<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ---------
Commission file number 1-2384
------
TRW Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0575430
- --------------------------------------------- -----------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1900 Richmond Road, Cleveland, Ohio 44124
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(216) 291-7000
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- -------
As of May 5, 1995, there were 65,085,367 shares of
TRW Common Stock, $0.625 par value, outstanding.
This is page one of a total of 16 pages.
The Exhibit Index is on page 13 of this filing.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
<TABLE>
<CAPTION>
Statements of Earnings (unaudited)
TRW Inc. and subsidiaries
- ------------------------------------------------------------------------------------------------------------------------
Quarter ended
March 31
In millions except per share data 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales $ 2,596 $ 2,159
Cost of sales 2,073 1,720
- ------------------------------------------------------------------------------------------------------------------------
Gross profit 523 439
Administrative and selling expenses 201 176
Research and development expenses 103 106
Interest expense 24 29
Other (income)expense-net 5 21
- ------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 190 107
Income taxes 75 43
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 115 $ 64
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK
Fully diluted $ 1.72 $ .97
Primary $ 1.74 $ .97
Dividends declared $ .00 $ .00
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Shares used in computing per share amounts
Fully diluted 66.7 66.4
Primary 65.9 65.8
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Statements of Cash Flows (unaudited)
TRW Inc. and subsidiaries
- ------------------------------------------------------------------------------------------------------------------------
Quarter ended
March 31
In millions 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net earnings $ 115 $ 64
Adjustments to reconcile net earnings to net cash used in
operating activities:
Depreciation and amortization 128 116
Restructuring - (7)
Deferred income taxes 4 31
Other-net 3 23
Changes in assets and liabilities, net of effects of
businesses acquired or sold:
Accounts receivable (205) (209)
Inventories and prepaid expenses (22) (29)
Accounts payable and other accruals 73 (36)
Other-net 3 29
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 99 (18)
- ------------------------------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures (100) (85)
Proceeds from divestitures - 15
Investments in other assets (14) (16)
Other-net (7) (8)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (121) (94)
- ------------------------------------------------------------------------------------------------------------------------
Financing activities
Increase in short-term debt 75 95
Proceeds from debt in excess of 90 days 15 64
Principal payments on debt in excess of 90 days (39) (41)
Dividends paid (33) (30)
Other-net (15) 8
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 3 96
- ------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (19) (9)
- ------------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (38) (25)
Cash and cash equivalents at beginning of quarter 109 79
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of quarter $ 71 $ 54
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Balance Sheets (unaudited)
TRW Inc. and subsidiaries
- ------------------------------------------------------------------------------------------------------------------------
March 31 December 31
In millions 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 71 $ 109
Accounts receivable 1,562 1,338
Inventories 498 470
Prepaid expenses 69 59
Deferred income taxes 239 239
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 2,439 2,215
Property, plant and equipment-on the basis of cost 5,740 5,556
Less accumulated depreciation and amortization 3,197 3,067
- ------------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment-net 2,543 2,489
Intangible assets
Intangibles arising from acquisitions 479 477
Capitalized data files 451 441
Other 68 69
- ------------------------------------------------------------------------------------------------------------------------
998 987
Less accumulated amortization 345 331
- ------------------------------------------------------------------------------------------------------------------------
Total intangible assets-net 653 656
Other assets 277 276
- ------------------------------------------------------------------------------------------------------------------------
$ 5,912 $ 5,636
- ------------------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' investment
Current liabilities
Short-term debt $ 147 $ 122
Accounts payable 729 737
Current portion of long-term debt 167 157
Other current liabilities 1,064 970
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,107 1,986
Long-term liabilities 794 796
Long-term debt 709 694
Deferred income taxes 274 269
Minority interests in subsidiaries 65 69
Capital stock 41 41
Other capital 366 354
Retained earnings 1,498 1,383
Cumulative translation adjustments 94 66
Treasury shares-cost in excess of par value (36) (22)
- ------------------------------------------------------------------------------------------------------------------------
Total shareholders' investment 1,963 1,822
- ------------------------------------------------------------------------------------------------------------------------
$ 5,912 $ 5,636
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Results by Business Segments (unaudited)
TRW Inc. and subsidiaries
- ------------------------------------------------------------------------------------------------------------------------
Quarter ended
March 31
In millions 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales
Automotive $ 1,741 $ 1,331
Space & Defense 706 680
Information Systems & Services 149 148
- ------------------------------------------------------------------------------------------------------------------------
Sales $ 2,596 $ 2,159
- ------------------------------------------------------------------------------------------------------------------------
Operating profit
Automotive $ 173 $ 95
Space & Defense 45 46
Information Systems & Services 21 20
- ------------------------------------------------------------------------------------------------------------------------
Operating profit 239 161
Company Staff and other (25) (26)
Interest expense (24) (29)
Earnings from affiliates - 1
- ------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes $ 190 $ 107
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Principles of Consolidation
- ---------------------------
The financial statements include the accounts of the Company and its
subsidiaries except for an insurance subsidiary. The wholly-owned insurance
subsidiary and the majority of investments in affiliated companies, which are
not significant individually or in the aggregate, are accounted for by the
equity method.
Inventories
- -----------
Inventories consist of the following:
(In millions)
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
---- ----
<S> <C> <C>
Finished products and work in process $264 $246
Raw materials and supplies 234 224
---- ----
$498 $470
---- ----
</TABLE>
Long-Term Liabilities
- ---------------------
For balance sheet purposes, long-term liabilities at March 31, 1995, and
December 31, 1994, include $682 million relating to postretirement benefits
other than pensions.
Other (Income) Expense-Net
- -------------------------
Other (income) expense included the following:
(In millions)
<TABLE>
<CAPTION>
Quarter ended
March 31
-----------------------------
1995 1994
---- ----
<S> <C> <C>
Other income $(19) $(10)
Other expense 14 14
Foreign currency translation 10 17
---- ----
$ 5 $ 21
---- ----
</TABLE>
<PAGE> 7
Earnings Per Share
- ------------------
Fully diluted earnings per share have been computed based on the weighted
average number of shares of Common Stock outstanding during each period,
including common stock equivalents and assuming the conversion of the Serial
Preference Stock II--Series 1 and 3. Primary earnings per share have been
computed based on the weighted average number of shares of Common Stock
outstanding during each period including common stock equivalents.
Supplemental Cash Flow Information
- ----------------------------------
<TABLE>
<CAPTION>
Quarter ended
(In millions) March 31
----------------------------
1995 1994
---- ----
<S> <C> <C>
Interest paid (net of amount capitalized) $24 $37
Income taxes paid (net of refunds) $29 $(7)
</TABLE>
For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with a maturity of three months or less to be cash
equivalents.
Interim Statements
- ------------------
The financial statements are based in part on approximations and are subject to
adjustments that may develop, such as unsettled contract and renegotiation
matters and matters that arise in connection with the annual audit of the
financial statements; however, in the opinion of management, all adjustments
(which consist of normal recurring accruals) necessary for a fair presentation
of the results of operations for the periods presented have been included.
Results of operations for any interim period are not necessarily indicative of
the results to be expected for the full year.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
RESULTS OF OPERATIONS
(In millions except per share data)
<TABLE>
<CAPTION>
First Quarter
------------------------------------
Percent
1995 1994 Inc(Dec)
---------- ---------- ---------
<S> <C> <C> <C>
Sales $2,596 $2,159 20%
Operating Profit 239 161 49%
Net Earnings 115 64 79%
Fully Diluted Earnings Per Share 1.72 .97 77%
Effective Tax Rate 39.5% 40.2%
</TABLE>
The increase in sales resulted from higher volume in the Automotive segment,
primarily North American and European occupant restraints and steering systems
businesses.
The increase in net earnings was due primarily to the higher volume in the
Company's North American and European air bag and steering systems businesses
and lower interest expense.
Interest expense was $24 million for the first quarter of 1995 compared to $29
million for the first quarter of 1994. The decrease was due primarily to lower
average domestic and foreign debt levels.
Automotive
(In millions)
<TABLE>
<CAPTION>
First Quarter
------------------------------------
Percent
1995 1994 Inc(Dec)
---------- ---------- ---------
<S> <C> <C> <C>
Sales $1,741 $1,331 31%
Operating Profit $ 173 $ 95 83%
</TABLE>
The increase in sales resulted primarily from increased North American and
European volume in the steering systems, air bags, and seatbelt businesses and
in European automotive electronics. Favorable exchange rates also contributed
to the sales increase. The increase in operating profit was primarily due to
the increased volume in the North American and European steering systems and
air bag businesses.
<PAGE> 9
Space & Defense
(In millions)
<TABLE>
<CAPTION>
First Quarter
------------------------------------
Percent
1995 1994 Inc(Dec)
---------- ---------- ---------
<S> <C> <C> <C>
Sales $706 $680 4%
Operating Profit $ 45 $ 46 (2%)
</TABLE>
The increase in sales resulted primarily from increased volume from new and
existing contracts, partially offset by the effect of several contracts nearing
completion. Operating profit decreased slightly due to the low profit accruals
in the early period of new programs.
Information Systems & Services
(In millions)
<TABLE>
<CAPTION>
First Quarter
------------------------------------
Percent
1995 1994 Inc(Dec)
---------- ---------- ---------
<S> <C> <C> <C>
Sales $149 $148 1%
Operating Profit $ 21 $ 20 5%
</TABLE>
The sales increase resulted from increased volume in the Information Services
and Business Credit businesses, partially offset by lower revenue in the
Information Systems and Real Estate Information Services businesses. The
operating profit increase was due to the higher revenues and cost reduction
efforts.
LIQUIDITY AND FINANCIAL POSITION
In the first quarter of 1995, cash flow provided by operating activities of $99
million, and a net increase in debt of $51 million were used to fund capital
expenditures of $100 million, dividend payments of $33 million and other items
of $36 million. In addition, the effect of exchange rate changes reduced cash
flow by $19 million. As a result, cash and cash equivalents decreased by $38
million.
Total debt (short-term debt, the current portion of long-term debt and
long-term debt) was $1,023 million at March 31, 1995, compared to $973 million
at December 31, 1994. The ratio of total debt to total capital (total debt,
total deferred income taxes, minority interest and shareholders' investment) at
March 31, 1995, was 33 percent compared to 34 percent at December 31, 1994.
<PAGE> 10
During the first quarter of 1995, the Company's committed 364-day U.S.
revolving credit agreement which allowed the Company to borrow up to $150
million expired. Also during the first quarter, the Company renegotiated the
terms of its multi-year U.S. revolving credit agreement. The credit agreement,
which previously allowed the Company to borrow up to $400 million, has been
revised to allow the Company to borrow up to $550 million. The revised
agreement now extends through February 2000 and contains lower commitment fees
and borrowing rates.
Also during the first quarter of 1995, the Company renegotiated the terms of
its committed multi-currency revolving agreement. The agreement, which
previously consisted of two tranches with 13 banks and allowed the Company to
borrow up to $200 million, now consists of one tranche and allows the Company
to borrow up to $200 million. The revised agreement now extends through
February 2000 and contains lower commitment fees and borrowing rates.
Management believes that funds generated from operations and existing borrowing
capacity will be adequate to support and finance planned growth, capital
expenditures, company-sponsored research and development programs and dividend
payments to shareholders.
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
On April 25, 1995 the Cuyahoga County Court of Common Pleas signed a
judgment entry approving the settlement reached in two shareholder derivative
actions initiated in 1991 on behalf of the Company, against the Company, as a
nominal defendant, the Company's current Directors (other than M. H. Armacost,
R. B. Cheney, R. M. Gates, C. H. Hahn, G. H. Heilmeier, P. S. Hellman, J. T.
Lynn and R. W. Pogue), certain former Directors, D. V. Skilling, Executive Vice
President and General Manager, Information Systems & Services, and two other
current or former employees. The complaints, which were filed on July 12, 1991
and July 30, 1991, respectively, were virtually identical and alleged that the
individual defendants acted with negligence, gross negligence, recklessness and
in breach of their fiduciary duties by failing to manage properly TRW's
Information Systems & Services business. The Court approved TRW's
indemnification of the director and employee defendants, and granted
plaintiffs' application for attorneys' fees and costs in the amount of
$561,395.03. The judgment becomes final on May 26, 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
11 Computation of Earnings Per Share -- Unaudited.
27 Financial Data Schedule.
99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited
(Supplement to Exhibit 12 of the following Form S-3 Registration
Statements of the Company: No. 33-30350, filed August 4, 1989,
and No. 33-42870 filed September 20, 1991).
(b) Reports on Form 8-K:
No report on Form 8-K was filed during the quarter for which this
report is filed.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRW Inc.
Date: May 9, 1995 By: /s/ Martin A. Coyle
-------------------
Martin A. Coyle
Executive Vice President
and Secretary
Date: May 9, 1995 By: /s/ Ronald D. Sugar
-------------------
Ronald D. Sugar
Executive Vice President
and Chief Financial Officer
<PAGE> 13
FORM 10-Q
Quarterly Report for Quarter Ended March 31, 1995
EXHIBIT INDEX
-------------
<TABLE>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
11 Computation of Earnings Per Share --
Unaudited. 14
27 Financial Data Schedule 15
99 Computation of Ratio of Earnings
to Fixed Charges -- Unaudited (Supplement
to Exhibit 12 of the following Form S-3
Registration Statements of the Company:
No. 33-30350, filed August 4, 1989,
and No. 33-42870 filed September 20, 1991). 16
</TABLE>
<PAGE> 1
Exhibit 11
TRW Inc. and Subsidiaries
COMPUTATION OF EARNINGS PER SHARE - UNAUDITED
(In Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------------
1995 1994
---- ----
<S> <C> <C>
PRIMARY
- -------
Net earnings $ 114.7 $ 64.1
Less preference dividend requirements 0.2 0.2
Net earnings applicable to common shares and -------- --------
common share equivalents $ 114.5 $ 63.9
======== ========
Average common shares outstanding 64.9 64.3
Stock options and performance share rights,
based on the treasury stock method using
average market price 1.0 1.5
Average common shares and common share -------- --------
equivalents 65.9 65.8
======== ========
Primary earnings per share $ 1.74 $ 0.97
======== ========
FULLY DILUTED
- -------------
Net earnings applicable to common shares and
common share equivalents $ 114.5 $ 63.9
Dividends assuming conversion of other
dilutive securities: (A)
Dilutive preference dividends 0.2 0.2
-------- --------
Net earnings applicable to fully diluted shares $ 114.7 $ 64.1
======== ========
Average common shares outstanding 64.9 64.3
Common shares assuming conversion of
other dilutive securities: (A)
Dilutive preference shares 0.6 0.6
Stock options and performance share rights,
based on the treasury stock method using
closing market price if higher than
average market price 1.2 1.5
-------- --------
Average fully diluted shares 66.7 66.4
======== ========
Fully diluted earnings per share $ 1.72 $ 0.97
======== ========
</TABLE>
(A) Assuming the conversion of the Serial Preference Stock II - Series 1 and
Series 3.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 71
<SECURITIES> 0
<RECEIVABLES> 1,562
<ALLOWANCES> 0
<INVENTORY> 498
<CURRENT-ASSETS> 2,439
<PP&E> 5,740
<DEPRECIATION> 3,197
<TOTAL-ASSETS> 5,912
<CURRENT-LIABILITIES> 2,107
<BONDS> 709
<COMMON> 41
0
0
<OTHER-SE> 1,922
<TOTAL-LIABILITY-AND-EQUITY> 5,912
<SALES> 2,596
<TOTAL-REVENUES> 2,596
<CGS> 2,073
<TOTAL-COSTS> 2,073
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 190
<INCOME-TAX> 75
<INCOME-CONTINUING> 115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 1.72
</TABLE>
<PAGE> 1
Exhibit 99
TRW Inc. and Subsidiaries
Computation of Ratio of Earnings
to Fixed Charges - Unaudited
(In millions except ratio data)
<TABLE>
<CAPTION>
Three Months Years Ended December 31
ended ---------------------------------------------------------------
March 31, 1995 1994 1993 1992 1991 1990
-------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Earnings(loss) before income
taxes $189.5 $534.5 $359.1 $347.6 $(129.4)(A) $343.1
Unconsolidated affiliates 0.9 (0.6) 0.7 (0.9) (1.0) (13.2)
Minority earnings 2.7 5.2 5.7 2.6 (7.8) (0.5)
Fixed charges excluding
capitalized interest 38.8 160.9 194.0 227.1 254.3 252.0
------ ------ ------ ------ ------- ------
Earnings $231.9 $700.0 $559.5 $576.4 $ 116.1 $581.4
------ ------ ------ ------ ------- ------
Fixed Charges:
Interest expense $ 24.0 $104.8 $137.8 $162.9 $ 189.6 $186.9
Capitalized interest 1.0 6.6 7.9 12.7 10.1 7.6
Portion of rents representa-
tive of interest factor 14.6 54.7 54.0 64.0 64.4 64.6
Interest expense of uncon-
solidated affiliates 0.2 1.4 2.2 0.2 0.3 0.5
------ ------ ------ ------ ------- ------
Total fixed charges $ 39.8 $167.5 $201.9 $239.8 $ 264.4 $259.6
------ ------ ------ ------ ------- ------
Ratio of earnings to fixed
charges 5.8x 4.2x 2.8x 2.4x 0.4x(A) 2.2x
--- ------ --- --- ------- ------
</TABLE>
(A) The 1991 loss before income taxes of $129.4 million includes a
charge of $343 million to cover costs associated with divestment and
restructuring activities. Excluding this charge, the ratio of earnings
to fixed charges would have been 1.7x.
