22 Improve Customer Satisfaction Right Service Right Time In the Right Condition – Delivered SAFELY At the Right Price Improve Profitability Revenue Growth Rate EBITDA Growth Return on Assets > WACC% Free Cash Flows Economic Value Add (EVA) Do Both Over the Long-Term Building Relationships with: Customers Watco Team Communities Vendors Investors Watco Customer First Foundation Principles Roll Tide Roll
33 Watco Customer First Foundation Principles When Successfully Applied Customer Satisfaction Customer Confidence, Trust and Loyalty Volume Growth Service Growth Expand Relationship Profitability Operating Leverage Increase Volumes and Lower Unit Cost Capital Management Cash Flow Return On Invested Capital Long Term Relationship Customer Growth Team Performance Public-Private Partnership Capital Access
44 Watco Performance System - Goals Safety – 0 injuries / accidents every day Service – Deliver accurate & timely service every day People – Find, keep & develop the best Team possible every day Profitability – Generate the most sustainable, long-term value every day Capital – Maintain & use the right type & least amount of assets every day Growth – Earn the right to grow by small improvements every day
55 Watco Growth Performance Listen-Understand-Grow Listen Understand Grow Listen to our Customers – Listen and learn our Customers needs, then work with our operations teams to meet and exceed those needs with Watco Services. Understand Customers logistics supply chains beginning to end. Raw material in… to finished product out. Grow organically with each Customer. What can we do differently to capture more of their transportation dollar?
66 4,500 track miles 3,200 Team Members 400 locomotives 3,900 railcars 26 states served 750,000+ annual carloads Watco – What We Do! One of the largest car repair service providers in U.S. Largest privately owned short line railroad operator in U.S. One of the fastest growing terminal operators International service in Canada and Western Australia
77 Watco Customer Diversity 7 Proudly serve more than 1,500 Customers Daily Average Length of Customer Relationship Switching22 years Mechanical20 years Railroad10 years Transload/Intermodal 2 years
88 Watcos Service Diversity Services Transportation (63% revenue ) Mechanical (25% revenue) Terminals/Port (12% revenue ) 29 Short Line Railroad Operations – 59% 400 Locomotives 4,500 Track Miles 3,900 Railcars 27 Switching Operations – 4% 16 Rail Car Repair Facilities – 24% 23 Railcar Car Repair Operations – 1% 5 Private Railcar Repair Facilities 20 Terminal Operations – 6% 2 Port Facilities - 5% 10 Warehouse Operations – 1%
11 Kinder Morgan & Watco On December 15, 2010, Watco Companies and Kinder Morgan Energy Partners announced a new partnership. The advantages of this partnership are: Significant Growth Opportunities Transaction provides an avenue for significant investment into high growth areas Proven track record of successful investments with recent acquisitions and expansions Entrepreneurial mindset towards growth Significant Synergies Over 1,500,000 carloads handled at KM & Watco facilities annually Over 100 Class I railroad connections and 50 short-line railroad connections in the U.S. The Terminaling and Railroad Industry are integral to each other Exceptional Operators Respected reputation among peers in the industry Leaders in crude by rail terminals and operations
12 Watcos 10-Year Revenue Growth 10 Year CAGR = 21.8% 2012 P = preliminary 2012 actual results.
13 Watcos 10-Year Adj. EBITDA Growth 10 Year CAGR = 21.7% Adj. EBITDA figures are per the Companys historical compliance certificates through 2011 and preliminary actual results for 2012, adjusted to exclude pro forma EBITDA from acquisitions to provide an accurate portrayal of the margin trends in Watcos base business.
14 Watcos Future Keys to understanding our future Understand our past successes – courage to change for success today & tomorrow Understand the future of our industry is very bright Understand we must continue to improve, earning the right to grow with our Customers Understand the importance of living by our Watco Customer First Foundation Principles Understand & implement the Watco Performance System Well positioned for future growth