TRW Reports First Quarter 2010 Financial Results

LIVONIA, Mich., May 5 /PRNewswire-FirstCall/ -- TRW Automotive Holdings Corp. (NYSE: TRW), the global leader in active and passive safety systems, today reported first quarter 2010 financial results with sales of $3.6 billion, an increase of 50 percent compared to the prior year period.  The Company reported GAAP first quarter net earnings of $204 million or $1.61 per diluted share, which compares to a net loss of $131 million or ($1.30) per share in the prior year period.          

The first quarter 2010 GAAP net earnings includes restructuring and fixed asset impairment charges of $7 million ($5 million after related tax benefits) compared with restructuring and fixed asset impairment charges of $24 million in the prior year first quarter.  In addition, the 2009 first quarter included a one-time charge of $30 million for the impairment of trademarks and a one-time gain on retirement of debt totaling $34 million.  Excluding these special items from both periods, the Company reported net earnings of $209 million, or $1.65 per diluted share in the first quarter of this year, which compares to a net loss of $115 million or ($1.14) per share in the prior year period.  

"TRW entered 2010 from a position of strength thanks to our hard fought accomplishments in 2009.  Increasing vehicle production combined with our lower cost structure is continuing to have a significant positive impact on our results," said John C. Plant, President and Chief Executive Officer.  "TRW is well positioned to take advantage of the industry rebound that is presently occurring and will continue to implement actions designed to ensure long term success for the Company."  

First Quarter 2010

The Company reported first-quarter 2010 sales of $3.6 billion, an increase of $1.2 billion or 50 percent from the prior year period.  The 2010 quarter benefited from a higher level of sales resulting from improved global vehicle production volumes compared to the prior year quarter when industry production fell to its lowest point of the cycle.  Currency movements during the quarter also had a positive impact on sales compared to the same period a year ago.      

The Company's first quarter 2010 operating income was $300 million compared with an operating loss of $125 million last year.  Both the 2010 and 2009 periods included restructuring and fixed asset impairment charges totaling $7 million and $24 million, respectively.  In addition, the 2009 period included a one-time charge of $30 million for the impairment of trademarks.  Excluding these charges from both periods, operating income for the first quarter of 2010 was $307 million, which compares to an operating loss of $71 million in the prior year period.  The year-to-year improvement of $378 million was driven primarily by the positive profit impact from the higher level of sales between the two quarters, the positive impact of the Company's restructuring and cost containment actions implemented over the past year, lower raw material prices and, to a lesser extent, a favorable currency outcome.        

Net interest and securitization expense for the first quarter of 2010 totaled $45 million, which compares to $42 million in the prior year.  In addition, a gain on retirement of debt totaling $34 million was recognized in the first quarter of 2009.          

Tax expense for the first quarter of 2010 was $50 million, which compares to a tax benefit of $5 million in the prior year period.  The increase in expense was driven by higher pre-tax earnings in certain geographic locations for the current period.  Excluding the tax benefits related to the special items previously noted in both years, tax expense was $52 million in the current quarter compared with a tax benefit of $1 million last year.                

The Company reported 2010 first quarter GAAP earnings of $204 million, or $1.61 per diluted share, which compares to a GAAP net loss of $131 million, or ($1.30) per share in the 2009 period.  

Excluding the special items referred to above, the Company reported first quarter 2010 net earnings of $209 million, or $1.65 per diluted share, which compares to a net loss of $115 million or ($1.14) per share in the 2009 period.  

Earnings before interest, securitization costs, taxes, depreciation and amortization and special items ("adjusted EBITDA") were $425 million in the first quarter of 2010, as compared to the prior year level of $43 million.  See page A5 for a description of the special items excluded in calculating adjusted EBITDA.        

Cash Flow and Capital Structure

First quarter 2010 net cash flow provided by operating activities was $21 million, which compares to a use of $254 million in the prior year.  The favorable outcome compared with last year resulted primarily from the higher level of profitability in the current quarter partially offset by higher working capital requirements.  Capital expenditures were $45 million in the current quarter compared to $35 million last year.  First quarter net cash flow used in operating activities less capital expenditures was $24 million, compared to $289 million in the prior year quarter.

As of April 2, 2010, the Company had $2,221 million of debt and $634 million of cash and marketable securities, resulting in net debt (defined as debt less cash and marketable securities) of $1,587 million.  This net debt outcome is about even with the $1,583 million balance at December 31, 2009 and $836 million lower than the balance at the end of the prior year first quarter.  Committed liquidity facilities and cash on hand provided the Company with available liquidity in excess of $1.6 billion as of April 2, 2010.      

2010 Outlook

TRW expects full year production to total 11.5 million units in North America and 16.7 million units in Europe.  Based on these production levels and the Company's expectations for foreign currency exchange rates, full-year sales are forecasted to range between $12.9 and $13.3 billion, with second quarter sales expected to be approximately $3.4 billion.                  

"Vehicle production schedules remained robust during the first quarter of 2010; however, we continue to be cautious with regard to European production levels in the second half of the year.  

In addition, while commodity inflation was not a factor in our first quarter results, we expect increasing commodity prices to negatively impact our results going forward," said Mr. Plant.  "Managing costs and growing the business through our key technologies will continue to be our top priorities in 2010."    

First Quarter 2010 Conference Call

The Company will host its first quarter conference call at 8:30 a.m. (Eastern time) today, Wednesday, May 5th, to discuss financial results and other related matters.  To participate in the conference call, please dial (877) 852-7898 for U.S. locations, or (706) 634-1095 for international locations.  

An audio replay of the conference call will be available approximately two hours after the conclusion of the call and will be accessible afterward for approximately one week.  To access the replay, U.S. locations should dial (800) 642-1687, and locations outside the U.S. should dial (706) 645-9291. The replay code is 68475005.  A live audio webcast and replay of the conference call will also be available on the Company's website at www.trw.com.

Reconciliation to GAAP

In addition to GAAP results included within this press release, the Company has provided certain information which is not calculated according to GAAP ("non-GAAP"), such as net earnings (losses), operating income (losses) and diluted earnings per share each excluding special items, tax expense excluding certain net tax benefits, adjusted EBITDA and free cash flow.  Management uses these non-GAAP measures to evaluate the operating performance of the Company and its business segments, including use in connection with forecasting future periods.  Management believes that investors will likewise find these non-GAAP measures useful in evaluating such performance.  Such measures are frequently used by security analysts, institutional investors and other interested parties in the evaluation of companies in our industry.  

Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures of other companies.  For a reconciliation of non-GAAP measures to the closest GAAP financial measure and for share amounts used to derive earnings per share, please see the financial schedules that accompany this release.

About TRW

With 2009 sales of $11.6 billion, TRW Automotive ranks among the world's leading automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, operates in 26 countries and employs over 60,000 people worldwide.  TRW Automotive products include integrated vehicle control and driver assist systems, braking systems, steering systems, suspension systems, occupant safety systems (seat belts and airbags), electronics, engine components, fastening systems and aftermarket replacement parts and services.  All references to "TRW Automotive", "TRW" or the "Company" in this press release refer to TRW Automotive Holdings Corp. and its subsidiaries, unless otherwise indicated.  TRW Automotive news is available on the internet at www.trw.com.

Forward-Looking Statements

This release contains statements that are not statements of historical fact, but instead are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  We caution readers not to place undue reliance on these statements, which speak only as of the date hereof.  All forward-looking statements are subject to numerous assumptions, risks and uncertainties which can cause our actual results to differ materially from those suggested by the forward-looking statements, including those set forth in our Report on Form 10-K for the fiscal year ended December 31, 2009 (our "Form 10-K") such as: the financial condition of our customers adversely affecting us or the viability of our supply base; disruptions in the financial markets adversely impacting the availability and cost of credit negatively affecting our business; any shortage of supplies adversely affecting us; any further material contraction in automotive sales and production adversely affecting our results, liquidity or the viability of our supply base; escalating pricing pressures from our customers; commodity inflationary pressures adversely affecting our profitability or supply base; our dependence on our largest customers; costs of product liability, warranty and recall claims and efforts by customers to adversely alter contract terms and conditions concerning warranty and recall participation; costs or liabilities relating to environmental, health and safety regulations; limitations on available cash and access to additional capital due to our substantial debt;  strengthening of the U.S. dollar and other foreign currency exchange rate fluctuations impacting our results; any increase in the expense of our pension and other postretirement benefits or the funding requirements of our pension plans; any impairment of a significant amount of our goodwill or other intangible assets; risks associated with non-U.S. operations, including foreign exchange risks and economic uncertainty in some regions; work stoppages or other labor issues at our facilities or at the facilities of our customers or suppliers; volatility in our annual effective tax rate resulting from a change in earnings mix or other factors; assertions by or against us relating to intellectual property rights; the possibility that our largest stockholder's interests will conflict with our or our other stockholders' interests; and other risks and uncertainties set forth in our Form 10-K and in our other filings with the Securities and Exchange Commission. We do not undertake any obligation to release publicly any update or revision to any of the forward-looking statements.

Free Cash Flow

Free cash flow represents net cash provided by (used in) operating activities less capital expenditures, and is used by management in analyzing the Company's ability to service and repay its debt and to forecast future periods.  However, this measure does not represent funds available for investment or other discretionary uses since it does not deduct cash used to service debt or for other non-discretionary expenditures.

SOURCE TRW Automotive Holdings Corp.