2nd May 2007 - TRW Automotive Reports First Quarter 2007 Financial Results

TRW Automotive Holdings Corp., the global leader in active and passive safety systems, today reported first-quarter 2007 financial results with sales of $3.6 billion, an increase of 5.0 percent compared to the same period a year ago. The Company reported a first quarter net loss of $(86) million or $(0.87) per share, which compares to net earnings of $47 million or $0.46 per diluted share in the previous year. Both periods included charges related to debt retirements.

In support of the Company's effort to improve financial flexibility and to lower borrowing costs, it issued $1.5 billion of Senior Notes and tendered for substantially all of its outstanding $1.3 billion Notes due 2013 during the first quarter. As a result of the transactions, the Company incurred debt retirement charges of $147 million for related premiums and fees. Similarly, the 2006 quarter included debt retirement charges of $57 million. Net earnings excluding debt retirement charges from both periods were $61 million or $0.60 per diluted share in 2007 and $104 million or $1.01 per diluted share in 2006. The year-to-year comparison was negatively impacted by difficult industry conditions, including lower North American customer vehicle production and commodity inflation, as well as an adverse mix of products sold and a higher tax rate between the two periods. Additional factors included Company specific issues related to a business disruption caused by a roof collapse at a facility in Brazil and underperformance in the Automotive Components group.

"The Company is on track to achieve its full year objectives as the first quarter operating results were consistent with our expectations despite continued North American industry pressures," said John Plant, president and chief executive officer.

Mr. Plant added, "Our steady financial performance can be attributed to the strength of the Company's safety portfolio, customer diversification and global sales balance, together with the benefits derived from our extensive cost reduction and restructuring programs."

First Quarter 2007

The Company reported first-quarter 2007 sales of $3.6 billion, an increase of $171 million or 5.0 percent over the prior year period. The 2007 quarter benefited from the positive effect of foreign currency translation and growth of safety products, including a higher concentration of lower margin module business. These positives were partially offset by the continued decline in North American customer vehicle production and price reductions provided to customers.

Operating income for first-quarter 2007 was $175 million, which compares to $227 million in the prior year period. The year-to-year decline was driven by a number of factors, including significantly lower North American customer vehicle production, negative product mix, higher commodity prices and pricing provided to customers. Additionally, the comparison was negatively impacted by the previously mentioned business disruption in Brazil and further underperformance in the Automotive Components segment. Savings generated from cost improvement and efficiency programs, including reductions in pension and OPEB related costs, new business growth and stable European production helped to offset these factors. Restructuring and asset impairment expenses in the 2007 period were $8 million, which is equal to the level reported in the previous year.

Net interest and securitization expense for the first quarter of 2007 increased to $64 million when compared to the prior year total of $61 million. The year-to-year increase can be attributed primarily to the impact of rising interest rates on the Company's floating rate debt. As mentioned previously, both periods included debt retirement costs, which were $147 million in the 2007 quarter and $57 million in the prior year.

First-quarter 2007 tax expense was $53 million, which compares to $63 million in the prior year. The effective tax rate in the 2007 quarter excluding previously mentioned debt retirement expenses was 46 percent, which is measurably higher than the previous year's adjusted rate of 38 percent. The higher effective tax rate contributed to the decrease in net earnings when compared to the prior year results. Additionally, the 2007 adjusted rate is above the expected full year rate of 42 percent primarily due to the impact of the Company's geographic earnings profile in the first quarter.

The Company reported a first-quarter 2007 net loss of $(86) million, or $(0.87) per share, which compares to $47 million or $0.46 per diluted share in the 2006 period. Net earnings excluding the previously mentioned debt retirement costs from both periods were $61 million or $0.60 per diluted share in 2007 and $104 million or $1.01 per diluted share in 2006.

Earnings before interest, securitization costs, loss on retirement of debt, taxes, depreciation and amortization ("EBITDA") were $309 million in the first quarter, which is down from the prior year level of $360 million.

Cash Flow and Capital Structure

Net cash from operating activities during the first quarter was a use of $221 million, which compares to a source of $18 million in the prior year. The year-to-year change resulted primarily from higher working capital requirements and lower earnings in the 2007 period. First quarter capital expenditures were $119 million compared to $83 million in 2006.

The Company completed its $1.5 billion Senior Note offering on March 26, 2007. Proceeds from the debt offering were used to repurchase existing Notes through its tender offer initiated on March 12. The Company incurred charges of $147 million in related premiums paid and fees during the first quarter as a result of the tender transaction. As of the expiration date on April 18, 2007, approximately 98.7 percent of the aggregate principal amount of outstanding Notes had been tendered.

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 of debt.

As of March 30, 2007, the Company had $3,309 million of debt and $354 million of cash and marketable securities, resulting in net debt (defined as debt less cash and marketable securities) of $2,955 million, which represents an increase of $512 million compared to year-end 2006. In addition to the higher level of working capital, the Senior Note offering and Note tender transaction increased net debt by approximately $130 million during the first quarter.

2007 Outlook

The Company revised its full year outlook to reflect the impact of the previously mentioned capital transactions and to account for other changes to its forecast assumptions. The revised outlook calls for full year sales in the range of $13.8 to $14.2 billion (including second quarter sales of approximately $3.6 billion) and net earnings per diluted share in the range of $0.62 to $0.92. Net earnings excluding first quarter debt retirement expenses of $147 million are expected to be in the range of $2.05 to $2.35, which is higher than previously provided guidance primarily due to an average lower borrowing rate associated with the newly issued debt.

This guidance range reflects an increase in estimated pre-tax restructuring expenses that now total approximately $45 million (including approximately $12 million in the second quarter). The effective tax rate remains at approximately 42 percent. Lastly, capital expenditures in 2007 are expected to be approximately 4 percent of sales.

Reconciliation to GAAP

In addition to GAAP results included within this press release, the Company has provided certain information which is not calculated according to GAAP ("non-GAAP"). Management believes these non-GAAP measures are useful to evaluate operating performance and/or regularly used by security analysts, institutional investors and other interested parties in the evaluation of the Company.

Non-GAAP measures are not purported to be a substitute for any GAAP measure and, as calculated, may not be comparable to other similarly titled measures of other companies. For a reconciliation of non-GAAP measures to the closest GAAP measure and for share amounts used to derive earnings per share, please see the financial schedules that accompany this release.

About TRW

With 2006 sales of $13.1 billion, TRW Automotive ranks among the world's leading automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, employs approximately 63,800 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 www.trw.com.

Source: TRW Automotive Press Release