5th February 2009 - WABCO Reports Q4 and Full Year 2008 Results, Record Full Year 2008 EPS

Realigns Company to New Market Conditions; Provides 2009 Operating Framework

WABCO Holdings Inc., a global technology leader and tier-one supplier to the commercial vehicle industry, today reported a record full year 2008 diluted EPS of $3.24 on a U.S. GAAP basis and diluted EPS of $3.75 on a performance basis, up 25 percent from prior year. Full year 2008 sales reached $2.6 billion, up 7 percent over prior year and flat in local currencies, despite Q4 2008 sales of $455 million, down 33 percent from prior year and down 25 percent in local currencies.

“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 Jacques Esculier, WABCO Chief Executive Officer. “The drop in the global commercial vehicle market in the fourth quarter was unprecedented for its speed and steepness, down 22 percent in Europe, 9 percent in North America, and 36 percent in China, based on preliminary market data. Facing this challenge, we demonstrated our ability to react rapidly and limit the decrease in our performance gross profit margin to 62 basis points in Q4 2008 compared with Q3 2008 when sales slightly rose. We more than doubled the results of our profit improvement plan that we launched in Q3 2008 by delivering $41 million in cost savings in Q4 2008, bringing total cost savings to $45 million for second half 2008.”

WABCO reported Q4 2008 Earnings Before Interest and Taxes (EBIT) of $15.2 million, down 80 percent from prior year. Excluding separation and streamlining costs as well as a one-time transitional impact from a new accounting standard (SFAS No. 141R) that WABCO will adopt in 2009, performance EBIT declined to $43.3 million, down 51 percent from prior year and down 50 percent from prior year in local currencies.

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 $21.2 million or $0.33 per diluted share from net income of $54.4 million or $0.79 per diluted share a year ago. Excluding 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, Q4 2008 performance net income decreased to $39.5 million versus $69.6 million a year ago. Performance earnings per diluted share decreased by 39.2 percent to $0.62 versus $1.02 per diluted share a year ago.

“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 $12 million of materials and conversion productivity in Q4 2008, resulting in a total of nearly $72 million of materials and conversion productivity gained during 2008 through our WABCO Operating System,” said Esculier. “We acted fast and efficiently to focus on realigning WABCO for a new level of market demand while still supporting our strategy of global expansion, technology leadership and excellence in execution. We also remain determined to deliver the innovation and continuously improving services that customers expect in all regions.”

WABCO generated $79.1 million in net cash from operating activities in Q4 2008 and $57.7 million of free cash flow. WABCO also paid $4.5 million in dividends in Q4 2008.

WABCO Directors Approve Cash Dividend

On January 29, 2009, WABCO’s board of directors approved a cash dividend of 7 cents per share of common stock. The dividend is payable on March 20, 2009, to shareholders of record on March 4, 2009.

Recent Highlights

As previously reported in January 2009, WABCO marked another milestone as a global technology leader when the company began supplying its highly advanced modular automated manual transmission (AMT) system to China National Heavy Truck Corporation (CNHTC). CNHTC is the largest producer of heavy duty trucks in China and the world’s first original equipment manufacturer to adopt WABCO’s highly advanced modular AMT system in volume production.

In December 2008, WABCO announced completion of its agreement with Guangdong FUWA Heavy Industry Co., Ltd., (Fuwa) to form a joint venture for production of air disc brakes in China. Fuwa is the largest manufacturer of commercial trailer axles in China and in the world. The joint venture will encompass manufacturing, assembly and testing of air disc brakes for commercial trailers, and it is expected in the coming years to manufacture air disc brakes to equip up to 250,000 axles.

In Q4 2008, the company’s joint venture in North America, Meritor WABCO, signed a five-year agreement to supply Wabash National Corporation with trailer anti-lock braking systems, roll stability systems, InfoLink™ data gateway systems, and the development of other related products to assist Wabash National in maintaining their technological leadership position in the North American trailer market. Wabash National has also honored Meritor WABCO with their platinum supplier award for outstanding delivery performance, product quality and product support.

In December 2008, the company announced that the Automotive Distribution Federation (ADF) in the United Kingdom has named WABCO as Commercial Vehicle Parts Supplier of the Year 2008, marking the third year in a row that WABCO has earned this award from the ADF, the UK trade association representing over 80 percent of parts distributors in the independent automotive aftermarket as well as parts manufacturers and importers.

Full Year 2008 Results

WABCO reported full year 2008 sales of $2.6 billion, up 7 percent over prior year and flat in local currencies, reflecting exceptional sales growth of 14 percent in local currencies during first half 2008 that was offset by sales decline of 13 percent during second half 2008 due to a severe and rapid falloff in the commercial vehicle market.

WABCO reported full year 2008 net income of $213.3 million or $3.24 per diluted share on a U.S. GAAP basis versus $125.4 million or $1.81 per diluted share in 2007. On a performance basis, which excludes 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, WABCO reported record net income, increasing 18 percent to $246.8 million from $208.5 million, while earnings per diluted share rose 25 percent to $3.75 per diluted share, compared with $3.01 per diluted share a year ago.

“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 August 1, 2007, WABCO repurchased 3.4 million shares for $153.5 million during 2008. 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. As reported on October 29, 2008, WABCO has temporarily suspended share repurchases under its buy-back program.

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 October 29, 2008, WABCO announced intended reductions in workforce by approximately 1,000 positions. In anticipation of further decrease in demand in the commercial vehicle industry, WABCO has expanded this streamlining program to a total of approximately 1,400 positions. As a result, WABCO expects that streamlining charges and related cash payments will range from $70 to $80 million, an update of its prior estimate. WABCO has also updated its estimated annualized savings associated with this program to range from $55 to $65 million. The company expects this streamlining program to be completed in the first half of 2009.

“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.”

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 $2.6 billion in 2008, WABCO is headquartered in Brussels, Belgium.