WABCO Reports Q4 and Full Year 2008 Results, Record Full Year 2008 EPS; Realigns Company to New Market Conditions; Provides 2009 Operating Framework
- Record full year 2008 diluted EPS of
- Q4 2008 diluted EPS of
- Full year 2008 EBIT margin of 9.6 percent, down from 10.0 percent a year ago; EBIT margin of 11.6 percent on a performance basis, up 4 basis points from prior year
- Q4 2008 EBIT margin of 3.3 percent, down from 11.1 percent a year ago; EBIT margin of 9.5 percent on a performance basis, down from 12.9 percent a year ago
- Significant progress in streamlining of organization by eliminating 600 positions in Q4 2008 out of 1,000 positions targeted for termination by Q2 2009
- Cash dividend of
“Even with sales flat versus a year ago, we reached a record level of earnings per share in 2008, delivered superb execution, and continued gains in productivity. We also achieved major success in our ambitious cost cutting program during Q4 2008, including elimination of 600 positions out of 1,000 positions targeted for termination by Q2 2009,” said
WABCO reported Q4 2008 Earnings Before Interest and Taxes (EBIT) of
WABCO’s EBIT margin in Q4 2008 decreased to 3.3 percent from 11.1 percent versus prior year. Performance EBIT margin decreased to 9.5 percent from 12.9 percent versus prior.
On a U.S. GAAP basis, Q4 2008 net income decreased to
“Early in the third quarter, we anticipated market declines and quickly took measures to mitigate the slowdown in production of commercial vehicles. We also achieved approximately
WABCO generated
WABCO Directors Approve Cash Dividend
On
Recent Highlights
As previously reported in
In
In Q4 2008, the company’s joint venture in
In
Full Year 2008 Results
WABCO reported full year 2008 sales of
WABCO reported full year 2008 net income of
“When markets slump, leaders rise to the challenge,” said Esculier. “Our realignment strategy includes cost reduction programs as well as our streamlining program that we began in Q4 2008. It not only sizes WABCO for current demand but it also enables us to flex our organization up or down in rapid response to changes in market conditions, and it creates a better cost structure for when we return to growth.”
Under its share buy-back program announced on
Full Year 2009 Operating Framework
Due to uncertainties associated with 2009 market forecasts for commercial vehicles, WABCO is presently not providing full year earnings guidance. However, based on a set of market assumptions, the company’s operating framework for 2009 includes an estimated decline in 2009 sales of 25 to 35 percent in local currencies, full year reported operating margin from negative 1 to positive 2 percent, and performance operating margin from 3 to 6 percent.
On
“Moving forward, WABCO is proactively and efficiently aligning its organization’s size and resource level with market assumptions to stay at the leading edge of capabilities and performance in a global commercial vehicle market that has significantly less volume. Furthermore, we have the flexibility to adapt rapidly to changes in market conditions, especially to take advantage of the potential impact of governmental economic stimulus programs that are being implemented in our key markets,” said Esculier. “As we continue to take actions to mitigate the industry slowdown and further accelerate our productivity, we are passionate about securing the future success of WABCO through continued pursuit of our strategic initiatives, including global expansion, technology leadership and excellence in execution.”
Conference Call
WABCO CEO
The call is also accessible by telephone in listen only mode. Dial-in number is +1 719 325 2157 and U.S. toll-free dial-in number is 888 809 5987.
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About WABCO
WABCO Vehicle Control Systems (NYSE: WBC) is a leading supplier of safety and control systems for commercial vehicles. For over 140 years, WABCO has pioneered breakthrough electronic, mechanical and mechatronic technologies for braking, stability, and transmission automation systems supplied to the world’s leading commercial truck, trailer, and bus manufacturers. With sales of
Forward-Looking Statements
Comments in this document contain certain forward-looking statements, which are based on management’s good faith expectations and beliefs concerning future developments. Actual results may differ materially from these expectations as a result of many factors. These factors include, but are not limited to, the risks and uncertainties described in the “Risk Factors” section and the “Forward Looking Statements” section of WABCO’s Form 10-K, as well as in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Information Concerning Forward Looking Statements” section of WABCO’s Form 10-Q Quarterly Reports. WABCO does not undertake any obligation to update such forward-looking statements. All market and industry data are based on Company estimates.
Non-GAAP Financial Measures
To facilitate understanding of Q4 and full year 2008 results, several tables follow this news release. EBIT and sales excluding the effects of foreign exchange are non-GAAP financial measures. Additionally, operating income, EBIT, EBIT margin, net income and net income per diluted share on a “performance basis” are non-GAAP financial measures that exclude separation and streamlining costs, one-time and discrete tax items as well as a one-time transitional impact from a new accounting standard (SFAS No. 141R) that WABCO will adopt in 2009, as applicable. Lastly, “free cash flow” presents our net cash provided by operating activities less net cash used in investing activities. These measures should be considered in addition to, not as a substitute for, GAAP measures. Management believes that presenting these non-GAAP measures is useful to shareholders because it enhances their understanding of how management assesses the operating performance of the Company’s business. Certain non-GAAP measures may be used, in part, to determine incentive compensation for current employees.
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WABCO HOLDINGS INC.
Consolidated Statements of Income
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
---- ---- ---- ----
(Amounts in millions,
except share data) (Unaudited) (Unaudited) (Unaudited) (Audited)
Sales $454.7 $679.2 $2,588.0 $2,415.9
Cost of sales 343.7 490.0 1,894.0 1,764.2
----- ----- ------- -------
Gross profit 111.0 189.2 694.0 651.7
Cost and expenses:
Selling and
administrative
expenses 76.2 82.8 343.2 299.8
Product engineering
expenses 18.1 19.8 92.9 84.2
Other operating
expense, net 0.4 12.0 11.4 26.0
--- ---- ---- ----
Operating income 16.3 74.6 246.5 241.7
Equity (income)/loss
of unconsolidated
joint ventures 0.1 (2.1) (8.1) (9.1)
Other non-operating
expense, net 1.0 1.3 6.8 9.6
Interest (income)/
expense, net (0.9) - (3.7) 4.5
---- - ---- ---
Income before income
taxes 16.1 75.4 251.5 236.7
Income taxes (5.1) 21.0 38.2 111.3
---- ---- ---- -----
Net income $21.2 $54.4 $213.3 $125.4
===== ===== ====== ======
Net income per
common share
Basic $0.33 $0.81 $3.28 $1.85
Diluted $0.33 $0.79 $3.24 $1.81
Common shares
outstanding
Basic 63,963,351 67,231,877 65,113,404 67,887,919
Diluted 64,036,035 68,434,257 65,871,941 69,270,661
WABCO HOLDINGS INC.
Condensed Consolidated Balance Sheet
December 31, December 31,
(Amounts in millions) 2008 2007
---- ----
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $392.8 $183.2
Accounts receivable, less allowance for
doubtful accounts: $6.9 in 2008; $6.4
in 2007 313.8 464.6
Inventories 162.7 177.4
Taxes on income 20.0 0.0
Future income tax benefits 2.3 8.0
Other current assets 54.4 54.2
---- ----
Total current assets 946.0 887.4
Facilities, less accumulated depreciation 315.8 336.2
Goodwill 360.8 376.8
Capitalized software costs, net of
accumulated amortization: $145.9 in
2008; $129.1 in 2007 22.7 35.1
Long-term future income tax benefits 31.1 40.7
Investments in unconsolidated joint ventures 74.0 83.0
Other assets 25.6 35.0
---- ----
Total Assets $1,776.0 $1,794.2
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable to banks $76.4 $10.2
Accounts payable 108.3 193.5
Accrued payroll 89.8 100.1
Current portion of warranties 54.2 49.7
Taxes on income 0.0 12.8
Indemnification liabilities 25.2 26.4
Other accrued liabilities 74.5 91.6
---- ----
Total current liabilities 428.4 484.3
Long-term debt 173.6 116.0
Post-retirement benefits 319.9 334.1
Deferred tax liabilities 26.6 25.6
Minority interests 13.4 13.5
Long-term indemnification liabilities 35.2 55.6
Long-term income tax liabilities 94.1 95.6
Other liabilities 83.3 61.9
---- ----
Total Liabilities 1,174.5 1,186.6
Total Shareholders' Equity 601.5 607.6
----- -----
Total Liabilities & Shareholders' Equity $1,776.0 $1,794.2
======== ========
WABCO HOLDINGS INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months
Ended
December 31,
-------------
(Amounts in millions) 2008 2007
---- ----
Operating activities:
Net income $21.2 $54.4
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 13.3 16.9
Amortization of capitalized software
and other intangibles 5.5 6.5
Equity in earnings of unconsolidated
joint ventures, net of dividends received 1.6 0.5
Non-cash stock compensation 2.0 1.4
Deferred income taxes 9.9 18.9
Loss on disposal of facilities 0.8 0.3
Changes in assets and liabilities:
Accounts receivable 106.4 (15.6)
Inventories 18.8 12.6
Accounts payable (57.3) (4.3)
Other accrued liabilities and taxes (64.2) (32.0)
Post-retirement benefits (3.1) (1.3)
Other current and long-term assets 7.7 10.4
Other long-term liabilities 16.6 7.8
---- ----
Net cash provided by operating
activities 79.1 76.5
---- ----
Investing activities:
Purchases of property, plant and equipment (20.3) (31.7)
Investments in capitalized software (1.1) (0.9)
Proceeds from disposal of property,
plant and equipment - 1.9
----- -----
Net cash used in investing activities (21.4) (30.7)
----- -----
Financing activities:
Net (repayments)/borrowings of long-term debt (29.1) 116.0
Net borrowings/(repayments) of short-term debt 66.3 (64.4)
Purchases of treasury stock (2.7) (93.6)
Dividend payments (4.5) (4.8)
Proceeds from exercise of stock options - 13.8
---- -----
Net cash provided/(used) in financing activities: 30.0 (33.0)
---- -----
Effect of exchange rate changes on cash and cash
equivalents (1.8) 5.3
---- ---
Net increase in cash and cash equivalents 85.9 18.1
Cash and cash equivalents at beginning of period 306.9 165.1
----- -----
Cash and cash equivalents at end of period $392.8 $183.2
====== ======
WABCO HOLDINGS Inc.
Consolidated Statements of Income
Reconciliation of Net Income to Performance Net Income and
Performance Net Income per Diluted Common Share
(Unaudited)
Three Months Twelve Months
(Amounts in millions, except Ended Ended
per share data) December 31, December 31,
2008 2007 2008 2007
---- ---- ---- ----
Net Income $21.2 $54.4 $213.3 $125.4
Adjustments:
Streamlining cost, net of tax 17.2 - 27.1 8.4
Tax items (0.5) (0.8) 1.4 1.2
Separation costs, net of tax and
separation related taxes 0.4 16.0 3.8 73.5
One-time impact from
adoption of FAS 141R 1.2 - 1.2 -
--- - --- -
Performance Net Income $39.5 $69.6 $246.8 $208.5
===== ===== ====== ======
Performance Net Income per
Diluted Common Share $0.62 $1.02 $3.75 $3.01
Common Shares Outstanding - Diluted 64.0 68.4 65.9 69.3
Note: The presentation of performance net income and performance net
income per diluted common share is not in conformity with generally
accepted accounting principles (GAAP). These measures may not be
comparable to similar measures of other companies as not all companies
calculate these measures in the same manner.
WABCO HOLDINGS INC.
Reconciliation of Net Cash Provided
By Operating Activities to Free Cash Flow
(Unaudited)
Three Months
(Amounts in Ended
millions) December 31,
-------------
2008 2007
---- ----
Net Cash Provided by
Operating Activities $79.1 $76.5
Deductions or Additions to
Reconcile to Free Cash Flow:
Purchases of property, plant,
equipment and computer software (21.4) (32.6)
Proceeds from disposal of
property, plant and equipment - 1.9
- ---
Free Cash Flow $57.7 $45.8
===== =====
Note: This statement reconciles net cash provided by operating
activities to free cash flow. Management uses free cash flow, which is
not defined by US GAAP, to measure the Company's operating performance.
Free cash flow is also one of the several measures used to determine
incentive compensation for certain employees.
WABCO HOLDINGS INC.
Q4 2008 Data Supplement Sheet
(Unaudited)
Quarter Ended December 31,
(Amounts in % of % of
millions) 2008 Sales/ 2007 Sales/ % Chg vs.
Adj Adj
Sales Sales 2007
----- ----- ----
Sales
-----
Reported $454.7 $679.2 -33.1%
Foreign exchange
translation
effects 51.4 -
---- -
Adjusted Sales $506.1 $679.2 -25.5%
====== ======
Gross Profit
------------
Reported $111.0 24.4% $189.2 27.9% -41.3%
Streamlining costs 8.5 -
Separation costs 0.3 0.4
--- ---
Performance
Gross Profit $119.8 26.3% $189.6 27.9% -36.8%
Foreign exchange
translational
effects 10.6 -
---- -
Adjusted
Gross Profit $130.4 25.8% $189.6 27.9% -31.2% -215 bps
====== ======
Selling,
Administrative,
Product Engineering
Expenses and Other
-------------------
Reported $94.7 20.8% $114.6 16.9% -17.4%
Streamlining costs (17.4) (1.4)
Separation costs (0.3) (11.3)
---- -----
Performance Selling,
Administrative,
Product Engineering
Expenses and Other $77.0 16.9% $101.9 15.0% -24.4%
Foreign exchange
translational
effects 10.3 -
---- -
Adjusted Selling,
Administrative,
Product Engineering
Expenses and Other $87.3 17.2% $101.9 15.0% -14.3% 225 bps
===== ======
Operating Income
----------------
Reported $16.3 3.6% $74.6 11.0% -78.2% -740 bps
Streamlining costs 25.9 1.4
Separation costs 0.6 11.7
--- ----
Performance
Operating
Income $42.8 9.4% 87.7 12.9% -51.2% -350 bps
Foreign exchange
translational
effects 0.3 -
--- -
Adjusted Operating
Income $43.1 8.5% $87.7 12.9% -50.9% -440 bps
===== =====
Equity in Income/
(Loss) of
Unconsolidated
Joint Ventures
-----------------
Reported (0.1) $2.1
Foreign exchange
translational
effects - -
- -
Adjusted Equity in
Income/(Loss) of
Unconsolidated
Joint Ventures $(0.1) $2.1
===== ====
EBIT (Earnings
Before Interest
and Taxes)
-----------
Reported Net Income $21.2 $54.4
Adjust for taxes (5.1) 21.0
Adjust for interest
income (0.9) -
---- -
EBIT $15.2 3.3% $75.4 11.1% -79.8% -776 bps
Streamlining costs 25.9 1.4
Separation costs 0.6 10.7
One-time impact
from adoption
of FAS 141R 1.6 -
--- -
Performance EBIT
(Earnings Before
Interest and
Taxes) $43.3 9.5% $87.5 12.9% -50.5% -336 bps
Foreign exchange
translational
effects 0.7 -
--- -
Adjusted EBIT
(Earnings Before
Interest and
Taxes) $44.0 8.7% $87.5 12.9% -49.7% -419 bps
===== =====
Note: The presentation of the performance measures above are not in
conformity with generally accepted accounting principles (GAAP). These
measures may not be comparable to similar measures of other companies as
not all companies calculate these measures in the same manner.
WABCO HOLDINGS INC.
Full Year 2008 Data Supplement Sheet
(Unaudited)
Twelve Months Ended December 31,
(Amounts in % of % of
millions) 2008 Sales/ 2007 Sales/ % Chg vs.
Adj Adj
Sales Sales 2007
----- ----- ----
Sales
-----
Reported $2,588.0 $2,415.9 7.1%
Foreign exchange
translation
effects (173.2) -
------ -
Adjusted Sales $2,414.8 $2,415.9 0.0%
======== ========
Gross Profit
------------
Reported $694.0 26.8% $651.7 27.0% 6.5%
Streamlining
costs 10.5 2.5
Separation
costs 1.1 0.8
--- ---
Performance
Gross Profit $705.6 27.3% $655.0 27.1% 7.7%
Foreign exchange
translational
effects (55.6) -
----- -
Adjusted
Gross Profit $650.0 26.9% $655.0 27.1%
====== ======
Selling,
Administrative,
Product Engineering
Expenses and Other
-------------------
Reported $447.5 17.3% $410.0 17.0% 9.1%
Streamlining
costs (26.4) (10.2)
Separation
costs (13.7) (26.2)
----- -----
Performance Selling,
Administrative,
Product Engineering
Expenses and Other $407.4 15.7% $373.6 15.5% 9.0%
Foreign exchange
translational
effects (28.6) -
----- -
Adjusted Selling,
Administrative,
Product Engineering
Expenses and Other $378.8 15.7% $373.6 15.5% 1.4%
====== ======
Operating Income
----------------
Reported $246.5 9.5% $241.7 10.0% 2.0%
Streamlining
costs 36.9 12.7
Separation
costs 14.8 27.0
---- ----
Performance
Operating Income $298.2 11.5% 281.4 11.6% 6.0% -13 bps
Foreign exchange
translational
effects (27.0) -
----- -
Adjusted Operating
Income $271.2 11.2% $281.4 11.6% -3.6% -42 bps
====== ======
Equity in Income of
Unconsolidated Joint
Ventures
---------------------
Reported $8.1 $9.1
Foreign exchange
translational
effects (0.3) -
---- -
Adjusted Equity
in Income of
Unconsolidated
Joint Ventures $7.8 $9.1 -14.3%
==== ====
EBIT (Earnings
Before Interest
and Taxes)
-----------
Reported Net
Income $213.3 $125.4
Adjust for taxes 38.2 111.3
Adjust for interest
(income)/ expense (3.7) 4.5
---- ---
EBIT $247.8 9.6% $241.2 10.0% 2.7%
Streamlining
costs 36.9 12.7
Separation
costs 14.8 26.1
One-time impact
from adoption
of FAS 141R 1.6 -
--- -
Performance EBIT
(Earnings Before
Interest and
Taxes) $301.1 11.6% $280.0 11.6% 7.5% 4 bps
Foreign exchange
translational
effects (25.6) -
----- -
Adjusted EBIT
(Earnings Before
Interest and
Taxes) $275.5 11.4% $280.0 11.6% -1.6%
====== ======
Note: The presentation of the performance measures above are not in
conformity with generally accepted accounting principles (GAAP). These
measures may not be comparable to similar measures of other companies as
not all companies calculate these measures in the same manner.
WABCO HOLDINGS INC.
Reconciliation of Operating Income Margin to Performance
Operating Income Margin for 2009 (at a Euro to US Dollar
rate of 1.2)
(Unaudited)
Twelve Months Ending,
December 31, 2009
-----------------
Operating Income
----------------
Reported Operating Income Margin (1.0%) - 2.0%
Streamlining costs, impact to margin 3.3%
Separation costs, impact to margin 0.7%
---
Performance Operating Income Margin 3.0% - 6.0%
===========
Note: The presentation of performance Operating Income Margin is not
in conformity with generally accepted accounting principles (GAAP).
These measures may not be comparable to similar measures of other
companies as not all companies calculate these measures in the same
manner.
SOURCE WABCO Holdings Inc.