Wabco Holdings Inc. (WBC)

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WABCO Holdings Inc. (WBC)

Q2 2011 Earnings Call

July 28, 2011 9:00 am ET


Mike Thompson - VP, Car Business and Corporate Relations

Jacques Esculier - Chairman and CEO

Ulrich Michel - CFO


Jeff Hammond - KeyBanc Capital Markets

Robert Kosowsky - Sidoti & Company

Ted Wheeler - Buckingham Research



Good day ladies and gentlemen and welcome to the WABCO Second Quarter 2011 Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press star and then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference Mr. Mike Thompson, Vice President, Car Business and Corporate Relations. Sir you may begin.

Mike Thompson

Thank you Johan. Good morning everyone and welcome to WABCO’s quarterly conference call. Today, we will present our second quarter 2011 results. With us this morning is Jacques Esculier, our Chairman and CEO and Uli Michel, our Chief Financial Officer.

As a reminder, this call, webcast and the presentation that we are using this morning are available on our website wabco-auto.com under the heading WABCO Q2 2011 results. A replay of this call will be available through August 28th.

Also, as shown on chart 2 of the presentation, certain forward-looking statements that we’ll make today are based on management’s good faith, expectations and beliefs concerning future developments. As you know, actual results may differ materially from these expectations as a result of many factors, examples of which can be found in our company’s Form 10-K and quarterly reports including our second quarter 2010 report, which was filed with the SEC this morning.

Lastly, some of our remarks contain non-GAAP financial measures as defined by the SEC. Reconciliations of the non-GAAP financial measures to the most comparable GAAP measures are attached as an appendix to this presentation and to our press release from this morning, both of which are posted on our website.

I’ll now turn the call over to Jacques Esculier.

Jacques Esculier

Okay, thanks Mike. Good morning, good afternoon ladies and gentlemen and thank you for joining us today. Well, prior to jumping to numbers, I would like to kind of share with you that this quarter marks yet another period of compelling results for WABCO. And this is very much in line with the strong performance that WABCO has delivered since the first quarter of 2010 when the economy was back on the recovery path and particularly for our industry.

Indeed in this second quarter, we have again seen a very strong organic growth at the top line and we have again proven our ability to transform this strong top line growth into strong bottom line configuration through a very significant level of incremental margin. And we are again breaking new ground in profitability.

So now, looking at numbers, top line went up 29% in local currencies of 44% reported. Our performance gross margin broke a new record at 29.6% at a performance level. Our operating income broke for the first time the threshold of $100 million at a performance level, leading to again a new record level of operating income margin of 13.6% for the quarter. And this drove to an EPS of $1.23 per share, again new record level, which is very close to twice as much as what we had seen just a year ago in the second quarter at 2010.

We generated free cash flow of $53 million, of which actually we returned the vast majority of it to our shareholders to repurchase 794,000 shares. Actually, that amounted to $51 million of buyback. And as we will share with you later during this call, we are again raising our expectation and guidance for the full year 2011.

So in summary, this is another quarter of stronger new growths, a new record profitability on this suite of very strong quarters that we have seen again starting in early 2010.

Next page, as we do every quarter, we are going to give you an analysis of ourselves. Again, revenue went up 29% short of this foreign exchange impact contributing to it 33% gross year-over-year of our revenues from OEMs. And actually, sequentially it is up 5% versus the first quarter of this year and that is reported by continuous increase of our content per vehicle and again, very strong growth that we are seeing from our developed markets particularly Europe and the U.S. Astro market went up again a hefty 13%, which is a very strong contributor to our growth.

And then, revenues from our sales through joint ventures mostly coming from the joint venture in the U.S. up 39% or up sequentially 4%, basically translating this continuous recovery of the market in the U.S. Now looking at the comparison of our evolution of revenues to the production by region, I think we can start saying that we again outperformed the market in all regions of the world. Starting with Europe, where we grew revenues 45% for an increase in production of commercial vehicles of 41%.

North America, a very healthy production increase of 52% that we outperformed by another 6%. South America went up 15% in production breaking a new record in the number of commercial vehicles built and again, we outperformed by 4%. Japan and Korea went down only 13%, we are going to see that Japan actually has not been as impacted as we had anticipated by the tragedy that they have gone through earlier this year and we outperformed by a healthy 23%.

Read the rest of this transcript for free on seekingalpha.com