WABCO Holdings, Inc. (WBC)
Q4 2011 Earnings Call
February 2, 2012, 9:00 a.m. ET
Jason Campbell – Director, IR
Jacques Esculier – Chairman and CEO
Ulrich Michel – CFO
Peter Chang – Credit Suisse
Alex Potter – Piper Jaffray
Steve Tusa – JPMorgan
David Leiker – Robert W. Baird & Co.
Jeff Hammond – KeyBanc Capital Markets
Robert [Inaudible] – Sidoti & Co.
Kristine Kubacki – Avondale Partners
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I would now like to the conference over to your host Jason Campbell, Director of Investor Relations. Sir, you may begin.
Thank you, Shannan. Good morning everyone and welcome to WABCO’s quarterly conference call. Today, we will present our fourth quarter full-year 2011 results. With us this morning is Jacques Esculier, our Chairman and CEO and Uli Michel, our Chief Financial Officer.
Before we begin I would like to remind you of a few things. First, this call, webcast and the presentation that we are using this morning are available on our website wabco-auto.com under the heading WABCO Q4 and full-year 2011 results. A replay of this call will be available through March 2.
Second, as shown on chart two 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 report.
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 Jacque.
Thank you, Jason. Good morning and good afternoon everybody. First I’d like to wish you all a very happy new year 2012, and let’s hope that 2012 will bring us a more peaceful and successful world.
So looking at Q4, this fourth quarter is really ending 2011 on a high note for our industry for WABCO in particular, but you know, Q4 is also setting the stage for 2012, which I would call a year of transition charged with economical uncertainty.
2012 could also be a year during which major economical challenges and issues should be addressed, and I believe resolved. Particularly looking at Europe that hopefully will take advantage of this year to conserve itself as a solid and credible period of the global economy.
So looking now at numbers, again, starting with the fourth quarter. We [inaudible] 9% in local currencies. Operating income was $90.5 million, leading to a margin of 13.5 versus 12.3 a year ago, which is driving an incremental margin of over 29%, which is kind of fairly exceptional given the single-digit growth that we have experienced this quarter.
Our EPS, performance EPS was up 20% at $1.21 per share versus $1.01 last year. Free cash flow of $52 million of which we’ve returned most of to the shareholders through the repurchase of 1.1 million shares.
Now kind of closing the full-year, we ended up with a sales revenue sales level of $2.8 billion, a 22% in local currency. Operating income ended up at $375 million for a margin of 13.4% versus 10.6% the prior year, which again corresponds to an incremental margin of 27%. Performance EPS ended up at $4.73 per share, which is almost 70% ahead of the performance level of 2010.
Free cash flow generated was $250 million for conversion rate close to 80%, out of which we returned 180 million to the repurchasing of 3.5 million shares. So overall, I think it was a very good strong year for our industry for WABCO in particular, and I think we have overall delivered great value to our shareholders.
Going to the next page, we’re going to review as usual the framework of our revenue growth for the fourth quarter, which again was up 9% at a performance level driven by a 8% growth coming from the OEM channels. Continued increase of content per vehicle, market expansion. Also our performance as we do usually.
Aftermarket channel was up 5%. We broke again the all-time record in revenue. However, and it slower than it was in the first half of the year, we think that it kind of could be pointing a finger to a disturbance largely of the continued growth in Europe truck and bus, our sales to JVs were up 29%, supporting the outstanding growth that we see and benefit from in the U.S.
Now we’re looking at the evolution of market revenues versus the dynamics of the T&B production, starting with Europe. Europe production actually slowed down to 3% year-over-year, which is actually the weakest decrease we have seen for quite a while. And actually even a little weaker than what we had expected. We’re still able to outperform that by 3% because of again increased content per vehicle in market penetration.
North America market gone up 45%, we out performed by 4%. South America going up 13%. Again a little slower than what we have prepared, even that we had planned, assumed pre-buy in view of the introduction of Euro 5 standards in 2012. And we were able outperform it by 13%. Japan/Korea still growing and doing very well for us, actually following the disaster that Japan had experienced earlier this year.