WABCO Holdings Inc. ( WBC) Q3 2011 Earnings Conference Call October 27, 2011 9:00 AM ET Executives Jason Campbell – Director, IR Jacques Esculier – Chairman and CEO Ulrich Michel – CFO Analysts Peter Chang – Credit Suisse Jeff Hammond – KeyBanc Steve Tusa – JP Morgan Ted Wheeler – Buckingham Research Presentation Operator
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. Jacques Esculier Thanks Jason. Good morning, good afternoon, good evening to you all and thank you for participating in this earnings call for our third quarter results. However, before we jump and describe another outstanding set of results for our third quarter 2011, I would like to kind of frame the way I see the business environments and the global context for our industry and for WABCO in particular. We came out of this severe downturn in 2009 recognizing that we had to deal with some kind of a new world order or new world disorder call it the way you want. Anyway, the new world order recognizes fully and also integrates now fundamental structural issue in the economy. Our developed countries have year-over-year generated major deficits in their budgets leading to paramount level of debt that affects the ability for the economy to keep growing, generating unemployment. In emerging countries, this remarkable extraordinary growth is also generating issues that need to be recognized including concerns for the environment, potential social issues also scarcity in resources that certainly contributes to the inflationary pressure over there. But nothing of this is actually new and however in the last three to four months for reasons that are really unclear to me. The political world and the press have depicted more sensationalized scenarios for the economy moving forward that are impacting the morale the sentiment from those businesses and consumers. And then turning more pessimistic obviously those businesses and consumers are revising their decisions in spending money, in investing, in hiring and this leads obviously to an impact on industrial and services activities.
I am very work on the actually the agreement that was reached in Europe within this context because I hope it will come down the successive pessimism and avoids deceitful feeling downwards spiral that could lead nowhere but to add recessive pleasures. Now looking at WABCO in this context, in the last two years we have more than fully leveraged to be coherent in our industry practically doubling our revenues. But we have increased capacity with the full awareness of the increased uncertainty (Inaudible) the global economy. We have indeed generating a super flexibility in our labor force. We have also pursued a strong build up of a strong infrastructure in emerging markets also diversifying the sources of revenues.In other words, we have built a very resilient franchise WABCO that can anticipate and adapts to market fluctuations. After we go through the details of the third quarter achievements I’m going to share with you some very preliminary thoughts and assumptions around the market dynamics in the different regions of our world. And then I will share with you how this resilient company that we have built along the last two years can cope and adapt to market fluctuations. Now looking at the first page on those results again we ended up the third quarter with a very solid growth up 30% reported 20% as we eliminated the impact of foreign exchange. Foreign exchange had a significant impact this quarter, leading to the performance gross profit margin of 29.1% versus 27.7% a year ago. Performance operating income of $94.5 million versus $56.4 million at the performance level and that translates into an operating margin of 13.4% just down from an all time record that we had seen during Q2 at 13.6%. Read the rest of this transcript for free on seekingalpha.com