GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and indefinite lived intangible assets are reviewed annually during the fourth quarter for impairment. The Company has identified three reporting units for purposes of testing goodwill for impairment. Two reporting units exist within the Freight segment (the "Freight" and "Components" reporting units) and the Transit segment is also a reporting unit. In 2023, management elected to first assess qualitative factors to determine whether a quantitative goodwill impairment test is necessary for the Components reporting unit. During the assessment, management evaluated all relevant events and facts that may impact the fair value or carrying value of the reporting unit's goodwill and concluded that it was not more likely than not that the estimated fair values were less than the carrying values; therefore, no further analysis was required. For the Freight and Transit reporting units, management elected to proceed directly to the quantitative impairment test. The discounted cash flow method and the market approach were used to estimate the fair value of each reporting unit using a weighting of 75% and 25%, respectively. The discounted cash flow model requires several assumptions including future sales growth, EBIT (earnings before interest and taxes) margins, capital expenditures, a discount rate and a terminal revenue growth rate (the revenue growth rate for the period beyond the years forecasted by the reporting units) for each reporting unit. The market approach requires several assumptions including EBITDA (earnings before interest, taxes, depreciation and amortization) multiples for comparable companies that operate in the same markets as the Company’s reporting units. For 2023, the discounted cash flow method was given more weight compared to the market approach due to variables between the operations of the guideline companies used in the analysis and Wabtec's operations, such as different reporting unit sizes, growth and business characteristics. However, both valuations resulted in a conclusion that the estimated fair values of the Freight and Transit reporting units were in excess of their respective carrying value, and no impairment existed.

Additionally, the Company proceeded directly to the quantitative impairment test for certain trade names with indefinite lives. For 2023, the Company's Portfolio Optimization resulted in approximately $14 million in accelerated trade name amortization expense, recorded in "Amortization expense" on the Consolidated Statements of Income. For the remaining trade names subject to the quantitative impairment test, the fair value exceeded each respective carrying value, resulting in a conclusion that no impairment existed. For 2022, the fair value of all material trade names subject to the quantitative impairment test exceeded its respective carrying value, resulting in a conclusion that no impairment existed. For trade names not subject to quantitative testing in 2023 and 2022, the Company elected to perform a qualitative impairment assessment, resulting in a conclusion that it was not more likely than not that the estimated fair values of the trade names were less than their carrying values; therefore, no further analysis was required. The assessment of qualitative factors used in determining whether it is more likely than not that the fair value of a trade name is less than its carrying amount involves significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, Wabtec specific events, share price trends and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact.

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


In millions	Freight Segment		Transit Segment		Total
Balance at December 31, 2021	$	7,073	$	1,514	$	8,587
Additions	35		—		35

Foreign currency impact	(23)		(91)		(114)
Balance at December 31, 2022	$	7,085	$	1,423	$	8,508
Additions	215		—		215
Disposals	(4)		—		(4)
Foreign currency impact	16		45		61
Balance at December 31, 2023	$	7,312	$	1,468	$	8,780

As of December 31, 2023 and 2022, the Company’s trade names had a net carrying amount of $612 million and $602 million, respectively, and the Company believes these intangibles have indefinite lives, with the exception of the right to use the GE Transportation trade name, to which the Company has an original useful life of 5 years.

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


	December 31, 2023						December 31, 2022
In millions	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Backlog	$	1,431	$	(526)	$	905	$	1,425	$	(415)	$	1,010
Customer relationships	1,333		(431)		902		1,274		(362)		912
Acquired technology	1,283		(497)		786		1,273		(395)		878
Total	$	4,047	$	(1,454)	$	2,593	$	3,972	$	(1,172)	$	2,800

The remaining weighted average useful lives of backlog, customer relationships and acquired technology were 9 years, 15 years and 7 years, respectively. The backlog intangible asset primarily consists of in-place long-term service agreements acquired by the Company in conjunction with the acquisition of GE Transportation. Amortization expense for intangible assets was $321 million, $291 million, and $287 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Estimated amortization expense for the five succeeding years is as follows (in millions):


2024	$	289
2025	$	272
2026	$	267
2027	$	262
2028	$	261