees, suppliers and local communities) in an effort to address responsibly this global pandemic. We continue to monitor the situation, to assess further possible implications to our employees, business, supply chain and customers, and to take certain actions in an effort to mitigate various adverse consequences.
Removed
However, uncertainty around general global economic and market conditions, exacerbated by the COVID-19 pandemic, will have an impact on our sales and operations in 2023 and beyond. We expect that the longer the COVID-19 pandemic, including its economic disruption, continues, the greater the adverse impact on our business operations, financial performance and results of operations could be.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Primary Use Segment Own/Lease Approximate Square Feet Domestic Erie, PA Manufacturing/Warehouse/Office Freight Own 3,800,000 Grove City, PA Manufacturing/Warehouse Freight Own 486,000 Salem, VA Manufacturing Freight Own 320,000 Justin, Texas Manufacturing/Warehouse Freight Own 305,000 Fort Worth, Texas Manufacturing/Warehouse Freight Own 304,000 Houston, Texas Manufacturing/Service Freight Own 280,000 Hanover Park, Illinois Manufacturing Freight Lease 250,000 Pittsburgh, PA Office Global HQ Lease 84,000 International Shenyang, China Manufacturing/Warehouse/Office Transit Own 336,000 Doncaster, UK Manufacturing Transit Own 330,000 Changzhou, China Manufacturing Transit Own 316,000 Northampton, UK Manufacturing Freight Lease 300,000 Shenyang City, China Manufacturing Transit Lease 291,000 Piossasco, Italy Manufacturing Transit Own 301,000 Burton-on-Trent, UK Manufacturing/Office Transit Lease 260,000 Bangalore, India Manufacturing Freight/Transit Lease 168,000
Biggest changeLocation Primary Use Segment Own/Lease Approximate Square Feet Domestic Erie, PA Manufacturing/Warehouse/Office Freight Own 3,800,000 Fort Worth, TX Manufacturing/Warehouse/Office Freight Own/Lease 1,438,000 Grove City, PA Manufacturing/Warehouse/Service Freight Own 728,000 Salem, VA Manufacturing/Warehouse/Office Freight Own 320,000 Oak Creek, WI Manufacturing/Warehouse/Office Freight Lease 290,000 Indianapolis, IN Distribution Center/Office Freight Own 265,000 Kansas City, MO Manufacturing/Warehouse/Office Freight Lease 200,000 Hibbing, MN Manufacturing/Warehouse/Office Freight Own 157,000 Spartanburg, SC Manufacturing/Warehouse/Office Transit Own/Lease 184,000 Pittsburgh, PA Office Global HQ Lease 84,000 International Astana, Kazakhstan Manufacturing/Warehouse/Office Freight Own/Lease 700,000 Bihar, India Manufacturing/Warehouse/Office Freight Own/Lease 500,000 San Luis Potosi, Mexico Manufacturing/Warehouse/Office Freight/Transit Own/Lease 480,000 Doncaster, UK Manufacturing/Warehouse/Office Transit Own 330,000 Contagem, Brazil Manufacturing/Warehouse/Office Freight Own 310,000 Piossasco, Italy Manufacturing/Warehouse/Office Transit Own 301,000 Tours, France Manufacturing/Warehouse/Office Transit Own/Lease 250,000 Pilsen, Czech Manufacturing/Warehouse/Office Transit Lease 236,000 Shanghai, China Manufacturing/Warehouse/Office Transit Lease 220,000 Bangalore, India Office Corporate Lease 171,000
Item 2. PROPERTIES Facilities The following table provides certain summary information about the principal facilities owned or leased by the Company as of December 31, 2022. The Company believes that its facilities and equipment are generally in good condition and that, together with scheduled capital improvements, they are adequate for its present and immediately projected needs.
Item 2. PROPERTIES Facilities The following table provides certain summary information about the principal facilities owned or leased by the Company as of December 31, 2023. The Company believes that its facilities and equipment are generally in good condition and that, together with scheduled capital improvements, they are adequate for its present and immediately projected needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. LEGAL PROCEEDINGS Information with respect to legal proceedings is included in Note 18 of “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report and incorporated by reference herein. Item 4. MINE SAFETY DISCLOSURES Not applicable. 25 PART II
Biggest changeItem 3. LEGAL PROCEEDINGS Information with respect to material pending legal proceedings is included in Note 18 of “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report and incorporated by reference herein. Item 4. MINE SAFETY DISCLOSURES Not applicable. 25 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

2 edited+0 added−0 removed0 unchanged
Biggest changeFinancial Statements and Supplementary Data 44 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 80 Item 9A. Controls and Procedures 80
Biggest changeFinancial Statements and Supplementary Data 44 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 83 Item 9A. Controls and Procedures 83 Item 9B. Other Information 83 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 83 PART III
Item 4. Mine Safety Disclosures 25 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. [Reserved] 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 43 Item 8.
Item 4. Mine Safety Disclosures 25 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. [Reserved] 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 42 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed3 unchanged
Biggest changeThe graph below compares the total stockholder return through December 31, 2022, of Wabtec’s common stock to (i) the S&P 500, (ii) the S&P 500 Industrials and, (iii) our peer group of manufacturing companies which consists of the following publicly traded companies: AGCO, AMETEK, Arconic, Borg Warner, CSX, Dover, Emerson Electric, Fortive, Greenbrier Companies, Illinois Tool Works, Ingersoll-Rand, Norfolk Southern, Oshkosh, Parker-Hannifin, Rockwell Automation, Terex, Textron, Trinity Industries, and Xylem. 26 Issuer Purchases of Common Stock Month Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (1) Maximum Dollar Value of Shares That May Yet Be Purchased Under the Programs (1) In millions October 2022 — $ — — $ 395 November 2022 578,667 $ 95.32 578,667 $ 340 December 2022 181,568 $ 100.18 181,568 $ 322 Total quarter ended December 31, 2022 760,235 $ 96.48 760,235 $ 322 (1) As of December 31, 2022, approximately $322 million was remaining under the stock repurchase plan.
Biggest changeThe graph below compares the total stockholder return through December 31, 2023, of Wabtec’s common stock to (i) the S&P 500, (ii) the S&P 500 Industrials and, (iii) our peer group of manufacturing companies which consists of the following publicly traded companies: AGCO, AMETEK, Borg Warner, CSX, Dover, Emerson Electric, Fortive, Greenbrier Companies, Howmet Aerospace, Illinois Tool Works, Ingersoll-Rand, Norfolk Southern, Oshkosh, Parker-Hannifin, Rockwell Automation, Terex, Textron, Trinity Industries, and Xylem. 26 Issuer Purchases of Common Stock Month Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (1) Maximum Dollar Value of Shares That May Yet Be Purchased Under the Programs (1) In millions October 2023 — $ — — $ 588 November 2023 819,918 $ 111.55 819,918 $ 496 December 2023 565,029 $ 115.92 565,029 $ 431 Total quarter ended December 31, 2023 1,384,947 $ 113.33 1,384,947 $ 431 (1) As of December 31, 2023, approximately $431 million was remaining under the stock repurchase plan.
The Company has historically paid quarterly dividends to shareholders, subject to quarterly approval by our Board of Directors, currently at a rate of approximately $123 million annually. The declaration and payment of future dividends are at the discretion of the Board of Directors.
The Company has historically paid quarterly dividends to shareholders, subject to quarterly approval by our Board of Directors, currently at a rate of approximately $142 million annually. The declaration and payment of future dividends are at the discretion of the Board of Directors.
On February 14, 2023, the Board of Directors reauthorized its stock repurchase program to refresh the amount available for stock repurchases to $750 million of the Company’s outstanding shares. This new stock repurchase authorization supersedes the previous authorization of $750 million, of which approximately $232 million remained at the reauthorization date.
On February 9, 2024, the Board of Directors reauthorized its stock repurchase program to refresh the amount available for stock repurchases to $1 billion of the Company’s outstanding shares. This new stock repurchase authorization supersedes the previous authorization of $750 million, of which approximately $333 million remained at the reauthorization date.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Common Stock of the Company is listed on the New York Stock Exchange under the symbol “WAB.” As of February 10, 2023, there were 180,352,300 shares of Common Stock outstanding held by approximately 103,420 holders of record.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Common Stock of the Company is listed on the New York Stock Exchange under the symbol “WAB.” As of February 9, 2024, there were 177,028,765 shares of Common Stock outstanding held by approximately 96,274 holders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

71 edited+34 added−46 removed39 unchanged
Biggest changeAlthough 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. 39 These forward-looking statements are subject to various risks, uncertainties and assumptions about us, including, among other things: Economic and industry conditions • changes in general economic and/or industry specific conditions, including the impacts of tax and tariff programs, inflation, supply chain disruptions, foreign currency exchange, and industry consolidation; • prolonged unfavorable economic and industry conditions in the markets served by us, including North America, South America, Europe, Australia, Asia and Africa; • decline in demand for freight cars, locomotives, passenger transit cars, buses and related products and services; • reliance on major original equipment manufacturer customers; • original equipment manufacturers’ program delays; • demand for services in the freight and passenger rail industry; • demand for our products and services; • orders either being delayed, canceled, not returning to historical levels, or reduced or any combination of the foregoing; • 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 • changes in market consensus as to what attributes are required for projects to be considered "green" or "sustainable" or negative perceptions regarding determinations in such regard with respect to our Green Finance Framework; Operating factors • supply disruptions; • technical difficulties; • changes in operating conditions and costs; • increases in raw material costs; • successful introduction of new products; • performance under material long-term contracts; • labor availability and relations; • the outcome of our existing or any future legal proceedings, including litigation involving our principal customers and any litigation with respect to environmental matters, asbestos-related matters, pension liabilities, warranties, product liabilities, competition and anti-trust matters or intellectual property claims; • completion and integration of acquisitions; • the development and use of new technology; or • cybersecurity and data protection risks; Competitive factors • the actions of competitors; or • the outcome of negotiations with partners, suppliers, customers or others; Political/governmental factors • political stability in relevant areas of the world, including the impacts of war and conflicts; • future regulation/deregulation of our customers and/or the rail industry; • levels of governmental funding on transit projects, including for some of our customers; 40 • political developments and laws and regulations, including those related to Positive Train Control; • federal and state income tax legislation; • sanctions imposed on countries and persons; or • the outcome of negotiations with governments; COVID-19 factors • the severity and duration of the pandemic; • deterioration of general economic conditions; • shutdown of one or more of our operating facilities; • supply chain and sourcing disruptions; • ability of our customers to pay timely for goods and services delivered; • health of our employees; • ability to retain and recruit talented employees; or • difficulty in obtaining debt or equity financing.
Biggest changeThese forward-looking statements are subject to various risks, uncertainties and assumptions about us, including, among other things: Economic and industry conditions • changes in general economic and/or industry specific conditions, including the impacts of tax and tariff programs, inflation, supply chain disruptions, foreign currency exchange, and industry consolidation; • prolonged unfavorable economic and industry conditions in the markets served by us, including North America, South America, Europe, Australia, Asia and Africa; • decline in demand for freight cars, locomotives, passenger transit cars, buses and related products and services; • reliance on major original equipment manufacturer customers; • original equipment manufacturers’ program delays; • demand for services in the freight and passenger rail industry; • demand for our products and services; • orders either being delayed, canceled, not returning to historical levels, or being reduced, and/or 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; • successful introduction of new products; 39 • performance under material long-term contracts; • labor availability and relations; • the outcome of our existing or any future legal proceedings, including litigation involving our principal customers and any litigation with respect to environmental matters, asbestos-related matters, pension liabilities, warranties, product liabilities, competition and anti-trust matters or intellectual property claims; • completion and integration of acquisitions; • the development and use of new technology; or • cybersecurity and data protection risks; Competitive factors • the actions of competitors; or • the outcome of negotiations with partners, suppliers, customers or others; Political/governmental factors • political stability in relevant areas of the world, including the impacts of war, conflicts, global military action, and acts of terrorism; • future regulation/deregulation of our customers and/or the rail industry; • levels of governmental funding on transit projects, including for some of our customers; • political developments and laws and regulations, including those related to Positive Train Control; • federal and state income tax legislation; • sanctions imposed on countries and persons; or • the outcome of negotiations with governments; 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.
Based on the Company's assessment, the incident has not had a material 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.
Based on the Company's assessment, the incident has not had a significant financial impact and the Company does not believe the incident will have a material impact on its business, operations or financial results. The Company maintains cyber insurance, subject to certain deductibles and policy limitations typical for its size and industry.
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 contract backlog, customer relationships, intellectual property intangibles and trade names, and below-market customer contract liabilities.
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 contract backlog, customer relationships, intellectual property intangibles and trade names.
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 2022, approximately 55% of the Company’s net sales came from customers outside the U.S.
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 2023, approximately 55% of the Company’s Net sales came from customers outside the U.S.
For 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. 29 RESULTS OF OPERATIONS Consolidated Results 2022 COMPARED TO 2021 The following table shows our Consolidated Statements of Operations for the years indicated.
For 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. 29 RESULTS OF OPERATIONS Consolidated Results 2023 COMPARED TO 2022 The following table shows our Consolidated Statements of Operations for the years indicated.
The Company performs its annual impairment test 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.
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.
The significant assumptions used to estimate the value of the intangible assets and below-market customer contract liabilities 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.
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.
ACQUISITIONS During 2022, the Freight Segment made three strategic acquisitions for a combined purchase price of $89 million. Two of the acquisitions are reported in the Digital Electronics product line and one is reported in the Services product line. Each of the acquisitions in 2022 are individually and collectively immaterial.
During 2022, the Company made three strategic acquisitions in the Freight Segment for a combined purchase price of $89 million. 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.
In addition, the Company had approximately $1.7 billion of open purchase orders for which the related goods or services had not been received.
In addition, the Company had approximately $1.3 billion of open purchase orders for which the related goods or services had not been received.
Areas of uncertainty that require judgments, estimates and assumptions include the accounting for allowance for doubtful accounts, inventories, business combinations, goodwill and other intangible assets, warranty reserves, income taxes, and revenue recognition.
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.
The discussion comparing our results for the year ended December 31, 2021 to the year ended December 31, 2020 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, 2021, filed with the SEC on February 17, 2022.
The discussion comparing our results for the year ended December 31, 2022 to the year ended December 31, 2021 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, 2022, filed with the SEC on February 15, 2023.
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.
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.
The Company does not provide any guarantees under these arrangements, does not have an economic interest in our supplier's voluntary participation and does not receive an economic benefit from the financial institutions.
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.
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 and incorporated by reference herein.
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.
At December 31, 2022, the total value of these bank guarantees and letters of credit were $865 million and expire on various dates through 2039. Amounts include interest payments based on contractual terms and the Company’s current interest rate.
At December 31, 2023, the total value of these bank guarantees and letters of credit were $855 million and expire on various dates through 2034. Amounts include interest payments based on contractual terms and the Company’s current interest rate.
Cost of sales for the years ended December 31, 2022 and 2021 included $28 million and $45 million of restructuring costs, respectively, primarily for headcount actions and footprint rationalization in Europe, with the amount in 2022 primarily related to Integration 2.0.
Cost of sales for the years ended December 31, 2023 and 2022 included $25 million and $28 million, respectively, of restructuring costs, primarily related to Integration 2.0 for headcount actions and footprint rationalization in Europe.
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 collections reinvested for any applicable periods. Net cash received/(remitted) from the revolving receivables program was $60 million and $(53) million for the years ended December 31, 2022 and 2021, respectively.
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)/received from the revolving receivables program was $(60) million and $60 million for the years ended December 31, 2023 and 2022, respectively.
The combined summarized financial information eliminates all intercompany balances and transactions among Wabtec Netherlands and Westinghouse Air Brake Technologies Corporation as well as all equity in earnings from and investments in any subsidiary of Westinghouse Air Brake Technologies Corporation, other than Wabtec Netherlands, which we refer to below as the Non-Issuer and Non-Guarantor Subsidiaries.
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.
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, 2022, $7 million of the Company's $541 million cash balance was classified as restricted cash.
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 35 tax impacts. As of December 31, 2023, approximately $5 million of the Company's $620 million cash balance was classified as restricted cash.
Unaudited Issuer and Guarantor In millions Twelve Months Ended December 31, 2021 Net sales to non-issuer and non-guarantor subsidiaries $ 33 Purchases from non-issuer and non-guarantor subsidiaries 82 Unaudited Issuer and Guarantor In millions December 31, 2021 Amount due from/(to) non-issuer and non-guarantor subsidiaries $ (7,703) 38 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.
Unaudited Issuer and Guarantor In millions Year Ended December 31, 2023 Net sales to non-guarantor subsidiaries $ 38 Purchases from non-guarantor subsidiaries 153 Unaudited Issuer and Guarantor In millions December 31, 2023 Amount due to non-guarantor subsidiaries $ 11,112 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.
On March 31, 2021, the Services product line of the Freight Segment acquired Nordco, a leading North American supplier of new, rebuilt and used maintenance of way equipment. The Company also made acquisitions in prior periods not listed above which are individually and collectively immaterial.
On March 31, 2021, the Company acquired Nordco, a leading North American supplier of new, rebuilt and used maintenance of way equipment. The Company also made acquisitions during 2021 not listed above which are individually and collectively immaterial.
The following tables present summarized financial information of Wabtec Netherlands, as the issuer of the Euro Notes, and Westinghouse Air Brake Technologies Corporation, as the parent guarantor, on a combined basis.
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.
Although open purchase orders are considered enforceable and legally binding, their terms generally allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services. (2) Operating leases represent multi-year obligations for rental of facilities and equipment.
Although open purchase orders are considered enforceable and legally binding, their terms generally allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.
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.
In addition, specific reserves are established for known warranty issues and their estimable losses. 41 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.
Additionally, the Company utilizes the revolving receivables program and supply chain financing program described below for added flexibility as part of our liquidity management strategy.
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.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Wabtec is one of the world’s largest providers of value-added, technology-based locomotives, equipment, systems and services for the global freight rail and passenger transit industries, and also serves customers in the mining, marine, and industrial markets.
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.
In 2022, cash used for financing activities was $(708) million, which included $(473) million for share repurchases, $(111) million of dividend payments, $(101) million of contingent consideration payments related to the GE Transportation acquisition, and net debt payments of $(30) million, which includes the partial redemption of the 2024 Notes mentioned below.
In 2022, cash used for financing activities was $(708) million which included $(30) million from net changes in debt, $(473) million of stock repurchases, $(111) million of dividend payments, and $(101) million of contingent consideration payments related to the GE Transportation acquisition.
The combined summarized financial information eliminates intercompany balances and transactions among the parent and guarantor subsidiaries and equity in earnings and investments in any guarantor subsidiaries or non-guarantor subsidiaries.
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.
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 2022, Wabtec achieved a multitude of accomplishments while successfully navigating volatile market conditions.
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.
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. On June 3, 2021, Wabtec Transportation Netherlands B.V.
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.
The above table does not reflect uncertain tax positions of $33 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.
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.
These actions include implementing price escalations and surcharges, driving operational efficiencies through various cost mitigation efforts and discretionary spend management, strategically sourcing materials, reviewing and modifying distribution logistics, and accelerating integration synergies where possible, including Integration 2.0.
These actions include implementing price escalations and surcharges, driving operational efficiencies through various cost mitigation efforts and discretionary spend management, strategically sourcing materials, reviewing and modifying distribution logistics, and accelerating integration synergies through Integration 2.0. A portion of our workers are represented by labor unions.
Management also launched Integration 2.0 to further poise the company for operational efficiencies into the future. During the first quarter of 2022, Wabtec announced Integration 2.0, a three-year strategic initiative to target incremental run rate synergies estimated to be between $75 million and $90 million by 2025.
During the first quarter of 2022, Wabtec announced Integration 2.0, a three-year strategic initiative to target incremental run rate synergies estimated to be between $75 million and $90 million in 2025.
The Company anticipates that it will incur one-time charges of approximately $135 million to $165 million related to this initiative. The estimate could change based on the specific programs approved or changes to the scope of the review.
The Company anticipates that it will incur one-time restructuring charges of approximately $135 million to $165 million related to this initiative, of which approximately $118 million has been incurred through December 31, 2023. Total estimated initiative charges could change based on the specific programs approved or changes to the scope of the review.
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 and indefinite-lived intangibles are required to be tested for impairment at least annually.
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.
Unaudited Westinghouse Air Brake Technologies Corp. and Guarantor Subsidiaries In millions Year Ended December 31, 2022 Net sales to Non-Guarantor Subsidiaries $ 763 Purchases from Non-Guarantor Subsidiaries 1,143 Unaudited Westinghouse Air Brake Technologies Corp. and Guarantor Subsidiaries In millions December 31, 2022 Amount due (to)/from Non-Guarantor Subsidiaries $ (6,821) Summarized Financial Information—Euro Notes The obligations under Wabtec Netherlands’ Euro Notes are fully and unconditionally guaranteed by the Company.
Unaudited Parent Company and Guarantor Subsidiaries In millions Year Ended December 31, 2023 Net sales to non-guarantor subsidiaries $ 956 Purchases from non-guarantor subsidiaries $ 1,571 Unaudited Parent Company and Guarantor Subsidiaries In millions December 31, 2023 Amount due to non-guarantor subsidiaries $ 10,208 Summarized Financial Information—Euro Notes The obligations under Wabtec Netherlands’ Euro Notes are fully and unconditionally guaranteed by the Parent Company.
Additional 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, 2022, the Company held approximately $541 million of cash, cash equivalents, and restricted cash.
Additional 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.
(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 expects to contribute $2 million to pension plan investments in 2023.
(2) Operating leases represent multi-year obligations for rental of facilities and equipment. 38 (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 compares inventory components to prior year sales history, current backlog and anticipated future requirements. To the extent that inventory parts exceed estimated usage and demand, a reserve is recognized 41 to reduce the carrying value of inventory.
The Company compares inventory components to prior year sales history, current backlog and 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.
Guarantor Summarized Financial Information—US Notes The obligations under the Company's US Notes have been fully and unconditionally guaranteed by certain of the parent company's U.S. subsidiaries. Each guarantor is 100% owned by the parent company, 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.
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.
Operating expenses Total operating expenses increased $36 million, or 2.4%, for the year ended December 31, 2022 compared to the same period in 2021. Operating expenses as a percentage of sales was 18.3% and 19.1% for the years ended December 31, 2022 and 2021, respectively.
Operating expenses as a percentage of sales was 17.3% and 18.3% for the years ended December 31, 2023 and 2022, respectively. Selling, general and administrative expenses ("SG&A") increased $110 million for the year ended December 31, 2023 compared to the same period in 2022.
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.
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 establishes a recognition and measurement threshold to determine the amount of tax benefit that should be recognized related to uncertain tax positions.
For the year ended December 31, In millions 2022 2021 Net sales: Sales of goods $ 6,459 $ 6,205 Sales of services 1,903 1,617 Total net sales 8,362 7,822 Cost of sales: Cost of goods (4,791) (4,545) Cost of services (1,031) (908) Total cost of sales (5,822) (5,453) Gross profit 2,540 2,369 Operating expenses: Selling, general and administrative expenses (1,029) (1,030) Engineering expenses (209) (176) Amortization expense (291) (287) Total operating expenses (1,529) (1,493) Income from operations 1,011 876 Other income and expenses: Interest expense, net (186) (177) Other income, net 29 38 Income before income taxes 854 737 Income tax expense (213) (172) Net income 641 565 Less: Net income attributable to noncontrolling interest (8) (7) Net income attributable to Wabtec shareholders $ 633 $ 558 The following table shows the major components of the change in net sales in 2022 from 2021: In millions Freight Segment Transit Segment Total 2021 Net Sales $ 5,239 $ 2,583 $ 7,822 Acquisitions 83 4 87 Foreign Exchange (62) (242) (304) Organic 752 5 757 2022 Net Sales $ 6,012 $ 2,350 $ 8,362 The following discussion compares our results for the year ended December 31, 2022 to the year ended December 31, 2021.
For the year ended December 31, In millions 2023 2022 Net sales: Sales of goods $ 7,647 $ 6,459 Sales of services 2,030 1,903 Total net sales 9,677 8,362 Cost of sales: Cost of goods (5,581) (4,791) Cost of services (1,152) (1,031) Total cost of sales (6,733) (5,822) Gross profit 2,944 2,540 Operating expenses: Selling, general and administrative expenses (1,139) (1,029) Engineering expenses (218) (209) Amortization expense (321) (291) Total operating expenses (1,678) (1,529) Income from operations 1,266 1,011 Other income and expenses: Interest expense, net (218) (186) Other income, net 44 29 Income before income taxes 1,092 854 Income tax expense (267) (213) Net income 825 641 Less: Net income attributable to noncontrolling interest (10) (8) Net income attributable to Wabtec shareholders $ 815 $ 633 The following table shows the major components of the change in net sales in 2023 from 2022: In millions Freight Segment Transit Segment Total 2022 Net Sales $ 6,012 $ 2,350 $ 8,362 Acquisitions 109 — 109 Foreign Exchange (23) 25 2 Organic 864 340 1,204 2023 Net Sales $ 6,962 $ 2,715 $ 9,677 The following discussion compares our results for the year ended December 31, 2023 to the year ended December 31, 2022.
The following is a summary of selected cash flow information and other relevant data: For the year ended December 31, In millions 2022 2021 Cash provided by (used for): Operating activities $ 1,038 $ 1,073 Investing activities $ (235) $ (540) Financing activities $ (708) $ (653) Operating activities .
The following is a summary of selected cash flow information and other relevant data: For the year ended December 31, In millions 2023 2022 Cash provided by (used for): Operating activities $ 1,201 $ 1,038 Investing activities $ (492) $ (235) Financing activities $ (633) $ (708) Operating activities In 2023, cash provided by operating activities was $1,201 million, primarily from $1,298 million attributable to Net income and other changes in the related statements of income amounts.
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 guarantor. 37 Summarized Statement of Income Unaudited Issuer and Guarantor In millions Twelve Months Ended December 31, 2022 Net sales $ 437 Gross profit 68 Net loss attributable to Wabtec shareholders (318) Summarized Balance Sheets Unaudited Issuer and Guarantor In millions December 31, 2022 December 31, 2021 Current assets $ 264 $ 217 Noncurrent assets $ 770 $ 770 Current liabilities $ 733 $ 479 Long-term debt $ 3,740 $ 4,044 Other non-current liabilities $ 128 $ 207 The following is a description of the transactions between the combined Westinghouse Air Brake Technologies Corp. and Wabtec Netherlands, with the subsidiaries of Westinghouse Air Brake Technologies Corp., other than Wabtec Netherlands, none of which are guarantors of the Euro Notes.
Summarized Statement of Income Unaudited Issuer and Guarantor In millions Year Ended December 31, 2023 Net sales $ 562 Gross profit $ 104 Net loss attributable to Wabtec shareholders $ (370) 37 Summarized Balance Sheet Unaudited Issuer and Guarantor In millions December 31, 2023 December 31, 2022 Current assets $ 493 $ 264 Noncurrent assets $ 651 $ 770 Current liabilities $ 1,272 $ 733 Long-term debt $ 3,287 $ 3,740 Other non-current liabilities $ 84 $ 128 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.
Cost of sales for the years ended December 31, 2022 and 2021 included $43 million and $53 million, respectively, of restructuring costs primarily for footprint rationalization and headcount actions, with the amount in 2022 primarily related to Integration 2.0.
Cost of sales for the years ended December 31, 2023 and 2022 included $38 million and $43 million, respectively, of restructuring costs primarily for footprint rationalization and headcount actions, primarily related to Integration 2.0. Operating expenses Total operating expenses increased $149 million, or 9.7%, for the year ended December 31, 2023 compared to the same period in 2022.
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.
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. 40 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.
Amortization expense increased $4 million, due to acquisitions. Interest expense, net Interest expense, net, increased $9 million to $186 million for the year ended December 31, 2022 over the same period in 2021 primarily attributable to higher average interest rates.
Interest expense, net Interest expense, net, increased $32 million to $218 million for the year ended December 31, 2023 over the same period in 2022 primarily attributable to higher effective interest rates and higher average overall debt balances in the current year.
Restructuring costs included within SG&A were $9 million and $14 million for the years ended December 31, 2022 and 2021, respectively, and were primarily for headcount actions for footprint rationalization in Europe, with the amount in 2022 primarily related to Integration 2.0.
The increase is primarily from costs incurred to support the higher sales volume, higher employee compensation and benefit costs, and higher professional services spend. Restructuring costs included in SG&A were $18 million and $9 million for the years ended December 31, 2023 and 2022, respectively, primarily for headcount actions and footprint rationalization programs, primarily related to Integration 2.0.
The increase is primarily due to the increase in sales and increased materials, labor and transportation costs. Cost of sales as a percentage of sales was 69.6% and 69.7% for the years ended December 31, 2022 and 2021, respectively.
Cost of sales Cost of sales for the year ended December 31, 2023 increased by $911 million, or 15.6%, to $6.73 billion compared to the same period in 2022. The increase is primarily due to the increase in Net sales. Cost of sales as a percentage of sales was 69.6% for the years ended December 31, 2023 and 2022.
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. 36 Summarized Statement of Income Unaudited Westinghouse Air Brake Technologies Corp. and Guarantor Subsidiaries In millions Year Ended December 31, 2022 Net sales $ 4,761 Gross profit 1,111 Net income attributable to Wabtec shareholders 282 Summarized Balance Sheets Unaudited Westinghouse Air Brake Technologies Corp. and Guarantor Subsidiaries In millions December 31, 2022 December 31, 2021 Current assets $ 1,328 $ 1,057 Noncurrent assets $ 2,384 $ 2,344 Current liabilities $ 1,881 $ 1,414 Long-term debt $ 3,209 $ 3,483 Other non-current liabilities $ 551 $ 592 The following is a description of the transactions between the combined Westinghouse Air Brake Technologies Corp. and guarantor subsidiaries with non-guarantor subsidiaries.
Summarized Statement of Income Unaudited Parent Company and Guarantor Subsidiaries In millions Year Ended December 31, 2023 Net sales $ 5,742 Gross profit $ 1,454 Net income attributable to Wabtec shareholders $ 481 36 Summarized Balance Sheet Unaudited Parent Company and Guarantor Subsidiaries In millions December 31, 2023 December 31, 2022 Current assets $ 1,513 $ 1,328 Noncurrent assets $ 2,196 $ 2,384 Current liabilities $ 2,443 $ 1,881 Long-term debt $ 2,739 $ 3,209 Other non-current liabilities $ 662 $ 551 The following is a description of the transactions between the combined Parent Company and guarantor subsidiaries with non-guarantor subsidiaries.
Net sales Net sales for the year ended December 31, 2022 increased by $540 million, or 6.9%, to $8.36 billion compared to the same period in 2021.
Other income, net Other income, net, increased $15 million to $44 million for the year ended December 31, 2023 compared to the same period in 2022.
The increase is primarily due to higher costs to support the increase in sales volumes, incremental expense from 32 acquisitions and higher technology costs. Engineering expense increased $36 million primarily due to investments in new technology and incremental expense from acquisitions.
Engineering expense increased $9 million primarily due to investments in new technology and Amortization expense increased $30 million, due to Portfolio Optimization costs and increased expense from acquisitions.
Organic sales increased $757 million which is primarily attributable to the Freight Segment driven by an increase in Services sales from higher locomotive modernizations and a larger active locomotive fleet, and an increase in Equipment sales due to higher international locomotive sales and higher mining equipment sales.
Freight Segment organic sales increased by $864 million primarily driven by Services sales from higher parts sales and higher deliveries of locomotive modernizations and overhauls, Equipment sales from higher North American and international locomotive sales and increased mining sales, and Components sales due to a higher railcar build and growth in industrial end-markets.
During the second quarter of 2022, the Company redeemed $25 million of principal from the 2024 Notes plus a premium and the related accrued interest. On August 15, 2022, the Company amended, restated and replaced the then-existing credit agreement.
During the second quarter of 2022, the Company redeemed $25 million of principal from the 2024 Notes plus a premium and the related accrued interest. The Company borrows and repays against the revolving credit facility for added flexibility in liquidity to manage cash during the operating cycle.
See Note 11 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report for additional information. 31 Freight Segment The following table shows our Consolidated Statements of Operations for our Freight Segment: For the year ended December 31, In millions 2022 2021 Net sales: Sales of goods $ 4,125 $ 3,646 Sales of services 1,887 1,593 Total net sales 6,012 5,239 Cost of sales: Cost of goods (3,098) (2,682) Cost of services (1,018) (890) Total cost of sales (4,116) (3,572) Gross profit 1,896 1,667 Operating expenses (1,032) (950) Income from operations ($) $ 864 $ 717 Income from operations (% of net sales) 14.4 % 13.7 % The following table shows the major components of the change in net sales for the Freight Segment in 2022 from 2021: In millions 2021 Net Sales $ 5,239 Acquisitions 83 Foreign Exchange (62) Changes in Sales by Product Line: Services 347 Equipment 251 Components 96 Digital Electronics 58 2022 Net Sales $ 6,012 Net sales Freight Segment sales increased by $773 million, or 14.8%, to $6.01 billion, compared to the same period in 2021 which was primarily attributable to an increase in Services sales from higher locomotive modernizations and a larger active locomotive fleet, and an increase in Equipment sales due to higher international locomotive sales and higher mining equipment sales.
See Note 11 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report for additional information. 31 Freight Segment The following table shows our Consolidated Statements of Operations for our Freight Segment for the periods indicated: For the year ended December 31, In millions 2023 2022 Change % Change Net sales: Sales of goods $ 4,945 $ 4,125 $ 820 19.9 % Sales of services 2,017 1,887 130 6.9 % Total net sales 6,962 6,012 950 15.8 % Cost of sales: Cost of goods (3,630) (3,098) 532 17.2 % Cost of services (1,142) (1,018) 124 12.2 % Total cost of sales (4,772) (4,116) 656 15.9 % Cost of Sales (% of Net sales) 68.5 % 68.5 % — Gross profit 2,190 1,896 294 15.5 % Operating expenses (1,119) (1,032) 87 8.4 % Income from operations ($) $ 1,071 $ 864 $ 207 24.0 % Income from operations (% of Net sales) 15.4 % 14.4 % 1.0 The following table shows the major components of the change in net sales for the Freight Segment in 2023 from 2022: In millions 2022 Net Sales $ 6,012 Acquisitions 109 Foreign Exchange (23) Changes in Sales by Product Line: Services 444 Equipment 250 Components 150 Digital Intelligence 20 2023 Net Sales $ 6,962 Net sales Freight Segment organic sales increased by $864 million driven primarily by: • Services sales from higher deliveries of locomotive modernizations and overhauls and higher parts sales • Equipment sales from higher North America and international locomotive sales and increased mining sales • Components sales from higher original equipment railcar build and increased market share for certain products due to product availability and increased demand for industrial products Additionally, Freight Segment sales also benefited from our strategic acquisitions, primarily from L&M Radiator Inc., by $109 million.
The table below provides a summary of contractual obligations and off-balance sheet arrangements as of December 31, 2022: In millions Total 2023 2024-25 2026-27 2028+ Operating activities: Purchase obligations (1) $ 168 $ 157 $ 10 $ 1 $ — Operating leases (2) 357 61 99 68 129 Pension and postretirement benefit payments (3) 189 17 35 38 99 Interest payments (4) 607 153 229 163 62 Financing activities: Long-term debt 4,023 251 1,237 1,285 1,250 Dividends to shareholders (5) 123 123 — — — Contingent consideration (6) 154 105 49 — — Total $ 5,621 $ 867 $ 1,659 $ 1,555 $ 1,540 (1) Purchase obligations represent non-cancelable contractual obligations at December 31, 2022.
The table below provides a summary of contractual obligations and off-balance sheet arrangements as of December 31, 2023: In millions Total 2024 2025-26 2027-28 2029+ Operating activities: Purchase obligations (1) $ 157 $ 137 $ 19 $ 1 $ — Operating leases (2) 341 61 102 64 114 Pension and postretirement benefit payments (3) 218 20 40 43 115 Interest payments (4) 501 140 225 136 — Financing activities: Long-term debt 4,084 781 1,250 2,053 — Dividends to shareholders (5) 142 142 — — — Contingent consideration (6) 42 42 — — — Total $ 5,485 $ 1,323 $ 1,636 $ 2,297 $ 229 (1) Purchase obligations represent non-cancelable contractual obligations at December 31, 2023.
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 .
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.
Of this amount, approximately $88 million was held within the United States and approximately $453 million was held outside 35 of the United States, primarily in India, China, Europe, and Brazil.
As of December 31, 2023, the Company held approximately $620 million of cash, cash equivalents, and restricted cash, of which approximately $190 million was held within the United States and approximately $430 million was held outside of the United States, primarily in India, Europe, Brazil, and Kazakhstan.
Cost of sales as a percentage of sales was 72.6% and 72.8% for the years ended December 31, 2022 and 2021, respectively, representing a 0.2 percentage point decrease.
Operating expenses Operating expenses as a percentage of sales for the Transit Segment were 17.1% and 17.6% for the years ended December 31, 2023 and 2022, respectively.
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.
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.
Other income, net Other income, net, decreased $9 million to $29 million for the year ended December 31, 2022 compared to the same period of 2021. The decrease is primarily attributable to lower foreign exchange gains and lower equity income in the current year compared to the prior year.
The gain was partially offset by lower foreign exchange gains and lower equity income in the current year compared to the prior year. Income taxes The effective income tax rate was 24.5% and 25.0% for the years ended December 31, 2023 and 2022, respectively. The decrease in the effective tax rate in 2023 is primarily the result of earnings mix.
Supply chain disruptions and labor availability have caused component, raw material and chip shortages 28 resulting in an adverse effect on the timing of the Company’s revenue generation. Additionally, broad-based inflation, escalation of diesel, metals, energy and other commodity costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations all continue to impact our results.
Additionally, broad-based inflation, metals, energy and other commodity costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations all continue to impact our results. The Company utilizes various mitigating actions intended to lessen the impact of macroeconomic volatility.
(4) Interest payments on the Senior Notes are based on interest rates in effect as of December 31, 2022 and are calculated on debt with maturities that extend to 2028. (5) Shareholder dividends are subject to approval by the Company’s Board of Directors, currently at an annual rate of approximately $123 million.
The Company expects to contribute $2 million to pension plan investments in 2024. (4) Interest payments on the Senior Notes and the amount borrowed under the Delayed Draw Term Loan as of December 31, 2023 are based on interest rates in effect as of December 31, 2023 and are calculated on debt with maturities that extend to 2028.
(6) Contingent consideration represents the total remaining payable to General Electric (GE) resulting from the 2019 acquisition of GE Transportation. The timing of the cash payments to GE is directly related to the future timing of tax benefits received by the Company and could change.
The timing of the cash payments to GE is directly related to the future timing of tax benefits received by the Company and could change. The above table does not reflect uncertain tax positions of $40 million, the timing of which are uncertain.
During 2022, the Company incurred one-time charges related to the initiative of approximately $46 million, primarily for employee-related costs associated with site consolidations in Europe and costs related to the restructuring of the North America distribution channels. See Note 21 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report for additional information.
Charges related to Integration 2.0 of 28 $46 million were recorded during the twelve months ended December 31, 2022, primarily for employee-related costs associated with site consolidations in Europe and costs related to the restructuring of North America distribution channels.
In 2021, cash used for financing activities was $(653) million which included, $(300) million for share repurchases, net debt payments of $(161) million, primarily resulting from the repayment of the 364 Day Facility and issuance of the Euro Notes mentioned below, $(99) million of contingent consideration payments related to the GE Transportation acquisition and $(92) million of dividend payments.
Financing activities 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.
Investing activities. In 2022 and 2021, cash used for investing activities was $(235) million and $(540) million, respectively. The major components of the cash outflow in 2022 was planned additions to property, plant, and equipment of $(149) million for continued investments in our facilities and manufacturing processes, and $(89) million in net cash paid for acquisitions.
During 2023, Wabtec also used $(186) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes. During 2022, Wabtec made three strategic acquisitions for a combined purchase price of $(89) million and used $(149) million for additions to property, plant and equipment.
Amortization expense increased $5 million due to acquisitions. 33 Transit Segment The following table shows our Consolidated Statements of Operations for our Transit Segment: For the year ended December 31, In millions 2022 2021 Net sales $ 2,350 $ 2,583 Cost of sales (1,706) (1,881) Gross profit 644 702 Operating expenses (413) (464) Income from operations ($) $ 231 $ 238 Income from operations (% of net sales) 9.8 % 9.2 % The following table shows the major components of the change in net sales for the Transit Segment in 2022 from 2021: In millions 2021 Net Sales $ 2,583 Foreign Exchange (242) Acquisitions 4 Changes in Sales by Product Line: Original Equipment Manufacturing (3) Aftermarket 8 2022 Net Sales $ 2,350 Net sales Transit Segment sales for the year ended December 31, 2022 decreased by $233 million, or 9.0%, to $2.35 billion compared to the same period in 2021, with foreign exchange rates being the primary driver of the decrease.
Freight Segment operating expenses increased by $87 million primarily driven by: • Higher SG&A expenses of $56 million resulting from higher costs to support increased sales volume, higher employee compensation and benefit costs and incremental expense from acquisitions • Higher amortization expense of $28 million, due to Portfolio Optimization costs and increased expense from acquisitions Freight Operating expenses for the year ended December 31, 2023 includes $28 million of restructuring costs related to Integration 2.0 and Portfolio Optimization. 33 Transit Segment The following table shows our Consolidated Statements of Operations for our Transit Segment for the periods indicated: For the year ended December 31, In millions 2023 2022 Change % Change Net sales $ 2,715 $ 2,350 $ 365 15.5 % Cost of sales (1,961) (1,706) 255 14.9 % Cost of sales (% of Net sales) 72.2 % 72.6 % (0.4) Gross profit 754 644 110 17.1 % Operating expenses (465) (413) 52 12.6 % Income from operations ($) $ 289 $ 231 $ 58 25.1 % Income from operations (% of net sales) 10.7 % 9.8 % 0.9 The following table shows the major components of the change in net sales for the Transit Segment in 2023 from 2022: In millions 2022 Net Sales $ 2,350 Foreign Exchange 25 Changes in Sales by Product Line: Original Equipment Manufacturing 132 Aftermarket 208 2023 Net Sales $ 2,715 Net sales Transit segment organic sales increased $340 million driven by strong Aftermarket and Original Equipment Manufacturing sales primarily as a result of increased demand for heating, ventilation and air conditioning (HVAC) and brake systems, increased infrastructure investment, and the easing of supply chain disruptions.
Restructuring costs included in SG&A were $9 million and $25 million for the years ended December 31, 2022 and 2021, respectively, and were primarily for headcount actions and footprint rationalization programs, with the amount in 2022 primarily related to Integration 2.0. Engineering expense increased $33 million primarily due to investments in new technology and incremental costs from acquisitions.
Transit Segment operating expenses increased by $52 million primarily driven by: • Higher SG&A expenses of $44 million to support higher sales volume and higher employee compensation and benefit costs, partially offset by benefits from structured cost actions taken through prior years' restructuring and integration projects, including Integration 2.0 • An increase in engineering expense of $6 million due to investments in new technology Transit Operating expenses for the years ended December 31, 2023 and 2022, includes $15 million and $9 million, respectively, of restructuring costs primarily related to Integration 2.0 for footprint rationalization and headcount actions in Europe. 34 Liquidity and Capital Resources Liquidity is provided by operating cash flows and borrowings under the Company’s Senior Notes and unsecured credit facility with a consortium of commercial banks.
Cost of sales Transit Segment cost of sales for the year ended December 31, 2022 decreased by $175 million, or 9.3%, to $1.71 billion compared to the same period in 2021. The decrease is primarily due to the decreased sales discussed above, decreased restructuring costs and the effect of foreign exchange rates.
Net sales Net sales for the year ended December 31, 2023 increased by $1.32 billion, or 15.7%, to $9.68 billion compared to the same period in 2022. Organic sales increased $1.20 billion which was attributable to both the Freight and Transit Segments.
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Through leveraging our installed customer base and our innovative scalable technologies, Wabtec was able to secure several key contracts globally that position the Company for long-term revenue generation.
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Business Update During 2023, Wabtec continued to execute on our value creation framework by signing strategic orders for locomotive modernizations in North America that will span multiple years, new locomotives with a North American railroad, new locomotives in Brazil, long-term supply and maintenance agreement for brakes in India, and mining drive systems in high altitude applications.
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These contracts include the largest locomotive modernization deal in rail industry history, orders for our FLXdrive battery-electric powered locomotives, international locomotive orders, as well as a North American locomotive order with a Class I railroad.
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We announced our largest certified pre-owned order for 69 locomotives for a North American customer and won a contract to supply pantograph and Passenger Information Systems for up to 504 transit cars.
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Wabtec executed on calculated market expansions through several strategic acquisitions that will allow us to leverage current and future product and service offerings for greater market share.
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Wabtec completed the strategic acquisition of L&M Radiator, Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers for the mining sector, and acquired the remaining 50% ownership interest in Lokomotiv Kurastyru Zauyty (LKZ), a locomotive manufacturing and assembly plant in Kazakhstan.
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Wabtec continued significant progress on our sustainability initiatives as exhibited in our completed green bond allocation and with our battery electric locomotive being recognized for sustainable innovation by the Business Intelligence Group and awarded “Commercial Technology of the Year” at the Platts Global Energy Awards.
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We delivered our 500th locomotive in Kazakhstan for the CIS region and our 500th locomotive to Indian Railways, which was a significant milestone in our 10-year contract. Our senior unsecured debt was upgraded by Moody's, which reflects resiliency of the business, our balance sheet strength and strong cash generation.
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The unfavorable global economic conditions driven by the impacts of the pandemic and supply chain disruptions, and further intensified by the Russian invasion of Ukraine, continue to have an adverse impact on our operations and business results. Impacts for the years ended December 31, 2022, and 2021 are discussed in more detail in the Results of Operations section below.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt December 31, 2022, the Company's interest risk related to variable-rate debt is limited to the amounts borrowed under the multi-currency Revolving Credit Facility. At December 31, 2022 and 2021, the Company had no outstanding variable rate debt.
Biggest changeAt December 31, 2023, the Company's interest risk related to variable-rate debt is limited to the amounts borrowed under the Restated Credit Agreement, which was limited to the 42 amount borrowed under the Delayed Draw Term Loan. At December 31, 2022, the Company had no outstanding variable rate debt.
Refer to “Financial Derivatives and Hedging Activities” in Notes 2, 17 and 20 of “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report for more information regarding foreign currency exchange risk and sales by geographic area. 43
Refer to "Summary of Significant Account Policies" in Note 2, “Fair Value Measurement and Derivative Instruments” in Note 17 and "Segment Information" in Note 19 of “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report for more information regarding foreign currency exchange risk and sales by geographic area. 43

Other WAB 10-K year-over-year comparisons