Including special items, TRW reported net loss of US$366 million or US$3.13 per share in the first quarter of 2015, compared with net earnings of US$199 million or US$1.68 per share in the prior-year quarter.
Revenues in the reported quarter dropped 6.8% to US$4.14 billion and fell short of the Zacks Consensus Estimate of US$4.37 billion. Excluding the effects of currency and divested businesses, revenues increased 7% year over year. The improvement was driven by rising demand for TRW’s innovative technologies and higher vehicle production volumes.
Adjusted operating income rose 7.9% to US$354 million (8.5% of sales) from US$328 million (7.4% of sales) in the year-ago quarter. The increase in margins was driven by profit from higher underlying sales, a positive mix of sales and improved operational performance, partially offset by a lower pension income. Including all special items, the company recorded operating income of US$534 million, compared with US$308 million a year ago.
Adjusted earnings before interest, taxes, depreciation and amortization, and special items (adjusted EBITDA) came in at US$460 million in the quarter versus US$437 million in the first quarter of 2014.
Acquisition by ZF Friedrichshafen
In Sep 2014, TRW had announced that it will be acquired by ZF Friedrichshafen AG. The latter will invest US$13.5 billion to buy all outstanding shares of TRW at US$105.60 per share. The transaction is expected to close by the end of Jun 2015.
Divestment
On Apr 21, 2015, TRW signed a definitive agreement with THK Co., LTD to divest its Linkage and Suspension business for US$400 million, subject to working capital and other adjustments. The Linkage and Suspension business generated annual sales of US$550 million. This transaction is expected to close by the end of the third quarter, subject to customary conditions, including regulatory approvals.
Financial Details
TRW had cash and cash equivalents of US$1.02 billion as of Apr 3, 2015, compared with US$1.03 billion as of Dec 31, 2014. Total debt increased to US$1.59 billion as of Apr 3, 2015 from US$1.58 billion as of Dec 31, 2014.
In the first quarter of 2015, net cash outflow from operating activities was US$192 million compared with US$183 million in the year-ago period. Capital expenditure decreased to US$95 million from US$105 million in the comparable year-ago period. Consequently, free cash outflow was US$287 million, compared with US$288 million in the first quarter of 2014.
Outlook
For full-year 2015, TRW anticipates industry production of 17.4 million units in North America, 2% higher than 2014. Industry production is expected to be 20 million units in Europe, flat with that recorded last year. Vehicle production in China and rest of world regions is expected to increase. However, revenues will be adversely affected by the loss of sales due to divested businesses, the sale of TRW’s engine valve business, and fluctuations in foreign currency exchange rates.
Revenues for 2015 are expected to be in the range of US$16.2–US$16.5 billion, down from US$16.6–US$16.9 billion projected earlier.
TRW is a leading manufacturer of advanced technology products and services for the automotive markets. Headquartered in Michigan, the company operates in 24 countries through its subsidiaries. These operations primarily involve the design, manufacture and sale of active and passive safety-related products. – Zacks.com