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8-K - FORM 8-K - ZF TRW AUTOMOTIVE HOLDINGS CORP | k50071e8vk.htm |
Exhibit 99.1
News Release
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TRW Automotive 12001 Tech Center Drive Livonia, MI 48150 |
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Investor Relations Contact: | ||||
Mark Oswald (734) 855-3140 |
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Media Contact: | ||||
John Wilkerson (734) 855-3864 |
TRW Reports Fourth Quarter and Full Year 2010 Financial Results
| Fourth quarter sales of $3.7 billion an increase of 10%; full year sales of $14.4 billion an increase of 24%. | ||
| Fourth quarter GAAP net earnings of $1.56 per diluted share; full year GAAP net earnings of $6.49 per diluted share | ||
| Fourth quarter free cash flow after discretionary pension contributions (cash flow from operating activities less capital expenditures) of $236 million; 2010 full year free cash flow of $758 million. | ||
| Strong cash generation enabled the further reduction of legacy liabilities through discretionary fourth quarter contributions of $170 million to certain of the Companys pension plans. | ||
| Year-end net debt of $768 million a record low and decline of $815 million compared to year-end 2009. |
LIVONIA, MICHIGAN, February 17, 2011 TRW Automotive Holdings Corp. (NYSE: TRW), the global
leader in active and passive safety systems, today reported fourth quarter 2010 financial results
with sales of $3.7 billion, an increase of 10 percent compared to the prior year period. The
Company reported GAAP fourth quarter net earnings of $204 million or $1.56 per diluted share,
which compares to net earnings of $141 million or $1.18 per diluted share in the prior year
period.
The Companys current and prior year quarterly results contain special items which primarily
consist of restructuring charges, a net gain related to certain pension matters, debt retirement
charges and favorable net tax items. Excluding these special items, the Company reported fourth
quarter 2010 net earnings of $225 million, or $1.72 per diluted share, which compares to $168
million or $1.40 per diluted share in the 2009 period.
1
For the full year, the Company reported sales of $14.4 billion, an increase of $2.8 billion or 24
percent compared to 2009. Strong revenue growth combined with the Companys low cost structure
resulted in record 2010 GAAP net earnings of $834 million, or $6.49 per diluted share, which
compares to net earnings of $55 million, or $0.51 per diluted share in the prior year.
Similar to the Companys quarterly results, the 2010 and 2009 full year results contain special
items such as restructuring charges, asset impairments, a net gain related to certain pension
matters, debt retirement charges and favorable net tax items. Excluding these special items, the
Company reported full year 2010 net earnings of $844 million, or $6.57 per diluted share, which
compares to net earnings of $137 million or $1.26 per diluted share in 2009.
The Company generated record free cash flow in 2010 of $758 million, compared to $254 million in
2009. The 2010 result is after the Company made discretionary contributions of $170 million in
the fourth quarter to certain of its pension plans. The strong cash flow generation allowed the
Company to reduce its year-end 2010 net debt (defined as debt less cash and cash equivalents) to
a record low of $768 million, a reduction of $815 million compared to December 31, 2009.
In addition to the record financial results achieved in 2010, the Company made significant
progress towards reducing its legacy liabilities. During the fourth quarter of 2010, TRW closed
its U.S. salaried pension plan to further accruals. This action, along with the prior cessation
of accruals in the Companys U.K. pension plan, and the discretionary contributions of $170
million to certain of the Companys pension plans, resulted in a $427 million reduction of legacy
liabilities at year-end 2010 compared with year-end 2009. This significant reduction, combined
with the large reduction in net debt, has further strengthened TRWs balance sheet and provides
flexibility to support the Companys future growth plans.
TRWs solid fourth quarter performance built on the positive momentum established earlier in the
year and enabled the Company to post its best full year results since becoming an independent
Company, said John C. Plant, Chairman, President and Chief Executive Officer. TRW ended the year with a
significantly improved capital structure including a record low net debt level and strong
performance on reducing the
2
Companys legacy liabilities. The outstanding business performance
achieved in 2010 demonstrates TRW is executing the right strategy for long-term success.
Fourth Quarter 2010
The Company reported fourth quarter 2010 sales of $3.7 billion, an increase of $329 million or 10
percent from the prior year period. The positive impact on sales resulting from improved global
vehicle production volumes compared to the prior year quarter was partially offset by the
negative impact of currency movements.
The Companys fourth quarter 2010 operating income and resulting margin was $293 million and 7.9
percent, respectively, compared with operating income of $229 million in the 2009 period. The
2010 and 2009 periods included restructuring and fixed asset impairment charges totaling $35
million and $26 million, respectively. In addition, the 2010 period included a net gain of $18
million relating to certain pension matters, primarily the curtailment of the Companys salaried
pension plan in the U.S. Excluding these special items from both periods, the year-to-year
improvement of $55 million and resulting margin of 8.3% was driven primarily by the contribution
from higher sales between the two quarters, partially offset by unfavorable currency movements
and an increase in raw material prices between the two periods.
Net interest expense for the fourth quarter of 2010 totaled $37 million, which compares favorably
to $51 million in the 2009 period as a result of lower debt levels. In addition, both the 2010
and 2009 periods recognized a net loss on retirement of debt totaling $13 million and $8 million,
respectively.
Tax expense for the fourth quarter of 2010 was $36 million, which compares to a tax expense of
$30 million in the prior year period. The 2010 and 2009 periods included tax benefits related to
restructuring actions totaling $9 million and $7 million, respectively. Excluding these benefits
from both periods, tax expense was $45 million in the current quarter compared with $37 million
last year.
The Company reported 2010 fourth quarter GAAP earnings of $204 million, or $1.56 per diluted
share, which compares to GAAP net earnings of $141 million, or $1.18 per diluted share in the
2009 period.
3
Excluding special items, the Company reported fourth quarter 2010 net earnings of $225 million,
or $1.72 per diluted share, which compares to net earnings of $168 million or $1.40 per diluted
share in the 2009 period.
Earnings before interest, taxes, depreciation and amortization and special items (adjusted
EBITDA) were $426 million in the fourth quarter of 2010, as compared to the prior year level of
$384 million. See page A6 for a description of the special items excluded in calculating
adjusted EBITDA.
Full Year 2010
The Company reported 2010 sales of $14.4 billion, an increase of $2.8 billion or 24 percent
compared to prior year sales. The increase in sales resulted from the significantly improved
global vehicle production volumes between the two periods.
For full year 2010, the Company reported operating income of $1,184 million which compares to
$289 million of operating income in the prior year. The 2010 period included restructuring and
fixed asset impairment charges of $45 million, as well as a net gain related primarily to the
curtailment of its U.S. pension plan totaling $18 million. The 2009 period included
restructuring and fixed asset impairment charges totaling $100 million, as well as a trademark
impairment charge of $30 million. Excluding these special items from both periods, the Company
reported operating income of $1,211 million in the 2010 period, which compares to $419 million in
the prior year. The year-to-year improvement of $792 million was driven primarily by the
contribution from the higher level of sales between the two periods and the positive net impact
of the Companys restructuring and cost containment actions.
Net interest expense for 2010 totaled $162 million, which compares to $190 million in the prior
year period. In addition, the 2010 period included a net loss on retirement of debt totaling $15
million, compared with 2009, which recognized a net gain on the retirement of debt of $26
million.
Tax expense in 2010 was $166 million, which compares to $67 million in the prior year. The
increase in expense was driven by higher pre-tax earnings in certain geographic locations for the
current period. The 2010 and 2009 periods included tax benefits of
4
$32 million and $22 million,
respectively, related to the favorable resolution of various tax matters in foreign jurisdictions
and restructuring actions.
The Company reported 2010 GAAP net earnings of $834 million, or $6.49 per diluted share, which
compares to GAAP net earnings of $55 million, or $0.51 per diluted share in 2009.
Excluding special items, the Company reported full year 2010 net earnings of $844 million, or
$6.57 per diluted share, which compares to net earnings of $137 million or $1.26 per diluted
share in 2009.
Adjusted EBITDA totaled $1,673 million, compared to $911 million in the prior year. See page A6
for a description of the special items excluded in calculating adjusted EBITDA.
Cash Flow and Capital Structure
Fourth quarter 2010 net cash flow provided by operating activities was $362 million (after making
$170 million in discretionary contributions to certain pension plans), which compares to $512
million in the fourth quarter of 2009. Capital expenditures were $126 million in the current
quarter compared to $80 million last year. Fourth quarter free cash flow (cash flow from
operating activities less capital expenditures) was $236 million, which is lower than the level
achieved in the prior year fourth quarter of $432 million resulting primarily from the
discretionary pension contributions.
For full year 2010, net cash flow provided by operating activities totaled $1,052 million,
despite the discretionary pension contributions, which compares to $455 million in the prior year
period. The year-to-year improvement resulted primarily from the higher operating income
generated by the Company in 2010 compared to the previous year. Capital expenditures were $294
million in 2010, which compares to $201 million last year. For 2010, free cash flow was $758
million compared to $254 million in 2009.
As of December 31, 2010, the Company had $1,846 million of debt and $1,078 million of cash and
cash equivalents, resulting in net debt of $768 million. This net debt outcome reached a new
historic low for the Company, $815 million lower than the balance at the end of 2009 making 2010 the fifth consecutive year the Company has reduced its net
debt. Committed liquidity facilities and cash on hand provided the Company with available
liquidity in excess of $2.0 billion as of December 31, 2010.
5
2011 Outlook
TRWs planning assumptions for industry production volumes are approximately 12.7 million units
in North America and 18.7 million units in Europe, up 7% and flat, respectively, compared to 2010
levels. The Company continues to expect China and the rest of world regions to remain growth
engines in 2011. Based on these production levels and the Companys expectations for foreign
currency exchange rates, full year 2011 sales are expected to range between $14.9 billion and
$15.3 billion, with first quarter sales expected to be approximately $3.9 billion.
Increasing global demand for TRWs innovative technologies combined with our low cost structure,
solid liquidity and flexible balance sheet will further strengthen our position as a leading
supplier to the worlds car manufacturers, said Mr. Plant. TRW is committed to advancing its
strategic priorities of quality, cost, innovative technologies, and leveraging our global reach
to ensure the Companys success is sustained in 2011 and beyond.
Fourth Quarter and Full Year 2010 Conference Call
The Company will host its fourth quarter conference call at 8:30 a.m. (Eastern time) today,
Thursday, February 17th, 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 37767918. A live audio webcast and replay of the conference
call will also be available on the Companys 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 (losses), operating income (losses) and diluted earnings per share each excluding
special items, tax expense excluding certain net 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
6
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 worlds 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, 2009 (our Form 10-K), and our Reports on Form 10-Q for
the quarters ended April 2, July 2, and October 1, 2010 such as: tighter financial markets
adversely impacting the availability and cost of credit negatively affecting our business; a
material contraction in automotive sales and production adversely affecting our results or the
viability of our supply base; commodity inflationary pressures adversely affecting our
profitability or supply base; strengthening of the U.S. dollar and other foreign currency
exchange rate fluctuations impacting our results; pricing pressures from our customers adversely
affecting our profitability; any shortage of supplies causing a production disruption; increasing
costs negatively impacting our profitability; the loss of any of our largest customers materially
adversely affecting us; costs of product liability, warranty and recall claims and efforts by
customers to adversely alter contract terms and conditions concerning warranty and recall
participation; costs or liabilities relating to environmental, health and safety regulations
adversely affecting our results; risks associated with non-U.S. operations adversely affecting
our business, results or financial condition; any inability to protect our intellectual property
rights adversely affecting our business or our competitive position; any increase in the expense
of our pension and other postretirement benefits or the funding requirements of our pension plans
reducing our profitability; work stoppages or other labor issues at our facilities or at the
facilities of our customers or suppliers adversely affecting our operations; volatility in our
annual effective tax rate resulting from a change in our valuation allowances position or other
factors; any impairment of a significant amount of our goodwill or other intangible assets; and
other risks and uncertainties set forth in our Form 10-K and in our other filings with the U.S.
Securities and Exchange Commission. We do not undertake any obligation to release publicly any update or
revision to any of the forward-looking statements.
# # #
7
TRW Automotive Holdings Corp.
Index of Condensed Consolidated Financial Information
Page | ||||
Consolidated Statements of Operations (unaudited)
for the three months ended December 31, 2010 and December 31, 2009 |
A2 | |||
Consolidated Statements of Operations
for the years ended December 31, 2010 (unaudited) and December 31, 2009 |
A3 | |||
Consolidated Balance Sheets
as of December 31, 2010 (unaudited) and December 31, 2009 |
A4 | |||
Consolidated Statements of Cash Flows
for the years ended December 31, 2010 (unaudited) and December 31, 2009 |
A5 | |||
Reconciliation of Non-GAAP Financial Measures (unaudited)
for the three months and years ended December 31, 2010 and December 31, 2009 |
A6 | |||
Reconciliation of GAAP Net Earnings (Losses) to Adjusted Earnings (Losses) (unaudited): |
||||
For the three months ended December 31, 2010 |
A7 | |||
For the year ended December 31, 2010 |
A8 | |||
For the three months ended December 31, 2009 |
A9 | |||
For the year ended December 31, 2009 |
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, 2009, and Quarterly Reports on Form 10-Q for the periods
ended April 2, 2010, July 2, 2010, and October 1, 2010, each of which were filed with the United
States Securities and Exchange Commission.
A1
TRW Automotive Holdings Corp.
Consolidated Statements of Operations
(Unaudited)
(Unaudited)
Three Months Ended | ||||||||
December 31, | ||||||||
(In millions, except per share amounts) | 2010 | 2009 | ||||||
Sales |
$ | 3,713 | $ | 3,384 | ||||
Cost of sales |
3,246 | 3,009 | ||||||
Gross profit |
467 | 375 | ||||||
Administrative and selling expenses |
134 | 129 | ||||||
Amortization of intangible assets |
6 | 5 | ||||||
Restructuring charges and fixed asset impairments |
35 | 26 | ||||||
Other (income) expense net |
(1 | ) | (14 | ) | ||||
Operating income (losses) |
293 | 229 | ||||||
Interest expense net |
37 | 51 | ||||||
(Gain) loss on retirement of debt net |
13 | 8 | ||||||
Equity in (earnings) losses of affiliates, net of tax |
(10 | ) | (6 | ) | ||||
Earnings (losses) before income taxes |
253 | 176 | ||||||
Income tax expense (benefit) |
36 | 30 | ||||||
Net earnings (losses) |
217 | 146 | ||||||
Less: Net earnings attributable to noncontrolling interest, net of tax |
13 | 5 | ||||||
Net earnings (losses) attributable to TRW |
$ | 204 | $ | 141 | ||||
Basic earnings (losses) per share: |
||||||||
Earnings (losses) per share |
$ | 1.68 | $ | 1.20 | ||||
Weighted average shares outstanding |
121.4 | 117.8 | ||||||
Diluted earnings (losses) per share: |
||||||||
Earnings (losses) per share |
$ | 1.56 | $ | 1.18 | ||||
Weighted average shares outstanding |
133.6 | 119.8 | ||||||
A2
TRW Automotive Holdings Corp.
Consolidated Statements of Operations
Years Ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
(In millions, except per share amounts) | (Unaudited) | |||||||
Sales |
$ | 14,383 | $ | 11,614 | ||||
Cost of sales |
12,661 | 10,708 | ||||||
Gross profit |
1,722 | 906 | ||||||
Administrative and selling expenses |
509 | 484 | ||||||
Amortization of intangible assets |
22 | 21 | ||||||
Restructuring charges and fixed asset impairments |
45 | 100 | ||||||
Intangible asset impairments |
| 30 | ||||||
Other (income) expense net |
(38 | ) | (18 | ) | ||||
Operating income (losses) |
1,184 | 289 | ||||||
Interest expense net |
162 | 190 | ||||||
(Gain) loss on retirement of debt net |
15 | (26 | ) | |||||
Equity in (earnings) losses of affiliates, net of tax |
(34 | ) | (15 | ) | ||||
Earnings (losses) before income taxes |
1,041 | 140 | ||||||
Income tax expense (benefit) |
166 | 67 | ||||||
Net earnings (losses) |
875 | 73 | ||||||
Less: Net earnings attributable to noncontrolling interest, net of tax |
41 | 18 | ||||||
Net earnings (losses) attributable to TRW |
$ | 834 | $ | 55 | ||||
Basic earnings (losses) per share: |
||||||||
Earnings (losses) per share |
$ | 6.96 | $ | 0.51 | ||||
Weighted average shares outstanding |
119.8 | 107.8 | ||||||
Diluted earnings (losses) per share: |
||||||||
Earnings (losses) per share |
$ | 6.49 | $ | 0.51 | ||||
Weighted average shares outstanding |
131.3 | 108.7 | ||||||
A3
TRW Automotive Holdings Corp.
Consolidated Balance Sheets
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | (Unaudited) | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,078 | $ | 788 | ||||
Accounts receivable net |
2,087 | 1,943 | ||||||
Inventories |
760 | 660 | ||||||
Prepaid expenses and other current assets |
126 | 135 | ||||||
Deferred income taxes |
89 | 66 | ||||||
Total current assets |
4,140 | 3,592 | ||||||
Property, plant and equipment net |
2,100 | 2,334 | ||||||
Goodwill |
1,761 | 1,768 | ||||||
Intangible assets net |
304 | 324 | ||||||
Pension assets |
454 | 179 | ||||||
Deferred income taxes |
83 | 138 | ||||||
Other assets |
446 | 397 | ||||||
Total assets |
$ | 9,288 | $ | 8,732 | ||||
Liabilities and Equity |
||||||||
Current liabilities: |
||||||||
Short-term debt |
$ | 23 | $ | 18 | ||||
Current portion of long-term debt |
20 | 28 | ||||||
Trade accounts payable |
2,079 | 1,912 | ||||||
Accrued compensation |
251 | 256 | ||||||
Income taxes |
50 | 26 | ||||||
Other current liabilities |
1,096 | 1,068 | ||||||
Total current liabilities |
3,519 | 3,308 | ||||||
Long-term debt |
1,803 | 2,325 | ||||||
Postretirement benefits other than pensions |
453 | 479 | ||||||
Pension benefits |
681 | 804 | ||||||
Deferred income taxes |
95 | 34 | ||||||
Long-term liabilities |
499 | 473 | ||||||
Total liabilities |
7,050 | 7,423 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock |
| | ||||||
Capital stock |
1 | 1 | ||||||
Treasury stock |
| | ||||||
Paid-in-capital |
1,638 | 1,553 | ||||||
Retained earnings (accumulated deficit) |
511 | (323 | ) | |||||
Accumulated other comprehensive earnings (losses) |
(87 | ) | (71 | ) | ||||
Total TRW stockholders equity |
2,063 | 1,160 | ||||||
Noncontrolling interest |
175 | 149 | ||||||
Total equity |
2,238 | 1,309 | ||||||
Total liabilities and equity |
$ | 9,288 | $ | 8,732 | ||||
A4
TRW Automotive Holdings Corp.
Consolidated Statements of Cash Flows
Years Ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | (Unaudited) | |||||||
Operating Activities |
||||||||
Net earnings (losses) |
$ | 875 | $ | 73 | ||||
Adjustments to reconcile net earnings (losses) to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
469 | 495 | ||||||
Net pension and other postretirement benefits income and contributions |
(407 | ) | (234 | ) | ||||
Net (gain) loss on sales of assets |
(3 | ) | (4 | ) | ||||
Amortization of debt issuance costs |
12 | 7 | ||||||
Net (gain) loss on retirement of debt |
15 | (26 | ) | |||||
Fixed asset impairment charges |
(1 | ) | 17 | |||||
Goodwill and intangible asset impairment charges |
| 30 | ||||||
Deferred income taxes |
56 | (4 | ) | |||||
Share-based compensation expense |
13 | 14 | ||||||
Exchangeable bond premium amortization |
9 | | ||||||
Other net |
(22 | ) | 7 | |||||
Changes in assets and liabilities, net of effects of businesses acquired: |
||||||||
Accounts receivable net |
(188 | ) | (312 | ) | ||||
Inventories |
(113 | ) | 63 | |||||
Trade accounts payable |
223 | 47 | ||||||
Prepaid expense and other assets |
(14 | ) | 151 | |||||
Other liabilities |
128 | 131 | ||||||
Net cash provided by (used in) operating activities |
1,052 | 455 | ||||||
Investing Activities |
||||||||
Capital expenditures, including other intangible assets |
(294 | ) | (201 | ) | ||||
Net proceeds from asset sales |
7 | 4 | ||||||
Other net |
(2 | ) | | |||||
Net cash provided by (used in) investing activities |
(289 | ) | (197 | ) | ||||
Financing Activities |
||||||||
Change in short-term debt |
4 | (48 | ) | |||||
Net (repayments on) proceeds from revolving credit facility |
| (203 | ) | |||||
Proceeds from issuance of long-term debt, net of fees |
53 | 1,960 | ||||||
Redemption of long-term debt |
(581 | ) | (2,225 | ) | ||||
Proceeds from issuance of capital stock, net of fees |
| 269 | ||||||
Proceeds from exercise of stock options |
76 | 6 | ||||||
Dividends paid to noncontrolling interest |
(20 | ) | (9 | ) | ||||
Capital contribution from noncontrolling interest |
5 | | ||||||
Net cash provided by (used in) financing activities |
(463 | ) | (250 | ) | ||||
Effect of exchange rate changes on cash |
(10 | ) | 24 | |||||
Increase (decrease) in cash and cash equivalents |
290 | 32 | ||||||
Cash and cash equivalents at beginning of period |
788 | 756 | ||||||
Cash and cash equivalents at end of period |
$ | 1,078 | $ | 788 | ||||
A5
TRW Automotive Holdings Corp.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(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 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 (losses) 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 managements
discretionary use, as they do not consider certain cash requirements such as interest payments, tax
payments and debt service requirements.
Three Months Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(Dollars in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
GAAP net earnings (losses) attributable to TRW |
$ | 204 | $ | 141 | $ | 834 | $ | 55 | ||||||||
Income tax expense (benefit) |
36 | 30 | 166 | 67 | ||||||||||||
Interest expense net |
37 | 51 | 162 | 190 | ||||||||||||
Depreciation and amortization |
119 | 128 | 469 | 495 | ||||||||||||
EBITDA |
396 | 350 | 1,631 | 807 | ||||||||||||
Restructuring charges and fixed asset impairments |
35 | 26 | 45 | 100 | ||||||||||||
Net gain on pension related matters |
(18 | ) | | (18 | ) | | ||||||||||
Intangible asset impairments |
| | | 30 | ||||||||||||
(Gain) loss on retirement of debt net |
13 | 8 | 15 | (26 | ) | |||||||||||
Adjusted EBITDA |
$ | 426 | $ | 384 | $ | 1,673 | $ | 911 | ||||||||
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 Companys 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 | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(Dollars in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Cash flow provided by (used in) operating activities |
$ | 362 | $ | 512 | $ | 1,052 | $ | 455 | ||||||||
Capital expenditures |
(126 | ) | (80 | ) | (294 | ) | (201 | ) | ||||||||
Free cash flow |
$ | 236 | $ | 432 | $ | 758 | $ | 254 | ||||||||
A6
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings (Losses) to Adjusted Earnings (Losses)
(Unaudited)
(Unaudited)
Among other adjustments, the Company recorded restructuring charges of $34 million primarily related to severance, retention and outplacement services at various production facilities and fixed asset
impairment charges of $2 million, offset by a net curtailment gain of $1 million.
Three Months | Three Months | |||||||||||
Ended | Ended | |||||||||||
December 31, | December 31, | |||||||||||
2010 | 2010 | |||||||||||
(In millions, except per share amounts) | Actual | Adjustments | Adjusted | |||||||||
Sales |
$ | 3,713 | $ | | $ | 3,713 | ||||||
Cost of sales |
3,246 | 26 | (a) | 3,272 | ||||||||
Gross profit |
467 | (26 | ) | 441 | ||||||||
Administrative and selling expenses |
134 | | 134 | |||||||||
Amortization of intangible assets |
6 | | 6 | |||||||||
Restructuring charges and fixed asset impairments |
35 | (35) | (b) | | ||||||||
Other (income) expense net |
(1 | ) | (8) | (a) | (9 | ) | ||||||
Operating income (losses) |
293 | 17 | 310 | |||||||||
Interest expense net |
37 | | 37 | |||||||||
(Gain) loss on retirement of debt net |
13 | (13) | (c) | | ||||||||
Equity in (earnings) losses of affiliates, net of tax |
(10 | ) | | (10 | ) | |||||||
Earnings (losses) before income taxes |
253 | 30 | 283 | |||||||||
Income tax expense (benefit) |
36 | 9 | (d) | 45 | ||||||||
Net earnings (losses) |
217 | 21 | 238 | |||||||||
Less: Net earnings attributable to noncontrolling interest, net of tax |
13 | | 13 | |||||||||
Net earnings (losses) attributable to TRW |
$ | 204 | $ | 21 | $ | 225 | ||||||
Basic earnings (losses) per share: |
||||||||||||
Earnings (losses) per share |
$ | 1.68 | $ | 1.85 | ||||||||
Weighted average shares outstanding |
121.4 | 121.4 | ||||||||||
Diluted earnings (losses) per share: |
||||||||||||
Earnings (losses) per share |
$ | 1.56 | $ | 1.72 | ||||||||
Weighted average shares outstanding |
133.6 | 133.6 | ||||||||||
(a) | Represents the elimination of a net gain of $18 million related to certain pension related matters. | |
(b) | Represents the elimination of restructuring charges and fixed asset impairments. | |
(c) | Represents the elimination of the loss on retirement of debt. | |
(d) | 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. |
A7
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings (Losses) to Adjusted Earnings (Losses)
(Unaudited)
(Unaudited)
Among other adjustments, the Company recorded restructuring charges of $47 million primarily related to severance, retention and outplacement services at various production facilities and fixed asset impairment
charges of $3 million, offset by a gain on the sale of a property in the amount of $4 million related to a closed North American braking facility, which was impaired in 2008, and a net curtailment gain of $1
million.
Year Ended | Year Ended | |||||||||||
December 31, | December 31, | |||||||||||
2010 | 2010 | |||||||||||
(In millions, except per share amounts) | Actual | Adjustments | Adjusted | |||||||||
Sales |
$ | 14,383 | $ | | $ | 14,383 | ||||||
Cost of sales |
12,661 | 26 | (a) | 12,687 | ||||||||
Gross profit |
1,722 | (26 | ) | 1,696 | ||||||||
Administrative and selling expenses |
509 | | 509 | |||||||||
Amortization of intangible assets |
22 | | 22 | |||||||||
Restructuring charges and fixed asset impairments |
45 | (45) | (b) | | ||||||||
Other (income) expense net |
(38 | ) | (8) | (a) | (46 | ) | ||||||
Operating income (losses) |
1,184 | 27 | 1,211 | |||||||||
Interest expense net |
162 | | 162 | |||||||||
(Gain) loss on retirement of debt net |
15 | (15) | (c) | | ||||||||
Equity in (earnings) losses of affiliates, net of tax |
(34 | ) | | (34 | ) | |||||||
Earnings (losses) before income taxes |
1,041 | 42 | 1,083 | |||||||||
Income tax expense (benefit) |
166 | 32 | (d) | 198 | ||||||||
Net earnings (losses) |
875 | 10 | 885 | |||||||||
Less: Net earnings attributable to noncontrolling interest, net of tax |
41 | | 41 | |||||||||
Net earnings (losses) attributable to TRW |
$ | 834 | $ | 10 | $ | 844 | ||||||
Basic earnings (losses) per share: |
||||||||||||
Earnings (losses) per share |
$ | 6.96 | $ | 7.05 | ||||||||
Weighted average shares outstanding |
119.8 | 119.8 | ||||||||||
Diluted earnings (losses) per share: |
||||||||||||
Earnings (losses) per share |
$ | 6.49 | $ | 6.57 | ||||||||
Weighted average shares outstanding |
131.3 | 131.3 | ||||||||||
(a) | Represents the elimination of a net gain of $18 million related to certain pension related matters. | |
(b) | Represents the elimination of restructuring charges and fixed asset impairments. | |
(c) | Represents the elimination of the loss on retirement of debt. | |
(d) | Represents the elimination of (i) 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, and (ii) tax benefits related to the favorable resolution of various tax matters in foreign jurisdictions of $21 million recorded in the second and third quarters of 2010. |
A8
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings (Losses) to Adjusted Earnings (Losses)
(Unaudited)
(Unaudited)
Among other adjustments, the Company recorded restructuring charges of $26 million primarily related to severance, retention and outplacement services and fixed asset impairment charges of $9 million, offset by net
curtailment gains of $9 million.
Three Months | Three Months | |||||||||||
Ended | Ended | |||||||||||
December 31, | December 31, | |||||||||||
2009 | 2009 | |||||||||||
(In millions, except per share amounts) | Actual | Adjustments | Adjusted | |||||||||
Sales |
$ | 3,384 | $ | | $ | 3,384 | ||||||
Cost of sales |
3,009 | | 3,009 | |||||||||
Gross profit |
375 | | 375 | |||||||||
Administrative and selling expenses |
129 | | 129 | |||||||||
Amortization of intangible assets |
5 | | 5 | |||||||||
Restructuring charges and fixed asset impairments |
26 | (26) | (a) | | ||||||||
Other (income) expense net |
(14 | ) | | (14 | ) | |||||||
Operating income (losses) |
229 | 26 | 255 | |||||||||
Interest expense net |
51 | | 51 | |||||||||
(Gain) loss on retirement of debt net |
8 | (8) | (b) | | ||||||||
Equity in (earnings) losses of affiliates, net of tax |
(6 | ) | | (6 | ) | |||||||
Earnings (losses) before income taxes |
176 | 34 | 210 | |||||||||
Income tax expense (benefit) |
30 | 7 | (c) | 37 | ||||||||
Net earnings (losses) |
146 | 27 | 173 | |||||||||
Less: Net earnings attributable to noncontrolling interest, net of tax |
5 | | 5 | |||||||||
Net earnings (losses) attributable to TRW |
$ | 141 | $ | 27 | $ | 168 | ||||||
Basic earnings (losses) per share: |
||||||||||||
Earnings (losses) per share |
$ | 1.20 | $ | 1.43 | ||||||||
Weighted average shares outstanding |
117.8 | 117.8 | ||||||||||
Diluted earnings (losses) per share: |
||||||||||||
Earnings (losses) per share |
$ | 1.18 | $ | 1.40 | ||||||||
Weighted average shares outstanding |
119.8 | 119.8 | ||||||||||
(a) | Represents the elimination of restructuring charges, fixed asset impairments and net curtailment gains. | |
(b) | Represents the elimination of the net loss on retirement of debt. | |
(c) | 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. |
A9
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings (Losses) to Adjusted Earnings (Losses)
(Unaudited)
(Unaudited)
Among other adjustments, for the year ended December 31, 2009, the Company recorded restructuring charges of $92 million primarily related to severance, retention and outplacement services, offset by net
curtailment gains of $9 million. Additionally, the Company recorded intangible asset impairment charges of $30 million and fixed asset impairment charges of $17 million.
Year Ended | Year Ended | |||||||||||
December 31, | December 31, | |||||||||||
2009 | 2009 | |||||||||||
(In millions, except per share amounts) | Actual | Adjustments | Adjusted | |||||||||
Sales |
$ | 11,614 | $ | | $ | 11,614 | ||||||
Cost of sales |
10,708 | | 10,708 | |||||||||
Gross profit |
906 | | 906 | |||||||||
Administrative and selling expenses |
484 | | 484 | |||||||||
Amortization of intangible assets |
21 | | 21 | |||||||||
Restructuring charges and fixed asset impairments |
100 | (100) | (a) | | ||||||||
Intangible asset impairments |
30 | (30) | (b) | | ||||||||
Other (income) expense net |
(18 | ) | | (18 | ) | |||||||
Operating income (losses) |
289 | 130 | 419 | |||||||||
Interest expense net |
190 | | 190 | |||||||||
(Gain) loss on retirement of debt net |
(26 | ) | 26 | (c) | | |||||||
Equity in (earnings) losses of affiliates, net of tax |
(15 | ) | | (15 | ) | |||||||
Earnings (losses) before income taxes |
140 | 104 | 244 | |||||||||
Income tax expense (benefit) |
67 | 22 | (d) | 89 | ||||||||
Net earnings (losses) |
73 | 82 | 155 | |||||||||
Less: Net earnings attributable to noncontrolling interest, net of tax |
18 | | 18 | |||||||||
Net earnings (losses) attributable to TRW |
$ | 55 | $ | 82 | $ | 137 | ||||||
Basic earnings (losses) per share: |
||||||||||||
Earnings (losses) per share |
$ | 0.51 | $ | 1.27 | ||||||||
Weighted average shares outstanding |
107.8 | 107.8 | ||||||||||
Diluted earnings (losses) per share: |
||||||||||||
Earnings (losses) per share |
$ | 0.51 | $ | 1.26 | ||||||||
Weighted average shares outstanding |
108.7 | 108.7 | ||||||||||
(a) | Represents the elimination of restructuring charges, fixed asset impairments and net curtailment gains. | |
(b) | Represents the elimination of intangible asset impairments. | |
(c) | Represents the elimination of the net gain on retirement of debt. | |
(d) | 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. |
A10