TRW Reports Record Second Quarter and First Half 2011 Financial Results

TRW Reports Record Second Quarter and First Half 2011 Financial Results

TRW Reports Record Second Quarter and First Half 2011 Financial Results

PR Newswire

LIVONIA, Mich., Aug. 3, 2011 /PRNewswire/ -- TRW Automotive Holdings Corp. (NYSE: TRW), the global leader in active and passive safety systems, today reported second quarter 2011 financial results with sales of $4.2 billion, an increase of 16 percent compared to the prior year period.  The Company reported GAAP second quarter net earnings of $293 million or $2.21 per diluted share, an increase of 24 percent compared to net earnings of $227 million or $1.78 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 a gain associated with the resolution of a commercial matter, debt retirement charges and favorable tax benefits while the prior year period included restructuring charges, the impact of debt retirement and favorable tax benefits.  Excluding these special items, the Company reported net earnings of $264 million, or $1.99 per diluted share in the second quarter of this year, which compares to net earnings of $221 million or $1.73 per diluted share in the prior year period.      

"TRW's record results for the second quarter and first six months of 2011 have been driven by the Company's strong market position and focus on profitably growing the business," said John C. Plant, Chairman and Chief Executive Officer.  "The Company's outstanding business performance and cash generation achieved in the first half of this year not only provides a solid foundation for the remainder of this year, it also supports key growth initiatives that will further position TRW for long-term success."

Second Quarter 2011

The Company reported second quarter 2011 sales of $4.2 billion, an increase of $573 million or 16 percent from the prior year period.  The increase in sales resulted from improved vehicle production volumes, primarily with domestic vehicle manufacturers in North America, 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 second quarter 2011 operating income was $368 million, compared with operating income of $322 million in the 2010 period.  The 2011 period includes a gain related to a favorable resolution of a commercial matter totaling $19 million.  Restructuring charges totaling $3 million were recognized in the 2010 period.  Excluding these items from both periods, operating income for the second quarter was $349 million, which compares to $325 million in the prior year period.  The year-to-year improvement in absolute profit was driven by the positive profit impact from the higher level of sales between the two quarters, largely offset by higher raw material prices and planned increases in costs to support future growth.                

Net interest expense for the second quarter of 2011 totaled $30 million, which compares favorably to $41 million in the 2010 period as a result of lower debt levels.  In addition, both the 2011 and 2010 periods recognized a net loss on retirement of debt totaling $10 million and $1 million, respectively.                  

Tax expense for the second quarter of 2011 was $34 million, which compares to a tax expense of $52 million in the prior year period.  The 2011 period included a net tax benefit of $20 million compared to the 2010 period which included a net tax benefit of $10 million, both of which related to favorable resolutions of tax matters in foreign jurisdictions.  Excluding these benefits from both periods, tax expense was $54 million in the current quarter compared with $62 million last year.                      

The Company reported 2011 second quarter GAAP earnings of $293 million, or $2.21 per diluted share, which compares to GAAP net earnings of $227 million, or $1.78 per diluted share in the 2010 period.  

Excluding special items, the Company reported second quarter 2011 net earnings of $264 million, or $1.99 per diluted share, which compares to net earnings of $221 million or $1.73 per diluted share in the 2010 period.  

Earnings before interest, taxes, depreciation and amortization and special items ("adjusted EBITDA") were $461 million in the second quarter of 2011, compared to the prior year level of $437 million.  See page A6 for a description of the special items excluded in calculating adjusted EBITDA.    

First Half 2011

The Company reported first half 2011 sales of $8.3 billion, an increase of $1.1 billion or 15 percent compared to prior year sales.  The increase in sales resulted from the higher level of global vehicle production volumes compared to first half 2010, increasing demand for TRW's innovative technologies and the positive impact of currency movements between the two periods.        

For the first half of 2011, the Company reported operating income of $740 million which compares to $622 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 $731 million in the 2011 period, which compares to $632 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 half of 2011 totaled $64 million, which compares to $86 million in the prior year period.  In addition, the current year-to-date period included a net loss on retirement of debt totaling $20 million compared with the first half 2010 period which recognized a net loss on retirement of debt totaling $1 million.        

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

First half 2011 tax expense was $90 million, which compares to $102 million in the prior year.  Excluding the tax benefits related to the special items previously noted in both periods, tax expense was $110 million and $114 million in the first half of 2011 and the first half of 2010, respectively.      

The Company reported record first half 2011 GAAP net earnings of $574 million, or $4.34 per diluted share, which compares to GAAP net earnings of $431 million, or $3.38 per diluted share in the prior year period.

Excluding special items, the Company reported net earnings of $556 million in the first half of 2011, or $4.20 per diluted share, which compares to net earnings of $430 million or $3.38 per diluted share in the first half of 2010.  

Adjusted EBITDA totaled $959 million in first half 2011, compared to $862 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

Second quarter 2011 net cash flow provided by operating activities was $271 million, which compares to $402 million in the second quarter of 2010.  Capital expenditures were $100 million in the current quarter compared to $62 million last year.  Second quarter free cash flow (cash flow from operating activities less capital expenditures) was a positive $171 million, compared to $340 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, increased working capital and an increased level of cash payments primarily for taxes, restructuring and employee related benefits.    

For the six month period ended July 1, 2011, net cash flow provided by operating activities totaled $352 million, which compares to $423 million in first half 2010.  First half capital expenditures were $167 million compared to $107 million in 2010.  Free cash flow was a positive $185 million in first half 2011 compared to $316 million for the same period last year.  

During the first half of 2011, the Company repurchased approximately $175 million of face value debt.  As of July 1, 2011, the Company had $1,705 million of debt and $1,151 million of cash and cash equivalents, resulting in net debt (defined as debt less cash and cash equivalents) of $554 million.  This net debt outcome sets a new historic low for the Company, $214 million lower than the balance at the end of 2010 and $723 million lower than the balance at the end of the prior year second quarter.  Committed liquidity facilities and cash on hand provided the Company with available liquidity in excess of $1.5 billion as of July 1, 2011.            

2011 Outlook

TRW expects full year production to total 13.0 million units in North America and 20.0 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 range between $16.2 billion and $16.4 billion, with third quarter sales expected to be approximately $3.9 billion.                    

"Vehicle production schedules remained robust during the first half of 2011 as the industry worked hard to avoid and mitigate production disruptions due to supply chain shortages caused by the March earthquake in Japan; however, normal seasonality will lead to a decline in production levels, primarily in Europe, during the second half of the year compared to the first half," said Mr. Plant.  "Building on the positive momentum established earlier this year while executing our profitable growth strategy is a top priority as we look to finish the year in a strong manner and position the Company for long-term success."      

Second Quarter 2011 Conference Call

The Company will host its second quarter conference call at 8:30 a.m. (Eastern time) today, Wednesday, August 3rd, 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 78541740.  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"), our Report on Form 10-Q for the fiscal quarter ended April 1, 2011 and our other filings with the U.S. Securities and Exchange Commission (the "SEC"), such as: any developments related to antitrust investigations adversely affecting our results, cash flows, financial condition or reputation; any shortage of supplies causing a production disruption due to the events in Japan or otherwise; 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; 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 SEC. We do not undertake any obligation to release publicly any update or revision to any of the forward-looking statements.    

TRW Automotive Holdings Corp.

Index of Condensed Consolidated Financial Information








Page



Consolidated Statements of Earnings (unaudited) for the three months ended July 1, 2011 and July 2, 2010

A2



Consolidated Statements of Earnings (unaudited) for the six months ended July 1, 2011 and July 2, 2010

A3



Condensed Consolidated Balance Sheets as of July 1, 2011 (unaudited) and December 31, 2010

A4



Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended July 1, 2011 and July 2, 2010

A5



Reconciliation of Non-GAAP Financial Measures (unaudited) for the three and six months ended July 1, 2011 and July 2, 2010

A6



Reconciliation of GAAP Net Earnings to Adjusted Earnings (unaudited):




  • For the three months ended July 1, 2011

A7




  • For the six months ended July 1, 2011

A8




  • For the three months ended July 2, 2010

A9




  • For the six months ended July 2, 2010

A10


The accompanying unaudited condensed consolidated financial information and reconciliation schedules should be read in conjunction with the TRW Automotive Holdings Corp. Annual Report on Form 10-K for the year ended December 31, 2010 and Quarterly Report on Form 10-Q for the period ended April 1, 2011, which were filed with the United States Securities and Exchange Commission.



A2

TRW Automotive Holdings Corp.

Consolidated Statements of Earnings

(Unaudited)


(In millions, except per share amounts)


Three Months Ended





July 1, 2011


July 2, 2010












Sales                                                               


$

4,234



$

3,661


Cost of sales                                                         



3,717




3,222




Gross profit                                                   



517




439


Administrative and selling expenses                                       



152




130


Amortization of intangible assets                                         



3




6


Restructuring charges and fixed asset impairments                          



-




3


Other (income) expense — net                                           



(6)




(22)




Operating income                                               



368




322


Interest expense — net                                                 



30




41


Loss on retirement of debt — net                                         



10




1


Equity in earnings of affiliates, net of tax                                   



(10)




(9)




Earnings before income taxes                                     



338




289


Income tax expense                                                   



34




52




Net earnings                                                   



304




237


Less: Net earnings attributable to noncontrolling interest, net of tax              



11




10




Net earnings attributable to TRW                                   


$

293



$

227
























Basic earnings per share:










Earnings per share                                                 


$

2.37



$

1.90



Weighted average shares outstanding                                 



123.7




119.4













Diluted earnings per share:










Earnings per share                                                 


$

2.21



$

1.78



Weighted average shares outstanding                                 



134.4




130.7




A3

TRW Automotive Holdings Corp.

Consolidated Statements of Earnings

(Unaudited)






Six Months Ended

(In millions, except per share amounts)

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