TRW Automotive Reports Fourth-Quarter and Full-Year 2003 Financial Results; Provides 2004 Guidance
LIVONIA, Mich., Feb. 17, 2004 -- TRW Automotive Holdings Corp. today reported financial results for the fourth quarter and full year ended December 31, 2003. TRW Automotive Holdings Corp. (the "Company"), the parent company of TRW Automotive Inc., completed its initial public offering ("IPO") of approximately 24.1 million shares of common stock on February 6, 2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20010824/TRWLOGO ) Fourth-Quarter 2003
The Company reported fourth-quarter 2003 sales of nearly $3.0 billion, up $308 million or 11.5% compared to predecessor combined sales of nearly $2.7 billion in fourth-quarter 2002. The Company also reported $139 million of operating income, an increase of $36 million from the prior year quarter, and a consolidated net loss of $1 million or 1 cent per share compared to a predecessor combined net loss of $33 million in the prior year quarter.
On February 28, 2003, affiliates of The Blackstone Group L.P. acquired the former TRW Inc.'s automotive business from Northrop Grumman Corporation. As a result, certain consolidated and combined financial information contained within this release (labeled as pro forma) have been adjusted to illustrate the estimated pro forma effects of such acquisition and a subsequent July 2003 debt refinancing, as if these transactions had occurred on January 1, 2002.
Sales for fourth-quarter 2003 totaled nearly $3.0 billion, up $371 million or 14% compared to pro forma fourth-quarter 2002. Operating income for the quarter was $139 million, an increase of $22 million from the prior year pro forma operating income. This increase reflects a number of factors, including a $66 million decline in net pension and OPEB income due primarily to the application of purchase accounting, a $59 million reduction in restructuring and other unusual charges, and $17 million of unrealized currency gains on debt instruments recognized in the fourth quarter of 2003. Excluding these factors, operating income improved by $12 million. The Company's fourth- quarter 2003 consolidated net loss of $1 million or 1 cent per share compares to a pro forma consolidated net loss of $7 million or 8 cents per share in fourth-quarter 2002.
Earnings before interest, taxes, depreciation, amortization, unrealized currency gains on debt instruments, and net pension and OPEB expense (EBITDAP) for fourth-quarter 2003 totaled $276 million, an increase of $67 million compared to pro forma fourth-quarter 2002. The Company incurred restructuring and other unusual charges totaling $14 million and $73 million for 2003 and 2002, respectively. Exclusive of these charges, fourth quarter EBITDAP was $290 million, an improvement of $8 million when compared to pro forma fourth- quarter 2002.
"Through its diversified customer base, the Company benefited from new business growth and foreign exchange during 2003," said John C. Plant, president and chief executive officer. "The commitment by our employees to drive down costs and to design and manufacture high-quality products were significant contributors to our 2003 financial performance and will continue to be essential to the Company's future success and overall competitiveness."
Full-Year 2003
For the ten-month period from March 1, 2003 (post acquisition date), through December 31, 2003, the Company reported sales of $9.4 billion, operating income of $340 million, and net losses of $101 million or $1.16 per share. For the two months ended February 28, 2003, the predecessor Company reported sales of $1.9 billion, operating income of $97 million, and net earnings of $31 million.
Pro forma sales for full-year 2003 totaled $11.3 billion, an increase of $924 million or about 9% compared to full-year 2002 pro forma sales. Pro forma operating income for the year was $579 million, a decline of $86 million from the prior year. This decrease reflects a number of factors, including a $224 million decline in net pension and OPEB income due primarily to the application of purchase accounting, a $49 million reduction in restructuring and other unusual charges, and $32 million of unrealized currency gains on debt instruments recognized in 2003. Excluding these factors, operating income improved by $57 million. On a pro forma basis, the Company reported full-year 2003 net earnings of $93 million or $1.03 per share on a fully diluted basis. In comparison, the Company reported pro forma consolidated net earnings of $201 million or $2.32 per share in full-year 2002.
Pro forma EBITDAP for full-year 2003 totaled $1,094 million, an increase of $109 million compared to the prior year period pro forma. The Company incurred restructuring and other unusual charges of $39 million and $88 million for 2003 and 2002, respectively. Excluding these charges, full year pro forma EBITDAP was $1,133 million, an improvement of $60 million when compared to the prior year.
Capital/Liquidity
As of December 31, 2003, the Company had $3,808 million of debt and $844 million of cash and marketable securities. At year-end, net debt (defined as debt less cash and marketable securities) totaled $2,964 million, a decrease of $473 million as compared to the Blackstone acquisition date of February 28, 2003. Cash flow from operations during the fourth quarter, which is generally the company's highest cash generating quarter, amounted to $549 million. Capital expenditures for fourth-quarter and full-year 2003 totaled $197 million and $415 million, respectively.
2004 Outlook
TRW expects full-year 2004 revenue in the range of $11.4 to $11.6 billion and earnings per share in the range of $1.55 to $1.70, excluding charges for debt repayment transactions in conjunction with the IPO and a January 2004 bank debt refinancing. These charges, which at this time have not been finalized, are expected to be significant and will be included in the Company's first quarter results. This range also reflects the impact of interest savings of the IPO as it occurred on February 6, 2004 and assumes an effective tax rate of approximately 45% for 2004.
Further, this guidance includes pre-tax expenses of approximately $33 million for amortization of intangibles (principally customer relationships) and $30 million related to restructuring. Excluding these two items, we expect earnings per share in the range of $2.01 to $2.16.
The Company expects EBITDA in the range of $1,035 to $1,060 million, including approximately $30 million of pre-tax restructuring charges. Excluding the restructuring charges, EBITDA is expected to be in the range of $1,065 to $1,090 million. Additionally, the Company expects capital expenditures for the year to be at, or slightly below, 4% of sales.
For first-quarter 2004, the Company expects revenue of approximately $2.9 billion and earnings per share in the range of $0.40 to $0.48, excluding charges for debt repayment transactions as described previously. Earnings per share, excluding amortization of intangibles and restructuring charges, as discussed above, is estimated to be in the range of $0.54 to $0.62. The Company also expects EBITDA in the range of $260 to $270 million, including approximately $10 million of pre-tax restructuring charges, or $270 to $280 million excluding these charges.
Reconciliation to GAAP
For a reconciliation of the pro forma and non-GAAP historical numbers appearing in this release to GAAP, please see the accompanying schedules or visit the investor information section of our website at www.trwauto.com .
About TRW
With 2003 pro forma sales of $11.3 billion, TRW Automotive ranks among the world's top 10 automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, employs approximately 61,000 people in 22 countries. Its 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. TRW Automotive news is available on the Internet at www.trwauto.com .
Forward-Looking Statements
This release contains statements that are not statements of historical fact, but instead are forward-looking statements. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those contained in forward-looking statements made in this release. Such risks, uncertainties and other important factors which could cause our actual results to differ materially from those contained in our forward-looking statements are set forth in the TRW Automotive Holdings Corp. final prospectus dated as of February 2, 2004 (the "Prospectus") filed with the Securities and Exchange Commission (the "SEC") pursuant to Rule 424(b)(4) and include: our substantial leverage; the highly competitive automotive parts industry and its cyclicality; pricing pressures from our customers; product liability and warranty and recall claims; our dependence on our largest customers; limitations on flexibility in operating our business contained in our debt agreements; increases in interest rates; fluctuations in foreign exchange rates; the possibility that our owners' interests will conflict with ours; work stoppages or other labor issues and other risks and uncertainties set forth under "Risk Factors" in the Prospectus and in our other SEC filings. We do not intend or assume any obligation to update any of these forward- looking statements.
TRW Automotive Holdings Corp.
Index
Actual and Pro Forma Consolidated and Combined
Financial Information
Page
Periods Ended December 31, 2003, February 28, 2003,
and December 31, 2002
Consolidated and Combined Statements of Operations
(unaudited) for the three months ended December 31, 2003
and December 31, 2002 A2
Consolidated and Combined Statements of Operations for
the ten months ended December 31, 2003 (unaudited), the
two months ended February 28, 2003 and the year ended
December 31, 2002 A3
Condensed Consolidated and Combined Balance Sheets -
December 31, 2003 (unaudited) and December 31, 2002 A4
Actual and Pro Forma Consolidated and Combined Statements
of Operations (unaudited) for the three months and years
ended December 31, 2003 and December 31, 2002 A5
Reconciliation of GAAP Net Income to Actual and Pro Forma
EBITDA and EBITDAP (unaudited) for the three months and years
ended December 31, 2003 and December 31, 2002 A7
The accompanying actual and pro forma consolidated and combined financial information and reconciliation of GAAP net income to actual and pro forma EBITDA and EBITDAP should be read in conjunction with the TRW Automotive Holdings Corp. Registration Statement on Form S-1 including the final prospectus dated February 2, 2004 and filed on February 3, 2004, which contains historical consolidated and combined financial statements and the accompanying notes to consolidated and combined financial statements and unaudited pro forma consolidated and combined financial information and accompanying notes to unaudited pro forma consolidated and combined financial information.
The accompanying unaudited pro forma consolidated and combined financial information is intended to give effect to the February 28, 2003 acquisition of the former TRW Inc.'s automotive business by affiliates of The Blackstone Group L.P. from Northrop Grumman Corporation and the July 22, 2003 refinancing of a portion of debt entered into in connection with the acquisition, as if these transactions had occurred on January 1, 2002. The unaudited pro forma consolidated and combined financial information is based upon available information and certain assumptions we believe are reasonable. However, these statements are for informational purposes only and are not intended to represent or be indicative of the consolidated results of operations or financial position that would have been reported had the acquisition been completed as of January 1, 2002, and should not be taken as representative of future consolidated results of operations or financial position.
TRW Automotive Holdings Corp.
Consolidated and Combined Statements of Operations
(unaudited)
Three Months Ended December 31,
Successor Predecessor
(In millions, except per share amounts) 2003 2002
Sales $2,982 $2,674
Cost of sales 2,674 2,369
Gross profit 308 305
Administrative and selling expenses 144 155
Research and development expenses 45 43
Amortization of intangible assets 8 4
Other income - net (28) -
Operating income 139 103
Interest expense 86 106
Interest income (3) (3)
Losses on sales of receivables - 2
Earnings (losses) before income taxes 56 (2)
Income tax expense 57 31
Net losses $(1) $(33)
Basic and diluted losses per share:
Losses per share $(0.01) N/A
Weighted average shares 86.8 N/A
A2
TRW Automotive Holdings Corp.
Consolidated and Combined Statements of Operations
Successor Predecessor
(In millions, except per
share amounts) Ten Months Two Months
Ended Ended Year Ended
December 31, February 28, December 31,
2003 2003 2002
(unaudited)
Sales $9,435 $1,916 $10,630
Cost of sales 8,456 1,686 9,315
Gross profit 979 230 1,315
Administrative and selling
expenses 446 100 541
Research and development expenses 137 27 151
Purchased in-process research and
development 85 - -
Amortization of intangible assets 27 2 15
Other (income) expense - net (56) 4 (6)
Operating income 340 97 614
Interest expense 295 48 316
Interest income (8) (1) (7)
Loss (gain) on retirement of debt 31 - (4)
Losses on sales of receivables 25 - 7
(Losses) earnings before income
taxes (3) 50 302
Income tax expense 98 19 138
Net (losses) earnings $(101) $31 $164
Basic and diluted losses
per share:
Losses per share $(1.16) N/A N/A
Weighted average shares 86.8 N/A N/A
A3
TRW Automotive Holdings Corp.
Consolidated and Combined Balance Sheets
Year ended December 31,
Successor Predecessor
(Dollars in millions) 2003 2002
(unaudited)
Assets
Current assets:
Cash and cash equivalents $828 $188
Marketable securities 16 26
Accounts receivable 1,643 1,348
Inventories 635 608
Prepaid expenses 73 49
Deferred income taxes 120 144
Total current assets 3,315 2,363
Property, plant and equipment - net 2,499 2,558
Goodwill and other intangible assets - net 3,324 2,578
Prepaid pension cost 120 3,048
Deferred income taxes 129 -
Other assets 520 401
$9,907 $10,948
Liabilities, minority interests and
stockholders' investment
Current liabilities:
Short-term debt $76 $327
Current portion of long-term debt 24 17
Trade accounts payable 1,626 1,407
Other current liabilities 1,400 1,004
Total current liabilities 3,126 2,755
Debt allocated from TRW - 3,279
Long-term debt 3,708 302
Post-retirement benefits other than pensions 935 751
Pension benefits 838 427
Deferred income taxes 222 731
Other long-term liabilities 300 231
Total liabilities 9,129 8,476
Minority interests 50 81
Stockholders' investment:
Parent company investment - 2,738
Capital stock (par value $0.01;
100 million shares authorized,
86.9 million issued and
outstanding as of December 31, 2003 1 -
Paid-in-capital 868 -
Accumulated deficit (101) -
Accumulated other comprehensive losses (40) (347)
Total stockholders' investment 728 2,391
$9,907 $10,948
A4
TRW Automotive Holdings Corp.
Actual and Pro Forma Consolidated and Combined Statements of Operations
(unaudited)
Three Months Ended December 31,
(In millions, except per share amounts) Actual Pro forma
2003 2002
Sales $2,982 $2,611
Cost of sales 2,674 2,300
Gross profit 308 311
Administrative and selling expenses 144 144
Research and development expenses 45 43
Amortization of intangible assets 8 9
Other income - net (28) (2)
Operating income 139 117
Interest expense 86 78
Interest income (3) (2)
Losses on sales of receivables - 2
Earnings before income taxes 56 39
Income tax expense 57 46
Net losses $(1) $(7)
Basic and diluted losses per share:
Losses per share $(0.01) $(0.08)
Weighted average shares 86.8 86.8
A5
TRW Automotive Holdings Corp.
Pro Forma Consolidated and Combined Statements of Operations
Year ended December 31,
(In millions, except per share amounts) 2003 2002
Sales $11,308 $10,384
Cost of sales 10,042 9,048
Gross profit 1,266 1,336
Administrative and selling expenses 544 501
Research and development expenses 164 151
Amortization of intangible assets 32 33
Other income - net (53) (14)
Operating income 579 665
Interest expense 327 310
Interest income (8) (6)
Losses on sales of receivables 8 5
Earnings before income taxes 252 356
Income tax expense 159 155
Net earnings $93 $201
Basic earnings per share:
Earnings per share $1.07 $2.32
Weighted average shares 86.8 86.8
Diluted earnings per share:
Earnings per share $1.03 $2.32
Weighted average shares 90.4 86.8
A6
TRW Automotive Holdings Corp.
Reconciliation to Actual and Pro Forma EBITDA and EBITDAP (unaudited)
* The reconciliation schedules that follow should be read in conjunction with the TRW Automotive Holdings Corp. Registration Statement on Form S-1 including the final prospectus dated February 2, 2004 and filed as of February 3, 2004, which contains summary historical and pro forma financial data. The accompanying unaudited pro forma financial information is intended to give effect to the February 28, 2003 acquisition of the former TRW Inc.'s automotive business by affiliates of The Blackstone Group L.P. from Northrop Grumman Corporation and the July 22, 2003 refinancing of a portion of debt entered into in connection with the acquisition, as if these transactions had occurred on January 1, 2002.
* The EBITDA and EBITDAP measures calculated in the schedules are measures used by management to evaluate operating performance. Management believes EBITDA and EBITDAP measures are useful to investors because they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management also believes that the inclusion of supplementary adjustments to EBITDA and EBITDAP are appropriate to provide additional information to investors about certain material cash items and other unusual items that we do not expect to continue at the same level in the future.
* EBITDA and EBITDAP are not recognized terms under GAAP and do not purport to be alternatives to net earnings (losses) as indicators of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, these presentations of EBITDA and EBITDAP may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA and EBITDAP are not intended to be measures of free cash flow for management's discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements, and, in the case of EBITDAP, pensions and other post retirement benefits.
* The adjustments to EBITDA to arrive at EBITDAP may not be in accordance with current Securities and Exchange Commission ("SEC") practice or with regulations adopted by the SEC that apply to registration statements filed under the Securities Act of 1933 and periodic reports filed under the Securities Exchange Act of 1934. Accordingly, the SEC may require that EBITDAP be presented differently in filings made with the SEC than as presented on these schedules or not presented at all.
A7
TRW Automotive Holdings Corp.
Reconciliation to Actual and Pro Forma EBITDA and EBITDAP (unaudited)
Three Months Ended December 31,
(Dollars in millions) Actual Pro Forma
2003 2002
GAAP net losses $(1) $(33)
Income tax expense 57 31
Interest expense, net of interest
income 83 103
Losses on sales of receivables - 2
GAAP operating income 139 103
Pro forma adjustments:
Stand alone costs - 7
Depreciation and amortization - 5
Other - 2
Operating income 139 117
Depreciation and amortization, net of pro
forma adjustments 128 132
Unrealized foreign exchange gain (17) -
EBITDA 250 249
Cash restructuring charges 14 20
Acquisition-related expenses - 23
Other unusual items - 30
EBITDA, excluding unusual items 264 322
EBITDA $250 $249
Net Pension/OPEB expense (income), net of pro
forma adjustments 26 (40)
EBITDAP 276 209
Cash restructuring charges 14 20
Acquisition-related expenses - 23
Other unusual items - 30
EBITDAP, excluding unusual items $290 $282
A8
TRW Automotive Holdings Corp.
Reconciliation to Pro Forma EBITDA and EBITDAP (unaudited)
Year Ended December 31,
(Dollars in millions) 2003 2002
GAAP net (losses) earnings $(70) $164
Income tax expense 117 138
Interest expense, net of interest income 334 309
Loss (gain) on retirement of debt 31 (4)
Losses on sales of receivables 25 7
GAAP operating income 437 614
Pro forma adjustments:
Inventory fair market value adjustment 43 -
Purchased in-process research and
development 85 -
Stand alone costs (1) 28
Depreciation and amortization 4 20
Other 11 3
Pro forma operating income 579 665
Depreciation and amortization, net of pro forma
adjustments 486 483
Unrealized foreign exchange gain (32) -
Pro forma EBITDA 1,033 1,148
Cash restructuring charges 33 27
Acquisition-related expenses 6 23
Other unusual items - 38
Pro forma EBITDA, excluding unusual items 1,072 1,236
Pro forma EBITDA $1,033 $1,148
Net Pension/OPEB expense (income), net of pro
forma adjustments 61 (163)
Pro forma EBITDAP 1,094 985
Cash restructuring charges 33 27
Acquisition-related expenses 6 23
Other unusual items - 38
Pro forma EBITDAP, excluding unusual items $1,133 $1,073
A9
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