News Releases

TRW Automotive Inc. Reports 2003 Third Quarter Results

Financial Performance In-Line With Expectations Following Decline In Industry Production Volumes

PRNewswire-FirstCall
LIVONIA, Mich.
Nov 7, 2003

TRW Automotive Inc. today reported financial results for the third quarter ended September 26, 2003. Consolidated net losses were $23 million compared to predecessor third quarter combined net earnings of $57 million in the prior year period. Sales for the current year third quarter were $2.5 billion, which were consistent with the level achieved in 2002.

(Logo: http://www.newscom.com/cgi-bin/prnh/20010824/TRWLOGO )

Several factors contributed to the sharp decline in profit between the current and prior year third quarter periods including a $65 million pre-tax decline in net pension/OPEB income, a $31 million non-cash charge incurred in the current quarter relating to the refinancing of the Company's bank term debt, a decline of $13 million in other income, an increase of $12 million in net interest expense, and an increase of $6 million in restructuring charges between the two periods. Excluding these items, consolidated earnings before income taxes were consistent with combined prior year results.

For the third quarter ended September 26, 2003, pro forma consolidated net losses were $23 million compared to pro forma third quarter combined net earnings of $58 million in the prior year. Sales for the period were $2.5 billion, a 2.1 percent increase from the pro forma level achieved in 2002. The decline in profit between the two periods on a pro forma basis results essentially from the same factors described above.

Consolidated and combined results of the privately-held company have been adjusted to illustrate the estimated pro forma effects of the February 28, 2003 acquisition of the former TRW Inc.'s automotive business by affiliates of The Blackstone Group L.P. ("Blackstone") from Northrop Grumman Corporation ("Northrop Grumman"), as if the acquisition had occurred on January 1, 2002. Blackstone affiliates and management currently own 80.4 percent of the business while a subsidiary of Northrop Grumman owns the remaining 19.6 percent.

The Company's pro forma earnings before interest, taxes, depreciation, amortization and net pension and OPEB expense (EBITDAP) for the third quarter of 2003 totaled $214 million, a decline of 11.2 percent compared to pro forma EBITDAP of $241 million during the prior year third quarter. Included in the current quarter were $13 million of charges relating to costs associated with restructuring programs while the prior year quarter had $7 million of charges. These charges were primarily related to headcount reductions. Exclusive of these charges, third quarter 2003 EBITDAP was $227 million, a decline of 8.5 percent compared to last year.

"As expected, the third quarter proved to be a challenging period as both North American and European production volumes declined," said TRW Automotive President and Chief Executive Officer, John C. Plant. "A strong result from our cost-down and productivity programs during the quarter allowed us to offset a substantial portion of the effect from lower production volumes."

Third quarter pro forma EBITDAP results were negatively impacted by the effect of lower vehicle production volumes, both in North America and Europe, mix of products sold, and a lower level of other income. Partially offsetting these items were translation gains resulting from the relative weakness of the U.S. dollar, and the net effect of cost reduction programs in excess of inflation and pricing.

During the third quarter, the Company used $6 million of cash in support of operating activities, which included semi-annual cash interest payments of $81 million on the Company's Senior and Senior Subordinated Notes. In addition, the Company also had capital expenditures totaling $87 million in the third quarter. As of September 26, 2003, net debt (defined as debt less cash and marketable securities) was $2.9 billion, an increase of $111 million as compared to June 27, 2003. The Company also completed a refinancing transaction in the third quarter that resulted in the establishment of a bank term C tranche of $1,250 million. These proceeds, together with $46 million of available cash, were used to retire the previously existing $1,100 million term B loan and $200 million of the previously existing $410 million term A loan.

For the nine-month period ended September 26, 2003, pro forma consolidated net earnings were $114 million compared to pro forma nine-month combined net earnings of $218 million in the prior year. Excluding a $158 million pre-tax decline in net pension/OPEB income, a $15 million unrealized currency translation gain on debt positions and the $31 million refinancing charge incurred in the third quarter, nine-month 2003 pro forma earnings before taxes improved by 8.7 percent compared to last year. Pro forma sales for the nine- month period were $8.3 billion, a 7.1 percent increase from the pro forma nine-month level achieved in 2002.

The Company's pro forma EBITDAP for the nine-month period ended September 26, 2003 totaled $819 million, an increase of 5.5 percent compared to pro forma EBITDAP of $776 million during the nine-month period in 2002. Included in the nine-months of 2003 were approximately $25 million of charges relating to costs associated with restructuring programs, primarily headcount reductions, and costs associated with the separation of the Company from Northrop Grumman. The prior year nine-month results had $15 million of restructuring charges. Exclusive of these special charges, pro forma EBITDAP for the nine-month period ended September 26, 2003, was $844 million, an increase of 6.7 percent compared to last year.

Reconciliation to GAAP

For a reconciliation of the pro forma and non-GAAP numbers appearing in this release to GAAP, please see the accompanying presentation or visit our website at www.trwauto.com (investor information section).

Third Quarter Conference Call

John C. Plant, President and Chief Executive Officer, and Joseph S. Cantie, Vice President and Chief Financial Officer, will host a brief conference call to discuss third quarter results beginning at 11:00 a.m. EST, Friday, November 7, 2003.

Domestic callers may access the conference call by dialing 877-852-7898. International callers should dial 706-634-1095.

About TRW Automotive Inc.

TRW Automotive's 2002 pro forma sales of $10.4 billion place it among the ten largest of the world's automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company employs approximately 62,000 people in 22 countries who design, engineer, test and manufacture one of the broadest arrays of automotive safety systems. The Company's products include braking systems, steering systems, suspension systems, occupant safety systems (seat belts and airbags), electronics, engine valves, fastening systems and aftermarket replacement parts and services. TRW Automotive news is available on the Internet at www.trwauto.com .

Forward-Looking Statements

This release may contain statements that are not statements of historical fact, but instead are forward-looking statements. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those contained in forward-looking statements made in this release. Such risks, uncertainties and other important factors which could cause our actual results to differ materially from those contained in our forward-looking statements are set forth in Amendment No. 3 to our Registration Statement on Form S-4, filed with the Securities and Exchange Commission as of November 5, 2003 (the "Registration Statement") and include: our substantial leverage; limitations on flexibility in operating our business contained in our debt agreements; increases in interest rates; our dependence on our largest customers; the possibility that our owners' interests will conflict with ours; the highly competitive automotive parts industry and its cyclicality; pricing pressures from our customers; risks related to our ability to operate on a stand-alone basis, separate from our former parent; product liability and customer warranty and recall claims, and other risks and uncertainties set forth under "Risk Factors" in the Registration Statement. TRW Automotive does not intend or assume any obligation to update any of these forward-looking statements.

                           TRW Automotive Inc.
                      Index to unaudited actual and
                     pro forma financial information

The accompanying unaudited actual and pro forma financial information and reconciliation to pro forma adjusted EBITDA should be read in conjunction with the TRW Automotive Inc. Registration Statement on Form S-4, as amended and filed as of November 5, 2003, which contains historical consolidated and combined financial statements and the accompanying notes to consolidated and combined financial statements and unaudited pro forma consolidated and combined financial information and accompanying notes to unaudited pro forma consolidated and combined financial information.

The accompanying unaudited combined pro forma financial statements are intended to give effect to the February 28, 2003 acquisition of the former TRW Inc.'s automotive business by affiliates of The Blackstone Group L.P. from Northrop Grumman Corporation, as if the acquisition had occurred on January 1, 2002. The unaudited pro forma combined financial statements are based upon available information and certain assumptions we believe are reasonable. However, these statements are for informational purposes only and are not intended to represent or be indicative of the consolidated results of operations or financial position that would have been reported had the acquisition been completed as of January 1, 2002, and should not be taken as representative of future consolidated results of operations or financial position.

                           TRW Automotive Inc.
      Consolidated and Combined Statements of Operations (unaudited)


                                               Successor        Predecessor
                                                     Three Months Ended
  (Dollars in millions)                       September 26,    September 27,
                                                   2003              2002

  Sales                                           $2,536            $2,545
  Cost of sales                                    2,294             2,248

  Gross profit                                       242               297

  Administrative and selling expenses                127               123
  Research and development expenses                   38                34
  Amortization of intangible assets                    9                 3
  Other income - net                                  (4)              (17)

  Operating income                                    72               154

  Interest expense                                    74                62
  Interest income                                     (1)               (2)
  Loss on retirement of debt                          31                 -
  Losses on sales of receivables                       -                 1

  (Losses) earnings before income taxes              (32)               93
  Income tax (benefit) expense                        (9)               36

  Net (losses) earnings                             $(23)              $57



                           TRW Automotive Inc.
      Consolidated and Combined Statements of Operations (unaudited)

                                  Successor            Predecessor
                                 Seven Months   Two Months    Nine Months
                                    Ended          Ended         Ended
                                 September 26,  February 28,  September 27,
  (Dollars in millions)              2003           2003          2002

  Sales                             $6,453         $1,916        $7,956
  Cost of sales                      5,782          1,686         6,946

  Gross profit                         671            230         1,010

  Administrative and
   selling expenses                    302            100           386
  Research and development expenses     92             27           108
  Purchased in-process research and
   development                          85              -             -
  Amortization of intangible assets     19              2            11
  Other (income) expense - net         (28)             4            (6)

  Operating income                     201             97           511

  Interest expense                     185             48           210
  Interest income                       (5)            (1)           (4)
  Loss (gain) on retirement of debt     31              -            (4)
  Losses on sales of receivables        25              -             5

  (Losses) earnings before
   income taxes                        (35)            50           304
  Income tax expense                    41             19           107

  Net (losses) earnings               $(76)           $31          $197


                           TRW Automotive Inc.
            Condensed Consolidated and Combined Balance Sheets
                    (unaudited at September 26, 2003)

                                         Successor         Predecessor
  (Dollars in millions)                 September 26,      December 31,
                                            2003               2002

  Assets
  Current assets:
    Cash and cash equivalents               $399               $188
    Marketable securities                     16                 26
    Accounts receivable                    1,887              1,348
    Inventories                              631                608
    Prepaid expenses                          59                 49
    Deferred income taxes                     39                144
  Total current assets                     3,031              2,363

  Property, plant and equipment - net      2,336              2,558
  Goodwill and other intangible
   assets - net                            3,546              2,578
  Prepaid pension cost                        85              3,048
  Other assets                               450                401
                                          $9,448            $10,948
  Liabilities, minority interests and
   stockholders' investment
  Current liabilities:
    Short-term debt                          $54               $327
    Current portion of long-term debt         14                 17
    Trade accounts payable                 1,485              1,407
    Other current liabilities              1,289              1,004
  Total current liabilities                2,842              2,755

    Debt allocated from TRW                    -              3,279
    Long-term debt                         3,270                302
    Post-retirement benefits
     other than pensions                   1,011                751
    Deferred income taxes                     66                731
    Other long-term liabilities            1,014                658
  Total liabilities                        8,203              8,476

  Minority interests                          50                 81

  Stockholders' investment:
    Parent company investment                  -              2,738
    Capital stock and paid-in-capital      1,216                  -
    Accumulated deficit                      (76)                 -
    Accumulated other comprehensive
     earnings (losses)                        55               (347)
  Total stockholders' investment           1,195              2,391
                                          $9,448            $10,948


                           TRW Automotive Inc.
       Pro forma Consolidated and Combined Statements of Operations
                               (unaudited)

  (Dollars in millions)                            Three Months Ended
                                             September 26,     September 27,
                                                   2003              2002

  Sales                                           $2,536            $2,485
  Cost of sales                                    2,293             2,184

  Gross profit                                       243               301

  Administrative and selling expenses                127               114
  Research and development expenses                   38                34
  Amortization of intangible assets                    9                 7
  Other income - net                                  (4)              (19)

  Operating income                                    73               165

  Interest expense                                    74                70
  Interest income                                     (1)               (2)
  Loss on retirement of debt                          31                 -
  Losses on sales of receivables                       -                 3

  (Losses) earnings before income taxes              (31)               94
  Income tax (benefit) expense                        (8)               36

  Net (losses) earnings                             $(23)              $58


                           TRW Automotive Inc.
       Pro forma Consolidated and Combined Statements of Operations
                               (unaudited)

  (Dollars in millions)                            Nine Months Ended
                                             September 26,     September 27,
                                                   2003              2002

  Sales                                           $8,326            $7,773
  Cost of sales                                    7,368             6,748

  Gross profit                                       958             1,025

  Administrative and selling expenses                400               357
  Research and development expenses                  119               108
  Amortization of intangible assets                   24                24
  Other income - net                                 (25)              (12)

  Operating income                                   440               548

  Interest expense                                   216               210
  Interest income                                     (5)               (4)
  Loss on retirement of debt                          31                 -
  Losses on sales of receivables                       9                 8

  Earnings before income taxes                       189               334
  Income tax expense                                  75               116

  Net earnings                                      $114              $218


                           TRW Automotive Inc.
               Reconciliation to Pro Forma Adjusted EBITDA
                               (unaudited)

  (Dollars in millions)                              Three Months Ended
                                               September 26,   September 27,
                                                    2003              2002
  GAAP Operating Income                              $72              $154
  Pro forma adjustments:
      Inventory fair market value adjustment           1                 -
      Depreciation and amortization                    -                 5
      Stand alone costs                                -                 6
  Pro forma operating income                          73               165

  Depreciation and amortization,
   net of pro forma adjustments                      118               120
  UK pension income                                  (14)              (69)
  Pension expense, net of pro forma adjustment        18                 8
  OPEB expense                                        19                17

  Pro forma EBITDAP                                  214               241

  Cash restructuring charges                          13                 -
  Other unusual items                                  -                 7

  Pro forma EBITDAP, excluding unusual items         227               248

  Cash paid for pensions                              (6)               (7)
  Cash paid for OPEB, less indemnity                 (18)              (12)

  Pro forma Adjusted EBITDA                         $203              $229

This schedule should be read in conjunction with the TRW Automotive Inc. Registration Statement on Form S-4 as amended and filed as of November 5, 2003, which contains summary historical and pro forma financial data.

EBITDAP, a measure used by management to measure operating performance, is defined as operating income plus depreciation and amortization, unrealized foreign exchange gain and net pension and OPEB expense. Adjusted EBITDA is defined as EBITDAP further adjusted to exclude unusual items and the cash paid for pension and other postretirement benefits. We believe that the inclusion of supplementary adjustments to EBITDAP applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain material cash items and other unusual items that we do not expect to continue at the same level in the future.

Such Supplementary adjustments to EBITDA may not be in accordance with current Securities and Exchange Commission ("SEC") practice or with regulations adopted by the SEC that apply to registration statements filed under the Securities Act of 1933 and periodic reports filed under the Securities Exchange Act of 1934. Accordingly, the SEC may require that EBITDAP and Adjusted EBITDA be presented differently in filings made with the SEC than as presented on this schedule or not presented at all. We believe that amounts shown for Adjusted EBITDA as presented on this schedule are not materially different from the amounts calculated under the definition of EBITDA used in the indentures for our senior notes and our senior subordinated notes.

EBITDAP and Adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to operating income as an indication of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, these presentations of EBITDAP and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, EBITDAP and Adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not consider certain cash requirements such as interest payments, and, in the case of EBITDAP, pensions and other post retirement benefits.

                           TRW Automotive Inc.
               Reconciliation to Pro Forma Adjusted EBITDA
                               (unaudited)

  (Dollars in millions)                              Nine months ended
                                               September 26,   September 27,
                                                    2003              2002
  GAAP Operating Income                             $298              $511
  Pro forma adjustments:
      Inventory fair market value adjustment          43                 -
      Purchased in-process research and
       development                                    85                 -
      Stand alone costs                               (1)               21
      Depreciation and amortization                    4                15
      Other                                           11                 1
  Pro forma operating income                         440               548

  Depreciation and amortization,
   net of pro forma adjustments                      359               351
  Unrealized foreign exchange gain                   (15)                -
  UK pension income                                  (67)             (197)
  Pension expense, net of pro forma adjustment        45                22
  OPEB expense                                        57                52

  Pro forma EBITDAP                                  819               776

  Cash restructuring charges                          19                 7
  Acquisition related expenses                         6                 -
  Other unusual items                                  -                 8

  Pro forma EBITDAP, excluding unusual items         844               791

  Cash paid for pensions                             (23)              (19)
  Cash paid for OPEB, less indemnity                 (48)              (36)

  Pro forma Adjusted EBITDA                         $773              $736

This schedule should be read in conjunction with the TRW Automotive Inc. Registration Statement on Form S-4 as amended and filed as of November 5, 2003, which contains summary historical and pro forma financial data.

EBITDAP, a measure used by management to measure operating performance, is defined as operating income plus depreciation and amortization, unrealized foreign exchange gain and net pension and OPEB expense. Adjusted EBITDA is defined as EBITDAP further adjusted to exclude unusual items and the cash paid for pension and other postretirement benefits. We believe that the inclusion of supplementary adjustments to EBITDAP applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain material cash items and other unusual items that we do not expect to continue at the same level in the future.

Such Supplementary adjustments to EBITDA may not be in accordance with current Securities and Exchange Commission ("SEC") practice or with regulations adopted by the SEC that apply to registration statements filed under the Securities Act of 1933 and periodic reports filed under the Securities Exchange Act of 1934. Accordingly, the SEC may require that EBITDAP and Adjusted EBITDA be presented differently in filings made with the SEC than as presented on this schedule or not presented at all. We believe that amounts shown for Adjusted EBITDA as presented on this schedule are not materially different from the amounts calculated under the definition of EBITDA used in the indentures for our senior notes and our senior subordinated notes.

EBITDAP and Adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to operating income as an indication of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, these presentations of EBITDAP and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, EBITDAP and Adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not consider certain cash requirements such as interest payments, and, in the case of EBITDAP, pensions and other post retirement benefits.

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20010824/TRWLOGO AP Archive: http://photoarchive.ap.org/ PRN Photo Desk, +1-888-776-6555 or +1-212-782-2840 SOURCE: TRW Automotive Inc.

CONTACT: Joseph S. Cantie, Vice President and Chief Financial Officer, +1-734-266-5433, or Manley Ford, Director, Communications, +1-734-266-2616, both of TRW Automotive Inc.

Web site: http://www.trwauto.com/


Email Page Print RSS
email print rss