TRW Reports Fourth Quarter and Full Year 2008 Financial Results

Fourth-quarter sales of $2.8 billion -- a decline of 28%; full-year sales of $15.0 billion -- an increase of 2%.

Fourth-quarter GAAP net loss of ($9.35) per share; full-year GAAP net loss of ($7.71) per share.

Excluding special items, fourth-quarter net loss of ($0.73) per share; full-year net earnings of $1.50 per diluted share.

Fourth-quarter free cash flow (cash flow from operating activities less capital expenditures) of $625 million; 2008 free cash flow of $291 million.

Year-end net debt of $2.2 billion -- a decline of $189 million since last year.

LIVONIA, Mich., February 20, 2009: TRW Automotive Holdings Corp. , the global leader in active and passive safety systems, today reported fourth-quarter 2008 financial results with sales of $2.8 billion, a decrease of 27.6 percent compared to the same period a year ago. The Company reported a GAAP fourth quarter net loss of $946 million or ($9.35) per diluted share, which compares to net earnings of $56 million or $0.55 per diluted share in the prior year period.

The 2008 fourth quarter GAAP net loss includes goodwill and other intangible asset impairment charges of $787 million, restructuring and fixed asset impairment charges of $81 million and a one-off net tax expense of $4 million. Similarly, the prior year fourth quarter included $19 million of restructuring charges and asset impairments and a one-off tax benefit of $14 million. Excluding these special items, TRW's 2008 fourth-quarter net loss was $74 million, or ($0.73) per diluted share, which compares to net earnings of $61 million or $0.59 per diluted share in the prior year period.

The Company's full-year 2008 sales grew to a record $15.0 billion, an increase of 2.0 percent compared with the prior year. For the year, GAAP net losses were $779 million or ($7.71) per diluted share, which compares to 2007 earnings of $90 million or $0.88 per diluted share. Excluding special items, 2008 net earnings were $1.50 per diluted share, down from $2.68 per diluted share a year ago.

"The automotive industry is in the midst of extraordinary challenges resulting from the sudden and steep decline in global automotive production and economic activity. TRW's fourth quarter results reflect those challenges," said John C. Plant, President and Chief Executive Officer. "We are confident the actions we have taken and will continue to take, to align our business with the current industry conditions, will allow us to prevail through these challenging times and prosper when the industry returns to a more stable environment."

Fourth Quarter 2008

The Company reported fourth-quarter 2008 sales of $2.8 billion, a decrease of $1.1 billion or 27.6 percent over the prior year period. The 2008 quarter was adversely impacted by lower sales in all geographic regions resulting from sharply reduced vehicle production volumes. Currency movements during the quarter also had a negative impact on sales compared to the same period a year ago.

As a result of the negative economic and automotive industry conditions, demand for the Company's products has declined substantially resulting in the impairment of certain of the Company's long-lived assets including goodwill, customer relationships and fixed assets totaling $854 million. In addition, the Company has incurred restructuring charges relating primarily to employment separations totaling $14 million.

Excluding asset impairments and restructuring charges from both periods, operating income for the fourth quarter of 2008 was a loss of $24 million, which compares to income of $168 million in the prior year period. The year-to-year decrease was driven primarily by the profit impact of lower sales and, to a lesser extent, net currency losses.

Net interest and securitization expense for the fourth quarter of 2008 totaled $48 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 fourth quarter of 2008 was nil, which compares to a $39 million expense in the prior year. The current year period included a net tax expense of $4 million relating to special items while the prior year period included a benefit of $14 million pertaining to a one-off tax matter.

The Company reported a 2008 fourth-quarter GAAP net loss of $946 million, or ($9.35) per diluted share, which compares to GAAP net earnings of $56 million, or $0.55 per diluted share in the 2007 period.

Excluding the special items referred to above, the Company reported a fourth-quarter 2008 net loss of $74 million, or ($0.73) per diluted share, which compares to net earnings of $61 million or $0.59 per diluted share in the 2007 period.

Earnings before interest, securitization costs, taxes, depreciation and amortization and special items ("adjusted EBITDA") were $101 million in the fourth quarter of 2008, as compared to the prior year level of $319 million. See page A6 for a description of the special items excluded in calculating adjusted EBITDA.

Full Year 2008

The Company reported 2008 sales of $15.0 billion, an increase of $293 million or 2.0 percent compared to prior year sales. The increase in sales resulted primarily from the positive effect of foreign currency translation during the first nine months of the year and above trend sales of lower margin modules.

For full-year 2008, the Company incurred goodwill, customer relationship and fixed asset impairments as well as restructuring charges totaling $932 million compared to restructuring charges and asset impairments of $51 million for 2007.

Excluding these restructuring charges and asset impairments from both periods, operating income in 2008 was $464 million, which is a decrease of $211 million or 31 percent compared to the prior year result of $675 million. Positive factors such as savings generated from cost improvement and efficiency programs, including reductions in pension and OPEB related costs, were more than offset by the profit impact resulting from lower core sales, a negative mix of products sold, higher commodity prices, price reductions provided to customers and foreign currency losses.

Net interest and securitization expense for 2008 totaled $184 million, which represents a significant improvement from the prior year result of $233 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 2008 was $126 million compared to $155 million in the prior year. Excluding one-off tax items recorded in the prior year, tax expense was $126 million in 2008 compared to $175 million in 2007.

The Company reported a 2008 full-year GAAP net loss of $779 million, or ($7.71) per diluted share, which compares to GAAP net earnings of $90 million, or $0.88 per diluted share in 2007.

Excluding special items, the Company reported full-year 2008 net earnings of $153 million, or $1.50 per diluted share, which compares to $276 million or $2.68 per diluted share in 2007.

Adjusted EBITDA totaled $1,039 million, compared to $1,241 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 2008 net cash flow from operating activities was $769 million, which compares to $826 million in the prior year. Fourth quarter 2008 capital expenditures were $144 million compared to $174 million in 2007. Free cash flow (cash flow from operating activities less capital expenditures) was $625 million compared to $652 million in the prior year quarter.

For full-year 2008, net cash flow from operating activities was $773 million, which compares to $737 million in the prior year. Capital expenditures were $482 million in 2008 compared to $513 million in 2007. Free cash flow (cash flow from operating activities less capital expenditures) was $291 million compared to $224 million in 2007.

As of December 31, 2008, the Company had $2,922 million of debt and $766 million of cash and marketable securities, resulting in net debt (defined as debt less cash and marketable securities) of $2,156 million. This compares favorably to net debt of $2,345 million at the end of 2007.

At the end of 2008, committed liquidity facilities and cash on hand provided the Company with available liquidity in excess of $1.5 billion. On February 13, 2009, the Company drew down additional funds under its $1.4 billion revolving credit facility (bringing the total outstanding to $1.1 billion) in order to bolster its liquidity position due to concerns about ongoing disruptions in the financial markets and uncertainty in the automotive industry and global economy.

2009 Outlook

TRW's 2009 planning assumptions for industry production volumes are approximately 9.3 million in North America and 16.5 million for Europe, down 27% and 20%, respectively, compared to 2008 levels. Based on these production levels and the Company's current expectations for foreign currency exchange rates, full-year sales are expected to range between $10.9 billion and $11.3 billion, with first-quarter sales expected to be approximately $2.4 billion.

"We anticipate 2009 will be another challenging year for the automotive industry, especially in our major markets of North America and Europe where customer production volumes are anticipated to be down significantly," said Mr. Plant. "TRW's capital structure and strong liquidity, combined with management's decisive actions to mitigate the effects of the downturn, will help TRW to remain a leading supplier to the world's car manufacturers."

Fourth Quarter and Full Year 2008 Conference Call

The Company will host its fourth-quarter conference call at 8:30 a.m. (EST) today, Friday, February 20th, to discuss financial results and other related matters. To participate in the conference call, please dial (877) 852-7898 for U.S. locations, or (706) 634-1095 for international locations.

An audio replay of the conference call will be available approximately two hours after the conclusion of the call and will be accessible afterward for approximately one week. To access the replay, U.S. locations should dial (800) 642-1687, and locations outside the U.S. should dial (706) 645-9291. The replay code is 80725154. A live audio webcast and replay of the conference call will also be available on the Company's website at TRW.

Reconciliation to GAAP

In addition to GAAP results included within this press release, the Company has provided certain information which is not calculated according to GAAP ("non-GAAP"), such as net (loss) earnings, operating income and diluted earnings per share each excluding special items, adjusted EBITDA and free cash flow. Management uses these non-GAAP measures to evaluate the operating performance of the Company and its business segments, including use in connection with forecasting future periods. Management believes that investors will likewise find these non-GAAP measures useful in evaluating such performance. Such measures are frequently used by security analysts, institutional investors and other interested parties in the evaluation of companies in our industry.

Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures of other companies. For a reconciliation of non-GAAP measures to the closest GAAP financial measure and for share amounts used to derive earnings per share, please see the financial schedules that accompany this release.