TRW Reports Third Quarter 2011 Financial Results

LIVONIA, Mich., Nov. 2, 2011 /PRNewswire/ -- TRW Automotive Holdings Corp. (NYSE: TRW), the global leader in active and passive safety systems, today reported third quarter 2011 financial results with sales of $3.9 billion, an increase of 14 percent compared to the prior year period.  The Company reported GAAP third quarter net earnings of $158 million or $1.22 per diluted share, which compares to net earnings of $199 million or $1.54 per diluted share in the prior year period.

The Company's current and prior year quarterly results both contain special items.  The current year quarter included debt retirement charges while the prior year period included debt retirement charges and favorable tax benefits.  Excluding these special items, the Company reported net earnings of $177 million, or $1.37 per diluted share in the third quarter of this year, which compares to net earnings of $189 million or $1.47 per diluted share in the prior year period.  

"TRW's solid third quarter results and business performance achieved through the first nine months of this year provide evidence of the Company's outstanding product and geographical positions," said John C. Plant, Chairman and Chief Executive Officer.  "We are confident in the future given the Company's strong market position and profitable growth initiatives that are positioning TRW for long-term success."

Third Quarter 2011

The Company reported third quarter 2011 sales of $3.9 billion, an increase of $489 million or 14 percent from the prior year period.  The increase in sales resulted from improved vehicle production volumes, increasing demand for TRW's broad array of active and passive safety products and the positive impact of currency movements between the two periods.  

The Company's third quarter 2011 operating income was $240 million, compared with operating income of $269 million in the 2010 period.  The year-to-year decline in profit was driven by the negative profit impact from higher raw material prices, higher legal fees and planned increases in costs to support future growth, partially offset by the improved profit from the higher level of sales between the two quarters.    

Net interest expense for the third quarter of 2011 totaled $26 million, which compares favorably to $39 million in the 2010 period as a result of lower debt levels.  In addition, both the 2011 and 2010 periods include net losses on retirement of debt totaling $19 million and $1 million, respectively.    

Tax expense for the third quarter of 2011 was $37 million, which compares to a tax expense of $28 million in the prior year period.  The 2010 period includes special tax benefits of $11 million.

The Company reported 2011 third quarter GAAP earnings of $158 million, or $1.22 per diluted share, which compares to GAAP net earnings of $199 million, or $1.54 per diluted share in the 2010 period.  

Excluding special items, the Company reported third quarter 2011 net earnings of $177 million, or $1.37 per diluted share, which compares to net earnings of $189 million or $1.47 per diluted share in the 2010 period.  

Earnings before interest, taxes, depreciation and amortization and special items ("adjusted EBITDA") were $354 million in the third quarter of 2011, compared to the prior year level of $385 million.  See page A6 for a description of the special items excluded in calculating adjusted EBITDA.    

Year-to-Date 2011

For the nine month period ended September 30, 2011, the Company reported sales of $12.3 billion, an increase of $1.6 billion or 15 percent compared to prior year sales.  The increase in sales resulted from the higher level of global vehicle production volumes, increasing demand for TRW's innovative technologies and the positive impact of currency movements between the two periods.        

For the 2011 year-to-date period, the Company reported operating income of $980 million which compares to $891 million of operating income in the prior year period.  The 2011 period included a gain related to a favorable resolution of a commercial matter totaling $19 million and a charge related to the termination of a service contract totaling $10 million.  Restructuring and fixed asset impairment charges totaling $10 million were recognized in the 2010 period.  Excluding these items from both periods, the Company reported operating income of $971 million in the 2011 period, which compares to $901 million in the prior year.  The year-to-year improvement in absolute profit was driven primarily by the positive profit impact of the higher level of sales between the two periods partially offset by inflationary pressures, including higher raw material prices and planned increases in costs to support future growth.          

Net interest expense for the first nine months of 2011 totaled $90 million, which compares to $125 million in the prior year period.  In addition, the current year-to-date period included a net loss on retirement of debt totaling $39 million compared with the first nine months of 2010, which recognized a net loss on retirement of debt totaling $2 million.        

The Company recognized a $9 million gain on an acquisition related to the purchase of a shock absorber manufacturing facility during the 2011 period.  The gain reflects the excess of fair value of the business in comparison to the purchase price.

Year-to-date tax expense was $127 million, which compares to $130 million in the prior year.  Excluding tax benefits related to special items in both periods, tax expense was $147 million and $153 million for the first nine months of 2011 and the first nine months of 2010, respectively.      

The Company reported year-to-date 2011 GAAP net earnings of $732 million, or $5.57 per diluted share, which compares to GAAP net earnings of $630 million, or $4.93 per diluted share in the prior year period.

Excluding special items, the Company reported 2011 year-to-date net earnings of $733 million, or $5.58 per diluted share, which compares to net earnings of $619 million or $4.84 per diluted share in the 2010 period.  

Adjusted EBITDA totaled $1,313 million for the first nine months of 2011, compared to $1,247 million in the prior year period.  See page A6 for a description of the special items excluded in calculating adjusted EBITDA.

Cash Flow and Capital Structure

Third quarter 2011 net cash flow provided by operating activities was $160 million, which compares to $267 million in the third quarter of 2010.  Capital expenditures were $137 million in the current quarter compared to $61 million last year.  Third quarter free cash flow (cash flow from operating activities less capital expenditures) was a positive $23 million, compared to $206 million in the prior year quarter.  The lower level of free cash flow compared with last year resulted from a planned increase in capital expenditures and higher working capital requirements.      

For the nine month period ended September 30, 2011, net cash flow provided by operating activities totaled $512 million, which compares to $690 million in the prior year period.  Year-to-date capital expenditures were $304 million compared to $168 million in 2010.  Free cash flow was a positive $208 million in the first nine months of 2011 compared to $522 million for the same period last year.  

During the third quarter of 2011, the Company used $213 million of cash to retire $162 million of face value debt, including $66 million of face value exchangeable notes.  As of September 30, 2011, the Company had $1,532 million of debt and $890 million of cash and cash equivalents, resulting in net debt (defined as debt less cash and cash equivalents) of $642 million.  This net debt outcome is $126 million lower than the balance at the end of 2010 and $388 million lower than the balance at the end of the prior year third quarter.  Committed liquidity facilities and cash on hand provided the Company with available liquidity in excess of $1.3 billion as of September 30, 2011.            

Divestiture Activity

During the most recent quarter the Company took action to divest certain of its non-safety related businesses in Asia and entered into an agreement to sell its cold forming business in Japan.  The planned divestitures, with annual sales of approximately $100 million, are expected to be finalized in the fourth quarter of 2011 and will enable the Company to concentrate its resources on the growing safety systems market in Asia.              

2011 Outlook

TRW expects full year production to total 12.9 million units in North America and 19.9 million units in Europe.  Based on these production levels and the Company's expectations for foreign currency exchange rates, full year 2011 sales are now expected to be approximately $16.2 billion (including fourth quarter sales of approximately $3.9 billion).                    

"Although vehicle production schedules have moderated slightly in the second half of 2011 compared to the first half of the year, increased demand for TRW's innovative products, continued growth in the developing markets of the world and the Company's business performance achieved through September will support a strong year for TRW," said Mr. Plant.  "We are committed to finishing a solid year while executing our profitable growth strategy to ensure TRW is well positioned for 2012 and beyond."      

Third Quarter 2011 Conference Call

The Company will host its third quarter conference call at 8:30 a.m. (Eastern time) today, Wednesday, November 2nd, 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 11694231.  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, operating income and diluted earnings per share each excluding special items; tax expense excluding certain 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 and to forecast 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 2010 sales of $14.4 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 could 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, 2010 (our "Form 10-K"), and our Reports on Form 10-Q for the quarters ended April 1 and July 1, 2011, such as: any developments related to antitrust investigations adversely affecting our results, cash flows, financial condition or reputation; tighter financial markets adversely impacting the availability and cost of credit negatively affecting our business; a material contraction in automotive sales and production adversely affecting our results or the viability of our supply base; commodity inflationary pressures adversely affecting our profitability or supply base; strengthening of the U.S. dollar and other foreign currency exchange rate fluctuations impacting our results; pricing pressures from our customers adversely affecting our profitability; any shortage of supplies causing a production disruption; increasing costs negatively impacting our profitability; the loss of any of our largest customers materially adversely affecting us; 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 adversely affecting our results; risks associated with non-U.S. operations, including economic and political uncertainty in some regions, adversely affecting our business, results or financial condition; any inability to protect our intellectual property rights adversely affecting our business or our competitive position; any increase in the expense of our pension and other postretirement benefits or the funding requirements of our pension plans reducing our profitability; work stoppages or other labor issues at our facilities or at the facilities of our customers or suppliers adversely affecting our operations; volatility in our annual effective tax rate resulting from a change in our valuation allowances position or other factors; any impairment of a significant amount of our goodwill or other intangible assets; and other risks and uncertainties set forth in our Form 10-K and in our other filings with the U.S. Securities and Exchange Commission.  We do not undertake any obligation to release publicly any update or revision to any of the forward-looking statements.    

SOURCE TRW Automotive Holdings Corp.