chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. xo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ~~or a~~ smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~large accelerated filer,~~” “accelerated~~ accelerated filer,” smaller reporting company, and ~~“smaller reporting company”~~emerging growth company in Rule 12b-2 of the Exchange ~~Act (Check one).~~Act.



Large Accelerated Filer	x		Accelerated Filer	o

Non-Accelerated Filer	o	(Do not check if a smaller reporting company)	Smaller Reporting Company	o

			Emerging Growth Company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

The aggregate market value of the voting stock (Common Stock) held by non-affiliates of the registrant as of the close of business on June 30, ~~2015,~~2018, the last business day of the registrant's most recently completed second fiscal quarter, was approximately ~~$7.2~~$6.2 billion based on the closing sale price of the common stock on the New York Stock Exchange on that date. The registrant does not have any non-voting common equity.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Common stock, $.01 par value, outstanding at
February ~~4, 2016~~5, 2019	~~56,805,303~~51,376,541	shares

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information from certain portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the fiscal year end of December 31, ~~2015~~2018.

~~Table of Contents~~

WABCO HOLDINGS INC. AND SUBSIDIARIES

FORM 10-K

Year ended December 31, ~~2015~~2018



TABLE OF CONTENTS
		Page
PART I.		5
Item 1.	Business	5
Item 1A.	Risk Factors	1619
Item 1B.	Unresolved Staff Comments	2126
Item 2.	Properties	2227
Item 3.	Legal Proceedings	2227
Item 4.	Mine Safety Disclosures	2228
Item 4A.	Executive Officers of the Registrant	2329
PART II.		2531
Item 5.	Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2531
Item 6.	Selected Financial Data	2834
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2934
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	4650
Item 8.	Financial Statements and Supplementary Data	4751
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	82101
Item 9A.	Controls and Procedures	82101
Item 9B.	Other Information	85103
PART III.		86104
Item 10.	Directors, Executive Officers and Corporate Governance	86104
Item 11.	Executive Compensation	86104
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	86104
Item 13.	Certain Relationships and Related Transactions and Director Independence	86104
Item 14.	Principal Accounting Fees and Services	87105
PART IV.		88106
Item 15.	Exhibits and Financial Statement Schedules	88106
Item 16.	Form 10-K Summary	112
	Signatures	91112

~~Table of Contents~~

Information Concerning Forward Looking Statements

Certain of the statements contained in this report (other than the historical financial data and other statements of historical fact), including, without limitation, statements as to management's expectations and beliefs, are forward-looking statements. These forward-looking statements were based on various facts and were derived utilizing numerous important assumptions and other important factors, and changes in such facts, assumptions or factors could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements include the information concerning our future financial performance, financial condition, liquidity, business strategy, projected plans and objectives. Statements preceded by, followed by or that otherwise include the words “believes”, “expects”, “anticipates”, “strategies”, “prospects”, “intends”, “projects”, “estimates”, "continues", "evaluates", “forecasts”, “seeks”, “plans”, "goals", "potential", “may increase”, “may fluctuate”, and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward looking in nature and not historical facts. This report includes important information as to risk factors in “Item 1. Business”, “Item 1A. Risk Factors”, and “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.” Many important factors could cause actual results to differ materially from management's expectations, including:

the actual level of commercial vehicle production in our end-markets;

adverse developments in the business of our key customers;

periodic changes to contingent liabilities;

adverse developments in general business, economic and political conditions or any outbreak or escalation of hostilities on a national, regional or international basis;

changes in international or U.S. economic conditions, such as inflation, interest rate fluctuations, foreign exchange rate fluctuations or recessions in our markets;

difficulties in international trade caused by geopolitical developments including tariffs, sanctions and the United Kingdom’s exit from the European Union;

cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption;

unpredictable difficulties or delays in the development of new product technology;

pricing changes to our products or those of our competitors, and other competitive pressures on pricing and sales;

our ability to receive components and parts from our suppliers of a reasonable quality level or to obtain them at reasonable price levels due to fluctuations in the costs of the underlying raw materials;

our ability to access credit markets or capital markets on a favorable basis or at all;

our ability to service our debt obligations;

changes in the environmental regulations that affect our current and future products;

competition in our existing and future lines of business and the financial resources of competitors;

our failure to comply with regulations and any changes in regulations;

our failure to complete potential future acquisitions, collaborations and cooperations or to realize benefits from completed ~~acquisitions;~~acquisitions, collaborations and cooperations;

our inability to implement our growth plan;

our ability to service our pension obligations;

the loss of any of our senior management;

difficulties in obtaining or retaining the management and other human resource competencies that we need to achieve our business objectives;

the success of, and costs and savings associated with, our current streamlining initiatives;

labor relations;

our ability to complete and realize the ~~European Commission’s decision~~tax benefits associated with certain projects relating to the ~~Belgian Excess Profit Ruling (EPR) program,~~reorganization of our treasury function and the establishment of a regulated insurance company to better manage our group unfunded pension liabilities;

our ability to mitigate any tax risks, including, but not limited to, those risks associated with changes in legislation, tax audits and the ~~risks that the European Commission’s decision may not be successfully appealed, or the actions that the Company takes to otherwise mitigate the impact~~loss of the ~~European Commission’s decision, including availing itself of alternative~~benefits associated with our tax ~~relief~~rulings and incentives in ~~Belgium or pursuing other strategic alternatives, may not be successful;~~certain jurisdictions;

risks inherent in operating in foreign countries, including exposure to local economic conditions, government regulation, currency restrictions and other restraints, changes in tax laws and rulings, expropriation, political instability and diminished ability to legally enforce our contractual rights.

~~Table of Contents~~

We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by ~~law~~.law.

~~Table of Contents~~

PART I

ITEM 1. BUSINESS

Overview

Except as otherwise indicated or unless context otherwise requires “WABCO”, “WABCO Holdings Inc.,” “we,” “us,” “our,” and “the Company” refer to WABCO Holdings Inc. and its consolidated subsidiaries.

WABCO is a leading global supplier of electronic, mechanical, electro-mechanical and aerodynamic products for the world's major manufacturers of commercial trucks, buses and trailers, as well as passenger cars. We engineer, develop, manufacture and sell integrated systems controlling advanced braking, stability, suspension, steering, transmission automation, as well as air compression and processing. These systems improve vehicle safety, efficiency and performance while reducing overall vehicle operating costs. We estimate that approximately two out of every three commercial vehicles with advanced and conventional vehicle control systems worldwide are equipped with our products. For passenger cars, including sports utility vehicles (SUVs), we supply products for sophisticated, niche applications. We continue to grow in more parts of the world as we increasingly provide additional components and systems throughout the life of a vehicle, from design and development to the aftermarket. By leveraging fleet connectivity, WABCO mobilizes vehicle intelligence to advance fleet safety, efficiency and security.

History of Our Company

WABCO was founded in the United States in 1869 as Westinghouse Air Brake Company. We were purchased by American Standard Companies Inc. (American Standard) in 1968 and operated as the Vehicle Control Systems business division within American Standard until we were spun off from American Standard on July 31, 2007. Subsequent to our spin-off, American Standard changed its name to Trane Inc., which we herein refer to as “Trane.” On June 5, 2008, Trane was acquired in a merger with Ingersoll-Rand Company Limited (Ingersoll Rand) and exists today as a wholly owned subsidiary of Ingersoll Rand.

Products and Services

We engineer, develop, manufacture and sell advanced braking, stability, suspension, ~~and~~steering, transmission automation and air management systems primarily for commercial vehicles. Our largest-selling products are pneumatic anti-lock braking systems (ABS), electronic braking systems (EBS), electronic stability control (ESC), systems, brake controls, automated manual transmission (AMT) systems, air disc brakes (ADB), and a large variety of conventional mechanical products such as actuators, air compressors and air control valves for ~~medium-~~medium and heavy-duty trucks, buses and trailers.

~~In addition, we supply~~We are also a global market leader in hydraulic components, controls and brake systems for heavy-duty, off-highway vehicles used, for example, in agriculture, construction and mining. We are the only supplier with a complete portfolio of pneumatic and hydraulic braking and control systems for off-highway vehicles worldwide. WABCO is also the only supplier that provides a full range of aerodynamic devices for commercial vehicles worldwide. Aerodynamic products reduce the air drag of commercial trucks traveling long distances at highway speeds, thereby lowering fuel consumption and CO2 emissions. Aerodynamic devices help commercial vehicle ~~aftermarket distributors and service partners as well as~~ fleet operators ~~with replacement parts, fleet management solutions, diagnostic tools, training~~improve their operational efficiency and ~~other expert services.~~environmental performance. Furthermore, we supply advanced electronic suspension controls and vacuum pumps to the passenger car and SUV markets in Europe, North America and Asia. We also provide remanufacturing services globally.

Fleet Management Solutions

We also supply commercial vehicle aftermarket distributors and service partners as well as fleet operators with replacement parts, fleet management solutions (FMS), diagnostic tools, training and other expert services.We provide innovative control functions by leveraging rich data from onboard mission-critical systems to advance fleet safety, efficiency and security. With WABCO’s Transics TX-TRAILERGUARD™and TX-SKY™, customers continuously obtain data from onboard mission-critical systems. Simultaneously, all of this information is integrated onto the fleet manager’s displays via TX-CONNECT™ web-based back-office technology. By translating this big data into actionable management insights, fleets gain efficiency and asset utilization improves.

WABCO further expanded its global FMS platform by completing the acquisition of Asset Trackr in 2018, an innovative FMS provider based in Bangalore, India. Asset Trackr helps commercial fleets to track, analyze and optimize their transportation resources and assets in real time through cloud-based solutions.

WABCO and G7, a technology leader in China’s fleet logistics industry, continued to grow the joint venture they established in 2017. G7 is dedicated to implementing telematics, artificial intelligence and big-data algorithms in the logistics industry. Coupled with WABCO’s Smart Trailer FMS, integrated with WABCO’s Intelligent Trailer Program, which monitors and controls more than 40 onboard functions drives penetration of electronic braking systems and advances vehicle intelligence of tractors and trailers, WABCO and G7 are setting new standards for cargo transportation safety, efficiency and connectivity in China.

WABCO launched TRAXEE FMS in 2018 and offers smaller fleet operators several business-critical functions without incurring large capital investment or management overhead expenses. Launched as a scalable and rapid pay-back solution, TRAXEE enables operators to better coordinate fleet capacity, manage driver activity and improve administrative efficiency. The system also provides real-time status updates on individual trucks and drivers while helping to address tachograph legal compliance requirements across Europe and Turkey.

In 2018, WABCO introduced its Global Intelligent Braking Platform for Trailers, the industry’s first global intelligent braking platform for trailers. It provides the foundation for WABCO’s new generation Trailer Anti-Lock Braking System (iABS™) and Electronic Braking System (iEBS™). It also features simplified interchange between iABS and iEBS, enhances trailer system functionality and supports the globalization strategies of trailer manufacturers due to increased standardization and modularity.

WABCO also signed a strategic agreement with RIO in 2018, the digital brand of global commercial vehicle manufacturer, the TRATON GROUP to extend its FMS portfolio into a fully digital, cloud-based open platform for freight transport that supports all brands of truck. Under the agreement, RIO will leverage WABCO’s advanced FMS within its cloud-based connectivity environment to support the European logistics industry. WABCO’s advanced FMS solutions will interface with RIO’s partners and will be available to RIO customers in early 2019. Specifically, RIO will integrate WABCO’s TX-SOCIAL™ which analyzes and manages tachograph and driver recorded data as well as TX-TRAILERPULSE™, a trailer-specific telematics solution. RIO, which is expanding its customer base across Europe, matches leading suppliers with the best tailored solutions to support fleets and enable them to pick and choose from a broad range of digital tools.

Steering Technologies

Steering technology was integrated into the WABCO product portfolio with the 2017 acquisition of R.H. Sheppard Co., Inc. (Sheppard), a leading North America steering manufacturer. This enables WABCO to combine steering technologies with active braking, electronic stability control and other advanced driver assistance systems. This represents a major step toward providing lateral control through active steering, which is a cornerstone to WABCO’s ability to control longitudinal movement through active breaking, stability and suspension controls.

Transmission Automation

WABCO AMT products include control technology that boosts fuel economy while reducing emissions. It enables drivers to focus further attention on road and traffic conditions, resulting in increased comfort and safety. It also helps to minimize any performance gap between highly skilled and less experienced drivers. Our industry continues to adopt AMT technology with great growth potential in the United States and Brazil, Russia, India and China (BRIC) as original equipment manufacturer (OEM) and fleet operators seek to increase driver comfort and safety.

Advanced Braking Systems

WABCO's ABS prevents the wheel from locking during emergency braking situations and thereby helps commercial vehicle drivers to maintain stability of the vehicle. ABS also helps to bring a vehicle to a complete stop with the shortest possible stopping distance and in the safest possible way. Electronic activation of the EBS braking components reduces response and build-up times in brake cylinders. This in turn reduces braking distance by several meters, which can be decisive in some situations. The integrated ABS function ensures driving stability and steerability throughout the braking procedure.

A new generation of ADB products was released in 2018 as part of our MAXX™ product suite. This is a new generation of high-performance single-piston ADB for trucks, buses and trailers world-wide, and is expected to further accelerate the industry’s conversion from conventional drum brakes to ADB. WABCO showcased this pioneering suite of MAXX ADB technology at IAA Commercial Vehicles 2018 in Hanover, Germany.

With over six million single-piston ADB systems sold, including more than one million systems proven in the field for 30,000 Nm heavy-duty applications, WABCO is the well-established global market leader for this advanced technology. WABCO’s fifth generation range of single-piston ADB technology is suitable for all types of light, medium and heavy-duty vehicles. Superbly

engineered, MAXX’s new lighter weight, high-performance and low drag-torque design further boosts fuel efficiency and enables increased transport payloads.

The latest MAXX design provides enhanced safety and braking efficiency levels, outperforming the requirements for all major vehicle applications. With 20 percent fewer parts than the current design, and over 40 percent fewer parts compared to other ADB brands, the platform offers reliability and an excellent weight-performance ratio. Delivering enhanced fuel efficiency, the compact design offers an average weight of 35 kilograms per ADB in a six-by-two wheel truck application - 12 kilograms less per truck than other manufacturers’ European heavy-duty ADB systems.

WABCO has accelerated its single-piston ADB technology leadership in China with the launch of a new joint venture for vehicle control systems in 2018. This new joint venture with FAW Jiefang Automotive Company is designed to advance the safety and efficiency of commercial vehicles in China. A major focus of the joint venture will be heavy-duty trucks given WABCO’s mastery of single-piston ADB technology for 30,000 Nm applications which have a compact, lightweight design with fewer components and are proven to deliver the highest standards of safety, performance and reliability. WABCO’s industry-leading, high-performance single-piston ADB technology is best suited for all types of commercial vehicles - light, medium and heavy-duty platforms.

Advanced Driver Assistance Systems

WABCO also offers a comprehensive suite of Advanced Driver Assistance Systems (ADAS) that include lane departure warning systems (LDWS) and collision mitigation systems. Safety regulations driven by the European Union started in 2015 and mandated LDWS on new commercial vehicles. This new regulation is addressed by WABCO’s OnLane™ camera-based LDWS technology. Once it detects unintended lane drift, OnLane prompts the driver via acoustic, visual and haptic signals to take corrective measures. It also features an advanced option to warn against driver drowsiness. In 2017, WABCO introduced OnSide™, an advanced blind-spot detection system for commercial trucks and trailers. This new radar-based system alerts drivers to the presence of a moving vehicle in a truck’s blind spot and provides a side-collision warning to reduce the risk of accidents. When used in conjunction with WABCO’s OnLaneASSIST™ lane-keeping assist system, OnSide can go beyond warning to enable active collision avoidance. WABCO’s OnLaneASSIST is the first application of active steering technology in our portfolio of advanced driver assistance systems and OnSide provides a critical capability for the autonomous commercial vehicles of the future.

WABCO is the global industry supplier of collision mitigation systems and ADAS to OEMs with more than 450,000 OnGuard safety systems sold world-wide. The scalable and modular architecture of OnGuard solutions offer a number of powerful differentiating benefits for OEMs. WABCO was the first supplier of advanced emergency braking systems (AEBS) homologated in Europe in accordance with European Union regulations. WABCO's OnGuardACTIVE™ AEBS for trucks and buses complies with European Union regulations that came into effect ~~in November~~at the tail end of 2015. It detects moving, stopping and stationary vehicles ahead. It alerts the driver via acoustic, visual and haptic signals. OnGuardACTIVE autonomously applies the brakes and can bring the vehicle to a complete stop, helping to prevent or mitigate rear-end collisions.

~~Beginning~~In 2018, WABCO announced the latest functionalities added to its industry-leading suite of OnGuard™ collision mitigation systems (CMS) featuring a new radar sensor which offers the commercial vehicle industry’s longest radar detection range, as well as the widest near-range field of view. WABCO’s OnGuardACTIVE can now provide up to full autonomous emergency braking on moving and stationery vehicles from a highway speed up to 80 km per hour - even in ~~November 2015,~~poor visibility conditions. WABCO’s OnGuardMAX utilizes the radar sensor integrated with a new jointly developed Mobileye® camera powered by its industry-leading EyeQ®4 chip. This system further differentiates itself by enabling autonomous collision avoidance with pedestrians intruding in front of the vehicle at speeds up to 20km/h.

Additionally, in 2018, WABCO signed a Memorandum of Understanding (MoU) with Valeo, an automotive technology leader at the center of several automotive industry innovations, to develop and industrialize the next generation of ADAS, which is among the key building blocks for vehicle autonomy. Within the scope of this agreement, the parties intend to develop sensor technologies helping pave the way for Valeo to supply WABCO with advanced short and mid-range sensors, including 77GHz radar and solid-state LiDAR. The first market application using Valeo’s sensing technologies will be WABCO’s OnCityALERT™, an urban turning driver assistance solution that warns about cyclists and pedestrians potentially crossing the predicted driving path, prompting the driver to take corrective action. On average, traffic accidents involving heavy trucks in the European ~~Union also mandated lane departure warning systems (LDWS)~~community result in about 7,200 fatalities and over 100,000 injuries each year. 23 percent of all traffic-related severe injuries are unprotected road users and of that number, 20 percent of accidents occur during a turning maneuver to the nearside.

Autonomous Driving

Taking the next step towards autonomous driving solutions and to further complement our ADAS technology, WABCO signed an MOU in 2018 with Baidu to collaborate on ~~new~~developing a best-in-class, cost-effective and highly standardized suite of solutions for Level 4 Autonomous Driving in hub-to-hub highway applications for commercial vehicles. This ~~new regulation~~will be a cornerstone of an open platform allowing OEMs and fleets to utilize WABCO’s and Baidu’s core safety and AI technologies while providing them an opportunity to develop customized, differentiated solutions. Baidu will bring the power of Apollo, its open autonomous driving software platform, proven in the passenger car segment, while WABCO will provide access to its own ADOPT™ (Autonomous Driving Open Platform Technology) ecosystem to simplify entry into WABCO’s world of advanced technologies for the commercial vehicle industry. WABCO and Baidu will work together to combine the required content of Baidu’s Apollo software platform, integrating all the safety and redundancy protocols necessary for road release in order to develop turnkey, hub-to-hub, Level 4 highway solutions for the commercial vehicle world. Our goal is ~~addressed by WABCO’s OnLane™, our camera-based LDWS technology. Once it detects unintended lane drift, OnLane prompts~~to be able to commercialize these solutions over the ~~driver via acoustic, visual and haptic signals to take corrective measures. It also features an advanced option to warn against driver drowsiness.~~next three years.

WABCO offers the industry's first hydraulic ABS integrated with ESCsmart™ electronic stability control. We uniquely deliver hydraulic as well as pneumatic ABS with ESC systems for manufacturers of commercial vehicles of all sizes from Class 5 to Class 8, representing the industry’s most comprehensive portfolio of stability control solutions.

2015 was the first full year since WABCO acquired Transics International, a leading provider of fleet management solutions in Europe. This acquisition aligns with a WABCO strategic objective to expand business relationships with fleets around the world. In 2015, WABCO released its next-generation TX-TRAILERGUARD™ fleet management solution, marking the first product integration after WABCO acquired Transics. It connects big data about trucks, trailers, drivers and cargo together with fleet

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managers and office functions. An industry-leading technology, TX-TRAILERGUARD helps fleet operators to improve vehicle safety and efficiency while reducing costs through real-time online exchange of differentiated data and messages.Electrification

In ~~2015,~~2018, WABCO ~~connected~~announced a prototype of its first electric trailer - named eTrailer - developed to ~~another new market by investing $20 million in SmartDrive Systems, a U.S.-based leader in driving performance management solutions, which help fleets to improve~~maximize operating ~~safety~~efficiency and lower fuel consumption. InThis eTrailer prototype uses an intelligent electric motor control to recuperate electric energy during braking, which can then be reutilized to power the vehicle’s traction or to operate onboard electric auxiliaries. Furthermore, commercial fleet operators that connect eTrailer to a truck equipped with WABCO’s intelligent braking and stability control systems will further enhance the operating efficiency of the truck-trailer combination. WABCO estimates that its eTrailer could deliver fuel savings up to 20 percent on short haul routes and up to 10 percent for long hauls in a truck-trailer combination.

Continuing on the path of electrification, in 2018, WABCO signed a MoU with Nidec Motor Corporation ("Nidec"), a subsidiary of Nidec Corporation, the world’s number one Comprehensive Motor Manufacturer (TSE: 6594) to define, develop, manufacture and commercialize fully integrated electric drivetrain and brake control solutions for longitudinal control of commercial vehicles. The fully integrated electric drivetrain solution will operate on vehicle control information received from driver inputs (use of accelerator and brake pedals) to automate decision flow on how to accelerate or decelerate the vehicle in the most prudent and economic way. By introducing advanced, fully integrated electric drivetrain solutions in this ~~strategic partnership,~~market segment, WABCO and ~~SmartDrive Systems~~Nidec will ~~jointly develop and launch next-generation, video-based analytics solutions for commercial~~provide efficient energy management, while maintaining stable vehicle ~~fleets worldwide.~~dynamics. Also, the electric drivetrain solution will enable improved energy recuperation across all use cases which will contribute to additional efficiency gains.

In addition, in 2015, WABCO connected to a new aftermarket offering by launching a brand called ProVia. It offers a smart and reliable alternative for budget spare parts for commercial vehicles. Without compromising quality, ProVia provides workshops and fleet operators with an affordable option to extend the utilization and safety performance of older vehicles. So far, ProVia offers over 40 products and it is supported by WABCO’s engineering, manufacturing and aftermarket service network.

In 2015, major customers continued adoption of mBSP™, our industry-first modular braking system platform. It enables commercial vehicle manufacturers worldwide to interchangeably equip their diverse global truck and bus platforms with ABS or EBS systems based on regional market and/or regulatory requirements. WABCO's mBSP features the industry's highest standardization across both components and software of its ABS and EBS systems, offering vehicle makers a high degree of flexibility and scalability globally. With WABCO's unique mBSP system, truck and bus builders can achieve significant savings in development time and production costs. They can also bring new vehicles to market faster in every region of the world.

Our key product groups and functions are described below.



WABCO KEY PRODUCT GROUPS
SYSTEM / PRODUCT		FUNCTION
Actuator		Converts energy stored in compressed air into mechanical force applied to foundation brake to slow or stop commercial vehicles
Air Compressor and Air Processing/Air Management System		Provides compressed, dried air for braking, suspension and other pneumatic systems on trucks, buses and trailers
Foundation Brake		Transmits braking force to slow, stop or hold vehicles
Anti-lock Braking System (ABS)		Prevents wheel locking during braking to ensure steerability and stability
Conventional Braking System		Mechanical and pneumatic devices for control of braking systems in commercial vehicles
Electronic Braking System (EBS)		Electronic controls of braking systems for commercial vehicles
Electronic and Conventional Air Suspension Systems		Level and pressure control of air springs in trucks, buses, trailers and cars
Transmission Automation		Automates transmission gear shifting for trucks and buses including clutch operation
Vehicle Electronic Stability Control (ESC) and Roll Stability Support (RSS)		Enhances driving stability
Advanced Driver Assistance Systems (ADAS)		Promotes driver safety through lane departure warnings, collision mitigation and emergency braking systems
Fleet Management ~~Systems~~Solutions (FMS)		Improves vehicle safety and efficiency for fleet managers through real-time online commercial vehicle telematics and communications
Steering Technologies		Controls the lateral movement of the vehicle

Key Markets and Trends

Electronically controlled products and systems are important for the growth of our business. Our markets are driven primarily by the electronics content of control systems in commercial vehicles. At the same time, major original equipment manufacturers (OEMs) are transforming toward modularization of their various vehicle platforms. Modularity enables more efficiency and cost-effectiveness in development, manufacturing and marketing of their commercial vehicles. These trends have been increasing steadily with each successive vehicle platform introduction, as OEMs seek to improve vehicle safety, efficiency and performance through added functionalities, and to meet evolving and rising regulatory standards around the world. Overall, engineering trends

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in commercial vehicle design show a shift in demand toward increased electronics content and platform modularity. Although their pace varies by region, these trends are similar in all major geographies.

In particular, braking systems are part of ~~this~~the shift from conventional to advanced electronic ~~systems.~~systems on the path towards fully autonomous driverless trucks. In addition to increasing safety, improving stopping distances, and reducing installation complexity, electronic braking systems also enable new functionalities to be integrated more cost effectively. New functionalities include stability control, adaptive cruise control, transmission automation, active steering brake performance warning, vehicle diagnostics, driver assistance systems as well as engine braking and engine speed controls, among others. Our ~~industry-leading~~ automated transmission controls optimize gear shifting, resulting in better fuel efficiency, less component wear and fewer parts. This technology further enhances driver safety and comfort ~~through~~requiring less physical effort.

The global commercial vehicle industry is also trending toward environmental sustainability. WABCO's technology leadership continues to deliver products and systems that increase fuel efficiency, reduce emissions, decrease vehicle weight and optimize energy recovery, among other advancements that enhance environmental compliance of trucks, buses and trailers over the lifetime of the vehicle. For example, a truck equipped with all of WABCO's green technologies can ~~improve~~have significantly improved fuel ~~efficiency by more than 15%.~~efficiency. These include advanced transmission automation systems, innovative aerodynamic solutions, sophisticated electronic driver assistance systems, electronic control of air suspension and breakthrough air compression ~~technologies, among others.~~technologies. We reduce vehicle weight and recuperate energy through ~~industry-leading~~ engineering and lighter materials, resulting in higher fuel efficiency and a reduction in emissions.

We have entered into collaborations, the most recent being a MoU with Nidec, to define, develop, manufacture and commercialize fully integrated electric drivetrain and brake control solutions for longitudinal control of commercial vehicles. We

have also made investments in electrification, the most recent being our investment in Nikola Motor Company, a leader in design and manufacturing of hydrogen-electric vehicles, vehicle components, energy storage systems and electric vehicle drivetrains.

We believe customers value how WABCO has been laying the foundations of autonomous driving for commercial vehicles as well as WABCO's extensive track record for mobilizing vehicle intelligence. This has made WABCO a leading partner of choice globally for the development and systems integration of sensor, control and actuation technology alongside its expertise in local product applications.

WABCO joined the ENSEMBLE consortium in 2018 to develop advanced safety technologies for multi-brand platooning on roads in Europe. Jointly funded as a public and corporate initiative, the ENSEMBLE consortium is expected to demonstrate multi-brand truck platooning on public roads in 2021 and to assess the impact of platooning on infrastructure, road safety and traffic flow. WABCO will support the ENSEMBLE consortium’s development and testing of multi-brand platooning by delivering platooning algorithm and connectivity enhancements for WABCO’s OnGuard autonomous emergency braking systems (AEBS), active cruise control (ACC) and WABCO’s electronic braking system (EBS).

WABCO is also increasingly contributing to the efficiency and safety of commercial and government-owned fleets worldwide. WABCO empowers fleets through its differentiated and expanding portfolio of leading fleet management solutions, its Intelligent Trailer Program offering more than 40 key trailer functions, and WABCO's growing connectivity between off-vehicle data analytics support and intelligent on-vehicle safety and efficiency systems. Fleets are also empowered through big data from WABCO's onboard electronic braking, stability, efficiency and driver assistance systems which are integrated with fleet management solutions.

A fundamental driver of demand for our products is commercial truck and bus ~~production, which generally follows a multi-year cyclical pattern.~~production. The number of new commercial vehicles built fluctuates from year to year in different regions of the world. Nonetheless, over the last five years, we have demonstrated our ability to outperform the market by increasing the amount of WABCO content on board each vehicle. During the five year period through ~~2015,~~2018, WABCO's European sales to truck and bus (T&B) OEM customers, excluding the impact of foreign currency exchange rates, outperformed the rate of European T&B production by an average of 3%2% per year.


Year to Year Change	2011		2012		2013		2014		2015		2014		2015		2016		2017		2018
Sales to European T&B OEMs (at a constant FX rate)	34	%	(10	)%	13	%	(7	)%	8	%	(7	)%	8	%	8	%	6	%	3	%
European T&B Production	31	%	(9	)%	5	%	(9	)%	6	%	(9	)%	6	%	1	%	8	%	2	%

Customers

We sell our products primarily to ~~four~~five groups of customers around the world:

Truck and bus OEMs;

Commercial vehicle aftermarket distributors for replacement parts and services and commercial vehicle fleet operators for management solutions and services;

Trailer ~~OEMs, and~~OEMs;

Major car ~~manufacturers.~~manufacturers, and

Manufacturers of heavy duty, off-highway vehicles in agriculture, construction, mining and similar industries.

Our largest ~~customer is~~customers are Daimler ~~which accounted~~and Volvo and account for approximately ~~10%~~14% and 11% of our sales, ~~in 2015 and 2014,~~ respectively. Other key customers include ~~Volvo,~~ Ashok Leyland, ~~BMW,~~TRATON, China National Heavy Truck Corporation (CNHTC), Cummins, Fiat (Iveco), Hino, ~~Hyundai, Krone, MAN Nutzfahrzeuge AG (MAN), Meritor, Meritor WABCO (a joint venture),~~ Paccar ~~(DAF Trucks N.V. (DAF), Kenworth, Leyland~~ and ~~Peterbilt), First Automobile Works, Otto Sauer Achsenfabrik (SAF), Scania, Schmitz Cargobull AG,~~ TATA ~~Motors and ZF Friedrichshafen AG (ZF).~~Motors. For the fiscal years ended December 31, ~~2015~~2018, 2017 and ~~2014,~~2016, our top 10 customers accounted for approximately ~~48%~~49%, 44% and ~~54%~~44% of our sales, respectively.

The largest group of our customers, representing approximately ~~57%~~55% of sales ~~(60%~~(57% in ~~2014)~~2017), consists of truck and bus OEMs who are large, increasingly global and few in ~~numbers~~number due to industry consolidation, as well as a smaller number of off-highway (agricultural and construction) OEMs. As truck and bus OEMs grow globally, they expect suppliers to expand with them beyond their traditional markets and become reliable partners, especially in the development of new technologies. WABCO has a strong reputation for technological innovation and collaborates closely with major OEM customers to design, develop and deliver technologies used in their products. Our products play an important role in enabling further vehicle safety and efficiency. At the same time, there are few other suppliers who compete across the breadth of products that we supply globally.

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The second largest group, representing approximately ~~26%~~25% of sales ~~(26%~~(24% in ~~2014)~~2017), consists of the aftermarket distributor network that provides commercial vehicle operators with replacement parts as well as a range of services. This distributor network is a fragmented and diverse group of customers, covering a broad spectrum from large OEM-affiliated or OEM-owned distributors to small independent local distributors. The increasing number of trucks, buses and trailers on the road worldwide that are equipped with our products continuously increases market demand for replacement parts and services which, in turn, generates a growing stream of recurring aftermarket sales. In addition, we continue to develop an array of service offerings - such as diagnostics, training and fleet management solutions - for repair shops and fleet operators that further enhance our presence and growth in the commercial vehicle aftermarket.

The next largest group, representing approximately ~~11%~~10% of sales ~~(10%~~(9% in ~~2014)~~2017), consists of trailer ~~manufacturers,~~manufacturers. This is a particularly fragmented group of local orand regional players that are widely diverse in business size, focus and operation. Smaller trailer manufacturers are highly dependent on suppliers such as WABCO to provide technical expertise and product knowledge. Similar to truck and bus OEMs, trailer manufacturers rely significantly on WABCO products for safety and efficiency functions through superior technologies and customized ~~applications of such technologies.~~technology applications.

The ~~smallest group, representing approximately 6% of sales (4% in 2014), consists of~~remaining two groups, passenger car and SUV manufacturers ~~that purchase~~and off-highway (agricultural and construction) OEMs represent approximately 5% (6% in 2017) and 5% (4% in 2017) of sales respectively. We supply passenger car and SUV manufacturers with our electronic air suspension systems and vacuum pumps. Electronic air suspension is a luxury feature with increasing penetration that exceeds market growth. Vacuum pumps are used with diesel and gasoline direct injection (GDI) ~~engines; as a result, WABCO's vacuum pumps have above-average growth rates due to increasing diesel and GDI applications in Europe, Asia and North America.~~engines. These customers are typically large, global and sophisticated; they demand high quality in products and services.

We ~~address~~support our customers through aour global sales force. It is organized around key accounts and customer groups and it interfaces with product marketing and management to identify opportunities and meet customer needs across our product portfolio and throughout ~~different regions of~~ the world.

As a result of the 2017 acquisitions, the sales proportion, in percentage, of sales in Europe and Asia decreased and increased in North America, whereas sales, in absolute value, increased in all these regions. Europe represented approximately ~~56%~~49% of our sales in ~~2015 (59%~~2018 (52% in ~~2014)~~2017), with the remainder coming primarily from Asia and the Americas. Our products are also manufactured in Europe, Asia and the Americas. WABCO's growth in Asia is enhanced by our strong roots in China and India where we have achieved leading market positions through close connectivity to customers. We are further strengthened in Asia by ~~an outstanding~~a network of suppliers, manufacturing sites and engineering hubs.

																			WABCO SALES
By Geography	FY 2015 % of Sales		FY 2014 % of Sales		By Major End-Market	FY 2015 % of Sales		FY 2014 % of Sales		FY 2018 % of Sales		FY 2017 % of Sales		By Major End-Market	FY 2018 % of Sales		FY 2017 % of Sales
Europe	56	%	59	%	Truck & Bus Products (OEMs)	57	%	60	%	49	%	52	%	Truck & Bus Products (OEMs)	55	%	57	%
Asia	22	%	19	%	Aftermarket	26	%	26	%	23	%	26	%	Aftermarket	25	%	24	%
North America	17	%	13	%	Trailer Products	11	%	10	%	23	%	18	%	Trailer Products	10	%	9	%
South America	3	%	6	%	Car Products	6	%	4	%	3	%	3	%	Car Products	5	%	6	%
Other	2	%	3	%						2	%	1	%	Off Highway Products	5	%	4	%

Additional information on the geographic distribution of our sales and our long-lived assets for the past three years may be found in Note 19 ("Geographic Information") in Notes to the Consolidated Financial Statements.

Backlog

Information on our backlog is set forth under Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations - Backlog” of this annual report.

~~Cyclical and Seasonal Nature of Business~~Seasonality

Information on the ~~cyclical and seasonal nature~~seasonality of our business is set forth under Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations - ~~Cyclical and Seasonal Nature of Business”~~Seasonality” of this annual report.

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Growth Strategy

In ~~2015,~~2018, WABCO continued its three-pillar growth strategy - technology ~~innovation, geographic expansion,~~leadership, globalization, and excellence in execution - which further differentiates WABCO within the global commercial vehicle industry. Key drivers of excellence in execution are ~~discussed~~set out in “Manufacturing and Operations” below.

Technology Leadership

WABCO remains focused on global technology trends that are ~~relevant~~important to our customers. Our technology strategy has ~~two~~three pillars to create value for manufacturers of commercial vehicles and fleet customers in every region of the world. ~~One~~The first pillar is advanced vehicle and driver safety to reduce the number of accidents involving commercial vehicles. The ~~other~~second pillar is vehicle efficiency to improve the environmental sustainability of trucks, buses and trailers, and to reduce their total cost of operation through better fuel economy and other ~~improvements~~improvements. Solidly anchored in the fully autonomous driverless vehicle vision, the third pillar is connectivity. This works with the other two pillars to enable WABCO to mobilize vehicle efficiency and empower fleets around the world leveraging off-vehicle data analytics support and intelligent on-vehicle safety and efficiency systems.

We continue to drive market outperformance by leveraging our ~~industry-leading~~ expertise in developing electronic systems that control braking, stability, steering suspension, transmission automation and air management. We have a strong track record of innovation and we are responsible for many of the commercial vehicle industry's most important innovations including:

First heavy-duty truck anti-lock braking system (ABS)

First electronically controlled air suspension (ECAS) system for commercial vehicles

First commercial vehicle automated manual transmission (AMT) controls system

First electronic braking system (EBS) for commercial vehicles

First electronic stability control (ESC) system for heavy-duty commercial vehicles

First collision mitigation system (CMS) with active braking for commercial vehicles

First autonomous emergency braking system (AEBS) for commercial vehicles

First collision safety system with active braking developed for the North American market based on Adaptive Cruise Control (ACC) technology

First hydraulic ABS integrated with ESC for medium-duty commercial vehicles

First modular braking system platform (mBSP™) that enables vehicle makers to interchangeably equip their truck and bus platforms with either ABS or electronic braking systems (EBS) anywhere in the world

First technology (TX-TRAILERGUARD™) that provides comprehensive operating data on the performance of the truck, trailer and driver in a single integrated real-time view

First technology (OptiLink™) that provides a single user interface via a mobile device, such as a smartphone, to monitor and control multiple functions on both the truck and trailer

First door lock control technology (OptiLock™) that provides high security locking systems for trailers and container doors seamlessly connected with telematics systems

First Evasive Maneuver Assist (EMA) capabilities that combines WABCO's world-class braking, stability and vehicle dynamics control systems on trucks and trailers with ZF's top active steering technology

OnSide™, an advanced blind-spot detection system for commercial trucks and trailers. A radar-based system alerts drivers to the presence of a moving vehicle in a truck’s blind spot and provides a side-collision warning to reduce the risk of accidents

We continue to expand our technology portfolio by introducing new product applications and functionalities, and by improving the market penetration of our existing technologies. Advanced products and functionalities are typically developed and adopted first in Europe and then migrated to North America and emerging economies. Examples include the adoption of ABS and automated transmission systems. These technologies were first widely adopted in European markets before starting to penetrate North America as well as China, India and other emerging markets. In terms of commitment to innovation, ~~WABCO expended approximately $139.5 million in 2015, $145.0 million in 2014 and $119.4 million in 2013~~WABCO's net expenditures for product engineering, including research activities and product ~~development.~~development amounted to approximately $184.4 million in 2018.

We are also focused on long-term opportunities as WABCO continues to anticipate and fulfill our industry's constant search for technology that advances vehicle safety and efficiency in mature and emerging markets on a cost-competitive basis.

WABCO safety technologies encompass braking systems, stability control, collision mitigation, steering systems as well as accident mitigation and prevention. In ~~2015,~~2018 - among other major accomplishments - we formed multiple new alliances, announced breakthrough technologies and further strengthened existing partnerships. We also continued to expand and enrich our portfolio of differentiated capabilities that improve the safety, efficiency and connectivity of commercial vehicles.

As our customers move toward intelligent vehicles and autonomous driving, WABCO is firmly positioned for the autonomous, electrified and connected future of our industry. This means leveraging WABCO’s breadth and depth of capabilities which will further enable the continued success of OEMs and fleet operators in every region of the world. The combination of steering technologies from the Sheppard acquisition with WABCO’s technologies represents a major step toward providing both lateral and longitudinal control through active steering, active braking, stability and suspension controls, a cornerstone of autonomous vehicles.

In 2017, we further strengthened our market leadership in ~~collision mitigation~~advanced driver assistance systems through the launch in North America of OnLANE™ and ~~advanced emergency braking through OnGuard™ and OnGuardACTIVE™ systems respectively.~~OnLaneASSIST ™ systems. WABCO’s mBSP, the industry's first modular braking system platform, is at the heart of a commercial vehicle's braking system. It enables commercial vehicle makers to interchangeably equip their diverse global truck and bus platforms with ABS or EBS systems anywhere in the world. WABCO's mBSP uniquely features commonality of components and electronics, enabling truck and bus builders to save development time and production costs, and to bring new vehicles to market faster in every region of the world.

In ~~2015,~~2018, WABCO continued to increase adoption of our breakthrough ~~MAXX™ air disc brakes (ADB),~~MAXX ADB the industry’s lightest and highest performing single-piston ADB for commercial vehicles. Compactly engineered, MAXX braking technology fits virtually every wheel size for commercial trucks, buses and trailers around the globe. In particular, WABCO ~~expanded~~continued to expand ADB market penetration for trucks in North America, Europe and China where major customers value ~~industry-leading~~ MAXX differentiators such as shorter stopping distances compared with drum brakes.

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WABCO efficiency technologies deliver fuel economy, emissions reduction, energy recovery, weight reduction, lower maintenance costs and increased driver capability. In 2018, WABCO increased adoption of OptiDrive systems at original equipment makers in emerging economies such as India and China. As of ~~2015, 3~~2018, over 4.5 million WABCO ~~automated manual transmission (AMT)~~AMT systems have been sold, including our ~~industry award-winning~~ OptiDrive™ system - our modular automated manual transmission technology - which increases fuel economy up to 5% through optimized gear shifting. In 2015, WABCO increased adoption of OptiDrive systems at original equipment makers in emerging economies such as India and China. For example, OptiDrive was further adopted at FAST, the largest manufacturer of transmissions in China. We released the next generation of OptiRide™ ~~electronically controlled air suspension (ECAS) technology. It~~is an ECAS technology that identifies axle overload, provides automatic load transfer and improves traction, which helps to reduce vehicle wear-and-tear and other operational costs. WABCO’s OptiRide delivers fuel savings up to 3% under certain conditions, while providing optimal ride performance. AsIn 2018, WABCO continued to expand the use of ~~2015, OptiRide remains~~ the ~~global industry’s best-selling solution for electronic control of air suspension. In 2015, we also expanded adoption of our~~OptiFlow™ product range ~~OptiFlow™ aerodynamic solutions among~~offering efficiency to trailer builders and major ~~fleets. These innovative~~fleets through aerodynamic devices. Aerodynamic products ~~help~~reduce air drag of commercial trucks traveling long distances at highway speeds, thereby lowering fuel consumption by up to ~~improve the fuel economy and operational efficiency of trailers in Europe.~~7% as well as reducing CO2 emissions.

~~Geographic Expansion~~Globalization

Americas

WABCO’s regional headquarters for the Americas ~~is located~~was recently relocated to a new facility in ~~Rochester~~Auburn Hills, ~~Michigan.~~Michigan, which will also be our customer experience center and the location for the launch of WABCO Academy. It further anchors WABCO as a global technology leader and tier-one supplier to the commercial vehicle and automotive industries. It also further demonstrates WABCO’s commitment to closely connect with original equipment manufacturers and fleet operators in North and South America by leveraging our local capabilities and distribution channels for our vehicle safety and efficiency products and services.

North America remains a long-term growth market for WABCO, particularly in the United States, due to its expected volume of truck and bus production and the increasing adoption of vehicle safety and efficiency technologies. ~~We participate~~In prior years, we participated in this market through ~~a dual approach. Our~~our North American joint venture, Meritor WABCO. In October 2017, WABCO acquired the remaining ownership stake from Meritor and consolidated all products under one WABCO brand in the North American market. WABCO can unlock further value for our customers, including offering them seamless access to WABCO's powerful technology and services portfolio, backed by the flexibility and efficiency of an integrated global supply chain. WABCO North America is focused on the application and delivery of WABCO’s braking and active safety systems, electronic suspension control and air management ~~products. At the same time, WABCO North America, which~~products in ~~2015 marked its third full year, provides further focus on business expansion~~addition to all other technologies such as ADB, AMT and ~~enhancement of WABCO’s positioning~~compressors in the North American market. ~~For example, in 2015,~~In 2018, we ~~achieved record annual sales for WABCO’s OnGuard collision mitigation system (CMS), the first with active braking~~increased WABCO's ADB penetration and market share and expanded adoption of high-performance ADB in North America. ~~This success~~WABCO’s AMT also continued its successful sales penetration to Daimler Trucks North

America and Volvo. Lastly, WABCO integrated the Sheppard acquisition into its global footprint, and began exporting steering products to India. WABCO also continued to ~~expand our market leadership~~develop advanced safety technologies specifically designed for electric commercial vehicles, including electronic braking systems and traction and stability controls for electric truck manufacturer, Nikola, in ~~CMS technology through increased adoption among major commercial vehicle makers~~which WABCO made a $10 million investment in 2017.

WABCO’s OnGuard is one of North America's leading collision mitigation systems. More than 250 fleets are currently utilizing the system to help keep their truck drivers, vehicles, and ~~national fleets. Also~~fellow motorists safe. Heavy-duty truck fleets have reported a reduction in ~~2015, penetration~~accidents of ~~WABCO’s automated manual transmission technologies reached record levels at two global commercial vehicle manufacturers serving the U.S. market. WABCO also invested $17 million~~up to ~~build a new factory~~87% and up to an 89% reduction in Charleston, South Carolina where we will continue local manufacturing of air compressors and braking system components. In addition, WABCO will also begin - for the first time in North America - to produce air disc brakes (ADB) for trailer axles and related components locally in response to increased demand for our advanced ADBs by major original equipment manufacturers and fleets in North America.accident costs since adopting OnGuard.

South America remains a long-term growth market for WABCO, particularly in Brazil, due to its expected volume of truck and bus production and the increasing adoption of vehicle safety and efficiency technologies. WABCO ~~continued in 2015~~continues to have a leadership position across all products and expects the continuous adoption of new technologies, such as ~~market leader for anti-lock braking systems (ABS)~~AMT and a range of our other technologies. WABCO has more than 30 years of ABS experience in Brazil and a leading position to help vehicle manufacturers comply with Brazilian legislation that now mandates ABS on all new trucks, buses and trailers. In 2015, penetration of WABCO’s automated manual transmission technologies reached record levels at two global commercial vehicle manufacturers serving the South American market. Also in 2015, WABCO expanded its position in the Brazilian trailer segment where one of the largest manufacturers of trailers awarded WABCO a sole-supplier contract for conventional braking control valves.ADB. WABCO's South American headquarters near São Paulo serves as a regional hub in the manufacturing and sales network of WABCO products and systems. It also has a world-class production facility and a distribution center in the Campinas region. WABCO South America’s enhanced capabilities include product and applications engineering, aftermarket service, supply chain management and manufacturing. WABCO connects with the specific needs of customers in South America through specially developed and locally adapted systems and products for emerging markets.

China

China remains a long-term growth market for WABCO due to its expected volume of truck and bus production and the increasing adoption of vehicle safety and efficiency technologies. In ~~2015,~~2018, WABCO continued to leverage its position as market leader and supplier of choice for control systems for trucks, buses and trailers in China, the world’s largest market for commercial vehicles. As the leading provider of ~~anti-lock braking~~ADAS, EBS, ESC, ADB, LDWS systems ~~(ABS)~~ in China, WABCO is well positioned for growth ~~driven by~~as new regulations related to these products are released and implemented in the ~~continued local enforcement~~coming years.

WABCO continues to leverage its traditional partnerships with leading OEMs (China National Heavy Truck Corporation (CNHTC), Yutong) and furthered support for additional growth, establishing a new joint venture for vehicle control systems with FAW Jiefang Automotive Company to advance the safety and efficiency of existing regulations making ABS mandatory on trucks, buses and trailers, as well as additional future regulations to cover more classes of vehicles. In 2015, WABCO’s industry-leading OptiDrive increased market adoption, particularly at FAST, the largest manufacturer of transmissionscommercial vehicles in China. ~~Also~~This includes accelerating WABCO’s single-piston air disc brake (ADB) technology leadership in ~~2015, we released~~China. This is the ~~next generation~~first step in a much broader collaboration. WABCO and FAW Jiefang are also planning to cooperate on advanced braking systems development in the areas of ~~OptiRide~~autonomous driving, active safety systems and fleet management systems (FMS) to help support commercial vehicle manufacturers and fleets in China further improve safety and efficiency.

~~Table~~Additionally, WABCO signed a MoU with Baidu to collaborate on developing a best-in-class, cost-effective and highly standardized suite of ~~Contents~~solutions for Level 4 Autonomous Driving in hub-to-hub highway applications for commercial vehicles.

WABCO also continued to grow the joint venture with G7, a technology leader in China’s fleet logistics industry. G7 is dedicated to implementing telematics, artificial intelligence and big- data algorithms in the ~~global industry’s best-selling solution~~logistics industry. WABCO and G7 are setting new standards for cargo transportation safety, efficiency and connectivity in China.

Since 2014, WABCO remains the first and predominant supplier of ECAS systems for truck and bus manufacturers in China. Several major Chinese heavy duty truck manufacturers - including CNHTC, DFLQ and Shaanqi - continue to increase adoption of OptiRide electronically controlled air suspension (ECAS)~~. WABCO is first to market with ECAS technology for trucks and buses~~ in ~~China where most major local truck makers adopted it during 2015.~~series production.

~~In addition, WABCO entered into a new long-term supply agreement with Dongfeng Liuzhou Motor Company (DFLQ), one of the largest truck makers in China.~~ We began series delivery in 2015 for new business involving ABS, electronic braking and stability control systems, and OptiRide ECAS, among other advanced vehicle safety and efficiency technologies. DFLQ also exports to South East Asia, Africa, Middle East and South America. Also in 2015, three major commercial vehicle manufacturers in China - Foton, Yutong Bus and BYD - signed agreements to equip their next generation trucks and buses for export to Europe with WABCO’s OnGuardACTIVE autonomous emergency braking systems and OnLane™ lane departure warning systems. WABCO was recognized in China in 2015 by multiple majorbelieve customers ~~for its supplier excellence. Customers~~ value WABCO’s local capabilities for product application development and engineering as our strategy is to “design for China,” which ~~also~~ involves our four world-class factories located there. This strategy delivers optimal localized solutions to improve vehicle safety and efficiency, enhance driver effectiveness and sustain environmental friendliness.

India

~~India remains a long-term growth market for WABCO due~~Due to its expected volume of truck and bus production and the increasing adoption of vehicle safety and efficiency ~~technologies.~~technologies, India remains a long-term growth market for WABCO. We participate in this market through our subsidiary WABCO INDIA, which has a ~~52-year track record of local~~ market leadership position for over 55 years in conventional braking products, advanced braking systems, air-assisted products, and automated manual transmission systems. In particular, all ~~local~~ commercial vehicle manufacturers in India relied on WABCO’s test track located in Chennai to homologate ~~anti-lock braking systems (ABS)~~over 50 vehicle platforms -truck and trailer to comply with the new national ~~ABS~~axle load regulation that came into effect ~~as of October 2015~~from July 2018 for trucks ~~weighing more than 12 tons~~ and ~~buses above 5 tons. Also~~trailers In 2018, WABCO INDIA together with Tata International DLT one of the leading trailer OEM’s launched the award winning Intelligent Trailer Program. The Intelligent Trailer Program, an industry-first initiative leverages capabilities of WABCO’s trailer anti-lock or electronic braking

control systems to provide a platform for upto40 innovative trailer operating functions. Designed to enhance trailer safety, security and efficiency, the Intelligent Trailer Program offers significant added value for India’s trailer manufacturers, fleet operators and cargo owners. The Intelligent Trailer Program also paves the way for India’s trailer industry to upgrade from basic braking systems to the next level of advanced braking and suspension technologies required for higher levels of vehicle automation.

Tata Motors, in ~~2015,~~2018, partnered with WABCO ~~continued~~India to ~~increase adoption~~launch WABCO’s Advanced Driver Assistance Systems (ADAS) for the PRIMA and SIGNA range of ~~our industry-leading OptiDrive modular~~trucks. Designed to help mitigate some of the most common causes of accidents involving commercial vehicle, WABCO’s ADAS solution enhances vehicle safety, driver comfort and effectiveness. With the introduction of ADAS, Tata Motors became the first Indian OEM to provide a host of specific safety technologies in their vehicles including ESCsmart TM - electronic stability control, automatic traction control (ATC), hill start aid, ADAS which includes WABCO’s OnGuardASSISTTM- collision mitigation system and OnLaneALERTTM- lane departure warning system. OnGuardASSISTTM alerts the driver to potentially critical driving situations via acoustic, visual and haptic signals, should the driver fail to take corrective action, the system provides active braking on moving and stationary vehicles to mitigate or prevent impending collision. OnLaneALERT TM helps prevent unintentional lane departure, one of the most common causes of accidents involving commercial vehicles.

During the year 2018, WABCO India also partnered with Escorts group to launch India’s first automated tractor concept. Escorts group is one of India’s leading engineering conglomerate operating in agri machinery, material handling and construction equipment and railway equipment. WABCO India is India’s first technological solution provider to develop the concept of automated agricultural tractor by integrating automated manual transmission (AMT) ~~system, including buses. Major commercial truck~~, brake controls and bus makers value the fuel economy improvements that WABCO’s AMT technologies enable, among other benefits, which help to make their vehicles more attractive to their own customers, including government bus fleets.steering technologies.

WABCO INDIA connects with global OEMs based ~~both~~ in India and in other regions of the world through five world-class manufacturing sites located in Ambattur, Jamshedpur, Mahindra World City, Pantnagar and Lucknow. In ~~2015, WABCO also opened a new facility~~addition there are facilities in Chennai ~~to expand capability~~and Pune for software and application engineering. In India, ~~software~~over 500 engineers ~~also~~ support ~~local~~the design of new products, applications and systems to meet the technical and economic needs of customers in emerging markets around the world. At the same time, they continue to contribute to global development of WABCO’s advanced technologies. ~~WABCO has more than doubled its world-class software talent pool in India to nearly 250 engineers since 2010.~~ Furthermore, WABCO INDIA continued in ~~2015~~2018 to be recognized by ~~multiple major~~key customers for its excellence in innovation, quality, cost and overall performance, among other attributes that further differentiate WABCO as a leading supplier based on customer satisfaction. Also, WABCO INDIA remains a market leader in its domestic aftermarket through an extensive national distribution ~~network.~~network of more than 7,000 WABCO outlets, to provide fleet customers with access to full product and service support. To enhance connectivity, WABCO completed the acquisition of Asset Trackr in 2018, an innovative FMS provider based in Bangalore, India. Asset Trackr helps commercial fleets to track, analyze and optimize their transportation resources and assets in real time through cloud-based solutions.

Demonstrating WABCO’s strong commitment to expand and to globalize its steering business beyond the U.S., we have secured an important first milestone in delivering leading steering solutions to customers internationally with a supply agreement to Tata Motors. As a full systems tier-I supplier to Tata Motors, WABCO is equipping the manufacturer with its hydraulic power steering systems, helping them to meet increasing demand for new heavy-duty trucks locally following the recent legislative changes on axle load.

Eastern Europe

~~Eastern Europe is another long-term growth market for WABCO.~~ Truck and bus production ~~there~~in Eastern Europe is mainly in the Commonwealth of Independent States (CIS), which includes Russia as its major market. This is another long-term growth market for WABCO. Headquartered in Moscow, WABCO Russia has a factory in Miass and a distribution center in the Moscow region, supplying makers of trucks, trailers and buses, as well as aftermarket customers. In ~~2015, GAZ Group, a long-time customer~~2018, WABCO delivered 100% of the braking systems (ADB, APU, ABS and all conventional valves) for the newest platforms of trucks and buses for Russia’s largest manufacturer of commercial vehicles, adopted WABCO’s industry-leading MAXX™ single-piston air disc brakes on new truck platforms. This additional major supply agreement increases WABCO content per vehicle. In addition, WABCO entered into a new long-term agreement as major supplier for a comprehensive range of advanced and conventional safety and efficiency technologies with one of Russia’s largest heavy-dutymedium-duty commercial vehicle ~~manufacturers, further expanding WABCO’s partnership with this customer.~~manufacturer.

WABCO is further differentiated in Russia ~~among other reasons, because~~by our local engineers support customers throughout product development and completion of successful homologation. WABCO has been connecting with markets within the CIS for more than 40 years. WABCO Russia alone also has ~~five~~7 regional sales offices, 2527 dealers, over ~~160~~200 authorized WABCO shops and more than ~~170~~230 Service Partners across the country.

Competition

Given the importance of technological leadership, vehicle life-cycle expertise, a reputation for quality and reliability, and the growing joint collaboration between OEMs and suppliers to drive new product development, the space in which we ~~mostly~~largely operate has not historically had a large number of competitors. Our principal competitors are Knorr-Bremse (Knorr's U.S. subsidiary is

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Bendix Commercial Vehicle Systems) and, in certain categories, Haldex. In the advanced electronics categories, automotive players such as Bosch (automotive) and Continental have recently been present in some commercial vehicle applications. In the mechanical product categories, several Asian competitors are emerging, primarily in China, who are focused on such products.

In each of our product categories, we compete on the basis of product design, manufacturing and distribution capabilities, product quality and reliability, price, delivery and service.

Manufacturing and Operations

Most of our manufacturing sites and distribution centers produce and/or house a broad range of products and serve different types of customers. Currently, approximately ~~71%~~68% of our manufacturing workforce is located in best cost countries such as China, India, Brazil and Poland up from approximately 45% in 2007. Facilities in best cost countries have historically helped to reduce costs on more labor-intensive products, while our facilities in Western Europe are generally producing more technologically advanced products. However, the increasing need for more advanced products and systems in emerging markets leads us to expand local supply chain capabilities to progressively cover more complex manufacturing.

All facilities worldwide are deploying Six Sigma Lean initiatives and global standards to continuously generate productivity and improve service levels. By applying Six Sigma policy, methodologies and tools, we seek to improve quality and predictability of our processes on a continual basis. Lean is geared toward eliminating waste in our supply chain, manufacturing and administrative processes. Methodologies are customer driven and data based. In addition, our global supply chain team is tightly connected throughout regions and at each site. They make decisions on where to manufacture ~~which products~~each product taking into account factors such ~~factors~~ as local and export demand, customer approvals, cost, key supplier locations and factory capabilities. WABCO's global manufacturing and logistics also support our customers in the aftermarket as we continue to perform ~~at industry-leading levels~~ for on-time delivery and inventory fulfillment, among other drivers of customer satisfaction.

In 2018, WABCO opened a new Global Technology and Innovation Center in Hanover, Germany. Significantly expanding WABCO’s global product development and engineering capabilities, the nearly $30 million facility will play an important role in ensuring WABCO’s technology leadership is sustained through future generations of innovation within WABCO’s integrated network of product development and engineering centers that now spans four continents. This includes developing pioneering technologies to support the industry’s migration towards increasingly autonomous, connected and electric commercial vehicles.

Our global sourcing organization purchases a wide variety of components, including electrical, electro-mechanical and cast aluminum products, as well as parts containing materials such as steel, copper, rubber and plastic. These items represent a substantial portion of manufacturing costs. We source products on a global basis from three key regions: Western Europe, Central and Eastern Europe, and Asia. To support WABCO's continuing shift of manufacturing to best cost countries, we ~~also continue to migrate~~are migrating more of our sourcing to best cost regions. Under the leadership of the global sourcing organization, which is ~~organized~~built around commodity and product groups, we identify and develop key suppliers and seek to integrate them as partners within our extended enterprise. Many of our Western European suppliers are accompanying us toward best cost countries. Since 2007, the share of our sourcing from best cost regions has increased from 36% to approximately ~~44%~~51%.

We have developed a strong position in the engineering, design, development and testing of products, components and systems. We are generally regarded within our global industry as a systems expert. This recognition reflects our in-depth technical knowledge and capabilities to support the development of advanced technology applications that are appropriately and optimally integrated with all of the vehicle's other systems and controls. Key customers depend on us and will typically involve us very early in the development process as they begin designing next generation platforms. We have approximately ~~1,977~~2,855 employees - of which approximately ~~50% is~~55% are located in best cost countries - dedicated to engineering and developing new products, components and systems as well as supporting and enhancing technology applications and manufacturing processes. These include 331 software engineers in India who support the local design of new products and systems for emerging markets and contribute to the global development of advanced technologies for commercial vehicles. They are dedicated to continuously improving the cost effectiveness and efficiency of WABCO's business processes and operations worldwide through services that are optimally leveraged and shared within our own organization and connected with suppliers, customers and others.

Our global sales organization hosts application engineers that are based near customers in different regions around the world and are partially resident at some customer locations. We also have significant resources in best cost countries where we perform functions such as ~~drawings,~~drawing, testing and software component development. We operate test tracks in Germany and India as well as in Finland for extreme weather-proving conditions.

In 2015, we opened a new facility in Chennai, India that will enable WABCO to significantly expand software engineering and shared services capabilities. Software engineering supports the local design of new products and systems for emerging markets and contributes to the global development of advanced technologies for commercial vehicles. Since 2010, WABCO has more than doubled its number of software engineers in India to nearly 250. The new facility will also accommodate WABCO's shared services team of more than 100 professionals. They are dedicated to continuously improving the cost effectiveness and efficiency of WABCO's business processes and operations worldwide through services that are optimally leveraged and shared within our own organization and connected with suppliers, customers and others.

In the third quarter of 2015, we announced proposals to cease manufacturing operations at two production facilities in Western Europe to preserve the our global competitiveness for certain mechanical products. Pending the timing of the outcome of the formal processes, production could cease at our Meppel, Netherlands facility by the second half of 2016, and at our Claye-Souilly, France plant in the second half of 2017, with production being transferred to other facilities within WABCO’s globally integrated supply chain.

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In 2015, WABCO officially opened a new production facility in Wroclaw, Poland to support our supply chain initiative to provide additional capacity in best cost countries. In addition to manufacturing capability, this new facility also includes administrative offices for the newly created WABCO General Accounting Team, a centralized service center for some of WABCO’s administrative functions.

Joint Ventures

We use joint ventures globally to expand and enhance our access to customers. Our ~~important~~ joint ventures ~~are:~~include:

A majority-owned joint venture (90%) in Japan with Sanwa-Seiki (WABCO Japan, Inc.) that distributes WABCO's products in the local ~~market.~~market

A majority-owned (70%) manufacturing partnership in the United States with Cummins Engine Co. (WABCO Compressor Manufacturing Co.)~~, a manufacturing partnership~~ formed to produce air compressors designed by ~~WABCO.~~WABCO

A majority-owned joint venture (70%) with ~~Guangdong FUWA Heavy Industry Co., Ltd.,~~Fuwa Mechanical Engineering Company Ltd, (FUWA) formed to produce air disc brakes for commercial trailers in China. FUWA is the largest manufacturer of commercial trailer axles in China and in the ~~world.~~world

A majority-owned joint venture (60%) with FAW Jiefang (FAW Jiefang Automotive Co., Ltd) to advance the safety and efficiency of commercial vehicles in China. This newly created joint venture will commence the manufacturing of ADB in 2019

A 50% owned joint venture in Germany with ~~Wurth Group~~RuC Holding GmbH (WABCOWURTH Workshop Services GmbH) that supplies commercial vehicle workshops, fleet owners and operators and end users internationally with multi-brand technology diagnostic ~~systems.~~systems

A 50% owned ~~partnership~~joint venture in ~~North America~~China with ~~Meritor, Inc. (Meritor WABCO)~~Beijing Huitong Tianxia IOT Technology Co., Ltd (Shanghai G7 WABCO IOT Technology Co Ltd), to develop innovative Trailer FMS solutions for the Chinese fleet market

A 50% owned joint venture in China with Northstars Automobile Steering System Ltd (Sino-American RH Sheppard Hubei Steering Systems LTD), that ~~markets ABS~~is specialized insteering gears distribution on the Chinese market

A 37.5% owned joint venture with Shanghai Qingchuang Metal Products Trading Co., Ltd (China Source Engineered Components Trading Corporation Ltd) that wholesales machined parts, fasteners, hydraulic components and other ~~vehicle control products.~~

~~A 49% owned partnership in South Africa with Sturrock & Robson Ltd (WABCO Automotive South Africa), a distributor of braking systems products.~~

automotive parts.

Employees

We have ~~12,429~~16,135 employees. Approximately ~~47%~~46% of our employees are salaried and ~~53%~~54% are hourly. Approximately ~~50%~~42% of our workforce is in Europe, 44% is in Asia, and the remaining 6%14% is in the Americas. ~~In 2015, we announced restructuring proposals to cease manufacturing at two of our production facilities, which could result in a total reduction in workforce of approximately 320 employees.~~

Employees located in our sites in Europe, Asia and South America are subject to collective bargaining, with internal company agreements or external agreements or laws at the region or country level. Currently approximately 50% of our workforce is covered by collective bargaining agreements. The employees' right to strike is typically protected by law and union membership is confidential information which does not have to be provided to the employer. The collective bargaining agreements are typically renegotiated on an annual basis. Our U.S. facilities are non-union. We have maintained good relationships with our employees around the world and historically have experienced very few work stoppages.

Intellectual Property

Patents, trademarks and other ~~proprietary~~intellectual property rights are important to our business. We also rely upon trade secrets, manufacturing know-how, continuing technological innovations, and licensing opportunities to maintain and improve our competitive ~~position.~~position; and to protect certain confidential information, we rely on copyright and trade secret law and enter into confidentiality agreements as applicable. We review third-party ~~proprietary~~intellectual property rights, including patents and patent applications, as available, in an effort to develop an effective intellectual property strategy, avoid infringement of third-party ~~proprietary~~intellectual property rights, identify licensing opportunities, and monitor the intellectual property claims of others.

We own a large portfolio of patents that principally relate to our products and technologies, and we have, from time to time, licensed some of our patents. Patents for individual products and processes extend for varying periods according to the date of patent filing or grant and the legal term of patents in various countries where patent protection is obtained.

We protect our brands by trademark registrations in key markets in which our products are sold. Such trademark protections apply to our ~~generic brands like the~~core WABCO brand as well as many of our product brand names. Our trademarks allow us to further distinguish our company and our products and are important in our relationships with customers, suppliers and partners.

While we consider our patents and trademarks to be valuable assets, we do not believe that our competitive position is materially dependent upon any single patent or group of related patents. At the same time, we recognize that technical leadership

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is an ongoing pillar of success and our intellectual property portfolio will continue to grow in importance for the company as a whole as a result. ~~The risks associated with~~We believe that the combination of our technology, patents, know-how and other intellectual property rights and assets creates an advantage for our business and we continue to focus on successful patent prosecution ~~and defense,~~to build a strong patent portfolio, trademark protection and the exploitation and protection of other intellectual property rights ~~accordingly is something that we continue to focus on.~~in terms of our intellectual property, R&D and business strategies.

Environmental Regulation

Our operations are subject to local, state, federal and foreign environmental laws and regulations that govern activities or operations that may have adverse environmental effects and which impose liability for clean-up costs resulting from past spills, disposals or other releases of hazardous wastes and environmental compliance. Generally, the international requirements that impact the majority of our operations tend to be no more restrictive than those in effect in the ~~United States.~~U.S.

Throughout the world, we have been dedicated to being an environmentally responsible manufacturer, neighbor and employer. We have a number of proactive programs ~~under way~~in place to minimize our impact on the environment and believe that we are in substantial compliance with environmental laws and regulations. Manufacturing facilities are audited on a regular basis. ~~Nineteen~~Twenty-four of our manufacturing (M) and logistic (L) sites have Environmental Management Systems (EMS), which have been certified as ISO 14001 compliant. In addition, two of our test tracks (TT) have also been certified as ISO 14001 compliant. These sites are those located ~~in:~~in :



Campinas, Brazil (M, L)	~~Gronau,~~Jeverson, Germany (TT)	~~Pantnagar, India~~Stanowice, Poland (M)
Jinan, China ~~(2 plants)~~	~~Mannheim, Germany~~	~~Stanowice, Poland~~
~~Qingdao, China~~(M)	Ambattur, India (M)	Wroclaw, Poland (2 ~~plants)~~plants, M)
Qingdao, China (M)	Jamshedpur, India (M)	Charleston, United States (M)
Taishan, China	~~Jamshedpur, India~~	~~Charleston, United States~~
~~Claye-Souilly, France~~ (M)	Mahindra World City, India (M)	Rochester Hills, United States (M)
Hanover, Germany (M)	Lucknow, India (M)	North Mankato, United States (M)
Langehagen, Germany (L)	Chennai, India (TT)	Hanover, United States (M)
Gronau, Germany (M)	Pantnagar, India (M)	Wytheville, United States (M)
Mannheim, Germany (M)	Pyungtaek, Korea
~~Meppel, Netherlands~~ (M)		Hebron, United States (M)

A number of our facilities are undertaking responsive actions to address groundwater and soil issues. Expenditures in ~~2015~~2018 to evaluate and remediate these sites were not ~~material.~~

material, and are also not expected to be material in 2019. Additional sites may be identified for environmental remediation in the future, including properties previously transferred and with respect to which the Company may have contractual indemnification obligations.

Available Information

Our web site is located at www.wabco-auto.com. Our periodic reports and all amendments to those reports required to be filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the web site. During the period covered by this report, we posted our periodic reports on Form 10-Q and our current reports on Form 8-K and any amendments to those documents to our web site as soon as such reports were filed or furnished electronically with the Securities Exchange Commission (SEC). We will continue to post to our web site such reports and amendments as soon as reasonably practicable after such reports are filed with or furnished to the SEC.

The Separation of WABCO from Trane

The spin-off by Trane of its Vehicle Control Systems business became effective on July 31, 2007, through a distribution of 100% of the common stock of WABCO to Trane's shareholders (the Distribution). The Distribution was effected through a separation and distribution agreement pursuant to which Trane distributed all of the shares of WABCO common stock as a dividend on Trane common stock, in the amount of one share of WABCO common stock for every three shares of outstanding Trane common stock to each shareholder on the record date. Trane received a private letter ruling from the Internal Revenue Service (IRS) and an opinion from tax counsel indicating that the spin-off was tax free to the shareholders of Trane and WABCO.

Code of Conduct and Ethics

Our Code of Conduct and Ethics, which applies to all employees, including all executive officers and senior financial officers and directors, is posted on our web site www.wabco-auto.com. The Code of Conduct and Ethics is compliant with Item 406 of SEC Regulation S-K and the NYSE corporate governance listing standards. Any changes to the Code of Conduct and Ethics that affect the provisions required by Item 406 of Regulation S-K will also be disclosed on the web site.

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Any waivers of the Code of Conduct and Ethics for our executive officers, directors or senior financial officers must be approved by our Audit Committee and those waivers, if any are ever granted, would be disclosed on our web site under the caption “Exemptions to the Code of Conduct and Ethics.” There have been no waivers to the Code of Conduct and Ethics.

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ITEM 1A. RISK FACTORS

Any of the following factors could have a material adverse effect on our future operating results as well as other factors included in “Management's Discussion and Analysis of Financial Condition and Results of Operations - Information Concerning Forward Looking Statements.”

Risks Relating to Our Business

Our sales could decline due to macro-economic factors, ~~cyclicality of~~downturns in the industry, regulatory changes, and other factors outside of our control.

Changes in economic conditions, ~~cyclical~~significant downturns in our industry, regulatory changes impacting our supply chain and the purchasing patterns of commercial vehicles, including the ability to trade across borders and import and export our products, and changes in the local economies of the countries or regions in which we sell our products, such as changes in consumer confidence, increases in interest rates, inflation and increases in unemployment, could affect demand for our products, which could negatively affect our business and results of operations.

Demand for new trucks and buses in the markets in which we operate has a significant impact on our sales. ~~In 2015, heavy truck and bus production declined year on year in most of our major markets except North America, Western Europe and India.~~ Adverse economic conditions in our markets, particularly in Europe, and other factors may cause our customers to reduce truck and bus production, which could have an adverse effect on our results of operations and financial condition.

A global recession would negatively impact our customers and result in reduced demand for our products, which would therefore have a significant negative impact on our business.

During the 2008-2009 recession, the credit markets experienced a period of unprecedented turmoil and upheaval characterized by significantly reduced availability of credit and increased borrowing costs. The disruptions in the credit markets and impacts of the global recession negatively impacted consumer spending patterns and caused our customers to reduce truck and bus production. During 2012, the commercial vehicle industry experienced an abrupt slowdown to the significant recovery seen in 2010 and 2011 in our more developed markets, in addition to double digit declines in some of our emerging markets, namely Brazil and China. A further global recession could cause our customers to again reduce truck and bus production, which would have a negative impact on our business and results of operations, our operating cash flows and our financial condition.

Our exposure to exchange rate fluctuations on cross border transactions and the translation of local currency results into U.S. Dollars could negatively impact our results of operations.

We conduct business through subsidiaries in many different countries, including most of the major countries of Western and Eastern Europe, Brazil, Russia, China, South Korea, India, Thailand and Japan, and fluctuations in currency exchange rates have a significant impact on the reported results of our operations, which are presented in U.S. Dollars. In ~~2015,~~2018, approximately ~~83%~~78% of our combined sales occurred outside of the United States. A significant and growing portion of our products are manufactured in best-cost countries and sold in various countries. Cross border transactions, both with external parties and intercompany relationships, result in exposure to foreign currency exchange effects. Accordingly, fluctuations in the currency exchange rates could negatively impact our results of operations, especially fluctuations in the exchange rates of the currencies for the countries referred to above. Additionally, our results of operations are translated into U.S. Dollars for reporting purposes. The strengthening or weakening of the U.S. Dollar results in unfavorable or favorable translation effects as the results of foreign locations are translated into U.S. Dollars.

The Company could be subject to an increase in its tax rates following the adoption of new U.S. or international tax legislation.

The Company is subject to taxes in the U.S. and numerous foreign jurisdictions where a number of the Company’s subsidiaries are organized. Due to economic and political conditions, the tax rate in various jurisdictions may be subject to significant changes. The Company’s overall effective tax rate could be affected by changes in the mix of earnings in countries with different statutory tax rates or changes in tax laws or their interpretation.

The OECD, which represents a coalition of member countries, has recommended changes to numerous long-standing tax principles relating to Base Erosion and Profit Shifting (BEPS). These changes are being adopted and implemented by many of the countries in which we do business and may increase our taxes in these countries. In addition, the European Commission has launched several initiatives to implement BEPS actions including an anti-tax avoidance directive and having a common (consolidated) corporate tax base. One impact for the Company is that the group's Dutch hybrid financing structure will no longer be effective as of January 1, 2019. The Company is in the process of establishing new treasury function in Switzerland but this

change will give rise to an increase in our effective tax rate.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation known as the Tax Cuts and Jobs Act (The Tax Act). The Tax Act includes a reduction in the corporate tax rate to 21%, from 35%, implementing a territorial tax system, a one-time transition tax on unrepatriated earnings of foreign subsidiaries at reduced tax rates regardless of whether the earnings are repatriated and the modification or repeal of many business deductions and credits.

While the Tax Act provides for a territorial tax system, beginning in 2018, it includes the global intangible low-taxed income (GILTI) provision. The Company elected to account for GILTI tax in the period in which it is incurred. The GILTI provision requires the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on foreign subsidiary's tangible assets. The GILTI tax expense is primarily caused by a U.S. foreign tax credit limitation which requires an allocation of interest expense to the GILTI income, effectively rendering the allocated interest expense non-deductible. The GILTI provision has resulted in a $1.5 million increase in income tax expense for 2018.

The SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. During 2017, the Company recognized provisional income tax expense of $100.0 million. The provisional U.S. tax is comprised of the estimated transition tax payable with the Company's U.S. tax filings of $196.4 million offset by the reversal of previously recorded deferred tax liabilities on outside basis differences in foreign subsidiaries of $96.4 million. During 2018, the Company recognized $5.8 million of income tax expense related to the final transition tax payable of $202.2 million included on the Company's 2017 U.S. tax filing. In addition, we recognized $2.0 million of income tax expense related to changes in the revaluation of deferred tax assets and liabilities, which was primarily due to finalization of R.H. Sheppard Co., Inc. purchase accounting. The accounting for the tax effects of the Tax Act has been completed in 2018.

The ultimate impact of the Tax Act may differ from our assessment and amounts recorded as income tax expense may require further adjustment due to, among other things, additional analysis, changes in interpretations or applications of the Tax Act, and additional regulatory guidance that may be issued.

Our annual effective tax rate will likely increase, perhaps significantly, ~~as a result of the European Commission’s decision on the Belgian excess profit ruling program~~ which would negatively impact our results of operations.

Our overall effective tax rate (ETR) is equal to our total ~~tax~~ expense as a percentage of our total profit or loss before tax. However, tax expenses and benefits are determined separately for each tax paying entity or group of entities that is consolidated for tax purposes in each jurisdiction. ~~A substantial majority of our profits are earned in jurisdictions with a lower rate than the U.S. statutory rate.~~

In addition, the Belgian Tax Code contains provisions to reduce the taxable base of companies, through rulings granted by the Belgian Government under the excess profit ruling program (EPR Program). On January 11, 2016, the European Commission ruled that the above provision of Belgian law is illegal and incompatible with European State Aid law (Decision). As a result, the European Commission requires Belgium to stop applying the EPR Program and to recover all past tax benefits received by applicable companies under the program (i.e. a “clawback”). The clawback amount may be reduced by applying other forms of

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relief which would have been available to companies during the period they participated in the EPR Program. Negotiations are ongoing between the Belgian Government and the European Commission to agree on a methodology to calculate the applicable amounts for each company.

Since 2012, WABCO has participated in the EPR Program to achieve a lower provision for income taxes and overall effective tax rate. As a result of the Decision, the Company’s effective tax rate will likely increase in 2016 and beyond. The extent of such increase is dependent on many factors, including the ultimate amount of the clawback (which would impact the amount of net operating losses we would have available to us in future years to offset taxable income), the availability of alternative tax relief (both, by re-filing tax returns for prior periods to reduce the amount of the clawback, and for current and future periods to reduce the tax provision in Belgium), the mix of profits and losses between jurisdictions where we operate, as well as any other strategic decisions we may pursue. We are exploring all paths to mitigate the potential increase to our effective tax rate, including litigation against the European Union (as discussed below), eligibility for other alternative tax relief, or pursuing other strategic alternatives.

The ~~Decision may be appealed before~~Company’s ETR of 10.6% for the ~~General Court~~year ended December 31, 2018 included non-recurring items which resulted in our ETR being significantly lower than our statutory rate of 21%. See Note 17 of Notes to the Consolidated Financial Statements for a detailed explanation of the European Union (General Court) by the Belgian Government and by companies which are directly affected by the Decision. We understand that the Belgian government is considering an appeal. We perceive that the Decision is flawed and that there are strong arguments which could justify an appeal by WABCO as well. WABCO’s position is supported by other State Aid cases in Europe which have been annulled upon successful appeal before the General Court. However, litigation is inherently uncertain and there is no guarantee that any litigation against the European Commission's Decision will be successful or result in annulment.

The European Commission has noted that affected companies, like WABCO, may take advantage of alternative tax relief that may have been available to them during any of the years that they relied on the EPR Program and re-file tax returns claiming applicable benefits. We are currently assessing the extent to which we are eligible to claim such alternative tax reliefETR for the ~~prior periods subject~~year ended December 31, 2018. The main non-recurring items in 2018 reduced the ETR in aggregate by 9.7%. In addition, other tax risks identified separately may give rise to ~~clawback, as well as for the current and future years.~~an increase in our ETR.

Management’s current estimate of the ~~2016~~2019 effective tax rate is approximately ~~20%~~18%, ~~assuming~~which includes the anticipated benefit associated with the reorganization of the Company’s treasury function which will be located in our new corporate headquarters in Switzerland and assumes that ~~alternative tax relief programs are successfully implemented.~~we will be able to establish a regulated insurance company to better manage our group unfunded pension liabilities - see "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations for 2018 Compared with 2017 - Income Taxes,” and Note 14 of Notes to the Consolidated Financial Statements. If we are ~~unable~~not able to ~~achieve any alternative~~establish the regulated insurance company described above and to realize the tax ~~relief programs,~~benefits associated with these projects, our ~~effective tax rate for 2016~~ETR could significantly increase, ~~to 25%. In addition, if we are unsuccessful in fully mitigating the clawback, an exceptional non-cash tax expense of up to $85 million would have to be recognized,~~ which ~~would reduce our deferred tax assets as at December 31, 2015~~may materially and ~~result in a one-time increase of up to 28% to our 2016 effective tax rate. Any increase in our effective tax rate would negatively~~adversely impact our results of operations.

The value of our deferred tax assets could become impaired, which could materially and adversely affect our operating results.

As of December 31, ~~2015,~~2018, we had approximately ~~$143.7~~$161.3 million in net deferred tax assets. These deferred tax assets include post-retirement and other employee benefits and net operating loss carryovers that can be used to offset taxable income in future periods and reduce income taxes payable in those future periods. Each quarter, we determine the probability of the realization of deferred tax assets, using significant judgments and estimates with respect to, among other things, historical operating results and expectations of future earnings and tax planning strategies. If we determine in the future that there is insufficient evidence to support the valuation of these assets, due to the risk factors described herein or other factors, we may be required to record or further adjust a valuation allowance to revalue our deferred tax assets. Such a revaluation could result in material non-cash expense in the period in which the valuation allowance is adjusted and could have a material adverse effect on our results of operations.

~~Further, as discussed above, the European Commission’s Decision requires the Belgian Government to clawback all past~~The occurrence of tax benefits received under the EPR Program. Unless the Decision is successfully appealed, or we are not otherwise able to mitigate the loss of our Belgian EPR, we estimate that we would be required to utilize approximately $85 million of our deferredliabilities arising from tax ~~assets as at December 31, 2015, which would impact our ability to offset taxable income in 2016 and future years and have a negative effect on our operating results.~~

~~Further changes in the tax laws or rulings~~audits in the jurisdictions in which we operate ~~as a result of the base erosion and profit shifting (BEPS) project~~ could materially and adversely affect our overall effective tax rate and our results of operations.

The ~~Organization for Economic Co-operation and Development (OECD), which represents a coalition of member~~Company is subject to tax audits in all major countries ~~has undertaken a project to review~~that it does business. While the Company believes it complies with all local country tax laws, there are many transactions and calculations where the ultimate tax determination is uncertain and significant judgment is required in ~~many countries around~~evaluating uncertain tax positions. Although the ~~world, including~~Company believes its tax estimates and reserves are adequate for all uncertain tax positions, if the results of an audit or litigation are different from the amounts accrued it could have a material effect on the Company’s consolidated financial statements in the period or periods in which the determination is made. We adjust the estimates and reserves in light of changing facts and circumstances such as the closing of a tax audit or a court decision.

We may have exposure to additional tax liabilities as a result of the Company no longer meeting the requirements for certain tax rulings it has been granted.

WABCO has received a number of tax rulings and incentives in countries in which ~~we operate. On October 5, 2015,~~it is carrying out significant operations. If these incentives are revoked or if the ~~OECD issued~~Company no longer complies with the tax incentive requirements, it may have a ~~series~~significant impact on the Company’s global effective tax rate which could have a material adverse effect on our results of ~~reports recommending changes~~operations.

The United Kingdom’s referendum to ~~numerous long-standing tax principles relating~~exit from the European Union will continue to ~~base erosion~~have uncertain effects and ~~profit shifting.~~could adversely impact our business, results of operations and financial condition.

The United Kingdom has voted to exit from the European Union (commonly referred to as “Brexit”) and the terms of the withdrawal and the United Kingdom’s relationship with the European Union after the withdrawal are subject to ongoing negotiations. The United Kingdom may decide to leave the European Union on March 29, 2019 with no agreement (a so-called “hard Brexit”).

The Brexit vote and subsequent negotiations have impacted global markets and the value of the British Pound as compared to the U.S. dollar and other major currencies. In addition, there remains considerable uncertainty around Brexit and volatility in the securities markets and in currency exchange rates may continue. The effects of Brexit on the economies of the European Union are also unknown and unpredictable, especially in the case of a hard Brexit. It is ~~likely~~possible that ~~some or all~~the level of ~~these recommendations~~economic activity in the United Kingdom and the European region will be ~~adopted by various countries in which~~adversely impacted and that there will be increased regulatory and legal complexities and costs.

While we dohave not experienced any material financial impact from Brexit on our business to date, we cannot predict the results of the Brexit negotiations or their future effects. Any impact from Brexit on our business and ~~may increase~~operations over the long term will depend, in part, on the outcome of negotiations related to tariffs, tax, trade, security and other regulatory matters. The effects of Brexit could be disruptive to our ~~taxes~~operations and business relationships in ~~these countries.~~the European markets and elsewhere.

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We are subject to general risks associated with our foreign operations.

In addition to the currency exchange risks inherent in operating in many different foreign countries, there are other risks inherent in our international operations.

The risks related to our foreign operations that we more often face in the normal course of business include:

increases in non-U.S. tax rates and the amount of non-U.S. earnings relative to total combined earnings could change and impact our combined tax rate;

foreign earnings may be subject to withholding requirements or the imposition of tariffs, price or exchange controls, or other restrictions;

general economic and political conditions in countries where we operate may have an adverse effect on our operations in those countries;

governmental actions (such as restrictions on transfer of funds and trade protection measures, including export duties, quotas and customs duties and tariffs);

we may have difficulty complying with a variety of foreign laws and regulations, some of which may conflict with United States law, and the uncertainty created by this legal environment could limit our ability to effectively enforce our rights in certain markets; and

in several of the countries in which we do business, we rely upon the ongoing performance of our joint venture partners who bear risks similar to our risks and also may include obligations they have under related shareholders' agreements and risk of being denied access to the capital markets which could lead to resource demands on the Company in order to maintain or advance its strategy.

The ability to manage these risks could be difficult and may limit our operations and make the manufacture and distribution of our products internationally more difficult, which could negatively affect our business and results of operations.

Increasing our financial leverage could affect our operations and profitability.

As of December 31, ~~2015,~~2018, our total debt balance was ~~$503.7~~$845.2 million compared to ~~$315.2~~$1,409.8 million as of our prior fiscal year end. ~~Of this amount, $498.0 million related to our issuance during the second quarter of 2015 of senior unsecured notes.~~ Our indebtedness could affect our business and financial condition in various ways, including:

increasing our interest expense under our revolving credit facilities or other variable-rate borrowing if interest rates were to rise; and

potentially limiting our ability to borrow additional funds on favorable terms, or at all.

While we believe we will have the ability to service our debt, respect all of the covenants contained in the credit facilities and obtain additional capital in the future if and when needed, that will depend upon our results of operations and financial position at the time, the then-current state of the credit and financial markets, and other factors that may be beyond our control. If we are unable to service our debt or obtain additional capital in the future on favorable terms, our financial condition and results of operations would be adversely affected.

Changes in factors that impact the determination of our non-U.S. pension liabilities may adversely affect us.

Certain of our non-U.S. subsidiaries sponsor defined benefit pension plans, which generally provide benefits based on negotiated amounts for each year of service. The Company’s pension expense and its required contributions to its pension plans are directly affected by the value of plan assets, the projected and actual rates of return on plan assets and the actuarial assumptions the Company uses to measure its defined benefit pension plan obligations, including the discount rate at which future projected and accumulated pension obligations are discounted to a present value and the inflation rate. The Company could experience increased pension expense due to a combination of factors, including the decreased investment performance of its pension plan assets, decreases in the discount rate and changes in its assumptions relating to the expected return on plan assets. The Company could also experience increased other post-retirement expense due to decreases in the discount rate, increases in the health care trend rate and changes in demographics. If the actual trends in these factors are less favorable than our assumptions, this could have an adverse effect on our results of operations and financial condition.

We purchase components and parts containing base metals and other commodities. If we are unable to obtain such components and parts or obtain them at reasonable price levels due to fluctuations in the costs of the underlying raw materials, our ability to maintain existing sales margins may be affected.

We purchase a broad range of materials and components and parts throughout the world in connection with our manufacturing activities. Major items include electronic components and parts containing aluminum, steel, copper, zinc, rubber and plastics. The cost of components and parts, which reflect the cost of the raw materials used therein, represents a significant portion of our total costs. Price increases of the underlying commodities may adversely affect our results of operations. Although we maintain alternative sources for components and parts, our business is subject to the risk of price fluctuations and periodic delays in the delivery of certain raw materials to our suppliers. The sudden inability of a supplier to deliver components or to do so at reasonable prices could have a temporary adverse effect on our production of certain products or the cost at which we can produce those products. In addition, any change in the supply or price of raw materials could materially adversely affect our future business and results of operations.

If we are not able to maintain good relations with our employees, we could suffer work stoppages that could negatively affect our business and results of operations.

Employees located in our sites in Europe, Asia and South America are subject to collective bargaining, with internal company agreements or external agreements at the region or country level. Currently approximately 50% of our workforce is covered by collective bargaining agreements. These employees' right to strike is typically protected by law and union membership is confidential information which does not have to be provided to the employer. Our U.S. facilities are non-union. Any disputes with our employee

base could result in work stoppages or labor protests, which could disrupt our operations. Any such labor disputes could negatively affect our business and results of operations.

We are dependent on key customers.

We rely on several key customers. For the fiscal year ending December 31, ~~2015,~~2018, sales to our top ten customers accounted for approximately ~~48%~~49% of our sales. Many of our customers place orders for products on an as-needed basis and operate in cyclical industries and, as a result, their order levels have varied from period to period in the past and may vary significantly in the future. Such customer orders are dependent upon their markets and customers and may be subject to delays or cancellations. As a result of dependence on our key customers, we have experienced and could experience in the future a material adverse effect on our business and results of operations if any of the following were to occur:

the loss of any key customer, in whole or in part;

a declining market in which customers reduce orders or demand reduced prices; or

a strike or work stoppage at a key customer facility, which could affect both its suppliers and customers.

We are subject to price reduction demands from our OEM customers. These price reductions could adversely affect the results of our operations

Downward pricing pressure is a characteristic of the automotive industry, and as with other suppliers to commercial vehicle OEMs, we continue to experience price reduction demands from our customers. In the face of lower prices to customers, we must reduce our operating costs in order to maintain profitability. Whilst we have successfully implemented cost reduction initiatives, we anticipate our customers will continue to pursue aggressive pricing strategies. Customers may also request that we pay for design, engineering and tooling costs that are incurred prior to the start of production and recover these costs through amortization in the price per unit of the applicable component. If the Company is unable to offset customer price reductions through improved operating efficiencies, new manufacturing processes, sourcing alternatives, technology enhancements and other initiatives, if a given program is not launched or is launched with significantly lower volumes than planned, or if we are unable to avoid price reductions from our customers, the results of our operations could be adversely affected.

If there are changes in the environmental or other regulations that affect one or more of our current or future products, it could have a negative impact on our business and results of operations.

We are currently subject to various environmental and other regulations in the ~~United States~~U.S. and internationally. ~~A risk~~Risk of environmental liability is inherent in our current and former manufacturing activities. Under certain environmental laws, we could be held jointly and severally responsible for the remediation of any hazardous substance contamination at our past and present

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facilities and at third party waste disposal sites and could also be held liable for damages to natural resources and any consequences arising out of human exposure to such substances or other environmental damage. See Environmental Regulation for a discussion of the Company’s current remediation efforts. While we have a number of proactive programs underway to minimize the impact of the production and use of our products on the environment and believe that we are in substantial compliance with environmental laws and regulations, we cannot predict whether there will be changes in the environmental regulations affecting our products.

Any changes in the environmental and other regulations which affect our current or future products could have a negative impact on our business if we are unable to adjust our product offering to comply with such regulatory changes. In addition, it is possible that we will incur increased costs as a result of complying with environmental regulations, which could have a material adverse effect on our business, results of operations and financial condition.

We may be subject to product liability, warranty and recall claims, which may increase the costs of doing business and adversely affect our business, financial condition and results of operations.

We are subject to a risk of product liability or warranty claims if our products actually or allegedly fail to perform as expected, whether or not due to defective supplier parts, or the use of our products results, or are alleged to result, in bodily injury and/or property damage. While we maintain reasonable limits of insurance coverage to appropriately respond to such exposures, large product liability claims, if made, could exceed our insurance coverage limits and insurance may not continue to be available on commercially acceptable terms, if at all. We ~~cannot assure you that we will not~~may incur significant costs to defend these claims ~~or that we will~~and may not be able to recover related costs from suppliers. We may also experience any product liability losses in the future. In addition, if any of our designed products are or are alleged to be defective, we may be required to participate in recalls and exchanges of such products. In the past five years, our net warranty expense has fluctuated between approximately 0.8% and ~~1.5%~~1.1% of sales on an annual basis. Individual quarters were above or below the annual averages. The future cost associated with providing product warranties and/or bearing

the cost of repair or replacement of our products could exceed our historical experience and have a material adverse effect on our business, financial condition and results of operations.

We are required to plan our capacity well in advance of production and our success depends on having available capacity and effectively using it.

We principally compete for new business at the beginning of the development of our customers' new products. Our customers' new product development generally begins significantly prior to the marketing and production of their new products and our supply of our products generally lasts for the life of our customers' products. Nevertheless, our customers may move business to other suppliers or request price reductions during the life cycle of a product. The long development and sales cycle of our new products, combined with the specialized nature of many of our facilities and the resulting difficulty in shifting work from one facility to another, could result in variances in capacity utilization. In order to meet our customers' requirements, we may be required to supply our customers regardless of the actual cost to us and consequently we may suffer an adverse impact on our operating profit margins and results of operations.

We must continue to make technological advances, or we may not be able to successfully compete in our industry.

We operate in an industry in which technological advancements are necessary to remain competitive. Accordingly, we devote substantial resources and collaborate with technology development partners to improve already technologically complex products and to remain a leader in technological innovation. However, if we fail to continue to make technological improvements or our competitors develop technologically superior products, it could have an adverse effect on our operating results or financial condition.

A disruption in our information technology systems including one related to cyber security could pose a risk to the security of our systems, products and services and could adversely affect our business and financial performance.

We rely on the accuracy, capacity and security of our information technology systems. Despite our efforts to protect data or information, our products, services, and systems, and those of our third-party service providers, may be vulnerable to failures, security breaches, theft, misplaced or lost data, programming and/or human errors. A system failure, security breach or error could result in:

the unauthorized access, use, disclosure, modification or destruction of information;

the compromising of sensitive, confidential or personal data or information, including our intellectual property or trade secrets;

the improper use of our systems, software solutions or networks; and

production downtimes and operational disruptions.

We may incur significant costs related to the threat of any unauthorized access to or malfunction of our systems, products or services, including but not limited to, costs of protecting our products and systems. To the extent that data is inappropriately used or disclosed, lost, modified or destroyed, our business may be interrupted and we may incur significant costs, fines or penalties related to defective products, regulatory investigations, and litigation. The development of products linked to autonomous driving may be vulnerable to security breaches or system failure and entail severe damages in case of accident. Our reputation and brand names could be materially damaged by the threat or perpetration of cyber crime and the sales of our products and services may decrease. Each of these outcomes could adversely affect our competitive position, relationships with our customers, financial condition and results of operations.

We may not be successful in executing and integrating acquisitions into our operations, which could harm our results of operations and financial condition.

We routinely evaluate potential acquisitions and may pursue acquisition opportunities, some of which could be material to ~~its~~our business. We cannot provide assurance whether we will be successful in pursuing any acquisition opportunities or what the consequences of any acquisition would be. We may encounter various risks in any acquisitions, including:

the possible inability to integrate an acquired business into our operations;

diversion of management’s attention;

loss of key management personnel;

unanticipated problems or liabilities; and

increased labor and regulatory compliance costs of acquired businesses.

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Some or all of those risks could impair our results of operations and impact our financial condition. We may finance any future acquisitions from internally generated funds, bank borrowings, public offerings or private placements of equity or debt securities, or a combination of the foregoing. Acquisitions may involve the expenditure of significant funds and management time.

Acquisitions may also require us to increase our borrowings under our bank credit facilities or other debt instruments, or to seek new sources of liquidity. Increased borrowings would correspondingly increase our financial leverage, and could result in lower credit ~~ratings~~assessments and increased future borrowing costs. These risks could also reduce our flexibility to respond to changes in the industry or in general economic conditions. If we are unable to identify or execute on appropriate opportunities for acquisition, investment or growth, our business could be materially adversely affected.

The Public Company Accounting Oversight Board, or PCAOB, is currently unable to inspect the audit work and practices of auditors operating in Belgium, including our auditor.

Our auditors, Ernst & Young Bedrijfsrevisoren BCVBA/Reviseurs d'Entreprises SCCRL, are registered with the Public Company Accounting Oversight Board (PCAOB). Our auditors, like any other independent registered public accounting firms operating in Belgium, are not yet permitted, because of Belgian regulation impediments, to be subject to inspections by the PCAOB that assess their compliance with U.S. law and professional standards in connection with performance of audits of financial statements filed with the SEC. As a result, our investors may not realize the potential benefits of such inspections.

Risks Relating to the Separation

We are responsible for certain of Trane's contingent and other corporate liabilities.

Under the Indemnification and Cooperation Agreement, the Separation and Distribution Agreement and the Tax Sharing Agreement, our wholly-owned subsidiary WABCO Europe BVBA has assumed and is responsible for certain contingent liabilities related to Trane's business (including certain associated costs and expenses, whether arising prior to, at or after the Distribution) and will indemnify Trane for these liabilities. Among the contingent liabilities against which we will indemnify Trane and the other indemnities, are liabilities associated with certain non-U.S. tax liabilities and certain U.S. and non-U.S. environmental liabilities associated with certain Trane entities.

Risks Relating to Our Common Stock

Your percentage ownership in WABCO may be diluted in the future.

Your percentage ownership in WABCO may be diluted in the future because of equity awards that have already been granted and that we expect will be granted to our directors and officers in the future under our Omnibus Incentive Plan. In addition, we may in the future issue additional equity securities in order to fund working capital needs, capital expenditures and product development, or to make acquisitions and other investments, which may dilute your ownership interest.

We cannot assure you that we will repurchase shares or pay any ~~dividends or repurchase shares.~~dividends.

While we have historically returned value to shareholders in the form of share repurchases and/or dividends, our ability to repurchase shares and pay dividends ismay be limited by available cash, contingent liabilities and surplus. Moreover, all decisions regarding the declaration and payment of dividends and share repurchases will be at the sole discretion of our Board and will be evaluated from time to time in light of our financial condition, earnings, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant.

~~Our shareholder rights plan and provisions~~Provisions in our amended and restated certificate of incorporation and amended and restated by-laws, and certain provisions of Delaware law may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock.

Our amended and restated certificate of incorporation, amended and restated by-laws and Delaware law contain provisions that are intended to deter coercive takeover practices and ~~inadequate takeover bids by making such practices or bids unacceptably expensive to the raider and~~ to encourage prospective acquirers to negotiate with our Board of Directors rather than to attempt a hostile takeover. These provisions include, among others:

a Board of Directors that is divided into three classes with staggered terms;

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elimination of the right of our shareholders to act by written consent;

rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;

the right of our Board to issue preferred stock without shareholder approval; and

limitations on the right of shareholders to remove directors.

Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock.

On July 13, 2007, our Board adopted a shareholder rights plan, which provides, among other things, that when specified events occur, our shareholders will be entitled to purchase from us a newly created series of junior preferred stock. The preferred stock purchase rights are triggered by the earlier to occur of (i) ten business days (or a later date determined by our Board of Directors before the rights are separated from our common stock) after the public announcement that a person or group has become an “acquiring person” by acquiring beneficial ownership of 15% or more of our outstanding common stock or (ii) ten business days (or a later date determined by our Board before the rights are separated from our common stock) after a person or group begins a tender or exchange offer that, if completed, would result in that person or group becoming an acquiring person. The issuance of preferred stock pursuant to the shareholder rights plan would cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board of Directors. The shareholder rights plan expires on July 16, 2017.

We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board and by providing our Board with more time to assess any acquisition proposal. These provisions are not intended to make our company immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our Board determines is not in the best interests of our shareholders and our company.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

As of February ~~11, 2016,~~15, 2019, our manufacturing activities, test tracks and engineering centers are located at 2837 sites in 1312 countries.



Site Location		Activity and Major Products Manufactured ~~at Location~~
Campinas, Brazil		Vehicle control systems
Jinan, China (2 ~~plants)~~sites)		Braking systems and ~~Compressors~~compressors
Qingdao, China		Braking systems
Taishan, China		Foundation brakes
~~Claye-Souilly, France~~Shanghai, China		Engineering center
Rovaniemi, Finland		Test track
Hanover, Germany (2 sites)		Vehicle control systems
~~Hanover, Germany~~		~~Vehicle control systems~~ and engineering center
Gronau, Germany		Compressors and hydraulics
Mannheim, Germany		Foundation brakes
Jeversen, Germany		Test track
Ambattur, India		Vehicle control systems
Jamshedpur, India		Vehicle control systems
Mahindra World City, India		Vehicle control systems
Pantnagar, India		Vehicle control systems
Lucknow, India		Vehicle control systems
Chennai, India (2 sites)		Test track and engineering center
Pune, India		Engineering center
Pyungtaek, Korea		Braking systems
~~Meppel, Netherlands~~		~~Actuators~~
Stanowice, Poland		Remanufactured products
Wroclaw, Poland ~~(2 plants)~~(3 sites)		Vehicle control systems (2 plants) and engineering center
Miass, Russia		Actuators and foundation brakes
Chelny, Russia		Braking systems
Rayong, Thailand		Actuators and foundation brakes
Charleston, SC, United States		~~Compressors~~Air compressors and braking system components
Rochester Hills, MI, United States		Remanufactured products
~~Minnesota,~~North Mankato, MN, United States		Braking systems
~~California,~~Wytheville, VA, United States		Steering systems
Hebron, KY, United States		Braking systems
~~Arizona,~~Hanover, PA, United States		Steering systems and foundry
Auburn Hills, MI, United States		Application engineering
Empalme, Mexico		Braking systems
~~Pershore, United Kingdom~~Toronto, Canada		~~Braking systems~~
~~Sonora, Mexico~~		~~Braking systems~~Aerodynamic products

We own all of the plants described above, except for the Jinan, ~~China;~~Shanghai, Rovaniemi, Pune, Taishan, ~~China;~~ Stanowice, ~~Poland;~~ Miass, ~~Russia;~~Chelny, Rayong, ~~Thailand;~~ Rochester Hills, ~~U.S.;~~ Charleston, ~~U.S.; Arizona, U.S.,~~Auburn Hills and ~~Sonora, Mexico~~Empalme sites which are leased. Our properties are generally in good condition, are well maintained, and are generally suitable and adequate to carry out our business. In ~~2015,~~2018, the manufacturing plants, taken as a whole, met our capacity needs.

We also own or lease warehouse and office space for administrative and sales staff. Our headquarters, located in Brussels, Belgium, and our executive offices, located in ~~Rochester~~Auburn Hills ~~Michigan,~~ are leased.

ITEM 3. LEGAL PROCEEDINGS

We may be party to a variety of legal proceedings with respect to environmental related, employee related, product related, and general liability and automotive litigation related matters that arise in the normal course of our business. While the results of these legal proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will

not have a material adverse effect on our combined results of operations or financial position. For more information on current legal proceedings, refer to Note 1516 of Notes to the Consolidated Financial Statements.

ITEM 4. MINE SAFETY DISCLOSURES

None.

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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth certain information as of February ~~11, 2016~~15, 2019 with respect to each person who is an executive officer of the Company:



Name	Age	Position(s)
Jacques Esculier	5659	Chairman of the Board of Directors and Chief Executive Officer
~~Prashanth Mahendra-Rajah~~Roberto Fioroni	4549	Chief Financial Officer
Mazen Mazraani	4750	~~Interim~~ Chief Human Resources Officer
~~Daniel Sebillaut~~Nicolas Bardot	5447	Chief Supply Chain Officer
Lisa Brown	3740	~~Vice President,~~Chief Legal Officer and Secretary
~~Leon Liu~~Jorge Solis*	5446	~~President, Truck, Bus & Car OEMs~~Senior V.P. Corporate Business Development
Nick Rens	5155	President ~~Trailer Systems, Aftermarket & Off-Highway~~EMEA
Sean Deason	4447	Vice President Controller and ~~Assistant Secretary~~Investor Relations
Christian Brenneke	44	Chief Technology Officer

* Current employment will end on February 28, 2019.

Each officer of the Company is appointed by the Board of Directors to a term of office expiring on the date of the first Board meeting after the Annual Meeting of Shareholders next succeeding his or her appointment or such officer's earlier resignation or removal.

Jacques Esculier has served as our Chief Executive Officer and director since July 2007. In May 2009, he was appointed Chairman of our Board of Directors. Prior to July 2007, Mr. Esculier served as Vice President of Trane and President of its Vehicle Control Systems business, a position he had held since January 2004. Prior to holding that position, Mr. Esculier served in the capacity of Business Leader for the Trane Commercial Systems' Europe, Middle East, Africa, India & Asia Region from 2002 through January 2004. Prior to joining Trane in 2002, Mr. Esculier spent more than six years in leadership positions at AlliedSignal/Honeywell. He was Vice President and General Manager of Environmental Control and Power Systems Enterprise based in Los Angeles, and Vice President of Aftermarket Services-Asia Pacific based in Singapore. Mr. Esculier is a member of the Board of Directors of Pentair plc.

~~Prashanth Mahendra-Rajah~~Roberto Fioroni ~~has served~~joined WABCO in June 2018 as ~~our~~ Chief Financial ~~Officer since June 2014.~~Officer. Prior to ~~joining~~his appointment at WABCO, Mr. ~~Mahendra-Rajah~~Fioroni served ~~as Corporate Vice President and Segment CFO for the Silicon Systems Group, a division of Applied Materials,~~ from ~~April 2012. Prior to this, Mr. Mahendra-Rajah served~~March 2014 as Vice President, Finance, ~~Head of~~with The Goodyear Tire & Rubber Company’s Europe, Middle East and Africa (EMEA) business unit. Mr. Fioroni joined Goodyear in 2009 as Finance Director for the Eastern Europe, Middle East and Africa (EEMEA) region before being appointed Vice President, Global ~~Planning & Reporting~~Internal Audit, in 2011. Prior to joining Goodyear, Mr. Fioroni was with General Electric for ~~Visa for two years. Before then, Mr. Mahendra-Rajah spent 12~~13 years ~~at United Technologies~~ where he ~~served as Vice President, Finance, Planning and Analysis, UTC Fire and Security and Vice President and~~held a number of senior finance positions. He was latterly Chief Financial Officer ~~Building Systems and Services, Carrier Corporation.~~(EMEA) for General Electric’s Security Division. Mr. Fioroni holds a degree in Business Administration from the Universita Commerciale Luigi Bocconi in Milan, Italy.

Mazen Mazraani has served as our Chief Human Resources Officer since September 2016, having served as our Interim Chief Human Resources Officer since October ~~2015, adding to his existing role as our Compensation and Benefits Leader which he has held since November 2008.~~2015. Prior to this, Mr. Mazraani served as our Compensation and Benefits Leader, a position he had held since November 2008, and as our Compensation & Benefits Manager ~~since joining WABCO in~~from June ~~2007.~~2007 when he joined WABCO. Before joining WABCO, Mr. Mazraani served as Head of Compensation & Benefits for Dexia, a ~~Belgian French-Bank~~Belgian-French Bank specialized in public financing. Before taking up his in-house roles, MrMr. Mazraani worked for 7 years as a tax consultant at Coopers & Lybrand and Ernst & Young. ~~Graduated~~Specializing in Journalism and Communication from Brussels University, he holds a ~~Bachelors~~Bachelor's degree in Business Administration and a ~~Master~~Master's degree in Tax Management from Solvay Business School in Brussels.

~~Daniel Sebillaut~~Nicolas Bardot was appointed as our Chief Supply Chain Officer in September ~~2013 in addition~~2016. Prior to ~~his role~~this, Mr. Bardot served as our Vice President, ~~Manufacturing & Logistics, a~~Sourcing and Purchasing, since September 2013. Prior to holding this position, ~~he has held since January 2011.~~ Mr. Sebillaut is responsible for WABCO's globally integrated supply chain, incorporating the company's production facilities and logistics environments worldwide into lean manufacturing. He also guides WABCO’s Sourcing &Bardot was our Strategic Purchasing ~~efforts in alignment with Manufacturing & Logistics to ensure WABCO customers are served with the best quality and delivery performance alongside our continuing drive for productivity.~~Leader. Prior to joining WABCO, Mr. ~~Sebillaut~~Bardot worked in France, the Czech Republic and China, and was ~~the Director~~a business purchasing leader for Valeo Group, a global automotive supplier. Overall, he has gained more than 17 years of Global Operations and Production Control at Delphi Corporation from September 2000. Before that, he was Vice President for Quality and Continuous Improvement at Lear Corporation. Mr. Sebillaut has extensive experience in ~~successfully deploying enterprise-wide lean manufacturing strategies~~positions of increasing responsibility within ~~complex, global, automotive-sector organizations while achieving breakthrough performance results.~~sourcing and business management. Mr. Bardot holds a Master’s degree in Purchasing and Supply Chain Management from ESSEC Business School and completed executive training in business administration and management at INSEAD, both located in Paris, France.

Lisa Brown has served as our Chief Legal Officer and Secretary since June 2016 after holding the role of Vice President, Legal and Secretary since April 2015. Prior to this, Ms. Brown served as our Senior Legal Counsel since February 2012. Prior to

joining WABCO, Ms. Brown served as Legal Director and Company Secretary since March 2011 for the largest pet care retailer in the United Kingdom. From 2006 to 2011, she held various legal leadership roles for SSL International Plc, one the world’s leading providers of consumer healthcare products. Ms. Brown held the position of Group Head of Legal and Intellectual Property and was responsible for creating and driving legal strategy and risk management

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across the global operations, including research and development, manufacturing, and sales. Before taking up her in-house roles, Ms. Brown worked in private practice as an Intellectual Property Attorney specializing in brand and copyright protection. Ms. Brown is a registered trademark attorney. She holds a Bachelor of Laws degree, as well as a Diploma in Legal Practice from Nottingham Law School in Nottingham, United Kingdom.

~~Leon Liu~~ Jorge Solis~~has served~~ was appointed Senior V.P. Corporate Business Development in October 2018. Mr. Solis joined WABCO in August 2010 as ~~our~~Strategic Purchasing Leader. He was promoted in October 2011 to Vice President, Sourcing and Purchasing, a position he held through September 2013. At that time, Mr. Solis was appointed Vice President, Driveline and Suspension Controls Business Unit. In September 2015, Mr. Solis took on the role of Vice President, Vehicle Dynamics and Controls Business Unit and the role of President, Truck, Bus &and Car OEMs ~~since July 2014. Prior to this, Mr. Liu served as our President, Asia since January 2005.~~Division in August 2016. Prior to joining WABCO, Mr. Solis worked in ~~2005, Mr. Liu served as~~Mexico, the ~~Director~~United States and France, and was a business purchasing leader for Valeo Group. Overall, he has gained more than 20 years of ~~Business Planning and Strategy for Asia operations at Visteon Corporation. Before joining Visteon, he held management~~experience in positions of increasing ~~responsibilities in product development, product launches, program management, corporate strategy~~responsibility within sourcing, quality, manufacturing, and business ~~development~~management. Mr. Solis holds a Master’s degree in engineering from Technical University in Monterrey (ITESM), Mexico. In addition, he completed educational programs in international marketing at ~~Ford Motor Company~~ITESM, as well as executive training in business administration and ~~several Japanese Tier-1 suppliers.~~management at INSEAD.

Nick Rens ~~has~~was appointed EMEA President in October 2018. Prior to this, Mr. Rens served as our President, Trailer Systems, Aftermarket & Off-Highway since July ~~2014. Prior to this, Mr. Rens served as~~2014 and our Vice President, Aftermarket since November 2008. This was in addition to his role as Vice President, Trailer Systems, a role which he had held since 2005. He also assumed the role of Vice President, Driveline Controls, from January 2013 to September 2013. Previously, Mr. Rens worked for three years as our regional trailer sales leader for southern and western Europe based in Claye Souilly, France. Since 1999, Mr. Rens has also been Managing Director of WABCO Belgium where he held several sales leadership roles both in the Aftermarket and Original Equipment sales organizations. Mr. Rens has worked at the Company for almost his entire career, having joined the Company in 1989 as a product line specialist.

Sean Deason has served as our Vice President Controller and ~~Assistant Secretary~~Investor Relations since June 2015. Prior to joining WABCO, Mr. Deason spent 4four years with Evraz N.A. where he served as Vice President, Financial Planning & Analysis. Prior to Evraz, Mr. Deason spent 12twelve years with Lear Corporation where he served as Director, Finance, Corporate Business Planning & Analysis, Director, Finance, Asia Pacific Operations, Assistant Treasurer, and held various other positions of increasing responsibility from August 1999. Mr. Deason holds a Masters of International Management from Thunderbird School of Global Management and is a Certified Management Accountant.

~~Table~~Christian Brenneke was appointed as our Chief Technology Officer in February 2018, having served as our Vice President, Engineering, to lead WABCO’s technology innovation and new product developments since October 2015. Prior to holding this position, Dr. Brenneke was leading the Advanced Braking Systems business unit from September 2013, and took on the role of ~~Contents~~Vice President, Vehicle Dynamics and Controls, from April 2014. Prior to this, Dr. Brenneke held various management roles, including Global Project Management Leader and Team Leader for Software Development, since joining WABCO in 2008. Prior to joining WABCO, Dr. Brenneke spent several years in research, development and program management for driver assistance systems and autonomous driving at Volkswagen Group in Germany. Dr. Brenneke holds a graduate degree in electrical engineering specializing in mechatronics and a doctorate degree in engineering both from Leibniz University in Hanover, Germany. In addition, he earned an M.B.A. degree in general management from the University for Applied Sciences in Hamburg, Germany.

PART II


ITEM 5.	MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on NYSE under the symbol “WBC”. Our Certificate of Incorporation, as amended, authorizes the Company to issue up to 400,000,000 shares of common stock, par value $.01 per share, and 4,000,000 shares of preferred stock, par value $.01 per share, all of which have been designated by our Board of Directors as a series of Junior Participating Cumulative Preferred Stock. We also have a rights agreement. Pursuant to the rights agreement, when triggered in certain takeover situations, one preferred stock purchase right will be issued for each outstanding share of our common stock.share.

We estimate that there are approximately ~~406~~315 holders of record of the Company's common stock. A significant number of the outstanding shares of common stock which are beneficially owned by individuals or entities are registered in the name of a nominee of The Depository Trust Company, a securities depository for banks and brokerage firms. As of February 4, ~~2016,~~2019, there were ~~48,862~~61,318 beneficial owners of our common stock.

We have not declared or paid any cash dividends in 2015 or 2014. Our last cash dividend was paid ($0.07 per share) in the first quarter of 2009. We continuously consider ways to return capital to our stockholders, either through our open market repurchase program and/or through the payment of cash dividends.

~~Set forth below are the high and low sales prices for shares of our common stock for each quarterly period of 2015 and 2014.~~

2015
High

Low
First quarter $ 122.53
$ 92.86
Second quarter $ 133.31
$ 118.73
Third quarter $ 126.39
$ 100.34
Fourth quarter $ 115.80
$ 95.60
2014
First quarter $ 106.72
$ 83.92
Second quarter $ 111.65
$ 100.31
Third quarter $ 110.93
$ 90.73
Fourth quarter $ 108.10
$ 85.22

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ISSUER PURCHASES OF EQUITY SECURITIES

Our Board of Directors has approved an open market stock repurchase ~~program.~~ programs consisting of the following stock repurchase program authorizations as also discussed in Note 7 of Notes to Consolidated Financial Statements.

On ~~May 26, 2011, the Board of Directors approved the purchase of shares in an amount not to exceed $400 million, which expired on May 31, 2013. On October 26, 2012,~~December 2, 2016, the Board of Directors authorized the ~~Company~~repurchase of shares of up to ~~enter into an additional share repurchase program for $400~~$600.0 million of common ~~shares. A repurchase program~~stock. From January 1, 2017 to December 31, 2018, the Company purchased 3,511,454 shares for ~~$200 million of common shares was further authorized on October 29, 2013. Both of these authorizations~~$420.0 million. This authorization for stock repurchases expired on December 31, ~~2014.~~

~~On December 5, 2014, the Board of Directors approved a repurchase program for an additional $500 million of common shares. This authorization expires on December 31, 2016.~~

~~The total unexpended balance under this repurchase program was $250.8 million as of December 31, 2015.~~

~~A summary of the repurchase activity for 2015 follows.~~

Period Total Number of Shares Purchased (a) Average price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)

Total through December 31, 2014 13,578,361
$ 71.57
13,578,361
$ 500,000,000

January 1 - January 31 231,293
231,293
$ 477,222,505
February 1 - February 28 103,806
103,806
$ 466,336,236
March 1 - March 31 239,553
239,553
$ 438,226,391
Total first quarter 574,652
$ 107.50
574,652

April 1 - April 30 108,847
108,847
$ 424,958,562
May 1 - May 31 91,076
91,076
$ 413,305,516
June 1 - June 30 300,890
300,890
$ 375,719,832
Total second quarter 500,813
$ 124.81
500,813

July 1 - July 31 152,000
152,000
$ 357,219,084
August 1 - August 31 213,986
213,986
$ 331,847,390
September 1 - September 30 162,000
162,000
$ 313,285,582
Total third quarter 527,986
$ 118.25
527,986

October 1 - October 31 13,200
13,200
$ 311,812,804
November 1 - November 30 262,700
262,700
$ 283,418,641
December 1 - December 31 326,000
326,000
$ 250,810,529
Total fourth quarter 601,900
$ 103.80
601,900

Total through December 31, 2015 15,783,712
$ 77.36
15,783,712
$ 250,810,529

~~(a) Relates to the share repurchase programs approved in May 2011, October 2012, October 2013 and December 2014 as previously discussed.~~2018.

All share repurchases were effected in accordance with the safe harbor provisions of Rule 10b-18 of the Exchange Act, and

certain repurchases were made pursuant to plans intending to comply with Rule 10b5-1 of the Exchange Act. The timing and amount of share repurchases depended on a variety of factors including, among other things, share price, market conditions and applicable legal and regulatory requirements.

A summary of the repurchase activity for the year ended December 31, 2018 follows.



Period	Total Number of Shares Purchased	Average price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)

Total through December 31, 2017	1,033,000	$116.13	1,033,000	$480,041,067

January 1 - January 31	—	-	—
February 1 - February 28	—	-	—
March 1 - March 31	221,000	$138.74	221,000
Total first quarter	221,000	$138.74	221,000	$449,378,909

April 1 - April 30	48,000	$130.30	48,000
May 1 - May 31	354,000	$128.58	354,000
June 1 - June 30	306,000	$122.26	306,000
Total second quarter	708,000	$125.96	708,000	$360,196,131

July 1 - July 31	72,000	$123.26	72,000
August 1 - August 31	398,400	$122.85	398,400
September 1 - September 30	270,090	$119.76	270,090
Total third quarter	740,490	$121.76	740,490	$270,034,351

October 1 - October 31	324,700	$109.61	324,700
November 1 - November 30	282,060	$115.42	282,060
December 1 - December 31	202,204	$108.07	202,204
Total fourth quarter	808,964	$111.25	808,964	$0

Total through December 31, 2018	3,511,454	$119.6	3,511,454	$0

~~Table~~

(a) Relates to the approved share repurchase programs as discussed above.

On December 7, 2018, the Board of ~~Contents~~Directors authorized the repurchase of up to an additional $600 million of common stock from January 1, 2019 through December 31, 2020.

PERFORMANCE GRAPH

The following graph and table compare the cumulative total shareholder's return on our common stock from December 31, ~~2010~~2013 through December 31, ~~2015,~~2018, with the Standard & Poor's 500 Index and the Standard & Poor's Auto Parts & Equipment Index. The ~~table~~graph and ~~graph~~table use data supplied by S&P Capital IQ.

The comparisons reflected in the graph and table are not intended to forecast the future performance of the common stock and may not be indicative of such future performance.

Total Shareholder Returns



	12/31/2013	12/31/2014	12/31/2015	12/31/2016	12/31/2017	12/31/2018
WABCO Holdings Inc.	100	112.17	109.47	113.64	153.62	114.91
S&P 500 Index	100	113.69	115.26	129.05	157.22	150.33
S&P 500 Auto Parts & Equipment Index	100	103.68	97.82	95.66	141.11	101.70

12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015
WABCO Holdings Inc. 100 71.23 106.99 153.31 171.97 167.83
S&P 500 Index 100 102.11 118.45 156.82 178.29 180.75
S&P 500 Auto Parts & Equipment Index 100 82.26 85.92 141.57 146.77 138.48

~~Table of Contents~~


ITEM 6.	SELECTED FINANCIAL DATA


(Amounts in millions, except share and per share data)	Year Ended December 31,														Year Ended December 31,
(Amounts in millions, except share and per share data)	2015			2014		2013			2012			2011			2018			2017			2016			2015			2014
Income Statement Data:
Sales	$	2,627.5		$	2,851.0	$	2,720.5		$	2,477.4		$	2,794.1		$	3,831.0		$	3,304.2		$	2,810.0		$	2,627.5		$	2,851.0
Cost of sales	1,797.2			1,968.3		1,906.2			1,732.0			1,984.6			2,658.5			2,290.4			1,931.0			1,837.6			1,972.6
Streamlining expenses	44.8			11.0		5.2			5.2			1.5
Gross profit	785.5			871.7		809.1			740.2			808.0			1,172.5			1,013.8			879.0			789.9			878.4
Costs and expenses:
Selling and administrative expenses	344.7			370.8		345.1			300.5			326.6			476.0			411.2			356.6			346.6			372.6
Product engineering expenses	139.5			145.0		119.4			104.3			105.1
Streamlining expenses	23.7			16.0		7.7			7.7			0.6
Other operating expense, net	6.7			8.9		5.0			3.2			5.8
Research, development and engineering expenses															184.4			147.0			135.2			139.5			145.0
Other operating (income)/expense, net															(0.4		)	20.6			5.3			6.7			8.9
Operating income	270.9			331.0		331.9			324.5			369.9			512.5			435.0			381.9			297.1			351.9
European Commission fine reimbursement	—			—		279.5			—			—
Equity income of unconsolidated joint ventures	32.1			23.8		17.7			18.1			16.5			1.0			23.1			24.8			32.1			23.8
Other non-operating income/(expense), net	1.6			1.8		6.9			(5.0		)	20.2
Gain on remeasurement of equity investments ⁽¹⁾															—			247.7			—			—			—
Other non-operating expense, net															(42.3		)	(37.2		)	(24.9		)	(24.6		)	(19.1		)
Interest (expense)/income, net	(7.1		)	0.2		4.9			(1.5		)	(1.7		)	(7.5		)	(16.0		)	(12.7		)	(7.1		)	0.2
Income before income taxes	297.5			356.8		640.9			336.1			404.9			463.7			652.6			369.1			297.5			356.8
Income tax expense/(benefit)	11.5			55.6		(21.0		)	23.6			36.7
Income tax expense ⁽²⁾															49.3			229.7			121.8			11.5			55.6
Net income including noncontrolling interests	286.0			301.2		661.9			312.5			368.2			414.4			422.9			247.3			286.0			301.2
Less: net income attributable to noncontrolling interests	10.8			9.7		8.7			10.5			11.2			20.3			16.8			24.3			10.8			9.7
Net income	$	275.2		$	291.5	$	653.2		$	302.0		$	357.0		$	394.1		$	406.1		$	223.0		$	275.2		$	291.5
Per share:
Basic	$	4.76		$	4.87	$	10.46		$	4.73		$	5.35		$	7.46		$	7.53		$	4.00		$	4.76		$	4.87
Diluted	$	4.72		$	4.81	$	10.31		$	4.62		$	5.19		$	7.43		$	7.50		$	3.98		$	4.72		$	4.81
Average number of outstanding common shares:
Basic	57,768,018			59,907,763		62,474,493			63,906,992			66,693,064			52,846,962			53,903,938			55,695,738			57,768,018			59,907,763
Diluted	58,274,987			60,546,454		63,382,564			65,323,389			68,829,440			53,062,573			54,139,815			55,981,816			58,274,987			60,546,454
Balance Sheet Data (at end of period):
Total assets	$	2,589.9		$	2,432.7	$	2,392.8		$	1,747.0		$	1,623.2		$	3,738.6		$	4,323.4		$	2,589.9		$	2,432.7		$	2,392.8
Total debt	$	503.7		$	315.2	$	87.1		$	76.2		$	78.8		$	845.2		$	1,409.8		$	503.7		$	315.2		$	87.1
Total shareholders' equity	$	786.7		$	841.6	$	1,152.8		$	676.4		$	587.2		$	1,176.8		$	1,121.4		$	786.7		$	841.6		$	1,152.8
Cash dividends per common share	$	—		$	—	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

⁽¹⁾ Gain on remeasurement of equity method investments includes gains resulting from the step up of equity method investments to their acquisition date fair values. See Note 22 of Notes to the Consolidated Financial Statements for additional information.

⁽²⁾Income tax expense for the year ended December 31, 2017 included incremental income tax expense mainly resulting from the Tax Cuts and Jobs Act. See Note 17 to the Consolidated Financial Statements for additional information.

For a comparative analysis of certain line items in the Income Statement Data section of this table, see Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” which follows.

~~Table of Contents~~


ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion summarizes the significant factors affecting the results of operations and financial condition of WABCO during the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 and should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere herein. Certain information in this discussion and analysis regarding industry outlook, our expectations regarding the future performance of our business and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” above. Our actual results may differ materially from those contained in any forward-looking statements. You should read the following discussion together with the sections entitled “Risk Factors”, “Information Concerning Forward-Looking Statements”, “Selected Financial Information”, “Liquidity and Capital Resources” and consolidated financial statements and related notes thereto included elsewhere herein.

Executive Overview

In ~~2015,~~2018, the Company once again delivered strong top-line growth of 15.9% (13.9% excluding foreign currency translation effects) compared to 2017, of which 6.7% was related to acquisitions. This growth was achieved in an environment where the global production of trucks and buses greater than six tons ~~decreased in most markets. We estimate the reduction~~increased only 2.5% compared to be approximately 7% globally. WABCO's sales during the full year 2015 decreased by 7.8% (increased 6.6% excluding foreign currency translation effects) compared with the same period a year ago, demonstrating our continued outperformance of the market.

~~In 2015, WABCO's~~2017. Our global aftermarket sales ~~decreased~~increased by ~~9.8% (increased 6.8%~~19.0% (17.5% excluding foreign currency translation effects), ~~compared with the same period a year ago, resulting in record aftermarket revenues on a currency adjusted basis. It demonstrates the continued success~~ of ~~the Company's aftermarket strategies.~~which 11.7% was related to acquisitions.

In addition, in 2015, WABCO connected to a new aftermarket offering by launching a brand called ProVia. It offers a reliable alternative for budget spare parts for commercial vehicles. So far, ProVia offers over 40 products and it is supported by WABCO’s engineering, manufacturing and aftermarket service network.

In November 2015, European Union regulations for advanced emergency braking systems (AEBS) came into effect. WABCO is the first supplier of AEBS in Europe that complies with European Union regulations. WABCO's OnGuardACTIVE™ AEBS for trucks and buses detects moving, stopping and stationary vehicles ahead. It alerts the driver via acoustic, visual and haptic signals. OnGuardACTIVE autonomously applies the brakes and can bring the vehicle to a complete stop, helping to prevent or mitigate rear-end collisions.

Beginning in November 2015, the European Union also mandated lane departure warning systems (LDWS) on new commercial vehicles. This new regulation is addressed by WABCO’s OnLane™, our camera-based LDWS technology. Once it detects unintended lane drift, OnLane prompts the driver via acoustic, visual and haptic signals to take corrective measures. It also features an advanced option to warn against driver drowsiness.

During 2015, all local commercial vehicle manufacturers in India relied on WABCO’s test track located in Chennai to homologate anti-lock braking systems (ABS) to comply with the new national ABS regulation that came into effect as of October 2015 for trucks weighing more than 12 tons and buses above 5 tons.

In 2015, we further strengthened our position in automated manual transmission (AMT) through agreements with major global OEM manufacturers. Also in 2015, we released the next generation of OptiRide™ technology, the global industry’s best-selling solution for electronically controlled air suspension (ECAS). WABCO is first to market with ECAS technology for trucks and buses in China, the world’s largest market for commercial vehicles. We also further increased our global presence for air disc brakes (ADB), notably through an exclusive contract to provide Hendrickson with advanced ADB systems for trailers in North America.

In 2015, WABCO connected to another new market by investing $20 million in SmartDrive Systems, a U.S.-based leader in driving performance management solutions, which help fleets to improve operating safety and lower fuel consumption. In this strategic partnership, WABCO and SmartDrive Systems will jointly develop and launch next-generation, video-based analytics solutions for commercial vehicle fleets worldwide.

~~Throughout 2015 and despite variations in volumes of new truck and bus production across markets,~~ WABCO continued to ~~deliver~~translate this strong ~~profitability. Also during 2015,~~sales growth into operating income which increased from $435.0 million in 2017 to $512.5 million in 2018. In spite of significant industry supply chain challenges in the first three quarters, WABCO's Operating System continued to provide fast and flexible responses to major market changes, delivering ~~$72.5~~$74.9 million of materials and conversion productivity. Gross ~~materials~~material productivity in ~~2015~~

~~Table~~2018 represented 5.0% of ~~Contents~~

~~represented 5.5% of total materials cost but, as expected,~~material savings before the impact of commodity inflation, ~~reduced~~which had a negative impact of 1.5%, bringing net ~~materials~~material productivity to ~~4.7%~~3.5%. ~~This commodity inflation covers the cost reduction of U.S. Dollar denominated commodities, more than offset by the increase of the U.S. Dollar versus most of the currencies that we purchase in.~~ Conversion productivity in our factories in ~~2015~~2018 represented ~~6.5%, a new annual record for WABCO.~~7.7%.

~~The corporate tax environment in Europe has been subject~~In 2018, among other accomplishments, we integrated two major acquisitions, formed new alliances and announced new technologies. We also continued to ~~review~~expand and ~~discussion over recent years at both a European level~~enrich our portfolio of differentiated capabilities that improve the safety, efficiency, and by international bodies such as the Organization for Economic Co-operation and Development (OECD). Against this background, the European Commission has launched several investigations into tax laws and arrangements within several European countries. The European Commission has used its powers under State Aid control to address fiscal laws in some European countries, Belgium being oneconnectivity of ~~them.~~commercial vehicles.

The Belgian Tax Code contains provisions to reduce the taxable base of companies, through rulings granted by the Belgian Government under the excess profit ruling program (EPR Program). The EPR Program has beenAs part of ~~Belgian law since 2004. We understand approximately 35 companies~~its change in organizational logic, WABCO decided to relocate its corporate headquarters to Bern, Switzerland, with the objective of ~~varying size, activities~~creating a singular focus on fully globalizing WABCO’s advanced technology strategy. The current Brussels base will become the headquarters of its newly formed division covering Europe, Middle East and ~~geographical operations participate in the EPR Program.~~

On January 11, 2016, the European Commission ruled that the above provision of Belgian law is illegal and incompatible with European State Aid law (Decision). As a result, the European Commission requires Belgium to stop applying the EPR Program and to recover all past tax benefits received by applicable companies under the program (i.e. a “clawback”). The clawback amount may be reduced by applying other forms of relief which would have been available to companies during the period they participated in the EPR Program. Negotiations are ongoing between the Belgian Government and the European Commission to agree on a methodology to calculate the applicable amounts for each company.Africa.

~~WABCO participated in~~Decoupling WABCO’s corporate headquarters from its four business regions will allow the ~~EPR Program since 2012. As~~Company to create a result of the Decision, the Company’s effective tax rate will likely increase in 2016 and beyond. The extent of such increase is dependent on many factors, including the ultimate amount of the clawback (which would impact the amount of net operating losses we would have availablebetter structure to us in future years to offset taxable income), the availability of alternative tax relief (both by re-filing tax returns for prior periods to reduce the amount of the clawback and for current and future periods to reduce the tax provision in Belgium), the mix of profits and losses between jurisdictions where we operate, as well as any other strategic decisions we may pursue. However, WABCO does not in any case expect the recognition of tax expense due to the clawback to result in any cash taxes for 2015 or prior years due to the availability of net operating losses. We are exploring all paths to mitigate the potential increase to our effective tax rate, including litigation to challenge the Decision of the European Commission (as discussed below), eligibility for other alternative tax relief, or pursuing other strategic alternatives.

The Decision may be appealed before the General Court of the European Union (General Court) by the Belgian Government and by companies which are directly affected by the Decision. We understand that the Belgian government will appeal. We perceive that the Decision is flawed and that there are strong arguments which could justify an appeal by WABCO as well. WABCO's position is supported by other State Aid decisions of the European Commission which have been annulled upon successful appeal before the General Court.

~~The European Commission has noted that affected companies, like WABCO, may take advantage of alternative tax relief that may have been available to them during any of the years that they relied~~focus on the ~~EPR Program~~next wave of advanced technologies and ~~re-file tax returns claiming applicable benefits. We are currently assessing the extent to which we are eligible to claim such alternative tax relief~~scale their adoption globally. Switzerland is world-renowned for ~~the prior periods subject to clawback, as well as~~providing a highly favorable environment for ~~the current~~breakthrough innovations and ~~future years.~~

Management’s current estimate of the 2016 effective tax rate is approximately 20%, but could be as low as 16%, assuming that alternative tax relief programs are successfully implemented. If we are unable to achieve any alternative tax relief programs, our effective tax rateoffers many distinct advantages for 2016 could increase to 25%. In addition, if we are unsuccessful in fully mitigating the clawback, an exceptional non-cash tax expense of up to $85 million would have to be recognized, which would reduce our deferred tax assets as at December 31, 2015 and result in a one-time increase of up to 28% to our 2016 effective tax rate.corporate headquarters.

Our Markets and Our Customers

Our sales are affected by changes in truck and bus (T&B) production. Europe is our largest geographic market and sales to T&B OEMs represent our largest customer group. The table below shows the relationship between our sales to European T&B OEMs, which account for approximately ~~56%~~40% of our global sales to T&B OEMs, and European T&B production for the last five years. Sales data is shown at a constant Euro to U.S. Dollar exchange rate for year to year comparability and to make comparisons to unit production meaningful. Over the past five years, our sales have outperformed the rate of European T&B production by an average of 3%2% per year.

~~Table of Contents~~


Year to Year Change	2011		2012		2013		2014		2015		2014		2015		2016		2017		2018
Sales to European T&B OEMs (at constant FX rates)	34	%	(10	)%	13	%	(7	)%	8	%	(7	)%	8	%	8	%	6	%	3	%
European T&B Production	31	%	(9	)%	5	%	(9	)%	6	%	(9	)%	6	%	1	%	8	%	2	%

In general, our sales track directionally with ~~truck and bus~~T&B builds. However, individual year to year sales changes are also influenced by other factors such as timing of orders and deliveries to T&B OEM customers, application content, new product introduction,

price and introduction of new customer platforms. The level of truck build activity is influenced by general economic conditions, including interest rate levels and inflation.

Our aftermarket sales account for approximately ~~26%~~25% of total sales and are affected by a variety of factors: content on specific vehicles and breadth of our product range, number of commercial trucks in active operation, truck age, type of vehicles built, miles driven, demand for transported goods, ~~and~~ overall economic ~~activity.~~activity and acquisitions. On average, our aftermarket sales (based on a constant exchange rate to the U.S. Dollar rate) have grown by 8%11% annually for the last five years as shown in the table below.


Year to Year Change	2011		2012		2013		2014		2015		Average Change		2014		2015		2016		2017		2018		Average Change
Aftermarket Sales (at constant FX rates)	8	%	5	%	5	%	13	%	7	%	8	%	13	%	7	%	6	%	9	%	18	%	11	%

Distribution of WABCO's Sales by Major End-Markets, Product Types and Geography


	2015		2014		2013
Major End-Markets
							2018		2017		2016
OE Manufacturers:
Truck & Bus products	57	%	60	%	62	%	55	%	57	%	55	%
Trailer products	11	%	10	%	9	%	10	%	9	%	10	%
Car products	6	%	4	%	4	%	5	%	6	%	6	%
Off highway							5	%	4	%	4	%
Aftermarket	26	%	26	%	25	%	25	%	24	%	25	%
	100	%	100	%	100	%	100	%	100	%	100	%
Geography:
Europe	56	%	59	%	61	%	49	%	52	%	54	%
North America	17	%	13	%	11	%	23	%	18	%	14	%
South America	3	%	6	%	7	%	3	%	3	%	3	%
Asia	22	%	19	%	18	%	23	%	26	%	24	%
Other	2	%	3	%	3	%	2	%	1	%	5	%
	100	%	100	%	100	%	100	%	100	%	100	%

Our largest ~~customer is~~customers are Daimler ~~which accounts~~and Volvo and account for approximately ~~10%~~14% and 11% of our ~~sales.~~sales, respectively. Other key customers include ~~Volvo,~~ Ashok Leyland, ~~BMW,~~TRATON, China National Heavy Truck Corporation (CNHTC), Cummins, Fiat (Iveco), Hino, ~~Hyundai, Krone, MAN Nutzfahrzeuge AG (MAN), Meritor, Meritor WABCO (a joint venture),~~ Paccar ~~(DAF Trucks N.V. (DAF), Kenworth, Leyland~~ and ~~Peterbilt), First Automobile Works, Otto Sauer Achsenfabrik (SAF), Scania, Schmitz Cargobull AG,~~ TATA ~~Motors and ZF Friedrichshafen AG (ZF).~~Motors. For the fiscal years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, our top 10 customers accounted for approximately ~~48%~~49%, ~~54%~~44% and ~~52%~~44% of our sales, respectively.

~~Table of Contents~~

Results of Operations

Approximately ~~83%~~78% of our sales are outside the United States and therefore, changes in exchange rates can have a significant impact on the reported results of our operations, which are presented in U.S. Dollars. Year-over-year changes in sales and expenses for ~~2015~~2018 compared with ~~2014~~2017 and ~~2014~~2017 compared with ~~2013~~2016 are presented both with and without the effects of foreign currency translation. Changes in sales and expenses excluding foreign exchange effects are calculated using current year sales and expenses translated at prior year exchange rates. Presenting changes in sales and expenses excluding the effects of foreign currency translation is not in conformity with U.S. Generally Accepted Accounting Principles (U.S. GAAP), but we analyze this data because it is useful to us in understanding the operating performance of our business. We believe this data is also useful to shareholders for the same reason. The changes in sales and expenses excluding the effects of foreign exchange translation are not meant to be a substitute for measurements prepared in conformity with U.S. GAAP, nor to be considered in isolation. Management believes that presenting these non-U.S. GAAP financial measures is useful to shareholders because it enhances their understanding of how management assesses the operating performance of the Company's business.

Results of Operations for ~~2015~~2018 Compared with ~~2014~~2017

The following table is a summary of sales, cost of sales, gross profit, operating expenses and other selected results of operations for the periods indicated.


	Year ended December 31,							Excluding Foreign Exchange Translation **					Year ended December 31,								Excluding Foreign Exchange Translation **
(Amounts in millions)	2015			2014		% change reported		2015 adjusted amount			% change adjusted		2018			2017			% change reported		2018 adjusted amount			% change adjusted
Sales	$	2,627.5		$	2,851.0	(7.8	)%	$	3,039.9		6.6	%	$	3,831.0		$	3,304.2		15.9	%	$	3,763.7		13.9	%
Cost of sales	1,842.0			1,979.3		(6.9	)%	2,125.7			7.4	%	2,658.5			2,290.4			16.1	%	2,622.7			14.5	%
Gross profit	785.5			871.7		(9.9	)%	914.2			4.9	%	1,172.5			1,013.8			15.7	%	1,141.0			12.5	%

Operating expenses	514.6			540.7		(4.8	)%	600.8			11.1	%	660.0			578.8			14.0	%	644.5			11.4	%
Equity in net income of unconsolidated joint ventures	32.1			23.8		34.9	%	32.3			35.7	%	1.0			23.1			(95.7	)%	1.0			(95.7	)%
Other non-operating income/(expense), net	1.6			1.8		(11.1	)%	(5.7		)	*
Interest (expense)/income, net	(7.1		)	0.2		*		(6.8		)	*
Gain on remeasurement of equity investments													—			247.7			*		—			*
Other non-operating expense, net													(42.3		)	(37.2		)	13.7	%	(37.5		)	0.8	%
Interest expense, net													(7.5		)	(16.0		)	(53.1	)%	(7.4		)	(53.8	)%
Income tax expense	11.5			55.6		(79.3	)%	14.6			(73.7	)%	49.3			229.7			(78.5	)%	48.9			(78.7	)%
Net income attributable to noncontrolling interests													20.3			16.8			20.8	%	20.8			23.8	%

~~Table of Contents~~

Liquidity and Capital Resources

We employ several means to manage our liquidity, and we are not dependent upon any one source of funding. Our sources of financing include cash flows from operations, cash and cash equivalents, our senior unsecured notes and revolving credit facilities, the use of operating leases and our former Accounts Receivable Securitization Program, which expired on September 26, 2014 as discussed in Note 11 of Notes to the Consolidated Financial Statements.facilities.

We believe the combination of expected cash flows, the funding received from our senior unsecured notes and the revolving credit facilities being committed until ~~2019 and 2020~~2023 will provide us with adequate liquidity to support the Company's operations. The Company also has the ability to access a wide range of additional external financing instruments.

Specifically for ~~2016,~~2019, we expect ~~a decrease of up to 10% in~~ our capital spending ~~primarily due~~ to remain consistent with prior year. As of December 31, 2018, there were no outstanding borrowings on the completion in 2015 of the construction of new plants in Poland and North America, partially offset by the anticipated construction of a new product engineering facility in Germany. As discussed in Note 23 of Notes to the Consolidated Financial Statements, our acquisition of MICO, Inc. in February 2016 will result in a net cash payment of approximately $67 million. In addition, as previously discussed, we do not expect the European Commission's decision on Belgium's excess profit ruling program (EPR Program) to result in any cash taxes relating to 2015 or prior years due to the availability of net operating losses. However, unless litigation to overturn the European Commission’s decision is successful in 2016, our cash taxes will increase unless we are able to fully mitigate such increases by availing ourselves of alternative tax relief programs for 2016. See the Executive Overview for additional discussion.revolving credit facility.

Outside of our capital expenditures, ~~acquisition-related~~ cash flows related to our senior unsecured notes, subsequent installments of the transition tax payable, acquisitions and ~~as discussed above relating to the European Commission's decision,~~short term debt repayments, our overall cash flow is expected to be in line with the Company's ~~2015~~2018 cash flow ~~profile, and there are no known trends or uncertainties that are reasonably expected to have~~profile. The U.S. Tax reform will provide a ~~material effect on~~higher flexibility regarding the ~~separate sources and uses~~use of ~~cash.~~our foreign cash in the United States which may reduce the overall financing needs of the Company.

As of December 31, ~~2015, $494.8~~2018, $491.0 million of the ~~$515.2~~$503.8 million of cash and cash equivalents on the consolidated balance sheets was held by foreign subsidiaries. The Company considers the earnings of substantially all of its ~~foreign~~ subsidiaries outside of Europe and Brazil to be permanently reinvested outside the United States and as such no additional U.S. tax cost has been provided. The Company has provided for tax at the U.S. tax rate for its Brazilian affiliate's current year earnings in 2015. The Company continues to assert permanent reinvestment outside the U.S. with respect to the remainder of its foreign earnings and at this time, does not have any plans or needs to repatriate additional earnings from its foreign subsidiaries except for Brazil. In addition, a tax provision was also provided on unremitted foreign earnings of $300.0 million in a Belgian affiliate for which the Company does not assert permanent reinvestment outside the United States. This assertion is resulting from the Company recognizing earnings in the fourth quarter of 2013 from the receipt of an exceptional refund including interest from the European Commission related to the Company’s appeal of the EC Fine as further discussed in Note 15 of Notes to the Consolidated Financial Statements. The Company estimates the amount of its unremitted foreign earnings permanently reinvested outside the United States to be approximately $990 million asAs of December 31, ~~2015; however, it is not practicable to estimate~~2017, $776.5 million of the ~~tax liability that would arise if~~$1,141.5 million of cash and cash equivalents on the consolidated balance sheets was held by foreign subsidiaries for which earnings ~~that~~ are ~~considered~~no longer permanently reinvested ~~were remitted to~~outside the United States.

Cash Flows for ~~2015~~2018 Compared with ~~2014~~2017

Operating activities - Net cash provided by operating activities was ~~$395.3~~$468.5 million and $421.5 million for ~~2015. This is in comparison with net cash provided by~~the years ended December 31, 2018 and 2017, respectively. Cash flow from operating activities consisted primarily of ~~$314.4 million for 2014. We recorded~~ net income including noncontrolling interests of ~~$286.0~~$414.4 million, increased by non-cash elements of $208.5 million comprising depreciation, pension and post-retirement benefit expenses, amortization, stock compensation, and deferred tax benefits. This was partially offset by $154.4 million related to changes in operating assets and liabilities, including $32.3 million of payments made related to U.S. transition taxes. Cash flow from operating activities for ~~2015 compared with~~2017 consisted primarily of net income including noncontrolling interests of ~~$301.2~~$422.9 million, ~~for 2014. Net income for 2015 included noncash~~decreased by non-cash elements ~~such as~~of $98.9 million comprising depreciation, ~~and~~ amortization, ~~of $96.7 million~~stock compensation, deferred tax benefits, pension and post-retirement benefit ~~expense of $43.1 million. We paid $22.8~~expenses, as well as a $247.7 million ~~in 2015 towards our post-retirement benefit obligations compared with $33.0 million in 2014,~~for a non-cash gain recognized on the ~~lower level of payments driven primarily by a stronger U.S. Dollar combined with reduced funding requirements on our funded plans. The issuance~~remeasurement of our ~~senior unsecured notes~~equity investments. This was offset by an accrual of $196.4 million for U.S. transition taxes payable, as well as $106.0 million related to changes in ~~the second quarter of 2015 gave rise to interest expense~~operating assets and amortization of debt issuance costs of $7.8 million, with the interest payable in the first quarter of 2016. We also recorded $7.7 million of impairment charges on fixed assets relating to our expected production site closures.liabilities as well as pension contributions.

Our working capital increased by $32.4 million, due primarily to a higher level of accounts receivables and inventory resulting from increased business, partially offset by a higher level of accounts payable. Other accrued liabilities and taxes increased $18.1 million for 2015 compared to $15.2 million for 2014. The major drivers of this increase were accruals for streamlining and tax-related items, partially offset by lower payroll-related accruals. Other current and long-term assets for 2015 increased $18.4 million compared to a decrease of $27.5 million for 2014, driven mainly by tax-related items. The change in other long-term liabilities for 2015 was an increase of $13.5 million compared to a decrease of $8.0 million for 2014, primarily for accruals related to long-term streamlining liabilities on our expected production site closures.

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Investing activities - ~~The net~~Net cash used in investing activities amounted to ~~$202.2~~$246.5 million for the year 2018 compared to $488.2 million in ~~2015 compared to $211.1~~2017. Aside from net capital expenditures in tooling, equipment and software of $132.1 million and $110.5 million in ~~2014. The net~~2018 and 2017, respectively, we had investing cash ~~usage for 2015 includes capital expenditures of $40.3 million of~~flows related to our investments and redemptions in ~~tooling, $49.4 million on plant~~repurchase agreements and equipment and $10.9 million in software to support the Company's long-term growth strategies. This compared with $45.0 million of investments in tooling, $78.8 million on plant and equipment including construction of a new plant in Poland and $12.1 million in software in 2014.

~~In 2015, we invested a total of $120.1 million in~~ short-term investments and repurchase agreements. The repurchase agreements are classified within other assets on the consolidated balance sheets. We also received proceeds of $38.5 million from the redemption of a repurchase agreement which matured during the year as ~~compared to $50.7 million of proceeds received in 2014 from the sale of our short-term investments.~~follow:



	December 31, 2018								December 31, 2017
(Amounts in millions)	Repurchase Agreements		Short-term Investments			Total			Repurchase Agreements		Short-term Investments		Total
Investments	$	161.2	$	526.0		$	687.2		$	312.2	$	223.0	$	535.2
Sales and redemptions	210.3		374.9			585.2			318.4		230.0		548.4
Net cash received/(invested)	$	49.1	$	(151.1	)	$	(102.0	)	$	6.2	$	7.0	$	13.2

We ~~acquired a $20.0 million minority stake in 2015 in SmartDrive Systems, a video-based analytics company headquartered in the United States. We~~ also paid ~~$125.9~~$6.4 million in ~~2014~~2018 as additional cash payment related to the 2017 acquisition of ~~Tavares~~R.H. Sheppard, as well as $2.2 million to acquire Asset Trackr, as discussed in Note 2122 of Notes to ~~the~~ Consolidated Financial ~~Statements.~~Statements, and we invested $3.8 million in unconsolidated joint ventures. This is in comparison to 2017 when we paid $382.7 million net of cash acquired for the acquisition of Sheppard, Meritor WABCO and WABCO Automotive South Africa.

Financing activities - ~~The net~~Net cash used by financing activities ~~during 2015~~ amounted to ~~$49.0~~$827.1 million for 2018 compared to ~~$121.4 million during 2014. Our total third-party debt increased $189.3~~net cash provided of $260.6 million for ~~2015 compared to $226.4~~2017. The main driver of this lower net cash flow from financing activities is the $500.0 million ~~for 2014. This increase was primarily driven by our issuance of $500 million of senior unsecured notes, net of $2.1 million of debt issuance costs, of which a portion~~

prepayment of the ~~proceeds were used to repay~~Senior USD Notes and net repayments under the ~~outstanding balance on our~~ revolving credit ~~facilities.~~

Wefacilities of $385.4 million, partially offset by proceeds received from the Schuldschein Loans of approximately $368.5 million.We also repurchased shares for a total ~~amount~~ of ~~$249.2 million and $351.5~~$300.0 million in ~~2015~~2018 compared to $120.0 million in 2017. Certain of these shares were repurchased under a 10b5-1 stock repurchase plan during the period between August 20, 2018 and ~~2014, respectively.~~ December 20, 2018.

We ~~also~~ received ~~$17.3~~$0.6 million of stock option proceeds and withheld $5.1 million of shares related to employee tax payments made for equity award vestings in ~~2015~~2018 compared to ~~$15.0~~$9.5 million and $4.9 million in ~~2014.~~2017, respectively. Dividends paid to noncontrolling interests amounted to ~~$6.4~~$5.7 million and ~~$5.6~~$7.1 million in ~~2015~~2018 and ~~2014,~~2017, respectively. ~~We also~~

Cash Flows for 2017 Compared with 2016

Operating activities - Net cash provided by operating activities was $421.5 million and $405.4 million for the years ended December 31, 2017 and 2016, respectively. Cash flow from operating activities consisted primarily of net income including noncontrolling interests of $422.9 million, decreased by non-cash elements of $98.9 million comprising depreciation, amortization, stock compensation, deferred tax benefits, pension and post-retirement benefit expenses, as well as a $247.7 million for a non-cash gain recognized on the remeasurement of our equity investments. This was offset by an accrual of $196.4 million for U.S. transition taxes payable, as well as $106.0 million related to changes in operating assets and liabilities as well as pension contributions. Cash flow from operating activities for 2016 consisted primarily of net income including noncontrolling interests

of $247.3 million, increased by $241.6 million for non-cash charges including depreciation, amortization, stock compensation, pension and post-retirement benefit expenses as well as a non-cash tax expense of $86.4 million related to the Belgian EPR program that was recorded in the first quarter of 2016. These increases were partially offset by $83.5 million related to changes in operating assets and liabilities as well as pension contributions.

Investing activities - Net cash used in investing activities amounted to $488.2 million for the year 2017 compared to $251.8 million in 2016. Aside from capital expenditures in tooling, equipment and software of $110.5 million and $107.0 million in 2017 and 2016, respectively, we had investing cash flows related to our investments and redemptions in repurchase agreements and short-term investments as follow:



	December 31, 2017						December 31, 2016
(Amounts in millions)	Repurchase Agreements		Short-term Investments		Total		Repurchase Agreements			Short-term Investments		Total
Investments	$	312.2	$	223.0	$	535.2	$	324.6		$	—	$	324.6
Sales and redemptions	318.4		230.0		548.4		228.8			44.2		273.0
Net cash received/(invested)	$	6.2	$	7.0	$	13.2	$	(95.8	)	$	44.2	$	(51.6	)

In 2017 we paid ~~$5.7~~$382.7 million ~~during 2014~~net of cash acquired for the acquisition of ~~the remaining ownership interest in Transics~~Sheppard, Meritor WABCO and WABCO Automotive South Africa as discussed in Note 22 of Notes to the Consolidated Financial Statements.

~~Cash Flows for 2014 Compared with 2013~~

~~Net cash provided by operating activities was $314.4 million for 2014.~~ This is in comparison ~~with net cash provided by operating activities of $665.8~~to 2016 when we paid $92.3 million for ~~2013,~~the acquisitions of ~~which $283.7 million related to a European Commission Fine reimbursement as discussed in our 2013 Form 10-K.~~

~~Operating activities~~ - We recorded net income including noncontrolling interests of $301.2 million for 2014 compared with net income including noncontrolling interests of $661.9 million for 2013. Net income for 2014 included noncash elements such as depreciationMICO, LCL and amortization of $101.6 million and post-retirement benefit expense of $32.6 million. We also recorded a noncash impairment charge on fixed assets of $0.8 million. Our working capital increased by $144.7 million, primarily due to the expiration of our Accounts Receivable Securitization Program whereupon we repurchased $111.7 million of accounts receivable and, to a lesser extent, a decrease in our accounts payable.

The change in other accrued liabilities and taxes was an increase of $15.2 million for 2014 compared to $38.5 million for 2013. The major drivers of this increase were accruals for payroll, streamlining and tax-related items, partially offset by lower accruals for our incentive compensation. Other current and long-term assets for 2014 decreased $27.5 million compared to an increase of $28.8 million for 2013. This decrease was primarily due to the release of $38.2 million of restricted cash upon the expiration of our Accounts Receivable Securitization Program, partially offset by increases in notes receivable from our Chinese operations. The change in other long-term liabilities for 2014 was a decrease of $8.0 million compared to $9.8 million for 2013, mainly driven by a release of accruals for tax indemnification liabilities related to a foreign tax audit, partially offset by accruals for our long-term incentive compensation and other tax-related items.

~~Investing activities~~ - The net cash used in investing activities amounted to $211.1 million in 2014 compared to $176.7 million in 2013. This included $125.9 million of net cash paid during 2014 related to the acquisition of Tavares as discussed in Note 21 of Notes to the Consolidated Financial Statements. The net cash usage for 2014 also includes capital expenditures of $45.0 million of investments in tooling, $78.8 million on plant and equipment and $12.1 million in software to support the Company's long-term growth strategies, including the construction of a new plant in Poland. This compared with $47.0 million of investments in tooling, $61.1 million on plant and equipment and $13.4 million in computer software in 2013. We also received proceeds from the sale of $50.7 million of short-term investments during 2014.Trans-Safety LOCKS.

Financing activities - ~~The net~~Net cash ~~used~~provided by financing activities ~~during 2014~~ amounted to ~~$121.4~~$260.6 million for 2017 compared to $220.6 million for 2016. The main driver of this higher net cash ~~used by~~flow from financing activities ~~of $193.4 million during 2013. Our total third-party debt increased $226.4 million~~is related to lower expenditures for ~~2014 compared to $10.3 million for 2013. This increase was primarily driven by additional borrowings of $259.0 million under our~~

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~~two revolving credit facilities, a large portion of which funds our~~ share ~~repurchase program, partially offset by the repayment of short-term debt from the Company's access to cash collections on sold receivables under our Accounts Receivable Securitization Program.~~

We received $15.0 million of stock option proceeds during 2014 compared with $49.7 million in 2013. We paid $5.7 million during 2014 for the acquisition of the remaining ownership interest in Transics as discussed in Note 22 of Notes to the Consolidated Financial Statements. We also paid $4.6 million during 2013 for the acquisition of the remaining ownership interest in our Chinese joint venture, Shandong Weiming Automotive Products (SWAP). During 2014,repurchases, where we repurchased shares for a total of $120.0 million in 2017 compared to $250.0 million in 2016. This was partially offset by lower net borrowings as our total third-party debt increased by $382.8 million in 2017 compared to an increase of $464.2 million in 2016. We also paid $0.3 million in 2017 for the settlement of a forward contract in comparison to cash received of $15.2 million in 2016 for such settlements.

We also repurchased shares in 2017 and 2016 for a total amount of ~~$351.5~~$120.0 million and $250.0 million. As previously disclosed, the Company's share repurchase program was suspended as a result of an acquisition proposal received by the Company in the second quarter of 2017. The Company did not restart its repurchase program as a result of two strategic acquisitions closed in the second half of the year. The Company restarted its share repurchase program in 2018.

We received $9.5 million of stock option proceeds and withheld $4.9 million of shares related to employee tax payments made for equity award vestings in 2017 compared to $3.9 million and $6.0 million in 2016, respectively. Dividends paid to noncontrolling interests amounted to $7.1 million and $6.7 million in 2017 and 2016, respectively. In 2017, we also received $0.6 million from a noncontrolling interest shareholder related to their share of capital increase in one of our consolidated joint ventures.

Senior Unsecured Notes

Schuldschein Loans

On March 22, 2018 the Company, through a European subsidiary, entered into a series of six individual senior unsecured loan agreements with an aggregate principal amount of €300.0 million (collectively, the Schuldschein Loans), as follows:



(Amounts in millions)	Face value		Coupon	Maturity date
Fixed rate term loan - Series A	€	10.0	0.85%	March 31, 2021
Fixed rate term loan - Series B	60.0		1.15%	March 31, 2022
Fixed rate term loan - Series C	80.0		1.43%	March 31, 2023
Floating rate term loan - Series A	50.0		6-month EURIBOR plus 80 bps	March 31, 2021
Floating rate term loan - Series B	60.0		6-month EURIBOR plus 90 bps	March 31, 2022
Floating rate term loan - Series C	40.0		6-month EURIBOR plus 100 bps	March 31, 2023
	€	300.0

Senior Notes (EUR and USD)

On ~~May 8, 2015,~~November 15, 2016, the Company ~~entered into a note purchase agreement (the Note Purchase Agreement) for the issuance~~issued €440.0 million in aggregate principal amount of ~~$150~~senior unsecured notes, comprised of €190.0 million of ~~2.83%~~0.84% senior unsecured notes due ~~June 25, 2022 (the Series A Notes), $200~~2023, €80.0 million of ~~3.08%~~1.20% senior unsecured notes due ~~June 25, 2025 (the Series B Notes)~~2026 and ~~$150~~€170.0 million of ~~3.18%~~1.36% senior unsecured notes due ~~June 25, 2027 (the Series C Notes); and together with the Series A Notes and the Series B Notes, collectively, the Senior Notes). The Senior Notes were issued and funded on June 25, 2015.~~2028. The Company paid ~~approximately $2.1~~$1.4 million of debt issuance costs in connection with ~~the Senior Notes, which has been presented in the consolidated balance sheets as a direct reduction of the related debt liability.~~these senior unsecured notes. Interest on ~~the Senior Notes~~these notes is payable semi-annually on January 1 and July 1 of each year, ~~(other than~~and commenced on July 1, ~~2015).~~2017.

On June 25, 2015, the Company issued $500.0 million in aggregate principal amount of senior unsecured notes, comprised of $150 million of 2.83% senior unsecured notes due 2022, $200 million of 3.08% senior unsecured notes due 2025 and $150 million of 3.18% senior unsecured notes due 2027. The Company paid $2.1 million of debt issuance costs in connection with these senior unsecured notes. Interest on these notes is payable semi-annually on January 1 and July 1 of each year, and commenced on January 1, 2016.

The proceeds from the Senior USD Notes were ~~partially~~ utilized to repay ~~the~~ outstanding ~~balance~~balances on ~~our~~the revolving credit ~~facilities. The remaining proceeds are intended to~~facilities, fund ~~our~~the Company's share repurchase program, finance acquisitions ~~refinance existing indebtedness~~ and meet general financing requirements.

~~The Note Purchase Agreement contains customary affirmative~~On April 30, 2018, the Company prepaid the outstanding principal amount of $500.0 million on the Senior USD Notes, and ~~negative covenants, and financial covenants consisting~~recognized a loss on debt extinguishment of ~~a consolidated~~$2.3 million net ~~indebtedness to consolidated EBITDA (earnings before interest,~~of taxes, depreciation and amortization adjusted for certain items) ratio and a consolidated EBITDA to consolidated net interest expense ratio of not more than three times at the end of fiscal quarter, always based upon the preceding twelve consecutive months. The Note Purchase Agreement also provides for customary events of default, the occurrence of which ~~could result~~the pretax amount, $2.6 million, was recorded in ~~an acceleration~~other non-operating expenses in the consolidated statement of ~~the Company's obligations under the Note Purchase Agreement. We were in compliance with all of the covenants as of December 31, 2015.~~operations.

Credit Facilities

~~On July 8, 2011,~~Effective June 28, 2018, the Company ~~entered into a $400 million multi-currency five-year senior~~amended its existing multi–currency unsecured revolving credit facility, ~~which was amended and restated on September 30, 2015~~increasing the maximum principal amount of borrowings under the facility from $400 million (the 2015 Facility) to ~~among other things, extend~~$600 million (the 2018 Facility), with an option to increase up to additional $250.0 million. The 2018 Facility also extended the ~~original expiry~~previously scheduled maturity date toof September 30, ~~2020~~2022 for the 2015 Facility to June 28, 2023, subject to two ~~1-year~~one–year extension ~~options and amend~~options. Concurrent with entering into the ~~applicable margins on the original revolving credit facility.~~

~~On December 17, 2014,~~2018 Facility, the Company ~~entered into a new~~also terminated the $100 million multi-currency five-year ~~senior~~ unsecured revolving credit facility (the 2014 Facility) ~~which will~~that was due to expire on December 17, 2019.

~~Under~~On the ~~revolving credit facilities,~~effective date of the 2018 Facility, the Company ~~may borrow, on a revolving basis, loans in an aggregate principal amount at any one time~~repaid the outstanding ~~not in excess~~balance of ~~$500 million.~~€104 million and €52 million under the 2015 Facility and 2014 Facility, respectively, and commenced borrowing under the 2018 Facility. As of December 31, ~~2015, the Company had the ability to borrow an incremental $500.0 million under~~2018, there were no outstanding borrowings on the revolving credit facilities and was in compliance with all the covenants. The proceeds from the revolving credit facilities are available to finance acquisitions, refinance existing indebtedness and meet general financing requirements.facilities.

As of December 31, 2015, various subsidiaries also had borrowings from banks totaling $5.7 million, of which $0.7 million was classified as long-term debt. The remaining $5.0 million supports local working requirements.

~~Accounts Receivable Securitization Program~~

The Company had previously established an accounts receivable securitization program which expired on September 26, 2014 and was not renewed. Prior to the expiration of this program, the Company had sold all of its eligible receivables into this accounts receivable securitization program. The receivables were removed from the balance sheet in accordance with the guidance under ASC 860, ~~Transfers and Servicing~~. The total amount of receivables sold under the accounts receivable securitization program for the year ended December 31, 2014 was €545.7 million ($739.9 million at average exchange rates for the 2014 period through program expiration).

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Derivative Instruments and Hedging Activities

~~Foreign exchange contracts are used by~~The Company designated borrowings under its revolving credit facilities and Senior EUR Notes to partially hedge the ~~Company to offset the earnings impact relating to the variability~~foreign currency exposure of its net investment in ~~exchange rates on~~ certain ~~assets and liabilities denominated in non-functional currencies and have not been designated as relationship hedges.~~Euro-denominated wholly-owned subsidiaries. As of December 31, ~~2015, forward contracts for an aggregate notional amount~~2018 and 2017, the Company designated Euro-denominated loans of ~~€107.7~~€440.0 million ~~($117.7~~(approximately $503.6 million at December 31, ~~2015~~2018 exchange ~~rates) were outstanding with an average duration~~rate) and €763.0 million (approximately $912.0 million at December 31, 2017 exchange rate) as hedges of ~~one month. These foreign exchange contracts have offset~~its net investment in these subsidiaries. For the ~~revaluation of assets and liabilities and resulted in a net non-operating gain of $0.3 million for the year~~twelve-month periods ended December 31, ~~2015. The majority of these exchange contracts were entered into on December 30, 2015~~2018 and ~~had a fair value of $0.7 million as of December 31, 2015.~~

~~During the first quarter of 2015,~~2017, the Company ~~also entered into and settled treasury rate lock agreements which were designated as cash flow hedges in anticipation~~recorded a gain of ~~issuing the Senior Notes. As of December 31, 2015, a loss related to these cash flow hedges of $1.2~~$16.8 million, net of taxes ~~has been recognized~~of $4.7 million, and a loss of $43.2 million, net of taxes of $25.1 million, respectively, in cumulative translation adjustment within accumulated other comprehensive income.

From July 2017, WABCO entered into a number of International Swaps and Derivatives Association (ISDA) Master Agreements with multiple derivative counterparties. An ISDA Master Agreement is a bilateral trading agreement between two parties that allow both parties to enter into over-the-counter derivative contracts. The ~~amount~~ISDA Master Agreement contains a Schedule to the Master Agreement and a Credit Support Annex, which governs the maintenance, reporting, collateral management and default process (netting provisions in the event of ~~unrealized loss reclassified to earnings for~~a default and/or a termination event). Under an ISDA Master Agreement, the ~~year ended December 31, 2015 was $0.1 million.~~Company may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty.

Off-Balance Sheet Arrangements

~~Please see the disclosure above~~We did not engage in ~~“Accounts Receivable Securitization Program”.~~any off-balance sheet financial arrangements as of December 31, 2018.

Contractual Obligations

~~The following table summarizes our expected cash outflows resulting from financial contracts and commitments as of December 31, 2015.~~

The amounts below exclude liabilities for uncertain tax positions of $16.3 million as of December 31, 2015. The table below also excludes probable indemnification liabilities of $0.7 million as of December 31, 2015, that the Company is responsible for under a Tax Sharing Agreement between Trane and WABCO. Both these amounts are classified as long-term, and we are unable to estimate the timing of future payments relating to these obligations. See Note 16 and Note 17 of Notes to the Consolidated Financial Statements for further discussion.

We ~~also~~ had ~~$68.7~~$26.4 million of streamlining liabilities as of December 31, ~~2015.~~2018. While we expect ~~the majority~~approximately $14.8 million of payments to be made ~~by 2018,~~in 2019, we are unable to estimate the timing of all future payments. See Note 56 of Notes to the Consolidated Financial Statements for further discussion.

~~Aggregate Contractual Obligations~~

AsThe following table summarizes our expected cash outflows resulting from our contractual obligations as of December 31, ~~2015~~2018. Some of the figures are based on our estimates and assumptions about these obligations. The obligations we will actually pay in future periods may vary from those reflected in the table.

~~(in millions)~~

Payments due by period (1)
Contractual Obligation

Total
2016 2017 and 2018 2019 and 2020 Beyond 2020
Debt obligations (excluding interest) $ 503.7
$ 5.0
$ 0.3
$ 0.2
$ 498.2
Operating lease obligations (2) 75.5
16.0
26.8
23.2
9.5
Purchase obligations (3) 187.0
187.0
—
—
—
Pension and post-retirement benefits (4) 285.0
27.5
55.6
56.4
145.5
Total $ 1,051.2
$ 235.5
$ 82.7
$ 79.8
$ 653.2



	Payments due by period
(Amounts in millions)	Total		2019		2020 and 2021		2022 and 2023		Beyond 2023
Debt obligations ⁽¹⁾	$	901.3	$	8.2	$	84.8	$	459.9	$	348.4
Lease obligations ⁽²⁾	121.1		30.1		43.3		24.5		23.2
Purchase obligations⁽³⁾	270.0		270.0		—		—		—
Pension and post-retirement contributions⁽⁴⁾	295.8		26.5		55.5		57.5		156.3
Transition tax payable ⁽⁵⁾	169.9		16.2		32.4		70.7		50.6
Total	$	1,758.1	$	351.0	$	216.0	$	612.6	$	578.5

⁽¹⁾

~~The amounts~~Includes principal and ~~timing of such obligations, as shown in the table may vary substantially from amounts that will actually be paid in future years.~~interest payments due on our senior unsecured notes. For ~~example, the actual amount to be paid under~~floating rate debt, ~~obligations will depend~~interest payments were calculated based on the ~~amount~~applicable interest rates as of ~~debt drawn under our revolving credit facilities~~December 31, 2018. Payment obligations denominated in ~~each year.~~a foreign currency were calculated using the local currency foreign exchange rates in effect at December 31, 2018. See Note 15 to of Notes to the Consolidated Financial Statements for additional information.


⁽²⁾	~~Amounts include~~Includes future rental commitments under all non-cancelable operating leases in effect at December 31, ~~2015.~~2018.

⁽³⁾

In the normal course of business we expect to purchase approximately ~~$1.6~~$2.5 billion in ~~2016~~2019 of materials and services, and estimate that on average no more than approximately ~~$187~~$270.0 million is outstanding at any one time in the form of legally binding commitments. We spent approximately ~~$1.5~~$2.3 billion, ~~$1.7~~$2.0 billion and ~~$1.6~~$1.7 billion on materials and services in ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively.

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⁽⁴⁾

Amounts represent undiscounted projected benefit payments over the next ten ~~years.~~years and represent our best estimate of future contributions to our pension and post-retirement benefit plans. The expected benefit payments ~~are~~have been estimated based on the same assumptions that were used to measure our accumulated benefit obligation ~~at the end~~as of ~~2015~~December 31, 2018 and include benefits attributable to estimated future service of current employees.


⁽⁵⁾	Includes a one-time repatriation tax resulting from the Tax Cuts and Jobs Act. The Tax Cuts and Jobs Act permits the Company to pay the tax liability interest free over a period of up to eight years.

Capital Expenditures

We believe our capital spending in recent years has been sufficient to maintain efficient production capacity, to implement important product and process redesigns and to expand capacity to meet increased demand. Productivity projects have freed up capacity in our manufacturing facilities and are expected to continue to do so. We expect to continue investing to expand and modernize our existing facilities and invest in our facilities to create capacity for new product development. Specifically for ~~2016, however,~~2019, we expect ~~a decrease of up to 10% in~~ our capital spending to remain at levels consistent with prior year as previously discussed.

Pending Adoptions of Recently Issued Accounting Standards

~~In August 2014,~~Refer to Note 3 of Notes to the ~~FASB issued ASU 2014-15~~ ~~Presentation of~~Consolidated Financial Statements ~~- Going Concern, which provide guidance about management's responsibility in evaluating whether there is substantial doubt relating to an entity’s ability to continue as~~for a going concern and to provide related footnote disclosures as applicable. ASU 2014-15 is effective for the interim and annual periods ending after December 15, 2016. The Company does not expect any material impact from adoptioncomplete description of ~~this guidance on the Company's consolidated financial statements.~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~, which is a new comprehensive revenue recognition standard on the financial reporting requirements for revenue from contracts entered into with customers. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016. The FASB subsequently deferred the effective date of this standard to December 15, 2017 with early adoption permitted as of December 15, 2016. The Company is currently assessing the potential impact of the adoption of this guidance on its consolidated financial statements.

~~We do not expect the pending adoption of other recently issued~~recent accounting standards which we have not yet been required to ~~have an impact on the consolidated financial statements.~~implement and which may be applicable to our operations.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with those accounting principles requires us to make judgments and estimates that affect the amounts reported in the consolidated

financial statements and accompanying notes. Those judgments and estimates have a significant effect on the consolidated financial statements because they result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Actual results could differ from those estimates. We frequently ~~re-evaluate~~reevaluate our judgments and estimates that are based upon historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

We believe that of our significant accounting policies, the ones that may involve a higher degree of uncertainty, judgment and complexity pertain to revenue recognition, ~~for multiple-element arrangements, allowance for doubtful accounts, inventory reserves,~~ goodwill, ~~stock-based compensation,~~recoverability of other long-lived assets, pension and post-retirement benefits, warranties, business combinations, income taxes and contingencies. See Note 2 of Notes to the Consolidated Financial Statements for additional discussion of our accounting policies.

Revenue Recognition - Revenue under ASC 606 Revenue from Contracts with Customers, is recognized when control of a product or service is transferred to a customer. The ~~Company recognizes revenue~~majority of our sales are derived from OEM customers. Revenue from the sale of serial production parts that is produced to industry standards for OEM customers is recognized at a point-in-time when ~~title~~control of the parts transfers to customers based on the shipping terms as these parts typically have an alternative use or the underlying contracts do not contain an enforceable right to payment prior to shipment depending on jurisdiction. In instances where customization services are performed for the OEM, and ~~risk of loss have transferred, persuasive evidence of arrangement exists,~~if the sales meet the over-time revenue recognition criteria, we will use the cost-to-cost method to recognize revenue. Under this method, progress is measured based in the ratio of actual costs incurred relative to the total estimated costs. Most OEM serial production contracts include a provision for volume discounts, and in certain markets, we provide customers with discounts not stated in the contract. In those instances where there is a valid expectation for the customers to receive a discount, the amount of variable consideration which is included in the transaction price may be constrained, and is ~~fixed or determinable and collectibility~~included in the net sales price only to the extent that it is ~~reasonably assured. Certain~~probable that a significant reversal in the amount of the ~~Company's product offerings contain multiple deliverables including hardware with embedded firmware, back office hosting services, unspecified software upgrades and enhancements related to~~cumulative revenue recognized under the ~~software embedded~~contract will not occur in these products through service contracts, which are considered separate units of accounting. For products under these arrangements, the software and non-software components function together to deliver the tangible product’s essential functionality.a future period.

The ~~Company allocates~~sale of aftermarket parts and spare parts are relatively homogeneous and revenue is recognized at a point-in-time when control transfers to the customer based on shipping terms. Aftermarket contracts include variable consideration related to discounts, bonuses and product returns. Revenue recognition for aftermarket parts and spare parts is not subject to the variable consideration constraint.

FMS sales include contracts for products, services, or a combination of products and services. The payment for products and certain services is fixed, with consideration being variable for the Software-as-a-Service (SAAS) performance obligation until the number of activated devices is known. Allocation of the transaction price to each ~~element~~performance obligation using stand alone selling price (SSP). When SSP does not exist, the company estimates the SSP based on the adjusted market approach. Revenue for hardware is recognized at a point-in-time and over-time for services as they are provided under the contract. Management exercises significant judgments as it relates to the FMS revenue recognition in ~~these multiple-element~~such areas as determining performance obligations, variable consideration, allocation of the transaction price and timing of revenue recognition.

Prior to the adoption of ASC 606, revenue was allocated to multiple element arrangements based upon the relative selling prices of each deliverable. In applying the relative selling price method, the Company ~~determines~~determined the selling price for each deliverable using vendor specific objective evidence (VSOE), if it ~~exists,~~existed, or third-party evidence (TPE) of selling price. If neither VSOE nor TPE of selling price ~~exist~~existed for a deliverable, the best estimate of selling price (BESP) ~~is then~~was used for that element. BESP ~~represents~~represented the price at which the Company would transact a sale if the element were sold on a standalone basis. The Company ~~determines~~determined BESP for an element by considering multiple factors including, but not limited to, the Company's go-to-market strategy, pricing practices, internal costs, gross margin, market conditions and geographies. Revenue allocated to each element iswas then recognized when the other revenue recognition criteria are met for that element.

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~~Allowance for Doubtful Accounts~~ - The Company performs ongoing credit evaluations of its customers. In determining the allowance for doubtful accounts, on a monthly basis, the Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness, availability of credit insurance and current economic trends. Though management considers the valuation of the allowances proper and adequate, changes in the economy and/or deterioration of the financial condition of the Company's customers could affect the reserve balances required. Historically, this valuation has proved to be a reasonable estimate of the Company's experience with doubtful debts.

~~Inventory Reserves~~- On a quarterly basis, the Company tests its inventory for slow moving and obsolete stock by considering both the historical and expected sales and the Company will record a provision, if needed. Historically, this policy has given a close approximation of the Company's experience with slow moving and obsolete inventory. From time to time unusual buying patterns or shifts in demand may cause large movements in the reserve.

Goodwill - The Company has a significant amount of goodwill on its balance sheet that is not amortized, but subject to impairment tests each fiscal year on October 1 or more often when events or circumstances indicate that the carrying amount of goodwill may not be recoverable. The Company's impairment tests utilize the two-step approach. The first step of the goodwill impairment test compares fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and thus the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test shall be performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess.

reporting unit for purposes of testing recoverability, ~~we use~~the Company uses the total market capitalization of the Company, a market approach, which is then compared to the total book value of the Company. In the event the Company's fair value has fallen below book value, the Company will compare the estimated fair value of goodwill to its book value. If the book value of goodwill exceeds the estimated fair value of goodwill, the Company will recognize the difference as an impairment loss in operating income. There has been no impairment of goodwill during ~~2015,~~2018, and the Company's goodwill was not at risk for failing the first step of its impairment test.

~~Stock-Based Compensation~~- The Company ~~measures~~expects the announced change to an organizational structure managed by business regions in 2019 to impact its determination of its operating segments and recognizes in its consolidated statements of operations the expense associated with all share-based payment awards made to employees and directors including stock options, restricted stock units, performance stockreporting units, and ~~restricted stock grants based on estimated fair values.~~

~~The vesting~~will also require the Company to evaluate its goodwill for impairment immediately before and after the implementation of the ~~Company's performance stock~~new organizational structure. There is no indication that a change in the operating segments or reporting units ~~(PSUs) occurs at levels ranging from none to 200%~~ of the ~~number of granted PSUs depending upon~~Company will have a material effect on the achievement of three-year cumulative earnings per share goals approved by the Compensation, Nominating and Governance Committee of the Board of Directors. The Company assesses the expected achievement levels at the end of each reporting period and accrues for the associated compensation expense where the Company believes it is probable that the performance conditions will be met.consolidated financial statements.

Recoverability of Other Long-lived Assets - The Company makes judgments about the recoverability of long-lived assets, including fixed assets and finite-lived intangible assets whenever events or changes in circumstances indicate that an impairment may exist. If circumstances indicate an impairment may exist, we use an estimate of the undiscounted value of expected future operating cash flows to determine whether the long-lived assets are impaired. Long-lived assets will be evaluated for impairment either individually or in asset groups where their cash flows are largely independent of cash flows generated from other long-lived assets. If the aggregate undiscounted cash flows are less than the carrying amount of the assets, the resulting impairment charge to be recorded is calculated based on the excess of the carrying amount of the assets over the fair value of such assets, with the fair value generally determined based on an analysis of discounted cash flows.

Pension and Post-Retirement Benefits - The Company has significant pension and post-retirement benefit costs and liabilities that are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates, expected return on plan assets, mortality rates, merit and promotion increases and the health care cost trend rate. The Company is required to consider current market conditions, including changes in interest rates and health care costs, in making its assumptions. Changes in the related pension and post-retirement benefit costs or liabilities may occur in the future due to changes in the assumptions. The assumptions as to the expected long-term rates of return on plan assets are based upon the composition of plan assets, historical long-term rates of return on similar assets and current and expected market conditions. The discount rate used for U.S. plans reflects the market rate for high-quality fixed-income investments on the Company's annual measurement date (December 31) and is subject to change each year. The discount rate was determined by matching, on an approximate basis, the coupons and maturities for a portfolio of corporate bonds (rated AA or ~~better by Moody's Investor Services)~~better) to the expected plan benefit payments defined by the projected benefit obligation. The discount rates used for plans outside the United States are based on a combination of relevant indices regarding corporate and government securities, the duration of the liability and appropriate judgment. ~~The impact of Health Care Reform legislation in the United States is immaterial to the Company.~~ See the disclosures

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about pension and post-retirement obligations, the composition of plan assets, assumptions and other matters in Note 1314 of Notes to the Consolidated Financial Statements.

estimable, less costs recoverable from suppliers related to warranty claims. To the extent we experience changes in warranty claim activity or costs associated with servicing those claims, our warranty accrual is adjusted accordingly. Warranty accrual estimates are updated based upon the most current warranty claims information available. The Company's warranty costs net of recoveries as a percentage of ~~net~~ sales totaled ~~1.0%~~0.8% in ~~2015,~~2018, 0.9% in ~~2014~~2017 and 0.8% in ~~2013.~~2016. We do not expect this percentage to change materially in the near future. See Note 1516 of Notes to the Consolidated Financial Statements for a three-year summary of warranty costs.

Business Combinations - We allocate the fair value of purchase consideration to the assets acquired, liabilities assumed, and non-controlling interests in the acquiree generally based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired, liabilities assumed and non-controlling interests in the acquiree is recorded as goodwill. When determining the fair values of assets acquired, liabilities assumed, and non-controlling interests in the acquiree, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth rates and margins, attrition rates, future changes in technology and brand awareness, loyalty and position, and discount rates. Fair value estimates are based on the assumptions management believes a market participant would use in pricing the asset or liability. Amounts recorded in a business combination may change during the measurement period,

which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.

Income Taxes - ~~We record a valuation allowance to reduce our~~Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense. The impact of mix of U.S. versus foreign earnings may have a material impact on the effective tax rate given that tax rates in certain foreign jurisdictions (primarily Belgium, China, Germany, India, the Netherlands and Poland) vary from the U.S. statutory tax rate. See Note 17 of Notes to the ~~amount that we believe is more likely than not to be realized. While we have considered future taxable~~Consolidated Financial Statements for Reconciliation of Effective Income Tax Rate.

Deferred income taxes arise from temporary differences between the tax basis of assets and ~~ongoing prudent~~liabilities and ~~feasible tax planning strategies in assessing the need for the valuation allowance,~~their reported amounts in the ~~event we were to determine that we would not be able to realize all~~financial statements, which will result in taxable or ~~part of our net deferred tax assets~~deductible amounts in the ~~future, an adjustment~~future. In evaluating our ability to ~~decrease the net deferred tax assets would be charged to income in the period such determination was made. Likewise, should we determine that we would be able to realize~~recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future ~~in excess~~taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss).

The calculation of our ~~net recorded amount, an adjustment to increase the net deferred~~ tax ~~assets would increase income~~liabilities involves dealing with uncertainties in the ~~period such determination was made. We calculate~~application of complex tax laws and regulations in a ~~valuation allowance in accordance with the provisions~~multitude of jurisdictions across our global operations. ASC 740, Income Taxes~~, which requires~~ states that a tax benefit from an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets, when measuring the need for a valuation allowance. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. In determining net deferred tax assets and valuation allowances, management is required to make judgments and estimates related to projections of profitability, the timing and extent of the utilization of net operating loss carry-forwards, applicable tax rates and tax planning strategies. We review the valuation allowance quarterly and maintain it until sufficient positive evidence exists to support a reversal.

We also estimate our effective income tax rate quarterly, considering all known factors and the estimated effects of future events or tax planning strategies that can cause that rate to vary from the statutory rate. Estimating the outcome of future events is inherently uncertain and final resolution of those events can cause the effective tax rate to vary significantly. In addition, changes in U.S. or foreign tax laws or rulings may have a significant impact on our effective tax rate.

A tax position ~~is a position in a previously filed tax return or a position expected to~~may be ~~taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions shall be~~ recognized ~~only~~ when it is more likely than not ~~(likelihood of greater than 50%), based on technical merits,~~ that the position will be ~~sustained. Tax positions~~sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that ~~meet~~is materially different from our current estimate of the ~~more likely than not threshold should be measured using a probability weighted approach as the largest amount of~~unrecognized tax benefit ~~that is greater than 50% likely of being realized upon settlement. Whether the more-likely-than-not recognition threshold is met for a~~liabilities. These differences will be reflected as increases or decreases to income tax position, is a matter of judgment based on the individual facts and circumstances of that position evaluated in light of all available evidence. Tax positions are not permitted to be recognized, derecognized, or remeasured due to changes subsequent to the balance sheet date, but prior to the issuance of the financial statements. Rather, these changes are recordedexpense in the period ~~the change occurs with appropriate disclosure of such subsequent events, if significant. The Company accrues interest and penalties related to unrecognized tax benefits~~ in ~~income tax expense.~~

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~~In situations where the Company has tax deductions that would otherwise increase a deferred tax asset related to net operating losses, a tax deduction~~ which new information is treated as an uncertain tax position is recorded as a reduction of the deferred tax asset on the balance sheet. In this regard, although the uncertain tax position is not reflected as an unrecognized tax benefit in the balance sheet as a recorded liability, it is disclosed in the tabular rollforward for unrecognized tax benefits in Note 16 of Notes to the Consolidated Financial Statements.

See “Executive Overview” above for a discussion of the European Commission’s recent decision to invalidate the Belgian excess profit ruling program that the Company has participated in since 2012, the impact of such decision on our effective tax rate and our deferred tax assets and the actions we are considering to potentially mitigate the impact of such decision on our effective tax rate and deferred tax assets.available

Contingencies - We are subject to proceedings, lawsuits and other claims related to products and other matters. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable and reasonably possible losses. A determination of the amount of liability to be recorded, if any, for these contingencies is made after careful analysis of each individual issue. It is reasonably possible that the Company could incur losses in excess of the amounts accrued. Although this amount cannot be estimated, we believe that any additional losses would not have a material adverse impact on the consolidated financial statements.

In conjunction with the Tax Sharing Agreement, as further discussed in Note 17 of Notes to the Consolidated Financial Statements, WABCO is responsible for certain tax and indemnification liabilities. These liabilities include indemnification liabilities to Trane of $0.7 million.

~~Cyclical and Seasonal Nature of Business~~

The industry in which we operate is cyclical. Approximately 68% of our sales are for newly manufactured trucks, buses and trailers, the production of which follows long investment cycles and are impacted by macro economic factors and legislation. Global commercial vehicle production grew consistently from 2001 through the fourth quarter of 2008, when the global commercial vehicle markets started to experience a significant decline that was unprecedented in its breadth, depth and speed which continued through 2009. All markets experienced favorable growth in 2010 and our most developed markets again experienced favorable growth in 2011. 2012 saw most markets decline with only our markets in North America and Japan experiencing growth. In 2013 we saw mixed performances across the various markets with some geographies up double digit while others were down double digit. This mixed trend continued through 2014 with a slight decline in the overall market. In 2015, we saw most markets continue to decline with growth only in the North America, Western Europe and India markets.Seasonality

Our ~~markets~~operations are ~~difficult~~directly related to ~~predict; however,~~the commercial vehicle industry. We may experience seasonal variations in ~~2016 we are again anticipating mixed markets where~~ the demand for our products to the extent that OEM vehicle production fluctuates, such as during July, August and December when North American and ~~Asian markets are expected to be flat to down versus 2015 while~~European OEM plants may close for summer shutdowns and holiday periods. Shut-down periods in the ~~European markets are expected to grow. The continued adoption~~rest of ~~new technologies~~the world may vary by ~~truck and bus manufacturers helps our business outperform the rate of truck and bus production over the longer term. The commercial vehicle industry is not subject to material seasonal impacts.~~country.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial risk resulting from volatility in foreign currency exchange rates, interest rates and commodity prices. All of those risks are closely monitored.

Foreign Currency Exchange Rates

We conduct operations through controlled subsidiaries in most of the major countries of Western and Eastern Europe, Brazil, China, South Korea, India, Thailand and Japan as well as the United States. In addition, we conduct business in many countries through cross border sales and purchases, affiliated companies and partnerships in which we own 50% or less of the stock or partnership interest. As our financial statements are presented in U.S. Dollars, fluctuations in currency exchange rates can have a significant impact on the reported results of our operations, especially for the countries and currencies referred to above. Applying a Value-At-Risk (VAR) methodology to our foreign currency exchange rate exposure, across the translational and transactional exposures for the year 2015, the potential maximum loss in earnings is estimated to be $16 million which is based on a one-year horizon and a 95% confidence level. The VAR model is a risk analysis tool and does not purport to represent actual losses in fair value that could be incurred by us, nor does it consider the potential effect of favorable changes in market factors or our ability to pass on foreign exchange effects to commercial counterparties. See also Note 19 of Notes to the Consolidated Financial Statements.

~~Interest Rate Sensitivity~~

As of December 31, 2015, we had an aggregate outstanding debt balance of $503.7 million related primarily to our issuance of fixed-rate senior unsecured notes which are not exposed to any interest rate fluctuations. We had no outstanding floating rate debt under our revolving credit facilities.

We had $559.0 million of cash, cash equivalents and short-term investments on hand as of December 31, 2015. These balances are predominantly invested in interest bearing short-term instruments. Due to increased volatility in interest rates, a 1% change of the interest rates would have the effect of increasing or decreasing interest income by approximately $6 million.

~~Commodity Exposures~~

We are also exposed to fluctuations in commodity prices through the purchase of base metals and steel, mainly through contractual agreements with component suppliers. As we do not purchase these commodities directly, changes in their prices could affect our financial results with a time lag of up to 6 months.

~~Applying a VAR methodology to our 2015 commodity exposure,~~2018, the potential maximum loss in earnings is estimated to be $19 million which is based on a one-year horizon and a 95% confidence level. The VAR model is a risk analysis tool and does not purport to represent actual losses in fair value that could be incurred by us, nor does it consider the potential effect of favorable changes in market factors or our ability to pass on foreign exchange effects to commercial counterparties. See also Note 20 of Notes to the Consolidated Financial Statements.

Interest Rate Sensitivity

We are exposed to market rate risk resulting from fluctuations in variable interest rate borrowings included in our debt portfolio. Our debt portfolio includes long-term fixed and floating rate term borrowings under the €300.0 million Schuldschein Loans, long-term fixed rate term borrowings under the €440.0 million Senior EUR Notes, and short-term variable rate borrowings, if any, under our multi-currency credit facility that has a borrowing capacity up to $600.0 million. See Note 15 of Notes to the Consolidated Financial Statements for further discussion of our debt.

At December 31, 2018, we had an aggregate outstanding debt balance of $845.2 million of which $171.7 million was related to floating rate debt under our Schuldschein Loans. The floating rate component of the Schuldschein loans is based on the Euro Interbank Offered Rate (Euribor) plus 0.80% to 1.00%. There were no outstanding borrowings under the multi-currency revolving credit facility at December 31, 2018, which may incur interest based on an applicable margin that can vary from 0.30% to 0.85% based on the Company’s leverage ratio plus LIBOR for loans denominated in U.S. Dollars and EURIBOR for loans denominated in Euros (SIBOR for loans denominated in Singapore Dollars and HIBOR for loans denominated in Hong Kong Dollars). As of December 31, 2018, a 1% increase in interest rates within the variable portion of our debt portfolio would have the effect of increasing annualized interest expense by approximately $1.3 million. As of December 31, 2018, a 1% decrease in interest rates would have no effect due to the interest rate floor on our variable rate debt.

As of December 31, 2018, we also had $639.6 million of cash, cash equivalents and short-term investments on hand. These balances are predominantly invested in interest bearing short-term instruments. As of December 31, 2018, a 1% change of the interest rates would have the effect of increasing or decreasing net interest income by approximately $7.0 million.

Commodity Exposures

Applying a VAR methodology to our 2018 commodity exposure, the potential maximum loss in earnings is estimated to be $23.1 million which is based on a one-year horizon and a 95% confidence level. The VAR model is a risk analysis tool and does not purport to represent actual losses in fair value that could be incurred by us, nor does it consider the potential effect of favorable changes in market factors or our ability to pass on effects to commercial counterparties.

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Item 8.	Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

~~The~~To the Shareholders and the Board of Directors ~~and Shareholders~~ of WABCO Holdings Inc. ~~and Subsidiaries~~

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of WABCO Holdings Inc. and subsidiaries (“the Company”) as of December 31, ~~2015~~2018 and ~~2014, and~~2017, the related consolidated statements of operations, comprehensive ~~income,~~income; shareholders' equity and cash flows ~~and shareholders' equity~~ for each of the three years in the period ended December 31, ~~2015. Our audits also included~~2018, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 15, 2019 expressed an unqualified opinion thereon.

Basis for opinion

These financial statements ~~and schedule~~ are the responsibility of the ~~Company's~~Company‘s management. Our responsibility is to express an opinion on ~~these~~the Company‘s financial statements ~~and schedule~~ based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material ~~misstatement. An audit includes~~misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence ~~supporting~~regarding the amounts and disclosures in the financial statements. ~~An audit~~Our audits also ~~includes assessing~~included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial ~~statement presentation.~~statements. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of WABCO Holdings Inc. and subsidiaries at December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), WABCO Holdings Inc. and subsidiaries' internal control over financial reporting as of December 31, 2015, based on criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 11, 2016 expressed an unqualified opinion thereon.

Ernst & Young Bedrijfsrevisoren BCVBA/~~Reviseurs d'Entreprises~~Réviseurs d’Entreprises SCCRL

We have served as the Company’s auditor since 2007.

~~Represented by:~~

/s/ Wim Van Gasse, Partner *

~~Brussels,~~Diegem, Belgium

February ~~11, 2016~~15, 2019

* Acting on behalf of a BVBA/SPRL

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WABCO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended December 31,								Year Ended December 31,
(Amounts in millions, except share and per share data)	2015			2014		2013			2018			2017			2016
Sales	$	2,627.5		$	2,851.0	$	2,720.5		$	3,831.0		$	3,304.2		$	2,810.0
Cost of sales	1,842.0			1,979.3		1,911.4			2,658.5			2,290.4			1,931.0
Gross Profit	785.5			871.7		809.1
Gross profit									1,172.5			1,013.8			879.0
Costs and expenses:
Selling and administrative expenses	368.4			386.8		352.8			476.0			411.2			356.6
Product engineering expenses	139.5			145.0		119.4
Other operating expense, net	6.7			8.9		5.0
Research, development and engineering expenses									184.4			147.0			135.2
Other operating (income)/expense, net									(0.4		)	20.6			5.3
Operating income	270.9			331.0		331.9			512.5			435.0			381.9
European Commission fine reimbursement	—			—		279.5
Equity income of unconsolidated joint ventures, net	32.1			23.8		17.7			1.0			23.1			24.8
Other non-operating income, net	1.6			1.8		6.9
Interest (expense)/income, net	(7.1		)	0.2		4.9
Gain on remeasurement of equity investments									—			247.7			—
Other non-operating expense, net									(42.3		)	(37.2		)	(24.9		)
Interest expense, net									(7.5		)	(16.0		)	(12.7		)
Income before income taxes	297.5			356.8		640.9			463.7			652.6			369.1
Income tax expense/(benefit)	11.5			55.6		(21.0		)
Income tax expense									49.3			229.7			121.8
Net income including noncontrolling interests	286.0			301.2		661.9			414.4			422.9			247.3
Less: net income attributable to noncontrolling interests	10.8			9.7		8.7			20.3			16.8			24.3
Net income attributable to Company	$	275.2		$	291.5	$	653.2		$	394.1		$	406.1		$	223.0
Net income attributable to Company per common share
Basic	$	4.76		$	4.87	$	10.46		$	7.46		$	7.53		$	4.00
Diluted	$	4.72		$	4.81	$	10.31		$	7.43		$	7.50		$	3.98
Cash dividends per share of common stock	$	—		$	—	$	—		$	—		$	—		$	—
Weighted average common shares outstanding
Basic	57,768,018			59,907,763		62,474,493			52,846,962			53,903,938			55,695,738
Diluted	58,274,987			60,546,454		63,382,564			53,062,573			54,139,815			55,981,816

See Notes to the Consolidated Financial Statements.

~~Table of Contents~~

WABCO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Year Ended December 31,									Year Ended December 31,
(Amounts in millions)	2015			2014			2013			2018			2017			2016
Net income including noncontrolling interests	$	286.0		$	301.2		$	661.9		$	414.4		$	422.9		$	247.3
Foreign currency translation effects	(130.6		)	(144.9		)	(4.1		)
Unrealized gains/(losses) on benefit plans, net of tax	24.4			(135.9		)	(1.8		)
Unrealized losses on hedges, net	(1.2		)	—			—
Unrealized gains on investment	—			0.2			—
Other comprehensive (loss)/income:
Currency translation adjustments										(71.2		)	154.2			(55.0		)
Pensions and post-retirement benefit plan adjustments, net										5.0			(38.0		)	(15.9		)
Unrealized gains on hedges, net										0.8			0.2			0.2
Unrealized losses on investments, net										—			(0.1		)	—
Total other comprehensive (loss)/income										$	(65.4	)	$	116.3		$	(70.7	)
Comprehensive income	$	178.6		$	20.6		$	656.0		$	349.0		$	539.2		$	176.6
Less: Comprehensive income attributable to noncontrolling interests	8.6			8.4			3.6			14.4			20.3			23.0
Comprehensive income attributable to Company	$	170.0		$	12.2		$	652.4		$	334.6		$	518.9		$	153.6

See Notes to the Consolidated Financial Statements.

~~Table of Contents~~

WABCO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31, 2015			December 31, 2014			December 31, 2018			December 31, 2017
(Amounts in millions, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	515.2		$	411.7		$	503.8		$	1,141.5
Short-term investments	43.8			—			135.8			0.6
Accounts receivable, less allowance for doubtful accounts of $5.9 in 2015 and $5.5 in 2014	444.0			445.6
Inventories	212.7			189.6
Taxes receivable on income	13.2			4.1
Accounts receivable, net							611.5			669.2
Inventories, net							319.1			321.4
Guaranteed notes receivable	53.9			52.8			44.1			39.7
Investments in repurchase agreements							85.8			137.5
Other current assets	103.6			57.9			96.8			84.3
Total current assets	1,386.4			1,161.7			1,796.9			2,394.2
Property, plant and equipment, less accumulated depreciation	398.0			424.9
Property, plant and equipment, net							553.6			522.3
Goodwill	377.7			421.0			809.4			834.7
Long-term future income tax benefits	280.8			289.5
Deferred tax assets							236.7			211.1
Investments in unconsolidated joint ventures	24.7			19.6			10.4			6.5
Intangible assets, net	62.8			78.4			246.6			266.6
Other assets	59.5			37.6			85.0			88.0
TOTAL ASSETS	$	2,589.9		$	2,432.7		$	3,738.6		$	4,323.4
LIABILITIES AND EQUITY
Current liabilities:
Loans payable to banks	$	5.0		$	8.1		$	—		$	386.5
Accounts payable	159.7			121.2			232.5			258.1
Accrued payroll	105.2			103.9			111.2			130.4
Current portion of warranties	23.1			25.8			23.3			29.5
VAT payable							15.7			18.2
Accrued expenses	61.9			58.5			73.8			81.6
Promotion and customer incentives							26.6			24.3
Accrued income tax							28.2			56.2
Other accrued liabilities	109.9			100.2			84.7			88.5
Total current liabilities	464.8			417.7			596.0			1,073.3
Long-term debt	498.7			307.1			845.2			1,023.3
Post-retirement benefits	552.7			595.0
Pension and post-retirement benefits							716.0			700.7
Deferred tax liabilities	137.1			129.2			75.4			75.3
Long-term income tax liabilities	16.3			48.5			156.8			166.8
Other liabilities	84.0			46.2			84.0			82.9
Total liabilities	1,753.6			1,543.7			2,473.4			3,122.3
Shareholders’ equity:
Preferred stock, 4,000,000 shares authorized; none issued and outstanding	—			—			—			—
Common stock, $.01 par value, 400,000,000 shares authorized; shares issued: 78,500,084 in 2015; 77,961,040 in 2014; and shares outstanding: 56,759,566 in 2015; 58,425,873 in 2014	0.8			0.8
Common stock, $.01 par value, 400,000,000 shares authorized; shares issued: 79,018,266 in 2018; 78,937,828 in 2017; and shares outstanding: 51,364,925 in 2018; 53,735,486 in 2017							0.8			0.8
Capital surplus	852.6			828.3			898.5			883.2
Treasury stock, at cost: 21,740,518 shares in 2015; 19,535,167 shares in 2014	(1,497.3		)	(1,248.1		)
Treasury stock, at cost: 27,653,341 shares in 2018; 25,202,342 shares in 2017							(2,159.3		)	(1,861.3		)
Retained earnings	1,938.5			1,663.3			2,960.8			2,563.2
Accumulated other comprehensive loss:	(507.9		)	(402.7		)
Accumulated other comprehensive loss							(524.0		)	(464.5		)
Total shareholders’ equity	786.7			841.6			1,176.8			1,121.4
Noncontrolling interests	49.6			47.4			88.4			79.7
Total equity	836.3			889.0			1,265.2			1,201.1
TOTAL LIABILITIES AND EQUITY	$	2,589.9		$	2,432.7		$	3,738.6		$	4,323.4

See Notes to the Consolidated Financial Statements.

WABCO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~CASHFLOWS~~CASH FLOWS

Year Ended December 31,
(Amounts in millions) 2015 2014 2013
Operating activities:
Net income including noncontrolling interests $ 286.0
$ 301.2
$ 661.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 77.5
81.7
74.6
Amortization of intangibles 19.2
19.9
10.6
Equity in earnings of unconsolidated joint ventures, net of dividends received (4.7 ) (0.2 ) 0.6
Non-cash stock compensation 12.0
15.5
13.6
Non-cash interest expense and debt issuance cost amortization 7.8
—
—
Deferred income tax (benefit)/expense (11.7 ) 4.5
(64.6 )
Post-retirement benefit expense 43.1
32.6
31.9
Impairment of property, plant and equipment 7.7
0.8
—
Loss/(gain) on sale or disposal of property, plant and equipment 0.4
1.4
(0.2 )
Changes in assets and liabilities:
Accounts receivable, net (41.8 ) (123.9 ) (44.3 )
Inventories (42.7 ) (2.5 ) (16.0 )
Accounts payable 52.1
(18.3 ) 33.1
Other accrued liabilities and taxes 18.1
15.2
38.5
Other current and long-term assets (18.4 ) 27.5
(28.8 )
Other long-term liabilities 13.5
(8.0 ) (14.7 )
Post-retirement benefit payments (22.8 ) (33.0 ) (30.4 )
Net cash provided by operating activities 395.3
314.4
665.8
Investing activities:
Purchases of property, plant and equipment (89.7 ) (123.8 ) (108.1 )
Investments in capitalized software (10.9 ) (12.1 ) (13.4 )
(Purchases)/sales of short-term investments (81.6 ) 50.7
(55.2 )
Cost of preferred stock investment (20.0 ) —
—
Acquisition of businesses, net —
(125.9 ) —
Net cash used in investing activities (202.2 ) (211.1 ) (176.7 )
Financing activities:
Net borrowings of short-term revolving credit facilities —
—
1.1
Borrowings of long-term debt and revolving credit facilities 577.0
259.0
—
Repayments of long-term revolving credit facilities (385.0 ) —
—
Net (repayments)/borrowings of short-term debt (2.7 ) (32.6 ) 9.2
Purchases of treasury stock (249.2 ) (351.5 ) (243.2 )
Purchase of subsidiary shares from noncontrolling interest —
(5.7 ) (4.6 )
Dividends to noncontrolling interest holders (6.4 ) (5.6 ) (5.6 )
Proceeds from exercise of stock options 17.3
15.0
49.7
Net cash used in financing activities (49.0 ) (121.4 ) (193.4 )
Effect of exchange rate changes on cash and cash equivalents (40.6 ) (43.0 ) 2.1
Net increase/(decrease) in cash and cash equivalents 103.5
(61.1 ) 297.8
Cash and cash equivalents at beginning of period 411.7
472.8
175.0
Cash and cash equivalents at end of period $ 515.2
$ 411.7
$ 472.8
Cash paid during the period for:
Interest $ 10.1
$ 2.0
$ 0.3
Income taxes $ 49.4
$ 48.4
$ 45.2
Non cash items for the period:
Unrealized gains on investments $ —
$ 0.2
$ —



	Year Ended December 31,
(Amounts in millions)	2018			2017			2016
Operating activities:
Net income including noncontrolling interests	$	414.4		$	422.9		$	247.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	95.8			84.8			76.0
Impairment of non-marketable equity securities	5.5			—			—
Amortization of intangibles	28.9			22.3			22.0
Equity in earnings of unconsolidated joint ventures, net of dividends received	(1.0		)	0.8			3.9
Non-cash stock compensation	20.0			16.4			13.1
Non-cash interest expense and debt issuance cost amortization	15.4			23.1			17.7
Deferred income tax (benefit)/expense	(23.6		)	(48.2		)	68.3
Pensions and post-retirement benefit expense	62.2			57.5			44.2
Gain on remeasurement of equity investments	—			(247.7		)	—
Foreign currency effects on changes in monetary assets/liabilities	(2.3		)	(6.8		)	(5.5		)
Unrealized loss/(gain) on revaluation of foreign currency forward contracts	2.5			(1.7		)	1.1
Loss on debt extinguishment	2.3			—			—
Other	2.8			0.6			0.8
Changes in assets and liabilities:
Accounts receivable, net	27.5			(64.3		)	(61.5		)
Inventories, net	(13.4		)	(16.0		)	(3.9		)
Accounts payable	(23.8		)	5.4			21.7
Other accrued liabilities and taxes	(66.8		)	12.6			66.4
Other current and long-term assets	(40.5		)	27.4			(38.8		)
Other long-term liabilities	(11.5		)	157.1			(45.8		)
Pension and post-retirement benefit contributions	(25.9		)	(24.7		)	(21.6		)
Net cash provided by operating activities	468.5			421.5			405.4
Investing activities:
Purchases of property, plant and equipment	(118.2		)	(104.7		)	(104.0		)
Investments in capitalized software	(13.9		)	(5.8		)	(10.0		)
Proceeds from disposal of property, plant and equipment	—			—			7.0
Purchases of short-term investments and repurchase agreements	(687.2		)	(535.2		)	(324.6		)
Sales and maturities of short-term investments and repurchase agreements	585.2			548.4			273.0
Cost of preferred stock investment	—			(10.0		)	(0.9		)
Return of investment in unconsolidated joint venture	—			1.8			—
Investment in unconsolidated joint ventures	(3.8		)	—			—
Acquisitions of businesses, net	(8.6		)	(382.7		)	(92.3		)
Net cash used by investing activities	(246.5		)	(488.2		)	(251.8		)
Financing activities:
Borrowings of long-term debt	368.5			25.3			730.1
Repayments of long-term debt	(500.0		)	(25.0		)	(261.0		)
Net (repayments)/borrowings of short-term debt	(385.4		)	382.5			(4.9		)
Settlement of forward contract	—			(0.3		)	15.2
Taxes withheld and paid on employee stock award vestings	(5.1		)	(4.9		)	(6.0		)
Purchases of treasury stock	(300.0		)	(120.0		)	(250.0		)
Proceeds from noncontrolling interest shareholders	—			0.6			—
Dividends to noncontrolling interest holders	(5.7		)	(7.1		)	(6.7		)
Proceeds from exercise of stock options	0.6			9.5			3.9
Net cash (used)/provided by financing activities	(827.1		)	260.6			220.6
Effect of exchange rate changes on cash and cash equivalents	(32.2		)	85.1			(26.9		)
Net (decrease)/increase in cash and cash equivalents	(637.3		)	279.0			347.3
Cash and cash equivalents at beginning of period	1,141.5			862.5			515.2
Cash and cash equivalents at end of period	$	504.2		$	1,141.5		$	862.5



	Year Ended December 31,
(Amounts in millions)	2018		2017		2016
Supplemental cash flow disclosures
Cash paid during the period for:
Interest	$	20.0	$	20.0	$	16.5
Income taxes	$	109.0	$	64.1	$	50.8
Non cash activity:
Increase/(decrease) in capital expenditures included in accounts payable and other accrued liabilities	$	13.8	$	1.8	$	(14.9	)

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets:
Cash and cash equivalents	$	503.8	$	1,141.5	$	862.5
Restricted cash, included in other assets	0.4		—		—
Cash, cash equivalents and restricted cash at end of period	$	504.2	$	1,141.5	$	862.5

See Notes to the Consolidated Financial Statements.

~~Table of Contents~~

WABCO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


(Amounts in millions)	Common Stock		Capital Surplus		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income			Non Controlling Interests			Total			Common Stock		Capital Surplus			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non Controlling Interests			Total
Balance at December 31, 2012	$	0.7	$	735.5	$	(655.8	)	$	718.6	$	(122.6	)	$	52.3		$	728.7
Balance at December 31, 2015																			$	0.8	$	852.6		$	(1,497.3	)	$	1,938.5		$	(507.9	)	$	49.6		$	836.3
Net income	—		—		—			653.2		—			8.7			661.9			—		—			—			223.0			—			24.3			247.3
Other comprehensive loss	—		—		—			—		(0.8		)	(5.1		)	(5.9		)	—		—			—			—			(69.4		)	(1.3		)	(70.7		)
Treasury stock purchased	—		—		(240.8		)			—			—			(240.8		)	—		—			(250.0		)	—			—			—			(250.0		)
Stock options exercised	0.1		49.7		—			—		—			—			49.8			—		3.9			—			—			—			—			3.9
Treasury stock reissued																			—		(2.9		)	2.9			—			—			—			—
Stock-based compensation	—		13.9		—			—		—			—			13.9			—		7.6			—			(0.4		)	—			—			7.2
Change in noncontrolling interest			1.1										(5.7		)	(4.6		)
Dividends paid	—		—		—			—		—			(5.6		)	(5.6		)	—		—			—			—			—			(6.7		)	(6.7		)
Balance at December 31, 2013	$	0.8	$	800.2	$	(896.6	)	$	1,371.8	$	(123.4	)	$	44.6		$	1,197.4
Balance at December 31, 2016																			$	0.8	$	861.2		$	(1,744.4	)	$	2,161.1		$	(577.3	)	$	65.9		$	767.3
Net income																					—			—			406.1			—			16.8			422.9
Other comprehensive income																			—		—			—			—			112.8			3.5			116.3
Treasury stock purchased																			—		—			(120.0		)	—			—			—			(120.0		)
Stock options exercised																			—		9.5			—			—			—			—			9.5
Treasury stock reissued																			—		0.9			3.1			(4.0		)	—			—			—
Stock-based compensation																			—		11.6			—			—			—			—			11.6
Dividends paid																			—		—			—			—			—			(7.1		)	(7.1		)
Proceeds from minority interest shareholders																			—		—			—			—			—			0.6			0.6
Balance at December 31, 2017																			$	0.8	$	883.2		$	(1,861.3	)	$	2,563.2		$	(464.5	)	$	79.7		$	1,201.1
Adoption of ASU 2016–16 - See Note 3																			—		—			—			5.3			—			—			5.3
Net income	—		—		—			291.5		—			9.7			301.2			—		—			—			394.1			—			20.3			414.4
Other comprehensive loss	—		—		—			—		(279.3		)	(1.3		)	(280.6		)	—		—			—			—			(59.5		)	(5.9		)	(65.4		)
Treasury stock purchased	—		—		(351.5		)	—		—			—			(351.5		)	—		—			(300.0		)	—			—			—			(300.0		)
Stock options exercised	—		14.9		—			—		—			—			14.9			—		0.6			—			—			—			—			0.6
Treasury stock reissued																			—		(0.2		)	2.0			(1.8		)	—			—			—
Stock-based compensation	—		13.2		—			—		—			—			13.2			—		14.9			—			—			—			—			14.9
Dividends paid										—			(5.6		)	(5.6		)	—		—			—			—			—			(5.7		)	(5.7		)
Balance at December 31, 2014	$	0.8	$	828.3	$	(1,248.1	)	$	1,663.3	$	(402.7	)	$	47.4		$	889.0
Net income	—		—		—			275.2		—			10.8			286.0
Other comprehensive loss	—		—		—			—		(105.2		)	(2.2		)	(107.4		)
Treasury stock purchased	—		—		(249.2		)	—		—			—			(249.2		)
Stock options exercised	—		17.3		—			—		—			—			17.3
Stock-based compensation	—		7.0		—			—		—			—			7.0
Dividends paid	—		—		—			—		—			(6.4		)	(6.4		)
Balance at December 31, 2015	$	0.8	$	852.6	$	(1,497.3	)	$	1,938.5	$	(507.9	)	$	49.6		$	836.3
Balance at December 31, 2018																			$	0.8	$	898.5		$	(2,159.3	)	$	2,960.8		$	(524.0	)	$	88.4		$	1,265.2

See Notes to the Consolidated Financial Statements.

~~Table of Contents~~

WABCO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, ~~2015~~2018


NOTE 1.	Description of Company

WABCO Holdings Inc. and its subsidiaries (collectively ~~WABCO~~"WABCO," "Company," "we," or ~~the Company) engineers, develops, manufactures~~"our") engineer, develop, manufacture and ~~sells~~sell integrated systems controlling advanced braking, stability, suspension, ~~and~~steering, transmission automation, as well as air compression and processing primarily for commercial vehicles. WABCO’s largest selling products are pneumatic ~~ABS, EBS, ESC,~~

anti-lock braking systems (ABS), electronic braking systems (EBS), electronic stability control (ESC) systems, brake controls,

automated manual transmission systems (AMT), air disc brakes and a large variety of conventional mechanical products such as actuators, air compressors and air control valves for medium- and heavy-duty trucks, buses and trailers. In addition, we supply commercial vehicle aftermarket distributors and service partners as well as fleet operators with replacement parts, fleet management solutions, diagnostic tools, training and other expert services. WABCO sells its products primarily to ~~four~~two groups of customers around the world: original equipment manufacturers (OEMs) including truck and bus, ~~OEMs,~~ trailer, ~~OEMs,~~car and off-highway, and commercial vehicle aftermarket distributors of replacement parts and services ~~and~~as well as commercial vehicle fleet operators for management solutions and ~~services, and major automotive OEMs.~~services. We also provide remanufacturing services globally.

WABCO was founded in the United States in 1869 as Westinghouse Air Brake Company. The Company was purchased by American Standard Companies Inc. (American Standard) in 1968 and operated as the Vehicle Control Systems business division within American Standard until the Company was spun off from American Standard on July 31, 2007. Subsequent to the spin-off, American Standard changed its name to Trane Inc., which is herein referred to as “Trane.” On June 5, 2008, Trane was acquired in a merger with Ingersoll-Rand Company Limited (Ingersoll Rand) and exists today as a wholly owned subsidiary of Ingersoll Rand.

The spin-off by Trane of its Vehicle Control Systems business became effective on July 31, 2007, through a distribution of 100% of the common stock of WABCO to Trane's shareholders (the Distribution). The Distribution was effected through a separation and distribution agreement pursuant to which Trane distributed all of the shares of WABCO common stock as a dividend on Trane common stock, in the amount of one share of WABCO common stock for every three shares of outstanding Trane common stock to each shareholder on the record date. Trane received a private letter ruling from the Internal Revenue Service and an opinion from tax counsel indicating that the spin-off was tax free to the shareholders of Trane and WABCO.

Based on the organizational structure, as well as the nature of financial information available and reviewed by the Company’s chief operating decision maker to assess performance and make decisions about resource allocations, the Company has concluded that its total WABCO operations represent one reportable segment.


NOTE 2.	Summary of Significant Accounting Policies

Use of Estimates - The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management believes the most complex and sensitive judgments, because of their significance to the ~~condensed~~ consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Actual results could differ from those estimates. ~~Some of the most~~The more significant estimates included in the preparation of the consolidated financial statements are related to ~~allowance for doubtful accounts, inventory reserves, goodwill,~~revenue recognition, useful lives and recoverability of long-lived assets, warranties, pension and post-retirement benefits, valuation of equity investments, income taxes, provisions for loss contingencies, business combinations and stock-based compensation. ~~Allocation methods are described in the notes to these consolidated financial statements where appropriate.~~

Principles of Consolidation and Presentation - All majority owned or controlled subsidiaries of WABCO are included in the consolidated financial statements and intercompany transactions are eliminated upon consolidation. WABCO investments in unconsolidated joint ventures are included at cost plus its equity in undistributed earnings in accordance with the equity method of accounting and reflected as investments in unconsolidated joint ventures inon the consolidated balance sheets. Certain prior period

amounts in the ~~prior years'~~ consolidated ~~financial statements~~statement of cash flows have been reclassified to ~~conform~~present the foreign currency effects on changes in monetary assets and liabilities and the revaluation of foreign currency forward contracts as non-cash adjustments to reconcile net income to net cash provided by operating activities.

Reportable Segment - Based on the organizational structure, as well as the nature of financial information available and reviewed by the Company’s chief operating decision maker to assess performance and make decisions about resource allocations, the Company has concluded that WABCO has one reportable segment as of December 31, 2018. During the fourth quarter of 2018, the Company disclosed a new organizational structure managed by business regions. However, the Company is currently in the implementation phase of this new structure including defining its revised internal reporting to the ~~current year presentation.~~chief operating decision

maker. The financial reporting to the Company's chief operating decision maker has remained unchanged as of December 31, 2018 and as of the filing date of February 15, 2019. See also Note 19 for discussion.

Foreign Currency Translation - Adjustments resulting from ~~translating~~the translation of foreign ~~functional~~ currency denominated assets and liabilities into U.S. Dollars at exchange rates in effect as of the balance sheet date, and income and expense accounts at the average exchange rates in effect during the period, are recorded inas a ~~separate~~ component of ~~shareholders' equity as~~ accumulated other comprehensive ~~income.~~loss in shareholders' equity. Accumulated other comprehensive loss also includes the effects of exchange rates on intercompany transactions of a long-term investment nature and transactions designated as a hedge of a net-investment in foreign subsidiaries. Gains or losses resulting from transactions in a currency other than the functional currency are reflected in the consolidated statements of operations as ~~part of~~ other non-operating income or ~~expense, except for intercompany transactions of a long-term investment~~expense.

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~~nature where the foreign exchange gains or losses from the remeasurement of such intercompany transactions is recorded within accumulated other comprehensive income.~~

Revenue Recognition -~~- Sales~~ The Company adopted Accounting Standards Update (ASU) 2014–09 Revenue from Contracts with Customers, together with its amendments collectively referred to as ASC 606, as of ~~products~~January 1, 2018 using the modified retrospective method as applied to customer contracts that were not completed as of the date of adoption. As a result, financial information for reporting periods beginning after January 1, 2018 are ~~recorded~~presented under ASC 606, while comparative financial information has not been adjusted and continues to be reported in accordance with the Company’s historical accounting policy for revenue recognition prior to the adoption of ASC 606.

Revenue under ASC 606 is recognized when ~~(i) title and risk~~control over a product or service is transferred to a customer. Revenue is measured at the transaction price which is based on the amount of ~~loss have transferred~~consideration that the Company expects to receive in exchange for transferring the promised goods or services to the customer ~~(ii) persuasive evidence~~and excludes any amounts collected on behalf of third parties. The transaction price will include estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. The Company enters into contracts that may include both products and services, which are generally capable of being distinct and accounted for as separate performance obligations.

The Company generates revenue through serial production of parts in the OEM end-market and through the delivery of parts, spare parts and fleet management solutions (FMS) in the Aftermarket. Truck and bus contracts generally include Long Term Supply Agreements (LTSA) and Purchase Orders (PO) whereby the LTSA stipulates the pricing and delivery terms and is evaluated together with a PO, which identifies the quantity, timing, and the type of product to be transferred. Certain customer contracts do not always have an ~~arrangement exists with~~LTSA, in which case, the ~~customer, (iii)~~contracts are governed by the PO from the customer.

Payments from customers are typically due within 60 days of invoicing but varies based on jurisdiction and local practices. The Company does not have significant financing components or payment terms greater than 12 months. In most jurisdictions where the Company operates, sales ~~price is fixed and determinable, and (iv)~~are subject to Value Added Tax (VAT). Sales are presented net of VAT in the ~~collectability~~consolidated statements of ~~the sales price is reasonably assured.~~operations. Amounts billed to customers for shipping and handling costs are included in sales. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales.

OEM

The sale of serial production parts to OEMs or independent distributors that do not require customization, such as most trailer parts or trailer production parts, are satisfied at a point in time as the parts are deemed to have an alternative use to the Company. Revenue is recognized when the control of the parts transfers to the customer, which is based on shipping terms. The transaction price for these parts is equal to the contracted part price of each unit and represents the standalone selling price for the part and there is no expectation of material variable consideration in the transaction price. Management does not exercise significant judgment when accounting for the sale of serial production parts that are relatively homogeneous and produced to industry standards.

Certain serial production parts may require specific customization. The Company performs these customization services in order to obtain the LTSA. In some instances, the Company receives reimbursement for a portion of the pre-production cost incurred from the OEM. These reimbursements are not within the scope of ASC 606 and are accounted for under the guidance in ASC 340-10, Other Assets and Deferred Costs, and are offset against capitalized costs or research and development expenses depending on the terms of the contract. Revenue for serial production contracts requiring customization is recognized at a point in time as most customized serial production parts have an alternative use in that they may be sold in the aftermarket. Serial production contracts also generally do not provide for an enforceable right for full recovery under the LTSA that would be necessary for over-time revenue recognition. Revenue for serial production contracts is recognized when the control of the parts transfers to the customer based on the shipping terms. If any sales were to meet the over-time recognition criteria, the Company has elected to recognize revenue as it produces the specified units, using a “cost-to-cost” method, which is an appropriate method under ASC 606-10-50-18 to measure progress towards completion of the performance obligation to deliver the parts to the customer. The Company believes that this method better reflects its efforts to satisfy its performance obligation as the cost incurred (resources

consumed, labor hours expended, time elapsed and machine hours used) is proportionate to its progress in satisfying the performance obligation.

Most serial production contracts include provisions for volume discounts. In certain markets, the Company has historically provided customers with discounts not stated in the contract. These practices create a valid expectation for the customer to receive discounts on purchases. The Company considers these adjustments to the contract price as variable considerations, which it estimates based on the most likely amount approach. Volume discounts offered to serial production part customers provide for a limited number of outcomes and are typically binary in nature when determining the amount of the customer discount. Variable consideration is not constrained. Revenue recognized is limited to the amount the Company expects to receive. Amounts billed but ultimately expected to be refunded to the customer are included within promotion and customer incentives on the consolidated balance sheet. Management has exercised significant judgment as it relates to revenue recognition for serial parts production in such areas as scoping, contract identification, determining performance obligations, variable consideration, and the timing of revenue recognition.

Aftermarket

The Company generates revenue through the delivery of aftermarket parts and spare parts to OEMs and independent distributors, and the delivery of FMS to truck, fleet, trailer and cargo management providers. Aftermarket parts production contracts have one type of performance obligation which is the delivery of aftermarket parts and spare parts. Aftermarket products are deemed to have alternative use since they can be sold to multiple customers. Revenue for aftermarket part production contracts is recognized at a point in time and revenue is recognized when the control of the parts transfers to the customer which is based on shipping terms.

Aftermarket contracts may include variable consideration related to discounts, bonuses, and product returns. Variable consideration for aftermarket parts is not constrained. The Company grants its customers cash discounts and various performance bonuses and incentives. The customer usually has the right to return products to the Company in the event of defective products or excess quantity. The Company estimates the volume discounts based on the most likely amount. Discounts and incentives offered to aftermarket customers provide for a limited number of outcomes and are typically binary in nature when determining the amount of the customer discount. Amounts billed and ultimately expected to be refunded to the customer are included within customer and promotion incentives on the consolidated balance sheets. The transaction price for each individual aftermarket part or spare part is identified on the aftermarket contract and represents the standalone selling price for the part.

FMS contracts generally include hardware and software and are bundled with a term-based service contract. The FMS revenue stream has multiple performance obligations that include products, services, or a combination of products and services. WABCO receives a fixed payment for the equipment and certain services and receives a variable payment for the Software-as-a-Service (SaaS) performance obligation based on the number of activated devices. Variable consideration is constrained until the amount of activated devices is known. WABCO allocates the total transaction price to the performance obligations based on the stand alone selling price (SSP) for each obligation. When the SSP does not exist, the Company estimates the SSP based on the adjusted market approach. Revenue is recognized when control of the goods or services transfers to the customer, at a point in time (based on shipping terms) for hardware and over-time as the services are provided for the remaining performance obligations. Management has exercised significant judgment as it relates to the revenue recognition for fleet management services in such areas as determining performance obligations, variable consideration, allocation of transaction price and the timing of revenue recognition.

Revenue recognition prior to January 1, 2018

The Company recognizes revenue when title and risk of loss have transferred, persuasive evidence of arrangement exists, the sales price is fixed or determinable and collectibility is reasonably assured. Certain of the Company's product offerings contain multiple deliverables including hardware with embedded firmware, back office hosting services, unspecified software upgrades and enhancements related to the software embedded in these products through service contracts, which are considered separate units of accounting. For products under these arrangements, the software and non-software components function together to deliver the tangible product’s essential functionality.

The Company allocates revenue to each element in these multiple-element arrangements based upon the relative selling prices of each deliverable.

In ~~evaluating~~applying the ~~revenue recognition for the Company's multiple-element arrangements,~~relative selling price method, the Company ~~determined that in certain cases,~~determines the selling price for each deliverable using vendor specific objective evidence (VSOE) ~~of selling price could not be established for some~~, if it exists, or all deliverables in the arrangement as the Company infrequently sold each element on a standalone basis, did not price products within a narrow range, or had a limited sales history. When VSOE cannot be established for an element, the Company attempts to establish the selling price of the element using third-party evidence (TPE) ~~based on competitor prices for similar deliverables sold separately. However, the Company is typically not able to establish TPE as we are unable to reliably determine the standalone~~of selling ~~prices of similar competitor products.~~

~~When~~price. If neither VSOE nor TPE ~~can be established~~of selling price exist for ~~an element,~~a deliverable, the ~~Company uses its~~ best estimate of selling price (BESP) ~~in the allocation of arrangement consideration.~~is then used for that element. BESP represents the price at which the Company would transact a sale if the element were sold on a standalone basis. The Company determines BESP for an element by considering multiple factors including, but not limited to, the Company's go-to-market strategy, pricing practices, internal costs, gross margin, market conditions and geographies. Revenue allocated to each element is then recognized when the other revenue recognition criteria are met for that element.

Rebates and sales incentives

The Company ~~typically~~ records cooperative advertising allowances, rebates and other forms of sales incentives as a reduction of sales at the later of the date of the sale or the date the incentive is offered. For these costs, the Company recorded ~~$43.2~~$51.8 million, ~~$43.0~~$48.6 million and ~~$42.4~~$53.8 million in ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively, in the accompanying consolidated statements of operations.

~~In most countries where WABCO operates, sales are subject to VAT taxes. Sales are presented net of VAT in the consolidated statements of operations.~~

~~Shipping and Handling Costs~~ ~~- Shipping, handling, receiving, inspecting, warehousing, internal transfer, procurement and other costs of distribution are included in cost of sales in the consolidated statements of operations.~~

Cash and Cash Equivalents - Cash equivalents include all highly liquid investments with maturity of three months or less when purchased. ~~The Company classifies~~Restricted cash ~~and cash equivalents that are restricted from operating use for the next twelve months as restricted cash. Amounts restricted for longer than twelve months~~balances are classified as either other ~~assets. When restrictions are no longer in place,~~current assets or other assets, depending upon the ~~amounts are reclassified to cash and cash equivalents.~~nature of the restriction.

~~Available-for-Sale~~Marketable Investments - Investments in marketable securities may consist of mutual funds or deposit funds holding primarily term deposits, certificates of deposit and short-term bonds. The ~~investments are classified as available-for-sale and are recorded in the consolidated financial statements at market value with changes in market value included in other comprehensive income. The~~ Company classifies its marketable investments as either short-term or long-term based on the ~~nature~~contractual maturity of ~~the investments,~~each underlying instrument, its availability of use in current operations and the Company's holding intention. ~~The fair~~Prior to the adoption of ASU 2016–01 as discussed in Note 3, marketable securities were accounted for as available-for-sale securities with changes in market value included in other comprehensive income. Subsequent to the adoption of ASU 2016–01 effective January 1, 2018 discussed in Note 3, the net unrealized change in the market value of ~~the~~ investments in marketable securities is ~~determined based on readily available pricing sources for identical instruments~~recorded in ~~less active markets (Level 2). In the event the investments experience an other-than-temporary impairment in value, such impairment is recognized as a loss~~other non–operating expense, net in the consolidated ~~statements~~statement of operations. As of December 31, ~~2015,~~2018, the Company had ~~$43.8~~marketable securities of $135.8 million ofclassified as short-term investments ~~as well as $2.7~~and $2.8 million ~~of long-term investments that have been~~ included in ~~"other assets"~~other assets on the consolidated balance sheets. As of December 31, 2017, the Company had marketable securities of $0.6 million classified as short-term investments and had $2.9 million included in other assets on the consolidated balance sheets.

~~Allowance~~The Company monitors its marketable securities for ~~Doubtful~~ indications of impairment and recognizes an impairment loss when it is determined the fair value is less than the carrying value. The Company did not recognize any impairment loss on its marketable securities during the years ended December 31, 2018, 2017 or 2016.

Accounts receivable, net - ~~The~~Accounts receivable are recorded at invoiced amounts less the allowance for doubtful accounts.The Company performs ongoing credit evaluations onof its ~~customers.~~customers and records an allowance to reduce receivables to the amount reasonably expected to be collected. In determining the allowance for doubtful accounts ~~on a monthly basis,~~ WABCO analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness, availability of credit insurance and current economic trends. The allowance for doubtful accounts was $10.7 million and $9.4 million at December 31, 2018 and 2017, respectively.

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Transfers of Financial Instruments - The Company accounts for sales and transfers of financial instruments under ASC 860, Transfers and Servicing. ASC 860 states that a transfer of financial assets (either all or a portion of a financial asset) in which the transferor surrenders control over those financial assets shall be accounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. In the normal course of business, the Company may discount and sell accounts receivable or exchange accounts receivable for short-term notes receivable. Accounts receivable that are sold without recourse and that meet the criteria for sale accounting under ASC 860 are excluded from accounts receivable on the consolidated balance sheets. The proceeds received from such sales are included in operating cash flows. In instances where receivables are sold with recourse, such that the Company effectively maintains control over the receivables, the Company accounts for these as secured borrowings. The expenses associated with the discounting of receivables are recorded in the consolidated statements of operations as other non-operating expense.

The Company may ~~sell receivables to the bank which qualify as financial assets since they are associated with the sale~~receive customer notes in settlement of ~~products by the subsidiaries of the Company and accepted by the Company's customers~~accounts receivable, primarily in the ~~ordinary course of business. Where such receivables sold to the bank, the risks of~~Asia Pacific region. The collection of such customer notes receivables ~~reside with~~are included in operating cash flows based on the ~~bank. Therefore, upon sale~~substance of the ~~receivables to~~underlying transactions, which are operating in nature. Notes receivable held by the Company that are secured by bank ~~the appropriate reversal~~guarantees are classified as guaranteed note receivable. The Company also accepts unsecured notes in settlement of ~~any applicable~~ accounts receivable ~~allowances is recorded~~from certain customers. Notes receivable may be held by the ~~Company.~~Company until maturity, transferred to suppliers to settle liabilities, or sold to third party financial institutions in exchange for cash. As of December 31, 2018 and 2017, there was $44.1 million and $39.7 million of guaranteed notes receivable outstanding, respectively, and $2.2 million and $3.3 million of unguaranteed notes receivable outstanding, respectively. See Note 12 for additional information on guaranteed notes receivable.

Investment in Repurchase Agreements - The Company may enter into agreements to purchase securities under agreements to resell (reverse repurchase agreements). Reverse repurchase agreements are accounted for as secured financing transactions and reported as investment in repurchase agreements on the consolidated balance sheets. These agreements are recorded at their contracted resale amounts plus accrued interest. In reverse repurchase transactions, the Company takes possession of or obtains a security interest in the related securities, and has the right to sell or repledge the collateral received.

~~Inventory Reserves~~Inventories, net - ~~Inventory costs are determined by the use of the last-in, first-out (LIFO) method, and~~Inventories are stated at the lower of ~~such~~ cost or ~~market.~~market using the last-in, first-out (LIFO) and first–in, first out (FIFO) methods with most inventories valued using the LIFO method. The inventories of an acquired business may be valued using either LIFO or FIFO as the Company considers the cost method ~~is used as it~~that provides afor the better matching of ~~the~~ costs to the sales. Inventories are categorized as finished products, products-in-process and raw materials. On a quarterly basis, the Company tests its inventory for slow moving and obsolete stock by considering both the historical and expected sales and the Company will record a provision, if needed.

Property, Plant & Equipment, net - Property, plant and equipment balances, including tooling, are stated at cost less accumulated depreciation. WABCO capitalizes costs, including interest during construction of fixed asset additions, improvements, and betterments that add to productive capacity or extend the ~~asset life.~~useful life of the fixed asset. WABCO assesses facilities and equipments for impairment when events or circumstances indicate that the carrying amount of these assets may not be recoverable. Maintenance and repair expenditures are expensed as incurred. Depreciation and amortization are computed on the straight-line method based on the estimated useful life of the asset or asset group, which are 40 years for buildings ~~3 to 5 years for tooling~~ and 5 to 15 years for machinery and equipment.

~~Capitalized Software Costs~~ ~~- WABCO capitalizes~~ Tooling may be depreciated over its estimated useful life from 2 to 10 years using the ~~costs~~straight–line method or units of obtaining or developing internal-use computer software, including directly related payroll costs. The Company amortizes those costs on a straight-line basis over periods of up to seven years, beginning when the software is ready for its intended use. The Company assesses capitalized software costs for impairment when events or circumstances indicate that the carrying amount of these assets may not be recoverable.production methods.

Equity Method and ~~Cost Method~~Non-Marketable Investments - ~~We have investments that are accounted for using~~The Company uses the equity ~~method. Our~~method of accounting for equity investments in instances where the Company has the ability to exercise significant influence, but does not have a controlling financial interest. The proportionate share of income or losses from investments accounted for under the equity method is recorded in the consolidated statements of operations. ~~We write down~~The carrying value of equity method investments of $10.4 million and $6.5 million at December 31, 2018 and 2017, respectively, is reported in the consolidated balance sheets as investments in unconsolidated joint ventures, and is adjusted for the Company's proportionate share of net earnings and losses, as well as dividends. The Company evaluates its equity method investments for impairment whenever events or ~~write off an investment and recognize~~changes in circumstances indicate a loss ~~when events or circumstances indicate there is impairment~~ in value of the investment ~~that is other-than-temporary.~~may be other than temporary. This ~~includes assessing~~evaluation considers the ~~investees’~~investee financial condition as well as ~~the investees’~~investee historical and projected results of operations and cash flows. If the actual outcomes for ~~the investees~~an investee are significantly different from projections, wethe Company may ~~incur future charges~~impair its investment. See Note 18 for ~~the impairment of these investments. Our investment in~~additional information on equity method ~~investees was $24.7 million and $19.6 million at December 31, 2015 and 2014, respectively, net of our proportionate share of the results of their operations and dividends received.~~investments.

~~Investments~~Prior to the adoption of ASU 2016–01 discussed in Note 3, the Company used the cost method to account for non-marketable equity investments for which ~~we do~~it does not control and for which it does not have the ability to exercise significant influence over the entity's operating and financial policies. Upon adoption of ASU 2016–01, the Company has elected the measurement alternative for its investments in equity securities without a readily determinable fair value. Under the measurement alternative, the Company measures its non-marketable investments at cost, less impairment and adjusted for observable price changes for identical or similar investments of the investee. At each reporting period the Company performs a qualitative assessment, considering impairment indicators, to evaluate whether its non–marketable investments are ~~accounted~~impaired. If the fair value of a non–marketable investment is less than its carrying value, an impairment loss is recognized in an amount equal to the difference between the fair value and the carrying value. See Note 21 for additional information on non–marketable investments

Pre-Production Costs Related to Long-Term Supply Arrangements -The Company may incur pre-production engineering and tooling related costs such as molds, dies, and tools (referred to as “tooling”), for products produced under long-term supply agreements with its customers. If the Company owns the related tooling, or if the Company does not own the tooling but receives a non-cancelable right from its customers to use the related tooling during the supply arrangement, then the costs incurred by the Company are capitalized as part of property, plant and equipment, subject to an impairment assessment, and amortized over the shorter of their useful life or the supply arrangement. If the Company has the contractual right to reimbursement for the tooling, the cost ~~method. The aggregate balance~~ of ~~these investments was $20.0 million at December 31, 2015. There were no such investments outstanding at December 31, 2014 .~~the tooling is also capitalized as property, plant and equipment, subject to an impairment assessment, pending transfer of ownership and reimbursement from the customer. If there is an estimated loss on an arrangement to provide tooling to a customer, it is recorded in the period in which the loss is estimated and is probable.

Non-reimbursable design and development costs for products to be sold under long-term supply arrangements are expensed as incurred to research, development and engineering expenses unless the cost reimbursement is contractually guaranteed in a customer contract, in which case the costs are capitalized and subsequently reduced upon lump sum or piece price recoveries from the customer.

Goodwill - ~~The Company has~~Goodwill represents the excess of fair value of consideration paid for an acquired entity over the fair value of the assets acquired and liabilities assumed in a ~~significant amount of goodwill on its balance sheet that~~business combination. Goodwill is not amortized, but subject to impairment tests each fiscal year on October 1 or more often when events or circumstances indicate that the carrying amount of goodwill may not be recoverable. The Company's impairment ~~tests utilize~~test utilizes the two-step approach. The first step of the goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and thus the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test ~~shall be~~ is

performed to measure the amount of the impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess.

The recoverability of goodwill is ~~measured based on~~performed at the entity level as the Company operates as one reportable segment and one reporting ~~unit for the total Company. Our~~unit. The plants, engineering, technical support, distribution centers and other support functions are shared among various product families and serve all distribution channels with many customers. Based on the organizational structure, as well as the nature of financial information available and reviewed by the Company's chief operating decision maker to assess performance and make decisions about resource allocations, the Company has concluded that its total WABCO operations represent one reportable segment. In order to approximate the fair value of the reporting unit for purposes of testing recoverability, we use the total market capitalization of the Company, a market approach, which is then compared to the total book value of the Company. In the event the Company's fair value has fallen below book value, the Company will compare the estimated fair value of goodwill to its book value. If the book value of goodwill

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exceeds the estimated fair value of goodwill, the Company will recognize the difference as an impairment loss in operating income. There has been no impairment of goodwill during each of the years presented in the consolidated statements of operations.

The Company expects the announced change to an organizational structure managed by business regions in 2019 to impact its determination of its operating segments and reporting units, and will also require the Company to evaluate its goodwill for impairment immediately before and after the change in operating segments. There is no indication that a change in the operating segments of the Company will have a material effect on the consolidated financial statements.

~~Other~~ Intangible Assets, ~~with Determinable Lives~~net - ~~Other intangible~~Intangible assets with determinable lives consist of customer and distribution relationships, patented and unpatented technology, in-process research and development, and other intangibles ~~and~~that are amortized on a straight-line basis over their estimated useful lives, ranging from 1 to ~~15 years.~~20 years except for intangibles related to trade name which may have a longer useful life. WABCO also capitalizes the cost of obtaining or developing internal-use computer software, including directly related payroll costs, as capitalized software within intangible assets. Capitalized software costs are amortized on a straight-line basis over periods of up to 7 years, beginning when the software is ready for its intended use. WABCO assesses intangible assets for impairment when events or circumstances indicate that the carrying amount of these assets may not be recoverable.

Warranties - Products sold by WABCO are covered by a basic limited warranty with terms and conditions that vary depending upon the product and country in which it was sold. The limited warranty covers the equipment, parts and labor (in certain cases) necessary to satisfy the warranty obligation generally for a period of ~~two~~2 years. Estimated product warranty expenses are accrued in cost of sales at the time the related sale is recognized. Estimates of warranty expenses are based primarily on warranty claims experience and specific customer contracts. Warranty expenses include accruals for basic warranties for product sold, as well as accruals for product recalls, service campaigns and other related events when they are known and ~~estimable.~~estimable, less costs recoverable from suppliers related to warranty claims. To the extent WABCO experiences changes in warranty claim activity or costs associated with servicing those claims, its warranty accrual is adjusted accordingly. Warranty accrual estimates are updated based upon the most current warranty claims information available. The Company's warranty costs net of recoveries as a percentage of sales totaled ~~1.0%~~0.8% in ~~2015,~~2018, 0.9% in ~~2014~~2017 and 0.8% in ~~2013.~~2016. See Note 1516 for ~~a summary of~~additional information on warranties.

Pension and Post-retirement Benefits - ~~All~~Pension and post-retirement ~~benefits are accounted for on an accrual basis using actuarial assumptions. Post-retirement~~ pension benefits are provided for substantially all employees of WABCO, both in the United States and abroad through plans specific to each of WABCO's legal entities. Defined benefits pension plans are primarily concentrated in Germany, United Kingdom, Austria, Switzerland and Belgium. In ~~addition, in~~ the United States, certain employees receive post-retirement health care and life insurance benefits. The impact of Health Care Reform legislation in the United States is immaterial to the Company. ~~The costs of~~All pension and post-retirement benefits are accounted for on an accrual basis using actuarial assumptions. WABCO measures the benefits provided through plans of WABCO are included in the accompanying consolidated financial statements and summarized in detail along with other information pertaining to these plans in Note 13. Plans are primarily concentrated in the United Kingdom, Austria, Germany, and Switzerland.

~~WABCO is also required to measure a~~ defined benefit and post-retirement ~~plan's~~plan assets and obligations ~~that determine its~~for purposes of determining their funded status as of the end of the ~~employer's~~Company's fiscal year, and ~~recognize~~recognizes changes in the funded status ~~of a defined benefit post-retirement plan~~ in comprehensive income in the year in which the changes occur. The costs of the benefits provided under these plans are included in the accompanying consolidated financial statements. See Note 14 for additional disclosures.

Fair Value of Financial Instruments - Financial instruments consist mainly of cash, short-term investments, accounts receivable, guaranteed notes receivable, investment in repurchase agreements, derivative instruments, pension plan assets, accounts payable, short-term borrowings and long-term debt.

Fair value is defined as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability. The following summarizes the three levels of inputs required to measure fair value, of which the first two are considered observable and the third is considered unobservable:

–Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.


–	Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


–	Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of December 31, 2018 and 2017, the carrying amount of cash, accounts receivable, accounts payable and ~~loans payable to banks. As of December 31, 2015 and 2014, the carrying amounts of these instruments~~short-term borrowings approximated their ~~fair values. Long-term~~fair-value due to their short-term nature. The carrying value of short-term investments, investment in repurchase agreements, derivative instruments and long-term debt ~~also approximated~~was determined to approximate fair value asbased on observable Level 2 inputs. The fair value of ~~December 31, 2015~~short-term investments and ~~2014.~~investments in repurchase agreements are based on pricing sources for identical instruments in less active markets. The fair value of the guaranteed notes receivable is based on Level 2 inputs, including credit ratings and other criteria observable in the market. The fair value of derivative instruments is determined using model-based valuation techniques for which significant assumptions are observable in the market. The fair value of long-term debt is based upon observable Level 2 inputs regarding interest rates available to the Company at each reporting period.

Derivative Instruments and Hedging Activities - The Company enters into derivative instruments to manage its exposure to movements in currency exchange rates and recognizes ~~all~~ derivative ~~financial instruments in~~assets and liabilities at fair value on the consolidated ~~financial statements at fair value. Changes~~balance sheets. The Company uses Euro–denominated debt and foreign currency contracts to partially hedge its net investment in Euro–denominated wholly–owned subsidiaries. Foreign currency gains and losses on Euro–denominated debt and foreign currency contracts designated and qualifying as partial hedges of a net investment are included in accumulated other comprehensive income on the ~~fair value of derivative financial instruments which qualify for hedge accounting are recorded as an offset to the changes~~consolidated balance sheets. The change in fair value of foreign currency contracts that are not designated as hedging instruments are recorded to the ~~underlying~~same line item as the hedged item, ~~and are included~~as non–operating expense/income in ~~other non-operating expense, net or other operating expense, net.~~the consolidated statements of operations. See Note 2019 for ~~further details~~additional information on derivative instruments.

Research, Development and Engineering Expenses - Research, development and ~~development~~engineering costs ~~are expensed as incurred. WABCO expended approximately $139.5 million in 2015, $145.0 million in 2014 and $119.4 million in 2013 for~~include research activities, product development and ~~for~~ product ~~engineering.~~engineering, and are expensed as incurred. Research, development and engineering costs were approximately $184.4 million in 2018, $147.0 million in 2017 and $135.2 million in 2016.

Business Combinations - ~~We allocate~~The Company allocates the fair value of purchase consideration to the assets acquired, liabilities assumed and non-controlling interests in the acquiree generally based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired, liabilities assumed and non-controlling interests in the acquiree is recorded as goodwill. When determining the fair values of assets acquired, liabilities assumed and non-controlling interests in the acquiree, ~~management~~the Company makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth rates and margins, attrition rates, future changes in technology and brand awareness, loyalty and position, and discount rates. Fair value estimates are based on the assumptions ~~management~~the Company believes a market participant would use in pricing the asset or liability. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.

Income Taxes - Deferred income taxes are determined on the liability method, and are recognized for all temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. ~~No provision is made for U.S. income taxes applicable to undistributed earnings of foreign subsidiaries that are permanently reinvested, except~~

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for Brazil's current year earnings and $300.0 million of unremitted foreign earnings related to a Belgian affiliate resulting from the receipt of an exceptional refund including interest from the European Commission related to the Company’s appeal of the EC fine.

A tax position is a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not (likelihood of greater than 50%) based on technical merits, that the position will be sustained upon examination. Tax positions that meet the more likely than not threshold are measured using a probability weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Tax positions are not permitted to be recognized, derecognized, or remeasured due to changes subsequent to the balance sheet date, but prior to the issuance of the financial statements. Rather, these changes are recorded in the period the change occurs with appropriate disclosure of such subsequent events, if significant.

We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. We calculate this valuation allowance in accordance with the provisions of ASC 740, Income Taxes,which requires an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets, when measuring the need for a valuation allowance. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to decrease the net deferred tax assets would be charged to income in the period such determination was made. Likewise, should we determine that we would be able

to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to increase the net deferred tax assets would increase income in the period such determination was made.

Earnings Per Share - Basic net income per share has been computed using the weighted average number of WABCO common shares outstanding. The average number of outstanding shares of common stock used in computing diluted net income per share includes weighted average incremental shares when the impact is not anti-dilutive.

The weighted average incremental shares represent the net amount of shares the Company would issue upon the assumed exercise of in-the-money stock options and vesting of restricted stock units (RSUs) and deferred stock units (DSUs) after assuming that the Company would use the proceeds from the exercises to repurchase stock. The weighted average incremental shares also includes the net amount of shares issuable for performance stock units (PSUs) at the end of the reporting period, if any at all, based on the number of shares issuable if the end of the period were the end of the vesting period.

Anti-dilutive shares, if applicable, are ~~excluded and represent those options, RSUs, PSUs and DSUs whose assumed proceeds were greater than the average price of the Company's common stock.~~excluded.

Year Ended December 31,
2015 2014 2013
Weighted average incremental shares included 506,969
638,691
908,071
Shares excluded due to anti-dilutive effect —
—
3,000



	Year Ended December 31,
	2018	2017	2016
Weighted average incremental shares included in diluted EPS	215,611	235,877	286,078
Shares excluded due to anti-dilutive effect on earnings per share	70	1,626	472

Comprehensive ~~Income/(Loss)~~Income - Comprehensive ~~income/(loss)~~income consists of net income, foreign currency translation adjustments (including ~~that~~translation on intercompany transactions of a long-term investment ~~nature)~~nature and net investment hedges), pension and post-retirement liability adjustments, unrecognized gains or losses on pensions and post-retirement benefit plans, unrecognized gains or losses on investments prior to the adoption of ASU 2016–01 discussed in Note 3, and unrecognized gains or losses on hedges, and is presented in the accompanying consolidated statements of shareholders' equity and comprehensive income.

Stock-Based Compensation - WABCO measures and recognizes in its consolidated statements of operations the expense associated with all share-based payment awards made to employees and directors including stock options, RSUs, PSUs, DSUs and restricted stock grants based on their estimated fair ~~values.~~value.

There were no stock options granted to employees during the years ended December 31, 2018, 2017 or 2016. RSUs granted to certain executives and employees and DSUs granted to non–management directors are time–based awards where the stock based compensation expense is measured based on the grant date fair value determined based on the number of shares granted and the quoted market price of the Company's common stock on the date of grant. Compensation expense for time-based RSU is amortized using graded vesting over the service period. The fair value of the PSUs is based on the grant date fair value of the number of awards expected to vest based on the Company's best estimate of the ultimate performance against respective targets.

All options granted prior to 2007 were adjusted upon the Distribution into two separate options, one relating to the Company's common stock and one relating to Trane common stock. This adjustment was made such that immediately following the Distribution (i) the number of shares relating to the Company options were equal to the number of shares of Company common stock that the option holder would have received in the Distribution had Trane options represented outstanding shares of Trane common stock, and (ii) the per share option exercise price of the original Trane stock option was proportionally allocated between the two types of stock options based upon the relative per share trading prices of the Company and Trane immediately following the Distribution. Thus, upon the Distribution, WABCO options ~~are~~were being held by both WABCO and Trane employees and Trane options continued to be held by WABCO employees. Options granted to WABCO employees in 2007 were equitably adjusted upon Distribution so

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as to relate solely to shares of the Company's common stock. These adjustments preserved the economic value of the awards immediately prior to the Distribution. All Company options issued as part of this adjustment and the Trane options ~~are~~were fully vested at this time. Further, for purposes of vesting and the post-termination exercise periods applicable to such stock options, the Trane Inc. Management Development and Compensation Committee determined that continued employment with the Company will be viewed as continued employment with the issuer of the options.

Outstanding WABCO options held by non-WABCO employees or directors that arose as a result of the Distribution are not reflected in compensation expense recognized by the Company. Consequently, these stock options do not result in any tax benefits to the Company at any time. The WABCO options held by non-employees or directors are considered in the Company's diluted EPS calculation.


NOTE 3.	Recently Issued Accounting Standards

Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-15 Intangibles - Goodwill and Other-Internal-Use Software which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim

and annual reporting periods beginning after December 15, 2019, and early adoption is permitted, including adoption in any interim period. The ~~adoption~~Company adopted the provisions of ~~recently issued accounting standards did not have~~ASU 2018–15 as of October 1, 2018 on a prospective basis. There was no material impact on the Company's consolidated financial ~~statements.~~

statements resulting from the adoption of this guidance.

In ~~November 2015,~~May 2017, the FASB issued ~~Accounting Standards Update 2015-17 (ASU 2015-17)~~ASU 2017-09 ~~Balance Sheet Classification of Deferred Taxes~~Compensation-Stock Compensation, which ~~requires that deferred tax assets~~provides guidance about which changes to the terms and ~~deferred tax liabilities be classified as noncurrent in the balance sheet.~~conditions of a share-based payment award require an entity to apply modification accounting. ASU ~~2015-17~~2017-09 is effective for the interim and annual periods ~~ending~~beginning after December 15, 2016. Early adoption is permitted, and the Company adopted the provisions of ASU 2015-17 retrospectively as of December 31, 2015. Prior period information presented in the Company's consolidated financial statements was retrospectively adjusted, resulting in the reclassification of $20.8 million of deferred tax assets from current assets to noncurrent assets within the Company's consolidated balance sheet at December 31, 2014.

~~In June 2015, the FASB issued ASU 2015-10~~ ~~Technical Corrections and Improvements, which clarifies various topics in the FASB Accounting Standards Codification. ASU 2015-10 is effective for the interim and annual periods ending after December 15, 2015.~~2017. The Company adopted the provisions of ASU ~~2015-10~~2017-09 as of ~~December 31, 2015.~~January 1, 2018. There was no material impact ~~from adoption of this guidance~~ on the Company's consolidated financial ~~statements.~~statements resulting from the adoption of this guidance.

In ~~April 2015,~~March 2017, the FASB issued ASU ~~2015-03~~2017-07 ~~Simplifying~~Compensation-Retirement Benefits, in order to improve the ~~Presentation~~presentation of ~~Debt Issuance Costs~~net periodic pension cost and net periodic postretirement benefit cost in the statements of operations. Under ASU 2017-07, the service cost component of the net periodic benefit cost is disclosed in the same income statement line item as other employee compensation costs arising from services rendered during the period, and the other components are reported separately from the line item that includes the service cost and outside of any subtotal of operating income. ASU 2017-07 is effective for annual periods beginning after December 15, 2017 and early adoption is permitted. As previously disclosed in the Company’s 2017 Annual Report on Form 10-K, the provisions of ASU 2017-07 were adopted as of January 1, 2017 and changes were applied retrospectively in the Company's consolidated statements of operations.

In January 2017, the FASB issued ASU 2017–01 Clarifying the Definition of a Business, which ~~require debt issuance costs to be presented in~~revises the ~~balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation~~definition of a ~~debt discount. ASU 2015-03~~business and provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for the fiscal year, and interim ~~and annual~~ periods ~~ending~~within that fiscal year, beginning after December 15, ~~2015. Early adoption is permitted, and the~~2017. The Company adopted the provisions of ASU ~~2015-03 retrospectively~~2017–01 as of ~~June 30, 2015.~~January 1, 2018. There was no ~~impact from adoption of this guidance on prior period information presented in the Company's consolidated financial statements.~~

~~In August 2014, the FASB issued ASU 2014-15 (ASU 2014-15)~~ ~~Presentation of Financial Statements - Going Concern~~, which provide guidance about management's responsibility in evaluating whether there is substantial doubt relating to an entity’s ability to continue as a going concern and to provide related footnote disclosures as applicable. ASU 2014-15 is effective for the interim and annual periods ending after December 15, 2016. The Company does not expect any material impact ~~from adoption of this guidance~~ on the Company's consolidated financial ~~statements.~~statements resulting from the adoption of this guidance.

In ~~May 2014,~~November 2016, the FASB issued ASU ~~2014-09,~~ 2016-18~~Revenue from Contracts with Customers~~ Restricted Cash, which ~~is a new comprehensive revenue recognition standard~~requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 (including interim periods within those periods) using a retrospective transition method to each period presented. The Company adopted the provisions of ASU 2016-18 as of January 1, 2018. There was no material impact on the Company's consolidated financial ~~reporting requirements for revenue~~statements resulting from ~~contracts entered into with customers.~~the adoption of this guidance.

In October 2016, the FASB issued ASU ~~2014-09~~2016-16 Intra-entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, ~~2016.~~2017. The Company adopted the provisions of ASU 2016-16 as of January 1, 2018, resulting in an adjustment of the deferred tax assets to retained earnings of $5.3 million.

In August 2016, the FASB ~~subsequently deferred~~issued ASU 2016-15 Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which provides guidance on the presentation of certain cash receipts and cash payments in the statement of cash flows in order to reduce diversity in existing practice. ASU 2016-15 is effective ~~date~~for interim and annual periods beginning after December 15, 2017. The Company adopted the provisions of ASU 2016-15 as of January 1, 2018. There was no material impact on the Company's consolidated financial statements resulting from the adoption of this ~~standard~~guidance.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, as amended by ASU 2018-03, Financial Instruments-Overall: Technical Corrections and Improvements, issued in February 2018, which among other changes in accounting and disclosure requirements, replaces the cost method of accounting for non-marketable equity securities with a model for recognizing impairments and observable price changes, and also eliminates the available-for-sale classification for marketable equity securities. Under the new guidance, other than when the consolidation or equity method of accounting is utilized, changes in the fair value of equity securities are to be recognized in earnings. The Company adopted the provisions of ASU 2016-01 and ASU 2018-03 as of January 1, 2018 resulting in a cumulative effect adjustment to retained earnings of $0.1 million related to the unrealized gain on marketable equity securities.

In May 2014, the FASB issued ASC 606 which requires revenue to be recognized when a customer obtains control of promised goods and services at an amount that reflects the consideration the Company expects to receive in exchange for those goods and services. In addition, ASU 2014-09 requires certain additional disclosures around the nature, amount, timing, and uncertainty of revenues and cash flows arising from contracts with customers.

The Company adopted ASC 606 as of January 1, 2018 using the modified retrospective method. The vast majority of sales continue to be recognized at a point in time as customer contracts did not meet the criteria in ASC 606 for over-time revenue

recognition, specifically the over-time revenue recognition criteria of creating an asset with no alternative use and having an enforceable right to payment for progress towards completion. The complexity of certain contracts requires the Company to assess the criteria for over-time revenue recognition by jurisdiction. The adoption of ASC 606 did not impact the Company’s accounting for reimbursements received from customers related to non-recurring product engineering activities. These activities will continue to be out-of-scope of ASC 606. Overall, the adoption of ASC 606 did not have a material impact on the Company’s consolidated balance sheet, statement of operations and statement of cash flows for the year ended December 31, 2018. See Note 4 for disclosures required by ASC 606 and the updated accounting policy for revenue recognition.

Pending Adoptions of Recently Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-14 Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The ASU removes the requirements to disclose: amounts in accumulated other comprehensive income (loss) expected to be recognized as components of net periodic benefit cost over the next fiscal year; the amount and timing of plan assets expected to be returned to the employer; and the effects of a one-percentage point change in assumed health care cost trend rates. The ASU requires disclosure of an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2017 with early~~2020. Early adoption is permitted ~~as of December 15, 2016.~~for all entities and the amendments in this update are required to be applied on a retrospective basis to all periods presented. The Company is currently ~~assessing~~evaluating this guidance to determine the ~~potential~~ impact on its disclosures.

In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact on its disclosures.

In June 2018, the FASB issued ASU 2018-07 Compensation-Stock Compensation (Topic 718), to simplify the accounting for share–based payments granted to nonemployees by aligning the accounting with the requirements for employee share–based compensation. ASU 2018-07 is effective for the Company beginning in fiscal 2019, including interim periods within that fiscal year. Early adoption is permitted but no earlier than a company's adoption of ASC 606. The Company does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard provides financial statement preparers with an option to reclassify stranded tax effects within Accumulated Other Comprehensive Income (AOCI) to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. ASU 2018-02 is effective for the Company beginning in fiscal 2019, including interim periods within that fiscal year. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12 Targeted Improvements to Accounting for Hedging Activities, which aims at improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements, by expanding and refining hedge accounting for both nonfinancial and financial risk components and aligning the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. ASU 2017-12 is effective for the Company beginning in fiscal 2019, including interim periods within that fiscal year. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04 Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. The standard eliminates the requirement to measure the implied fair value of goodwill by assigning the fair value of a reporting unit to all assets and liabilities within that unit (“the Step 2 test”) from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess,

limited by the amount of goodwill in that reporting unit. The standard is effective for the Company beginning January 1, 2020 and will be applied to any annual or interim goodwill impairment assessment after that date. Early adoption is permitted for interim and annual impairment testing after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016–13 Financial Instruments-Credit Losses to replace the incurred loss model for financial assets measured at amortized cost and require entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. For trade and other receivables, loans and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02 Leases. ASU 2016–02 replaces ASC 840 Leases and is codified in ASC 842 Leases. ASU 2016-02 requires recognition of operating leases as lease assets and liabilities on the balance sheet, and disclosure of key information about leasing arrangements. ASU 2016-02 will be effective for the Company for the year ending December 31, 2019. The Company regularly enters into operating leases for which current guidance does not require recognition on the consolidated balance sheets. The Company will apply the modified retrospective transition method and elect the transition option to use the effective date of January 1, 2019 as the date of initial application. The Company will recognize the cumulative effect of the transition adjustment as of the effective date, and does not expect to provide any new lease disclosures for periods before the effective date. The Company elected the package of practical expedients and did not elect the use of the hindsight practical expedient. As a result, the Company will, in effect, continue to account for existing leases in accordance with ASC 840, throughout the entire lease term, including periods after the effective date, with the exception that the Company will apply the new balance sheet recognition guidance for operating leases and apply ASC 842 for remeasurements and modifications after the transition date.

Other key practical expedients elected by the Company (as a lessee) relate to maintaining leases with an initial term of 12 months or less off the balance sheet; not separating lease and non-lease components and the use of the portfolio approach to determine the incremental borrowing rate. For transition purposes, the Company will be using the incremental borrowing rate based on the total lease term and total minimum rental payments.

While the Company continues to finalize its transition adjustments, it anticipates that this standard will result in the recognition of right-of-use assets and leasing liabilities on its consolidated balance sheets of approximately $95 million to $120 million. The Company does not expect a material impact on its consolidated statement of operations.

In connection with the adoption of ASU 2016-02, the Company has assembled a cross-functional team supported by external consultants to evaluate the lease portfolio, systems, processes and policy change requirements. The Company analyzed service contracts not in the form of a lease and did identify certain contracts that met the definition of a lease under ASC 840 and ASC 842 which were included in the right-of-use assets and leasing liabilities estimates mentioned above. Further, the Company analyzed its part sales contracts with OEMs and part purchase contracts from suppliers and did not identify any material leases of production equipment. The Company has also selected a third-party software program to track, store and analyze its leases. The Company has implemented the software program for its leases and as such all material leases have been input into the system.

The Company does not expect the pending adoption of other recently issued accounting standards to have a material impact on its consolidated financial statements.

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NOTE 4.	Revenue from Contracts with Customers

The Company follows the guidance under ASC 606 effective January 1, 2018. Revenue under ASC 606 is measured based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer, which is typically at a point in time. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. See Note 2 for additional discussion of the revenue recognition accounting policy.

Disaggregation of Revenue

The following table presents product sales disaggregated by end-market:



	Year Ended December 31,
(Amount in millions)	2018		2017		2016
OEM⁽¹⁾	$	2,886.9	$	2,511.8	$	2,101.0
Aftermarket	944.1		792.4		709.0
Total sales	$	3,831.0	$	3,304.2	$	2,810.0


⁽¹⁾	Sales for 2016 and until the third quarter of 2017 include sales to the Meritor WABCO joint venture, which was acquired in the fourth quarter of 2017, and consolidated from that date.

The following table presents product sales disaggregated by geography, based on the billing addresses of customers:



	Year Ended December 31,
(Amount in millions)	2018		2017		2016
United States	$	859.0	$	579.6	$	399.9
Europe	1,860.7		1,705.3		1,509.2
Other⁽¹⁾	1,111.3		1,019.3		900.9
Total sales	$	3,831.0	$	3,304.2	$	2,810.0


⁽¹⁾	Sales to other regions includes revenues primarily from Japan, China, Brazil and India.

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional. Contract liabilities primarily relate to performance obligations to be satisfied in the future. Contract assets and contract liabilities were not material as of December 31, 2018.

Transaction Price Allocated to the Remaining Performance Obligations

The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2018 was not material. The Company has elected to apply the practical expedient in paragraph ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.


NOTE 5.	Accumulated Other Comprehensive ~~Income~~Loss

The table below presents the changes in accumulated other comprehensive loss, net of taxes and noncontrolling interests, for the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013:~~2016:


	Year Ended December 31,									Year Ended December 31,
(Amount in millions)	2015			2014			2013			2018			2017			2016
Foreign currency translation adjustments:
Foreign currency translation adjustments :
Balance at beginning of period	$	(148.1	)	$	(5.5	)	$	(9.5	)	$	(177.6	)	$	(328.7	)	$	(271.2	)
Adjustment for the period	(123.1		)	(142.6		)	4.0
Balance at end of period	(271.2		)	(148.1		)	(5.5		)
Comprehensive (loss)/income before reclassification, net										(65.4		)	152.9			(57.5		)
Remeasurement of equity investments ⁽¹⁾										—			(1.8		)	—
Balance at end of period ⁽²⁾										(243.0		)	(177.6		)	(328.7		)

Losses on intra-entity transactions (1):
Loss on intra-entity transactions :
Balance at beginning of period	(9.9		)	(8.9		)	(5.9		)	(11.8		)	(11.4		)	(15.2		)
Adjustment for the period	(5.3		)	(1.0		)	(3.0		)
Balance at end of period	(15.2		)	(9.9		)	(8.9		)
Comprehensive (loss)/income before reclassification, net										(0.1		)	(0.4		)	3.8
Balance at end of period ⁽³⁾										(11.9		)	(11.8		)	(11.4		)

Unrealized gains on investments:
Balance at beginning of period	0.2			—			—			0.1			0.2			0.2
Adjustment for the period	—			0.4			—
Amounts reclassified to earnings, net	—			(0.2		)	—
Adjustments for the period										(0.1		)	(0.1		)	—
Balance at end of period	0.2			0.2			—			—			0.1			0.2

Unrealized losses on hedges:
Balance at beginning of period	—			—			—			(0.8		)	(1.0		)	(1.2		)
Adjustment for the period (2)	(1.3		)	—			—
Comprehensive income before reclassification, net										—			0.2			—
Amounts reclassified to earnings, net	0.1			—			—			0.8			—			0.2
Balance at end of period	(1.2		)	—			—			—			(0.8		)	(1.0		)

Pension and Post-retirement Plans:
Pension and post-retirement plans:
Balance at beginning of period	(244.9		)	(109.0		)	(107.2		)	(274.4		)	(236.4		)	(220.5		)
Other comprehensive income before reclassifications	12.9			(140.1		)	(6.6		)
Comprehensive loss before reclassification, net										(12.2		)	(56.2		)	(26.5		)
Amounts reclassified to earnings, net ~~(3)~~(4)	11.5			4.2			4.8			17.5			18.2			10.6
Balance at end of period	(220.5		)	(244.9		)	(109.0		)	(269.1		)	(274.4		)	(236.4		)

Accumulated other comprehensive loss at end of period	$	(507.9	)	$	(402.7	)	$	(123.4	)	$	(524.0	)	$	(464.5	)	$	(577.3	)

⁽¹⁾ Consists of $1.8 million associated with the foreign currency translation adjustment reclassified to gain on remeasurement of equity method investment in the consolidated statements of operations upon the Company's acquisition of the remaining interests in WABCO Automotive South Africa. See Note 22 for further discussion.

⁽²⁾ Includes losses of $10.8 million and $27.6 million as of December 31, 2018 and 2017, respectively, net of taxes of $10.7 million and $15.4 million, respectively, related to foreign currency gains and losses on Euro-denominated debt and foreign currency contracts designated and qualifying as partial hedges of a net investment.

⁽³⁾Relates to intra-entity foreign currency transactions that are of a long term investment nature, when the entities to the transaction are consolidated, combined or accounted for by the equity method in the Company's financial statements.

~~(2)~~⁽⁴⁾Consists of amortization of prior service cost and actuarial losses that are included as a component of pension expenses within other non-operating expenses. The ~~adjustment for the period is~~amounts reclassified to earnings are recorded net of ~~taxes~~tax of ~~$0.7~~$7.0 million, ~~for the year ended December 31, 2015. See Note 20 for further discussion.~~

~~(3) This accumulated other comprehensive income component, net of taxes of $4.6 million, $1.9~~$7.9 million and ~~$1.9~~$4.5 million for the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013, respectively, is included in the computation of net periodic pension cost.~~2016, respectively. See Note 1314 for ~~additional details.~~further discussion.


NOTE 5.6.	Streamlining

The Company accounts for employee-related streamlining charges as either a one-time benefit arrangement or an ongoing benefit arrangement as appropriate. From time to time the Company also has streamlining charges that are not related to employees, such as facility exit costs.

Based on market declines occurring in the fourth quarter of 2008, we commenced a streamlining program on October 28, 2008 (the 2008/2009 Program), which began with a consultative process with works councils and employee representatives globally. The 2008/2009 Program reduced our global workforce by approximately 1,800 employees. The Company does not expect to incur any further charges on the 2008/2009 Program and has fully paid all liabilities related to this program as of December 31, 2015.

In the third quarter of 2015, the Company announced proposals to cease manufacturing at two production facilities to preserve the Company's global competitiveness for certain mechanical products. These proposals ~~are expected to result~~resulted in a workforce reduction of ~~approximately 320~~316 positions and ~~includes~~included a smaller program initiated in the fourth quarter of 2014 (the 2014/2015 Program). ~~Depending on the timing~~As of ~~the outcome of formal processes in accordance with local labor laws and practices,~~December 31, 2018, production at both facilities ~~could be~~has been transferred to other facilities within the Company's globally integrated supply ~~chain by~~chain. The cumulative costs incurred as of December 31, 2018 related to the ~~end of 2017.~~2014/2015 Program was $65.2 million, which approximates the total expected costs to be incurred under this program.

Based on the Company’s efforts to maintain ~~our~~its global footprint, the Company ~~may~~has periodically ~~enter~~entered into other streamlining programs as deemed necessary which may include workforce reductions, site closures or relocations and the rotation of manufacturing footprint to low cost regions (Other Programs).

The following is a summary of changes in the Company’s streamlining program liabilities for the ~~year~~years ended December 31, ~~2015.~~2018 and 2017.

(Amounts in millions)
2008 / 2009 Program
Balance as of December 31, 2014 $ 3.3
Charges during 2015 —
Payments during 2015 (3.3 )
FX effects —
Balance as of December 31, 2015 $ —
2014 / 2015 Program
Balance as of December 31, 2014 $ 10.0
Charges during 2015 45.4
Payments during 2015 (1.1 )
Noncash writeoffs during 2015 (8.5 )
FX effects (2.0 )
Balance as of December 31, 2015 $ 43.8
Other Programs
Balance as of December 31, 2014 $ 18.7
Charges during 2015 23.1
Payments during 2015 (14.5 )
FX effects (2.4 )
Balance as of December 31, 2015 $ 24.9
Total streamlining liability as of December 31, 2015 $ 68.7



	Year Ended December 31,
(Amounts in millions)	2018			2017
2014 / 2015 Program
Balance at beginning of period	$	16.8		$	27.8
Charges	2.2			1.7
Payments	(12.5		)	(15.6		)
Foreign exchange effects	(0.1		)	2.9
Balance at end of period	$	6.4		$	16.8
Other Programs
Balance at beginning of period	$	26.9		$	23.4
Charges	11.8			10.3
Payments	(17.8		)	(10.0		)
Foreign exchange effects	(0.9		)	3.2
Balance at end of period	$	20.0		$	26.9
Total streamlining liability	$	26.4		$	43.7

AAs of December 31, 2018 and December 31, 2017, the balance ~~of $55.3 million is included in other liabilities (non-current) and $13.4 million is~~ included in other accrued liabilities (current) ~~as of December 31, 2015.~~amounted to $14.8 million and $24.2 million, respectively, while the balance included in other liabilities (non-current) amounted to $11.6 million and $19.5 million, respectively.

~~Table of Contents~~

The following is a summary of ~~current~~the streamlining costs recorded for the years ended December 31, 2018, 2017 and ~~cumulative streamlining costs:~~2016 :


	Charges for Year Ended December 31, 2015						Cumulative Charges as of December 31, 2015						Charges for Year Ended December 31, 2018				Charges for Year Ended December 31, 2017					Charges for Year Ended December 31, 2016
(Amounts in millions)	2008/2009 Program		2014/2015 Program		Other Programs		2008/2009 Program		2014/2015 Program		Other Programs		2014/2015 Program		Other Programs		2014/2015 Program			Other Programs		2014/2015 Program			Other Programs
Employee-related charges – cost of sales	$	—	$	32.9	$	7.4	$	45.7	$	34.0	$	32.8	$	0.1	$	3.1	$	(1.0	)	$	8.1	$	4.0		$	6.9
Employee-related charges – selling and administrative	—		4.0		15.3		45.8		11.9		43.4		0.7		6.8		2.3			2.2		(0.2		)	3.2
Asset write-offs	—		7.7		—		—		8.5		2.1		—		—		—			—		0.6			—
Other streamlining charges	—		0.8		0.4		—		1.0		0.2		1.4		1.9		0.4			—		1.7			0.2
Total program costs	$	—	$	45.4	$	23.1	$	91.5	$	55.4	$	78.5	$	2.2	$	11.8	$	1.7		$	10.3	$	6.1		$	10.3

Streamlining costs incurred for Other Programs include charges related to footprint relocations and headcount reductions. For the years ended December 31, 2018, 2017 and 2016, the Company recorded $8.7 million, $5.9 million and $6.8 million,

respectively, related to headcount reductions primarily driven by its continued cost optimization efforts. The Company also recorded restructuring charges of $3.1 million, $4.4 million and $3.5 million for the years ended December 31, 2018, 2017 and 2016, respectively, related to footprint relocations including the anticipated move of its corporate headquarters and the transfer of certain product lines and business processes to best cost countries including India and Poland.


NOTE 6.7.	Capital Stock

The following is a summary of ~~net shares~~common stock issued, treasury stock and common stock outstanding ~~and shares issued or reacquired during~~for the years ending December 31, ~~2015, 2014~~2018, 2017 and ~~2013.~~

2016.


	Number of Shares of Common Stock					Number of Shares of Common Stock
	Total Shares	Treasury Shares		Net Shares Outstanding		Issued	Treasury Stock		Outstanding
Balance, December 31, 2012	75,755,306	(13,008,155	)	62,747,151
Balance, December 31, 2015						78,500,084	(21,740,518	)	56,759,566
Shares issued upon exercise of stock options	1,600,850	—		1,600,850		87,047	16,400		103,447
Shares issued upon vesting of RSUs	106,768	—		106,768		38,723	9,288		48,011
Shares issued upon vesting of PSUs						67,219	17,675		84,894
Shares issued for DSUs	7,350	—		7,350		7,100	—		7,100
Shares issued for stock awards	900	—		900		1,100	—		1,100
Shares purchased for treasury	—	(3,103,994	)	(3,103,994	)	—	(2,512,200	)	(2,512,200	)
Balance, December 31, 2013	77,471,174	(16,112,149	)	61,359,025
Balance, December 31, 2016						78,701,273	(24,209,355	)	54,491,918
Shares issued upon exercise of stock options	394,899	—		394,899		161,687	28,840		190,527
Shares issued upon vesting of RSUs	91,235	—		91,235		44,419	3,998		48,417
Shares issued upon vesting of PSUs						24,525	7,175		31,700
Shares issued for DSUs	2,932	—		2,932		5,924	—		5,924
Shares issued for stock awards	800	—		800
Shares purchased for treasury	—	(3,423,018	)	(3,423,018	)	—	(1,033,000	)	(1,033,000	)
Balance, December 31, 2014	77,961,040	(19,535,167	)	58,425,873
Balance, December 31, 2017						78,937,828	(25,202,342	)	53,735,486
Shares issued upon exercise of stock options	414,782	—		414,782		14,964	12,999		27,963
Shares issued upon vesting of RSUs	117,830	—		117,830		36,126	8,447		44,573
Shares issued upon vesting of PSUs						21,515	6,009		27,524
Shares issued for DSUs	6,432	—		6,432		7,833	—		7,833
Shares issued for stock awards	—	—		—
Shares purchased for treasury	—	(2,205,351	)	(2,205,351	)	—	(2,478,454	)	(2,478,454	)
Balance, December 31, 2015	78,500,084	(21,740,518	)	56,759,566
Balance, December 31, 2018						79,018,266	(27,653,341	)	51,364,925



Delaware		20-8481962
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
~~Chaussee~~Chaussée de la Hulpe 166 1170 Brussels, Belgium

~~2770 Research~~1220 Pacific Drive ~~Rochester~~Auburn Hills, MI		~~48309-3511~~48326-3511
(Address of principal executive offices)		(Zip Code)



Title of each class		Name of each exchange on which registered
Common stock, par value $0.01 per share		New York Stock Exchange


(Amounts in millions)	Cost of Sales			Gross Profit			Cost of Sales			Gross Profit
Cost of sales / gross profit for the year ended December 31, 2014	$	1,979.3		$	871.7
Cost of sales / gross profit for the year ended December 31, 2017							$	2,290.4		$	1,013.8

Increase/(decrease) due to:
Sales price reductions	—			(44.0		)	—			(41.8		)
Sales price reductions as % of sales										(1.2		)%
Volume, mix and absorption	175.9			57.0			227.4			51.6
Material productivity	(44.8		)	44.8
Material productivity ⁽¹⁾							(36.4		)	36.4
Conversion productivity	(27.7		)	27.7			(38.5		)	38.5
U.S. acquisitions							145.1			77.1
Labor inflation	16.7			(16.7		)	17.2			(17.2		)
Foreign exchange effects	(302.2		)	(110.2		)
Other	44.8			(44.8		)
Net decrease	(137.3		)	(86.2		)
Foreign exchange effects ⁽²⁾							43.5			23.9
Other ⁽³⁾							9.8			(9.8		)
Net increase							368.1			158.7

Cost of sales / gross profit for the year ended December 31, 2015	$	1,842.0		$	785.5

Sales price reductions as % of sales				1.4		%
Cost of sales / gross profit for the year ended December 31, 2018							$	2,658.5		$	1,172.5


(Amounts in millions)	Cost of Sales			Gross Profit			Cost of Sales			Gross Profit
Cost of sales / gross profit for the year ended December 31, 2013	$	1,911.4		$	809.1
Cost of sales / gross profit for the year ended December 31, 2016							$	1,931.0		$	879.0

Increase/(decrease) due to:
Sales price reductions	—			(35.3		)	—			(51.6		)
Sales price reductions as % of sales										(1.6		)%
Volume, mix and absorption	146.7			51.6			391.6			110.4
Material productivity	(49.3		)	49.3			(46.9		)	46.9
Conversion productivity	(27.2		)	27.2			(36.3		)	36.3
Labor	13.7			(13.7		)
U.S. acquisitions							(24.8		)	24.8
Labor inflation							14.5			(14.5		)
Foreign exchange effects	(22.4		)	(10.1		)	45.7			(1.9		)
Other	6.4			(6.4		)	15.6			(15.6		)
Net increase	67.9			62.6			359.4			134.8

Cost of sales / gross profit for the year ended December 31, 2014	$	1,979.3		$	871.7

Sales price reductions as % of sales				1.2		%
Cost of sales / gross profit for the year ended December 31, 2017							$	2,290.4		$	1,013.8


(Amounts in millions)
Operating expenses for the year ended December 31, 2013	$	477.2
Operating expenses for the year ended December 31, 2016				$	497.1

Increase/(decrease) due to:
Transics operating costs	34.8
Amortization of acquired intangibles	8.9
Labor inflation and other people-related costs	16.7
Labor inflation				13.6
Incentive compensation	(8.2		)	10.3
Incremental costs from U.S. acquisitions				13.4
Indemnification charges				15.5
Pension and post retirement benefit costs				3.9
Foreign exchange translation				8.3
Extraordinary sell-side M&A activity				4.5
Research and development investments, net	9.3			3.2
Foreign exchange translation	(3.3		)
Other	5.3			9.0
Net increase	63.5			81.7

Operating expenses for the year ended December 31, 2014	$	540.7
Operating expenses for the year ended December 31, 2017				$	578.8



2015	High		Low
First quarter	$	122.53	$	92.86
Second quarter	$	133.31	$	118.73
Third quarter	$	126.39	$	100.34
Fourth quarter	$	115.80	$	95.60
2014
First quarter	$	106.72	$	83.92
Second quarter	$	111.65	$	100.31
Third quarter	$	110.93	$	90.73
Fourth quarter	$	108.10	$	85.22



Period	Total Number of Shares Purchased (a)	Average price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)

Total through December 31, 2014	13,578,361	$	71.57	13,578,361	$	500,000,000

January 1 - January 31	231,293			231,293	$	477,222,505
February 1 - February 28	103,806			103,806	$	466,336,236
March 1 - March 31	239,553			239,553	$	438,226,391
Total first quarter	574,652	$	107.50	574,652

April 1 - April 30	108,847			108,847	$	424,958,562
May 1 - May 31	91,076			91,076	$	413,305,516
June 1 - June 30	300,890			300,890	$	375,719,832
Total second quarter	500,813	$	124.81	500,813

July 1 - July 31	152,000			152,000	$	357,219,084
August 1 - August 31	213,986			213,986	$	331,847,390
September 1 - September 30	162,000			162,000	$	313,285,582
Total third quarter	527,986	$	118.25	527,986

October 1 - October 31	13,200			13,200	$	311,812,804
November 1 - November 30	262,700			262,700	$	283,418,641
December 1 - December 31	326,000			326,000	$	250,810,529
Total fourth quarter	601,900	$	103.80	601,900

Total through December 31, 2015	15,783,712	$	77.36	15,783,712	$	250,810,529



	12/31/2010	12/31/2011	12/31/2012	12/31/2013	12/31/2014	12/31/2015
WABCO Holdings Inc.	100	71.23	106.99	153.31	171.97	167.83
S&P 500 Index	100	102.11	118.45	156.82	178.29	180.75
S&P 500 Auto Parts & Equipment Index	100	82.26	85.92	141.57	146.77	138.48



Payments due by period (1)
Contractual Obligation	Total		2016		2017 and 2018		2019 and 2020		Beyond 2020
Debt obligations (excluding interest)	$	503.7	$	5.0	$	0.3	$	0.2	$	498.2
Operating lease obligations (2)	75.5		16.0		26.8		23.2		9.5
Purchase obligations (3)	187.0		187.0		—		—		—
Pension and post-retirement benefits (4)	285.0		27.5		55.6		56.4		145.5
Total	$	1,051.2	$	235.5	$	82.7	$	79.8	$	653.2



(Amounts in millions)
2008 / 2009 Program
Balance as of December 31, 2014	$	3.3
Charges during 2015	—
Payments during 2015	(3.3		)
FX effects	—
Balance as of December 31, 2015	$	—
2014 / 2015 Program
Balance as of December 31, 2014	$	10.0
Charges during 2015	45.4
Payments during 2015	(1.1		)
Noncash writeoffs during 2015	(8.5		)
FX effects	(2.0		)
Balance as of December 31, 2015	$	43.8
Other Programs
Balance as of December 31, 2014	$	18.7
Charges during 2015	23.1
Payments during 2015	(14.5		)
FX effects	(2.4		)
Balance as of December 31, 2015	$	24.9
Total streamlining liability as of December 31, 2015	$	68.7


	Underlying Shares						Weighted - Average Exercise Price				Weighted - Average Grant Date Fair Value		Underlying Shares						Weighted - Average Exercise Price
	WABCO employees		Trane employees		Total					WABCO employees				Trane employees		Total			Weighted - Average Exercise Price
Options Outstanding December 31, 2012	2,300,133		568,059		2,868,192		Weighted - Average Exercise Price	$	35.82		Weighted - Average Grant Date Fair Value
Options Outstanding December 31, 2015													296,032		95,587		391,619		$	43.37
Options Granted	—		—		—		$	—			$	—	—		—		—		$	—
Options Exercised	(1,359,825	)	(242,243	)	(1,602,068	)	$	31.08					(49,466	)	(54,494	)	(103,960	)	$	38.70
Options Forfeited	(53,391	)	(200	)	(53,591	)	$	52.71					—		(128	)	(128	)	$	32.38
Options Outstanding December 31, 2013	886,917		325,616		1,212,533		$	41.20
Options Outstanding December 31, 2016													246,566		40,965		287,531		$	45.07
Options Granted	—		—		—		$	—			$	—	—		—		—		$	—
Options Exercised	(298,032	)	(98,611	)	(396,643	)	$	38.01					(152,419	)	(40,882	)	(193,301	)	$	50.90
Options Forfeited	(8,036	)	(200	)	(8,236	)	$	58.54					(394	)	(83	)	(477	)	$	44.15
Options Outstanding December 31, 2014	580,849		226,805		807,654		$	42.60
Options Outstanding December 31, 2017													93,753		—		93,753		$	33.04
Options Granted	—		—		—		$	—			$	—	—		—		—		$	—
Options Exercised	(284,817	)	(130,882	)	(415,699	)	$	41.87					(29,081	)	—		(29,081	)	$	25.50
Options Forfeited	—		(336	)	(336	)	$	38.97					(1,080	)	—		(1,080	)	$	58.85
Options Outstanding December 31, 2015	296,032		95,587		391,619		$	43.37
Options Outstanding December 31, 2018													63,592		—		63,592		$	36.05

Exercisable at December 31, 2015	283,842		95,587		379,429		$	42.86
Exercisable at December 31, 2018													63,592		—		63,592		$	36.05



	Underlying Shares		Weighted - Average Grant Date Fair Value
PSUs Outstanding December 31, 2012	—		$	—
PSUs Granted	94,364		$	68.10
PSUs Forfeited	(9,954	)	$	68.10
PSUs Outstanding December 31, 2013	84,410		$	68.10
PSUs Granted	65,508		$	103.41
PSUs Forfeited	(10,940	)	$	77.38
PSUs Outstanding December 31, 2014	138,978		$	84.01
PSUs Granted	58,630		$	116.38
PSUs Forfeited	(24,896	)	$	95.65
PSUs Outstanding December 31, 2015	172,712		$	93.31



	Underlying Shares		Weighted - Average Grant Date Fair Value
DSUs Outstanding December 31, 2012	12,766		$	51.32
DSUs Granted	5,864		$	75.12
DSUs Issued	(7,350	)	$	52.39
DSUs Outstanding December 31, 2013	11,280		$	63.00
DSUs Granted	7,156		$	107.70
DSUs Issued	(2,932	)	$	75.12
DSUs Outstanding December 31, 2014	15,504		$	78.11
DSUs Granted	5,917		$	129.94
DSUs Issued	(6,432	)	$	106.59
DSUs Outstanding December 31, 2015	14,989		$	86.35



	Shares	Weighted - Average Grant Date Fair Value
Stock Awards granted:
Year ended December 31, 2013	900	$	70.53
Year ended December 31, 2014	800	$	96.37
Year ended December 31, 2015	—	$	—



	Vesting Schedule
	Equal installments over 3 years	After 2 years	After 3 years	After 4 years	Total
RSUs granted in 2013	109,254	—	3,710	—	112,964
RSUs granted in 2014	78,966	1,934	12,170	—	93,070
RSUs granted in 2015	74,394	814	3,456	—	78,664


~~NOTE 8.~~	~~Other Operating and Non-Operating Expense / (Income), Net~~


NOTE 9.	~~Inventories~~Other Operating and Non-Operating (Income) and Expense, Net


⁽¹⁾	Indemnification costs in 2017 included expenses recorded primarily related to tax claims in Brazil. See Note 16 for additional information.


⁽²⁾	Relates to the release of contingent consideration on the 2016 acquisition of Laydon Composites Ltd.


⁽³⁾	Non–marketable equity securities are evaluated for impairment each reporting period and adjusted to their estimated fair value using the measurement alternative, namely cost less impairment and adjusted for observable price changes for identical or similar investments of the investee. See Note 21 for additional information.


⁽⁴⁾	Loss on debt extinguishment resulting from the prepayment of the Senior USD Notes. See Note 15 for additional information.



	Capitalized Software			Other Intangible Assets			Total
Gross intangible assets as of:
December 31, 2012	$	99.1		$	50.3		$	149.4
Additions	13.5			2.2			15.7
Disposals	(1.9		)	(0.5		)	(2.4		)
Foreign exchange translation	4.3			(0.2		)	4.1
December 31, 2013	115.0			51.8			166.8
Additions	12.7			53.4			66.1
Disposals	(17.7		)	—			(17.7		)
Foreign exchange translation	(14.5		)	(11.6		)	(26.1		)
December 31, 2014	95.5			93.6			189.1
Additions	10.9			—			10.9
Disposals	(0.8		)	—			(0.8		)
Foreign exchange translation	(9.8		)	(8.6		)	(18.4		)
December 31, 2015	$	95.8		$	85.0		$	180.8

Accumulated amortization as of:
December 31, 2012	$	(76.4	)	$	(33.6	)	$	(110.0	)
Amortization expense	(7.5		)	(3.1		)	(10.6		)
Disposals	1.9			0.4			2.3
Foreign exchange translation	(3.4		)	(0.8		)	(4.2		)
December 31, 2013	(85.4		)	(37.1		)	(122.5		)
Amortization expense	(9.1		)	(12.4		)	(21.5		)
Disposals	17.7			—			17.7
Foreign exchange translation	10.7			4.9			15.6
December 31, 2014	(66.1		)	(44.6		)	(110.7		)
Amortization expense	(8.7		)	(10.5		)	(19.2		)
Disposals	0.7			—			0.7
Foreign exchange translation	6.9			4.3			11.2
December 31, 2015	$	(67.2	)	$	(50.8	)	$	(118.0	)

Net intangible assets as of:
December 31, 2015	$	28.6		$	34.2		$	62.8


Benefit Obligation at December 31	2015 Health & Life Ins. Benefits		2015 Foreign Pension Plans		2014 Health & Life Ins. Benefits		2014 Foreign Pension Plans		2018 Health & Life Ins. Benefits		2018 Foreign Pension Plans		2017 Health & Life Ins. Benefits		2017 Foreign Pension Plans
Discount rate	3.75	%	2.50	%	3.50	%	2.43	%	4.30	%	1.90	%	3.55	%	1.87	%
Salary growth	N/A		2.95	%	N/A		3.03	%	N/A		3.71	%	N/A		2.85	%
Net Periodic Pension Cost for the year
Discount rate	3.50	%	2.43	%	4.00	%	3.71	%	3.55	%	1.87	%	4.00	%	1.79	%
Salary growth	N/A		3.03	%	N/A		3.18	%	N/A		2.85	%	N/A		3.03	%
Expected return on plan assets	N/A		4.89	%	N/A		4.27	%	N/A		2.40	%	N/A		2.75	%



Asset Allocation	2015		2014		2015 Target		2014 Target
Equity securities	30	%	28	%	28	%	28	%
Debt securities	7	%	11	%	11	%	11	%
Insurance contracts	47	%	46	%	46	%	—	%
Investments in collective foundations	14	%	14	%	14	%	14	%
Other *	2	%	1	%	1	%	1	%



(Amounts in millions)	December 31, 2018		Fair Value Hierarchy
	December 31, 2018		Level 1		Level 2		Level 3
Debt securities (issued by non-U.S. government agencies)	$	8.9	8.9		$	—	$	—
Mutual funds	53.4		—		53.4		—
Insurance contracts	77.3		—		—		77.3
Investments in collective foundations	23.8		—		—		23.8
Cash	1.3		1.3		—		—
Total plan assets	$	164.7	$	10.2	$	53.4	$	101.1


(Amounts in millions)	1% Increase		1% Decrease			1% Increase		1% Decrease
Effect on the health care component of accumulated post-retirement obligation	$	1.0	$	(0.9	)	$	1.6	$	(1.4	)
Effect on total of service and interest cost components of net periodic post-retirement health care benefit costs	$	—	$	—		$	0.3	$	(0.2	)



(Amounts in EUR millions)	Face value		Coupon		Maturity Date
Series D Notes	€	190.0	0.84	%	November 15, 2023
Series E Notes	80.0		1.20	%	November 15, 2026
Series F Notes	170.0		1.36	%	November 15, 2028
	€	440.0



	As of December 31, 2015				As of December 31, 2014
(Amounts in millions)	Outstanding borrowings		Letters of credit		Outstanding borrowings		Letters of credit
2014 Facility	$	—	$	—	$	100.0	$	—
2015 Facility (previously the 2011 Facility)	—		—		206.0		0.9
	$	—	$	—	$	306.0	$	0.9

Incremental ability to borrow	$	500.0			$	193.1



(Amounts in millions)
2019	—
2020	0.3
2021	68.7
2022	137.3
2023	354.8
Thereafter	286.2
Less: unamortized debt issuance fees	(2.1		)
Total long-term debt	$	845.2


~~NOTE 15.~~	~~Warranties, Guarantees, Commitments and Contingencies~~


~~NOTE 17.~~	~~Tax and Indemnification Liabilities Transferred from Trane to WABCO~~



Entity	Description	Ownership %
WABCOWURTH Workshop Services GmbH (WABCOWURTH)	Supplier of diagnostic systems	50.0%
Sino-American RH Sheppard Hubei Steering Systems LTD (Sheppard Hubei)	Provider of steering gear solutions in China	50.0%
China Source Engineered Components Trading Corporation Ltd (SSCS)	Wholesaler of machined parts	37.5%
Shanghai G7 WABCO IOT Technology Co Ltd (G7)	Developer of fleet management solutions	50.0%


													WABCO Sales to						WABCO Purchases from
(Amounts in millions)	WABCO Sales to						WABCO Purchases from						2018		2017		2016		2018		2017		2016
Joint Venture	2015		2014		2013		2015		2014		2013
WABCOWURTH													$	0.2	$	0.2	$	0.2	$	0.5	$	0.2	$	0.3
Sheppard Hubei													—		1.2		—		—		0.1		—
SSCS													—		—		—		—		0.5		—
G7													—		—		—		0.2		—		—
Meritor WABCO	$	228.7	$	218.7	$	176.0	$	—	$	0.7	$	—	—		156.8		167.6		—		0.1		0.1
WABCO SA	4.8		4.5		5.7		3.9		—		—
WABCOWURTH	0.2		0.2		0.2		0.2		0.3		0.3
WABCO Automotive South Africa													—		4.7		3.6		—		—		—



(Amounts in millions)	WABCO Receivables from				WABCO Payables to
Joint Venture	2015		2014		2015		2014
Meritor WABCO	$	35.6	$	32.0	$	0.2	$	—
WABCO SA	1.6		1.1		—		—
WABCOWURTH	—		—		—		—


(a)	Sales to external customers are classified by country of destination.