Second Quarter 2008 Financial Results Presentation July 31, 2008 © TRW Automotive Holdings Corp. 2008 Materials Included Pages -Press Release 1-7 -Financial Summaries A1-A8 -Presentation P1-P24
Oct 21, 2014
Second Quarter 2008Financial Results Presentation
July 31, 2008
© TRW Automotive Holdings Corp. 2008
Materials Included Pages-Press Release 1-7-Financial Summaries A1-A8-Presentation P1-P24
TRW Automotive News 12001 Tech Center Drive
Livonia, MI 48150 Release
Investor Relations Contact: Eric Birge (734) 855-3115 Media Contact:
John Wilkerson (734) 855-3864
TRW Automotive Reports Second Quarter 2008 Financial Results; Provides Update on 2008 Outlook LIVONIA, MICHIGAN, July 31, 2008 — TRW Automotive Holdings Corp. (NYSE:
TRW), the global leader in active and passive safety systems, today reported second-
quarter 2008 financial results with sales of $4.4 billion, an increase of 18.4 percent
compared to the same period a year ago. The Company reported second quarter net
earnings of $127 million or $1.24 per diluted share, which compares to net earnings of
$97 million or $0.94 per diluted share in the prior year period.
During the second quarter of the previous year, the Company completed the final step
of its 2007 debt recapitalization plan with the successful refinancing of its $2.5 billion
credit facilities. The second quarter results of last year included $8 million of costs
related to this refinancing. Excluding the refinancing costs in 2007, the Company
earned $127 million or $1.24 per diluted share in the 2008 quarter compared to $105
million, or $1.02 per diluted share in the prior year. The current quarter benefited from
a higher level of operating income, despite increased restructuring and asset
impairment charges between the two periods, and also from a lower level of interest
expense.
“Our second quarter and first half results have demonstrated the strength of TRW’s
safety product portfolio, leading customer and geographical diversification and the
Company’s intense cost reduction efforts,” said John Plant, President and Chief
Executive Officer. “These strengths have allowed TRW to mitigate the increasingly
challenging industry conditions, primarily in North America, and provide the basis for
the continued advancement of the Company’s strategic and operational objectives.”
1
Mr. Plant added, “The transformation of TRW is not complete as we need to
successfully react to the changing automotive landscape, while continuing to provide
leading safety technologies, whose prospects we expect will be further enhanced by
growth in emerging markets. We continue to explore strategies that will strengthen our
competitiveness and help to achieve our goal of growing the Company profitably over
the long term.”
Second Quarter 2008 The Company reported second-quarter 2008 sales of $4.4 billion, an increase of $692
million or 18.4 percent over the prior year period. The 2008 quarter benefited from the
positive effect of foreign currency translation, higher customer vehicle production in
Europe and China and continued growth of safety products in all markets, including
above-trend sales of lower margin modules. These positive factors were partially offset
by lower vehicle production levels at our major customers in North America and price
reductions provided to customers.
Operating income for second-quarter 2008 was $224 million, which compares to $205
million in the prior year period. The year-to-year increase was driven by a number of
factors, including savings generated from cost improvement and efficiency programs,
including reductions in pension and other postretirement benefit related costs, higher
product volumes, the net positive effect of an insurance recovery totaling $14 million
received in the current quarter relating to a prior year business disruption at one of the
Company’s manufacturing facilities, and the non-recurrence of certain one-off items that
netted to an expense in the prior year. These positive factors were in part offset by
price reductions provided to customers, higher commodity prices, a negative mix of
products sold and a $13 million increase in restructuring and asset impairment
expenses.
Net interest and securitization expense for the second quarter of 2008 totaled $44
million, which compares to $57 million in the prior year. The year-to-year decline can
be attributed to the benefits derived from the Company’s 2007 debt recapitalization and
lower interest rates between the two periods. As mentioned previously, the 2007
quarter also included debt retirement costs of $8 million.
2
Second-quarter 2008 tax expense was $56 million, resulting in an effective tax rate of
31 percent, which compares to $45 million or 30 percent in the prior year, excluding
debt retirement expenses. The second-quarter 2008 tax rate is below the expected full
year rate primarily due to the Company’s geographic earnings profile and other factors
in the quarter.
The Company reported second-quarter 2008 net earnings of $127 million, or $1.24 per
diluted share, which compares to $97 million or $0.94 per diluted share in the 2007
period. Net earnings in the 2007 quarter excluding previously mentioned debt
retirement costs of $8 million were $105 million or $1.02 per diluted share.
Earnings before interest, securitization costs, loss on retirement of debt, taxes,
depreciation and amortization (“EBITDA”) were $380 million in the second quarter, as
compared to the prior year level of $344 million.
First Half 2008 The Company reported first-half 2008 sales of $8.6 billion, an increase of $1.3 billion or
17.3 percent compared to prior year sales of $7.3 billion. The 2008 period benefited
primarily from the positive effect of foreign currency translation, higher product volumes
related to new product growth, including above-trend sales of lower margin modules,
and robust industry sales in overseas markets. These positives were partially offset by
the continued decline in North American customer vehicle production and price
reductions provided to customers.
Operating income for the first half of 2008 was $412 million, which is an 8.4 percent
increase from the prior year result of $380 million. The year-to-year improvement was
driven by a number of factors, including savings generated from cost improvement and
efficiency programs, including reductions in pension and OPEB related costs, higher
product volumes, the net positive effect of an insurance recovery received in 2008
relating to a prior year business disruption, and the non-recurrence of certain one-off
items that netted to an expense in the prior year. These positives were partially offset
by price reductions provided to customers, negative product mix, higher commodity
prices and a higher level of restructuring and asset impairment expenses in 2008
compared to the prior year.
3
Net interest and securitization expense in the first-half 2008 period was $93 million,
which represents a significant improvement from the prior year result of $121 million.
The decline in interest expense resulted primarily from the Company’s debt
recapitalization completed in the first half of 2007 and lower interest rates between the
two periods. The 2007 period also included debt retirement costs of $155 million
related to the debt recapitalization.
First-half 2008 tax expense was $103 million, resulting in an effective tax rate of 32
percent, which compares to $98 million or 37 percent excluding previously mentioned
debt retirement expenses in the prior year.
The Company reported first-half 2008 net earnings of $221 million, or $2.16 per diluted
share, which compares to $11 million or $0.11 per diluted share in the 2007 period.
The comparison of net earnings, excluding the previously mentioned debt retirement
costs from the prior year, were $221 million, or $2.16 per diluted share in 2008 as
compared to $166 million or $1.62 per diluted share in 2007.
EBITDA was $717 million in the first half of 2008, which is a 9.8 percent increase from
the prior year level of $653 million primarily due to the higher level of operating income
in the current year.
Cash Flow and Capital Structure Second quarter 2008 net cash provided by operations was $40 million, which compares
to $290 million in the prior year. Cash flow in the 2007 period included proceeds of
$127 million related to outstanding borrowings under the Company’s U.S. based
Accounts Receivable Securitization Facility (“Receivable Facility”). Absent these
proceeds, the Company’s cash flow from operations in the 2007 quarter was $163
million. Second quarter 2008 capital expenditures were $120 million compared to $109
million in 2007.
For the six month period ended June 27, 2008, the Company had a net cash usage in
operating activities of $75 million, which compares to net cash generated of $69 million
in the prior year. Excluding proceeds related to outstanding borrowings under the
Receivable Facility, cash flow from operations was a use of $58 million in the 2007
period. The year-to-year decline resulted primarily from higher working capital
4
requirements, partly offset by higher operating income. First half capital expenditures
were $217 million compared to $228 million in 2007.
As mentioned previously, the Company refinanced substantially all of its debt in 2007.
The Company incurred debt retirement charges of approximately $155 million during
the 2007 year-to-date period related to these transactions.
As of June 27, 2008, the Company had $3,122 million of debt and $453 million of cash
and marketable securities, resulting in net debt (defined as debt less cash and
marketable securities) of $2,669 million. Net debt is $324 million higher than the
balance at the end of 2007.
2008 Outlook The Company increased its full year outlook to reflect the strong second quarter
outcome, partially offset by a lower outlook for the second half of 2008. Sales are now
expected to be in the range of $16.4 to $16.8 billion (including third quarter sales of
approximately $3.9 billion). Full year net earnings per share are now expected to be in
the range of $2.40 to $2.70.
This guidance range reflects pre-tax restructuring and asset impairment charges of
approximately $75 million (including approximately $25 million in the third quarter). The
effective tax rate is expected to be in the range of approximately 38 to 42 percent.
Lastly, the Company expects capital expenditures in 2008 to be approximately 3.5
percent of sales.
“In recent months, the outlook for the North American automotive industry has further
deteriorated with the decline in overall production of light vehicles, the shift of
production away from light trucks to passenger cars and severe commodity inflation
being the primary pressures in this market,” said Mr. Plant. “Our updated 2008 outlook
provided today reflects the weaker outlook for the North American market as well as our
expectations for a softening production environment in Europe.” Mr. Plant added, “The
pressures we are seeing for the second half of 2008 will undoubtedly continue into
2009.”
Second Quarter 2008 Conference Call The Company will host its second-quarter conference call at 8:30 a.m. (EDT) today,
Thursday, July 31, to discuss financial results and other related matters. To access the
5
conference call, U.S. locations should dial (877) 852-7898, and locations outside the
U.S. should dial (706) 634-1095.
A replay of the conference call will be available approximately two hours after the
conclusion of the call and accessible for approximately one week. To access the
replay, U.S. locations should dial (800) 642-1687, and locations outside the U.S. should
dial (706) 645-9291. The replay code is 55410719. A live audio webcast and
subsequent replay of the conference call will also be available on the Company’s
website at www.trw.com/results.
Reconciliation to GAAP In addition to GAAP results included within this press release, the Company has
provided certain information which is not calculated according to GAAP (“non-GAAP”).
Management believes these non-GAAP measures are useful to evaluate operating
performance and/or regularly used by security analysts, institutional investors and other
interested parties in the evaluation of the Company.
Non-GAAP measures are not purported to be a substitute for any GAAP measure and,
as calculated, may not be comparable to other similarly titled measures of other
companies. For a reconciliation of non-GAAP measures to the closest GAAP measure
and for share amounts used to derive earnings per share, please see the financial
schedules that accompany this release.
About TRW With 2007 sales of $14.7 billion, TRW Automotive ranks among the world's leading
automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through
its subsidiaries, operates in 27 countries and employs approximately 66,300 people
worldwide. TRW Automotive products include integrated vehicle control and driver
assist systems, braking systems, steering systems, suspension systems, occupant
safety systems (seat belts and airbags), electronics, engine components, fastening
systems and aftermarket replacement parts and services. All references to "TRW
Automotive", "TRW" or the "Company" in this press release refer to TRW Automotive
Holdings Corp. and its subsidiaries, unless otherwise indicated. TRW Automotive news
is available on the internet at www.trw.com.
6
Forward-Looking Statements This release contains statements that are not statements of historical fact, but instead
are forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. We caution readers not to place undue reliance on these
statements, which speak only as of the date hereof. All forward-looking statements are
subject to numerous assumptions, risks and uncertainties which can cause our actual
results to differ materially from those suggested by the forward-looking statements,
including those set forth in our Report on Form 10-K for the fiscal year ended
December 31, 2007, such as: loss of market share, production cuts and capacity
reductions by domestic North American vehicle manufacturers and resulting
restructuring initiatives, including bankruptcy actions, of our suppliers and customers;
escalating pricing pressures from our customers; commodity inflationary pressures
adversely affecting our profitability and supply base, including any resulting inability of
our suppliers to perform as we expect; our dependence on our largest customers;
product liability, warranty and recall claims and efforts by customers to alter terms and
conditions concerning warranty and recall participation; strengthening of the U.S. dollar
and other foreign currency exchange rate fluctuations; work stoppages or other labor
issues at our facilities or at the facilities of our customers or suppliers; our substantial
debt and resulting vulnerability to an economic or industry downturn and to rising
interest rates; cyclicality of automotive production and sales; any increase in the
expense and funding requirements of our pension and other postretirement benefits;
risks associated with non-U.S. operations, including foreign exchange risks and
economic uncertainty in some regions; any impairment of our goodwill or other
intangible assets; volatility in our annual effective tax rate resulting from a change in
earnings mix or other factors; adverse effects of environmental and safety regulations;
assertions by or against us relating to intellectual property rights; the possibility that our
largest shareholder's interests will conflict with ours; and other risks and uncertainties
set forth in our Report on Form 10-K and in our other filings with the Securities and
Exchange Commission. We do not undertake any obligation to release publicly any
revision to any of these forward-looking statements.
# # #
7
TRW Automotive Holdings Corp.
Index of Condensed Consolidated Financial Information Page Consolidated Statements of Earnings (unaudited) for the three months ended June 27, 2008 and June 29, 2007 .......................................................A2 Consolidated Statements of Earnings (unaudited) for the six months ended June 27, 2008 and June 29, 2007 ...........................................................A3 Condensed Consolidated Balance Sheets as of June 27, 2008 (unaudited) and December 31, 2007 .......................................................................A4 Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 27, 2008 and June 29, 2007 ...........................................................A5 Reconciliation of GAAP Net Earnings to EBITDA (unaudited) for the three and six months ended June 27, 2008 and June 29, 2007...........................................A6 Reconciliation of GAAP Net Earnings to Adjusted Earnings (unaudited) for the three months ended June 29, 2007 ......................................................................................A7 Reconciliation of GAAP Net Earnings to Adjusted Earnings (unaudited) for the six months ended June 29, 2007..........................................................................................A8
The accompanying unaudited condensed consolidated financial information and reconciliation schedules should be read in conjunction with the TRW Automotive Holdings Corp. Annual Report on Form 10-K for the year ended December 31, 2007 and Quarterly Report on Form 10-Q for the period ended March 28, 2008, as filed with the United States Securities and Exchange Commission on February 21, 2008 and April 30, 2008, respectively.
A2
TRW Automotive Holdings Corp.
Consolidated Statements of Earnings (Unaudited)
(In millions, except per share amounts) Three Months Ended
June 27, 2008
June 29, 2007 Sales ........................................................................................... $ 4,446 $ 3,754 Cost of sales ............................................................................... 4,045 3,417 Gross profit............................................................................ 401 337 Administrative and selling expenses........................................... 136 140 Amortization of intangible assets ................................................ 9 9 Restructuring charges and asset impairments............................ 24 11 Other expense (income) — net................................................... 8 (28) Operating income.................................................................. 224 205 Interest expense — net............................................................... 43 56 Loss on retirement of debt .......................................................... — 8 Accounts receivable securitization costs .................................... 1 1 Equity in earnings of affiliates, net of tax .................................... (8) (9) Minority interest, net of tax.......................................................... 5 7 Earnings before income taxes ............................................. 183 142 Income tax expense.................................................................... 56 45 Net earnings ....................................................................... $ 127 $ 97 Basic earnings per share: Earnings per share.................................................................... $ 1.26 $ 0.97 Weighted average shares outstanding ..................................... 101.1 99.5 Diluted earnings per share: Earnings per share.................................................................... $ 1.24 $ 0.94 Weighted average shares outstanding ..................................... 102.6 103.4
A3
TRW Automotive Holdings Corp.
Consolidated Statements of Earnings (Unaudited)
(In millions, except per share amounts) Six Months Ended
June 27, 2008
June 29, 2007 Sales ........................................................................................... $ 8,590 $ 7,321 Cost of sales ............................................................................... 7,848 6,668 Gross profit............................................................................ 742 653 Administrative and selling expenses........................................... 268 268 Amortization of intangible assets ................................................ 18 18 Restructuring charges and asset impairments............................ 32 19 Other expense (income) — net................................................... 12 (32) Operating income.................................................................. 412 380 Interest expense — net............................................................... 91 119 Loss on retirement of debt .......................................................... — 155 Accounts receivable securitization costs .................................... 2 2 Equity in earnings of affiliates, net of tax .................................... (15) (15) Minority interest, net of tax.......................................................... 10 10 Earnings before income taxes ............................................. 324 109 Income tax expense.................................................................... 103 98 Net earnings ....................................................................... $ 221 $ 11 Basic earnings per share: Earnings per share.................................................................... $ 2.19 $ 0.11 Weighted average shares outstanding ..................................... 100.9 99.0 Diluted earnings per share: Earnings per share.................................................................... $ 2.16 $ 0.11 Weighted average shares outstanding ..................................... 102.3 102.5
A4
TRW Automotive Holdings Corp.
Condensed Consolidated Balance Sheets
(Dollars in millions) As of
June 27,
2008 December 31,
2007 (Unaudited)
Assets
Current assets: Cash and cash equivalents .................................................... $ 453 $ 895 Marketable securities.............................................................. — 4 Accounts receivable — net..................................................... 3,165 2,313 Inventories .............................................................................. 944 822 Prepaid expenses and other current assets ........................... 419 292
Total current assets..................................................................... 4,981 4,326
Property, plant and equipment — net ......................................... 2,987 2,910 Goodwill ...................................................................................... 2,249 2,243 Intangible assets — net............................................................... 715 710 Pension asset.............................................................................. 1,500 1,461 Other assets................................................................................ 711 640
Total assets ............................................................................. $ 13,143 $ 12,290
Liabilities, Minority Interests and Stockholders’ Equity
Current liabilities: Short-term debt ...................................................................... $ 90 $ 64 Current portion of long-term debt........................................... 16 30 Trade accounts payable......................................................... 2,710 2,406 Accrued compensation .......................................................... 329 298 Other current liabilities ........................................................... 1,133 917
Total current liabilities ................................................................. 4,278 3,715
Long-term debt............................................................................ 3,016 3,150 Postretirement benefits other than pensions............................... 580 591 Pension benefits.......................................................................... 493 497 Other long-term liabilities ............................................................ 1,055 1,011
Total liabilities.......................................................................... 9,422 8,964
Minority interests ......................................................................... 149 134
Commitments and contingencies
Stockholders’ equity: Capital stock .......................................................................... 1 1 Treasury stock........................................................................ — — Paid-in-capital ........................................................................ 1,189 1,176 Retained earnings.................................................................. 622 398 Accumulated other comprehensive earnings......................... 1,760 1,617
Total stockholders’ equity............................................................ 3,572 3,192 Total liabilities, minority interests, and stockholders’ equity .... $ 13,143 $ 12,290
A5
TRW Automotive Holdings Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions) Six Months Ended June 27, 2008 June 29, 2007 Operating Activities Net earnings ....................................................................................... $ 221 $ 11 Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Depreciation and amortization.......................................................... 300 268 Net pension and other postretirement benefits income and contributions ................................................................................... (105)
(94)
Net gains on sale of assets .............................................................. (3) (12) Loss on retirement of debt................................................................ — 155 Other — net ...................................................................................... 18 21
Changes in assets and liabilities, net of effects of businesses acquired:
Accounts receivable — net............................................................. (710) (450) Inventories...................................................................................... (59) (54) Trade accounts payable ................................................................. 176 201 Prepaid expense and other assets................................................. (107) (38) Other liabilities................................................................................ 194 61 Net cash (used in) provided by operating activities ........................ (75) 69
Investing Activities Capital expenditures, including other intangible assets ..................... (217) (228) Acquisitions of businesses, net of cash acquired............................... (40) (12) Termination of interest rate swaps ..................................................... — (12) Investment in affiliates........................................................................ (5) — Proceeds from sale/leaseback transactions....................................... 1 6 Net proceeds from asset sales........................................................... 3 17
Net cash used in investing activities............................................... (258) (229) Financing Activities Change in short-term debt.................................................................. 26 50 Net (repayments on) proceeds from revolving credit facility ............. (129) 200 Proceeds from issuance of long-term debt, net of fees...................... 4 2,582 Redemption of long-term debt............................................................ (55) (2,993) Proceeds from exercise of stock options............................................ 4 28
Net cash used in financing activities .............................................. (150) (133) Effect of exchange rate changes on cash .......................................... 41 (10) Decrease in cash and cash equivalents............................................. (442) (303) Cash and cash equivalents at beginning of period............................. 895 578 Cash and cash equivalents at end of period ...................................... $ 453 $ 275
A6
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings to EBITDA (Unaudited)
The reconciliation schedule below should be read in conjunction with the TRW Automotive Holdings Corp. Annual Report on Form 10-K for the year ended December 31, 2007 and Quarterly Report on Form 10-Q for the period ended March 28, 2008. The EBITDA measure calculated in the following schedules is a measure used by management to evaluate operating performance. Management believes that EBITDA is a useful measurement because it is frequently used by securities analysts, institutional investors and other interested parties in the evaluation of companies in our industry. EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net earnings as an indicator of operating performance, or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as tax payments and debt service requirements. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly titled measures of other companies.
(Dollars in millions) Three Months Ended June 27, 2008 June 29, 2007 GAAP net earnings ....................................................... $ 127 $ 97
Income tax expense................................................ 56 45 Interest expense — net ........................................... 43 56 Loss on retirement of debt ...................................... — 8 Accounts receivable securitization costs................. 1 1 Depreciation and amortization ................................ 153 137
EBITDA......................................................................... $ 380 $ 344
(Dollars in millions) Six Months Ended June 27, 2008 June 29, 2007 GAAP net earnings ....................................................... $ 221 $ 11
Income tax expense ................................................ 103 98 Interest expense — net ........................................... 91 119 Loss on retirement of debt ...................................... — 155 Accounts receivable securitization costs................. 2 2 Depreciation and amortization ................................ 300 268
EBITDA......................................................................... $ 717 $ 653
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings to Adjusted Earnings
(Unaudited) In conjunction with the Company’s tender offer and repurchases of its then outstanding 9⅜% Senior Notes and 10⅛% Senior Notes in original principal amounts of $925 million and €200 million, respectively, and 11% Senior Subordinated Notes and 11¾% Senior Subordinated Notes in original principal amounts of $300 million and €125 million, respectively (collectively, the “Old Notes”), the Company recorded a loss on retirement of debt of $1 million during the three months ended June 29, 2007 for additional redemption premiums paid. The Company entered into its Fifth Amended and Restated Credit Agreement dated as of May 9, 2007, which provides for $2.5 billion in senior secured credit facilities, consisting of (i) a 5-year $1.4 billion Revolving Credit Facility, (ii) a 6-year $600 million Term Loan A-1 Facility and (iii) a 6.75-year $500 million Term Loan B-1 Facility (collectively, the “Facilities”). Proceeds from the Facilities were used to refinance $2.5 billion of existing senior secured credit facilities and pay fees and expenses related to the refinancing. The Company recorded a loss on retirement of debt related to the transaction of $7 million during the second quarter of 2007. The following reconciliation excludes the impact of the loss on retirement of debt.
(In millions, except per share amounts)
Three MonthsEnded
June 29, 2007Actual Adjustments
Three Months Ended
June 29,2007 Adjusted
Sales ..................................................................... $ 3,754 $ — $ 3,754
Cost of sales ......................................................... 3,417 — 3,417
Gross profit........................................................ 337 — 337
Administrative and selling expenses..................... 140 — 140
Amortization of intangible assets .......................... 9 — 9
Restructuring charges and asset impairments...... 11 — 11
Other income — net .............................................. (28) — (28)
Operating income.............................................. 205 — 205
Interest expense, net............................................. 56 — 56
Loss on retirement of debt .................................... 8 (8) (a) —
Accounts receivable securitization costs .............. 1 — 1
Equity in earnings of affiliates, net of tax .............. (9) — (9)
Minority interest, net of tax.................................... 7 — 7
Earnings before income taxes .......................... 142 8 150
Income tax expense ............................................. 45 — 45
Net earnings ..................................................... $ 97 $ 8 $ 105
Effective tax rate ................................................... 32% 30%
Basic earnings per share:
Earnings per share.............................................. $ 0.97 $ 1.06
Weighted average shares outstanding ............... 99.5 99.5
Diluted earnings per share:
Earnings per share.............................................. $ 0.94 $ 1.02
Weighted average shares outstanding ............... 103.4 103.4
(a) Reflects the elimination of the loss on retirement of debt.
A7
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net Earnings to Adjusted Earnings
(Unaudited) In conjunction with the Company’s tender offer and repurchases of its then outstanding Old Notes, the Company recorded a loss on retirement of debt of $148 million during the six months ended June 29, 2007. This loss included $112 million for redemption premiums paid, $20 million for the write-off of deferred debt issuance costs, $11 million relating to the principal amount in excess of carrying value of the 9⅜% Senior Notes and $5 million of fees. The Company entered into its Fifth Amended and Restated Credit Agreement dated as of May 9, 2007, which provides for $2.5 billion in senior secured credit facilities, consisting of (i) a 5-year $1.4 billion Revolving Credit Facility, (ii) a 6-year $600 million Term Loan A-1 Facility and (iii) a 6.75-year $500 million Term Loan B-1 Facility (collectively, the “Facilities”). Proceeds from the Facilities were used to refinance $2.5 billion of existing senior secured credit facilities and pay fees and expenses related to the refinancing. The Company recorded a loss on retirement of debt related to the transaction of $7 million during the second quarter of 2007. The following reconciliation excludes the impact of the loss on retirement of debt.
(In millions, except per share amounts)
Six Months Ended
June 29, 2007Actual Adjustments
Six Months Ended
June 29, 2007 Adjusted
Sales ..................................................................... $ 7,321 $ — $ 7,321
Cost of sales ......................................................... 6,668 — 6,668
Gross profit ....................................................... 653 — 653
Administrative and selling expenses..................... 268 — 268
Amortization of intangible assets .......................... 18 — 18
Restructuring charges and asset impairments ..... 19 — 19
Other income — net.............................................. (32) — (32)
Operating income.............................................. 380 — 380
Interest expense, net ............................................ 119 — 119
Loss on retirement of debt .................................... 155 (155) (a) —
Accounts receivable securitization costs .............. 2 — 2
Equity in earnings of affiliates, net of tax .............. (15) — (15)
Minority interest, net of tax.................................... 10 — 10
Earnings before income taxes .......................... 109 155 264
Income tax expense ............................................. 98 — 98
Net earnings ..................................................... $ 11 $ 155 $ 166
Effective tax rate ................................................... 90% 37%
Basic earnings per share:
Earnings per share ............................................. $ 0.11 $ 1.68
Weighted average shares outstanding ............... 99.0 99.0
Diluted earnings per share:
Earnings per share ............................................. $ 0.11 $ 1.62
Weighted average shares outstanding ............... 102.5 102.5
(a) Reflects the elimination of the loss on retirement of debt.
A8
Second Quarter 2008Financial Results Presentation
July 31, 2008
© TRW Automotive Holdings Corp. 2008
IntroductionEric BirgeInvestor Relations
Business SummaryJohn C. PlantPresident and Chief Executive Officer
P3© TRW Automotive Holdings Corp. 2008
Safe Harbor Statement
This presentation contains statements that are not statements of historical fact, but instead are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We caution readers not to place undue reliance on these statements, which speak only as of the date hereof. All forward-looking statements are subject to numerous assumptions, risks and uncertainties which can cause our actual results to differ materially from those suggested by the forward-looking statements, including those set forth in our Report on Form 10-K for the fiscal year ended December 31, 2007, and our Form 10-Q for the quarter ended March 28, 2008, such as: loss of market share, production cuts and capacity reductions by domestic North American vehicle manufacturers and resulting restructuring initiatives, including bankruptcy actions, of our suppliers and customers; escalating pricing pressures from our customers; commodity inflationary pressures adversely affecting our profitability and supply base, including any resulting inability of our suppliers to perform as we expect; our dependence on our largest customers; product liability, warranty and recall claims and efforts by customers to alter terms and conditions concerning warranty and recall participation; strengthening of the U.S. dollar and other foreign currency exchange rate fluctuations; work stoppages or other labor issues at our facilities or at the facilities of our customers or suppliers; our substantial debt and resulting vulnerability to an economic or industry downturn and to rising interest rates; cyclicality of automotive production and sales; any increase in the expense and funding requirements of our pension and other postretirement benefits; risks associated with non-U.S. operations, including foreign exchange risks and economic uncertainty in some regions; any impairment of our goodwill or other intangible assets; volatility in our annual effective tax rate resulting from a change in earnings mix or other factors; adverse effects of environmental and safety regulations; assertions by or against us relating to intellectual property rights; the possibility that our largest shareholder’s interests will conflict with ours; and other risks and uncertainties set forth in our Form 10-K and in other SEC filings. We do not undertake any obligation to release publicly any revision to any of these forward-looking statements.
P4© TRW Automotive Holdings Corp. 2008
Summary Comments
• TRW reports solid second quarter results:– Healthy growth in sales, earnings and EBITDA – Industry pressures mitigated by geographic, customer
and product diversification and demand for increased safety content
– Continue to pursue business strategies that improve long-term competitiveness
• Our vision of Cognitive Safety Systems:– Culmination of new and better technology that increasingly uses advanced
electronics and proprietary algorithms to sense, analyze, anticipate and respond to ever-changing conditions
– Examples of technology advancements:►Haptic Lane Feedback System ►Advanced Head Protection System►Automatic Emergency Braking System ►Low-Profile Knee Airbag Module
Strong Performance in the face of heightened
challenges in the Automotive Industry
P5© TRW Automotive Holdings Corp. 2008
$3,754
$4,446
Q2 2007 Q2 2008
Second Quarter Summary
18% Growth
Sales Summary
Q2 Vehicle Production(c)(% changes based on year-over-year comparisons)
Financial Summary(US $ in millions, except where noted)
North AmericaDetroit 3 -21.6%EU OE 1.0%Asian OE -3.3%Total Region -14.5%
East 19.3%
China 14.3%
South America 21.4%
India 16.6%Korea -4.7%Japan 4.5%
Total Region 3.8%
ROW
EuropeWest -1.7%
36.3%ROW 20.5%Europe
7.8%North America
Net Earnings Summary
(a) Excludes $8 million of debt retirement charges. For adjusted results reconciliation to GAAP, please see slide P14.(b) Per share amounts based on diluted shares.(c) Production volumes based on CSM Worldwide data.
Q2 2008
GAAP Adjusted(a) GAAP
Net Earnings 97$ 105$ 127$
Earnings Per Share(b) 0.94$ 1.02$ 1.24$
Q2 2007
P6© TRW Automotive Holdings Corp. 2008
$7,321$8,590
FH 2007 FH 2008
First Half Sales Summary
17% Growth
Sales Summary
First Half Vehicle Production(c)(% changes based on year-over-year comparisons)
Financial Summary(US $ in millions, except where noted)
North AmericaDetroit 3 -17.6%EU OE -0.7%Asian OE -2.0%Total Region -11.7%
East 19.0%
China 13.9%
South America 19.2%
India 16.3%Korea -0.9%Japan 5.2%
Total Region 3.4%
ROW
EuropeWest -1.9%
39.6%ROW 16.1%Europe 11.6%North America
Net Earnings Summary
(a) Excludes $155 million of debt retirement charges. For adjusted results reconciliation to GAAP, please see slide P16.(b) Per share amounts based on diluted shares.(c) Production volumes based on CSM Worldwide data.
FH 2008
GAAP Adjusted(a) GAAP
Net Earnings 11$ 166$ 221$
Earnings Per Share(b) 0.11$ 1.62$ 2.16$
FH 2007
P7© TRW Automotive Holdings Corp. 2008
Quarterly Developments
• Unprecedented time period for the Automotive Industry:
– Extreme spikes in commodity inflation
– Further reductions for second half vehicle production in North America
– Shift in production away from light trucks to passenger cars in North America
• Commodity Inflation has been a headwind since 2004 with a step increase in most areas over the last 3 months:
– Steel and Iron Ore prices have increased dramatically since the beginning of the year
– Full year impact of approximately $150 million anticipated
– Working to mitigate through product changes, efficiency initiatives, supply chain management, and customer recoveries
• European market showing signs of an economic slowdown.
P8© TRW Automotive Holdings Corp. 2008
Quarterly Developments
• Production estimates:
―Lowering North America production by 700 thousand to approximately 13.5 million units
―Detroit 3 production estimate lowered to 8.0 million units
―Lowering European production to 22.0 million units
• Mix shift in North America has been dramatic:
―In last 3 months, Detroit 3 have announced plans to permanently shutter light truck capacity and delay production launches
―Effect partially mitigated by fact that only 22% of TRW’s 2007 global sales were to the Detroit 3 in North America
―Assessing our plans to see what changes will be needed to align our operations
P9© TRW Automotive Holdings Corp. 2008
10.8 10.1 8.6
5.0 5.2 5.6 5.6 5.5
8.09.5
2005 2006 2007 2008EOLD
2008ENEW
Detroit 3 Transplants
15.9 15.4
4.1 4.9 5.8 6.7 6.6
15.5 15.615.8
2005 2006 2007 2008EOLD
2008ENEW
Western Eastern
10.0 10.6 10.8 10.9 11.0
4.8 5.7 6.9 7.8 7.83.6
3.8 4.0 3.9 4.03.94.0
4.6 5.5 5.4
2005 2006 2007 2008EOLD
2008ENEW
Japan China Korea South Asia
• Forecast for North American production lowered to approximately 13.5 million units –lowest production level since 1992.
• European production lowered to 22.0 million units. Steady growth forecasted in the emerging markets of China, India and Brazil.
• Revised Euro rate assumptions upward, which is reflected in the increased full year sales guidance.
• Commodity inflation pressures to continue, with significant increases expected in second half.
(1) Source: Light vehicle assumptions primarily CSM Worldwide and internal company estimates.
South America
North America
Asia
Europe21.720.419.915.115.315.8
14.222.0
2008 Operating Environment
2008 Industry Production Assumptions(1)(units in millions)
2.8 3.0 3.6 4.14.1
2005 2006 2007 2008EOLD
2008ENEW
13.522.3
P10© TRW Automotive Holdings Corp. 2008
2008 Full Year Outlook
(a) Per share amounts based on assumed weighted average diluted shares outstanding of approximately 102.5 million shares.
Sales $16.4 - $16.8 billionNet Earnings per Diluted Share(a) $2.40 to $2.70Restructuring Expenses (pre-tax) $75 millionCapital Spending approx. 3.5% of salesEffective Tax Rate approx. 38% - 42%
TRW is Well Positioned for the Future with Leading Customer andGeographic Diversification, Innovation and a Track Record of
Steady Performance During Difficult Conditions.
Financial OverviewJoseph S. CantieExecutive Vice Presidentand Chief Financial Officer
P12© TRW Automotive Holdings Corp. 2008
• Strong second quarter performance:
―Sales of $4.4 billion, up 18%
―Earnings per share of $1.24
• Second quarter completes an outstanding first half:
―Record sales of $8.6 billion, up 17% over last year
―Record earnings per share of $2.16, up 33% over last year, excluding debt retirement charges in the prior year(a)
―EBITDA in excess of $700 million for the first time in any six-month period(b)
• Raised full year guidance despite the challenges facing the industry and TRW.
Financial Summary
(a) For adjusted results comparison and reconciliation to GAAP, please see slide P16.(b) Please refer to slide P21 for management’s rationale for using this metric and slide P23 for a reconciliation to GAAP.
•Strong Q2 and First Half Performance•Significant “Headwinds”for the Second Half and into 2009
P13© TRW Automotive Holdings Corp. 2008
Rest of World 13.8%
North America
28.4%Europe57.8%
Rest of World 11.9%
North America
31.3%Europe56.8%
Foreign CurrencyProduct Volumes
Modules New ProductsVehicle Production
Customer Pricing
$3,754$4,446
Q2 2007 Q2 2008
Total SalesUS $ in millions
Q2 YOY Sales Comparison
Second Quarter Sales Summary
+18%
Geographic Sales Mix% of total sales
$2,042
$1,201
$511
$2,556
$1,335
$555
Q2 2007 Q2 2008
ChassisOSSAuto Comp
Q2 2007 Q2 2008
Segment SalesUS $ in millions
P14© TRW Automotive Holdings Corp. 2008
(a) $8 million loss on retirement of debt related to the Company’s 2007 debt recapitalization.(b) Please refer to slide P21 for management’s rationale for using this metric and slide P22 for a reconciliation to GAAP.
Second Quarter Results
(US $ in millions, except where noted)
GAAP Results
GAAP Results
Adjusting Item
Adjusted Results
Sales 4,446$ 3,754$ -$ 3,754$ Operating Income 224 205 - 205 Net Interest and Securitization 44 57 - 57 Loss on Retirement of Debt - 8 (8) (a) - Equity in Earnings of Affiliates (8) (9) - (9) Minority Interest 5 7 - 7 Income Tax Expense 56 45 - 45 Effective Tax Rate 31% 32% 30%Net Earnings 127$ 97$ 8$ 105$ Share Count 102.6 103.4 103.4 Earnings Per Share 1.24$ 0.94$ 1.02$
EBITDA(b) 380$ 344$
Q2 2008 Q2 2007
P15© TRW Automotive Holdings Corp. 2008
Rest of World 13.3%
North America
29.3%Europe57.4%
Rest of World 11.1%
North America
30.9%Europe58.0%
Foreign CurrencyProduct Volumes
Modules New ProductsVehicle Production
Customer Pricing
$7,321 $8,590
FH 2007 FH 2008
Total SalesUS $ in millions
FH YOY Sales Comparison
First Half Sales Summary
17%
Geographic Sales Mix% of total sales
$3,938
$2,383
$1,000
$4,898
$2,609
$1,083
FH 2007 FH 2008
ChassisOSSAuto Comp
FH 2007 FH 2008
Segment SalesUS $ in millions
P16© TRW Automotive Holdings Corp. 2008
(a) $155 million loss on retirement of debt related to the Company’s 2007 debt recapitalization.(b) Please refer to slide P21 for management’s rationale for using this metric and slide P23 for a reconciliation to GAAP.
First Half Results
(US $ in millions, except where noted)
GAAP Results
GAAP Results
Adjusting Item
Adjusted Results
Sales 8,590$ 7,321$ -$ 7,321$ Operating Income 412 380 - 380 Net Interest and Securitization 93 121 - 121 Loss on Retirement of Debt - 155 (155) (a) - Equity in Earnings of Affiliates (15) (15) - (15) Minority Interest 10 10 - 10 Income Tax Expense 103 98 - 98 Effective Tax Rate 32% 90% 37%Net Earnings 221$ 11$ (155)$ 166$ Share Count 102.3 102.5 102.5 Earnings Per Share 2.16$ 0.11$ 1.62$
EBITDA(b) 717$ 653$
First Half 2008 First Half 2007
P17© TRW Automotive Holdings Corp. 2008
Year End 2007 Q2 2008Memo: Q2
2007Cash 895$ 453$ 275$ Marketable Securities 4 - 9 Total Cash & Marketable Securities 899$ 453$ 284$
3,244 3,122 3,042 Total Equity 3,192 3,572 2,500 Total Capital 6,436$ 6,694$ 5,542$
Total Debt / Capital Ratio 50% 47% 55%
Net Debt(a) 2,345$ 2,669$ 2,758$ (a) Total debt less total cash & marketable securities. For net debt reconciled to the closest GAAP equivalent, please refer to slide P24.
Total Debt
Period-End Balances
Capital Structure Summary
Operating Cash Flow: 2007 2008
First Quarter (221)$ (115)$
Second Quarter 290 40
GAAP Operating Cash Flow 69$ (75)$
A/R Securitization Proceeds (127) -
Adjusted Operating Cash Flow (58)$ (75)$
$119
$97$109
$120
$228 $217
Q1 Q2 First Half
20072008
Operating Cash FlowUS $ in millions
Capital ExpendituresUS $ in millions
Capital StructureUS $ in millions
P18© TRW Automotive Holdings Corp. 2008
$3,437$2,964
$2,372$2,560 $2,443
$2,955 $2,758
$2,885(b)
$2,345$2,599 $2,669
Feb 28,2003
Dec 31,2003
Dec 31,2004
Dec 31,2005
Dec 31,2006
Mar 30,2007
Jun 29,2007
Dec 31,2007
Mar 28,2008
Jun 27,2008
Capital Structure Summary
(a) Net debt is equal to total debt less cash and marketable securities. For net debt reconciled to the closest GAAP equivalent, please refer to slide P24.(b) Net debt adjusted to include receivables facility proceeds.
Dalphimetal acquisition increased net debt
by $244 million
Debt transaction increased
net debt by $57 million
Debt transactions increased net debt by approximately $130
million
Net Debt (a)
US $ in millions
$127 million receivables facility proceeds
P19© TRW Automotive Holdings Corp. 2008
Outlook Discussion
Full Year• Raised full year sales guidance to $16.4 - $16.8 billion:
– Decline in North American volume expected to be significant with the Detroit 3 producing nearly 1.5 million fewer vehicles compared to 2007
– Module sales expected to increase in 2008 by $800 to $900 million– Currency effect will provide measurable upside to sales – no material impact to
income expected
• Full year earnings of $2.40 to $2.70 per share.Third Quarter• Sales increase to approximately $3.9 billion due primarily to currency and
modules.• Restructuring and asset impairment expenses of approximately $25 million.• Due to compressed production levels, restructuring, and higher effective tax
rate, the level of net earnings will likely be break-even to very low.
Financial Reconciliations
P21© TRW Automotive Holdings Corp. 2008
EBITDA Measurement
The accompanying unaudited consolidated financial information and reconciliation of GAAP net earnings to earnings before interest, income tax, accounts receivable securitization cost, loss on retirement of debt, and depreciation and amortization (“EBITDA”) should be read in conjunction with the TRW Automotive HoldingsCorp. Form 10-K for the year ended December 31, 2007, and Form 10-Q for the quarter ended March 28, 2008,as filed with the United States Securities and Exchange Commission.
The EBITDA measure calculated in this presentation is a measure used by management to evaluate operating performance. Management believes that EBITDA is a useful measurement because it is frequently used by securities analysts, institutional investors and other interested parties in the evaluation of companies in our industry.
EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net earnings (losses) as an indicator of operating performance, or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to other similarly titled measures of other companies.
P22© TRW Automotive Holdings Corp. 2008
Second Quarter EBITDA
(US $ in millions, except where noted)
Q2 2008 Q2 2007GAAP Net Earnings 127$ 97$ Income Tax Expense 56 45 Net Interest 43 56 Loss on Retirement of Debt - 8 Accounts Receivable Securitization Costs 1 1 Depreciation & Amortization 153 137 EBITDA 380$ 344$
Memo:Restructuring & AssetImpairments Included in EBITDA 24$ 11$
P23© TRW Automotive Holdings Corp. 2008
First Half 2008 EBITDA
(US $ in millions, except where noted)
First Half 2008
First Half 2007
GAAP Net Earnings 221$ 11$ Income Tax Expense 103 98 Net Interest 91 119 Loss on Retirement of Debt - 155 Accounts Receivable Securitization Costs 2 2 Depreciation & Amortization 300 268 EBITDA 717$ 653$
Memo:Restructuring & AssetImpairments Included in EBITDA 32$ 19$
P24© TRW Automotive Holdings Corp. 2008
Net Debt Reconciliation
(US $ in millions)2/28/03 12/31/03 12/31/04 12/31/05 12/31/06 3/30/07 6/29/07 12/31/07 03/28/08 6/27/08
Cash 449$ 828$ 790$ 659$ 578$ 343$ 275$ 895$ 562$ 453$ Marketable securities 26 16 19 17 11 11 9 4 3 -
Total cash and marketable securities 475 844 809 676 589 354 284 899 565 453
Short term debt 168 76 40 98 69 125 140 64 80 90 Term loan facilities 1,510 1,480 1,512 1,593 1,582 1,579 1,100 1,098 1,098 1,096 Revolving credit facilities - - - - - - 200 429 339 300 Senior & senior subordinated notes due 2013 1,577 1,636 1,369 1,255 1,284 26 17 19 - - Senior notes due 2014 and 2017 - - - - - 1,467 1,469 1,505 1,522 1,521 Lucas Varity senior notes 167 189 202 181 - - - - - - Other borrowings 142 45 58 109 97 112 116 129 125 115 Northrop seller note 348 382 - - - - - - - -
Total debt 3,912 3,808 3,181 3,236 3,032 3,309 3,042 3,244 3,164 3,122 Net debt 3,437$ 2,964$ 2,372$ 2,560$ 2,443$ 2,955$ 2,758$ 2,345$ 2,599$ 2,669$
Memo:Receivable facility proceeds(a) - - - - - - 127$ - - -
Net debt including receivables facility proceeds 3,437$ 2,964$ 2,372$ 2,560$ 2,443$ 2,955$ 2,885$ 2,345$ 2,599$ 2,669$
Period-End Balances
(a) Proceeds related to outstanding borrowings under the Company’s U.S. based Accounts Receivables Securitization Facility.