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LIVONIA, Mich., July 31, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- TRW Automotive Holdings Corp. (NYSE: TRW), the global leader in active and passive safety systems, today reported second-quarter 2008 financial results with sales of $4.4 billion, an increase of 18.4 percent compared to the same period a year ago. The Company reported second quarter net earnings of $127 million or $1.24 per diluted share, which compares to net earnings of $97 million or $0.94 per diluted share in the prior year period.
(Logo: http://www.newscom.com/cgi-bin/prnh/20010824/TRWLOGO )
During the second quarter of the previous year, the Company completed the final step of its 2007 debt recapitalization plan with the successful refinancing of its $2.5 billion credit facilities. The second quarter results of last year included $8 million of costs related to this refinancing. Excluding the refinancing costs in 2007, the Company earned $127 million or $1.24 per diluted share in the 2008 quarter compared to $105 million, or $1.02 per diluted share in the prior year. The current quarter benefited from a higher level of operating income, despite increased restructuring and asset impairment charges between the two periods, and also from a lower level of interest expense.
"Our second quarter and first half results have demonstrated the strength of TRW's safety product portfolio, leading customer and geographical diversification and the Company's intense cost reduction efforts," said John Plant, President and Chief Executive Officer. "These strengths have allowed TRW to mitigate the increasingly challenging industry conditions, primarily in North America, and provide the basis for the continued advancement of the Company's strategic and operational objectives."
Mr. Plant added, "The transformation of TRW is not complete as we need to successfully react to the changing automotive landscape, while continuing to provide leading safety technologies, whose prospects we expect will be further enhanced by growth in emerging markets. We continue to explore strategies that will strengthen our competitiveness and help to achieve our goal of growing the Company profitably over the long term."
Second Quarter 2008
The Company reported second-quarter 2008 sales of $4.4 billion, an increase of $692 million or 18.4 percent over the prior year period. The 2008 quarter benefited from the positive effect of foreign currency translation, higher customer vehicle production in Europe and China and continued growth of safety products in all markets, including above-trend sales of lower margin modules. These positive factors were partially offset by lower vehicle production levels at our major customers in North America and price reductions provided to customers.
Operating income for second-quarter 2008 was $224 million, which compares to $205 million in the prior year period. The year-to-year increase was driven by a number of factors, including savings generated from cost improvement and efficiency programs, including reductions in pension and other postretirement benefit related costs, higher product volumes, the net positive effect of an insurance recovery totaling $14 million received in the current quarter relating to a prior year business disruption at one of the Company's manufacturing facilities, and the non-recurrence of certain one-off items that netted to an expense in the prior year. These positive factors were in part offset by price reductions provided to customers, higher commodity prices, a negative mix of products sold and a $13 million increase in restructuring and asset impairment expenses.
Net interest and securitization expense for the second quarter of 2008 totaled $44 million, which compares to $57 million in the prior year. The year-to-year decline can be attributed to the benefits derived from the Company's 2007 debt recapitalization and lower interest rates between the two periods. As mentioned previously, the 2007 quarter also included debt retirement costs of $8 million.
Second-quarter 2008 tax expense was $56 million, resulting in an effective tax rate of 31 percent, which compares to $45 million or 30 percent in the prior year, excluding debt retirement expenses. The second-quarter 2008 tax rate is below the expected full year rate primarily due to the Company's geographic earnings profile and other factors in the quarter.
The Company reported second-quarter 2008 net earnings of $127 million, or $1.24 per diluted share, which compares to $97 million or $0.94 per diluted share in the 2007 period. Net earnings in the 2007 quarter excluding previously mentioned debt retirement costs of $8 million were $105 million or $1.02 per diluted share.
Earnings before interest, securitization costs, loss on retirement of debt, taxes, depreciation and amortization ("EBITDA") were $380 million in the second quarter, as compared to the prior year level of $344 million.
First Half 2008
The Company reported first-half 2008 sales of $8.6 billion, an increase of $1.3 billion or 17.3 percent compared to prior year sales of $7.3 billion. The 2008 period benefited primarily from the positive effect of foreign currency translation, higher product volumes related to new product growth, including above-trend sales of lower margin modules, and robust industry sales in overseas markets. These positives were partially offset by the continued decline in North American customer vehicle production and price reductions provided to customers.
Operating income for the first half of 2008 was $412 million, which is an 8.4 percent increase from the prior year result of $380 million. The year-to-year improvement was driven by a number of factors, including savings generated from cost improvement and efficiency programs, including reductions in pension and OPEB related costs, higher product volumes, the net positive effect of an insurance recovery received in 2008 relating to a prior year business disruption, and the non-recurrence of certain one-off items that netted to an expense in the prior year. These positives were partially offset by price reductions provided to customers, negative product mix, higher commodity prices and a higher level of restructuring and asset impairment expenses in 2008 compared to the prior year.
Net interest and securitization expense in the first-half 2008 period was $93 million, which represents a significant improvement from the prior year result of $121 million. The decline in interest expense resulted primarily from the Company's debt recapitalization completed in the first half of 2007 and lower interest rates between the two periods. The 2007 period also included debt retirement costs of $155 million related to the debt recapitalization.
First-half 2008 tax expense was $103 million, resulting in an effective tax rate of 32 percent, which compares to $98 million or 37 percent excluding previously mentioned debt retirement expenses in the prior year.
The Company reported first-half 2008 net earnings of $221 million, or $2.16 per diluted share, which compares to $11 million or $0.11 per diluted share in the 2007 period. The comparison of net earnings, excluding the previously mentioned debt retirement costs from the prior year, were $221 million, or $2.16 per diluted share in 2008 as compared to $166 million or $1.62 per diluted share in 2007.
EBITDA was $717 million in the first half of 2008, which is a 9.8 percent increase from the prior year level of $653 million primarily due to the higher level of operating income in the current year.
Cash Flow and Capital Structure
Second quarter 2008 net cash provided by operations was $40 million, which compares to $290 million in the prior year. Cash flow in the 2007 period included proceeds of $127 million related to outstanding borrowings under the Company's U.S. based Accounts Receivable Securitization Facility ("Receivable Facility"). Absent these proceeds, the Company's cash flow from operations in the 2007 quarter was $163 million. Second quarter 2008 capital expenditures were $120 million compared to $109 million in 2007.
For the six month period ended June 27, 2008, the Company had a net cash usage in operating activities of $75 million, which compares to net cash generated of $69 million in the prior year. Excluding proceeds related to outstanding borrowings under the Receivable Facility, cash flow from operations was a use of $58 million in the 2007 period. The year-to-year decline resulted primarily from higher working capital requirements, partly offset by higher operating income. First half capital expenditures were $217 million compared to $228 million in 2007.
As mentioned previously, the Company refinanced substantially all of its debt in 2007. The Company incurred debt retirement charges of approximately $155 million during the 2007 year-to-date period related to these transactions.
As of June 27, 2008, the Company had $3,122 million of debt and $453 million of cash and marketable securities, resulting in net debt (defined as debt less cash and marketable securities) of $2,669 million. Net debt is $324 million higher than the balance at the end of 2007.
2008 Outlook
The Company increased its full year outlook to reflect the strong second quarter outcome, partially offset by a lower outlook for the second half of 2008. Sales are now expected to be in the range of $16.4 to $16.8 billion (including third quarter sales of approximately $3.9 billion). Full year net earnings per share are now expected to be in the range of $2.40 to $2.70.
This guidance range reflects pre-tax restructuring and asset impairment charges of approximately $75 million (including approximately $25 million in the third quarter). The effective tax rate is expected to be in the range of approximately 38 to 42 percent. Lastly, the Company expects capital expenditures in 2008 to be approximately 3.5 percent of sales.
"In recent months, the outlook for the North American automotive industry has further deteriorated with the decline in overall production of light vehicles, the shift of production away from light trucks to passenger cars and severe commodity inflation being the primary pressures in this market," said Mr. Plant. "Our updated 2008 outlook provided today reflects the weaker outlook for the North American market as well as our expectations for a softening production environment in Europe." Mr. Plant added, "The pressures we are seeing for the second half of 2008 will undoubtedly continue into 2009."
Second Quarter 2008 Conference Call
The Company will host its second-quarter conference call at 8:30 a.m. (EDT) today, Thursday, July 31, to discuss financial results and other related matters. To access the conference call, U.S. locations should dial (877) 852-7898, and locations outside the U.S. should dial (706) 634-1095.
A replay of the conference call will be available approximately two hours after the conclusion of the call and accessible 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 55410719. A live audio webcast and subsequent replay of the conference call will also be available on the Company's website at www.trw.com/results .
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"). Management believes these non-GAAP measures are useful to evaluate operating performance and/or regularly used by security analysts, institutional investors and other interested parties in the evaluation of the Company.
Non-GAAP measures are not purported to be a substitute for any GAAP measure 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 measure and for share amounts used to derive earnings per share, please see the financial schedules that accompany this release.
About TRW
With 2007 sales of $14.7 billion, TRW Automotive ranks among the world's leading automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, operates in 27 countries and employs approximately 66,300 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 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, 2007, such as: loss of market share, production cuts and capacity reductions by domestic North American vehicle manufacturers and resulting restructuring initiatives, including bankruptcy actions, of our suppliers and customers; escalating pricing pressures from our customers; commodity inflationary pressures adversely affecting our profitability and supply base, including any resulting inability of our suppliers to perform as we expect; our dependence on our largest customers; product liability, warranty and recall claims and efforts by customers to alter terms and conditions concerning warranty and recall participation; strengthening of the U.S. dollar and other foreign currency exchange rate fluctuations; work stoppages or other labor issues at our facilities or at the facilities of our customers or suppliers; our substantial debt and resulting vulnerability to an economic or industry downturn and to rising interest rates; cyclicality of automotive production and sales; any increase in the expense and funding requirements of our pension and other postretirement benefits; risks associated with non-U.S. operations, including foreign exchange risks and economic uncertainty in some regions; any impairment of our goodwill or other intangible assets; volatility in our annual effective tax rate resulting from a change in earnings mix or other factors; adverse effects of environmental and safety regulations; assertions by or against us relating to intellectual property rights; the possibility that our largest shareholder's interests will conflict with ours; and other risks and uncertainties set forth in our Report on Form 10-K and in our other filings with the Securities and Exchange Commission. We do not undertake any obligation to release publicly any revision to any of these forward-looking statements.
TRW Automotive Holdings Corp.
Index of Condensed Consolidated Financial Information
Page
Consolidated Statements of Earnings (unaudited)
for the three months ended June 27, 2008 and June 29, 2007 A2
Consolidated Statements of Earnings (unaudited)
for the six months ended June 27, 2008 and June 29, 2007 A3
Condensed Consolidated Balance Sheets as of
June 27, 2008 (unaudited) and December 31, 2007 A4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the six months ended June 27, 2008 and June 29, 2007 A5
Reconciliation of GAAP Net Earnings to EBITDA (unaudited)
for the three and six months ended June 27, 2008 and June 29, 2007 A6
Reconciliation of GAAP Net Earnings to Adjusted Earnings (unaudited)
for the three months ended June 29, 2007 A7
Reconciliation of GAAP Net Earnings to Adjusted Earnings (unaudited)
for the six months ended June 29, 2007 A8
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, 2007 and Quarterly Report on Form 10-Q for the period ended March 28, 2008, as filed with the United States Securities and Exchange Commission on February 21, 2008 and April 30, 2008, respectively.
A2
TRW Automotive Holdings Corp.
Consolidated Statements of Earnings
(Unaudited)
(In millions, except per share amounts) Three Months Ended
June 27, 2008 June 29, 2007
Sales $4,446 $3,754
Cost of sales 4,045 3,417
Gross profit 401 337
Administrative and selling expenses 136 140
Amortization of intangible assets 9 9
Restructuring charges and asset impairments 24 11
Other expense (income) - net 8 (28)
Operating income 224 205
Interest expense - net 43 56
Loss on retirement of debt - 8
Accounts receivable securitization costs 1 1
Equity in earnings of affiliates, net of tax (8) (9)
Minority interest, net of tax 5 7
Earnings before income taxes 183 142
Income tax expense 56 45
Net earnings $127 $97
Basic earnings per share:
Earnings per share $1.26 $0.97
Weighted average shares outstanding 101.1 99.5
Diluted earnings per share:
Earnings per share $1.24 $0.94
Weighted average shares outstanding 102.6 103.4
A3
TRW Automotive Holdings Corp.
Consolidated Statements of Earnings
(Unaudited)
(In millions, except per share amounts) Six Months Ended
June 27, 2008 June 29, 2007
Sales $8,590 $7,321
Cost of sales 7,848 6,668
Gross profit 742 653
Administrative and selling expenses 268 268
Amortization of intangible assets 18 18
Restructuring charges and asset impairments 32 19
Other expense (income) - net 12 (32)
Operating income 412 380
Interest expense - net 91 119
Loss on retirement of debt - 155
Accounts receivable securitization costs 2 2
Equity in earnings of affiliates, net of tax (15) (15)
Minority interest, net of tax 10 10
Earnings before income taxes 324 109
Income tax expense 103 98
Net earnings $221 $11
Basic earnings per share:
Earnings per share $2.19 $0.11
Weighted average shares outstanding 100.9 99.0
Diluted earnings per share:
Earnings per share $2.16 $0.11
Weighted average shares outstanding 102.3 102.5
A4
TRW Automotive Holdings Corp.
Condensed Consolidated Balance Sheets
(Dollars in millions) As of
June 27, December 31,
2008 2007
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $453 $895
Marketable securities - 4
Accounts receivable - net 3,165 2,313
Inventories 944 822
Prepaid expenses and other current
assets 419 292
Total current assets 4,981 4,326
Property, plant and equipment - net 2,987 2,910
Goodwill 2,249 2,243
Intangible assets - net 715 710
Pension asset 1,500 1,461
Other assets 711 640
Total assets $13,143 $12,290
Liabilities, Minority Interests and Stockholders' Equity
Current liabilities:
Short-term debt $90 $64
Current portion of long-term debt 16 30
Trade accounts payable 2,710 2,406
Accrued compensation 329 298
Other current liabilities 1,133 917
Total current liabilities 4,278 3,715
Long-term debt 3,016 3,150
Postretirement benefits other than
pensions 580 591
Pension benefits 493 497
Other long-term liabilities 1,055 1,011
Total liabilities 9,422 8,964
Minority interests 149 134
Commitments and contingencies
Stockholders' equity:
Capital stock 1 1
Treasury stock - -
Paid-in-capital 1,189 1,176
Retained earnings 622 398
Accumulated other comprehensive earnings 1,760 1,617
Total stockholders' equity 3,572 3,192
Total liabilities, minority interests,
and stockholders' equity $13,143 $12,290
A5
TRW Automotive Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in millions) Six Months Ended
June 27, 2008 June 29, 2007
Operating Activities
Net earnings $221 $11
Adjustments to reconcile net earnings to
net cash (used in) provided by operating
activities:
Depreciation and amortization 300 268
Net pension and other postretirement
benefits income and contributions (105) (94)
Net gains on sale of assets (3) (12)
Loss on retirement of debt - 155
Other - net 18 21
Changes in assets and liabilities, net of
effects of businesses acquired:
Accounts receivable - net (710) (450)
Inventories (59) (54)
Trade accounts payable 176 201
Prepaid expense and other assets (107) (38)
Other liabilities 194 61
Net cash (used in) provided by operating
activities (75) 69
Investing Activities
Capital expenditures, including other
intangible assets (217) (228)
Acquisitions of businesses, net of cash
acquired (40) (12)
Termination of interest rate swaps - (12)
Investment in affiliates (5) -
Proceeds from sale/leaseback transactions 1 6
Net proceeds from asset sales 3 17
Net cash used in investing activities (258) (229)
Financing Activities
Change in short-term debt 26 50
Net (repayments on) proceeds from revolving
credit facility (129) 200
Proceeds from issuance of long-term debt, net
of fees 4 2,582
Redemption of long-term debt (55) (2,993)
Proceeds from exercise of stock options 4 28
Net cash used in financing activities (150) (133)
Effect of exchange rate changes on cash 41 (10)
Decrease in cash and cash equivalents (442) (303)
Cash and cash equivalents at beginning of
period 895 578
Cash and cash equivalents at end of period $453 $275
A6
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings to EBITDA
(Unaudited)
The reconciliation schedule below should be read in conjunction with the TRW Automotive Holdings Corp. Annual Report on Form 10-K for the year ended December 31, 2007 and Quarterly Report on Form 10-Q for the period ended March 28, 2008.
The EBITDA measure calculated in the following schedules is a measure used by management to evaluate operating performance. Management believes that EBITDA is a useful measurement because it is frequently used by securities analysts, institutional investors and other interested parties in the evaluation of companies in our industry.
EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net earnings as an indicator of operating performance, or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not consider certain cash requirements such as tax payments and debt service requirements. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly titled measures of other companies.
(Dollars in millions) Three Months Ended
June 27, 2008 June 29, 2007
GAAP net earnings $127 $97
Income tax expense 56 45
Interest expense - net 43 56
Loss on retirement of debt - 8
Accounts receivable securitization costs 1 1
Depreciation and amortization 153 137
EBITDA $380 $344
(Dollars in millions) Six Months Ended
June 27, 2008 June 29, 2007
GAAP net earnings $221 $11
Income tax expense 103 98
Interest expense - net 91 119
Loss on retirement of debt - 155
Accounts receivable securitization costs 2 2
Depreciation and amortization 300 268
EBITDA $717 $653
A7
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings to Adjusted Earnings
(Unaudited)
In conjunction with the Company's tender offer and repurchases of its then outstanding 9-3/8% Senior Notes and 10 1/8% Senior Notes in original principal amounts of $925 million and euro 200 million, respectively, and 11% Senior Subordinated Notes and 11-3/4% Senior Subordinated Notes in original principal amounts of $300 million and euro 125 million, respectively (collectively, the "Old Notes"), the Company recorded a loss on retirement of debt of $1 million during the three months ended June 29, 2007 for additional redemption premiums paid.
The Company entered into its Fifth Amended and Restated Credit Agreement dated as of May 9, 2007, which provides for $2.5 billion in senior secured credit facilities, consisting of (i) a 5-year $1.4 billion Revolving Credit Facility, (ii) a 6-year $600 million Term Loan A-1 Facility and (iii) a 6.75-year $500 million Term Loan B-1 Facility (collectively, the "Facilities"). Proceeds from the Facilities were used to refinance $2.5 billion of existing senior secured credit facilities and pay fees and expenses related to the refinancing. The Company recorded a loss on retirement of debt related to the transaction of $7 million during the second quarter of 2007.
The following reconciliation excludes the impact of the loss on retirement
of debt.
Three Months Three Months
Ended Ended
June 29, June 29,
(In millions, except per share 2007 2007
amounts) Actual Adjustments Adjusted
Sales $3,754 $- $3,754
Cost of sales 3,417 - 3,417
Gross profit 337 - 337
Administrative and selling
expenses 140 - 140
Amortization of intangible
assets 9 - 9
Restructuring charges and asset
impairments 11 - 11
Other income - net (28) - (28)
Operating income 205 - 205
Interest expense, net 56 - 56
Loss on retirement of debt 8 (8)(a) -
Accounts receivable securitization
costs 1 - 1
Equity in earnings of affiliates,
net of tax (9) - (9)
Minority interest, net of tax 7 - 7
Earnings before income taxes 142 8 150
Income tax expense 45 - 45
Net earnings $97 $8 $105
Effective tax rate 32% 30%
Basic earnings per share:
Earnings per share $0.97 $1.06
Weighted average shares
outstanding 99.5 99.5
Diluted earnings per share:
Earnings per share $0.94 $1.02
Weighted average shares
outstanding 103.4 103.4
(a) Reflects the elimination of the loss on retirement of debt.
A8
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings to Adjusted Earnings
(Unaudited)
In conjunction with the Company's tender offer and repurchases of its then outstanding Old Notes, the Company recorded a loss on retirement of debt of $148 million during the six months ended June 29, 2007. This loss included $112 million for redemption premiums paid, $20 million for the write-off of deferred debt issuance costs, $11 million relating to the principal amount in excess of carrying value of the 9-3/8% Senior Notes and $5 million of fees.
The Company entered into its Fifth Amended and Restated Credit Agreement dated as of May 9, 2007, which provides for $2.5 billion in senior secured credit facilities, consisting of (i) a 5-year $1.4 billion Revolving Credit Facility, (ii) a 6-year $600 million Term Loan A-1 Facility and (iii) a 6.75-year $500 million Term Loan B-1 Facility (collectively, the "Facilities"). Proceeds from the Facilities were used to refinance $2.5 billion of existing senior secured credit facilities and pay fees and expenses related to the refinancing. The Company recorded a loss on retirement of debt related to the transaction of $7 million during the second quarter of 2007.
The following reconciliation excludes the impact of the loss on retirement
of debt.
Six Months Six Months
Ended Ended
June 29, June 29,
(In millions, except per share 2007 Adjustments 2007
amounts) Actual Adjusted
Sales $7,321 $- $7,321
Cost of sales 6,668 - 6,668
Gross profit 653 - 653
Administrative and selling
expenses 268 - 268
Amortization of intangible assets 18 - 18
Restructuring charges and asset
impairments 19 - 19
Other income - net (32) - (32)
Operating income 380 - 380
Interest expense, net 119 - 119
Loss on retirement of debt 155 (155)(a) -
Accounts receivable securitization
costs 2 - 2
Equity in earnings of affiliates,
net of tax (15) - (15)
Minority interest, net of tax 10 - 10
Earnings before income taxes 109 155 264
Income tax expense 98 - 98
Net earnings $11 $155 $166
Effective tax rate 90% 37%
Basic earnings per share:
Earnings per share $0.11 $1.68
Weighted average shares
outstanding 99.0 99.0
Diluted earnings per share:
Earnings per share $0.11 $1.62
Weighted average shares
outstanding 102.5 102.5
(a) Reflects the elimination of the loss on retirement of debt.
SOURCE TRW Automotive Holdings Corp.
http://www.trw.com
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