1st November 2006 - TRW Automotive Reports Third Quarter 2006 Financial Results

Revises 2006 Full Year Outlook

TRW Automotive Holdings Corp., the global leader in active and passive safety systems, today reported third-quarter 2006 financial results with sales of $3.0 billion, an increase of about 3.4 percent compared to the same period a year ago. Net earnings for the 2006 quarter were $5 million or $0.05 per diluted share, which compares to $10 million or $0.10 per diluted share in the prior year quarter.

Comparing the third quarter 2006 results to the previous year, a higher effective tax rate in the current year contributed significantly to the decrease in earnings. The 2006 quarterly tax rate, which is significantly higher than the full year expected rate, was negatively impacted primarily by the Company's geographic earnings profile in the quarter.

"Despite a precipitously more difficult second half operating environment, we are on pace to post profitable operating growth in 2006 as we continue to benefit from our industry leading sales diversification and the underlying strength of our safety product portfolio," said John Plant, president and chief executive officer. "We've been successful at offsetting lower customer production in North America with higher product volumes in Europe, Asia and other parts of the world, which together represent 66% of our sales. However, the unprecedented level of recent production cuts by our major North American customers, along with other industry and operational pressures facing our business, have caused us to scale back our expected operating earnings growth for the year to more moderate levels."

Third Quarter 2006

The Company reported third-quarter 2006 sales of $3.0 billion, an increase of $98 million or 3.4 percent over the prior year period. The 2006 quarter benefited from the inclusion of sales from Dalphi Metal Espana, S.A. ("Dalphimetal"), which was acquired in October 2005. Excluding the incremental benefit from Dalphimetal, third-quarter 2006 sales were essentially flat compared to the previous year as the positive effect of foreign currency translation and growth from safety products were offset by lower customer vehicle production volumes in North America and price reductions provided to customers.

Operating income for third-quarter 2006 was $82 million, which compares favorably to the prior year result of $73 million. In comparison to the prior year, the current quarter benefited from lower restructuring and asset impairment expenses, savings generated from cost improvement and efficiency programs, the inclusion of Dalphimetal and the favorable resolution of certain patent-related matters. These positive factors were partially offset by pricing provided to customers, the effect of lower North American industry production, commodity inflation and underperformance by the Company's Automotive Components Segment related primarily to inefficient product launches, supplier issues, ongoing competitive pressures and other factors. Restructuring and asset impairment expenses in the 2006 period were $3 million, which compares to $35 million in 2005.

Net interest and securitization expense for the third quarter of 2006 increased to $62 million when compared to the prior year total of $59 million. The year-to-year increase can be attributed to the impact of rising interest rates on the Company's floating rate debt, which stands at approximately 63% of total debt outstanding, and incremental bank debt assumed at the time of the Dalphimetal acquisition. Together, these factors more than offset interest savings related to past debt reduction and capital structure improvement efforts.

Third-quarter 2006 tax expense was $18 million resulting in an effective tax rate of 78 percent, which is above the expected annual rate as a result of the Company's quarterly geographic earnings profile. The higher tax rate in the quarter contributed significantly to the decrease in net earnings when compared to the prior year results.

Additionally, tax expense in the 2006 quarter included the positive effect of a reversal of prior tax reserves resulting from a tax interpretation issued by the German tax authorities clarifying the treatment of certain corporate interest deductions and the negative effect of establishing a valuation allowance for the net deferred tax asset of the Company's Canadian operations. The net impact of these two items was immaterial.

The Company reported third-quarter 2006 net earnings of $5 million, or $0.05 per diluted share, which compares to $10 million or $0.10 per diluted share in the 2005 period.

Earnings before interest, securitization costs, loss on retirement of debt, taxes, depreciation and amortization ("EBITDA") were $213 million in the third quarter, which compares to the prior year level of $200 million.

Year-to-Date 2006

For the nine-month period ended September 29, 2006, the Company reported sales of $9.9 billion, an increase of $365 million or 3.8 percent compared to prior period sales of $9.5 billion. The current year benefited from the inclusion of sales resulting from the acquisition of Dalphimetal, continued growth from safety products and foreign currency translation, partially offset by lower North American customer vehicle production and price reductions provided to customers.

Operating income for the 2006 year-to-date period was $510 million, which represents an increase of $90 million, or 21 percent, over the prior year result of $420 million. The current quarter benefited from a higher level of sales than the prior year, including a beneficial product mix that favored the Company's Occupant Safety business in the first half of the year. Savings generated from cost improvement and efficiency programs, lower restructuring and asset impairment costs, and the non-recurrence of certain customer solvency and foreign currency related expenses also contributed. These items were partially offset by price reductions provided to customers, the net impact of commodity inflation, and the previously mentioned underperformance by the Automotive Components Segment in the third quarter. Restructuring and asset impairment expenses in the nine month year-to-date 2006 period were $22 million, which compares to $58 million in 2005.

Net interest and securitization expense for the first nine months of 2006 totaled $184 million, which compares to $173 million in the prior year period. The year-to-year increase can be attributed to the impact of rising interest rates on the Company's floating rate debt and incremental bank debt assumed at the time of the Dalphimetal acquisition that together more than offset interest savings related to past debt reduction and capital structure improvement efforts.

During the year-to-date 2006 period, the Company incurred charges of $57 million related to the tender for the outstanding GBP 94.6 million 10-7/8% bonds of its Lucas Industries Limited subsidiary. Similarly, the Company incurred charges of $7 million in the prior year period for debt retirement expenses associated with the partial redemption of its 10-1/8% senior notes. Tax expense in the first nine months of 2006 was $134 million. The effective tax rate excluding expenses related to the Lucas bond transaction of $57 million (which carry zero tax benefit due to the Company's tax loss position in the applicable jurisdiction) was 40 percent. The adjusted rate is below the expected annual rate as a result of the Company's quarterly geographic earnings profile.

Year-to-date 2006 net earnings were $143 million, or $1.38 per diluted share, which compares to $145 million or $1.42 per diluted share in the 2005 period. Net earnings in both periods were impacted by certain non-recurring items, which were expenses of $57 million in the 2006 period related to the Lucas bond tender transaction and net income of $10 million in the 2005 period related to the combined effect of a one-time tax benefit and the previously mentioned loss on retirement of debt. Net earnings excluding these items from both periods were $200 million or $1.93 per diluted share in 2006, which compares to $135 million or $1.32 per diluted share in 2005.

EBITDA for the first nine months of 2006 was $899 million, which is an 11 percent increase compared to the prior year total of $807 million. The year- to-year increase can be attributed to the higher level of operating income in the 2006 period.

Capital Structure/Liquidity/Transactions

Net cash provided by operating activities during the third quarter and the first nine months of 2006 was $1 million and $252 million, respectively. In the comparable 2005 period, the Company's cash flow from operating activities was a use of ($90) million in the third quarter and a source of $122 million in the first nine months. Third quarter capital expenditures were $132 million compared to $107 million in 2005. For the year-to-date period, capital expenditures were $334 million, which compares to $281 million in the prior year.

As of September 29, 2006, the Company had $3,038 million of debt and $369 million of cash and marketable securities, resulting in net debt (defined as debt less cash and marketable securities) of $2,669 million, which represents an increase of $109 million compared to the year-end 2005 level. The change in net debt includes the $57 million premium associated with the Lucas bond tender transaction.

On February 2, 2006, the Company's wholly owned subsidiary, Lucas Industries Limited, completed the tender for its outstanding GBP 94.6 million 10-7/8% bonds. As a result of the transaction, the Company incurred a $57 million charge for loss on retirement, which reflects the difference between the tender amount and the book value of debt related to the bonds at the time of the transaction.

On May 3, 2005, the Company completed the redemption of a portion of its Euro denominated 10-1/8% senior notes, which resulted in pre-tax expenses of $7 million for premiums and associated fees.

2006 Outlook

The Company revised its full year guidance downward to account for expected lower customer vehicle production schedules and other factors in the fourth quarter. Accordingly, full year sales are now expected to be approximately $13.0 billion (including fourth quarter sales of approximately $3.1 billion). Net earnings per diluted share are expected to be in the range of $1.25 to $1.50, which includes the previously mentioned $57 million debt retirement expenses. Earnings per diluted share excluding this one-time item are expected to be in the range of $1.80 to $2.05.

For the year, the Company continues to expect pre-tax restructuring expenses of approximately $50 million. The full year effective tax rate is estimated at approximately 46 percent, which excludes expenses related to the bond tender transaction.

Mr. Plant commented, "In the midst of an extremely difficult operating environment, the Company has posted solid operating growth for the year-to- date period, which is a significant achievement for the organization. Additionally, we are making considerable investments to enhance our technology and our global presence in the marketplace, with the ultimate goal of growing the Company profitably and competitively over the long term."

"As we assess the health of the industry environment over the coming year, we anticipate further pressures from lower North American customer volumes, an adverse negative mix change favoring passenger cars over light trucks, and weaker commercial vehicle sales. Our ability to mitigate these challenges, together with rising commodity prices and a weakened supply base, will certainly test our resolve."

About TRW

With 2005 sales of $12.6 billion, TRW Automotive ranks among the world's leading automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, employs approximately 63,000 people in 26 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 http://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, 2005 (the "10-K"), and our Forms 10-Q for the quarters ended March 31 and June 30, 2006, and include: production cuts or restructuring by our major customers; work stoppages or other labor issues at the facilities of our customers or suppliers; non-performance by, or insolvency of, our suppliers and customers, which may be exacerbated by recent bankruptcies and other pressures within the automotive industry; the inability of our suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; interest rate risk arising from our variable rate indebtedness (which constitutes a majority of the company's indebtedness), especially in view of the current climate of rising interest rates; loss of market share by domestic vehicle manufacturers; efforts by our customers to consolidate their supply base; severe inflationary pressures impacting the market for commodities; escalating pricing pressures from our customers; our dependence on our largest customers; fluctuations in foreign exchange rates; our substantial leverage; product liability and warranty and recall claims; limitations on flexibility in operating our business contained in our debt agreements; the possibility that our owners' interests will conflict with ours 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