SEC Filing | Wabtec Corporation

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wab-20220930

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, 2022


☐			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									25-1615902
(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 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 ☐ 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 27, 2022, there were 181,867,864 shares of common stock, par value $.01 per share, of the registrant outstanding.

WESTINGHOUSE AIR BRAKE

TECHNOLOGIES CORPORATION

September 30, 2022

FORM 10-Q

TABLE OF CONTENTS


		Page
	PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements - (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021	4
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	6
	Condensed Consolidated Statements of Shareholders' Equity for the three and nine months ended September 30, 2022 and 2021	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	42
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 4.	Mine Safety Disclosures	44
Item 6.	Exhibits	44
	Signatures	45

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


	Unaudited
In millions, except par value	September 30, 2022		December 31, 2021
Assets
Assets
Cash and cash equivalents	$	514	$	473
Accounts receivable	1,004		1,085
Unbilled accounts receivable	458		392
Inventories	2,023		1,689
Other current assets	200		193
Total current assets	4,199		3,832
Property, plant and equipment, net	1,402		1,497
Goodwill	8,361		8,587
Other intangible assets, net	3,410		3,705
Other noncurrent assets	890		833
Total noncurrent assets	14,063		14,622
Total Assets	$	18,262	$	18,454
Liabilities and Shareholders’ Equity
Liabilities
Accounts payable	$	1,206	$	1,012
Customer deposits	691		629
Accrued compensation	278		335
Accrued warranty	208		228
Current portion of long-term debt	251		2
Other accrued liabilities	694		704
Total current liabilities	3,328		2,910
Long-term debt	3,824		4,056
Accrued postretirement and pension benefits	63		77
Deferred income taxes	287		288
Contingent consideration	143		141
Other long-term liabilities	692		743
Total Liabilities	8,337		8,215
Commitments and contingencies (Note 14)
Equity
Common stock, $.01 par value; 500.0 shares authorized and 226.9 shares issued: 181.9 and 185.8 outstanding at September 30, 2022 and December 31, 2021, respectively	2		2
Additional paid-in capital	7,937		7,916
Treasury stock, at cost, 45.0 and 41.1 shares, at September 30, 2022 and December 31, 2021, respectively	(1,697)		(1,306)
Retained earnings	4,447		4,055
Accumulated other comprehensive loss	(808)		(466)
Total Westinghouse Air Brake Technologies Corporation shareholders’ equity	9,881		10,201
Noncontrolling interest	44		38
Total Equity	9,925		10,239
Total Liabilities and Equity	$	18,262	$	18,454

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Unaudited				Unaudited
	Three Months Ended September 30,				Nine Months Ended September 30,
In millions, except per share data	2022		2021		2022		2021

Net sales:
Sales of goods	$	1,625	$	1,489	$	4,714	$	4,562
Sales of services	456		418		1,342		1,187
Total net sales	2,081		1,907		6,056		5,749
Cost of sales:
Cost of goods	(1,200)		(1,075)		(3,431)		(3,368)
Cost of services	(233)		(229)		(737)		(664)
Total cost of sales	(1,433)		(1,304)		(4,168)		(4,032)
Gross profit	648		603		1,888		1,717
Operating expenses:
Selling, general and administrative expenses	(260)		(269)		(757)		(766)
Engineering expenses	(54)		(44)		(149)		(124)
Amortization expense	(73)		(73)		(218)		(215)
Total operating expenses	(387)		(386)		(1,124)		(1,105)
Income from operations	261		217		764		612
Other income and expenses:
Interest expense, net	(48)		(42)		(135)		(135)
Other income, net	4		—		15		25
Income before income taxes	217		175		644		502
Income tax expense	(54)		(43)		(162)		(130)
Net income	163		132		482		372
Less: Net income attributable to noncontrolling interest	(3)		(1)		(7)		(4)
Net income attributable to Wabtec shareholders	$	160	$	131	$	475	$	368

Earnings Per Common Share
Basic
Net income attributable to Wabtec shareholders	$	0.88	$	0.69	$	2.60	$	1.95
Diluted
Net income attributable to Wabtec shareholders	$	0.88	$	0.69	$	2.59	$	1.95

Weighted average shares outstanding
Basic	181.3		187.6		182.6		188.2
Diluted	181.9		188.0		183.1		188.6

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Unaudited				Unaudited
	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2022		2021		2022		2021

Net income attributable to Wabtec shareholders	$	160	$	131	$	475	$	368
Foreign currency translation loss	(170)		(60)		(352)		(88)
Unrealized gain (loss) on derivative contracts	—		—		3		(8)
Unrealized gain on pension benefit plans and post-retirement benefit plans	6		4		11		—
Other comprehensive loss before tax	(164)		(56)		(338)		(96)
Income tax (expense) benefit related to components of other comprehensive loss	(3)		(1)		(4)		2
Other comprehensive loss, net of tax	(167)		(57)		(342)		(94)
Comprehensive (loss) income attributable to Wabtec shareholders	$	(7)	$	74	$	133	$	274

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Unaudited
	Nine Months Ended September 30,
In millions	2022		2021

Operating Activities
Net income	$	482	$	372
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	359		368
Stock-based compensation expense	30		34
Below market intangible amortization	(39)		(36)
Net loss on disposal of property, plant and equipment	5		7
Changes in operating assets and liabilities, net of acquisitions
Accounts receivable and unbilled accounts receivable	(39)		35
Inventories	(401)		(32)
Accounts payable	232		41
Accrued income taxes	43		29
Accrued liabilities and customer deposits	37		(11)
Other assets and liabilities	(81)		(48)
Net cash provided by operating activities	628		759
Investing Activities
Purchase of property, plant and equipment	(82)		(78)
Acquisitions of businesses, net of cash acquired	(69)		(405)
Proceeds from disposal of property, plant and equipment	2		8
Net cash used for investing activities	(149)		(475)
Financing Activities
Proceeds from debt, net of issuance costs	4,567		4,329
Payments of debt	(4,474)		(4,491)
Repurchase of stock	(400)		(200)
Cash dividends	(83)		(69)
Other financing activities	(5)		(2)
Net cash used for financing activities	(395)		(433)
Effect of changes in currency exchange rates	(43)		6
Increase (decrease) in cash	41		(143)
Cash and cash equivalents, beginning of period	473		599
Cash and cash equivalents, end of period	$	514	$	456

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


In millions	Common Stock Shares	Common Stock Amount		Additional Paid-in Capital		Treasury Stock Shares	Treasury Stock Amount		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interest		Total
Balance, December 31, 2021	226.9	$	2	$	7,916	(41.1)	$	(1,306)	$	4,055	$	(466)	$	38	$	10,239
Cash dividends ($0.15 dividend per share)	—	—		—		—	—		(28)		—		—		(28)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		(9)		0.2	5		—		—		—		(4)
Stock based compensation	—	—		10		—	—		—		—		—		10
Net income	—	—		—		—	—		149		—		1		150
Other comprehensive income, net of tax	—	—		—		—	—		—		17		—		17
Stock repurchase	—	—		—		(3.1)	(296)		—		—		—		(296)

Balance, March 31, 2022	226.9	$	2	$	7,917	(44.0)	$	(1,597)	$	4,176	$	(449)	$	39	$	10,088
Cash dividends ($0.15 dividend per share)	—	—		—		—	—		(27)		—		—		(27)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		(1)		0.1	4		—		—		—		3
Stock based compensation	—	—		10		—	—		—		—		—		10
Net income	—	—		—		—	—		166		—		3		169
Other comprehensive loss, net of tax	—	—		—		—	—		—		(192)		—		(192)
Stock repurchase	—	—		—		(1.1)	(103)		—		—		—		(103)

Balance, June 30, 2022	226.9	$	2	$	7,926	(45.0)	$	(1,696)	$	4,314	$	(641)	$	42	$	9,947
Cash dividends ($0.15 dividend per share)	—	—		—		—	—		(28)		—				(28)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		1		—	—		—		—		—		1
Stock based compensation	—	—		10		—	—		—		—		—		10
Net income	—	—		—		—	—		160		—		3		163
Other comprehensive loss, net of tax	—	—		—		—	—		—		(167)		—		(167)
Stock repurchase	—	—		—		—	(1)		—		—		—		(1)

Balance, September 30, 2022	226.9	$	2	$	7,937	(45.0)	$	(1,697)	$	4,447	$	(808)	$	44	$	9,925

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


In millions, except per share data	Common Stock Shares	Common Stock Amount		Additional Paid-in Capital		Treasury Stock Shares	Treasury Stock Amount		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interest		Total
Balance, December 31, 2020	226.9	$	2	$	7,881	(38.0)	$	(1,010)	$	3,589	$	(339)	$	30	$	10,153
Cash dividends ($0.12 dividend per share)	—	—		—		—	—		(23)		—		—		(23)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		(6)		—	—		—		—		—		(6)
Stock based compensation	—	—		9		—	—		—		—		—		9
Net income	—	—		—		—	—		112		—		3		115
Other comprehensive loss, net of tax	—	—		—		—	—		—		(70)		—		(70)
Stock repurchase	—	—		—		—	(1)		—		—		—		(1)
Balance, March 31, 2021	226.9	$	2	$	7,884	(38.0)	$	(1,011)	$	3,678	$	(409)	$	33	$	10,177
Cash dividends ($0.12 dividend per share)	—	—		—		—	—		(23)		—		—		(23)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		(1)		0.1	2		—		—		—		1
Stock based compensation	—	—		14		—	—		—		—		—		14
Net income	—	—		—		—	—		125		—		—		125
Other comprehensive income, net of tax	—	—		—		—	—		—		33		—		33

Balance, June 30, 2021	226.9	$	2	$	7,897	(37.9)	$	(1,009)	$	3,780	$	(376)	$	33	$	10,327
Cash dividends ($0.12 dividend per share)	—	—		—		—	—		(23)		—		—		(23)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		1		0.1	2		—		—		—		3
Stock based compensation	—	—		8		—	—		—		—		—		8
Net income	—	—		—		—	—		131		—		1		132
Other comprehensive loss, net of tax	—	—		—		—	—		—		(57)		—		(57)
Stock repurchase	—	—		—		(2.3)	(199)		—		—		—		(199)
Balance, September 30, 2021	226.9	$	2	$	7,906	(40.1)	$	(1,206)	$	3,888	$	(433)	$	34	$	10,191

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022 (UNAUDITED)

1. BUSINESS

Westinghouse Air Brake Technologies Corporation (“Wabtec” or the "Company") is one of the world’s largest providers of value-added, technology-based locomotives, equipment, systems, and services for the global freight rail and passenger transit industries, as well as the mining, marine and industrial markets. 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 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 2022, approximately 55% of the Company’s net sales came from customers outside the United States.

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. Certain prior year amounts have been reclassified, where necessary, to conform to the current year presentation.

Results for these interim periods are not necessarily indicative of results to be expected for the full year particularly in light of the ongoing COVID-19 pandemic, supply chain disruptions, labor availability, broad-based inflation, and the impacts resulting from Russia's invasion of Ukraine. These factors continue to impact our sales channels, supply chain, manufacturing operations, workforce, and other key aspects of our operations. We are unable to reasonably predict the full impact of these factors due to the high degree of uncertainty regarding their duration and severity, their potential impact on global economic activity, and the impact that current and new sanctions may have on our business, global supply chain operations and our customers, suppliers, and end-markets.

For the year ended December 31, 2021, Wabtec had earnings of approximately $40 million attributable to customers in Russia, while earnings from customers in Ukraine and Belarus were not significant. As of September 30, 2022, Wabtec had approximately $16 million of assets related to Russian operations, which were primarily cash and inventory. Assets related to Ukraine and Belarus operations are not significant.

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, 2021. The December 31, 2021 information has been derived from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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 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 throughout the year and adjustments are reflected in the accounting period as such amounts are determined.

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 or service; 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, 2022, the Company's remaining performance obligations were approximately $22.2 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 The Company utilizes a revolving facility to sell certain receivables of the Company and certain of its subsidiaries (the "Originators"). The Originators contribute receivables to our bankruptcy-remote subsidiary, which sells the receivables to a financial institution on a recurring basis in exchange for cash equal to the gross receivables sold. During the third quarter of 2022, the Company amended its revolving receivables facility to increase the amount of certain receivables that can be sold to such financial institution from $200 million to up to $350 million. The bankruptcy remote subsidiary is a separate legal entity with its own creditors, and its assets are not available to pay creditors of the Company or any other affiliates of the Company. As customers pay their balances, we transfer additional receivables into the program, which results in our gross receivables sold exceeding collections reinvested for any applicable period. The sold receivables are fully guaranteed by our bankruptcy-remote subsidiary, which holds additional receivables that are pledged as collateral under this facility. The Company has agreed to guarantee the performance of the Originators respective obligations under the revolving agreement. Neither the Company (except for the bankruptcy-remote consolidated subsidiary referenced above) nor the Originators guarantees the collectability of the receivables under the revolving agreements.

At September 30, 2022 and 2021 the bankruptcy-remote subsidiary held receivables of $634 million and $285 million, respectively. The transfers are recorded at the fair value of the proceeds received and obligations assumed less derecognized receivables. No obligation was recorded at September 30, 2022 or 2021 as the estimated expected credit losses on receivables sold is insignificant. Our maximum exposure to losses related to these receivables transferred is limited to the amount outstanding.

The following table sets forth a summary of receivables sold:


In millions	Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Gross receivables sold/cash proceeds received	$	1,281	$	959
Collections reinvested under revolving receivables agreement	(1,076)		(875)
Net cash proceeds received	$	205	$	84

Depreciation Expense Depreciation of property, plant and equipment related to the manufacturing of products or services provided is included in Cost of goods 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 expenses depending on how the property, plant and equipment is used.

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 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 to be performed.

Accounting Standards Recently Issued In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Obligations. The amendments in this update outline specific quantitative and qualitative disclosure requirements for entities that use supplier finance programs in connection with the purchase of goods or services. The amendments in this update do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. The amendments in this update will be effective for Wabtec's reporting periods beginning January 1, 2023 and will require increased interim and annual disclosures be provided on current and comparable reporting periods presented in annual and interim company filings.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update provide specific guidance on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts in a business combination and address how to determine whether a contract liability is recognized by the acquirer in a business combination. The amendments in this update will be effective for Wabtec on January 1, 2023 and will be applied prospectively to business combinations occurring on or after the effective date.

Accumulated Other Comprehensive Loss Comprehensive income (loss) comprises both net income and Other comprehensive (loss) income resulting from the change in equity from transactions and other events and circumstances from non-owner sources.

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the three months ended September 30, 2022 and 2021 are as follows:


	Foreign currency translation				Derivative contracts				Pension and postretirement benefit plans				Total
In millions	2022		2021		2022		2021		2022		2021		2022		2021
Balance at June 30	$	(578)	$	(288)	$	(2)	$	(3)	$	(61)	$	(85)	$	(641)	$	(376)


Other comprehensive (loss) income, net	(170)		(60)		—		—		3		3		(167)		(57)
Balance at September 30	$	(748)	$	(348)	$	(2)	$	(3)	$	(58)	$	(82)	$	(808)	$	(433)

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the nine months ended September 30, 2022 and 2021 are as follows:


	Foreign currency translation				Derivative contracts				Pension and postretirement benefit plans				Total
In millions	2022		2021		2022		2021		2022		2021		2022		2021
Balance at beginning of year	$	(396)	$	(260)	$	(5)	$	3	$	(65)	$	(82)	$	(466)	$	(339)
Other comprehensive (loss) income before reclassifications	(352)		(88)		3		(6)		6		(2)		(343)		(96)
Amounts reclassified from Accumulated other comprehensive loss	—		—		—		—		1		2		1		2
Other comprehensive (loss) income, net	(352)		(88)		3		(6)		7		—		(342)		(94)
Balance at September 30	$	(748)	$	(348)	$	(2)	$	(3)	$	(58)	$	(82)	$	(808)	$	(433)

Amounts reclassified from Accumulated other comprehensive loss are recognized in "Other income, net" with the tax impact recognized in "Income tax expense."

3. ACQUISITIONS

Nordco

On March 31, 2021, the Company acquired Nordco, a leading North American supplier of new, rebuilt and used maintenance of way equipment. Nordco's products and services portfolio includes mobile railcar movers and ultrasonic rail flaw detection technologies. The purchase price paid for 100% ownership of Nordco was approximately $410 million.

The following table summarizes the fair value of the Nordco assets acquired and liabilities assumed:


In millions
Assets acquired
Cash and cash equivalents	$	5
Accounts receivable	23
Inventory	34
Other current assets	2
Property, plant and equipment	17
Goodwill	215
Other intangible assets	168
Other noncurrent assets	12
Total assets acquired	476
Liabilities assumed
Current liabilities	20
Noncurrent liabilities	46
Total liabilities assumed	66
Net assets acquired	$	410

The fair values of the assets acquired and liabilities assumed were determined using the income, cost and market approaches. Discounted cash flow models were used to estimate the fair values of acquired intangibles. The fair value measurements were primarily based on significant inputs that are not observable in the market and are considered Level 3 in the fair value hierarchy. Intangible assets acquired include customer relationships and acquired technology that are subject to amortization, and trade names that were assigned an indefinite life and are not subject to amortization. Contingent liabilities assumed as part of the transaction were not material.

Goodwill was calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired, and represents the assembled workforce and the future economic benefits, including synergies, that are expected to be achieved as a result of the acquisition. The purchased goodwill is not expected to be deductible for tax purposes. The results of this business since the date of acquisition are reported within the Services product line of the Freight Segment. The pro forma impact on Wabtec’s sales and results of operations, including the pro forma effect of events that are directly attributable to the acquisition, was not significant.

During the second quarter of 2022 the Company made two strategic acquisitions for a combined purchase price of $69 million within the Digital Electronics product line of the Freight Segment which are individually and collectively immaterial. The Company also made acquisitions in prior periods not listed above which are individually and collectively immaterial.

4. INVENTORIES

The components of inventory, net of reserves, were:


In millions	September 30, 2022		December 31, 2021
Raw materials	$	856	$	757
Work-in-progress	534		316
Finished goods	633		616
Total inventories	$	2,023	$	1,689

5. GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill by segment is as follows:


In millions	Freight Segment		Transit Segment		Total
Balance at December 31, 2021	$	7,073	$	1,514	$	8,587
Additions/adjustments	24		(2)		22
Foreign currency impact	(40)		(208)		(248)
Balance at September 30, 2022	$	7,057	$	1,304	$	8,361

As of September 30, 2022 and December 31, 2021, the Company’s trade names had a net carrying amount of $568 million and $635 million, respectively. The Company believes these intangibles have indefinite lives, with the exception of the right to use the GE Transportation trade name, to which the Company has assigned a useful life of 5 years.

Intangible assets of the Company, other than goodwill and trade names, consist of the following:


In millions	September 30, 2022		December 31, 2021
Backlog, net of accumulated amortization of $391 and $309	$	1,035	$	1,114
Customer relationships, net of accumulated amortization of $359 and $331	904