TRW Automotive Holdings Q1 2010 Earnings Call Transcript

TRW Automotive Holdings Q1 2010 Earnings Call Transcript
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TRW Automotive Holdings (TRW)

Q1 2010 Earnings Call

May 05, 2010 8:30 am ET

Executives

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

John Plant - Chief Executive Officer, President and Director

Mark Oswald - Director of Investor Relations

Analysts

Christopher Ceraso - Crédit Suisse First Boston, Inc.

Patrick Archambault - Goldman Sachs Group Inc.

Rod Lache - Deutsche Bank AG

John Murphy - BofA Merrill Lynch

Himanshu Patel - JP Morgan Chase & Co

Brett Hoselton - KeyBanc Capital Markets Inc.

Presentation

Operator

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Good morning, and welcome to the TRW Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Presentation materials 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'd like to welcome everyone to our First Quarter 2010 Financial Results Conference Call. Joining me this morning are John Plant, our President and Chief Executive Officer; and Joe Cantie, our Chief Financial Officer.

Today's call will follow our usual format. 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 business matters related to TRW and the 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 2009 Form 10-K contains additional information about risks and uncertainties that could impact our business. You can access a copy of our 2009 10-K and other SEC filings by visiting the Investors section on 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 on the conference call materials, which are posted on the Investors section of our website at trw.com.

And 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 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 Plant

Thank you, Mark, and good morning, everybody. I'm pleased to report that TRW is off to a strong start in 2010 as evidenced by our first quarter results. In the quarter, sales increased compared with the fourth quarter of 2009 and were also some 50% higher than compared with the prior-year first quarter. Operating profit after restructuring was $300 million, resulting in an operating margin of 8.4%. And this is another record for TRW building on our fourth quarter margin in excess of 7%.

Net income was $204 million and earnings per share were $1.61, again records. And finally, our cash flow was the best-ever first quarter outcome for the company. The increased profitability and strong cash performance resulted in a net debt to the last 12 month EBITDA ratio of only 1.2x, another best-ever result for the company. This rerating of our net debt to EBITDA cannot be stressed too much. The strong cash performance in the quarter continues to build on TRW's solid track record of delivering consistent positive cash flow. Since becoming an independent company in 2003, TRW has generated over $1.5 billion of free, free cash flow for an average some $220 million of annual positive cash flow, albeit having gone through the worst economic conditions and recession in some 70 years.

This is very important, as it has allowed the company to significantly reduce its level of debt over that same period and of course, reduce its financing charges. The first quarter was a good example of this, as our strong cash outcome and confidence in generating cash allowed the company to permanently pay down some $100 million of term loans. And also with an additional $75 million of term loans, which have already been paid down so far in the second quarter.

Restructuring and downturn management programs implemented over the past year, combined with our geographic and customer diversity, innovative technology and world-class quality, have positioned TRW to take advantage of the industry rebound from the historic lows of a year ago. Our first quarter results demonstrate that TRW is taking advantage of its strong position.

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