Press Release

TRW Reports Third Quarter 2002 Operating Earnings from Continuing Operations up 42 Percent

By SpaceRef Editor
October 16, 2002
Filed under , ,

* Operating EPS Increases 39 Percent to $0.89 Per Share * Sales Increase 10 Percent * Systems and Space & Electronics Awarded Over $5.5 Billion In New Contracts * $1.5 Billion Sale Of Aeronautical Systems Completed October 1

TRW Inc. reported
third quarter operating earnings from continuing operations of $115 million, a
42 percent increase over the prior year, Chairman Philip A. Odeen announced
today. Sales increased 10 percent to $3.9 billion, compared with $3.6 billion
in 2001. After the impact of discontinued operations and unusual items, GAAP
net earnings for the quarter were $13 million, or $0.10 per share.

“TRW has again delivered on its commitments to shareholders. In three
critical areas — operating earnings, sales, and contract awards — TRW had an
outstanding third quarter. Growing profitability at our Space & Electronics
and Systems businesses, combined with reduced corporate expenses and lower
financing costs, contributed to an impressive earnings performance,” Odeen
said. “Continued strength in the North American automotive market contributed
to a 9 percent increase in sales for that business, while the nation’s
increased emphasis on security and defense resulted in a 19 percent sales
increase for our Systems business.

“The third quarter awards, with a combined value of more than
$5.5 billion, demonstrate the high regard in which key decision-makers in the
U.S. Department of Defense, Department of Commerce, NASA, and the Centers for
Disease Control and Prevention (CDC) hold TRW’s technological expertise. This
confidence was reflected in the quarter by the award of three separate space
systems projects, among the most significant contracts in TRW history, with a
combined value of $4.5 billion. It was further demonstrated by a $600 million
award from the U.S. Missile Defense Agency and a $511 million contract from
the CDC.

“On October 1, 2002, the company took another important step in
deleveraging its balance sheet with the close of the $1.5 billion cash sale of
its Aeronautical Systems business. Additionally, the merger of TRW with
Northrop Grumman Corporation continues to be on track for a fourth quarter
close, pending both regulatory and shareholder approval,” Odeen said.

Financial highlights include:

* Operating earnings from continuing operations increased 42 percent to
$115 million, compared with $80 million in 2001, driven by improvements
in both defense segments and reduced corporate and financing costs.
Operating earnings per share from continuing operations increased 39
percent to $0.89 from last year’s $0.64 per share. Operating earnings
from continuing operations exclude the results of Aeronautical Systems,
which are reported as discontinued operations, and unusual items. All
2001 numbers have been adjusted for the effect of SFAS 142 for
comparative purposes.

* Sales of $3.9 billion and segment operating profit of $234 million
exceeded third quarter 2001 performance by 10 percent and 9 percent
respectively. Automotive sales improved $218 million, compared with the
prior year, on higher North American vehicle production and increased
European vehicle content. Automotive profits declined slightly,
compared with the third quarter of 2001. The benefits of strong North
American production volumes and productivity improvements were offset by
the effects of lower pricing and increased costs on new product
introductions. Systems and Space & Electronics sales and profits
improved by 11 percent and 24 percent respectively, as a result of new
business, increased customer requirements, and reductions in expenses
associated with defense technology commercialization.

* Corporate expenses declined 33 percent to $20 million compared with the
third quarter of 2001, principally due to reduced personnel and related
costs resulting from 2001 restructuring actions. Financing costs
declined 22 percent to $92 million, principally due to deleveraging
initiatives, lower interest rates, and interest associated with an IRS

* Net debt remained unchanged during the quarter. Net proceeds received
from the sale of Aeronautical Systems on October 1, 2002, will be used
to reduce debt and fund other cash needs.

* The company reported GAAP net earnings in the third quarter of $13
million, or $0.10 per share. This result includes an after tax loss of
$82 million from discontinued operations and a net charge for unusual
items of $20 million after tax.

* For the first nine months of 2002, total sales increased 5 percent to
$12.1 billion, compared with $11.5 billion in 2001. Operating earnings
from continuing operations before extraordinary items increased 54
percent to $329 million, compared with $213 million in 2001. Due
primarily to after tax losses associated with the sale of the
Aeronautical Systems business, the Company reported a GAAP net loss for
the first nine months of 2002 of $455 million, or $3.57 per share.


Automotive sales in the third quarter grew 9 percent to more than
$2.5 billion as strengthening North American build rates, sales from new
products, and stronger European currencies offset lower pricing. Operating
profit declined by $3 million to $129 million, a 5 percent margin, compared
with 5.6 percent in the third quarter of 2001. The benefits of strong North
American production volumes and productivity improvement programs were more
than offset by lower pricing, declines in European production by the company’s
largest European customers, and the continuation of new product introductions.

For the first nine months of 2002, sales increased $322 million, or 4
percent, to $8 billion. For the year, operating profit improved by 8 percent
to a margin of 5.4 percent, driven by benefits from the company’s cost
reduction and productivity initiatives and higher North American sales.

Automotive continues to focus on both growth and consolidation of its cost
base. During the third quarter, operations were discontinued at three
manufacturing facilities. Automotive also received significant new awards
during the third quarter from North American, European, and Asia-Pacific
automakers for electrically assisted power steering, air bags and associated
electronics, seat belts, and tire pressure monitoring systems. The company’s
joint venture with Thales, Autocruise®, won a contract to provide an
Adaptive Cruise Control System (ACC) for a major European truck manufacturer.
Scheduled for launch in both Europe and North America in 2005, the trucks will
be the first to incorporate a TRW ACC system for this manufacturer.


Systems’ third quarter 2002 sales grew 19 percent over last year to $905
million. Operating profit increased 16 percent to $67 million, compared with
2001, for a 7.4 percent margin. The sales and profit increases resulted from
a combination of new business and expansion of customer requirements across a
number of existing programs in all lines of business, including defense and
intelligence programs.

For the first nine months of 2002, sales increased $253 million, or 11
percent, to $2.6 billion. New business and expansion of existing contracts
more than offset the effect of completed contracts and those near completion.
Operating profit increased 13 percent to $189 million, compared with 2001, for
a 7.3 percent margin.

Systems continued to grow its core businesses with significant contract
awards in information technology, missile defense, and ICBM program
management. Extending and expanding the work the company has performed for
the CDC since 1996, TRW received a $511 million, seven-year contract to
develop and support CDC information systems for public health research,
surveillance, and intervention efforts. In September, the U.S. Missile
Defense Agency awarded TRW a contract worth up to $600 million to extend into
2005 its role as prime contractor at the Joint National Integration Center.
Additionally, TRW received a $135 million award as part of its contract for
the sustainment of the Minuteman and Peacekeeper ICBM systems for the U.S. Air
Force, bringing 2002 awards on the programs to over $500 million. In new
business, the Air Force Weather Agency selected TRW as prime contractor for a
five-year contract, worth potentially $119 million, to consolidate, modernize,
and enhance its weather systems.

Space & Electronics

Space & Electronics’ third quarter sales were $496 million, an increase of
14 percent when compared with the third quarter 2001, after adjusting for the
discontinuation in late 2001 of the Astrolink program. The increase in sales
was driven by new and ongoing programs, including the Advanced Extremely High
Frequency (AEHF) satellite communications payloads and integrated avionics for
the F-22 and Joint Strike Fighter. Including Astrolink in 2001, sales were
essentially flat. Third quarter operating profit improved by 41 percent to
$38 million, compared with the third quarter of 2001, for a 7.5 percent
margin. The improvement was due to increased sales volume, reduced equity
losses from affiliates, and lower costs related to commercializing defense
technologies, partially offset by the effects of the discontinued Astrolink

For the first nine months of 2002, sales were $1.5 billion, an increase of
14 percent over 2001, adjusting for the effect of the discontinued Astrolink
program. Including Astrolink, sales were comparable with 2001. Operating
profit for the first nine months increased 15 percent to $106 million, a 7.0
percent margin.

Space & Electronics was awarded three major space systems projects as
result of its advanced technologies. The company won a $2.9 billion contract
to build the next-generation meteorological satellite system, the National
Polar-Orbiting Operational Environmental Satellite System (NPOESS). Another
major award came from the U.S. Missile Defense Agency, which selected TRW for
an $868 million cost-plus award fee contract to begin development of the Space
Based Infrared System Low (SBIRS Low) program. In addition, NASA’s Goddard
Space Flight Center selected TRW to lead development and construction of the
$825 million James Webb Space Telescope.

Discontinued Operations

Effective with the announced sale in the second quarter, the Company has
reported Aeronautical Systems as a discontinued operation. Third quarter
after-tax results were a loss of $82 million, due primarily to an additional
non-cash curtailment loss of the Company’s UK pension plan, resulting from a
further decline in pension asset values.

Non-Operational Items

In the third quarter, the Company recorded unusual expenses of $20 million
after tax, or $0.15 per share. These items relate principally to asset
impairment charges and costs related to the proposed merger with Northrop
Grumman, partially offset by a favorable litigation outcome.

TRW provides advanced-technology products and services for the automotive,
space & electronics, and systems markets. The Company’s news releases are
available through TRW’s corporate Web site . Investors and the
general public are invited to listen to an internet webcast of the Company’s
quarterly conference call, beginning 11:00 a.m. eastern time today, October
16, 2002. This webcast can be accessed through .

SpaceRef staff editor.