TRW Automotive Holdings' CEO Discusses Q1 2012 Results - Earnings Call Transcript

TRW Automotive Holdings (TRW)

Q1 2012 Earnings Call

May 01, 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

Peter Nesvold

Rod Lache - Deutsche Bank AG, Research Division

Christopher J. Ceraso - Crédit Suisse AG, Research Division

Matthew T. Stover - Guggenheim Securities, LLC, Research Division

John Murphy - BofA Merrill Lynch, Research Division

Ravi Shanker - Morgan Stanley, Research Division

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

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'd like to welcome everyone to our first quarter 2012 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, I 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 2011 Form 10-K contains additional information about risks and uncertainties that could impact our business. You can access a copy of our 2011 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 the 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.

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?

John C. Plant

Thank you, Mark, and good morning, everyone.

As you can see from the results posted this morning, TRW has achieved a solid start to 2012 and looks to build on the positive momentum established over the past several quarters.

During the first quarter, sales, which totaled $4.2 billion, were 2% higher compared with the prior-year quarter and marked the highest level achieved for any first quarter. Adjusting for currency and divestitures, sales increased by 5.4%. Operating profit and margin before special items was $333 million and 7.9%, respectively, and tracks in line with our expectations. Net income was $211 million, and earnings per share were $1.62 on the same basis.

And finally, also in line with company expectations and normal seasonality, operating cash flow in the quarter was a use of some $102 million. In addition to funding our growth, the company used about $91 million during the quarter to repurchase certain bonds and stock. Joe will discuss these capital structure transactions in more detail in just a few moments.

Despite the use of cash in the first quarter, we anticipate 2012 will be another strong year of cash generation for TRW.

Overall, the first quarter results demonstrate TRW's strong market position and commitment to protect its profitability, especially in the light of weak industry conditions that exist in Europe. The strength of recovery in North America, which surpassed the expectations of most industry observers established at the beginning of the quarter, has partially offset the year-on-year decline in vehicle sales and production in Europe and also a slower-than-expected start in China.

In North America, overall vehicle production was up 16% compared with the first quarter of 2011. On a sequential basis, compared with the fourth quarter of last year, production was up about 14%. The upstream production level of about 3.9 million vehicles in the quarter was the highest quarterly level achieved since before the start of the 2008 recession. The unexpected North American higher production growth presented some challenges, primarily for our supply base, that we expect will moderate as we move through the year.

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