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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-K

x ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2018~~2019

o ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 1-33332

WABCO Holdings Inc.

(Exact name of Registrant as specified in its charter)

Delaware		~~20-8481962~~	20-8481962
(State or other jurisdiction ofincorporation or organization)		~~(I.R.S. EmployerIdentification No.)~~	(I.R.S. EmployerIdentification No.)
Chaussée de la Hulpe 1661170 Brussels, Belgium
1 Giacomettistrasse	Bern	Switzerland	3000-31
1220 Pacific DriveAuburn Hills, MI		48326-3511
1220 Pacific Drive	Auburn Hills	Michigan	48326-3511
(Address of principal executive offices)		~~(Zip Code)~~	(Zip Code)

Registrant’s telephone number, including area code +~~32 2 663 98 00~~41 315 813-300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	WBC	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:



Title of each class
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x☒ Yes o☐ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o☐ Yes x☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x☒ Yes o☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Table of Contents

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) ~~during~~is not contained herein, and will not be contained, to the ~~preceding~~best 12of ~~months~~registrant's (knowledge, in definitive proxy or ~~for~~information ~~such~~statements ~~shorter~~incorporated ~~period~~by ~~that~~reference ~~the~~in ~~registrant~~Part ~~was~~III ~~required~~of tothis ~~submit~~Form ~~and~~10-K ~~post~~or ~~such~~any ~~files)~~amendment to this Form 10-K. ~~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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange 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, ~~2018~~2019, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $6.28 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 5, 2019	51,376,541	shares
February 12, 2020	51,270,513	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, ~~2018~~2019.

Table of Contents

WABCO HOLDINGS INC. AND SUBSIDIARIES

FORM 10-K

Year ended December 31, ~~2018~~2019

TABLE OF CONTENTS
		Page
PART I.		5
Item 1.	Business	5
Item 1A.	Risk Factors	19
Item 1B.	Unresolved Staff Comments	2627
Item 2.	Properties	2728
Item 3.	Legal Proceedings	2728
Item 4.	Mine Safety Disclosures	2829
Item 4A.	Executive Officers of the Registrant	2930
PART II.		3132
Item 5.	Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3132
Item 6.	Selected Financial Data	3435
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3435
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	5051
Item 8.	Financial Statements and Supplementary Data	5152
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~101~~100
Item 9A.	Controls and Procedures	~~101~~100
Item 9B.	Other Information	~~103~~102
PART III.		~~104~~103
Item 10.	Directors, Executive Officers and Corporate Governance	~~104~~103
Item 11.	Executive Compensation	~~104~~103
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~104~~103
Item 13.	Certain Relationships and Related Transactions and Director Independence	~~104~~103
Item 14.	Principal Accounting Fees and Services	~~105~~104
PART IV.		~~106~~105
Item 15.	Exhibits and Financial Statement Schedules	~~106~~105
Item 16.	Form 10-K Summary	~~112~~113
	Signatures	~~112~~113

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, 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 tax benefits associated with certain projects relating to the reorganization of our treasury function ~~and the establishment of a regulated insurance company to better manage our group unfunded pension liabilities~~;

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•	our ability to mitigate any tax risks, including, but not limited to, those risks associated with changes in legislation, tax audits and the loss of the benefits associated with our tax rulings and incentives in 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.;


•	conditions to the closing of the Merger, including obtaining required regulatory approvals, may not be satisfied or waived on a timely basis or otherwise;


•	a governmental entity or a regulatory body may prohibit, delay or refuse to grant approval for the consummation of the Merger and may require conditions, limitations or restrictions in connection with such approvals that can adversely affect the anticipated benefits of the proposed Merger or cause the parties to abandon the proposed Merger;


•	the Merger may involve unexpected costs, liabilities or delays;


•	our business may suffer as a result of uncertainty surrounding the Merger or the potential adverse changes to business relationships resulting from the proposed Merger;


•	legal proceedings that may be initiated related to the Merger and the outcome of any legal proceedings related to the Merger, which may be adverse to us;


•	our inability to complete the acquisition of the North American aftermarket distribution rights from Meritor within the timeframe called for under the contract and on the terms required under the contract;


•	we may be adversely affected by other general industry, economic, business and/or competitive factors;


•	there may be unforeseen events, changes or other circumstances that could give rise to the termination of the Merger Agreement or affect the ability to recognize benefits of the Merger;


•	risks that the proposed Merger may disrupt current plans and operations and present potential difficulties in employee retention as a result of the Merger;


•	risks related to diverting management’s attention from WABCO's ongoing business operations; and


•	there may be other risks to consummation of the Merger, including the risk that the Merger will not be consummated within the expected time period or at all which may affect our business and the price of our common stock.

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.

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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.

On March 28, 2019, WABCO entered into an Agreement (the Merger Agreement) and Plan of Merger with ZF Friedrichshafen AG (ZF), a stock corporation organized and existing under the laws of the Federal Republic of Germany, pursuant to which ZF will acquire 100% of the issued and outstanding shares of WABCO common stock (the Merger). The Merger Agreement was adopted by WABCO’s shareholders at the June 27, 2019 special meeting of shareholders. The European Commission and the United States Department of Justice cleared the Merger on January 23, 2020. In connection with the Department of Justice's review of the Merger, WABCO is divesting the Company's steering components business, R.H. Sheppard Co., Inc., for which the Company entered into a definitive agreement to sell on January 30, 2020. Consummation of the Merger is subject to customary closing conditions and remaining regulatory approvals.

Products and Services

We engineer, develop, manufacture and sell advanced braking, stability, suspension, 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 and heavy-duty trucks, buses and trailers.

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 fleet operators improve their operational efficiency and 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.

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~~WABCO~~Fleet ~~and~~Management 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. Solutions

~~WABCO~~In ~~launched~~a ~~TRAXEE~~drive ~~FMS~~to inmake ~~2018~~the ~~and~~transport ~~offers~~sector ~~smaller~~leaner, ~~fleet~~greener ~~operators~~and ~~several~~safer, ~~business-critical~~WABCO ~~functions~~further ~~without~~supplies ~~incurring~~commercial ~~large~~vehicle ~~capital~~aftermarket ~~investment~~distributors orand ~~management~~service ~~overhead~~partners ~~expenses.~~as ~~Launched~~well as afleet ~~scalable~~operators ~~and~~with ~~rapid~~quality ~~pay-back~~replacement ~~solution~~parts, ~~TRAXEE~~advanced ~~enables~~fleet ~~operators~~management tosolutions ~~better~~(FMS), ~~coordinate~~diagnostic ~~fleet capacity~~tools, ~~manage~~training ~~driver activity~~ and ~~improve~~expert ~~administrative efficiency~~services. ~~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~~offers ~~its~~replacement ~~Global~~parts ~~Intelligent~~across ~~Braking~~the ~~Platform~~original ~~for Trailers~~equipment, ~~the~~remanufactured ~~industry’s~~and ~~first~~quality ~~global~~budget ~~intelligent~~segments ~~braking~~through ~~platform~~its ~~for~~ProVia ~~trailers.~~brand, Itsupported ~~provides~~by ~~the~~an ~~foundation~~extensive ~~for~~service ~~WABCO’s~~network ~~new~~of ~~generation~~distributors ~~Trailer~~and ~~Anti-Lock~~workshops ~~Braking~~globally. ~~System~~Diagnostic ~~(iABS™)~~tools ~~and~~from ~~Electronic~~WABCO ~~Braking~~support ~~System~~improved ~~(iEBS™).~~workshop Itefficiency ~~also~~while ~~features~~its ~~simplified~~advanced ~~interchange~~global ~~between~~training ~~iABS~~courses ~~and iEBS~~have, ~~enhances~~up ~~trailer~~to ~~system~~today, ~~functionality~~enabled ~~and~~over ~~supports~~190,000 ~~the~~transport ~~globalization~~sector ~~strategies~~trainees ofglobally ~~trailer~~to ~~manufacturers~~improve ~~due~~their todaily ~~increased~~operational ~~standardization~~efficiency and ~~modularity~~safety record.

~~WABCO~~In ~~also signed a strategic agreement with RIO in 2018~~addition, 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~~Internet ~~base~~of ~~across~~Things ~~Europe,~~(IoT) ~~matches~~enabled ~~leading~~and ~~suppliers~~cloud ~~with~~based ~~the~~capabilities ~~best tailored solutions to~~ support ~~fleets~~transport ~~and~~operators ~~enable~~globally ~~them~~in totheir ~~pick~~drive ~~and~~for ~~choose~~new ~~from~~levels ~~a broad range~~ of ~~digital~~safety ~~tools.~~and efficiency.

With WABCO’s TX-TRAILERGUARD™ and TX-SKY™, customers continuously obtain data from onboard mission-critical systems. All of this information is simultaneously integrated onto the fleet manager’s displays via the TX-CONNECT™ web-based back-office technology. By translating this data into actionable management insights, fleets can enhance their overall efficiency, meet regulatory and environmental requirements and improve their safety records.

WABCO further expanded its global FMS offering by completing the acquisition of Asset Trackr in 2018, an innovative FMS provider based in Bangalore, India and expanding its advanced FMS expertise into India.

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. That same year “Smart Trailer FMS,” a jointly developed breakthrough trailer FMS connected with WABCO’s Intelligent Trailer Program was launched. The solution sets new standards for cargo transportation safety, efficiency and connectivity in China.

WABCO launched TRAXEE™ FMS in 2018 which 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; providing real-time status updates on vehicles, tachograph-based legal compliance for Europe and Turkey, driver activity management and improved administrative efficiency.

In 2019 WABCO kicked off sales for its TX-FUELCOMPASS™, a software platform that provides a complete view of fleet fuel and refueling costs. The solution accesses a large volume of data from different sources and brings these Big Data sets together in transparent graphs and dashboard views. Combined with TX-SKY or TX-GO 2™, TX-FUELCOMPASS allows fleets to evaluate and improve their refueling behavior without any extra or special hardware investment.

The company also launched its sales drive for TX-DIAGNOSTIX™ in 2019, which enables a detailed and remote assessment of the technical health of any European truck brand. Co-developed with WABCOWÜRTH, a joint venture between WABCO and the Wurth Group delivering multi-brand technology diagnostic systems, TX-DIAGNOSTIX reads out all fault codes and translates them into actionable data on root cause analysis and problem solving.

Also in 2019, WABCO unveiled its new advanced trailer monitoring and remote diagnostics solution, TX-TRAILERPULSE™, a trailer-focused IoT connectivity solution which combines real-time track and trace functionality with additional remote trailer health and diagnostic information. The first of its kind, it combines both trailer tracking and advanced remote diagnostic in one solution across all trailer types, improving fleet operational insight and efficiency.

In 2019, WABCO also signed a strategic partnership agreement with TIP Trailer Services, one of Europe’s and Canada’s leading equipment service providers, to upgrade its trailers with advanced trailer telematics and digital fleet management services, delivering data-driven insights and new levels of efficiency for its 70,000 strong mixed trailer fleet. The deal further expands WABCO’s large fleet customer base after it signed a major agreement with Girteka Logistics, Europe’s leading asset-based transport company, to equip its extensive fleet with telematics and associated services in 2018, re-enforcing its position as a trusted partner in this segment.

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.

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As mentioned earlier, on March 28, 2019, WABCO entered into an Agreement (the Merger Agreement) and Plan of Merger with ZF Friedrichshafen AG (ZF), pursuant to which ZF will acquire 100% of the issued and outstanding shares of WABCO common stock (the Merger). The European Commission and the United States Department of Justice cleared the Merger on January 23, 2020. In connection with the Department of Justice's review of the Merger, WABCO is divesting the Company's steering components business, R.H. Sheppard Co., Inc., for which the Company entered into a definitive agreement to sell on January 30, 2020.

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~~7.4 million single-piston ADB systems sold, including more than ~~one~~1.8 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.

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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~~are 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 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.

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 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 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.

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WABCO is the global industry supplier of collision mitigation systems and ADAS to OEMs with more than 600,000 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 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.

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 and in 2019 continues to collaborate on 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 ~~will~~is 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~~brings ~~bring~~ the power of Apollo, its open autonomous driving software platform, proven in the passenger car segment, while WABCO ~~will~~provides ~~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~~continue to 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 to be able to commercialize these solutions over the next three years.

Electrification

In 2018, WABCO announced a prototype of its first electric trailer - named eTrailer - developed to maximize operating efficiency and lower fuel consumption. This 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 market segment, WABCO and Nidec will provide efficient energy management, while maintaining stable vehicle dynamics. Also, the electric drivetrain solution will enable improved energy recuperation across all use cases which will contribute to additional efficiency gains.

Our key product groups and functions are described below.

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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 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 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 the shift from conventional to advanced electronic 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 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 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 have significantly improved fuel 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. We reduce vehicle weight and recuperate energy through 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

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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~~is a member of the ENSEMBLE consortium inand ~~2018~~industry togroup ~~develop~~focused on the development of 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. 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 ~~2018~~2019, 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 2over 1% per year.

Year to Year Change	~~2014~~2015		~~2015~~2016		~~2016~~2017		~~2017~~2018		~~2018~~2019
Sales to European T&B OEMs (at a constant FX rate)	(78	)%	8	%	86	%	63	%	3(9	)%
European T&B Production	(96	)%	61	%	18	%	82	%	2(8	)%

Customers

We sell our products primarily to 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;


•	Major car manufacturers, and


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

Our largest customers are Daimler and Volvo and account for approximately 1413% and 1112% of our sales, respectively. Other key customers include Ashok Leyland, TRATON, China National Heavy Truck Corporation (CNHTC), Cummins, Fiat (Iveco), Hino, Paccar and TATA Motors. For the fiscal years ended December 31, ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017, our top 10 customers accounted for approximately 4948%, 4449% and 44% of our sales, respectively.

The largest group of our customers, representing approximately 5554% of sales (5755% in ~~2017~~2018), consists of truck and bus OEMs who are large, increasingly global and few in 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~~technologies ~~second~~used ~~largest group, representing approximately 25% of sales (24%~~ in ~~2017),~~their ~~consists~~products. ofOur ~~the~~products ~~aftermarket~~play ~~distributor~~an ~~network~~important ~~that~~role ~~provides~~in ~~commercial~~enabling further vehicle ~~operators~~safety ~~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~~efficiency. ~~The~~At ~~increasing~~the ~~number~~same ~~of trucks~~time, ~~buses~~there ~~and trailers on the road worldwide that~~ are ~~equipped~~few ~~with~~other ~~our~~suppliers ~~products~~who ~~continuously~~compete ~~increases~~across ~~market~~the ~~demand~~breadth ~~for replacement parts and services which, in turn, generates a growing stream~~ of ~~recurring~~products ~~aftermarket~~that ~~sales. In addition,~~ we ~~continue~~supply 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 aftermarketglobally.

The ~~next~~second largest group, representing approximately 1026% of sales (925% in ~~2017~~2018), consists of ~~trailer~~the ~~manufacturers~~aftermarket distributor network that provides commercial vehicle operators with replacement parts as well as a range of services. This distributor network is a ~~particularly~~ fragmented and diverse group of ~~local~~customers, ~~and~~covering ~~regional~~a ~~players~~broad ~~that~~spectrum ~~are~~from ~~widely~~large ~~diverse~~OEM-affiliated inor ~~business~~OEM-owned ~~size~~distributors to small independent local distributors. The increasing number of trucks, ~~focus~~buses and ~~operation.~~trailers ~~Smaller~~on ~~trailer~~the ~~manufacturers~~road worldwide that are ~~highly~~equipped ~~dependent~~with onour ~~suppliers~~products ~~such~~continuously asincreases ~~WABCO~~market todemand ~~provide~~for ~~technical~~replacement ~~expertise~~parts and ~~product~~services ~~knowledge~~which, in turn, generates a growing stream of recurring aftermarket sales. ~~Similar~~In addition, we continue to ~~truck~~develop ~~and~~an ~~bus~~array ~~OEMs,~~of ~~trailer~~service ~~manufacturers~~offerings ~~rely~~- ~~significantly~~such onas ~~WABCO~~diagnostics, ~~products~~training and fleet management solutions - for ~~safety~~repair shops and ~~efficiency~~fleet ~~functions~~operators ~~through~~that ~~superior~~further ~~technologies~~enhance our presence and ~~customized~~growth ~~technology~~in ~~applications~~the commercial vehicle aftermarket.

The ~~remaining~~next ~~two~~largest ~~groups~~group, ~~passenger~~representing ~~car~~approximately ~~and~~10% ~~SUV~~of ~~manufacturers~~sales ~~and off-highway~~ (~~agricultural and construction) OEMs represent approximately 5~~10% ~~(6%~~ in ~~2017~~2018), ~~and~~consists 5%of ~~(4%~~trailer inmanufacturers. ~~2017)~~This ofis ~~sales~~a ~~respectively.~~particularly Wefragmented ~~supply~~group ~~passenger~~of ~~car~~local and ~~SUV~~regional ~~manufacturers~~players ~~with~~that ~~our~~are ~~electronic~~widely ~~air~~diverse ~~suspension~~in ~~systems~~business ~~and~~size, ~~vacuum~~focus ~~pumps~~and operation. ~~Electronic~~Smaller ~~air~~trailer ~~suspension~~manufacturers isare ahighly ~~luxury~~dependent ~~feature~~on ~~with~~suppliers ~~increasing~~such ~~penetration~~as ~~that~~WABCO ~~exceeds~~to ~~market~~provide ~~growth.~~technical ~~Vacuum~~expertise ~~pumps~~and ~~are~~product ~~used~~knowledge. ~~with~~Similar ~~diesel~~to truck and ~~gasoline~~bus ~~direct~~OEMs, ~~injection~~trailer ~~(GDI)~~manufacturers ~~engines. These~~rely ~~customers~~significantly ~~are~~on ~~typically~~WABCO ~~large,~~products ~~global~~for safety and ~~sophisticated;~~efficiency ~~they~~functions ~~demand~~through ~~high~~superior ~~quality~~technologies ~~products~~ and ~~services~~customized technology applications.

The remaining two groups, passenger car and SUV manufacturers and off-highway (agricultural and construction) OEMs each represent approximately 5% of sales (5% in 2018). 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. These customers are typically large, global and sophisticated; they demand high quality products and services.

We support our customers through our global sales force. It is organized around key accounts and customer groups and interfaces with product marketing and management to identify opportunities and meet customer needs across our product portfolio and throughout 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 4948% of our sales in ~~2018~~2019 (5249% in ~~2017~~2018), 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 a network of suppliers, manufacturing sites and engineering hubs.

WABCO SALES
By Geography	FY ~~2018~~2019 % of Sales		FY ~~2017~~2018 % of Sales		By Major End-Market	FY ~~2018~~2019 % of Sales		FY ~~2017~~2018 % of Sales
Europe	4948	%	5249	%	Truck & Bus Products (OEMs)	5554	%	5755	%
Asia	2322	%	2624	%	Aftermarket	2526	%	2425	%
North America	2324	%	1823	%	Trailer Products	10	%	910	%
South America	34	%	3	%	Car Products	5	%	65	%
Other	2	%	1	%	Off Highway Products	5	%	45	%

Additional information on the geographic distribution of our sales and our long-lived assets for the past three years may be found in Note 1920 ("Geographic Information") inof 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.

Seasonality

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

Growth Strategy

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

In 2019, WABCO continued its three-pillar growth strategy - technology leadership, globalization, and excellence in execution - which further differentiates WABCO within the global commercial vehicle industry. Key drivers of excellence in execution are set out in “Manufacturing and Operations” below.

Technology Leadership

WABCO remains focused on global technology trends that are important to our customers. Our technology strategy has three pillars to create value for manufacturers of commercial vehicles and fleet customers in every region of the world. The first pillar is advanced vehicle and driver safety to reduce the number of accidents involving commercial vehicles. The 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. 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 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's net expenditures for product engineering, including research activities and product development amounted to approximately $~~184~~193.42 million in ~~2018~~2019.

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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 ~~2018~~2019 - 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 advanced driver assistance systems through the launch in North America of OnLANE™ and 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 ~~2018~~2019, WABCO continued to increase adoption of our breakthrough 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 continued to expand ADB market penetration for trucks in North America, Europe and China where major customers value MAXX differentiators such as shorter stopping distances compared with drum brakes.

WABCO efficiency technologies deliver fuel economy, emissions reduction, energy recovery, weight reduction, lower maintenance costs and increased driver capability. In ~~2018~~2019, WABCO increased adoption of OptiDrive systems at original equipment makers in emerging economies such as India and China. As of ~~2018~~2019, over 4.5 million WABCO AMT systems have been sold, including our OptiDrive™ system - our modular automated manual transmission technology - which increases fuel economy up to 5% through optimized gear shifting. OptiRide™ 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. In ~~2018~~2019, WABCO continued to expand the use of the OptiFlow™ product range offering efficiency to trailer builders and major fleets through aerodynamic devices. Aerodynamic products reduce air drag of commercial trucks traveling long distances at highway speeds, thereby lowering fuel consumption by up to 7% as well as reducing CO2 emissions.

Globalization

Americas

WABCO’s regional headquarters for the Americas ~~was~~is ~~recently~~located ~~relocated~~Auburn toHills, Michigan. North America remains a ~~new~~long-term ~~facility~~growth inmarket ~~Auburn~~for ~~Hills~~WABCO, ~~Michigan,~~particularly ~~which~~in ~~will~~the ~~also~~United beStates, ~~our~~due ~~customer~~to ~~experience~~its ~~center~~expected volume of truck and ~~the~~bus ~~location~~production ~~for~~and the ~~launch~~increasing adoption of ~~WABCO~~vehicle ~~Academy.~~safety Itand ~~further~~efficiency ~~anchors~~technologies. ~~WABCO~~In asprior ayears, ~~global~~we ~~technology~~participated ~~leader~~in ~~and~~this ~~tier-one~~market ~~supplier~~through toour ~~the~~North ~~commercial~~American ~~vehicle~~joint ~~and~~venture, ~~automotive~~Meritor ~~industries~~WABCO. ItIn ~~also~~October ~~further~~2017, ~~demonstrates~~ WABCO’s ~~commitment~~acquired tothe ~~closely~~remaining ~~connect~~ownership ~~with~~stake ~~original~~from ~~equipment~~Meritor ~~manufacturers~~ and ~~fleet~~consolidated ~~operators~~all products under one WABCO brand in the North ~~and~~American ~~South~~market. ~~America~~WABCO bydelivers ~~leveraging~~value for our ~~local~~customers, ~~capabilities~~including offering them seamless access to WABCO's powerful technology and ~~distribution~~services ~~channels~~portfolio, ~~for~~backed ~~our~~by ~~vehicle~~the ~~safety~~flexibility and efficiency ~~products~~of ~~and~~an ~~services~~integrated global supply chain.

~~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. In prior years, we participated in this market through 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 in addition to all other technologies such as ADB, AMT and compressors in the North American market. In ~~2018~~2019, we increased WABCO's ADB penetration and market share and expanded adoption of high-performance ADB in North America. WABCO’s AMT also continued its successful sales penetration to Daimler Trucks North America and Volvo. WABCO also continued to 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 which WABCO made a $10 million investment in 2017.

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America and Volvo. Lastly, WABCO integrated the Sheppard acquisition into its global footprint, and began exporting steering products to India. WABCO also continued to 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 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 fellow motorists safe. Heavy-duty truck fleets have reported a reduction in accidents of up to 87% and up to an 89% reduction in accident costs since adopting OnGuard.

South America remains a long-term growth market for WABCO, particularly Brazil, due to its expected volume of truck and bus production and the increasing adoption of vehicle safety and efficiency technologies. WABCO continues to have a leadership position across all products and expects the continuous adoption of new technologies, such as AMT and 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 ~~2018~~2019, 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 ADAS, EBS, ESC, ADB, ~~LDWS~~ systems in China, WABCO is well positioned for growth as new regulations related to these products are released and implemented in the 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 commercial vehicles in China. This includes accelerating WABCO’s single-piston air disc brake (ADB) technology leadership in China. This is the 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 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.

Additionally, WABCO ~~signed~~continues ato ~~MoU~~collaborate with Baidu toon ~~collaborate~~the ondevelopment ~~developing~~of 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.

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 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) in series production.

We believe customers value WABCO’s local capabilities for product application development and engineering as our strategy is to “design for China,” which 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

Due to its expected volume of truck and bus production and the increasing adoption of vehicle safety and efficiency technologies, India remains a long-term growth market for WABCO. We participate in this market through our subsidiary WABCO INDIA, which has a market leadership position for over 5556 years in conventional braking products, advanced braking systems, air-assisted products, and automated manual transmission systems. In particular, all commercial vehicle manufacturers in India relied on WABCO’s test track located in Chennai to homologate over 50 vehicle platforms - truck and trailer to comply with the new national axle load regulation that came into effect from July 2018 for trucks and 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~~

WABCO INDIA remains a market leader in its domestic aftermarket through an extensive national distribution network of more than 7,000 outlets, to provide fleet customers with access to full product and service support. To enhance connectivity,

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~~control~~WABCO ~~systems~~completed tothe ~~provide~~acquisition aof ~~platform~~Asset ~~for~~Trackr ~~upto40~~in ~~innovative trailer operating functions. Designed to enhance trailer safety~~2018, ~~security~~an ~~and~~innovative ~~efficiency,~~FMS ~~the~~provider ~~Intelligent~~based ~~Trailer~~in ~~Program offers significant added value for India’s trailer manufacturers~~Bangalore, ~~fleet operators and cargo owners~~India. ~~The~~Asset ~~Intelligent~~Trackr ~~Trailer~~helps ~~Program~~commercial ~~also~~fleets ~~paves the way for India’s trailer industry~~ to ~~upgrade~~track, ~~from~~analyze ~~basic~~and ~~braking~~optimize ~~systems~~their totransportation ~~the~~resources ~~next level of advanced braking~~ and ~~suspension~~assets ~~technologies~~in ~~required~~real ~~for~~time ~~higher~~through ~~levels~~cloud-based ~~of vehicle automation~~solutions.

Tata Motors, in 2018, partnered with WABCO India to launch WABCO’s Advanced Driver Assistance Systems (ADAS) for the PRIMA and SIGNA range of 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), brake controls and steering technologies.

WABCO INDIA connects with global OEMs based in India and other regions of the world through five world-class manufacturing sites located in Ambattur, Jamshedpur, Mahindra World City, Pantnagar and Lucknow. In addition there are facilities in Chennai and Pune for software and application engineering. In India, over 500 engineers support 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. Furthermore, WABCO INDIA continued in 2018 to be recognized by 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 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

Truck and bus production 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 ~~2018~~2019, 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 medium-duty commercial vehicle manufacturer.

WABCO is further differentiated in Russia 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 7 regional sales offices, 27 dealers, over 200 authorized WABCO shops and more than 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 largely operate has not historically had a large number of competitors. Our principal competitors are Knorr-Bremse (Knorr's U.S. subsidiary is 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.

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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 6865% 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 each product taking into account factors such 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 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~~Hannover, 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 are migrating more of our sourcing to best cost regions. Under the leadership of the global sourcing organization, which is 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 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 2,855 employees - of which approximately 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. 15

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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 50%.

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 2,903 employees - of which approximately 53% 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 255 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 drawing, testing and software component development. We operate test tracks in Germany and India as well as in Finland for extreme weather-proving conditions.

Joint Ventures

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


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

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

• A majority-owned joint venture (7060%) with ~~Fuwa~~FAW ~~Mechanical~~Jiefang ~~Engineering~~(FAW ~~Company~~Jiefang ~~Ltd~~Automotive Co., ~~(FUWA~~Ltd) ~~formed~~ to ~~produce~~advance ~~air disc brakes for commercial trailers in China. FUWA is~~ the ~~largest~~safety ~~manufacturer~~and efficiency of commercial ~~trailer~~vehicles ~~axles~~ in China ~~and in the 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 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


•	A 50% owned joint venture in China with 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 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 automotive parts.

Employees

We have 1613,~~135~~911 employees. Approximately 4652% of our employees are salaried and 5448% are hourly. Approximately 4246% of our workforce is in Europe, 4439% is in Asia, and the remaining 1415% is in the Americas.

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 5057% 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 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; 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 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 intellectual property rights, identify licensing opportunities, and monitor the intellectual property claims of others.

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manufacturing know-how, continuing technological innovations, and licensing opportunities to maintain and improve our competitive 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 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 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 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 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. 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 to build a strong patent portfolio, trademark protection and the exploitation and protection of other intellectual property rights in terms of our intellectual property, R&D and business strategies.

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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 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 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. 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 :

Campinas, Brazil (M, L)	~~Jeverson~~Jeversen, Germany (TT)	Stanowice, Poland (M)
Jinan, China (M)	Ambattur, India (M)	Wroclaw, Poland (2 plants, M)
Qingdao, China (M)	Jamshedpur, India (M)	Charleston, United States (M)
Taishan, China (M)	Mahindra World City, India (M)	Rochester Hills, United States (M)
Hanover, Germany (M)	Lucknow, India (M)	North Mankato, United States (M)
Hannover, 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 (M)	Hebron, United States (M)

A number of our facilities are undertaking responsive actions to address groundwater and soil issues. Expenditures in ~~2018~~2019 to evaluate and remediate these sites were not material, and are also not expected to be material in ~~2019~~2020. 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.

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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.

Merger with ZF Friedrichshafen AG

On March 28, 2019, WABCO entered into an Agreement (the Merger Agreement) and Plan of Merger with ZF Friedrichshafen AG (ZF), a stock corporation organized and existing under the laws of the Federal Republic of Germany, and Verona Merger Sub Corp., a Delaware corporation and indirect wholly owned subsidiary of ZF, pursuant to which ZF will acquire 100% of the issued and outstanding shares of WABCO common stock (the Merger). The Merger Agreement was adopted by WABCO’s shareholders at the June 27, 2019 special meeting of shareholders, whereby holders representing 68.4% of the Company’s outstanding shares voted in favor of adopting the Merger Agreement. The European Commission and the United States Department of Justice cleared the Merger on January 23, 2020. In connection with the Department of Justice's review of the Merger, WABCO is divesting the Company's steering components business, R.H. Sheppard Co., Inc., for which the Company entered into a definitive agreement to sell on January 30, 2020. Consummation of the Merger is subject to customary closing conditions and remaining regulatory approvals.

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.

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, downturns in the industry, regulatory changes, and other factors outside of our control.

Changes in economic conditions, 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. 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 ~~2018~~2019, approximately 7877% 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~~As ~~impact~~BEPS ~~for~~initiatives ~~the~~are ~~Company~~implemented isin ~~that~~various ~~the group's Dutch hybrid financing structure will no longer be effective as of January 1~~countries, ~~2019.~~these ~~The~~changes ~~Company~~could isgive inrise ~~the~~to ~~process~~an ofincrease ~~establishing new treasury function~~ in ~~Switzerland~~our ~~but~~effective ~~this~~tax rate.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation known as the Tax Cuts and Jobs Act

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~~change~~(The ~~will~~Tax ~~give~~Act). ~~rise~~The toTax anAct ~~increase~~includes a reduction in ~~our~~the ~~effective~~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.

OnWhile ~~December~~the ~~22,~~Tax ~~2017,~~Act ~~the~~provides ~~U.S.~~for ~~government~~a ~~enacted~~territorial ~~comprehensive~~ tax ~~legislation~~system, ~~known~~it asalso includes the ~~Tax~~global ~~Cuts~~intangible ~~and~~low-taxed ~~Jobs~~income ~~Act~~ (~~The Tax Act~~GILTI) provision. The ~~Tax~~Company ~~Act~~elected ~~includes~~to aaccount ~~reduction~~for GILTI tax in the ~~corporate~~period ~~tax~~in ~~rate~~which toit ~~21%,~~was ~~from~~incurred. ~~35%,~~The ~~implementing~~GILTI aprovision ~~territorial~~requires ~~tax~~the ~~system,~~Company ato ~~one-time~~include ~~transition~~in its U.S. income tax onreturn ~~unrepatriated~~foreign subsidiary earnings in excess of an allowable return on foreign ~~subsidiaries~~subsidiary's attangible ~~reduced~~assets. The GILTI tax ~~rates~~expense ~~regardless~~is primarily caused by a U.S. foreign tax credit limitation which requires an allocation of ~~whether~~interest expense to the ~~earnings~~GILTI ~~are~~income, ~~repatriated~~effectively ~~and~~rendering the ~~modification~~allocated orinterest ~~repeal~~expense ofnon-deductible. ~~many~~The ~~business~~GILTI ~~deductions~~provision ~~and~~does ~~credits~~not have a material impact on income tax expense for 2019.

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, which would negatively impact our results of operations.

Our overall effective tax rate (ETR) is equal to our total 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.

The Company’s ETR of 10.6% for the 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 ETR for the 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 an increase in our ETR.

Management’s current estimate of the 2019 effective tax rate is approximately 18%, 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 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 not able to establish the regulated insurance company described above and to realize the tax benefits associated with these projects, our ETR could significantly increase, which may materially and 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, ~~2018~~2019, we had approximately $~~161~~203.38 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.

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The occurrence of tax liabilities arising from tax audits in the jurisdictions in which we operate could materially and adversely affect our overall effective tax rate and our results of operations.

The Company is subject to tax audits in all major countries 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 evaluating uncertain tax positions. Although the 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 it is carrying out significant operations. If these incentives are revoked or if the Company no longer complies with the tax incentive requirements, it may have a significant impact on the Company’s global effective tax rate which could have a material adverse effect on our results of operations.

The United Kingdom’s ~~referendum~~withdrawal ~~to exit~~ from the European Union will continue to have uncertain effects and could adversely impact our business, results of operations and financial condition.

The United Kingdom ~~has~~exited ~~voted to exit from~~ the European Union (commonly referred to as “Brexit”) ~~and~~on ~~the~~January 31, 2020. The terms of the withdrawal and an outline of the future relationship between the United Kingdom’s ~~relationship~~and ~~with~~ the European Union ~~after~~are ~~the~~contained ~~withdrawal~~in ~~are~~a ~~subject~~treaty toknown ~~ongoing~~as ~~negotiations.~~the ~~The~~“Agreement on the Withdrawal of the United Kingdom ~~may~~of ~~decide~~Great toBritain ~~leave~~and Northern Ireland from the European Union and the European Atomic Energy Community,” which was signed on ~~March~~January 2924, ~~2019~~2020. However, ~~with~~some nodetails ~~agreement~~about (athe solong-~~called~~term ~~“hard~~relationship ~~Brexit”).~~are subject to ongoing negotiations which will take place over the course of an eleven-month transition period ending on December 31, 2020.

~~The~~While ~~Brexit~~the ~~vote~~signing ~~and~~of ~~subsequent~~the ~~negotiations~~withdrawal ~~have~~agreement ~~impacted~~has ~~global~~reduced ~~markets and~~ the ~~value~~uncertainty ofsurrounding ~~the~~Brexit, ~~British~~some ~~Pound~~uncertainty asremains ~~compared~~about to the ~~U.S.~~details ~~dollar~~of ~~and~~the ~~other~~long-term ~~major~~future ~~currencies.~~relationship Inbetween ~~addition,~~the ~~there~~United ~~remains~~Kingdom ~~considerable~~and ~~uncertainty~~the ~~around~~European ~~Brexit~~Union, and volatility in the securities markets and in currency exchange rates may continue. The effects of Brexit on the economies of the United Kingdom and the European Union are also unknown and unpredictable~~, especially in the case of a hard Brexit~~. It is possible that the level of economic activity in the United Kingdom and the European region will be adversely impacted and that there will be increased regulatory and legal complexities and costs.

~~While~~ we have 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 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 operations and business relationships in the European markets and elsewhere. 20

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While we have not experienced any material financial impact from Brexit on our business to date, we cannot predict the results of the negotiations or their future effects. Any impact from Brexit on our business and 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 operations and business relationships in the European markets and elsewhere.

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;


•	our internal controls may not always protect us from reckless or criminal acts committed by our employees, agents or business partners that would violate the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation, as well as export controls and trade sanctions, which could result in fines or criminal penalties;


•	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~~

• 21in 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; and

~~Table~~• ofbusiness ~~Contents~~interruptions resulting from the COVID-19 coronavirus or other health epidemics, which may impact our foreign operations and suppliers and the supply chains that support their operations.

• 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, ~~2018~~2019, our total debt balance was $~~845~~828.23 million compared to $~~1,409~~845.82 million as of our prior fiscal year end. 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.

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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 5057% 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.

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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, ~~2018~~2019, sales to our top ten customers accounted for approximately 4948% 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.

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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 U.S. and internationally. 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 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 may incur significant costs to defend these claims 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 1.10% 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.

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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.

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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 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 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~~EY ~~& Young~~ Bedrijfsrevisoren ~~BCVBA~~BV/Reviseurs d'Entreprises ~~SCCRL~~SRL, 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.

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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 the Merger

The proposed Merger may not be consummated on a timely basis, or at all, and the failure to close or delays in closing the Merger could adversely affect our business, financial results and stock price.

As previously announced, on March 28, 2019, WABCO entered into an Agreement and Plan of Merger (the Merger Agreement) with ZF Friedrichshafen AG (ZF), a stock corporation organized and existing under the laws of the Federal Republic of Germany, and Verona Merger Sub Corp., a Delaware corporation and indirect wholly owned subsidiary of ZF, pursuant to which ZF will acquire 100% of the issued and outstanding shares of WABCO common stock (the Merger). We can provide no assurance that the Merger will be consummated or consummated in the timeframe or manner currently anticipated. The Merger is subject to a number of conditions including the receipt of regulatory approvals, which is not within our control. Although WABCO’s shareholders approved the adoption of the Merger Agreement at a special meeting of shareholders on June 27, 2019, there can be no assurance as to when, or if, the other conditions to closing of the Merger will be satisfied or waived or that other events will not intervene to delay the Merger or result in the termination of the Merger Agreement.

Any delay in closing or a failure to close could have a negative impact on our business, financial results and stock price as well as our relationships with our customers, suppliers or employees, and a negative impact on our ability to pursue alternative strategic transactions and/or our ability to implement alternative business plans.

Our business and financial results could be adversely impacted during the pendency of the Merger.

The Merger may cause disruptions to our business or business relationships and create uncertainty surrounding our ongoing business operations, which could have an adverse impact on our financial condition, results of operations and cash flows, regardless of whether the Merger is completed, including as a result of the following (all of which could be exacerbated by a delay in consummation of the Merger):


•	matters relating to the Merger may require substantial commitments of time and effort by our management, which could divert employees' attention away from the day-to-day operations of our business;


•	our employees may experience uncertainty about their future roles with us, which may adversely affect our ability to hire, retain and motivate key personnel and other employees;


•	customers, suppliers, strategic partners or other third parties that we maintain business relationships with may experience uncertainty prior to the closing of the Merger and seek alternative relationships with other third parties or seek to terminate or re-negotiate their relationships with us; and


•	the Merger Agreement restricts us from engaging in certain actions without the consent of ZF, which could delay or prevent us from realizing certain business opportunities or taking certain actions with respect to our operations that WABCO would otherwise take.

In addition, we have incurred, and will continue to incur, significant costs, expenses, and fees for professional services and other transaction costs in connection with the Merger, and we are required to pay many of these costs regardless of whether or not the Merger is consummated.

We could also be subject to litigation related to failure to close the Merger or to enforce our obligations under the Merger Agreement.

The Merger Agreement contains restrictions on our ability to pursue an acquisition proposal or an offer or proposal that could

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reasonably be expected to lead to an acquisition proposal. The adoption of the Merger Agreement by WABCO’s shareholders eliminated our right to terminate the Merger Agreement in response to an acquisition proposal.

Regulatory authorities may enjoin consummation of the Merger or seek divestitures of certain interests and assets in connection with the Merger.

Pursuant to the Merger Agreement, WABCO and ZF have agreed to use their respective reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the Merger and the other transactions contemplated by the Merger Agreement, including obtaining any requisite approvals, subject to certain specified limitations under the Merger Agreement. This includes using reasonable best efforts to obtain all requisite approvals, clearances, orders, decisions, decrees or authorizations or expirations of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and from the Committee on Foreign Investment in the United States and each member agency thereof acting in such capacity under the Defense Production Act of 1950, as amended. The Merger is also conditioned upon receipt of certain foreign approvals.

We cannot assure you that these regulatory clearances and approvals will be timely obtained or obtained at all, or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the closing of the Merger including the requirement to divest assets. In furtherance thereof, pursuant to the Merger Agreement, WABCO and ZF have also agreed to work together and use their respective reasonable best efforts to cause WABCO to divest certain interests and assets. ZF has agreed, subject to certain exceptions, to make divestitures and take remedial actions required by regulators so long as such actions do not result in a material adverse effect on the combined company, after giving effect to the Merger. ZF is not required to divest a portion of, or certain assets primarily related to, specific product lines or business divisions.

The delay or failure to obtain regulatory approvals or the imposition of conditions to obtain regulatory approvals could result in a delay or failure to close the Merger or a termination of the Merger Agreement.

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.

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 may 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, contractual and legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant.

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 to encourage prospective acquirers to negotiate with our Board of Directors rather than to attempt a hostile takeover. These provisions include, among others:

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


•	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

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•	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.

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 1521, ~~2019~~2020, our manufacturing activities, test tracks and engineering centers are located at 37 sites in 12 countries.

Site Location		Activity and Major Products Manufactured
Campinas, Brazil		Vehicle control systems
Jinan, China (2 sites)		Braking systems and compressors
Jinan, China		Braking systems and compressors
Qingdao, China		Braking systems
Taishan, China		Foundation brakes
Shanghai, China		Engineering center
Rovaniemi, Finland		Test track
Hanover, Germany (2 sites)		Vehicle control systems and engineering center
Hannover, Germany (2 sites)		Vehicle control systems and engineering center
Gronau, Germany		Compressors and hydraulics
Mannheim, Germany		Foundation brakes
Jeversen, Germany		Test track
Ambattur, India		Vehicle control systems
Ambattur, India (2 sites)		Vehicle control systems and engineering center
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
Chennai, India		Test track
Pune, India		Engineering center
Pyungtaek, Korea		Braking systems
Stanowice, Poland		Remanufactured products
Wroclaw, Poland (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		Air compressors and braking system components
Rochester Hills, MI, United States		Remanufactured products
North Mankato, MN, United States		Braking systems
Wytheville, VA, United States		Steering systems
Hebron, KY, United States		Braking systems
Hanover, PA, United States		Steering systems and foundry
Auburn Hills, MI, United States		Application engineering
Empalme, Mexico		Braking systems
Toronto, Canada		Aerodynamic products

We own all of the plants described above, except for the Jinan, Shanghai, Rovaniemi, Pune, Taishan, Stanowice, Miass, Chelny, Rayong, Rochester Hills, Charleston, Auburn Hills and 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 ~~2018~~2019, 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~~Bern, ~~Belgium~~Switzerland, and our executive offices, located in Auburn Hills 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

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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 1617 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 1521, ~~2019~~2020 with respect to each person who is an executive officer of the Company:

Name	Age	Position(s)
Jacques Esculier	5960	Chairman of the Board of Directors and Chief Executive Officer
Roberto Fioroni	49	Chief Financial Officer
Sean Deason	48	Chief Financial Officer and Controller
Mazen Mazraani	50	Chief Human Resources Officer
Lisa Brown	41	Chief Legal Officer and Secretary
Nicolas Bardot	47	Chief Supply Chain Officer
Lisa Brown	40	Chief Legal Officer and Secretary
Jorge Solis*	46	Senior V.P. Corporate Business Development
Nick Rens	55	President EMEA
Sean Deason	47	Vice President Controller and Investor Relations
Mazen Mazraani	51	Chief Human Resources Officer and Vice President Communications
Christian Brenneke	44	Chief Technology Officer
Nicolas Bardot	48	Chief Supply Chain Officer
Christian Brenneke	45	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.

~~Roberto~~Sean ~~Fioroni~~Deason ~~joined~~has ~~WABCO~~served ~~in June 2018~~ as our Chief Financial Officer~~. Prior~~ toand ~~his~~Controller ~~appointment~~since atApril ~~WABCO, Mr~~2019. ~~Fioroni~~Prior ~~served~~to ~~from~~this, ~~March~~Mr. ~~2014~~Deason aswas Vice President, ~~Finance,~~Controller ~~with~~and ~~The~~Investor ~~Goodyear~~Relations ~~Tire~~since &June ~~Rubber~~2015. ~~Company’s~~Prior ~~Europe,~~to ~~Middle~~joining ~~East~~WABCO, ~~and Africa (EMEA) business unit.~~ Mr. ~~Fioroni~~Deason ~~joined~~spent ~~Goodyear~~four inyears ~~2009~~with asEvraz ~~Finance~~N.A. ~~Director~~where ~~for~~he ~~the~~served ~~Eastern~~as ~~Europe, Middle East and Africa (EEMEA) region before being appointed~~ Vice President, ~~Global~~Financial ~~Internal~~Planning ~~Audit,~~& ~~in 2011~~Analysis. Prior to ~~joining Goodyear~~Evraz, Mr. ~~Fioroni~~Deason ~~was~~spent ~~with~~twelve ~~General~~years ~~Electric~~with ~~for~~Lear 13Corporation ~~years~~ where he ~~held~~served aas ~~number~~Director, ofFinance, ~~senior~~Corporate ~~finance~~Business ~~positions.~~Planning He& ~~was~~Analysis, ~~latterly~~Director, ~~Chief~~Finance, ~~Financial~~Asia ~~Officer~~Pacific ~~(EMEA)~~Operations, ~~for~~Assistant ~~General~~Treasurer, ~~Electric’s~~and ~~Security~~held ~~Division~~various other positions of increasing responsibility from August 1999. Mr. ~~Fioroni~~Deason holds a ~~degree~~Masters inof ~~Business~~International ~~Administration~~Management from ~~the~~Thunderbird ~~Universita~~School ~~Commerciale~~of ~~Luigi~~Global ~~Bocconi~~Management inand ~~Milan,~~is ~~Italy~~a Certified Management Accountant.

~~Mazen~~Lisa ~~Mazraani~~Brown has served as our Chief ~~Human~~Legal ~~Resources~~ Officer and Secretary since ~~September~~June 2016, ~~having~~after ~~served~~holding asthe ~~our~~role ~~Interim~~of ~~Chief~~Vice ~~Human~~President, ~~Resources~~Legal ~~Officer~~and Secretary since ~~October~~April 2015. Prior to this, MrMs. ~~Mazraani~~Brown served as our ~~Compensation~~Senior ~~and~~Legal ~~Benefits~~Counsel ~~Leader,~~since aFebruary ~~position~~2012. hePrior ~~had~~to ~~held~~joining ~~since~~WABCO, ~~November~~Ms. ~~2008,~~Brown ~~and~~served as ~~our~~Legal ~~Compensation~~Director &and ~~Benefits~~Company ~~Manager~~Secretary ~~from~~since ~~June~~March ~~2007~~2011 ~~when~~for hethe ~~joined~~largest ~~WABCO~~pet care retailer in the United Kingdom. ~~Before~~From ~~joining~~2006 ~~WABCO~~to 2011, Mrshe held various legal leadership roles for SSL International Plc, one the world’s leading providers of consumer healthcare products. ~~Mazraani~~Ms. ~~served~~Brown asheld the position of Group Head of ~~Compensation~~Legal &and ~~Benefits~~Intellectual Property and was responsible for ~~Dexia~~creating and driving legal strategy and risk management across the global operations, aincluding ~~Belgian-French~~research ~~Bank~~and ~~specialized~~development, inmanufacturing, ~~public~~and ~~financing~~sales. Before taking up ~~his~~her in-house roles, MrMs. ~~Mazraani~~Brown worked ~~for~~in 7private ~~years~~practice as aan ~~tax~~Intellectual ~~consultant~~Property atAttorney ~~Coopers~~specializing &in ~~Lybrand~~brand and ~~Ernst~~copyright &protection. ~~Young~~Ms. ~~Specializing~~Brown inis ~~Journalism~~a ~~and~~registered ~~Communication~~trademark ~~from~~attorney. ~~Brussels~~She ~~University, he~~ holds a Bachelor's ~~degree~~of inLaws ~~Business~~degree, ~~Administration~~as ~~and~~well as a ~~Master's~~Diploma ~~degree~~ in ~~Tax~~Legal ~~Management~~Practice from ~~Solvay~~Nottingham ~~Business~~Law School in ~~Brussels~~Nottingham, United Kingdom.

Nicolas Bardot was appointed as our Chief Supply Chain Officer in September 2016. Prior to this, Mr. Bardot served as our Vice President, Sourcing and Purchasing, since September 2013. Prior to holding this position, Mr. Bardot was our Strategic Purchasing Leader. Prior to joining WABCO, Mr. Bardot worked in France, the Czech Republic and China, and was a business purchasing leader for Valeo Group, a global automotive supplier. Overall, he has gained more than 17 years of experience in positions of increasing responsibility within 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

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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 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.

Jorge Solis was appointed Senior V.P. Corporate Business Development in October 2018. Mr. Solis joined WABCO in August 2010 as 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 Division in August 2016. Prior to joining WABCO, Mr. Solis worked in Mexico, the United States and France, and was a business purchasing leader for Valeo Group. Overall, he has gained more than 20 years of experience in positions of increasing responsibility within sourcing, quality, manufacturing, and business 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 ITESM, as well as executive training in business administration and management at INSEAD.

Nick Rens was appointed EMEA President in October 2018. Prior to this, Mr. Rens served as our President, Trailer Systems, Aftermarket & Off-Highway since July 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~~Mazen ~~Deason~~Mazraani ~~has~~was ~~served~~appointed ~~as our~~ Vice President ~~Controller~~Communications ~~and~~in ~~Investor~~November ~~Relations~~2019 ~~since~~in ~~June~~addition ~~2015. Prior~~ to ~~joining~~his ~~WABCO,~~role ~~Mr.~~as ~~Deason~~Chief ~~spent~~Human ~~four~~Resources ~~years~~Officer, ~~with~~which ~~Evraz N.A. where~~ he ~~served~~has asheld ~~Vice~~since ~~President,~~September ~~Financial Planning & Analysis~~2016. Prior to ~~Evraz~~this, Mr. ~~Deason~~Mazraani ~~spent twelve years with Lear Corporation where he~~ served as ~~Director,~~Interim ~~Finance,~~Chief ~~Corporate~~Human ~~Business~~Resources 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.

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 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.

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Officer from October 2015. Mr. Mazraani also served as our Compensation and Benefits Leader, a position he had held since November 2008, and as our Compensation & Benefits Manager from June 2007 when he joined WABCO. Before joining WABCO, Mr. Mazraani served as Head of Compensation & Benefits for Dexia, a Belgian-French Bank specialized in public financing. Before taking up his in-house roles, Mr. Mazraani worked for 7 years as a tax consultant at Coopers & Lybrand and Ernst & Young. Specializing in Journalism and Communication from Brussels University, he holds a Bachelor's degree in Business Administration and a Master's degree in Tax Management from Solvay Business School in Brussels.

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 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 Hannover, Germany. In addition, he earned an M.B.A. degree in general management from the University for Applied Sciences in Hamburg, Germany.

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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.

We estimate that there are approximately ~~315~~300 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 418, ~~2019~~2020, there were 61approximately 30,~~318~~700 beneficial owners of our common stock.

ISSUER PURCHASES OF EQUITY SECURITIES

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

On December 27, ~~2016~~2018, the Board of Directors authorized the repurchase of shares of up to $600.0 million of common stock~~. From~~ from January 1, ~~2017~~2019 tothrough December 31, ~~2018~~2020. During the year ended December 31, 2019, the Company has purchased 3272,~~511,454~~000 shares for $~~420~~30.06 million. ~~This~~and ~~authorization~~suspended ~~for~~its ~~stock~~share ~~repurchases~~repurchase ~~expired~~program ondue to the pending Merger. As of December 31, ~~2018~~2019, the Company had $569.4 million of availability remaining under this repurchase authorization.

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~~2019 follows.

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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
Total through December 31, 2018	3,511,454	$119.60	3,511,454	$0
January 1 - January 31	—208,000	-$111.53	—208,000	$576,800,982
February 1 - February 28	—64,000	-$115.62	—64,000	$569,401,085
March 1 - March 31	~~221,000~~—	~~$138.74~~-	~~221,000~~—	$569,401,085
Total first quarter	~~221~~272,000	$~~138~~112.7450	~~221~~272,000	$~~449~~569,~~378~~401,~~909~~085
April 1 - April 30	~~48,000~~—	~~$130.30~~-	~~48,000~~—	$569,401,085
May 1 - May 31	~~354,000~~—	~~$128.58~~-	~~354,000~~—	$569,401,085
June 1 - June 30	~~306,000~~—	~~$122.26~~-	~~306,000~~—	$569,401,085
Total second quarter	~~708,000~~—	~~$125.96~~-	~~708,000~~—	$~~360~~569,~~196~~401,~~131~~085
July 1 - July 31	~~72,000~~—	~~$123.26~~-	~~72,000~~—	$569,401,085
August 1 - August 31	~~398,400~~—	~~$122.85~~-	~~398,400~~—	$569,401,085
September 1 - September 30	~~270,090~~—	~~$119.76~~-	~~270,090~~—	$569,401,085
Total third quarter	~~740,490~~—	~~$121.76~~-	~~740,490~~—	$~~270~~569,~~034~~401,~~351~~085
October 1 - October 31	~~324,700~~—	~~$109.61~~-	~~324,700~~—	$569,401,085
November 1 - November 30	~~282,060~~—	~~$115.42~~-	~~282,060~~—	$569,401,085
December 1 - December 31	~~202,204~~—	~~$108.07~~-	~~202,204~~—	$569,401,085
Total fourth quarter	~~808,964~~—	~~$111.25~~-	~~808,964~~—	$0569,401,085
Total through December 31, 2018	3,511,454	$119.6	3,511,454	$0
Total through December 31, 2019	3,783,454	$119.09	3,783,454	$569,401,085

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

On ~~December 7, 2018, the Board of Directors authorized the repurchase of up to an additional $600 million of common stock from January 1, 2019 through December 31, 2020.~~33

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PERFORMANCE GRAPH

The following graph and table compare the cumulative total shareholder's return on our common stock from December 31, ~~2013~~2014 through December 31, ~~2018~~2019, with the Standard & Poor's 500 Index and the Standard & Poor's Auto Parts & Equipment Index. The graph and 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
	12/31/2014	12/31/2015	12/31/2016	12/31/2017	12/31/2018	12/31/2019
WABCO Holdings Inc.	100	~~112~~97.1759	~~109~~101.4731	~~113~~136.6495	~~153~~102.6244	~~114~~129.9132
S&P 500 Index	100	~~113~~101.6938	~~115~~113.2651	~~129~~138.0529	~~157~~132.2223	~~150~~173.3386
S&P 500 Auto Parts & Equipment Index	100	~~103~~94.6835	9792.8227	95136.6611	~~141~~98.1110	~~101~~144.7020

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ITEM 6.	SELECTED FINANCIAL DATA

(Amounts in millions, except share and per share data)	Year Ended December 31,
	2018			2017			2016			2015			2014
	2019			2018			2017			2016			2015
Income Statement Data:
Sales	$	3,~~831~~421.04		$	3,~~304~~831.20		$	23,~~810~~304.02		$	2,~~627~~810.50		$	2,~~851~~627.05
Cost of sales	2,~~658~~429.54			2,~~290~~658.45			12,~~931~~290.04			1,~~837~~931.60			1,~~972~~837.6
Gross profit	~~1,172~~992.50			1,~~013~~172.85			~~879~~1,013.08			~~789~~879.90			~~878~~789.49
Costs and expenses:
Selling and administrative expenses	~~476~~463.02			~~411~~476.20			~~356~~411.62			~~346~~356.6			~~372~~346.6
Research, development and engineering expenses	~~184~~193.42			~~147~~184.04			~~135~~147.20			~~139~~135.52			~~145~~139.05
Other operating (income)/expense, net	(01.45		)	20(0.64		)	520.36			65.73			86.97
Operating income	~~512~~337.51			~~435~~512.05			~~381~~435.90			~~297~~381.19			~~351~~297.91
Equity income of unconsolidated joint ventures	12.0			~~23.~~1.0			2423.81			3224.18			2332.81
Gain on remeasurement of equity investments (1)	—			~~247.7~~—			—247.7			—			—
Other non-operating expense, net	(4226.32		)	(3742.23		)	(2437.92		)	(24.69		)	(1924.16		)
Interest (expense)/income, net	(7.5		)	(16.0		)	(12.7		)	(7.1		)	0.2
Interest expense, net	(0.1		)	(7.5		)	(16.0		)	(12.7		)	(7.1		)
Income before income taxes	~~463~~312.78			~~652~~463.67			~~369~~652.16			~~297~~369.51			~~356~~297.85
Income tax expense (2)	4953.34			~~229~~49.73			~~121~~229.87			11121.58			5511.65
Net income including noncontrolling interests	~~414~~259.4			~~422~~414.94			~~247~~422.39			~~286~~247.03			~~301~~286.20
Less: net income attributable to noncontrolling interests	2013.36			1620.83			2416.38			1024.83			910.78
Net income	$	~~394~~245.18		$	~~406~~394.1		$	~~223~~406.01		$	~~275~~223.20		$	~~291~~275.52
Per share:
Basic	$	74.4680		$	7.5346		$	47.0053		$	4.7600		$	4.8776
Diluted	$	74.4378		$	7.5043		$	37.9850		$	43.7298		$	4.8172
Average number of outstanding common shares:
Basic	5251,~~846~~242,~~962~~913			5352,~~903~~846,~~938~~962			5553,~~695~~903,~~738~~938			5755,~~768~~695,~~018~~738			5957,~~907~~768,~~763~~018
Diluted	5351,~~062~~398,~~573~~548			5453,~~139~~062,~~815~~573			5554,~~981~~139,~~816~~815			5855,~~274~~981,~~987~~816			6058,~~546~~274,~~454~~987
Balance Sheet Data (at end of period):
Total assets	$	34,~~738~~037.61		$	43,~~323~~738.46		$	24,~~589~~323.94		$	23,~~432~~056.70		$	2,~~392~~589.89
Total debt	$	~~845~~828.23		$	~~1,409~~845.82		$	~~503~~1,409.78		$	~~315~~959.21		$	87503.17
Total shareholders' equity	$	1,~~176~~340.82		$	1,~~121~~176.48		$	~~786~~1,121.74		$	~~841~~701.64		$	~~1,152~~786.87
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 2223 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 1718 of Notes 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.

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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, ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017 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

InDue ~~2018,~~to the ~~Company~~slowdown ~~once~~in ~~again~~global ~~delivered~~economic ~~strong top-line~~ growth, ofas ~~15.9%~~well ~~(13.9%~~as ~~excluding~~increasing ~~foreign~~geopolitical ~~currency translation effects) compared to 2017~~uncertainty, ~~of which 6.7% was related to acquisitions. This growth was achieved in an environment where~~ the ~~global~~worldwide production of ~~trucks~~new ~~and~~vehicles ~~buses~~declined ~~greater~~in ~~than~~2019 ~~six tons increased only 2.5%~~ compared to ~~2017.~~2018 ~~Our global aftermarket sales increased~~ by ~~19.0~~6% ~~(17~~.5% ~~excluding foreign currency translation effects), of which 11.7% was related to acquisitions.~~

~~WABCO~~Our ~~continued~~sales decreased compared to ~~translate~~one ~~this~~year ~~strong~~ago ~~sales~~by ~~growth~~10.7% ~~into~~on ~~operating~~a ~~income~~reported ~~which~~basis ~~increased~~and ~~from~~by ~~$435~~7.0% ~~million~~excluding inforeign ~~2017~~currency totranslation ~~$512~~effects.5 ~~million~~The inglobal ~~2018. In~~production ~~spite~~ of ~~significant~~new ~~industry~~trucks ~~supply~~and ~~chain~~buses ~~challenges~~shrank inby ~~the~~an ~~first~~estimated ~~three~~5.7% ~~quarters,~~driven ~~WABCO's~~by ~~Operating~~significant ~~System~~decreases ~~continued~~in toIndia ~~provide fast~~ and ~~flexible~~Europe ~~responses~~of toapproximately ~~major market changes, delivering $74~~39.97% ~~million of materials~~ and ~~conversion productivity~~8. ~~Gross material productivity in 2018 represented 5.0~~1% ~~of material savings before the impact of commodity inflation~~, ~~which~~respectively. ~~had~~The aglobal ~~negative~~trailer ~~impact~~market ofalso ~~1.5%,~~declined ~~bringing~~by ~~net~~approximately ~~material productivity to 3~~14.50%. ~~Conversion~~year ~~productivity~~over ~~in our factories in 2018 represented 7~~year.~~7%.~~

InWe ~~2018,~~continued ~~among~~to ~~other~~leverage ~~accomplishments,~~the weWABCO ~~integrated~~Operating ~~two~~System ~~major~~to ~~acquisitions~~drive fast and flexible actions to counteract the challenging market environment by driving profitability projects, ~~formed~~solidly ~~new~~performing ~~alliances~~in ~~and~~delivering ~~announced~~strong ~~new~~materials ~~technologies~~and conversion productivity. We ~~also~~took ~~continued~~actions to ~~expand~~optimize our variable cost structure and ~~enrich~~to ~~our~~decrease ~~portfolio~~operating ofexpenses, ~~differentiated~~while ~~capabilities~~we ~~that~~continued ~~improve~~to ~~the~~increase ~~safety,~~our ~~efficiency,~~investment ~~and~~in ~~connectivity~~engineering ensuring the successful execution of ~~commercial~~the ~~vehicles~~Company's long-term strategy.

As ~~part~~previously announced, on March 28, 2019, WABCO entered into an Agreement (the Merger Agreement) and Plan of ~~its~~Merger ~~change~~with inZF ~~organizational~~Friedrichshafen ~~logic~~AG (ZF), ~~WABCO~~a ~~decided~~stock tocorporation ~~relocate~~organized ~~its~~and ~~corporate~~existing ~~headquarters~~under tothe ~~Bern~~laws of the Federal Republic of Germany, ~~Switzerland~~and Verona Merger Sub Corp., ~~with~~a Delaware corporation and indirect wholly owned subsidiary of ZF, pursuant to which ZF will acquire 100% of the ~~objective~~issued and outstanding shares of ~~creating~~WABCO acommon ~~singular~~stock ~~focus~~(the onMerger). ~~fully~~The ~~globalizing~~Merger Agreement was adopted by WABCO’s ~~advanced~~shareholders ~~technology~~at ~~strategy~~the June 27, 2019 special meeting of shareholders, whereby holders representing 68.4% of the Company’s outstanding shares voted in favor of adopting the Merger Agreement. The ~~current~~European ~~Brussels~~Commission ~~base~~and ~~will~~the ~~become~~United States Department of Justice cleared the ~~headquarters~~Merger on January 23, 2020. In connection with the Department of ~~its~~Justice's ~~newly~~review ~~formed~~of ~~division~~the ~~covering~~Merger, ~~Europe~~WABCO is divesting the Company's steering components business, ~~Middle~~R.H. ~~East~~Sheppard ~~and~~Co., ~~Africa~~Inc., for which the Company entered into a definitive agreement to sell on January 30, 2020. Consummation of the Merger is subject to customary closing conditions and remaining regulatory approvals.

~~Decoupling~~The ~~WABCO’s~~Company ~~corporate~~suspended ~~headquarters from~~ its ~~four~~share ~~business~~repurchase ~~regions~~program ~~will~~due ~~allow the Company~~ to ~~create a better structure to focus on~~ the ~~next~~pending ~~wave~~Merger, ~~of advanced technologies~~ and ~~scale~~we ~~their~~do ~~adoption~~not ~~globally.~~expect ~~Switzerland~~to isreinstate ~~world-renowned~~the ~~for~~program ~~providing~~in ~~a highly favorable environment for breakthrough innovations and offers many distinct advantages for corporate headquarters~~2020.

On September 13, 2019, Meritor, our exclusive distributor for a certain range of WABCO aftermarket products in the U.S.

and Canada, and our non-exclusive distributor in Mexico, exercised an option, triggered by the announcement of the Merger, to terminate the distribution agreement and sell the distribution rights back to WABCO. The Company will acquire the distribution rights from Meritor at an exercise price ranging from $225 million to $265 million, depending on the earnings of the distribution business. The purchase price for the distribution rights is payable in cash and will result in an increase to the intangible assets balance. The Company is expected to complete the acquisition in the first quarter of 2020.

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 4044% 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 2over 1% per year.

Year to Year Change	2014		2015		2016		2017		2018
Sales to European T&B OEMs (at constant FX rates)	(7	)%	8	%	8	%	6	%	3	%
European T&B Production	(9	)%	6	%	1	%	8	%	2	%

In general, our sales track directionally with 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,

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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.



Year to Year Change	2015		2016		2017		2018		2019
Sales to European T&B OEMs (at constant FX rates)	8	%	8	%	6	%	3	%	(9	)%
European T&B Production	6	%	1	%	8	%	2	%	(8	)%

~~Our~~In ~~aftermarket~~general, our sales ~~account~~track ~~for~~directionally ~~approximately~~with ~~25%~~T&B ofbuilds. ~~total~~However, ~~sales~~individual ~~and~~year ~~are~~to ~~affected~~year bysales achanges ~~variety~~are ofalso ~~factors:~~influenced ~~content~~by onother ~~specific~~factors ~~vehicles~~such ~~and~~as ~~breadth~~timing of ~~our~~orders ~~product~~and ~~range,~~deliveries ~~number~~to ofT&B ~~commercial~~OEM ~~trucks in active operation~~customers, ~~truck~~application ~~age~~content, ~~type~~new ofproduct ~~vehicles built~~introduction, ~~miles~~price ~~driven,~~and ~~demand~~introduction ~~for~~of ~~transported~~new ~~goods,~~customer ~~overall economic activity and acquisitions~~platforms. OnThe ~~average,~~level ~~our~~of ~~aftermarket~~truck ~~sales~~build ~~(based~~activity onis ainfluenced ~~constant~~by ~~exchange~~general ~~rate~~economic toconditions, ~~the~~including ~~U.S.~~interest ~~Dollar~~ rate) ~~have~~levels ~~grown~~and ~~by 11% annually for the last five years as shown in the table below~~inflation.

Year to Year Change	2014		2015		2016		2017		2018		AverageChange
Aftermarket Sales (at constant FX rates)	13	%	7	%	6	%	9	%	18	%	11	%

Our aftermarket sales account for approximately 26% 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, overall economic activity and acquisitions. On average, our aftermarket sales (based on a constant exchange rate to the U.S. Dollar rate) have grown by 7% annually for the last five years as shown in the table below.



Year to Year Change	2015		2016		2017		2018		2019		Average Change
Aftermarket Sales (at constant FX rates)	7	%	6	%	9	%	18	%	(3	)%	7	%

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

	2018		2017		2016
	2019		2018		2017
OE Manufacturers:
Truck & Bus products	5554	%	5755	%	5558	%
Trailer products	10	%	910	%	109	%
Car products	5	%	65	%	6	%
Off highway	5	%	45	%	4	%
Aftermarket	2526	%	2425	%	2523	%
	100	%	100	%	100	%
Geography:
Europe	4948	%	5249	%	5452	%
North America	2324	%	1823	%	1418	%
South America	34	%	3	%	3	%
Asia	2322	%	2624	%	2426	%
Other	2	%	1	%	51	%
	100	%	100	%	100	%

Results of Operations

Approximately 7877% 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 ~~2018~~2019 compared with ~~2017~~2018 and ~~2017~~2018 compared with ~~2016~~2017 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.

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~~Results~~Management believes that presenting these non-U.S. GAAP financial measures is useful to shareholders because it enhances their understanding of ~~Operations~~how ~~for~~management ~~2018~~assesses ~~Compared~~the ~~with~~operating ~~2017~~performance of the Company's business.

Results of Operations for 2019 Compared with 2018

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 endedDecember 31,								Excluding ForeignExchange Translation **
(Amounts in millions)	~~2018~~2019			~~2017~~2018			% changereported		~~2018~~2019 adjustedamount			% changeadjusted
Sales	$	3,~~831~~421.04		$	3,~~304~~831.20		15(10.97	)%	$	3,~~763~~563.79		13(7.90	)%
Cost of sales	2,~~658~~429.54			2,~~290~~658.45			16(8.16	)%	2,~~622~~526.7			~~14.~~(5.0	)%
Gross profit	~~1,172~~992.50			1,~~013~~172.85			(15.74	)%	1,~~141~~037.02			12(11.5	)%
Operating expenses	~~660~~654.09			~~578~~660.80			~~14.~~(0.8	)%	~~644~~683.57			113.46	%
Equity in net income of unconsolidated joint ventures	1.0			23.1			(95.7	)%	1.0			(95.7	)%
Other non-operating expense, net	(26.2		)	(42.3		)	(38.1	)%	(29.0		)	(31.4	)%
Gain on remeasurement of equity investments	—			247.7			*		—			*
Interest expense, net	(0.1		)	(7.5		)	(98.7	)%	0.2			(102.7	)%
Other non-operating expense, net	(42.3		)	(37.2		)	13.7	%	(37.5		)	0.8	%
Income tax expense	53.4			49.3			8.3	%	55.3			12.2	%
Interest expense, net	(7.5		)	(16.0		)	(53.1	)%	(7.4		)	(53.8	)%
Net income attributable to noncontrolling interests	13.6			20.3			(33.0	)%	13.8			(32.0	)%
Income tax expense	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	%

** ~~Percentage~~Amounts ~~change~~translated ~~not~~using ~~considered~~2018 ~~meaningful~~average exchange rates for comparability

** Amounts translated using 2017 average exchange rates for comparability

Sales

Our sales for ~~2018~~2019 were $3,~~831~~421.04 million, ana ~~increase~~decrease of 1510.97% (137.90% excluding foreign currency translation effects) from $3,~~304~~831.20 million in ~~2017~~2018.

Total sales in Europe, our largest market, ~~increased~~decreased 911.15% (46.74% excluding foreign currency translation effects) for the full year ~~2018~~2019, ~~which~~while ~~was~~the ~~supported~~production byof ~~strong~~new trucks and buses decreased 8.1%. Our sales to truck and bus ~~production~~OEMs ofalso 2declined 13.46% ~~and~~(8.6% byexcluding aforeign ~~penetration~~currency ~~increase~~translation ofeffects) ~~AMT.~~impacted ~~This~~by ~~was~~an unfavorable customer mix partially offset by ~~the~~an ~~phase~~increased content per vehicle for EBS, E-~~out~~APU ofand awheel ~~prior~~end ~~generation~~products, partially offset by continued phase out of AMT at a major ~~gearbox~~gear box supplier. The production of trailers in Europe dropped by 18.1%, however our sales were down 14.0% (8.5% excluding foreign currency translation effects), outperforming this market.

Sales in North America ~~increased~~decreased ~~55.~~5.3% (544.6% excluding foreign currency translation effects). Our ~~acquisition~~sales ofto Rtruck and bus OEMs decreased 2.H8% (1.9% ~~Sheppard~~excluding ~~and~~foreign ~~the~~currency ~~full~~translation ~~consolidation~~effects). ofAlthough ~~our~~the ~~former~~truck ~~joint~~and ~~venture~~bus ~~also~~market ~~contributed~~grew 38by 4.53%, towe ~~this~~were ~~growth~~not asable ~~well~~to asoffset ~~strong~~the ~~truck~~headwinds ~~and~~from ~~bus~~an ~~production~~unfavorable ~~growth~~customer ofmix ~~18.1%.~~and ~~Total~~insourcing ~~sales~~of ina ~~South~~product ~~America~~at ~~increased~~major 16OEMs.5% ~~(30.6%~~Our ~~excluding~~sales ~~foreign~~in ~~currency~~car ~~translation~~products ~~effects),~~were ~~driven~~impacted ~~primarily~~ by ~~truck~~a ~~and~~strong ~~bus~~decline ~~production~~in ~~growth~~the production of ~~27.1%~~passenger ~~combined~~cars ~~with~~in ~~increased~~the ~~content~~U.S. ~~per~~and ~~truck,~~additionally ~~partially~~impacted ~~offset~~ by a ~~lower~~phase ~~growth~~out inof ~~other~~vacuum ~~customer~~pump ~~groups~~technology.

Total sales in ~~Asia~~South America increased 59.04% (418.83% excluding foreign currency translation effects), while the ~~vehicle production decreased by 2.1%. Total sales in China decreased by 7.4% (9.7% excluding foreign currency translation effects) which was primarily driven by a 8.0% decrease in~~ truck and bus production ~~with a stronger negative impact on sales from the lower share of tractor trucks in the 2018 truck production as well as supply chain constraints. Total sales in India~~ increased 293.1% ~~(34~~.8% ~~excluding~~Our ~~foreign~~sales ~~currency translation effects) due~~ to the 23.5% increase in the production of new trucks and buses, ramping up volumes of steering sales at a major customer as well as continued sales growth from market share gains in automatic slack adjusters, air processing products and others. Total sales in Korea decreased 7.2% (9.6% excluding foreign currency translation effects), driven by a decrease in truck and bus ~~production~~OEMs ~~of 21.5%. Japan~~ increased 2.by 6.8% (115.02% excluding foreign currency translation effects). ~~despite~~Our aoutperformance ~~decrease~~ in ~~the~~this ~~truck~~market ~~and~~included ~~bus~~a ~~production~~share of ~~3.8%, outperforming the~~ market bygain ~~the~~in ~~ramp~~braking upcontrols ofand ~~recent~~wheel ~~product~~end ~~launches~~products.

~~WABCO's~~Total ~~global aftermarket~~ sales, ~~included~~ in ~~the~~Asia ~~geographic~~decreased ~~numbers provided above, increased 19~~17.02% (1714.54% excluding foreign currency translation effects). ~~This~~compared ~~increase,~~to ~~excluding~~an ~~foreign~~estimated ~~currency translation effects, was supported by acquisitions which contributed 11~~8.73% asdecrease ~~well~~in asnew ~~continued~~vehicle ~~success~~production ofin the ~~Company's aftermarket strategies~~region.

~~Cost~~Total sales in China decreased by 12.1% (8.3% excluding foreign currency translation effects). Our sales to truck and bus OEMs declined by 5.2% (0.8% excluding foreign currency translation effects) despite the overall growing production of ~~Sales~~new trucks and ~~Gross~~buses ~~Profit~~by 2.1% year over year. Although the penetration of EBS at buses increased we were not able to fully offset the impact from pricing, some market share loss at a major customer and a negative customer mix. Lower demand in the Chinese light commercial vehicle market in combination with the vacuum pump technology phase out, as well as weak off-highway and trailer markets contributed additionally to the sales decline compared to 2018.

~~Within~~ cost of sales, our largest expense is material costs, which mainly represents the purchase of components and parts. Our continued focus on productivity generated 5.0% of material savings including a $9.1 million supplier-related productivity 38

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~~settlement~~Total ~~and~~sales ~~before~~in ~~the~~India ~~impact~~decreased of39.1% ~~commodity~~(36.7% ~~inflation,~~excluding ~~which~~foreign ~~had~~currency atranslation ~~negative~~effects) ~~impact~~driven ofby 1a 39.57% decrease in vehicle production, ~~bringing~~which ~~net~~was ~~material~~driven ~~productivity~~by the continued economic uncertainty, reduced truck utilization and reduction of truck inventories at OEMs. Our sales to 3truck and bus OEMs declined by 44.54% ~~for~~(41.9% ~~the~~excluding ~~year.~~foreign currency translation effects).

(Amounts in millions)	Cost of Sales			Gross Profit
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	—			(41.8		)
Sales price reductions as % of sales				(1.2		)%
Volume, mix and absorption	227.4			51.6
Material productivity (1)	(36.4		)	36.4
Conversion productivity	(38.5		)	38.5
U.S. acquisitions	145.1			77.1
Labor inflation	17.2			(17.2		)
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, 2018	$	2,658.5		$	1,172.5

Total sales in Korea increased 6.2% (12.0% excluding foreign currency translation effects), outperforming the production of trucks and buses which increased 0.2%. Our sales to truck and bus OEMs grew by 30.4% (37.4% excluding foreign currency translation effects) driven by a safety stock accumulation for a new platform launch at a major OEM. Sales in Japan increased 1.7% (0.4% excluding foreign currency translation effects) compared to a decrease in truck and bus production of 8.7% supported by a favorable model mix and a share of market gain in braking controls at a major OEM.

WABCO's aftermarket sales, included in the geographic numbers provided above, decreased 6.7% (12.8% excluding foreign currency translation effects) ~~Includes~~in 2019. Our aftermarket sales in Europe declined by 9.5% (4.4% excluding foreign currency translation effects) on a ~~supplier-related~~year ~~productivity~~over ~~settlement~~year basis, which was a result of $9an overall market drop as well as a one time campaign in 2018. We are also facing a decline in India of 14.5% (12.1% ~~million~~excluding foreign currency translation effects) due to the sharp economic decline in the country, resulting in stock reductions at distributors. Softening U.S. market conditions contributed to a decline in North America of 3.8% (3.8% excluding foreign currency translation effects).

~~(2)~~Cost ~~Foreign~~of ~~exchange~~Sales ~~effects include both translational~~ and ~~transactional~~Gross ~~effects.~~Profit

(3) Includes inefficiencies due to supply chain constraints.



(Amounts in millions)	Cost of Sales			Gross Profit
Cost of sales / gross profit for the year ended December 31, 2018	$	2,658.5		$	1,172.5

Increase/(decrease) due to:
Sales pricing, volume and mix	—			(267.1		)
Cost of materials	(151.2		)	151.2
Cost of manufacturing workforce	(7.8		)	7.8
Streamlining costs	17.3			(17.3		)
Warranty accruals	4.4			(4.4		)
Foreign exchange translational effects	(97.3		)	(45.2		)
Other	5.5			(5.5		)
Net decrease	(229.1		)	(180.5		)

Cost of sales / gross profit for the year ended December 31, 2019	$	2,429.4		$	992.0

Within cost of sales, our largest expense is material costs, which mainly represents the purchase of components and parts. The lower materials cost is due to lower volume, mix and cost absorption partially driven by the decrease in sales level, as well as our continued focus on materials productivity. Management uses material productivity as one of the internal measures of our cost reduction efforts.

The decrease in gross profit is mainly driven by lower sales volume and an unfavorable mix. Sales price reductions of approximately 1.3% also contributed to the decrease. These decreases were partially offset by reduced costs as discussed above.

Operating Expenses

Operating expenses include selling and administrative expenses, product engineering expenses and other operating expenses.

(Amounts in millions)
Operating expenses for the year ended December 31, 2017	$	578.8
Increase/(decrease) due to:
Labor inflation	15.6
Incentive compensation	(5.3		)
Incremental costs from U.S. acquisitions (1)	37.8
Streamlining	7.0
Pension and post retirement benefit costs	3.3
Foreign exchange translation	15.5
Indemnification costs (2)	(14.9		)
Research and development investments, net	15.9
Other	6.3
Net increase	81.2
Operating expenses for the year ended December 31, 2018	$	660.0

(1) Includes costs incurred related to the R.H. Sheppard acquisition and the acquisition of Meritor's interest in Meritor WABCO for business and product integration, including engineering costs to develop and integrate active steering with WABCO products.

(2) The indemnification costs relate primarily to accruals recorded in 2017 in Brazil under an indemnification agreement with Trane (formerly American Standard). See Note 16 of Notes to the Consolidated Financial Statements for further discussion.

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Equity in Net Income of Unconsolidated Joint Ventures



(Amounts in millions)
Operating expenses for the year ended December 31, 2018	$	660.0

Increase/(decrease) due to:
Labor inflation	18.7
Sell-side M&A activity⁽¹⁾	18.0
Employee-related costs	1.4
Stock compensation costs	(10.8		)
Streamlining	(2.1		)
Headquarters relocation costs	3.9
Environmental reserve reduction	(3.8		)
Foreign exchange translation	(28.8		)
Other	(1.6		)
Net decrease	(5.1		)

Operating expenses for the year ended December 31, 2019	$	654.9

~~Equity in net income of unconsolidated joint ventures decreased $22.~~(1) ~~million~~Consists ~~to $1.0 million in 2018 as compared to $23.1 million in 2017. This decrease was~~ primarily ~~driven~~of bylegal ~~the acquisition~~ and ~~consolidation~~financial ofadvisory ~~previously~~fees ~~unconsolidated~~related ~~joint~~to ~~ventures during~~ the ~~fourth quarter of 2017~~Merger.

Gain on remeasurement of equity investments

The gain on remeasurement of equity method investments recorded in 2017 included 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.

Other non-operating expense, net

The non-operating expense net ~~increased~~decreased by $516.1 million to $4226.32 million in ~~2018~~2019 as compared to $3742.23 million in ~~2017,~~ 2018. This decrease was primarily driven by the recognition of an impairment loss of $5.5 million on a non-marketable equity investment in 2018 compared to a gain of $2.2 million on another non-marketable equity investment in 2019. Other contributors to the decrease include a $2.6 million loss recognized in 2018 on the prepayment of the Senior USD Notes, as well as higher gains on marketable investments realized in 2019. See Note 9 and Note 16 of Notes to the Consolidated Financial Statements.

Interest Expense, net

The Company recorded net interest expense of $70.51 million in ~~2018~~2019 compared to $167.05 million in ~~2017~~2018. This decrease was primarily due to our prepayment of the Senior USD Notes in April 2018. See Note 1516 of Notes to the Consolidated Financial Statements for further discussion.

Income Taxes

The income tax provision for ~~2018~~2019 was $4953.34 million on $~~463~~312.78 million of pre-tax income before adjusting for noncontrolling interest, compared with an income tax provision of $~~229~~49.73 million on pre-tax income of $~~652~~463.67 million before adjusting for noncontrolling interest in ~~2017~~2018. The ~~2018~~2019 ~~decrease~~increase in income tax expense is primarily the result of ~~the~~2018 ~~$33.3~~one-time ~~million~~tax ~~net~~benefits ~~benefit~~ for changes to the uncertain tax position related to the Excess Profit Ruling (EPR) / Patent Income Deduction (PID) clawback and ~~the $10.6 million benefit~~ for ~~change~~settlement inof ~~valuation allowances, partially offset by higher pre-tax income, excluding~~ a ~~one-time~~transfer ~~item~~pricing ~~related~~claim tobetween ~~the~~Germany ~~2017~~and ~~remeasurement~~Belgium ~~gain~~of $33.3 onmillion ~~equity~~and ~~investments of~~ $~~247~~11.74 million, respectively. These ~~The~~benefits ~~2017~~are ~~income~~partially ~~tax~~offset ~~provision~~by ~~included~~ the ~~one-time~~tax ~~provisional~~effect ~~estimate~~ of ~~U.S.~~lower ~~transition~~ pre-tax ofincome ~~$100.0~~in ~~million~~2019, aand ~~net~~one-time ~~$18.6~~income ~~million~~tax ~~benefit~~expenses ~~for~~in ~~remeasurement~~2018 ofthat ~~deferred~~do ~~tax~~not ~~assets~~reoccur ~~and~~in ~~liabilities~~2019, ~~resulting~~specifically ~~from~~a U$5.S.8 ~~and~~million ~~Belgian~~net transition tax ~~reforms~~adjustment and a $915.42 million deferred ~~income~~ tax ~~expense~~revaluation ~~related~~resulting tofrom ~~the~~a ~~remeasurement~~Belgian ~~gain~~tax onrate ~~the Meritor WABCO equity investment~~change.

Additional internal reorganization projects the Company is implementing or pursuing may also carry ancillary tax benefits that would improve the Company’s effective tax rate in 2019, including the Company’s decision to reorganize its treasury function and relocate it to the Company’s new Swiss corporate headquarters, as well as the Company’s plans to better manage its group unfunded pension liabilities (see Note 14 of Notes to the Consolidated Financial Statements) through the establishment of a regulated insurance company. Management is also currently evaluating the possible impact on its future effective tax rate of the judgment by the General Court of the European Union on February 14, 2019 relating to the Belgium EPR program. See Note 23 of Notes to the Consolidated Financial Statements.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests ~~increased~~decreased $36.57 million to $2013.36 million in ~~2018~~2019 as compared to $1620.83 million in ~~2017~~2018 primarily due ~~better~~lower ~~results~~net income in ~~some~~certain consolidated affiliate companies.

Backlog

Backlog represents sales orders that have not yet been filled as of the end of the reporting period. This amounted to $1.42 billion at the end of ~~2018~~2019, ana ~~increase~~decrease of 2014.93% (2314.07% excluding foreign currency translation effects) from the end of ~~2017~~2018 following the ~~growth~~decline in ~~our business~~sales. Backlog is not necessarily predictive of future business as it relates only to some of our products, and customers may still change orders and future delivery dates.

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Results of Operations for ~~2017~~2018 Compared with ~~2016~~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 endedDecember 31,								Excluding ForeignExchange Translation **
(Amounts in millions)	~~2017~~2018			~~2016~~2017			% changereported		~~2017~~2018 adjustedamount			% changeadjusted
Sales	$	3,~~304~~831.20		$	23,~~810~~304.02		1715.69	%	$	3,~~260~~763.47		1613.09	%
Cost of sales	2,~~290~~658.45			12,~~931~~290.04			1816.61	%	2,~~260~~622.17			1714.05	%
Gross profit	1,~~013~~172.85			~~879~~1,013.08			15.37	%	1,~~000~~141.30			1312.85	%
Operating expenses	~~578~~660.80			~~497~~578.18			1614.40	%	~~570~~644.5			1411.84	%
Equity in net income of unconsolidated joint ventures	~~23.~~1.0			2423.81			(695.97	)%	~~23.~~1.0			(695.97	)%
Gain on remeasurement of equity investments	~~247.7~~—			—247.7			*		~~247.2~~—			*
Interest expense, net	(16.0		)	(12.7		)	26.0	%	(16.2		)	27.6	%
Other non operating expense, net	(42.3		)	(37.2		)	13.7	%	(37.5		)	0.8	%
Income tax expense	229.7			121.8			88.6	%	223.4			83.4	%
Interest expense, net	(7.5		)	(16.0		)	(53.1	)%	(7.4		)	(53.8	)%
Net income attributable to noncontrolling interests	16.8			24.3			(30.9	)%	16.5			(32.1	)%
Income tax expense	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	%

* Percentage change not considered meaningful

** Amounts translated using ~~2016~~2017 average exchange rates for comparability

Sales

Our sales for ~~2017~~2018 were $3,~~304~~831.20 million, an increase of 1715.69% (1613.09% excluding foreign currency translation effects) from $23,~~810~~304.02 million in ~~2016~~2017. The increase, excluding foreign currency translation effects, was mainly driven by increased WABCO content per vehicle as well as market growth of 6.6%. Contribution from market growth was mainly driven by Europe and North America (with high content per vehicle) as well as China (with limited content per vehicle).

Total sales in Europe, our largest market, increased 9.31% (74.27% excluding foreign currency translation effects) for the full ~~year 2017, which was supported by strong truck and bus production of 7.7% as well as by market share gains at a major OEM customer, partially offset by a phase out of AMT at a major gearbox supplier.~~

~~Sales~~year ~~in North America increased 40.7% (39.7% excluding foreign currency translation effects)~~2018, ~~primarily~~which ~~driven~~was supported by ~~the~~strong ~~increased~~truck ~~content~~and ~~per~~bus ~~vehicle~~production ~~due to higher penetration~~ of ~~AMT, growth coming from the acquisitions (17~~2.4%) asand ~~well~~by asa ~~market~~penetration ~~growth~~increase of 9AMT.~~1%.~~ ~~Total~~This ~~sales~~was inpartially ~~South~~offset ~~America~~by ~~increased~~the ~~26.2%~~phase-out ~~(17.4%~~of ~~excluding~~a ~~foreign~~prior ~~currency~~generation ~~translation~~AMT ~~effects)~~at ~~driven~~a ~~primarily~~major bygearbox ~~growth in truck and bus production~~supplier.

~~Total~~Sales ~~sales~~ in ~~Asia~~North America increased 2555.65% (2554.56% excluding foreign currency translation effects). ~~compared~~Our toacquisition ~~an estimated 37% increased growth~~ of ~~the~~R.H. ~~vehicles~~Sheppard inand the ~~region.~~full ~~Further~~consolidation ~~increase in production~~ of ~~new~~our ~~truck~~former ~~and~~joint ~~buses~~venture inalso ~~China strongly~~ contributed ~~to the sales growth of 42~~38.05% ~~(43.4%~~to ~~excluding~~this ~~foreign~~growth ~~currency translation effects), which was additionally strengthened by increased WABCO content per vehicle~~ as well as ~~further~~strong ~~benefits~~truck ~~from~~and ~~the~~bus ~~ABS~~production ~~mandate~~growth onof ~~light-~~18.1%. ~~and~~Total ~~medium-~~sales ~~duty~~in ~~trucks.~~South ~~India~~America increased 1416.05% (1130.06% excluding foreign currency translation effects), ~~despite a minor 0.9% increase in vehicle production~~ driven primarily by ~~the~~truck ~~enforcement of load restrictions as well as increase demand from construction~~ and ~~mining~~bus inproduction ~~the~~growth ~~second half~~ of ~~2017~~27. ~~Japan increased 7.~~1% ~~(10.5%~~combined ~~excluding foreign currency translation effects)~~ with increased content per ~~vehicle~~truck, ~~and~~partially ~~South~~offset ~~Korea increased 9.4% (7.7% excluding foreign currency translation effects) driven~~ by ~~higher~~a ~~vehicle~~lower ~~production~~growth ~~compared~~in toother ~~2016~~customer ~~which was negatively impacted by export slowdown~~groups.

~~WABCO's~~Total ~~global~~sales ~~aftermarket~~in ~~sales,~~Asia ~~included~~increased in5.0% (4.8% excluding foreign currency translation effects) while the ~~geographic~~vehicle ~~numbers~~production ~~provided~~decreased ~~above,~~by ~~increased~~2.1%. 11Total sales in China decreased by 7.84% (9.47% excluding foreign currency translation effects) which was primarily driven by a 8.0% ~~This~~decrease ~~increase,~~in ~~excluding~~truck ~~foreign~~and ~~currency~~bus ~~translation~~production ~~effects,~~with ~~demonstrates~~a ~~the~~stronger ~~continued~~negative ~~success~~impact ofon ~~the~~sales ~~Company's~~from ~~aftermarket~~the ~~strategies.~~lower share

of 40tractor trucks in the 2018 truck production as well as supply chain constraints. Total sales in India increased 29.1% (34.8% excluding foreign currency translation effects) due to the 23.5% increase in the production of new trucks and buses, ramping up volumes of steering sales at a major customer as well as continued sales growth from market share gains in automatic slack adjusters, air processing products and others. Total sales in Korea decreased 7.2% (9.6% excluding foreign currency translation effects), driven by a decrease in truck and bus production of 21.5%. Japan increased 2.6% (1.0% excluding foreign currency translation effects) despite a decrease in the truck and bus production of 3.8%, outperforming the market by the ramp up of recent product launches.

WABCO's global aftermarket sales, included in the geographic numbers provided above, increased 21.4% (19.7% excluding

foreign currency translation effects). This increase, excluding foreign currency translation effects, was supported by acquisitions which contributed 13.5% as well as continued success of the Company's aftermarket strategies.

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Cost of Sales and Gross Profit

Within cost of sales, our largest expense is material costs, which mainly represents the purchase of components and parts. Our continued focus on productivity generated 5.3% of material savings before the impact of commodity inflation, which had a negative impact of 1.0%, bringing net material productivity to 4.3% for the year.



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

Increase/(decrease) due to:
Sales pricing, volume and mix	—			237.2
Cost of materials	152.3			(152.3		)
Cost of manufacturing workforce	24.4			(24.4		)
U.S. acquisitions	145.1			77.1
Streamlining costs	(4.4		)	4.4
Foreign exchange translational effects	35.9			31.5
Other	14.8			(14.8		)
Net increase	368.1			158.7

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 for the year ended December 31, 2016	$	1,931.0		$	879.0
Increase/(decrease) due to:
Sales price reductions	—			(51.6		)
Sales price reductions as % of sales				(1.6		)%
Volume, mix and absorption	391.6			110.4
Material productivity	(46.9		)	46.9
Conversion productivity	(36.3		)	36.3
U.S. acquisitions	(24.8		)	24.8
Labor inflation	14.5			(14.5		)
Foreign exchange effects	45.7			(1.9		)
Other	15.6			(15.6		)
Net increase	359.4			134.8
Cost of sales / gross profit for the year ended December 31, 2017	$	2,290.4		$	1,013.8

Within cost of sales, our largest expense is material costs, which mainly represents the purchase of components and parts. The increased materials cost is primarily driven by our higher sales and partially offset through our continued focus on productivity including a supplier-related productivity settlement of $9.1 million. Inefficiencies due to supply chain constraints also contributed to increases in our costs of sales. Management uses material productivity as one of the internal measures of our cost reduction efforts.

~~Foreign~~The ~~exchange~~increase ~~impacts~~in ~~include~~gross ~~both~~profit ~~translational~~is ~~and~~mainly ~~transactional~~driven ~~effects.~~by ~~Cost~~the ~~variances~~higher ~~included~~sales involume, ~~"Other"~~partially ~~above~~offset ~~consisted~~by ~~mainly~~sales ofprice ~~inflation~~reductions onof ~~energy,~~approximately ~~travel and freight ($3~~1.52%. ~~million)~~The ~~and~~increase ~~liquidation~~in ofgross aprofit ~~step-up~~was inalso ~~inventory~~partially ~~related~~offset toby the ~~Meritor~~higher ~~WABCO~~cost ~~acquisition~~of ~~($7.5~~sales ~~million).~~as discussed above.

Operating Expenses

Operating expenses include selling and administrative expenses, product engineering expenses and other operating expenses.

(Amounts in millions)
Operating expenses for the year ended December 31, 2016	$	497.1
Increase/(decrease) due to:
Labor inflation	13.6
Incentive compensation	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	3.2
Other	9.0
Net increase	81.7
Operating expenses for the year ended December 31, 2017	$	578.8
Increase/(decrease) due to:
Labor inflation	15.6
Incentive compensation	(5.3		)
Incremental costs from U.S. acquisitions (1)	37.8
Streamlining	7.0
Pension and post retirement benefit costs	3.3
Foreign exchange translation	15.5
Indemnification costs (2)	(14.9		)
Research and development investments, net	15.9
Other	6.3
Net increase	81.2
Operating expenses for the year ended December 31, 2018	$	660.0

~~The~~(1) Includes ~~indemnification~~ costs ofincurred ~~$15.5~~related ~~million~~to ~~relate~~the ~~primarily~~R.H. toSheppard ~~accruals~~acquisition ~~recorded~~and inthe ~~Brazil~~acquisition ~~under~~of anMeritor's ~~indemnification~~interest ~~agreement~~in ~~with~~Meritor ~~Trane~~WABCO ~~(formerly~~for ~~American~~business ~~Standard).~~and ~~See~~product ~~Note~~integration, 16including ofengineering ~~Notes~~costs to ~~the~~develop ~~Consolidated~~and ~~Financial~~integrate ~~Statements~~active ~~for~~steering ~~further~~with ~~discussion~~WABCO products.

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As(2) The ~~previously~~indemnification ~~disclosed~~costs inrelate ~~our~~primarily ~~2017~~to ~~second~~accruals ~~quarter~~recorded ~~Form~~in ~~10-Q,~~2017 ~~the~~in ~~$4.5~~Brazil ~~million~~under ~~costs~~an ofindemnification ~~extraordinary~~agreement ~~sell-side~~with ~~M&A~~Trane ~~activity~~(formerly ~~pertain~~American toStandard). ~~professional~~See ~~fees~~Note ~~incurred~~17 inof ~~connection~~Notes ~~with~~to anthe ~~acquisition~~Consolidated ~~proposal~~Financial ~~received~~Statements byfor ~~the~~further ~~Company~~discussion.

Equity in Net Income of Unconsolidated Joint Ventures

Equity in net income of unconsolidated joint ventures decreased $122.71 million to $~~23.~~1.0 million in ~~2017~~2018 as compared to $2423.81 million in ~~2016~~2017. This decrease was primarily driven by the acquisition and consolidation of previously unconsolidated joint ventures during the fourth quarter of 2017~~, which was partially offset by higher income from our North American joint venture due to increased content per vehicle of WABCO products during the first three quarters of 2017~~.

Gain on remeasurement of equity investments

The gain on remeasurement of equity method investments recorded in 2017 included gains resulting from the step up of

equity method investments to their acquisition date fair values. See Note 23 of Notes to the Consolidated Financial Statements

for additional information.

Other non-operating expense, net

The non-operating expense net increased by $5.1 million to $42.3 million in 2018 as compared to $37.2 million in 2017, primarily driven by the recognition of an impairment loss of $5.5 million on a non-marketable equity investment. See Note 9 of Notes to the Consolidated Financial Statements.

Interest Expense, net

The Company recorded net interest expense of $167.05 million in ~~2017~~2018 compared to $1216.70 million in ~~2016~~2017. This ~~increase~~decrease was primarily due to ~~a full year of interest expense incurred on~~ our ~~2016~~prepayment ~~issuance~~ of the Senior ~~EUR~~USD Notes asin ~~well~~April ~~as incremental interest expense incurred on borrowings under revolving credit facilities which were used to fund our share repurchase program as well as our acquisitions~~2018. See Note 1516 of Notes to the Consolidated Financial Statements for further discussion.

Income Taxes

The income tax provision for ~~2017~~ 2018 was $~~229~~49.73 million on $~~652~~463.67 million of pre-tax income before adjusting for noncontrolling interest, compared with an income tax provision of $~~121~~229.87 million on pre-tax income of $~~369~~652.16 million before adjusting for noncontrolling interest in ~~2016~~ 2017. The 2018 decrease ~~2017 increase~~ in income tax expense is primarily the result of the $33.3 million net benefit for changes to the uncertain tax position related to the Excess Profit Ruling (EPR) / Patent Income Deduction (PID) clawback and the $10.6 million benefit for change in valuation allowances, partially offset by higher pre-tax income, ~~and~~excluding ~~the~~a ~~tax~~one-time ~~expense~~item related to ~~tax~~the ~~law~~2017 ~~changes~~remeasurement ingain ~~the~~on ~~U.S.~~equity ~~and~~investments ~~Belgium~~of $247.7 ~~The~~million. The 2017 income tax provision ~~includes~~included the one-time provisional estimate of U.S. transition tax of $100.0 million, a net $18.6 million benefit for remeasurement of deferred tax assets and liabilities resulting from U.S. and Belgian tax reforms and a $91.4 million deferred income tax expense related to the remeasurement gain on the Meritor WABCO equity investment. ~~The 2016 income tax provision included a $69.3 million charge for the claw-back of Belgian EPR tax relief for 2012-2014.~~

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests ~~decreased~~increased $73.5 million to $1620.83 million in ~~2017~~2018 as compared to $2416.38 million in ~~2016~~2017 primarily due to abetter ~~$12.3~~results ~~million out-of-period, non-cash adjustment recorded for a correction~~ in ~~our~~some ~~noncontrolling interest attributable to one of our~~ consolidated ~~affiliates~~affiliate ~~in 2016 as previously disclosed in our 2016 Form 10-K~~companies.

Backlog

Backlog represents sales orders that have not yet been filled as of the end of the reporting period. This amounted to $1.54 billion at the end of ~~2017~~2018, an increase of 2220.89% (~~increase of 9~~23.60% excluding foreign currency translation effects) from the end of ~~2016~~2017 following the growth in our business. Backlog is not necessarily predictive of future business as it relates only to some of our products, and customers may still change orders and future delivery dates.

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~~debt and revolving credit 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 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.43

Specifically for 2019, we expect our capital spending to remain consistent with prior year. As of December 31, 2018, there were no outstanding borrowings on the revolving credit facility.

Outside of our capital expenditures, cash flows related to our senior unsecured notes, subsequent installments of the transition tax payable, acquisitions and short term debt repayments, our overall cash flow is expected to be in line with the Company's 2018 cash flow profile. The U.S. Tax reform will provide a higher flexibility regarding the use of our foreign cash in the United States which may reduce the overall financing needs of the Company.

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AsWe ofbelieve ~~December 31, 2018, $491.0 million of~~ the ~~$503.8~~combination ~~million~~ of ~~cash~~expected ~~and~~ cash ~~equivalents~~flows, on the ~~consolidated~~funding ~~balance~~received ~~sheets~~from ~~was~~our ~~held~~senior byunsecured ~~foreign~~debt ~~subsidiaries.~~and ~~The Company considers~~ the ~~earnings~~revolving ofcredit ~~substantially~~facilities ~~all~~being ofcommitted ~~its~~until ~~subsidiaries~~2024 ~~outside~~will ofprovide ~~Europe~~us ~~and~~with ~~Brazil~~adequate liquidity to besupport ~~permanently reinvested outside~~ the ~~United~~Company's ~~States~~operations. AsThe ofCompany ~~December 31,~~also ~~2017,~~has ~~$776.5 million of~~ the ~~$1,141.5~~ability ~~million~~to ofaccess ~~cash~~a ~~and~~wide ~~cash~~range ~~equivalents~~of onadditional ~~the~~external ~~consolidated~~financing ~~balance sheets was held by foreign subsidiaries for which earnings are no longer permanently reinvested outside the United States~~instruments.

Specifically for 2020, we expect our capital spending to remain consistent with prior year. As of December 31, 2019, there were no outstanding borrowings on the revolving credit facility.

Outside of our capital expenditures, cash flows related to our senior unsecured debt, subsequent installments of the transition tax payable, acquisitions including the purchase of the distribution rights from Meritor and short term debt repayments, our overall cash flow is expected to be in line with the Company's 2019 cash flow profile. The U.S. Tax reform will provide a higher flexibility regarding the use of our foreign cash in the United States which may reduce the overall financing needs of the Company.

As of December 31, 2019, $867.2 million of the $891.8 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 subsidiaries outside of Europe and Brazil to be permanently reinvested outside the United States. As of December 31, 2018, $491.0 million of the $503.8 million of cash and cash equivalents on the consolidated balance sheets was held by foreign subsidiaries for which earnings are no longer permanently reinvested outside the United States.

The Company was notified that Meritor has exercised their put option for WABCO to purchase the distribution rights for the aftermarket products in the United States and Canada for an amount between $225 million and $265 million, payable in cash in early 2020. The Company believes its available cash on-hand and availability under its existing credit facilities adequately provide for the funding of this acquisition.

Cash Flows for 2019 Compared with 2018

Operating activities - Net cash provided by operating activities was $439.9 million and $468.5 million for the years ended December 31, 2019 and 2018, respectively. Cash flow from operating activities consisted primarily of net income including noncontrolling interests of $259.4 million, increased by non-cash elements of $187.7 million comprising depreciation, pension and post-retirement benefit expenses, amortization, stock compensation, and deferred tax benefits. This was partially offset by $7.2 million related to changes in operating assets and liabilities, including $16.6 million of payments made related to costs associated with the Merger. Cash flow from operating activities for 2018 consisted primarily of net income including noncontrolling interests of $414.4 million, decreased by non-cash elements of $208.5 million comprising depreciation, amortization, stock compensation, deferred tax benefits, pension and post-retirement benefit expenses.

Investing activities - Net cash used in investing activities amounted to $10.4 million in 2019 compared to $246.5 million in 2018. Aside from net capital expenditures in tooling, equipment and software of $153.6 million and $132.1 million in 2019 and 2018, respectively, we had investing cash flows related to our investments and redemptions in repurchase agreements and short-term investments as follow:



	December 31, 2019						December 31, 2018
(Amounts in millions)	Repurchase Agreements		Short-term Investments		Total		Repurchase Agreements		Short-term Investments			Total
Investments	$	113.3	$	633.2	$	746.5	$	161.2	$	526.0		$	687.2
Sales and redemptions	198.4		693.5		891.9		210.3		374.9			585.2
Net cash received/(invested)	$	85.1	$	60.3	$	145.4	$	49.1	$	(151.1	)	$	(102.0	)

In 2019, we paid $0.4 million towards the remaining payment for the 2018 acquisition of Asset Trackr. This is in comparison to to $8.6 million paid in 2018, of which $6.4 million related to additional cash paid for the 2017 acquisition of R.H. Sheppard and $2.2 million for the acquisition of Asset Trackr. We also invested $1.8 million in unconsolidated joint ventures in 2019 compared to $3.8 million in 2018.

Financing activities - Net cash used by financing activities decreased from $827.1 million in 2018 to $39.0 million in 2019. We had no net borrowings or repayments under our revolving credit facilities in 2019. We also had no additional borrowings or prepayments of long-term debt in 2019. This is compared to net repayments under the revolving credit facilities of $385.4 million in 2018, as well as prepayment of $500.0 million of the Senior USD Notes partially offset by proceeds received from the Schuldschein Loans of approximately $368.5 million. We also repurchased shares for a total of $30.6 million in 2019 compared to $300.0 million in 2018. Certain of these shares were repurchased under a 10b5-1 stock repurchase plan during the period between August 20, 2018 and December 20, 2018.

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We received $1.2 million of stock option proceeds and paid $5.0 million related to employee taxes for equity award vestings in 2019 compared to $0.6 million and $5.1 million in 2018, respectively. Dividends paid to noncontrolling interests amounted to $7.4 million and $5.7 million in 2019 and 2018, respectively. In 2019, we also had $2.8 million of Net proceeds from noncontrolling interest shareholders.

Cash Flows for 2018 Compared with 2017

Operating activities - Net cash provided by operating activities was $468.5 million and $421.5 million for the years ended December 31, 2018 and 2017, respectively. Cash flow from operating activities consisted primarily of net income including noncontrolling interests of $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 2017 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.

Investing activities - Net cash used in investing activities amounted to $246.5 million for ~~the year~~ 2018 compared to $488.2 million in 2017. Aside from net capital expenditures in tooling, equipment and software of $132.1 million and $110.5 million in 2018 and 2017, respectively, we had investing cash flows related to our investments and redemptions in repurchase agreements and short-term investments as 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 also paid $6.4 million in 2018 as additional cash payment related to the 2017 acquisition of R.H. Sheppard, as well as $2.2 million to acquire Asset Trackr, ~~as discussed in Note 22 of Notes to Consolidated Financial 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 - Net cash used by financing activities amounted to $827.1 million for 2018 compared to net cash provided of $260.6 million for 2017. The main driver of this lower net cash flow from financing activities is the $500.0 million

prepayment of the Senior USD Notes and net repayments under the revolving credit facilities 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 of $300.0 million in 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 December 20, 2018.

We received $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 2018 compared to $9.5 million and $4.9 million in 2017, respectively. Dividends paid to noncontrolling interests amounted to $5.7 million and $7.1 million in 2018 and 2017, respectively.

~~Cash~~Senior ~~Flows~~Unsecured ~~for 2017 Compared with 2016~~Debt

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

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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 $382.7 million net of cash acquired for the acquisition of Sheppard, Meritor WABCO and WABCO Automotive South Africa as discussed in Note 22 of Notes to the Consolidated Financial Statements. This is in comparison to 2016 when we paid $92.3 million for the acquisitions of MICO, LCL and Trans-Safety LOCKS.

Financing activities - Net cash provided by financing activities amounted to $260.6 million for 2017 compared to $220.6 million for 2016. The main driver of this higher net cash flow from financing activities is related to lower expenditures for share 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 $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

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(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 November 15, 2016, the Company issued €440.0 million in aggregate principal amount of senior unsecured notes (the Senior EUR Notes), comprised of €190.0 million of 0.84% senior unsecured notes due 2023, €80.0 million of 1.20% senior unsecured notes due 2026 and €170.0 million of 1.36% senior unsecured notes due 2028. The Company paid $1.4 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 July 1, 2017.

On June 25, 2015, the Company issued $500.0 million in aggregate principal amount of senior unsecured notes, ~~comprised~~(the ofSenior ~~$150~~USD ~~million of 2~~Notes).~~83%~~ ~~senior~~The ~~unsecured~~Company ~~notes~~prepaid ~~due~~the ~~2022,~~entire ~~$200~~outstanding ~~million~~principal ofamount ~~3.08%~~on ~~senior~~April ~~unsecured~~30, ~~notes~~2018. ~~due 2025~~ and ~~$150~~recognized ~~million~~a ofloss ~~3.18%~~on ~~senior~~debt ~~unsecured~~extinguishment ~~notes~~of ~~due 2027. The Company paid~~ $2.13 million net of ~~debt~~taxes, ~~issuance~~of ~~costs~~which inthe ~~connection~~pretax ~~with~~amount, ~~these senior unsecured notes~~$2.6 ~~Interest~~million, onwas ~~these~~recorded ~~notes~~in isother ~~payable semi~~non-~~annually~~operating onexpenses ~~January~~in 1the ~~and~~consolidated ~~July~~statement 1 of ~~each year, and commenced on January 1, 2016~~operations.

The proceeds from the Senior USD Notes were utilized to repay outstanding balances on the revolving credit facilities, fund the Company's share repurchase program, finance acquisitions and meet general financing requirements.

On April 30, 2018, the Company prepaid the outstanding principal amount of $500.0 million on the Senior USD Notes, and recognized a loss on debt extinguishment of $2.3 million net of taxes, of which the pretax amount, $2.6 million, was recorded in other non-operating expenses in the consolidated statement of operations.

Credit Facilities

Effective June 28, 2018, the Company amended its existing multi–currency unsecured revolving credit facility, increasing the maximum principal amount of borrowings under the facility from $400 million ~~(the 2015 Facility)~~ to $600 million (the 2018 Facility), with an option to increase up to additional $250.0 million. The 2018 Facility also extended the ~~previously~~ scheduled maturity date of ~~September~~our ~~30,~~revolving ~~2022~~credit ~~for~~facility ~~the 2015 Facility~~ to June 28, 2023, subject to two one–year extension options., ~~Concurrent~~of ~~with~~which ~~entering~~the ~~into~~first ~~the~~one ~~2018~~was ~~Facility,~~exercised ~~the~~on ~~Company~~May ~~also~~28, ~~terminated~~2019 ~~the~~and ~~$100~~extended ~~million~~the ~~multi-currency~~maturity ~~five-year~~date ~~unsecured~~to ~~revolving~~June ~~credit~~28, ~~facility~~2024. ~~(the~~As ~~2014~~of ~~Facility)~~December 31, ~~that~~2019, ~~was~~there ~~due~~were tono ~~expire~~outstanding borrowings on ~~December~~the ~~17,~~revolving ~~2019~~credit facility.

On the effective date of the 2018 Facility, the Company repaid the outstanding balance of €104 million and €52 million under the 2015 Facility and 2014 Facility, respectively, and commenced borrowing under the 2018 Facility. As of December 31, 2018, there were no outstanding borrowings on the revolving credit facilities.

Derivative Instruments and Hedging Activities

The Company designated borrowings under its revolving credit facilities and Senior EUR Notes to partially hedge the foreign currency exposure of its net investment in certain Euro-denominated wholly-owned subsidiaries. As of December 31, ~~2018~~2019 and ~~2017~~2018, the Company designated Euro-denominated loans of €440.0 million (approximately $~~503~~493.65 million at December 31, ~~2018~~2019 exchange rate) and €~~763~~440.0 million (approximately $~~912~~503.06 million at December 31, ~~2017~~2018 exchange rate) as hedges of its net investment in these subsidiaries. For the ~~twelve-month~~years ~~periods~~ ended December 31, ~~2018~~2019 and ~~2017~~2018, the Company recorded a gain of $169.80 million, net of taxes of $42.75 million, and a ~~loss~~gain of $4316.28 million, net of taxes of $254.17 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 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 a default and/or a termination event). Under an ISDA Master Agreement, the 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

We did not engage in any off-balance sheet financial arrangements as of December 31, ~~2018~~2019.

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Contractual Obligations

We had $2632.48 million of streamlining liabilities as of December 31, ~~2018~~2019. While we expect approximately $14.87 million of payments to be made in ~~2019~~2020, we are unable to estimate the timing of all future payments. See Note 6 of Notes to the Consolidated Financial Statements for further discussion.

The following table summarizes our expected cash outflows resulting from our contractual obligations as of December 31, ~~2018~~2019. 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.

	Payments due by period
(Amounts in millions)	Total		~~2019~~2020		~~2020~~2021 and ~~2021~~2022		~~2022~~2023 and ~~2023~~2024		Beyond ~~2023~~2024
Debt obligations (1)	$	~~901~~876.37	$	89.21	$	84218.81	$	~~459~~357.90	$	~~348~~292.45
Lease obligations (2)	~~121~~108.1		3029.14		4335.35		2418.50		2325.2
Purchase obligations (3)	~~270~~225.0		~~270~~225.0		—		—		—
Pension and post-retirement contributions (4)	~~295~~300.80		2627.57		5556.5		5759.56		156.32
Transition tax payable (5)	169.9		16.2		32.4		70.7		50.6
Purchase of distribution rights (5)	265.0		265.0		—		—		—
Total	$	1,758.1	$	351.0	$	216.0	$	612.6	$	578.5
Transition tax payable (6)	157.7		4.0		32.4		70.7		50.6
Total	$	1,932.5	$	560.2	$	342.5	$	505.3	$	524.5

(1) Includes principal and interest payments due on our senior unsecured ~~notes~~debt. For floating rate debt, interest payments were calculated based on the applicable interest rates as of December 31, ~~2018~~2019. Payment obligations denominated in a foreign currency were calculated using the local currency foreign exchange rates in effect at December 31, ~~2018~~2019. See Note 1516 to of Notes to the Consolidated Financial Statements for additional information.

(2) Includes future rental commitments under all non-cancelable operating leases in effect at December 31, ~~2018~~2019.

(3) In the normal course of business we expect to purchase approximately $21.59 billion in ~~2019~~2020 of materials and services, and estimate that on average no more than approximately $~~270~~225.0 million is outstanding at any one time in the form of legally binding commitments. We spent approximately $2.31 billion, $2.03 billion and $12.70 billion on materials and services in ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017, respectively.

(4) Amounts represent undiscounted projected benefit payments over the next ten years and represent our best estimate of future contributions to our pension and post-retirement benefit plans. The expected benefit payments have been estimated based on the same assumptions that were used to measure our accumulated benefit obligation as of December 31, ~~2018~~2019 and include benefits attributable to estimated future service of current employees.

(5) ~~Includes~~Relates ato ~~one-time~~the ~~repatriation~~purchase ~~tax~~of ~~resulting~~the distribution rights from ~~the~~Meritor ~~Tax~~for ~~Cuts~~WABCO ~~and~~aftermarket ~~Jobs~~products ~~Act.~~in ~~The~~the ~~Tax~~United ~~Cuts~~States and ~~Jobs~~Canada. ~~Act~~The ~~permits~~final ~~the~~purchase ~~Company~~price towill ~~pay~~be ~~the~~determined ~~tax~~in ~~liability~~early ~~interest~~2020 ~~free~~and ~~over~~could abe ~~period~~for ofan upamount toless ~~eight~~than ~~years~~$265 million.


⁽⁶⁾	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 ~~2019~~2020, we expect our capital spending to remain at levels consistent with prior year as previously discussed.

Pending Adoptions of Recently Issued Accounting Standards

Refer to Note 3 of Notes to the Consolidated Financial Statements for a complete description of recent accounting standards which we have not yet been required to implement and which may be applicable to our operations.

~~Critical~~ ~~Accounting Policies and Estimates~~ 47

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~~financial~~Critical ~~statements~~Accounting ~~and~~Policies ~~accompanying notes. Those judgments~~ and ~~estimates~~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 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.

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 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, goodwill, 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 majority of our sales are derived from OEM customers. Revenue from the sale of serial production parts that isare produced to industry standards for OEM customers is recognized at a point-in-time when 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 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 included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period.

The 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 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 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 determined the selling price for each deliverable using vendor specific objective evidence (VSOE), if it existed, or third-party evidence (TPE) of selling price. If neither VSOE nor TPE of selling price existed for a deliverable, the best estimate of selling price (BESP) was used for that element. BESP represented the price at which the Company would transact a sale if the element were sold on a standalone basis. The Company 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 was then recognized when the other revenue recognition criteria are met for that element.

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.~~

~~The~~ recoverability of goodwill is performed at the entity level as the Company operates as one reportable segment and one reporting 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. In order to approximate the fair value of the 48

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of reporting unit for purposes of testing recoverability, 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~~implied fair value of that goodwill, ~~the Company will recognize the difference as~~ an impairment loss inshall ~~operating~~be ~~income.~~recognized ~~There~~in ~~has~~an ~~been~~amount noequal ~~impairment~~to ofthat ~~goodwill during 2018, and the Company's goodwill was not at risk for failing the first step of its impairment test~~excess.

The ~~Company~~recoverability ~~expects~~of goodwill is performed at the ~~announced~~entity ~~change~~level toas anthe ~~organizational~~Company ~~structure~~operates ~~managed~~as byone ~~business~~reportable ~~regions~~segment inand ~~2019~~one toreporting ~~impact~~unit. ~~its~~The ~~determination~~plants, ofengineering, ~~its~~technical ~~operating~~support, ~~segments~~distribution centers and other support functions are shared among various product families and serve all distribution channels with many customers. In order to approximate the fair value of the reporting ~~units~~unit for purposes of testing recoverability, ~~and~~the ~~will~~Company ~~also~~uses ~~require~~the total market capitalization of the Company, a market approach, which is then compared to ~~evaluate~~the ~~its~~total ~~goodwill~~book ~~for~~value ~~impairment~~of ~~immediately~~the ~~before~~Company. ~~and~~In ~~after~~the event the ~~implementation~~Company's offair value has fallen below book value, the ~~new~~Company ~~organizational~~will ~~structure~~compare the estimated fair value of goodwill to its book value. ~~There~~If isthe nobook ~~indication~~value ~~that~~of agoodwill ~~change~~exceeds inthe estimated fair value of goodwill, the Company will recognize the difference as an impairment loss in operating ~~segments~~income. orThere ~~reporting~~has ~~units~~been no impairment of goodwill during 2019, and the Company's ~~will~~goodwill ~~have~~was anot ~~material~~at ~~effect~~risk onfor failing the ~~consolidated~~first ~~financial~~step ~~statements~~of its impairment test.

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) to the expected future 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 highly-rated corporate and government securities, the duration of the liability and appropriate judgment. See the disclosures about pension and post-retirement obligations, the composition of plan assets, assumptions and other matters in Note 1415 of Notes to the Consolidated Financial Statements.

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 years. Estimated product warranty expenses are accrued in cost of goods sold 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, 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 sales totaled 01.80% in ~~2018~~2019, 0.98% in ~~2017~~2018 and 0.89% in ~~2016~~2017. We do not expect this percentage to change materially in the near future. See Note 1617 of Notes to the Consolidated Financial Statements for a three-year summary of warranty costs.

~~Business~~Income ~~Combinations~~Taxes - WeOur ~~allocate~~income ~~the~~tax ~~fair~~expense, ~~value~~deferred oftax ~~purchase consideration to the~~ assets ~~acquired,~~and liabilities ~~assumed~~, and ~~non-controlling~~liabilities ~~interests~~for inunrecognized ~~the~~tax ~~acquiree~~benefits ~~generally~~reflect ~~based~~management’s onbest ~~their~~estimate ~~fair~~of ~~values~~current atand ~~the~~future ~~acquisition~~taxes ~~date.~~to ~~The~~be ~~excess~~paid. ofWe ~~the~~are ~~fair~~subject ~~value~~to ofincome ~~purchase~~taxes ~~consideration~~in ~~over~~ the ~~fair~~United ~~value~~States ofand ~~these~~numerous ~~assets~~foreign ~~acquired,~~jurisdictions. ~~liabilities~~Significant ~~assumed~~judgments and ~~non-controlling~~estimates ~~interests~~are required in the ~~acquiree~~determination isof ~~recorded~~the asconsolidated ~~goodwill.~~income ~~When~~tax ~~determining~~expense. ~~the~~The ~~fair~~impact ~~values~~ of ~~assets~~mix ~~acquired,~~of ~~liabilities~~U.S. ~~assumed,~~versus ~~and~~foreign ~~non-controlling~~earnings ~~interests~~may inhave ~~the~~a ~~acquiree,~~material ~~management~~impact ~~makes~~on ~~significant~~the ~~estimates~~effective ~~and~~tax ~~assumptions,~~rate ~~especially~~given ~~with~~that ~~respect~~tax torates ~~intangible assets. Critical estimates~~ in ~~valuing~~certain ~~intangible~~foreign ~~assets~~jurisdictions ~~include,~~(primarily ~~but are not limited to~~Belgium, ~~expected future cash flows~~China, ~~which includes consideration of future growth rates and margins~~Germany, ~~attrition rates~~India, ~~future~~the ~~changes in technology and brand awareness~~Netherlands, ~~loyalty~~Poland and ~~position,~~Switzerland) ~~and~~vary ~~discount~~from ~~rates. Fair value estimates are based on~~ the ~~assumptions~~U.S. ~~management~~statutory ~~believes~~tax arate. ~~market~~See ~~participant~~Note ~~would~~18 ~~use~~of inNotes ~~pricing~~to the ~~asset~~Consolidated orFinancial ~~liability.~~Statements ~~Amounts~~for ~~recorded~~Reconciliation inof aEffective ~~business~~Income ~~combination~~Tax ~~may change during the measurement period,~~ Rate.

Deferred 48income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to

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recover our deferred tax assets in the jurisdiction from which isthey aarise, ~~period~~we ~~not~~consider toall ~~exceed~~available ~~one~~positive ~~year~~and ~~from~~negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the ~~date~~results of ~~acquisition~~discontinued operations and incorporate assumptions about the amount of future state, asfederal, ~~additional~~and ~~information~~foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about ~~conditions~~future ~~existing~~taxable atincome require the ~~acquisition~~use ~~date~~of ~~becomes~~significant ~~available~~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).

Income Taxes - 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 Consolidated Financial Statements for Reconciliation of Effective Income Tax Rate.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to 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 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 tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. ASC 740, Income Taxes states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be 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 is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is 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.

Seasonality

Our operations are directly related to the commercial vehicle industry. We may experience seasonal variations in the demand for our products to the extent that OEM vehicle production fluctuates, such as during July, August and December when North American and European OEM plants may close for summer shutdowns and holiday periods. Shut-down periods in the rest of the world may vary by 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 ~~2018~~2019, the potential maximum loss in earnings is estimated to be $1912 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 2021 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 1516 of Notes to the Consolidated Financial Statements for further discussion of our debt.

At December 31, ~~2018~~2019, we had an aggregate outstanding debt balance of $~~845~~828.23 million of which $~~171~~168.72 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~~2019, 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~~2019, 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 $1.31 million. As of December 31, ~~2018~~2019, 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~~2019, we also had $~~639~~959.64 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~~2019, a 1% change of the interest rates would have the effect of increasing or decreasing net interest income by approximately $79.06 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 ~~2018~~2019 commodity exposure, the potential maximum loss in earnings is estimated to be $2319.18 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

To the Shareholders and the Board of Directors of WABCO Holdings Inc.

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, ~~2018~~2019 and ~~2017~~2018, the related consolidated statements of operations, comprehensive income;, shareholders' equity and cash flows for each of the three years in the period ended December 31, ~~2018,~~2019 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~~2019 and ~~2017~~2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2018~~2019, 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~~2019, 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 1521, ~~2019~~2020 expressed an unqualified opinion thereon.

~~Basis~~Change ~~for~~in ~~opinion~~Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leasing transactions as of January 1, 2019 due to the adoption of Accounting Standard Update (ASU) 2016-02 Leases (Topic 842) and related amendments.

Basis for Opinion

These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company‘s financial statements 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 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, 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 regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~Ernst~~Critical &Audit ~~Young Bedrijfsrevisoren BCVBA/Réviseurs d’Entreprises SCCRL~~Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Determination of the Discount Rates Used in Defined Benefit Pension Obligation



Description of the Matter		The Company's aggregate defined benefit pension obligation was $1,006.3 million as of December 31, 2019. As described in Note 15 to the consolidated financial statements, the weighted average discount rate used in estimating the net defined benefit pension plan obligation as of December 31, 2019, was 1.21%. The discount rate is estimated using indices including highly-rated bonds matching the duration of the liability. Given the significance of the pension obligation and its sensitivity to a change in the weighted average discount rate, performing audit procedures to evaluate management’s selected discount rates for the individual pension plans, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.
How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s determination of the discount rates used. For example, we tested controls over management’s review of the appropriateness of the model used to develop the discount rates and the indices selected, the duration used, and its approval of the discount rate. To determine the appropriateness of the discount rates used in estimating the net defined benefit pension plan obligation, we involved our actuarial specialists to assist us to perform our audit procedures. These procedures included, amongst others, evaluating management’s methodology used to develop the discount rates for consistency with prior periods. We assessed the appropriateness of the discount rates selected by management by benchmarking against discounts rates independently developed by our actuarial specialist. This included consideration of bond indices that reflect the duration of the benefit payments. We also compared the projected cash flows to the prior year projections and compared the current year benefits paid to the prior year projected cash flows.

Unrecognized Tax Benefits



Description of the Matter		As discussed in Note 18 to the consolidated financial statements, the Company had unrecognized tax benefits (including accrued interest) as of December 31, 2019 amounting to $35.3 million. The Company conducts its business globally and, as a result, is subject to audit by local taxing authorities for its various global subsidiaries and the resolution of such audits may span multiple years. Uncertainty in a tax position may arise because tax laws are complex and subject to varied interpretation. Accordingly, the ultimate outcome with respect to tax positions may differ from the amounts recognized. The Company uses significant judgment to determine whether, based on the technical merits, a tax position is more likely than not to be sustained. Auditing management’s analysis of the Company’s unrecognized tax benefits and the related impact on the income tax expense and liability is challenging because the analysis is complex and involves significant management judgment and estimation, requiring a high degree of auditor judgment in evaluating the Company’s interpretation of, and compliance with, tax laws across its multiple subsidiaries. Each unrecognized tax benefit involves unique facts and circumstances and multiple potential outcomes that must be evaluated for multiple jurisdictions. There are many uncertainties around initial recognition including regulatory changes, litigation and examination activity.

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How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls that address the risks of material misstatement relating to unrecognized tax benefits. For example, we tested controls over management’s identification of various unrecognized tax benefits, its assessment and interpretation of tax laws, its evaluation of which tax positions may not be sustained upon audit and projected outcome upon examination by the tax authorities. Our audit procedures included, among others, evaluating the assumptions the Company used to determine its unrecognized tax benefits by jurisdiction. We tested the completeness and accuracy of the underlying data used by the Company to calculate its tax positions. We also assessed the historical accuracy of management’s estimates of its unrecognized tax benefits by comparing the estimates with the resolution of the related positions or upon completion of the audit by the income tax authorities. In addition, we involved our tax professionals to assist us to evaluate the Company’s interpretation and application of relevant tax laws and regulations in the Company’s various jurisdictions in determining their unrecognized tax benefits. We also evaluated management’s disclosures about its unrecognized tax benefits.

/s/ EY Bedrijfsrevisoren BV/Réviseurs d’Entreprises SRL

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

Diegem, Belgium

February 1521, ~~2019~~2020

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WABCO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
(Amounts in millions, except share and per share data)	~~2018~~2019			~~2017~~2018			~~2016~~2017
Sales	$	3,~~831~~421.04		$	3,~~304~~831.20		$	23,~~810~~304.02
Cost of sales	2,~~658~~429.54			2,~~290~~658.45			12,~~931~~290.04
Gross profit	~~1,172~~992.50			1,~~013~~172.85			~~879~~1,013.08
Costs and expenses:
Selling and administrative expenses	~~476~~463.02			~~411~~476.20			~~356~~411.62
Research, development and engineering expenses	~~184~~193.42			~~147~~184.04			~~135~~147.20
Other operating (income)/expense, net	(01.45		)	20(0.64		)	520.36
Operating income	~~512~~337.51			~~435~~512.05			~~381~~435.90
Equity income of unconsolidated joint ventures, net	12.0			~~23.~~1.0			2423.81
Gain on remeasurement of equity investments	—			~~247.7~~—			—247.7
Other non-operating expense, net	(4226.32		)	(3742.23		)	(2437.92		)
Interest expense, net	(70.51		)	(167.05		)	(1216.70		)
Income before income taxes	~~463~~312.78			~~652~~463.67			~~369~~652.16
Income tax expense	4953.34			~~229~~49.73			~~121~~229.87
Net income including noncontrolling interests	~~414~~259.4			~~422~~414.94			~~247~~422.39
Less: net income attributable to noncontrolling interests	2013.36			1620.83			2416.38
Net income attributable to Company	$	~~394~~245.18		$	~~406~~394.1		$	~~223~~406.01
Net income attributable to Company per common share
Basic	$	74.4680		$	7.5346		$	47.0053
Diluted	$	74.4378		$	7.5043		$	37.9850
Cash dividends per share of common stock	$	—		$	—		$	—
Weighted average common shares outstanding
Basic	5251,~~846~~242,~~962~~913			5352,~~903~~846,~~938~~962			5553,~~695~~903,~~738~~938
Diluted	5351,~~062~~398,~~573~~548			5453,~~139~~062,~~815~~573			5554,~~981~~139,~~816~~815

See Notes to the Consolidated Financial Statements.

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WABCO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Year Ended December 31,
(Amounts in millions)	~~2018~~2019			~~2017~~2018			~~2016~~2017
Net income including noncontrolling interests	$	~~414~~259.4		$	~~422~~414.94		$	~~247~~422.39
Other comprehensive (loss)/income:
Currency translation adjustments	(719.25		)	~~154~~(71.2		)	~~(55~~154.02		)
Pensions and post-retirement benefit plan adjustments, net	5(48.03		)	~~(38~~5.0		)	(1538.90		)
Unrealized gains on hedges, net	~~0.8~~—			0.28			0.2
Unrealized losses on investments, net	—			~~(0.1~~—		)	—(0.1		)
Total other comprehensive (loss)/income	$	(6557.48	)	$	~~116~~(65.34	)	$	~~(70~~116.73	)
Comprehensive income	$201.6	~~349.0~~		$349.0	~~539.2~~		$539.2	~~176.6~~
Less: Comprehensive income attributable to noncontrolling interests	1412.41			2014.34			2320.03
Comprehensive income attributable to Company	$	~~334~~189.65		$	~~518~~334.96		$	~~153~~518.69

See Notes to the Consolidated Financial Statements.

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WABCO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31, 2018			December 31, 2017
	December 31, 2019			December 31, 2018
(Amounts in millions, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	~~503~~891.8		$	~~1,141~~503.58
Short-term investments	~~135~~67.86			0135.68
Accounts receivable, net	~~611~~523.53			~~669~~611.25
Inventories, net	~~319~~292.19			~~321~~319.41
Guaranteed notes receivable	4435.10			3944.71
Investments in repurchase agreements	~~85.8~~—			~~137~~85.58
Other current assets	96103.87			8496.38
Total current assets	1,~~796~~914.93			21,~~394~~796.29
Property, plant and equipment, net	~~553~~593.60			~~522~~553.36
Goodwill	809.4			834.7
Operating lease right-of-use assets	100.8			—
Deferred tax assets	236.7			211.1
Goodwill	802.5			809.4
Investments in unconsolidated joint ventures	10.4			6.5
Deferred tax assets	275.0			236.7
Intangible assets, net	246.6			266.6
Investments in unconsolidated joint ventures	11.5			10.4
Other assets	85.0			88.0
Intangible assets, net	226.9			246.6
TOTAL ASSETS	$	3,738.6		$	4,323.4
Other assets	113.1			85.0
TOTAL ASSETS	$	4,037.1		$	3,738.6
LIABILITIES AND EQUITY
Current liabilities:
Loans payable to banks	$	—		$	~~386.5~~—
Accounts payable	~~232~~185.50			~~258~~232.15
Accrued payroll	~~111~~108.23			~~130~~111.42
Current portion of warranties	2328.31			2923.53
VAT payable	1511.74			1815.27
Accrued expenses	7368.87			8173.68
Promotion and customer incentives	2624.68			2426.36
Accrued income tax	2824.21			5628.2
Other accrued liabilities	84121.71			8884.57
Total current liabilities	~~596~~571.05			~~1,073~~596.30
Long-term debt	~~845~~828.23			~~1,023~~845.32
Pension and post-retirement benefits	716.0			700.7
Operating lease liabilities	74.2			—
Deferred tax liabilities	75.4			75.3
Pension and post-retirement benefits	821.8			716.0
Long-term income tax liabilities	156.8			166.8
Deferred tax liabilities	71.2			75.4
Other liabilities	84.0			82.9
Long-term income tax liabilities	156.9			156.8
Total liabilities	2,473.4			3,122.3
Other liabilities	77.1			84.0
Total liabilities	2,601.0			2,473.4
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: 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
Common stock, $.01 par value, 400,000,000 shares authorized; shares issued: 79,147,135 in 2019; 79,018,266 in 2018; and shares outstanding: 51,267,324 in 2019; 51,364,925 in 2018	0.8			0.8
Capital surplus	~~898~~902.51			~~883~~898.25
Treasury stock, at cost: 27,653,341 shares in 2018; 25,202,342 shares in 2017	(2,159.3		)	(1,861.3		)
Treasury stock, at cost: 27,879,811 shares in 2019; 27,653,341 shares in 2018	(2,186.3		)	(2,159.3		)
Retained earnings	23,~~960~~212.83			2,~~563~~960.28
Accumulated other comprehensive loss	(~~524~~588.07		)	(~~464~~524.50		)
Total shareholders’ equity	1,~~176~~340.82			1,~~121~~176.48
Noncontrolling interests	8895.49			7988.74
Total equity	1,~~265~~436.21			1,~~201~~265.12
TOTAL LIABILITIES AND EQUITY	$	34,~~738~~037.61		$	43,~~323~~738.46

See Notes to the Consolidated Financial Statements.

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WABCO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
(Amounts in millions)	~~2018~~2019			~~2017~~2018			~~2016~~2017
Operating activities:
Net income including noncontrolling interests	$	~~414~~259.4		$	~~422~~414.94		$	~~247~~422.39
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	95.81			8495.8			7684.08
Impairment of non-marketable equity securities	5.5			—			—
Change in fair value of non-marketable equity securities	(2.2		)	5.5			—
Amortization of intangibles	28.95			2228.39			22.03
Equity in earnings of unconsolidated joint ventures, net of dividends received	~~(1.~~0.3		)	0(1.80		)	30.98
Non-cash stock compensation	209.02			1620.40			1316.14
Non-cash interest expense and debt issuance cost amortization	159.49			2315.14			1723.71
Deferred income tax (benefit)/expense	(23.6		)	(48.2		)	68.3
Deferred income tax benefit	(19.4		)	(23.6		)	(48.2		)
Pensions and post-retirement benefit expense	62.2			57.5			44.2
Pension and post-retirement benefit expense	64.7			62.2			57.5
Gain on remeasurement of equity investments	—			~~(247.7~~—		)	—(247.7		)
Foreign currency effects on changes in monetary assets/liabilities	(20.3		)	(62.83		)	(56.58		)
Unrealized loss/(gain) on revaluation of foreign currency forward contracts	2.5			(1.7		)	1.1
Unrealized (gain)/loss on revaluation of foreign currency forward contracts	(0.4		)	2.5			(1.7		)
Loss on debt extinguishment	~~2.3~~—			—2.3			—
Other	21.87			02.68			0.86
Changes in assets and liabilities:
Accounts receivable, net	2779.52			~~(64~~27.35		)	(6164.53		)
Inventories, net	~~(13~~21.42		)	(1613.04		)	(316.90		)
Accounts payable	(2343.82		)	5(23.48		)	215.74
Other accrued liabilities and taxes	(~~66.~~8.6		)	12(66.68		)	6612.46
Other current and long-term assets	(4027.58		)	27(40.45		)	~~(38~~27.84		)
Other long-term liabilities	(114.51		)	~~157~~(11.15		)	~~(45~~157.81		)
Pension and post-retirement benefit contributions	(2523.9		)	(2425.79		)	(2124.67		)
Net cash provided by operating activities	~~468~~439.59			~~421~~468.5			~~405~~421.45
Investing activities:
Purchases of property, plant and equipment	(~~118~~144.28		)	(~~104~~118.72		)	(104.07		)
Investments in capitalized software	(138.98		)	(513.89		)	(105.08		)
Proceeds from disposal of property, plant and equipment	—			—			7.0
Purchases of short-term investments and repurchase agreements	(746.5		)	(687.2		)	(535.2		)
Purchases of short-term investments and repurchase agreements	(687.2		)	(535.2		)	(324.6		)
Sales and maturities of short-term investments and repurchase agreements	891.9			585.2			548.4
Sales and maturities of short-term investments and repurchase agreements	585.2			548.4			273.0
Cost of preferred stock investment	—			—			(10.0		)
Cost of preferred stock investment	—			(10.0		)	(0.9		)
Return of investment in unconsolidated joint venture	—			—			1.8
Return of investment in unconsolidated joint venture	—			1.8			—
Investment in unconsolidated joint ventures	(1.8		)	(3.8		)	—
Investment in unconsolidated joint ventures	(3.8		)	—			—
Acquisitions of businesses, net	(0.4		)	(8.6		)	(382.7		)
Acquisitions of businesses, net	(8.6		)	(382.7		)	(92.3		)
Net cash used by investing activities	(10.4		)	(246.5		)	(488.2		)
Net cash used by investing activities	(246.5		)	(488.2		)	(251.8		)
Financing activities:
Borrowings of long-term debt	~~368.5~~—			25368.35			~~730~~25.13
Repayments of long-term debt	~~(500.0~~—		)	(25500.0		)	(~~261~~25.0		)
Net (repayments)/borrowings of short-term debt	(385.4		)	382.5			(4.9		)
Net borrowings/(repayments) of short-term debt	—			(385.4		)	382.5
Settlement of forward contract	—			~~(0.3~~—		)	15(0.23		)
Taxes withheld and paid on employee stock award vestings	(5.10		)	(45.91		)	(64.09		)
Purchases of treasury stock	(~~300~~30.06		)	(~~120~~300.0		)	(~~250~~120.0		)
Proceeds from noncontrolling interest shareholders	—			0.6			—
Proceeds from noncontrolling interest shareholders, net	2.8			—			0.6
Dividends to noncontrolling interest holders	(5.7.4		)	(75.17		)	(6.7.1		)
Proceeds from exercise of stock options	01.62			90.56			3.9.5
Net cash (used)/provided by financing activities	(~~827~~39.10		)	~~260~~(827.61		)	~~220~~260.6
Effect of exchange rate changes on cash and cash equivalents	(~~32.~~2.4		)	85(32.12		)	~~(26~~85.91		)
Net (decrease)/increase in cash and cash equivalents	(637.3		)	279.0			347.3
Net increase/(decrease) in cash and cash equivalents	388.1			(637.3		)	279.0
Cash and cash equivalents at beginning of period	~~1,141~~504.52			~~862~~1,141.5			~~515~~862.25
Cash and cash equivalents at end of period	$	~~504~~892.23		$	~~1,141~~504.52		$	~~862~~1,141.5

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	Year Ended December 31,
(Amounts in millions)	~~2018~~2019		~~2017~~2018		~~2016~~2017
Supplemental cash flow disclosures
Cash paid during the period for:
Interest	$	209.02	$	20.0	$	1620.50
Income taxes	$89.1	~~109.0~~	$109.0	~~64.1~~	$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	)
Increase in capital expenditures included in accounts payable and other accrued liabilities	$	2.4	$	13.8	$	1.8
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets:
Cash and cash equivalents	$	~~503~~891.8	$	~~1,141~~503.58	$	~~862~~1,141.5
Restricted cash, included in other assets	0.45		—0.4		—
Cash, cash equivalents and restricted cash at end of period	$	~~504~~892.23	$	~~1,141~~504.52	$	~~862~~1,141.5

See Notes to the Consolidated Financial Statements.

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WABCO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Amounts in millions)	CommonStock		CapitalSurplus			TreasuryStock			RetainedEarnings			Accumulated Other Comprehensive Loss			Non Controlling Interests			Total
Balance at December 31, 2015	$	0.8	$	852.6		$	(1,497.3	)	$	1,938.5		$	(507.9	)	$	49.6		$	836.3
Net income	—		—			—			223.0			—			24.3			247.3
Other comprehensive loss	—		—			—			—			(69.4		)	(1.3		)	(70.7		)
Treasury stock purchased	—		—			(250.0		)	—			—			—			(250.0		)
Stock options exercised	—		3.9			—			—			—			—			3.9
Treasury stock reissued	—		(2.9		)	2.9			—			—			—			—
Stock-based compensation	—		7.6			—			(0.4		)	—			—			7.2
Dividends paid	—		—			—			—			—			(6.7		)	(6.7		)
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
Adoption of ASU 2016–16	—		—			—			5.3			—			—			5.3
Net income	—		—			—			394.1			—			20.3			414.4
Other comprehensive loss	—		—			—			—			(59.5		)	(5.9		)	(65.4		)
Treasury stock purchased	—		—			(300.0		)	—			—			—			(300.0		)
Stock options exercised	—		0.6			—			—			—			—			0.6
Treasury stock reissued	—		(0.2		)	2.0			(1.8		)	—			—			—
Stock-based compensation	—		14.9			—			—			—			—			14.9
Dividends paid	—		—			—			—			—			(5.7		)	(5.7		)
Balance at December 31, 2018	$	0.8	$	898.5		$	(2,159.3	)	$	2,960.8		$	(524.0	)	$	88.4		$	1,265.2
Adoption of ASU 2018-02	—		—			—			8.4			(8.4		)				—
Net income	—		—			—			245.8			—			13.6			259.4
Other comprehensive loss	—		—			—			—			(56.3		)	(1.5		)	(57.8		)
Treasury stock purchased	—		—			(30.6		)	—			—			—			(30.6		)
Stock options exercised	—		0.3			—			—			—			—			0.3
Treasury stock reissued	—		—			3.6			(2.7		)	—			—			0.9
Stock-based compensation	—		4.2			—			—			—			—			4.2
Dividends paid	—		—			—			—			—			(7.4		)	(7.4		)
Changes in ownership of noncontrolling interests	—		(0.9		)	—			—			—			(1.1		)	(2.0		)
Proceeds from minority interest shareholders	—		—			—			—			—			3.9			3.9
Balance at December 31, 2019	$	0.8	$	902.1		$	(2,186.3	)	$	3,212.3		$	(588.7	)	$	95.9		$	1,436.1

See Notes to the Consolidated Financial Statements.

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WABCO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, ~~2018~~2019


NOTE 1.	Description of Company

WABCO Holdings Inc. and its subsidiaries (collectively "WABCO," "Company," "we," or "our") engineer, develop, manufacture and sell integrated systems controlling advanced braking, stability, suspension, steering, transmission automation, as well as air compression and processing primarily for commercial vehicles. WABCO’s largest selling products are pneumatic 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 two groups of customers around the world: original equipment manufacturers (OEMs) including truck and bus, trailer, car and off-highway, and commercial vehicle aftermarket distributors of replacement parts and services as well as commercial vehicle fleet operators for management solutions and services. We also provide remanufacturing services globally.

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 two groups of customers around the world: original equipment manufacturers (OEMs) including truck and bus, trailer, car and off-highway, and commercial vehicle aftermarket distributors of replacement parts and services as well as commercial vehicle fleet operators for management solutions and 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.

On March 28, 2019, WABCO entered into an Agreement (the Merger Agreement) and Plan of Merger with ZF Friedrichshafen AG (ZF), a stock corporation organized and existing under the laws of the Federal Republic of Germany, and Verona Merger Sub Corp., a Delaware corporation and indirect wholly owned subsidiary of ZF, pursuant to which ZF will acquire 100% of the issued and outstanding shares of WABCO common stock (the Merger). The Merger Agreement was adopted by WABCO’s shareholders at the June 27, 2019 special meeting of shareholders, whereby holders representing 68.4% of the Company’s outstanding shares voted in favor of adopting the Merger Agreement. The European Commission and the United States Department of Justice cleared the Merger on January 23, 2020. In connection with the Department of Justice's review of the Merger, WABCO is divesting the Company's steering components business, R.H. Sheppard Co., Inc., for which the Company entered into a definitive agreement to sell on January 30, 2020. The consummation of the Merger remains subject to customary closing conditions and remaining regulatory approvals. The Company has incurred $18.0 million of Merger related costs for the year ended December 31, 2019 primarily for legal and financial advisory services that are included in selling, general and administrative expenses.


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 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. The more significant estimates included in the preparation of the consolidated financial statements are related to revenue recognition, ~~useful lives and~~ recoverability of long-lived assets, warranties, pension and post-retirement benefits, ~~valuation of equity investments~~goodwill, income taxes, ~~provisions~~non-marketable ~~for~~equity ~~loss~~investments ~~contingencies,~~and ~~business~~provisions ~~combinations~~for ~~and~~loss ~~stock-based compensation~~contingencies.

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 on the consolidated balance sheets. Certain prior period~~

~~amounts~~ in the consolidated statement of cash flows have been reclassified to 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.61

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 chief operating decision

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~~maker.~~of ~~The~~accounting ~~financial~~and ~~reporting~~reflected toas ~~the~~investments ~~Company's~~in ~~chief~~unconsolidated ~~operating~~joint ~~decision~~ventures ~~maker~~on ~~has~~the ~~remained~~consolidated ~~unchanged~~balance assheets. ofCertain ~~December 31,~~amounts ~~2018~~in ~~and~~the asprior ofyear's ~~the~~financial ~~filing~~statement ~~date~~footnotes ofhave ~~February~~been ~~15,~~reclassified ~~2019.~~to ~~See~~conform ~~also~~with ~~Note~~the 19current ~~for~~year ~~discussion~~presentation.

Reportable Segment - The Company announced a new organizational structure in the prior year managed by business region, whereby the Company was in the implementation phase of this new structure including defining its revised internal reporting to the chief operating decision maker. These changes to the Company's internal reporting have been suspended due to the Merger discussed in Note 1 and the financial reporting to the Company's chief operating decision maker remains unchanged from prior year. Based on the organizational structure of the Company, as well as the nature of financial information available and reviewed by the 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, 2019.

Foreign Currency Translation - Adjustments resulting from the translation of foreign 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 as a component of accumulated other comprehensive 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 other non-operating income or expense.

Revenue Recognition - 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 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 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 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 consideration that the Company expects to receive in exchange for transferring the promised goods or services to the customer 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 LTSA, in which case, the 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 are subject to Value Added Tax (VAT). Sales are presented net of VAT in the consolidated statements of 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

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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 applying the relative selling price method, the Company determines the selling price for each deliverable using vendor specific objective evidence (VSOE), if it exists, or third-party evidence (TPE) of selling price. If neither VSOE nor TPE of selling price exist for a deliverable, the best estimate of selling price (BESP) 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.

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~~Rebates~~deliverable using vendor specific objective evidence (VSOE), if it exists, or third-party evidence (TPE) of selling price. If neither VSOE nor TPE of selling price exist for a deliverable, the best estimate of selling price (BESP) 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 ~~sales~~geographies. ~~incentives~~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 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 $5144.83 million, $4851.68 million and $5348.86 million in ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017, respectively, in the accompanying consolidated statements of operations.

Cash and Cash Equivalents - Cash equivalents include all highly liquid investments with maturity of three months or less when purchased. Restricted cash balances are classified as either other current assets or other assets, depending upon the nature of the restriction.

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 Company classifies its marketable investments as either short-term or long-term based on the contractual maturity of each underlying instrument, its availability of use in current operations and the Company's holding intention. 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 investments in marketable securities is recorded in other non–operating expense, net in the consolidated statement of operations. As of December 31, ~~2018~~2019, the Company had marketable securities of $~~135~~67.86 million classified as short-term investments and $2.8 million included in other assets on the consolidated balance sheets. As of December 31, ~~2017~~2018, the Company had marketable securities of $0135.68 million classified as short-term investments and ~~had~~ $2.98 million included in other assets on the consolidated balance sheets.

The Company monitors its marketable securities for 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~~2019, ~~2017~~2018 or ~~2016~~2017.

Accounts receivable, net - Accounts receivable are recorded at invoiced amounts less the allowance for doubtful accounts.The Company performs ongoing credit evaluations of its customers and records an allowance to reduce receivables to the amount reasonably expected to be collected. In determining the allowance for doubtful accounts 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 $1012.73 million and $910.47 million at December 31, ~~2018~~2019 and ~~2017~~2018, respectively.

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 receive customer notes in settlement of accounts receivable, primarily in the Asia Pacific region. The collection of such customer notes receivables are included in operating cash flows based on the substance of the underlying transactions, which are operating in nature. Notes receivable held by the Company that are secured by bank guarantees are classified as guaranteed note receivable. The Company also accepts unsecured notes in settlement of accounts receivable from certain customers. Notes receivable may be held by the 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~~2019 and ~~2017~~2018, there was $4435.10 million and $3944.71 million of guaranteed notes receivable outstanding, respectively, and $2.21 million and $32.32 million of unguaranteed notes receivable outstanding, respectively. See Note 1213 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.

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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.

Inventories, net - Inventories are stated at the lower of cost or 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 that provides for the better matching of 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 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 and 5 to 15 years for machinery and equipment. Tooling may be depreciated over its estimated useful life from 2 to 10 years using the straight–line method or units of production methods.

~~Equity~~Leases ~~Method~~- ~~and~~The ~~Non-Marketable~~Company ~~Investments~~has -operating ~~The~~leases ~~Company~~for ~~uses~~warehouses, ~~the~~corporate ~~equity~~offices, ~~method~~cars, offorklifts ~~accounting~~and ~~for~~certain ~~equity~~equipment. ~~investments~~On inJanuary ~~instances~~1, ~~where~~2019, the Company ~~has~~adopted the ~~ability~~accounting toand ~~exercise~~transition ~~significant~~guidance ~~influence,~~in ~~but~~ASC ~~does~~842 ~~not~~for ~~have~~its aoperating ~~controlling~~leases ~~financial~~resulting ~~interest.~~in ~~The~~the ~~proportionate~~recognition ~~share~~ of ~~income~~operating orlease ~~losses~~right-of-use ~~from~~(ROU) ~~investments~~assets ~~accounted~~and ~~for~~lease ~~under~~liabilities ~~the~~on ~~equity method is recorded in~~ the ~~consolidated~~effective ~~statements of operations~~date. The ~~carrying~~Company ~~value~~measures ofROU ~~equity~~assets ~~method~~throughout ~~investments~~the oflease ~~$10.4~~term ~~million~~at ~~and~~the ~~$6.5~~carrying ~~million~~amount atof ~~December 31,~~the ~~2018~~lease ~~and 2017~~liability, ~~respectively,~~plus isinitial ~~reported~~direct incosts, ~~the~~plus ~~consolidated~~(minus) ~~balance~~any ~~sheets~~prepaid as(accrued) ~~investments~~lease ~~in unconsolidated joint ventures~~payments, ~~and~~less ~~is adjusted for~~ the ~~Company's~~unamortized ~~proportionate~~balance ~~share~~ of ~~net~~lease ~~earnings~~incentives ~~and losses, as well as dividends~~received. The ~~Company~~lease ~~evaluates~~liabilities ~~its~~are ~~equity~~measured ~~method~~at ~~investments~~the ~~for~~present ~~impairment whenever events or changes in circumstances indicate a loss in~~ value of the ~~investment~~unpaid ~~may~~lease bepayments ~~other~~at ~~than temporary. This evaluation considers~~ the ~~investee~~lease ~~financial~~commencement ~~condition~~date. asLeases ~~well~~that asinclude ~~investee~~both ~~historical~~lease and ~~projected~~non-lease ~~results~~components ofare ~~operations~~accounted ~~and cash flows. If the actual outcomes~~ for anas ~~investee~~a ~~are~~single ~~significantly~~lease ~~different~~component ~~from projections, the Company may impair its investment. See Note 18~~ for ~~additional~~each ~~information~~asset ~~on equity method investments~~class.

~~Prior~~The tominimum ~~the~~payments ~~adoption~~under ofoperating ~~ASU~~leases ~~2016–01~~are ~~discussed~~recognized inon ~~Note~~a 3,straight-line ~~the~~basis ~~Company~~over ~~used~~ the ~~cost~~lease ~~method~~term toin ~~account~~the ~~for~~consolidated ~~non-marketable~~statements ~~equity~~of ~~investments~~operations. ~~for~~Operating ~~which~~lease itexpenses ~~does~~related ~~not control and for which it does not have the ability~~ to ~~exercise~~variable ~~significant~~lease ~~influence~~payments ~~over~~are ~~the~~recognized ~~entity's~~in ~~operating~~cost ~~and financial policies. Upon adoption~~ of ~~ASU~~sales ~~2016–01,~~or ~~the~~as ~~Company~~operating ~~has~~expenses ~~elected the measurement alternative for its investments~~ in ~~equity securities without~~ a ~~readily~~manner ~~determinable~~consistent ~~fair~~with ~~value. Under~~ the ~~measurement~~nature ~~alternative,~~of the ~~Company~~underlying ~~measures~~lease ~~its~~and ~~non-marketable~~as ~~investments~~the atevents, ~~cost~~activities, ~~less impairment and adjusted for observable price changes for identical~~ or ~~similar~~circumstances ~~investments~~in of the ~~investee.~~lease Atagreement ~~each~~occur. ~~reporting~~Leases ~~period~~with ~~the Company performs~~ a ~~qualitative~~term ~~assessment,~~of ~~considering~~less ~~impairment~~than ~~indicators,~~12 tomonths ~~evaluate whether its non–marketable investments~~ are ~~impaired.~~not Ifrecognized on the ~~fair~~consolidated ~~value~~balance ofsheets aand ~~non–marketable~~the ~~investment~~related islease ~~less~~expenses ~~than~~are ~~its carrying value, an impairment loss is~~ recognized in anthe ~~amount~~consolidated ~~equal~~statements toof ~~the~~operations ~~difference~~on ~~between~~a ~~the~~straight-line ~~fair~~basis ~~value~~over ~~and~~ the ~~carrying~~lease ~~value.~~term ~~See~~and ~~Note~~are 21recorded ~~for~~as ~~additional~~operating ~~information on non–marketable investments~~expenses.

The accounting for leases requires management to exercise judgment and make estimates in determining the applicable discount rate, lease term and payments due under a lease. If a lease does not provide an implicit rate, the Company uses the incremental borrowing rate to determine the present value of future lease payments. The incremental borrowing rate is applied to leases on a portfolio basis and is determined from a rate for borrowings with a term equal to one-half the total lease term and an amount equal to the total minimum lease payments. A Euro (EUR) and United States Dollar (USD) quote are used because these currencies represent the majority of the lease population.

The lease term includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not terminate) that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) a lease controlled by the lessor. The Company has leases with a lease term ranging from 1 year to 15 years. Lease payments are generally comprised of fixed payments including in-substance fixed payments, payments that depend on an index or rate, any amounts payable under residual value guarantees, as well as any exercise price for a Company option to purchase the underlying asset if it is reasonably certain the Company will exercise the option. The Company generally does not provide residual value guarantees.

The operating leases of the Company do not contain major restrictions or covenants such as those relating to dividends or additional financial obligations. Finance leases and income related to subleasing are immaterial to the consolidated financial statements. There were no lease transactions with related parties as of December 31, 2019.

Equity Method and Non-Marketable Investments - The Company uses the equity 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. The carrying value of equity method investments of $11.5 million and $10.4 million at December 31, 2019 and 2018, 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

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evaluates its equity method investments for impairment whenever events or changes in circumstances indicate a loss in value of the investment may be other than temporary. This evaluation considers the investee financial condition as well as investee historical and projected results of operations and cash flows. If the actual outcomes for an investee are significantly different from projections, the Company may impair its investment. See Note 19 for additional information on equity method investments.

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 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 22 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 of 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 - 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 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 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 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.

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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 performed at the entity level as the Company operates as one reportable segment and one reporting 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. 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 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.

Intangible Assets, net - Intangible assets with determinable lives consist of customer and distribution relationships, patented and unpatented technology, in-process research and development, and other intangibles that are amortized on a straight-line basis over their estimated useful lives, ranging from 1 to 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 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, 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 0.8% in 2018, 0.9% in 2017 and 0.8% in 2016. See Note 16 for additional information on warranties.

~~Pension~~ and Post-retirement Benefits - Pension and 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 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. All pension and post-retirement benefits are accounted for on an accrual basis using actuarial assumptions. WABCO measures the defined benefit and post-retirement plan assets and obligations for purposes of determining their funded status as of the end of the Company's fiscal year, and recognizes changes in the funded status 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. 66

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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, 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% in 2019, 0.8% in 2018 and 0.9% in 2017. See Note 17 for additional information on warranties.

Pension and Post-retirement Benefits - Pension and 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 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. All pension and post-retirement benefits are accounted for on an accrual basis using actuarial assumptions. WABCO measures the defined benefit and post-retirement plan assets and obligations for purposes of determining their funded status as of the end of the Company's fiscal year, and recognizes changes in the funded status 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 15 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.

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–	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~~2019 and ~~2017~~2018, the carrying amount of cash, accounts receivable, accounts payable and short-term borrowings approximated their 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 was determined to approximate fair value based on observable Level 2 inputs. The fair value of short-term investments and 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 derivative assets and liabilities at fair value on the consolidated 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 consolidated balance sheets. The change in fair value of foreign currency contracts that are not designated as hedging instruments are recorded to the same line item as the hedged item, as non–operating expense/income in the consolidated statements of operations. See Note 1921 for additional information on derivative instruments.

Research, Development and Engineering Expenses - Research, development and engineering costs include research activities, product development and product engineering, and are expensed as incurred. Research, development and engineering costs were approximately $~~184~~193.42 million in ~~2018~~2019, $~~147~~184.04 million in ~~2017~~2018 and $~~135~~147.20 million in ~~2016~~2017.

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Business Combinations - 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, 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 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.

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.

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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.

	Year Ended December 31,
	2018	2017	2016
	2019	2018	2017
Weighted average incremental shares included in diluted EPS	~~215~~155,~~611~~635	~~235~~215,~~877~~611	~~286~~235,~~078~~877
Shares excluded due to anti-dilutive effect on earnings per share	70—	~~1,626~~70	~~472~~1,626

Comprehensive Income - Comprehensive income consists of net income, foreign currency translation adjustments (including translation on intercompany transactions of a long-term investment 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 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. 68

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There were no stock options granted to employees during the years ended December 31, 2019, 2018 or 2017. 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 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 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 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.

NOTE 3. Recently Issued Accounting Standards

Recently Adopted Accounting Standards

In ~~August~~June 2018, the FASB issued ASU 2018-1507 ~~Intangibles~~ Compensation-Stock ~~Goodwill~~Compensation ~~and~~(ASC ~~Other-Internal-Use~~718), ~~Software~~to ~~which~~simplify ~~aligns~~the accounting for share–based payments granted to nonemployees by aligning the accounting with the requirements for ~~capitalizing~~employee ~~implementation~~share–based ~~costs~~compensation. ~~incurred~~ASU 2018-07 is effective for the Company beginning in afiscal ~~hosting~~2019, ~~arrangement~~including interim periods within that isfiscal ayear. ~~service~~The ~~contract~~Company ~~with~~adopted the ~~requirements~~guidance ~~for~~as ~~capitalizing~~of ~~implementation~~January ~~costs~~1, ~~incurred~~2019. toThere ~~develop~~was orno ~~obtain~~material ~~internal-use~~impact ~~software.~~on ~~This~~the ~~guidance~~consolidated isfinancial ~~effective~~statements ~~for~~resulting ~~interim~~from the adoption of this guidance.

In 65February 2018, the FASB issued ASU 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASC 220). The standard allows for certain stranded tax effects within accumulated other comprehensive income (AOCI), resulting from the U.S. Tax Cuts and Jobs Act, to be reclassified to retained earnings. ASU 2018-02 is effective for the Company beginning in fiscal 2019, including interim periods within that fiscal year. The Company adopted the provisions of ASU 2018–02 as of January 1, 2019. There was a one–time reclassification of $8.4 million from AOCI to retained earnings related to the remeasurement of deferred taxes recorded in other comprehensive income based on the newly enacted corporate tax rate. Refer to Note 18 for additional detail regarding the components of the reclassification.

In August 2017, the FASB issued ASU 2017-12 Targeted Improvements to Accounting for Hedging Activities (ASC 815), 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. The Company adopted the provisions of ASU 2017–12 as of January 1, 2019. There was no material impact on the consolidated financial statements resulting from the adoption of this guidance.

In February 2016, the FASB issued ASU 2016-02 and subsequent amendments, collectively known as Topic 842 Leases (ASC 842). ASC 842 requires recognition of operating leases as lease assets and liabilities on the balance sheet and also requires the disclosure of key information about leasing arrangements. The Company has elected to adopt Topic 842 by applying the modified transition method and has elected to use the effective date of January 1, 2019 as the initial date of application. 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 continue to account for existing leases in accordance with previous accounting guidance throughout the entire lease term including periods after the effective date. The remeasurement or modification of a lease after the effective date requires application of the new guidance. The Company has also elected the practical expedient under ASU 2018-01 Land Easement and will apply previous judgments under previous guidance as to the recognition of land easements as a lease.

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~~and~~The ~~annual~~adoption ~~reporting~~of ASC ~~periods~~842 ~~beginning~~resulted ~~after~~in ~~December~~the ~~15,~~recognition ~~2019,~~of operating lease right-of-use (ROU) assets of $110.1 million and ~~early~~operating ~~adoption~~lease isliabilities ~~permitted,~~of ~~including~~$111.2 ~~adoption~~million inon ~~any~~the ~~interim~~effective ~~period~~date. The ~~Company~~new ~~adopted~~guidance did not have a material impact on the consolidated ~~provisions~~statement of ~~ASU~~operations ~~2018–15~~or asstatement of ~~October~~cash 1,flow. ~~2018~~The onaccounting afor ~~prospective~~finance ~~basis.~~leases ~~There~~under ~~was~~ASC no842 remained substantially unchanged from previous accounting guidance and are not material. ~~impact~~See onNote 12 for the ~~Company's~~disclosures ~~consolidated~~required ~~financial~~by ~~statements~~ASC ~~resulting~~842 ~~from~~and ~~the~~accounting ~~adoption~~policy ofinformation ~~this~~for ~~guidance~~leases.

InPending ~~May~~Adoption ~~2017, the FASB issued ASU 2017-09 Compensation-Stock Compensation, which provides guidance about which changes to the terms and conditions~~ of aRecently ~~share-based~~Issued ~~payment~~Accounting award require an entity to apply modification accounting. ASU 2017-09 is effective for the interim and annual periods beginning after December 15, 2017. The Company adopted the provisions of ASU 2017-09 as of January 1, 2018. There was no material impact on the Company's consolidated financial statements resulting from the adoption of this guidance.Standards

In ~~March~~December ~~2017~~2019, the FASB issued ASU ~~2017~~2019-0712 ~~Compensation-Retirement~~Simplifying ~~Benefits,~~the inAccounting ~~order~~for toIncome ~~improve~~Taxes ~~the~~(ASC740). ~~presentation~~This ofASU ~~net~~enhances ~~periodic pension cost~~ and ~~net~~simplifies ~~periodic~~various ~~postretirement~~aspects ~~benefit~~of ~~cost in~~ the ~~statements~~income oftax ~~operations.~~accounting ~~Under~~guidance ~~ASU~~in ~~2017-07~~ASC 740, ~~the~~including ~~service~~requirements ~~cost~~related ~~component~~to ofhybrid tax regimes, the ~~net~~tax ~~periodic~~basis ~~benefit~~step-up ~~cost~~in isgoodwill ~~disclosed~~obtained in ~~the~~a ~~same~~transaction ~~income~~that ~~statement~~is ~~line~~not ~~item~~a asbusiness ~~other~~combination, ~~employee~~separate ~~compensation~~financial ~~costs~~statements ~~arising~~of ~~from~~entities ~~services~~not ~~rendered~~subject ~~during~~to ~~the period~~tax, ~~and~~ the ~~other~~intraperiod ~~components~~tax ~~are~~allocation ~~reported~~exception ~~separately~~to ~~from~~ the ~~line~~incremental ~~item~~approach, ~~that~~ownership ~~includes~~changes ~~the~~in ~~service~~investments ~~cost~~- ~~and~~changes ~~outside~~from ofa ~~any~~subsidiary ~~subtotal~~to ofan ~~operating~~equity ~~income.~~method ~~ASU~~investment, ~~2017~~interim-07period isaccounting ~~effective~~ for ~~annual~~enacted ~~periods~~changes ~~beginning~~in ~~after~~tax ~~December 15~~law, ~~2017~~ and ~~early~~the ~~adoption~~year-to-date isloss ~~permitted~~limitation in interim-period tax accounting. This Asguidance ~~previously~~is ~~disclosed~~effective infor the Company’s ~~2017~~for ~~Annual~~annual ~~Report~~and oninterim ~~Form~~period ~~10-K~~in fiscal 2021; however, ~~the~~early ~~provisions~~adoption ofis ~~ASU~~permitted. ~~2017-07~~The ~~were~~Company ~~adopted~~does asnot ofexpect ~~January~~the 1,adoption ~~2017~~of ~~and~~this ~~changes~~guidance ~~were~~to ~~applied~~have ~~retrospectively~~a inmaterial ~~the~~impact ~~Company's~~on the consolidated ~~statements~~financial ~~of operations~~statements.

In ~~January~~November ~~2017~~2019, the FASB issued ASU ~~2017–01~~2019-08 ~~Clarifying~~Compensation ~~the~~- ~~Definition~~Stock ofCompensation a(ASC ~~Business,~~718) ~~which~~and ~~revises~~Revenue ~~the~~from ~~definition~~Contracts ofwith aCustomers ~~business~~(ASC ~~and~~606). ~~provides~~This ~~guidance~~ASU torequires ~~assist~~an ~~entities~~entity ~~with~~measure ~~evaluating~~and ~~whether~~classify ~~transactions~~share-based ~~should~~payment beawards ~~accounted~~granted ~~for~~to asa ~~acquisitions~~customer ~~(or~~by ~~disposals)~~applying ofthe ~~assets~~guidance orin ~~businesses~~ASC 718. The ~~guidance~~amount isof ~~effective~~the ~~for~~share-based ~~the~~payment ~~fiscal~~award ~~year,~~that ~~and~~is ~~interim~~recorded ~~periods~~as ~~within~~a ~~that~~reduction ~~fiscal~~of ~~year,~~the ~~beginning~~transaction ~~after~~price ~~December~~is ~~15,~~required ~~2017.~~to ~~The~~be ~~Company~~measured ~~adopted~~at the ~~provisions~~grant-date offair ~~ASU~~value ~~2017–01~~in asaccordance ofwith ~~January~~ASC ~~1, 2018~~718. ~~There~~The ~~was~~amendments noin ~~material~~this ~~impact~~update onare effective for the Company's ~~consolidated~~for ~~financial~~annual ~~statements~~and ~~resulting~~interim ~~from~~periods beginning in fiscal 2020. The Company does not expect the adoption of this guidance to have a material impact on the consolidated financial statements.

In ~~November~~August ~~2016~~2018, the FASB issued ASU ~~2016~~2018-~~18 Restricted~~14 ~~Cash,~~Compensation ~~which~~- ~~requires~~Retirement ~~amounts~~Benefits ~~generally~~- ~~described~~Defined asBenefit ~~restricted~~Plans ~~cash~~- ~~and~~General ~~restricted~~(ASC ~~cash~~715-20): ~~equivalents~~Disclosure beFramework ~~included~~- ~~with~~Changes ~~cash~~to ~~and~~the ~~cash~~Disclosure ~~equivalents~~Requirements ~~when~~for ~~reconciling~~Defined ~~the~~Benefit ~~total~~Plans. ~~beginning~~This ~~and~~ASU ~~ending~~modifies ~~amounts~~the disclosure requirements for ~~the~~employers ~~periods~~that ~~shown~~sponsor ondefined ~~the~~benefit ~~statement~~pension ofor ~~cash~~other ~~flows~~postretirement plans. The ASU ~~2016-18 is~~removes ~~effective~~the ~~for~~requirements ~~fiscal~~to ~~years~~disclose: ~~beginning~~amounts ~~after~~in ~~December~~accumulated ~~15,~~other ~~2017~~comprehensive income (~~including~~loss) ~~interim~~expected ~~periods~~to ~~within~~be ~~those~~recognized ~~periods)~~as ~~using~~components aof ~~retrospective~~net ~~transition~~periodic ~~method~~benefit cost over the next fiscal year; the amount and timing of plan assets expected to ~~each~~be ~~period~~returned ~~presented.~~to ~~The~~the ~~Company~~employer; ~~adopted~~and the ~~provisions~~effects of ~~ASU~~a ~~2016~~one-18percentage aspoint ofchange ~~January~~in 1,assumed ~~2018~~health care cost trend rates. ~~There~~The ~~was~~ASU norequires ~~material~~disclosure ~~impact~~of onan explanation of the ~~Company's~~reasons ~~consolidated~~for ~~financial~~significant ~~statements~~gains ~~resulting~~and ~~from~~losses related to changes in the benefit obligation for the period. This guidance is effective for the Company for annual and interim period in fiscal 2021. Early adoption ofis permitted and the amendments in this update are required to be applied on a retrospective basis to all periods presented. The Company is currently evaluating this guidance to determine the impact on its disclosures.

In ~~October~~August ~~2016~~2018, the FASB issued ASU ~~2016~~2018-1613 ~~Intra-entity~~Fair ~~Transfer~~Value ofMeasurement ~~Assets~~(ASC ~~Other~~820): ~~than~~Disclosure ~~Inventory,~~Framework ~~which~~- ~~requires~~Changes to the ~~recognition~~Disclosure ofRequirements for Fair Value Measurement. The ASU removes the ~~income~~requirement ~~tax~~to ~~consequences~~disclose: the amount of anand ~~intra-entity~~reasons ~~transfer~~for transfers between Level 1 and Level 2 of anthe ~~asset,~~fair ~~other~~value ~~than~~hierarchy; ~~inventory,~~the ~~when~~policy for timing of transfers between levels; and the ~~transfer~~valuation ~~occurs~~processes for Level 3 fair value measurements. The ASU ~~2016-16~~also isrequires ~~effective~~disclosure ~~for~~of ~~interim~~changes in unrealized gains and ~~annual~~losses ~~periods~~for ~~beginning~~the ~~after~~period ~~December~~included ~~15,~~in ~~2017.~~other ~~The~~comprehensive ~~Company~~income ~~adopted~~(loss) for recurring Level 3 fair value measurements held at the ~~provisions~~end of ~~ASU~~the ~~2016-16~~reporting asperiod and the range and weighted average of ~~January~~significant 1,unobservable ~~2018,~~inputs ~~resulting~~used to develop Level 3 fair value measurements. This guidance is effective the Company for annual and interim periods beginning in anfiscal ~~adjustment~~2020. ofThe Company does not expect the ~~deferred~~adoption ~~tax~~of ~~assets~~this guidance to ~~retained~~have ~~earnings~~a ofmaterial ~~$5.3~~impact ~~million~~on the consolidated financial statements.

In ~~August~~January ~~2016~~2017, the FASB issued ASU ~~2016~~2017-1504 ~~Statement~~Intangibles of- ~~Cash~~Goodwill ~~Flows~~and -Other: ~~Classification~~Simplifying ofthe ~~Certain~~Test ~~Cash~~for ~~Receipts~~Goodwill ~~and~~Impairment ~~Cash~~(ASC ~~Payments,~~350). ~~which~~The ~~provides~~standard ~~guidance~~eliminates onthe requirement to measure the ~~presentation~~implied fair value of ~~certain~~goodwill ~~cash~~by ~~receipts~~assigning the fair value of a reporting unit to all assets and ~~cash~~liabilities ~~payments~~within inthat unit (the ~~statement~~Step 2 test) from the goodwill impairment test. Instead, if the carrying amount of ~~cash~~a ~~flows~~reporting inunit ~~order~~exceeds toits ~~reduce~~fair ~~diversity~~value, an impairment loss is recognized in ~~existing~~an ~~practice.~~amount ~~ASU~~equal ~~2016-15~~to isthat ~~effective~~excess, ~~for~~limited ~~interim~~by ~~and~~the ~~annual~~amount ~~periods~~of ~~beginning~~goodwill ~~after~~in ~~December~~that ~~15,~~reporting ~~2017~~unit. The ~~Company~~guidance ~~adopted~~is effective for the ~~provisions~~Company ofbeginning ~~ASU~~in ~~2016-15~~fiscal as2020 ofand ~~January~~will 1,be ~~2018.~~applied ~~There~~to ~~was~~any noannual ~~material~~or ~~impact~~interim ongoodwill ~~the~~impairment ~~Company's~~assessment ~~consolidated~~after ~~financial~~that ~~statements~~date. The ~~resulting~~Company ~~from~~does not expect the adoption of this guidance to have a material impact on the consolidated financial statements.

In ~~January~~June 2016, the FASB issued ASU No. 2016~~-01,~~–13 ~~Recognition~~Financial ~~and~~Instruments–Credit ~~Measurement~~Losses of(Topic ~~Financial~~326) ~~Assets~~which ~~and~~replaces ~~Financial~~the ~~Liabilities,~~incurred asloss ~~amended~~model ~~by ASU~~with ~~2018-03, Financial~~a ~~Instruments-Overall:~~current ~~Technical~~expected ~~Corrections~~credit ~~and~~loss ~~Improvements,~~model ~~issued~~(CECL) infor ~~February~~financial ~~2018,~~assets ~~which~~measured ~~among~~at ~~other~~amortized ~~changes~~cost. inThe ~~accounting~~Company ~~and~~adopted ~~disclosure~~this ~~requirements,~~guidance ~~replaces~~effective ~~the cost~~January ~~method of~~1, ~~accounting~~2020 ~~for~~using ~~non-marketable~~a ~~equity~~modified ~~securities~~retrospective ~~with~~approach aand ~~model~~is ~~for~~in ~~recognizing~~the ~~impairments~~process ~~and~~of ~~observable~~finalizing ~~price~~certain ~~changes,~~key ~~and~~assumptions ~~also~~related ~~eliminates~~to ~~the~~its ~~available-for-sale~~CECL ~~classification~~model ~~for~~and ~~marketable~~methodologies. ~~equity~~The ~~securities.~~adoption ~~Under~~is ~~the~~expected ~~new~~to ~~guidance,~~result ~~other~~in ~~than~~an ~~when~~immaterial decrease to the ~~consolidation~~allowance orfor ~~equity~~doubtful ~~method~~accounts ofthat ~~accounting~~will isbe ~~utilized,~~recorded ~~changes~~as ina ~~the~~one-time ~~fair~~adjustment, ~~value~~net of ~~equity~~tax, ~~securities are~~ to beretained ~~recognized in~~ earnings. The Company ~~adopted~~does not expect the ~~provisions~~application of ~~ASU~~CECL ~~2016-01~~to ~~and~~have ~~ASU~~a ~~2018-03~~material asimpact ofon ~~January~~any 1,other ~~2018~~financial ~~resulting~~asset inheld aat ~~cumulative~~amortized ~~effect~~cost ~~adjustment~~on tothe ~~retained~~transition ~~earnings~~date. ofThe ~~$0.1~~estimated ~~million~~impacts related to the ~~unrealized~~application ~~gain~~of onCECL ~~marketable~~may ~~equity~~change ~~securities~~as the Company completes its implementation with the ongoing impact of CECL dependent upon changes in economic conditions and forecasts.

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. 70

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

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~~recognition,~~We ~~specifically~~do ~~the~~not ~~over-time~~expect ~~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~~pending ~~to assess the criteria for over-time revenue recognition by jurisdiction. The~~ adoption of ~~ASC~~other ~~606~~recently ~~did~~issued ~~not impact the Company’s~~ accounting ~~for~~standards ~~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 aan ~~material~~ impact on the ~~Company’s~~ consolidated ~~balance~~financial ~~sheet, statement of operations and statement of cash flows for the year ended December 31, 2018~~statements. ~~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, 2020. Early adoption is permitted 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 evaluating this guidance to determine the 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,

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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.


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)	2019		2018		2017
OEM⁽¹⁾	$	2,524.1	$	2,868.9	$	2,511.8
Aftermarket	897.3		962.1		792.4
Total sales	$	3,421.4	$	3,831.0	$	3,304.2

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

	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~~2019

~~2017~~2018

~~2016~~2017

United States

~~859~~785.01

~~579~~830.6

~~399~~579.96

Europe

1,~~860~~656.71

1,~~705~~872.36

1,~~509~~705.23

Other (1)

~~1,111~~980.32

1,~~019~~127.38

~~900~~1,019.93

Total sales

3,~~831~~421.04

3,~~304~~831.20

23,~~810~~304.02


⁽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, 2019 and 2018.

Transaction Price Allocated to the Remaining Performance Obligations

The aggregate ~~amount~~amounts of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2019 and 2018 ~~was~~were 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 Loss

The table below presents the changes in accumulated other comprehensive loss, net of taxes and noncontrolling interests, for the years ended December 31, ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017:

6971

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	Year Ended December 31,
(Amount in millions)	~~2018~~2019			~~2017~~2018			~~2016~~2017
Foreign currency translation adjustments :
Balance at beginning of period	$	(~~177~~243.60	)	$	(~~328~~177.76	)	$	(~~271~~328.27	)
Comprehensive (loss)/income before reclassification, net	(65.4		)	152.9			(57.5		)
Adoption of ASU 2018-02 (Note 3)	(7.1		)	—			—
Remeasurement of equity investments (1)	—			(1.8		)	—
Comprehensive loss before reclassification, net	(7.8		)	(65.4		)	152.9
Balance at end of period (2)	(243.0		)	(177.6		)	(328.7		)
Remeasurement of equity investments	—			—			(1.8		)
Balance at end of period (1)	(257.9		)	(243.0		)	(177.6		)
Loss on intra-entity transactions :
Balance at beginning of period	(11.89		)	(11.48		)	(1511.24		)
Comprehensive (loss)/income before reclassification, net	(0.12		)	(0.41		)	3(0.84		)
Balance at end of period (3)	(11.9		)	(11.8		)	(11.4		)
Balance at end of period (2)	(12.1		)	(11.9		)	(11.8		)
Unrealized gains on investments:
Balance at beginning of period	~~0.1~~—			0.21			0.2
Adjustments for the period	~~(0.1~~—		)	(0.1		)	—(0.1		)
Balance at end of period	—			~~0.1~~—			0.21
Unrealized losses on hedges:
Balance at beginning of period	~~(0.8~~—		)	(1.0.8		)	(1.20		)
Comprehensive income before reclassification, net	—			~~0.2~~—			—0.2
Amounts reclassified to earnings, net	~~0.8~~—			—0.8			~~0.2~~—
Balance at end of period	—			~~(0.8~~—		)	(1.0.8		)
Pension and post-retirement plans:
Balance at beginning of period	(~~274~~269.41		)	(~~236~~274.4		)	(~~220~~236.54		)
Comprehensive loss before reclassification, net	(12.2		)	(56.2		)	(26.5		)
Adoption of ASU 2018-02 (Note 3)	(1.3		)	—			—
Amounts reclassified to earnings, net (4)	17.5			18.2			10.6
Comprehensive loss before reclassification, net	(66.5		)	(12.2		)	(56.2		)
Balance at end of period	(269.1		)	(274.4		)	(236.4		)
Amounts reclassified to earnings, net (3)	18.2			17.5			18.2
Accumulated other comprehensive loss at end of period	$	(524.0	)	$	(464.5	)	$	(577.3	)
Balance at end of period	(318.7		)	(269.1		)	(274.4		)
Accumulated other comprehensive loss at end of period	$	(588.7	)	$	(524.0	)	$	(464.5	)

(1) ~~Consists~~Includes an accumulated loss of $9.0 million, net of taxes of $1.0 million as of December 31, 2019 and an accumulated loss of $10.8 million, ~~associated~~net ~~with~~of ~~the~~taxes ~~foreign~~of ~~currency~~$10.7 ~~translation~~million, ~~adjustment~~as ~~reclassified~~of December 31, 2018 related to ~~gain~~foreign currency gains and losses on ~~remeasurement~~Euro-denominated ofdebt ~~equity~~and ~~method~~foreign ~~investment~~currency incontracts ~~the~~designated ~~consolidated~~and ~~statements~~qualifying as partial hedges of ~~operations~~a ~~upon~~net investment. This includes the ~~Company's~~one-time ~~acquisition~~adjustment of ~~the~~currency ~~remaining~~translation ~~interests~~related into ~~WABCO~~the ~~Automotive~~adoption ~~South~~of ~~Africa.~~ASU ~~See~~2018-02 ~~Note~~of 22$7.1 ~~for~~million ~~further~~disclosed ~~discussion~~above.

(2) ~~Includes~~Relates ~~losses~~to ofintra-entity ~~$10.8~~foreign ~~million~~currency ~~and~~transactions ~~$27.6~~that ~~million~~are as of ~~December 31,~~a ~~2018~~long ~~and~~term ~~2017,~~investment ~~respectively~~nature, ~~net~~when ofthe ~~taxes~~entities ofto ~~$10.7~~the ~~million~~transaction ~~and~~are ~~$15.4 million~~consolidated, ~~respectively,~~combined ~~related~~or toaccounted ~~foreign~~for ~~currency~~by ~~gains~~the ~~and~~equity ~~losses~~method onin ~~Euro-denominated~~the ~~debt~~Company's ~~and~~financial ~~foreign currency contracts designated and qualifying as partial hedges of a net investment~~statements.

(3) ~~Relates~~Consists toof ~~intra-entity~~amortization ~~foreign~~of ~~currency~~prior ~~transactions~~service cost and actuarial losses that are ofincluded as a ~~long~~component ~~term~~of ~~investment~~pension ~~nature,~~expenses ~~when~~within ~~the~~other ~~entities~~non-operating toexpenses. ~~the~~The ~~transaction~~amounts reclassified to earnings are ~~consolidated~~recorded net of tax of $7.2 million, ~~combined~~$7.0 ormillion ~~accounted~~and ~~for~~$7.9 bymillion for the ~~equity~~years ~~method~~ended inDecember ~~the~~31, ~~Company's~~2019, ~~financial~~2018 ~~statements~~and 2017, respectively. See Note 15 for further discussion.

~~(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 amounts reclassified to earnings are recorded net of tax of $7.0 million, $7.9 million and $4.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. See Note 14 for further discussion.72

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NOTE 6.	Streamlining

The Company accounts for employee-related streamlining charges as either a one-time benefit arrangement or an ongoing benefit arrangement as appropriate under the applicable accounting guidance. From time to time the Company also has streamlining charges that are not related to employees, such as facility exit costs. Based on the Company’s efforts to maintain our global footprint, the Company has periodically entered into streamlining programs as deemed necessary which may include workforce reductions, site closures and rotation of manufacturing footprint to low cost regions.

InThe ~~the~~following ~~third~~is 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 resulted in a ~~workforce~~summary ~~reduction~~ of ~~316~~changes ~~positions and included a smaller program initiated~~ in the ~~fourth quarter of 2014 (the 2014/2015 Program). As of December 31, 2018, production at both facilities has been transferred to other facilities within the~~ Company'’s ~~globally~~streamlining ~~integrated~~program ~~supply~~liabilities ~~chain.~~for ~~The~~the ~~cumulative~~years ~~costs~~ended ~~incurred as of~~ December 31, ~~2018~~2019 ~~related~~and ~~to the 2014/2015 Program was $65~~2018.2 ~~million, which approximates the total expected costs to be incurred under this program.~~

Based on the Company’s efforts to maintain its global footprint, the Company has periodically 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).



	Year Ended December 31,
(Amounts in millions)	2019			2018
Balance at beginning of period	$	26.4		$	43.7
Charges	27.7			14.0
Payments	(21.0		)	(30.3		)
Foreign exchange effects	(0.3		)	(1.0		)
Balance at end of period	$	32.8		$	26.4
Current liabilities, included in other accrued liabilities	$	14.7		$	14.8
Non-current liabilities, included in other liabilities	$	18.1		$	11.6

~~The~~A ~~following is a~~ summary of ~~changes in~~ the ~~Company’s~~ streamlining ~~program~~costs ~~liabilities~~is ~~for~~as ~~the years ended December~~follows: ~~31, 2018 and 2017.~~

	Year Ended December 31,
(Amounts in millions)	~~2018~~2019			~~2017~~2018			2017
2014 / 2015 Program
Employee-related charges – cost of sales	$	19.6		$	3.2		$	7.1
Balance at beginning of period	$	16.8		$	27.8
Employee-related charges – selling and administrative	8.1			7.5			4.5
Charges	2.2			1.7
Other streamlining charges	—			3.3			0.4
Payments	(12.5		)	(15.6		)
Total streamlining costs	$	27.7		$	14.0		$	12.0
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

AsStreamlining ofcosts for the years ended December 31, 2019, 2018 and ~~December 31,~~ 2017 include charges related to headcount reductions, site closures and footprint relocations including the ~~balance~~move ~~included~~of inthe ~~other~~Company's ~~accrued~~corporate ~~liabilities~~headquarters ~~(current)~~and ~~amounted~~the transfer of certain product lines and business processes to ~~$14.8~~best ~~million~~cost countries including India and ~~$24~~Poland.2 ~~million,~~In ~~respectively~~2019, ~~while~~due to prevailing market conditions, the ~~balance~~streamlining ~~included~~costs inwere ~~other~~primarily ~~liabilities~~around ~~(non-current)~~workforce ~~amounted~~reduction due to ~~$11.6~~reduced ~~million~~demand ~~and~~globally ~~$19.5~~in ~~million,~~addition ~~respectively~~to continued cost optimization.

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



	Year Ended December 31,
(Amounts in millions)	2019		2018		2017
Headcount reduction	$	26.5	$	8.7	$	5.9
Site closures and footprint relocation	1.2		5.3		6.1
Total streamlining costs	$	27.7	$	14.0	$	12.0

	Charges for YearEnded December 31, 2018				Charges for YearEnded December 31, 2017					Charges for YearEnded December 31, 2016
(Amounts in millions)	2014/2015 Program		OtherPrograms		2014/2015 Program			OtherPrograms		2014/2015 Program			OtherPrograms
Employee-related charges – cost of sales	$	0.1	$	3.1	$	(1.0	)	$	8.1	$	4.0		$	6.9
Employee-related charges – selling and administrative	0.7		6.8		2.3			2.2		(0.2		)	3.2
Asset write-offs	—		—		—			—		0.6			—
Other streamlining charges	1.4		1.9		0.4			—		1.7			0.2
Total program costs	$	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,

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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 7.	Capital Stock

The following is a summary of common stock issued, treasury stock and common stock outstanding for the years ending December 31, ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017.

	Number of Shares of Common Stock
	Issued	Treasury Stock		Outstanding
Balance, December 31, 2015	78,500,084	(21,740,518	)	56,759,566
Shares issued upon exercise of stock options	87,047	16,400		103,447
Shares issued upon vesting of RSUs	38,723	9,288		48,011
Shares issued upon vesting of PSUs	67,219	17,675		84,894
Shares issued for DSUs	7,100	—		7,100
Shares issued for stock awards	1,100	—		1,100
Shares purchased for treasury	—	(2,512,200	)	(2,512,200	)
Balance, December 31, 2016	78,701,273	(24,209,355	)	54,491,918
Shares issued upon exercise of stock options	161,687	28,840		190,527
Shares issued upon vesting of RSUs	44,419	3,998		48,417
Shares issued upon vesting of PSUs	24,525	7,175		31,700
Shares issued for DSUs	5,924	—		5,924
Shares purchased for treasury	—	(1,033,000	)	(1,033,000	)
Balance, December 31, 2017	78,937,828	(25,202,342	)	53,735,486
Shares issued upon exercise of stock options	14,964	12,999		27,963
Shares issued upon vesting of RSUs	36,126	8,447		44,573
Shares issued upon vesting of PSUs	21,515	6,009		27,524
Shares issued for DSUs	7,833	—		7,833
Shares purchased for treasury	—	(2,478,454	)	(2,478,454	)
Balance, December 31, 2018	79,018,266	(27,653,341	)	51,364,925

~~The~~Table ~~Company accounts for purchases~~ of treasury stock under the cost method with the costs of such share purchases reflected in treasury stock in the accompanying consolidated balance sheets. Upon the exercise or vesting of an equity incentive award, the Company may reissue shares from treasury stock or may elect to issue new shares. When treasury shares are reissued, they are recorded at the average cost of the treasury shares acquired since the inception of the share buy back programs, net of shares previously reissued. Gains on the reissuance of treasury shares are recorded as capital surplus. Losses on the reissuance of treasury shares are charged to capital surplus to the extent of previous gains recorded, and to retained earnings for any losses in excess. The Company has reissued a total of 110,831 shares from treasury stock related to certain employee vestings under its equity incentive program.Contents

On December 2, 2016, the Board of Directors authorized the repurchase of shares of common stock for an amount of $600.0 million through December 31, 2018. During the year ended December 31, 2018, the Company purchased 2,478,454 shares for $300.0 million. As of December 31, 2018, the Company had no availability remaining under this repurchase authorization.



	Number of Shares of Common Stock
	Issued	Treasury Stock		Outstanding
Balance, December 31, 2016	78,701,273	(24,209,355	)	54,491,918
Shares issued upon exercise of stock options	161,687	28,840		190,527
Shares issued upon vesting of RSUs	44,419	3,998		48,417
Shares issued upon vesting of PSUs	24,525	7,175		31,700
Shares issued for DSUs	5,924	—		5,924
Shares purchased for treasury	—	(1,033,000	)	(1,033,000	)
Balance, December 31, 2017	78,937,828	(25,202,342	)	53,735,486
Shares issued upon exercise of stock options	14,964	12,999		27,963
Shares issued upon vesting of RSUs	36,126	8,447		44,573
Shares issued upon vesting of PSUs	21,515	6,009		27,524
Shares issued for DSUs	7,833	—		7,833
Shares purchased for treasury	—	(2,478,454	)	(2,478,454	)
Balance, December 31, 2018	79,018,266	(27,653,341	)	51,364,925
Shares issued upon exercise of stock options	13,304	27,481		40,785
Shares issued upon vesting of RSUs	43,007	6,226		49,233
Shares issued for deferred compensation	9,730	—		9,730
Shares issued upon vesting of PSUs	56,521	11,823		68,344
Shares issued for DSUs	6,307	—		6,307
Shares purchased for treasury	—	(272,000	)	(272,000	)
Balance, December 31, 2019	79,147,135	(27,879,811	)	51,267,324

OnThe ~~December~~Company 7accounts for purchases of treasury stock under the cost method with the costs of such share purchases reflected in treasury stock in the accompanying consolidated balance sheets. Upon the exercise or vesting of an equity incentive award, ~~2018~~the Company may reissue shares from treasury stock or may elect to issue new shares. When treasury shares are reissued, they are recorded at the ~~Board~~average cost of ~~Directors~~the ~~authorized~~treasury shares acquired since the ~~repurchase~~inception of ~~shares~~the share buy back programs, net of ~~common~~shares ~~stock~~previously ~~for~~reissued. anGains ~~amount~~on the reissuance of ~~$600~~treasury shares are recorded as capital surplus.0 ~~million~~Losses ~~from~~on ~~January~~the 1reissuance of treasury shares are charged to capital surplus to the extent of previous gains recorded, ~~2019~~and ~~through~~to ~~December~~retained 31earnings for any losses in excess. The Company has reissued a total of 156,361 ~~2020~~shares from treasury stock related to certain employee vestings under its equity incentive program.

On December 7, 2018, the Board of Directors authorized the repurchase of shares of common stock for an amount of $600.0 million from January 1, 2019 through December 31, 2020. During the year ended December 31, 2019, the Company repurchased 272,000 shares for $30.6 million. As of December 31, 2019, the Company had $569.4 million of availability remaining under this repurchase authorization. The Company suspended its share repurchase program due to the pending Merger.


NOTE 8.	Stock-Based Compensation

The Company's Certificate of Incorporation authorizes the Company to issue up to 400,000,000 shares of common stock, par value $0.01 per share and 4,000,000 shares of preferred stock, par value $0.01 per share.

The 72Company paid no dividends on its common stock in 2019, 2018 and 2017.

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The Company paid no dividends on its common stock in 2018, 2017 and 2016.

The issuance of stock-based compensation is intended to promote long-term financial success and increase shareholder value by providing the Company with greater flexibility to implement the optimal mix of annual and long-term cash, equity and equity-based incentives. It is also intended to align the interests of employees with the interests of shareholders by affording them certain opportunities to acquire an interest in our stock. The Company believes that these incentives and opportunities will encourage its executives and other key employees to continue employment, by providing them with a competitive level of compensation that varies based on performance.

In May 2018, the existing Amended and Restated WABCO Holdings Inc. 2009 Omnibus Incentive Plan (2009 Restated Omnibus Plan), previously adopted on May 28, 2009, was further amended and restated and was approved by the shareholders at the Annual Meeting of Shareholders. The Company also maintains the 2007 Omnibus Incentive Plan for awards granted prior to the establishment of the 2009 Restated Omnibus Plan. The term of the 2009 Restated Omnibus Plan extends through May 2028. The 2009 Restated Omnibus Plan further places restrictions on vesting for time–based equity incentive awards and places annual limits on incentive awards granted to any single participant. During a calendar year, no participant may receive annual and long-term cash awards that, in the aggregate, exceed $10,000,000. In addition, no participant shall be granted stock options, stock appreciation rights, or both with respect to more than 750,000 shares during any calendar year. No individual shall be granted restricted shares or restricted stock units, with respect to more than 200,000 shares or units as the case may be during any calendar year. If an award granted under the 2009 Restated Omnibus Plan expires or becomes unexercisable without having been exercised in full, or, with respect to full-value incentive awards, is forfeited to or repurchased by the Company, these shares will become available for future grant or sale under the 2009 Restated Omnibus Plan. Shares withheld by the Company to satisfy tax withholding obligations on any equity incentive award would be fully counted against the share authorization.

As of December 31, 2018, a total of 407,911 stock options, RSUs, PSUs and DSUs were outstanding and there were 2,669,703 shares remaining available for grant under the 2009 Restated Omnibus Plan.

The PSUs granted as part of the Company's equity incentive awards vest at levels ranging from none to 200% of the number of granted PSUs depending upon the achievement of three-year cumulative earnings per share goals as 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. As of December 31, 2018, the Company believes it is probable that the performance conditions will be met and has accrued for the compensation expense accordingly.

The DSUs are granted to our non-management directors as part of the equity portion of their annual retainer and are fully vested at grant. Each DSU provides the right to the issuance of a share of our common stock, within ten days after the earlier of the director's death or disability, the 13-month anniversary of the grant date or the director's separation from service. Each director may also elect within a month after the grant date to defer the receipt of shares for five or more years. No election can be made to accelerate the issuance of stock from a DSU.

The Company records stock-based compensation based on the estimated fair value of the award at the grant date and is recognized as an expense in the consolidated statements of operations over the requisite service period. The estimated fair value of the award is based on the closing market price of the Company’s common stock on the date of grant. For PSUs, the grant date fair value of the number of awards expected to vest based on the Company’s best estimate of ultimate performance against the respective targets is recognized as compensation expense on a straight-line basis over the requisite vesting period of the awards.

Total stock-based compensation cost recognized in selling and administrative expenses during the years ended December 31, 2018, 2017 and 2016 was as follows:

	Year Ended December 31,
(Amounts in millions)	2018		2017		2016
Stock-based compensation	$	20.0	$	16.4	$	13.1

The following tables summarize the stock options, RSUs, PSUs, DSUs and stock awards activity for each of the periods presented:

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	Underlying Shares						Weighted - Average Exercise Price
	WABCO employees		Trane employees		Total
Options Outstanding December 31, 2015	296,032		95,587		391,619		$	43.37
Options Granted	—		—		—		$	—
Options Exercised	(49,466	)	(54,494	)	(103,960	)	$	38.70
Options Forfeited	—		(128	)	(128	)	$	32.38
Options Outstanding December 31, 2016	246,566		40,965		287,531		$	45.07
Options Granted	—		—		—		$	—
Options Exercised	(152,419	)	(40,882	)	(193,301	)	$	50.90
Options Forfeited	(394	)	(83	)	(477	)	$	44.15
Options Outstanding December 31, 2017	93,753		—		93,753		$	33.04
Options Granted	—		—		—		$	—
Options Exercised	(29,081	)	—		(29,081	)	$	25.50
Options Forfeited	(1,080	)	—		(1,080	)	$	58.85
Options Outstanding December 31, 2018	63,592		—		63,592		$	36.05
Exercisable at December 31, 2018	63,592		—		63,592		$	36.05

	Underlying Shares		Weighted - Average Grant Date Fair Value
RSUs Outstanding December 31, 2015	153,087		$	101.91
RSUs Granted	94,033		$	92.59
RSUs Vested	(73,358	)	$	91.60
RSUs Forfeited	(13,452	)	$	100.55
RSUs Outstanding December 31, 2016	160,310		$	101.27
RSUs Granted	81,116		$	118.72
RSUs Vested	(75,887	)	$	102.67
RSUs Forfeited	(13,358	)	$	106.32
RSUs Outstanding December 31, 2017	152,181		$	109.43
RSUs Granted	68,908		$	137.04
RSUs Vested	(66,979	)	$	107.40
RSUs Forfeited	(7,892	)	$	120.99
RSUs Outstanding December 31, 2018	146,218		$	122.74

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	Underlying Shares		Weighted - Average Grant Date Fair Value
PSUs Outstanding December 31, 2015	172,712		$	93.31
PSUs Granted	152,010		$	82.76
PSUs Vested	(126,840	)	$	68.10
PSUs Forfeited	(22,192	)	$	102.46
PSUs Outstanding December 31, 2016	175,690		$	101.31
PSUs Granted	72,163		$	115.85
PSUs Vested	(48,357	)	$	103.41
PSUs Forfeited	(25,589	)	$	103.14
PSUs Outstanding December 31, 2017	173,907		$	106.48
PSUs Granted	57,110		$	139.93
PSUs Vested	(41,436	)	$	115.88
PSUs Forfeited	(9,766	)	$	110.74
PSUs Outstanding December 31, 2018	179,815		$	114.70

the establishment of the 2009 Restated Omnibus Plan. The term of the 2009 Restated Omnibus Plan extends through May 2028. The 2009 Restated Omnibus Plan further places restrictions on vesting for time–based equity incentive awards and places annual limits on incentive awards granted to any single participant. During a calendar year, no participant may receive annual and long-term cash awards that, in the aggregate, exceed $10,000,000. In addition, no participant shall be granted stock options, stock appreciation rights, or both with respect to more than 750,000 shares during any calendar year. No individual shall be granted restricted shares or restricted stock units, with respect to more than 200,000 shares or units as the case may be during any calendar year. If an award granted under the 2009 Restated Omnibus Plan expires or becomes unexercisable without having been exercised in full, or, with respect to full-value incentive awards, is forfeited to or repurchased by the Company, these shares will become available for future grant or sale under the 2009 Restated Omnibus Plan. Shares withheld by the Company to satisfy tax withholding obligations on any equity incentive award would be fully counted against the share authorization.

	Underlying Shares		Weighted - Average Grant Date Fair Value
DSUs Outstanding December 31, 2015	14,989		$	86.35
DSUs Granted	9,194		$	105.52
DSUs Issued	(7,100	)	$	88.10
DSUs Outstanding December 31, 2016	17,083		$	95.93
DSUs Granted	7,752		$	118.75
DSUs Issued	(5,924	)	$	105.51
DSUs Outstanding December 31, 2017	18,911		$	102.28
DSUs Granted	7,208		$	127.77
DSUs Issued	(7,833	)	$	109.85
DSUs Outstanding December 31, 2018	18,286		$	109.09

As of December 31, 2019, a total of 332,470 stock options, RSUs, PSUs and DSUs were outstanding and there were 2,692,070 shares remaining available for grant under the 2009 Restated Omnibus Plan.

	Shares	Weighted - Average Grant Date Fair Value
Stock Awards granted:
Year ended December 31, 2016	1,100	$	107.47
Year ended December 31, 2017	—	$	—
Year ended December 31, 2018	—	$	—

The PSUs granted as part of the Company's equity incentive awards vest at levels ranging from none to 200% of the number of granted PSUs depending upon the achievement of three-year cumulative earnings per share goals as 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. As of December 31, 2019, the Company has accrued for compensation expense on the PSUs based on the expected achievement levels for the outstanding awards.

The ~~table~~DSUs ~~below~~are ~~shows~~granted to our non-management directors as part of the ~~vesting~~equity ~~schedule~~portion of their annual retainer and are fully vested at grant. Each DSU provides the ~~RSUs~~right ~~granted~~to ~~for~~the ~~each~~issuance of a share of our common stock, within ten days after the ~~periods~~earlier ~~presented:~~of the director's death or disability, the 13-month anniversary of the grant date or the director's separation from service. Each director may also elect within a month after the grant date to defer the receipt of shares for five or more years. No election can be made to accelerate the issuance of stock from a DSU.

	Vesting Schedule
	Equal installments over 3 years	After 3 years	Total
RSUs granted in 2016	86,123	7,910	94,033
RSUs granted in 2017	69,253	11,863	81,116
RSUs granted in 2018	65,190	3,718	68,908

AsTotal ~~discussed~~stock-based ~~above,~~compensation ~~the~~cost ~~PSUs~~recognized ~~granted~~ in ~~each~~selling ofand administrative expenses during the years ended December 31, ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017 ~~vest,~~was ifas ~~at all, and at levels depending upon, the achievement of certain three-year cumulative earnings per share goals. To the extent that the PSUs~~ follows:



	Year Ended December 31,
(Amounts in millions)	2019		2018		2017
Stock-based compensation	$	9.2	$	20.0	$	16.4

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~~vest~~The atfollowing atables ~~level~~summarize ~~greater (or lesser) than 100% as a result of~~ the ~~final~~stock ~~performance~~options, ~~achievement~~RSUs, ~~the~~PSUs ~~Company~~and ~~considers~~DSUs ~~the~~activity ~~increment~~for ~~(or~~each ~~reduction)~~of ~~in shares vested as additional grants (or forfeitures) in~~ the ~~year~~periods ~~of vesting.~~presented:

The DSUs granted in each of the years ended December 31, 2018, 2017 and 2016 vest immediately upon grant.



	Underlying Shares			Weighted - Average Exercise Price
	WABCO employees	Trane employees	Total	Weighted - Average Exercise Price
Options Outstanding December 31, 2016	246,566	40,965	287,531	$	45.07
Options Granted	—	—	—

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