FEDERAL-MOGUL HOLDINGS CORP LIVONIA, Mich., May 5, 2015 /PRNewswire/ -- TRW Automotive Holdings Corp. (NYSE: TRW), the global leader in active and passive safety systems, today reported first quarter 2015 financial results with sales of $4.1 billion, an increase of 7% compared to the prior year period excluding the effects of currency and divested businesses. The Company reported GAAP first quarter net earnings of $366 million or $3.13 per diluted share, which compares to net earnings of $199 million or $1.68 per diluted share in the prior year period.
The first quarter 2015 results include a pre-tax gain of $186 million on the previously announced sale of TRW's Engine Valve business to Federal-Mogul Holdings Corporation (NASDAQ: FDML), which closed during the quarter. Excluding this gain and other special items from the TRW's current and prior year quarterly results, the Company reported first quarter 2015 net earnings of $235 million, or $2.01 per diluted share, an increase of 11% compared to last year's first quarter earnings of $1.81 per diluted share.
As previously announced, the Company entered into a definitive agreement with ZF Friedrichshafen AG ("ZF") on September 15, 2014 under which ZF will acquire all outstanding shares of TRW for $105.60 per share in an all-cash transaction. The transaction is expected to close by the end of June 2015.
"TRW achieved a strong start to 2015, which will provide a solid foundation as we enter the merger with ZF," said John C. Plant, Chairman and Chief Executive Officer. "The agreement signed with ZF, which we expect to close during the second quarter, provides significant benefits for our shareholders who will receive full and certain value for their shares, as well as for our employees, customers and communities all of which will reap the benefits of being part of a larger, more diversified global organization."
First Quarter 2015
The Company reported first quarter 2015 sales of $4.1 billion, a decrease of $300 million from the prior year period. Excluding the effects of currency ($379 million) and divested businesses ($191 million), sales increased $270 million or 7% compared to the previous year. The higher level of sales was driven by increasing demand for TRW's innovative technologies and higher vehicle production volumes.
The Company's first quarter 2015 operating income was $534 million, compared with $308 million in the 2014 period. Excluding the $186 million gain on the sale of TRW's Engine Valve business, restructuring and asset impairment charges totaling $4 million in 2015 and $20 million in 2014, and transaction costs of $2 million in 2015, operating income for the first quarter was $354 million (margin of 8.5%), which compares to $328 million (margin of 7.4%) in the prior year period. The margin improvement resulted primarily from the positive profit impact of the higher underlying sales, a positive mix of sales and improved operational performance. These benefits were partially offset by a lower level of pension income in the current quarter compared to last year.
Net interest expense for the first quarter of 2015 totaled $23 million, which compares to $31 million in the 2014 period. The current quarter included a $1 million loss on the retirement of debt.
Tax expense for the first quarter of 2015 was $144 million, which compares to a tax expense of $78 million in the prior year period. The 2015 period included a net tax expense of $48 million primarily related to the gain on the sale of the Engine Valve business. The 2014 period included a tax benefit of $4 million related to special items.
The Company reported 2015 first quarter GAAP net earnings of $366 million, or $3.13 per diluted share, which compares to GAAP net earnings of $199 million, or $1.68 per diluted share in the 2014 period.
Excluding special items, the Company reported first quarter 2015 net earnings of $235 million, or $2.01 per diluted share, an increase of 11% compared to last year's first quarter earnings of $1.81 per diluted share.
Earnings before interest, taxes, depreciation and amortization and special items ("adjusted EBITDA") were $460 million in the first quarter of 2015, compared to the prior year level of $437 million. See page A5 for a description of the special items excluded in calculating adjusted EBITDA.
Cash Flow and Capital Structure
First quarter 2015 net cash flow used in operating activities was $192 million, which compares to a use of $183 million in the first quarter of 2014. Capital expenditures were $95 million in the current quarter compared to $105 million last year. First quarter free cash flow (cash flow from operating activities less capital expenditures) was an outflow of $287 million which is consistent with the prior year quarter's outflow of $288 million.
During the first quarter of 2015, TRW received net cash proceeds of $313 million relating to the sale of substantially all of TRW's Engine Valve business, which closed during the first quarter.
As of April 3, 2015, the Company had $1,594 million of debt and $1,017 million of cash and cash equivalents, resulting in net debt (defined as debt less cash and cash equivalents) of $577 million.
Subsequent Events
On April 21, 2015, TRW announced that it had signed a definitive agreement to divest its Linkage and Suspension business for $400 million in cash, subject to working capital and other adjustments, to THK Co., LTD (TSE:6481). The planned divestiture of the Linkage and Suspension business, which has annual sales of approximately $550 million, is expected to close by the end of TRW's fiscal third quarter and is subject to customary conditions, including regulatory approvals.
2015 Outlook
TRW's planning assumptions for industry production volumes in 2015 are approximately 17.4 million units in North America and 20.0 million units in Europe, up 2% and flat, respectively, compared to 2014 levels. The Company continues to expect expansion in vehicle production volumes in China and rest of world regions. Based on these production levels, the negative impact of lost sales related to divested businesses, primarily the previously announced sale of TRW's Engine Valve business, and the Company's expectations for foreign currency exchange rates, full year 2015 sales are expected to range between $16.2 and $16.5 billion.
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 margin and diluted earnings per share each excluding special items; sales increases; 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 similarly titled measures of other companies. For a reconciliation of non-GAAP measures to the most comparable 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 2014 sales of $17.5 billion, TRW Automotive ranks among the world's leading automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, operates in 24 countries and employs approximately 65,000 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, 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (our "Form 10-K"), such as: the occurrence of any event, change or other circumstances that could give rise to the termination of the ZF merger agreement, which could have a material adverse effect on us and our stock price; the inability to consummate the proposed ZF merger or the inability to consummate the ZF merger in the timeframe or manner currently anticipated, due to the failure to satisfy conditions to completion of the proposed ZF merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the ZF merger, could have a material adverse effect on us and our stock price; risks related to disruption of management's attention from our ongoing business operations due to the ZF merger; the effect of the announcement of the proposed ZF merger on the Company's relationships with its customers, suppliers, joint venture partners and others, as well as our operating results and business generally; strengthening of the U.S. dollar and other foreign currency exchange rate fluctuations impacting our results; economic conditions adversely affecting our business, results or the viability of our supply base; risks associated with non-U.S. operations, including economic and political uncertainty in some regions, adversely affecting our business, results or financial condition; any developments related to antitrust investigations adversely affecting our financial condition, results, cash flows or reputation; pricing pressures from our customers adversely affecting our profitability; global competition adversely affecting our sales, profitability or financial condition; any disruption in our information technology systems adversely impacting our business and operations; any shortage of supplies causing a production disruption for any customers or us; the loss of any of our largest customers or a significant amount of their business, or a significant decline in their production levels, adversely affecting us; our contingent liabilities and tax matters causing us to incur losses or costs; any inability to protect our intellectual property rights adversely affecting our business or our competitive position; costs or adverse effects on our business, reputation or results from governmental regulations; work stoppages or other labor issues at our facilities or those of our customers or others in our supply chain adversely affecting our business, results or financial condition; commodity inflationary pressures adversely affecting our profitability or supply base; any increase in the expense of our pension and other postretirement benefits or the funding requirements of our pension plans reducing our profitability; and other risks and uncertainties set forth in the Company's Form 10-K under "Item 1A. Risk Factors" and in our other filings with the U.S. Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by such cautionary statements. We do not undertake any obligation to release publicly any update or revision to any of the forward-looking statements.
A1
TRW Automotive Holdings Corp.
Index of Condensed Consolidated
Financial Information
Page
----
Consolidated Statements of Earnings
(unaudited) for the three months
ended April 3, 2015 and March 28,
2014 A2
Condensed Consolidated Balance Sheets
as of April 3, 2015 (unaudited) and
December 31, 2014 A3
Condensed Consolidated Statements of
Cash Flows (unaudited) for the three
months ended April 3, 2015 and March
28, 2014 A4
Reconciliation of Non-GAAP Financial
Measures (unaudited) for the three
months ended April 3, 2015 and March
28, 2014 A5
Reconciliation of GAAP Net Earnings
to Adjusted Earnings (unaudited):
-For the three months ended
April 3, 2015 A6
-For the three months ended
March 28, 2014 A7
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, 2014, as amended,
which was filed with the United
States Securities and Exchange
Commission.
A2
TRW Automotive Holdings Corp.
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended
------------------
(In millions, except per share amounts) April 3, 2015 March 28, 2014
------------- --------------
Sales $4,142 $4,442
Cost of sales 3,659 3,942
----- -----
Gross profit 483 500
Administrative and selling expenses 150 166
Restructuring charges and asset
impairments 4 20
Transaction costs 2 -
Gain on divestiture (186) -
Other (income) expense - net (21) 6
--- ---
Operating income 534 308
Interest expense - net 23 31
Loss on retirement of debt - net 1 -
Equity in earnings of affiliates, net of
tax (11) (10)
--- ---
Earnings before income taxes 521 287
Income tax expense 144 78
--- ---
Net earnings 377 209
Less: Net earnings attributable to
noncontrolling interest, net of tax 11 10
--- ---
Net earnings attributable to
TRW $366 $199
==== ====
Basic earnings per share:
Earnings per
share $3.18 $1.76
Weighted
average shares
outstanding 115.1 113.3
Diluted earnings per share:
Earnings per
share $3.13 $1.68
Weighted
average shares
outstanding 117.1 119.8
A3
TRW Automotive Holdings Corp.
Condensed Consolidated Balance Sheets
As of
-----
April 3, December 31,
(Dollars in millions) 2015 2014
---- ----
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $1,017 $1,031
Accounts receivable - net 2,580 2,432
Inventories 978 972
Prepaid expenses and other current
assets 454 413
Assets held-for-sale 265 252
Total current assets 5,294 5,100
Property, plant and equipment - net 2,441 2,645
Goodwill 1,740 1,749
Intangible assets - net 290 291
Pension assets 654 663
Other assets 863 846
--- ---
Total assets $11,282 $11,294
Liabilities and Equity
Current liabilities:
Short-term debt $264 $222
Current portion of long-term debt 45 72
Trade accounts payable 2,287 2,423
Accrued compensation 199 253
Other current liabilities 1,193 1,270
Liabilities related to assets held-
for-sale 113 104
Total current liabilities 4,101 4,344
Long-term debt 1,285 1,284
Postretirement benefits other than
pensions 328 346
Pension benefits 713 774
Long-term liabilities 574 508
--- ---
Total liabilities 7,001 7,256
Commitments and contingencies
Stockholders' equity:
Capital stock 1 1
Paid-in-capital 1,830 1,829
Retained earnings 3,117 2,751
Accumulated other comprehensive
losses (855) (739)
Total TRW stockholders' equity 4,093 3,842
Noncontrolling interest 188 196
--- ---
Total equity 4,281 4,038
----- -----
Total liabilities and equity $11,282 $11,294
======= =======
A4
TRW Automotive Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
------------------
April 3, March 28,
(Dollars in millions) 2015 2014
---- ----
Operating Activities
Net earnings $377 $209
Adjustments to reconcile net earnings
to net cash used in operating
activities:
Depreciation
and
amortization 106 109
Net pension
and other
postretirement
benefits
cost/income
and
contributions (26) (58)
Gain on
divestiture (186) -
Asset
impairments - 12
Deferred
income taxes 69 30
Other - net (18) (5)
Changes in assets and liabilities:
Accounts
receivable -
net (326) (473)
Inventories (94) (50)
Trade accounts
payable 28 57
Prepaid
expenses and
other assets (119) (57)
Other
liabilities (3) 43
Net cash used in operating
activities (192) (183)
Investing Activities
Capital expenditures, including other
intangible assets (95) (105)
Net proceeds from asset sales and
divestiture 313 -
Investment in non-consolidated joint
venture assets (5) -
--- ---
Net cash provided by (used
in) investing activities 213 (105)
Financing Activities
Change in short-term debt 42 242
Proceeds from issuance of long-term
debt, net of fees 10 -
Redemption of long-term debt (12) (471)
Proceeds from exercise of stock
options 1 1
Repurchase of capital stock - (400)
Dividends paid to noncontrolling
interest (13) (3)
--- ---
Net cash provided by (used
in) financing activities 28 (631)
Effect of exchange rate changes on
cash (60) 1
Change in cash held-for-sale (3) -
--- ---
Decrease in cash and cash equivalents (14) (918)
Cash and cash equivalents at beginning
of period 1,031 1,729
----- -----
Cash and cash equivalents at end of
period $1,017 $811
====== ====
A5
TRW Automotive Holdings Corp.
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
EBITDA, Adjusted EBITDA and free cash
flow are not recognized terms under
GAAP and do not purport to be
alternatives to the most comparable
GAAP amounts. Further, since all
companies do not use identical
calculations, our definition and
presentation of these measures may not
be comparable to similarly titled
measures reported by other companies.
EBITDA and Adjusted EBITDA
--------------------------
EBITDA as calculated below is a measure
used by management to evaluate the
operating performance of the Company
and its business segments and to
forecast future periods. Adjusted
EBITDA is defined as EBITDA excluding
restructuring charges, asset
impairments, loss on retirement of
debt-net and other significant special
items. Management uses Adjusted
EBITDA to evaluate the performance of
ongoing operations separate from items
that may have a disproportionate
impact in any particular period.
EBITDA and Adjusted EBITDA are
frequently used by securities
analysts, institutional investors and
other interested parties in the
evaluation of companies in our
industry.
EBITDA and Adjusted EBITDA do not
purport to be alternatives to net
earnings as an indicator of operating
performance, nor to cash flows from
operating activities as a measure of
liquidity. Additionally, neither is
intended to be a measure of free cash
flow for management's discretionary
use, as they do not consider certain
cash requirements such as interest
payments, tax payments and debt
service requirements.
Three Months Ended
------------------
April 3, March 28,
(Dollars in millions) 2015 2014
---- ----
GAAP net earnings attributable to TRW $366 $199
Income tax expense 144 78
Interest expense - net 23 31
Depreciation and amortization 106 109
EBITDA 639 417
Restructuring charges and asset impairments 4 20
Transaction costs 2 -
Gain on divestiture (186) -
Loss on retirement of debt - net 1 -
Adjusted EBITDA $460 $437
==== ====
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.
Three Months Ended
------------------
April 3, March 28,
(Dollars in millions) 2015 2014
---- ----
Cash flow used in operating
activities $(192) $(183)
Capital expenditures (95) (105)
--- ----
Free cash flow $(287) $(288)
===== =====
A6
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings to Adjusted Earnings
(Unaudited)
Three Months Three Months
Ended Ended
April 3, 2015 April 3, 2015
(In millions, except per share amounts) Actual Adjustments Adjusted
------ ----------- --------
Operating income $534 $(180) (a) $354
Interest expense - net 23 - 23
Loss on retirement of debt - net 1 (1) (b) -
Equity in earnings of affiliates, net of tax (11) - (11)
--- --- ---
Earnings before income taxes 521 (179) 342
Income tax expense 144 (48) (c) 96
--- --- --- ---
Net earnings 377 (131) 246
Less: Net earnings attributable to noncontrolling interest, net of tax 11 - 11
--- --- ---
Net earnings attributable to TRW $366 $(131) $235
==== ===== ====
Basic earnings per share:
Earnings per share $3.18 $2.04
Weighted average shares
outstanding 115.1 115.1
Diluted earnings per share:
Earnings per share $3.13 $2.01
Weighted average shares
outstanding 117.1 117.1
__________
(a) Represents the elimination of:
(i) Restructuring charges of $4 million related to severance and other charges,
(ii) Transaction costs of $2 million, and
(iii) Gain on divestiture of $186 million.
(b) Represents the elimination of the loss on retirement of debt.
(c) Represents the elimination of the income tax impact of the above adjustments, by
calculating the income tax impact using the appropriate tax rate for the jurisdiction
where the charges were incurred.
A7
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings to Adjusted Earnings
(Unaudited)
Three Months Three Months
Ended Ended
March 28, 2014 March 28, 2014
(In millions, except per share amounts) Actual Adjustments Adjusted
------ ----------- --------
Operating income $308 $20 (a) $328
Interest expense - net 31 - 31
Equity in earnings of affiliates, net of tax (10) - (10)
--- --- ---
Earnings before income taxes 287 20 307
Income tax expense 78 4 (b) 82
--- --- --- ---
Net earnings 209 16 225
Less: Net earnings attributable to noncontrolling interest, net of tax 10 - 10
--- --- ---
Net earnings attributable to TRW $199 $16 $215
==== === ====
Basic earnings per share:
Earnings per share $1.76 $1.90
Weighted average shares
outstanding 113.3 113.3
Diluted earnings per share:
Earnings per share $1.68 $1.81
Weighted average shares
outstanding 119.8 119.8
__________
(a) Represents the elimination of:
(i) Restructuring charges of $8 million related to severance and other charges, and
(ii) Asset impairment charges of $12 million.
(b) Represents the elimination of the income tax impact of the above adjustments, by
calculating the income tax impact of each of these items using the appropriate tax rate
for the jurisdiction where the charges were incurred.
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SOURCE TRW Automotive Holdings Corp.
