- Fourth quarter sales of $4.0 billion, an increase of 4% excluding the impact of currency movements and divestitures; record full year sales of $16.4 billion, an increase of 7% on the same basis.
- Fourth quarter GAAP net earnings of $3.26 per diluted share; full year GAAP net earnings of $7.83 per diluted share.
- Excluding special items, fourth quarter net earnings of $1.55 per diluted share; full year net earnings of $6.14 per diluted share.
- Fourth quarter free cash flow (cash flow from operating activities less capital expenditures) of $413 million; 2012 full year free cash flow of $333 million.
- Total gross debt and net debt of $1,462 million and $239 million, respectively – both historic lows for the Company.
- Returned $268 million to shareholders through share repurchases in 2012.
TRW Automotive Holdings Corp. (NYSE: TRW), the global leader in active and passive safety systems, today reported fourth quarter 2012 financial results with sales of $4.0 billion, an increase of 1% compared to the prior year period (up 4% excluding the impact of currency movements and divestitures). The Company reported GAAP fourth quarter net earnings of $419 million or $3.26 per diluted share.
Excluding special items from the Company’s current and prior year quarterly results, the Company reported fourth quarter 2012 net earnings of $199 million, or $1.55 per diluted share, which compares to net earnings of $238 million or $1.84 per diluted share in the prior year period.
The Company’s full year 2012 sales grew to a record $16.4 billion, an increase of 7% compared to 2011 excluding the impact of currency movements and divestitures. For the year, GAAP net earnings were $1,008 million, or $7.83 per diluted share. Similar to the Company’s quarterly results, both the 2012 and 2011 full year results contain special items. Excluding special items, the Company reported full year 2012 net earnings of $788 million, or $6.14 per diluted share, which compares to net earnings of $971 million, or $7.42 per diluted share in 2011. Compared to last year’s pro forma adjusted results (reflecting the U.S. deferred tax asset valuation allowance reversal), diluted earnings per share in 2012 were slightly higher compared to full year 2011.
“2012 was a successful year for TRW as the Company delivered solid financial performance, as evidenced by our fourth quarter and full year results reported today. We also continued to execute our significant growth strategy and initiated a $1 billion share repurchase program,” said John C. Plant, Chairman and Chief Executive Officer. “TRW’s success and ability to build on its positive momentum, despite the challenges the automotive industry faced in Europe during the year, demonstrate the Company’s resilience and strong market position.”
Fourth Quarter 2012
The Company reported fourth quarter 2012 sales of $4.0 billion, an increase of $46 million from the prior year period. The impact of increasing demand for TRW’s innovative technologies, higher vehicle production volumes in North America and China and a higher level of module sales globally were partially offset by sharply lower vehicle production in Europe and the negative impact of currency movements between the two periods.
The Company’s fourth quarter 2012 operating income was $155 million, compared with $280 million in the 2011 period. The 2012 and 2011 periods included restructuring and asset impairment charges totaling $88 million and $27 million, respectively. In addition, the current period included a net charge of $52 million relating to certain pension and other post retirement benefit matters, primarily lump sum pension buyouts made to certain of our U.S. retirees and former employees, partially offset by certain post employment benefit plan settlements. Excluding these special items from both periods, operating income for the fourth quarter was $295 million, which compares to $307 million in the prior year period. The positive contribution from the higher level of sales and lower legal expense was more than offset by planned increases in costs to support future growth and the negative profit impact of currency movements between the two periods.
Net interest expense for the fourth quarter of 2012 totaled $29 million, which compares to $28 million in the 2011 period. In addition, the 2011 period included a net loss on retirement of debt totaling $1 million.
A tax benefit of $286 million was recognized in the fourth quarter of 2012, which compares to a benefit of $174 million in the prior year period. Both the 2012 and 2011 periods include special tax items. In 2012, net special tax items totaling $360 million were recognized primarily relating to changes in TRW’s overall deferred tax position as a result of tax planning initiatives and the reversal of the Company’s valuation allowance on deferred tax assets in Canada. The 2011 period included $217 million of net special tax items, the most significant of which was associated with the reversal of the valuation allowance on the Company’s deferred income tax assets in the United States.
The Company reported 2012 fourth quarter GAAP net earnings of $419 million, or $3.26 per diluted share, which compares to GAAP net earnings of $425 million, or $3.27 per diluted share in the 2011 period.
Excluding special items, the Company reported fourth quarter 2012 net earnings of $199 million, or $1.55 per diluted share, which compares to net earnings of $238 million or $1.84 per diluted share in the 2011 period. Compared to last year’s pro forma adjusted results (reflecting the U.S. deferred tax asset valuation allowance reversal), diluted earnings per share in the fourth quarter of 2012 were slightly higher compared to the 2011 period.
Earnings before interest, taxes, depreciation and amortization and special items (“adjusted EBITDA”) were $404 million in the fourth quarter of 2012, compared to the prior year level of $413 million. See page A6 for a description of the special items excluded in calculating adjusted EBITDA.
Full Year 2012
The Company reported record 2012 sales of $16.4 billion, an increase of $200 million compared to prior year sales (up 7% excluding the impact of currency movements and divestitures). The increase in sales resulted from a higher level of demand for TRW’s broad array of active and passive safety products, improved vehicle production volumes in North America and a higher level of module sales globally, partially offset by lower vehicle production volumes in Europe and the negative impact of currency movements between the two periods.
For full year 2012, the Company reported operating income of $1,085 million which compares to $1,260 million in the prior year. The 2012 period included restructuring and asset impairment charges totaling $95 million and a net charge of $52 million relating to certain pension and other post retirement benefit matters, primarily lump sum pension buyouts made to certain of our U.S. retirees and former employees, partially offset by certain post employment benefit plan settlements. The 2011 period included restructuring and asset impairment charges of $27 million, a gain related to a favorable resolution of a commercial matter totaling $19 million and a charge related to the termination of a service contract totaling $10 million. Excluding these items from both periods, the Company reported operating income of $1,232 million in 2012, which compares to $1,278 million in the prior year. The positive contribution from the higher level of sales was more than offset by planned increases in costs to support future growth and the negative profit impact from higher raw material prices and currency movements between the two periods.
Net interest expense for 2012 totaled $111 million, which compares to $118 million in the prior year period. In addition, the 2012 period included a net loss on retirement of debt totaling $6 million compared with 2011, which recognized a net loss on retirement of debt totaling $40 million.
A tax benefit of $33 million was recognized in 2012, which compares to a benefit of $47 million in the prior year. Excluding tax benefits related to special items in both years, tax expense was $340 million and $190 million for 2012 and 2011, respectively. The increase in expense is attributable to a higher effective tax rate in the current period resulting from the reversal of the Company’s valuation allowance on deferred income tax assets in the United States that occurred in late 2011.
The Company reported 2012 GAAP net earnings of $1,008 million, or $7.83 per diluted share, which compares to GAAP net earnings of $1,157 million, or $8.82 per diluted share in the prior year period.
Excluding special items, the Company reported 2012 net earnings of $788 million, or $6.14 per diluted share, which compares to net earnings of $971 million or $7.42 per diluted share in 2011. Compared to last year’s pro forma adjusted results (reflecting the U.S. deferred tax asset valuation allowance reversal), diluted earnings per share in 2012 were slightly higher compared to full year 2011.
Adjusted EBITDA totaled $1,648 million in 2012, compared to $1,726 million in the prior year. See page A6 for a description of the special items excluded in calculating adjusted EBITDA.
Cash Flow and Capital Structure Fourth quarter 2012 net cash flow provided by operating activities totaled $711 million, which compares to $608 million in the fourth quarter of 2011. Capital expenditures were $298 million in the current quarter compared to $267 million last year. Fourth quarter free cash flow (cash flow from operating activities less capital expenditures) was $413 million, compared to $341 million in the prior year quarter.
For full year 2012, net cash flow provided by operating activities totaled $956 million, which compares to $1,120 million in the prior year. Capital expenditures were $623 million in 2012, which compares to $571 million last year. For 2012, free cash flow was a positive $333 million, compared to $549 million in 2011. The lower level of free cash flow compared with last year resulted primarily from higher capital expenditures, increased payments pertaining to benefit plans and higher cash taxes.
During 2012, TRW used approximately $321 million of cash to repurchase over 5.6 million shares of its common stock and retire $48 million of face value senior notes.
As of December 31, 2012, the Company had $1,462 million of debt and $1,223 million of cash and cash equivalents, resulting in net debt (defined as debt less cash and cash equivalents) of $239 million. Both total debt and net debt set historic lows for the Company, $70 million and $52 million lower than the balances at the end of 2011, respectively.
2013 Outlook
TRW’s planning assumptions for industry production volumes in 2013 are approximately 15.8 million units in North America and 18.3 million units in Europe, up 3% and down 4%, respectively, compared to 2012 levels. The Company continues to expect expansion in vehicle production volumes in China and rest of world regions. Based on these production levels and the Company’s expectations for foreign currency exchange rates, full year 2013 sales are expected to range between $16.4 billion and $16.7 billion, with first quarter sales expected to be approximately $4.1 billion.
“TRW enters 2013 from a position of strength. Increased demand for the Company’s innovative products combined with our leading customer, product and regional diversification will help offset the difficult economic environment and lower vehicle production levels that are expected in Europe,” said Mr. Plant. “Remaining focused on executing the Company’s growth strategy, while mitigating the negative impact related to the industry challenges in Europe, especially in the first half of the year, are key objectives in 2013.”
