WABCO Reports Q3 2008 Results
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Record third quarter sales of $655 million, up 10 percent over prior year; up 2 percent in local currencies; all organic growth
EBIT margin of 10.1 percent, an expansion of 136 basis points over prior year; EBIT margin of 11.4 percent on a performance basis, an expansion of 97 basis points over prior year in local currencies
Quarterly diluted EPS of $0.97 on a U.S. GAAP basis; diluted EPS of $0.94 on a performance basis, up 45 percent over prior year
Updates full-year 2008 earnings projections; U.S. GAAP diluted EPS range estimated at $3.42 - $3.52, a decrease of $0.29 to $0.33 from prior projection; performance diluted EPS range estimated at $3.85 - $3.95, a decrease of $0.27 to $0.31 from prior projection
Initiated a $20 million profit improvement plan for Second Half 2008. Additionally, intends a reduction in workforce of approximately 1,000 positions, nearly half through attrition of temporary workers
BRUSSELS, Belgium, Oct. 29, 2008: WABCO Holdings Inc. , a global technology leader and tier-one supplier to the commercial vehicle industry, today reported Q3 2008 sales of $655 million, up 10 percent over prior year and up 2 percent in local currencies, continuing the Company's long track record of quarterly growth.
"This quarter, we continued to grow sales, increase income and demonstrate our ability to outperform the global commercial vehicle industry in all regions. At IAA Commercial Vehicles 2008, the world's largest trade show for commercial vehicles, we introduced a powerful suite of new technologies and innovative systems, including OnGuardMax(TM), a breakthrough driver assistance technology, and the industry's first autonomous emergency braking system," said Jacques Esculier, WABCO Chief Executive Officer. "In October, we also initiated a major new opportunity in China for further growth in air disc brakes through our intended joint venture with GuangDong Fuwa Engineering Manufacturing Co., Ltd. (Fuwa), the world's largest manufacturer of commercial trailer axles."
WABCO reported Q3 2008 operating income of $62.2 million, up 14 percent over prior year on a U.S. GAAP basis. Performance operating income, which excludes separation and streamlining costs, rose to $71.1 million, up 10 percent over prior year and up 1 percent over prior year in local currencies.
"We continued to improve execution through the implementation of our WABCO Operating System. We achieved $15 million of productivity during Q3 2008 in spite of a decrease in production volume," said Esculier. "We also realized $4 million out of a $20 million profit improvement plan for second half 2008 that was launched in Q3 in rapid response to reports of a potential slowdown in the demand for new commercial vehicles."
WABCO reported Q3 2008 EBIT of $65.9 million, up 27 percent over prior year. Performance EBIT, which excludes separation and streamlining costs, rose to $74.8 million, up 21 percent over prior year and up 11 percent over prior year in local currencies.
WABCO's EBIT margin in Q3 2008 increased to 10.1 percent, expanding 136 basis points over prior year. Performance EBIT margin increased to 11.4 percent, expanding 97 basis points over prior year in local currencies.
On a U.S. GAAP basis, Q3 2008 net income increased to $63.7 million, or $0.97 per diluted share from a net loss of $0.3 million, or $0.00 per diluted share a year ago. Included in reported net income for Q3 2008 was a one-time tax benefit of approximately $10.0 million for the reduction in a provision stemming from WABCO's separation from the former American Standard Companies Inc. Excluding separation and streamlining costs, and one-time and discrete tax items, Q3 2008 performance net income increased by 36 percent to $61.3 million versus $45 million a year ago. Performance earnings per diluted share increased by 45 percent to $0.94 versus $0.65 per diluted share a year ago.
WABCO generated $103.9 million in net cash from operating activities in Q3 2008 and $78.4 million of free cash flow. Under its share buy-back program announced on August 1, 2007, the Company repurchased approximately 1.3 million shares for $53.5 million in open market transactions in Q3 2008, bringing the total number of repurchased shares year-to-date to 3.4 million shares for $153.5 million. Since commencement of this program, WABCO has repurchased 6.0 million shares, or 8.8 percent of diluted shares outstanding at the time of spin-off. WABCO also paid $4.5 million in dividends in Q3 2008.
WABCO recently announced it has signed a letter of intent with Fuwa, the world's and China's largest manufacturer of commercial trailer axles, to form a joint venture for production of air disc brakes in China. The agreement is expected to be finalized by year-end. By partnering with Fuwa, WABCO expects to further enhance its development of the Chinese market as a major driver of growth as the Company prepares for the future expansion of the market for air disc brakes in China.
Also as reported, WABCO won a multi-year contract with ZF to supply commercial vehicle transmission automation systems. WABCO's contract with ZF, one of the world's leading automotive industry suppliers specializing in driveline and chassis technologies, is worth several hundred million U.S. dollars in cumulative sales into the next decade.
During the IAA 2008 trade show, WABCO introduced 14 new products and systems, including OnGuardMax(TM), a breakthrough driver assistance technology, and the commercial vehicle industry's first system for autonomous emergency braking (AEB) in collision imminent situations with moving or stopped vehicles. WABCO's revolutionary AEB system will be available worldwide to truck and bus original equipment manufacturers in 2010.
Updated Full-Year 2008 Projections
Due to current global economic conditions affecting industrial markets, WABCO has updated its expectation for 2008 sales growth to be between 5.5 and 6.5 percent in local currencies. WABCO has also updated its full-year U.S. GAAP and performance diluted EPS projections. The revised range for U.S. GAAP diluted EPS is $3.42 to $3.52, a decrease of $0.29 on the low end to $0.33 on the high end from prior projection; the revised range for performance diluted EPS is $3.85 to $3.95, a decrease of $0.27 on the low end to $0.31 on the high end from prior projection, $0.05 of which is due to updated foreign exchange rates. EPS on a performance basis excludes separation and streamlining costs, and one-time and discrete tax items. Additionally, WABCO has suspended share repurchases under the buy-back program.
In anticipation of further market declines, WABCO is initiating a process to reduce its total workforce by approximately 1,000 positions, nearly half through attrition of temporary workers, in accordance with local labor laws and practices.
"We are confident in our ability to continue outperforming the market, powered by our pipeline of new technologies, continuous global expansion, and increasing content-per-vehicle," said Esculier. "Near term, we are taking the necessary actions to secure the continued success of WABCO."
WABCO CEO Jacques Esculier and CFO Ulrich Michel will discuss WABCO's results and outlook on a conference call at 8 a.m. Eastern Time today. It will be webcast at www.wabco-auto.com/investor-relations where the press release and financial information will be available under "WABCO Q3 2008 Results."
The call is also accessible by telephone in listen only mode. Dial-in number is +1 719 325 2281 and U.S. toll-free dial-in number is 888 539 3613.
A replay of the call will be available from 11:00 a.m. Eastern Time on October 29 until midnight November 5, 2008. Replay dial-in number is +1 719 457 0820 and U.S. toll-free dial-in number is 888 203 1112. Pass code is 6412254.