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TRW Automotive Holdings Q2 2010 Earnings Call Transcript

TRW Automotive Holdings Q2 2010 Earnings Call Transcript

TRW Automotive Holdings (TRW)

Q2 2010 Earnings Call

August 04, 2010 8:30 am ET


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

John Plant - Chief Executive Officer, President and Director

Mark Oswald - Director of Investor Relations


Rod Lache - Deutsche Bank AG

Patrick Archambault - Goldman Sachs Group Inc.

Christopher Ceraso - Crédit Suisse AG

Brett Hoselton - KeyBanc Capital Markets Inc.

John Murphy - BofA Merrill Lynch

Himanshu Patel - JP Morgan Chase & Co



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Good morning, and welcome to the TRW Conference Call. [Operator Instructions] Presentation material for today's call was posted to the company's website this morning at 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 Second Quarter 2010 Financial Results Conference Call. Joining me on the call this morning, as usual, are John Plant, our President 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 2009 Form 10-K and our first quarter 10-Q contain additional information about risks and uncertainties that could impact our business. You can access a copy of our 2009 10-K and 2010 quarterly SEC filings by visiting the Investors section of our website at or through the SEC’s website at On a related matter, we expect to file our second 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

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, everyone. As you can see from the results posted this morning, TRW's second quarter performance continued to build on the positive momentum established last year.

During the recent quarter, sales totaled $3.7 billion and were 34% higher compared with the prior year second quarter and about 2% higher compared with our first quarter. Operating profit was $322 million, resulting in an operating margin of 8.8%. Both of these are records for TRW. This marks the third consecutive quarter that the company has posted record profits and the second consecutive quarter with operating margins above 8%.

Net income was $227 million and earnings per share was $1.78. The company generated cash from operations, less capital expenditures, of $340 million. And finally, the strong operating and cash performance allowed TRW to continue its debt reduction trend. In fact, both our gross debt and our net debts reduced and reached historic lows at the quarter end.

TRW's second quarter results, combined with the impressive performance achieved in the first quarter has resulted in an excellent performance for the first half of 2010. I’ll expand on the year-to-date results in just a few minutes.

First just a few additional comments from the second quarter. During Q2, industry production volumes remained robust, especially in North America, and these made a positive contribution to our results. In North America, overall vehicle production was up 72% compared with the second quarter of 2009. On a sequential basis compared to the first quarter of this year, production was up 6%. Increased consumer demand, albeit slower than expected, has driven this fifth sequential quarter increase in production for the region.

In Europe, vehicle production was robust and exceeded the expectations of most industry observers that was set earlier in this quarter. Compared to last year's second quarter, vehicle production was up 13%. And on a sequential basis, production was up 3% compared with the first quarter, which I noted was better than expected only three months ago. For Western Europe, production is relatively flat when compared to Q1 of this year. Although demand and sales continue to fall in most countries following the exploration of government incentives, the larger volume of exports and inventory rebuilding has provided support for vehicle production.

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