TRW Announces Fourth Quarter and 2000 Results
Business EditorsCLEVELAND--Jan. 24, 2001--TRW Inc.
Financial Highlights 2000 1999
-------------------- ---- ----
- Sales
- Fourth Quarter $4.1 billion $4.6 billion
- Full Year $17.2 billion $17.0 billion
- Earnings Per Share,
Excluding Unusual Items
- Fourth Quarter $0.50 per share $1.33 per share
- Full Year $3.78 per share $4.61 per share
- Earnings (Loss) Per Share,
Including Unusual Items
- Fourth Quarter $(0.02) per share $1.81 per share
- Full Year $3.51 per share $3.80 per share
- Net Debt $6.4 billion $8.3 billion
TRW Inc. reported that for the fourth quarter ended December 31, 2000, net earnings excluding unusual items were $60.9 million, compared with $164.8 million last year. The related earnings per share were $0.50, compared with $1.33 per share a year ago. Fourth quarter 2000 sales were $4.1 billion, compared with $4.6 billion in the fourth quarter of 1999.
Reductions in North American light-vehicle and heavy-truck production schedules, a change in mix of major space-related programs, increased investments relating to initiatives focused on commercializing defense technologies, the strength of the U.S. dollar, and previously disclosed product recall issues were the primary reasons for the decline in fourth quarter profitability. Sales decreased primarily as a result of business dispositions, the strength of the U.S. dollar, automotive price reductions, the decline in North American light-vehicle and heavy-truck production schedules, partially offset by sales from automotive product introductions and growth in the defense systems integration business.
For the year 2000, net earnings excluding unusual items were $471.2 million compared with $568.4 million in 1999. The related earnings per share were $3.78 compared with $4.61 per share a year ago, while sales for 2000 increased to $17.2 billion compared with $17.0 billion in 1999.
"While the fourth quarter became more challenging than anticipated, results were consistent with the revised expectations we announced in December," said Joseph T. Gorman, chairman and chief executive officer. "The precipitous fourth quarter decline in North American light-vehicle production, coupled with global economic conditions, had an adverse effect on our earnings and sales. To mitigate the future impact of these challenging market conditions, we have initiated capital investment and fixed costs reduction programs, made numerous workforce adjustments, accelerated actions to divest noncore assets, and accelerated initiatives to implement lean manufacturing techniques throughout our global operations.
"In spite of the challenges we face, I remain pleased with our cash flow, an area of continued strength, and the progress we have made to reduce debt, both of which will continue to receive management's priority attention," Gorman said. "In the fourth quarter, TRW reduced net debt by approximately $200 million, bringing the total net debt reduction for the year to $1.9 billion."
Including unusual items, a net loss of $2.7 million, or $0.02 per share, was reported in the fourth quarter of 2000, compared with net earnings of $223.9 million, or $1.81 per share, in 1999. In the fourth quarter 2000, net after-tax charges totaling $63.6 million, or $0.52 per share, included $50.9 million relating to impairment of assets and automotive restructuring actions; $23.4 million to reserve for pending litigation; and $17.4 million primarily relating to the write-down of a technology investment. These charges were partially offset by after-tax noncash gains of $14.2 million relating to the initial public offering of Endwave Corporation; an $11.5 million unrealized gain on foreign currency hedges; and $2.4 million relating to the valuation of RF Micro Devices (RFMD) warrants. Fourth quarter 1999 net earnings included unusual items that resulted in after-tax net earnings of $59.1 million, or $0.48 per share.
Including unusual items, net earnings were $438.1 million in 2000, or $3.51 per share, compared with $468.8 million, or $3.80 per share, in 1999. For the year 2000, unusual items resulting in net after-tax charges of $33.1 million, or $0.27 per share, included charges of $118.1 million for impairments of assets and automotive restructuring actions; $72.1 million for warranty, claims, and litigation; and $33.9 million of unrealized losses on foreign currency hedges. The charges were partially offset by $153.2 million of gains on asset sales, primarily the sale of RFMD shares; and $37.7 million of net gains relating to the formation and public offering of Endwave Corporation. For the year 1999, unusual items resulted in net after-tax charges of $99.6 million, or $0.81 per share.
Automotive operations
Fourth quarter sales in TRW's automotive business declined 18 percent to $2.6 billion, compared with $3.1 billion in the fourth quarter of 1999. This was due primarily to the disposal of several businesses, including the Lucas Diesel Systems business sold in January of 2000, and the effect of the strong U.S. dollar. Adjusting for those factors, fourth quarter sales declined 3 percent compared with the prior year, as the effect of price reductions and lower North American industry volumes were only partially offset by increased sales from product introductions.
Total automotive profit before unusual items for the fourth quarter of 2000 declined to $101.8 million, compared with $230.1 million in the fourth quarter of 1999. The decline in profit of $128.3 million included approximately $16 million relating to the negative impact of the strong U.S. dollar; $23 million due to business disposals, and approximately $27 million to previously announced product recall actions and the establishment of reserves for receivables from a customer that has filed for bankruptcy protection. The remaining profit decline was primarily due to the decline in North American light-vehicle and heavy-truck production schedules, the effect of continuing price reductions, and costs associated with new product offerings, partially offset by benefits from the company's cost-reduction programs.
For the year 2000, sales in TRW's automotive business were $11.0 billion, compared with $11.3 billion in 1999. The decline was due primarily to the effect of the strong U.S. dollar and price reductions partially offset by higher volume and the net effect of the LucasVarity acquisition, less business disposals in the year. Segment profit before unusual items for the year 2000 was $720.3 million, compared with $815.1 million in 1999. This decline was primarily due to price reductions, the negative impact of the strong U.S. dollar, costs associated with the introduction of new products, and product recalls. These factors were partially offset by cost reductions and the net effect of the LucasVarity acquisition, less business disposals in the year.
David M. Cote, president and chief operating officer, said, "The rapid downshift of the U.S. light-vehicle market in the fourth quarter clearly impacted the industry as a whole. In spite of the government's action in January of this year to lower interest rates, forecasts for first quarter light-vehicle production offer no near-term relief. We have controlled our fixed costs during the year, and will continue efforts to reduce costs even further throughout 2001. To strengthen our position going forward, TRW will continue to focus its automotive business by selling noncore operations, as we did in 2000 with the sale of the actuation and man-machine interface businesses."
Aerospace and Information Systems
In TRW's aerospace and information systems business, fourth quarter sales were $1.6 billion, compared with $1.5 billion in the prior year. Excluding the negative currency translation effect in the aeronautical systems business, sales increased 7 percent. This increase was driven by the growth in the company's missile defense systems business and other defense programs.
Total aerospace and information systems fourth quarter profit before unusual items declined to $128.1 million, compared with $159.0 million reported in the fourth quarter 1999. The decline in profit was driven primarily by the change in mix of major programs in the space and electronics business from maturing to early-phase programs, increased investments relating to initiatives focused on commercializing defense technologies, and the effect of the strong U.S. dollar, partially offset by the increase in profitability from the systems and information technology business. TRW's share of losses from technology companies partially owned and from Cutting Edge Optronics, which was acquired in the fourth quarter, was approximately $11 million, most of which was noncash.
For the year 2000, sales in the aerospace and information systems business increased 11 percent to $6.2 billion from $5.6 billion in 1999, due to increased sales to the civil federal information technology marketplace, primarily related to the U.S. Census program, growth in the company's missile defense systems and commercial satellite businesses, and the acquisition of LucasVarity. The increase was partially offset by the negative currency translation effect due to the strength of the U.S. dollar. Segment profit before tax and unusual items for 2000 was $528.4 million, compared with $551.2 million in 1999. The overall decline in profitability resulted from the change in mix of major programs in the space and electronics business from maturing to early-phase programs, increased investments relating to initiatives focused on commercializing defense technologies, and the effect of currency translation, partially offset by growth in the systems and information technology business and the acquisition of LucasVarity.
"Our information technology business produced solid financial results during the quarter due to strong program performance and outstanding customer satisfaction," Cote said. "We helped the U.S. Census Bureau capture data from over 140 million forms; helped to successfully consolidate police, fire, and ambulance emergency services into one call center for the city of San Francisco; and trained nearly 10,000 U.S. Army soldiers to use our battlefield digitization systems, which were used by selected U.S. forces in the Balkans. In another example of commercializing TRW technology, we launched Picture PipeLine LLC, a media management service company which will provide the entertainment industry with a secure, broadband conduit for the transfer of film dailies from remote locations.
"TRW was awarded a multi-year contract by Saab Aircraft of America to participate in its Aircraft Parts Exchange Program, servicing the Saab 340 and Saab 2000 aircraft generating systems. TRW also was awarded a contract by the U.S. Navy to retrofit F/A-18 C/D aircraft with a newly designed power transmission shaft," Cote said. "Our technology investments continue to show promise, and we are increasing our efforts to develop newer state-of-the-art technologies. We recently developed a new family of high-frequency, indium phosphide integrated circuits with NASA's Jet Propulsion Laboratory that promises significant performance improvement for next-generation space communications and remote sensing applications."
TRW STATISTICAL SUMMARY (UNAUDITED)
(Dollar Amounts in Millions Except for Per Share Data)
FOURTH QUARTER 2000
-----------------------------------------------
Margin Unusual Margin
Operations % Items Total %
----------------------------------------------------------------------
Sales
Occupant Safety
Systems $ 676.4 $ 676.4
Chassis Systems 1,340.7 1,340.7
Automotive Electronics 377.0 377.0
Other Automotive 174.5 174.5
----------------------------------------------------------------------
Total Automotive 2,568.6 2,568.6
Space & Electronics 464.4 464.4
Systems & Information
Technology 805.0 805.0
Aeronautical Systems 298.7 298.7
----------------------------------------------------------------------
Total Aerospace
& Information Systems 1,568.1 1,568.1
----------------------------------------------------------------------
Sales $4,136.7 $4,136.7
----------------------------------------------------------------------
Profit Before Taxes
Occupant Safety
Systems $ 7.5 1.1% $ (2.8) $ 4.7 0.7%
Chassis Systems 75.9 5.7% (44.6) 31.3 2.3%
Automotive Electronics 19.4 5.1% (1.3) 18.1 4.8%
Other Automotive (1.0) (0.6)% (22.5) (23.5) (13.5)%
----------------------------------------------------------------------
Total Automotive 101.8 4.0% (71.2) 30.6 1.2%
Space & Electronics 23.0 5.0% 25.5 48.5 10.4%
Systems & Information
Technology 54.7 6.8% (26.9) 27.8 3.5%
Aeronautical Systems 50.4 16.9% - 50.4 16.9%
----------------------------------------------------------------------
Total Aerospace &
Information Systems 128.1 8.2% (1.4) 126.7 8.1%
Profit Before Taxes 229.9 5.6% (72.6) 157.3 3.8%
Corporate Expense
and Other (53.6) (22.4) (76.0)
Financing Costs (134.4) - (134.4)
Pension Income 53.2 - 53.2
In-process Research
and Development - - -
----------------------------------------------------------------------
Earnings(Loss)
Before Income Taxes $ 95.1 2.3% $ (95.0) $ 0.1 0.0%
Income Taxes 34.2 (31.4) 2.8
----------------------------------------------------------------------
Net Earnings(Loss) $ 60.9 1.5% $ (63.6) $ (2.7) (0.1)%
----------------------------------------------------------------------
Diluted earnings(loss)
per share $ 0.50 $ (0.52) $ (0.02)
Basic earnings(loss)
per share $ 0.50 $ (0.52) $ (0.02)
Dividends paid
per common share $ 0.35
Common stock
outstanding 124.3
Shares used in
computing per
share amounts
Diluted 123.5
Basic 123.5
TRW STATISTICAL SUMMARY (UNAUDITED)
(Dollar Amounts in Millions Except for Per Share Data)
FOURTH QUARTER 1999
-----------------------------------------------
Margin Unusual Margin
Operations % Items Total %
----------------------------------------------------------------------
Sales
Occupant Safety
Systems $ 741.4 $ 741.4
Chassis Systems 1,488.6 1,488.6
Automotive Electronics 444.9 444.9
Other Automotive 459.8 459.8
----------------------------------------------------------------------
Total Automotive 3,134.7 3,134.7
Space & Electronics 457.5 457.5
Systems & Information
Technology 713.3 713.3
Aeronautical Systems 319.8 319.8
----------------------------------------------------------------------
Total Aerospace
& Information Systems 1,490.6 1,490.6
----------------------------------------------------------------------
Sales $4,625.3 $4,625.3
----------------------------------------------------------------------
Profit Before Taxes
Occupant Safety Systems $ 48.2 6.5% $ 0.3 $ 48.5 6.5%
Chassis Systems 111.3 7.5% (7.1) 104.2 7.0%
Automotive Electronics 38.3 8.6% (2.4) 35.9 8.1%
Other Automotive 32.3 7.0% (2.3) 30.0 6.5%
----------------------------------------------------------------------
Total Automotive 230.1 7.3% (11.5) 218.6 7.0%
Space & Electronics 55.6 12.2% 205.9 261.5 57.2%
Systems & Information
Technology 44.9 6.3% (71.8) (26.9) (3.8)%
Aeronautical Systems 58.5 18.3% - 58.5 18.3%
----------------------------------------------------------------------
Total Aerospace &
Information Systems 159.0 10.7% 134.1 293.1 19.7%
Profit Before Taxes 389.1 8.4% 122.6 511.7 11.1%
Corporate Expense
and Other (45.2) (12.6) (57.8)
Financing Costs (144.5) (17.1) (161.6)
Pension Income 60.3 - 60.3
In-process Research
and Development - - -
----------------------------------------------------------------------
Earnings(Loss)
Before Income Taxes $ 259.7 5.6% $ 92.9 $ 352.6 7.6%
Income Taxes 94.9 33.8 128.7
----------------------------------------------------------------------
Net Earnings(Loss) $ 164.8 3.6% $ 59.1 $ 223.9 4.8%
----------------------------------------------------------------------
Diluted earnings(loss)
per share $ 1.33 $ 0.48 $ 1.81
Basic earnings(loss)
per share $ 1.35 $ 0.49 $ 1.84
Dividends paid
per common share $ 0.33
Common stock
outstanding 122.0
Shares used in
computing per
share amounts
Diluted 123.8
Basic 121.7
TRW STATISTICAL SUMMARY
(Dollar Amounts in Millions Except for Per Share Data)
TWELVE MONTHS ENDED 2000
-----------------------------------------------
Margin Unusual Margin
Operations % Items Total %
----------------------------------------------------------------------
Sales
Occupant Safety
Systems $ 2,803.2 $ 2,803.2
Chassis Systems 5,681.0 5,681.0
Automotive Electronics 1,663.9 1,663.9
Other Automotive 845.7 845.7
----------------------------------------------------------------------
Total Automotive 10,993.8 10,993.8
Space & Electronics 1,880.5 1,880.5
Systems & Information
Technology 3,251.8 3,251.8
Aeronautical Systems 1,105.0 1,105.0
----------------------------------------------------------------------
Total Aerospace
& Information Systems 6,237.3 6,237.3
----------------------------------------------------------------------
Sales $17,231.1 $17,231.1
Profit Before Taxes
Occupant Safety
Systems $ 160.2 5.7% $(101.1) $ 59.1 2.1%
Chassis Systems 387.1 6.8% (97.6) 289.5 5.1%
Automotive Electronics 110.9 6.7% (16.8) 94.1 5.7%
Other Automotive 62.1 7.3% 3.2 65.3 7.7%
----------------------------------------------------------------------
Total Automotive 720.3 6.6% (212.3) 508.0 4.6%
Space & Electronics 163.6 8.7% 295.4 459.0 24.4%
Systems & Information
Technology 213.3 6.6% (4.2) 209.1 6.4%
Aeronautical Systems 151.5 13.7% - 151.5 13.7%
----------------------------------------------------------------------
Total Aerospace &
Information Systems 528.4 8.5% 291.2 819.6 13.1%
Profit Before Taxes 1,248.7 7.2% 78.9 1,327.6 7.7%
Corporate Expense
and Other (202.4) (92.2) (294.6)
Financing Costs (530.7) (0.7) (531.4)
Pension Income 216.5 - 216.5
In-process Research
and Development - (11.7) (11.7)
----------------------------------------------------------------------
Earnings(Loss)
Before Income Taxes $ 732.1 4.2% $ (25.7) $ 706.4 4.1%
Income Taxes 260.9 7.4 268.3
----------------------------------------------------------------------
Net Earnings(Loss) $ 471.2 2.7% $ (33.1) $ 438.1 2.5%
----------------------------------------------------------------------
Diluted earnings(loss)
per share $ 3.78 $ (0.27) $ 3.51
Basic earnings(loss)
per share $ 3.82 $ (0.27) $ 3.55
Dividends paid
per common share $ 1.34
Common stock
outstanding 124.3
Shares used in
computing per
share amounts
Diluted 124.9
Basic 123.1
TRW STATISTICAL SUMMARY
(Dollar Amounts in Millions Except for Per Share Data)
TWELVE MONTHS ENDED 1999
-----------------------------------------------
Margin Unusual Margin
Operations % Items Total %
----------------------------------------------------------------------
Sales
Occupant Safety
Systems $ 3,009.2 $ 3,009.2
Chassis Systems 5,077.1 5,077.1
Automotive Electronics 1,631.7 1,631.7
Other Automotive 1,611.7 1,611.7
----------------------------------------------------------------------
Total Automotive 11,329.7 11,329.7
Space & Electronics 1,869.6 1,869.6
Systems & Information
Technology 2,868.5 2,868.5
Aeronautical Systems 901.6 901.6
----------------------------------------------------------------------
Total Aerospace
& Information Systems 5,639.7 5,639.7
----------------------------------------------------------------------
Sales $16,969.4 $16,969.4
Profit Before Taxes
Occupant Safety
Systems $ 196.4 6.5% $ (9.5) $ 186.9 6.2%
Chassis Systems 374.8 7.4% (75.5) 299.3 5.9%
Automotive Electronics 127.7 7.8% (13.8) 113.9 7.0%
Other Automotive 116.2 7.2% (1.7) 114.5 7.1%
----------------------------------------------------------------------
Total Automotive 815.1 7.2% (100.5) 714.6 6.3%
Space & Electronics 243.8 13.0% 256.3 500.1 26.7%
Systems & Information
Technology 184.1 6.4% (98.5) 85.6 3.0%
Aeronautical Systems 123.3 13.7% - 123.3 13.7%
----------------------------------------------------------------------
Total Aerospace &
Information Systems 551.2 9.8% 157.8 709.0 12.6%
Profit Before Taxes 1,366.3 8.1% 57.3 1,423.6 8.4%
Corporate Expense
and Other (175.0) (24.4) (199.4)
Financing Costs (478.9) (52.5) (531.4)
Pension Income 176.3 3.5 179.8
In-process Research
and Development - (85.3) (85.3)
----------------------------------------------------------------------
Earnings(Loss)
Before Income Taxes $ 888.7 5.2% $(101.4) $ 787.3 4.6%
Income Taxes 320.3 (1.8) 318.5
----------------------------------------------------------------------
Net Earnings(Loss) $ 568.4 3.3% $ (99.6) $ 468.8 2.8%
----------------------------------------------------------------------
Diluted earnings(loss)
per share $ 4.61 $ (0.81) $ 3.80
Basic earnings(loss)
per share $ 4.69 $ (0.82) $ 3.87
Dividends paid
per common share $ 1.32
Common stock
outstanding 122.0
Shares used in
computing per
share amounts
Diluted 123.5
Basic 121.0
TRW STATISTICAL SUMMARY
(Dollar Amounts in Millions)
SELECTED CASH FLOW ITEMS Twelve Months Ended
December 31, 2000 December 31, 1999
----------------- -----------------
Net earnings $ 438 $ 469
Gains on sale of nonoperating assets (343) (360)
Asset impairment charges 96 153
Depreciation and amortization 794 850
Pension income (249) (192)
Deferred income taxes 49 233
Operating working capital 342 201
Capital expenditures including other
intangibles (742) (865)
Acquisitions, net of cash acquired (3) (6,095)
Net proceeds from divestitures 1,557 432
Net (decrease)increase in debt (1,806) 5,455
Dividends paid (167) (160)
Purchased in-process research and
development 12 85
SUMMARY BALANCE SHEETS
December 31, 2000 December 31, 1999
----------------- -----------------
ASSETS
Cash and cash equivalents $ 267 $ 228
Accounts receivable 2,328 2,480
Inventories 870 1,039
Net assets of acquired businesses
held for sale - 827
Other current assets 502 625
---------- ----------
Total current assets 3,967 5,199
Property, plant & equipment–net 3,587 3,894
Intangible assets–net 4,123 4,331
Investments in affiliated companies 1,040 1,185
Other notes and accounts receivable 283 257
Prepaid pension cost 2,902 2,876
Other assets 565 524
---------- ----------
Total assets $ 16,467 $ 18,266
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS’
INVESTMENT
Short-term debt $ 1,450 $ 2,444
Trade accounts payable 1,795 1,638
Current portion of long-term debt 489 758
Other current liabilities 2,126 1,889
---------- ----------
Total current liabilities 5,860 6,729
Long-term liabilities 2,038 1,991
Long-term debt 4,765 5,369
Deferred income taxes 1,030 1,352
Minority interests in subsidiaries 123 113
Total shareholders’ investment 2,651 2,712
---------- ----------
Total liabilities and
shareholders’ investment $ 16,467 $ 18,266
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