TRW Automotive Holdings Management Discusses Q2 2012 Results - Earnings Call Transcript

TRW Automotive Holdings (TRW)

Q2 2012 Earnings Call

July 31, 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

Rod Lache - Deutsche Bank AG, Research Division

Christopher J. Ceraso - Crédit Suisse AG, Research Division

Patrick Archambault - Goldman Sachs Group Inc., Research Division

Ryan Brinkman - JP Morgan Chase & Co, Research Division

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

Matthew T. Stover - Guggenheim Securities, LLC, 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 second 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, 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 2011 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 2011 10-K and 2012 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 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 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 to these non-GAAP measures to the closest GAAP equivalent can be found in 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 C. Plant

Thank you, Mark, and good morning, everyone. As you can see from the results posted this morning, TRW continue to build on a solid performance achieved earlier in the year despite the negative conditions that continue to weigh on the industry, particularly in Europe.

During the second quarter, our sales were $4.2 billion, an increase of over 8%, adjusting for currency and divestitures. This is a positive outcome and evidence of the increasing demand for TRW's technologies considering the decline in the European vehicle production and the negative impact of currency movements between the 2 periods.

Operating profit and margin before special items was $339 million and 8%, respectively. Included in our Q2 operating profit is an accrual for the fine to resolve the U.S. antitrust investigation. This accrual pertains not -- only to the Department of Justice investigation. At this point, the company cannot estimate the financial impact resulting from the European Commission's investigation. We will evaluate developments in this matter on a regular basis and will record an accrual as and when appropriate.

Net income was $221 million, and earnings per share were $1.72 on the same basis. This EPS outcome represents a 5% year-on-year increase compared to last year's pro forma adjusted results. Joe will walk you through this comparison in a few minutes.

And finally, also in line with company expectations, the company generated cash from operations of $191 million during the quarter.

I'll also point out that during the course of the quarter, the company continued to repurchase its common stock, reaching its authorized limit for the year at 2.3 million shares. Total cash of about $102 million was used in completing the repurchases this year. Joe will discuss our cash flow and the enhancements we continue to make in the capital structure in detail in a few minutes.

Combining TRW's solid second quarter performance with Q1 results provides the firm foundation for TRW to reach its full year goals as we head into the second half.

I will expand on the year-to-date results in just a few moments. First, just a few additional comments on the second quarter.

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