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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________
FORM 10-Q
____________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
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
CORP
ORATION
(Exact name of registrant as specified in its charter)
____________________________________
Delaware25-1615902
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
30 Isabella Street Pittsburgh, Pennsylvania
15212
(Address of principal executive offices)(Zip code)
412-825-1000
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
____________________________________
Securities registered pursuant to Section 12(b) of the Act:
Class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.01 par value per share
WAB
New York Stock Exchange
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 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      No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filer
Emerging growth companySmaller 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      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of October 23, 2020, there were 190,326,442 shares of common stock, par value $.01 per share, of the registrant outstanding.




WESTINGHOUSE AIR BRAKE
TECHNOLOGIES CORPORATION
September 30, 2020
FORM 10-Q
TABLE OF CONTENTS
Page
PART I—FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II—OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 4.
Item 6.

2


PART I—FINANCIAL INFORMATION
Item 1.    FINANCIAL STATEMENTS
WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
In millions, except par valueSeptember 30,
2020
December 31,
2019
Assets
Current Assets
Cash and cash equivalents $559.3 $604.2 
Accounts receivable 1,020.0 1,149.9 
Unbilled accounts receivables413.5 514.0 
Inventories 1,779.7 1,773.1 
Other current assets 163.7 150.9 
Total current assets 3,936.2 4,192.1 
Property, plant and equipment 2,283.6 2,216.0 
Accumulated depreciation (679.9)(560.2)
Property, plant and equipment, net 1,603.7 1,655.8 
Other Assets
Goodwill 8,366.1 8,360.6 
Other intangibles, net 3,889.6 4,104.0 
Other noncurrent assets 648.8 631.7 
Total other assets 12,904.5 13,096.3 
Total Assets $18,444.4 $18,944.2 
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable $962.0 $1,157.5 
Customer deposits 640.9 604.2 
Accrued compensation 243.9 343.8 
Accrued warranty 223.0 226.5 
Current portion of long-term debt454.8 95.7 
Other accrued liabilities 704.0 830.3 
Total current liabilities 3,228.6 3,258.0 
Long-term debt 3,799.9 4,333.6 
Accrued postretirement and pension benefits106.1 113.0 
Deferred income taxes 163.1 145.3 
Contingent consideration300.5 291.8 
Other long-term liabilities 793.8 808.9 
Total Liabilities 8,392.0 8,950.6 
Commitments and contingencies (Note 15)
Equity
Convertible preferred stock, $.01 par value; 1.0 shares authorized, no shares issued and outstanding, at September 30, 2020 and December 31, 2019
  
Common stock, $.01 par value; 500.0 shares authorized: 226.9 and 226.9 shares issued and 190.3 and 191.7 outstanding at September 30, 2020 and December 31, 2019, respectively
2.0 2.0 
Additional paid-in capital 7,882.3 7,877.2 
Treasury stock, at cost, 36.6 and 35.2 shares, at September 30, 2020 and December 31, 2019, respectively
(909.4)(807.1)
Retained earnings 3,524.2 3,267.0 
Accumulated other comprehensive loss (482.2)(382.6)
Total Westinghouse Air Brake Technologies Corporation shareholders’ equity 10,016.9 9,956.5 
Noncontrolling interest35.5 37.1 
Total Equity 10,052.4 9,993.6 
Total Liabilities and Equity $18,444.4 $18,944.2 
The accompanying notes are an integral part of these statements.
3


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UnauditedUnaudited
Three Months Ended
September 30,
Nine Months Ended
September 30,
In millions, except per share data2020201920202019
Net sales:
Sales of goods$1,543.6 $1,605.4 $4,540.5 $4,932.4 
Sales of services321.5 396.3 991.9 899.2 
Total net sales1,865.1 2,001.7 5,532.4 5,831.6 
Cost of sales:
Cost of goods(1,109.9)(1,184.1)(3,327.1)(3,635.4)
Cost of services(189.0)(218.2)(573.7)(593.1)
Total cost of sales(1,298.9)(1,402.3)(3,900.8)(4,228.5)
Gross profit566.2 599.4 1,631.6 1,603.1 
Operating expenses:
Selling, general and administrative expenses(252.7)(292.2)(712.9)(842.9)
Engineering expenses(36.5)(58.6)(123.7)(150.3)
Amortization expense(70.3)(79.5)(211.6)(172.9)
Total operating expenses(359.5)(430.3)(1,048.2)(1,166.1)
Income from operations206.7 169.1 583.4 437.0 
Other income and expenses:
Interest expense, net(45.6)(57.7)(150.3)(160.8)
Other income (expense), net14.3 1.9 5.8 (4.1)
Income from operations before income taxes 175.4 113.3 438.9 272.1 
Income tax expense(46.9)(22.7)(113.4)(82.6)
Net income128.5 90.6 325.5 189.5 
Less: Net (income) loss attributable to noncontrolling interest(0.4)0.5 1.0 1.5 
Net income attributable to Wabtec shareholders128.1 91.1 326.5 191.0 
Earnings Per Common Share
Basic
Net income attributable to Wabtec shareholders$0.67 $0.48 $1.71 $1.17 
Diluted
Net income attributable to Wabtec shareholders$0.67 $0.48 $1.71 $1.11 
Weighted average shares outstanding
Basic189.8 189.6 190.1 163.2 
Diluted190.2 191.5 190.6 172.2 
 
The accompanying notes are an integral part of these statements.
4


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
UnauditedUnaudited
Three Months Ended
September 30,
Nine Months Ended
September 30,
In millions2020201920202019
Net income attributable to Wabtec shareholders$128.1 $91.1 $326.5 $191.0 
Foreign currency translation gain (loss)53.8 (181.1)(98.4)$(208.9)
Unrealized gain (loss) on derivative contracts2.8 0.2 1.8 $(4.0)
Unrealized (loss) gain on pension benefit plans and post-retirement benefit plans(0.6)2.2 (3.5)(0.1)
Other comprehensive income (loss) before tax56.0 (178.7)(100.1)(213)
Income tax (expense) benefit related to components of other comprehensive income(0.5)(0.7)0.4 1.0 
Other comprehensive income (loss), net of tax55.5 (179.4)(99.7)(212.0)
Comprehensive income (loss) attributable to Wabtec shareholders$183.6 $(88.3)$226.8 $(21.0)
 
The accompanying notes are an integral part of these statements.

5


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Nine Months Ended
September 30,
In millions20202019
Operating Activities
Net income$325.5 $189.5 
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization353.3 289.3 
Stock-based compensation expense17.6 36.1 
Below market intangible amortization(67.9)(29.9)
Changes in operating assets and liabilities, net of acquisitions
Accounts receivable and unbilled accounts receivable245.2 (32.3)
Inventories7.8 58.7 
Accounts payable(203.4)(146.5)
Accrued income taxes17.9 14.5 
Accrued liabilities and customer deposits(76.3)18.8 
Other assets and liabilities(161.6)169.5 
Net cash provided by operating activities458.1 567.7 
Investing Activities
Purchase of property, plant and equipment(98.7)(112.6)
Proceeds from disposal of assets and businesses19.1 3.4 
Acquisitions of businesses, net of cash acquired(40.3)(3,000.6)
Net cash used for investing activities(119.9)(3,109.8)
Financing Activities
Proceeds from debt2,936.0 2,955.5 
Payments of debt(3,117.1)(2,064.6)
Repurchase of stock(105.3) 
Cash dividends(69.2)(58.2)
Other financing activities(5.2)(15.6)
Net cash (used for) provided by financing activities(360.8)817.1 
Effect of changes in currency exchange rates(22.3)(29.9)
Decrease in cash(44.9)(1,754.9)
Cash, cash equivalents, and restricted cash, beginning of period604.2 2,342.3 
Cash and cash equivalents, end of period$559.3 $587.4 
 
The accompanying notes are an integral part of these statements.
 

6


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
Common StockCommon StockAdditional Paid-inTreasury StockTreasury StockRetainedAccumulated OtherNon-controlling
In millions, except per share dataSharesAmountCapitalSharesAmountEarningsComprehensive LossInterestTotal
Balance, December 31, 2019226.9 $2.0 $7,877.2 (35.3)$(807.1)$3,267.0 $(382.6)$37.1 $9,993.6 
Cash dividends ($0.12 dividend per share)
— — — — — (23.0)— — (23.0)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax— — (7.9)0.2 2.2 — — — (5.7)
Stock based compensation— — 10.0 — — — — — 10.0 
Net income (loss)— — — — — 111.6 — (0.4)111.2 
Other comprehensive loss, net of tax— — — — — — (178.0)— (178.0)
Stock repurchase— — — (1.6)(105.3)— — — (105.3)
Other owner changes— — (4.3)— — — — (0.8)(5.1)
Balance, March 31, 2020226.9 $2.0 $7,875.0 (36.7)$(910.2)$3,355.6 $(560.6)$35.9 $9,797.7 
Cash dividends ($0.12 dividend per share)
— — — — — (23.4)— — (23.4)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax— — (0.6)0.1 0.9 — — — 0.3 
Stock based compensation— — (2.7)— — — — — (2.7)
Net income (loss)— — — — — 86.8 — (1.0)85.8 
Other comprehensive income, net of tax— — — — — — 22.8 — 22.8 
Other owner changes— — — — — — — 0.1 0.1 
Balance, June 30, 2020226.9 $2.0 $7,871.7 (36.6)$(909.3)$3,419.0 $(537.8)$35.0 $9,880.6 
Cash dividends ($0.12 dividend per share)
— — — — — (22.8)— — (22.8)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax— — 0.4  (0.1)— — — 0.3 
Stock based compensation— — 10.2 — — — — — 10.2 
Net income— — — — — 128.0 — 0.5 128.5 
Other comprehensive income, net of tax— — — — — — 55.6 — 55.6 
Balance, September 30, 2020226.9 $2.0 $7,882.3 (36.6)$(909.4)$3,524.2 $(482.2)$35.5 $10,052.4 
7


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
Common StockCommon StockAdditional Paid-inTreasury StockTreasury StockRetainedAccumulated OtherNon-controlling
In millions, except per share dataSharesAmountCapitalSharesAmountEarningsComprehensive LossInterestTotal
Balance, December 31, 2018132.3 $1.3 $914.6 (35.7)$(816.1)$3,022.0 $(256.6)$3.9 $2,869.1 
Cash dividends ($0.12 dividend per share)
— — — — — (11.7)— — (11.7)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax— — (14.4)0.4 8.9 — — — (5.5)
Stock based compensation— — 8.5 — — — — — 8.5 
Net (loss) income— — — — — (4.5)— 0.5 (4.0)
Other comprehensive loss, net of tax— — — — — — (52.4)— (52.4)
Acquisitions, net65.8 0.7 6,887.6 — — — — 86.7 6,975.0 
Other owner changes— — — — — — — 1.4 1.4 
Balance, March 31, 2019198.1 $2.0 $7,796.3 $(35.3)$(807.2)$3,005.8 $(309.0)$92.5 $9,780.4 
Cash dividends ($0.12 dividend per share)
— — — — — (22.6)— — (22.6)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax— — (4.6)0.1 1.6 — — — (3.0)
Stock based compensation— — 15.4 — — — — — 15.4 
Net income (loss)— — — — — 104.1 — (1.4)102.7 
Other comprehensive income, net of tax— — — — — — 19.8 — 19.8 
Acquisitions, net — — — — — — (56.2)(56.2)
Other owner changes25.3 — — — — — — (1.6)(1.6)
Balance, June 30, 2019223.4 $2.0 $7,807.1 $(35.2)$(805.6)$3,087.3 $(289.2)$33.3 $9,834.9 
Cash dividends ($0.12 dividend per share)
— — — — — (23.9)— — (23.9)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax— — (3.5)(0.1)(2.0)— — — (5.5)
Stock based compensation— — 12.2 — — — — — 12.2 
Net income (loss)— — — — — 91.4 — (0.6)90.8 
Other comprehensive loss, net of tax— — — — — — (179.4)— (179.4)
Acquisitions, net— — — — — — — 0.1 0.1 
Other owner changes3.5 — — — — — — 0.2 0.2 
Balance, September 30, 2019226.9 $2.0 $7,815.8 $(35.3)$(807.6)$3,154.8 $(468.6)$33.0 $9,729.4 

The accompanying notes are an integral part of these statements.
8


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020 (UNAUDITED)

1. BUSINESS
Westinghouse Air Brake Technologies Corporation (“Wabtec” or the "Company") is one of the world’s largest providers of locomotives, value-added, technology-based equipment, systems and services for the global freight rail and passenger transit 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, 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 over 50 countries and our products can be found in more than 100 countries throughout the world. In the first nine months of 2020, approximately 58% of the Company’s revenues came from customers outside the United States.
On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus, known as COVID-19, as a global pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibit many employees from going to work. Our top concern is, and remains, the health and well-being of our employees around the world. To date, COVID-19 has surfaced in nearly all regions around the world and has impacted our sales channels, supply chain, manufacturing operations, workforce, and other key aspects of our operations. The outbreak and preventive measures taken to help curb the spread, including temporary plant closures in China, India, Italy and other countries where outbreaks and stay-at-home orders were most prevalent, had an adverse impact on our operations and business results for the first nine months of 2020.

2. ACCOUNTING POLICIES
Basis of Presentation The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America and the rules and regulations of the Securities and Exchange Commission and include the accounts of Wabtec and its subsidiaries in which Wabtec has a controlling interest. These condensed consolidated interim financial statements do not include all of the information and footnotes required for complete financial statements. In management’s opinion, these financial statements reflect all adjustments of a normal, recurring nature necessary for a fair presentation of the results for the interim periods presented. Results for these interim periods are not necessarily indicative of results to be expected for the full year particularly in light of the rapidly evolving COVID-19 pandemic that is impacting our sales channels, supply chain, manufacturing operations, workforce, or other key aspects of our operations and the high degree of uncertainty regarding the pandemic's duration and severity, actions to control it, and the potential impact on global economic activity, global supply chain operations and our customers, suppliers, and end-markets.
The Company operates on a four-four-five week accounting quarter, and the quarters end on or about March 31, June 30, September 30, and December 31.
The notes included herein should be read in conjunction with the audited consolidated financial statements included in Wabtec’s Annual Report on Form 10-K for the year ended December 31, 2019. The December 31, 2019 information has been derived from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Reclassifications Certain prior year amounts have been reclassified, where necessary, to conform to the current year presentation.
Use of Estimates The preparation of financial statements in conformity with GAAP 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 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.
Revenue Recognition A majority of the Company’s revenues are derived from performance obligations that are satisfied at a point in time when control passes to the customer. The remaining revenues are earned over time. Generally, for performance obligations satisfied at a point in time control passes at the time of shipment in accordance with agreed upon delivery terms.
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
9


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. 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 periodically through the year 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. The current portion of the contract assets are classified as current assets under the caption “Unbilled Accounts Receivable” while the noncurrent contract assets are classified as other assets under the caption "Other Noncurrent Assets" on the consolidated balance sheet. Noncurrent contract assets were $103.8 million at September 30, 2020 and $109.4 million at December 31, 2019, respectively. Included in noncurrent contract assets are certain costs that are specifically related to a contract, however, do not directly contribute to the transfer of control of the tangible product being created, such as non-recurring engineering costs. The Company has elected to use the practical expedient and does not consider unbilled amounts anticipated to be paid within one year as significant financing components.
Contract liabilities include customer deposits that are made prior to the incurrence of costs related to a newly agreed upon contract and advanced customer payments that are in excess of revenue recognized. The current portion of contract liabilities are classified as current liabilities under the caption “Customer Deposits” while the noncurrent contract liabilities are classified as noncurrent liabilities under the caption "Other Long-Term Liabilities" on the consolidated balance sheet. Noncurrent contract liabilities were $67.5 million at September 30, 2020 and $77.0 million at December 31, 2019. 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 or 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 $101.3 million and $118.5 million at September 30, 2020 and December 31, 2019, 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 process where management reviews the progress of long term-projects periodically throughout the year. 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 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; however, a single contract may have multiple performance obligations comprising multiple promises to customers. When there are multiple performance obligations, revenue is allocated based on the relative stand-alone selling price. 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 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 the transaction price of firm customer orders subject to standard industry cancellation provisions and substantial scope-of-work adjustments. As of September 30, 2020, the Company's remaining performance obligations were $20.5 billion. The Company expects to recognize revenue of approximately 25% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.
Revolving Receivables Program In May 2020, the Company entered into a revolving agreement to transfer up to $150.0 million of certain receivables of certain subsidiaries of the Company (the "Originators") through our bankruptcy-remote subsidiary to a financial institution on a recurring basis in exchange for cash equal to the gross receivables transferred. As customers pay their balances, we sell additional receivables into the program, resulting in our gross receivables sold exceeding net cash flow impacts (e.g., collect and reinvest). The sold receivables are fully guaranteed by our bankruptcy-remote subsidiary which holds additional receivables of $191.7 million at September 30, 2020 that are pledged as collateral under this agreement. The transfers are recorded at fair value of the proceeds received and obligations assumed less derecognized receivables. No
10


obligation was recorded at September 30, 2020 as the estimated expected credit losses on receivables sold is insignificant. Our maximum exposure to loss related to these receivables transferred is limited to the amount outstanding. The Company has agreed to guarantee the performance of the Originators respective obligations' under the revolving agreement. None of the Company nor the Originators guarantees the collectability of the receivables under the revolving agreements.
The following table sets forth a summary of receivables sold:
In millionsThree Months Ended
September 30, 2020
Nine Months Ended
September 30, 2020
Gross receivables sold/cash proceeds received$289.1 $583.0 
Collections reinvested under revolving agreement 291.6 485.5 
Net cash proceeds (remitted) received$(2.5)$97.5 
Depreciation Expense Depreciation of property, plant and equipment related to the manufacturing of products or services provided is included in Cost of Goods Sold or Cost of Services. Depreciation of other property, plant and equipment that is not attributable to the manufacturing of products or services provided is included in Selling, General and Administrative Expenses or Engineering Expense to the extent the property, plant, and equipment is used for research and development purposes.
Goodwill and Intangibles 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 least annually which will occur in the fourth quarter of 2020. The Company has identified three reporting units for purposes of testing goodwill for impairment. Two reporting units exist within the freight segment and the transit segment is also a reporting unit. The 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.
As a result of the COVID-19 pandemic and the uncertainty surrounding the global economy, the Company's stock price was highly volatile especially during the first half of 2020. The Company considered the Company's stock price volatility combined with overall macroeconomic conditions and concluded that it was not more likely than not that the fair value of its three reporting units declined below their carrying value and therefore an interim quantitative impairment test was not required during the first nine months of 2020. The present uncertainty surrounding the global economy due to the COVID-19 pandemic increases the likelihood that adverse changes could occur in key assumptions used to determine the fair value of reporting units like sales estimates, cost factors, discount rates and stock price resulting in interim quantitative goodwill impairment tests and non-cash goodwill impairments in future periods.
Also, as a result of the COVID-19 pandemic the Company reviewed indefinite-lived tradename intangible assets and concluded that it was not more likely than not that the fair value of such tradename assets were below their carrying value. However, uncertainty surrounding the impact of the COVID-19 pandemic increases the likelihood that adverse changes in key assumptions used to determine the fair value of indefinite-lived intangibles like sales estimates or discount rates could result in interim quantitative tradename impairments tests and non-cash tradename impairments in future periods. Additionally, uncertainty around the current macroeconomic environment could result in changes to the Company’s marketing and branding strategy which also could impact the carrying value or estimated useful lives of the Company’s tradenames.
Financial Derivatives and Hedging Activities As part of its risk management strategy, the Company utilizes derivative financial instruments to mitigate the impact of changes in foreign currency exchange rates and interest rates on earnings and cash flow. For further information regarding financial derivatives and hedging activities, refer to Notes 13 and 14.
Foreign Currency Translation Certain of our international operations have determined that the local currency is the functional currency whereas others have determined the U.S. dollar is their functional currency. Assets and liabilities of foreign subsidiaries where the functional currency is the local currency 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 transactions that are denominated in a currency other than an entity’s functional currency are charged or credited to earnings.
11


Recently Issued Accounting Pronouncements In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, “Income Taxes: Simplifying the Accounting for Income Taxes.” The amendments in this update simplify the accounting for certain income tax transactions by removing specific exceptions to the general principles in Topic 740, Income Taxes. This guidance is effective for fiscal years beginning after December 15, 2020 with early adoption permitted. The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements.
Recently Adopted Accounting Pronouncements In June 2016, FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This updated guidance sets forth a current expected credit loss model based on expected losses. Under this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions and forecasted information rather than the current methodology of delaying recognition of credit losses until it is probable a loss has been incurred. This guidance became effective for the Company on January 1, 2020. The Company adopted this accounting standard at the beginning of the period. The impact of adopting the new standard was not material to the consolidated statement of income or the consolidated balance sheet.
In January 2017, 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 guidance became effective for the Company on January 1, 2020. The adoption of this guidance had no impact on the Company, however, the amendments in this update could result in a change to 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 unit's carrying value exceeds its fair value.
In March 2020, the SEC amended Rules 3-10 and 3-16 of Regulation S-X regarding financial disclosure requirements for registered debt offerings involving subsidiaries as either issuers or guarantors and affiliates whose securities are pledged as collateral. This new guidance narrows the circumstances that require separate financial statements of subsidiary issuers and guarantors and streamlines the alternative disclosures required in lieu of those statements. The final rule also allows for simplified disclosures to be included within Management’s Discussion and Analysis. This rule is effective January 4, 2021 with early adoption permitted. The Company elected to early adopt this rule during the three months ended June 30, 2020.
Other Comprehensive Income (Loss) Comprehensive income comprises both net income and the change in equity from transactions and other events and circumstances from nonowner sources.
The changes in accumulated other comprehensive income (loss) by component, net of tax, for the nine months ended September 30, 2020 are as follows:
In millionsForeign
currency
translation
Derivative
contracts
Pension and
post
retirement
benefit plans
Total
Balance at December 31, 2019$(308.6)$(3.3)$(70.7)$(382.6)
Other comprehensive loss before reclassifications(98.4)1.4 (4.8)(101.8)
Amounts reclassified from accumulated other comprehensive income  2.2 2.2 
Net current period other comprehensive income (loss)(98.4)1.4 (2.6)(99.6)
Balance at September 30, 2020$(407.0)$(1.9)$(73.3)$(482.2)
12


Reclassifications out of accumulated other comprehensive income (loss) for the three months ended September 30, 2020 are as follows:
In millionsAmount reclassified from
accumulated other
comprehensive income
Affected line item in the
Condensed Consolidated
Statements of Income
Amortization of defined benefit plan items
Amortization of initial net obligation and prior service cost$(0.4)Other income (expense), net
Amortization of net loss1.4 Other income (expense), net
1.0 Other income (expense), net
(0.3)Income tax expense
$0.7 Net income
Reclassifications out of accumulated other comprehensive income (loss) for the nine months ended September 30, 2020 are as follows:
In millionsAmount reclassified from
accumulated other
comprehensive income
Affected line item in the
Condensed Consolidated
Statements of Income
Amortization of defined benefit plan items
Amortization of initial net obligation and prior service cost$(1.1)Other income (expense), net
Amortization of net loss4.1 Other income (expense), net
3.0 Other income (expense), net
(0.8)Income tax expense
$2.2 Net income
13


The changes in accumulated other comprehensive loss by component, net of tax, for the nine months ended September 30, 2019 are as follows:
In millionsForeign
currency
translation
Derivative
contracts
Pension and
post
retirement
benefit plans
Total
Balance at December 31, 2018$(202.2)$(0.1)$(54.3)$(256.6)
Other comprehensive loss before reclassifications(208.9)(3.0)(1.7)(213.6)
Amounts reclassified from accumulated other comprehensive income  1.6 1.6 
Net current period other comprehensive income (loss) (208.9)(3.0)(0.1)(212.0)
Balance at September 30, 2019$(411.1)$(3.1)$(54.4)$(468.6)
Reclassifications out of accumulated other comprehensive loss for the three months ended September 30, 2019 are as follows:
In millionsAmount reclassified from
accumulated other
comprehensive income
Affected line item in the
Condensed Consolidated
Statements of Income
Amortization of defined benefit plan items
Amortization of initial net obligation and prior service cost$(0.4)Other income (expense), net
Amortization of net loss1.1 Other income (expense), net
0.7 Other income (expense), net
(0.2)Income tax expense
$0.5 Net income
Reclassifications out of accumulated other comprehensive loss for the nine months ended September 30, 2019 are as follows:
In millionsAmount reclassified from
accumulated other
comprehensive income
Affected line item in the
Condensed Consolidated
Statements of Income
Amortization of defined benefit plan items
Amortization of initial net obligation and prior service cost$(1.1)Other income (expense), net
Amortization of net loss3.3 Other income (expense), net
2.2 Other income (expense), net
(0.6)Income tax expense
$1.6 Net income

3. ACQUISITIONS
General Electric Transportation
    Wabtec, General Electric Company ("GE"), GE Transportation, a Wabtec Company formerly known as 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, 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.
As part of the Merger, certain assets of GE Transportation, including the equity interests of certain pre-Transaction subsidiaries of GE that composed 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 (the
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"Direct Sale"). 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. Following this issuance of additional SpinCo common stock to GE, and immediately prior to the Distribution (as defined below), 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 to its stockholders (the "Distribution"). Immediately after the Distribution, Merger Sub merged with and into SpinCo (the "Merger"), 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, Wabtec issued 46,763,975 shares of common stock to the holders of GE common stock, 19,018,207 shares of common stock to GE and 10,000 shares of preferred stock to GE and made a cash payment to GE of $2.885 billion. As a result and calculated based on Wabtec’s outstanding common stock on a fully-diluted, as-converted and as-exercised basis, as of February 25, 2019, approximately 49.2% of the outstanding shares of Wabtec common stock was held collectively by GE and holders of GE common stock (with 9.9% held by GE directly in shares of Wabtec common stock and 15% underlying the shares of Wabtec convertible preferred stock held by GE) and approximately 50.8% of the outstanding shares of Wabtec common stock would be held by pre-Merger Wabtec stockholders, in each case calculated on a fully-diluted, as-converted and as-exercised basis. Following the Merger, GE also retained 15,000 shares of SpinCo Class A non-voting preferred stock, and Wabtec held 10,000 shares of SpinCo Class B non-voting preferred stock.
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), and Direct Sale Purchaser, which also is Wabtec’s wholly owned subsidiary, together, SpinCo and Direct Sale Purchaser own and operate the post-transaction GE Transportation. All shares of the Company’s common stock, including those issu