avatar WABTEC RAIL LIMITED Transportation, Communications, Electric, Gas, And Sanitary Services

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    ® 2008 Annual Report


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    Profile Wabtec Corporation provides highly engineered, value-added products and services to our freight rail, passenger transit and industrial customers around the world to help them increase their safety, efficiency and productivity. Through its subsidiaries, the company manufactures a range of products for locomotives, freight cars and passenger transit vehicles; and builds new commuter and switcher locomotives. We strive to combine practical innovations for our customers with the best in modern manufacturing and business practices to generate above- average, long-term returns for our shareholders, and to provide our employees with a safe, challenging and dynamic work environment. This annual report contains forward-looking statements and includes assumptions about future market conditions, operations and results. These statements are based on current expectations and are subject to risks and uncertainties. They are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Form 10-K filed with the Securities and Exchange Commission lists the factors that could cause actual results to differ materially from the forward-looking statements. In making these forward-looking statements, the company assumes no obligation to update them or advise of changes in the assumptions on which they were based. The Sarbanes-Oxley Section 302 certifications by our CEO and CFO have been filed as exhibits to our Form 10-K for the year ended December 31, 2008, and the CEO’s annual certification to the New York Stock Exchange regarding our compliance with the NYSE’s corporate governance listing standards has been submitted as required without qualification.


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    Message from the CEO Amid growing economic uncertainty throughout 2008, Wabtec had another strong year. We set records for sales and earnings, and generated $159 million in cash flow from operations. We made strategic acquisitions in the U.S. and abroad, strengthened our position as a leader in railway electronics, and started new operations in China and South Africa. Our balance sheet remained healthy, with $142 million of cash at year-end. By almost any measure, 2008 was one of the best years in our long history. That we accomplished this in the face of a growing economic firestorm, speaks to the company’s industry- leading market position, balanced growth strategies, diverse business model and dedicated employees. We think this business model will continue to serve the company well as we manage through the current economic uncertainty which has resulted in very challenging market conditions. We have responded to these current conditions with a heightened focus on cost reductions—we’re targeting annualized savings of $25 million in 2009—while continuing to make prudent, long-term investments in our business. Despite the current uncertainty, we believe strongly in the long-term prospects of our primary end market, rail transportation. This market will always be subject to economic cycles, but it offers compelling growth opportunities because it’s the most cost-efficient and environmentally friendly mode of travel for products and people. The Association of American Railroads says trains can move a ton of freight 436 miles on a gallon of fuel, and a single intermodal train hauls the equivalent of 280 trucks. Meanwhile, the American Public Transportation Association says using public transportation saves U.S. consumers 4.2 billion gallons of gasoline and reduces carbon dioxide emissions by 37 million metric tons annually. Combine those statistics with trends such as population growth, urbanization, global trade expansion and increasing environmental awareness, and you can see what’s driving countries around the world to invest billions of dollars to expand and improve their rail infrastructure. In China, where Wabtec recently formed two joint ventures, the government plans to nearly double spending, to almost $90 billion, on its freight and passenger rail system in 2009. India said it will invest $13 billion to improve its freight rail infrastructure. In the U.S., rail’s share of intercity freight traffic increased five percentage points in the past 10 years, while trucking’s share remained flat. Public transit ridership in the U.S., meanwhile, has shown unprecedented growth—up 30% since 1995—and the federal government has responded with increased funding through its 2009 economic stimulus package. So while we are not immune to the inevitable cycles in short-term demand for our products and services, we believe the company is well positioned to benefit from the long-term, secular trends in the freight rail and passenger transit industries.


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    We have achieved this position by combining our long-standing, historical market presence with a growth strategy built around the Wabtec Performance System. This system is based on the core principles of lean manufacturing and continuous improvement, and it has become the foundation of our corporate culture. Through the Wabtec Performance System, we can improve quality, drive margins higher and generate cash to invest in our four growth strategies: • Global and market expansion • New products and technologies • Aftermarket products and services • Acquisitions In 2008, significant strategic progress was evident. Sales outside the U.S. grew 20 percent, almost twice as fast as domestic sales, as we expanded or started operations in China, South Africa, the UK and Europe. New products, those developed in the past five years, represented 38 percent of sales, an all-time high. Just as important, we continued to invest in other new products to keep the technology pipeline flowing, such as our Electronic Train Management System® (ETMS), Wabtec’s version of Positive Train Control (PTC). ETMS uses a locomotive-based computer to enforce train speed limits and other authority limits to improve safety and efficiency. In 2008, the U.S. Federal government passed legislation that requires implementation of PTC by Dec. 31, 2015 for locomotives that carry hazardous materials or that run on shared freight-transit track. Sales of aftermarket products and services increased 20 percent in 2008, with particular strength in our worldwide friction businesses. We also completed two acquisitions during the year: POLI, a European manufacturer of brake discs and related equipment; and Standard Car Truck, a designer and manufacturer of stabilization systems for freight cars. Both transactions are strategic and provide growth opportunities for the future. With our strong balance sheet and ability to generate cash, we have adequate capacity to invest in future acquisitions to expand our capabilities and geographic reach. So, 2008 was a strong year for the company. We recognize that 2009 will be a challenging year, but we will remain focused on our long-term growth opportunities as we manage prudently in the short term. Thanks to our Board of Directors for their support, to our employees for their dedication and hard work, and to our customers for their loyalty. President and Chief Executive Officer


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    UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K È Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2008 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 1-13782 WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION (Exact name of registrant as specified in its charter) Delaware 25-1615902 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1001 Air Brake Avenue Wilmerding, Pennsylvania 15148 (412) 825-1000 (Address of principal executive offices, including zip code) (Registrant’s telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of Class Name of Exchange on which registered Common Stock, par value $.01 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘. Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ‘ No È. 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 È No ‘. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ‘. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer È Accelerated filer ‘ Non-accelerated filer ‘ Smaller reporting company ‘ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ‘ No È. The registrant estimates that as of June 30, 2008, the aggregate market value of the voting shares held by non-affiliates of the registrant was approximately $2.2 billion based on the closing price on the New York Stock Exchange for such stock. As of February 23, 2009, 47,996,857 shares of Common Stock of the registrant were issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Proxy Statement for the registrant’s Annual Meeting of Stockholders to be held on May 13, 2009 are incorporated by reference into Part III of this Form 10-K.


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    TABLE OF CONTENTS Page PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . 23 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . 39 Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 PART III Item 10. Directors, Executive Officers and Corporate Governance of the Registrant . . . . . . . . . . . . . . . . . 41 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . 41 Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 PART IV Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 2


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    PART I Item 1. BUSINESS General Westinghouse Air Brake Technologies Corporation, doing business as Wabtec Corporation, is a Delaware corporation with headquarters at 1001 Air Brake Avenue in Wilmerding, Pennsylvania. Our telephone number is 412-825-1000, and our website is located at www.wabtec.com. All references to “we”, “our”, “us”, the “Company” and “Wabtec” refer to Westinghouse Air Brake Technologies Corporation and its subsidiaries. Westinghouse Air Brake Company (“WABCO”) was formed in 1990 when it acquired certain assets and operations from American Standard, Inc., now known as Trane (“Trane”). In 1999, WABCO merged with MotivePower Industries, Inc. (“MotivePower”) and adopted the name Wabtec. Today, Wabtec is one of the world’s largest providers of value-added, technology-based equipment and services for the global rail industry. We believe we hold approximately a 50% market share in North America for our primary braking-related equipment and a leading position in North America for most of our other product lines. Our highly engineered products, which are intended to enhance safety, improve productivity and reduce maintenance costs for customers, can be found on virtually all U.S. locomotives, freight cars, subway cars and buses. In 2008, the Company had sales of approximately $1.6 billion and net income of approximately $130.6 million. Sales of aftermarket parts and services represented approximately 53% of total sales in 2008. Industry Overview The Company primarily serves the worldwide freight and passenger transit rail industries. As such, our operating results are largely dependent on the level of activity, financial condition and capital spending plans of the global railroad industry. Many factors influence the industry, including general economic conditions; rail traffic, as measured by freight tonnage and passenger ridership; government spending on public transportation; and investment in new technologies by freight and passenger rail systems. Customers outside of the U.S. accounted for approximately 41% of Wabtec’s sales in 2008. According to a 2008 study by UNIFE, the Association of the European Rail Industry, the global market for railway products and services is more than $100.0 billion. The three largest markets, which represent about 85% of the total market, are Europe, North America and Asia-Pacific. Over the next decade, Asia-Pacific is expected to be the fastest-growing region and to surpass the North American market. In North America, railroads carry about 40% of intercity freight, as measured by ton-miles, which is more than any other mode of transportation. They are an integral part of the continent’s economy and transportation system, serving nearly every industrial, wholesale and retail sector. Through direct ownership and operating partnerships, U.S. railroads are part of an integrated network that includes railroads in Canada and Mexico, forming what is regarded as the world’s most-efficient and lowest-cost freight rail service. There are more than 500 railroads operating in North America, with the largest railroads, referred to as “Class I,” accounting for more than 90% of the industry’s revenues. Although the railroads carry a wide variety of commodities and goods, coal is the single-largest item, representing about 45% of carloadings in 2008. Intermodal traffic—the movement of trailers or containers by rail in combination with another mode of transportation—has been the railroads’ fastest- growing market segment in the past 10 years. Railroads operate in a competitive environment, especially with the trucking industry, and are always seeking ways to improve safety, cost and reliability. New technologies offered by Wabtec and others in the industry can provide some of these benefits. Demand for our freight related products and services in North America are driven by a number of factors, including: • Rail traffic. The Association of American Railroads (AAR) compiles statistics that gauge the level of activity in the freight rail industry. Two important statistics are revenue ton-miles and carloadings, 3


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    which are generally referred to as “rail traffic”. In 2008, revenue ton-miles decreased 1.3% and carloadings decreased 3.2% as rail traffic was negatively impacted by the economic recession in the U.S. • Demand for new locomotives. Currently, the active locomotive fleet for Class I railroads in North America is about 23,000 units. The average number of new locomotives delivered over the past 10 years was about 1,100 annually. In 2008, about 1,500 new, heavy-haul locomotives were delivered, compared to about 1,200 in 2007. • Demand for new freight cars. Currently, the active freight car fleet in North America is about 1.3 million. The average number of new freight cars delivered over the past 10 years was about 54,000 annually. In 2008, about 60,000 new freight cars were delivered, compared to about 63,000 cars in 2007. In the U.S., the passenger transit industry is dependent largely on funding from federal, state and local governments, and from fare box revenues. With about 40% of the nation’s passenger transit vehicles, the New York City region is the largest passenger transit market in the U.S., but most major cities also offer either rail or bus transit services. Demand for North American passenger transit products is driven by a number of factors, including: • Government funding. The U.S. federal government provides money to local transit authorities, primarily to fund the purchase of new equipment and infrastructure for their transit systems. Under a multi-year spending bill known as SAFETEA-LU, federal government funding increased on average by 6-8% annually since 2005. Due in part to this increased funding, the number of new and rebuilt transit cars delivered in 2008 increased to 1,569, compared to 1,044 in 2007; and the number of new buses delivered in 2008 increased to about 5,100, compared to about 4,800 in 2007. In the past 10 years, the average number of new transit cars delivered is about 600, and the average number of new buses delivered is about 4,800. SAFETEA-LU expires in September 2009, so the government is expected to discuss a new, multi-year spending plan during 2009. In February 2009, the U.S. federal government passed new spending legislation designed to stimulate the U.S. economy. Of the $789 billion spending package, up to $20 billion is to be spent on freight and passenger transportation, as follows: $8.4 billion for public transportation, $8 billion for high-speed rail, $1.5 billion for discretionary intermodal projects, and $1.3 billion for AMTRAK. The majority of this money is to be spent by September 2010. Wabtec expects to benefit from this additional spending, as transit authorities invest in expansion, new equipment and other related projects. • Ridership. Ridership provides fare box revenues to transit authorities, which use these funds, along with state and local money, primarily for equipment and system maintenance. Based on preliminary figures from the American Public Transportation Association, ridership on U.S. transit vehicles increased about 5% in 2008, the sixth consecutive year that ridership has increased. Outside of North America, many of the rail systems have historically been focused on passenger transit, rather than freight. In recent years, however, railroads in countries such as Australia, India and China have been investing capital to expand and improve both their freight and passenger rail systems. Throughout the world, some government-owned railroads are being sold to private owners, who often look to improve the efficiency of the rail system by investing in new equipment and new technologies. These investment programs represent opportunities for Wabtec to provide products and services. In Europe, the majority of the rail system serves the passenger transit market, which is expected to continue growing as high fuel costs and environmental factors encourage investment in public mass transit. In addition, countries such as England are experiencing growth in the freight market due to an increasing market share compared to trucking. According to UNIFE, the European freight market consists of about 33,000 locomotives and about 700,000 freight cars. 4


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    The Asia/Pacific market is expected to be the second-largest geographic segment by 2016, according to the UNIFE study. Growth is expected to be driven by the continued urbanization of countries such as China and India, and by investment in freight rail infrastructure to serve the mining and natural resources markets in those countries, as well as in Australia. According to UNIFE, this market consists of about 34,000 locomotives and about 1.0 million freight cars. Business Segments and Products We provide our products and services through two principal business segments, the Freight Group and the Transit Group, both of which have different market characteristics and business drivers. The Freight Group primarily manufactures and services components for new and existing freight cars and locomotives, builds new switcher locomotives and rebuilds freight locomotives. Customers include large, publicly traded railroads, leasing companies and manufacturers of original equipment such as locomotives and freight cars around the world. As discussed previously, demand in the freight market is primarily driven by rail traffic, and deliveries of new locomotives and freight cars. In 2008, the Freight Group accounted for 49% of our total sales, with the majority of its sales in North America and about half of its sales in the aftermarket. The Transit Group primarily manufactures and services components for new and existing passenger transit vehicles, typically subway cars and buses, builds new commuter locomotives and refurbishes subway cars. Customers include public transit authorities and municipalities, leasing companies and manufacturers of subway cars and buses around the world. As discussed previously, demand in the transit market is primarily driven by government funding at all levels and passenger ridership. In 2008, the Transit Group accounted for 51% of our total sales, with the majority of its sales outside of North America and about half of its sales in the aftermarket. Following is a summary of our leading product lines across both of our business segments: • Railway braking equipment and related components • Freight car truck components and undercarriage components • Draft gears, couplers and slack adjusters • Air compressors and dryers • Positive train control equipment and electronically controlled pneumatic braking products • Railway electronics, including event recorders, monitoring equipment and end of train devices • Friction products, including brake shoes and pads • Rail and bus door assemblies • Accessibility lifts and ramps for buses and subway cars • Heat exchangers and cooling products for locomotives and power generation equipment • Commuter and switcher locomotives • Transit car and locomotive overhauls We have become a leader in the rail industry by capitalizing on the strength of our existing products, technological capabilities and new product innovation, and by our ability to harden products to protect them from severe conditions, including extreme temperatures and high-vibration environments. Over the past several years, we introduced a number of significant new products including electronic braking equipment and train control equipment that encompasses onboard digital data and global positioning communication protocols. In 2007, for example, the Federal Railroad Administration (FRA) approved the use of our Electronic Train Management System®, which offers safety benefits to the rail industry. In 2008, the U.S. federal government enacted a rail safety bill that mandates the use of positive train control technology on a majority of the locomotives and track in 5


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    the U.S. by December 31, 2015, and Wabtec is working with the railroads to implement this technology. Supported by our technical staff of over 600 engineers and specialists, we have extensive experience in a broad range of product lines, which enables us to provide comprehensive, systems-based solutions for our customers. We currently own over 1,500 active patents worldwide and over 600 U.S. patents. During the last three years, we have filed for more than 340 patents worldwide in support of our new and evolving product lines. For additional information on our business segments, see Note 20 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. Competitive Strengths Our key strengths include: • Leading market positions in core products. Dating back to 1869 and George Westinghouse’s invention of the air brake, we are an established leader in the development and manufacture of pneumatic braking equipment for freight and passenger transit vehicles. We have leveraged our leading position by focusing on research and engineering to expand beyond pneumatic braking components to supplying integrated parts and assemblies for the locomotive through the end of the train. We are a recognized leader in the development and production of electronic recording, measuring and communications systems, highly engineered compressors and heat exchangers for locomotives and a leading manufacturer of freight car components, including electronic braking equipment, draft gears, trucks, brake shoes and electronic end-of-train devices. We are also the leading manufacturer of commuter locomotives and a leading provider of braking equipment, door assemblies, lifts and ramps, and couplers for passenger transit vehicles. • Breadth of product offering with a stable mix of OEM and aftermarket business. Our product portfolio is one of the broadest in the rail industry, as we offer a wide selection of quality parts, components and assemblies across the entire train. We believe this comprehensive product offering enables us to leverage our installed base to maintain our leadership position with OEMs and the Class I railroads. We provide our products in both the original equipment market and the aftermarket. Our substantial installed base of products with end-users such as the railroads and the passenger transit authorities is a significant competitive advantage for providing products and services to the aftermarket because these customers often look to purchase safety and performance-related replacement parts from the original equipment components supplier. In addition, as OEMs and Class I railroad operators attempt to modernize fleets with new products designed to improve and maintain safety and efficiency, these products must be designed to be interoperable with existing equipment. Over the last several years, about 50% of our total net sales have come from our aftermarket products and services business. • Leading design and engineering capabilities. We believe a hallmark of our relationship with our customers has been our leading design and engineering practice, which has, in our opinion, assisted in the improvement and modernization of global railway equipment. We believe both our customers and the government authorities value our technological capabilities and commitment to innovation, as we seek not only to enhance the efficiency and profitability of our customers, but also to improve the overall safety of the railways through continuous improvement of product performance. The Company has an established record of product improvements and new product development. We have assembled a wide range of patented products, which we believe provides us with a competitive advantage. Wabtec currently owns over 1,500 active patents worldwide and over 600 U.S. patents. During the last three years, we have filed for more than 340 patents worldwide in support of our new and evolving product lines. • Experience with industry regulatory requirements. The U.S. rail industry is governed by the AAR and by the FRA. These groups mandate rigorous manufacturer certification and new product testing and approval processes that we believe are difficult for new entrants to meet cost-effectively and efficiently without the scale and extensive experience we possess. 6


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    • Experienced management team and the Wabtec Performance System. Our executive management team has over 50 years of combined experience with the Company and has implemented numerous initiatives that enable us to manage successfully through cycles in the rail supply market. For example, the Wabtec Performance System (WPS), an ongoing program that focuses on “lean manufacturing” principles and continuous improvement across all aspects of our business, has been a part of the company’s culture for nearly 20 years. As a result, our management team has improved our cost structure, operating leverage and financial flexibility and placed us in an excellent position to benefit from growth opportunities. Business strategy Using WPS, we strive to generate sufficient cash to invest in our growth strategies and to build on what we consider to be a leading position as a low-cost producer in the industry while maintaining world-class product quality, technology and customer responsiveness. Through WPS and employee-directed initiatives such as Kaizen, a Japanese-developed team concept, we strive to improve quality, delivery and productivity continuously, and to reduce costs. These efforts enable us to streamline processes, improve product reliability and customer satisfaction, reduce product cycle times and respond more rapidly to market developments. Over time, we expect these lean initiatives to enable us to increase operating margins, which would improve cash flow and strengthen our ability to invest in the following growth strategies: • Expand globally and into new product markets. We believe that international markets represent a significant opportunity for future growth. In 2008, sales to non-U.S. customers increased to $644.6 million, including export sales from the Company’s U.S. operations of $261.8 million. We intend to increase our existing international sales through strategic acquisitions, direct sales of products through our existing subsidiaries and licensees, and joint ventures with railway suppliers having a strong presence in their local markets. We are specifically targeting markets that operate significant fleets of U.S.-style locomotives and freight cars, including Australia, China, India, Russia, South Africa, and select areas within Europe and South America. In support of this strategy, in 2008 Wabtec acquired POLI S.p.A., a European-based manufacturer of rail braking equipment; and the Company made investments in China and South Africa. In addition, we have opportunities to sell certain products that we currently manufacture for the rail industry into other industrial markets, such as mining, off-highway and energy. These products include heat exchangers and friction materials. • Expand aftermarket sales. Historically, aftermarket sales are less cyclical than OEM sales because a certain level of aftermarket maintenance and service work must be performed, even during an industry slowdown. In 2008, Wabtec’s aftermarket sales represented approximately 53% of the Company’s total sales. Wabtec provides aftermarket parts and services for its components, and the Company is seeking to expand this business with new customers such as short-line and regional railroads, or with customers who currently perform the work in-house. In this way, we expect to take advantage of the rail industry trend toward outsourcing, as railroads and transit authorities focus on their core function of transporting goods and people, rather than maintaining and servicing their equipment. • Accelerate new product development. We continue to emphasize research and development funding to create new and improved products. We are focusing on technological advances, especially in the areas of electronics, braking products and other on-board equipment, as a means of new product growth. We seek to provide customers with incremental technological advances that offer immediate benefits with cost-effective investments. To further enhance our product development on October 27, 2008 the Company acquired certain assets related to the development, sale, service, and maintenance of software programs used in train management systems for $4.5 million. In 2008, the U.S. federal government passed new legislation that mandates the use of positive train control on a majority of U.S. locomotives and track by December 31, 2015. Wabtec is currently the leading supplier with a train control product, our Electronic Train Management System®, that is approved for use by the Federal Railroad Administration. As such, Wabtec is working with all Class I railroads in the U.S. to develop and implement the technology. 7


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    • Seek acquisitions, joint ventures and alliances. We are exploring acquisition, joint venture and alliance opportunities using a disciplined, selective approach and rigorous financial criteria. We seek companies that will help Wabtec to grow profitably and expand geographically, while helping to dampen any impact from potential cycles in the North American rail industry. In 2008, Wabtec acquired Standard Car Truck Company, a U.S.-based manufacturer of rail equipment; and POLI, a European-based manufacturer of rail braking equipment. Recent Acquisitions and Joint Ventures In 2008, Wabtec completed three acquisitions and three investments in support of its growth strategies. On December 5, 2008, the Company acquired 100% of the stock of Standard Car Truck Company for $302.9 million, net of cash received. Standard Car Truck is a leading manufacturer and designer of stabilization systems for freight cars, including engineered truck (undercarriage) components such as springs, friction wedges and wear plates. Its Barber® brand truck design is used throughout the world and holds a leading share of the North American market. The company also manufactures and services locomotives components, including compressors and pumps. We believe that the combination of Wabtec braking products with Standard Car Truck’s undercarriage products will lead to a competitive advantage over time for the Company. On October 27, 2008, the Company acquired certain assets related to the development, sale, service, and maintenance of software programs used in train management systems for $4.5 million. On June 30, 2008, the Company acquired 100% of the stock of POLI S.p.A. (“POLI”) for €52.2 million ($82.3 million), net of cash received. POLI is a European-based manufacturer of rail braking equipment including brake discs for high-speed applications, as well as tread brake units and pneumatic brake valves that meet International Union of Railways (“UIC”) standards. Because of its historic focus on the North American market, Wabtec did not previously offer products to meet UIC standards. Wabtec expects to benefit over time from POLI’s UIC-approved products, as well as the future development and certification of additional products. During 2008, Wabtec expanded its presence in key geographic areas. Wabtec acquired the majority of Beijing Wabtec Huaxia Technology Company, Ltd, which manufactures friction products for the freight car market and invested in a joint venture in China to manufacture other braking-related components. In addition, the Company formed a joint venture in South Africa to manufacture friction products. In 2006 and 2007, Wabtec completed three acquisitions. In June 2007, the Company acquired 100% of the stock of Ricon Corporation (“Ricon”), a manufacturer of a variety of electro-mechanical wheelchair lifts and ramps and anti-graffiti windows for $73.6 million. In December 2006, the Company acquired 100% of the stock of Becorit GmbH (“Becorit”), a manufacturer of a variety of brake shoes, pads and friction linings for passenger transit cars, freight cars and locomotives, and friction products for industrial markets such as mining and wind power generation for $51.3 million. In October 2006, the Company acquired 100% of the stock of Schaefer Equipment, Inc. (“Schaefer”), a manufacturer of a variety of forged components for body-mounted and truck- mounted braking systems for $36.7 million. Backlog The Company’s backlog was approximately $1.1 billion at December 31, 2008 as additional contracts booked in the Transit Group offset a reduction in backlog for the Freight Group. In 2008, about 53% of our sales came from aftermarket orders, which typically carry lead times of less than 30 days, so they are not recorded in backlog for a significant period of time. As such, the Company’s backlog is mostly an indicator of future original equipment sales, primarily for the Transit Group, not expected aftermarket activity. 8


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    The Company’s contracts are subject to standard industry cancellation provisions, including cancellations on short notice or upon completion of designated stages. Substantial scope-of-work adjustments are common. For these and other reasons, completion of the Company’s backlog may be delayed or cancelled. The railroad industry, in general, has historically been subject to fluctuations due to overall economic conditions and the level of use of alternative modes of transportation. The backlog of firm customer orders as of December 31, 2008, and December 31, 2007, and the expected year of completion are as follows: Expected Delivery Expected Delivery Total Total Backlog Other Backlog Other In thousands 12/31/08 2009 Years 12/31/07 2008 Years Freight Group . . . . . . . . . . . . . . . . . . . $ 195,717 $148,617 $ 47,100 $ 224,917 $153,738 $ 71,179 Transit Group . . . . . . . . . . . . . . . . . . . 865,005 417,014 447,991 796,251 378,691 417,560 Total . . . . . . . . . . . . . . . . . . . . . . . . . . $1,060,722 $565,631 $495,091 $1,021,168 $532,429 $488,739 Engineering and Development To execute our strategy to develop new products, we invest in a variety of engineering and development activities. For the fiscal years ended December 31, 2008, 2007, and 2006, we invested about $39.0 million, $37.4 million and $32.7 million, respectively, on product development and improvement activities. Approximately 40% of these costs comprise of activities devoted to new product development in any given year. These engineering and development expenditures, in total, represent about 2.5%, 2.8% and 3.0% of net sales for the same periods, respectively. Sometimes we conduct specific research projects in conjunction with universities, customers and other railroad product suppliers. Our engineering and development program is largely focused upon train control and new braking technologies, with an emphasis on applying electronics to traditional pneumatic equipment. Electronic braking has been used in the transit industry for years, and freight railroads are beginning to conduct pilot programs to test its reliability and benefits. Freight railroads have generally been slower to accept the technology due to issues over interoperability, connectivity and durability. We are proceeding with efforts to enhance the major components for existing hard-wired braking equipment and development of new electronic technologies for the freight railroads. We use our Product Development System (PDS) to develop and monitor new product programs. The system requires the product development team to follow consistent steps throughout the development process, from concept to launch, to ensure the product will meet customer expectations and internal profitability targets. Intellectual Property We have more than 1,500 active patents worldwide. We also rely on a combination of trade secrets and other intellectual property laws, nondisclosure agreements and other protective measures to establish and protect our proprietary rights in our intellectual property. Certain trademarks, among them the name WABCO®, were acquired or licensed from American Standard Inc., now known as Trane, in 1990 at the time of our acquisition of the North American operations of the Railway Products Group of Trane. Other trademarks have been developed through the normal course of business, or acquired as a part of our ongoing merger and acquisition program. We have entered into a variety of license agreements as licensor and licensee. We do not believe that any single license agreement is of material importance to our business or either of our business segments as a whole. 9


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    We have issued licenses to the two sole suppliers of railway air brakes and related products in Japan, Nabtesco and Mitsubishi Electric Company. The licensees pay annual license fees to us and also assist us by acting as liaisons with key Japanese passenger transit vehicle builders for projects in North America. We believe that our relationships with these licensees have been beneficial to our core transit business and customer relationships in North America. Customers Our customers include railroads throughout North America, as well as in the United Kingdom, Australia, Europe, Asia and South Africa; manufacturers of transportation equipment, such as locomotives, freight cars, subway vehicles and buses; lessors of such equipment; and passenger transit authorities, primarily those in North America. In 2008, approximately 41% of our sales were to customers outside the U.S. and to 104 countries throughout the world. Approximately 53% of our sales were in the aftermarket, with the rest of our sales to OEMs of locomotives, freight cars, subway vehicles and buses. Our top customers can change from year to year. For the fiscal year ended December 31, 2008, our top five customers, Greater Toronto Transit Authority (GO Transit), GE Transportation Systems, Maryland Department of Transportation, Trinity Industries, and Alstom, accounted for 27% of our net sales. No one customer represents 10% or more of consolidated sales. We believe that we have strong relationships with all of our key customers. Competition We believe that we hold approximately a 50% market share in North America for our primary braking- related equipment and a leading market position in North America for most of our other product lines. On a global basis, our market shares are generally much smaller. We operate in a highly competitive marketplace. Price competition is strong because we have a relatively small number of customers and they are very cost- conscious. In addition to price, competition is based on product performance and technological leadership, quality, reliability of delivery, and customer service and support. Our principal competitors vary to some extent across product lines, but most competitors tend to be privately held companies. Within North America, New York Air Brake Company, a subsidiary of the German air brake producer Knorr-Bremse AG, is our principal overall OEM competitor. Our competition for locomotive, freight and passenger transit service and repair is primarily from the railroads’ and passenger transit authorities’ in-house operations, Electro-Motive Diesel, GE Transportation Systems, and New York Air Brake/Knorr. We believe our key strengths, which include leading market positions in core products, breadth of product offering with a stable mix of OEM and aftermarket business, leading design and engineering capabilities, significant barriers to entry and an experienced management team enable us to compete effectively in this marketplace. Employees At December 31, 2008, we had 7,295 full-time employees, approximately 32% of whom were unionized. A majority of the employees subject to collective bargaining agreements are within North America and these agreements generally extend through 2009, 2010, 2011, and 2012. Agreements expiring in 2009 cover approximately 19% of the Company’s workforce. We consider our relations with our employees and union representatives to be good, but cannot assure that future contract negotiations will be favorable to us. 10


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    Regulation In the course of our operations, we are subject to various regulations of agencies and other entities. In the United States, these include principally the FRA and the AAR. The FRA administers and enforces federal laws and regulations relating to railroad safety. These regulations govern equipment and safety standards for freight cars and other rail equipment used in interstate commerce. The AAR oversees a wide variety of rules and regulations governing safety and design of equipment, relationships among railroads with respect to railcars in interchange and other matters. The AAR also certifies railcar builders and component manufacturers that provide equipment for use on railroads in the United States. New products generally must undergo AAR testing and approval processes. As a result of these regulations and those stipulated in other countries in which we derive our revenues, we must maintain certain certifications as a component manufacturer and for products we sell. Effects of Seasonality Our business is not typically seasonal, although the third quarter results may be impacted by vacation and plant shutdowns at several of our major customers during this period. Environmental Matters Information on environmental matters is included in Note 19 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. Available Information We maintain an Internet site at www.wabtec.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as the annual report to stockholders and other information, are available free of charge on this site. The Internet site and the information contained therein or connected thereto are not incorporated by reference into this Form 10-K. Our Corporate Governance Guidelines, the charters of our Audit, Compensation and Nominating and Corporate Governance Committees, our Code of Conduct, which is applicable to all employees, and our Code of Ethics for Senior Officers, which is applicable to all of our executive officers, are also available free of charge on this site and are available in print to any shareholder who requests them. Item 1A. Risk Factors. Prolonged unfavorable economic and market conditions could adversely affect our business. Unfavorable general economic and market conditions in the United States and internationally (including as a result of terrorist activities and the military response by the United States and other countries) could have a negative impact on our sales and operations. To the extent that these factors result in continued instability of capital markets, shortages of raw materials or component parts, longer sales cycles, deferral or delay of customer orders or an inability to market our products effectively, our business and results of operations could be materially adversely affected. We are dependent upon key customers. We rely on several key customers who represent a significant portion of our business. Our top customers can change from year to year. For the fiscal year ended December 31, 2008, our top five customers, Greater Toronto Transit Authority (GO Transit), GE Transportation Systems, Maryland Department of Transportation, Trinity Industries, and Alstom, accounted for 27% of our net sales. While we believe our relationships with our customers are generally good, our top customers could choose to reduce or terminate their relationships with us. In addition, many of our customers place orders for products on an as needed basis and operate in cyclical 11


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    industries. As a result, their order levels have varied from period to period in the past and may vary significantly in the future. Such customer orders are dependent upon their markets and customers, and may be subject to delays and cancellations. As a result of our dependence on our key customers, we could experience a material adverse effect on our business, results of operations and financial condition if we lost any one or more of our key customers or if there is a reduction in their demand for our products. Our business operates in a highly competitive industry. We operate in a competitive marketplace and face substantial competition from a limited number of established competitors in the United States and abroad, some of which may have greater financial resources than we do. Price competition is strong and, coupled with the existence of a number of cost conscious purchasers, has historically limited our ability to increase prices. In addition to price, competition is based on product performance and technological leadership, quality, reliability of delivery and customer service and support. There can be no assurance that competition in one or more of our markets will not adversely affect us and our results of operations. We intend to pursue acquisitions, joint ventures and alliances that involve a number of inherent risks, any of which may cause us not to realize anticipated benefits. One aspect of our business strategy is to selectively pursue acquisitions, joint ventures and alliances that we believe will improve our market position, and provide opportunities to realize operating synergies. These transactions involve inherent risks and uncertainties, any one of which could have a material adverse effect on our business and results of operations, including: • difficulties in achieving identified financial and operating synergies, including the integration of operations, services and products; • diversion of Management’s attention from other business concerns; • the assumption of unknown liabilities; and • unanticipated changes in the market conditions, business and economic factors affecting such an acquisition. We cannot assure that we will be able to consummate any future acquisitions, joint ventures or other business combinations. If we are unable to identify suitable acquisition candidates or to consummate strategic acquisitions, we may be unable to fully implement our business strategy, and our business and results of operations may be adversely affected as a result. In addition, our ability to engage in strategic acquisitions will be dependent on our ability to raise substantial capital, and we may not be able to raise the funds necessary to implement our acquisition strategy on terms satisfactory to us, if at all. As we introduce new products and services, a failure to predict and react to consumer demand could adversely affect our business. We have dedicated significant resources to the development, manufacturing and marketing of new products. Decisions to develop and market new transportation products are typically made without firm indications of customer acceptance. Moreover, by their nature, new products may require alteration of existing business methods or threaten to displace existing equipment in which our customers may have a substantial capital investment. There can be no assurance that any new products that we develop will gain widespread acceptance in the marketplace or that such products will be able to compete successfully with other new products or services that may be introduced by competitors. 12


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    Our revenues are subject to cyclical variations in the railway and passenger transit markets and changes in government spending. The railway industry historically has been subject to significant fluctuations due to overall economic conditions, the use of alternate methods of transportation and the levels of federal, state and local government spending on railroad transit projects. In economic downturns, railroads have deferred, and may defer, certain expenditures in order to conserve cash in the short term. Reductions in freight traffic may reduce demand for our replacement products. The passenger transit railroad industry is also cyclical. New passenger transit car orders vary from year to year and are influenced greatly by major replacement programs and by the construction or expansion of transit systems by transit authorities. A substantial portion of our net sales have been, and we expect that a material portion of our future net sales may be, derived from contracts with metropolitan transit and commuter rail authorities and Amtrak. To the extent that future funding for proposed public projects is curtailed or withdrawn altogether as a result of changes in political, economic, fiscal or other conditions beyond our control, such projects may be delayed or cancelled, resulting in a potential loss of business for us, including transit aftermarket and new transit car orders. There can be no assurance that economic conditions will be favorable or that there will not be significant fluctuations adversely affecting the industry as a whole and, as a result, us. A growing portion of our sales may be derived from our international operations, which exposes us to certain risks inherent in doing business on an international level. In fiscal year 2008, approximately 41% of our consolidated net sales were to customers outside of the U.S. and we intend to continue to expand our international operations in the future. We currently conduct our international operations through a variety of wholly and majority-owned subsidiaries and joint ventures in Australia, Canada, China, France, Germany, India, Italy, Kunta Hora, Macedonia, Malaysia, Mexico, Poland, Spain, South Africa, and the United Kingdom. As a result, we are subject to various risks, any one of which could have a material adverse effect on those operations and on our business as a whole, including: • lack of complete operating control; • lack of local business experience; • currency exchange fluctuations and devaluations; • foreign trade restrictions and exchange controls; • difficulty enforcing agreements and intellectual property rights; • the potential for nationalization of enterprises; and • economic, political and social instability and possible terrorist attacks against American interests. In addition, certain jurisdictions have laws that limit the ability of non-U.S. subsidiaries and their affiliates to pay dividends and repatriate cash flows. We may incur increased costs due to fluctuations in interest rates and foreign currency exchange rates. In the ordinary course of business, we are exposed to increases in interest rates that may adversely affect funding costs associated with variable-rate debt and changes in foreign currency exchange rates. We may seek to minimize these risks through the use of interest rate swap contracts and currency hedging agreements. There can be no assurance that any of these measures will be effective. Any material changes in interest or exchange rates could result in material losses to us. 13


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    We may have liability arising from asbestos litigation. Claims have been filed against the Company and certain of its affiliates in various jurisdictions across the United States by persons alleging bodily injury as a result of exposure to asbestos-containing products. Over the last four years, the overall number of new claims filed has significantly decreased as compared to the previous four year period; however, the resolution of these new claims, and all previously filed claims, may take a significant period of time. Most of these claims have been made against our wholly owned subsidiary, Railroad Friction Products Corporation (RFPC), and are based on a product sold by RFPC prior to the time that the Company acquired any interest in RFPC. Most of these claims, including all of the RFPC claims, are submitted to insurance carriers for defense and indemnity or to non-affiliated companies that retain the liabilities for the asbestos-containing products at issue. We cannot, however, assure that all these claims will be fully covered by insurance or that the indemnitors will remain financially viable. Our ultimate legal and financial liability with respect to these claims, as is the case with other pending litigation, cannot be estimated. It is Management’s belief that the potential range of loss for asbestos-related bodily injury cases is not reasonably determinable at present due to a variety of factors, including: (1) the limited asbestos case settlement history of the Company’s wholly owned subsidiary, RFPC; (2) the unpredictable nature of personal injury litigation in general; and (3) the uncertainty of asbestos litigation in particular. Despite this uncertainty, and although the results of the Company’s operations and cash flows for any given period could be adversely affected by asbestos-related lawsuits, Management believes that the final resolution of the Company’s asbestos-related cases will not be material to the Company’s overall financial position, results of operations and cash flows. In general, this belief is based upon: (1) Wabtec’s and RFPC’s limited history of settlements and dismissals of asbestos-related cases to date; (2) the inability of many plaintiffs to establish any exposure or causal relationship to RFPC’s product; and (3) the inability of many plaintiffs to demonstrate any identifiable injury or compensable loss. More specifically, as to RFPC, Management’s belief that any losses due to asbestos-related cases would not be material is also based on the fact that RFPC owns insurance which provides coverage for asbestos-related bodily injury claims. To date, RFPC’s insurers have provided RFPC with defense and indemnity in these actions. As to Wabtec and its divisions, Management’s belief that asbestos-related cases will not have a material impact is also based on its position that it has no legal liability for asbestos-related bodily injury claims, and that the former owners of Wabtec’s assets retained asbestos liabilities for the products at issue. To date, Wabtec has been able to successfully defend itself on this basis, including two arbitration decisions and a judicial opinion, all of which confirmed Wabtec’s position that it did not assume any asbestos liabilities from the former owners of certain Wabtec assets. Although Wabtec has incurred defense and administrative costs in connection with asbestos bodily injury actions, these costs have not been material, and the Company has no information that would suggest these costs would become material in the foreseeable future. We are subject to a variety of environmental laws and regulations. We are subject to a variety of environmental laws and regulations governing discharges to air and water, the handling, storage and disposal of hazardous or solid waste materials and the remediation of contamination associated with releases of hazardous substances. We believe our operations currently comply in all material respects with all of the various environmental laws and regulations applicable to our business; however, there can be no assurance that environmental requirements will not change in the future or that we will not incur significant costs to comply with such requirements. Our manufacturer’s warranties or product liability may expose us to potentially significant claims. We warrant the workmanship and materials of many of our products. Accordingly, we are subject to a risk of product liability or warranty claims in the event that the failure of any of our products results in personal 14


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    injury or death, or does not conform to our customers’ specifications. In addition, in recent years, we have introduced a number of new products for which we do not have the same level of historical warranty experience. Although we have not had any material product liability or warranty claims made against us and we currently maintain liability insurance coverage, we cannot assure that product liability claims, if made, would not exceed our insurance coverage limits or that insurance will continue to be available on commercially acceptable terms, if at all. The possibility exists for these types of warranty claims to result in costly product recalls, significant repair costs and damage to our reputation. Labor disputes may have a material adverse effect on our operations and profitability. We collectively bargain with labor unions that represent approximately 32% of our employees. Our current collective bargaining agreements generally extend through 2009, 2010, 2011, and 2012. Agreements expiring in 2009 cover approximately 19% of the Company’s workforce. Failure to reach an agreement could result in strikes or other labor protests which could disrupt our operations. If we were to experience a strike or work stoppage, it would be difficult for us to find a sufficient number of employees with the necessary skills to replace these employees. We cannot assure that we will reach any such agreement or that we will not encounter strikes or other types of conflicts with the labor unions of our personnel. Such labor disputes could have an adverse effect on our business, financial condition or results of operations, could cause us to lose revenues and customers and might have permanent effects on our business. From time to time we are engaged in contractual disputes with our customers. From time to time, we are engaged in contractual disputes with our customers regarding routine delivery and performance issues as well as adjustments for design changes and related extra work. These disputes are generally resolved in the ordinary course of business without having a material adverse impact on us. Our indebtedness could adversely affect our financial health. At December 31, 2008, we have total debt of $387.1 million. If it becomes necessary to access our available borrowing capacity under the 2008 Refinancing Credit Agreement, along with carrying the $236.0 million currently borrowed under this facility and the $150 million 6 7/8% senior notes, being indebted could have important consequences to us. For example, it could: • increase our vulnerability to general adverse economic and industry conditions; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • place us at a disadvantage compared to competitors that have less debt; and • limit our ability to borrow additional funds. The indenture for our $150 million 6 7/8% senior notes due in 2013 and our 2008 Refinancing Credit Agreement contain various covenants that limit our Management’s discretion in the operation of our businesses. The indenture governing the notes and our credit agreement contain various covenants that limit our Management’s discretion. The 2008 Refinancing Credit Agreement limits the Company’s ability to declare or pay cash dividends and prohibits the Company from declaring or making other distributions, subject to certain exceptions. The 2008 15


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    Refinancing Credit Agreement contains various other covenants and restrictions including the following limitations: incurrence of additional indebtedness; mergers, consolidations and sales of assets and acquisitions; additional liens; sale and leasebacks; permissible investments, loans and advances; certain debt payments; capital expenditures; and imposes a minimum interest expense coverage ratio and a maximum debt to cash flow ratio. The indenture under which the senior notes were issued contains covenants and restrictions which limit among other things, the following: the incurrence of indebtedness, payment of dividends and certain distributions, sale of assets, change in control, mergers and consolidations and the incurrence of liens. The integration of our recently completed acquisitions may not result in anticipated improvements in market position or the realization of anticipated operating synergies or may take longer to realize than expected. In 2007 and 2008, we completed the acquisition of 100% of the stock of Ricon, Poli and Standard Car Truck for a combined $458.8 million, net of cash received. Although we believe that the acquisitions will improve our market position and realize positive operating results, including operating synergies, operating expense reductions and overhead cost savings, we cannot be assured that these improvements will be obtained. The management and acquisition of businesses involves substantial risks, any of which may result in a material adverse effect on our business and results of operations, including: • the uncertainty that an acquired business will achieve anticipated operating results; • significant expenses to integrate; • diversion of Management’s attention; • departure of key personnel from the acquired business; • effectively managing entrepreneurial spirit and decision-making; • integration of different information systems; • unanticipated costs and exposure to unforeseen liabilities; and • impairment of assets. Item 1B. UNRESOLVED STAFF COMMENTS None. 16


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    Item 2. PROPERTIES Facilities The following table provides certain summary information about the principal facilities owned or leased by the Company. The Company believes that its facilities and equipment are generally in good condition and that, together with scheduled capital improvements, they are adequate for its present and immediately projected needs. Leases on the facilities are long-term and generally include options to renew. The Company’s corporate headquarters are located at the Wilmerding, PA site. Approximate Location Primary Use Segment Own/Lease Square Feet Domestic Wilmerding, PA . . . . . . . . . . . . . . . . Manufacturing/Service Freight Own 365,000(1) Lexington, TN . . . . . . . . . . . . . . . . . Manufacturing Freight Own 170,000 Jackson, TN . . . . . . . . . . . . . . . . . . . Manufacturing Freight Own 150,000 Chicago, IL . . . . . . . . . . . . . . . . . . . Manufacturing Freight Own 123,140 Warren, OH . . . . . . . . . . . . . . . . . . . Manufacturing Freight Own 102,650 Greensburg, PA . . . . . . . . . . . . . . . . Manufacturing Freight Own 97,800 Coshocton, OH . . . . . . . . . . . . . . . . Manufacturing/Warehouse/Office Freight Own 83,000 Germantown, MD . . . . . . . . . . . . . . Manufacturing Freight Own 80,000 Gibsonia, PA . . . . . . . . . . . . . . . . . . Manufacturing/Office Freight Own 16,160 Chillicothe, OH . . . . . . . . . . . . . . . . Manufacturing/Office Freight Lease 104,000 Kansas City, MO . . . . . . . . . . . . . . . Service Center Freight Lease 95,900 Pittsburgh, PA . . . . . . . . . . . . . . . . . Manufacturing Freight Lease 90,000 Bensenville, IL . . . . . . . . . . . . . . . . Manufacturing/Warehouse/Office Freight Lease 66,200 Strongsville, OH . . . . . . . . . . . . . . . Manufacturing/Warehouse/Office Freight Lease 62,000 Columbia, SC . . . . . . . . . . . . . . . . . Service Center Freight Lease 40,250 Cedar Rapids, IA . . . . . . . . . . . . . . . Manufacturing Freight Lease 37,000 St. Joseph, MI . . . . . . . . . . . . . . . . . Manufacturing/Warehouse Freight Lease 33,625 Carson City, NV . . . . . . . . . . . . . . . Service Center Freight Lease 22,000 Montgomery, IL . . . . . . . . . . . . . . . Warehouse/Office Freight Lease 20,000 Harvey, IL . . . . . . . . . . . . . . . . . . . . Service Center Freight Lease 19,200 Park Ridge, IL . . . . . . . . . . . . . . . . . Office Freight Lease 15,150 Jackson, TN . . . . . . . . . . . . . . . . . . . Warehouse Freight Lease 6,000 Oak Creek, WI . . . . . . . . . . . . . . . . . Engineering/Admin Freight Lease 5,000 Boulder, CO . . . . . . . . . . . . . . . . . . . Engineering/Admin Freight Lease 3,400 Omaha, NE . . . . . . . . . . . . . . . . . . . Office Freight Lease 1,470 Azle, TX . . . . . . . . . . . . . . . . . . . . . Office Freight Lease 1,400 Burr Ridge, IL . . . . . . . . . . . . . . . . . Service Center Freight Lease 1,050 Maxton, NC . . . . . . . . . . . . . . . . . . . Manufacturing Freight /Transit Own 105,000 Willits, CA . . . . . . . . . . . . . . . . . . . . Manufacturing Freight /Transit Own 70,000 Boise, ID . . . . . . . . . . . . . . . . . . . . . Manufacturing Freight /Transit Own 326,000 Panorama City, CA . . . . . . . . . . . . . Manufacturing Transit Lease 200,000 Spartanburg, SC . . . . . . . . . . . . . . . . Manufacturing/Service Transit Lease 183,600 Buffalo Grove, IL . . . . . . . . . . . . . . Manufacturing Transit Lease 115,570 Plattsburgh, NY . . . . . . . . . . . . . . . . Manufacturing Transit Lease 64,000 Elmsford, NY . . . . . . . . . . . . . . . . . Service Center Transit Lease 28,000 Spartanburg, SC . . . . . . . . . . . . . . . . Warehouse Transit Lease 20,000 Elkhart, IN . . . . . . . . . . . . . . . . . . . . Warehouse Transit Lease 8,000 Sun Valley, CA . . . . . . . . . . . . . . . . Service Center Transit Lease 4,000 Doraville, GA . . . . . . . . . . . . . . . . . Sales Office Transit Lease 1,720 San Pablo, CA . . . . . . . . . . . . . . . . . Office Transit Lease 550 17


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    Approximate Location Primary Use Segment Own/Lease Square Feet New Castle, DE . . . . . . . . . . . . . . . . Sales Office Transit Lease 400 Concord, PA . . . . . . . . . . . . . . . . . . Sales Office Transit Lease 355 Hillendale, MD . . . . . . . . . . . . . . . . Sales Office Transit Lease 350 Mountaintop, PA . . . . . . . . . . . . . . . Vacant Land Available for Sale Own N/A International Stoney Creek (Ontario), Canada . . . Manufacturing/Service Freight Own 189,200 Wallaceburg (Ontario), Canada . . . . Foundry Freight Own 117,600 San Luis Potosi, Mexico . . . . . . . . . Manufacturing/Service Freight Own 73,100 Skopje, Macedonia . . . . . . . . . . . . . Manufacturing/Office Freight Own 20,000 Shanghai, China . . . . . . . . . . . . . . . . Manufacturing Freight Lease 360,505 Beijing, China . . . . . . . . . . . . . . . . . Manufacturing Freight Lease 53,819 Kolkata, India . . . . . . . . . . . . . . . . . Manufacturing Freight Lease 36,965 Lachine (Quebec), Canada . . . . . . . Service Center Freight Lease 17,000 Rydalmere, Australia . . . . . . . . . . . . Office Freight Lease 14,786 Calgary (Alberta), Canada . . . . . . . . Service Center Freight Lease 14,400 Sydney, Australia . . . . . . . . . . . . . . Manufacturing Freight Lease 11,250 Beijing, China . . . . . . . . . . . . . . . . . Office Freight Lease 3,545 Kuala Lumpur, Malaysia . . . . . . . . . Office Freight Lease 2,655 Shanghai, China . . . . . . . . . . . . . . . . Office Freight Lease 1,245 Karlov, Kutna Hora . . . . . . . . . . . . . Warehouse Freight Lease 532 Kilkcaldy, Fife, UK . . . . . . . . . . . . . Office Freight Lease 200 Doncaster, UK . . . . . . . . . . . . . . . . . Manufacturing/Service Freight /Transit Own 330,000 Wetherill Park, Australia . . . . . . . . . Manufacturing Freight /Transit Lease 70,600 Johannesburg, South Africa . . . . . . . Manufacturing Freight /Transit Lease 11,840 Avellino, Italy . . . . . . . . . . . . . . . . . Manufacturing/Office Transit Own 132,495 St. Laurent (Quebec), Canada . . . . . Manufacturing Transit Own 106,000 Recklinghausen, Germany . . . . . . . . Manufacturing Transit Own 86,390 Camisano, Italy . . . . . . . . . . . . . . . . Manufacturing/Office Transit Lease 136,465 Sassuolo, Italy . . . . . . . . . . . . . . . . . Manufacturing Transit Lease 30,000 Droylsden, UK . . . . . . . . . . . . . . . . . Manufacturing/Office Transit Lease 22,500 Aachen, Germany . . . . . . . . . . . . . . Office Transit Lease 1,130 Vierzon, France . . . . . . . . . . . . . . . . Office Transit Lease 1,076 Derby, UK . . . . . . . . . . . . . . . . . . . . Office Transit Lease 850 Warsaw, Poland . . . . . . . . . . . . . . . . Office Transit Lease 775 Essen, Germany . . . . . . . . . . . . . . . . Office Transit Lease 150 Barcelona, Spain . . . . . . . . . . . . . . . Office Transit Lease 110 (1) Approximately 250,000 square feet are currently used in connection with the Company’s corporate and manufacturing operations. The remainder is leased to third parties. Item 3. LEGAL PROCEEDINGS Information with respect to legal proceedings is included in Note 19 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 18


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    EXECUTIVE OFFICERS OF THE REGISTRANT The following table provides information on our executive officers. They are elected periodically by our Board of Directors and serve at its discretion. Officers Age Position Albert J. Neupaver . . . . . . . . . . . . . . 58 President and Chief Executive Officer Alvaro Garcia-Tunon . . . . . . . . . . . . 56 Senior Vice President, Chief Financial Officer and Secretary Raymond T. Betler . . . . . . . . . . . . . . 53 Vice President, Group Executive R. Mark Cox . . . . . . . . . . . . . . . . . . . 41 Vice President, Corporate Development Patrick D. Dugan . . . . . . . . . . . . . . . . 42 Vice President, Finance and Corporate Controller Keith P. Hildum . . . . . . . . . . . . . . . . 46 Vice President and Treasurer Charles F. Kovac . . . . . . . . . . . . . . . . 52 Vice President, Group Executive Richard A. Mathes . . . . . . . . . . . . . . 54 Vice President, Group Executive David M. Seitz . . . . . . . . . . . . . . . . . 44 Vice President, Senior Counsel and Assistant Secretary Scott E. Wahlstrom . . . . . . . . . . . . . . 45 Vice President, Human Resources Timothy R. Wesley . . . . . . . . . . . . . . 47 Vice President, Investor Relations and Corporate Communications Albert J. Neupaver was named President and Chief Executive Officer of the Company in February, 2006. Prior to joining Wabtec, Mr. Neupaver served in various positions at AMETEK, Inc., a leading global manufacturer of electronic instruments and electric motors. Most recently he served as President of its Electromechanical Group for nine years. Alvaro Garcia-Tunon has been Senior Vice President, Chief Financial Officer and Secretary of the Company since March 2003. Mr. Garcia-Tunon was Senior Vice President, Finance of the Company from November 1999 until March 2003 and Treasurer of the Company from August 1995 until November 1999. Raymond T. Betler has been Vice President, Group Executive since August 2008. Prior to joining Wabtec, Mr. Betler served in various positions of increasing responsibility at Bombardier Transportation since 1979. Most recently, Mr. Betler served as President, Total Transit Systems from 2004 until 2008 and before that as President, London Underground Projects from 2002 to 2004. R. Mark Cox was named Vice President, Corporate Development in September 2006. Prior to joining Wabtec, Mr. Cox served as Director of Business Development for the Electrical Group of Eaton Corporation since 2002. Prior to joining Eaton, Mr. Cox was an investment banker with UBS Warburg, Prudential and Stephens. Patrick D. Dugan was named Vice President, Finance and Corporate Controller in January 2007. He has served as Corporate Controller since November 2003. Prior to joining Wabtec, Mr. Dugan served as Vice President and Chief Financial Officer of CWI International, Inc. from December 1996 to November 2003. Prior to 1996, Mr. Dugan was a Manager with PricewaterhouseCoopers. Charles F. Kovac was named Vice President, Group Executive in September 2007. Prior to joining Wabtec, Mr. Kovac served as General Manager of the Global Floor Care / Specialty Motors Division of AMETEK, Inc. since 2003. Prior to joining AMETEK, Inc., Mr. Kovac was Chief Operating Officer of The Teleios Group, LLC from 1999 to 2003. Keith P. Hildum was named Vice President and Treasurer in October 2006. He had been serving as Treasurer of the Company since 2001, and prior to that was Vice President, Finance and Administration – Railroad Operations. He has been with Wabtec since 1999, having held various positions with MotivePower Industries. Prior to MotivePower, Mr. Hildum was a Senior Manager with Deloitte & Touche. 19


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    Richard A. Mathes was named Vice President, Group Executive of Wabtec in December, 2008. Prior to joining Wabtec Mr. Mathes was CEO of Standard Car Truck Company (“SCT”) from 1995 to 2008, having rejoined SCT in 1989 as President. Mr. Mathes had previously been in sales and marketing with SCT from 1979 through 1984 before leaving to pursue other opportunities in the rail industry. He began his 36 year career in the transportation industry in 1972 with the Missouri Pacific Railroad in St. Louis, MO. David M. Seitz was promoted to Vice President, Senior Counsel and Assistant Secretary in January 2008. He had served as Senior Counsel and Assistant Secretary of Wabtec since 2000 and was appointed as an executive officer in 2006. Prior to joining Wabtec, Mr. Seitz was General Attorney and Assistant Secretary at Transtar, Inc., and had also been an electrical engineer with Westinghouse Electric Company. Scott E. Wahlstrom has been Vice President, Human Resources, since November 1999. Previously, Mr. Wahlstrom was Vice President, Human Resources & Administration of MotivePower Industries, Inc. from August 1996 until November 1999. Timothy R. Wesley has been Vice President, Investor Relations and Corporate Communications since November 1999. Previously, Mr. Wesley was Vice President, Investor and Public Relations of MotivePower Industries, Inc. from August 1996 until November 1999. PART II Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Common Stock of the Company is listed on the New York Stock Exchange. As of February 23, 2009, there were 47,996,857 shares of Common Stock outstanding held by 839 holders of record. The high and low sales price of the shares and dividends declared per share were as follows: 2008 High Low Dividends First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $37.37 $28.72 $0.01 Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $51.50 $36.49 $0.01 Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $60.75 $43.29 $0.01 Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $55.81 $28.86 $0.01 2007 High Low Dividends First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35.00 $28.40 $0.01 Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40.02 $33.46 $0.01 Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41.99 $34.78 $0.01 Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39.64 $32.46 $0.01 The Company’s credit agreement restricts the ability to make dividend payments, with certain exceptions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and see Note 9 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. At the close of business on February 23, 2009, the Company’s Common Stock traded at $25.70 per share. The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference to any future filings under the Securities Act of 1933 and the Securities Exchange Act of 1934, each as amended, except to the extent that Wabtec specifically incorporates it by reference into such filing. The graph below compares the total stockholder return through December 31, 2008, of Wabtec’s common stock, (i) the S&P 500, 20


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    (ii) and our peer group of manufacturing companies consisting of the following publicly traded companies: The Greenbrier Companies, Inc., L.B. Foster Company, Trinity Industries, Portec Rail Products, Inc. and Freight Car America, Inc. Comparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 December 2008 250 200 150 100 50 0 2003 2004 2005 2006 2007 2008 WABTEC S&P 500 Index - Total Return Peer Group On July 31, 2006, the Board of Directors authorized the repurchase of up to $50 million of the Company’s outstanding shares. On February 20, 2008 the Board of Directors authorized the repurchase of up to an additional $100 million of the Company’s outstanding shares. The Company intends to purchase these shares on the open market or in negotiated or block trades. No time limit was set for the completion of the program. The program qualifies under the Refinancing Credit Agreement or 2008 Refinancing Credit Agreement, as applicable, as well as the 6 7⁄ 8% Senior Notes currently outstanding. No shares were purchased during the first quarter of 2007. During the second quarter of 2007, the Company repurchased 92,700 shares of Wabtec stock at an average price of $36.87 per share. During the third quarter of 2007, the Company repurchased 38,500 shares of Wabtec stock at an average price of $36.22 per share. During the fourth quarter of 2007, the Company repurchased 378,600 shares of Wabtec stock at an average price of $34.50 per share. All purchases were on the open market. During the first quarter of 2008, the Company repurchased 712,900 shares at an average price of $34.29 per share, exhausting the $50.0 million authorization made in 2006. During the second quarter of 2008, the Company repurchased 5,200 shares at an average price of $35.97 per share. No additional shares were repurchased during the third quarter of 2008. During the fourth quarter of 2008, the Company repurchased 599,800 shares at an average price of $35.22 per share. All purchases were on the open market. Fourth quarter purchases were as follows: Number of Approximate Shares Dollar Value Total Average Purchased of Shares Number Price for that May of Shares Paid per Announced Yet Be Period Purchased Share Program Purchased September 28, 2008 to October 25, 2008 . . . . . . . . . . . . . . . . . . 50,000 $38.65 50,000 $86,650,819 October 26, 2008 to November 22, 2008 . . . . . . . . . . . . . . . . . . 437,500 34.81 437,500 71,409,352 November 23, 2008 to December 31, 2008 . . . . . . . . . . . . . . . . 112,300 35.31 112,300 67,441,754 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599,800 $35.22 599,800 $67,441,754 21


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    Item 6. SELECTED FINANCIAL DATA The following table shows selected consolidated financial information of the Company and has been derived from audited financial statements. This financial information should be read in conjunction with, and is qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements of the Company and the Notes thereto included elsewhere in this Form 10-K. Year Ended December 31, In thousands, except per share amounts 2008 2007 2006 2005 2004 Income Statement Data Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,574,749 $1,360,088 $1,087,620 $1,034,024 $ 822,018 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 427,186 369,619 296,777 259,646 205,164 Operating expenses . . . . . . . . . . . . . . . . . . . . . (214,670) (189,878) (166,626) (157,717) (149,077) Income from operations . . . . . . . . . . . . . . . . . $ 212,516 $ 179,741 $ 130,151 $ 101,929 $ 56,087 Interest expense, net . . . . . . . . . . . . . . . . . . . . $ (8,508) $ (3,637) $ (2,177) $ (9,358) $ (12,210) Other income (expense), net . . . . . . . . . . . . . . 292 (3,650) (1,417) (3,055) (1,020) Income from continuing operations . . . . . . . . 130,554 109,387 86,494 57,685 32,096 Income (loss) from discontinued operations (net of tax) (1) . . . . . . . . . . . . . . . . . . . . . . . (3) 183 (1,690) (1,909) 349 Net income (2) . . . . . . . . . . . . . . . . . . . . . . . . $ 130,551 $ 109,570 $ 84,804 $ 55,776 $ 32,445 Diluted Earnings per Common Share Income from continuing operations . . . . . . . . $ 2.67 $ 2.23 $ 1.76 $ 1.21 $ 0.70 Net income (2) . . . . . . . . . . . . . . . . . . . . . . . . $ 2.67 $ 2.23 $ 1.73 $ 1.17 $ 0.71 Cash dividends declared per share . . . . . . . . . $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 Fully diluted shares outstanding . . . . . . . . . . . 48,847 49,141 49,108 47,595 45,787 Balance Sheet Data Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,507,520 $1,158,702 $ 972,842 $ 836,357 $ 713,396 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,805 234,689 187,979 141,365 95,257 Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387,080 150,250 150,000 150,000 150,107 Shareholders’ equity . . . . . . . . . . . . . . . . . . . . 645,371 617,268 469,889 379,207 312,426 (1) In 2006, includes $1.7 million relating to the sale of a non-core product division of Rütgers Rail, S.p.A. In 2005, includes $1.6 million relating to the liquidation of the bus door joint venture in China. (2) In 2007 and 2006, a tax benefit of $3.1 million and $5.3 million, respectively, was recognized related to deferred taxes, primarily due to the reversal of previously established valuation allowances on deferred tax assets. In 2008, 2006 and 2004, tax benefits of $1.0 million, $700,000 and $4.9 million were recognized, respectively, primarily related to resolving certain tax issues from prior years that have been closed from further regulatory examination. 22


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    Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Wabtec is one of the world’s largest providers of value-added, technology-based products and services for the global rail industry. Our products are found on virtually all U.S. locomotives, freight cars and passenger transit vehicles, as well as in more than 104 countries throughout the world. Our products enhance safety, improve productivity and reduce maintenance costs for customers, and many of our core products and services are essential in the safe and efficient operation of freight rail and passenger transit vehicles. Wabtec is a global company with operations in 16 countries. In 2008, about 41% of the Company’s revenues came from customers outside the U.S. Management Review and Outlook Wabtec’s long-term financial goals are to generate free cash flow in excess of net income, maintain a strong credit profile while minimizing our overall cost of capital, increase margins through strict attention to cost controls, and increase revenues through a focused growth strategy, including global and market expansion, new products and technologies, aftermarket products and services, and acquisitions. In addition, Management evaluates the Company’s short-term operational performance through measures such as quality and on-time delivery. The Company monitors a variety of factors and statistics to gauge market activity. The freight rail industry is largely driven by general economic conditions, which can cause fluctuations in rail traffic. Based on those fluctuations, railroads can increase or decrease purchases of new locomotive and freight cars. Growth in the U.S. economy slowed in 2008, which led to a decrease in rail traffic during the year. Deliveries of new locomotives increased about 25% during the year, in part due to strong international demand for U.S.-built locomotives. Deliveries of new freight cars decreased about 5.0% in 2008, due in part to the slowing economic conditions and resulting decrease in rail traffic. About 20% of the Company’s revenues are directly related to deliveries of new freight cars. At December 31, 2008, the industry backlog of freight cars ordered was 31,921, compared to 75,860 at the end of the prior year. The North American transit rail industry is primarily driven by government spending and ridership, which increased 8% and 5%, respectively, in 2008. In February 2009, the U.S. federal government passed new spending legislation designed to stimulate the U.S. economy. Of the $789 billion spending package, up to $20 billion is to be spent on freight and passenger transportation, as follows: $8.4 billion for public transportation, $8 billion for high-speed rail, $1.5 billion for discretionary intermodal projects, and $1.3 billion for AMTRAK. The majority of this money is to be spent by September 2010. Wabtec expects to benefit from this additional spending, as transit authorities invest in expansion, new equipment and other related projects. In 2009, the Company expects conditions to slow in its freight rail and to remain generally stable in its passenger transit rail markets. Demand for new freight cars is expected to be lower. In the passenger transit rail market, the Company believes that increases in ridership and federal funding will continue to have a positive effect on the demand for new equipment and aftermarket parts. In addition, the Company has a strong backlog of transit-related projects, some of which are expected to generate increased revenues in 2009. In response to current market conditions, Wabtec expects to take certain actions to reduce costs, including plant consolidations, work force reductions and general spending cuts. Management believes these actions will not affect the company’s ability to continue to invest in its strategic growth initiatives. In 2009 and beyond, we will continue to face many challenges, including a weaker economy, higher costs for medical and insurance premiums, and foreign currency fluctuations. Unfavorable general economic and market conditions in the United States and internationally could have a negative impact on our sales and operations. To the extent that these factors result in continued instability of capital markets, shortages of raw 23


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    materials or component parts, longer sales cycles, deferral or delay of customer orders or an inability to market our products effectively, our business and results of operations could be materially adversely affected. In addition, we face risks associated with our four-point growth strategy include the level of investment that customers are willing to make in new technologies developed by the industry and the Company, and risks inherent in global expansion. When necessary, we will modify our financial and operating strategies to reflect changes in market conditions and risks. Wabtec downsized two of its Canadian plants, in Stoney Creek and Wallaceburg, by moving certain products to lower-cost facilities and outsourcing. For the years ended December 31, 2008, 2007 and 2006, Wabtec recorded charges of $4.6 million, $3.6 million and $6.8 million, respectively. For the year ended December 31, 2007, additional severance, pension, and asset impairment charges of $1.5 million were recorded related to other Canadian operations. All of these costs were paid as of December 31, 2008. Total charges for restructuring and other expenses recorded to date have been $16.5 million, comprised of the $5.7 million for employee severance costs associated for approximately 400 salaried and hourly employees; $5.5 million of pension and postretirement benefit curtailment for those employees; $4.8 million related to asset impairments for structures, machinery, and equipment; and $541,000 for goodwill impairment. Severance costs are contractual liabilities and payment is dependent on the waiver by or expiration of certain seniority rights of those employees. As of December 31, 2008, $3.9 million of this amount had been paid. RESULTS OF OPERATIONS The following table shows our Consolidated Statements of Operations for the years indicated. Year Ended December 31, In millions 2008 2007 2006 Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,574.8 $1,360.1 $1,087.6 Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,147.6 (990.5) (790.8) Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427.2 369.6 296.8 Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (170.6) (148.5) (130.3) Engineering expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39.0) (37.4) (32.7) Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5.1) (4.0) (3.6) Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214.7) (189.9) (166.6) Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212.5 179.7 130.2 Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8.5) (3.6) (2.2) Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 (3.6) (1.4) Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . 204.3 172.5 126.6 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73.7) (63.1) (40.1) Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130.6 109.4 86.5 Discontinued operations (net of tax) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2 (1.7) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 130.6 $ 109.6 $ 84.8 2008 COMPARED TO 2007 The following table summarizes the results of operations for the period: For the year ended December 31, Percent In thousands 2008 2007 Change Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,574,749 $1,360,088 15.8% Income from operations . . . . . . . . . . . . . . . . . . . . . . . 212,516 179,741 18.2% Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,551 109,570 19.2% 24


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    Net sales increased by $214.7 million to $1,574.8 million in 2008 from $1,360.1 million in 2007. The increase is primarily due to internal growth from increased sales of $55.3 million for brake products, $36.8 million for contracts related to transit authorities, $21.8 million in remanufacturing, overhaul and build of locomotives, and $16.6 million for heat exchangers. Sales related to acquisitions also contributed $59.3 million to the increase. Sales related to international expansion also contributed $18 million to the increase. Offsetting these increases, the Company did realize a net sales decrease of $12.2 million due to foreign exchange but net earnings are mostly not impacted by foreign exchange. Net income for 2008 was $130.6 million or $2.67 per diluted share. Net income for 2007 was $109.6 million or $2.23 per diluted share. Net income improved primarily due to sales increases. Net sales by Segment The following table shows the Company’s net sales by business segment: For the year ended December 31, In thousands 2008 2007 Freight Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 773,523 $ 734,173 Transit Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801,226 625,915 Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,574,749 $1,360,088 Freight Group sales increased by $39.4 million or 5.4% due to increased sales from international expansion of $18 million, increased sales from heat exchangers of $16.6 million, sales of $11.2 million for aftermarket brake products, and sales of $11.1 million from an acquisition completed in the fourth quarter of 2008. Offsetting these increases were decreases of $20.9 million in locomotive component, repair and refurbishment services. Transit Group sales increased by $175.3 million or 28% due to increased sales of brake products of $52.1 million, contracts related to transit authorities of $37.6 million, increased sales of $21.8 million related to refurbishment of transit cars, and sales of $48 million for the full year results from acquisitions completed in 2007 and the acquisitions completed in the second quarter of 2008. Gross profit Gross profit increased to $427.2 million in 2008 compared to $369.6 million in 2007. Gross profit is dependent on a number of factors including pricing, sales volume and product mix. In 2008, gross profit, as a percentage of sales, was 27.1% compared to 27.2% in 2007. The gross profit percentage was flat due to the changing mix of revenues from Freight to Transit as Transit margins tend to be lower than Freight. This was offset by ongoing efficiency and cost saving initiatives. The provision for warranty expense is generally established for specific losses, along with historical estimates of customer claims as a percentage of sales. The provision for warranty expense was $10.7 more in 2008 compared to 2007 because of increased sales, particularly for large transit authority contracts which ramped up in 2008. The warranty reserve increased at December 31, 2008 compared to December 31, 2007 by $8.4 million due to $4 million from acquisitions completed in 2008, and primarily from customer claims or transit authority contracts. Operating expenses The following table shows our operating expenses: For the year ended December 31, Percent In thousands 2008 2007 Change Selling, general and administrative expenses . . . . . . . . . $170,597 $148,437 14.9% Engineering expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,981 37,434 4.1% Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,092 4,007 27.1% Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . $214,670 $189,878 13.1% 25


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    Selling, general, and administrative expenses increased $22.2 million in 2008 compared to 2007 mostly due to the acquisitions that were completed during the fourth quarter of 2008. Engineering expenses increased by $1.5 million in 2008 compared to 2007 mostly due to those same acquisitions. Amortization expense increased $1.0 million due to acquisitions. Total operating expenses were 13.6% and 14.0% of sales for 2008 and 2007, respectively. Income from operations Income from operations totaled $212.5 million (or 13.5% of sales) in 2008 compared to $179.7 million (or 13.2% of sales) in 2007. Income from operations improved primarily due to sales increases. Interest expense, net Interest expense, net increased $4.9 million in 2008 compared to 2007 primarily due to the Company’s overall lower cash balances, resulting in lower interest income, and acquisition financing incurred in the fourth quarter in connection with the acquisition of Standard Car Truck. Other expense, net Other expense, net decreased $3.9 million in 2008 compared to 2007. The Company recorded foreign exchange expense of $300,000 and $3.2 million, respectively, in 2008 and 2007, due to the effect of currency exchange rate changes on intercompany transactions that are non U.S. dollar denominated amounts and charged or credited to earnings. Income taxes The effective income tax rate was 36.1% and 36.6% in 2008 and 2007, respectively. The decrease in the effective tax rate is primarily the result of a $1.0 million net tax benefit recognized in 2008 due to the expiration of statutory review periods and current examinations in various tax jurisdictions. Net income Net income for 2008 increased $21.0 million, compared to 2007. Net income improved primarily due to sales increases. 2007 COMPARED TO 2006 The following table summarizes the results of operations for the period: For the year ended December 31, Percent In thousands 2007 2006 Change Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,360,088 $1,087,620 25.1% Income from operations . . . . . . . . . . . . . . . . . . . . . . . 179,741 130,151 38.1% Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,570 84,804 29.2% Net sales increased by $272.5 million to $1,360.1 million in 2007 from $1,087.6 million in 2006. The increase is primarily due to internal growth from increased sales of $69.4 million for locomotives, $30.3 million for refurbishing transit cars, $38.1 million for heat exchangers, $20.6 million for contracts related to transit authorities, and $99.4 million from acquisitions completed in the fourth quarter of 2006 and second quarter of 2007. Offsetting those increases was a decrease of $22.3 million primarily related to lower industry deliveries of freight cars. The Company did realize a net sales improvement of $22.7 million due to foreign exchange but net earnings are mostly not impacted by foreign exchange. Net income for 2007 was $109.6 million or $2.23 per diluted share. Net income for 2006 was $84.8 million or $1.73 per diluted share. Net income improved primarily due to sales increases and higher operating margins. 26


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    Net sales by Segment The following table shows the Company’s net sales by business segment: For the year ended December 31, In thousands 2007 2006 Freight Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 734,173 $ 709,353 Transit Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625,915 378,267 Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,360,088 $1,087,620 Freight Group sales increased by $24.8 million or 3.5% due to increased sales from heat exchangers of $38.1 million, sales of $18.0 million from an acquisition completed in the fourth quarter of 2006, and a net sales improvement of about $1.6 million due to foreign exchange. Offsetting these increases were decreases of $14.0 million in locomotive component, repair and refurbishment services, and decreases of $22.3 million primarily related to lower industry deliveries of freight cars. Transit Group sales increased by $247.7 million or 65.5% due to increased commuter locomotive sales of $83.4 million, increased sales of $41.7 million related to refurbishment of transit cars, contracts related to transit authorities of $20.4 million, sales of $81.4 million from acquisitions completed in the fourth quarter of 2006 and second quarter of 2007, and a net sales improvement of about $21.1 million due to foreign exchange. Gross profit Gross profit increased to $369.6 million in 2007 compared to $296.8 million in 2006. Gross profit is dependent on a number of factors including pricing, sales volume and product mix. In 2007, gross profit, as a percentage of sales, was 27.2% compared to 27.3% in 2006. The gross profit percentage was flat due to the changing mix of revenues from Freight to Transit as Transit margins tend to be lower than Freight. This was offset by ongoing efficiency and cost saving initiatives. In 2007, restructuring plan expenses of $5.5 million were recorded in cost of sales. 2007 gross profit, as a percentage of sales, excluding these charges, would have been 27.6%. In 2006, restructuring plan expenses of $6.3 million were recorded in cost of sales. 2006 gross profit, as a percentage of sales, excluding these charges, would have been 27.9%. The provision for warranty expense was $180,000 less in 2007 compared to 2006. The warranty reserve increased at December 31, 2007 compared to December 31, 2006 by $4.9 million due to $4.7 million from an acquisition completed in the second quarter of 2007. Operating expenses The following table shows our operating expenses: For the year ended December 31, Percent In thousands 2007 2006 Change Selling, general and administrative expenses . . . . . . . . . $148,437 $130,294 13.9% Engineering expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,434 32,701 14.5% Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,007 3,631 10.4% Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . $189,878 $166,626 14.0% Selling, general, and administrative expenses increased $18.1 million in 2007 compared to 2006 mostly due to the acquisitions that were completed during the fourth quarter of 2006 and second quarter of 2007. In addition, during 2007, the Company recorded a provision of $4.4 million for the settlement with Bombardier (see Note 19 of “Notes to Condensed Consolidated Financial Statements”). Engineering expenses increased by $4.7 million in 2007 compared to 2006 mostly due to those same acquisitions. Total operating expenses were 14.0% and 15.3% of sales for 2007 and 2006, respectively. Income from operations Income from operations totaled $179.7 million (or 13.2% of sales) in 2007 compared to $130.2 million (or 12.0% of sales) in 2006. Income from operations improved primarily due to sales increases and higher operating margins. 27


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    Interest expense, net Interest expense, net increased $1.4 million in 2007 compared to 2006 primarily due to the Company’s overall lower cash balances, resulting in lower interest income. Other expense, net Other expense, net increased $2.2 million in 2007 compared to 2006. The Company recorded foreign exchange expense of $3.2 million and $1.1 million, respectively, in 2007 and 2006, due to the effect of currency exchange rate changes on intercompany transactions that are non U.S. dollar denominated amounts and charged or credited to earnings. Income taxes The effective income tax rate was 36.6% and 31.7% in 2007 and 2006, respectively. The increase in effective tax rate is primarily the result of the Company’s 2007 adoption of FIN 48 as well as the reversal of certain valuation allowances in 2006. Approximately $3.1 million and $5.3 million of tax benefits were recognized in 2007 and 2006, respectively, related to the reversal of deferred tax valuation allowances. Net income Net income for 2007 increased $24.8 million, compared to 2006. Net income improved primarily due to sales increases and higher operating margins. Liquidity and Capital Resources Liquidity is provided primarily by operating cash flow and borrowings under the Company’s unsecured credit facility with a consortium of commercial banks. The following is a summary of selected cash flow information and other relevant data: For the year ended December 31, In thousands 2008 2007 2006 Cash provided by (used for): Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 159,384 $142,509 $ 151,027 Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (417,441) (93,536) (104,762) Financing activities: Proceeds from debt . . . . . . . . . . . . . . . . . . . . . . . . . . 236,000 — — Payments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . (385) (657) — Stock repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,796) (17,888) (18,874) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (108) 5,560 17,067 Operating activities. Cash provided by operations in 2008 was $159.4 million as compared to $142.5 million in 2007. This $16.9 million increase was the result of increased earnings offset by certain changes in operating assets and liabilities. Net income for the Company increased $21.0 million primarily as a result of increased sales. Although account receivable continued to increase due to higher overall sales, the increase was less than the increase in 2007 which resulted in a $10.8 million improvement. Inventories increased in 2008 about $28.4 million more than 2007 due to higher inventory on hand for large contracts requirements and overall higher sales activity. Accounts payable increased less in 2008 compared to 2007 by $18.4 million resulting in less cash generated. Customer deposits and other accruals increased compared to 2007 resulting in a cash increase of $35.8 million. Cash was generated due to the collection of large customer deposits on certain long term contracts. Other assets and liabilities, including accrued income taxes, used cash of $9.1 million compared to 2007. Cash provided by operations in 2007 was $142.5 million as compared to $151.0 million in 2006. This $8.5 million decrease was the result of increased earnings offset by certain changes in operating assets and liabilities. Net income for the Company increased $24.8 million primarily as a result of increased sales and higher operating margins. Accounts receivable decreased operating cash flows by $77.2 million due to large customer receivables collected for certain locomotive contracts in 2006. Accounts payable provided cash of $40.1 million due to increased purchases for new businesses. Accrued liabilities used cash of $9.3 million as the result of applying customer deposits against customer contract revenue in 2007. Other assets and liabilities used cash of $782,000. 28


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    Investing activities. In 2008 and 2007, cash used in investing activities was $417.4 million and $93.5 million, respectively. In 2008, Wabtec acquired 100% of the stock of Poli SpA and Standard Car Truck for $82.3 million and $302.9 million, respectively, net of cash received. Other investments include $8.4 million for certain operations in China, and $4.5 million for certain assets to support our train management business. In 2007, Wabtec acquired 100% of the stock of Ricon Corporation for $73.6 million, net of cash received. In 2006, Wabtec acquired 100% of the stock of Schaefer Equipment and Becorit for $36.3 million and $50.9 million, respectively, net of cash received. Capital expenditures were $19.7 million, $20.4 million, and $20.9 million in 2008, 2007 and 2006, respectively. In 2006, the Company sold a non-core division for $1.4 million. Financing activities. In 2008, cash provided by financing activities was $189.7 million, which included $236.0 million of borrowings under the new credit facility, offset by $45.8 million of Wabtec stock repurchases. In 2007, cash used by financing activities was $13.0 million compared to cash used by financing activities of $1.8 million in 2006. The following table shows outstanding indebtedness at December 31, 2008 and 2007. December 31, In thousands 2008 2007 6.875% senior notes, due 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000 $150,000 Term Loan Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 — Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000 — Capital Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,080 250 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387,080 150,250 Less—current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,381 73 Long-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $356,699 $150,177 Cash balance at December 31, 2008 and 2007 was $141.8 million and $234.7 million, respectively. 2008 Refinancing Credit Agreement On November 4, 2008, the Company refinanced its existing unsecured revolving credit agreement with a consortium of commercial banks. This “2008 Refinancing Credit Agreement” provides the company with a $300 million five-year revolving credit facility and a $200 million five-year term loan facility. The Company incurred $2.9 million of deferred financing cost related to the 2008 Refinancing Credit Agreement. Both facilities expire in January 2013. The 2008 Refinancing Credit Agreement borrowings bear variable interest rates indexed to the indices described below. At December 31, 2008 the weighted average interest rate on the Company’s variable rate debt was 3.32%. At December 31, 2008, the Company had available bank borrowing capacity, net of $57.3 million of letters of credit, of approximately $242.7 million, subject to certain financial covenant restrictions. Under the 2008 Refinancing Credit Agreement, the Company may elect a Base Rate of interest or an interest rate based on the London Interbank Offered Rate (“LIBOR”) of interest (“the Alternate Rate”). The Base Rate adjusts on a daily basis and is the greater of the PNC, N.A. prime rate, 30-day LIBOR plus 150 basis points or the Federal Funds Effective Rate plus 0.5% per annum, plus a margin that ranges from 25 to 50 basis points. The Alternate rate is based on quoted LIBOR rates plus a margin that ranges from 125 to 200 basis points. Both the Base Rate and Alternate Rate margins are dependent on the Company’s consolidated total indebtedness to cash flow ratios. The initial Base Rate margin is 25 basis points and the initial Alternate Rate margin is 175 basis points. The 2008 Refinancing Credit Agreement limits the Company’s ability to declare or pay cash dividends and prohibits the Company from declaring or making other distributions, subject to certain exceptions. The 2008 Refinancing Credit Agreement contains various other covenants and restrictions including the following 29


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    limitations: incurrence of additional indebtedness; mergers, consolidations, sales of assets and acquisitions; additional liens; sale and leasebacks; permissible investments, loans and advances; certain debt payments; and imposes a minimum interest expense coverage ratio of 3.0 and a maximum debt to cash flow ratio of 3.25. The Company is in compliance with these measurements and covenants and expects that these measurements will not be any type of limiting factor in executing our operating activities. See Note 9 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. Refinancing Credit Agreement In January 2004, the Company refinanced its existing unsecured revolving credit agreement with a consortium of commercial banks. This “Refinancing Credit Agreement” provided a $175 million five-year revolving credit facility expiring in January 2009. In November 2005, the Company entered into an amendment to the Refinancing Credit Agreement which extended the expiration of the agreement. The Company entered into another amendment to its Refinancing Credit Agreement in February 2007 which permitted the Company to complete any acquisitions without prior approval of the bank consortium as long as certain financial parameters and ratios are met. Refinancing Credit Agreement variable interest rates were indexed to certain indices. The Company may have elected a base interest rate or an interest rate based on the LIBOR. The base interest rate was the greater of LaSalle Bank National Association’s prime rate or the federal funds effective rate plus 0.5% per annum. The LIBOR rate was based on LIBOR plus a margin that ranges from 62.5 to 175 basis points depending on the Company’s consolidated total indebtedness to cash flow ratios. The margin was 62.5 basis points. The Company did not borrow under the Refinancing Credit Agreement during 2007 or 2006. 6.875% Senior Notes Due August 2013. In August 2003, the Company issued $150 million of Senior Notes due in 2013 (“the Notes”). The Notes were issued at par. Interest on the Notes accrues at a rate of 6.875% per annum and is payable semi-annually on January 31 and July 31 of each year. The proceeds were used to repay debt outstanding under the Company’s existing credit agreement, and for general corporate purposes. The principal balance is due in full at maturity. The Notes are senior unsecured obligations of the Company and rank pari passu with all existing and future senior debt and senior to all our existing and future subordinated indebtedness of the Company. The indenture under which the Notes were issued contains covenants and restrictions which limit among other things, the following: the incurrence of indebtedness, payment of dividends and certain distributions, sale of assets, change in control, mergers and consolidations and the incurrence of liens. The Company is in compliance with these measurements and covenants and expects that these measurements will not be any type of limiting factor in executing our operating activities. Management believes that based on current levels of operations and forecasted earnings, cash flow and liquidity will be sufficient to fund working capital and capital equipment needs as well as meeting debt service requirements. If sources of funds were to fail to satisfy the Company’s cash requirements, the Company may need to refinance our existing debt or obtain additional financing. There is no assurance that such new financing alternatives would be available, and, in any case, such new financing, if available, would be expected to be more costly and burdensome than the debt agreements currently in place. 30


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    Contractual Obligations and Off-Balance Sheet Arrangements The Company is obligated to make future payments under various contracts such as debt agreements, lease agreements and have certain contingent commitments such as debt guarantees. The Company has grouped these contractual obligations and off-balance sheet arrangements into operating activities, financing activities, and investing activities in the same manner as they are classified in the Statement of Consolidated Cash Flows to provide a better understanding of the nature of the obligations and arrangements and to provide a basis for comparison to historical information. The table below provides a summary of contractual obligations and off-balance sheet arrangements as of December 31, 2008: Less than 1–3 3–5 More than In thousands Total 1 year years years 5 years Operating activities: Purchase obligations (1) . . . . . . . . . . . . . . . . . . . . $ 36,731 $ 28,236 $ 4,010 $ 4,485 $ — Operating leases (2) . . . . . . . . . . . . . . . . . . . . . . . 36,687 7,636 14,015 9,365 5,671 Pension benefit payments (3) . . . . . . . . . . . . . . . . — 10,557 21,697 17,873 — Postretirement benefit payments (4) . . . . . . . . . . . — 2,348 4,533 4,259 — Financing activities: Interest payments (5) . . . . . . . . . . . . . . . . . . . . . . 69,242 17,599 31,599 19,771 273 Long-term debt (6) . . . . . . . . . . . . . . . . . . . . . . . . 387,080 30,381 72,948 283,583 168 Dividends to shareholders (7) . . . . . . . . . . . . . . . . — — — — — Investing activities: Capital projects (8) . . . . . . . . . . . . . . . . . . . . . . . . 29,009 29,009 — — — Other: Standby letters of credit (9) . . . . . . . . . . . . . . . . . 58,274 9,811 48,463 — — Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $135,577 $197,265 $339,336 (1) Purchase obligations for the purposes of this disclosure have been defined as a contractual obligation that is in excess of $100,000 annually, and $200,000 in total. (2) Future minimum payments for operating leases are disclosed by year in Note 15 of the “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. (3) Annual payments to participants are expected to continue into the foreseeable future at the amounts or ranges noted. Pension benefit payments are based on actuarial estimates using current assumptions for discount rates, expected return on long-term assets and rate of compensation increases. The Company expects to contribute about $9.1 million to pension plan investments in 2009. See further disclosure in Note 10 of the “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. (4) Annual payments to participants are expected to continue into the foreseeable future at the amounts or ranges noted. Postretirement payments are based on actuarial estimates using current assumptions for discount rates and health care costs. See further disclosure in Note 10 of the “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. (5) Interest payments are payable January and July of each year at 6 7/8% of $150 million Senior Notes due in 2013. Interest payments for the Term Loan Facility, Revolving Credit Facility and Capital Leases are based on contractual terms and the Company’s current interest rates. (6) Scheduled principal repayments of outstanding loan balances are disclosed in Note 9 of the “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. (7) Shareholder dividends are subject to approval by the Company’s Board of Directors, currently at an annual rate of approximately $1.9 million. (8) The annual capital expenditure budget is subject to approval by the Board of Directors. The 2009 budget amount was approved at the December 2008 Board of Directors meeting. (9) The Company has $57.3 million in outstanding letters of credit for performance and bid bond purposes, which expire in various dates through 2011. Amounts include interest payments based on contractual terms and the Company’s current interest rate. 31


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    The above table does not reflect uncertain tax positions of $17.1 million, the timing of which are uncertain except for $484,000 that may become payable during 2009. Refer to Note 11 of the “Notes to Consolidated Financial Statements” for additional information on uncertain tax positions. Obligations for operating activities. The Company has entered into $36.7 million of material long-term non-cancelable materials and supply purchase obligations. Operating leases represent multi-year obligations for rental of facilities and equipment. Estimated pension funding and post retirement benefit payments are based on actuarial estimates using current assumptions for discount rates, expected return on long-term assets, rate of compensation increases and health care cost trend rates. Benefits paid for pension obligations were $14.8 million and $10.4 million in 2008 and 2007, respectively. Benefits paid for post retirement plans were $2.0 million and $2.2 million in 2008 and in 2007, respectively. Obligations for financing activities. Cash requirements for financing activities consist primarily of long- term debt repayments, interest payments and dividend payments to shareholders. The Company has historically paid quarterly dividends to shareholders, subject to quarterly approval by our Board of Directors, currently at a rate of approximately $1.9 million annually. The Company arranges for performance bonds to be issued by third party insurance companies to support certain long term customer contracts. At December 31, 2008 initial value of performance bonds issued on the Company’s behalf is about $190.1 million. Obligations for investing activities. The Company typically spends approximately $20 million to $30 million a year for capital expenditures, primarily related to facility expansion efficiency and modernization, health and safety, and environmental control. The Company expects annual capital expenditures in the future will be within this range. Forward Looking Statements We believe that all statements other than statements of historical facts included in this report, including certain statements under “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure that our assumptions and expectations are correct. These forward-looking statements are subject to various risks, uncertainties and assumptions about us, including, among other things: Economic and industry conditions • prolonged unfavorable economic and industry conditions in the markets served by us, including North America, South America, Europe, Australia, Asia, and South Africa; • further decline in demand for freight cars, locomotives, passenger transit cars, buses and related products and services; • reliance on major original equipment manufacturer customers; • original equipment manufacturers’ program delays; • demand for services in the freight and passenger rail industry; • demand for our products and services; • orders either being delayed, cancelled, not returning to historical levels, or reduced or any combination of the foregoing; 32


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    • consolidations in the rail industry; • continued outsourcing by our customers; industry demand for faster and more efficient braking equipment; • fluctuations in interest rates and foreign currency exchange rates; or • availability of credit; Operating factors • supply disruptions; • technical difficulties; • changes in operating conditions and costs; • increases in raw material costs; • successful introduction of new products; • performance under material long-term contracts; • labor relations; • completion and integration of acquisitions; or • the development and use of new technology; Competitive factors • the actions of competitors; Political/governmental factors • political stability in relevant areas of the world; • future regulation/deregulation of our customers and/or the rail industry; • levels of governmental funding on transit projects, including for some of our customers; • political developments and laws and regulations; or • the outcome of our existing or any future legal proceedings, including litigation involving our principal customers and any litigation with respect to environmental, asbestos-related matters and pension liabilities; and Transaction or commercial factors • the outcome of negotiations with partners, governments, suppliers, customers or others. Statements in this 10-K apply only as of the date on which such statements are made, and we undertake no obligation to update any statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Critical Accounting Policies The preparation of the financial statements in accordance with generally accepted accounting principles requires Management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Areas of uncertainty that require judgments, estimates and assumptions include the accounting for derivatives, environmental matters, warranty reserves, the testing of goodwill and other 33


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    intangibles for impairment, proceeds on assets to be sold, pensions and other postretirement benefits, and tax matters. Management uses historical experience and all available information to make these judgments and estimates, and actual results will inevitably differ from those estimates and assumptions that are used to prepare the Company’s financial statements at any given time. Despite these inherent limitations, Management believes that Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and the financial statements and related footnotes provide a meaningful and fair perspective of the Company. A discussion of the judgments and uncertainties associated with accounting for derivatives and environmental matters can be found in Notes 2 and 19, respectively, in the “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. A summary of the Company’s significant accounting policies is included in Note 2 in the “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report. Management believes that the application of these policies on a consistent basis enables the Company to provide the users of the financial statements with useful and reliable information about the Company’s operating results and financial condition. Effect if Actual Results Differ From Description Judgments and Uncertainties Assumptions Accounts Receivable and Allowance for Doubtful Accounts: The Company provides an The allowance for doubtful If our estimates regarding the allowance for doubtful accounts accounts receivable reflects our collectability of troubled accounts, to cover anticipated losses on best estimate of probable losses and/or our actual losses within our uncollectible accounts inherent in our receivable portfolio receivable portfolio exceed our receivable. determined on the basis of historical experience, we may be historical experience, specific exposed to the expense of allowances for known troubled increasing our allowance for accounts and other currently doubtful accounts. available evidence. Inventories: Inventories are stated at the Cost is determined under the If the market value of our products lower of cost or market. first-in, first-out (FIFO) method. were to decrease due to changing Inventory costs include material, market conditions, the Company labor and overhead. could be at risk of incurring the cost of additional reserves to adjust inventory value to a market value lower than stated cost. Inventory is reviewed to ensure The Company compares inventory If our estimates regarding sales that an adequate provision is components to prior year sales and backlog requirements are recognized for excess, slow history and current backlog and inaccurate, we may be exposed to moving and obsolete anticipated future requirements. To the expense of increasing our inventories. the extent that inventory parts reserves for slow moving and exceed estimated usage and obsolete inventory. demand, a reserve is recognized to reduce the carrying value of inventory. Also, specific reserves are established for known inventory obsolescence. 34


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    Effect if Actual Results Differ From Description Judgments and Uncertainties Assumptions Goodwill and Indefinite-Lived Intangibles: Goodwill and indefinite-lived We use a combination of a Management considers historical intangibles are required to be guideline public company market experience and all available tested for impairment at least approach and a discounted cash information at the time the fair annually. The evaluation of flow model (“DCF model”) to values of its business are impairment involves comparing determine the current fair value of estimated. However, actual the current fair value of the the business. A number of amounts realized may differ from business to the recorded value significant assumptions and those used to evaluate the (including goodwill). estimates are involved in the impairment of goodwill. application of the DCF model to forecast operating cash flows, If actual results are not consistent including markets and market with our assumptions and share, sales volume and pricing, judgments used in estimating costs to produce and working future cash flows and asset fair capital changes. values, we may be exposed to additional impairment losses that could be material to our results of operations. Warranty Reserves: The Company provides In general, reserves are provided If actual results are not consistent warranty reserves to cover for as a percentage of sales, based with the assumptions and expected costs from repairing or on historical experience. In judgments used to calculate our replacing products with addition, specific reserves are warranty liability, the Company durability, quality or established for known warranty may be at risk of realizing material workmanship issues occurring issues and their estimable losses. gains or losses. during established warranty periods. Accounting for Pensions and Postretirement Benefits: These amounts are determined Significant judgments and If assumptions used in determining using actuarial methodologies estimates are used in determining the pension and other and incorporate significant the liabilities and expenses for postretirement benefits change assumptions, including the rate pensions and other postretirement significantly, these costs can used to discount the future benefits. fluctuate materially from period to estimated liability, the long-term period. rate of return on plan assets and The rate used to discount future several assumptions relating to estimated liabilities is determined the employee workforce (salary considering the rates available at increases, medical costs, year-end on debt instruments that retirement age and mortality). could be used to settle the obligations of the plan. The long- term rate of return is estimated by considering historical returns and expected returns on current and projected asset allocations and is generally applied to a five-year average market value of assets. 35


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    Effect if Actual Results Differ From Description Judgments and Uncertainties Assumptions Income Taxes: As a global company, Wabtec The estimate of our tax obligations Management uses its best records an estimated liability or are uncertain because Management judgment in the determination of benefit for income and other must use judgment to estimate the these amounts. However, the taxes based on what it exposures associated with our liabilities ultimately realized and determines will likely be paid in various filing positions, as well as paid are dependent on various various tax jurisdictions in realization of our deferred tax matters including the resolution of which it operates in accordance assets. the tax audits in the various with Statement of Financial affected tax jurisdictions and may Accounting Standards No. 109, FIN 48 establishes a recognition differ from the amounts recorded. “Accounting for Income Taxes” and measurement threshold to and Financial Accounting determine the amount of tax An adjustment to the estimated Standards Board Interpretation benefit that should be recognized liability would be recorded through No. 48, “Accounting for related to uncertain tax positions. income in the period in which it Uncertainty in Income Taxes” becomes probable that the amount (“FIN 48”). of the actual liability differs from the recorded amount. A deferred tax valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Revenue Recognition: Revenue is recognized in Revenue is recognized when Should market conditions and accordance with Staff products have been shipped to the customer demands dictate changes Accounting Bulletins (SABs) respective customers, title has to our standard shipping terms, the 101, “Revenue Recognition in passed and the price for the Company may be impacted by Financial Statements” and 104 product has been determined. longer than typical revenue “Revision of Topic 13.” recognition cycles. The Company recognizes For long-term contracts, revenues Provisions are made currently for revenues on long-term contracts and cost estimates are reviewed estimated losses on uncompleted based on the percentage of and revised at a minimum contracts. completion method of quarterly and adjustments are accounting. The reflected in the accounting period units-of-delivery method or as such amounts are determined. other input-based or output- based measures, as appropriate, are used to measure the progress toward completion of individual contracts. Contract revenues and cost estimates are reviewed and revised at a minimum quarterly and adjustments are reflected in the accounting period as such amounts are determined. 36


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    Effect if Actual Results Differ From Description Judgments and Uncertainties Assumptions Certain pre-production costs Pre-production costs are A charge to expense for relating to long term production recognized over the expected life unrecognized portions of and supply contracts have been of the contract usually based on the pre-production costs could be deferred and will be recognized Company’s progress toward the realized if the Company’s estimate over the life of the contracts. estimated number of units of the number of units to be expected to be delivered under the delivered changes or the production or supply contract. underlying contract is cancelled. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk In the ordinary course of business, Wabtec is exposed to risks that increases in interest rates may adversely affect funding costs associated with its variable-rate debt. The Company’s variable rate debt represents 61% and 0% of total long-term debt at December 31, 2008 and 2007, respectively. On an annual basis a 1% change in the interest rate for variable rate debt at December 31, 2008 would increase or decrease interest expense by $2.3 million. Foreign Currency Exchange Risk The Company has entered into foreign currency forward contracts to reduce the impact of changes in currency exchange rates. Forward contracts are agreements with a counterparty to exchange two distinct currencies at a set exchange rate for delivery on a set date at some point in the future. There is no exchange of funds until the delivery date. At the delivery date the Company can either take delivery of the currency or settle on a net basis. We occasionally enter into several types of financial instruments for the purpose of managing our exposure to foreign currency exchange rate fluctuations in countries in which we have significant operations. As of December 31, 2008, we had several such instruments outstanding to hedge currency rate fluctuation in 2009. At December 31, 2008, the Company had forward contracts for the sale of South African Rand (ZAR) and the purchase of U.S. Dollars (USD). The Company concluded that these foreign currency forward contracts qualify for cash flow hedge accounting which permits the recording of the fair value of the forward contract and corresponding adjustment to other comprehensive income (loss), net of tax, on the balance sheet. As of December 31, 2008, the Company had forward contracts with a notional value of $5.0 million ZAR (or $557,000 U.S.) with an average exchange rate of $8.97 ZAR per $1 USD, resulting in the recording of a current asset of $41,000 and a corresponding offset in accumulated other comprehensive income of $26,000, net of tax. At December 31, 2007, the Company had forward contracts for the sale of USD and the purchase of Euro with a notional value of €2.3 million Euro (or $3.1 million USD), with an average exchange rate of $1.32 USD per €1 Euro. These forward contracts are used to mitigate the variability in cash flows from the payment of liabilities denominated in currencies other than the USD. Since the Company does not treat these derivatives as hedges, the change in fair value of both the forward contracts and the related liabilities are recorded in the income statement. In 2007, the Company recorded a fair value gain in the amount of $315,000. We are also subject to certain risks associated with changes in foreign currency exchange rates to the extent our operations are conducted in currencies other than the U.S. dollar. For the year ended December 31, 2008, approximately 59% of Wabtec’s net sales were to the United States, 9% to Canada, 3% to Mexico, 5% to Australia, 2% to Germany, 11% to the United Kingdom, and 11% in other international locations. (See Note 20 of “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this report). Our market risk exposure is not substantially different from our exposure at December 31, 2007. 37


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    Recent Accounting Pronouncements In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements. The statement indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. SFAS 157 defines fair value based upon an exit price model. Relative to SFAS 157, the FASB issued FASB Staff Positions (FSP) 157-1, 157-2, and 157-3. FSP 157-1 amends SFAS 157 to exclude SFAS 13 and its related interpretive accounting pronouncements that address leasing transactions, while FSP 157-2 delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. FSP 157-3 clarifies the application of SFAS 157 as it relates to the valuation of financial assets in a market that is not active for those financial assets. This FSP is effective immediately and includes those periods for which financial statements have not been issued. The Company does not have any financial assets that are valued using inactive markets, and as such is not impacted by the issuance of this FSP. The Company adopted SFAS 157 as of January 1, 2008, with the exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. Refer to Note 18 to the Notes to Consolidated Financial Statements for additional discussion on fair value measurements. In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115” (SFAS 159). SFAS 159 permits entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS 159 and has elected not to measure any additional financial instruments and other items at fair value. In December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations” (SFAS 141(R)), replacing SFAS No. 141, “Business Combinations” (SFAS 141), and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an Amendment of ARB No. 51” (SFAS 160). SFAS 141(R) retains the fundamental requirements of SFAS 141, broadens its scope by applying the acquisition method to all transactions and other events in which one entity obtains control over one or more other businesses, and requires, among other things, that assets acquired and liabilities assumed be measured at fair value as of the acquisition date, that liabilities related to contingent consideration be recognized at the acquisition date and remeasured at fair value in each subsequent reporting period, that acquisition-related costs be expensed as incurred, and that income be recognized if the fair value of the net assets acquired exceeds the fair value of the consideration transferred. SFAS 160 establishes accounting and reporting standards for noncontrolling interests (i.e., minority interests) in a subsidiary, including changes in a parent’s ownership interest in a subsidiary and requires, among other things, that noncontrolling interests in subsidiaries be classified as a separate component of equity. Except for the presentation and disclosure requirements of SFAS 160, which are to be applied retrospectively for all periods presented, SFAS 141(R) and SFAS 160 are to be applied prospectively in financial statements issued for fiscal years beginning after December 15, 2008. The Company is currently evaluating the impact of adopting these statements. In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an Amendment FASB Statement No. 133” (SFAS 161). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. SFAS 161 applies to all derivative instruments within the scope of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. 38


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    SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. The Company is currently evaluating the disclosure implications of adopting this statement. In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (FSP EITF 03-6-1). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform with the provisions of FSP EITF 03-6-1. The Company is currently evaluating the impact of adopting FSP EITF 03-6-1. In December 2008, the FASB issued FSP SFAS No. 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (FSP SFAS 132(R)-1). FSP SFAS 132(R)-1 amends SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, (SFAS 132(R)), to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The additional disclosure requirements under this FSP include expanded disclosures about an entity’s investment policies and strategies, the categories of plan assets, concentrations of credit risk and fair value measurements of plan assets. The Company is currently evaluating the disclosure implications of adopting this statement. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements and supplementary data are set forth in Item 15, of Part IV hereof. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements with our independent public accountants. Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Wabtec’s principal executive officer and its principal financial officer have evaluated the effectiveness of Wabtec’s “disclosure controls and procedures,” (as defined in Exchange Act Rule 13a-15(e)) as of December 31, 2008. Based upon their evaluation, the principal executive officer and principal financial officer concluded that Wabtec’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by Wabtec in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by Wabtec in such reports is accumulated and communicated to Wabtec’s Management, including its principal executive officer and principal finance officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting There was no change in Wabtec’s “internal control over financial reporting” (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2008, that has materially affected, or is reasonably likely to materially affect, Wabtec’s internal control over financial reporting. Management’s annual report on internal control over financial reporting and the attestation report of the registered public accounting firm are included in Part IV, Item 15 of this report. 39


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    Management’s Report on Internal Control over Financial Reporting Management’s Report on Internal Control Over Financial Reporting appears on page 45 and is incorporated herein by reference. Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting Ernst & Young’s attestation report on internal control over financial reporting appears on page 47 and is incorporated herein by reference. Item 9B. OTHER INFORMATION None. 40


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    PART III Items 10 through 14. In accordance with the provisions of General Instruction G(3) to Form 10-K, the information required by Item 10 (Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters), Item 13 (Certain Relationships and Related Transactions, and Director Independence) and Item 14 (Principal Accounting Fees and Services) is incorporated herein by reference from the Company’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 13, 2009, except for the Equity Compensation Plan Information required by Item 12, which is set forth in the table below. The definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2008. Information relating to the executive officers of the Company is set forth in Part I. Wabtec has adopted a Code of Ethics for Senior Officers which is applicable to all of our executive officers. As described in Item 1 of this report the Code of Ethics for Senior Officers is posted on our website at www.wabtec.com. In the event that we make any amendments to or waivers from this code, we will disclose the amendment or waiver and the reasons for such on our website. This table provides aggregate information as of December 31, 2008 concerning equity awards under Wabtec’s compensation plans and arrangements. (a) (b) (c) Number of securities Weighted-average remaining available for Number of securities to exercise price of future issuance be issued upon exercise outstanding under equity compensation of outstanding options, options warrants plans (excluding securities Plan Category warrants and rights and rights reflected in column (a)) Equity compensation plans approved by shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 1,054,244 $20.16 1,759,969 Equity compensation plans not approved by shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . — — — Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,054,244 $20.16 1,759,969 41


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    PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The financial statements, financial statement schedules and exhibits listed below are filed as part of this annual report: Page (a) (1) Financial Statements and Reports on Internal Control Management’s Reports to Westinghouse Air Brake Technologies Corporation Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . 46 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Consolidated Balance Sheets as of December 31, 2008 and 2007 . . . . . . . . . . . . . . . . . . . . 48 Consolidated Statements of Operations for the three years ended December 31, 2008, 2007 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Consolidated Statements of Cash Flows for the three years ended December 31, 2008, 2007 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Consolidated Statements of Shareholders’ Equity for the three years ended December 31, 2008, 2007 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 (2) Financial Statement Schedules Schedule II—Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Filing Method (b) Exhibits 2.1 Amended and Restated Agreement and Plan of Merger, as amended (originally included as Annex A to the Joint Proxy Statement/Prospectus) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3.1 Restated Certificate of Incorporation of the Company dated January 30, 1995, as amended March 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3.2 Amended and Restated By-Laws of the Company, effective December 13, 2007 . . . . . . . . 7 4.1(a) Indenture with the Bank of New York as Trustee dated as of August 6, 2003 . . . . . . . . . . . 5 4.1(b) Resolutions Adopted July 23, 2003 by the Board of Directors establishing the terms of the offering of up to $150,000,000 aggregate principal amount of 6.875% Notes due 2013 . . . 5 4.2 Purchase Agreement, dated July 23, 2003, by and between the Company and the initial purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4.3 Exchange and Registration Rights Agreement, dated August 6, 2003 . . . . . . . . . . . . . . . . . 5 10.1 Indemnification Agreement dated January 31, 1995 between the Company and the Voting Trust Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 42


  • Page 47

    Filing Method 10.2 Agreement of Sale and Purchase of the North American Operations of the Railway Products Group, an operating division of American Standard Inc. (now known as Trane), dated as of 1990 between Rail Acquisition Corp. and American Standard Inc. (only provisions on indemnification are reproduced) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 10.3 Letter Agreement (undated) between the Company and American Standard Inc. (now known as Trane) on environmental costs and sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 10.4 Purchase Agreement dated as of June 17, 1992 among the Company, Schuller International, Inc., Manville Corporation and European Overseas Corporation (only provisions on indemnification are reproduced) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 10.5 Asset Purchase Agreement dated as of January 23, 1995 among the Company, Pulse Acquisition Corporation, Pulse Electronics, Inc., Pulse Embedded Computer Systems, Inc. and the Pulse Shareholders (Schedules and Exhibits omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . 2 10.6 Letter Agreement dated as of January 19, 1995 between the Company and Vestar Capital Partners, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 10.7 Westinghouse Air Brake Company 1995 Non-Employee Directors’ Fee and Stock Option Plan, as amended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 10.8 Letter Agreement dated as of January 1, 1995 between the Company and Vestar Capital Partners, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 10.9 Form of Indemnification Agreement between the Company and Authorized Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 10.10 Westinghouse Air Brake Technologies Corporation 2000 Stock Incentive Plan, as amended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 10.11 Asset Purchase Agreement, by and between General Electric Company, through its GE Transportation Systems business and Westinghouse Air Brake Technologies Corporation, dated as of July 24, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 10.12 Sale and Purchase Agreement, by and between Rütgers Rail S.p.A. and the Company, dated August 12, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 10.13 Amendment Agreement dated January 28, 2005 by and among Rütgers Rail S.p.A., the Company, CoFren S.r.l. and RFPC Holding Company to the Sale and Purchase Agreement dated August 12, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 10.14 Employment Agreement with Albert J. Neupaver, dated February 1, 2006 . . . . . . . . . . . . . . . 8 10.15 Restricted Stock Agreement with Albert J. Neupaver, dated February 1, 2006 . . . . . . . . . . . . . 8 10.16 Stock Purchase Agreement, by and among Wabtec Holding Company, certain shareholders of Schaefer Manufacturing, Inc. and CCP Limited Partnership, dated October 6, 2006 . . . . . . 10 10.17 Share Purchase Agreement, by and between BBA Holding Deutschland GmbH and Westinghouse Air Brake Technologies Corporation, dated November 27, 2006 (Exhibits and Schedules omitted, but will be provided to the Commission upon request) . . . . . . . . . . . . . . . 11 10.18 Share Purchase Agreement dated as of June 8, 2007 among the Company, RICON Acquisition Corp., RICON Corp., CGW Southeast Partners IV, L.P. and William L. Baldwin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 10.19 Stock Purchase Agreement, by and between the Company and Polinvest S.r.l., dated May 16, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 43


  • Page 48

    Filing Method 10.20 Stock Purchase Agreement, by and among the Company, Standard Car Truck Company and Robclif, Inc., dated September 12, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 10.21 Refinancing Credit Agreement by and among the Company, the Guarantors, various lenders, PNC Bank, National Association, PNC Capital Markets LLC, J.P. Morgan Securities, Inc., RBS Greenwich Capital, JP Morgan Chase Bank, Bank of America, N.A., Citizens Bank of Pennsylvania, the Bank of Nova Scotia and First Commonwealth Bank, dated as of November 4, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 21 List of subsidiaries of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 23.1 Consent of Ernst & Young LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 31.1 Rule 13a-14(a)/15d-14(a) Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 31.2 Rule 13a-14(a)/15d-14(a) Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 32.1 Section 1350 Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 Filed herewith. 2 Filed as an exhibit to the Company’s Registration Statement on Form S-1 (No. 33-90866). 3 Filed as part of the Company’s Registration Statement on Form S-4 (No. 333-88903). 4 Filed as an exhibit to the Company’s Current Report on Form 8-K, dated November 13, 2001. 5 Filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-110600). 6 Filed as an exhibit to the Company’s Annual Report on Form 10-K for the period ended December 31, 2004. 7 Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated December 13, 2007. 8 Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2006 9 Filed as an Annex to the Company’s Schedule 14A Proxy Statement filed on April 13, 2006. 10 Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2006. 11 Filed as an exhibit to the Company’s Annual Report on Form 10-K for the period ended December 31, 2006. 12 Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2007. 13 Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2008. 14 Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2008. 44


  • Page 49

    MANAGEMENT’S REPORTS TO WABTEC SHAREHOLDERS Management’s Report on Financial Statements and Practices The accompanying consolidated financial statements of Westinghouse Air Brake Technologies Corporation and subsidiaries (the “Company”) were prepared by Management, which is responsible for their integrity and objectivity. The statements were prepared in accordance with generally accepted accounting principles and include amounts that are based on Management’s best judgments and estimates. The other financial information included in the 10-K is consistent with that in the financial statements. Management also recognizes its responsibility for conducting the Company’s affairs according to the highest standards of personal and corporate conduct. This responsibility is characterized and reflected in key policy statements issued from time to time regarding, among other things, conduct of its business activities within the laws of host countries in which the Company operates and potentially conflicting outside business interests of its employees. The Company maintains a systematic program to assess compliance with these policies. Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, Management has conducted an assessment, including testing, using the criteria in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting standards. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management has excluded Poli SpA (Poli) and Standard Car Truck (SCT) from its assessment of internal controls over financial reporting as of December 31, 2008 because Poli and SCT were acquired by the Company in a purchase business combination effective June 30, 2008 and December 5, 2008, respectively. Poli and SCT are wholly owned subsidiaries whose total assets represents 6.4% and 21.3%, respectively and net sales represents 1.0% and 0.7%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2008. Based on its assessment, Management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2008, based on criteria in Internal Control-Integrated Framework issued by the COSO. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2008, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein. Management’s Certifications The certifications of the Company’s Chief Executive Officer and Chief Financial Officer required by the Sarbanes-Oxley Act have been included in Exhibits 31 and 32 in the Company’s 10-K. In addition, in 2008, the Company’s Chief Executive Officer provided to the New York Stock Exchange the annual CEO certification regarding the Company’s compliance with the New York Stock Exchange’s corporate governance listing standards. By /s/ ALBERT J. NEUPAVER Albert J. Neupaver, President, Chief Executive Officer and Director By /s/ ALVARO GARCIA-TUNON Alvaro Garcia-Tunon, Senior Vice President, Chief Financial Officer and Secretary 45


  • Page 50

    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Westinghouse Air Brake Technologies Corporation: We have audited the accompanying consolidated balance sheets of Westinghouse Air Brake Technologies Corporation and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Westinghouse Air Brake Technologies Corporation and subsidiaries as of December 31, 2008 and 2007, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As explained in Note 11 in the “Notes to Consolidated Financial Statements”, for the year ended December 31, 2007 the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109”. As explained in Note 10 in the “Notes to Consolidated Financial Statements”, at December 31, 2006, the Company adopted Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)”. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Westinghouse Air Brake Technologies Corporation’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2009 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Pittsburgh, Pennsylvania February 23, 2009 46

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