30th October 2008 - TRW Automotive Reports Third Quarter 2008 Financial Results; Provides Update on 2008 Outlook

TRW Automotive Holdings Corp., the global leader in active and passive safety systems, today reported third-quarter 2008 financial results with sales of $3.6 billion, an increase of 2.8 percent compared to the same period a year ago. The Company reported a third quarter net loss of $54 million or ($0.53) per diluted share, which compares to net earnings of $23 million or $0.22 per diluted share in the prior year period. Third quarter 2008 net cash flow from operating activities was $79 million, which exceeded the level generated in the prior year.

Sales in the third quarter benefited from currency movements and increased sales of modules, which together did not provide a corresponding benefit to earnings. Excluding the benefits of currency and modules, core product sales were sharply lower, which was the primary reason for the decline in earnings between the two quarters. Other negative factors included a higher level of restructuring charges, commodity costs and tax expense despite a loss before income taxes.

"TRW's third quarter results reflect the unprecedented challenges facing the automotive industry and global economic markets in general," said John C. Plant, President and Chief Executive Officer. "During this time of uncertainty, we are taking the actions necessary to align our organization with the changing industry conditions while continuing to remain focused on advancing our strategic priorities to ensure our long-term competitiveness."

Third Quarter 2008

The Company reported third-quarter 2008 sales of $3.6 billion, an increase of $97 million or 2.8 percent over the prior year period. The 2008 quarter benefited from the positive effect of foreign currency translation and the increase in sales of lower margin modules. These positive factors were substantially offset by lower sales of core products in both North America and Europe resulting from sharply reduced light vehicle production volumes. Price reductions provided to our customers were also a negative factor between the two quarters.

Operating income for the third-quarter 2008 was $12 million, which compares to $95 million in the prior year period. The year-to-year decrease was driven by a number of factors, the most significant of which were the impact of lower sales, excluding currency, and the negative sales mix including a decline in higher margin core product sales replaced by lower margin module sales. Other negative factors included net currency losses and increased commodity costs.

As a result of the negative industry conditions, the Company has increased its level of restructuring actions as it focuses on reducing its cost base, which also contributed to a lower level of operating profit between quarters. In the 2008 third quarter, restructuring charges and asset impairments totaled $32 million compared to $13 million in the prior year period.

Net interest and securitization expense for the third quarter of 2008 totaled $43 million, which compares to $56 million in the prior year. The year-to-year decrease is due to lower interest rates between the periods. Tax expense for the third quarter of 2008 was $23 million, despite a loss before income taxes. The expense for the quarter is attributable to earnings in profitable tax jurisdictions while the Company has not recognized a tax benefit from losses in certain other jurisdictions. In the prior year quarter, tax expense was $18 million, resulting in an effective tax rate of 44 percent.

The Company reported a third-quarter 2008 net loss of $54 million, or ($0.53) per diluted share, which compares to net earnings of $23 million or $0.22 per diluted share in the 2007 period.

Earnings before interest, securitization costs, loss on retirement of debt, taxes, depreciation and amortization ("EBITDA") were $157 million in the third quarter of 2008, as compared to the prior year level of $237 million.

Year-to-Date 2008

For the nine-month period ended September 26, 2008, the Company reported sales of $12.2 billion, an increase of $1.4 billion or 12.6 percent compared to prior year sales. All of the increase in sales resulted from the positive effect of foreign currency translation and above trend sales of lower margin modules. Higher product volumes related to new product growth and robust industry sales in certain overseas markets during the first nine months of the year were fully offset by the continued decline in North American and Western European vehicle production and price reductions provided to customers.

Operating income for the 2008 year-to-date period was $424 million, which is a decrease of $51 million or 10.7 percent compared to the prior year result of $475 million. The decline resulted from a number of factors including a $32 million increase in the level of restructuring and asset impairment expenses. Positive factors such as savings generated from cost improvement and efficiency programs, including reductions in pension and OPEB related costs, and the positive effect of net insurance proceeds received in 2008 relating to a prior year business disruption were more than offset by the profit impact resulting from a negative mix of products sold, higher commodity prices, price reductions provided to customers and foreign currency losses.

Net interest and securitization expense in the first nine months of the 2008 period was $136 million, which represents a significant improvement from the prior year result of $177 million. The decline in interest expense resulted primarily from the Company's debt recapitalization completed in the first half of 2007 and lower interest rates between the periods. The debt recapitalization completed last year resulted in $155 million of costs in 2007.

Tax expense in the first nine months of 2008 was $126 million, resulting in an effective tax rate of 43 percent, which compares to $116 million, or 38 percent excluding the debt retirement costs of $155 million, in the prior year.

The Company reported year-to-date 2008 net earnings of $167 million, or $1.63 per diluted share, which compares to $34 million or $0.33 per diluted share in the 2007 period. The comparison of net earnings, excluding the previously mentioned debt retirement costs from the prior year, were $167 million or $1.63 per diluted share in 2008 as compared to $189 million or $1.84 per diluted share in 2007.

EBITDA was $874 million in the first nine months of 2008, which is a 1.8 percent decrease from the prior year level of $890 million primarily due to the lower level of operating income in the current year.

Cash Flow and Capital Structure

Third quarter 2008 net cash flow from operating activities was $79 million, which compares to a use of $(158) million in the prior year. The prior year use of cash included the pay down of $127 million of outstanding borrowings under the Company's U.S. based Accounts Receivable Securitization Facility ("Receivable Facility"). Excluding the pay down of the Receivable Facility, the comparison of net cash flow from operating activities was an inflow of $79 million in the current quarter compared to a use of $(31) million in the prior year. Third quarter 2008 capital expenditures were $121 million compared to $111 million in 2007.

For the nine month period ended September 26, 2008, net cash flow from operating activities was $4 million, which compares to net cash use of $(89) million in the prior year. Year-to-date capital expenditures were $338 million in 2008 compared to $339 million in 2007.

As of September 26, 2008, the Company had $3,243 million of debt and $511 million of cash and marketable securities, resulting in net debt (defined as debt less cash and marketable securities) of $2,732 million. This compares favorably to net debt of $3,029 million at the end of the prior year third quarter period ended September 28, 2007.

At the end of the 2008 third quarter, committed liquidity facilities and cash on hand provided the Company with available liquidity of approximately $1.5 billion.

2008 Outlook

The Company expects its full year sales to be approximately $15.3 billion (including fourth quarter sales of approximately $3.1 billion). Full year net earnings per share are expected to be in the range of $0.90 to $1.10, which includes pre-tax restructuring and asset impairment charges for known actions forecasted at approximately $95 million (including approximately $30 million in the fourth quarter).

The Company continues to evaluate other actions that may be necessary in reaction to the current environment, which will most likely lead to additional restructuring charges and asset impairments that are not incorporated in the guidance provided above.

The guidance range above reflects the continued reduction in vehicle production schedules in both Europe and North America, increased commodity costs and significantly higher restructuring expenses. The effective tax rate, which is highly dependent on the Company's overall level of pre-tax earnings and the location of those earnings, is expected to exceed 50% for the full year. Lastly, the Company expects capital expenditures in 2008 to be approximately 3.5 percent of sales.

"Our 2008 guidance provided today reflects the challenges facing the automotive industry and TRW, most notably the rapid decline and change in mix of vehicle production schedules of our customers," said John C. Plant. "At this point, we are planning for a difficult 2009 year with vehicle sales below 2008 levels in both Europe and North America."

About TRW

With 2007 sales of $14.7 billion, TRW Automotive ranks among the world's leading automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, operates in 27 countries and employs approximately 66,000 people worldwide. 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.

Source: TRW Automotive Press Release