1st November 2005 - TRW Automotive Reports Third Quarter 2005 Financial Results

TRW Automotive Holdings Corp., the global leader in active and passive safety systems, today reported third-quarter 2005 financial results with sales of $2.9 billion, an increase of 6.5 percent compared to the same period a year ago. Net earnings for the quarter were $10 million or $0.10 per diluted share, which compares to $13 million or $0.13 per diluted share in the prior year quarter. Consistent with the Company's expectations, net debt increased from the previous quarter due to the impact of seasonal factors on its cash flows.

Third quarter net earnings were slightly above previously provided guidance due to better than expected operating results, but below the comparable prior year period primarily due to higher restructuring costs and increased commodity inflation levels in the 2005 quarter. Additionally, during the quarter, the Company announced an agreement to acquire a majority stake in Dalphi Metal Espana, S.A. ("Dalphimetal"), a European based manufacturer of airbags and steering wheels. Subsequent to the quarter-end, on October 27, the Company completed its acquisition of Dalphimetal, which it funded with a combination of cash and existing credit facilities.

"In addition to posting solid results for the quarter and achieving our operational and financial objectives, we made progress on our strategic initiatives with the acquisition of Dalphimetal, which enhances our Occupant Safety Systems business and further broadens the Company's leading sales diversification," said John Plant, president and chief executive officer.

Mr. Plant added, "We've taken an aggressive approach to our cost reduction efforts this year, driven by our need to adapt to changing industry conditions and growing economic pressures. We believe the results of our cost reduction efforts and other strategic initiatives will improve our long term competitiveness and best position the Company to support the growing global demands of our customers."

Third Quarter 2005

The Company reported third-quarter 2005 sales of $2.9 billion, an increase of $178 million or 6.5 percent compared to prior year sales of $2.7 billion. The increase resulted primarily from higher product sales and foreign currency translation, partially offset by pricing provided to customers and lower vehicle production volumes. Operating income for third-quarter 2005 was $74 million, a decrease of $21 million compared to the prior year period total of $95 million. The decrease resulted primarily from the continued impact of commodity inflation above prior year levels, increased restructuring and impairment expenses, and a higher level of research and development costs, which were partially offset by the benefits of higher sales and cost reduction programs in excess of pricing provided to customers and non-commodity inflation. Restructuring and asset impairment expenses in the third quarter of 2005 were $35 million, which compares to $5 million in the prior year quarter. Operating income after excluding the impact of restructuring and impairment expenses from both periods increased by 9 percent compared to the prior year period.

Net interest and securitization expense for third-quarter 2005 totaled $59 million, which is slightly below the prior year level of $60 million. The year-to-year reduction was lessened by the impact of rising interest costs offsetting the Company's deleveraging activities, which include debt reduction and other capital structure improvement efforts. During the quarter, the Company revised its annual tax rate assumption slightly downward to 47 percent before one-time items. As a result of this change, tax expense in the third quarter was $5 million (33 percent effective tax rate), which is the amount required to bring the tax rate for the nine month period to the level of the revised annual tax rate assumption of 47 percent. The Company reported third- quarter 2005 net earnings of $10 million or $0.10 per diluted share, compared to net earnings of $13 million or $0.13 per diluted share in the 2004 period.

Earnings before interest, securitization costs, loss on retirement of debt, taxes, depreciation and amortization ("EBITDA") were $200 million for third-quarter 2005, which compares to prior year EBITDA of $215 million. The decline in EBITDA resulted primarily from the increase in restructuring charges and asset impairments.

Year-to-Date 2005

For the nine month period ended September 30, 2005, the Company reported sales of $9.5 billion, an increase of $682 million or 7.7 percent compared to prior year sales of $8.8 billion. The increase resulted primarily from higher product sales together with foreign currency translation and the effect of five additional calendar days in the first nine months of 2005, partially offset by pricing provided to customers and lower vehicle production volumes. Operating income for the 2005 year-to-date period was $427 million, a decrease of $23 million compared to the prior year total of $450 million. The decrease resulted primarily from the impact of commodity inflation above prior year levels, increased restructuring and asset impairment costs, a higher level of research and development expenses and the impact of customer solvency issues, partially offset by the benefits of higher sales and cost reduction programs in excess of pricing provided to customers and non-commodity inflation. Restructuring and asset impairment expenses in the first nine months of 2005 were $56 million, compared to $18 million in the prior year period. Operating income after excluding the impact of restructuring and impairment expenses from both periods increased by 3 percent compared to the prior year level.

Net interest and securitization expense for the first nine months of 2005 totaled $173 million, which compares to $183 million in the 2004 period. The reduction can be attributed to the benefits derived from past de-leveraging efforts in excess of the impact of rising interest rates associated with the Company's debt. During the 2005 period, the Company incurred $7 million for loss on retirement of debt related to the partial redemption of its Euro denominated 10-1/8 percent senior notes. The comparable 2004 period included debt retirement and refinancing expenses of $48 million related to the Company's initial public offering and a bank debt refinancing transaction.

Tax expense for the year-to-date 2005 period was $102 million, which included a one-time tax benefit of $17 million resulting from a tax law change in Poland. The Company's year-to-date 2005 effective tax rate after excluding the $17 million tax benefit and the effects of the $7 million loss on retirement of debt was 47 percent. Net earnings for the first nine months of 2005 were $145 million or $1.42 per diluted share, which compares to net earnings of $91 million or $0.91 per diluted share in the prior year period. Net earnings excluding the impact of the $17 million one-time tax benefit in 2005 and the previously mentioned losses on retirement of debt from both periods were $135 million or $1.32 per diluted share in the 2005 period compared to $139 million or $1.39 per diluted share in the prior year.

EBITDA for the first nine months of 2005 totaled $807 million, which compares to $816 million in the prior year period. The decline in EBITDA resulted primarily from the increase in restructuring charges and asset impairments.

Capital Structure/Liquidity

Net cash flow from operating activities during the third quarter and the first nine months of 2005 was a use of $(90) million and a source of $122 million, respectively. Capital expenditures for the quarter were $107 million compared to $86 million in the prior year quarter. Year to date capital expenditures totaled $281 million, which compares to $248 million in the prior year period. As of September 30, 2005, the Company had $2,831 million of debt and $317 million of cash and marketable securities, resulting in net debt (defined as debt less cash and marketable securities) of $2,514 million. Net debt increased by $188 million compared to the end of the second quarter 2005 and $142 million compared to year-end 2004, primarily due to seasonal factors.

Subsequent Event

On October 27, 2005, the Company completed its acquisition of a 68.4 percent stake of Dalphimetal, which it purchased for approximately euro 112 million, or $134 million, subject to post-closing adjustment, and the assumption of debt of approximately euro 80 million or $96 million. The acquisition was funded with a combination of cash and existing credit facilities. TRW will report Dalphimetal as a consolidated entity effective the date of the acquisition.

2005 Outlook

The Company is updating its full-year 2005 outlook to reflect, among other factors, revised foreign currency and interest rate assumptions, updated production volumes and an increased level of net pre-tax restructuring and asset impairment costs that are expected to total $90 million. Conversely, the Company's outlook has not been updated to include the consolidation of Dalphimetal, which, excluding the potential impact of purchase accounting adjustments, is not expected to have a material impact on its 2005 operating results. As a result, the Company now expects full year revenues of approximately $12.6 billion and earnings per diluted share in the range of $1.65 to $1.80. Full year outlook after excluding the previously mentioned $17 million one-time tax benefit and the $7 million loss on retirement of debt is expected to be in the range of $1.55 to $1.70 per diluted share.

For the fourth quarter of 2005, the Company expects revenue of approximately $3.1 billion and net earnings in the range of $0.23 to $0.38 per diluted share. Fourth quarter guidance includes net pre-tax restructuring and asset impairment expenses of approximately $34 million.

Mr. Plant commented, "We've performed to the expectations we set at the beginning of the year despite facing a more difficult industry environment than originally anticipated. Much of our success under these conditions can be attributed to the dedication and commitment of our employees and their ability to deliver the many cost reduction initiatives demanded of them throughout the year. As we assess the mounting challenges of the coming year and set our operating and financial objectives accordingly, the same level of commitment and high level of execution will be essential as we envision an environment that will test our ability to post flat to moderate earnings growth in 2006."

About TRW

With 2004 sales of $12.0 billion, TRW Automotive ranks among the world's leading automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, employs approximately 60,000 people in 24 countries. TRW Automotive 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. All references to "TRW Automotive", "TRW" or the "Company" in this press release refer to TRW Automotive Holdings Corp. and its subsidiaries, unless otherwise indicated. 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 within the meaning of the Private Securities Litigation Reform Act of 1995. 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 our Report on Form 10-K for the fiscal year ended December 31, 2004 (the "10-K") and our Reports on Form 10-Q for the quarters ended April 1 and July 1, 2005, and include: our ability to successfully integrate Dalphimetal's operations into the Company, which includes the retention of their customer base; possible production cuts or restructuring by our customers; efforts by our customers to consolidate their supply base; escalating pricing pressures from our customers; severe inflationary pressures impacting the market for commodities; non-performance by, or insolvency of, our suppliers and customers, which may be exacerbated by recent bankruptcies; our substantial leverage; interest rate risk arising from our variable rate indebtedness; product liability and warranty and recall claims; our dependence on our largest customers; loss of market share by domestic vehicle manufacturers; limitations on flexibility in operating our business contained in our debt agreements; fluctuations in foreign exchange rates; the possibility that our owners' interests will conflict with ours; work stoppages or other labor issues at our facilities or at the facilities of our customers or suppliers and other risks and uncertainties set forth under "Risk Factors" in the 10-K and in our other SEC filings. We do not intend or assume any obligation to update any of these forward-looking statements.

Source: TRW Automotive Press Release