TRW Automotive Holdings Corporation (TRW)

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TRW Automotive Holdings (TRW)

Q1 2011 Earnings Call

May 04, 2011 8:30 am ET

Executives

Joseph Cantie - Chief Financial Officer, Executive Vice President and Treasurer

Mark Oswald - Director of Investor Relations

John Plant - Chairman, Chief Executive Officer and President

Analysts

Rod Lache - Deutsche Bank AG

Patrick Archambault - Goldman Sachs Group Inc.

H. Nesvold - Jefferies & Company, Inc.

Christopher Ceraso - Crédit Suisse AG

Brett Hoselton - KeyBanc Capital Markets Inc.

Himanshu Patel - JP Morgan Chase & Co

Presentation

Operator

Good morning, and welcome to the TRW Conference Call. [Operator Instructions] And as a reminder, this conference call is being recorded. Presentation material for today's call was posted to the company's website this morning at trw.com/results. Please download the material now if you have not already done so. [Operator Instructions] I would now like to introduce your host for today's conference call, Mark Oswald, Director of Investor Relations. Sir, you may begin.

Mark Oswald

Thank you, and good morning. I would like to welcome everyone to our First Quarter 2011 Financial Results Conference Call. This morning, as usual, I'm joined by John Plant, our Chairman and Chief Executive Officer; and Joe Cantie, our Chief Financial Officer.

On today's call, John will provide an overview of the current automotive environment and its impact on TRW. John will also provide a brief summary of the financial results and discuss other related business matters, including our outlook for the remainder of the year. After John's comments, Joe will provide an expanded review of the financial information. At the conclusion of Joe's comments, we will open the call to your questions.

Before I turn the call over to John and Joe, there are a few items I'd like to cover. First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today, and therefore, involve risks and uncertainties. I would caution you that our actual results could differ materially from the forward-looking statements made on this call. Please refer to Slide 2 of the presentation for our complete Safe Harbor statement.

The risk factors section of our 2010 Form 10-K contains additional information about risks and uncertainties that could impact our business. You can access a copy of our 2010 10-K and other SEC filings by visiting the Investors section of our website at trw.com or through the SEC's website at sec.gov. On a related matter, we expect to file our first quarter 10-Q within the next day or so. Once filed, the 10-Q can also be accessed through either website.

In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the conference call materials, which are posted on the Investor section of our website at trw.com. Finally, a replay of this call can be accessed via dial-in or through a webcast on our website. Replay instructions were included in our release this morning. We have not given our permission or any other recording of this call and do not approve or sanction any transcribing of the call.

This concludes my comments. I'll now turn the call over to John Plant.

John Plant

Thank you, Mark, and good morning, everyone. As you can see from the results posted this morning, TRW started 2011 with a strong first quarter and has continued to build momentum. During the quarter, sales totaled $4.1 billion or 15% higher compared with the prior year quarter. Operating profit before special items was $382 million, with a margin of 9.3%. This marked the highest level of operating profit and margin for any quarter in our history.

Net income was $292 million, and earnings per share were $2.21 on the same basis. Regarding cash, the company generated cash from operations of $81 million and free cash flow of $14 million. We are extremely pleased with this best ever first quarter cash performance, considering the increased investment required to fund our growth and the normal seasonality of our cash flows. And this outcome in the first quarter laid the foundation for what we anticipate to be yet another year of strong cash generation.

And finally, our net debt of $719 million was another best outcome for the company and highlights our continued performance on further strengthening our balance sheet. Joe will discuss TRW's capital structure and the very positive developments that have occurred during the first quarter in just a few moments.

Overall, our first quarter results demonstrate that TRW is taking advantage of its strong position, and it continues to lay solid foundations to ensure long-term success. The trend established throughout 2010, during which the industry production volume has remained robust, was extended to the first quarter of 2011, with the recent production disruptions at our customers due to the earthquakes in Japan having a minimal impact in the quarter.

In North America, overall vehicle production was up 14% compared with the prior quarter. On a sequential basis compared to the fourth quarter of last year, production was up around 12%. This level of production has been supported by the gradual increase in consumer demand. For the quarter, the seasonally adjusted annual selling rate averaged 13 million units, up from the mid-12 million unit range experienced in the fourth quarter of 2010.

In Europe, vehicle production was up about 8% compared with last year's quarter. And on a sequential basis compared to the fourth quarter, production was up around 4%. Improving customer demand inside Europe, combined with strong consumer demand outside of Europe, which continues to support this level of production. In fact, in Germany and France, they recorded 14% and 9% year-on-year increase in registration, respectively during this first quarter, and these are definitely positive signs as we move into the year.

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