TRW Announces Record First Quarter 2000 Results; Earnings Increase 46 Percent
19 April 2000
TRW Announces Record First Quarter 2000 Results; Earnings Increase 46 Percent
CLEVELAND--April 19, 2000--TRW Inc. (NYSE:TRW)
Financial Highlights First Quarter First Quarter
2000 1999
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- Sales $4.6 billion $3.1 billion
- Excluding Unusual Items
- Net Earnings $152.1 million $104.2 million
- Diluted Earnings
Per Share $1.22 per share $0.86 per share
- Including Unusual Items
- Net Earnings(Loss) $209.3 million ($28.4) million
- Diluted Earnings(Loss)
Per Share $1.68 per share ($0.24) per share
- Net Debt To Total Capital 68.2 percent 83.5 percent
TRW Inc. (NYSE:TRW) today reported that for the first quarter ended March 31, 2000, net earnings increased 46 percent to a record $152.1 million, or $1.22 per share, excluding unusual items. This compares with first quarter 1999 net earnings of $104.2 million, or $0.86 per share. First quarter 2000 sales increased 47 percent to $4.6 billion, compared with $3.1 billion the first quarter of 1999.
TRW's first quarter 2000 earnings and sales reflect the results of LucasVarity, which was acquired on March 25, 1999. Excluding LucasVarity, first quarter 2000 sales increased 5 percent, compared with 1999.
Including unusual items, net earnings in the first quarter of 2000 were a record $209.3 million, or $1.68 per share, compared with a net loss of $28.4 million, or $0.24 per share, in the first quarter of 1999. For the first quarter 2000, unusual items resulted in net earnings of $57.2 million, or $0.46 per share. After-tax net gains of $126.1 million from asset sales, primarily the sale of RF Micro Devices (RFMD) stock and the company's Nelson Stud Welding and Australian steering businesses, were offset by a $48.7 million charge that was previously announced relating to warranty reserves, claims, and threatened litigation; $11.8 million for automotive restructuring charges; and $8.4 million of unrealized losses on foreign currency hedges.
First quarter 1999 net earnings included unusual items that resulted in net after-tax charges of $132.6 million, or $1.10 per share. These charges included $125.9 million for expenses related to the LucasVarity acquisition, of which $85.3 million related to purchased in-process research and development; $28.1 million for losses on fixed-price type contacts; and $7.1 million for automotive restructuring. These charges were partially offset by after-tax gains of $28.5 million related to RFMD.
"We made excellent progress against our plan to deleverage the balance sheet, and we reduced net debt by approximately $1.2 billion in the first quarter," said Joseph T. Gorman, chairman and chief executive officer. "We completed our actions to divest significant noncore businesses with the closing of Lucas Diesel Systems, Lucas Rists Wiring Systems, and Nelson Stud Welding. Through innovative forward sales agreements and the outright sale of 2.2 million shares, we have further monetized a portion of our ownership position in RFMD.
"I am particularly excited about developments in the commercialization of TRW technology," Gorman said. "The early success we've experienced in unlocking the value of TRW's vast technology bank through partnerships with RFMD, Astrolink, E-Sync, and E-Certify continued this quarter with the announcement of the merger forming Endwave Corporation, creating an industry-leading provider of broadband wireless Internet access products. We followed that with the announcement of an equity ownership in Paracel Inc., which has agreed to be acquired by Celera Genomics Corporation, through which TRW technology will be used in the documentation of human gene sequences."
Automotive Operations
First quarter sales in TRW's automotive business increased 55 percent to a record $3.0 billion from $2.0 billion in the first quarter of 1999, due to the acquisition of LucasVarity. Excluding LucasVarity, first quarter sales were approximately even with the prior year's, as higher volume was offset primarily by the effect of the strong dollar and price reductions.
Total automotive profit before tax and unusual items for the first quarter of 2000 increased to a record $241.5 million, compared with $145.5 million in the first quarter of 1999, primarily due to the inclusion of LucasVarity. Excluding LucasVarity results and unusual items, profit before tax increased 4 percent to $143.1 million, compared with the first quarter of 1999. This improvement was primarily due to an increase in volume and benefits from the company's cost-reduction programs, partially offset by continuing price reductions.
"I am very encouraged by the overall improvement in our automotive business," said Gorman. "As evidenced by its solid first quarter performance, the effects of restructuring activities over the past year are taking hold.
"Driven by its new leadership team, changes within the automotive organization continue at a robust pace. Focusing on three initiatives -- purchasing, working capital, and capital expenditures -- we are driving improved financial performance while continuing to meet our customer commitments," Gorman said. "Going forward, these actions should have a positive impact on performance throughout the organization. I am also pleased that in the quarter, TRW received more than $1.2 billion in new automotive sales awards, with significant awards for electric steering and vehicle stability control."
Aerospace and Information Systems
In TRW's aerospace and information systems business, first quarter sales increased 35 percent to a record $1.5 billion from $1.1 billion in the first quarter of 1999, primarily due to the inclusion of LucasVarity sales and organic growth. Excluding LucasVarity, first quarter 2000 sales increased 13 percent, primarily due to growth in the civil federal marketplace, specifically related to the U.S. Census and Treasury communications programs, and from growth in the company's space and missile defense systems contracts and commercial programs, particularly those related to Astrolink.
Total aerospace and information systems first quarter profit before tax and unusual items increased 40 percent to a record $127.3 million, compared with $90.8 million in the first quarter of 1999. Profit before tax and unusual items increased primarily due to the LucasVarity acquisition. Excluding LucasVarity and unusual items, first quarter 2000 profit increased 13 percent to $99.8 million, primarily due to the increase in revenues.
"TRW continues its ongoing role as a contributor to the nation's defense through several new contracts with the U.S. Air Force," Gorman said. "Our decades-long relationship with NASA continues with our selection for a study contract on the Terrestrial Planet Finder Mission. A new contract for a ground-to-satellite interface from Astrolink International LLC further expands our commercial satellite business, while Samsung's and Honeywell's selection of TRW for its unique power take off shafts for jet aircraft and unmanned aerial vehicles expands our aerospace business. In the United Kingdom, TRW was selected to integrate an advanced digital communications service for police forces countrywide."
TRW provides advanced-technology products and services for the automotive, aerospace, and information systems markets. The company's news releases are available through TRW's corporate Web site (http://www.trw.com).
Statements that are not statements of historical fact may be forward-looking statements. 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 continue technical innovation and the development of and demand for new products and contract awards; the ability to effectively implement the Company automotive restructuring program and improve automotive margins; the ability to develop and market products and services for customers outside of the traditional aerospace and information systems markets; the ability to reduce debt; and the ability to design and develop e-commerce initiatives for business systems and processes. Additional factors can be found in Item 7, "Management's Discussion and Analysis--Forward-Looking Statements," in the company's most recent Form 10-K. TRW undertakes no obligation to update any forward-looking statement.
TRW STATISTICAL SUMMARY (UNAUDITED)
(Dollar Amounts in Millions Except for Per Share Data)
FIRST QUARTER 2000
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Margin Unusual Margin
Operations % Items Total %
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Sales
Occupant Safety Systems $ 760.5 $ 760.5
Chassis Systems 1,528.1 1,528.1
Automotive Electronics 471.5 471.5
Other Automotive 274.7 274.7
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Total Automotive 3,034.8 3,034.8
Space & Electronics 486.0 486.0
Systems & Information Technology 773.8 773.8
Aeronautical Systems 270.7 270.7
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Total Aerospace & Information
Systems 1,530.5 1,530.5
Sales $4,565.3 $4,565.3
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Profit Before Taxes
Occupant Safety Systems $ 54.6 7.2% $(40.6) $ 14.0 1.8%
Chassis Systems 122.8 8.0% (44.0) 78.8 5.2%
Automotive Electronics 36.6 7.8% (4.2) 32.4 6.9%
Other Automotive 27.5 10.0% 31.0 58.5 21.3%
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Total Automotive 241.5 8.0% (57.8) 183.7 6.1%
Space & Electronics 52.9 10.9% 173.7 226.6 46.6%
Systems & Information Technology 46.9 6.1% - 46.9 6.1%
Aeronautical Systems 27.5 10.2% - 27.5 10.2%
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Total Aerospace & Information
Systems 127.3 8.3% 173.7 301.0 19.7%
Profit Before Taxes 368.8 8.1% 115.9 484.7 10.6%
Corporate Expense and Other (51.4) (12.1) (63.5)
Financing Costs (136.8) (0.7) (137.5)
Pension Income 57.4 - 57.4
In-process Research and Development - - -
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Earnings(Loss) Before
Income Taxes $238.0 5.2% $103.1 $341.1 7.5%
Income Taxes 85.9 45.9 131.8
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Net Earnings(Loss) $152.1 3.3% $ 57.2 $209.3 4.6%
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Diluted earnings(loss) per share $ 1.22 $ 0.46 $ 1.68
Basic earnings(loss) per share $ 1.24 $ 0.47 1.71
Dividends paid per common share $ 0.33
Common stock outstanding 122.9
Shares used in computing
per share amounts
Diluted 124.7
Basic 122.3
TRW STATISTICAL SUMMARY (UNAUDITED)
(Dollar Amounts in Millions Except for Per Share Data)
FIRST QUARTER 1999
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Margin Unusual Margin
Operations % Items Total %
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Sales
Occupant Safety Systems $ 795.2 $795.2
Chassis Systems 613.8 613.8
Automotive Electronics 317.3 317.3
Other Automotive 238.3 238.3
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Total Automotive 1,964.6 1,964.6
Space & Electronics 461.2 461.2
Systems & Information Technology 653.0 653.0
Aeronautical Systems 18.1 18.1
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Total Aerospace & Information
Systems 1,132.3 1,132.3
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Sales $3,096.9 $3,096.9
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Profit Before Taxes
Occupant Safety Systems $ 56.4 7.1% $ (3.1) $ 53.3 6.7%
Chassis Systems 39.4 6.4% (4.7) 34.7 5.7%
Automotive Electronics 23.3 7.3% (1.1) 22.2 7.0%
Other Automotive 26.4 11.1% (0.8) 25.6 10.7%
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Total Automotive 145.5 7.4% (9.7) 135.8 6.9%
Space & Electronics 49.9 10.8% 33.1 83.0 18.0%
Systems & Information Technology 38.8 5.9% (32.5) 6.3 1.0%
Aeronautical Systems 2.1 11.6% - 2.1 11.6%
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Total Aerospace & Information
Systems 90.8 8.0% 0.6 91.4 8.1%
Profit Before Taxes 236.3 7.6% (9.1) 227.2 7.3%
Corporate Expense and Other (30.9) (50.2) (81.1)
Financing Costs (41.6) (12.2) (53.8)
Pension Income - - -
In-process Research and Development - (85.3) (85.3)
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Earnings(Loss) Before
Income Taxes $163.8 5.3% $(156.8) $ 7.0 0.2%
Income Taxes 59.6 (24.2) 35.4
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Net Earnings(Loss) $104.2 3.4% $(132.6) $(28.4) (0.9)%
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Diluted earnings(loss)
per share $ 0.86 $ (1.10) $(0.24)
Basic earnings(loss) per share $ 0.86 $ (1.10) $(0.24)
Dividends paid per common share $ 0.33
Common stock outstanding 120.2
Shares used in computing
per share amounts
Diluted 120.1
Basic 120.1
TRW STATISTICAL SUMMARY (UNAUDITED)
(Dollar Amounts in Millions)
SELECTED CASH FLOW ITEMS Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
Net earnings(loss) $ 209 $ (28)
Gains on sale of nonoperating assets (174) (15)
Depreciation and amortization 212 142
Pension income (66) -
Deferred income taxes 45 2
Operating working capital (234) (240)
Capital expenditures including
other intangibles (153) (111)
Acquisitions, net of cash acquired - (36)
Net proceeds from divestitures 1,351 17
Net increase(decrease) in debt (1,145) 1,049
Dividends paid (41) (40)
Purchased in-process research and
development - 85
SUMMARY BALANCE SHEETS
March 31, 2000 December 31, 1999
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ASSETS
Cash and cash equivalents $ 261 $ 228
Accounts receivable 2,737 2,480
Inventories 978 1,039
Net assets of acquired businesses
held for sale - 827
Other current assets 605 625
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Total current assets 4,581 5,199
Property, plant & equipment-net 3,775 3,894
Intangible assets-net 4,315 4,331
Investments in affiliated companies 1,838 1,185
Other notes and accounts receivable 244 257
Prepaid pension cost 2,908 2,876
Other assets 590 524
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Total assets $18,251 $18,266
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
Short-term debt $ 1,326 $ 2,444
Trade accounts payable 1,652 1,638
Current portion of long-term debt 756 758
Other current liabilities 2,088 1,889
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Total current liabilities 5,822 6,729
Long-term liabilities 2,177 1,991
Long-term debt 5,338 5,369
Deferred income taxes 1,569 1,352
Minority interests in subsidiaries 117 113
Total shareholders' investment 3,228 2,712
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Total liabilities and
shareholders' investment $18,251 $18,266
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