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 and applications. Our highly engineered rail and transit products, which are intended to enhance safety, improve productivity and reduce maintenance costs for customers, can be found on most locomotives, freight cars, passenger transit cars, and buses around the world. Our core products and services are essential in the safe and efficient operation of freight rail and passenger transit vehicles. Wabtec is a global company with operations in over 50 countries, and our products can be found in more than 100 countries throughout the world. In 2025, approximately half of the Company’s Net sales came from customers outside the United States.
Wabtec’s long-term financial goals are to increase revenues through a focused growth strategy, including product innovation and new technologies, global and market expansion, aftermarket products and services, and strategic acquisitions, to increase margins through strict attention to cost controls, to drive improved efficiencies across the business, to drive strong cash flow conversion, and to maintain a strong credit profile while minimizing our overall cost of capital. In addition, Management evaluates the Company’s current operational performance through measures such as safety, quality and on-time delivery.
The Company primarily serves the worldwide freight and transit rail industries. Our operating results are largely dependent on the level of activity, financial condition and capital spending plans of railroads and passenger transit agencies around the world, and transportation equipment manufacturers who serve those markets. Many factors influence these industries, including general economic conditions; traffic volumes, as measured by freight carloads and passenger ridership; number of locomotives and railcars in operation; government spending on public transportation; and investment in new technologies. In general, trends such as urbanization and growth in developing markets, sustainability and environmental awareness, investment in technology solutions, an aging equipment fleet, and growth in global trade are expected to drive continued investment in freight rail and passenger transit.
The Company monitors a variety of factors and statistics to gauge market activity. Freight rail markets around the world are driven primarily by overall economic conditions and activity, while Transit markets are driven primarily by government funding and passenger ridership. Changes in these market drivers can cause fluctuations in demand for Wabtec's products and services.
Business Update
During the fourth quarter of 2025, Wabtec signed $2.2 billion in new locomotive orders in North America, which included $1.3 billion for locomotive modernizations and $0.9 billion for new locomotives. Also during the fourth quarter, Digital Intelligence secured $75 million of PTC and KinetiX orders in key international markets. In the third quarter of 2025, Wabtec announced an agreement with National Company Kazakhstan Temir Zholy ("KTZ"), the national railway of Kazakhstan, to deliver Evolution Series locomotives and provide long-term service support. The multi-national order, valued by the Company at approximately $4.2 billion, marks the largest locomotive agreement in Wabtec's history. Wabtec also continued to drive recurring revenue in the global market by winning a new service contract in Kazakhstan worth $299 million earlier in 2025. Additionally in the Freight Segment, the first Simandou locomotives reached Guinea, marking the first exports from the Company's India locomotive facility. We also signed a $140 million new locomotive order with a North American Class I railroad, signed new locomotive, mining and service orders in the Asia-Pacific region totaling $127 million, and signed a $125 million ultra class mining order.
During 2025, the Transit Segment signed $140 million in new Transit brake orders, two multi-year transit platform door contracts valued at $85 million and a $47 million order to provide brakes and couplers for servicing a North American customer, among many other orders.
In March of 2025, Moody's upgraded the Senior Notes ratings to Baa2 from Baa3 and changed the outlook to stable from positive, and S&P Global Ratings reaffirmed Wabtec's credit rating at BBB with a stable outlook.
In February 2025, Wabtec announced Integration 3.0, a three-year strategic initiative to target incremental run rate synergies currently estimated to be between $115 million to $140 million by 2028. The scope of the review includes consolidating our footprint via value chain improvement and facility rationalization, reducing headcount, expanding operating capacity in low-cost countries, and streamlining administrative and commercial activities. Management will also consider additional capital investments to further simplify and streamline the business. The Company anticipates that it will incur charges of approximately $125 million to $155 million related to this initiative, of which approximately $80 million to $100 million are expected to be one-time restructuring charges. Estimates for this program could change based on the specific programs approved or changes to the scope of the review. In addition to Integration 3.0, there are other ongoing restructuring initiatives, including Portfolio Optimization and Integration 2.0, focused on driving operational efficiency and improving
profitability while reducing manufacturing complexity. For the years ended December 31, 2025 and 2024, Wabtec incurred $75 million and $65 million, respectively, of restructuring costs primarily for employee-related costs and asset write downs on programs under these initiatives.
Future macroeconomic volatility, changes to tariffs and trade policies, supply chain disruptions, and labor availability, amongst other things, could cause a negative impact on revenue and cost increases resulting in an adverse effect on the Company’s operating 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, including the impact of current tariffs. These actions include implementing price escalations and surcharges, driving operational efficiencies through various cost mitigation efforts and discretionary spend management, strategically sourcing materials, reviewing and modifying distribution logistics, and accelerating integration synergies through our restructuring programs. The Company has experienced increased tariff costs which unfavorably impacted our cash from operations for the year ended December 31, 2025. Although we did not experience a material impact to our results of operations in 2025 because of mitigation efforts, due to the of trade policies, we are to reasonably predict the future impact.
During the first quarter of 2025, Management determined that certain businesses within the Services product line would be better aligned with Management oversight in the Components product line. As such, Sales by product line for 2024 and 2023 have been recast to conform to the current period presentation. These changes were within the Freight Segment and had no impact on Total Freight Segment Sales, Gross profit, or Income from operations.
ACQUISITIONS
On July 1, 2025, the Company acquired Inspection Technologies for approximately $1.788 billion. Inspection Technologies was formerly part of the Scientific Solutions Division of Olympus Corporation, a global leader in nondestructive testing, remote visual inspection and analytical instruments solutions for mission critical assets. On December 1, 2025, the Company acquired Frauscher, a global market leader in train detection, wayside object control solutions and axle counting systems, for approximately $792 million. Also during 2025, the Freight Segment completed two additional acquisitions which were individually and collectively immaterial.
Also during the first quarter of 2025, Wabtec announced a definitive agreement to acquire Dellner Couplers, a global leader in highly engineered safety-critical train connection systems and services for passenger rail rolling stock, for approximately €890 million. The acquisition subsequently closed on February 10, 2026.
Transaction costs incurred for the year ended December 31, 2025 related to completed and announced acquisitions were approximately $49 million.
During 2024, the Company made four strategic acquisitions for a combined purchase price of approximately $168 million, net of cash acquired. Two of the acquisitions are reported in the Transit Segment, one is reported in the Digital Intelligence product line of the Freight Segment and one is reported in the Components product line of the Freight Segment. Each of the acquisitions in 2024 are individually and collectively immaterial.
During the fourth quarter of 2023, the Company purchased the remaining ownership shares of Locomotiv Kurastyru Zuayty ("LKZ"), a locomotive manufacturing and assembly company located in Kazakhstan for $111 million, at which time it became a wholly owned subsidiary of the Company. Prior to this purchase, Wabtec owned 50% of LKZ as a joint venture partner and accounted for its interest as an equity method investment. During the second quarter of 2023, the Company acquired L&M Radiator, Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers for the mining sector, for a purchase price of approximately $245 million. 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.
RESULTS OF OPERATIONS
Consolidated Results
2025 COMPARED TO 2024
The following table shows our Consolidated Statements of Operations for the years indicated.
For the year ended December 31,
In millions
Net sales:
Sales of goods
Sales of services
Total Net sales
Cost of sales:
Cost of goods
Cost of services
Total Cost of sales
Gross profit
Operating expenses:
Selling, general and administrative expenses
Engineering expenses
Amortization expense
Total Operating expenses
Income from operations
Other income and expenses:
Interest expense, net
Other income, net
Income before income taxes
Income tax expense
Net income
Less: Net income attributable to noncontrolling interest
Net income attributable to Wabtec shareholders
The following table shows the major components of the change in Net sales in 2025 from 2024:
In millions
Freight Segment
Transit Segment
Total
2024 Net sales
Acquisitions
Portfolio Optimization (Divestitures/Exits)
Foreign Exchange
Organic
2025 Net sales
The following discussion compares our results for the year ended December 31, 2025 to the year ended December 31, 2024. The discussion comparing our results for the year ended December 31, 2024 to the year ended December 31, 2023 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, 2024, filed with the SEC on February 12, 2025.
Net sales
Net sales for the year ended December 31, 2025 increased by $780 million, or 7.5%, to $11.17 billion compared to the same period in 2024. Organic sales increased $464 million which was attributable to both the Freight and Transit Segments. Freight sales increased primarily due to higher North American locomotive deliveries and higher parts sales. Transit sales increased from higher demand for Aftermarket and Original Equipment Manufacturing products and services driven by increased investments in sustainable infrastructure, fleet expansion and renewals and increased passenger ridership levels. Sales
from acquisitions contributed $355 million, primarily from Inspection Technologies in the Freight Segment, and favorable changes in foreign exchange increased Net sales by $33 million.
Cost of sales
Cost of sales for the year ended December 31, 2025 increased by $340 million, or 4.8%, to $7.36 billion compared to the same period in 2024. The increase is primarily due to the increase in Net sales. Cost of sales as a percentage of Net sales was 65.9% and 67.6% for the years ended December 31, 2025 and 2024, respectively. The improvement in gross margin is attributable to strong productivity and cost management, savings from restructuring initiatives, and the exit of low margin business offerings through Portfolio Optimization. Cost of sales for the year ended December 31, 2025 included $53 million of costs related to purchase price accounting for the step-up of Inspection Technologies and Frauscher inventories to fair value on the respective dates of acquisition. Cost of sales for the years ended December 31, 2025 and 2024 included $12 million and $37 million, respectively, of costs related to restructuring initiatives.
Operating expenses
Total Operating expenses increased $256 million, or 14.6%, for the year ended December 31, 2025 compared to the same period in 2024. Selling, general and administrative expenses ("SG&A") increased $242 million for the year ended December 31, 2025 compared to the same period in 2024. The increase is primarily from costs incurred to support the higher sales volume, transaction costs associated with completed and announced acquisitions, incremental expense from acquisitions, and higher employee compensation and benefit costs, partially offset by the impacts of restructuring initiatives. Transaction costs associated with completed and announced acquisitions included in SG&A were $49 million for the year ended December 31, 2025. SG&A for the year ended December 31, 2025 included $60 million of costs related to restructuring initiatives, including a $38 million loss on disposition of a business associated with Portfolio Optimization. SG&A for the year ended December 31, 2024 included $18 million of costs related to restructuring initiatives. Engineering expenses increased $17 million primarily due to incremental expense from acquisitions and increased investments in new technology.
Interest expense, net
Interest expense, net, increased $24 million to $225 million for the year ended December 31, 2025 over the same period in 2024, primarily due to higher average overall debt balances in the current period, primarily related to the Inspection Technologies acquisition.
Other income, net
Other income, net, increased $22 million to $24 million for the year ended December 31, 2025 compared to the same period in 2024, primarily due to a $19 million net gain on mark-to-market derivatives in the current period associated with the acquisition of Frauscher and anticipated acquisition of Dellner Couplers and lower foreign exchange losses, partially offset by lower equity income.
Income taxes
The effective income tax rate was 25.7% and 24.3% for the years ended December 31, 2025 and 2024, respectively. The year over year increase in the effective tax rate was primarily driven by changes in jurisdictional mix of earnings and the non-deductible loss generated from the divestiture of a business as part of the Portfolio Optimization initiative. See Note 11 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report for additional information.
Freight Segment
The following table shows our Consolidated Statements of Operations for our Freight Segment for the periods indicated:
For the year ended December 31,
In millions
Change
% Change
Net sales:
Sales of goods
Sales of services
Total Net sales
Cost of sales:
Cost of goods
Cost of services
Total Cost of sales
Cost of sales (% of Net sales)
Gross profit
Operating expenses
Income from operations ($)
Income from operations (% of Net sales)
The following table shows the major components of the change in Net sales for the Freight Segment in 2025 from 2024:
In millions
2024 Net sales
Acquisitions
Portfolio Optimization (Divestitures/Exits)
Foreign Exchange
Changes in Net sales by Product Line:
Equipment
Services
Components
Digital Intelligence
2025 Net sales
Net sales
Freight Segment organic sales increased by $307 million driven primarily by Equipment sales from higher North American locomotive deliveries and Services sales from higher parts sales. Components sales were flat as higher sales of industrial products were offset by decreased rail car build in North America. This was partially offset by decreased Digital Intelligence sales, attributable to softness in the North American market. Sales from acquisitions contributed $328 million, primarily from Inspection Technologies, and unfavorable changes in foreign exchange decreased sales by $31 million.
Cost of sales
Freight Segment Cost of sales increased $256 million from higher sales volume, and Cost of sales as a percentage of Net sales decreased 1.5 percentage points. The improvement in gross margin is attributable to strong productivity and cost management, savings from restructuring initiatives and the exit of low margin business offerings through Portfolio Optimization. Cost of sales for the year ended December 31, 2025 included $53 million of costs related to purchase price accounting for the step-up of Inspection Technologies and Frauscher inventories to fair value on the respective dates of acquisition. Cost of sales for the years ended December 31, 2025 and 2024 included $6 million and $18 million, respectively, of costs related to restructuring initiatives.
Operating expenses
Freight Segment Operating expenses increased by $167 million, and operating expenses as a percentage of sales increased 1.1 percentage points, of which $134 million was related to incremental expense from acquisitions. Freight SG&A
expenses for the year ended December 31, 2025 included $47 million of costs related to restructuring initiatives, including a $38 million loss on disposition of a business associated with Portfolio Optimization. Freight SG&A expenses for the year ended December 31, 2024 included $3 million of costs related to restructuring initiatives. SG&A expenses also increased due to higher costs to support increased sales volume and higher employee compensation and benefit costs.
Transit Segment
The following table shows our Consolidated Statements of Operations for our Transit Segment for the periods indicated:
For the year ended December 31,
In millions
Change
% Change
Net sales
Cost of sales
Cost of sales (% of Net sales)
Gross profit
Operating expenses
Income from operations ($)
Income from operations (% of Net sales)
The following table shows the major components of the change in Net sales for the Transit Segment in 2025 from 2024:
In millions
2024 Net sales
Acquisitions
Portfolio Optimization (Divestitures/Exits)
Foreign Exchange
Changes in Net sales by Product Line:
Original Equipment Manufacturing
Aftermarket
2025 Net sales
Net sales
Transit Segment organic sales increased $157 million driven by strong Aftermarket and Original Equipment Manufacturing sales primarily as a result of increased demand for products and services due to fleet expansion and renewals, increased passenger ridership levels and increased investments in sustainable infrastructure. Sales from acquisitions contributed $27 million, and favorable changes in foreign exchange rates increased sales by $64 million.
Cost of sales
Transit Segment Cost of sales increased by $84 million primarily from higher sales volume, and Cost of sales as a percentage of Net sales decreased by 2.1 percentage points. The increase in gross margin is primarily attributable to favorable mix within the Transit Segment, increased productivity and the benefits from Integration 2.0 and 3.0 and Portfolio Optimization. Transit Cost of sales for the years ended December 31, 2025 and 2024 included $6 million and $19 million, respectively, of costs related to restructuring initiatives.
Operating expenses
Transit Segment Operating expenses increased by $44 million and as a percentage of sales increased 0.2 percentage points. The increase in SG&A expenses was primarily to support higher sales volume and higher employee compensation and benefit costs, partially offset by benefits from Integration 2.0 and 3.0. Transit SG&A expenses for the years ended December 31, 2025 and 2024 included $11 million and $13 million, respectively, of costs related to restructuring initiatives. Transit Segment Engineering expenses increased by $11 million due to increased investments in new technology.
Liquidity and Capital Resources
Liquidity is provided by operating cash flows, borrowings under our credit facilities, and proceeds from the Company's Senior Notes. Additionally, the Company utilizes the Revolving Receivables Program and supply chain financing program described below, as well as other short-term financing agreements with certain banks, for added flexibility as part of our liquidity management strategy. The following is a summary of selected cash flow information and other relevant data:
For the year ended
December 31,
In millions
Cash provided by (used for):
Operating activities
Investing activities
Financing activities
Operating activities In 2025, cash provided by operating activities was $1,759 million compared to $1,834 million in 2024. Significant changes to the sources and (uses) of cash for the twelve month periods include the following:
• $116 million from increased Net income;
• $(65) million from changes in inventory due to increased raw material costs, tariffs and in support of higher sales;
• $(62) million from changes in employee related benefit payments; and,
• $(36) million from changes in accounts payable due to the timing of payments.
Investing activities In 2025 and 2024, cash used for investing activities was $(2,747) million and $(343) million, respectively. During 2025, Wabtec acquired Inspection Technologies for net cash of approximately $(1,729) million and Frauscher for net cash of approximately $(765) million. During 2025, Wabtec also used $(260) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes, made two additional strategic acquisitions for net cash of $(26) million and received $20 million upon settlement of foreign currency contracts associated with the Frauscher acquisition. During 2024, Wabtec made four strategic acquisitions for net cash of $(168) million. During 2024, Wabtec also used $(207) million for additions to property, plant and equipment, received $19 million of net proceeds from dispositions of businesses, and received $13 million of proceeds from disposals of property, plant and equipment.
Financing activities In 2025, cash provided by financing activities was $1,031 million, which included $1,484 million from net changes in debt, $(223) million of stock repurchases, $(173) million of dividend payments, $(40) million of payments for income tax withholding on share-based compensation, and $(6) million of distributions to noncontrolling interest. In 2024, cash used for financing activities was $(1,371) million, which included $(64) million from net changes in debt, $(1,097) million of stock repurchases, $(140) million of dividend payments, $(42) million of contingent consideration payments related to the GE Transportation acquisition, $(25) million of payments for income tax withholding on share-based compensation, and $(6) million of distributions to noncontrolling interest.
During the fourth quarter of 2025, the Company entered into the 2025 Term Credit Agreement for a term loan of $500 million, which was utilized for general corporate purposes, including as part of funding for the Frauscher acquisition.
During the second quarter of 2025, the Company entered into the 2025 Credit Agreement, which amended and restated the 2022 Credit Agreement and refinanced the 2024 Credit Agreement. The 2025 Credit Agreement increased the amount available under the Revolving Credit Facility to $2.0 billion and provided a Term Loan Facility of $725 million. The Term Loan Facility was utilized to refinance (i) $250 million of the outstanding Delayed Draw Term Loan under the 2022 Credit Agreement and (ii) $225 million of the outstanding term loan under the 2024 Credit Agreement. During the third quarter of 2025, the remaining $250 million under the Term Loan Facility was drawn and utilized as part of funding for the Inspection Technologies acquisition.
Also during the second quarter of 2025, the Company issued $500 million of Senior Notes due in 2030 (the "2030 Notes") and $750 million of Senior Notes due in 2035 (the "2035 Notes"). Proceeds from the 2030 Notes and cash on hand were utilized to repay the outstanding amount of 3.20% Senior Notes due 2025 at maturity. Proceeds from the 2035 Notes were utilized as part of funding for the Inspection Technologies acquisition.
During the first quarter of 2024, the Company entered into the 2024 Credit Agreement for a term loan of $225 million and issued $500 million of Senior Notes due in 2034 (the "2034 Notes"). Proceeds from the 2034 Notes, combined with the
proceeds from the term loan under the 2024 Credit Agreement and cash on hand, were utilized to repay the outstanding amount of 2024 Notes at maturity.
The Company borrows and repays against the Revolving Credit Facility for added flexibility in liquidity to manage cash during the operating cycle. The proceeds from borrowing and the repayments are shown within the "Proceeds from debt, net of issuance costs" and "Payments of debt" lines, respectively, presented in the Consolidated Statements of Cash Flows. Additional 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, 2025, the Company held approximately $789 million of cash, cash equivalents, and restricted cash, of which approximately $198 million was held within the United States and approximately $591 million was held outside of the United States, primarily in Europe, South Africa, India and China. 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, 2025, approximately $25 million of the Company's $789 million cash balance was classified as restricted cash.
The Company's goal is to maintain an investment-grade credit profile. Rating agencies that are engaged by the Company periodically update our credit ratings as events occur. As of December 31, 2025, the long-term credit ratings assigned to the Company were BBB with a stable outlook by Fitch Ratings, Baa2 with a stable outlook by Moody's Investors Service, and BBB with a stable outlook by S&P Global Ratings.
We or our affiliates may, from time to time, seek to retire or purchase outstanding debt through negotiated or open-market cash purchases, exchanges, or otherwise, and such transactions, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
Revolving Receivables Program
Effective January 1, 2025, the Company utilizes its Revolving Receivables Program to request borrowings from a financial institution against certain collateralized receivables. During the third quarter of 2025, the Company amended the Revolving Receivables Program to increase its availability from $350 million to up to $450 million. The Company collateralizes certain receivables through our bankruptcy-remote subsidiary on a recurring basis. As customers pay their balances, we transfer additional receivables into the program. Borrowings and repayments under the Revolving Receivables Program are included within Proceeds from debt, net of issuance costs and Payments of debt within the Financing activities section of the Consolidated Statements of Cash Flows.
Prior to January 1, 2025, the Company utilized its Revolving Receivables Program to sell certain receivables for up to $350 million on a recurring basis. Net cash proceeds received from the sale of receivables in exchange for cash equal to the gross receivables sold are included in cash from operations within the Consolidated Statements of Cash Flows.
During the year ended December 31, 2025, the Company borrowed and repaid $1,202 million against the collateralized receivables. There were no receivables sold during the year ended December 31, 2025. Net cash payments included in cash from operations from the Revolving Receivables Program was $(20) million for the year ended December 31, 2024. Additional information with respect to the Revolving Receivables Program is included in Note 2 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report.
Supply Chain Financing Program
The Company has entered into supply chain financing arrangements with third-party financial institutions to provide our vendors with enhanced payment options while providing the Company with added working capital flexibility. The Company does not provide any guarantees under these arrangements, does not have an economic interest in our supplier's voluntary participation, does not receive an economic benefit from the financial institutions, and no assets are pledged under the arrangements. The arrangements do not change the payable terms negotiated by the Company and our vendors and does not result in a change in the classification of amounts due as accounts payable in the Consolidated Balance Sheets. Additional information with respect to the Supply Chain Financing Program is included in Note 2 of "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this report.
Intra-Quarter Uncommitted Money Market Line Credit Agreement
During the third quarter of 2024, the Company entered into an uncommitted bilateral money market line credit agreement which provides an aggregate borrowing capacity of $150 million for general business purposes and working capital needs within a quarter.
Total Available Liquidity
For the year ended
December 31,
In millions
Cash and cash equivalents
Revolving Credit Facility
Revolving Receivables Program
Total Available Liquidity
On March 18, 2025, Wabtec announced a definitive agreement to acquire Dellner Couplers, with a purchase price of approximately €890 million. The transaction subsequently closed on February 10, 2026, and was funded with a combination of cash on hand and borrowings under other sources of available liquidity.
In connection with the completed acquisition of Frauscher and the announced definitive agreement to acquire Dellner Couplers, the Company entered into foreign exchange contracts for a notional amount of €1,290 million to mitigate foreign currency exposure associated with the acquisitions. As part of the acquisition of Frauscher, the Company utilized foreign exchange forward contracts with a notional value of €690 million.
Guarantor Summarized Financial Information
Westinghouse Air Brake Technologies Corporation (the “Parent Company”) has issued 3.20% Senior Notes due 2025 (retired in May 2025), 3.45% Senior Notes due 2026, 4.70% Senior Notes due 2028, 4.90% Senior Notes due 2030, 5.611% Senior Notes due 2034, and 5.50% Senior Notes due 2035 (collectively, the “US Notes”).
The obligations under the US Notes issued by the Parent Company have been fully and unconditionally guaranteed by certain of the Parent Company's U.S. subsidiaries ("Guarantor Subsidiaries"), currently comprising GE Transportation, a Wabtec Company, RFPC Holding Corp., Transportation IP Holdings, LLC, Transportation Systems Services Operations Inc., Wabtec Components LLC, Wabtec Holding LLC, Wabtec Railway Electronics Holdings, LLC, Wabtec Transportation Systems, LLC and Wabtec US Rail, Inc.. Each guarantor is 100% owned by the Parent Company, with the exception of GE Transportation, a Wabtec Company, which has 15,000 shares outstanding of Class A Non-Voting Preferred Stock held by General Electric Company. The Euro Notes are issued by Wabtec Transportation Netherlands B.V. ("Wabtec Netherlands") and are fully and unconditionally guaranteed by the Parent Company.
The following tables present summarized financial information of the Parent Company and the Guarantor Subsidiaries on a combined basis. The combined summarized financial information eliminates (i) intercompany balances and transactions among the Parent Company and Guarantor Subsidiaries and (ii) equity in earnings from and investments in any subsidiaries that is not a Guarantor Subsidiary.
The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the Parent Company, as the issuer of the US Notes, and Guarantor Subsidiaries.
Summarized Statement of Income
Unaudited
Parent Company and Guarantor Subsidiaries
In millions
Year Ended December 31, 2025
Net sales
Gross profit
Net loss attributable to Wabtec shareholders
Summarized Balance Sheet
Unaudited
Parent Company and Guarantor Subsidiaries
In millions
December 31, 2025
December 31, 2024
Current assets
Noncurrent assets
Current liabilities
Long-term debt
Other non-current liabilities
The following is a description of the transactions between the combined Parent Company and guarantor subsidiaries with non-guarantor subsidiaries.
Unaudited
Parent Company and Guarantor Subsidiaries
In millions
Year Ended December 31, 2025
Net sales to non-guarantor subsidiaries
Purchases from non-guarantor subsidiaries
Unaudited
Parent Company and Guarantor Subsidiaries
In millions
December 31, 2025
Amount due to non-guarantor subsidiaries
Summarized Financial Information—Euro Notes
The obligations under Wabtec Netherlands’ Euro Notes are fully and unconditionally guaranteed by the Parent Company. Wabtec Netherlands is a wholly-owned, indirect subsidiary of the Parent Company. Wabtec Netherlands is a holding company and does not have any independent operations. Its assets consist of its investments in subsidiaries, which are separate and distinct legal entities that are not guarantors of the Euro Notes and have no obligations to pay amounts due under Wabtec Netherlands’ obligations.
The following tables present summarized financial information of Wabtec Netherlands, as the Issuer of the Euro Notes, and the Parent Company, as the parent Guarantor, on a combined basis. The combined summarized financial information eliminates all intercompany balances and transactions among Wabtec Netherlands and the Parent Company as well as all equity in earnings from and investments in any subsidiary of the Parent Company, other than Wabtec Netherlands, which we refer to below as the Non-Guarantor Subsidiaries.
The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for Wabtec Netherlands, as the issuer of the Euro Notes, and Parent Company guarantor.
Summarized Statement of Income
Unaudited
Issuer and Parent Company (Guarantor)
In millions
Year Ended December 31, 2025
Net sales
Gross profit
Net loss attributable to Wabtec shareholders
Summarized Balance Sheet
Unaudited
Issuer and Parent Company (Guarantor)
In millions
December 31, 2025
December 31, 2024
Current assets
Noncurrent assets
Current liabilities
Long-term debt
Other non-current liabilities
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.
Unaudited
Issuer and Parent Company (Guarantor)
In millions
Year Ended December 31, 2025
Net sales to non-guarantor subsidiaries
Purchases from non-guarantor subsidiaries
Unaudited
Issuer and Parent Company (Guarantor)
In millions
December 31, 2025
Amount due to non-guarantor subsidiaries
Contractual Obligations and Off-Balance Sheet Arrangements
The Company is obligated to make future payments under various contracts such as purchase, debt and lease agreements and has certain contingent commitments. The Company has grouped these contractual obligations and off-balance sheet arrangements into operating activities, financing activities, and investing activities in the same manner as they are classified in the Statement of Consolidated Cash Flows to provide a better understanding of the nature of the obligations and arrangements and to provide a basis for comparison to historical information. The table below provides a summary of contractual obligations and off-balance sheet arrangements as of December 31, 2025:
In millions
Total
Operating activities:
Purchase obligations (1)
Operating leases (2)
Pension and postretirement benefit payments (3)
Interest payments (4)
Financing activities:
Long-term debt
Dividends to shareholders (5)
Total
(1) Purchase obligations represent non-cancelable contractual obligations at December 31, 2025.
(2) Operating leases represent multi-year obligations for rental of facilities and equipment.
(3) Pension and postretirement benefit payments includes expected payments to participants out of plan assets and corporate assets. The benefit payments are based on actuarial estimates using current assumptions for discount rates, expected return on long-term assets and rate of compensation increases. The Company does not expect material contributions to pension plan investments in 2026.
(4) Interest payments on the Senior Notes and the amounts borrowed under the 2025 Term Credit Agreement and 2025 Credit Agreement as of December 31, 2025 are based on interest rates in effect as of December 31, 2025 and are calculated on debt with maturities that extend to 2035.
(5) Shareholder dividends are subject to approval by the Company’s Board of Directors, currently at an annual rate of approximately $212 million beginning in 2026.
The above table does not reflect uncertain tax positions of $29 million, the timing of which are uncertain. Refer to Note 11 of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report for additional information on uncertain tax positions. Additionally, the Company arranges for certain types of bank guarantees and letters of credit, such as performance bonds, bid bonds and financial guarantees, that are issued by certain banks and insurance companies to support customer contracts. At December 31, 2025, the total value of these bank guarantees and letters of credit were $1,141 million and expire on various dates through 2035. Amounts include interest payments based on contractual terms and the Company’s current interest rate.
Forward Looking Statements
We believe that all statements other than statements of historical facts included in this report, including certain statements under “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure that our assumptions and expectations are correct.
These forward-looking statements are subject to various risks, uncertainties and assumptions about us, including, among other things:
Economic and industry conditions
• changes in general economic and/or industry specific conditions, including the impacts of tax and tariff programs, inflation, supply chain disruptions, foreign currency exchange, and industry consolidation;
• the impacts of significant recent shifts in trade policies, including the imposition of tariffs, retaliatory tariff measures, and subsequent modifications or suspensions thereof, and market reactions to such policies and resulting trade disputes;
• prolonged unfavorable economic and industry conditions in the markets served by us, including North America, South America, Europe, Australia, Asia and Africa;
• decline in demand for freight cars, locomotives, passenger transit cars, buses and related products and services;
• reliance on major original equipment manufacturer customers;
• original equipment manufacturers’ program delays;
• decreased demand for services in the freight and passenger rail industry;
• decreased demand for our products and services;
• orders either being delayed, canceled, not returning to historical levels or being reduced, and/or economic conditions affecting the ability of our customers to pay timely for goods and services delivered;
• consolidations in the rail industry;
• continued outsourcing by our customers;
• industry demand for faster and more efficient braking equipment;
• fluctuations in interest rates and foreign currency exchange rates;
• availability of credit or difficulty in obtaining debt or equity financing;
• changes in market consensus as to what attributes are required for projects to be considered "green" or "sustainable" or negative perceptions regarding determinations in such regard with respect to our Green Finance Framework or sustainability strategy; or
• changes in the sustainability topics that have the highest relative priority for Wabtec's external stakeholders;
Operating factors
• supply disruptions;
• technical difficulties;
• changes in operating conditions and costs;
• increases in raw material costs;
• challenges associated with the successful introduction of new products;
• product safety, quality and reliability;
• performance under material long-term contracts;
• labor availability constraints and labor relations challenges;
• the outcome of our existing or any future legal proceedings, including litigation involving our principal customers and any litigation with respect to environmental matters, asbestos-related matters, pension liabilities, warranties, product liabilities, competition and anti-trust matters or intellectual property claims;
• our ability to successfully complete and integrate acquisitions;
• risks associated with the development and use of new technology; or
• cybersecurity and data protection risks;
Competitive factors
• the actions of competitors; or
• adverse outcomes of negotiations with partners, suppliers, customers or others;
Political/governmental factors
• political instability in relevant areas of the world, including the impacts of war, conflicts, global military action, and acts of terrorism;
• future regulation/deregulation of our customers and/or the rail industry;
• decreases in levels of governmental funding on transit projects, including for some of our customers;
• political developments and laws and regulations, including those related to Positive Train Control;
• consequences of federal and state income tax legislation;
• sanctions imposed on countries and persons; or
• the outcome of negotiations with governments;
Natural hazards / health crises
• impacts of climate change, including evolving climate change policy;
• disruptive natural hazards, including earthquakes, fires, floods, tornadoes, hurricanes or other 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, health crises or other external factors;
Statements in this Form 10-K apply only as of the date on which such statements are made, and except as required by law, we undertake no obligation to update any statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
Critical Accounting Estimates
The preparation of the financial statements in accordance with generally accepted accounting principles requires management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Critical areas of uncertainty that require judgments, estimates and assumptions include the accounting for inventories, business combinations, goodwill and indefinite-lived intangible assets, warranty reserves, income taxes, and revenue recognition. Management uses historical experience and all available information to make these judgments and estimates, and actual results may differ from those estimates and assumptions that are used to prepare the Company’s financial statements at any given time. Despite these inherent limitations, management believes that Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and the financial statements and related footnotes provide a meaningful and fair perspective of the Company.
A summary of the Company’s significant accounting policies is included in Note 2 in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report. Management believes that the application of these policies on a consistent basis enables the Company to provide the users of the financial statements with useful and reliable information about the Company’s operating results and financial condition.
Inventories:
Description Inventories are stated at the lower of cost or net realizable value and are reviewed to ensure that an adequate provision is recognized for excess, slow moving and obsolete inventories, and net realizable value reserves.
Judgments and Uncertainties Cost is determined primarily using the first-in, first-out ("FIFO") method. Inventory costs include material, labor and overhead. The Company compares inventory components to prior year sales history, current backlog and anticipated future requirements. To the extent that inventory parts exceed estimated usage and demand, a reserve is recognized
to reduce the carrying value of inventory. Also, specific reserves are established for known inventory obsolescence, a decline in market value, or loss of a customer with specific inventory.
Effect if Actual Results Differ From Assumptions If the market value or demand for our products were to decrease due to changing market conditions, the Company could be at risk of incurring write-downs to adjust inventory value to a net realizable value lower than stated cost. If our estimates regarding sales and backlog requirements are inaccurate, we may be exposed to the expense of increasing our reserves for slow moving and obsolete inventory.
Business Combinations:
Description The Company accounts for business acquisitions in accordance with Accounting Standard Codification ("ASC") 805, Business Combinations, which requires the purchase price of the acquired business to be allocated to tangible and intangible assets acquired and liabilities assumed based on the respective fair values. The amount of purchase price which is in excess of the fair values of assets acquired and liabilities assumed is recognized as goodwill.
Judgments and Uncertainties Discounted cash flow models are used to estimate the fair values of acquired intangible assets such as contract backlog, customer relationships, intellectual property, and trade names. The significant assumptions used to estimate the value of the intangible assets include revenue growth rates, projected profit margins, discount rates, royalty rates, customer attrition rates, revenue obsolescence rates and market participant profit margins. These significant assumptions are forward-looking and could be affected by future economic and market conditions.
Effect if Actual Results Differ From Assumptions Different assumptions may result in materially different values for assets acquired and liabilities assumed, which may impact the Company's financial position and future results of operations, including potential future impairment charges.
Goodwill and Indefinite-Lived Intangible Assets:
Description Goodwill represents the excess of cost over the fair value of the net assets acquired in a business combination. Indefinite-lived intangible assets primarily represent certain trade names acquired in a business combination that were determined to have indefinite useful lives. Goodwill and indefinite-lived intangibles are required to be tested for impairment at least annually. The Company performs its annual impairment tests during the fourth quarter and more frequently when indicators of impairment are present. The Company reviews goodwill for impairment at the reporting unit level. The Company has identified three reporting units for purposes of testing goodwill for impairment. Two reporting units exist within the Freight segment and the Transit segment is also a reporting unit. The evaluation of impairment involves comparing the current fair value of the business to the recorded value including goodwill.
Judgments and Uncertainties A number of significant assumptions and estimates are involved in the application of the impairment test, including the identification of macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance. We also consider Wabtec-specific events and share price trends and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such amount.
Effect if Actual Results Differ From Assumptions Management considers historical experience and all available information at the time the fair values of its reporting units are estimated. However, actual amounts realized may differ from those used to evaluate the impairment of goodwill and indefinite lived intangible assets. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to impairment losses that could be material to our results of operations.
Warranty Reserves:
Description The Company provides warranty reserves to cover expected costs from repairing or replacing products with durability, quality or workmanship issues occurring during established warranty periods.
Judgments and Uncertainties In general, reserves are provided for as a percentage of sales, based on historical experience. In addition, specific reserves are established for known warranty issues and their estimable losses.
Effect if Actual Results Differ From Assumptions If actual results are not consistent with the assumptions and judgments used to calculate our warranty liability, the Company may be exposed to the expense of increasing our reserves for warranty expense.
Income Taxes:
Description Wabtec records an estimated liability for income and other taxes based on what it determines will likely be paid in various tax jurisdictions in which it operates in accordance with ASC 740-10 Accounting for Income Taxes and Accounting for Uncertainty in Income Taxes .
Judgments and Uncertainties The estimate of our tax obligations are uncertain because management must use judgment to estimate the exposures associated with our various filing positions, as well as realization of our deferred tax assets. ASC 740-10
establishes a recognition and measurement threshold to determine the amount of tax benefit that should be recognized related to uncertain tax positions.
Effect if Actual Results Differ From Assumptions Management uses its best judgment in the determination of these amounts. However, the liabilities ultimately realized and paid are dependent on various matters including the resolution of the tax audits in the various affected tax jurisdictions and may differ from the amounts recorded. An adjustment to the estimated liability would be recorded through income in the period in which new information changes the expected outcome of an uncertain tax position. A deferred tax valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Revenue Recognition:
Description Revenue is recognized in accordance with ASC 606 Revenue from Contracts with Customers . The Company recognizes a portion of its revenues on long-term customer agreements involving the design and production of highly engineered products that require revenue to be recognized over time because these products have no alternative use without significant economic loss and the agreements contain an enforceable right to payment including a reasonable profit margin from the customer in the event of contract termination. Generally, the Company uses an input method for determining the amount of revenue, cost and gross margin to recognize over time for these customer agreements. The input method used for these agreements recognizes revenue based on our efforts to satisfy the performance obligation and includes costs of material and labor, both of which give an accurate representation of the progress made toward complete satisfaction of a particular performance obligation. The Company may also use the output method which recognizes revenue based on direct measurements of the value transferred to the customer.
Judgments and Uncertainties Accounting for long-term customer agreements involves a judgmental process of estimating the total sales and costs for each contract, which results in the development of estimated profit margin percentages. Contract estimates related to long-term projects are based on various assumptions to project the outcome of future events that could span several years. These assumptions include cost of materials, labor availability and productivity, complexity of the work to be performed, and the performance of suppliers, customers and subcontractors that may be associated with the contract. Factors that influence these estimates include inflationary trends, foreign exchange rates, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Generally, pricing is defined in our contracts but may include an estimate of variable consideration when required by the terms of the individual customer contract. Types of variable consideration that the Company typically has include volume discounts, prompt payment discounts, price escalation clauses, liquidating damages, and performance bonuses.
Effect if Actual Results Differ From Assumptions Should market conditions and customer demands dictate changes to our standard shipping terms, the Company may be impacted by longer than typical revenue recognition cycles. The development of expected contract costs and contract profit margin percentages involves procedures and personnel in all areas that provide financial or production information on the status of contracts. Due to the significance of judgments in the estimation process, it is likely that materially different revenue and cost amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions/estimates, inflation or deflation, foreign currency exchange rates, supplier performance, or other circumstances may adversely or positively affect financial performance in future periods. Some of our contracts are expected to be completed in a loss position. Provisions are made currently for estimated losses on uncompleted contracts and are updated as necessary.
