Wabtec Annual Report 2018

FY2018 Annual Report · Wabtec

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2018 Annual Report

Profile

Wabtec Corporation is a leading global provider of equipment, systems, digital solutions and value-added services for freight and
transit rail. Drawing on nearly four centuries of collective experience across Wabtec, GE Transportation and Faiveley Transport, the
company has unmatched digital expertise, technological innovation, and world-class manufacturing and services, enabling the digital-
rail-and-transit ecosystems. Wabtec is focused on performance that drives progress, creating transportation solutions that move and
improve the world. The freight portfolio features a comprehensive line of locomotives, software applications and a broad selection of
mission-critical controls systems, including Positive Train Control (PTC). The transit portfolio provides highly engineered systems
and services to virtually every major rail transit system around the world, supplying an integrated series of components for buses and
all train-related market segments that deliver safety, efficiency and passenger comfort. Along with its industry-leading portfolio of
products and solutions for the rail and transit industries, Wabtec is a leader in mining, marine, and industrial solutions. Based in
Wilmerding, PA, Wabtec has approximately 27,000 employees in facilities throughout the world. Visit: www.WabtecCorp.com or
www.wabtec.com

This annual report contains forward-looking statements and includes assumptions about future market conditions, operations and
results. These statements are based on current expectations and are subject to risks and uncertainties. They are made pursuant to safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The Form 10-K and our other filings made with the
Securities and Exchange Commission lists the factors that could cause actual results to differ materially from the forward-looking
statements. In making these forward-looking statements, the company assumes no obligation to update them or advise of changes in
the assumptions on which they were based.

CORPORATE INFORMATION
Transfer Agent and
Registrar
Our transfer agent is responsible for
shareholder records, issuance of
stock certificates, and distribution
of dividends and I.R.S. form 1099.
Your requests, as shareholders,
concerning these matters are most
efficiently answered by
communicating directly with:

EQ Shareowner Services
P.O. Box 64854
St Paul, MN 55164-0874
Street and overnight
delivery address:
EQ Shareowner Services
1110 Centre Point Curve,
Suite 101
Mendota Heights,
MN 55120
Toll-free number:
(800) 468-9716

Stock Exchange Listing
New York Stock Exchange
Ticker Symbol: WAB
Independent Public
Accountants
Ernst & Young LLP
Pittsburgh, PA 15222

Form 10-K
This document
includes the company’s
Form 10-K annual
report.

Annual Meeting
May 17, 2019
11:30 a.m.
The Duquesne Club
325 Sixth Avenue
Pittsburgh, PA 15222

Message to Shareholders

This year Wabtec celebrates the 150th anniversary of the company’s founding. Throughout those 150
years we have been a company that has continued to innovate – from George Westinghouse’s invention
of the air brake that began our business to the deployment of Positive Train Control (PTC) equipment in
recent years, we have consistently taken the lead to help transform the transportation industry. With
the acquisition of GE Transportation early this year, we are poised to begin the next 150 years of
innovation – while undergoing a transformation of our own as we integrate our two great companies.

With the close of the merger, Wabtec became an S&P 500 company with leading positions in rail,
equipment, software and services, and operations in more than 50 countries. Today, we are a stronger
company, with exceptional opportunities for growth. The combination of Wabtec and GE
Transportation’s uniquely complementary capabilities creates new opportunities to capitalize on
emerging trends using advanced technologies and a more effective suite of products and expertise, to
increase the safety, efficiency and productivity of our customers.

We believe shareholders will benefit from the enhanced strength and diversity of our business. We also
believe that we will be better positioned to perform through the business cycle, with expanded margins,
expected double-digit EPS growth and total run rate synergies of about $250 million by 2022. And we
welcome the GE Transportation management team, led by Rafael Santana, who now serves as president
and CEO of Wabtec’s freight segment.

During 2018, Wabtec and GE Transportation laid a solid foundation for future growth. Wabtec’s sales
increased by 12 percent and its backlog ended the year at a near-record high of $4.5 billion, with a
significant portion of the backlog representing transit projects around the world. GE Transportation,
meanwhile, booked orders for more than 1,000 new locomotives and ended the year with a backlog of
$19 billion.

In 2019, we are focused on integrating the GE Transportation business and strengthening our balance
sheet by reducing debt to maintain our investment grade credit rating. We are also committed to
executing our growth strategies: Product Innovation and New Technologies; Global and Market
Expansion; Aftermarket Products and Services; and Acquisitions.

Product Innovation and New Technologies
Today, electronics/digital products and services represent 10% of our business, and we believe this
portfolio has the potential to be the fastest-growing piece of our company. We are combining Wabtec’s
PTC and signaling capabilities with GE Transportation’s digital solutions for a complementary and
compelling product offering that can unlock significant productivity improvements, as well as billions in
annual savings across freight rail for customers and operators. Through this platform, we will support
our customers’ path to Precision Scheduled Railroading and advanced train automation. Additionally,
these electronics/digital technology solutions will improve safety, efficiency and productivity for the
transportation industry and help address the industry’s growing demand for rail performance.

Global and Market Expansion
Last year both Wabtec and GE Transportation continued to target global growth because the majority of
the world’s locomotives, freight cars and transit cars operate outside of North America. At Wabtec last
year, for example, international sales of $2.9 billion grew 13% – faster than total sales – and we saw
growth in most major markets around the world in both freight and transit.

Aftermarket Products and Services
Our current locomotive installed base is approximately 23,000, which provides long-term revenue
streams for the company. Today, approximately 70% of our installed base are under long-term service
contracts, which represents roughly two-thirds of GE Transportation’s backlog, and almost half of our
installed base provides future opportunities for upgrade projects, given the age of the locomotives
Meanwhile, for legacy Wabtec, aftermarket sales grew 14% last year to $2.5 billion.

Acquisitions
We will continue our successful strategy to look selectively for strategic acquisitions. In recent years,
acquisitions such as GE Transportation, Faiveley Transport and Fandstan have increased our technical
capabilities, expanded our global reach and strengthened our aftermarket presence.

In closing, we think Wabtec is better positioned than ever for continued growth and innovation, in both
our freight and transit segments. We are a more diverse and global business with significantly enhanced
electronic/digital technologies to address growing market demand. Our 27,000 global employees are
committed to our vision to accelerate the future of transportation by building the safest, most reliable
and sustainable freight, transit and logistics systems and services. We expect to leverage our scale and
innovation to drive double-digit earnings growth and lead the transportation industry in unprecedented
ways.

We want to thank our board of directors for their guidance and you, our shareholders, for continuing to
support our efforts to grow Wabtec successfully. Finally, thank you to all our employees worldwide.
Without them, our success would not be possible.

Albert J. Neupaver, Executive Chairman
Raymond T. Betler, President and Chief Executive Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2018

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 033-90866
WESTINGHOUSE AIR BRAKE TECHNOLOGIES
CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

25-1615902
(IRS Employer
Identification No.)

1001 Air Brake Avenue
Wilmerding, Pennsylvania 15148
(Address of principal executive offices, including zip code)

(412) 825-1000
(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class

Common Stock, par value $.01 per share

Name of Exchange on which registered
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange

No
.

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data

File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files) Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be

contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting

company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Emerging growth company

Smaller reporting company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying

with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes
The registrant estimates that as of June 30, 2018, the aggregate market value of the voting shares held by non-affiliates of the

registrant was approximately $8.5 billion based on the closing price on the New York Stock Exchange for such stock.
As of February 20, 2019, 96,613,310 shares of Common Stock of the registrant were issued and outstanding.

Portions of the Proxy Statement for the registrant’s Annual Meeting of Stockholders to be held on May 17, 2019 are incorporated by

DOCUMENTS INCORPORATED BY REFERENCE:

reference into Part III of this Form 10-K.

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103

Business
Risk Factors

Item 1.
Item 1A.
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.

Properties
Legal Proceedings
Mine Safety Disclosures
Executive Officers of the Registrant

TABLE OF CONTENTS

PART I

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9.
Item 9A.
Controls and Procedures
Item 9B. Other Information

PART III

Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services

Item 15.
Item 16.

Exhibits and Financial Statement Schedules
Form 10-K Summary

PART IV

Item 1.

BUSINESS

General

PART I

Westinghouse Air Brake Technologies Corporation, doing business as Wabtec Corporation, is a Delaware corporation
with headquarters at 1001 Air Brake Avenue in Wilmerding, Pennsylvania. Our telephone number is 412-825-1000, and our
website is located at www.wabtec.com. All references to “we”, “our”, “us”, the “Company” and “Wabtec” refer to Westinghouse
Air Brake Technologies Corporation and its consolidated subsidiaries. George Westinghouse founded the original Westinghouse
Air Brake Co. in 1869 when he invented the air brake. Westinghouse Air Brake Company (“WABCO”) was formed in 1990
when it acquired certain assets and operations from American Standard, Inc., now known as Trane (“Trane”). The company
went public on the New York Stock Exchange in 1995. In 1999, WABCO merged with MotivePower Industries, Inc. and
adopted the name Wabtec.

On May 20, 2018, the Company entered into a transaction that resulted in the merger of Wabtec and GE

Transportation, a business unit of General Electric Company. The merger of Wabtec and GE Transportation was completed on
February 25, 2019. To effect the transaction, the Company entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with General Electric Company (“GE”), Transportation Systems Holdings Inc. (“SpinCo”), which was a newly
formed wholly owned subsidiary of GE, and Wabtec US Rail Holdings, Inc. (“Merger Sub”), which is a newly formed wholly
owned subsidiary of the Company. In addition, on May 20, 2018, GE, SpinCo, the Company and Wabtec US Rail Holdings,
Inc. (“Direct Sale Purchaser”), entered into the Separation, Distribution and Sale Agreement (the “Separation Agreement”).
Together, the Merger Agreement and the Separation Agreement provided for the combination of the Company and GE’s
realigned transportation business (“GE Transportation”). GE Transportation (www.getransportation.com) is a global
technology leader and supplier of locomotives, equipment, services and digital solutions to the rail, mining, marine, stationary
power and drilling industries. GE Transportation employs approximately 9,000 employees worldwide and had 2018 sales of
about $3.9 billion. Wabtec expects the transactions to have the following strategic benefits:

•

Increased Scale and Diversification of Wabtec’s Product Portfolio. As a result of the Transactions, Wabtec expects the
combined business to be one of the world’s largest providers of technology-enabled equipment, systems and services
for the locomotive, freight and passenger rail industries with approximately $8.0 billion in revenue and 25,000
employees in 52 countries.

• Complementary Digital Technologies. GE Transportation will contribute a comprehensive digital portfolio and leading

engineering and technical intellectual property to Wabtec, providing electronics and digital technologies that position
the combined company to meet growing demand for train intelligence and network optimization.

• Enhanced Aftermarket and Services Opportunities. The combined entity will have an installed base of more than
23,000 locomotives and content on virtually all North American locomotives and freight cars, which enables
significant opportunities in the high-margin aftermarket parts and services business and mitigates the combined
company’s exposure to cycles.

•

Significant Operating Synergies. The consummation of the transactions is expected to generate $250 million annual
run-rate operating synergies, driven by cost and revenue opportunities, within four years after closing.

Improved Financial Profile. The consummation of the transactions will enhance Wabtec’s margins and revenue growth
opportunities with strong free cash flow generation to enable strategic deleveraging through debt reduction and
earnings growth.

In 2017, Wabtec completed the acquisition of Faiveley Transport, S.A. (“Faiveley Transport”), a leading provider of

value-added, integrated systems and services, primarily for the global transit rail market, for a purchase price of approximately
$1.5 billion. Based in France, Faiveley Transport has roots to 1919 and became a leader in manufacturing pantographs,
automatic door mechanisms and air conditioning systems. Faiveley Transport was listed on the Paris Stock Exchange in 1994
and during the next 20 years acquired a number of rail industry leaders including Sab Wabco, a specialist in railway braking
systems and couplers. Wabtec believes that the acquisition of Faiveley Transport provided the following strategic benefits:

•

Increased diversity of revenues by product, geography and market. A majority of Faiveley Transport’s revenues are
outside the U.S. and in the transit market, which helps to balance the cyclicality of our North American freight
business.

• Broadened product line. Faiveley Transport provides many products that we did not previously offer, including

braking and door systems for high-speed trains and air conditioning systems.

• Expanded international presence in the transit market. A majority of Faiveley Transport’s revenues come from transit

markets outside the U.S., where we previously did not have a strong presence.

•

Increased technical and engineering expertise. Faiveley Transport strengthens Wabtec's technical capabilities and
product development efforts.

Today, we are one of the world’s largest providers of value-added, technology-based equipment, systems and services

for the global passenger transit and freight rail industries. We believe we hold a leading market share for many of our core
product lines globally. 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. In 2018, the Company had sales of approximately $4.4 billion and net income attributable to our shareholders of about
$294.9 million. In 2018, sales of aftermarket parts and services represented about 57% of total sales, while sales to customers
outside of the U.S. accounted for about 67% of total sales.

Industry Overview

The Company primarily serves the global passenger transit and freight rail industries. As such, our operating results are

largely dependent on the level of activity, financial condition and capital spending plans of passenger transit agencies and
freight railroads 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 carloadings and
passenger ridership; government spending on public transportation; and investment in new technologies. In general, trends
such as increasing urbanization and growth in developing markets, a focus on sustainability and environmental awareness,
increasing investment in technology solutions, an aging equipment fleet, and growth in global trade are expected to drive
continued investment in passenger transit and freight rail.

According to the 2018 bi-annual edition of a market study by UNIFE, the Association of the European Rail Industry, the

accessible global market for railway products and services was more than $100 billion and was expected to grow at a
compounded annual growth rate of 2.6% through 2023. The three largest geographic markets, which represented about 80% of
the total accessible market, were Europe, North America and Asia Pacific. UNIFE projected above-average growth rates in
North America, Latin America and Africa/Middle East, with Asia Pacific and Europe growing at about the industry average.
UNIFE said trends such as urbanization and increasing mobility, deregulation, investments in new technologies, energy and
environmental issues, and increasing government support continue to drive investment. The largest product segments of the
market were rolling stock, services and infrastructure, which represent almost 90% of the accessible market. UNIFE projected
spending on turnkey management projects and infrastructure to grow at above-average rates. UNIFE estimated that the global
installed base of locomotives was about 114,000 units, with about 33% in Asia Pacific, about 26% in North America and about
18% in Russia-CIS (Commonwealth of Independent States). Wabtec estimates that about 2,500 new locomotives were
delivered worldwide in 2018, and we expect deliveries of about 2,900 in 2019. UNIFE estimated the global installed base of
freight cars was about 5.1 million, with about 33% in North America, about 26% in Asia Pacific and about 24% in Russia-CIS.
Wabtec estimates that about 175,000 new freight cars were delivered worldwide in 2018, and we expect deliveries of about
174,000 in 2019. UNIFE estimated the global installed base of passenger transit vehicles to be about 600,000 units, with about
45% in Asia Pacific, about 33% in Europe and about 12% in Russia-CIS. Wabtec estimates that about 30,000 new passenger
transit vehicles were ordered worldwide in 2018, and we expect orders of about the same number in 2019.

In Europe, the majority of the rail system serves the passenger transit market, which is expected to continue growing as

energy and environmental factors encourage continued investment in public mass transit. According to UNIFE, France,
Germany and the United Kingdom were the largest Western European transit markets, representing almost two-thirds of
industry spending in the European Union. UNIFE projected the accessible Western European rail market to grow at about 2.3%
annually, led by investments in new rolling stock in France and Germany. About 75% of freight traffic in Europe is hauled by
truck, while rail accounts for about 20%. The largest freight markets in Europe are Germany, Poland and the United Kingdom.
In recent years, the European Commission has adopted a series of measures designed to increase the efficiency of the European
rail network by standardizing operating rules and certification requirements. UNIFE believes that adoption of these measures
should have a positive effect on ridership and investment in public transportation over time.

In North America, railroads carry about 40% of intercity freight, as measured by ton-miles, which is more than any other

mode of transportation. Through direct ownership and operating partnerships, U.S. railroads are part of an integrated network
that includes railroads in Canada and Mexico, forming what is regarded as the world’s most-efficient and lowest-cost freight
rail service. There are more than 500 railroads operating in North America, with the largest railroads, referred to as “Class I,”
accounting for more than 90% of the industry’s revenues. The railroads carry a wide variety of commodities and goods,
including coal, metals, minerals, chemicals, grain, and petroleum. These commodities represent about 50% of total rail
carloadings, with intermodal carloads accounting for the rest. Railroads operate in a competitive environment, especially with
the trucking industry, and are always seeking ways to improve safety, cost and reliability. New technologies offered by Wabtec
and others in the industry can provide some of these benefits. Demand for our freight related products and services in North
America is driven by a number of factors, including rail traffic, and production of new locomotives and new freight cars. In the
U.S., the passenger transit industry is dependent largely on funding from federal, state and local governments, and from fare

box revenues. Demand for North American passenger transit products is driven by a number of factors, including government
funding, deliveries of new subway cars and buses, and ridership. The U.S. federal government provides money to local transit
authorities, primarily to fund the purchase of new equipment and infrastructure for their transit systems.

Growth in the Asia Pacific market has been driven mainly by the continued urbanization of China and India, and by
investments in freight rail rolling stock and infrastructure in Australia to serve its mining and natural resources markets. India is
making significant investments in rolling stock and infrastructure to modernize its rail system; for example, the country has
awarded a 1,000-unit locomotive order to GE Transportation

Other key geographic markets include Russia-CIS and Africa-Middle East. With about 1.2 million freight cars and
about 20,000 locomotives, Russia-CIS is among the largest freight rail markets in the world, and it’s expected to invest in both
freight and transit rolling stock. PRASA, the Passenger Rail Agency of South Africa, is expected to continue to invest in new
transit cars and new locomotives. According to UNIFE, emerging markets were expected to grow at above-average rates as
global trade led to increased freight volumes and urbanization led to increased demand for efficient mass-transportation
systems. As this growth occurs, Wabtec expects to have additional opportunities to provide products and services in these
markets.

In its study, UNIFE also said it expected increased investment in digital tools for data and asset management, and in rail

control technologies, both of which would improve efficiency in the global rail industry. UNIFE said data-driven asset
management tools have the potential to reduce equipment maintenance costs and improve asset utilization, while rail control
technologies have been focused on increasing track capacity, improving operational efficiency and ensuring safer railway
traffic. Wabtec offers products and services to help customers make ongoing investments in these initiatives.

Business Segments and Products

We provide our products and services through two principal business segments, the Transit Segment and the Freight

Segment, both of which have different market characteristics and business drivers. The acquisition of Faiveley Transport
significantly strengthened our capabilities and presence in the worldwide transit market.

The Transit Segment primarily manufactures and services components for new and existing passenger transit vehicles,
typically regional trains, high speed trains, subway cars, light-rail vehicles and buses; supplies rail control and infrastructure
products including electronics, positive train control equipment, and signal design and engineering services; builds new
commuter locomotives; and refurbishes passenger transit vehicles. Customers include public transit authorities and
municipalities, leasing companies, and manufacturers of passenger transit vehicles and buses around the world. Demand in the
transit market is primarily driven by general economic conditions, passenger ridership levels, government spending on public
transportation, and investment in new rolling stock. In 2018, the Transit Segment accounted for 64% of our total sales, with
about 22% of its sales in the U.S. Approximately two-thirds of the Transit Segment’s sales are in the aftermarket with the
remainder in the original equipment market. The addition of Faiveley Transport’s key products strengthened Wabtec's presence
in the following areas: high-speed braking and door systems; heating, ventilation and air conditioning systems; pantographs
and power collection; information systems; platform screen doors and gates; couplers; and aftermarket services, maintenance
and spare parts. Geographically, Faiveley Transport significantly strengthened Wabtec’s presence in the European and Asia
Pacific transit markets.

The Freight Segment primarily manufactures and services components for new and existing locomotives and freight

cars; supplies rail control and infrastructure products including electronics, positive train control equipment, and signal design
and engineering services; overhauls locomotives; and provides heat exchangers and cooling systems for rail and other industrial
markets. Customers include large, publicly traded railroads, leasing companies, manufacturers of original equipment such as
locomotives and freight cars, and utilities. Demand is primarily driven by general economic conditions and industrial activity;
traffic volumes, as measured by freight carloadings; investment in new technologies; and deliveries of new locomotives and
freight cars. In 2018, the Freight Segment accounted for 36% of our total sales, with about 54% of its sales in the U.S. In 2018,
slightly more than half of the Freight Segment’s sales were in the aftermarket.

Following is a summary of our leading product lines in both aftermarket and original equipment across both of our

business segments in 2018:

Specialty Products & Electronics:

•

Positive Train Control equipment and electronically controlled pneumatic braking products

• Railway electronics, including event recorders, monitoring equipment and end of train devices

•

Signal design and engineering services

Freight car trucks and couplers

• 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

Brake Products:

• Railway braking equipment and related components for Freight and Transit applications, including high-speed

passenger transit vehicles

•

Friction products, including brake shoes, discs and pads

Remanufacturing, Overhaul and Build:

• New commuter and switcher locomotives

• Transit car and locomotive overhaul and refurbishment

Transit Products:

• Heating, ventilation and air conditioning equipment

• Doors for buses and subway cars

•

Platform screen doors

Pantographs

• Window assemblies

• Couplers

• Accessibility lifts and ramps for buses and subway cars

• Traction motors

We believe we have become a leader in the passenger transit and freight rail 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 conditions, including extreme temperatures and high-vibration environments. Supported by our technical
staff of more than 2,500 engineers and specialists, we have extensive experience in a broad range of product lines, which
enables us to provide comprehensive, systems-based solutions for our customers.

In recent years, we have introduced a number of significant new products, including Positive Train Control (“PTC”)

equipment that encompasses onboard digital data and global positioning communication protocols. We are making additional
investments in this technology which we believe will provide customers with opportunities to improve safety and efficiency, in
part through data analytics solutions. Other new products include HVAC inverter integrated solutions, brake discs and brake
controls, platform doors and gates, and door controllers.

For additional information on our business segments, see Note 22 of “Notes to Consolidated Financial Statements”

included in Part IV, Item 15 of this report.

Competitive Strengths

Our key strengths include:

•

Leading market positions in core products. Dating back to 1869 and George Westinghouse’s invention of the air brake,
we are an established leader in the development and manufacture of pneumatic braking equipment for freight and
passenger transit vehicles. Faiveley Transport, founded 100 years ago, has a long history and is a market leader for its
core products, including pantographs, automatic door mechanisms and air conditioning systems. We have leveraged
our leading positions by focusing on research and engineering to expand beyond pneumatic braking components to
supplying integrated parts and assemblies for the locomotive through the end of the train. We are a recognized leader in
the development and production of electronic recording, measuring and communications systems, positive train control
equipment, highly engineered compressors and heat exchangers for locomotives, and a leading manufacturer of freight
car components, including electronic braking equipment, draft gears, trucks, brake shoes and electronic end-of-train
devices. 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. Our

product portfolio is one of the broadest in the rail industry, as we offer a wide selection of quality parts, components
and assemblies across the entire train and worldwide. We provide our products in both the original equipment market
and the aftermarket. 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. In addition, as OEMs and railroad operators attempt to modernize fleets with new products
designed to improve and maintain safety and efficiency, these products must be designed to be interoperable with
existing equipment. On average, over the last several years, about 58% of our total net sales have come from our
aftermarket products and services business.

•

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 both our customers and the government authorities value our technological capabilities
and commitment to innovation, as we seek not only to enhance the efficiency and profitability of our customers, but
also to improve the overall safety of the railways through continuous improvement of product performance. The
Company has an established record of product improvements and new product development. We have assembled a
wide range of patented products, which we believe provides us with a competitive advantage. Wabtec currently owns
3,333 active patents worldwide. During the last three years, we have filed for approximately 443 patents worldwide in
support of our new and evolving product lines.

• Experience with industry regulatory requirements. The freight rail and passenger transit industries are governed by

various government agencies and regulators in each country and region. These groups mandate rigorous manufacturer
certification, new product testing and approval processes that we believe are difficult for new entrants to meet cost-
effectively and efficiently without the scale and extensive experience we possess. Certification processes are lengthy,
and often require local presence and expertise. In addition, each transit agency places a high degree of importance on
vehicle customization, which requires experience and technical expertise to meet ever-evolving specifications.

• Experienced management team and the Wabtec Excellence Program (WEP) Wabtec’s lean manufacturing and

continuous improvement initiatives, known as the Wabtec Excellence Program, have been a part of the Company’s
culture for more than 25 years and have enabled Wabtec to manage successfully through cycles in the rail supply
market. We believe that, over time, the application of WEP initiatives has resulted in a reduced cost structure and
standardized excellence in all processes. We believe that using WEP as our operational foundation will foster state-of-
the-art processes and continuous improvement, promote a constant pursuit of quality, and drive practical innovations
and best-in-class, modern manufacturing.

Business strategy

Using WEP, we strive to generate sufficient cash to invest in our growth strategies and to build on what we consider to

be a leading position as a low-cost producer in the industry while maintaining world-class product quality, technology and
customer responsiveness. Through WEP and employee-directed initiatives such as Kaizen, a Japanese-developed team concept,
we continuously strive to improve quality, delivery and productivity, and to reduce costs utilizing global sourcing and supply
chain management. These practices enable us to streamline processes, improve product reliability and customer satisfaction,
reduce product cycle times and respond more rapidly to market developments. We also rely on functional experts within the
Company across various disciplines to train, coach and share best practices throughout the corporation, while benchmarking
against best-in-class competitors and peers. Over time, we believe the principles of WEP will enable us to continue to increase
operating margins, improve cash flow and strengthen our ability to invest in the following growth strategies:

• Product innovation and new technologies. We continue to emphasize innovation and development funding to create

new products and capabilities, such as vehicle monitoring and data analytics. WabtecONE is a multi-year initiative to
build on our existing expertise and technologies in electronics. In addition, we invest in developing enhancements and
new features to existing products, such as brake discs and heat exchangers. We are focusing on technological advances,
especially in the areas of electronics, 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.

• Global and market expansion. We believe that international markets represent a significant opportunity for future

growth. In 2018, sales to non-U.S. customers were approximately $2.9 billion. We intend to increase international sales
through direct sales of existing products to current and new customers, by developing specific new products for
application in new geographic markets, by making strategic acquisitions, and through joint ventures with railway
suppliers which have a strong presence in their local markets. 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 U.S.-

style locomotives and freight cars, including Australia, Brazil, China, India, Russia, South Africa, and other select areas
within Europe and South America. 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. These
products include heat exchangers and friction materials.

• Aftermarket products and services. Historically, aftermarket sales are less cyclical than OEM sales because a certain
level of aftermarket maintenance and service work must be performed, even during an industry slowdown. In 2018,
Wabtec’s aftermarket sales and services represented approximately 57% of the Company’s total sales across both of our
business segments. As a long time supplier of original equipment, we have an extensive installed base of equipment in
the field, which generates recurring aftermarket sales. Wabtec provides aftermarket parts and services for its
components, and we seek to expand this business with customers who currently perform the work in-house. In this
way, we expect to benefit as transit authorities and railroads outsource certain maintenance and overhaul functions.

• Acquisitions, joint ventures and alliances. We continue to invest in acquisitions, joint ventures and alliances using a
disciplined, selective approach and rigorous financial criteria. These transactions are expected to meet our financial
criteria and contribute to growth strategies of product innovation and new technologies, global expansion, and
aftermarket products and services. We believe these expansion strategies will help Wabtec to grow profitably, expand
geographically, and dampen the impact from potential cycles in the North American freight rail industry.

Recent Acquisitions and Joint Ventures

See Note 3 of the Notes to Consolidated Financial Statements

Backlog

The Company’s backlog was about $4.5 billion at December 31, 2018. For 2018, about 57% of total sales came from

aftermarket orders, which typically carry lead times of less than 30 days and are not recorded in backlog for a significant period
of time.

The Company’s contracts are subject to standard industry cancellation provisions, including cancellations on short

notice or upon completion of designated stages. Generally, if a customer were to cancel a contract we would have an
enforceable right to payment for work completed up to the date of cancellation which would include a reasonable profit margin.
Substantial scope-of-work adjustments are common. For these and other reasons, completion of the Company’s backlog may be
delayed or canceled. The railroad industry, in general, has historically been subject to fluctuations due to overall economic
conditions and the level of use of alternative modes of transportation.

The backlog of firm customer orders as of December 31, 2018 and December 31, 2017, and the expected year of

completion are as follows:

Total

Backlog

Expected Delivery

Total

Backlog

Other

Years

Other

Years

In thousands

12/31/2018

2019

12/31/2017

2018

Freight Segment ................................................................

Transit Segment ................................................................

Total ..................................................................................

664,657

3,816,925

4,481,582

503,528

1,954,573

2,458,101

161,129

1,862,352

2,023,481

549,188

4,050,460

4,599,648

423,805

1,891,079

2,314,884

125,383

2,159,381

2,284,764

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, 2018, 2017 and 2016, we invested about $87.5 million, $95.2 million and $71.4 million,
respectively, on product development and improvement activities. The engineering resources of the Company are allocated
between research and development activities and the execution of original equipment customer contracts. Across the
corporation we have established multiple Centers of Competence, which have specialized, technical expertise in various
disciplines and product areas.

Our engineering and development program includes investments in data analytics, train control and other new
technologies, with an emphasis on developing products that enhance safety, productivity and efficiency for our customers. For
example, we have developed advanced cooling systems that enable lower emissions from diesel engines used in rail and other
industrial markets. Sometimes we conduct specific research projects in conjunction with universities, customers and other
industry suppliers.

We use our Product Development System to develop and monitor new product programs. 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.

Positive Train Control ("PTC")

PTC is a collision-avoidance system that uses GPS to monitor and control the movement of passenger and freight trains.
In 2008, the U.S. mandated the use of PTC on a majority of the locomotives and track in the U.S. The Federal Railroad
Administration (the "FRA") eventually approved the use of Wabtec’s Electronic Train Management System® as the on-board
locomotive standard for the deployment of this technology. Our system includes an on-board locomotive computer and related
software. The deadline to implement this technology was December 31, 2018, and we worked with the U.S. Class I railroads,
commuter rail authorities and other industry suppliers to meet this deadline. Under certain conditions, the deadline could be
extended through 2019 and 2020. In 2018, Wabtec recorded about $395 million of revenue from freight and transit train
control and signaling projects, which includes PTC.

Intellectual Property

We have 3,333 active patents worldwide and on average file for approximately 150 new patents each year. 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 also follow the product development practices of
our competitors to monitor any possible patent infringement by them, and to evaluate their strategies and plans.

Certain trademarks, among them the name WABCO®, were acquired or licensed from American Standard Inc., now
known as Trane, in 1990 at the time of our acquisition of the North American operations of the Railway Products Group of
Trane. Other trademarks have been developed through the normal course of business or acquired as a part of our ongoing
merger and acquisition program.

We have entered into a variety of license agreements as licensor and licensee. We do not believe that any single license

agreement is of material importance to our business or either of our business segments as a whole.

We have issued licenses to the two sole suppliers of railway air brakes and related products in Japan, Nabtesco and
Mitsubishi Electric Company. The licensees pay annual license fees to us and also assist us by acting as liaisons with key
Japanese passenger transit vehicle builders for projects in North America. We believe that our relationships with these licensees
are beneficial to our core transit business and customer relationships in North America.

Customers

We provide products and services for more than 500 customers worldwide. Our customers include passenger transit

authorities and railroads throughout North America, Europe, Asia Pacific, South Africa and South America; manufacturers of
transportation equipment, such as locomotives, freight cars, passenger transit vehicles and buses; and companies that lease and
maintain such equipment.

Top customers can change from year to year. For the fiscal year ended December 31, 2018, our top five customers
accounted for approximately 15% of net sales: Bombardier, Inc., Alstom, the Greenbrier Companies, Indian Railways and
Trinity Industries. No one customer represents 10% or more of consolidated sales. We believe that we have strong relationships
with all of our key customers.

Competition

We believe we hold a leading market share for many of our core product lines globally, although market shares vary by
product lines and geographies. We operate in a highly competitive marketplace. 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. 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 competition for locomotive,
freight and passenger transit service and repair is mostly from the railroads’ and passenger transit authorities’ in-house
operations, Electro-Motive Diesel, a division of Caterpillar, and New York Air Brake/Knorr. We believe our key strengths,
which include leading market positions in core products, breadth of product offering with a stable mix of OEM and aftermarket
business, leading design and engineering capabilities, significant barriers to entry and an experienced management team, enable
us to compete effectively in this marketplace. 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.

Employees

At December 31, 2018, we employed approximately 18,000 full-time employees around the world. This figure includes
employees subject to collective bargaining agreements, most of which are outside of North America. We consider our relations
with employees and union representatives to be good but cannot assure that future contract negotiations and labor relations will
be so.

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. These entities typically govern equipment, safety and interoperability standards for passenger
transit and freight rail rolling stock, oversee a wide variety of rules and regulations governing safety and design of equipment,
and evaluate certification and qualification requirements for suppliers. New products generally must undergo testing and
approval processes that are rigorous and lengthy. 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 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. Also, in Europe, the European Committees for Standardization continually draft new European standards
which cover, for example, the Reliability, Availability, Maintainability and Safety of railways systems. To guarantee
interoperability in Europe, the European Union for Railway Agencies is responsible for defining and implementing Technical
Standards of Interoperability, which covers areas such as infrastructure, energy, rolling stock, telematic applications, traffic
operation and management subsystems, noise pollution and waste generation, protection against fire and smoke, and system
safety.

Most countries and regions in which Wabtec does business have similar rule-making bodies. In Russia, a GOST-R

certificate of conformity is mandatory for all products related to the safety of individuals in Russian territory. In China, any
product or system sold on the Chinese market must have been certified in accordance with national standards. In the local
Indian market, most products are covered by regulations patterned after AAR and UIC standards.

Effects of Seasonality

Our business is not typically seasonal. The third quarter results may be affected by vacation and scheduled plant
shutdowns at several of our major customers and fourth quarter results may be affected by the timing of spare parts and service
orders placed by transit agencies worldwide. Quarterly results can also be affected by the timing of projects in backlog and by
project delays.

Environmental Matters

Additional information on environmental matters is included in Note 21 of “Notes to Consolidated Financial

Statements” included in Part IV, Item 15 of this report.

Available Information

We maintain a website at www.wabtec.com. 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 and other information, are available free of charge on this
site. The Internet site and the information contained therein or connected thereto are not incorporated by reference into this
Form 10-K. 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, and our
Sustainability Report.

Item 1A.

RISK FACTORS

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. To the extent that these factors result in continued instability
of capital markets, shortages of raw materials or component parts, longer sales cycles, deferral or delay of customer orders or
an inability to market our products effectively, our business and results of operations could be materially adversely affected.

We are dependent upon key customers.

We rely on several key customers who represent a significant portion of our business. While we believe our relationships

with our customers are generally good, our top customers could choose to reduce or terminate their relationships with us. In
addition, many of our customers place orders for products on an as-needed basis and operate in cyclical industries. As a result,
customer order levels have varied from period to period in the past and may vary significantly in the future. Such customer
orders are dependent upon their markets and customers and may be subject to delays and cancellations. Furthermore, the
average service life of certain products in our end markets has increased in recent years due to innovations in technologies and
manufacturing processes, which has also allowed end users to replace parts less often. 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.

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. Price competition is
strong and, coupled with the existence of a number of cost conscious customers with significant negotiating power, has
historically limited our ability to increase prices. In addition to price, competition is based on product performance and
technological leadership, quality, reliability of delivery and customer service and support. If our competitors invest heavily in
innovation and develop products that are more efficient or effective than our products, we may not be able to compete
effectively. There can be no assurance that competition in one or more of our markets will not adversely affect us and our
results of operations.

We intend to pursue acquisitions, joint ventures and alliances that involve a number of inherent risks, any of which may
cause us not to realize anticipated benefits.

One aspect of our business strategy is to selectively pursue acquisitions, joint ventures and alliances that we believe will
improve our market position and provide opportunities to realize operating synergies. These transactions involve inherent risks
and uncertainties, any one of which could have a material adverse effect on our business, results of operations and financial
condition including:

•

•
•
•

difficulties in achieving identified financial and operating synergies, including the integration of operations, services
and products;
diversion of management’s attention from other business concerns;
the assumption of unknown liabilities; and
unanticipated changes in the market conditions, business and economic factors affecting such an acquisition, joint
venture or alliance.

We cannot assure that we will be able to consummate any future acquisitions, joint ventures or other business

combinations. If we are unable to identify or consummate suitable acquisitions, joint ventures or alliances, we may be unable to
fully implement our business strategy, and our business and results of operations may be adversely affected as a result. In
addition, our ability to engage in such strategic transactions will be dependent on our ability to raise substantial capital, and we
may not be able to raise the funds necessary to implement this strategy on terms satisfactory to us, if at all.

A failure to predict and react to customer demand could adversely affect our business.

If we are unable to accurately forecast demand for our existing products or to react appropriately to changes in demand,

we may experience delayed product shipments and customer dissatisfaction. If demand increases significantly from current
levels, both we and our suppliers may have difficulty meeting such demand, particularly if such demand increases occur
rapidly. Alternatively, we may carry excess inventory if demand for our products decreases below projected levels.

Additionally, we have dedicated significant resources to the development, manufacturing and marketing of new
products. Decisions to develop and market new transportation products are typically made without firm indications of customer
11

acceptance. Moreover, by their nature, new products may require alteration of existing business methods or threaten to displace
existing equipment in which our customers may have a substantial capital investment. There can be no assurance that any new
products that we develop will gain widespread acceptance in the marketplace or that such products will be able to compete
successfully with other new products or services that may be introduced by competitors. Furthermore, we may incur additional
warranty or other costs as new products are tested and used by customers.

Failure to accurately predict and react to customer demand could have a material adverse effect on our business, results

of operations and financial condition.

We may fail to respond adequately or in a timely manner to innovative changes in new technology.

In recent years, the global transportation landscape has been characterized by rapid changes in technology, leading to
innovative transportation and logistics concepts that could change the way the railway industry does business. There may be
additional innovations impacting the railway industry that we cannot yet foresee. Any failure by us to quickly adapt to and
adopt new innovations in products and processes desired by our customers may result in a significant loss of demand for our
product and service offerings. In addition, advances in technology may require us to increase investments in order to remain
competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments.

A portion of our sales are related to delivering products and services to help our U.S. railroad and transit customers meet
the Positive Train Control ("PTC") mandate from the U.S. federal government, which requires the use of on-board
locomotive computers and software by the end of 2018.

For the fiscal year ended December 31, 2018, we had sales of about $395 million related to train control and signaling,

which includes PTC. In 2015, the industry's PTC deadline was extended by three years through December 31, 2018, which also
included the ability of railroads to request an additional two years for compliance with the approval of the Department of
Transportation if certain parameters are met. This could change the timing of our revenues and could cause us to reassess the
staffing, resources and assets deployed in delivering PTC services.

Our revenues are subject to cyclical variations in the railway and passenger transit markets and changes in government
spending.

The railway industry historically has been subject to significant fluctuations due to overall economic conditions, the use

of alternate methods of transportation and the levels of government spending on railway projects. In economic downturns,
railroads have deferred, and may defer, certain expenditures in order to conserve cash in the short term. Reductions in freight
traffic may reduce demand for our replacement products.

The passenger transit railroad industry is also cyclical and is influenced by a variety of factors. New passenger transit

car orders vary from year to year and are influenced by a variety of factors, including major replacement programs, the
construction or expansion of transit systems by transit authorities and the quality and cost of alternative modes of
transportation. To the extent that future funding for proposed public projects is curtailed or withdrawn altogether as a result of
changes in political, economic, fiscal or other conditions beyond our control, such projects may be delayed or cancelled,
resulting in a potential loss of business for us, including transit aftermarket and new transit car orders. There can be no
assurance that economic conditions will be favorable or that there will not be significant fluctuations adversely affecting the
industry as a whole and, as a result, us.

Our backlog is not necessarily indicative of the level of our future revenues.

Our backlog represents future production and estimated potential revenue attributable to firm contracts with, or written
orders from, our customers for delivery in various periods. Instability in the global economy, negative conditions in the global
credit markets, volatility in the industries that our products serve, changes in legislative policy, adverse changes in the financial
condition of our customers, adverse changes in the availability of raw materials and supplies, or un-remedied contract breaches
could possibly lead to contract termination or cancellations of orders in our backlog or request for deferred deliveries of our
backlog orders, each of which could adversely affect our cash flows and results of operations.

A growing 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, 2018, approximately 67% of our consolidated net sales were to customers

outside of the United States. We intend to continue to expand our international operations, including in emerging markets, in
the future. 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, Macedonia, Mexico, the Netherlands, Poland, Russia, Spain, South
Africa, Turkey, and the United Kingdom. As a result, we are subject to various risks, any one of which could have a material
adverse effect on those operations and on our business as a whole, including:

•
•
•
•
•
•
•
•
•
•
•
•
•

lack of complete operating control;
lack of local business experience;
currency exchange fluctuations and devaluations;
restrictions on currency conversion or the transfer of funds or limitations on our ability to repatriate income or capital;
the complexities of operating within multiple tax jurisdictions;
foreign trade restrictions and exchange controls;
adverse impacts of international trade policies, such as import quotas, capital controls or tariffs;
difficulty enforcing agreements and intellectual property rights;
the challenges of complying with complex and changing laws, regulations, and policies of foreign governments;
the difficulties involved in staffing and managing widespread operations;
the potential for nationalization of enterprises;
economic, political and social instability; and
possible terrorist attacks, conflicts and wars, including those against American interests.

Our exposure to the risks associated with international operations may intensify if our international operations expand in

the future.

We may have liability arising from asbestos litigation.

Claims have been filed against us and certain of our affiliates in various jurisdictions across the United States by persons
alleging bodily injury as a result of exposure to asbestos-containing products. Most of these claims have been made against our
wholly owned subsidiary, Railroad Friction Products Corporation ("RFPC"), and are based on a product sold by RFPC prior to
the time that we acquired any interest in RFPC.

Most of these claims, including all of the RFPC claims, are submitted to insurance carriers for defense and indemnity or
to non-affiliated companies that have retained the liabilities for the asbestos-containing products at issue. We cannot, however,
assure that all these claims will be fully covered by insurance or that the indemnitors or insurers will remain financially viable.
Our ultimate legal and financial liability with respect to these claims, as is the case with most other pending litigation, cannot
be estimated.

We are subject to a variety of laws and regulations, including anti-corruption laws, in various jurisdictions.

We are subject to various laws, rules and regulations administered by authorities in jurisdictions in which we do
business, such as the anti-corruption laws of the U.S. Foreign Corrupt Practices Act, the French Law n° 2016-1691 (Sapin II)
and the U.K. Bribery Act, relating to our business and our employees. We are also subject to other laws and regulations
governing our international operations, including regulations administered by the U.S. Department of Commerce’s Bureau of
Industry and Security, the U.S. Department of Treasury’s Office of Foreign Assets Control, and various non-U.S. government
entities, including applicable export control regulations, economic sanctions on countries and persons, customs requirements,
currency exchange regulations, and transfer pricing regulations. Despite our policies, procedures and compliance programs, our
internal controls and compliance systems may not be able to protect us from prohibited acts willfully committed by our
employees, agents or business partners that would violate such applicable laws and regulations. Any such improper acts could
damage our reputation, subject us to civil or criminal judgments, fines or penalties, and could otherwise disrupt our business,
and as a result, could materially adversely impact our business, results of operations and financial condition.

In addition, our manufacturing operations are subject to safety, operations, maintenance and mechanical standards, rules
and regulations enforced by various federal and state agencies and industry organizations both domestically and internationally.
Our business may be adversely impacted by new rules and regulations or changes to existing rules or regulations, which could
require additional maintenance or substantial modification or refurbishment of certain of our products or could make such
products obsolete or require them to be phased out prior to their useful lives. 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 subject to a variety of environmental laws and regulations.

We are subject to a variety of increasingly stringent environmental laws and regulations governing discharges to air and

water, substances in products, the handling, storage and disposal of hazardous or solid waste materials and the remediation of
contamination associated with releases of hazardous substances. We have incurred, and will continue to incur, both operating
and capital costs to comply with environmental laws and regulations, including costs associated with the clean-up and

investigation of some of our current and former properties and offsite disposal locations. We believe our operations currently
comply in all material respects with all of the various environmental laws and regulations applicable to our business; however,
there can be no assurance that environmental requirements will not change in the future or that we will not incur significant
costs to comply with such requirements. Failure to comply with environmental laws and regulations could have significant
consequences on our business and results of operations, including the imposition of substantial fines and sanctions for
violations, injunctive relief (including requirements that we limit or cease operations at affected facilities), and reputational
risk.

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,
the European Union and other regulatory agencies around the world. We have made, and will continue to make, significant
capital and research expenditures relating to compliance with these standards. The successful development and introduction of
new and enhanced products in order to comply with new regulatory requirements are subject to other risks, such as delays in
product development, cost over-runs and unanticipated technical and manufacturing difficulties. In addition to these risks, the
nature and timing of government implementation and enforcement of these standards-particularly in emerging markets-are
unpredictable and subject to change.

Future climate change regulation could result in increased operating costs, affect the demand for our products or affect the
ability of our critical suppliers to meet our needs.

We have followed the current debate over climate change and the related policy discussion and prospective legislation.
We have reviewed the potential challenges for us that climate change policy and legislation may pose. Any such challenges are
heavily dependent on the nature and degree of climate change legislation and the extent to which it applies to our industry. At
this time, we cannot predict the ultimate impact of climate change and climate change legislation on our operations. Further,
when or if these impacts may occur cannot be assessed until scientific analysis and legislative policy are more developed and
specific legislative proposals begin to take shape. Any laws or regulations that may be adopted to restrict or reduce emissions of
greenhouse gas could require us to incur increased operating costs and could have an adverse effect on demand for our
products. In addition, the price and availability of certain of the raw materials that we use could vary in the future as a result of
environmental laws and regulations affecting our suppliers. An increase in the price of our raw materials or a decline in their
availability could adversely affect our operating margins or result in reduced demand for our products.

The occurrence of litigation in which we could be named as a defendant is unpredictable.

From time to time, we are subject to litigation or other commercial disputes and other legal and regulatory proceedings
with respect to our business, customers, suppliers, creditors, stockholders, product liability, intellectual property infringement,
warranty claims or environmental-related matters. Due to the inherent uncertainties of any litigation, commercial disputes or
other legal or regulatory proceedings, we cannot accurately predict their ultimate outcome, including the outcome of any
related appeals. We may incur significant expense to defend or otherwise address current or future claims. 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. Although we maintain insurance policies for certain risks, we cannot make assurances
that this insurance will be adequate to protect us from all material judgments and expenses related to potential future claims or
that these levels of insurance will be available in the future at economical prices or at all.

If we are not able to protect our intellectual property and other proprietary rights, we may be adversely affected.

Our success can be impacted by our ability to protect our intellectual property and other proprietary rights. We rely
primarily on patents, trademarks, copyrights, trade secrets and unfair competition laws, as well as license agreements and other
contractual provisions, to protect our intellectual property and other proprietary rights. However, filing, prosecuting and
defending patents on our products in all countries and jurisdictions throughout the world would be prohibitively expensive.
Moreover, existing U.S. legal standards relating to the validity, enforceability and scope of protection of intellectual property
rights offer only limited protection, may not provide us with any competitive advantages and may be challenged by third
parties. The laws of countries other than the United States may be even less protective of intellectual property rights. As a
result, a significant portion of our technology is not patented, and we may be unable or may not seek to obtain patent protection
for this technology. Further, although we routinely conduct anti-counterfeiting activities in multiple jurisdictions, we have
encountered counterfeit reproductions of our products or products that otherwise infringe on our intellectual property rights.
Counterfeit components of low quality may negatively impact our brand value. Accordingly, despite our efforts, we may be
unable to prevent third parties from infringing upon, counterfeiting or misappropriating our intellectual property or otherwise
gaining access to our technology. If we fail to protect our intellectual property and other proprietary rights, then our business,
results of operations and financial condition could be negatively impacted.

In addition, we operate in industries in which there are many third-party owners of intellectual property rights. Owners

of intellectual property that we need to conduct our business as it evolves may be unwilling to license such intellectual property
rights to us on terms we consider reasonable. Third party intellectual property owners may assert infringement claims against
us based on their intellectual property portfolios. If we are sued for intellectual property infringement, we may incur significant
expenses investigating and defending such claims, even if we prevail.

We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business
disruptions.

Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to
grow and our business is at risk from and may be impacted by cybersecurity attacks. We rely extensively on computer systems
to process transactions and manage our business. In addition, we collect, process, and retain sensitive and confidential customer
information in the normal course of business. Cybersecurity attacks could include attempts to gain unauthorized access to our
data and computer systems. Attacks can be both individual and/or highly organized attempts by very sophisticated hacking
organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include employee
education, password encryption, frequent password change events, firewall detection systems, anti-virus software in-place and
frequent backups; however, there is no guarantee such efforts will be successful in preventing a cyber-attack. A cybersecurity
attack could compromise the confidential information of our employees, customers and suppliers, and potentially violate
certain domestic and international privacy laws. Furthermore, a cybersecurity attack on our customers and suppliers could
compromise our confidential information in the possession of our customers and suppliers. A successful attack could disrupt
and otherwise adversely affect our business operations, including through lawsuits by third-parties. In addition, the regulatory
environment related to information security and privacy is constantly changing, and compliance with those requirements could
result in additional costs.

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. Accordingly, we are subject to a risk of product
liability or warranty claims in the event that the failure of any of our products results in personal injury or death or does not
conform to our customers’ specifications. In addition, in recent years, we have introduced a number of new products for which
we do not have a history of warranty experience. Although we currently maintain liability insurance coverage, we cannot assure
that product liability claims, if made, would not exceed our insurance coverage limits or that insurance will continue to be
available on commercially acceptable terms, if at all. The possibility exists for these types of warranty claims to result in costly
product recalls, significant repair costs and damage to our reputation.

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. Due to the competitive nature of the labor

markets in which we operate, we may not be able to retain, recruit and train the personnel we require, particularly when the
economy expands, production rates are high or competition for such skilled labor increases.

We collectively bargain with labor unions at some of our operations throughout the world. Failure to reach an

agreement could result in strikes or other labor protests which could disrupt our operations. Furthermore, non-union employees
in certain countries have the right to strike. If we were to experience a strike or work stoppage, it would be difficult for us to
find a sufficient number of employees with the necessary skills to replace these employees. We cannot assure that we will reach
any such agreement or that we will not encounter strikes or other types of conflicts with the labor unions of our personnel.

Any such labor shortages or labor disputes could have an adverse effect on our business, results of operations and

financial condition, could cause us to lose revenues and customers and might have permanent effects on our business.

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.

All of our facilities, equipment, supply chains, distribution systems and information technology systems are subject to
the risk of catastrophic loss due to unanticipated events, such as fires, earthquakes, explosions, floods, tornados, hurricanes or
weather conditions. An interruption in our manufacturing capabilities, supply chains, distribution systems or information
technology systems, whether as a result of such catastrophic loss or any other reason, could reduce, prevent or delay our
production and shipment of our product offerings, result in defective products or services, damage customer relationships and
our reputation and result in legal exposure and large repair or replacement expenses. This could result in the delay or
termination of orders, the loss of future sales and a negative impact to our reputation with our customers.

Third-party insurance coverage that we maintain with respect to such matters will vary from time to time in both type

and amount depending on cost, availability and our decisions regarding risk retention, and may be unavailable or insufficient to

protect us against losses. Any of these risks coming to fruition could materially adversely affect our business, results of
operations and financial condition.

We may be exposed to raw material shortages, supply shortages and fluctuations in raw material, energy and commodity
prices.

We purchase energy, steel, aluminum, copper, rubber and rubber-based materials, chemicals, polymers and other key

manufacturing inputs from outside sources, and traditionally have not had long-term pricing contracts with our pure raw
material suppliers. The costs of these raw materials have been volatile historically and are influenced by factors that are outside
our control. 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. In addition, we rely upon third-party suppliers, including

certain single-sourced suppliers, for various components for our products. In the event of a shortage or discontinuation of
certain raw materials or key inputs, we may experience challenges sourcing certain of our components to meet our production
requirements and may not be able to arrange for alternative sources of certain raw materials or key inputs. Any such shortage
may materially adversely affect our competitive position versus companies that are able to better or more cheaply source such
raw materials or key inputs.

We may incur increased costs due to fluctuations in interest rates and foreign currency exchange rates

In the ordinary course of business, we are exposed to increases in interest rates that may adversely affect funding costs
associated with variable-rate debt and changes in foreign currency exchange rates. We are subject to currency exchange rate
risk to the extent that our costs may be denominated in currencies other than those in which we earn and report revenues and
vice versa. In addition, a decrease in the value of any of these currencies relative to the U.S. dollar could reduce our profits
from non-U.S. operations and the translated value of the net assets of our non-U.S. operations when reported in U.S. dollars in
our consolidated financial statements. 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.

If we lose our senior management or key personnel, our business may be materially and adversely affected.

The success of our business is largely dependent on our senior management team, as well as on our ability to attract and

retain other qualified key personnel. It cannot be assured that we will be able to retain all of our current senior management
personnel and attract and retain other key personnel necessary for the development of our business. The loss of the services of
senior management and other key personnel or the failure to attract additional personnel as required could have a material
adverse effect on our business, results of operations and financial condition.

Following the consummation of the acquisition of GE Transportation, we will have substantial operations located in India,
and will be subject to regulatory, economic, social and political uncertainties in India.

Although we currently have operations in India, following the consummation of our acquisition of GE Transportation,

these operations will be substantially more significant, including a large-scale project involving the construction of a factory in
the state of Bihar, which includes a township to house employees. The project also includes construction of two service sheds,
in the states of Uttar Pradesh and Gujarat. Operations in India are inherently risky due to a number of regulatory, economic,
social and political uncertainties. For example, in September 2017, several media outlets reported that the Indian government
expressed a desire to switch the country's rail system from diesel to electric locomotives, which would threaten to interfere with
the completion of the project and curtail the viability of our ongoing operations in India. While no such actions have been taken
to date, any change in policy with respect to India’s rail system could have a material adverse effect on the business of the
combined company.

In addition, the Indian government has exercised and continues to exercise significant influence over many aspects of the

Indian economy. Since 1991, successive Indian governments have generally pursued policies of economic liberalization and
financial sector reforms, including by significantly relaxing restrictions on the private sector. Nevertheless, the role of the
Indian central and state governments in the Indian economy as producers, consumers and regulators has remained significant
and we cannot assure you that such liberalization policies will continue. The rate of economic liberalization could change, and
specific laws and policies affecting foreign investments in India could change as well, including exposure to possible
expropriation, nationalization or other governmental actions.

Further, protests against privatizations and government corruption scandals, which have occurred in the past, could slow
the pace of liberalization and deregulation. A significant change in India’s policy of economic liberalization and deregulation or

any social or political uncertainties could significantly harm business and economic conditions in India generally and our
business and prospects.

India’s physical infrastructure is less developed than that of many developed nations. Any congestion or disruption with

respect to communication systems or any public facility, including transportation infrastructure, could disrupt our normal
business activity. Any deterioration of India’s physical infrastructure would harm the national economy, disrupt the
transportation of people, goods and supplies, and add costs to doing business in India. These disruptions could interrupt our
business operations and significantly harm our results of operations, financial condition and cash flows.

Our indebtedness could adversely affect our financial health.

At December 31, 2018, we had total debt of $3,856.9 million. We entered into a Credit Agreement, as amended, dated

June 8, 2018, by and among us, Wabtec Netherlands B.V, the other borrowing subsidiaries party thereto from time to time, PNC
Bank, National Association, as administrative agent, and the other parties thereto, which includes (i) a $1.2 billion Revolving
Credit Facility, (ii) a $350.0 million Refinancing Term Loan and (iii) a $400.0 million Delayed Draw Term Loan. Being
indebted could have important consequences to us. 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.

The indenture for our $500.0 million floating rate senior notes due in 2021, our $744.4 million 4.375% senior notes due in
2023, our $499.1 million 4.150% senior notes due in 2024, our $750.0 million 3.450% senior notes due in 2026, our $1.25
billion 4.700% senior notes due in 2028 and our Credit Agreement contain various covenants that limit our management’s
discretion in the operation of our businesses.

Our Credit Agreement contains customary representations and warranties by us and our subsidiaries, including
customary use of materiality, material adverse effect, and knowledge qualifiers. We and our subsidiaries are also subject to (i)
customary affirmative covenants that impose certain reporting obligations on us and our subsidiaries and (ii) customary
negative covenants, including limitations on: indebtedness; liens; restricted payments; fundamental changes; business activities;
transactions with affiliates; restrictive agreements; changes in fiscal year; and use of proceeds. 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 3.25 to 1.00 or less; provided that, any material acquisition in which the cash consideration
paid exceeds $500.0 million, the maximum Leverage Ratio permitted will be (x) 3.75 to 1.00 at the end of the fiscal quarter in
which such acquisition is consummated and each of the three fiscal quarters immediately following such fiscal quarter and (y)
3.50 to 1.00 at the end of each of the fourth and fifth full fiscal quarters after the consummation of such acquisition.

The indenture under which our senior notes were issued contain covenants and restrictions which limit among other
things, the following: sale and leaseback transactions, sale of assets, change in control, mergers and consolidations and the
incurrence of liens.

The integration of our recently completed acquisitions may not result in anticipated improvements in market position or the
realization of anticipated operating synergies or may take longer to realize than expected.

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. 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;
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.

Item 1B.

UNRESOLVED STAFF COMMENTS

None.

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, 2018. 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. Leases
on the facilities are long-term and generally include options to renew. The Company’s corporate headquarters are located at the
Wilmerding, PA site.

Primary Use

Segment

Own/Lease

Approximate
Square Feet

Location

Domestic

Rothbury, MI

Wilmerding, PA
Lexington, TN

Jackson, TN

Berwick, PA

Chicago, IL
Greensburg, PA

Warren, OH

Boise, ID

Maxton, NC

Salem, VA

Greenville, SC

Brenham, TX

Spartanburg, SC

Buffalo Grove, IL
International

Sao Paulo, Brazil

Wallaceburg (Ontario), Canada

Northampton, UK

Shenyang City, Liaoning
Province, China

Lincolnshire, UK

Manufacturing/Warehouse/Office

Manufacturing/Service
Manufacturing

Manufacturing

Manufacturing/Warehouse

Manufacturing/Service
Manufacturing

Manufacturing

Manufacturing/Office

Manufacturing/Service

Manufacturing

Manufacturing/Office

Manufacturing

Manufacturing/Office

London (Ontario), Canada

Manufacturing

Doncaster, UK

Kilmarnock, UK

Loughborough, UK

Kempton Park, South Africa

Piossasco, Italy

Monte Alto, Brazil

Tamil Nadu, India

Schkeuditz, Germany

Schuttorf, Germany
Amiens, France

Chard, UK

Manufacturing/Service

Manufacturing

Manufacturing/Office

Manufacturing

Manufacturing/Office
Manufacturing

Manufacturing/Office

St Pierre Des Corps, France

Manufacturing

Avellino, Italy

Manufacturing/Office

Freight

Freight
Freight

Freight

Freight
Freight

Freight

Freight/Transit

Transit

Freight

Freight/Transit

Transit

Transit
Transit

Transit

Own

Own
Own

Own

Own
Own

Own

Lease

Own

Lease

Own

Lease

Own

Own
Own

Own

(1)

500,000

365,000
170,000

150,000

123,000
113,000

103,000

326,000

105,000

320,000

154,000

145,000

184,000

116,000

177,000

126,000

300,000

291,000

149,000

104,000

330,000

108,000

245,000

156,000

301,000

244,000

220,000

219,000

189,000
142,000

142,000

133,000

132,000

Location

Primary Use

Segment

Own/Lease

Burton on Trent, UK

Blovice, Czech Republic

Nyrany, Czech Republic

Witten, Germany

Verviers, Belgium

Camisano, Italy

San Luis Potosi, Mexico

Birkenhead, UK

Shanghai, China

Manufacturing/Office

Manufacturing

Manufacturing/Office

Manufacturing

Manufacturing/Office

Overhaul/Manufacturing

Manufacturing

Transit

Lease

Approximate
Square Feet

253,000

235,000

223,000

209,000

137,000

136,000

113,000

109,000

104,000

(1) Approximately 250,000 square feet are currently used in connection with the Company’s corporate and manufacturing

operations. The remainder is leased to a third party.

Item 3.

LEGAL PROCEEDINGS

Additional information with respect to legal proceedings is included in Note 21 of “Notes to Consolidated Financial

Statements” included in Part IV, Item 15 of this report and incorporate by reference herein.

Item 4.

MINE SAFETY DISCLOSURES

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table provides information on our executive officers as of February 25, 2019. They are elected

periodically by our Board of Directors and serve at its discretion.

Officers

Albert J. Neupaver

Raymond T. Betler

Rafael Santana

David L. DeNinno

Patrick D. Dugan

Scott E. Wahlstrom

Dominique Malefant

John A. Mastalerz

Greg Sbrocco

Timothy R. Wesley

Age

Position

Executive Chairman of the Board

President and Chief Executive Officer

Executive Vice President, President and Chief Executive Officer, Freight Segment

Executive Vice President, General Counsel and Secretary

Executive Vice President Finance, and Chief Financial Officer

Executive Vice President, Human Resources

Senior Vice President and Global Technology Officer

Senior Vice President of Finance, Corporate Controller and Principal Accounting
Officer

Senior Vice President, Wabtec Excellence Program

Vice President, Investor Relations and Corporate Communications

Albert J. Neupaver was re-named Executive Chairman of the Board of Directors in May 2018, having previously served

as Executive Chairman from May 2014 to May 2017. Prior to that, Mr. Neupaver served as Executive Chairman of the
Company since May 2014. Previously, he served as Chairman from May 2017 to May 2018, and Chairman and CEO from
May 2013 to May 2014 and as the Company’s President and CEO from February 2006 to May 2013. Prior to joining Wabtec,
Mr. Neupaver served in various positions at AMETEK, Inc., a leading global manufacturer of electronic instruments and
electric motors. Most recently he served as President of its Electromechanical Group for nine years.

Raymond T. Betler was named President and Chief Executive Officer in May 2014. Previously, Mr. Betler was President

and Chief Operating Officer since May 2013 and the Company’s Chief Operating Officer since December 2010. Prior to that,
he served as Vice President, Group Executive of the Company since August 2008. Prior to joining Wabtec, Mr. Betler served in
various positions of increasing responsibility at Bombardier Transportation since 1979. Most recently, Mr. Betler served as
President, Total Transit Systems from 2004 until 2008 and before that as President, London Underground Projects from 2002 to
2004.

Rafael Santana was named Executive Vice President, President and Chief Executive Officer of Wabtec's Freight
Segment effective February 25, 2019. Previously Mr. Santana was President and Chief Executive Officer of GE Transportation
since November 2017. Mr. Santana has held several global leadership positions since joining GE in 2000, including roles in the
Transportation, Power and Oil and Gas businesses. Prior to being named President and Chief Executive Officer of GE
Transportation, Mr. Santana was President and Chief Executive Officer of GE in Latin America. He also served as President
and Chief Executive Officer of GE Oil and Gas Turbomachinery Solutions and had roles as Chief Executive Officer for GE Gas
Engines and Chief Executive Officer for GE Energy in Latin America.

David L. DeNinno was named Executive Vice President, General Counsel and Secretary of the Company effective

December 2016. Previously, Mr. DeNinno served as Sr. Vice President, General Counsel and Secretary since February 2012.
Previously, Mr. DeNinno served as a partner at K&L Gates LLP since May 2011 and prior to that with Reed Smith LLP.

Patrick D. Dugan was named Executive Vice President and Chief Financial Officer effective December 2016.
Previously Mr. Dugan served as Senior Vice President and Chief Financial Officer since January 2014. Previously, Mr. Dugan
was Senior Vice President, Finance and Corporate Controller from January 2012 until November 2013. He originally joined
Wabtec in 2003 as Vice President, Corporate Controller. Prior to joining Wabtec, Mr. Dugan served as Vice President and Chief
Financial Officer of CWI International, Inc. from December 1996 to November 2003. Prior to 1996, Mr. Dugan was a Manager
with PricewaterhouseCoopers.

Scott E. Wahlstrom was named Executive Vice President, Human Resources effective December 2016. Previously, Mr.
Wahlstrom served as Senior Vice President, Human Resources since January 2012. Prior to that, Mr. Wahlstrom has been Vice
President, Human Resources, since November 1999. Previously, Mr. Wahlstrom was Vice President, Human Resources &
Administration of MotivePower Industries, Inc. from August 1996 until November 1999.

Dominique Malefant was named Senior Vice President, Global Technology effective February 25, 2019. Previously, Mr.

Malefant was the Vice President of Global Technology of GE Transportation. Prior to that, Mr. Malefant served as Vice
President of product and engineering for the Transport and Propulsion and Control business at Bombardier Transport.

John A. Mastalerz was named Senior Vice President of Finance, Corporate Controller and Principal Accounting Officer

in July 2017. Previously, Mr. Mastalerz served as Vice President and Corporate Controller from January 2014 to July 2017.
Prior to joining Wabtec, Mr. Mastalerz served in various executive management roles with the H.J. Heinz Company from
January 2001 to December 2013, most recently as Corporate Controller and Principal Accounting Officer. Prior to 2001, Mr.
Mastalerz was a Senior Manager with PricewaterhouseCoopers.

Greg Sbrocco was named Senior Vice President, Wabtec Excellence Program, effective February 25, 2019. Prior to this,
Mr. Sbrocco was Global Supply Chain Leader for GE Transportation. Mr. Sbrocco has been with GE for 27 years as he joined
in 1992 as an Environmental Engineer for the GE Energy business. During his tenure with GE, Mr. Sbrocco has held several
leadership roles in GE Energy, GE Oil and Gas, and GE Transportation.

Timothy R. Wesley was named Vice President, Investor Relations and Corporate Communications in November 1999.
Previously, Mr. Wesley was Vice President, Investor and Public Relations of MotivePower Industries, Inc. from August 1996
until November 1999.

PART II

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 20, 2019, there were 96,613,310 shares of Common Stock outstanding held by 452 holders of record.

The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with

the Securities and Exchange Commission, nor shall such information be incorporated by reference to any future filings under
the Securities Act of 1933 and the Securities Exchange Act of 1934, each as amended, except to the extent that Wabtec
specifically incorporates it by reference into such filing. The graph below compares the total stockholder return through
December 31, 2018, of Wabtec’s common stock to (i) the S&P 500 and (ii) our peer group of manufacturing companies which
consists of the following publicly traded companies: AGCO, AMETEK, Colfax, Dana, Dover, Flowserve, The Greenbrier
Companies, Navistar, Oshkosh, Regal Beloit, Rockwell Automation, Rockwell Collins, Terex, Trinity Industries, Snap-On,
WABCO and Xylem.

Month
October 2018 ....................................................
November 2018 ................................................
December 2018 ................................................
Total quarter ended December 31, 2018 ..........

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)

— $

137,824,347

(1)

On February 9, 2016, the Board of Directors amended its stock repurchase authorization to $350 million of the
Company’s outstanding shares. During 2018, the Company did not repurchase any shares, leaving $137.8 million
remaining under the authorization. The Company intends to purchase shares on the open market or in negotiated
block trades from time to time depending on market conditions. No time limit was set for the completion of the
programs which conforms to the requirements under the 2016 and 2018 Refinancing Credit Agreements, as well as the
senior notes currently outstanding.

Item 6.

SELECTED FINANCIAL DATA

The following table shows selected consolidated financial information of the Company and has been derived from

audited financial statements. This financial information should be read in conjunction with, and is qualified by reference to,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial
Statements of the Company and the Notes thereto included elsewhere in this Form 10-K.

In thousands, except per share amounts

2018

2017

2016

2015

2014

Year Ended December 31,

Income Statement Data

Net sales .............................................................................................

4,363,547

3,881,756

2,931,188

3,307,998

3,044,454

Gross profit ........................................................................................

Operating expenses ............................................................................

1,233,885

(760,448)

1,065,313

(644,234)

924,239

(467,632)

1,047,816

(438,962)

Income from operations .....................................................................

Interest expense, net...........................................................................

Other income, net...............................................................................

Net income attributable to Wabtec shareholders................................
Diluted Earnings per Common Share

Net income attributable to Wabtec shareholders................................

Cash dividends declared per share.....................................................

Fully diluted shares outstanding ........................................................
Balance Sheet Data

473,437

421,079

456,607

608,854

(112,235) $

(77,884) $

(50,298) $

(27,254) $

6,380

294,944

3.05

0.48

96,464

8,868

262,261

2.72

0.44

96,125

6,528

304,887

3.34

0.36

91,141

3,768

398,628

4.10

0.28

97,006

935,982

(406,198)

529,784

(29,074)

7,145

351,680

3.62

0.20

96,885

Total assets.........................................................................................

8,649,234

6,579,980

6,581,018

3,229,513

3,303,841

Cash, cash equivalents, and restricted cash .......................................

Total debt ...........................................................................................

Total equity ........................................................................................

2,342,354

3,856,873

2,869,075

233,401

1,870,528

2,828,532

398,484

1,892,776

2,976,825

226,191

692,238

425,849

521,195

1,701,339

1,808,298

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 products and services for the global rail

industry. Our products are found on virtually all U.S. locomotives, freight cars and passenger transit vehicles, as well as in
more than 100 countries throughout the world. Our products enhance safety, improve productivity and reduce maintenance
costs for customers, and many of 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 30 countries. In 2018, about 67% of the
Company’s revenues came from customers outside the U.S.

Management Review and Future Outlook

Wabtec’s long-term financial goals are to generate cash flow from operations in excess of net income, maintain a strong

credit profile while minimizing our overall cost of capital, increase margins through strict attention to cost controls and
implementation of the Wabtec Excellence Program, and increase revenues through a focused growth strategy, including product
innovation and new technologies, global and market expansion, aftermarket products and services, and acquisitions. In
addition, Management evaluates the Company’s current operational performance through measures such as quality and on-time
delivery.

The Company primarily serves the worldwide freight and transit rail industries. As such, 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 carloadings and passenger ridership;
government spending on public transportation; and investment in new technologies. In general, trends such as increasing
urbanization, a focus on sustainability and environmental awareness, an aging equipment fleet, and growth in global trade are
expected to drive continued investment in freight and transit rail.

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.

According to the 2018 bi-annual edition of a market study by UNIFE, the Association of the European Rail Industry, the

In Europe, the majority of the rail system serves the passenger transit market, which is expected to continue growing as

In North America, railroads carry about 40% of intercity freight, as measured by ton-miles, which is more than any other

In its study, UNIFE also said it expected increased investment in digital tools for data and asset management, and in rail

In 2019 and beyond, general global economic and market conditions will have an impact on our sales and operations. To

the extent that these factors cause instability of capital markets, shortages of raw materials or component parts, longer sales
cycles, deferral or delay of customer orders or an inability to market our products effectively, our business and results of
operations could be materially adversely affected. In addition, we face risks associated with our four-point growth strategy
including the level of investment that customers are willing to make in new technologies developed by the industry and the
Company, and risks inherent in global expansion. When necessary, we will modify our financial and operating strategies to
reflect changes in market conditions and risks.

MERGER OF WABTEC WITH GE TRANSPORTATION

Wabtec, GE, SpinCo, which was a newly formed wholly owned subsidiary of GE, and Merger Sub, which was a

newly formed wholly owned subsidiary of the Company, entered into the Original Merger Agreement on May 20, 2018, and
GE, SpinCo, Wabtec and Wabtec US Rail Holdings, Inc. ("Direct Sale Purchaser") entered into the Original Separation
Agreement on May 20, 2018, which together provided for the combination of Wabtec and GE Transportation. The Original
Merger Agreement and Original Separation Agreement were subsequently amended on January 25, 2019 and the merger was
completed on February 25, 2019.

In connection with the Direct Sale, certain assets of GE Transportation, including the equity interests of certain pre-

Transaction subsidiaries of GE that compose part of GE Transportation, were sold to Direct Sale Purchaser for a cash payment
of $2.875 billion, and Direct Sale Purchaser assumed certain liabilities of GE Transportation in connection with this purchase.
Thereafter, GE transferred the SpinCo Business to SpinCo and its subsidiaries (to the extent not already held by SpinCo and its
subsidiaries), and SpinCo issued to GE shares of SpinCo Class A preferred stock, SpinCo Class B preferred stock, SpinCo
Class C preferred stock and additional shares of SpinCo common stock in the SpinCo Transfer. Following this issuance of
additional SpinCo common stock to GE, and immediately prior to the Distribution, GE owned 8,700,000,000 shares of SpinCo
common stock, 15,000 shares of SpinCo Class A preferred stock, 10,000 shares of SpinCo Class B preferred stock and one
share of SpinCo Class C preferred stock, which constituted all of the outstanding stock of SpinCo.

Following the Direct Sale, GE distributed the Distribution Shares of SpinCo in a spin-off transaction. Immediately

after the Distribution, Merger Sub merged with and into SpinCo, whereby the separate corporate existence of Merger Sub
ceased and SpinCo continued as the surviving company and a wholly owned subsidiary of Wabtec (except with respect to
shares of SpinCo Class A preferred stock held by GE). In the Merger, subject to adjustment in accordance with the Merger
Agreement, each share of SpinCo common stock converted into the right to receive a number of shares of Wabtec common
stock based on the common stock exchange ratio set forth in the Merger Agreement and the share of SpinCo Class C preferred
stock was converted into the right to receive (a) 10,000 shares of Wabtec convertible preferred stock and (b) a number of shares
of Wabtec common stock equal to 9.9% of the fully-diluted pro forma Wabtec shares. Immediately prior to the Merger, Wabtec
paid $10.0 million in cash to GE in exchange for all of the shares of SpinCo Class B preferred stock.

Upon consummation of the Merger and calculated based on Wabtec’s outstanding common stock on a fully-diluted,

as-converted and as-exercised basis, as of December 31, 2018, approximately 49.2% of the outstanding shares of Wabtec
common stock would be held collectively by GE and Spin-Off record date holders of GE common stock (with 9.9% to be held
by GE directly in shares of Wabtec common stock and 15% underlying the shares of Wabtec convertible preferred stock to be
held by GE) and approximately 50.8% of the outstanding shares of Wabtec common stock would be held by pre-Merger
Wabtec stockholders. Following the effective time of the Merger, GE will also own 15,000 shares of SpinCo Class A preferred
stock, and Wabtec will hold 10,000 shares of SpinCo Class B preferred stock. The shares of Wabtec common stock and Wabtec
convertible preferred stock held by GE will be subject to GE’s obligations under the Shareholders Agreement, including,
among other things, and in each case subject to certain exceptions, (i) restrictions on the ability to sell, transfer or otherwise
divest such shares for a period of 30 days and (ii) an obligation to sell, transfer or otherwise divest (A) by no later than 120
days following the closing date of the Merger, GE’s (and its affiliates’) ownership of Wabtec common stock and/or Wabtec
convertible preferred stock so that GE (together with its affiliates) beneficially owns not less than 14.9% and not more than
19.9% of the number of shares of Wabtec common stock that were outstanding immediately after the closing of the Merger, (B)
by no later than one year following the closing date of the Merger, GE’s (and its affiliates’) ownership of Wabtec common stock
and/or Wabtec convertible preferred stock so that GE (together with its affiliates) beneficially owns not more than 18.5% of the
number of shares of Wabtec common stock that were outstanding immediately after the closing of the Merger, in each case of
clauses (A) and (B) treating the Wabtec convertible preferred stock as the Wabtec common stock into which it is convertible
both for purposes of determining the number of shares of Wabtec common stock owned and for purposes of determining the
number of shares of Wabtec common stock outstanding and (C) by no later than the third anniversary of the closing date of the
Merger, all of the subject shares that GE (together with its affiliates) beneficially owns, and (iii) an obligation to vote all of such
shares of Wabtec common stock in the proportion required under the Shareholders Agreement.

The estimated total value of the consideration to be paid by Wabtec in the Transactions was subject to the market price

of shares of Wabtec common stock at the date of closing. Using Wabtec’s closing stock price on the NYSE as of February 22,
2019, the total value of the consideration for the Transactions was approximately $10.2 billion, including the Direct Sale
Purchase Price, contingent consideration, assumed debt and net of cash acquired.

On September 14, 2018, Wabtec completed a public offering and sale of (i) $500 million aggregate principal amount

of floating rate senior notes, (ii) $750 million aggregate principal amount of 2024 Senior Notes and (iii) $1.25 billion aggregate
principal amount of 2028 Senior Notes. The Company used the net proceeds from the offering and sale of these notes combined
with the proceeds from a $400 million delayed draw term loan that was entered into on June 8, 2018 to finance the $2.875
billion Direct Sale. Wabtec used a portion of the proceeds from the September 14, 2018 notes to pay debt associated with its
revolving credit facility. The remaining proceeds are classified as Restricted Cash on the consolidated balance sheet, as the
Company used these cash amounts to finance the Direct Sale. Refer to Footnote 10 for further information regarding debt.

After the Merger, SpinCo, which is Wabtec’s wholly owned subsidiary (except with respect to shares of SpinCo Class

A preferred stock held by GE), holds the SpinCo Business and Direct Sale Purchaser, which also is Wabtec’s wholly owned
subsidiary, holds the assets purchased and the liabilities assumed in connection with the Direct Sale. Together, SpinCo and
Direct Sale Purchaser own and operate the post-Transaction GE Transportation. All shares of the Company’s common stock,
including those issued in the Merger, are listed on the NYSE under the Company’s current trading symbol “WAB.”

On the date of the Distribution, GE or its subsidiaries and SpinCo or the SpinCo Transferred Subsidiaries entered into

additional agreements relating to, among other things, intellectual property, employee matters, tax matters, research and
development and transition services.

ACQUISITION OF FAIVELEY TRANSPORT S.A.

On November 30, 2016, the Company acquired majority ownership of Faiveley Transport under the terms of the Share

Purchase Agreement. Faiveley Transport is a leading global provider of value-added, integrated systems and services for the
railway industry with annual sales of about $1.2 billion and more than 5,700 employees in 24 countries. Faiveley Transport
supplies railway manufacturers, operators and maintenance providers with a range of value-added, technology-based systems
and services in Energy & Comfort (air conditioning, power collectors and converters, and passenger information), Access &
Mobility (passenger access systems and platform doors), and Brakes and Safety (braking systems and couplers). The
transaction was structured as a step acquisition as follows:

• On November 30, 2016, the Company acquired majority ownership of Faiveley Transport, after completing the

purchase of the Faiveley family’s ownership interest under the terms of the Share Purchase Agreement, which
directed the Company to pay €100 per share of Faiveley Transport, payable between 25% and 45% in cash at the
election of those shareholders and the remainder payable in Wabtec stock. The Faiveley family’s ownership
interest acquired by the Company represented approximately 51% of outstanding share capital and approximately
49% of the outstanding voting shares of Faiveley Transport. Upon completion of the share purchase under the
Share Purchase Agreement, Wabtec commenced a tender offer for the remaining publicly traded Faiveley
Transport shares. The public shareholders had the option to elect to receive €100 per share in cash or 1.1538
shares of Wabtec common stock per share of Faiveley Transport. The common stock portion of the consideration
was subject to a cap on issuance of Wabtec common shares that was equivalent to the rates of cash and stock
elected by the 51% owners.

• On February 3, 2017, the initial cash tender offer was closed, which resulted in the Company acquiring

approximately 27% of additional outstanding share capital and voting rights of Faiveley Transport for
approximately $411.8 million in cash and $25.2 million in Wabtec stock. After the initial cash tender offer, the
Company owned approximately 78% of outstanding share capital and 76% of voting rights.

• On March 6, 2017, the final cash tender offer was closed, which resulted in the Company acquiring approximately
21% of additional outstanding share capital and 22% of additional outstanding voting rights of Faiveley Transport
for approximately $303.2 million in cash and $0.3 million in Wabtec stock. After the final cash tender offer, the
Company owned approximately 99% of the share capital and 98% of the voting rights of Faiveley Transport.

• On March 21, 2017, a mandatory squeeze-out procedure was finalized, which resulted in the Company acquiring
the Faiveley Transport shares not tendered in the offers for approximately $17.5 million in cash. This resulted in
the Company owning 100% of the share capital and voting rights of Faiveley Transport.

As of November 30, 2016, the date the Company acquired 51% of the share capital and 49% of the voting interest in
Faiveley Transport, Faiveley Transport was consolidated under the variable interest entity model as the Company concluded
that it was the primary beneficiary of Faiveley Transport as it then possessed the power to direct the activities of Faiveley
Transport that most significantly impact its economic performance and it then possessed the obligation and right to absorb
losses and benefits from Faiveley Transport.

The purchase price paid for 100% ownership of Faiveley Transport was $1,507 million. The $744.7 million included as

deposits in escrow on the consolidated balance sheet at December 31, 2016 was cash designated for use as consideration for the
tender offers.

RESULTS OF OPERATIONS

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

In thousands

For the year ended December 31,

2018

2017

Net sales ..............................................................................................................................

4,363,547

3,881,756

Cost of sales ........................................................................................................................

Gross profit .........................................................................................................................

Selling, general and administrative expenses .....................................................................

Engineering expenses..........................................................................................................

Amortization expense .........................................................................................................

Total operating expenses.....................................................................................................

Income from operations ......................................................................................................

Interest expense, net............................................................................................................

Other income, net................................................................................................................

Income from operations before income taxes.....................................................................

Income tax expense.............................................................................................................

Net income ..........................................................................................................................

Net loss (income) attributable to noncontrolling interest ...................................................

(3,129,662)

1,233,885

(633,244)

(87,450)

(39,754)

(760,448)

473,437

(112,235)

6,380

367,582

(75,879)

291,703

3,241

(2,816,443)

1,065,313

(512,552)

(95,166)

(36,516)

(644,234)

421,079

(77,884)

8,868

352,063

(89,773)

262,290

(29)

Net income attributable to Wabtec shareholders.................................................................

294,944

262,261

2016

2,931,188

(2,006,949)

924,239

(373,559)

(71,375)

(22,698)

(467,632)

456,607

(50,298)

6,528

412,837

(99,433)

313,404

(8,517)

304,887

The following table summarizes the results of operations for the period:

2018 COMPARED TO 2017

In thousands

For the year ended December 31,

2018

2017

Percent

Change

Freight Segment ..................................................................................................................

1,564,297

Transit Segment ..................................................................................................................

Net sales ........................................................................................................................

Income from operations ......................................................................................................

2,799,250

4,363,547

473,437

Net income attributable to Wabtec shareholders.................................................................

300,344

1,396,588

2,485,168

3,881,756

421,079

262,261

12.0%

12.6%

12.4%

14.5%

The following table shows the major components of the change in sales in 2018 from 2017:

In thousands

Freight

Segment

Transit

Segment

2017 Net Sales ....................................................................................................................

1,396,588

2,485,168

Acquisitions ........................................................................................................................
Change in Sales by Product Line:

Specialty Products & Electronics..................................................................................

Brake Products ..............................................................................................................

Remanufacturing, Overhaul & Build............................................................................

Transit Products ............................................................................................................

Other .............................................................................................................................

Foreign exchange ................................................................................................................

50,876

83,829

85,098

21,561

(21,862)

—

33,174

(1,138)

73,797

104,642

15,356

(30,037)

3,044

63,451

Total

3,881,756

134,705

158,895

126,203

(6,506)

(30,037)

36,218

62,313

2018 Net Sales ....................................................................................................................

1,564,297

2,799,250

4,363,547

Net sales increased by $481.8 million to $4,363.5 million in 2018 from $3,881.8 million in 2017. The increase is
primarily due to an organic increase of $158.9 million for Specialty Products and Electronics from higher demand for freight
and transit original equipment rail products and train control and signaling products and services and a $126.2 million increase
for Brake Products due to increased demand for original equipment brakes from freight and transit customers. Additionally,
sales from acquisitions increased sales by $134.7 million, and favorable foreign exchange increased sales $62.3 million.

Freight Segment sales increased by $167.7 million, or 12.0%, mostly from an organic increase of $85.1 million for
Specialty Products and Electronics due to higher demand for freight original equipment rail products and train control and
signaling products and services. Additionally, Other Products sales increased $33.2 million from increased spare parts demand
resulting from an increase in rail traffic. Acquisitions increased sales by $50.9 million.

Transit Segment sales increased by $314.1 million, or 12.6%, primarily due to a $104.6 million increase for Brake
Products from higher demand for original equipment brakes, $83.8 million from sales related to acquisitions, and $73.8 million
for Specialty Products and Electronics from higher demand for train control and signaling products and services. Favorable
foreign exchange increased sales by $63.5 million.

Cost of Sales and Gross Profit The following table shows the major components of cost of sales for the periods

indicated:

In thousands

For the year ended December 31, 2018

Freight

Percentage of
Sales

Transit

Percentage of
Sales

Total

Percentage of
Sales

Material .......................................................... $

Labor ..............................................................

Overhead ........................................................

Other/Warranty...............................................

544,580

227,006

271,351

9,980

34.8% $

1,154,663

41.2% $

1,699,243

14.5%

17.3%

0.6%

484,581

382,539

54,962

17.3%

13.7%

2.0%

711,587

653,890

64,942

Total cost of sales.................................... $

1,052,917

67.2% $

2,076,745

74.2% $

3,129,662

38.9%

16.3%

15.0%

1.5%

71.7%

For the year ended December 31, 2017

In thousands

Freight

Percentage of
Sales

Transit

Percentage of
Sales

Total

Percentage of
Sales

Material .......................................................... $

Labor ..............................................................

Overhead ........................................................

Other/Warranty...............................................

526,727

186,863

233,786

7,148

37.7% $

1,123,571

45.2% $

1,650,298

13.4%

16.7%

0.5%

339,110

341,389

57,849

13.6%

13.7%

2.3%

525,973

575,175

64,997

Total cost of sales.................................... $

954,524

68.3% $

1,861,919

74.8% $

2,816,443

42.5%

13.5%

14.8%

1.7%

72.5%

Cost of sales increased by $313.2 million to $3,129.7 million in 2018 compared to $2,816.4 million in 2017. In 2018,
cost of sales as a percentage of sales was 71.7% compared to 72.5% in 2017. Cost of sales in 2018 includes $17.6 million of
restructuring costs primarily in the Transit Segment. Cost of sales in 2017 includes $44.5 million of project adjustments on
certain projects and $11.8 million of restructuring and integration costs related to recent acquisitions, all of which were
primarily in the Transit Segment. Excluding the restructuring costs and contract adjustments in both years, cost of sales
increased 0.2% as a percentage of sales.

Freight Segment cost of sales decreased 1.1% as a percentage of sales to 67.2% in 2018 compared to 68.3% in 2017.

The decrease is primarily related to a favorable product mix which saw an increase in sales for train control and signaling
products and services and freight car products due to an increase in freight cars built which have a higher margin. The train
control and signaling products and services have lower material content and higher labor content which contributed to the
decrease in material costs as a percentage of revenue and a subsequent increase in the labor percentage. Additionally, there
were $11.4 million of project adjustments and restructuring costs in 2017, which did not recur in 2018.

Transit Segment cost of sales decreased 0.6% as a percentage of sales to 74.2% in 2018 compared to 74.8% in 2017.

Cost of sales in 2018 includes $15.9 million of restructuring costs primarily related to the downsizing of operations in the U.K.
and consolidation of certain operations in the U.S. and China. Cost of sales in 2017 includes $37.6 million of project
adjustments on certain contracts primarily related to material and warranty cost and $7.3 million of restructuring and
integration costs related to recent acquisitions. Excluding the restructuring costs and contract adjustments in both years, Transit
Segment cost of sales increased 0.5% as a percentage of sales. This increase is a result of additional costs on projects primarily
in the U.K.

Included in cost of sales is warranty expense. The provision for warranty expense is generally established for specific

losses, along with historical estimates of customer claims as a percentage of sales, which can cause variability in warranty
expense between quarters. Warranty expense was $58.0 million in 2018 compared to $50.4 million in 2017. The increase in
warranty expense is primarily related to the increase in sales.

Operating expenses The following table shows our operating expenses:

In thousands

Selling, general and administrative expenses................................

Engineering expenses ....................................................................

Amortization expense....................................................................

Total operating expenses .........................................................

2018

633,244

87,450

39,754

760,448

For the year ended December 31,

Percentage of

Sales

14.5% $

2.0%

0.9%

17.4% $

2017

512,552

95,166

36,516

644,234

Percentage of

Sales

13.2%

2.5%

0.9%

16.6%

Total operating expenses as a percentage of sales increased 0.8% to 17.4% in 2018 compared to 16.6% in 2017. Selling,

general, and administrative expenses increased $120.7 million, or 23.5%, primarily due to $21.3 million of costs related to the
GE Transportation transaction, $20.3 million of restructuring costs related to the exit of certain operations and headcount
reductions across the company, $7.2 million of costs related to a goods and service tax law change in India, $14.8 million of
increased employee benefit costs and $18.0 million in incremental expense from acquisitions. Changes in foreign currency
rates increased selling, general, and administrative expenses by $14.1 million and organic sales volume increases contributed to
the remainder of the change. In 2017, selling, general, and administrative expenses included $29.7 million of Faiveley
Transport transaction and restructuring costs. Engineering expense decreased by $7.7 million, or 13.8%, primarily due to
timing of research and development expenses. Amortization expense increased $3.1 million due to amortization of intangibles
associated with acquisitions.

The following table shows our segment operating expenses:

In thousands

2018

2017

Freight Segment ..................................................................................................................

206,549

Transit Segment ..................................................................................................................

Corporate.............................................................................................................................

494,565

59,334

Total operating expenses...............................................................................................

760,448

177,787

435,031

31,416

644,234

Percent

Change

16.2%

13.7%

88.9%

18.0%

For the year ended December 31,

Freight Segment operating expenses increased $28.8 million, or 16.2%, in 2018 and increased 50 basis points to 13.2%

of sales. The increase is primarily attributable to increased sales and marketing expenses of $4.0 million attributable to the
increased sales volumes, increased employee benefit costs of $5.4 million, and $11.1 million of incremental operating expenses
from prior year acquisitions.

Transit Segment operating expenses increased $59.5 million, or 13.7%, in 2018 and increased 20 basis points to 17.7%

of sales. Operating expense included $18.3 million and $20.0 million of restructuring and integration charges in 2018 and
2017, respectively. The 2018 restructuring charges related to the exit of certain operations and headcount reductions and the
2017 restructuring charges related to Faiveley Transportation integration costs. Additionally, in 2018, operating expenses
includes $7.2 million of costs related to a goods and service tax law change in India. Excluding the restructuring and
integration costs in both years and the impact of the goods and service tax law change in 2018, Transit operating expenses
increased $54.1 million. This increase is primarily due to increased sales volumes, increase employee benefits costs of $9.5
million, and $11.0 million of incremental operating expenses from acquisitions. In addition, changes in foreign currency rates
increased operating expenses by $15.8 million.

Corporate non-allocated operating expenses increased $27.9 million in 2018 due primarily to costs related to the GE

Transportation transaction of $21.3 million and increased litigation costs of $6.7 million. The prior year operating costs
included $5.7 million related to the Faiveley integration.

Interest expense, net Overall interest expense, net, increased $34.4 million in 2018 because of interest expense
associated with the proposed GE Transportation transaction of $29.3 million. In addition, net interest expense in the prior year
included a $2.2 million benefit related to the prepayment of debt assumed in the Faiveley Transport acquisition.

Other expense, net Other expense, net, decreased $2.5 million to $6.4 million for 2018, compared to 2017.

Income taxes The effective income tax rate was 20.6% and 25.5% in 2018 and 2017, respectively. On December 22,
2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. The U.S. tax reform
bill lowered the Federal statutory tax rate from 35% to 21% beginning January 1, 2018. The decrease in the effective tax for the

twelve months ended December 31, 2018 is the result of a higher earnings mix in lower tax jurisdictions as well as a benefit
from the completion of the accounting for the income tax effects of the Tax Act and the adjustment to the provisional amounts
previously recorded in accordance with SEC Staff Accounting Bulletin No. 118 which was partially offset by the reversal of
non-recurring tax benefits recorded in the twelve months ended December 31, 2018.

The following table summarizes the results of operations for the period:

2017 COMPARED TO 2016

For the year ended December 31,

In thousands

2017

2016

Freight Segment ..................................................................................................................

1,396,588

Transit Segment ..................................................................................................................

Net sales ........................................................................................................................

Income from operations ......................................................................................................

Net income attributable to Wabtec shareholders.................................................................

2,485,168

3,881,756

421,079

262,261

1,543,098

1,388,090

2,931,188

456,607

304,887

The following table shows the major components of the change in sales in 2017 from 2016:

In thousands

Freight

Segment

Transit

Segment

2016 Net Sales ....................................................................................................................

1,543,098

1,388,090

Acquisition..........................................................................................................................
Change in Sales by Product Line:

Specialty Products & Electronics..................................................................................

Remanufacturing, Overhaul & Build............................................................................

Brake Products ..............................................................................................................

Transit Products ............................................................................................................

Other .............................................................................................................................

Foreign exchange ................................................................................................................

148,122

1,035,061

(164,532)

(79,129)

(51,595)

—

(480)

1,104

8,502

10,548

2,473

45,462

1,397

(6,365)

Percent

Change

(9.5)%

79.0 %

32.4 %

(7.8)%

(14.0)%

Total

2,931,188

1,183,183

(156,030)

(68,581)

(49,122)

45,462

917

(5,261)

2017 Net Sales ....................................................................................................................

1,396,588

2,485,168

3,881,756

Net sales increased by $950.6 million to $3,881.8 million in 2017 from $2,931.2 million in 2016. The increase is due
to sales from acquisitions of $1,183.2 million with the majority related to the Faiveley Transport acquisition. This increase was
partially offset by a $156.0 million decrease for Specialty Products and Electronics due to lower demand for freight original
equipment rail products and train control and signaling products and services, a $68.6 million decrease for Remanufacturing,
Overhaul and Build primarily due to the absence of a large locomotive rebuild contract that completed in 2016, and a $49.1
million decrease for Brake products due to lower demand for original equipment brakes from freight and transit customers.
Unfavorable foreign exchange decreased sales $5.3 million.

Freight Segment sales decreased by $146.5 million, or 9.5%, primarily due to a $164.5 million decrease for Specialty
Products and Electronics sales from lower demand for freight original equipment rail products and train control and signaling
products attributable to lower freight car and locomotive builds, a decrease of $79.1 million for Remanufacturing, Overhaul
and Build sales due to a large locomotive rebuild contract that was completed in 2016, and a $51.6 million decrease in Brake
Products sales from lower demand for original equipment brakes and aftermarket services. Acquisitions increased sales by
$148.1 million and favorable foreign exchange increased sales by $1.1 million.

Transit Segment sales increased by $1,097.1 million, or 79.0%, primarily due to an increase in sales from acquisitions of

$1,035.1 million with the majority related to the Faiveley Transport acquisition. Additionally, Transit Products sales increased
$45.5 million from increased demand in original train doors, air conditioning systems, and other transit electronics, Overhaul &
Build sales increased $10.5 million due to an increase in transit overhaul demand, and Specialty Products & Electronics sales
increased $8.5 million due to increased demand for transit train control and signaling products and services. Unfavorable
foreign exchange decreased sales by $6.4 million.

Cost of Sales and Gross Profit The following table shows the major components of cost of sales for the periods

indicated:

In thousands

For the year ended December 31, 2017

Freight

Percentage of
Sales

Transit

Percentage of
Sales

Total

Percentage of
Sales

Material .......................................................... $

Labor ..............................................................

Overhead ........................................................

Other/Warranty...............................................

526,727

186,863

233,786

7,148

37.7% $

1,123,571

45.2% $

1,650,298

13.4%

16.7%

0.5%

339,110

341,389

57,849

13.6%

13.7%

2.3%

525,973

575,175

64,997

Total cost of sales.................................... $

954,524

68.3% $

1,861,919

74.8% $

2,816,443

42.5%

13.5%

14.8%

1.7%

72.5%

In thousands

For the year ended December 31, 2016

Freight

Percentage of
Sales

Transit

Percentage of
Sales

Total

Percentage of
Sales

Material .......................................................... $

Labor ..............................................................

Overhead ........................................................

Other/Warranty...............................................

590,876

176,518

242,956

5,575

38.3% $

587,516

42.3% $

1,178,392

11.4%

15.7%

0.4%

170,481

213,821

19,206

12.3%

15.4%

1.4%

346,999

456,777

24,781

Total cost of sales.................................... $

1,015,925

65.8% $

991,024

71.4% $

2,006,949

40.2%

11.8%

15.6%

0.8%

68.4%

Cost of sales increased by $809.5 million to $2,816.4 million in 2017 compared to $2,006.9 million in the same period

of 2016. For the twelve months ended 2017, cost of sales as a percentage of sales was 72.5% compared to 68.4% in the same
period of 2016. The increase as a percentage of sales is due to product mix largely attributable to higher transit segment sales
due to acquisitions, along with an unfavorable product mix within the freight segment. Also contributing to the increase were
higher project adjustments of $44.5 million recorded on certain existing contracts and $11.8 million of restructuring and
integration costs related to recent acquisitions.

Freight Segment cost of sales increased 2.5% as a percentage of sales to 68.3% in 2017 compared to 65.8% for the same
period of 2016. The increase is primarily related to lower demand for freight original equipment rail products and train control
and signaling products and services which typically offer a higher margin, higher project adjustments of $6.9 million on certain
existing contracts related to labor, material and warranty costs, and $4.5 million of restructuring and integration costs related to
recent acquisitions.

Transit Segment cost of sales increased 3.4% as a percentage of sales to 74.8% in 2017 compared to 71.4% for the same

period in 2016. The increase is primarily related to product mix largely attributable to the acquisition of Faiveley Transport,
which has lower overall margins and higher project adjustments of $37.6 million on certain existing contracts primarily related
to material and warranty costs and $7.3 million of restructuring and integration costs related to recent acquisitions.

Included in cost of sales is warranty expense. The provision for warranty expense is generally established for specific

losses, along with historical estimates of customer claims as a percentage of sales, which can cause variability in warranty
expense between quarters. Warranty expense was $50.4 million in 2017 compared to $28.9 million in 2016. The increase in
warranty expense is primarily related to the increase in sales and the contract adjustments noted above.

Operating expenses The following table shows our operating expenses:

In thousands

Selling, general and administrative expenses................................

Engineering expenses ....................................................................

Amortization expense....................................................................

Total operating expenses .........................................................

2017

512,552

95,166

36,516

644,234

For the year ended December 31,

Percentage of

Sales

13.2% $

2.5%

0.9%

16.6% $

2016

373,559

71,375

22,698

467,632

Percentage of

Sales

12.7%

2.4%

0.8%

15.9%

Total operating expenses were 16.6% and 15.9% of sales for 2017 and 2016, respectively. Selling, general, and
administrative expenses increased $139.0 million, or 37.2%, primarily due to $174.7 million in incremental expense from
acquisitions partially offset by lower costs due to cost saving initiatives and lower organic sales volumes. Engineering expense
increased $23.8 million or 33.3% primarily due to additional expenses from acquisitions and remained a relatively consistent as
a percentage of sales. Amortization expense increased $13.8 million due to amortization of intangibles associated with new
acquisitions.

The following table shows our segment operating expenses:

In thousands

2017

2016

Freight Segment ..................................................................................................................

177,787

Transit Segment ..................................................................................................................

Corporate.............................................................................................................................

435,031

31,416

Total operating expenses...............................................................................................

644,234

183,595

226,497

57,540

467,632

Percent

Change

(3.2)%

92.1 %

(45.4)%

37.8 %

For the year ended December 31,

Freight Segment operating expenses decreased $5.8 million, or 3.2%, in 2017 and increased 80 basis points to 12.7%
of sales. The decrease is primarily attributable to reduced sales volumes and realized benefits associated with the cost saving
initiatives undertaken in 2017 partially offset by $19.7 million of incremental operating expenses from acquisitions and $3.2
million related to integration and restructuring costs.

Transit Segment operating expenses increased $208.5 million, or 92.1%, in 2017 and increased 120 basis points to
17.5% of sales. The increase is primarily related to $191 million of incremental operating expenses related to acquisitions and
$20 million related to integration and restructuring costs related to recent acquisitions.

Corporate non-allocated operating expenses decreased $26.1 million in 2017 primarily due to a decrease in Faiveley

Transport transaction and integration costs as well as benefits from cost savings initiatives undertaken in 2017 and 2016.

Interest expense, net Overall interest expense, net, increased $27.6 million in 2017 due to a higher overall debt balance

in 2017 compared to 2016, primarily related to the Faiveley Transport acquisition and higher interest rates.

Other (expense) income, net Other income, net, increased $2.3 million to $8.9 million for 2017, compared to 2016

primarily due to an increase in equity income earned on unconsolidated subsidiaries.

Income taxes The effective income tax rate was 25.5% and 24.1% in 2017 and 2016, respectively. On December 22,

2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "U.S.
tax reform bill"). On December 23, 2017, the French government enacted the Finance Act for 2018 and it was published in the
Official Bulletin on December 31, 2017. As a result, tax expense increased by $55.0 million related to the U.S. tax reform bill,
see Note 12 of "Notes to Consolidated Financial Statements" included in Part IV, Item 8 of this report for further explanation.
This was offset by decreases of $50.7 million primarily due to the revaluation of the net U.S. and French deferred tax liabilities
as a result of the tax law enactments and the result of a lower earnings mix in higher tax rate jurisdictions. The net favorable
deferred tax benefits related to the adjustment of deferred tax liabilities which had originally been established in prior periods.

Liquidity and Capital Resources

Liquidity is provided by operating cash flow and borrowings under the Company’s unsecured credit facility with a

consortium of commercial banks. The following is a summary of selected cash flow information and other relevant data:

In thousands

Cash provided by (used for):

For the year ended
December 31,

2018

2017

2016

Operating activities ......................................................................................................

Investing activities .......................................................................................................

314,671

(147,287)

188,811

(1,033,474)

450,530

(232,966)

Financing activities:

Proceeds from debt ................................................................................................

Payments of debt....................................................................................................

Stock repurchases...................................................................................................

Cash dividends .......................................................................................................

3,480,702

(1,453,954)

—

(46,277)

1,216,740

(1,269,537)

—

(42,218)

1,875,000

(1,102,748)

(212,176)

(32,430)

Operating activities. Cash provided by operations in 2018 was $314.7 million compared with $188.8 million in 2017.

In comparison to 2017, cash provided by operations increased due to favorable working capital performance and higher net
income of $29.4 million. The major components of the increase in cash provided by operations were as follows: a favorable
change in accounts payable of $140.5 million due to the timing of payments to suppliers, a favorable change in taxes of $22.4
million due to the revaluation of deferred taxes caused by the Tax Cut and Jobs Act (the "Tax Act") and the timing of income
tax payments, and a favorable change in accrued liabilities and customer deposits of $50.6 million due to an increase in
customer advances during 2018. These favorable changes in working capital were offset by an unfavorable change in inventory
of $99.9 million due to efforts to ramp up production in anticipation of stronger product demand in 2019.

Cash provided by operations in 2017 was $188.8 million compared with $450.5 million in 2016. In comparison to 2016,
cash provided by operations decreased due to unfavorable working capital performance and lower net income of $51.1 million.
The major components of working capital were as follows: an unfavorable change of $88.4 million in accounts receivable
primarily due to higher sales, an unfavorable change in accounts payable of $72.8 million due to the timing of payments to
suppliers, an unfavorable change of $25.4 million in other assets and liabilities primarily due to an unfavorable change in
accrued liabilities due to payments related to contract liabilities, accrued expenses, and acquisition costs in 2017, and an
unfavorable change in inventory of $54.3 million due to efforts to ramp up production in anticipation of stronger product
demand in 2018.

Investing activities. In 2018, 2017 and 2016, cash used in investing activities was $147.3 million, $1,033.5 million and
$233.0 million, respectively. The major components of the cash outflow in 2018 were planned additions to property, plant, and
equipment of $93.3 million for continued investments in our facilities and manufacturing processes and $51.2 million in net
cash paid for acquisitions. These outflows were partially offset by $11.3 million in proceeds from disposal of property, plant,
and equipment. This compares to $89.5 million for property, plant, and equipment and $945.3 million in net cash paid for
acquisitions in 2017, primarily related to the acquisition of Faiveley Transport. In 2016, $50.2 million of cash was used to
purchase property, plant, and equipment and net cash paid for acquisitions was $183.1 million.

Financing activities. In 2018, cash provided by financing activities was $1,978.1 million, which included $2,500.0
million in proceeds from new borrowings, $980.7 million in proceeds from the revolving credit facility, $1,453.9 million in
repayments of debt, and $46.3 million of dividend payments. In 2017, cash used for financing activities was $97.4 million,
which included $1,216.7 million in proceeds from the revolving credit facility debt, $1,269.5 million of repayments of debt on
the revolving credit facility, and dividend payments of $42.2 million. In 2016, cash provided by financing activities was $523.0
million, which included $1,125.0 million in proceeds from the revolving credit facility debt, $770.0 million of repayments of
debt on the revolving credit facility, $332.7 million in repayments of other debt, which was primarily driven by repayments of
debt acquired from the purchase of Faiveley Transport, $750.0 million of new borrowings on the 2026 Senior Notes, $32.4
million of dividend payments and $212.2 million of Wabtec stock repurchases.

The following table shows outstanding indebtedness at December 31, 2018 and 2017:

In thousands

Floating Senior Notes, due 2021, net of unamortized debt
issuance costs of $3,204

4.150% Senior Notes, due 2024, net of unamortized debt
issuance costs of $7,043

4.70% Senior Notes, due 2028, net of unamortized debt
issuance costs of $10,343

3.45% Senior Notes, due 2026, net of unamortized debt
issuance costs of $1,718 and $2,345

4.375% Senior Notes, due 2023, net of unamortized
discount and debt issuance costs of $1,177 and $1,433

Revolving Credit Facility, net of unamortized
debt issuance costs of $3,138 and $2,451

Other Borrowings

Total

Less - current portion

Long-term portion

December 31,

2018

2017

496,796

742,957

1,239,657

748,282

248,823

338,112

42,246

3,856,873

64,099

—

747,655

248,567

853,124

21,182

1,870,528

47,225

3,792,774

1,823,303

On September 14, 2018 the Company issued $2.5 billion of senior notes with three different maturities.

• Floating Rate Senior Notes due 2021 - The Company issued $500.0 million of Floating Rate Senior Notes due 2021
(the "Floating Rate Notes"). The Floating Rate Notes, which are non-callable for one year, were issued at 100% of
face value. Interest on the Floating Rate Notes accrues at a floating rate per annum equal to three-month Libor plus
105 basis points. The interest rate for the Floating Rate Notes for the initial interest period was the three-month Libor
plus 105 basis points determined on September 12, 2018 and is payable quarterly on December 15, March 15, June 15,
and September 15 of each year. The Company incurred $3.5 million of deferred financing costs related to the issuance
of the Floating Rate Notes.

•

4.150% Senior Notes due 2024 - The Company issued $750.0 million of 4.150% Senior Notes due 2024 (the "2024
Notes"). The 2024 Notes were issued at 99.805% of face value. Interest on the 2024 Notes accrues at a rate of
4.150% per annum and is payable semi-annually on March 15 and September 15 of each year. The Company incurred
$7.4 million of deferred financing costs related to the issuance of the 2024 Notes.

4.70% Senior Notes Due 2028 - The Company issued $1,250.0 million of 4.70% Senior Notes due 2028 (the "2028
Notes" and together with the Floating Rate Notes and 2024 Notes, the "Senior Notes"). The 2028 Notes were issued at
99.889% of face value. Interest on the 2028 Notes accrues at a rate of 4.700% per annum and is payable semi-
annually on March 15 and September 15 of each year. The Company incurred $10.6 million of deferred financing
costs related to the issuance of the 2028 Notes.

The net proceeds from the issuance and sale of the Senior Notes was used to finance the cash portion of the GE

Transportation acquisition. The principal balances are due in full at maturity. The Senior Notes are senior unsecured
obligations of the Company and rank pari passu with all existing and future senior debt and senior to all existing and future
subordinated indebtedness of the Company. The indenture under which the Senior Notes were issued contains covenants and
restrictions which limit among other things, the following: the incurrence of indebtedness, payment of dividends and certain
distributions, sales of assets, change in control, mergers and consolidations and the incurrence of liens.

On February 12, 2019, the rating assigned by Moody's was decreased to Ba1. Accordingly, pursuant to the respective
terms of the Senior Notes issued on September 14, 2018, the interest rate will be increased by 0.25%. The interest rate increase
will take effect from the next interest period following February 12, 2019.

The Company is in compliance with the restrictions and covenants in the indenture under which the Senior Notes were

issued and expects that these restrictions and covenants will not be any type of limiting factor in executing our operating
activities.

3.45% Senior Notes Due November 2026

In October 2016, the Company issued $750.0 million of Senior Notes due in 2026 (the “2016 Notes”). The 2016 Notes

Transport acquisition, refinance Faiveley Transport’s indebtedness, and for general corporate purposes. The principal balance
is due in full at maturity. The Company incurred $2.7 million of deferred financing costs related to the issuance of the 2016
Notes.

The 2016 Notes are senior unsecured obligations of the Company and rank pari passu with all existing and future senior

debt and senior to all existing and future subordinated indebtedness of the Company. The indenture under which the 2016 Notes
were issued contains covenants and restrictions which limit among other things, the following: the incurrence of indebtedness,
payment of dividends and certain distributions, sale of assets, change in control, mergers and consolidations and the incurrence
of liens.

The Company is in compliance with the restrictions and covenants in the indenture under which the 2016 Notes were

issued and expects that these restrictions and covenants will not be any type of limiting factor in executing our operating
activities.

4.375% Senior Notes Due August 2023

In August 2013, the Company issued $250.0 million of Senior Notes due in 2023 (the “2013 Notes”). The 2013 Notes
were issued at 99.879% of face value. Interest on the 2013 Notes accrues at a rate of 4.375% per annum and is payable semi-
annually on February 15 and August 15 of each year. The proceeds were used to repay debt outstanding under the Company’s
existing credit agreement, and for general corporate purposes. The principal balance is due in full at maturity. The Company
incurred $2.6 million of deferred financing costs related to the issuance of the 2013 Notes.

The 2013 Notes are senior unsecured obligations of the Company and rank pari passu with all existing and future senior
debt and senior to all existing and future subordinated indebtedness of the Company. The indenture under which the 2013 Notes
were issued contains covenants and restrictions which limit among other things, the following: the incurrence of indebtedness,
payment of dividends and certain distributions, sale of assets, change in control, mergers and consolidations and the incurrence
of liens.

The Company is in compliance with the restrictions and covenants in the indenture under which the 2013 Notes were

issued and expects that these restrictions and covenants will not be any type of limiting factor in executing our operating
activities.

2018 Refinancing Credit Agreement

On June 8, 2018, the Company entered into a credit agreement (the “2018 Refinancing Credit Agreement”), which

replaced the Company’s then-existing “2016 Refinancing Credit Agreement.” As part of the 2018 Refinancing Credit
Agreement, the Company entered into (i) a $1.2 billion revolving credit facility (the “Revolving Credit Facility”), which
replaced the Company’s revolving credit facility under the 2016 Refinancing Credit Agreement, and includes a letter of credit
sub-facility of up to $450.0 million and a swing line sub-facility of $75.0 million, (ii) a $350.0 million term loan (the
“Refinancing Term Loan”), which refinanced the term loan under the 2016 Refinancing Credit Agreement, and (iii) a new
$400.0 million delayed draw term loan (the “Delayed Draw Term Loan”). The 2018 Refinancing Credit Agreement also
provided for a bridge loan facility (the “Bridge Loan Facility”) in an amount not to exceed $2.5 billion, such facility to become
effective at the Company’s request. Commitments in respect of the Bridge Loan Facility were terminated upon the issuance and
sale of the Senior Notes on September 14, 2018. In addition, the 2018 Refinancing Credit Agreement contains an uncommitted
accordion feature allowing the Company to request, in an aggregate amount not to exceed $600.0 million, increases to the
borrowing commitments under the Revolving Credit Facility or a new incremental term loan commitment. At December 31,
2018, the Company had available bank borrowing capacity, net of $29.2 million of letters of credit, of approximately $1,170.8
million subject to certain financial covenant restrictions.

The Revolving Credit Facility matures on June 8, 2023 and is unsecured. The Refinancing Term Loan matures on June 8,
2021 and is unsecured. The Delayed Draw Term Loan matures on the third anniversary of the date on which it is borrowed and
is unsecured. The applicable interest rate for borrowings under the 2018 Refinancing Credit Agreement includes interest rate
spreads based on the lower of the pricing corresponding to (i) the Company’s ratio of total debt (less unrestricted cash up to
$300.0 million) to EBITDA (“Leverage Ratio”) or (ii) the Company’s public rating, in each case that range between 1.000%
and 1.875% for LIBOR/CDOR-based borrowings and 0.0% and 0.875% for Alternate Base Rate based borrowings. The
obligations of the Company under the 2018 Refinancing Credit Agreement have been guaranteed by certain of the Company’s
subsidiaries.

fundamental changes; business activities; transactions with affiliates; restrictive agreements; changes in fiscal year; and use of
proceeds. In addition, the Company is required to maintain (i) an Interest Coverage ratio 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 3.25 to 1.00 or less; provided that, in the event the
Company completes the Direct Sale and the Merger or any other material acquisition in which the cash consideration paid
exceeds $500.0 million, the maximum Leverage Ratio permitted will be 3.75 to 1.00 at the end of the fiscal quarter in which
such acquisition is consummated and each of the three fiscal quarters immediately following such fiscal quarter and 3.50 to
1.00 at the end of each of the fourth and fifth full fiscal quarters after the consummation of such acquisition. The Company is in
compliance with the restrictions and covenants of the 2018 Refinancing Credit Agreement and does not expect that these
measurements will limit the Company in executing its operating activities.

At December 31, 2018, the weighted average interest rate on the Company’s variable rate debt was 3.68%. On June 5,
2014, the Company entered into a forward starting interest rate swap agreement with a notional value of $150.0 million. The
effective date of the interest rate swap agreement was November 7, 2016, and the termination date was December 19, 2018.

2016 Refinancing Credit Agreement

On June 22, 2016, the Company amended its existing revolving credit facility with a consortium of commercial banks.

This “2016 Refinancing Credit Agreement” provided the Company with a $1.2 billion, 5 year revolving credit facility and a
$400.0 million delayed draw term loan (the “Term Loan”). The Company incurred approximately $3.3 million of deferred
financing cost related to the 2016 Refinancing Credit Agreement. The 2016 Refinancing Credit Agreement borrowings bore
variable interest rates indexed as described below.

Under the 2016 Refinancing Credit Agreement, the Company could elect a Base Rate of interest for U.S. Dollar
denominated loans or, for certain currencies, an interest rate based on the London Interbank Offered Rate (“LIBOR”) of
interest, or other rates appropriate for such currencies (in any case, “the Alternate Rate”). The Base Rate adjusted on a daily
basis and was the greater of the Federal Funds Effective Rate plus 0.50% per annum, the PNC, N.A. prime rate or the Daily
LIBOR Rate plus 100 basis points, plus a margin that ranged from 0 to 75 basis points. The Alternate Rate was based on the
quoted rates specific to the applicable currency, plus a margin that ranged from 75 to 175 basis points. Both the Base Rate and
Alternate Rate margins were dependent on the Company’s consolidated total indebtedness to EBITDA ratios. The initial Base
Rate margin was 0 basis points and the Alternate Rate margin was 175 basis points.

Contractual Obligations and Off-Balance Sheet Arrangements

The Company is obligated to make future payments under various contracts such as debt agreements, lease agreements
and has certain contingent commitments such as debt guarantees. 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, 2018:

In thousands

Operating activities:

Total

Less than

1 year

1 - 3

years

3 - 5

years

More than

5 years

Purchase obligations (1)..............................................

149,624

38,777

46,276

23,176

Operating leases (2) ....................................................

Pension benefit payments (3)......................................

Postretirement benefit payments (4) ...........................

Financing activities:

Interest payments (5)...................................................

Long-term debt (6)......................................................

Dividends to shareholders (7) .....................................

Other:

190,410

167,825

10,065

1,068,729

3,856,873

46,375

36,429

14,789

1,158

158,450

64,099

46,375

55,417

30,848

2,221

302,129

801,367

—

35,503

33,108

2,113

250,191

248,927

—

41,395

63,061

89,080

4,573

357,959

2,742,480

—

Standby letters of credit (8)

354,176

14,566

121,443

112,879

105,288

Total ..................................................................................

5,844,077

374,643

1,359,701

705,897

3,403,836

(1) Purchase obligations represent non-cancelable contractual obligations at December 31, 2018. In addition, the
Company had $441.9 million of open purchase orders for which the related goods or services had not been
received. 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) Future minimum payments for operating leases are disclosed by year in Note 16 of the “Notes to Consolidated

Financial Statements” included in Part IV, Item 15 of this report.

(3) Annual payments to participants are expected to continue into the foreseeable future at the amounts or ranges noted.

Pension 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 about $6.4 million to
pension plan investments in 2019. See further disclosure in Note 11 of the “Notes to Consolidated Financial
Statements” included in Part IV, Item 15 of this report.

(4) Annual payments to participants are expected to continue into the foreseeable future at the amounts or ranges noted.

Postretirement payments are based on actuarial estimates using current assumptions for discount rates and health care
costs. See further disclosure in Note 11 of the “Notes to Consolidated Financial Statements” included in Part IV,
Item 15 of this report.

(5) Interest payments are payable March, June, September and December of each year at a rate based on contractual terms
of Floating Senior Notes due 2021. Interest payments are payable May and September of each year at 4.15% of $750
million Senior Notes due 2024. Interest payments are payable March and September of each year at 4.7% of $1,250
million Senior Note due 2028. Interest payments are payable May and November of each year at 3.45% of $750
million Senior Notes due in 2026. Interest payments are payable February and August of each year at 4.375% of $250
million Senior Notes due in 2023. Interest payments for the Revolving Credit Facility and Other Borrowings are based
on contractual terms and the Company’s current interest rates.

(6) Scheduled principal repayments of outstanding loan balances are disclosed in Note 10 of the “Notes to Consolidated

Financial Statements” included in Part IV, Item 15 of this report.

(7) Shareholder dividends are subject to approval by the Company’s Board of Directors, currently at an annual rate of

approximately $46.4 million.

(8) The $354.2 million of standby letters of credit is comprised of outstanding letters of credit for performance and bid

bond purposes, which expire in various dates through 2025. Amounts include interest payments based on contractual
terms and the Company’s current interest rate.

The above table does not reflect uncertain tax positions of $9.5 million, the timing of which are uncertain. Refer to Note

12 of the “Notes to Consolidated Financial Statements” for additional information on uncertain tax positions.

Obligations for operating activities. The Company has entered into $149.6 million of material long-term non-cancelable

materials and supply purchase obligations. Operating leases represent multi-year obligations for rental of facilities and
equipment. Estimated pension funding and post-retirement benefit payments are based on actuarial estimates using current
assumptions for discount rates, expected return on long-term assets, rate of compensation increases and health care cost trend
rates. Benefits paid for pension obligations were $16.9 million and $16.0 million in 2018 and 2017, respectively. Benefits paid
for post-retirement plans were $1.0 million and $1.2 million in 2018 and in 2017, respectively.

Obligations for financing activities. Cash requirements for financing activities consist primarily of long-term debt
repayments, interest payments and dividend payments to shareholders. The Company has historically paid quarterly dividends
to shareholders, subject to quarterly approval by our Board of Directors, currently at a rate of approximately $46.4 million
annually.

The Company arranges for performance bonds to be issued by third party insurance companies to support certain long

term customer contracts. At December 31, 2018, the initial value of performance bonds issued on the Company’s behalf is
about $507 million.

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

•

•
•
•
•
•
•
•
•
•
•
•

prolonged unfavorable economic and industry conditions in the markets served by us, including North America, South
America, Europe, Australia, Asia and South 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; or
availability of credit;

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 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 or intellectual property claims;
completion and integration of acquisitions, including the acquisition of Faiveley Transport and GE Transportation; or
the development and use of new technology;

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;
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; or
federal and state income tax legislation; and
the outcome of negotiations with governments.

Statements in this 10-K apply only as of the date on which such statements are made, and 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. Areas of
uncertainty that require judgments, estimates and assumptions include the accounting for allowance for doubtful accounts,
inventories, the testing of goodwill and other intangibles for impairment, warranty reserves, pensions and other postretirement
benefits, stock based compensation and tax matters. Management uses historical experience and all available information to
make these judgments and estimates, and actual results will inevitably 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 discussion of the judgments and
uncertainties associated with accounting for derivatives and environmental matters can be found in Notes 2 and 19,
respectively, in the “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report.

A summary of the Company’s significant accounting policies is included in Note 2 in the “Notes to Consolidated
Financial Statements” included in Part IV, Item 15 of this report and is incorporated by reference herein. Management believes
that the application of these policies on a consistent basis enables the Company to provide the users of the financial statements
with useful and reliable information about the Company’s operating results and financial condition.

Accounts Receivable and Allowance for Doubtful Accounts:

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

Judgments and Uncertainties The allowance for doubtful accounts receivable reflects our best estimate of probable losses
inherent in our receivable portfolio determined on the basis of historical experience, specific allowances for known troubled
accounts and other currently available evidence.

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

Inventories:

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

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

Effect if Actual Results Differ From Assumptions If the market value of 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 market 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.

Goodwill and Indefinite-Lived Intangibles:

Description Goodwill and indefinite-lived intangibles are required to be tested for impairment at least annually. 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 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,
overall financial performance, 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. 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. For example, based on the quantitative analysis performed as of October 1, 2018, a decline in the terminal growth
rate by 50 basis points would decrease fair market value by $398 million, or an increase in the weighted-average cost of capital
by 100 basis points would result in a decrease in fair market value by $1,156 million. Even with such changes the fair value of
the reporting units would be greater than their net book values, necessitating no Step 2 calculations. See Note 2 in the “Notes to
Consolidated Financial Statements” included in Part IV, Item 15 of this report for additional discussion regarding impairment
testing.

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 at risk of realizing material gains or losses.

Accounting for Pensions and Postretirement Benefits:

Description The Company provides pension and postretirement benefits for its employees. These amounts are determined
using actuarial methodologies and incorporate significant assumptions, including the rate used to discount the future estimated
liability, the long-term rate of return on plan assets and several assumptions relating to the employee workforce (salary
increases, medical costs, retirement age and mortality).

Judgments and Uncertainties Significant judgments and estimates are used in determining the liabilities and expenses for
pensions and other postretirement benefits. The rate used to discount future estimated liabilities is determined considering the
rates available at year-end on debt instruments that could be used to settle the obligations of the plan. The long-term rate of
return is estimated by considering historical returns and expected returns on current and projected asset allocations and is
generally applied to a five-year average market value of assets. The differences between actual and expected asset returns are
recognized in expense using the normal amortization of gains and losses per ASC 715.

Effect if Actual Results Differ From Assumptions If assumptions used in determining the pension and other postretirement
benefits change significantly, these costs can fluctuate materially from period to period. The key assumptions in determining
the pension and other postretirement expense and obligation include the discount rate, expected return on assets and health care
cost trend rate. For example, a 1% decrease or increase in the discount rate used in determining the pension and postretirement
expense would increase expense $1.1 million or decrease expense $1.9 million, respectively. A 1% decrease or increase in the
discount rate used in determining the pension and postretirement obligation would increase the obligation $43.8 million or
decrease the obligation $54.8 million, respectively. A 1% decrease or increase in the expected return on assets used in
determining the pension expense would increase or decrease expense $2.8 million. If the actual asset values at December 31,
2018 had been 1% lower, the amortization of losses in the following year would decrease $0.2 million.

Stock-based Compensation:

Description The Company has issued incentive stock units to eligible employees that vest upon attainment of certain
cumulative three-year performance goals. The program is structured as a rolling three-year plan; each year starts a new three-

year performance cycle with the most recently completed cycle being 2016-2018. No incentive stock units will vest for
performance below the three-year cumulative threshold. The Company utilizes an economic profit measure for this
performance goal. Economic profit is a measure of the extent to which the Company produces financial results in excess of its
cost of capital. Based on the Company’s achievement of the threshold and three-year cumulative performance, the stock units
vested can range from 0% to 200% of the shares granted.

Judgments and Uncertainties Significant judgments and estimates are used in determining the estimated three-year
performance, which is then used to estimate the total shares expected to vest over the three year vesting cycle and
corresponding expense based on the grant date fair value of the award. When determining the estimated three-year
performance, the Company utilizes a combination of historical actual results, budgeted results and forecasts. In the initial grant
year of a performance cycle, the Company estimates the three-year performance at 100%. As actual performance results for a
cycle begin to accumulate and the Company completes its budgeting and forecasting cycles the performance estimates are
updated. These judgments and estimates are reviewed and updated on a quarterly basis.

Effect if Actual Results Differ From Assumptions If assumptions used in determining the estimated three-year performance
change significantly, stock-based compensation expense related to the unvested incentive stock awards can fluctuate materially
from period to period. For example, a 10% decrease or increase in the estimated vesting percentage for incentive stock awards
would decrease or increase stock-based compensation expense by approximately $1.5 million and $1.5 million, respectively.

Income Taxes:

Description Wabtec records an estimated liability or benefit 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 it becomes probable that the amount of the actual liability differs
from the recorded amount. 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 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 with 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 methods used for these agreements include costs of
material and labor, both of which give an accurate representation of the progress made toward complete satisfaction of a
particular performance obligation.

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 subcontracts that may be associated with the contract. Factors that
influence these estimates include inflationary trends, 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 contain 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,
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 judgment in the estimation process, it
is likely that materially different revenue amounts could be recorded if we used different assumptions or if the underlying
circumstances were to change. Changes in underlying assumptions/estimates, supplier performance, or circumstances may
adversely or positively affect financial performance in future periods. If the combined profit margin for all contracts recognized
on the percentage of completion method during 2018 had been estimated to be higher or lower by 1%, it would have increased
or decreased revenue and gross profit for the year by approximately $30.0 million. A few of our contracts are expected to be
completed in a loss position. Provisions are made currently for estimated losses on uncompleted contracts.

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

In the ordinary course of business, Wabtec is exposed to risks that increases in interest rates may adversely affect

funding costs associated with its variable-rate debt. The Company’s variable rate debt represents 22% and 38% of total long-
term debt at December 31, 2018 and 2017, respectively.

To reduce the impact of interest rate changes on a portion of this variable-rate debt, the Company entered into interest

rate swap agreements which effectively converted a portion of the debt from a variable to a fixed-rate borrowing during the
term of the swap contracts. Refer to “Financial Derivatives and Hedging Activities” in Note 2 of “Notes to Consolidated
Financial Statements” included in Part IV, Item 15 of this report for additional information regarding interest rate risk.

Foreign Currency Exchange Rate Risk

The Company is subject to certain risks associated with changes in foreign currency exchange rates to the extent our

operations are conducted in currencies other than the U.S. dollar. For the year ended December 31, 2018, approximately 33%
of Wabtec’s net sales were in the United States, 9% in the United Kingdom, 7% in Germany, 6% in Canada, 6% in France, 5%
in Mexico, 4% in China, 4% in Australia, 4% in India, 4% in Italy, 2% in Brazil, and 16% in other international locations. (See
Note 22 of “Notes in Consolidated Financial Statements” included in Part IV, Item 15 of this report). To reduce the impact of
changes in currency exchange rates, the Company has periodically entered into foreign currency forward contracts. Refer to
“Financial Derivatives and Hedging Activities” in Note 2 of “Notes to Consolidated Financial Statements” included in Part IV,
Item 15 of this report for more information regarding foreign currency exchange risk.

Our market risk exposure is not substantially different from our exposure at December 31, 2018.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data are set forth in Item 15 of Part IV hereof.

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There have been no disagreements with our independent registered public accountants.

Item 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Wabtec’s principal executive officer and its principal financial officer have evaluated the effectiveness of Wabtec’s
“disclosure controls and procedures,” (as defined in Exchange Act Rule 13a-15(e)) as of December 31, 2018. Based upon their
evaluation, the principal executive officer and principal financial officer concluded that Wabtec’s disclosure controls and
procedures are effective to provide reasonable assurance that information required to be disclosed by Wabtec in the reports filed
or submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by Wabtec in such
reports is accumulated and communicated to Wabtec’s Management, including its principal executive officer and principal
finance officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in Wabtec’s “internal control over financial reporting” (as defined in Rule 13a-15(f) under the

Exchange Act) that occurred during the quarter ended December 31, 2018, that has materially affected, or is reasonably likely
to materially affect, Wabtec’s internal control over financial reporting. Management’s annual report on internal control over
financial reporting and the attestation report of the registered public accounting firm are included in Part IV, Item 15 of this
report.

Management’s Report on Internal Control over Financial Reporting

Management’s Report on Internal Control Over Financial Reporting appears on page 52 and is incorporated herein by

reference.

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

Ernst & Young LLP's attestation report on internal control over financial reporting appears on page 55 and is

incorporated herein by reference.

Item 9B.

OTHER INFORMATION

None.

Items 10 through 14.

PART III

In accordance with the provisions of General Instruction G(3) to Form 10-K, the information required by Item 10
(Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters), Item 13 (Certain Relationships and Related
Transactions, and Director Independence) and Item 14 (Principal Accounting Fees and Services) is incorporated herein by
reference from the Company’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 17, 2019,
except for the Equity Compensation Plan Information required by Item 12, which is set forth in the table below. The definitive
Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2018.
Information relating to the executive officers of the Company is set forth in Part I.

Wabtec has adopted a Code of Ethics for Senior Officers which is applicable to our executive officers. As described in
Item 1 of this report the Code of Ethics for Senior Officers is posted on our website at www.wabtec.com. In the event that we
make any amendments to or waivers from this code, we will disclose the amendment or waiver and the reasons for such on our
website.

This table provides aggregate information as of December 31, 2018 concerning equity awards under Wabtec’s

compensation plans and arrangements.

(a)
Number of securities to
be issued upon exercise
of outstanding options,

(b)
Weighted-average
exercise price of
outstanding
options warrants

Plan Category

warrants and rights

and rights

reflected in column (a))

Equity compensation plans approved by shareholders

Equity compensation plans not approved by shareholders

Total

466,677

—

466,677

61.04

—

61.04

2,800,836

—

2,800,836

Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

PART IV

The financial statements, financial statement schedules and exhibits listed below are filed as part of this annual report:

(1)

Financial Statements and Reports on Internal Control

Management’s Reports to Westinghouse Air Brake Technologies Corporation Shareholders

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

Consolidated Balance Sheets as of December 31, 2018 and 2017

Consolidated Statements of Income for the three years ended December 31, 2018, 2017 and 2016

Consolidated Statements of Comprehensive Income for the three years ended December 31, 2018, 2017
and 2016

Consolidated Statements of Cash Flows for the three years ended December 31, 2018, 2017 and 2016

Consolidated Statements of Shareholders’ Equity for the three years ended December 31, 2018, 2017 and
2016

Notes to Consolidated Financial Statements
Financial Statement Schedules

Schedule II—Valuation and Qualifying Accounts

Exhibits
Share Purchase Agreement among Financiere Faiveley S.A., Famille Faiveley Participations Francois
Faiveley, Erwan Faiveley, FW Acquisition, LLC and Wabtec Corporation dated as of October 6, 2015

Tender Offer Agreement among Faiveley Transport S.A., FW Acquisition, LLC, and Wabtec Corporation
dated as of October 6, 2015

Shareholder's Agreement among Financiere Faiveley S.A., FW Acquisition, LLC, and Wabtec
Corporation dated as of October 6, 2015

Amendment No. 1 to Share Purchase Agreement among Mr. Erwan Faiveley, Wabtec France, and Wabtec
Corporation dated as of October 24, 2016

Amendment No. 1 to Tender Offer Agreement among Faiveley Transport, S.A., Wabtec France, and
Wabtec Corporation dated as of October 24, 2016

Amendment No. 1 to Shareholder’s Agreement among Financiere Faiveley S.A., Famille Faiveley
Participations, Francois Faiveley, Erwan Faiveley, and Wabtec Corporation dated as of dated as of
October 24, 2016

Agreement and Plan of Merger, date May 20, 2018, among Westinghouse Air Brake Technologies
Corporation, General Electric Company, Transportation Systems Holdings Inc. and Wabtec US Rail
Holdings, Inc.

Separation, Distribution and Sale Agreement, date May 20, 2018, among Westinghouse Air Brake
Technologies Corporation, General Electric Company, Transportation Systems Holdings Inc., and
Wabtec US Rail, Inc.

Voting and Support Agreement, dated May 20, 2018, among General Electric Company and each of the
persons listed on Schedule 1 thereto.

Form of Shareholders Agreement between General Electric Company and Westinghouse Air Brake
Technologies Corporation

(2)

2.1

2.2

2.3

2.4

2.5

2.6

2.7**

2.8**

2.9

2.10

Page

102

Filing
Method

2.11

2.12

2.13**

2.14**

2.15

2.16**

3.1

3.2

3.3

3.4

3.5

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

4.10

4.11

4.12

10.1

10.2

10.3

Form of Tax Matters Agreement among General Electric Company, Transportation Systems Holdings
Inc., Westinghouse Air Brake Technologies Corporation and Wabtec US Rail, Inc.

Form of Employee Matters Agreement among General Electric Company, Transportation Systems
Holdings Inc., Westinghouse Air Brake Technologies Corporation and Wabtec US Rail, Inc.
Amendment to the Agreement and Plan of Merger, dated January 25, 2019, by and among Westinghouse
Air Brake Technologies Corporation, General Electric Company, Transportation Systems Holdings Inc.,
and Wabtec US Rail Holdings, Inc.

Amendment to the Separation, Distribution and Sale Agreement, dated January 25, 2019, by and between
Westinghouse Air Brake Technologies Corporation and General Electric Company.

Form of Shareholders Agreement between General Electric Company and Westinghouse Air Brake
Technologies Corporation.

Form of Tax Matters Agreement among General Electric Company, Transportation Systems Holdings
Inc., Westinghouse Air Brake Technologies Corporation and Wabtec US Rail, Inc.
Restated Certificate of Incorporation of the Company dated January 30, 1995, as amended December 31,
2003

Certificate of Amendment of Restated Certificate of Incorporation dated May 14, 2013

Amended By-Laws of the Company, effective May 14, 2014

Certificate of Amendment to Restated Certificate of Incorporation dated November 19, 2018

Certificate of Designations of Series A Non-Voting Convertible Preferred Stock of Westinghouse Air
Brake Technologies Corporation, dated February 22, 2019
Indenture, dated August 8, 2013 by and between the Company and Wells Fargo, National Association, as
Trustee

First Supplemental Indenture, dated August 8, 2013, by and between the Company and Wells Fargo
Bank, National Association, as Trustee

Form of 4.375% Senior Note due 2023 (included in Exhibit 4.2)

Second Supplemental Indenture, dated November 3, 2016, by and among Westinghouse Air Brake
Technologies Corporation, the subsidiary guarantors named therein and Wells Fargo Bank, National
Association, as Trustee

Third Supplemental Indenture, dated November 3, 2016, by and among Westinghouse Air Brake
Technologies Corporation, the subsidiary guarantors named therein and Wells Fargo Bank, National
Association, as Trustee

Form of 3.450% Senior Note due 2026 (included in Exhibit 4.5)

Fourth Supplemental Indenture, dated February 9, 2017, by and among Westinghouse Air Brake
Technologies Corporation, the subsidiary guarantors named therein and Wells Fargo Bank, National
Association, as Trustee

Fifth Supplemental Indenture, dated April 28, 2017, by and among Westinghouse Air Brake Technologies
Corporation, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as
Trustee

Sixth Supplemental Indenture, dated June 21, 2017, by and among Westinghouse Air Brake Technologies
Corporation, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as
Trustee.
Seventh Supplemental Indenture, dated June 8, 2018, by and among Westinghouse Air Brake
Technologies Corporation, the subsidiary guarantors named therein and Wells Fargo Bank, National
Association, as Trustee

Eighth Supplemental Indenture, dated June 29, 2018, by and among Westinghouse Air Brake
Technologies Corporation, the subsidiary guarantors named therein and Wells Fargo Bank, National
Association, as Trustee
Ninth Supplemental Indenture, dated September 14, 2018, by and among the Company, the guarantors
party thereto and Wells Fargo Bank, National Association, as Trustee.

Agreement of Sale and Purchase of the North American Operations of the Railway Products Group, an
operating division of American Standard Inc. (now known as Trane), dated as of 1990 between Rail
Acquisition Corp. and American Standard Inc. (only provisions on indemnification are reproduced)

Letter Agreement (undated) between the Company and American Standard Inc. (now known as Trane) on
environmental costs and sharing

Purchase Agreement dated as of June 17, 1992 among the Company, Schuller International, Inc.,
Manville Corporation and European Overseas Corporation (only provisions on indemnification are
reproduced)

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

21.0

23.1

23.2

31.1

31.2
32.1

Westinghouse Air Brake Company 1995 Non-Employee Directors’ Fee and Stock Option Plan, as
amended and restated*

Westinghouse Air Brake Technologies Corporation 2000 Stock Incentive Plan, as amended *

Employment Agreement with Albert J. Neupaver, dated February 1, 2006 *

Form of Restricted Stock Agreement *

Westinghouse Air Brake Technologies Corporation 2011 Stock Incentive Plan as amended and restated*

Stock Purchase Agreement, by and among the Company, Standard Car Truck Company and Robclif, Inc.,
dated September 12, 2008

Second Amended and Restated Refinancing Credit Agreement, dated as of June 22, 2016, by and among
the Company, Wabtec Cooperatief UA, as borrowers, certain subsidiaries of the Company as guarantors
and the lenders party thereto and PNC Bank, National Association, as Administrative Agent, PNC
Capital Markets LLC, Merrill Lynch, Pierce, Fenner & Smith Inc., JPMorgan Chase Bank, N.A., HSBC
Bank, USA, National Association and Société Générale, as Joint Lead Arrangers and Joint Bookrunners,
Bank of America, National Association and JPMorgan Chase Bank, N.A., as Co-Syndication Agents, and
HSBC Bank USA, National Association and Société Générale, as Co-Documentation Agents.

First Amendment to Second Amended and Restated Refinancing Credit Agreement, dated as of April 19,
2017, by and among the Company, Wabtec Cooperatief UA, as a borrower, certain subsidiaries of the
Company as guarantors, the lenders party thereto and PNC Bank, National Association, as
Administrative Agent.
Second Amendment to Second Amended and Restated Refinancing Credit Agreement, dated as of
October 11, 2017, by and among the Company, Wabtec Cooperatief UA, as a borrower, certain
subsidiaries of the Company as guarantors, the lenders party thereto and PNC Bank, National
Association, as Administrative Agent.

Form of Employment Continuation Agreement entered into by the Company with Albert J. Neupaver,
Raymond T. Betler, David L. DeNinno, Patrick D. Dugan, Scott E. Wahlstrom, Michael E. Fetsko,
Timothy R. Wesley and John A Mastalerz Jr.*

Amended and Restated Employment Agreement with Stephane Rambaud-Measson dated October 24,
2016*

Amended and Restated Employment Agreement with Guillaume Bouhours dated October 24, 2016*

Wabtec Corporation Deferred Compensation Plan for Executive Officers and Directors as adopted
December 10, 2009 *

Form of Agreement for Nonstatutory Stock Option under the 1995 Non-Employee Directors’ Fee and
Stock Option Plan, as amended and restated*

Form of Agreement for Nonstatutory Stock Options under 2000 Stock Incentive Plan, as amended *

Form of Agreement for Nonstatutory Stock Options under 2011 Stock Incentive Plan as amended and
restated*

Credit Agreement, dated as of June 8, 2018, by and among Westinghouse Air Brake Technologies
Corporation, Wabtec Netherlands B.V. and the other borrowing subsidiaries party thereto, the lenders
party thereto and PNC Bank, National Association, as Administrative Agent, Goldman Sachs Bank USA,
HSBC Bank USA, N.A., JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, PNC Capital Markets LLC and TD Securities (USA) LLC, as Joint Lead Arrangers and
Joint Bookrunners, Goldman Sachs Bank USA and PLC Capital Markets LLC, as Syndication Agents,
and Bank of America, N.A., HSBC Bank USA, N.A., JPMorgan Chase Bank, N.A., and TD Securities

First Amendment to Credit Agreement, dated as of February 22, 2019, among Westinghouse Air Brake
Technologies Corporation, Wabtec Netherlands B.V. and the other borrowing subsidiaries party thereto,
the lenders party thereto and PNC Bank, National Association, as Administrative Agent
List of subsidiaries of the Company

Consent of Ernst & Young LLP

Consent of Independent Accountants

Rule 13a-14(a)/15d-14(a) Certifications

Rule 13a-14(a)/15d-14(a) Certifications
Section 1350 Certifications

101.INS XBRL Instance Document.

101.SCH XBRL Taxonomy Extension Calculation Linkbase Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document.

1
1

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

1 Filed herewith.

2 Filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 33-90866).

3 Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q (File No. 033-90866) for the period ended

March 31, 2006.

4 Filed as an Annex to the Company’s Schedule 14A Proxy Statement (File No. 1-13782) filed on April 13, 2006.

5 Filed as an Annex to the Company’s Schedule 14A Proxy Statement (File No. 1-13782) filed on March 31, 2011.

6 Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q (File No. 1-13782) for the period ended

September 30, 2008.

7 Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 1-13782) dated July 2, 2009.

8 Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 1-13782), dated May 19, 2014.

9 Filed as an exhibit to the Company’s Annual Report on Form 10-K (File No. 1-13782), dated February 25, 2011.

10 Filed as an exhibit to the Company’s Annual Report on Form 10-K (File No. 1-13782), dated February 22, 2013.

11 Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 1-13782), dated May 15, 2013.

12 Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 1-13782), dated August 8, 2013.

13 Filed as an exhibit to the Company’s Annual Report on Form 10-K (File No. 1-13782), dated February 21, 2014.

14 Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 1-13782), dated June 24, 2016.

15 Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 1-13782), dated July 30, 2015.

16 Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 1-13782), dated October 6, 2015.

17 Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 1-13782), dated October 26, 2016.

18 Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 1-13782), dated November 1, 2016.

19 Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 1-13782), dated November 3, 2016.

20 Filed as an exhibit to the Company’s Annual Report on Form 10-K (File No. 1-13782), dated February 28, 2017.

21 Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q (File No. 1-13782) for the period ended March

31, 2017.

22 Filed as an exhibit to the Company’s Registration Statement on Form S-4 (File No. 333-219354).

23 Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q (File No. 1-13782) for the period ended

September 30, 2017.

24 Filed as an exhibit to the Company's Current Report on Form 8-K (File No 1-13782), dated May 24, 2018.

25 Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (File No. 1-13782), dated July 31, 2018.

26 Filed as an exhibit to the Company's Current Report on Form 8-K (File No 1-13782), dated September 14, 2018.

27 Filed as an exhibit to the Company's Current Report on Form 8-K (File No 1-13782), dated January 31, 2019.

28 Filed as an exhibit to the Company's Current Report on Form 8-K (File No 1-13782), dated February 25, 2019.

*
**

Management contract or compensatory plan.
Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Wabtec hereby undertakes to
furnish supplementally, copies of any of the omitted schedules upon request by the SEC.

MANAGEMENT’S REPORTS TO WABTEC SHAREHOLDERS

Management’s Report on Financial Statements and Practices

The accompanying consolidated financial statements of Westinghouse Air Brake Technologies Corporation and

subsidiaries (the “Company”) were prepared by Management, which is responsible for their integrity and objectivity. The
statements were prepared in accordance with U.S. generally accepted accounting principles and include amounts that are based
on Management’s best judgments and estimates. The other financial information included in the 10-K is consistent with that in
the financial statements.

Management also recognizes its responsibility for conducting the Company’s affairs according to the highest standards
of personal and corporate conduct. This responsibility is characterized and reflected in key policy statements issued from time
to time regarding, among other things, conduct of its business activities within the laws of host countries in which the Company
operates and potentially conflicting outside business interests of its employees. The Company maintains a systematic program
to assess compliance with these policies.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the
Company. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act, Management has conducted an assessment, including testing, using the criteria in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework)
(COSO). The Company’s system of internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting standards. Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Management has excluded Annax GmbH ("Annax") from its assessment of internal controls over financial reporting as

of December 31, 2018 because the Company acquired Annax effective March 22, 2018. Annax is a subsidiary whose total
assets, net assets, customer revenues and net income represents 1.0%, 1.6%, 1.1% and 1.0%, respectively, of the related
consolidated financial statement amounts as of and for the year ended December 31, 2018.

Based on its assessment, Management has concluded that the Company maintained effective internal control over
financial reporting as of December 31, 2018, based on criteria in Internal Control-Integrated Framework issued by the COSO.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2018, has been audited by
Ernst & Young LLP, independent registered public accounting firm, as stated in their report which is included herein.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Westinghouse Air Brake Technologies Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Westinghouse Air Brake Technologies Corporation (the
Company) as of December 31, 2018 and 2017, the related consolidated statements of income, comprehensive income,
shareholders' equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes
and financial statement schedule listed in the Index at Item 15.(2) (collectively referred to as the “consolidated financial
statements”). In our opinion, based on our audits and the report of other auditors, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S.
generally accepted accounting principles.

We did not audit the pre-acquisition historical basis consolidated financial statements of Faiveley Transport S.A., a
consolidated subsidiary, which statements reflect total revenues constituting 3.8% in 2016 of the related consolidated total.
Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Faiveley Transport S.A., is based solely on the report of the other auditors. We audited the
adjustments necessary to convert the pre-acquisition historical amounts included for Faiveley Transport S.A. to the basis
reflected in the Company’s 2016 consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated February 27, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits and the report of other auditors provide a reasonable basis
for our opinion.

/s/ ERNST & YOUNG LLP

We have served as the Company's auditor since 2002.

Pittsburgh, Pennsylvania
February 27, 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Management Board of Faiveley Transport

In our opinion, the consolidated statement of income, comprehensive income, shareholders’ equity and cash flows present
fairly, in all material respects, the results of operations and cash flows of Faiveley Transport and its subsidiaries for the period
from November 30, 2016 to December 31, 2016 (not presented separately herein), in conformity with accounting principles
generally accepted in the United States of America. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion. As discussed in Note 3, the company has not applied push down accounting for its acquisition by Wabtec.

PricewaterhouseCoopers Audit

/s/ Philippe Vincent
Partner

Neuilly-sur-Seine, France
February 23, 2017

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Westinghouse Air Brake Technologies Corporation

Opinion on Internal Control over Financial Reporting

We have audited Westinghouse Air Brake Technologies Corporation’s internal control over financial reporting as of December 31,
2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Westinghouse Air Brake Technologies Corporation
(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based
on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of
and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Annax GmbH
("Annax") which is included in the 2018 consolidated financial statements of the Company and constituted 1.0% and 1.6% of total
and net assets, respectively, as of December 31, 2018 and 1.1% and 1.0% of revenues and net income, respectively, for the year then
ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control
over financial reporting of Annax.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of
income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31,
2018, and the related notes and financial statement schedule listed in the Index at Item 15.(2) and our report dated February 27, 2019
expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

February 27, 2019

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS

In thousands, except shares and par value

Assets

Current Assets

December 31,

2018

2017

Cash and cash equivalents ........................................................................................................................................

580,908

Restricted cash ..........................................................................................................................................................

1,761,446

Accounts receivable ..................................................................................................................................................

Unbilled accounts receivable ....................................................................................................................................

Inventories.................................................................................................................................................................

Other assets ...............................................................................................................................................................

Total current assets..............................................................................................................................................

Property, plant and equipment ..................................................................................................................................

Accumulated depreciation ........................................................................................................................................

Property, plant and equipment, net .....................................................................................................................

Other Assets

Goodwill ...................................................................................................................................................................

Other intangibles, net ................................................................................................................................................

Other noncurrent assets.............................................................................................................................................

Total other assets.................................................................................................................................................

801,193

345,585

844,886

115,649

4,449,667

1,036,550

(472,813)

563,737

2,396,544

1,129,880

109,406

3,635,830

Total Assets ...................................................................................................................................................

8,649,234

Current Liabilities

Liabilities and Shareholders’ Equity

Accounts payable ......................................................................................................................................................

589,449

Customer deposits.....................................................................................................................................................

Accrued compensation..............................................................................................................................................

Accrued warranty......................................................................................................................................................

Current portion of long-term debt.............................................................................................................................

Other accrued liabilities ............................................................................................................................................

Total current liabilities ........................................................................................................................................

Long-term debt..........................................................................................................................................................

Accrued postretirement and pension benefits ...........................................................................................................

Deferred income taxes ..............................................................................................................................................

Accrued warranty......................................................................................................................................................

Other long-term liabilities.........................................................................................................................................

373,538

173,183

135,636

64,099

310,785

1,646,690

3,792,774

95,446

198,269

18,066

28,914

233,401

—

800,619

366,168

742,634

122,291

2,265,113

1,026,046

(452,074)

573,972

2,460,103

1,204,432

76,360

3,740,895

6,579,980

552,525

369,716

164,210

137,542

47,225

302,112

1,573,330

1,823,303

103,734

175,902

15,521

59,658

Total liabilities ..............................................................................................................................................

5,780,159

3,751,448

Commitment and Contingencies (Note 21)
Equity

Preferred stock, 1,000,000 shares authorized, no shares issued ...............................................................................

—

Common stock, $.01 par value; 500,000,000 and 200,000,000 shares authorized:

132,349,534 shares issued and 96,614,946 and 96,034,352 outstanding

at December 31, 2018 and December 31, 2017, respectively................................................................................

Additional paid-in capital .........................................................................................................................................

Treasury stock, at cost, 35,734,588 and 36,315,182 shares, at

December 31, 2018 and December 31, 2017, respectively....................................................................................

Retained earnings......................................................................................................................................................

Accumulated other comprehensive loss....................................................................................................................

Total Westinghouse Air Brake Technologies Corporation shareholders' equity .................................................

Noncontrolling interest .............................................................................................................................................

Total equity .........................................................................................................................................................

1,323

914,568

(816,145)

3,021,968

(256,583)

2,865,131

3,944

2,869,075

Total Liabilities and Equity...........................................................................................................................

8,649,234

1,323

906,616

(827,379)

2,773,300

(44,992)

2,808,868

19,664

2,828,532

6,579,980

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31,

2018

2017

2016

In thousands, except per share data

Net sales .............................................................................................................................................

4,363,547

3,881,756

2,931,188

Cost of sales .......................................................................................................................................

Gross profit .........................................................................................................................

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 from operations before income taxes.....................................................................

Income tax expense............................................................................................................................

Net income ..........................................................................................................................

Less: Net loss (income) attributable to noncontrolling interest .........................................................

(3,129,662)

1,233,885

(633,244)

(87,450)

(39,754)

(760,448)

473,437

(112,235)

6,380

367,582

(75,879)

291,703

3,241

(2,816,443)

1,065,313

(512,552)

(95,166)

(36,516)

(644,234)

421,079

(77,884)

8,868

352,063

(89,773)

262,290

(29)

Net income attributable to Wabtec shareholders.................................................................

294,944

262,261

Earnings Per Common Share

Basic

Net income attributable to Wabtec shareholders.................................................................

Diluted

Net income attributable to Wabtec shareholders.................................................................

Weighted average shares outstanding

3.06

3.05

2.74

2.72

Basic....................................................................................................................................

Diluted.................................................................................................................................

95,994

96,464

95,453

96,125

(2,006,949)

924,239

(373,559)

(71,375)

(22,698)

(467,632)

456,607

(50,298)

6,528

412,837

(99,433)

313,404

(8,517)

304,887

3.37

3.34

90,359

91,141

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31,

2018

2017

2016

In thousands, except per share data

Net income attributable to Wabtec shareholders................................................................................

294,944

262,261

Foreign currency translation gain (loss) ............................................................................................

Unrealized gain (loss) on derivative contracts...................................................................................

Unrealized gain (loss) on pension benefit plans and post-retirement benefit plans ..........................

Other comprehensive gain (loss) before tax ................................................................................

Income tax (expense) benefit related to components of

other comprehensive loss................................................................................................................

Other comprehensive income (loss), net of tax ...........................................................................

(207,267)

(5,307)

(3,774)

(216,348)

4,757

(211,591)

326,096

9,799

2,845

338,740

(4,127)

334,613

Comprehensive income attributable to Wabtec shareholders ......................................................

83,353

596,874

304,887

(93,684)

305

(12,021)

(105,400)

2,514

(102,886)

202,001

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

December 31,

2018

2017

2016

In thousands, except per share data

Operating Activities

Net income .........................................................................................................................................

291,703

262,290

313,404

Adjustments to reconcile net income to cash provided by operations:

Depreciation and amortization.....................................................................................................

Stock-based compensation expense.............................................................................................

Deferred income taxes .................................................................................................................

Loss on disposal of property, plant and equipment......................................................................

Changes in operating assets and liabilities, net of acquisitions

Accounts receivable and unbilled accounts receivable..........................................................

Inventories..............................................................................................................................

Accounts payable ...................................................................................................................

Accrued income taxes ............................................................................................................

Accrued liabilities and customer deposits..............................................................................

Other assets and liabilities .....................................................................................................

Net cash provided by operating activities........................................................................

Investing Activities

Purchase of property, plant and equipment..................................................................................

Proceeds from disposal of property, plant and equipment...........................................................

Acquisitions of business, net of cash acquired ............................................................................

Other ............................................................................................................................................

109,297

25,315

(5,299)

898

(54,611)

(108,883)

48,763

7,880

31,744

(32,136)

314,671

(93,305)

11,293

(51,153)

(14,122)

103,248

21,287

(67,423)

1,907

(68,676)

(8,955)

(91,722)

47,644

(18,891)

8,102

188,811

(89,466)

1,291

(945,299)

—

69,795

20,813

(10,228)

232

19,728

45,340

(18,932)

(11,759)

(11,338)

33,475

450,530

(50,216)

363

(183,113)

—

Net cash used for investing activities...............................................................................

(147,287)

(1,033,474)

(232,966)

Financing Activities

Proceeds from debt, net of issuance costs....................................................................................

Payments of debt..........................................................................................................................

Stock re-purchase.........................................................................................................................

Proceeds from exercise of stock options and other benefit plans ................................................

Payment of income tax withholding on share-based compensation ............................................

Cash dividends ($0.48, $0.44 and $0.36 per share for the years

ended December 31, 2018, 2017 and 2016) .............................................................................

Net cash provided by (used for) financing activities .......................................................

Effect of changes in currency exchange rates....................................................................................

Increase (decrease) in cash...........................................................................................................

Cash, cash equivalents and restricted cash, beginning of year ..............................................

3,480,702

(1,453,954)

—

9,962

(12,322)

(46,277)

1,978,111

(36,542)

2,108,953

233,401

1,216,740

(1,269,537)

—

4,428

(6,844)

(42,218)

(97,431)

32,263

(909,831)

1,143,232

1,875,000

(1,102,748)

(212,176)

1,983

(6,658)

(32,430)

522,971

(26,436)

714,099

429,133

Cash, cash equivalents and restricted cash, end of year ........................................................

2,342,354

233,401

1,143,232

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

In thousands, except share and per
share data

Common
Stock

Amount

Additional
Paid-in

Capital

Treasury
Stock

Retained

Accumulated
Other

Non-
controlling

Amount

Earnings

Comprehensive
Loss

Interest

Total

Balance, December 31, 2015

132,349,534

1,323

469,326

(40,513,428)

$ (775,124)

$ 2,280,801

(276,719)

1,732

$ 1,701,339

Cash dividends ($0.36 dividend per
share) ..................................................

Proceeds from treasury stock issued
from the exercise of stock
options and other benefit plans, net
of tax ...................................................

Stock based compensation ..................

Non-controlling interests associated
with Faiveley Transport Acquisition ...

Net income ..........................................

Other comprehensive loss, net of tax ..

Stock issued for Faiveley Transport
Acquisition ..........................................

Stock re-purchase ................................

—

(32,430)

(8,490)

17,748

—

328,245

5,038

—

391,367

6,307,489

143,312

—

(3,046,408)

(212,176)

—

304,887

—

(102,886)

—

(32,430)

—

760,599

8,517

—

(3,452)

17,748

760,599

313,404

(102,886)

534,679

(212,176)

Balance, December 31, 2016

132,349,534

1,323

869,951

(36,924,102)

(838,950)

2,553,258

(379,605)

770,848

2,976,825

Cash dividends ($0.44 dividend per
share) ..................................................

Proceeds from treasury stock issued
from the exercise of stock
options and other benefit plans, net
of tax ...................................................

Stock based compensation ..................

Acquisition of Faiveley Transport
noncontrolling interest ........................

Net income ..........................................

Other comprehensive income, net of
tax .......................................................
Stock issued for Faiveley Transport
Acquisition

—

(42,218)

(7,361)

16,650

8,931

—

18,445

608,920

4,945

—

6,626

—

262,261

—

334,613

—

(42,218)

—

(2,416)

16,650

(751,213)

(742,282)

—

262,290

334,613

25,071

Balance, December 31, 2017

132,349,534

1,323

906,616

(36,315,182)

(827,379)

2,773,300

(44,992)

19,664

2,828,532

Cash dividends ($0.48 dividend per
share) ..................................................

Proceeds from treasury stock issued
from the exercise of stock
options and other benefit plans, net of
tax .......................................................
Stock based compensation ..................

Net income (loss) ................................

Other comprehensive loss, net of tax ..

Other owner changes ...........................

—

(46,277)

(13,594)

21,546

—

580,594

11,234

—

294,944

—

(46,277)

—

(2,360)

21,546

(3,241)

291,703

(211,591)

—

(211,591)

—

(12,479)

Balance, December 31, 2018

132,349,534

1,323

914,568

(35,734,588)

$ (816,145)

$ 3,021,968

(256,583)

3,944

$ 2,869,075

The accompanying notes are an integral part of these statements

1. BUSINESS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Wabtec is one of the world’s largest providers of value-added, technology-based equipment, systems and services for the

global passenger transit and freight rail industries. Our highly engineered products, which are intended to enhance safety,
improve productivity and reduce maintenance costs for customers, can be found on most locomotives, freight cars, passenger
transit cars and buses around the world. Our products enhance safety, improve productivity and reduce maintenance costs for
customers, and many of 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 30 countries and our products can be found in more
than 100 countries throughout the world. In 2018, about 67% of the Company’s revenues came from customers outside the U.S.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation The consolidated financial statements include the accounts of the Company and all
subsidiaries that it controls. For consolidated subsidiaries in which the Company's ownership is less than 100%, the outside
shareholders' interests are shown as noncontrolling interests. These statements have been prepared in accordance with U.S.
generally accepted accounting principles. Sales between subsidiaries are billed at prices consistent with sales to third parties
and are eliminated in consolidation.

Cash Equivalents Cash equivalents are highly liquid investments purchased with an original maturity of three months or

less.

Allowance for Doubtful Accounts The allowance for doubtful accounts receivable reflects our best estimate of probable

losses inherent in our receivable portfolio determined on the basis of historical experience, specific allowances for known
troubled accounts and other currently available evidence. The allowance for doubtful accounts was $16.9 million and $12.3
million as of December 31, 2018 and 2017, respectively.

Inventories Inventories are stated at the lower of cost or market. Cost is determined under the first-in, first-out (FIFO)

method. Inventory costs include material, labor and overhead.

Property, Plant and Equipment Property, plant and equipment additions are stated at cost. Expenditures for renewals

and improvements are capitalized. Expenditures for ordinary maintenance and repairs are expensed as incurred. The Company
computes book depreciation principally on the straight-line method. Accelerated depreciation methods are utilized for income
tax purposes.

Leasing Arrangements The Company conducts a portion of its operations from leased facilities and finances certain

equipment purchases through lease agreements. In those cases in which the lease term approximates the useful life of the leased
asset or the lease meets certain other prerequisites, the leasing arrangement is classified as a capital lease. The remaining
arrangements are treated as operating leases.

Goodwill and Intangible Assets Goodwill and other intangible assets with indefinite lives are not amortized. Other

intangibles (with definite lives) are amortized on a straight-line basis over their estimated economic lives. Amortizable
intangible assets are reviewed for impairment when indicators of impairment are present. The Company tests goodwill and
indefinite-lived intangible assets for impairment at the reporting unit level and at least annually. The Company performs its
annual impairment test during the fourth quarter after the annual forecasting process is completed, and also tests for impairment
whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Periodically,
Management of the Company assesses whether or not an indicator of impairment is present that would necessitate an
impairment analysis be performed.

For 2018, the Company opted to proceed directly to the quantitative impairment test for all reporting units with

goodwill. In the first step of the quantitative assessment, our assets and liabilities, including existing goodwill and other
intangible assets, are assigned to the identified reporting units to determine the carrying value of the reporting units. The
income approach and the market approach are weighted at 50% and 50%, respectively, in arriving at fair value. The discounted
cash flow model requires several assumptions including future sales growth, EBIT (earnings before interest and taxes) margins
and capital expenditures for the reporting units. The discounted cash flow model also requires the use of a discount rate and a
terminal revenue growth rate (the revenue growth rate for the period beyond the years forecasted by the reporting units), as well
as projections of future operating margins. The market approach requires several assumptions including EBITDA (earnings
before interest, taxes, depreciation and amortization) multiples for comparable companies that operate in the same markets as
the Company’s reporting units. The estimated fair value of all reporting units was in excess of its respective carrying value,
which resulted in a conclusion that no impairment existed.

Additionally, the Company proceeded directly to the quantitative impairment test for some trade names with indefinite

lives. The fair value of all trade names subject to the quantitative impairment test exceeded its respective carrying value,
resulting in a conclusion that no impairment existed. For trade names not subject to the quantitative testing, the Company
opted to perform a qualitative trade name impairment assessment and determined from the qualitative assessment that it was
not more likely than not that the estimated fair values of the trade names were less than their carrying values; therefore, no
further analysis was required. In assessing the qualitative factors to determine whether it is more likely than not that the fair
value of a trade name is less than its carrying amount, we assess relevant events and circumstances that may impact the fair
value and the carrying amount of the trade name. The identification of relevant events and circumstances and how these may
impact a trade name’s fair value or carrying amount involve significant judgments and assumptions. The judgment and
assumptions include the identification of macroeconomic conditions, industry and market considerations, cost factors, overall
financial performance, Wabtec specific events, 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 impact.

Warranty Costs Warranty costs are accrued based on Management’s estimates of repair or upgrade costs per unit and

historical experience. Warranty expense was $58.0 million, $50.4 million and $28.9 million for 2018, 2017 and 2016,
respectively. Accrued warranty was $153.7 million and $153.1 million at December 31, 2018 and 2017, respectively.

Income Taxes Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are
determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the
enacted tax rates and laws. The provision for income taxes includes federal, state and foreign income taxes.

Stock-Based Compensation The Company recognizes compensation expense for stock-based compensation based on

the grant date fair value amortized ratably over the requisite service period following the date of grant.

Financial Derivatives and Hedging Activities The Company uses forward contracts to mitigate its foreign currency

exchange rate exposure. Foreign currency forward contracts are agreements with a counterparty to exchange two distinct
currencies at a set exchange rate for delivery on a set date at some point in the future. There is no exchange of funds until the
delivery date. At the delivery date, the Company can either take delivery of the currency or settle on a net basis. For further
information regarding the foreign currency forward contracts, see Footnote 19.

The Company uses interest rate swaps to manage interest rate exposures, The Company entered into an interest rate
swap agreement with a notional value of $150 million. As of December 19, 2018, the interest swap agreement has expired. For
further information regarding the interest rate swap agreement, see Footnote 19.

Foreign Currency Translation Assets and liabilities of foreign subsidiaries, except for the Company’s Mexican
operations whose functional currency is the U.S. Dollar, are translated at the rate of exchange in effect on the balance sheet date
while income and expenses are translated at the average rates of exchange prevailing during the period. Foreign currency gains
and losses resulting from transactions, and the translation of financial statements are recorded in the Company’s consolidated
financial statements based upon the provisions of Accounting Standards Codification (“ASC”) 830, “Foreign Currency
Matters.” The effects of currency exchange rate changes on intercompany transactions and balances of a long-term investment
nature are accumulated and carried as a component of accumulated other comprehensive loss. The effects of currency exchange
rate changes on intercompany transactions that are denominated in a currency other than an entity’s functional currency are
charged or credited to earnings. Foreign exchange transaction losses recognized in other income, net were $5.7 million, $6.6
million and $4.0 million for 2018, 2017 and 2016, respectively.

Noncontrolling Interests In accordance with ASC 810, the Company has classified noncontrolling interests as equity on
our condensed consolidated balance sheets as of December 31, 2018 and 2017. Net loss attributable to noncontrolling interests
was $3.2 million for the year ended December 31, 2018. Net income attributable to noncontrolling interest was $8.5 million
for the year ended December 31, 2016. Net income attributable to noncontrolling interests for the year ended December 31,
2017 was not material.

Revenue Recognition On January 1, 2018, the Company adopted ASC 606 “Revenue from Contracts with Customers”.
This new guidance provides a five-step analysis of transactions to determine when and how revenue is recognized and requires
entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in
exchange for transferring goods or services to a customer.

Approximately 75% of the Company’s revenues are derived from performance obligations that are satisfied at a point in

time when control passes to the customer which is generally at the time of shipment in accordance with agreed upon delivery

terms. The remaining revenues are earned over time. This approach is consistent with our revenue recognition approach in prior
years.

The Company also has 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. Additionally, the Company has customer agreements involving the creation or
enhancement of an asset that the customer controls which also require revenue to be recognized over time. This approach is
consistent with our revenue recognition approach in prior years. 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 methods used
for these agreements include costs of material and labor, both of which give an accurate representation of the progress made
toward complete satisfaction of a particular performance obligation. Contract revenues and cost estimates are reviewed and
revised quarterly at a minimum and adjustments are reflected in the accounting period as such amounts are determined.

Contract assets include unbilled amounts resulting from sales under long-term contracts where revenue is recognized

over time and revenue exceeds the amount that can be billed to the customer based on the terms of the contract. Contract assets
are classified as current assets under the caption “Unbilled Accounts Receivable” on the consolidated balance sheet. The
Company has elected to use the practical expedient and not consider unbilled amounts anticipated to be paid within one year as
significant financing components.

Contract liabilities include customer deposits that are made prior to the incurrence of costs related to a newly agreed

upon contract and advanced customer payments that are in excess of revenue recognized. These contract liabilities are
classified as current liabilities under the caption “Customer Deposits” on the consolidated balance sheet. These contract
liabilities are not considered a significant financing component because they are used to meet working capital demands that can
be higher in the early stages of a contract and revenue associated with the contract liabilities is expected to be recognized
within one year. Contract liabilities also include provisions for estimated losses from uncompleted contracts. Provisions for
loss contracts were $71.2 million and $94.0 million at December 31, 2018 and 2017, respectively. These provisions for
estimated losses are classified as current liabilities and included within the caption “Other accrued liabilities” on the
consolidated balance sheet.

Due to the nature of work required to be performed on the Company’s long-term projects, the estimation of total revenue

and cost at completion is subject to many variables and requires significant judgment. 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. We have a disciplined
quarterly estimate-at-completion process where management reviews the progress of long term-projects. As part of this
process, management reviews information including key contract matters, progress towards completion, identified risks and
opportunities and any other information that could impact the Company’s estimates of revenue and costs. After completing this
analysis, any quarterly adjustments to net sales, cost of goods sold, and the related impact to operating income are recognized
as necessary in the period they become known.

Generally, the Company’s revenue contains a single performance obligation for each distinct good. Pricing is defined in

our contracts on a line item basis and includes 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, liquidating damages, and performance bonuses. Sales returns and allowances are also estimated
and recognized in the same period the related revenue is recognized, based upon the Company’s experience.

Remaining performance obligations represent transaction price of firm customer orders subject to standard industry

cancellation provisions and substantial scope-of-work adjustments. As of December 31, 2018, the Company's remaining
performance obligations were $4.5 billion. The Company expects to recognize revenue of approximately 55% of remaining
performance obligations over the next 12 months, with the remainder recognized thereafter.

Letters of Credit In the ordinary course of its business, the Company issues letters of credit related to commercial
products. The outstanding amount, including the letters of credit issues under the credit facility, were $354.2 million and
$364.6 million at December 31, 2018 and 2017, respectively.

Pre-Production Costs Certain pre-production costs relating to long-term production and supply contracts have been
deferred and will be recognized over the life of the contracts. Deferred pre-production costs were $16.4 million and $20.2
million at December 31, 2018 and 2017, respectively.

Significant Customers and Concentrations of Credit Risk The Company’s trade receivables are from rail and transit

industry original equipment manufacturers, Class I railroads, railroad carriers and commercial companies that utilize rail cars in
their operations, such as utility and chemical companies. No one customer accounted for more than 10% of the Company’s
consolidated net sales in 2018, 2017 or 2016.

Shipping and Handling Fees and Costs All fees billed to the customer for shipping and handling are classified as a

component of net revenues. All costs associated with shipping and handling are classified as a component of cost of sales.

Research and Development Research and development costs are charged to expense as incurred. For the years ended

December 31, 2018, 2017 and 2016, the Company incurred costs of approximately $87.5 million, $95.2 million, and $71.4
million, respectively.

Earnings Per Share Basic and diluted earnings per common share is computed in accordance with ASC 260 “Earnings

Per Share.” Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and included in the computation of earnings per share pursuant to the two-
class method included in ASC 260-10-55 (See Note 13 “Earnings Per Share” included herein).

Reclassifications Certain prior year amounts have been reclassified, where necessary, to conform to the current year

presentation. Refer to Recently Adopted Accounting Pronouncements below.

Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in

the United States requires the Company to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.
Actual amounts could differ materially from the estimates. On an ongoing basis, Management reviews its estimates based on
currently available information. Changes in facts and circumstances may result in revised estimates.

Recently Issued Accounting Pronouncements In February 2018, the Financial Accounting Standards Board ("FASB")

issued Accounting Standards Update ("ASU") No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic
220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income". The amendments in this
update address certain stranded income tax effects in accumulated other comprehensive income ("AOCI") resulting from the
Tax Cuts and Jobs Act (the "Tax Act"). Current guidance requires the effect of a change in tax laws or rates on deferred tax
balances to be reported in income from continuing operations in the accounting period that includes the period of enactment,
even if the related income tax effects were originally charged or credited directly to AOCI. The amendments in this update
allow a reclassification from accumulated other comprehensive income to retained earnings for stranded effects resulting from
the Tax Act. The amount of the reclassification would include the effect of the change in the U.S. federal corporate income tax
rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of the enactment of the Tax Act
related to items in AOCI. The updated guidance is effective for reporting periods beginning after December 15, 2018 and is to
be applied retrospectively to each period in which the effect of the Tax Act related to items remaining in AOCI are recognized
or at the beginning of the period of adoption. The Company has evaluated the potential impact of adopting this guidance and
determined it will not have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment". The amendments in this update eliminate the requirement to perform Step 2 of the goodwill
impairment test. Instead, an entity should perform a goodwill impairment test by comparing the fair value of a reporting unit
with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the
reporting unit's fair value up to the carrying amount of the goodwill. This ASU is effective for public companies in the fiscal
years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The
impact of adopting this guidance could result in a change in the overall conclusion as to whether or not a reporting unit's
goodwill is impaired and the amount of an impairment charge recognized in the event a reporting units' carrying value exceeds
its fair value. All of the Company's reporting units had fair values that were greater than the carrying value as of the Company's
last quantitative goodwill impairment test, which was performed as of October 1, 2018. The Company is currently evaluating
the potential impact of adopting this guidance on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 814)" which requires lessees to recognize a right
of use asset and lease liability on the balance sheet for all leases with terms longer than 12 months. For leases with terms less
than 12 months, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a right
of use asset and lease liability. The guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of
cash flows arising from leases that will be effective for interim and annual periods beginning after December 15, 2018, with
early adoption permitted. This guidance becomes effective for the Company on January 1, 2019. The Company plans to elect
64

the practical expedient which does not require the capitalization of leases with terms of 12 months or less. And the Company
does not plan to elect the practical expedient which allows hindsight to be used to determine the term of a lease. The Company
has completed the accumulation of its lease portfolio into a lease management system and has validated the information for
accuracy and completeness. The Company has implemented the system which will be used as the primary source for the
Company’s lease information and related accounting. Management expects to record a right-of-use asset and lease liability on
the Consolidated Balance Sheet for several types of operating leases, including land and buildings, plant equipment, and
vehicles. The amount of the respective asset and liability is estimated to be within a range of $165 million to $185 million. The
FASB recently proposed a transition alternative, which would allow for the application of the guidance at beginning of the
period in which it is adopted, rather than requiring the adjustment of prior comparative periods. The Company has adopted this
transition alternative on the January 1, 2019 adoption date.

Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, “Revenue from

Contracts with Customers.” This ASU supersedes most of the previous revenue recognition requirements in U.S. GAAP and
requires entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled
in exchange for transferring goods or services to a customer. The new standard also requires significantly expanded disclosures
regarding the qualitative and quantitative information of an entity’s nature, amount, timing and uncertainty of revenue and cash
flows arising from contracts with customers. This ASU became effective for public companies during interim and annual
reporting periods beginning after December 15, 2017. The Company adopted this accounting standard update using the
modified retrospective method. The impact of adopting the new standard was not material to the consolidated statement of
income or the consolidated balance sheet.

In March 2017, the FASB issued ASU No. 2017-07 "Compensation - Retirement Benefits (Topic 715): Improving the

Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost". The amendments in this update
require the service cost component of net benefit costs to be reported in the same line item or items as other compensation costs
arising from services rendered by the pertinent employees during the period. The other components of net benefit costs are
required to be presented in the income statement separately from the service cost component and outside income from
operations. This update also allows the service cost component to be eligible for capitalization when applicable. In accordance
with this update, the Company began recognizing the interest expense component of net periodic benefit cost in interest
expense in the income statement and the expected return on plan assets, net amortization/deferrals, and curtailments in other
income (expense), net in the income statement. This update has been adopted by the Company and applied retrospectively for
presentation of the service cost component and other components of net benefit costs in accordance with the ASU. The impact
of adoption resulted in increases of $0.6 million, $9.2 million and $9.8 million to selling, general, and administrative expense,
interest expense, net and other income, net, respectively, in the income statement for the year ended December 31, 2017. The
impact of adoption resulted in increases of $1.8 million, $7.7 million and $9.5 million to selling, general, and administrative
expense, interest expense, net and other income, net, respectively, in the income statement for the year ended December 31,
2016. Also, the capitalization of the service cost component of net benefit cost will be adopted prospectively in accordance
with the ASU.

In November 2016, the FASB issued ASU No. 2016-18 "Statement of Cash Flows (Topic 230): Restricted Cash". The

amendments in this update require a statement of cash flows to explain the change during the period in total cash, cash
equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as
restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The requirements of this update
have been adopted by the Company and applied retrospectively. As a result, restricted cash related to the acquisition of Faiveley
Transport is included in the change in cash for the years ended December 31, 2017 and 2016.

3. ACQUISITIONS

Faiveley Transport

On November 30, 2016, the Company acquired majority ownership of Faiveley Transport under the terms of a Share
Purchase Agreement. Faiveley Transport is a leading global provider of value-added, integrated systems and services for the
railway industry with annual sales of about $1.2 billion and more than 5,700 employees in 24 countries. Faiveley Transport
supplies railway manufacturers, operators and maintenance providers with a range of value-added, technology-based systems
and services in Energy & Comfort (air conditioning, power collectors and converters, and passenger information), Access &
Mobility (passenger access systems and platform doors), and Brakes and Safety (braking systems and couplers). The
transaction was structured as a step acquisition as follows:

• On November 30, 2016, the Company acquired majority ownership of Faiveley Transport, after completing the

• On February 3, 2017, the initial cash tender offer was closed, which resulted in the Company acquiring

The purchase price paid for 100% ownership of Faiveley Transport was $1,507 million. The $744.7 million included as
deposits in escrow on the consolidated balance sheet at December 31, 2016 was cash designated for use as consideration for the
tender offers.

The fair values of the assets acquired and liabilities assumed were determined using the income, cost and market
approaches. The fair value measurements were primarily based on significant inputs that are not observable in the market and
are considered Level 3. The December 31, 2016 consolidated balance sheet includes the assets and liabilities of Faiveley
Transport, which have been measured at fair value. The fair value of the noncontrolling interest was determined using the
market price of Faiveley Transport’s publicly traded common stock multiplied by the number of publicly traded common shares
outstanding at the acquisition date and is considered Level 1. The acquisition of the noncontrolling interest during the three
months ended March 31, 2017 resulted in a $8.9 million increase to additional paid-in capital on the consolidated balance sheet
which represents the difference in consideration paid to acquire the noncontrolling interest and the carrying value of
noncontrolling interest at acquisition.

The following table summarizes the final fair values of the Faiveley Transport assets acquired and liabilities assumed.

In thousands

Assets acquired

Cash and cash equivalents.........................................................................................................................

Accounts receivable ..................................................................................................................................

Inventories .................................................................................................................................................

Other current assets ...................................................................................................................................

Property, plant, and equipment..................................................................................................................

178,318

439,631

205,649

70,930

148,746

Goodwill....................................................................................................................................................

1,262,350

Trade names...............................................................................................................................................

Customer Relationships.............................................................................................................................

Patents .......................................................................................................................................................

Other noncurrent assets .............................................................................................................................

346,328

233,529

1,201

184,564

Total assets acquired...............................................................................................................................

3,071,246

Liabilities assumed

Current liabilities.......................................................................................................................................

Debt ...........................................................................................................................................................

Other noncurrent liabilities........................................................................................................................

Total liabilities assumed ............................................................................................................................

Net assets acquired ....................................................................................................................................

819,493

409,899

335,039

1,564,431

1,506,815

Other Acquisitions

The Company made the following acquisitions operating as a business unit or component of a business unit in the

Freight Segment:

• On December 4, 2017, the Company acquired Melett Limited ("Melett"), a leader in the design, manufacture, and

supply of high-quality turbochargers and replacement parts to the turbocharger aftermarket, for a purchase price
of approximately $71.9 million, net of cash acquired, resulting in goodwill of $26.7 million, none of which will be
deductible for tax purposes.

• On April 5, 2017, the Company acquired Thermal Transfer Corporation ("TTC"), a leading provider of heat
transfer solutions for industrial applications, for a purchase price of approximately $32.5 million, net of cash
acquired, resulting in goodwill of $14.1 million, all of which will be deductible for tax purposes.

• On March 13, 2017, the Company acquired Aero Transportation Products ("ATP"), a manufacturer of engineered

covering systems for hopper freight cars, for a purchase price of approximately $65.3 million, net of cash
acquired, resulting in goodwill of $29.0 million, all of which will be deductible for tax purposes.

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the date of the

acquisitions.

In thousands

Melett

TTC

ATP

December 4,
2017

April 5, 2017

March 13, 2017

Current assets, net of cash acquired....................................................................................................

34,491

Property, plant & equipment...............................................................................................................

Goodwill .............................................................................................................................................
Other intangible assets ........................................................................................................................

Total assets acquired ..................................................................................................................

5,917

26,653
28,590

95,651

Total liabilities assumed.............................................................................................................

(23,758)

3,744

5,413

14,095
12,300

35,552

(3,041)

Net assets acquired.....................................................................................................................

71,893

32,511

11,666

5,354

29,034
25,000

71,054

(5,800)

65,254

The Company made the following acquisitions operating as a business unit or component of a business unit in the

Transit Segment:

• On March 22, 2018, the Company acquired Annax GmbH ("Annax"), a leading supplier of public address and

passenger information systems for transit vehicles, for a purchase price of approximately $28.7 million, net of cash
acquired, resulting in preliminary goodwill of $25.5 million, none of which will be deductible for tax purposes.

• On October 2, 2017, the Company acquired AM General Contractor ("AM General"), a manufacturer of safety

systems, mainly for transit rail cars for a purchase price of approximately $10.4 million, net of cash acquired, resulting
in goodwill of $6.1 million, none of which will be deductible for tax purposes.

For the Annax acquisition, the following table summarizes the preliminary estimated fair value of the assets acquired

and liabilities assumed at the date of acquisition. For the AM General acquisition, the following table summarizes the final fair
value of the assets acquired and liabilities assumed at the date of the acquisition.

In thousands

Annax

AM General

March 22, 2018 October 2, 2017

Current assets, net of cash acquired....................................................................................................................................

34,036

Property, plant & equipment...............................................................................................................................................

Goodwill .............................................................................................................................................................................

Other intangible assets ........................................................................................................................................................

Total assets acquired ..................................................................................................................................................

674

25,471

12,828

73,009

Total liabilities assumed.............................................................................................................................................

(44,345)

Net assets acquired.....................................................................................................................................................

28,664

6,805

4,140

6,114

19,427

36,486

(26,070)

10,416

The acquisitions listed above include escrow deposits of $24.4 million, which may be released to the Company for

indemnity and other claims in accordance with the purchase and escrow agreements.

The total goodwill and other intangible assets for acquisitions listed in the tables above was $199.5 million, of which
$101.4 million and $98.1 million was related to goodwill and other intangible assets, respectively. Of the allocation of $98.1
million of acquired intangible assets, $22.3 million was assigned to trade names, and $70.2 million was assigned to customer
relationships. The trade names are considered to have an indefinite useful life while the intellectual property and customer
relationships’ useful life is 20 years.

The Company also made smaller acquisitions not listed above which are individually and collectively immaterial.

The following unaudited pro forma financial information presents income statement results as if the acquisitions listed

above had occurred January 1, 2017:

In thousands

For the year ended
December 31,

2018

2017

Net sales ..........................................................................................................................................................................

4,376,972

Gross profit......................................................................................................................................................................

Net income attributable to Wabtec shareholders .............................................................................................................

1,235,821

292,207

3,994,515

1,099,878

273,301

Diluted earnings per share

As Reported............................................................................................................................................................

Pro forma................................................................................................................................................................

3.05

3.06

2.72

2.84

The historical consolidated financial information of the Company and the acquisitions detailed above have been

adjusted in the pro forma information to give effect to pro forma events that are (1) directly attributable to the transactions, (2)
factually supportable and (3) expected to have a continuing impact on the combined results. Pro forma data may not be
indicative of the results that would have been obtained had these acquisitions occurred at the beginning of the periods
presented, nor is it intended to be a projection of future results.

4. MERGER OF WABTEC WITH GE TRANSPORTATION

Wabtec, General Electric Company ("GE"), Transportation System Holdings Inc. ("SpinCo"), which was a newly

formed wholly owned subsidiary of GE, and Wabtec US Rail Holdings, Inc. ("Merger Sub"), which was a newly formed wholly
owned subsidiary of the Company, entered into the Original Merger Agreement on May 20, 2018, and GE, SpinCo, Wabtec and
Wabtec US Rail Holdings, Inc. ("Direct Sale Purchaser") entered into the Original Separation Agreement on May 20, 2018,

which together provided for the combination of Wabtec and GE Transportation. The Original Merger Agreement and Original
Separation Agreement were subsequently amended on January 25, 2019 and the merger was completed on February 25, 2019.

In connection with the Direct Sale, certain assets of GE Transportation, including the equity interests of certain pre-

Following the Direct Sale, GE distributed the Distribution Shares of SpinCo in a spin-off transaction. Immediately

Upon consummation of the Merger and calculated based on Wabtec’s outstanding common stock on a fully-diluted,

The estimated total value of the consideration to be paid by Wabtec in the Transactions was subject to the market price

On September 14, 2018, Wabtec completed a public offering and sale of (i) $500 million aggregate principal amount

of floating rate senior notes, (ii) $750 million aggregate principal amount of 2024 Senior Notes and (iii) $1.25 billion aggregate
principal amount of 2028 Senior Notes. The Company used the net proceeds from the offering and sale of these notes combined
with the proceeds from a $400 million delayed draw term loan that was entered into on June 8, 2018 to finance the Direct Sale.
Wabtec used a portion of the proceeds from the September 14, 2018 notes to pay debt associated with its revolving credit
facility. The remaining proceeds are classified as Restricted Cash on the consolidated balance sheet, as the Company used these
cash amounts to finance the Direct Sale. Refer to Footnote 10 for further information regarding debt.

After the Merger, SpinCo, which is Wabtec’s wholly owned subsidiary (except with respect to shares of SpinCo Class

On the date of the Distribution, GE or its subsidiaries and SpinCo or the SpinCo Transferred Subsidiaries entered into

additional agreements relating to, among other things, intellectual property, employee matters, tax matters, research and
development and transition services.

5. SUPPLEMENTAL CASH FLOW DISCLOSURES

In thousands

Interest paid during the year.......................................................................................................

Income taxes paid during the year, net of amount refunded ......................................................
Business acquisitions:

Fair value of assets acquired ................................................................................................

Liabilities assumed ...............................................................................................................

Non-controlling interest (acquired) assumed .......................................................................

Stock and cash paid ...........................................................................................................

Less: Cash acquired.................................................................................................................

Stock used for acquisition .............................................................................................

Year Ended December 31,

2018

2017

2016

81,756

83,949

75,317

89,379

30,211

121,563

91,758

32,908

—

58,850

7,697

—

452,209

207,788

(761,786)

1,006,207

35,408

25,500

3,118,420

1,453,382

760,343

904,695

186,903

534,679

183,113

Net cash paid ..................................................................................................................

51,153

945,299

6. INVENTORIES

The components of inventory, net of reserves, were:

In thousands

December 31,

2018

2017

Raw materials ................................................................................................................................................................

465,873

Work-in-progress...........................................................................................................................................................

Finished goods...............................................................................................................................................................

154,485

224,528

Total inventories ................................................................................................................................................

844,886

378,481

167,390

196,763

742,634

7. PROPERTY, PLANT & EQUIPMENT

The major classes of depreciable assets are as follows:

In thousands

December 31,

2018

2017

Machinery and equipment .............................................................................................................................................

749,782

Buildings and improvements.........................................................................................................................................

Land and improvements ................................................................................................................................................

Property, plant and equipment...........................................................................................................................

Less: accumulated depreciation.....................................................................................................................................

248,111

38,657

1,036,550

(472,813)

Total...................................................................................................................................................................

563,737

728,257

259,561

38,228

1,026,046

(452,074)

573,972

The estimated useful lives of property, plant and equipment are as follows:

Land improvements .............................................................................................................................................................................................
Building and improvements.................................................................................................................................................................................

Machinery and equipment....................................................................................................................................................................................

Years

10 to 20
20 to 40

3 to 15

Depreciation expense was $66.4 million, $66.7 million, and $47.1 million for 2018, 2017 and 2016, respectively.

8. INTANGIBLES

Goodwill and other intangible assets with indefinite lives are not amortized. Other intangibles with definite lives are
amortized on a straight-line basis over their estimated economic lives. Goodwill and indefinite lived intangible assets are reviewed
annually during the fourth quarter for impairment (See Note 2 “Summary of Significant Accounting Policies” included herein).
Goodwill and indefinite live intangible assets were not impaired at December 31, 2018 and 2017.

The change in the carrying amount of goodwill by segment for the year ended December 31, 2018 is as follows:

In thousands

Freight

Segment

Transit

Segment

Total

Balance at December 31, 2017...................................................................................................

718,958

1,741,145

2,460,103

Additions ....................................................................................................................................

Foreign currency impact.............................................................................................................

6,478

(12,045)

16,790

(74,782)

23,268

(86,827)

Balance at December 31, 2018...................................................................................................

713,391

1,683,153

2,396,544

As of December 31, 2018 and 2017, the Company’s trade names had a net carrying amount of $582.8 million and

$603.4 million, respectively, and the Company believes these intangibles have indefinite lives. Intangible assets of the
Company, other than goodwill and trade names, consist of the following:

In thousands

Patents, non-compete and other intangibles, net of accumulated

December 31,

2018

2017

amortization of $42,446 and $43,021.....................................................................................................................

15,328

17,554

Customer relationships, net of accumulated amortization

of $158,533 and $126,824.......................................................................................................................................

531,761

Total......................................................................................................................................................................

547,089

583,459

601,013

The remaining weighted average useful lives of patents, customer relationships and intellectual property were 10 years,

16 years and 13 years respectively. Amortization expense for intangible assets was $39.8 million, $36.5 million, and $22.7
million for the years ended December 31, 2018, 2017, and 2016, respectively.

Estimated amortization expense for the five succeeding years is as follows (in thousands):

2019................................................................................................................................................................................................................. $

2020.................................................................................................................................................................................................................

2021.................................................................................................................................................................................................................

2022.................................................................................................................................................................................................................

2023.................................................................................................................................................................................................................

38,289

36,552

35,595

35,283
34,945

9. CONTRACT ASSETS AND CONTRACT LIABILITIES

Contract assets include unbilled amounts resulting from sales under long-term contracts where revenue is recognized

over time and revenue exceeds the amount that can be billed to the customer based on the terms of the contract. Contract
liabilities include customer deposits that are made prior to the incurrence of costs related to a newly agreed upon contract,
advanced customer payments that are in excess of revenue recognized, and provisions for estimated losses from uncompleted
contracts.

The change in the carrying amount of contract assets and contract liabilities for the twelve months ended December 31,

2018 is as follows:

In thousands
Balance at beginning of year ................................................................................................................
Recognized in current year ...................................................................................................................
Reclassified to accounts receivable ......................................................................................................
Foreign currency impact .......................................................................................................................
Balance at December 31, 2018 .............................................................................................................

Contract Assets

366,168

426,829
(432,307)
(15,105)
345,585

In thousands
Balance at beginning of year ................................................................................................................
Recognized in current year ...................................................................................................................
Amounts in beginning balance reclassified to revenue ........................................................................
Current year amounts reclassified to revenue.......................................................................................
Foreign currency impact .......................................................................................................................
Balance at December 31, 2018 .............................................................................................................

Contract Liabilities

463,704

230,159
(199,735)
(30,914)
(18,409)
444,805

10. LONG-TERM DEBT

Long-term debt consisted of the following:

In thousands

December 31,

2018

2017

Floating Senior Notes, due 2021, net of unamortized debt
issuance costs of $3,204 ..........................................................................................................................................

496,796

4.150% Senior Notes, due 2024, net of unamortized debt
issuance costs of $7,043 ..........................................................................................................................................

4.70% Senior Notes, due 2028, net of unamortized debt
issuance costs of $10,343 .........................................................................................................................................

3.45% Senior Notes, due 2026, net of unamortized debt
issuance costs of $1,718 and $2,345 ........................................................................................................................

4.375% Senior Notes, due 2023, net of unamortized
discount and debt issuance costs of $1,177 and $1,433 ...........................................................................................

Revolving Credit Facility, net of unamortized
debt issuance costs of $3,138 and $2,451 ................................................................................................................

Other Borrowings ..........................................................................................................................................................
Total...................................................................................................................................................................

Less - current portion ........................................................................................................................................

742,957

1,239,657

748,282

248,823

338,112

42,246

3,856,873

64,099

—

747,655

248,567

853,124

21,182

1,870,528

47,225

Long-term portion .............................................................................................................................................

3,792,774

1,823,303

On September 14, 2018 the Company issued $2.5 billion of senior notes with three different maturities.

•

The net proceeds from the issuance and sale of the Senior Notes was used to finance the cash portion of the GE

On February 12, 2019, the rating assigned by Moody's was decreased to Ba1. Accordingly, pursuant to the respective

terms of the Senior Notes issued on September 14, 2018, the interest rate shall be increased by 0.25%. The interest rate
increase shall take effect from the next interest period following February 12, 2019.

The Company is in compliance with the restrictions and covenants in the indenture under which the Senior Notes were

issued and expects that these restrictions and covenants will not be any type of limiting factor in executing our operating
activities.

3.45% Senior Notes Due November 2026

In October 2016, the Company issued $750.0 million of Senior Notes due in 2026 (the “2016 Notes”). The 2016 Notes

were issued at 99.965% of face value. Interest on the 2016 Notes accrues at a rate of 3.45% per annum and is payable semi-
annually on May 15 and November 15 of each year. The proceeds were used to finance the cash portion of the Faiveley
Transport acquisition, refinance Faiveley Transport’s indebtedness, and for general corporate purposes. The principal balance
is due in full at maturity. The Company incurred $2.7 million of deferred financing costs related to the issuance of the 2016
Notes.

The 2016 Notes are senior unsecured obligations of the Company and rank pari passu with all existing and future senior

The Company is in compliance with the restrictions and covenants in the indenture under which the 2016 Notes were

issued and expects that these restrictions and covenants will not be any type of limiting factor in executing our operating
activities.

4.375% Senior Notes Due August 2023

The Company is in compliance with the restrictions and covenants in the indenture under which the 2013 Notes were

issued and expects that these restrictions and covenants will not be any type of limiting factor in executing our operating
activities.

2018 Refinancing Credit Agreement

On June 8, 2018, the Company entered into a credit agreement (the “2018 Refinancing Credit Agreement”), which

The 2018 Refinancing Credit Agreement contains customary representations and warranties by the Company and its
subsidiaries, including customary use of materiality, material adverse effect, and knowledge qualifiers. The Company and its
subsidiaries are also subject to (i) customary affirmative covenants that impose certain reporting obligations on the Company
and its subsidiaries and (ii) customary negative covenants, including limitations on: indebtedness; liens; restricted payments;
fundamental changes; business activities; transactions with affiliates; restrictive agreements; changes in fiscal year; and use of
proceeds. In addition, the Company is required to maintain (i) an Interest Coverage ratio 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 3.25 to 1.00 or less; provided that, in the event the
Company completes the Direct Sale and the Merger or any other material acquisition in which the cash consideration paid
exceeds $500.0 million, the maximum Leverage Ratio permitted will be 3.75 to 1.00 at the end of the fiscal quarter in which
such acquisition is consummated and each of the three fiscal quarters immediately following such fiscal quarter and 3.50 to
1.00 at the end of each of the fourth and fifth full fiscal quarters after the consummation of such acquisition. The Company is in
compliance with the restrictions and covenants of the 2018 Refinancing Credit Agreement and does not expect that these
measurements will limit the Company in executing its operating activities.

2016 Refinancing Credit Agreement

On June 22, 2016, the Company amended its existing revolving credit facility with a consortium of commercial banks.

Debt and Capital Leases

Scheduled principal repayments of debt and capital lease balances as of December 31, 2018 are as follows:

2019 ................................................................................................................................................................................................................ $

2020 ................................................................................................................................................................................................................

2021 ................................................................................................................................................................................................................

2022 ................................................................................................................................................................................................................

2023 ................................................................................................................................................................................................................

Future years ....................................................................................................................................................................................................

Total................................................................................................................................................................................................................ $

64,099

36,387

764,980

248,873

2,742,480

3,856,873

11. EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plans

The Company sponsors defined benefit pension plans that cover certain U.S., Canadian, German, and United Kingdom

employees and which provide benefits of stated amounts for each year of service of the employee. The Company uses a
December 31 measurement date for the plans.

The following tables provide information regarding the Company’s defined benefit pension plans summarized by U.S.

and international components.

Obligations and Funded Status

In thousands

Change in projected benefit obligation

U.S.

International

2018

2017

2018

2017

Obligation at beginning of year.............................................................................

(44,213) $

(45,512) $

(353,017) $

(319,551)

Benefits paid..........................................................................................................

(3,476)

(3,079)

Opening balance sheet adjustment ........................................................................

Service cost............................................................................................................

Interest cost............................................................................................................

Employee contributions.........................................................................................

Plan settlements and amendments.........................................................................

Benefits paid..........................................................................................................

Acquisition ............................................................................................................

Actuarial gain (loss) ..............................................................................................

Effect of currency rate changes .............................................................................

Obligation at end of year .................................................................................

Change in plan assets

Fair value of plan assets at beginning of year .......................................................

Opening balance sheet adjustment ........................................................................

Actual return on plan assets...................................................................................

Employer contributions .........................................................................................

Employee contributions.........................................................................................

Settlements ............................................................................................................

Effect of currency rate changes .............................................................................

Fair value of plan assets at end of year ...........................................................

Funded status

Fair value of plan assets ........................................................................................

Benefit obligations ................................................................................................

Funded status...................................................................................................

Amounts recognized in the statement of financial position consist of:

Noncurrent assets ..................................................................................................

Current liabilities...................................................................................................

—

(349)

(1,332)

—

3,476

—

2,942

—

(344)

(1,422)

—

3,079

—

(14)

—

(2,611)

(7,047)

(448)

15,191

13,453

(864)

6,740

19,337

(5,321)

(2,740)

(7,310)

(880)

4,153

12,906

—

(3,009)

(31,265)

(39,476) $

(44,213) $

(309,266) $

(353,017)

37,432

35,802

281,602

241,283

—

(1,983)

—

4,223

486

—

31,973

(39,476)

—

37,432

(44,213)

— $

—

— $

—

(6,938)

10,821

448

(13,453)

(16,601)

(16,380)

239,499

(309,266)

8,910

(2,062)

(76,615)

(7,503) $

(6,781) $

(69,767) $

2,058

19,102

13,479

880

(12,905)

(4,523)

22,228

281,602

(353,017)

(71,415)

10,577

(2,158)

(79,834)

(71,415)

(32)

(54,043)

(54,075)

Noncurrent liabilities.............................................................................................

(7,503)

(6,781)

Net amount recognized....................................................................................

(7,503) $

(6,781) $

(69,767) $

Amounts recognized in accumulated other comprehensive income (loss)
consist of:

Prior service cost ...................................................................................................

(3)

(6)

Net actuarial loss ...................................................................................................

(20,268)

(20,418)

(1,419)

(58,748)

Net amount recognized....................................................................................

(20,271) $

(20,424) $

(60,167) $

The aggregate accumulated benefit obligation for the U.S. pension plans was $38.8 million and $43.3 million as of

December 31, 2018 and 2017, respectively. The aggregate accumulated benefit obligation for the international pension plans
was $301.1 million and $344.3 million as of December 31, 2018 and 2017, respectively.

In thousands

Information for pension plans with accumulated benefit obligations in

excess of Plan assets:

U.S.

International

2018

2017

2018

2017

Projected benefit obligation................................................................................

(39,476) $

(44,213) $

(251,010) $

Accumulated benefit obligation .........................................................................

Fair value of plan assets .....................................................................................

(38,805)

31,973

(43,340)

37,432

(243,613)

172,333

(282,077)

(274,557)

200,218

Information for pension plans with projected benefit obligations in

excess of plan assets:

Projected benefit obligation................................................................................

(39,476) $

(44,213) $

(251,010) $

(283,106)

Fair value of plan assets .....................................................................................

31,973

37,432

172,333

201,115

Components of Net Periodic Benefit Costs

In thousands

2018

U.S.

2017

2016

2018

2017

2016

International

Service cost ......................................................................................

349

344

337

Interest cost ......................................................................................

Expected return on plan assets.........................................................

Amortization of initial net obligation and prior service cost ...........

Amortization of net loss...................................................................

Settlement and curtailment losses recognized .................................

1,332

(1,780)

970

—

1,422

(1,731)

989

—

1,475

(2,076)

914

—

Net periodic benefit cost ............................................................

874

1,027

653

2,611

7,047

2,740

7,310

(13,458)

(12,412)

2,149

3,112

1,483

2,846

768

1,279

1,379

5,774

(9,971)

1,818

218

(721)

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income during 2018 are as
follows:

In thousands

U.S.

International

Net gain (loss) arising during the year.....................................................................................................................

(820) $

(13,655)

Effect of exchange rates...........................................................................................................................................

Amortization, settlement, or curtailment recognition of net transition obligation

Amortization or curtailment recognition of prior service cost.................................................................................

Amortization or settlement recognition of net loss..................................................................................................

Total recognized in other comprehensive gain ..................................................................................................

Total recognized in net periodic benefit cost and other comprehensive gain ....................................................

—

970

153

(721) $

3,690

3,112

(1,388)

2,149

(6,092)

(7,575)

The weighted average assumptions in the following table represent the rates used to develop the actuarial present

value of the projected benefit obligation for the year listed.

Discount rate ....................................................................................

Expected return on plan assets.........................................................

Rate of compensation increase.........................................................

2018

4.30%

5.15%

3.00%

U.S.

2017

3.56%

4.95%

3.00%

International

2016

2018

2017

2016

3.95%

5.70%

3.00%

2.53%

5.10%

2.61%

2.40%

5.02%

2.54%

2.51%

6.07%

2.54%

The discount rate is based on settling the pension obligation with high grade, high yield corporate bonds, and the rate of
compensation increase is based on actual experience. The expected return on plan assets is based on historical performance as
well as expected future rates of return on plan assets considering the current investment portfolio mix and the long-term
investment strategy.

As of December 31, 2018, the following table represents the amounts included in other comprehensive loss that are

expected to be recognized as components of periodic benefit costs in 2019.

In thousands

Prior service cost ......................................................................................................................................................

Net actuarial loss ......................................................................................................................................................

U.S.

International

826

829

2,512

2,565

Pension Plan Assets

The Company has established formal investment policies for the assets associated with our pension plans. Objectives

include maximizing long-term return at acceptable risk levels and diversifying among asset classes. Asset allocation targets are
based on periodic asset liability study results which help determine the appropriate investment strategies. The investment
policies permit variances from the targets within certain parameters. The plan assets consist primarily of equity security funds,
debt security funds, and temporary cash and cash equivalent investments. The assets held in these funds are generally actively
managed and are valued at the net asset value per share multiplied by the number of shares held as of the measurement date.
(See Note 20 “Fair Value Measurement” included herein). Plan assets by asset category at December 31, 2018 and 2017 are as
follows:

In thousands

Pension Plan Assets

U.S.

International

2018

2017

2018

2017

Equity security funds.............................................................................................

13,162

18,122

95,058

Debt security funds and other................................................................................

Cash and cash equivalents.....................................................................................

17,528

1,283

18,304

1,006

140,894

3,547

100,453

178,730

2,419

Fair value of plan assets ..................................................................................

31,973

37,432

239,499

281,602

The U.S. plan has a target asset allocation of 50% equity securities and 50% debt securities. The International plan has a

target asset allocation of 31% equity securities, 40% debt securities and 29% in other investments. Investment policies are
determined by the respective Plan’s Pension Committee and set forth in its Investment Policy. Rebalancing of the asset
allocation occurs on a quarterly basis.

The following tables summarize our pension plan assets measured at fair value on a recurring basis by fair value

hierarchy level (See Note 20):

In thousands

US:

NAV

Level 1

Level 2

Level 3

Total

December 31, 2018

Equity ........................................................................................

— $

13,162

— $

Debt Securities and other ..........................................................

Cash and cash equivalents.........................................................

—

4,523

1,283

13,005

—

13,162

17,528

1,283

International:

Equity ........................................................................................

3,710

34,848

56,500

— $

95,058

Debt Securities and other ..........................................................

Insurance Contracts ...................................................................

Cash and cash equivalents.........................................................

—

3,547

125,587

5,383

—

9,924

—

125,587

15,307

3,547

Total

3,710

57,363

200,475

9,924

271,472

In thousands

US:

NAV

Level 1

Level 2

Level 3

Total

December 31, 2017

Equity ........................................................................................

— $

18,122

— $

Debt Securities ..........................................................................

Cash and cash equivalents.........................................................

—

4,273

1,006

14,031

—

18,122

18,304

1,006

International:

Equity ........................................................................................

4,586

38,647

95,641

— $

138,874

Debt Securities ..........................................................................

Insurance Contracts ...................................................................

Cash and cash equivalents.........................................................

—

2,507

111,204

15,893

—

111,204

13,123

—

29,016

2,507

Total

4,586

64,555

236,769

13,123

319,033

The following table presents a reconciliation of Level 3 assets:

In thousands

Balance at December 31, 2016

Net purchases, issuances, and settlements.......................................................................................................................................................

Actual return of plan assets .............................................................................................................................................................................

Opening balance sheet adjustment ..................................................................................................................................................................

Effect of currency rate changes .......................................................................................................................................................................

Balance at December 31, 2017

Total

12,996

778

375

(1,308)

282

13,123

Net purchases, issuances, and settlements.......................................................................................................................................................

(3,611)

Transfers ..........................................................................................................................................................................................................

Effect of currency rate changes .......................................................................................................................................................................

Balance at December 31, 2018

Cash Flows

277

658

(523)

9,924

The Company’s funding methods are based on governmental requirements and differ from those methods used to
recognize pension expense. The Company expects to contribute $6.4 million to the international plans during 2019. The
company does not expect to make contributions to the U.S. plans during 2019.

Benefit payments expected to be paid to plan participants are as follows:

In thousands

Year ended December 31,

U.S.

International

2019 ..........................................................................................................................................................................

2020 ..........................................................................................................................................................................

2021 ..........................................................................................................................................................................

2022 ..........................................................................................................................................................................

2023 ..........................................................................................................................................................................

2024 through 2028....................................................................................................................................................

3,233

3,242

3,100

3,095

3,077

13,623

11,556

12,017

12,489

13,353

13,583

75,457

Postretirement Benefit Plans

In addition to providing pension benefits, the Company has provided certain unfunded postretirement health care and
life insurance benefits for a portion of North American employees. The Company is not obligated to pay health care and life
insurance benefits to individuals who had retired prior to 1990.

The Company uses a December 31 measurement date for all postretirement plans. The following tables provide
information regarding the Company’s post retirement benefit plans summarized by U.S. and international components.

Obligations and Funded Status

In thousands

Change in projected benefit obligation

U.S.

International

2018

2017

2018

2017

Obligation at beginning of year.............................................................................

(11,345) $

(11,876) $

(3,720) $

(3,425)

Service cost............................................................................................................

Interest cost............................................................................................................

Benefits paid..........................................................................................................

Actuarial gain (loss) ..............................................................................................

Effect of currency rate changes .............................................................................

Obligation at end of year .................................................................................

Change in plan assets

Fair value of plan assets at beginning of year .......................................................

Employer contributions .........................................................................................

Benefits paid..........................................................................................................

Fair value of plan assets at end of year ...........................................................

Funded status

Fair value of plan assets ........................................................................................

Benefit obligations ................................................................................................

Funded status...................................................................................................

In thousands
Amounts recognized in the statement of financial position consist of:

Current liabilities...................................................................................................

Noncurrent liabilities.............................................................................................

Net amount recognized....................................................................................

Amounts recognized in accumulated other comprehensive income (loss)

consist of:

(5)

(326)

786

1,072

—

(5)

(350)

970

(84)

—

(31)

(100)

201

646

335

(28)

(98)

199

(131)

(237)

(9,818) $

(11,345) $

(2,669) $

(3,720)

— $

786

(786)

970

(970)

201

(201)

— $

(9,818)

(11,345)

(2,669)

(9,818) $

(11,345) $

(2,669) $

—

199

(199)

—

(3,720)

U.S.

International

2018

2017

2018

2017

(984) $

(1,046) $

(175) $

(8,834)

(10,299)

(2,494)

(9,818) $

(11,345) $

(2,669) $

(208)

(3,512)

(3,720)

Prior service credit.................................................................................................

Net actuarial (loss) gain.........................................................................................

18,097

(16,593)

19,616

(18,882)

Net amount recognized....................................................................................

1,504

734

748

750

154

163

Components of Net Periodic Benefit Cost

In thousands

2018

U.S.

2017

2016

2018

2017

2016

International

Service cost ......................................................................................

Interest cost ......................................................................................

Amortization of initial net obligation and prior service cost ...........

Amortization of net loss (gain) ........................................................

326

(1,519)

1,216

350

(1,519)

1,225

389

(1,709)

1,287

100

(7)

(8)

(7)

(23)

Net periodic benefit cost (credit) ...............................................

(29) $

116

(7)

(29)

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income during 2018 are as
follows:

In thousands

U.S.

International

Net loss arising during the year ...............................................................................................................................

Effect of exchange rates...........................................................................................................................................

Amortization or curtailment recognition of prior service cost.................................................................................
Amortization or settlement recognition of net loss (gain) .......................................................................................

Total recognized in other comprehensive income (loss)....................................................................................

Total recognized in net periodic benefit cost and other comprehensive income (loss) .....................................

1,072

—

(1,519)
1,216

769

741

646

(44)

(7)
(8)

587

471

The weighted average assumptions in the following table represent the rates used to develop the actuarial present value
of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year. The discount
rate is based on settling the pension obligation with high grade, high yield corporate bonds.

2018

U.S.

2017

2016

2018

2017

2016

International

Discount rate ....................................................................................

4.17%

3.43%

3.76%

3.49%

3.21%

3.46%

As of December 31, 2018, the following table represents the amounts included in other comprehensive loss that are

expected to be recognized as components of periodic benefit costs in 2019.

In thousands

U.S.

International

Prior service credit ...................................................................................................................................................

Net actuarial loss (gain) ...........................................................................................................................................

(1,519)

1,116

Total ...................................................................................................................................................................

(403) $

(2)

(88)

(90)

The assumed health care cost trend rate for the U.S. plans grades from an initial rate of 6.30% to an ultimate rate of

4.50% by 2028 and for international plans from 6.04% to 4.50% by 2027.

Cash Flows

Benefit payments expected to be paid to plan participants are as follows:

In thousands

Year ended December 31,

U.S.

International

2019..........................................................................................................................................................................

2020..........................................................................................................................................................................

2021..........................................................................................................................................................................

2022..........................................................................................................................................................................

2023..........................................................................................................................................................................

2024 through 2028 ...................................................................................................................................................

983

949

920

879

854

3,661

175

171

181

184

196

912

Defined Contribution Plans

The Company also participates in certain defined contribution plans and multiemployer pension plans. Costs recognized

under these plans are summarized as follows:

In thousands

Multi-employer pension and health & welfare plans ........................................................................

401(k) savings and other defined contribution plans ........................................................................

Total.............................................................................................................................................

For the year ended
December 31,

2018

2017

2016

965

27,869

28,834

1,522

23,209

24,731

2,054

23,062

25,116

The 401(k) savings plan is a participant directed defined contribution plan that holds shares of the Company’s stock as

one of the investment options. At December 31, 2018 and 2017, the plan held on behalf of its participants about 442,239 shares
with a market value of $31.1 million, and 495,274 shares with a market value of $40.3 million, respectively.

Additionally, the Company has stock option based benefit and other plans further described in Note 14.

The Company contributes to a multi-employer defined benefit pension plan under a collective bargaining agreement that
covers certain of its union-represented employees. The risks of participating in such plans are different from the risks of single-
employer plans. Assets contributed to a multi-employer plan by one employer may be used to provide benefits to employees of
other participating employers. If a participating employer ceases to contribute to the plan, the unfunded obligations of the plan
may be borne by the remaining participating employers. If the Company ceases to have an obligation to contribute to the multi-
employer plan in which it had been a contributing employer, it may be required to pay to the plan an amount based on the
underfunded status of the plan and on the history of the Company’s participation in the plan prior to the cessation of its
obligation to contribute. The amount that an employer that has ceased to have an obligation to contribute to a multi-employer
plan is required to pay to the plan is referred to as a withdrawal liability.

The Company’s participation in multi-employer plans for the year ended December 31, 2018 is outlined in the table
below. For plans that are not individually significant to the Company, the total amount of contributions is presented in the
aggregate.

Pension Protection
Act Zone Status
(b)

Pension Fund

EIN/PN (a)

2017

2016

FIP/

RP Status
Pending/

Implemented
(c)

Contributions by
the Company

2018

2017

2016

Idaho Operating Engineers-

EIN #

91-607553
8

Employers Pension Trust
Fund

Plan#

001

Green

$ 965

(1)

$ 1,020

(1)

$ 1,306

(1)

Total
Contributions

$ 965

$ 1,020

$ 1,306

Expiration
Dates of

Collective
Bargaining

Agreements

8/6/2021

Surcharge
Imposed

(d)

(1) The Company’s contribution represents more than 5% of the total contributions to the plan.

(a) The “EIN / PN” column provides the Employer Identification Number and the three-digit plan number assigned to a plan by the Internal Revenue

Service.

(b) The most recent Pension Protection Act Zone Status available for 2018 and 2017 is for plan years that ended in 2017 and 2016, respectively. The zone
status is based on information provided to the Company and other participating employers by each plan and is certified by the plan’s actuary. A plan in
the “red” zone has been determined to be in “critical status”, based on criteria established under the Internal Revenue Code (“Code”), and is generally
less than 65% funded. A plan in the “yellow” zone has been determined to be in “endangered status”, based on criteria established under the Code, and
is generally less than 80% funded. A plan in the “green” zone has been determined to be neither in “critical status” nor in “endangered status” and is
generally at least 80% funded.

(c) The “FIP/RP Status Pending/Implemented” column indicates whether a Funding Improvement Plan, as required under the Code to be adopted by plans

in the “yellow” zone, or a Rehabilitation Plan, as required under the Code to be adopted by plans in the “red” zone, is pending or has been
implemented as of the end of the plan year that ended in 2018.

(d) The “Surcharge Imposed” column indicates whether the Company’s contribution rate for 2018 included an amount in addition the contribution rate

specified in the applicable collective bargaining agreement, as imposed by a plan in “critical status”, in accordance with the requirements of the Code.

12. INCOME TAXES

The Company is responsible for filing consolidated U.S., foreign and combined, unitary or separate state income tax

returns. The Company is responsible for paying the taxes relating to such returns, including any subsequent adjustments
resulting from the redetermination of such tax liabilities by the applicable taxing authorities.

On December 23, 2017, the French government enacted the Finance Act for 2018 and it was published in the Official

Bulletin on December 31, 2017. The Finance act reduced the French corporate tax rate from 28% in 2020 to 25%, enacting an
additional 1.5% reduction in each year 2021 and 2022.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax

Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code that affected fiscal
2017, including, but not limited to requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries
that is payable over eight years (the "Transition Tax"). The Tax Act also established new tax laws that affect 2018 and later
years, including, but not limited to, a reduction of the U.S. federal corporate tax rate from 35% to 21%, repeals the Domestic
Manufacturing Deduction, a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries, new
provisions designed to tax global intangible low-taxed income ("GILTI"), tax certain deductible base erosion payments called
base erosion and anti-abuse tax (“BEAT”), and new interest expense limitation provisions.

In relation to the analysis of the impact of the all tax law changes, the Company recorded a net tax expense of $4.3

million in fiscal 2017. This included a provisional expense for the U.S. tax reform bill of $55.0 million, as well as a net benefit
for the revaluation of deferred tax assets and liabilities of $50.7 million. Of this amount, net tax expense of $27.2 million is
related to the Tax Act and a benefit of $22.9 million is related to the French Finance Act for 2018.

In the current year, the Company has completed its accounting for the income tax effects of the Tax Act. The Company
has adjusted the provisional amounts previously recorded in accordance with SEC Staff Accounting Bulletin No. 118. As such,
the Company has included the following tax provisions in its financial statements as of December 31, 2018:

Revaluation of deferred tax assets and liabilities: The Tax Act reduces the U.S. federal corporate tax rate from 35% to
21% for tax years beginning after December 31, 2017. In addition, the Tax Act made certain changes to the depreciation rules
and implemented new limits on the deductibility of certain executive compensation. The Company evaluated these changes and
recorded a provisional benefit to net deferred taxes of $24.6 million at December 31, 2017. As a result of the completion of its
2017 U.S. corporate tax return in the current year, the Company has adjusted its U.S. deferred tax balances which has resulted

in a current period benefit of $5.1 million. The Company has completed its calculation of the impact of these changes on its
deferred tax balances. As of December 31, 2018, the Company has completed its analysis of the impact of the Tax Act on the
deductibility of certain executive compensation. As a result, no further adjustments were made as of December 31, 2018.

Transition Tax on unrepatriated foreign earnings: The Transition Tax on unrepatriated foreign earnings is a tax on
previously untaxed accumulated and current earnings and profits ("E&P") of the Company's foreign subsidiaries. To determine
the amount of the Transition Tax, the Company had to determine, among other factors, the amount of post-1986 E&P of its
foreign subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company was able to make a
reasonable estimate of the Transition Tax and recorded a provisional Transition Tax expense of $51.8 million at December 31,
2017. As of December 31, 2018, the Company has completed its calculation of the Transition Tax which resulted in a benefit
of $14.4 million for the twelve months ended December 31, 2018.

Global intangible low taxed income ("GILTI"): The Tax Act created a new requirement that certain income
(i.e., GILTI) earned by foreign subsidiaries must be included currently in the gross income of the U.S. shareholder. Under
U.S. GAAP, the Company is permitted to make an accounting policy election to either treat taxes due on future inclusions in
U.S. taxable income related to GILTI as a current-period expense when incurred or to factor such amounts into the Company's
measurement of its deferred taxes. The Company has made the election to treat taxes due on future inclusions related to GILTI
as current period expense and has included a current period expense of $9.3 million in its financial statements as of December
31, 2018.

Indefinite reinvestment assertion: Beginning in 2018, the Tax Act provides a 100% deduction for dividends received

from 10-percent owned foreign corporations by U.S. corporate shareholders, subject to a one-year holding period. Although
dividend income is now exempt from U.S. federal tax in the hands of the U.S. corporate shareholders, companies must still
apply the guidance of ASC 740 to account for the tax consequences of outside basis differences and other tax impacts of their
investments in non-U.S. subsidiaries. While the Company has finalized its calculation of the Transition Tax on the deemed
repatriated earnings that were previously indefinitely reinvested, the Company was unable to determine a reasonable estimate
of the remaining tax liability, if any, under the Tax Act for its remaining outside basis differences. Therefore, the Company has
not included a provisional amount for this item in its financial statements for fiscal year ended December 31, 2018.

The components of the income from operations before provision for income taxes for the Company’s domestic and

foreign operations for the years ended December 31 are provided below:

In thousands

Domestic

Foreign

Income from operations before income taxes

For the year ended
December 31,

2018

2017

2016

145,096

222,486

367,582

140,325

211,738

352,063

276,218

136,619

412,837

The consolidated provision for income taxes included in the Statement of Income consisted of the following:

In thousands

Current taxes

Federal

State

Foreign

Deferred taxes

Federal

State

Foreign

For the year ended
December 31,

2018

2017

2016

6,940

5,771

68,467

81,178

4,689

1,263

(11,251)

(5,299)

86,157

3,644

67,395

157,196

(22,863)

(1,024)

(43,536)

(67,423)

72,317

9,953

27,391

109,661

11,013

1,953

(23,194)

(10,228)

99,433

Total provision

75,879

89,773

A reconciliation of the United States federal statutory income tax rate to the effective income tax rate on operations for

the years ended December 31 is provided below:

In thousands

U.S. federal statutory rate

State taxes

Foreign

Research and development credit

Manufacturing deduction

France tax rate change

U.S. tax rate change

U.S. tax reform (benefit) provision

Transaction costs related to acquisitions

Other, net

Effective rate

For the year ended
December 31,

2018

2017

2016

21.0%

35.0%

1.6

0.7

(1.1)

—

(0.6)

(1.4)

—

0.4

20.6%

0.4

(8.3)

(0.8)

(1.1)

(6.5)

(7.9)

15.6

—

(0.9)

25.5%

2.1

(4.3)

(1.0)

(1.8)

(6.5)

—

1.5

(0.9)

24.1%

The decrease in the effective tax rate in 2018 is primarily due to the application of the U.S. tax rate change which

resulted in the reduction of the corporate income tax rate in the U.S. from 35.0% to 21.0%, a higher earnings mix in lower tax
jurisdictions as well as a benefit from the completion of the accounting for the income tax effects of the Tax Act and the
adjustment to the provisional amounts previously recorded in accordance with SEC Staff Accounting Bulletin No. 118.

Components of deferred tax assets and liabilities were as follows:

In thousands

Deferred income tax assets:

Accrued expenses and reserves

Warranty reserve

Deferred compensation/employee benefits

Pension and postretirement obligations

Inventory

Net operating loss carry forwards

Other

Gross deferred income tax assets

Valuation allowance

Total deferred income tax assets

Deferred income tax liabilities:

Property, plant & equipment

Intangibles

Total deferred income tax liabilities

Net deferred income tax liability

December 31,

2018

2017

13,795

25,944

8,994

19,532

16,769

85,051

20,048

190,133

41,779

148,354

35,440

287,419

322,859

10,961

20,211

18,353

21,637

19,620

65,671

14,974

171,427

25,683

145,744

37,015

288,141

325,156

(174,505) $

(179,412)

A 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. As of December 31, 2018, the valuation allowance for certain foreign deferred tax asset carryforwards was $41.8
million primarily in China, France, the Netherlands, United Kingdom, and South Africa.

Net operating loss carry-forwards in the amount of $342.5 million expire in various periods from December 31, 2019 to

December 31, 2038.

As of December 31, 2018, the liability for income taxes associated with unrecognized tax benefits was $9.5 million, of
which $8.4 million, if recognized, would favorably affect the Company’s effective income tax rate. As of December 31, 2017, the
liability for income taxes associated with unrecognized tax benefits was $6.9 million, of which $4.4 million, if recognized, would
favorably affect the Company’s effective tax rate. A reconciliation of the beginning and ending amount of the liability for income
taxes associated with unrecognized tax benefits follows:

In thousands

Gross liability for unrecognized tax benefits at beginning of year

Gross increases - unrecognized tax benefits in prior periods

Gross decreases - audit settlement during year

Gross decreases - expiration of audit statute of limitations

Gross liability for unrecognized tax benefits at end of year

2018

2017

2016

10,557

6,910

5,389

—

(2,756)

9,543

8,423

2,466

(3,979)

—

6,910

—

(2,140)

8,423

The Company includes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31,
2018, the total interest and penalties accrued was approximately $0.9 million. As of December 31, 2017, the total interest and
penalties accrued was approximately $0.8 million.

With limited exception, the Company is no longer subject to examination by various U.S. and foreign taxing authorities
for years before 2013. At this time, the Company believes that it is reasonably possible that unrecognized tax benefits of
approximately $4.1 million may change within the next 12 months due to the expiration of statutory review periods and current
examinations.

13. EARNINGS PER SHARE

The computation of earnings per share from operations is as follows:

In thousands, except per share data

Numerator

For the Year Ended
December 31,

2018

2017

2016

Numerator for basic and diluted earnings per common share - net income attributable

to Wabtec shareholders................................................................................................

294,944

262,261

Less: dividends declared - common shares and non-vested restricted stock ....................

Undistributed earnings ......................................................................................................

Percentage allocated to common shareholders (1) ............................................................

Add: dividends declared - common shares........................................................................

Numerator for basic and diluted earnings per common share...........................................
Denominator ....................................................................................................................
Denominator for basic earnings per common share - weighted average shares .........

Effect of dilutive securities:

(46,277)

248,667

99.7%

247,921

46,173

(42,218)

220,043

99.7%

219,383

42,092

294,094

261,475

304,887

(32,430)

272,457

99.7%

271,640

32,333

303,973

95,994

95,453

90,359

Assumed conversion of dilutive stock-based compensation plans ...................................

470

672

782

Denominator for diluted earnings per common share - adjusted weighted average

shares and assumed conversion...................................................................................

96,464

96,125

91,141

Net income per common share attributable to Wabtec shareholders

Basic ..................................................................................................................................

Diluted ...............................................................................................................................

3.06

3.05

2.74

2.72

3.37

3.34

(1) Basic weighted-average common shares outstanding .................................................

95,994

95,453

90,359

Basic weighted-average common shares outstanding and non-vested restricted..............

stock expected to vest..................................................................................................

Percentage allocated to common shareholders..................................................................

96,281

99.7%

95,740

99.7%

90,627

99.7%

Options to purchase approximately 135,000, 24,000, and 20,000 shares of Common Stock were outstanding in 2018, 2017
and 2016, respectively, but were not included in the computation of diluted earnings because their impact would have been
antidilutive.

14. STOCK-BASED COMPENSATION PLANS

As of December 31, 2018, the Company maintains employee stock-based compensation plans for stock options,
restricted stock, and incentive stock units as governed by the 2011 Stock Incentive Compensation Plan, as amended and
restated (the “2011 Plan”) and the 2000 Stock Incentive Plan, as amended (the “2000 Plan”). The 2011 Plan has a term through
May 10, 2027 and as of December 31, 2018 the number of shares available for future grants under the 2011 Plan was 2,800,836
shares, which includes remaining shares to grant under the 2000 Plan. The amendment and restatement of the 2011 Plan was
approved by stockholders of Wabtec on May 10, 2017. The Company also maintains a 1995 Non-Employee Directors’ Fee and
Stock Option Plan as amended and restated (“the Directors Plan”). The amendment and restatement of the Directors Plan was
approved by stockholders of Wabtec on May 10, 2017. The Directors Plan, as amended, authorizes a total of 1,000,000 shares
of Common Stock to be issued. Under the Directors Plan options issued become exercisable over a three-year vesting period
and expire ten years from the date of grant and restricted stock issued under the plan vests one year from the date of grant. As
compensation for directors’ fees for the years ended December 31, 2018, 2017 and 2016, the Company issued a total of 12,960,
16,500 and 16,972 shares of restricted stock to non-employee directors. The total number of shares issued under the plan as of
December 31, 2018 was 894,152 shares.

Stock-based compensation expense for all of the plans was $25.3 million, $21.3 million and $20.8 million for the years
ended December 31, 2018, 2017 and 2016, respectively. The Company recognized associated tax benefits related to the stock-
based compensation plans of $6.3 million, $8.9 million and $14.9 million for the respective periods. Included in the stock-
based compensation expense for 2018 above is $1.6 million of expense related to stock options, $7.1 million related to non-
vested restricted stock, $5.1 million related to restricted stock units, $10.3 million related to incentive stock units and $1.2
million related to units issued for Directors’ fees. At December 31, 2018, unamortized compensation expense related to those
stock options, non-vested restricted shares and incentive stock units expected to vest totaled $27.1 million and will be
recognized over a weighted period of 1.3 years.

Stock Options Stock options are granted to eligible employees and directors at the fair market value, which is the

average of the high and low Wabtec stock price on the date of grant. Under the 2011 Plan and the 2000 Plan, options become
exercisable over a four year vesting period and expire 10 years from the date of grant.

The following table summarizes the Company’s stock option activity and related information for the 2011 Plan, the 2000

Plan and Directors Plan for the years ended December 31:

Weighted
Average
Exercise
Price

Options

Weighted Average
Remaining
Contractual Life

Aggregate
Intrinsic value
(in thousands)

Outstanding at December 31, 2015 ...........................................................

1,097,323

Granted ................................................................................................

Exercised .............................................................................................

Canceled ..............................................................................................

94,115

(83,790)

(8,825)

Outstanding at December 31, 2016 ...........................................................

1,098,823

Granted ................................................................................................

Exercised .............................................................................................

Canceled ..............................................................................................

65,522

(166,838)

(13,995)

Outstanding at December 31, 2017 ...........................................................

983,512

Granted ................................................................................................

Exercised .............................................................................................

Canceled ..............................................................................................

Outstanding at December 31, 2018 ...........................................................

Exercisable at December 31, 2018 ............................................................

82,580

(582,303)

(17,112)

466,677

283,169

Options outstanding at December 31, 2018 were as follows:

32.70

61.39

25.58

71.47

35.39

86.91

21.37

76.89

32.52

77.54

28.29

69.76

61.04

50.60

4.8

4.3

4.0

5.7

4.6

42,154

2,035

(4,813)

(102)

52,332

—

(10,020)

(64)

40,137

—

(24,433)

(8)

4,298

5,564

Weighted
Average
Exercise
Price of
Options

Weighted
Average
Remaining
Contractual

Number of
Options

Range of exercise prices

Outstanding

Life

Number of
Options
Currently

Exercisable

Weighted Average
Exercise Price of
Options Currently

Exercisable

Under $35.00 ...............................................................

71,765

35.00 - 50.00................................................................

50.00 - 65.00................................................................

65.00 - 80.00................................................................

Over 80.00 ...................................................................

107,034

65,199

98,981

123,698

466,677

27.84

41.36

61.33

72.21

88.25

61.04

2.0

3.6

7.1

7.6

7.5

71,765

107,034

24,615

38,187

41,568

283,169

27.84

41.36

61.33

72.85

86.90

50.60

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with

the following weighted-average assumptions:

For the year ended
December 31,

2018

2017

2016

Dividend yield ....................................................................................................................

Risk-free interest rate .........................................................................................................

Stock price volatility ..........................................................................................................

Expected life (years)...........................................................................................................

0.31%

2.8%

23.9%

5.0

0.23%

2.2%

23.4%

5.0

0.26%

1.5%

26.9%

5.0

Weighted average fair value of options granted during the year........................................

20.59

20.69

14.96

The dividend yield is based on the Company’s dividend rate and the current market price of the underlying common

stock at the date of grant. Expected life in years is determined from historical stock option exercise data. Expected volatility is
based on the historical volatility of the Company’s stock. The risk-free interest rate is based on the 7 years U.S. Treasury bond
rates for the expected life of the option.

Restricted Stock and Incentive Stock Beginning in 2006 the Company adopted a restricted stock program. As
provided for under the 2011 and 2000 Plans, eligible employees are granted restricted stock that generally vests over four years
from the date of grant. Under the Directors Plan, restricted stock units vest one year from the date of grant.

In addition, the Company has issued incentive stock units to eligible employees that vest upon attainment of certain
cumulative three-year performance goals. Based on the Company’s performance for each three year period then ended, the
incentive stock units can vest and be awarded ranging from 0% to 200% of the initial incentive stock units granted. The
incentive stock units included in the table below represent the number of shares that are expected to vest based on the

Company’s estimate for meeting those established performance targets. As of December 31, 2018, the Company estimates that
it will achieve 81%, 97% and 107% for the incentive stock units expected to vest based on performance for the three year
periods ending December 31, 2018, 2019, and 2020, respectively, and has recorded incentive compensation expense
accordingly. If estimates of the number of these stock units expected to vest changes in a future accounting period, cumulative
compensation expense could increase or decrease and will be recognized in the current period for the elapsed portion of the
vesting period and would change future expense for the remaining vesting period.

Compensation expense for the non-vested restricted stock and incentive stock units is based on the closing price of the

Company’s common stock on the date of grant and recognized over the applicable vesting period.

The following table summarizes the restricted stock activity and related information for the 2011 Plan, the 2000 Plan,

and Directors Plan, and incentive stock units activity and related information for the 2011 Plan and the 2000 Plan with related
information for the years ended December 31:

Outstanding at December 31, 2015............................................................................................

Granted.................................................................................................................................

Vested...................................................................................................................................

Adjustment for incentive stock awards expected to vest .....................................................

Canceled...............................................................................................................................

Outstanding at December 31, 2016............................................................................................

Granted.................................................................................................................................

Vested...................................................................................................................................

Adjustment for incentive stock awards expected to vest .....................................................

Canceled...............................................................................................................................

Outstanding at December 31, 2017............................................................................................

Granted.................................................................................................................................

Vested...................................................................................................................................

Adjustment for incentive stock awards expected to vest .....................................................

Canceled...............................................................................................................................

Outstanding at December 31, 2018............................................................................................

15. OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss were:

Restricted
Stock
and Units

Incentive
Stock
Awards

Weighted
Average Grant
Date Fair
Value

356,885

212,600

(159,975)

—

(13,215)

396,295

153,516

(137,088)

—

(13,723)

399,000

224,060

(148,644)

—

(29,327)

445,089

541,638

167,850

(236,591)

(38,164)

(9,983)

424,750

157,025

(153,271)

(87,592)

(13,579)

327,333

175,100

(93,312)

32,996

(26,875)

415,242

65.89

66.03

51.80

74.42

71.84

72.18

86.66

70.34

73.69

76.61

78.76

73.76

81.55

74.62

78.60

75.51

In thousands

Foreign currency translation gain (loss)

Unrealized gain (loss) on interest rate swap contracts, net of tax of $16 and $1,338

Unrealized loss on pension and post-retirement benefit plans, net of tax of $23,049 and $19,532

Total accumulated other comprehensive loss

December 31,

2018

2017

(202,204) $

(53)

(54,326)

(256,583) $

5,063

4,015

(54,070)

(44,992)

The changes in accumulated other comprehensive loss by component, net of tax, for the year-ended December 31, 2018

are as follows:

In thousands

Balance at December 31, 2017

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other

comprehensive income

Net current period other comprehensive income

Balance at December 31, 2018

Foreign
currency

Derivative

Pension and
post
retirement

translation

contracts

benefits plans

Total

5,063

4,015

(54,070) $

(207,267)

(7,803)

(2,319)

—

(207,267)

3,735

(4,068)

2,063

(256)

(202,204) $

(53) $

(54,326) $

(44,992)

(217,389)

5,798

(211,591)

(256,583)

Reclassifications out of accumulated other comprehensive loss for the year-ended December 31, 2018 are as follows:

In thousands

Amortization of defined pension and post retirement items

Amortization of initial net obligation and prior service cost

Amortization of net loss (gain)

Derivative contracts

Realized loss on derivative contracts

Amount reclassified from
accumulated other

Affected line item in the
Condensed Consolidated

comprehensive income

Statements of Income

(1,501) Other income, net

4,327 Other income, net

2,826 Other income, net

(763)

Income tax expense

2,063 Net income

4,915

Interest expense, net

(1,180)

Income tax expense

3,735 Net income

The changes in accumulated other comprehensive loss by component, net of tax, for the year-ended December 31, 2017

are as follows:

In thousands

Balance at December 31, 2016

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other

comprehensive income

Net current period other comprehensive income

Balance at December 31, 2017

Foreign
currency

Derivative

Pension and
post
retirement

translation

contracts

benefits plans

Total

(321,033) $

(2,957) $

(55,615) $

(379,605)

326,096

—

326,096

5,063

6,712

260

6,972

4,015

(1,017)

331,791

2,562

1,545

(54,070) $

2,822

334,613

(44,992)

Reclassifications out of accumulated other comprehensive loss for the year-ended December 31, 2017 are as follows:

In thousands

Amortization of defined pension and post retirement items

Amortization of initial net obligation and prior service cost

Amortization of net loss (gain)

Derivative contracts

Realized loss on derivative contracts

Amount reclassified from
accumulated other

Affected line item in the
Condensed Consolidated

comprehensive income

Statements of Income

(1,496) Other income, net

5,037 Other income, net

3,541 Other income, net

(979)

Income tax expense

2,562 Net income

400

Interest expense, net

(140)

Income tax expense

260 Net income

16. OPERATING LEASES

The Company leases office and manufacturing facilities under operating leases with terms ranging from one to 15 years,

excluding renewal options.

Total net rental expense charged to operations in 2018, 2017, and 2016 was $40.1 million, $34.6 million and $27.2

million, respectively. The amounts above are shown net of sublease rentals which were immaterial for the years 2018, 2017
and 2016, respectively.

Future minimum rental payments under operating leases with remaining non-cancelable terms in excess of one year are

as follows:

In thousands

Real

Estate

Equipment

Total

2019.............................................................................................................................

31,428

2020.............................................................................................................................

2021.............................................................................................................................

2022.............................................................................................................................

2023.............................................................................................................................

2024 and after .............................................................................................................

28,132

22,897

18,020

16,267

63,061

5,001

2,636

1,752

825

391

—

17. WARRANTIES

The following table reconciles the changes in the Company’s product warranty reserve as follows:

In thousands

2018

2017

Balance at beginning of year.....................................................................................................................

153,063

Warranty expense................................................................................................................................

Acquisitions ........................................................................................................................................

Warranty claim payments....................................................................................................................

Foreign currency impact .....................................................................................................................

57,988

3,135

(54,111)

(6,373)

Balance at end of year...............................................................................................................................

153,702

36,429

30,768

24,649

18,845

16,658

63,061

138,992

50,385

806

(48,548)

11,428

153,063

18. PREFERRED STOCK

The Company’s authorized capital stock includes 1,000,000 shares of preferred stock. The Board of Directors has the

authority to issue the preferred stock and to fix the designations, powers, preferences and rights of the shares of each such class
or series, including dividend rates, conversion rights, voting rights, terms of redemption and liquidation preferences, without
any further vote or action by the Company’s shareholders. The rights and preferences of the preferred stock would be superior
to those of the common stock. At December 31, 2018 and 2017 there was no preferred stock issued or outstanding.

19. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

Foreign Currency Hedging The Company uses forward contracts to mitigate its foreign currency exchange rate
exposure due to forecasted sales of finished goods and future settlement of foreign currency denominated assets and liabilities.
Derivatives used to hedge forecasted transactions and specific cash flows associated with foreign currency denominated
financial assets and liabilities that meet the criteria for hedge accounting are designated as cash flow hedges. The effective
portion of gains and losses is deferred as a component of accumulated other comprehensive income and is recognized in
earnings at the time the hedged item affects earnings, in the same line item as the underlying hedged item. The contracts are
scheduled to mature within two years. For the years ended December 31, 2018, 2017 and 2016, the amounts reclassified into
income were not material.

Other Activities The Company enters into certain derivative contracts in accordance with its risk management strategy

that do not meet the criteria for hedge accounting but which have the impact of largely mitigating foreign currency exposure.
These foreign exchange contracts are accounted for on a full mark to market basis through earnings, with gains and losses
recorded as a component of other expense, net. The net unrealized gain related to these contracts was $2.9 million and $2.1
million for the years ended December 31, 2018 and 2017, respectively. The net unrealized gain related to these contracts for
the year ended December 31, 2016 was not material. These contracts are scheduled to mature within one year.

The following table summarizes the gross notional amounts and fair values of the designated and non-designated hedges

discussed in the above sections as of December 31, 2018:

In millions

Gross notional amount ...................................................................................................

Fair Value:

Other current assets........................................................................................................

Other current liabilities ..................................................................................................

Total ...............................................................................................................................

Designated

Non-Designated

Total

863.0

834.0

1,697.0

— $

(2.3)
(2.3) $

1.3
—
1.3

1.3
(2.3)
(1.0)

The following table summarizes the gross notional amounts and fair values of the designated and non-designated hedged

discussed in the above sections as of December 31, 2017:

In millions

Gross notional amount ....................................................................................................

Fair Value:

Other current assets.........................................................................................................

Other current liabilities ...................................................................................................

Total ................................................................................................................................

Designated

Non-Designated

Total

805.1

379.7

1,184.8

3.5

—

3.5

2.1

— $

2.1

5.6

—

5.6

Interest Rate Hedging The Company used interest rate swaps to manage interest rate exposures. The Company is

exposed to interest rate volatility with regard to existing floating rate debt. Primary exposure includes the London Interbank
Offered Rates (LIBOR). Derivatives used to hedge risk associated with changes in the fair value of certain variable-rate debt
are primarily designated as fair value hedges. Consequently, changes in the fair value of these derivatives, along with changes
in the fair value of debt obligations are recognized in current period earnings. Refer to footnote 20 for further information on
interest rate swaps.

20. FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair

value and explains the related disclosure requirements. ASC 820 indicates, among other things, that a fair value measurement
assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous market for the asset or liability and defines fair value based upon an exit
price model.

Valuation Hierarchy. ASC 820 establishes a valuation hierarchy for disclosure of the inputs to valuation used to

measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices
(unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities
in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market
corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the
Company’s assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within
the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the liabilities carried at fair value measured on a recurring basis as of December 31, 2017,

which are included in other current liabilities on the Consolidated Balance sheet:

In thousands

Fair Value Measurements at December 31, 2017 Using

Total Carrying
Value at
December 31,

Quoted Prices in
Active Markets for
Identical Assets

Significant Other
Observable Inputs

2017

(Level 1)

(Level 2)

Significant
Unobservable
Inputs

(Level 3)

Interest rate swap agreements..........................................................

Total.................................................................................................

1,163

—

— $

1,163

—

To reduce the impact of interest rate changes on a portion of its variable-rate debt, the Company entered into interest rate

swaps which effectively converted a portion of the debt from variable to fixed-rate borrowings during the term of the swap

contracts. For certain derivative contracts whose fair values are based upon trades in liquid markets, such as interest rate swaps,
valuation model inputs can generally be verified and valuation techniques do not involve significant management judgment.
The fair values of such financial instruments are generally classified within Level 2 of the fair value hierarchy.

As a result of our global operating activities the Company is exposed to market risks from changes in foreign currency

exchange rates, which may adversely affect our operating results and financial position. When deemed appropriate, the
Company minimizes these risks through entering into foreign currency forward contracts. The foreign currency forward
contracts are valued using broker quotations, or market transactions in either the listed or over-the counter markets. As such,
these derivative instruments are classified within level 2.

The Company’s cash and cash equivalents are highly liquid investments purchased with an original maturity of three
months or less and are considered Level 1 on the fair value valuation hierarchy. The fair value of cash and cash equivalents
approximated the carrying value at December 31, 2018 and December 31, 2017. The Company’s defined benefit pension plan
assets consist primarily of equity security funds, debt security funds and temporary cash and cash equivalent investments.
These investments are comprised of a number of investment funds that invest in a diverse portfolio of assets including equity
securities, corporate and governmental bonds, and money markets. Trusts are valued at the net asset value (“NAV”) as
determined by their custodian. NAV represents the accumulation of the unadjusted quoted close prices on the reporting date for
the underlying investments divided by the total shares outstanding at the reporting dates. The 2013 and 2016 Notes are
considered Level 2 based on the fair value valuation hierarchy.

The estimated fair values and related carrying values of the Company’s financial instruments are as follows:

In thousands

December 31, 2018

December 31, 2017

Carry

Value

Fair

Value

Carry

Value

Fair

Value

Interest rate swap agreements ..........................................................

— $

1,163

4.375% Senior Notes, due 2023.......................................................

3.45% Senior Notes, due 2026.........................................................

Floating Rate Notes, due 2021.........................................................

4.15% Senior Notes, due 2024.........................................................

248,823

748,282

496,796

742,957

254,218

675,075

497,425

727,350

4.7% Senior Notes, due 2028...........................................................

1,239,657

1,179,625

248,567

747,655

—

1,163

262,033

741,113

—

The fair value of the Company’s interest rate swap agreements and all the Notes were based on dealer quotes and

represent the estimated amount the Company would pay to the counterparty to terminate the agreement.

21. COMMITMENTS AND CONTINGENCIES

The Company is subject to a variety of environmental laws and regulations governing discharges to air and water, the

handling, storage and disposal of hazardous or solid waste materials and the remediation of contamination associated with
releases of hazardous substances. The Company believes its operations currently comply in all material respects with all of the
various environmental laws and regulations applicable to our business; however, there can be no assurance that environmental
requirements will not change in the future or that we will not incur significant costs to comply with such requirements.

Under terms of the purchase agreement and related documents for the 1990 Acquisition, Ingersoll Rand, the successor-

in-interest to American Standard, Inc. (“Ingersoll”), has indemnified the Company for certain items including, among other
things, certain environmental claims the Company asserted prior to 2000. If Ingersoll was unable to honor or meet these
indemnifications, the Company would be responsible for such items. In the opinion of Management, Ingersoll currently has the
ability to meet its indemnification obligations.

Claims have been filed against the Company and certain of its affiliates in various jurisdictions across the United States
by persons alleging bodily injury as a result of exposure to asbestos-containing products. Most of these claims have been made
against our wholly owned subsidiary, Railroad Friction Products Corporation (“RFPC”), and are based on a product sold by
RFPC prior to the time that the Company acquired any interest in RFPC.

Most of these claims, including all of the RFPC claims, are submitted to insurance carriers for defense and indemnity or

to non-affiliated companies that retain the liabilities for the asbestos-containing products at issue. We cannot, however, assure
that all these claims will be fully covered by insurance or that the indemnitors or insurers will remain financially viable. Our
ultimate legal and financial liability with respect to these claims, as is the case with other pending litigation, cannot be
estimated.

It is management’s belief that the potential range of loss for asbestos-related bodily injury cases is not reasonably
determinable at present due to a variety of factors, including: (1) the asbestos case settlement history of the Company’s wholly

owned subsidiary, RFPC; (2) the unpredictable nature of personal injury litigation in general; and (3) the uncertainty of
asbestos litigation in particular. Despite this uncertainty, and although the results of the Company’s operations and cash flows
for any given period could be adversely affected by asbestos-related lawsuits, Management believes that the final resolution of
the Company’s asbestos-related cases will not be material to the Company’s overall financial position, results of operations and
cash flows. In general, this belief is based upon: (1) Wabtec’s and RFPC’s history of settlements and dismissals of asbestos-
related cases to date; (2) the inability of many plaintiffs to establish any exposure or causal relationship to RFPC’s product; and
(3) the inability of many plaintiffs to demonstrate any identifiable injury or compensable loss.

More specifically, as to RFPC, management’s belief that any losses due to asbestos-related cases would not be material
is also based on the fact that RFPC owns insurance which provides coverage for asbestos-related bodily injury claims. To date,
RFPC’s insurers have provided RFPC with defense and indemnity in these actions. The overall number of new claims being
filed against RFPC has dropped significantly in recent years; however, these new claims, and all previously filed claims, may
take a significant period of time to resolve. As to Wabtec and its divisions, Management’s belief that asbestos-related cases will
not have a material impact is also based on its position that it has no legal liability for asbestos-related bodily injury claims, and
that the former owners of Wabtec’s assets retained asbestos liabilities for the products at issue. To date, Wabtec has been able to
successfully defend itself on this basis, including two arbitration decisions and a judicial opinion, all of which confirmed
Wabtec’s position that it did not assume any asbestos liabilities from the former owners of certain Wabtec assets. Although
Wabtec has incurred defense and administrative costs in connection with asbestos bodily injury actions, these costs have not
been material, and the Company has no information that would suggest these costs would become material in the foreseeable
future.

On April 21, 2016, Siemens Industry, Inc. filed a lawsuit against the Company in federal district court in Delaware

alleging that the Company has infringed seven patents owned by Siemens related to Positive Train Control (PTC) technology.
On November 2, 2016, Siemens amended its complaint to add six additional patents they also claim are infringed by the
Company’s PTC Products or End of Train (EOT) Products (Siemen Patent Case). The Company has filed Answers, and asserted
counterclaims, in response to Siemens’ complaints. Additionally, after filings by the Company, the US Patent & Trademark
Office’s Patent Trail and Appeal Board (PTAB) has granted Inter-Parties Review (IPR) proceedings on ten (10) of the patents
asserted by Siemens to contest their validity. Following pre-trial rulings that greatly reduced Siemens’ alleged damages, a jury
trial was held in federal district court in Delaware in January 2019 on eight patents, two of which were still subject to an IPR
decision on validity from the PTAB. At the conclusion of the trial, the jury awarded Siemens damages of $5.6 million related to
PTC patents and $1.1 million related to EOT patents; as of February 25, 2019, a final verdict has not yet been entered by the
Court. Since the jury’s verdict was issued, one of the PTC patents found to be infringed was held to be invalid by the PTAB,
and a ruling on another of the PTC patents is still pending. Once a verdict is entered, the parties will file post-trial motions
which could also potentially affect the verdict, and potential appeals could follow.

Wabtec’s initial counterclaims in the Siemens Patent Case alleging that Siemens has violated three (3) of Wabtec’s

patents were severed from the Siemens Patent case and were re-filed by Wabtec in a separate case now pending in the federal
district court in Delaware (Wabtec Patent Case); a trial date of April 13, 2020 has been set in this case.

On July 19, 2018, Siemens amended its pleadings in the Wabtec Patent Case to add new counterclaims alleging
violations of federal antitrust and state trade practices laws related to Wabtec’s PTC sales. On January 29, 2019, Wabtec’s
motion to sever the antitrust claims was granted; it is expected that Siemens will re-file the antitrust claims as a separate action
(Siemens Antitrust Case).

Xorail, Inc., a wholly owned subsidiary of the Company (“Xorail”), has received notices from Denver Transit

Constructors (“DTC”) alleging breach of contract related to the operating of constant warning wireless crossings, and late
delivery of the Train Management & Dispatch System (“TMDS”) for the Denver Eagle P3 Project, which is owned by the
Denver Regional Transit District ("RTD"). No damages have been asserted for the alleged late delivery of the TMDS, and no
formal claim has been filed. Xorail is in the final stages of successfully implementing a recovery plan concerning the TMDS
issues. With regard to the wireless crossing issue, as of September 8, 2017, DTC alleged that total damages were $36.8 million
through July 31, 2017 and are continuing to accumulate. The majority of the damages stems from a delay in approval of the
wireless crossing system by the Federal Railway Administration ("FRA") and the Public Utility Commission ("PUC"), resulting
in the use of flaggers at all of the crossings pending approval of the wireless crossing system and certification of the crossings.
DTC has alleged that the delay is due to Xorail's failure to achieve constant warning times for the crossings in accordance with
the approval requirements imposed by the FRA and PUC. Xorail has denied DTC's assertions, stating that its system satisfied
the contractual requirements. Xorail has worked with DTC to modify its system an implement the FRA's and PUC's previously
undefined approval requirements; the FRA and PUC have both approved modified wireless crossing system, and as of August
2018, DTC completed the process of certifying the crossings and eliminating the use of flaggers. On September 21, 2018, DTC
filed a complaint against RTD in Colorado state court for breach of contract related to non-payments and the costs for the
flaggers, asserting a change-in-law arising from the FRA/PUC’s new certification requirements. The complaint generally

supports Xorail’s position and does not name or implicate Xorail. DTC has not updated its notices against Xorail nor has any
formal claim been filed against Xorail by DTC.

On April 3, 2018, the United States Department of Justice entered into a proposed consent decree resolving allegations
that the Company and Knorr-Bremse AG had maintained unlawful agreements not to compete for each other’s employees. The
allegations also related to Faiveley Transport before it was acquired by the Company in November 2016. The proposed consent
decree is pending review and approval by the U.S. District Court for the District of Columbia. No monetary fines or penalties
have been imposed on the Company. The Company elected to settle this matter with the Department of Justice to avoid the
cost and distraction of litigation. Putative class action lawsuits were filed in several different federal district courts naming the
Company and Knorr as defendants in connection with the allegations contained in the proposed consent decree. The lawsuits
seek unspecified damages on behalf of employees of the Company (including Faiveley Transport) and Knorr allegedly caused
by the defendants’ actions. A federal Multi-District Litigation (MDL) Panel decided to consolidate the cases in the Western
District of Pennsylvania, and on October 12, 2018, a consolidated class action complaint was filed in the Western District of PA
with five named plaintiffs, three of whom were Company employees. The litigation is in its very early stages and the Company
does not believe that it has diminished competition for talent in the marketplace and intends to contest these claims vigorously.
The Company has filed a motion to dismiss, which is pending

From time to time the Company is involved in litigation relating to claims arising out of its operations in the ordinary

course of business. As of the date hereof, the Company is involved in no litigation that the Company believes will have a
material adverse effect on its financial condition, results of operations or liquidity.

22. SEGMENT INFORMATION

Wabtec has two reportable segments—the Freight Segment and the Transit Segment. The key factors used to identify

these reportable segments are the organization and alignment of the Company’s internal operations, the nature of the products
and services, and customer type. The business segments are:

Freight Segment primarily manufactures and services components for new and existing freight cars and locomotives,
builds new switcher locomotives, rebuilds freight locomotives, supplies railway electronics, positive train control equipment,
signal design and engineering services, and provides related heat exchange and cooling systems. Customers include large,
publicly traded railroads, leasing companies, manufacturers of original equipment such as locomotives and freight cars, and
utilities.

Transit Segment primarily manufactures and services components for new and existing passenger transit vehicles,
typically regional trains, high speed trains, subway cars, light-rail vehicles and buses, builds new commuter locomotives,
refurbishes subway cars, provides heating, ventilation, and air conditioning equipment, and doors for buses and subways.
Customers include public transit authorities and municipalities, leasing companies, and manufacturers of subway cars and
buses around the world.

The Company evaluates its business segments’ operating results based on income from operations. Intersegment sales

are accounted for at prices that are generally established by reference to similar transactions with unaffiliated customers.
Corporate activities include general corporate expenses, elimination of intersegment transactions, interest income and expense
and other unallocated charges. Since certain administrative and other operating expenses and other items have not been
allocated to business segments, the results in the following tables are not necessarily a measure computed in accordance with
generally accepted accounting principles and may not be comparable to other companies.

Segment financial information for 2018 is as follows:

In thousands

Freight

Segment

Transit

Segment

Corporate

Activities and

Elimination

Total

Sales to external customers.........................................................................................

Intersegment sales/(elimination).................................................................................

Total sales........................................................................................................

Income (loss) from operations ....................................................................................

Interest expense and other, net....................................................................................

Income (loss) from operations before income taxes .......................................

Depreciation and amortization....................................................................................

Capital expenditures....................................................................................................

1,564,297

54,228

1,618,525

304,832

—

304,832

39,979

26,568

2,799,250

17,583

2,816,833

227,939

—

227,939

64,287

59,603

— $

4,363,547

(71,811)

—

(71,811) $

4,363,547

(59,334) $

473,437

(105,855)

(165,189) $

5,031

7,134

367,582

109,297

93,305

Segment assets ............................................................................................................

3,774,689

9,087,026

(4,212,481)

8,649,234

Segment financial information for 2017 is as follows: