TRW Reports Fourth Quarter, Year-End Results
20 January 1999
TRW Reports Fourth Quarter, Year-End Results; Quarter Sales Increase 5 Percent, Segment Profit up 7 Percent
CLEVELAND--Jan. 20, 1999--TRW Inc. today reported that fourth quarter sales increased 5 percent to $2.9 billion, compared with $2.8 billion in 1997. Total 1998 sales grew 10 percent to $11.9 billion, compared with $10.8 billion in 1997.TRW reported 1998 fourth quarter net earnings of $117.4 million, or $.96 per share. Included in the quarter is a $16.3 million after tax, or $.13 per share, benefit from an interest accrual adjustment relating to a tax litigation settlement, and a $10.3 million after tax charge, or $.08 per share, for the previously announced automotive restructuring. Excluding the automotive restructuring charge, segment profit before tax for the fourth quarter 1998 increased 7 percent to $254.9 million. This compares with a net loss of $410.8 million, or a loss of $3.34 per share, in the fourth quarter of 1997, which included a $547.9 million one-time noncash acquisition charge related to in-process research and development associated with TRW's acquisition of BDM International Inc., and an after tax gain of $9.7 million, or $.08 per share, for the sale of property.
Earnings for the year were $476.8 million, or $3.83 per share, compared with a net loss of $48.5 million, or a loss of $.40 per share in 1997. Results for 1997 include the charge associated with TRW's acquisition of BDM. Excluding the automotive restructuring charge of $24.3 million for the year 1998, segment profit before tax increased 4 percent to $1.0 billion.
"This was a pivotal year for TRW," said Joseph T. Gorman, chairman and chief executive officer. "We were successful in many areas -- improving performance on government contracts, growing the commercial wireless telecommunications product lines, maintaining our market leadership position in the highly competitive automotive supplier industry, introducing new products, and taking the initial actions to improve the automotive business. We were also pleased to increase the quarterly dividend by 6 percent to $.33 per share."
Space, defense and information systems
In the space, defense and information systems business, fourth quarter sales were $1.1 billion, an 11 percent increase over the $1.0 billion reported in 1997. Segment profit before tax for the fourth quarter increased 20 percent to $109.2 million from $91.2 million in 1997.
Sales in the fourth quarter increased due to the acquisition of BDM and new contract awards, partially offset by lower volume on existing contracts. Higher segment profit before tax was due to those same factors as well as continued success in telecommunications product lines.
Sales for 1998 increased 23 percent to $4.7 billion from the $3.8 billion reported in 1997. Segment profit before tax in 1998 increased 31 percent to $457.4 million from $348.9 million in 1997.
Sales for 1998 increased due to the acquisition of BDM, which contributed $885 million in sales. An increase in sales from new contract awards was offset by lower volume on existing programs and a contract modification. Segment profit before tax increased due to the acquisition of BDM, new contract awards, improved program performance, excellent award and orbital incentive fees earned, continued success in commercial gallium arsenide product lines, and the benefit from the settlement of certain patent litigation. The increase was partially offset by charges for litigation and a contract reserve.
"Overall, space, defense and information systems continued to deliver increased profits," said Gorman. "Contract awards for the year reached a record $5.3 billion, despite the delays in awards on several new contracts, while backlog was nearly $6 billion.
"For the Department of Defense, TRW continues successfully to develop and build advanced technology ground, space and high-energy laser systems. Capitalizing on a growing privatization trend within the government and industry, TRW secured a number of outsourcing contracts in 1998. These contracts included a $240 million award from the U.S. Air Force Strategic Command to manage its data processing activities, a $264 million contract to manage the Defense Travel System, and a $187 million contract from the U.S. Census Department for Census 2000," Gorman said. "In the commercial information technology market, TRW received a $70 million award from Wheeling Pittsburgh Steel Corporation to outsource and modernize its information technology and telecommunications systems."
Automotive
In the automotive business, fourth quarter sales of $1.8 billion and segment profit before tax of $145.7 million, excluding the 1998 restructuring charge, were essentially unchanged from amounts reported in 1997.
Higher sales volume in most product lines, the benefit from strengthening European currencies, and the effects of several acquisitions were essentially offset by lower pricing. Fourth quarter segment profits before tax were unchanged as cost reductions were offset by lower pricing, higher research and development expenditures, and the start-up costs associated with new product launches.
Sales for 1998 increased 2 percent to $7.2 billion from the $7.0 billion reported in 1997. Excluding the 1998 restructuring charge of $24.3 million, segment profit before tax in 1998 decreased 11 percent to $567.6 million from $636.5 million in 1997.
Sales for 1998 increased primarily due to higher volume in nearly all product lines. The increase was partially offset by lower pricing, primarily in occupant restraint products, the effect of a strong U.S. dollar, and weakening economic conditions in Brazil and Asia. Segment profit before tax for 1998 decreased due to lower pricing across all product lines, higher research and development costs, economic conditions in Brazil and Asia, and start-up costs associated with new product launches. The decrease was partially offset by cost reductions.
"Our automotive restructuring is well under way," Gorman said. "Since July, we closed two manufacturing facilities, reducing excess manufacturing capacity, and divested one noncore business. We eliminated a management layer and reorganized the business into eight global product lines. The reorganization is aimed at enhancing customer focus, increasing capacity utilization by managing capacity on a global basis and implementing lean manufacturing techniques, improving the effectiveness of product development and manufacturing process engineering, and leveraging our global purchasing power. We also made substantial progress in supplier consolidation and improvement in supplier quality. All of these actions are aimed at reducing costs, with the goal of returning automotive margins to the 10 percent range at the completion of the program.
"In addition to restructuring actions, TRW introduced new automotive products in 1998 such as an innovative multistage inflator as part of a complete advanced restraint system, and successfully launched electrically powered hydraulic steering for Opel," Gorman said. "TRW now offers the industry's broadest range of electrically assisted steering technologies, including rack, pinion and column drive."
TRW provides advanced technology products and services for the automotive, space and defense, and information technology markets. The company's news releases are available through TRW's corporate Web site (http://www.trw.com/).
The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, during the fourth quarter of 1998. Statement 131 establishes standards for reporting financial information about operating segments to shareholders. Operating segment information has been restated to conform to these standards.
Important factors that could cause TRW's actual results to differ materially from the forward-looking statements contained in this release include the ability to achieve cost reductions, mitigate pricing pressure, and effectively implement the restructuring program in the company's automotive business. Additional factors can be found in TRW's Form 8-K filed with the Securities and Exchange Commission on May 29, 1998. TRW undertakes no obligation to update any forward-looking statement.
TRW STATISTICAL SUMMARY (UNAUDITED)
(Dollar Amounts in Millions Except for Per Share Data)
Operating segment information for all periods presented has been
restated to conform to Statement 131.
FOURTH QUARTER 1998
_________________________________________________
Restruc-
Margin turing Margin
Operations % Charges Total %
____________________________________________________________________
Sales
Automotive $1,816.6 -- $1,816.6
Space, Defense &
Information Systems 1,110.7 -- 1,110.7
______________________________ _____________________
Sales $2,927.3 -- $2,927.3
______________________________ _____________________
______________________________ _____________________
Segment Profit Before
Income Taxes
Automotive $ 145.7 8.0% $ (11.7) $ 134.0 7.4%
Space, Defense &
Information Systems 109.2 9.8% -- 109.2 9.8%
______________________________ _____________________
Segment profit (loss)
before income taxes 254.9 8.7% (11.7) 243.2 8.3%
Company Staff and other (46.8) -- (46.8)
Interest expense (16.3) -- (16.3)
R&D write-off (BDM) -- -- --
______________________________ _____________________
Earnings (loss) before
income taxes 191.8 6.6% (11.7) 180.1 6.2%
Income taxes 64.1 (1.4) 62.7
______________________________ _____________________
Net earnings (loss) $ 127.7 4.4% $ (10.3) $ 117.4 4.0%
______________________________ _____________________
______________________________ _____________________
Diluted earnings (loss)
per share $ 1.04 $ (.08) $ .96
Basic earnings (loss)
per share $ 1.07 $ (.09) $ .98
Dividends paid per common share $ .33
Common stock outstanding 119.9
Shares used in computing per
share amounts
Diluted 122.8
Basic 119.8
TRW STATISTICAL SUMMARY (UNAUDITED)
(Dollar Amounts in Millions Except for Per Share Data)
Operating segment information for all periods presented has been
restated to conform to Statement 131.
FOURTH QUARTER 1997
_________________________________________________
Margin R&D Margin
Operations % Write-off Total %
____________________________________________________________________
Sales
Automotive $1,792.9 -- $1,792.9
Space, Defense &
Information Systems 1,005.6 -- 1,005.6
______________________________ _____________________
Sales $2,798.5 -- $2,798.5
______________________________ _____________________
______________________________ _____________________
Segment Profit Before
Income Taxes
Automotive $ 147.7 8.2% -- $ 147.7 8.2%
Space, Defense &
Information Systems 91.2 9.1% -- 91.2 9.1%
______________________________ _____________________
Segment profit before
income taxes 238.9 8.5% -- 238.9 8.5%
Company Staff and other (11.0) -- (11.0)
Interest expense (20.0) -- (20.0)
R&D write-off (BDM) -- $(547.9) (547.9)
______________________________ _____________________
Earnings (loss) before
income taxes 207.9 7.4% (547.9) (340.0) (12.1)%
Income taxes 70.8 -- 70.8
______________________________ _____________________
Net earnings (loss) $ 137.1 4.9% $(547.9) $ (410.8) (14.7)%
______________________________ _____________________
______________________________ _____________________
Diluted earnings
(loss) per share $ 1.12 $ (4.46) $ (3.34)
Basic earnings
(loss) per share $ 1.12 $ (4.46) $ (3.34)
Dividends paid per common share $ .31
Common stock outstanding 122.5
Shares used in computing per
share amounts
Diluted 122.9
Basic 122.9
TRW STATISTICAL SUMMARY, CONTINUED
(Dollar Amounts in Millions Except for Per Share Data)
Operating segment information for all periods presented has been
restated to conform to Statement 131.
TWELVE MONTHS ENDED 1998
_________________________________________________
Restruc-
Margin turing Margin
Operations % Charges Total %
____________________________________________________________________
Sales
Automotive $ 7,201.1 -- $ 7,201.1
Space, Defense &
Information Systems 4,685.4 -- 4,685.4
______________________________ _____________________
Sales $11,886.5 -- $11,886.5
______________________________ _____________________
______________________________ _____________________
Segment Profit Before
Income Taxes
Automotive $ 567.6 7.9% $ (24.3) $ 543.3 7.5%
Space, Defense &
Information Systems 457.4 9.8% -- 457.4 9.8%
______________________________ _____________________
Segment profit (loss)
before income taxes 1,025.0 8.6% (24.3) 1,000.7 8.4%
Company Staff and
other (135.5) -- (135.5)
Interest expense (119.1) -- (119.1)
R&D write-off (BDM) -- -- --
______________________________ _____________________
Earnings (loss) before
income taxes 770.4 6.5% (24.3) 746.1 6.3%
Income taxes 275.3 (6.0) 269.3
______________________________ _____________________
Net earnings (loss) $ 495.1 4.2% $ (18.3) $ 476.8 4.0%
______________________________ _____________________
______________________________ _____________________
Diluted earnings
(loss) per share $ 3.98 $ (.15) $ 3.83
Basic earnings
(loss) per share $ 4.08 $ (.15) $ 3.93
Dividends paid per common share $ 1.26
Common stock outstanding 119.9
Shares used in computing per
share amounts
Diluted 124.4
Basic 121.3
TRW STATISTICAL SUMMARY, CONTINUED
(Dollar Amounts in Millions Except for Per Share Data)
Operating segment information for all periods presented has been
restated to conform to Statement 131.
TWELVE MONTHS ENDED 1997
_________________________________________________
Margin R&D Margin
Operations % Write-off Total %
____________________________________________________________________
Sales
Automotive $ 7,031.7 -- $ 7,031.7
Space, Defense &
Information Systems 3,799.6 -- 3,799.6
______________________________ _____________________
Sales $10,831.3 -- $10,831.3
______________________________ _____________________
______________________________ _____________________
Segment Profit Before
Income Taxes
Automotive $ 636.5 9.1% -- $ 636.5 9.1%
Space, Defense &
Information Systems 348.9 9.2% -- 348.9 9.2%
______________________________ _____________________
Segment profit before
income taxes 985.4 9.1% -- 985.4 9.1%
Company Staff and
other (118.0) -- (118.0)
Interest expense (79.9) -- (79.9)
R&D write-off (BDM) -- $(547.9) (547.9)
______________________________ _____________________
Earnings (loss) before
income taxes 787.5 7.3% (547.9) 239.6 2.2%
Income taxes 288.1 -- 288.1
______________________________ _____________________
Net earnings (loss) $ 499.4 4.6% $(547.9) $ (48.5) (.4)%
______________________________ _____________________
______________________________ _____________________
Diluted earnings
(loss) per share $ 4.03 $ (4.43) $ (.40)
Basic earnings
(loss) per share $ 4.03 $ (4.43) $ (.40)
Dividends paid per common share $ 1.24
Common stock outstanding 122.5
Shares used in computing per
share amounts
Diluted 123.7
Basic 123.7
TRW STATISTICAL SUMMARY (UNAUDITED), CONTINUED
(Dollar Amounts in Millions)
SELECTED CASH FLOW ITEMS Twelve Months Ended
December 31, 1998 December 31, 1997
_________________ _________________
Net earnings (loss) $ 477 $ (49)
Purchased in-process research and
development -- 548
Depreciation and amortization 566 490
Acquisitions, net of cash acquired 249 1,270
Net increase (decrease) in debt 522 936
Capital expenditures 625 571
Dividend payments 154 154
Purchase of TRW common stock 184 247
Net change in deferred taxes (223) 116
SUMMARY BALANCE SHEETS
December 31, 1998 December 31, 1997
_________________ _________________
ASSETS
Cash and cash equivalents $ 83 $ 70
Accounts receivable 1,721 1,617
Inventories 616 573
Other current assets 283 175
______ ______
Total current assets 2,703 2,435
Property, plant & equipment, net 2,683 2,621
Total intangible assets, net 1,067 811
Investments in affiliated companies 243 139
Long-term deferred income taxes 33 --
Other assets 440 404
______ ______
Total assets $7,169 $6,410
______ ______
______ ______
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Short-term debt $ 839 $ 411
Trade accounts payable 964 859
Current portion of long-term debt 30 128
Other current liabilities 1,185 1,321
______ ______
Total current liabilities 3,018 2,719
Long-term liabilities 826 788
Long-term debt 1,353 1,117
Deferred income taxes -- 57
Minority interests in subsidiaries 94 105
Total shareholders' investment 1,878 1,624
______ ______
Total liabilities and
shareholders' investment $7,169 $6,410
______ ______
______ ______
TRW STATISTICAL SUMMARY (UNAUDITED), CONTINUED
(Dollar Amounts in Millions Except for Per Share Data)
Operating segment information for all periods presented has been
restated to conform to Statement 131.
Margin Margin
FIRST QUARTER 1998 % 1997 %
____________________________________________________________________
Sales
Automotive $1,885.5 $1,792.5
Space, Defense & Information
Systems 1,209.1 867.1
__________________________________________ _________
Sales $3,094.6 $2,659.6
__________________________________________ _________
__________________________________________ _________
Segment Profit Before Income
Taxes
Automotive $ 149.2 7.9% $ 168.7 9.4%
Space, Defense & Information
Systems 125.4 10.4% 82.8 9.5%
__________________________________________ _________
Segment profit before income
taxes 274.6 8.9% 251.5 9.5%
Company Staff and other (31.1) (36.2)
Interest expense (39.7) (20.7)
__________________________________________ _________
Earnings before income taxes 203.8 6.6% 194.6 7.3%
Income taxes 74.4 75.4
__________________________________________ _________
Net earnings $ 129.4 4.2% $ 119.2 4.5%
__________________________________________ _________
__________________________________________ _________
Diluted earnings per share $ 1.03 $ .92
Basic earnings per share $ 1.05 $ .95
Dividends paid per common share $ .31 $ .31
Common stock outstanding 122.6 124.8
Shares used in computing per
share amounts
Diluted 126.2 129.4
Basic 122.6 125.2
TRW STATISTICAL SUMMARY (UNAUDITED), CONTINUED
(Dollar Amounts in Millions Except for Per Share Data)
Operating segment information for all periods presented has been
restated to conform to Statement 131.
Margin Margin
SECOND QUARTER 1998 % 1997 %
____________________________________________________________________
Sales
Automotive $1,813.4 $1,876.3
Space, Defense & Information
Systems 1,214.5 975.8
__________________________________________ _________
Sales $3,027.9 $2,852.1
__________________________________________ _________
__________________________________________ _________
Segment Profit Before Income
Taxes
Automotive $ 153.1 8.4% $ 183.5 9.8%
Space, Defense & Information
Systems 110.9 9.1% 88.2 9.0%
__________________________________________ _________
Segment profit before income
taxes 264.0 8.7% 271.7 9.5%
Company Staff and other (27.2) (33.6)
Interest expense (38.6) (18.8)
__________________________________________ _________
Earnings before income taxes 198.2 6.5% 219.3 7.7%
Income taxes 72.4 84.9
__________________________________________ _________
Net earnings $ 125.8 4.2% $ 134.4 4.7%
__________________________________________ _________
__________________________________________ _________
Diluted earnings per share $ 1.00 $ 1.05
Basic earnings per share $ 1.03 $ 1.09
Dividends paid per common share $ .31 $ .31
Common stock outstanding 121.8 123.2
Shares used in computing per
share amounts
Diluted 125.4 127.7
Basic 122.1 123.6
TRW STATISTICAL SUMMARY (UNAUDITED), CONTINUED
(Dollar Amounts in Millions Except for Per Share Data)
Operating segment information for all periods presented has been
restated to conform to Statement 131.
THIRD QUARTER 1998
________________________________________________
Restruc-
Margin turing Margin
Operations % Charges Total %
______________________________________________________________________
Sales
Automotive $1,685.6 -- $1,685.6
Space, Defense &
Information Systems 1,151.1 -- 1,151.1
_________________________________ ____________________
Sales $2,836.7 -- $2,836.7
_________________________________ ____________________
_________________________________ ____________________
Segment Profit Before
Income Taxes
Automotive $ 119.6 7.1% $ (12.6) $ 107.0 6.3%
Space, Defense &
Information Systems 111.9 9.7% -- 111.9 9.7%
_________________________________ ____________________
Segment profit (loss)
before income taxes 231.5 8.2% (12.6) 218.9 7.7%
Company Staff and other (30.4) -- (30.4)
Interest expense (24.5) -- (24.5)
_________________________________ ____________________
Earnings (loss) before
income taxes 176.6 6.2% (12.6) 164.0 5.8%
Income taxes 64.4 (4.6) 59.8
_________________________________ ____________________
Net earnings (loss) $ 112.2 4.0% $ (8.0) $ 104.2 3.7%
_________________________________ ____________________
_________________________________ ____________________
Diluted earnings (loss)
per share $ .92 $ (.07) $ .85
Basic earnings (loss)
per share $ .93 $ (.07) $ .86
Dividends paid per
common share $ .31
Common stock outstanding 119.7
Shares used in computing per
share amounts
Diluted 123.2
Basic 120.5
TRW STATISTICAL SUMMARY (UNAUDITED), CONTINUED
(Dollar Amounts in Millions Except for Per Share Data)
Operating segment information for all periods presented has been
restated to conform to Statement 131.
THIRD QUARTER 1997
__________________
Margin
Total %
__________________________________________________
Sales
Automotive $1,570.0
Space, Defense &
Information Systems 951.1
_________________________________________
Sales $2,521.1
_________________________________________
_________________________________________
Segment Profit Before
Income Taxes
Automotive $ 136.6 8.7%
Space, Defense &
Information Systems 86.7 9.1%
_________________________________________
Segment profit before
income taxes 223.3 8.9%
Company Staff and other (37.2)
Interest expense (20.4)
_________________________________________
Earnings before income
taxes 165.7 6.6%
Income taxes 57.0
_________________________________________
Net earnings $ 108.7 4.3%
_________________________________________
_________________________________________
Diluted earnings per
share $ .85
Basic earnings per
share $ .88
Dividends paid per
common share $ .31
Common stock outstanding 123.2
Shares used in computing per
share amounts
Diluted 127.4
Basic 123.1
TRW STATISTICAL SUMMARY, CONTINUED
(Dollar Amounts in Millions Except for Per Share Data)
Operating segment information for all periods presented has been
restated to conform to Statement 131.
TWELVE MONTHS ENDED 1996
_________________________________________________
Restruc-
Margin turing Margin
Operations % Charges Total %
____________________________________________________________________
Sales
Automotive $6,492.7 -- $6,492.7
Space, Defense &
Information Systems 3,364.4 -- 3,364.4
______________________________ _____________________
Sales $9,857.1 -- $9,857.1
______________________________ _____________________
______________________________ _____________________
Segment Profit Before
Income Taxes
Automotive $ 622.1 9.6% $ (292.5) $ 329.6 5.1%
Space, Defense &
Information Systems 270.7 8.0% (89.9) 180.8 5.4%
______________________________ _____________________
Segment profit (loss)
before income taxes 892.8 9.1% (382.4) 510.4 5.2%
Company Staff and
other (136.0) 15.5 (120.5)
Interest expense (69.8) (17.9) (87.7)
______________________________ _____________________
Earnings (loss) before
income taxes 687.0 7.0% (384.8) 302.2 3.1%
Income taxes (252.7) 132.9 (119.8)
______________________________ _____________________
Earnings (Loss) From
Continuing
Operations $ 434.3 4.4% $ (251.9) $ 182.4 1.9%
Discontinued Operations
Gain on sale of IS&S -- 259.8 259.8
Operating results
of IS&S 37.9 -- 37.9
______________________________ _____________________
Net earnings $ 472.2 4.8% $ 7.9 $ 480.1 4.9%
______________________________ _____________________
______________________________ _____________________
Diluted earnings (loss) per share
Continuing $ 3.27 $ (1.90) $ 1.37
Discontinued 0.29 1.96 2.25
______________________________ _____________________
Net earnings
per share $ 3.56 $ .06 $ 3.62
Basic earnings (loss) per share
Continuing $ 3.37 $ (1.96) $ 1.41
Discontinued .29 2.02 2.31
______________________________ _____________________
Net earnings
per share $ 3.66 $ 0.06 $ 3.72
Dividends paid per common share $ 1.14
Common stock outstanding 126.1
Shares used in computing per
share amounts
Diluted 132.8
Basic 128.7