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P1© TRW Automotive Holdings Corp. 2008
Third Quarter 2008 Financial Results Presentation
October 30, 2008
© TRW Automotive Holdings Corp. 2008
WE PUT THE THINKING IN SAFETY SYSTEMS.
Materials Included Pages-Press Release 1-7-Financial Summaries A1-A7-Presentation P1-P27
TRW Automotive
12001 Tech Center Drive Livonia, MI 48150 News Release
Investor Relations Contact:
Mark Oswald (734) 855-3140 Media Contact:
John Wilkerson (734) 855-3864
TRW Automotive Reports Third Quarter 2008 Financial Results; Provides Update on 2008 Outlook LIVONIA, MICHIGAN, October 30, 2008 — TRW Automotive Holdings Corp. (NYSE:
TRW), the global leader in active and passive safety systems, today reported third-
quarter 2008 financial results with sales of $3.6 billion, an increase of 2.8 percent
compared to the same period a year ago. The Company reported a third quarter net
loss of $54 million or ($0.53) per diluted share, which compares to net earnings of $23
million or $0.22 per diluted share in the prior year period. Third quarter 2008 net cash
flow from operating activities was $79 million, which exceeded the level generated in
the prior year.
Sales in the third quarter benefited from currency movements and increased sales of
modules, which together did not provide a corresponding benefit to earnings. Excluding
the benefits of currency and modules, core product sales were sharply lower, which
was the primary reason for the decline in earnings between the two quarters. Other
negative factors included a higher level of restructuring charges, commodity costs and
tax expense despite a loss before income taxes.
“TRW’s third quarter results reflect the unprecedented challenges facing the automotive
industry and global economic markets in general,” said John C. Plant, President and
Chief Executive Officer. “During this time of uncertainty, we are taking the actions
necessary to align our organization with the changing industry conditions while
continuing to remain focused on advancing our strategic priorities to ensure our long-
term competitiveness.”
1
Third Quarter 2008 The Company reported third-quarter 2008 sales of $3.6 billion, an increase of $97
million or 2.8 percent over the prior year period. The 2008 quarter benefited from the
positive effect of foreign currency translation and the increase in sales of lower margin
modules. These positive factors were substantially offset by lower sales of core
products in both North America and Europe resulting from sharply reduced light vehicle
production volumes. Price reductions provided to our customers were also a negative
factor between the two quarters.
Operating income for the third-quarter 2008 was $12 million, which compares to $95
million in the prior year period. The year-to-year decrease was driven by a number of
factors, the most significant of which were the impact of lower sales, excluding
currency, and the negative sales mix including a decline in higher margin core product
sales replaced by lower margin module sales. Other negative factors included net
currency losses and increased commodity costs.
As a result of the negative industry conditions, the Company has increased its level of
restructuring actions as it focuses on reducing its cost base, which also contributed to a
lower level of operating profit between quarters. In the 2008 third quarter, restructuring
charges and asset impairments totaled $32 million compared to $13 million in the prior
year period.
Net interest and securitization expense for the third quarter of 2008 totaled $43 million,
which compares to $56 million in the prior year. The year-to-year decrease is due to
lower interest rates between the periods.
Tax expense for the third quarter of 2008 was $23 million, despite a loss before income
taxes. The expense for the quarter is attributable to earnings in profitable tax
jurisdictions while the Company has not recognized a tax benefit from losses in certain
other jurisdictions. In the prior year quarter, tax expense was $18 million, resulting in
an effective tax rate of 44 percent.
The Company reported a third-quarter 2008 net loss of $54 million, or ($0.53) per
diluted share, which compares to net earnings of $23 million or $0.22 per diluted share
in the 2007 period.
2
Earnings before interest, securitization costs, loss on retirement of debt, taxes,
depreciation and amortization (“EBITDA”) were $157 million in the third quarter of 2008,
as compared to the prior year level of $237 million.
Year-to-Date 2008 For the nine-month period ended September 26, 2008, the Company reported sales of
$12.2 billion, an increase of $1.4 billion or 12.6 percent compared to prior year sales.
All of the increase in sales resulted from the positive effect of foreign currency
translation and above trend sales of lower margin modules. Higher product volumes
related to new product growth and robust industry sales in certain overseas markets
during the first nine months of the year were fully offset by the continued decline in
North American and Western European vehicle production and price reductions
provided to customers.
Operating income for the 2008 year-to-date period was $424 million, which is a
decrease of $51 million or 10.7 percent compared to the prior year result of $475
million. The decline resulted from a number of factors including a $32 million increase
in the level of restructuring and asset impairment expenses. Positive factors such as
savings generated from cost improvement and efficiency programs, including
reductions in pension and OPEB related costs, and the positive effect of net insurance
proceeds received in 2008 relating to a prior year business disruption were more than
offset by the profit impact resulting from a negative mix of products sold, higher
commodity prices, price reductions provided to customers and foreign currency losses.
Net interest and securitization expense in the first nine months of the 2008 period was
$136 million, which represents a significant improvement from the prior year result of
$177 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 periods. The debt recapitalization completed last year resulted in $155 million of
costs in 2007.
Tax expense in the first nine months of 2008 was $126 million, resulting in an effective
tax rate of 43 percent, which compares to $116 million, or 38 percent excluding the debt
retirement costs of $155 million, in the prior year.
3
The Company reported year-to-date 2008 net earnings of $167 million, or $1.63 per
diluted share, which compares to $34 million or $0.33 per diluted share in the 2007
period. The comparison of net earnings, excluding the previously mentioned debt
retirement costs from the prior year, were $167 million or $1.63 per diluted share in
2008 as compared to $189 million or $1.84 per diluted share in 2007.
EBITDA was $874 million in the first nine months of 2008, which is a 1.8 percent
decrease from the prior year level of $890 million primarily due to the lower level of
operating income in the current year.
Cash Flow and Capital Structure Third quarter 2008 net cash flow from operating activities was $79 million, which
compares to a use of $(158) million in the prior year. The prior year use of cash
included the pay down of $127 million of outstanding borrowings under the Company’s
U.S. based Accounts Receivable Securitization Facility (“Receivable Facility”).
Excluding the pay down of the Receivable Facility, the comparison of net cash flow
from operating activities was an inflow of $79 million in the current quarter compared to
a use of $(31) million in the prior year. Third quarter 2008 capital expenditures were
$121 million compared to $111 million in 2007.
For the nine month period ended September 26, 2008, net cash flow from operating
activities was $4 million, which compares to net cash use of $(89) million in the prior
year. Year-to-date capital expenditures were $338 million in 2008 compared to $339
million in 2007.
As of September 26, 2008, the Company had $3,243 million of debt and $511 million of
cash and marketable securities, resulting in net debt (defined as debt less cash and
marketable securities) of $2,732 million. This compares favorably to net debt of $3,029
million at the end of the prior year third quarter period ended September 28, 2007.
At the end of the 2008 third quarter, committed liquidity facilities and cash on hand
provided the Company with available liquidity of approximately $1.5 billion.
4
2008 Outlook The Company expects its full year sales to be approximately $15.3 billion (including
fourth quarter sales of approximately $3.1 billion). Full year net earnings per share are
expected to be in the range of $0.90 to $1.10, which includes pre-tax restructuring and
asset impairment charges for known actions forecasted at approximately $95 million
(including approximately $30 million in the fourth quarter).
The Company continues to evaluate other actions that may be necessary in reaction to
the current environment, which will most likely lead to additional restructuring charges
and asset impairments that are not incorporated in the guidance provided above.
The guidance range above reflects the continued reduction in vehicle production
schedules in both Europe and North America, increased commodity costs and
significantly higher restructuring expenses. The effective tax rate, which is highly
dependent on the Company’s overall level of pre-tax earnings and the location of those
earnings, is expected to exceed 50% for the full year. Lastly, the Company expects
capital expenditures in 2008 to be approximately 3.5 percent of sales.
“Our 2008 guidance provided today reflects the challenges facing the automotive
industry and TRW, most notably the rapid decline and change in mix of vehicle
production schedules of our customers,” said John C. Plant. “At this point, we are
planning for a difficult 2009 year with vehicle sales below 2008 levels in both Europe
and North America.”
Third Quarter 2008 Conference Call The Company will host its third-quarter conference call at 8:00 a.m. (EDT) today,
Thursday, October 30, 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 66236676. 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.
5
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 uses these non-GAAP measures to evaluate the operating performance
of the Company and its business segments, including use in connection with
forecasting 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 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 66,000 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 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,
6
7
including those set forth in our Report on Form 10-K for the fiscal year ended
December 31, 2007 (our “Form 10-K”), and in our Reports on Form 10-Q for the
quarters ended March 28 and June 27, 2008, such as: rapidly changing conditions in
the automotive industry and disruptions in the financial markets make our sales and
operating results difficult to forecast; loss of market share, production cuts and capacity
reductions by domestic North American vehicle manufacturers and a market shift in
vehicle mix in North America and resulting restructuring initiatives, including bankruptcy
actions, of our suppliers and customers; sharply increasing commodity inflationary
pressures adversely affecting our profitability and supply base, including any resulting
inability of our suppliers to perform as we expect; escalating pricing pressures from our
customers; our dependence on our largest customers; strengthening of the U.S. dollar
and other foreign currency exchange rate fluctuations impacting our results; our
substantial debt and resulting vulnerability to an economic or industry downturn and to
rising interest rates; cyclicality of automotive production and sales; risks associated with
non-U.S. operations, including economic uncertainty in some regions; contraction in
consumer spending, a market shift in vehicle mix and production cuts in Europe; any
impairment of our goodwill or other intangible assets; product liability, warranty and
recall claims and efforts by customers to alter terms and conditions concerning
warranty and recall participation; work stoppages or other labor issues at our facilities
or at the facilities of our customers or suppliers; any increase in the expense and
funding requirements of our pension and other postretirement benefits; 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.
# # #
TRW Automotive Holdings Corp.
Index of Condensed Consolidated Financial Information Page Consolidated Statements of Operations (unaudited) for the three months ended September 26, 2008 and September 28, 2007....................................A2 Consolidated Statements of Operations (unaudited) for the nine months ended September 26, 2008 and September 28, 2007 .....................................A3 Condensed Consolidated Balance Sheets as of September 26, 2008 (unaudited) and December 31, 2007..............................................................A4 Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 26, 2008 and September 28, 2007 .....................................A5 Reconciliation of GAAP Net (Losses) Earnings to EBITDA (unaudited) for the three and nine months ended September 26, 2008 and September 28, 2007.....................A6 Reconciliation of GAAP Net Earnings to Adjusted Earnings (unaudited) for the nine months ended September 28, 2007..............................................................................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, 2007 and Quarterly Reports on Form 10-Q for the periods ended March 28, 2008 and June 27, 2008 as filed with the United States Securities and Exchange Commission on February 21, 2008, April 30, 2008 and July 31, 2008, respectively.
A2
TRW Automotive Holdings Corp.
Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts) Three Months Ended
September 26,
2008
September 28,
2007 Sales ........................................................................................... $ 3,592 $ 3,495 Cost of sales ............................................................................... 3,411 3,263 Gross profit............................................................................ 181 232 Administrative and selling expenses........................................... 139 123 Amortization of intangible assets ................................................ 9 9 Restructuring charges and asset impairments............................ 32 13 Other income — net.................................................................... (11) (8) Operating income.................................................................. 12 95 Interest expense — net............................................................... 43 54 Accounts receivable securitization costs .................................... — 2 Equity in earnings of affiliates, net of tax .................................... (2) (5) Minority interest, net of tax.......................................................... 2 3 (Losses) earnings before income taxes............................... (31) 41 Income tax expense.................................................................... 23 18 Net (losses) earnings.......................................................... $ (54) $ 23 Basic (losses) earnings per share: (Losses) earnings per share ..................................................... $ (0.53) $ 0.23 Weighted average shares outstanding ..................................... 101.2 100.6 Diluted (losses) earnings per share: (Losses) earnings per share ..................................................... $ (0.53) $ 0.22 Weighted average shares outstanding ..................................... 101.2 103.3
A3
TRW Automotive Holdings Corp.
Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts) Nine Months Ended
September 26,
2008
September 28,
2007 Sales ........................................................................................... $ 12,182 $ 10,816 Cost of sales ............................................................................... 11,259 9,931 Gross profit............................................................................ 923 885 Administrative and selling expenses........................................... 407 391 Amortization of intangible assets ................................................ 27 27 Restructuring charges and asset impairments............................ 64 32 Other expense (income) — net................................................... 1 (40) Operating income.................................................................. 424 475 Interest expense — net............................................................... 134 173 Loss on retirement of debt .......................................................... — 155 Accounts receivable securitization costs .................................... 2 4 Equity in earnings of affiliates, net of tax .................................... (17) (20) Minority interest, net of tax.......................................................... 12 13 Earnings before income taxes ............................................. 293 150 Income tax expense.................................................................... 126 116 Net earnings ....................................................................... $ 167 $ 34 Basic earnings per share: Earnings per share.................................................................... $ 1.65 $ 0.34 Weighted average shares outstanding ..................................... 101.0 99.5 Diluted earnings per share: Earnings per share.................................................................... $ 1.63 $ 0.33 Weighted average shares outstanding ..................................... 102.2 102.8
A4
TRW Automotive Holdings Corp.
Condensed Consolidated Balance Sheets
(Dollars in millions) As of
September 26,
2008 December 31,
2007 (Unaudited)
Assets
Current assets: Cash and cash equivalents .................................................... $ 511 $ 895 Marketable securities.............................................................. — 4 Accounts receivable — net..................................................... 2,830 2,313 Inventories .............................................................................. 883 822 Prepaid expenses and other current assets ........................... 367 292
Total current assets..................................................................... 4,591 4,326
Property, plant and equipment — net ......................................... 2,809 2,910 Goodwill ...................................................................................... 2,242 2,243 Intangible assets — net............................................................... 706 710 Pension asset.............................................................................. 1,418 1,461 Other assets................................................................................ 621 640
Total assets ............................................................................. $ 12,387 $ 12,290
Liabilities, Minority Interests and Stockholders’ Equity
Current liabilities: Short-term debt ...................................................................... $ 72 $ 64 Current portion of long-term debt........................................... 22 30 Trade accounts payable......................................................... 2,314 2,406 Accrued compensation .......................................................... 296 298 Other current liabilities ........................................................... 1,047 917
Total current liabilities ................................................................. 3,751 3,715
Long-term debt............................................................................ 3,149 3,150 Postretirement benefits other than pensions............................... 574 591 Pension benefits.......................................................................... 451 497 Other long-term liabilities ............................................................ 1,027 1,011
Total liabilities.......................................................................... 8,952 8,964
Minority interests ......................................................................... 144 134
Commitments and contingencies
Stockholders’ equity: Capital stock .......................................................................... 1 1 Treasury stock........................................................................ — — Paid-in-capital ........................................................................ 1,194 1,176 Retained earnings.................................................................. 568 398 Accumulated other comprehensive earnings......................... 1,528 1,617
Total stockholders’ equity............................................................ 3,291 3,192 Total liabilities, minority interests, and stockholders’ equity .... $ 12,387 $ 12,290
A5
TRW Automotive Holdings Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions) Nine Months Ended
September 26,
2008 September 28,
2007 Operating Activities Net earnings ....................................................................................... $ 167 $ 34 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization.......................................................... 445 408 Net pension and other postretirement benefits income and contributions ................................................................................... (140)
(147)
Net gains on sale of assets .............................................................. (4) (19) Loss on retirement of debt................................................................ — 155 Other — net ...................................................................................... 23 27
Changes in assets and liabilities, net of effects of businesses acquired:
Accounts receivable — net............................................................. (518) (424) Inventories...................................................................................... (45) (86) Trade accounts payable ................................................................. (94) (10) Prepaid expense and other assets................................................. (29) (9) Other liabilities................................................................................ 199 (18) Net cash provided by (used in) operating activities ........................ 4 (89)
Investing Activities Capital expenditures, including other intangible assets ..................... (338) (339) Acquisitions of businesses, net of cash acquired............................... (41) (12) Termination of interest rate swaps ..................................................... — (12) Investment in affiliates........................................................................ (5) — Purchase price adjustments ............................................................... — 3 Proceeds from sale/leaseback transactions....................................... 1 6 Net proceeds from asset sales........................................................... 6 35
Net cash used in investing activities............................................... (377) (319) Financing Activities Change in short-term debt.................................................................. 10 66 Net proceeds from revolving credit facility ......................................... 50 638 Proceeds from issuance of long-term debt, net of fees...................... 4 2,584 Redemption of long-term debt............................................................ (61) (3,000) Proceeds from exercise of stock options............................................ 4 29
Net cash provided by financing activities ....................................... 7 317 Effect of exchange rate changes on cash .......................................... (18) (14) Decrease in cash and cash equivalents............................................. (384) (105) Cash and cash equivalents at beginning of period............................. 895 578 Cash and cash equivalents at end of period ...................................... $ 511 $ 473
A6
TRW Automotive Holdings Corp.
Reconciliation of GAAP Net (Losses) 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 Reports on Form 10-Q for the periods ended March 28, 2008 and June 27, 2008. The EBITDA measure calculated in the following schedules is a measure used by management to evaluate the operating performance of the Company and its business segments, including use in connection with forecasting future periods. Management believes that investors will likewise find EBITDA useful in evaluating such performance. EBITDA 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
September 26,
2008 September 28,
2007 GAAP net (losses) earnings.......................................... $ (54) $ 23
Income tax expense................................................ 23 18 Interest expense — net ........................................... 43 54 Accounts receivable securitization costs................. — 2 Depreciation and amortization ................................ 145 140
EBITDA......................................................................... $ 157 $ 237
(Dollars in millions) Nine Months Ended
September 26,
2008 September 28,
2007 GAAP net earnings ....................................................... $ 167 $ 34
Income tax expense ................................................ 126 116 Interest expense — net ........................................... 134 173 Loss on retirement of debt ...................................... — 155 Accounts receivable securitization costs................. 2 4 Depreciation and amortization ................................ 445 408
EBITDA......................................................................... $ 874 $ 890
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 nine months ended September 28, 2007. This loss included $112 million for redemption premiums paid, $20 million for the write-off of deferred debt issue 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 nine months ended September 28, 2007. The following reconciliation excludes the impact of the loss on retirement of debt.
(In millions, except per share amounts)
Nine Months Ended
September 28,2007
Actual Adjustments
Nine Months Ended
September 28, 2007
Adjusted
Sales ..................................................................... $ 10,816 $ — $ 10,816
Cost of sales ......................................................... 9,931 — 9,931
Gross profit ....................................................... 885 — 885
Administrative and selling expenses..................... 391 — 391
Amortization of intangible assets .......................... 27 — 27
Restructuring charges and asset impairments ..... 32 — 32
Other income — net.............................................. (40) — (40)
Operating income.............................................. 475 — 475
Interest expense, net ............................................ 173 — 173
Loss on retirement of debt .................................... 155 (155) (a) —
Account receivable securitization costs................ 4 — 4
Equity in earnings of affiliates, net of tax .............. (20) — (20)
Minority interest, net of tax.................................... 13 — 13
Earnings before income taxes .......................... 150 155 305
Income tax expense ............................................. 116 — 116
Net earnings ..................................................... $ 34 $ 155 $ 189
Effective tax rate ................................................... 77% 38%
Basic earnings per share:
Earnings per share ............................................. $ 0.34 $ 1.90
Weighted average shares................................... 99.5 99.5
Diluted earnings per share:
Earnings per share ............................................. $ 0.33 $ 1.84
Weighted average shares................................... 102.8 102.8
(a) Reflects the elimination of the loss on retirement of debt.
A7
P1© TRW Automotive Holdings Corp. 2008
Third Quarter 2008 Financial Results Presentation
October 30, 2008
©
TRW Automotive Holdings Corp. 2008
WE PUT THE THINKING IN SAFETY SYSTEMS.
Introduction Mark A. Oswald Director,
Investor 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 (our “Form 10-K”), and in our Reports on Form 10-Q for the quarters ended March 28 and June 27, 2008, such as: rapidly changing conditions in the automotive industry and disruptions in the financial markets make our sales and operating results difficult to forecast; loss of market share, production cuts and
capacity reductions by domestic North American vehicle manufacturers and a market shift in vehicle mix in North America
and resulting restructuring initiatives, including bankruptcy actions, of our suppliers and customers; sharply increasing commodity inflationary pressures adversely affecting our profitability and supply base, including any resulting inability
of our suppliers to perform as we expect; escalating pricing pressures from our customers; our dependence on our largest customers; strengthening of the U.S. dollar and other foreign currency exchange rate fluctuations impacting our results; our substantial debt and resulting vulnerability to an economic or industry downturn and to rising interest rates; cyclicality of automotive production and sales; risks associated with non-U.S. operations, including economic uncertainty in some regions; contraction in consumer spending, a market shift in vehicle mix and production cuts in Europe; any impairment of our goodwill or
other intangible assets; product liability, warranty and recall
claims and efforts by customers to alter terms and conditions concerning warranty and recall participation; work stoppages or other labor issues at our facilities or at the facilities of our
customers or suppliers; any increase in the expense and funding
requirements of our pension and other postretirement benefits; 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.
P4© TRW Automotive Holdings Corp. 2008
Summary Comments
•
Uncertainty in the global financial markets.–
Consumers’
ability to purchase new cars is limited.
•
Unprecedented period for the automotive industry:–
Significantly lower production in both North America and Western
Europe.–
Mix shift to more fuel efficient cars in North America and smaller cars in Europe.–
Significantly higher restructuring expenses. –
Increased commodity costs.
•
TRW remains focused on advancing our strategic priorities:–
World class quality –
Global reach–
Innovative technologies–
Lowest cost
TRW’s third quarter results reflect the unprecedented challenges facing the industry and global economic markets in general.
P5© TRW Automotive Holdings Corp. 2008
5.5%ROW 6.0%Europe
-4.2%North America
$3,495 $3,592
Q3 2007 Q3 2008
Third Quarter Summary
Q3 2008 Q3 2007
GAAP GAAP
Net (Losses) Earnings (54)$ 23$
(Losses) Earnings Per Share(a) (0.53)$ 0.22$
2.8% Growth
Sales Summary
Q3 Vehicle Production (% changes based on year-over-year comparisons and CSM data)
Financial Summary(US $ in millions, except where noted)
Net (Losses) Earnings Summary
(a)
Represents diluted (losses) earnings per share.
Slowing Growth
Forecast @ July 31st Actual
Detroit 3 -18% -23%EU OE -7% -3%Asian OE -1% -8%Total Region -12% -16%
West -4% -9%East 18% 18%Total Region 2% -1%
China 14% 5%India 21% 10%Korea 10% -11%Japan 7% 5%South America 15% 13%
North America
Europe
ROW
P6© TRW Automotive Holdings Corp. 2008
$10,816 $12,182
YTD 2007 YTD 2008
Year-to-Date (9 months) Sales Summary
YTD 2008
GAAP GAAP Adjusted(a)
Net Earnings 167$ 34$ 189$
Earnings Per Share(b) 1.63$ 0.33$ 1.84$
YTD 2007
12.6% Growth
Sales Summary
Year-to-Date Vehicle Production (% changes based on year-over-year comparisons and CSM data)
Financial Summary(US $ in millions, except where noted)
North America 6.4%Europe 13.0%ROW 26.8%
Net Earnings Summary
(a)
Excludes $155 million of debt retirement charges. For adjusted results reconciliation to GAAP, please see slide P18.(b)
Represents diluted earnings per share.
Slowing Growth
ActualDetroit 3 -19%EU OE -1%Asian OE -5%Total Region -13%
West -4%East 19%Total Region 3%
China 11%India 14%Korea -3%Japan 5%South America 18%
North America
Europe
ROW
P7© TRW Automotive Holdings Corp. 2008
Strategic Priorities – Global Reach
•
Renault Megane: Rear Brake Calipers, Electric Park Brake, Electric Park Brake Switch, Electric Power Steering Mechanical Gear, Lower Ball Joint, Actuation.
•
Opel Insignia: Front and Rear Brake Calipers, Electronic Stability Control, Inner Ball Joint, Outer Tie Rod, Upper Ball Joint, Main Light Switch, Instrument Panel Switches, Electrical Sun Roof Switches, Multi-
functional Controller, Window Lifter Function, and Mirror Adjuster.
•
Ford Ka: Driver-Curtain-Side Airbags, Steering Wheel, Actuation, Electric Power Steering Mechanical Gear.
Renault Megane
Opel Insignia
Ford Ka
Successfully launched 133 programs during Q3…
Participating in the shift to more fuel efficient cars with increased safety content.
P8© TRW Automotive Holdings Corp. 2008
Strategic Priorities – Innovative Technologies
•
Electrically Powered Hydraulic Steering (EPHS):–
System for light commercial vehicles highlighted at the IIA Truck Technical Showcase in Hanover, Germany.
–
Recently launched on Citroen’s Berlingo
and Peugeot’s Partner vans.–
The steering system offers fuel savings and reduced CO2 emissions.
•
Slip Control Boost 2 Brake Technology:–
The technology is ideal for regenerative and low vacuum powertrain
vehicles.
–
Replaces traditional boosters, master cylinders and vacuum pumps
with a 25% smaller and lighter electro-hydraulic control unit.
•
Active Buckle Lifter:–
The product is designed to make fastening seat belts easier. In
particular, the feature is intended to assist the elderly and people with mobility challenges.
PIC
PIC
PIC
P9© TRW Automotive Holdings Corp. 2008
Strategic Priorities – Lowest Cost
During 2008, we have continued to address and reduce our cost structure:
Facility Closures
•
Bergheim, Austria –
Seat Belt plant
•
St. Louis, Missouri –
Module plant
Personnel Actions – North America
•
Salary positions reduced by 18% or ≈
1,200 heads.
•
Hourly labor positions reduced by ≈
2,700 heads.
In addition to direct restructuring actions, Six Sigma and Business Excellence programs ensure efficiencies are incorporated into our
day-to-day operations.
$95
$51
$13 $32
Q3 2007 Q3 2008 FY 2007 FY 2008Estimate
Cash Non Cash
Restructuring and Asset Impairment ChargesUS $ in millions
P10© TRW Automotive Holdings Corp. 2008
$170
Q1 08 Q2 08 Q3 08 Q4 08 FY 08
Commodity Inflation
•
During the third quarter, commodity inflation was $60 million higher compared with the same period last year.
•
Raising the 2008 full year impact to approximately $170 million.
•
TRW continues to aggressively act to mitigate the inflation:
–
Design, material and sourcing alternatives.
–
Work with suppliers and customers to share cost (pricing).
•
The recent decline of certain quoted commodity spot rates and the strengthening dollar are providing some hope commodity prices will level off or decrease.
•
Time lag will exist with falling prices.
Estimated Commodity Inflation Impact for 2008
US $ in millions
Greater Impact on
2nd Half Results
P11© TRW Automotive Holdings Corp. 2008
10.8 10.18.0
5.0 5.2 5.65.5 5.2
7.79.5
2005 2006 2007 2008EOLD
2008ENEW
Detroit 3 Transplants
15.9 14.8
4.1 4.9 5.8 6.6 6.7
15.5 15.415.8
2005 2006 2007 2008EOLD
2008ENEW
Western Eastern
10.0 10.6 10.8 11.0 11.0
4.8 5.7 6.9 7.8 7.73.6
3.8 4.0 4.0 3.83.94.0
4.6 5.4 5.2
2005 2006 2007 2008EOLD
2008ENEW
Japan China Korea South Asia
2008 Operating Environment
•
Forecast for North American production lowered to 12.9 million units –
down 15% compared with last year.
•
Within the 12.9 million units, light truck production is forecasted to be down 24% compared with last year.
•
European production lowered to 21.5 million units. Western Europe is forecasted to decline to 14.8 million units, or 6%, compared with last year.
•
Shift from large and mid-sized cars to smaller cars in Europe is expected to continue.
•
Sales and production in the high growth regions of the world are starting to slow.
(1) Source: Light vehicle assumptions primarily CSM Worldwide and internal company estimates.
South America
North America
Asia
Europe21.720.419.915.115.315.8
13.521.5
2008 Industry Production Assumptions(1)
(units in millions)
2.8 3.0 3.6 4.04.1
2005 2006 2007 2008EOLD
2008ENEW
12.9
22.0
P12© TRW Automotive Holdings Corp. 2008
2008 Full Year Outlook
(a)
Per share amounts based on assumed weighted average diluted shares outstanding of approximately 101.8 million shares.
Sales $15.3 billionNet Earnings per Diluted Share(a) $0.90 to $1.10Restructuring Expenses (pre-tax) $95 millionCapital Spending approx. 3.5% of salesEffective Tax Rate to exceed 50%
TRW remains a strong global franchise that is well diversified with strong technology and leading market positions.
Financial Overview Joseph S. Cantie Executive Vice President
and Chief Financial Officer
P14© TRW Automotive Holdings Corp. 2008
•
Third quarter performance:
―Sales of $3.6 billion, up 2.8% or $97 million from last year.
―Excluding currency and the increase in module revenues, sales declined 8.6% or $299 million.
― Lost contribution margin on the sales decline resulted in lower operating profit.
― Third quarter net loss of $54 million or diluted (losses) per share of ($0.53).
Financial Summary
$164
$3,592$3,495 $232
($299)
Q3 2007 Sales Currency Module Sales Core Sales Q3 2008 Sales
Third Quarter Sales Variance to Prior Year
US $ in millions
TRW’s third quarter results reflect significantly lower production and other factors.
P15© TRW Automotive Holdings Corp. 2008
Rest of World 14.4%
North America
28.7%Europe56.9%
Rest of World 14.0%
North America
30.8%Europe55.2%
Foreign CurrencyProduct Volumes
Modules New ProductsVehicle ProductionCore Products
Customer Pricing
$3,495$3,592
Q3 2007 Q3 2008
Third Quarter Sales Summary
Total SalesUS $ in millions
Q3 YOY Sales Comparison
2.8%
Geographic Sales Mix% of total sales
$1,927
$1,100
$468
$2,136(a)
$1,022
$434
Q3 2007 Q3 2008
ChassisOSSAuto Comp
Q3 2007 Q3 2008
Segment SalesUS $ in millions
(a)
Includes $164 million of increased module sales
P16© TRW Automotive Holdings Corp. 2008
(In millions, except where noted)
GAAP Results
GAAP Results
Sales 3,592$ 3,495$ Operating Income 12 95 Net Interest and Securitization 43 56 Equity in Earnings of Affiliates (2) (5) Minority Interest 2 3 Income Tax Expense 23 18 Effective Tax Rate N/A 44%Net (Losses) Earnings (54)$ 23$ Share Count 101.2 103.3
(Losses) Earnings Per Share(b) (0.53)$ 0.22$
Q3 2008 Q3 2007
(a)
Please refer to slide P24 for management’s rationale for using this metric and slide P25 for a reconciliation to GAAP.(b)
Represents diluted (losses) earnings per share.
Third Quarter Results
$157
$237
Q3 2008 Q3 2007
EBITDA(a)
US $ in millions
P17© TRW Automotive Holdings Corp. 2008
Rest of World 13.6%
North America
29.1%Europe57.3%
Rest of World 12.1%
North America
30.8%Europe57.1%
Foreign CurrencyProduct Volumes
Modules New ProductsVehicle Production
Customer Pricing
$10,816
$12,182
$7,000
$8,000
$9,000
$10,000
$11,000
$12,000
$13,000
YTD 2007 YTD 2008
Year-to-Date (9 months) Sales Summary
Total SalesUS $ in millions
YTD YOY Sales Comparison
12.6%
Geographic Sales Mix% of total sales
$5,865
$3,483
$1,468
$7,034
$3,631
$1,517
YTD 2007 YTD 2008
ChassisOSSAuto Comp
YTD 2007 YTD 2008
Segment SalesUS $ in millions
P18© TRW Automotive Holdings Corp. 2008
(a)
$155 million loss on retirement of debt related to the Company’s 2007 debt recapitalization.(b)
Represents diluted earnings per share.(c
)
Please refer to slide P24 for management’s rationale for using this metric and slide P26 for a reconciliation to GAAP.
Year-to-Date (9 months) Results
(In millions, except where noted)
GAAP Results
GAAP Results
Adjusting Item
Adjusted Results
Sales 12,182$ 10,816$ -$ 10,816$ Operating Income 424 475 - 475 Net Interest and Securitization 136 177 - 177 Loss on Retirement of Debt - 155 (155) (a) - Equity in Earnings of Affiliates (17) (20) - (20) Minority Interest 12 13 - 13 Income Tax Expense 126 116 - 116 Effective Tax Rate 43% 77% 38%Net Earnings 167$ 34$ (155)$ 189$ Share Count 102.2 102.8 102.8
Earnings Per Share(b) 1.63$ 0.33$ 1.84$
Year-to-Date 2008 Year-to-Date 2007
$874$890
YTD 2008 YTD 2007
EBITDA(c)
US $ in millions
P19© TRW Automotive Holdings Corp. 2008
Capital Structure Summary
Variance
Q3 2008 Q3 2007Increase/
(Decrease)First Half
2008Year End
2007Total Cash & Marketable Securities 511$ 486$ 25$ 453$ 899$
Total Debt 3,243 3,515 (272) 3,122 3,244 Total Equity 3,291 2,588 703 3,572 3,192 Total Capital 6,534$ 6,103$ 431$ 6,694$ 6,436$
Total Debt / Capital Ratio 50% 58% (8 pts.) 47% 50%Net Debt(a) 2,732$ 3,029$ (297)$ 2,669$ 2,345$ (a) Total debt less total cash & marketable securities. For net debt reconciled to the closest GAAP equivalent, please refer to slide P27.
Period-End BalancesMemo:
$97$119 $120 $109 $121 $111
$338 $339
Q1 Q2 Q3 Year-to-Date
20082007
Operating Cash FlowUS $ in millions
Capital ExpendituresUS $ in millions
Capital StructureUS $ in millions
2008 2007First Half
GAAP Operating Cash Flow (75)$ 69$ A/R Securitization Proceeds - (127)
Adjusted Operating Cash Flow (75)$ (58)$
Third QuarterGAAP Operating Cash Flow 79$ (158)$ A/R Securitization Repayment - 127
Adjusted Operating Cash Flow 79$ (31)$
Year-to-DateGAAP Operating Cash Flow 4$ (89)$ A/R Securitization (no balance) - -
GAAP Operating Cash Flow 4$ (89)$
P20© TRW Automotive Holdings Corp. 2008
Strong Liquidity
Approx.$1,500
$830
$330
$511
Total Liquidity Revolver A/R Facilities Cash
Committed Liquidity Facilities Available Liquidity(as of September 26, 2008 --
US dollar equivalents in millions)
Capital StructureUS $ in millions
•
Credit Facilities–
$1.4 billion revolving credit facility through May 2012
•
Accounts Receivable FacilitiesUnited States Facility–
$209 million facility through December 2009
Other Facilities–
€155 million of facilities –
renewable annually
–
£25 million
facility –
renewable annually
Required In compliance
Maximum Leverage 4.00x Yes
Minimum Interest Coverage 2.75x Yes
Key Credit Facility Financial Covenants(as of September 26, 2008)
P21© TRW Automotive Holdings Corp. 2008
$2,560 $2,443 $2,345$3,029
$2,732
Dec 31, 2005 Dec 31, 2006 Dec 31, 2007 Sep 28, 2007 Sep 26, 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 P27.
Dalphimetal acquisition increased net debt
by $244 million
Net Debt (a)
US $ in millions Debt transactions added $57 million in
2006 and $145 million in 2007
Net debt outstanding down $297 million compared to prior year third quarter
$(297)
P22© TRW Automotive Holdings Corp. 2008
Outlook Discussion
Full Year 2008•
Full year sales of approximately $15.3 billion. –
Fourth quarter sales of approximately $3.1 billion.–
Lower production levels, increased restructuring costs and currency movement.•
Earnings per share to be in the range of $0.90 to $1.10.•
Pre-tax restructuring expenses raised to approximately $95 million.–
Fourth quarter restructuring and asset impairment charges of approximately $30 million.
–
The Company is evaluating additional actions not included in the
above guidance.•
Capital spending will remain at approximately 3.5% of sales. •
Effective tax rate for the full year is expected to exceed 50%.
The challenges we faced over the past three months are expected to continue into the fourth quarter of 2008.
Financial Reconciliations
P24© TRW Automotive Holdings Corp. 2008
EBITDA Measurement
The accompanying unaudited consolidated financial information and reconciliation of GAAP net earnings (losses) 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 Holdings Corp. Form 10-K for the year ended December 31, 2007, and Form 10-Q for each of the quarters ended March 28, and June 27, 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 the operating performance of the Company and its business segments. Management believes that investors will likewise find EBITDA useful in evaluating such performance. EBITDA 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.
P25© TRW Automotive Holdings Corp. 2008
Third Quarter EBITDA
(US $ in millions)
Q3 2008 Q3 2007GAAP Net (Losses) Earnings (54)$ 23$ Income Tax Expense 23 18 Net Interest 43 54 Accounts Receivable Securitization Costs - 2 Depreciation & Amortization 145 140 EBITDA 157$ 237$
Memo:Restructuring & AssetImpairments Included in EBITDA 32$ 13$
P26© TRW Automotive Holdings Corp. 2008
Year-to-Date (9 months) 2008 EBITDA
(US $ in millions)
Year-to-Date 2008
Year-to-Date 2007
GAAP Net Earnings 167$ 34$ Income Tax Expense 126 116 Net Interest 134 173 Loss on Retirement of Debt - 155 Accounts Receivable Securitization Costs 2 4 Depreciation & Amortization 445 408 EBITDA 874$ 890$
Memo:Restructuring & AssetImpairments Included in EBITDA 64$ 32$
P27© TRW Automotive Holdings Corp. 2008
Net Debt Reconciliation
(US $ in millions)12/31/05 12/31/06 12/31/07 9/28/07 9/26/08
Cash 659$ 578$ 895$ 473$ 511$ Marketable securities 17 11 4 13 -
Total cash and marketable securities 676 589 899 486 511
Short term debt 98 69 64 161 72 Term loan facilities 1,593 1,582 1,098 1,100 1,095 Revolving credit facilities - - 429 638 479 Senior & senior subordinated notes due 2013 1,255 1,284 19 18 - Senior notes due 2014 and 2017 - - 1,505 1,489 1,492 Lucas Varity senior notes 181 - - - - Other borrowings 109 97 129 109 105
Total debt 3,236 3,032 3,244 3,515 3,243 Net debt 2,560$ 2,443$ 2,345$ 3,029$ 2,732$
Period-End Balances