Westinghouse Air Brake Technologies Corporation

Good morning. Welcome to the fourth quarter 2019 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Christine Kubacki, Vice President of Investors Relations.

Thank you, Kate. Good morning, everyone, and welcome to Wabtec's fourth quarter earnings call. With us today are President and CEO Rafael Santana, CFO Pat Dugan, and Senior VP of Finance John Mastelers. Today's slide presentation, along with our earnings release and financial disclosures, were posted on our website earlier today and can be accessed on our Investor Relations tab on wabteccorp.com. Some statements we're making are forward-looking and are our best view of the world and our business today. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables carefully as you consider these metrics. And now, I will turn the call over to Raphael.

Hey, thanks, Christine, and good morning, everyone. Thanks for joining us. Today, I'll share some thoughts on the fourth quarter and overall 2019 performance. We will discuss the rail transportation market as well as provide an outlook for 2020. Then Pat will cover the quarter in greater detail. Turning to slide three, you can see that we delivered a strong financial result for 2019. In particular, we had a solid cash generation of more than a billion dollars, which exceeded our guidance, driven by strong working capital performance. This allowed us to strengthen the balance sheet by reducing debt by over $500 million since the end of the first quarter, which creates the flexibility needed to fund future strategic organic and inorganic growth. In line with our goal to drive continued margin expansion, adjusted operating margins for the full year were roughly at 14%, as we continue to deliver on cost management actions and synergies stemming from the WAPTEC and GE transportation merger. Total adjusted income from operations for the quarter was $313 million, driven in part by year-over-year growth in both freight and transit. I'd like to emphasize the total backlog increased in the fourth quarter, driven by international freight, services, and a significant digital electronic order that will drive enhanced network optimization for Class 1 railroads. Each provided a strong foundation for visibility and growth in the future. Finally, we ended the year with adjusted EPS within our prior guidance range of about 417. We hit roughly $30 million in net synergies for the year, which exceeded our net $20 million target and puts us on a path to deliver a total of $250 million in synergies before 2022. Looking to 2020, we will continue to take actions on improved project execution, particularly in transit, and we remain focused on the prioritization of resources and prudent capital allocation. We expect market conditions to continue to be challenging, primarily in the North American freight market, but our diversified global portfolio, significant stall base, and backlog will help us navigate this headwind. With these factors in mind, we forecast that 2020 revenues will be about $8.7 billion. Margins will grow about 100 base points, driven by synergies and further improvement in the transit segment. EPS will grow and will have another strong cash generating year, allowing us to further strengthen the balance sheet. Finally, this morning, the company announced a $500 million share repurchase authorization. The program reinforces our confidence in the company, our ability to generate strong cash flows through the cycle, and deliver shareholder value. As we turn to slide four, I'd like to cover market conditions we're seeing across the freight and transit segments. Let me start with freight. Our business performed well despite continued challenging conditions in North America. North American car loads were down about 7% in the fourth quarter and were down about 4% for the full year versus 2018. This was driven largely by trade uncertainty. weak global macro conditions that have led to drop in intermodal traffic, declines in commodities like coal and agriculture. We expect carload volumes in 2020 to be flat to slightly down versus last year, and we forecast that the railcar built to be about 40,000 railcars versus about 58,000 in 2019. And we anticipate the locomotive deliveries to be down double digits versus 2019 driven by North America. These assumptions are included in our 2020 guidance. As we've shared on previous calls, lower car load volumes, along with precision scheduled railroading, are having an impact on new local orders. However, the impacts continue to be partially offset by international orders, growth in services, including our modernization program and aftermarket sales. We remain very aligned with our customers in driving efficiency and productivity across their operations through advanced technology, digital solutions, and unique service offerings. Our digital electronics business saw solid momentum with backlog up double digits in 2019, This gives us further confidence that the business can grow, in average, faster than the overall freight segment. Across our international install base, we continue to see strong opportunities for growth, especially across Asia in regions like Russia, CIS, Australia, and India, where we've delivered over 100 locomotives in 2019 as part of our 1,000 locomotive contract. In the transit segment, we continue to see steady growth in ridership and urbanization. Investments in transit rail systems across Europe, the UK, and even in certain U.S. markets are presenting unique opportunities for growth. This includes growth in infrastructure spending in established economies like Germany, where rail spending is steadily increasing due to the shift to green in emerging economies like India, where we are uniquely positioned to win. In the fourth quarter, we're able to take advantage of these growth trends, with notably orders in breaks and doors across India, Europe, US, and Asia. And across our segment portfolio, we have firm multi-year backlog that will contribute to growth. With that, I'm gonna turn it over to Pat, who will provide a deeper dive into the financials. Thanks, Raphael.