TRW Automotive Holdings Corporation (TRW)

TRW 
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TRW Automotive Holdings (TRW)

Q4 2011 Earnings Call

February 16, 2012 8:30 am ET

Executives

Mark Oswald - Director of Investor Relations

John C. Plant - Chairman, Chief Executive Officer and President

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

Analysts

Himanshu Patel - JP Morgan Chase & Co, Research Division

Rod Lache - Deutsche Bank AG, Research Division

Christopher J. Ceraso - Crédit Suisse AG, Research Division

Brett D. Hoselton - KeyBanc Capital Markets Inc., Research Division

John Murphy - BofA Merrill Lynch, Research Division

Presentation

Operator

Good morning, and welcome to the TRW Fourth Quarter and Fiscal Year 2011 Earnings 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/result. 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, Mark Oswald, Director of Investor Relations. Sir, you may begin.

Mark Oswald

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

On today's call, consistent with our previous calls, 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 look to discuss other related business matters, including our outlook and planning assumptions for 2012. 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 and our first, second and third quarter 10-Qs contain additional information about risks and uncertainties that could impact our business. You can access a copy of our 2010 10-K and 2011 quarterly 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 2011 Form 10-K within the next day or so. Once filed, the 10-K 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 on the conference call materials, which are posted on the Investors 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 permission for 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?

John C. Plant

Thank you, Mark, and good morning, everyone. As you can see from the results post this morning, TRW's fourth quarter performance solidified a highly successful year for the company. During the fourth quarter, sales, which totaled $4 billion, were 7% higher compared with the prior year quarter.

Operating profit before special items was $307 million. Net income was $238 million and earnings per share were $1.84 on the same basis.

Regarding cash, after making $100 million of discretionary contributions to our pension plans, the company generated cash from operations less capital expenditures of $341 million. And finally, gross debt and net debt reached historic lows of $1 billion and $32 million and $291 million respectively.

The strong performance achieved in the fourth quarter and for the full year enabled the company to fund its aggressive growth plans, continue its efforts to further strengthen its balance sheet and actively manage its legacy liabilities, namely the company's pension obligations.

Making discretionary contributions of $100 million to the company's pension plans, actively managing the pension obligations and healthy asset returns were instrumental in limiting and more than offsetting the negative impact of the historically low discount rates at the end of the year.

Through active management, the unfunded status of the company's legacy liabilities improved by about $350 million compared with the end of 2010. In addition to being at a very manageable level, we also believe that we are well positioned to take further and additional actions as the opportunities arise to reduce our exposures.

Beyond the financial performance achieved in Q4 and for the full year, TRW's world-class quality metrics, expanding regional diversification and continued success at winning new business provide evidence of the overall strength of the company.

Combining the operational and financial accomplishments achieved in 2011 positions the company for future long-term success.

I'll expand on the full year results in just a few moments. I will add a few additional comments on the fourth quarter. During the quarter, global production volumes were in line with our expectations and those of most industry observers. In North America, overall vehicle production was up 16% compared with the fourth quarter of 2010.

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