/// On Track For Long-Term Growth
I n v e s t onovembre
r P r e10,s 2016
entation
/// March 2017
/// FORWARD-LOOKING STATEMENTS
Statements contained in this presentation, which are not historical facts, are forward-looking
statements as that item is defined in the Private Securities Litigation Reform Act of 1995. This
presentation contains forward-looking statements and certain information contained in this
presentation involves risks and uncertainties that could result in actual results differing materially from
expected results. Forward-looking statements represent the Company’s expectations and beliefs
concerning future events, based on information available to the Company as of the date of this
presentation. The Company undertakes no obligation to publicly update or revise any forward-looking
statements to reflect events or circumstances that may arise after the date of this presentation.
Additional information regarding these and other factors is contained in the Company’s SEC filings,
including without limitation, the Company’s Form 10-K and Form 10-Q filings.
.
2 /// Investor Presentation, March 2017
/// A DIVERSE, GLOBAL RAIL INDUSTRY LEADER…
• History dates to 1869 when George Westinghouse invented air brakes
• A leading global provider of equipment, systems and value-added services for transit and
freight rail, strengthened by acquisition of Faiveley Transport
• Large, global installed base with operations in 30+ countries; sales in more than 100
• Diversity of revenue base across markets, products and geography offsets cyclicality of
U.S. freight market
• Strong platform of product and service capabilities in key global markets offers stability
and growth opportunities
• World-class lean manufacturing, process excellence and continuous improvement
• 16% EPS CAGR since 2006
3 /// Investor Presentation, March 2017
/// …WITH SUCCESSFUL TRACK RECORD
$ millions, unless
indicated
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 *
Sales
$1,088
$1,360
$1,575
$1,402
$1,507
$1,968
$2,391
$2,566
$3,044
$ 3,308
$2,931
Income from
Operations
$ 130
$ 180
$ 213
$ 180
$ 203
$ 281
$ 392
$ 437
$ 527
$
608
$ 513
Operating Margin
11.9%
13.2%
13.5%
12.8%
13.5%
14.3%
16.4%
17.0%
17.3%
18.4%
17.5%
Net Income
$
85
$ 110
$ 131
$ 115
$ 123
$ 180
$ 252
$ 292
$ 352
$
399
$ 352
Diluted EPS from
cont. ops ($)
$ 0.88
$ 1.12
$ 1.34
$ 1.20
$ 1.28
$ 1.86
$ 2.59
$ 3.01
$ 3.62
$ 4.10
$ 3.85
Cash from
operations
$ 151
$ 143
$ 159
$ 161
$ 176
$ 249
$ 237
$ 236
$ 472
$
448
$ 449
Debt net of cash
$ (38)
$ (85)
$ 245
$ 203
$ 185
$ 109
$ 101
$ 165
$
$ 267
$ 1,500
* Excludes expenses related to Faiveley Transport acquisition and other adjustments
4 /// Investor Presentation, March 2017
94
/// ACQUISITION OF FAIVELEY TRANSPORT
CREATES OPPORTUNITIES FOR SYNERGIES, GROWTH
• Expected long-term annual synergies of at least $50M to be achieved by year three
Revenue growth
Supply chain efficiencies
Review of operations for efficiency and cost savings; operational excellence
Leveraging SG&A capabilities
• Estimated synergies of about $15-20M in first year with estimated one-time costs of
$8-10M; to achieve at least $50M in annual synergies by year three will require
additional restructuring and one-time costs
• Significant long-term growth opportunities
• Complementary geographic presence, products and engineering activities creates
global scale and expertise
• Strengthens technology and innovation initiatives to improve ability to offer safety,
productivity and efficiency enhancements
• Expands product and service capabilities in key global markets with blue-chip,
global customers
5 /// Investor Presentation, March 2017
/// EXPERIENCED MANAGEMENT TEAM
• Al Neupaver remains WAB Executive Chairman through initial phase of integration
• Ray Betler remains WAB President and CEO
• Stéphane Rambaud-Measson is now President and CEO of Wabtec's Transit Group
(now known as Faiveley Transport) and a Wabtec Corporate Executive Vice President,
reporting to Ray Betler
• Faiveley Transport’s headquarters will remain near Paris, France and will be the
headquarters of Wabtec's Transit Group
• Wabtec's Transit Group encompasses all of Wabtec's worldwide transit activities, with
combined revenues exceeding $2 billion
6 /// Investor Presentation, March 2017
/// DIVERSIFIED REVENUE BASE
SEGMENT
MARKET
Freight
Transit
55%
45%
Aftermarket
60%
GEOGRAPHY
US
40%
Rest of
the
world
60%
7 /// Investor Presentation, March 2017
OEM
40%
/// A GLOBAL PRESENCE
8 /// Investor Presentation, March 2017
/// COMPELLING INDUSTRY DYNAMICS
• Global, accessible rail supply market exceeds $100 billion annually, with average
annual growth of about 3% through 2021
- New rolling stock expected to grow at 3.5% CAGR, mainly in Europe (high-speed,
very high-speed and urban segments)
- Services expected to grow at 3.1% CAGR, mainly in Asia Pacific (driven by growth
of installed base in recent years)
• Secular trends also driving investment
- Urbanization
- Focus on safety
- Awareness of environmental issues/benefits
• Efficient transportation system/infrastructure essential to global economic growth in
developed, emerging countries
Source: World Rail Market Study 2016 - UNIFE/Roland Berger.
9 /// Investor Presentation, March 2017
/// FREIGHT SEGMENT
•
•
•
•
Overall economic activity (GDP) drives freight traffic volumes and capital investment
NAFTA sets technology standards
Majority of rolling stock outside of NAFTA, where Wabtec share is smaller
Headwinds in new locomotive and freight car markets will continue in 2017
Locomotives Freight Cars (Global installed base of ~ 114,000)
(Global installed base of ~ 5.5 million)
Other
8%
Europe
18%
Russia CIS
17%
NAFTA
25%
Europe 12%
NAFTA
37%
Asia Pacific
32%
Source: World Rail Market Study 2016 - UNIFE/Roland Berger.
10 /// Investor Presentation, March 2017
Other
5%
Russia CIS 26%
Asia Pacific
20%
/// FREIGHT SEGMENT: Locomotive
11 /// Investor Presentation, March 2017
/// FREIGHT SEGMENT: Freight Car
12 /// Investor Presentation, March 2017
/// TRANSIT SEGMENT
• Overall markets driven by government funding and ridership levels, with Europe setting
technology standards
• Europe/Asia Pacific significantly larger than NAFTA; Faiveley Transport strengthens
Wabtec share in these markets
• Strongest growth through 2021 expected to be in Western Europe (Germany, France,
UK) and Asia Pacific (India, Australia)
• Infrastructure-focused spending in U.S. provides opportunities
Transit Cars (Global installed base of ~ 569,000)
Other
6%
NAFTA
5%
Europe
32%
Russia - CIS
14%
Source: World Rail Market Study 2016 UNIFE/Roland Berger.
13 /// Investor Presentation, March 2017
Asia – Pacific
43%
/// TRANSIT SEGMENT: Transit Cars
14 /// Investor Presentation, March 2017
/// TRANSIT SEGMENT: Buses
15 /// Investor Presentation, March 2017
/// WABTEC’S VISION FOR THE FUTURE
TO AVERAGE
DOUBLE-DIGIT
EPS GROWTH THROUGH
THE BUSINESS CYCLE
(Actual Performance, 2006-16:
Sales growth CAGR of 10% • EPS growth CAGR of 16%)
16 /// Investor Presentation, March 2017
/// PERFORMANCE-DRIVEN GROWTH STRATEGIES
Wabtec Excellence Program drives
our investment in these Growth Strategies:
PRODUCT
INNOVATION
& NEW
TECHNOLOGIES
17 /// Investor Presentation, March 2017
GLOBAL
AND MARKET
EXPANSION
AFTERMARKET
PRODUCTS
AND SERVICES
ACQUISITIONS
/// WABTEC EXCELLENCE PROGRAM
Drives The Business
• Goal to generate more
cash from operations
than net income
annually
• Corporate Business
Councils foster culture
of continuous
improvement in all key
processes and
disciplines, including
lean manufacturing,
supply chain, quality
and innovation
• Drives cash flow,
reduces costs and
improves efficiency to
help manage through
cycles
18 /// Investor Presentation, March 2017
/// PRODUCT INNOVATION AND NEW TECHNOLOGIES
• Product breadth and engineering expertise provide unique ability to help customers
use technology to improve safety, productivity and efficiency
• Continued investment to expand capabilities in signaling and train control, an annual
global market of about $20B
• Increased focus on innovation and R&D by leveraging global footprint for
best-in-class engineering solutions
- More than 20 Centers of Competence with specialized expertise
- Nearly 1,500 engineers worldwide
- More than 4,000 active patents; nearly 100 annual new applications
• A leading innovator in brakes, electronics, doors and HVAC, with an active pipeline of
new products and upgrades
- Signaling and train control, Tier IV cooling systems, oil-free compressors,
axle-mounted brake discs
19 /// Investor Presentation, March 2017
/// GLOBAL AND MARKET EXPANSION
• Expanded geographic platforms in key transit markets
- Stronger presence in Europe, Asia Pacific (especially India and China)
and South Africa
• New, state-of-the-art production facility in Czech Republic
• Freight market opportunities in key natural resources markets
• Selective opportunities in adjacent markets where we offer competitive advantages
- About 10% of sales (power generation and other industrial)
20 /// Investor Presentation, March 2017
/// AFTERMARKET PRODUCTS AND SERVICES
• Expanded installed base of OEM products globally due to Faiveley Transport acquisition
provides additional aftermarket opportunities
• New service center capabilities in key growth markets worldwide
• Focus on less cyclical MRO segment
• Capitalize on larger installed base globally
21 /// Investor Presentation, March 2017
/// ACQUISITIONS
• Strategic, selective acquisitions in core or adjacent markets that add to Wabtec’s
differentiation and/or help to dampen cyclicality
• Financial criteria: Goal of accretion in first year, with positive and sustainable impact
on economic profit
• Completed 50+ transactions in the last 10 years, in support of corporate growth
strategies
- Product extensions in core, adjacent markets
- New technologies, engineering capabilities
- Expanded global footprint
- Established presence in emerging countries
- Strengthened aftermarket capabilities
• Strong balance sheet provides ample capacity to continue execution of acquisition
strategy globally
22 /// Investor Presentation, March 2017
/// COMPELLING INDUSTRY DYNAMICS,
STRONG COMPANY FUNDAMENTALS
• Compelling industry dynamics
• Worldwide rail supply market large with share growth opportunities
• Efficient transportation system essential to global economic growth
• Strong company fundamentals
Market leader with substantial installed base
Diversified revenue model, strong balance sheet and cash flow
Wabtec Excellence Program drives continuous improvement
Focused growth strategies and capital to invest
Significant synergies and growth opportunities from Faiveley Transport acquisition
Board and Management own about 10% equity stake, with incentive compensation
tied to EPS, working capital and economic profit
• 16% EPS CAGR since 2006
•
•
•
•
•
•
• On track for long-term growth
23 /// Investor Presentation, March 2017