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8-K - 8-K - ZF TRW AUTOMOTIVE HOLDINGS CORPa14-11276_18k.htm

Exhibit 99.1

 

News Release

TRW Automotive
12001 Tech Center Drive
Livonia, MI 48150

 

 

 

 

Investor Relations Contact:

 

 

Mark Oswald

 

 

(734) 855-3140

 

 

 

 

 

Media Contact:

 

 

John Wilkerson

 

 

(734) 855-3864

 

 

TRW Reports First Quarter 2014 Financial Results

 

LIVONIA, MICHIGAN, April 29, 2014 — TRW Automotive Holdings Corp. (NYSE: TRW), the global leader in active and passive safety systems, today reported first quarter 2014 financial results with sales of $4.4 billion, an increase of 5% compared to the prior year period.  The Company reported GAAP first quarter net earnings of $199 million or $1.68 per diluted share, which compares to net earnings of $162 million or $1.29 per diluted share in the prior year period.

 

Excluding special items from the Company’s current and prior year quarterly results, the Company reported first quarter 2014 net earnings of $215 million, or $1.81 per diluted share, an increase of 20% compared to last year’s first quarter earnings of $1.51 per diluted share.

 

“TRW achieved a strong start to 2014 as evidenced by the Company’s first quarter performance,” said John C. Plant, Chairman and Chief Executive Officer.  “Increasing global demand for TRW’s safety technologies, especially in China where sales increased 16% year-on-year, combined with increased vehicle production in each of the Company’s major regions, continued to drive profitable growth, solid results and long-term value to our shareholders.”

 

First Quarter 2014

 

The Company reported first quarter 2014 sales of $4.4 billion, an increase of $229 million from the prior year period.  The higher level of sales was driven by increasing demand for TRW’s innovative technologies, higher vehicle production volumes, and the positive impact of currency movements between the two periods, partially offset by the negative impact related to exiting certain businesses within the Company’s North American brake component and assembly operations.

 

1



 

The Company’s first quarter 2014 operating income was $308 million, compared with $253 million in the 2013 period.  Both the 2014 and 2013 periods included restructuring and asset impairment charges totaling $20 million and $37 million, respectively.  Excluding these charges, operating income for the first quarter was $328 million (margin of 7.4%), which compares to $290 million (margin of 6.9%) in the prior year period.

 

Net interest expense for the first quarter of 2014 totaled $31 million, which compares to $30 million in the 2013 period.

 

Tax expense for the first quarter of 2014 was $78 million, which compares to a tax expense of $62 million in the prior year period.  Both the 2014 and 2013 periods included tax benefits related to restructuring actions totaling $4 million and $10 million, respectively.

 

The Company reported 2014 first quarter GAAP net earnings of $199 million, or $1.68 per diluted share, which compares to GAAP net earnings of $162 million, or $1.29 per diluted share in the 2013 period.

 

Excluding special items, the Company reported first quarter 2014 net earnings of $215 million, or $1.81 per diluted share, an increase of 20% compared to last year’s first quarter earnings of $1.51 per diluted share.

 

Earnings before interest, taxes, depreciation and amortization and special items (“adjusted EBITDA”) were $437 million in the first quarter of 2014, compared to the prior year level of $396 million.  See page A5 for a description of the special items excluded in calculating adjusted EBITDA.

 

Cash Flow and Capital Structure

 

First quarter 2014 net cash flow provided by operating activities was a use of $183 million, which compares to a use of $178 million in the first quarter of 2013.  Capital expenditures were $105 million in the current quarter compared to $104 million last year.  First quarter free cash flow (cash flow from operating activities less capital expenditures) was an outflow of $288 million, compared to an outflow $282 million in the prior year quarter.

 

2



 

During the first quarter of 2014, TRW used $400 million of cash and initially received 3.9 million shares of its common stock through an accelerated share repurchase agreement.  As previously disclosed, the repurchase agreement is expected to be completed by the end of the third quarter 2014.  In addition, $469 million of face value bond debt matured during the quarter and was paid off with a combination of cash on hand and short-term debt facilities.

 

As of March 28, 2014, the Company had $1,886 million of debt and $811 million of cash and cash equivalents, resulting in net debt (defined as debt less cash and cash equivalents) of $1,075 million.  The $228 million decrease in total gross debt compared to year end 2013 primarily reflects the $469 million of face value bond debt that matured during the quarter, partially offset by an increase in short-term uncommitted lines of credit.

 

2014 Outlook

 

TRW expects full year industry production volumes to total 16.8 million units in North America and 19.6 million units in Europe.  In addition, the Company continues to expect expansion in vehicle production volumes in China.  Based on these production levels, the Company’s first quarter performance and expectations for foreign currency exchange rates, full year 2014 sales are now expected to range between $17.4 billion and $17.7 billion, with second quarter sales expected to be approximately $4.5 billion.

 

First Quarter 2014 Conference Call

 

The Company will host its first quarter conference call at 8:30 a.m. (Eastern time) today, Tuesday, April 29th, 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 two weeks. To access the replay, U.S. locations should dial (855) 859-2056, and locations outside the U.S. should dial (404) 537-3406. The replay code is 21549269.  A live audio webcast and replay of the conference call will also be available on the Company’s website at www.trw.com.

 

3



 

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; 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 2013 sales of $17.4 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, 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.  There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those suggested by our forward-looking statements, including those set forth in the Company’s Annual Report on Form 10-K for fiscal year ended December 31, 2013 under “Item 1A. Risk Factors,” including: 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; the unsuccessful implementation of our current expansion efforts adversely impacting our business or results; 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; strengthening of the U.S. dollar and other foreign currency exchange rate fluctuations impacting our results; 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; commodity inflationary pressures adversely affecting our profitability or supply base; 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

 

4



 

supply chain adversely affecting our business, results or financial condition; 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 our Annual Report on Form 10-K, in “— Executive Overview” and in our other filings with the Securities and Exchange Commission.  We do not undertake any obligation to release publicly any update or revision to any of the forward-looking statements.

 

# # #

 

5



 

TRW Automotive Holdings Corp.

 

Index of Condensed Consolidated Financial Information

 

 

Page

 

 

Consolidated Statements of Earnings (unaudited) for the three months ended March 28, 2014 and March 29, 2013

A2

 

 

Condensed Consolidated Balance Sheets as of March 28, 2014 (unaudited) and December 31, 2013

A3

 

 

Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 28, 2014 and March 29, 2013

A4

 

 

Reconciliation of Non-GAAP Financial Measures (unaudited) for the three months ended March 28, 2014 and March 29, 2013

A5

 

 

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

 

 

 

·       For the three months ended March 28, 2014

A6

 

 

·       For the three months ended March 29, 2013

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, 2013, which was filed with the United States Securities and Exchange Commission.

 

A1



 

TRW Automotive Holdings Corp.

 

Consolidated Statements of Earnings

(Unaudited)

 

 

 

Three Months Ended

 

(In millions, except per share amounts)

 

March 28,
2014

 

March 29,
2013

 

 

 

 

 

 

 

Sales

 

$

4,442

 

$

4,213

 

Cost of sales

 

3,942

 

3,786

 

Gross profit

 

500

 

427

 

Administrative and selling expenses

 

166

 

141

 

Restructuring charges and asset impairments

 

20

 

37

 

Other expense (income) — net

 

6

 

(4

)

Operating income

 

308

 

253

 

Interest expense — net

 

31

 

30

 

Equity in earnings of affiliates, net of tax

 

(10

)

(12

)

Earnings before income taxes

 

287

 

235

 

Income tax expense

 

78

 

62

 

Net earnings

 

209

 

173

 

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

 

10

 

11

 

Net earnings attributable to TRW

 

$

199

 

$

162

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

Earnings per share

 

$

1.76

 

$

1.35

 

Weighted average shares outstanding

 

113.3

 

119.6

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

Earnings per share

 

$

1.68

 

$

1.29

 

Weighted average shares outstanding

 

119.8

 

126.9

 

 

A2



 

TRW Automotive Holdings Corp.

 

Condensed Consolidated Balance Sheets

 

 

 

As of

 

 

 

March 28,

 

December 31,

 

(Dollars in millions)

 

2014

 

2013

 

 

 

(Unaudited)

 

 

 

Assets

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

811

 

$

1,729

 

Accounts receivable — net

 

2,934

 

2,478

 

Inventories

 

1,066

 

1,019

 

Prepaid expenses and other current assets

 

435

 

402

 

Total current assets

 

5,246

 

5,628

 

 

 

 

 

 

 

Property, plant and equipment — net

 

2,697

 

2,718

 

Goodwill

 

1,759

 

1,760

 

Intangible assets — net

 

290

 

292

 

Pension assets

 

1,115

 

1,059

 

Other assets

 

829

 

795

 

Total assets

 

$

11,936

 

$

12,252

 

 

 

 

 

 

 

Liabilities and Equity

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Short-term debt

 

$

397

 

$

159

 

Current portion of long-term debt

 

21

 

482

 

Trade accounts payable

 

2,638

 

2,597

 

Accrued compensation

 

273

 

285

 

Other current liabilities

 

1,287

 

1,232

 

Total current liabilities

 

4,616

 

4,755

 

 

 

 

 

 

 

Long-term debt

 

1,468

 

1,473

 

Postretirement benefits other than pensions

 

369

 

375

 

Pension benefits

 

676

 

676

 

Other long-term liabilities

 

609

 

577

 

Total liabilities

 

7,738

 

7,856

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Capital stock

 

1

 

1

 

Paid-in-capital

 

1,628

 

1,715

 

Retained earnings

 

2,737

 

2,858

 

Accumulated other comprehensive earnings (losses)

 

(375

)

(380

)

Total TRW stockholders’ equity

 

3,991

 

4,194

 

Noncontrolling interest

 

207

 

202

 

Total equity

 

4,198

 

4,396

 

Total liabilities and equity

 

$

11,936

 

$

12,252

 

 

A3



 

TRW Automotive Holdings Corp.

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 28,

 

March 29,

 

(Dollars in millions)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

Net earnings

 

$

209

 

$

173

 

Adjustments to reconcile net earnings to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

109

 

105

 

Net pension and other postretirement benefits income and contributions

 

(58

)

(62

)

Asset impairments

 

12

 

 

Deferred income taxes

 

30

 

23

 

Other — net

 

(5

)

3

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable — net

 

(473

)

(506

)

Inventories

 

(50

)

(63

)

Trade accounts payable

 

57

 

119

 

Prepaid expenses and other assets

 

(57

)

(31

)

Other liabilities

 

43

 

61

 

Net cash used in operating activities

 

(183

)

(178

)

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Capital expenditures, including other intangible assets

 

(105

)

(104

)

Net cash used in investing activities

 

(105

)

(104

)

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

Change in short-term debt

 

242

 

36

 

Proceeds from issuance of long-term debt, net of fees

 

 

394

 

Redemption of long-term debt

 

(471

)

(12

)

Proceeds from exercise of stock options

 

1

 

16

 

Repurchase of capital stock

 

(400

)

(10

)

Dividends paid to noncontrolling interest

 

(3

)

(2

)

Net cash (provided by) used in financing activities

 

(631

)

422

 

Effect of exchange rate changes on cash

 

1

 

(17

)

(Decrease) increase in cash and cash equivalents

 

(918

)

123

 

Cash and cash equivalents at beginning of period

 

1,729

 

1,223

 

Cash and cash equivalents at end of period

 

$

811

 

$

1,346

 

 

A4



 

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 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

 

 

 

March 28,

 

March 29,

 

(Dollars in millions)

 

2014

 

2013

 

 

 

 

 

 

 

GAAP net earnings attributable to TRW

 

$

199

 

$

162

 

Income tax expense

 

78

 

62

 

Interest expense - net

 

31

 

30

 

Depreciation and amortization

 

109

 

105

 

EBITDA

 

417

 

359

 

 

 

 

 

 

 

Restructuring charges and asset impairments

 

20

 

37

 

Adjusted EBITDA

 

$

437

 

$

396

 

 

Free Cash Flow

 

Free cash flow represents net cash 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

 

 

 

March 28,

 

March 29,

 

(Dollars in millions)

 

2014

 

2013

 

 

 

 

 

 

 

Cash flow used in operating activities

 

$

(183

)

$

(178

)

Capital expenditures

 

(105

)

(104

)

Free cash flow

 

$

(288

)

$

(282

)

 

A5



 

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.

 

A6



 

TRW Automotive Holdings Corp.

 

Reconciliation of GAAP Net Earnings to Adjusted Earnings

(Unaudited)

 

 

 

Three Months

 

 

 

Three Months

 

 

 

Ended

 

 

 

Ended

 

 

 

March 29, 2013

 

 

 

March 29, 2013

 

(In millions, except per share amounts)

 

Actual

 

Adjustments

 

Adjusted

 

 

 

 

 

 

 

 

 

Operating income

 

253

 

37

(a)

290

 

Interest expense — net

 

30

 

 

30

 

Equity in earnings of affiliates, net of tax

 

(12

)

 

(12

)

Earnings before income taxes

 

235

 

37

 

272

 

Income tax expense

 

62

 

10

(b)

72

 

Net earnings

 

173

 

27

 

200

 

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

 

11

 

 

11

 

Net earnings attributable to TRW

 

$

162

 

$

27

 

$

189

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

Earnings per share

 

$

1.35

 

 

 

$

1.58

 

Weighted average shares outstanding

 

119.6

 

 

 

119.6

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

Earnings per share

 

$

1.29

 

 

 

$

1.51

 

Weighted average shares outstanding

 

126.9

 

 

 

126.9

 

 


(a)         Represents the elimination of restructuring charges of $37 million primarily related to severance and other charges.

(b)         Represents the elimination of the income tax impact of the above adjustment, by calculating the income tax impact of the item using the appropriate tax rate for the jurisdiction where the charges were incurred.

 

A7