WABCO Holdings Inc. (NYSE: WBC) today reported that Q1 2009 sales totaled $334 million, down 53 percent from prior year and down 45 percent in local currencies, reflecting the anticipated continued deep decline in global demand for new commercial vehicles.
WABCO reported a Q1 2009 gross profit margin of 17.4 percent versus 27.8 percent a year ago. Excluding separation and streamlining costs, performance gross profit was 24 percent versus 27.9 percent a year ago. WABCO reported a Q1 2009 operating loss of $30 million versus operating income of $83.7 million a year ago. Performance operating income was $3 million, down 97 percent from prior year and down 96 percent from prior year in local currencies.
WABCO reported a Q1 2009 operating margin of negative 9 percent versus positive 11.9 percent a year ago. Performance operating income margin was 0.9 percent versus 13.0 percent a year ago.
"Our results in Q1 2009 show that WABCO continues to successfully weather the global economic crisis as we remain focused on our strategy of excellence in execution, global expansion and technology leadership," said Jacques Esculier, WABCO Chief Executive Officer. "Sales significantly declined in Q1 2009, as anticipated, and we demonstrated the power of our execution by maintaining a positive performance operating margin. We achieved cost savings of $20 million in operating expenses, well ahead of our plan, representing a reduction of approximately 20 percent year on year. Such success reflects major progress in our streamlining program with 1,200 positions eliminated through Q1 2009, as well as cost reductions across our organization, including flexible work schedules in our offices, reductions in discretionary expenses, and our decision to decrease executive and senior management compensation, among other measures."
"We also achieved approximately $12 million of materials and conversion productivity in Q1 2009 through outstanding execution despite a challenging environment, powering Q1 2009 to near record levels of productivity," said Esculier. "Our aftermarket business also contributed to our positive performance operating margin as Q1 2009 aftermarket sales declined by 14 percent, less than expected, driven by increased market penetration and tough winter conditions in Europe."
On a U.S. GAAP basis, Q1 2009 reported a net loss of $36.4 million or $0.57 per diluted share versus net income of $61.3 million or $0.91 per diluted share a year ago. Excluding separation and streamlining costs, and discrete tax items, Q1 2009 resulted in a performance net loss of $5.4 million versus performance net income of $70.3 million a year ago.
Impacting net income for the quarter, equity investments generated a loss of $4.8 million, which is predominantly due to the non-brakes Indian joint venture. Performance earnings per diluted share was a loss of $0.08 versus income of $1.04 per diluted share a year ago.
WABCO generated $33.9 million in net cash from operating activities in Q1 2009 and $23.3 million of free cash flow.
"In an environment where the commercial vehicle market has deteriorated significantly for two consecutive quarters, we generated operating cash flow of $33.9 million in Q1 2009, another mark of WABCO's ability to execute efficiently, under control and with maximum flexibility," said Esculier. "Anticipating lower levels of market demand as early as eight months ago, we took clear and quick measures to mitigate adverse market conditions. The power of our execution delivered outstanding results in Q1 2009: positive performance operating margin, cost savings of $20 million in operating expenses, well ahead of plan, productivity at near record levels, and strong cash flow."
"Our strategy of investing in global expansion is proving to be increasingly powerful. As in Q1 2009, emerging markets such as China and Brazil are expanding their share of WABCO's total revenues while business conditions for commercial vehicles in these markets seem less affected by the global economic crisis," said Esculier. "We have established WABCO as a leading supplier in China and, through our joint venture, in India. We expect these markets will suffer least during the industry's current downturn and be fastest to recover, providing additional growth while we fully leverage our investments and continue to execute our globalization strategy. Furthermore, we look forward to taking majority control of our joint venture in India, one of the world's most promising commercial vehicle markets, giving us additional access to unique resources and capabilities in manufacturing, sourcing and engineering to further power WABCO's growth."