SEC Filing | Wabtec Corporation

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wab-20230930

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, 2023


☐			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 20, 2023, there were 179,159,160 shares of common stock, par value $.01 per share, of the registrant outstanding.

WESTINGHOUSE AIR BRAKE

TECHNOLOGIES CORPORATION

September 30, 2023

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, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	6
	Condensed Consolidated Statements of Shareholders' Equity for the three and nine months ended September 30, 2023 and 2022	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46
Item 4.	Controls and Procedures	46
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities , Use of Proceed s and Issuer Purchases of Equity Securitie s	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48
	Signatures	49

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, 2023		December 31, 2022
Assets
Assets
Cash, cash equivalents and restricted cash	$	392	$	541
Accounts receivable	1,104		975
Unbilled accounts receivable	610		544
Inventories, net	2,246		2,034
Other current assets	282		233
Total current assets	4,634		4,327
Property, plant and equipment, net	1,419		1,429
Goodwill	8,590		8,508
Other intangible assets, net	3,267		3,402
Other noncurrent assets	890		850
Total noncurrent assets	14,166		14,189
Total Assets	$	18,800	$	18,516
Liabilities and Shareholders’ Equity
Liabilities
Accounts payable	$	1,243	$	1,301
Customer deposits	679		772
Accrued compensation	308		300
Accrued warranty	220		215
Current portion of long-term debt	759		251
Other accrued liabilities	682		628
Total current liabilities	3,891		3,467
Long-term debt	3,288		3,751
Accrued postretirement and pension benefits	63		57
Deferred income taxes	355		326
Contingent consideration	49		47
Other long-term liabilities	787		721
Total Liabilities	8,433		8,369
Commitments and contingencies (Note 14)
Equity
Common stock, $.01 par value; 500.0 shares authorized and 226.9 shares issued: 179.1 and 181.2 outstanding at September 30, 2023 and December 31, 2022, respectively	2		2
Additional paid-in capital	7,965		7,953
Treasury stock, at cost, 47.8 and 45.7 shares, at September 30, 2023 and December 31, 2022, respectively	(2,013)		(1,769)
Retained earnings	5,085		4,577
Accumulated other comprehensive loss	(713)		(661)
Total Westinghouse Air Brake Technologies Corporation shareholders’ equity	10,326		10,102
Noncontrolling interest	41		45
Total Equity	10,367		10,147
Total Liabilities and Equity	$	18,800	$	18,516

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	2023		2022		2023		2022

Net sales:
Sales of goods	$	2,048	$	1,625	$	5,631	$	4,714
Sales of services	502		456		1,520		1,342
Total net sales	2,550		2,081		7,151		6,056
Cost of sales:
Cost of goods	(1,475)		(1,200)		(4,132)		(3,431)
Cost of services	(283)		(233)		(839)		(737)
Total cost of sales	(1,758)		(1,433)		(4,971)		(4,168)
Gross profit	792		648		2,180		1,888
Operating expenses:
Selling, general and administrative expenses	(295)		(260)		(843)		(757)
Engineering expenses	(53)		(54)		(157)		(149)
Amortization expense	(74)		(73)		(222)		(218)
Total operating expenses	(422)		(387)		(1,222)		(1,124)
Income from operations	370		261		958		764
Other income and expenses:
Interest expense, net	(60)		(48)		(163)		(135)
Other income, net	10		4		17		15
Income before income taxes	320		217		812		644
Income tax expense	(78)		(54)		(204)		(162)
Net income	242		163		608		482
Less: Net income attributable to noncontrolling interest	(2)		(3)		(8)		(7)
Net income attributable to Wabtec shareholders	$	240	$	160	$	600	$	475

Earnings Per Common Share
Basic
Net income attributable to Wabtec shareholders	$	1.34	$	0.88	$	3.34	$	2.60
Diluted
Net income attributable to Wabtec shareholders	$	1.33	$	0.88	$	3.33	$	2.59

Weighted average shares outstanding
Basic	178.6		181.3		179.1		182.6
Diluted	179.2		181.9		179.7		183.1

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	2023		2022		2023		2022

Net income attributable to Wabtec shareholders	$	240	$	160	$	600	$	475
Foreign currency translation loss	(106)		(170)		(82)		(352)
Unrealized gain on derivative contracts	21		—		39		3
Unrealized gain on pension benefit plans and post-retirement benefit plans	3		6		1		11
Other comprehensive loss before tax	(82)		(164)		(42)		(338)
Income tax expense related to components of other comprehensive income	(7)		(3)		(10)		(4)
Other comprehensive loss, net of tax	(89)		(167)		(52)		(342)
Comprehensive income (loss) attributable to Wabtec shareholders	$	151	$	(7)	$	548	$	133

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	2023		2022

Operating Activities
Net income	$	608	$	482
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	371		359
Stock-based compensation expense	36		30
Below market intangible amortization	(39)		(39)
Net loss on disposal of property, plant and equipment	4		5
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable and unbilled accounts receivable	(214)		(39)
Inventories	(201)		(401)
Accounts payable	(50)		232
Accrued income taxes	(6)		43
Accrued liabilities and customer deposits	12		37
Other assets and liabilities	(6)		(81)
Net cash provided by operating activities	515		628
Investing Activities
Acquisitions of businesses, net of cash acquired	(227)		(69)
Purchase of property, plant and equipment	(109)		(82)
Proceeds from disposal of property, plant and equipment	—		2
Net cash used for investing activities	(336)		(149)
Financing Activities
Proceeds from debt, net of issuance costs	4,351		4,567
Payments of debt	(4,302)		(4,474)
Repurchase of stock	(252)		(400)
Cash dividends	(92)		(83)
Payment of income tax withholding on share-based compensation	(16)		(4)
Distribution to noncontrolling interest	(12)		—
Other financing activities	—		(1)
Net cash used for financing activities	(323)		(395)
Effect of changes in currency exchange rates	(5)		(43)
(Decrease) increase in cash	(149)		41
Cash, cash equivalents and restricted cash, beginning of period	541		473
Cash, cash equivalents and restricted cash, end of period	$	392	$	514

The accompanying notes are an integral part of these statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

CONDENSED 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, 2022	226.9	$	2	$	7,953	(45.7)	$	(1,769)	$	4,577	$	(661)	$	45	$	10,147
Cash dividends ($0.17 dividend per share)	—	—		—		—	—		(31)		—		—		(31)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		(23)		0.3	6		—		—		—		(17)
Stock based compensation	—	—		10		—	—		—		—		—		10
Net income	—	—		—		—	—		169		—		4		173
Other comprehensive income, net of tax	—	—		—		—	—		—		30		—		30
Stock repurchase	—	—		—		(1.7)	(178)		—		—		—		(178)
Balance, March 31, 2023	226.9	$	2	$	7,940	(47.1)	$	(1,941)	$	4,715	$	(631)	$	49	$	10,134
Cash dividends ($0.17 dividend per share)	—	—		—		—	—		(31)		—		—		(31)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		(3)		0.1	3		—		—		—		—
Stock based compensation	—	—		12		—	—		—		—		—		12
Net income	—	—		—		—	—		191		—		2		193
Other comprehensive income, net of tax	—	—		—		—	—		—		7		—		7
Stock repurchase	—	—		—		(0.8)	(76)		—		—		—		(76)
Distribution to noncontrolling interest	—	—		—		—	—		—		—		(12)		(12)
Balance, June 30, 2023	226.9	$	2	$	7,949	(47.8)	$	(2,014)	$	4,875	$	(624)	$	39	$	10,227
Cash dividends ($0.17 dividend per share)	—	—		—		—	—		(30)		—				(30)
Proceeds from treasury stock issued from the exercise of stock options and other benefit plans, net of tax	—	—		2		—	1		—		—		—		3
Stock based compensation	—	—		14		—	—		—		—		—		14
Net income	—	—		—		—	—		240		—		2		242
Other comprehensive loss, net of tax	—	—		—		—	—		—		(89)		—		(89)


Balance, September 30, 2023	226.9	$	2	$	7,965	(47.8)	$	(2,013)	$	5,085	$	(713)	$	41	$	10,367


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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023 (UNAUDITED)

1. BUSINESS

Except as the context otherwise requires, all references to “we”, “our”, “us”, the “Company” and “Wabtec” refer to Westinghouse Air Brake Technologies Corporation and its consolidated subsidiaries. References to the “Parent Company” refer to Westinghouse Air Brake Technologies Corporation alone. Wabtec is one of the world’s largest providers of value-added, technology-based locomotives, equipment, systems, and services for the global freight rail and passenger transit industries, 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 2023, 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 ongoing volatility in the macroeconomic environment caused by 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.

As of September 30, 2023, Wabtec had approximately $2 million of cash related to Russian operations which will be utilized to settle remaining obligations in Russia. 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, 2022. The December 31, 2022 information has been derived from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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. The Company

may also use the output method which recognizes revenue based on direct measurements of the value transferred to the customer. 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, price escalation clauses, 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 and future expectations.

Remaining performance obligations represent the allocated transaction price of unsatisfied or partially unsatisfied performance obligations. As of September 30, 2023, the Company's remaining performance obligations were approximately $21.4 billion. The Company expects to recognize revenue of approximately 30% 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 up to $350 million of 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. 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 could result in our gross receivables sold being higher or lower than 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, 2023 and December 31, 2022, the bankruptcy-remote subsidiary held receivables of $745 million and $458 million, respectively, which are included in the Company's Condensed Consolidated Balance Sheets. The receivables held by the bankruptcy-remote subsidiary collateralize the outstanding receivables sold, which were $235 million and $80 million at September 30, 2023 and December 31, 2022, 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, 2023 or December 31, 2022 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, 2023		Nine Months Ended September 30, 2022
Gross receivables sold/cash proceeds received	$	2,030	$	1,281
Collections reinvested under revolving receivables agreement	(1,875)		(1,076)
Net cash proceeds received	$	155	$	205

Restricted Cash At September 30, 2023 and December 31, 2022, the Company classified cash of $7 million as restricted for cash held in escrow related to a 2022 acquisition.

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 to the extent the property, plant, and equipment is used for research and development purposes.

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 to be performed.

Accounting Standards Recently Adopted 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 were effective for Wabtec's reporting periods beginning January 1, 2023, except for the amendments on roll forward information which will be effective for reporting periods beginning January 1, 2024. The amendments will require increased interim and annual disclosures be provided on current and comparable reporting periods presented in annual and interim company filings.

The Company has entered into supply chain financing arrangements with third-party financial institutions to provide our vendors with enhanced payment options while providing the Company with added working capital flexibility. The Company does not provide any guarantees under these arrangements, does not have an economic interest in our supplier's voluntary participation, does not receive an economic benefit from the financial institutions, and no assets are pledged under the arrangements. The arrangements do not change the payable terms negotiated by the Company and our vendors, which range between net 45 and net 180 days, and does not result in a change in the classification of amounts due as Accounts payable in the Condensed Consolidated Balance Sheets. Suppliers utilized the program to accelerate receipt of payment from these financial institutions for $317 million and $296 million of the Company's outstanding Accounts payable as of September 30, 2023 and December 31, 2022, respectively. The supplier invoices included under the program require payment in full to the financial institutions consistent with the Company’s normal terms and conditions as agreed upon with the vendor.

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, 2023 and 2022 are as follows:


	Foreign currency translation				Derivative contracts				Pension and postretirement benefit plans				Total
In millions	2023		2022		2023		2022		2023		2022		2023		2022
Balance at June 30	$	(572)	$	(578)	$	4	$	(2)	$	(56)	$	(61)	$	(624)	$	(641)


Other comprehensive (loss) income, net	(106)		(170)		16		—		1		3		(89)		(167)
Balance at September 30	$	(678)	$	(748)	$	20	$	(2)	$	(55)	$	(58)	$	(713)	$	(808)

The changes in Accumulated other comprehensive loss by component, including any tax impacts, for the nine months ended September 30, 2023 and 2022 are as follows:


	Foreign currency translation				Derivative contracts				Pension and postretirement benefit plans				Total
In millions	2023		2022		2023		2022		2023		2022		2023		2022
Balance at beginning of year	$	(596)	$	(396)	$	(9)	$	(5)	$	(56)	$	(65)	$	(661)	$	(466)
Other comprehensive (loss) income before reclassifications	(82)		(352)		29		3		—		6		(53)		(343)
Amounts reclassified from Accumulated other comprehensive loss	—		—		—		—		1		1		1		1
Other comprehensive (loss) income, net	(82)		(352)		29		3		1		7		(52)		(342)
Balance at September 30	$	(678)	$	(748)	$	20	$	(2)	$	(55)	$	(58)	$	(713)	$	(808)

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

3. ACQUISITIONS

During the second quarter of 2023, the Company acquired L&M Radiator, Inc., a leading manufacturer of heavy-duty equipment radiators and heat exchangers for the mining sector, for a purchase price of approximately $245 million.

The following table summarizes the preliminary fair value of the L&M Radiator, Inc. assets acquired and liabilities assumed:


In millions
Assets acquired
Cash and cash equivalents	$	16
Accounts receivable	20
Inventory	27
Other current assets	1
Property, plant and equipment	43
Goodwill	102
Other intangible assets	89
Other noncurrent assets	1
Total assets acquired	299
Liabilities assumed
Current liabilities	16
Noncurrent liabilities	38
Total liabilities assumed	54
Net assets acquired	$	245

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. These estimates are preliminary in nature and subject to adjustments, which could be material as the Company has not completed its valuation of acquired assets and liabilities. Any necessary adjustments will be finalized within one year from the date of acquisition.

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 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 twelve months ended December 31, 2022, the Freight Segment made three strategic acquisitions for a combined purchase price of $89 million. Two of the acquisitions are reported in the Digital Intelligence product line and one is reported in the Services product line. Each of the acquisitions in 2022 are individually and collectively immaterial.

4. INVENTORIES

The components of inventory, net of reserves, were:


In millions	September 30, 2023		December 31, 2022
Raw materials	$	990	$	878
Work-in-progress	518		515
Finished goods	738		641
Total inventories	$	2,246	$	2,034

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, 2022	$	7,085	$	1,423	$	8,508
Additions/adjustments	102		—		102
Foreign currency impact	(1)		(19)		(20)
Balance at September 30, 2023	$	7,186	$	1,404	$	8,590

As of September 30, 2023 and December 31, 2022, the Company’s trade names had a net carrying amount of $612 million and $602 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:


	September 30, 2023						December 31, 2022
In millions	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Backlog	$	1,428	$	(498)	$	930	$	1,425	$	(415)	$	1,010
Customer relationships	1,322		(407)		915		1,274		(362)		912
Acquired technology	1,283		(473)		810		1,273		(395)		878
Total	$	4,033	$	(1,378)	$	2,655	$	3,972	$	(1,172)	$	2,800

At September 30, 2023 the weighted average remaining useful lives of backlog, customer relationships and acquired technology were 9 years, 16 years and 7 years, respectively. The backlog intangible asset primarily consists of in-place long-term service agreements acquired by the Company in conjunction with the acquisition of GE Transportation. Amortization expense for intangible assets was $74 million and $222 million for the three and nine months ended September 30, 2023, respectively, and $73 million and $218 million for the three and nine months ended September 30, 2022, respectively.

Amortization expense for the five succeeding years is estimated to be as follows:


In millions
Remainder of 2023	$	75
2024	$	287
2025	$	270
2026	$	266
2027	$	262

6. 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. 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 Condensed Consolidated Balance Sheets. Noncurrent contract assets were $196 million at September 30, 2023 and $162 million at December 31, 2022. Included in noncurrent contract assets are certain costs that are specifically related to a contract but 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 Condensed Consolidated Balance Sheets. Noncurrent contract liabilities were $200 million at September 30, 2023 and $86 million at December 31, 2022. 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 $90 million and $98 million at September 30, 2023 and December 31, 2022, respectively. These provisions for estimated losses are classified as current liabilities and included within the caption “Other accrued liabilities” on the Condensed Consolidated Balance Sheets.

The change in the carrying amount of contract assets and contract liabilities for the nine months ended September 30, 2023 and 2022 is as follows:


	Contract Assets
In millions	2023		2022
Balance at beginning of year	$	706	$	545
Recognized in current year	562		463
Reclassified to accounts receivable	(456)		(344)
Acquisitions/adjustments	(2)		28
Foreign currency impact	(4)		(36)
Balance at September 30	$	806	$	656

	Contract Liabilities
In millions	2023		2022
Balance at beginning of year	$	956	$	824
Recognized in current year	1,043		768
Amounts in beginning balance reclassified to revenue	(632)		(348)
Current year amounts reclassified to revenue	(393)		(343)
Acquisitions	1		12
Foreign currency impact	(6)		(33)
Balance at September 30	$	969	$	880

7. LEASES

The Company leases certain property, buildings and equipment. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments. Many of the Company's leases include rental escalation clauses, renewal options, and/or termination options that are factored into our determination of lease payments when appropriate. The right-of-use assets are classified as noncurrent and included within the caption "Other noncurrent assets" on the Condensed Consolidated Balance Sheets. The current portion of lease liabilities are classified under the caption "Other accrued liabilities," while the noncurrent portion of lease liabilities are classified under the caption "Other long-term liabilities" on the Condensed Consolidated Balance Sheets. The Company does not separate lease and non-lease components. As most of the Company's leases do not provide a readily stated discount rate, the Company must estimate the rate to discount lease payments using its incremental borrowing rate.

Operating lease expense was $16 million and $48 million for the three and nine months ended September 30, 2023, respectively, and $15 million and $44 million for the three and nine months ended September 30, 2022, respectively. New operating leases of $7 million and $27 million were added during the three and nine months ended September 30, 2023, respectively, and $34 million and $58 million for the three and nine months ended September 30, 2022, respectively. Wabtec does not have material financing leases, short-term or variable leases or sublease income.

Scheduled payments of lease liabilities are as follows:


In millions	Operating Leases
Remaining 2023	$	17
2024	58
2025	51
2026	45
2027	35
Thereafter	137
Total lease payments	343
Less: Present value discount	(26)
Present value of lease liabilities	$	317

The following table summarizes the remaining lease term and discount rate assumptions used to develop the present value of operating lease liabilities:


	September 30, 2023		December 31, 2022
Weighted-average remaining lease term (years)	7.9		8.3
Weighted-average discount rate	2.4	%	2.3	%

8. LONG-TERM DEBT

Long-term debt consisted of the following:


	Effective Interest Rate		Face Value		September 30, 2023				December 31, 2022
In millions					Book Value		Fair Value1		Book Value		Fair Value1
Restated Credit Agreement:
Revolving Credit Facility	7.2	%	$	25	$	25	$	25	$	—	$	—
Delayed Draw Term Loan	6.8	%	$	250	250		250		—		—
Senior Notes:
4.375% Senior Notes, due 2023	—		$	—	—		—		250		248
4.15% Senior Notes, due 2024	4.4	%	$	725	724		718		723		714
3.20% Senior Notes, due 2025	3.4	%	$	500	498		475		498		471
3.45% Senior Notes, due 2026	3.5	%	$	750	749		698		749		699
1.25% Senior Notes (EUR), due 2027	1.5	%	€	500	524		464		529		455
4.70% Senior Notes, due 2028	4.8	%	$	1,250	1,245		1,176		1,244		1,201
Other Borrowings					32		35		9		13
Total					4,047		3,841		4,002		3,801
Less: current portion					(759)		(753)		(251)		(249)
Long-term portion					$	3,288	$	3,088	$	3,751	$	3,552

1. See Note 13 for information on the fair value measurement of the Company's long-term debt.

Variances between Face Value and Book Value are the result of unamortized discounts and debt issuance fees as well as foreign exchange on the Euro Notes. Amortization of discounts and debt issuance fees are included in the calculation of Effective Interest Rate.

For those debt securities that have a premium or discount at the time of issuance, the Company amortizes the amount through interest expense based on the maturity date or the first date the holders may require the Company to repurchase the debt securities, if applicable. A premium would result in a decrease in interest expense, and a discount would result in an increase in interest expense in future periods. Additionally, the Company has debt issuance costs related to certain financing transactions which are also amortized through interest expense. As of September 30, 2023 and December 31, 2022, the Company had total combined unamortized discount and debt issuance costs of $16 million and $21 million, respectively.

Credit Agreement

On June 8, 2018, the Company entered into a credit agreement (“Original Credit Agreement”) consisting of (i) term loans denominated in euros and U.S. dollars ("Term Loans") and (ii) a multi-currency revolving loan facility, providing for an equivalent in U.S. dollars of up to $1.2 billion. On August 15, 2022, the Company entered into a new unsecured credit agreement ("Restated Credit Agreement"), which amended, restated and replaced the Original Credit Agreement. The Restated Credit Agreement is with a syndicate of lenders and provides for borrowings consisting of (i) a multi-currency revolving credit facility, providing for an equivalent in U.S. dollars of up to $1.5 billion (the “Revolving Credit Facility”) and (ii) a new $250 million delayed draw term loan facility (the “Delayed Draw Term Loan”), all pursuant to the terms and conditions of the Restated Credit Agreement (which are substantially similar with the terms of the Original Credit Agreement). The Restated Credit Agreement allows the Company to request, at prevailing market rates, an aggregate amount not to exceed $750 million, (a) increases to the borrowing commitments under the Revolving Credit Facility and/or (b) new incremental term loan commitments. The agreement contains affirmative, negative and financial covenants, and events of default customary for facilities of this type.

The Revolving Credit Facility matures on August 15, 2027. The Delayed Draw Term Loan is available for borrowings until February 15, 2024 and any borrowings under the Delayed Draw Term Loan will mature on August 15, 2027. Amounts borrowed and repaid under the Delayed Draw Term Loan may not be reborrowed. The applicable interest rate for borrowings under the Restated Credit Agreement includes a base rate (per the Interest Election terms of the agreement) plus an interest rate spread up to 1.75% based on the lower of the pricing corresponding to (i) the Company’s financial leverage or (ii) the Company’s public rating. Obligations under the Restated Credit Agreement have been guaranteed by certain of the Company’s subsidiaries.

During the third quarter of 2023, the Company borrowed the full $250 million of availability from the Delayed Draw Term Loan and utilized the proceeds to redeem the 4.375% Senior Notes, due 2023. The borrowing rate for the Delayed Draw Term Loan is a variable rate reassessed periodically in accordance with the terms of the Restated Credit Agreement.

Under the Restated Credit Agreement, the Company has agreed to maintain an Interest Coverage Ratio of at least 3.0 to 1.0, and a Leverage Ratio not to exceed 3.5 to 1.0. The Interest Coverage Ratio is defined as EBITDA (earnings before interest, taxes, depreciation, and amortization) to Interest Expense for the four quarters then ended. The Leverage Ratio is defined as Net Debt as of the last day of such fiscal quarter to EBITDA for the four quarters then ended. Additionally, the Company may submit a request for an increased maximum Leverage Ratio in contemplation of a Material Acquisition. All terms are as defined in the Restated Credit Agreement.

The Company was in compliance with all financial covenants in the Restated Credit Agreement as of September 30, 2023.

The following table presents availability under the Restated Credit Agreement at September 30, 2023:


In millions	Revolving Credit Facility		Delayed Draw Term Loan		Total
Maximum Availability	$	1,500	$	250	$	1,750
Outstanding Borrowings	(25)		(250)		(275)
Letters of Credit Under Credit Agreement	—		—		—
Current Availability	$	1,475	$	—	$	1,475

Senior Notes

The Company or its subsidiaries may issue senior notes from time to time. These notes are comprised of our 4.375% Senior Notes due 2023 (the "2023 Notes"), 4.15% Senior Notes due 2024 (the "2024 Notes"), 3.20% Senior Notes due 2025 (the "2025 Notes"), 3.45% Senior Notes due 2026 (the "2026 Notes"), 1.25% Senior Notes (EUR) due 2027 (the "Euro Notes"), and 4.70% Senior Notes due 2028 (the "2028 Notes"). The 2023 Notes, 2024 Notes, 2025 Notes, 2026 Notes and 2028 Notes are the “US Notes”, and collectively with the Euro Notes, the “Senior Notes.” Interest on the US Notes is payable semi-annually and interest on the Euro Notes is paid annually. Each series of the Senior Notes may be redeemed at any time in whole or from time to time in part in accordance with the provisions of the indenture, under which such series of notes was issued. Each of the Senior Notes may be redeemed at a redemption price of 100% of the principal amount plus a specified make-whole premium and accrued interest. The US Notes and the Company's guarantee of the Euro Notes are senior unsecured obligations of the Company and rank pari passu with all existing and future senior debt, and are senior to all existing and future subordinated indebtedness of the Company.

Beginning September 15, 2023, the effective interest rates for the 2024 Notes and the 2028 Notes were each reduced by 0.25% due to a favorable change in Wabtec's corporate credit rating and the rating of the aforementioned notes.

During the second quarter of 2022, the Company redeemed $25 million of principal from the 2024 Notes plus a premium and the related accrued interest.

The indentures under which the Senior Notes were issued contain covenants and restrictions which limit, subject to certain exceptions, certain sale and leaseback transactions with respect to principal properties, the incurrence of secured debt without equally and ratably securing the Senior Notes, and certain merger and consolidation transactions. The covenants do not require the Company to maintain any financial ratios or specified levels of net worth or liquidity. The US Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of the Company's subsidiaries that is a guarantor under the Restated Credit Agreement. The Euro Notes were issued by Wabtec Transportation Netherlands B.V. and are fully and unconditionally guaranteed by the Company.

The Company is in compliance with the restrictions and covenants in the indentures 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.

9. STOCK-BASED COMPENSATION

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 September 30, 2023, the number of shares available for future grants under the 2011 Plan was approximately 4.9 million shares. The Company also maintains a 1995 Non-Employee Directors’ Fee and Stock Option Plan as amended and restated (“the Directors Plan”).

Stock-based compensation expense was $16 million and $42 million for the three and nine months ended September 30, 2023, respectively, and $12 million and $35 million for the three and nine months ended September 30, 2022, respectively. At

September 30, 2023, unamortized compensation expense related to stock options, non-vested restricted shares and incentive stock units expected to vest is approximately $66 million.

Stock Options Stock options are granted to eligible employees and directors at an exercise price equal to 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 three-year vesting period and expire 10 years from the date of grant. No stock options were granted during the nine months ended September 30, 2023 or the twelve months ended December 31, 2022.

The following table summarizes the Company’s stock option activity and related information for the 2011 Plan, the 2000 Plan and the Directors Plan for the nine months ended September 30, 2023:


	Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic value (in millions)
Outstanding at December 31, 2022	399,938	$	77.32	5.9	$	11
Exercised	(73,380)	$	74.34
Canceled	(1,751)	$	79.50
Outstanding at September 30, 2023	324,807	$	78.28	5.5	$	9
Exercisable at September 30, 2023	289,263	$	77.95	5.5	$	8

Restricted Stock, Restricted Stock Units and Incentive Stock As provided for under the 2011 Plan and 2000 Plan, eligible employees are granted restricted stock that generally vests over three years from the date of grant. Under the Directors Plan, restricted stock awards vest one year from the date of grant. The restricted stock units are liability-classified equity awards as they can be settled in cash.

In addition, the Company has issued incentive stock units to eligible employees that vest upon attainment of certain cumulative three-year performance goals. 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. Upon the initial grant of a performance cycle, the Company estimates the three-year performance at 100%. Quarterly, the Company reviews and updates performance estimates based on actual performance results and current projections. 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 incentive stock units that are expected to vest based on the Company’s estimate for meeting those established performance targets. As of September 30, 2023, the Company estimates that it will achieve 129%, 129% and 107% for the incentive stock awards expected to vest based on performance for the three-year periods ending December 31, 2023, 2024, and 2025, respectively, and has recorded incentive compensation expense accordingly. If the estimates of the number of these incentive 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. Expense for incentive stock units is updated as necessary based on the Company's performance.

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 nine months ended September 30, 2023:


	Restricted Stock and Units	Incentive Stock Units	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022	689,420	744,844	$	84.73
Granted	358,075	192,751	$	104.58
Vested	(247,280)	(265,678)	$	81.06
Adjustment for incentive stock awards expected to vest	—	32,111	$	89.50
Canceled	(20,644)	(6,542)	$	91.57
Outstanding at September 30, 2023	779,571	697,486	$	93.48

10. INCOME TAXES

The overall effective tax rate for the three and nine months ended September 30, 2023 was 24.5% and 25.1%, respectively. These rates differ from the U.S. federal statutory rate of 21.0% primarily due to the impact of state and foreign taxes.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law. This act includes a new book minimum tax on certain large corporations and an excise tax on corporate stock buybacks among other provisions. This act has not had, and is not expected to have, a material impact on our consolidated financial position, results of operations, or cash flows.

11. EARNINGS PER SHARE

The computation of basic and diluted earnings per share for Net income attributable to Wabtec shareholders is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
In millions, except per share data	2023		2022		2023		2022
Numerator
Net income attributable to Wabtec shareholders	$	240	$	160	$	600	$	475
Denominator
Weighted average shares outstanding - basic	178.6		181.3		179.1		182.6
Effect of dilutive securities:
Assumed conversion of dilutive stock-based compensation plans	0.6		0.6		0.6		0.5
Weighted average shares outstanding - diluted	179.2		181.9		179.7		183.1
Net income attributable to Wabtec shareholders per common share
Basic	$	1.34	$	0.88	$	3.34	$	2.60
Diluted	$	1.33	$	0.88	$	3.33	$	2.59

12. WARRANTIES

The following table reconciles the changes in the Company’s product warranty reserve for the nine months ended September 30, 2023 and 2022:


In millions	2023	2022