Operating Earnings Increase 45 Percent In Quarter, Exceeding Expectations – Net Debt Reduced By $770 Million In Quarter – Record $8 Billion Backlog In Systems, Space & Electronics, Up 20 Percent
TRW Inc. (NYSE: TRW) reported
increased earnings, earnings per share, and cash generation for the fourth
quarter 2001, David M. Cote, chairman, president and chief executive officer,
announced today.
“Despite economic and market turmoil, TRW had a great fourth
quarter, further demonstrating the benefits of our persistent focus on asset
management, meeting commitments, increased attention to customers, and
productivity improvement,” Cote said.
“These solid achievements, combined
with a record backlog and our company-wide commitment to Six Sigma, well
position TRW for earnings growth and continued debt reduction.”
Highlights of the company’s 2001 results include:
– Fourth quarter earnings per share, excluding unusual items, exceeded
analyst consensus estimates and increased 40 percent to $0.70, up from
last year’s $0.50. Operating earnings increased 45 percent to
$88 million, while fourth quarter sales were essentially unchanged at
approximately $4.1 billion. Including unusual items, GAAP net earnings
were $90 million, $0.72 per share, compared with a net loss of
$3 million, $.02 per share in the same quarter last year.– TRW reduced its year-end net debt position to under $5.5 billion. In
the quarter, this reduction was driven primarily through cash flow from
operating activities of $250 million, asset sales of $190 million, and a
$330 million securitization of receivables. For the year, TRW reduced
net debt by approximately $1 billion.– Despite a recessionary economy and lower automotive production, TRW
maintained its fourth quarter operating profit and margins as improved
Automotive performance offset a decrease in Aeronautical Systems’
profitability. The September 11 events significantly impacted
Aeronautical Systems’ business, while in the quarter both Systems and
Space & Electronics maintained their solid performances.– Fourth quarter financing costs and corporate expenses were reduced
approximately $41 million, reflecting lower debt levels and interest
rates, and a 38 percent reduction in corporate staff and related
Business Support Center expenses.– During the fourth quarter of 2001, net gains totaling $152 million after
tax were recognized primarily from the sale of shares of RF Micro
Devices stock. Also in the quarter, charges of $150 million after tax
were incurred primarily for Automotive and Aeronautical Systems
restructuring actions and asset impairments intended to improve TRW’s
competitiveness. These gains and charges were classified as unusual
items and were not included in profit from operations.– For 2001, TRW earnings per share, excluding unusual items, were $2.36,
compared with $3.78 in 2000. Net earnings, excluding unusual items,
were $296 million, compared with $471 million in 2000. Sales declined
5 percent to approximately $16.4 billion. Including unusual items, GAAP
net earnings were $68 million, $0.54 per share, compared with
$438 million, $3.51 per share, last year.
“Throughout the year, TRW has been vigorously transforming itself into a
leaner, more customer centered and productive corporation focused on high-
potential, technology-driven growth,” Cote said.
“We worked hard to
streamline our entire organization structure, reduce total employment by
10,000, and train over 1,800 employees in Six Sigma concepts.
CEO staff
changes resulted in a change of eight of 14 key executives, while the company
added to the technical depth and expertise of its Board of Directors with
three new outside chief executives.
All this made the fourth quarter pivotal
for the company, as we began to see the benefits of a reshaped TRW.
“The nation’s growing homeland security and national defense needs are
generating significant opportunities for our technology businesses, intrinsic
areas of TRW’s strength.
In automotive, the company is stabilizing
profitability, even while the economy remains weak.
Commercial aviation faces
an uncertain recovery following the events of September 11, and as a result
our Aeronautical Systems business is taking aggressive actions to change its
cost structure while continuing to fund key program wins.”
Systems
Fourth quarter 2001 sales and operating profit were essentially unchanged
from the fourth quarter 2000.
For the year, after adjusting for the
successful completion of the U.S. Census Bureau and TESS programs, Systems’
sales increased 9 percent due to growth in new contracts.
Including these
programs, Systems’ sales were lower by 3 percent compared with the prior year.
Annual operating profit was in line with sales.
Significant wins increased Systems’ backlog 16 percent from $3.4 billion
to a record level of $4 billion at year-end 2001.
TRW continued to win
important systems contracts from the U.S. military, civil federal, and state
customers.
Under a new contract, TRW will develop the Guardrail Information
System for the U.S. Army.
The company also continues its long-term
involvement with the nation’s ICBM program with an Air Force award for
propulsion replacement.
Leveraging its work on an important civil federal
project for the Securities and Exchange Commission, TRW completed an upgrade
and expansion of the EDGAR subscriber service.
On the state level, the
company was selected to continue operations of a traffic management service
serving Cincinnati and northern Kentucky.
Space & Electronics
Fourth quarter 2001 sales in Space & Electronics were $502 million,
compared with $464 million a year ago.
This was due in part to higher volumes
in the airborne laser and Advanced Extremely High Frequency (AEHF) satellite
programs, offset in part by lower volumes on microelectronic products.
Operating profit increased to $27 million in the current quarter, compared
with $23 million, as improved overall program performance and a favorable
income effect from a terminated commercial contract offset the profit impact
from lower volume on microelectronic products and costs associated with
commercializing defense technologies.
For the year 2001, sales in Space &
Electronics increased to $2 billion from $1.9 billion in 2000, due to
improvements in several ongoing programs, including AEHF, airborne laser, and
products in the avionics business.
Operating profit for 2001 decreased to
$117 million from $164 million, primarily due to costs associated with the
commercial ventures.
Space & Electronics recorded two long-term, strategically important
contract wins that contributed significantly to increasing the business’
backlog 25 percent from $3.2 billion to $4 billion.
The company was awarded a
contract with the potential value of $1.3 billion to provide the
communications payload for its AEHF satellite, the military’s next generation
of highly secure communications satellites and ground systems.
The company
also was selected for an award with a potential value of $5 billion to provide
integrated communications, navigation, and identification equipment to
Lockheed Martin in support of the Joint Strike Fighter program.
Aeronautical Systems
Fourth quarter 2001 sales in TRW’s Aeronautical Systems business were
essentially unchanged at $298 million, compared with the fourth quarter of
2000.
Operating profit in the fourth quarter 2001 declined to $28 million
from $51 million in the previous year.
The decline in operating profit was
due to an increase in research and development costs on several new programs,
an increase in costs relating to operational improvement programs, and an
unfavorable mix of repair services and spare parts sold due to changes in the
commercial aviation market after September 11.
For the year 2001, sales in
Aeronautical Systems were unchanged at $1.1 billion.
Operating profit for the
year 2001 decreased to $110 million from $152 million in 2000, principally due
to an increase in research and development costs to support new program wins
and a change in product mix.
As a result of the decreased demand for civil
aviation equipment, TRW Aeronautical Systems initiated cost reduction measures
to reduce employment expense.
This will result in a
16 percent employment reduction of approximately 1,100 workers.
Aeronautical Systems is another TRW business that will play a key role in
the Joint Strike Fighter program.
The business was awarded a $600 million
contract to provide the plane’s weapons bay door drive system.
The business
also won a contract from Dassault Aviation valued at $350 million to supply
flap and airbrake systems and the electrical power generation and management
system for its new three-engine Falcon 7X long-range business jet.
Automotive
Fourth quarter 2001 sales in TRW’s Automotive business were $2.5 billion,
compared with $2.6 billion in the fourth quarter of 2000.
Despite lower
global production volumes, operating profit in the quarter increased to
$121 million from $102 million.
This increase resulted from cost reductions
that more than offset the impact of lower fourth quarter 2001 sales and a
recall charge in the fourth quarter of 2000.
For the year 2001, sales in
Automotive declined 8 percent to $10.1 billion from $11 billion in 2000, due
to reduced industry volumes, the effect of divested businesses, foreign
currency translation, and price reductions.
Operating profit for 2001 was
$469 million, compared with $720 million in 2000.
This was due to lower
production volumes, price reductions, divestitures, and an increase in sales
of lower margin products, that were partially offset by cost reductions.
In 2001, Automotive positioned its business for improved competitiveness
through a consolidation of its businesses, streamlining its management
structure, reducing salaried employment by approximately 3,000 positions, and
aggressively reducing cost.
These actions reduced fixed costs by $150 million
for the year.
Significant activity in Europe led to new contracts for
electrically powered hydraulic steering, restraint systems, and the first
development contract for steer-by-wire technology.
To better serve European
customers, the company opened a new brake actuation manufacturing facility in
Poland. New contracts in North America were secured for braking systems
components and for an occupant weight sensing system.
TRW provides advanced-technology products and services for the aerospace,
information systems, and automotive markets. The company’s news releases are
available through TRW’s corporate Web site, www.trw.com .
Investors and the
general public are invited to listen to an Internet Webcast of the company’s
quarterly conference call, beginning at 11:00 a.m. EST today, January 24,
2002.
This Webcast can be accessed through www.trw.com/investorpresentation .
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 can be found in Part 1, Item 2, “Management’s Discussion and Analysis-
-Forward-Looking Statements,” in the company’s most recent Form 10-Q.
Important factors that could cause TRW’s actual results to differ materially
from those contained in any forward-looking statement contained in this
release are described below.
The Company’s consolidated results could be affected by: the economic,
regulatory and political domestic and international conditions; the
termination of existing government contracts; the level of defense funding by
the government; moderation or decline in the automobile build rate; pricing
pressures from customers; and the ability to reduce the level of outstanding
debt from cash flow from operations and the proceeds from asset dispositions.
The above list of important factors is not exclusive.
We caution that any
forward-looking statement reflects only the beliefs of the Company or its
management at the time the statement is made.
The Company undertakes no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement was made.
TRW Inc.
All amounts except earnings per share are in millions
Q4 2001 Q4 2000 % Change
================ ================ =================
Sales $4,078 $4,137 -1%
before including before including before including
unusuals unusuals unusuals unusuals unusuals unusuals
-------- -------- -------- -------- -------- --------
Net Earnings
(Loss) $ 88 $ 90 $ 61 $ (3) 45% nm
Earnings(Loss)
Per Share
Diluted $0.70 $0.72 $0.50 $(0.02) 40% nm
Basic $0.70 $0.72 $0.50 $(0.02) 40% nm
Number of Shares:
Diluted 126.3 123.5
Basic 125.6 123.5
Segment Sales
Systems $ 801 $ 805 -1%
Space & Electronics 502 464 8%
Aeronautical Systems 298 299 --
Automotive 2,477 2,569 -4%
before including before including before including
unusuals unusuals unusuals unusuals unusuals unusuals
-------- -------- -------- -------- -------- --------
Profit(Loss)
Before Taxes
Systems $ 53 $ 35 $ 55 $ 28 -3% 27%
Space & Electronics 27 265 23 48 14% 445%
Aeronautical Systems 28 4 51 51 -43% -91%
Automotive 121 (70) 102 31 19% -329%
Corporate Expense/
Other (24) (19) (42) (64) 38% 69%
Financing Cost (111) (111) (134) (134) 17% 17%
Net Employee
Benefits Income 44 44 40 40 13% 13%
--------------- -----------------
Earnings Before
Taxes 138 148 95 -- 45% nm
Income Taxes (50) (58) (34) (3)
--------------- -----------------
Net Earnings
(Loss) $ 88 $ 90 $ 61 $ (3) 45% nm
=============== =================
nm = not meaningful
TRW Inc.
All amounts except earnings per share are in millions
Twelve months ended: 2001 2000 % Change
=============== ============== ===============
Sales $16,383 $17,231 -5%
before including before including before including
unusuals unusuals unusuals unusuals unusuals unusuals
-------- -------- -------- -------- -------- --------
Net Earnings $ 296 $ 68 $ 471 $ 438 -37% -85%
Earnings Per Share
Diluted $2.36 $0.54 $3.78 $3.51 -38% -85%
Basic $2.36 $0.54 $3.82 $3.55 -38% -85%
Number of Shares:
Diluted 125.7 124.9
Basic 124.8 123.1
Segment Sales
Systems $ 3,150 $ 3,252 -3%
Space & Electronics 2,020 1,880 7%
Aeronautical Systems 1,102 1,105 --
Automotive 10,111 10,994 -8%
before including before including before including
unusuals unusuals unusuals unusuals unusuals unusuals
-------- -------- -------- -------- -------- --------
Profit Before Taxes
Systems $ 207 $ 176 $ 213 $ 209 -3% -16%
Space & Electronics 117 212 164 459 -29% -54%
Aeronautical Systems 110 90 152 152 -28% -40%
Automotive 469 228 720 508 -35% -55%
Corporate Expense/
Other (116) (241) (148) (252) 21% 4%
Financing Cost (482) (482) (530) (531) 9% 9%
Net Employee
Benefits Income 157 157 161 161 -2% -2%
--------------- -----------------
Earnings Before
Taxes 462 140 732 706 -37% -80%
Income Taxes (166) (72) (261) (268)
--------------- -----------------
Net Earnings $ 296 $ 68 $ 471 $ 438 -37% -85%
=============== =================
Note: 2000 "Corporate Expense/Other including unusuals" includes $12
million of In-process R&D
TRW Inc.
Earnings Reconciliation - 4th Quarter 2001 ($M) ($)
Earnings EPS
Net Earnings Before Unusual Items $ 88 $ 0.70
Systems
* Asset impairment charges/other (a) (12) (0.09)
Space & Electronics
* Gains on the sale of assets (b) 162 1.28
* Asset impairment charges/other (c) (7) (0.05)
Aeronautical Systems
* Aeronautical restructuring (d) (18) (0.14)
Automotive
* Automotive restructuring (e) (99) (0.78)
* Asset impairment charges, sales and other (27) (0.23)
Corporate & Other
* Other 3 0.03
------------------------
Reported Earnings $ 90 $ 0.72
========================
Earnings Reconciliation Footnotes
(a) Includes impairment of certain assets and closure costs.
(b) Net gains relating to the sale of approximately 12 million shares of
RFMD. At year-end, TRW owned approximately 4.5 million shares of RFMD
stock including 4 million shares that were sold forward in February
2000.
(c) Primarily asset impairment charges associated with certain
investments.
(d) The net after-tax charge is related to the employee reductions
announced in October.
(e) Charges relating to restructuring actions, which include employee
reduction programs, plant closures and consolidations and costs
relating to exiting certain product lines.
TRW Inc.
Earnings Reconciliation - 2001 ($M) ($)
Earnings EPS
Net Earnings Before Unusual Items $ 296 $ 2.36
Systems
* Asset impairment charges (a) (13) (0.10)
* Other (7) (0.06)
Space & Electronics
* Gains on the sale of assets (b) 268 2.12
* Asset impairment charges (c) (217) (1.72)
* Other (2) (0.01)
Aeronautical Systems
* Aeronautical restructuring and asset sales (d) (15) (0.12)
Automotive
* Automotive restructuring (e) (151) (1.21)
* Asset impairment charges, sales and other (9) (0.07)
Corporate & Other
* Pending and threatened litigation (68) (0.54)
* BSC restructuring, asset impairment and other (14) (0.11)
------------------------
Reported Earnings $ 68 $ 0.54
========================
Earnings Reconciliation Footnotes
(a) Includes asset impairment charges associated with certain investments
and intangible assets.
(b) Net gains relating to the sale of approximately 18.7 million shares of
RFMD.
(c) Asset impairment charges primarily associated with investments in
Astrolink and Endwave. These charges were non-cash.
(d) Primarily includes previously announced employee reduction charges.
(e) Charges relating to restructuring actions, which include employee
reduction programs, plant closures and consolidations, and costs
relating to exiting certain product lines.
TRW Inc.
All amounts are in millions
STATEMENTS OF CASH FLOWS
December 31 December 31
2001 2000
------- -------
Operating activities
Net earnings $ 68 $ 438
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation and amortization 755 794
Pension income (248) (249)
Net gain on sale of assets (444) (286)
Asset impairment charges 398 93
Pending and threatened litigation 97 65
Deferred income taxes (36) 49
Gain on Endwave merger - (57)
Purchased in-process research and development - 12
Other-net 109 32
Changes in assets and liabilities, net of
effects of businesses acquired or divested
Accounts receivable, net 249 -
Securitization of accounts receivable 327 -
Inventories 75 85
Trade accounts payable (6) 257
Prepaid expenses and other liabilities (12) (103)
Other-net 165 29
------- -------
Net cash provided by operating activities 1,497 1,159
Investing activities
Capital expenditures including other intangibles (764) (742)
Net proceeds from divestitures 476 1,557
Acquisitions, net of cash acquired - (3)
Other-net (89) (19)
------- -------
Net cash (used in)provided by investing activities (377) 793
Financing activities
Decrease in short-term debt (1,223) (1,083)
Proceeds from debt in excess of 90 days 1,147 1,429
Principal payments on debt in excess of 90 days (898) (2,152)
Dividends paid (154) (167)
Other-net 7 47
------- -------
Net cash used in financing activities (1,121) (1,926)
Effect of exchange rate changes on cash (26) 13
------- -------
(Decrease)increase in cash and cash equivalents (27) 39
Cash and cash equivalents at beginning of year 267 228
------- -------
Cash and cash equivalents at end of year $ 240 $ 267
------- -------
TRW Inc.
All amounts are in millions
SUMMARY BALANCE SHEETS
December 31 December 31
2001 2000
-------- --------
ASSETS
Cash and cash equivalents $ 240 $ 267
Accounts receivable 1,596 2,328
Interest in securitized receivables 162 --
Inventories 763 870
Other current assets 401 502
-------- --------
Total current assets 3,162 3,967
Property, plant & equipment-net 3,542 3,587
Intangible assets-net 3,811 4,012
Investments in affiliated companies 245 1,040
Other notes and accounts receivable 223 283
Prepaid pension cost 2,871 2,902
Other assets 590 676
-------- --------
Total assets $ 14,444 $ 16,467
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Short-term debt $ 115 $ 1,450
Trade accounts payable 1,742 1,795
Current portion of long-term debt 724 489
Other current liabilities 2,177 2,126
-------- --------
Total current liabilities 4,758 5,860
Long-term liabilities 1,944 2,038
Long-term debt 4,870 4,765
Deferred income taxes 612 1,030
Minority interests in subsidiaries 74 123
Total shareholders' investment 2,186 2,651
-------- --------
Total liabilities and shareholders'
investment $ 14,444 $ 16,467
======== ========
