<PAGE> 1
[TRW logo]
1994
SEC FORM 10-K
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
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 (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1900 RICHMOND ROAD, CLEVELAND, OHIO 44124
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(216) 291-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
----------------------------------------- ----------------------------
<S> <C>
Common Stock, par value $0.625 per share New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
Rights to Purchase Cumulative Redeemable New York Stock Exchange
Serial Preference Stock II, Series 4 Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
Cumulative Serial Preference Stock II, New York Stock Exchange
$4.40 Convertible Series 1
Cumulative Serial Preference Stock II, New York Stock Exchange
$4.50 Convertible Series 3
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the registrant's voting stock held by
non-affiliates was $4,229,613,216 as of March 3, 1995. This amount was computed
on the basis of the closing price of the registrant's voting securities included
in the NYSE-Composite Transactions report for such date, as published in the
Midwest edition of The Wall Street Journal or, in the case of the registrant's
voting cumulative preference stock, for the date of the most recent trade, as
reported in the Dow Jones News Retrieval Service.
As of March 3, 1995 there were 64,862,758 shares of TRW Common Stock, $0.625 par
value, outstanding.
The following documents have been incorporated herein by reference to the extent
indicated herein:
<TABLE>
<S> <C>
TRW Proxy Statement dated March 14, 1995 Part III
TRW Annual Report to Security Holders for the year ended December 31,
1994 Parts I, II and IV
</TABLE>
<PAGE> 3
TRW INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PART I PAGE
------ ----
<S> <C>
Item 1. Business............................................................................... 1
Item 2. Properties............................................................................. 5
Item 3. Legal Proceedings...................................................................... 6
Item 4. Submission of Matters to a Vote of Security Holders.................................... 6
Executive Officers of the Registrant............................................................. 7
PART II
-------
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters....................................................... 8
Item 6. Selected Financial Data................................................................ 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................... 9
Item 8. Financial Statements and Supplementary Data............................................ 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................................... 9
PART III
--------
Item 10. Directors and Executive Officers of
the Registrant.................................................................... 9
Item 11. Executive Compensation................................................................. 10
Item 12. Security Ownership of Certain Beneficial
Owners and Management............................................................. 10
Item 13. Certain Relationships and Related Transactions......................................... 10
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K............................................................... 10
</TABLE>
<PAGE> 4
PART I
ITEM 1. BUSINESS
------- --------
INDUSTRY SEGMENTS AND PRODUCT CLASSIFICATIONS
TRW is an international company that provides advanced technology products
and services. The principal businesses of TRW and its subsidiaries are the
design, manufacture and sale of products and the performance of systems
engineering, research and technical services for industry and the United States
Government in three industry segments: Automotive; Space & Defense; and
Information Systems & Services. TRW's principal products and services include
automotive systems and components; spacecraft; software and systems engineering
support services; electronic systems, equipment and services; and information
systems and services. TRW was incorporated under the laws of Ohio on June 17,
1916. As used herein the terms "TRW" and the "Company" refer to TRW Inc. or to
TRW Inc. and its subsidiaries or to a subsidiary of TRW Inc.
AUTOMOTIVE
TRW's Automotive segment designs, manufactures and sells a broad range of
steering, suspension, engine, safety, engineered fastening, electrical,
electronic, electromechanical and other components and systems as original
equipment for passenger cars, commercial vehicles, trucks, buses, farm machinery
and off-highway vehicles. These products include occupant safety systems such as
seat belt systems and inflatable restraint systems, manual and power steering
gears, engine valves and valve train components, suspension components,
electronic monitoring and control systems, electromechanical assemblies,
fasteners, stud welding systems and other components. TRW also manufactures and
sells, for use as aftermarket parts, a broad line of engine and chassis parts
for cars, trucks, off-highway vehicles and other miscellaneous uses.
Automotive original equipment included in this industry segment is sold
primarily to original equipment manufacturers. Aftermarket parts manufactured by
TRW are sold to original equipment manufacturers and others for resale through
their own independent distribution networks.
SPACE & DEFENSE
TRW's Space & Defense segment includes spacecraft, software and systems
engineering support services and electronic systems, equipment and services.
The Company's spacecraft activities include the design and manufacture of
spacecraft equipment, propulsion subsystems, electro-optical and instrument
systems, spacecraft payloads, high-energy lasers and laser technology and other
high-reliability components. TRW's software and systems engineering support
services are in the fields of command and control, security for defense and
nondefense applications, counterterrorism, undersea surveillance, antisubmarine
warfare and other high-technology space and defense mission support systems,
management of radioactive waste, automated fingerprint matching, upgrading of
the nation's air traffic control program and other civilian applications. The
Company's electronic systems, equipment and services include the design and
manufacture of communications systems, avionics systems (such as unmanned aerial
vehicles) and other electronic technologies for space and defense applications.
Products and services in this industry segment are sold and distributed
principally to the United States Government. TRW's spacecraft business involves
the sale to the United States Government of subsystems and components for space
propulsion and unmanned spacecraft for defense, scientific research and
communications purposes. TRW has designed and built a significant number of
unmanned spacecraft and is currently participating in a number of spacecraft
programs. Sales to the United States Government of software and systems
engineering support services include a wide variety of computer software systems
and analytical services for space and defense applications. Sales to the United
States Government of electronic systems, equipment and services consist of
systems and subsystems for defense and space applications, including
communications, command and control, guidance, navigation, electric power,
sensing and electronic display equipment. While classified projects are not
discussed herein, the operating results relating to classified projects are
included in the Company's consolidated financial statements and the business
risks associated with such projects do not differ materially from those of other
projects for the United States Government.
TRW also performs diverse testing and general research projects in many of
the technical disciplines related to its Space & Defense products and services
under both private and United States Government contracts, including several
advanced defense system projects.
1
<PAGE> 5
INFORMATION SYSTEMS & SERVICES
TRW's Information Systems & Services segment includes consumer credit
information services, real estate information services, direct marketing
services, imaging systems engineering and integration services and business
credit information services.
Products and services in this industry segment are sold primarily to
commercial entities. Consumer and business credit information services are sold
primarily to credit-granting organizations and businesses. Real estate
information services are sold to financial institutions, title companies and
other customers. Marketing services are sold primarily to direct marketing
customers. Imaging systems engineering and integration services are sold to
financial institutions and other businesses.
RESULTS BY INDUSTRY SEGMENT
Reference is made to the information relating to the Company's industry
segments, including sales, operating profit and identifiable assets attributable
to each segment for each of the years 1992 through 1994, presented under the
note entitled "Industry segments" in the Notes to Financial Statements on pages
37 through 39 of the TRW 1994 Annual Report. Such information is incorporated
herein by reference.
FOREIGN AND DOMESTIC OPERATIONS
TRW manufactures products and has facilities in various countries
throughout the world. TRW's principal operations outside the United States are
in Australia, Austria, Brazil, Canada, Czech Republic, France, Germany, India,
Italy, Japan, Malaysia, Mexico, Poland, South Korea, Spain, Taiwan, Thailand,
the United Kingdom and Venezuela. TRW also exports products manufactured by it
in the United States. Such export sales accounted for 7% of total sales during
1994, 6% of total sales during 1993 and 4% during 1992, or $638 million, $438
million and $352 million, respectively.
TRW's foreign operations are subject to the usual risks that may affect
such operations. These include, among other things, customary exchange controls
and currency restrictions, currency fluctuations, changes in local economic
conditions, exposure to possible expropriation or other government actions,
unsettled political conditions and foreign government-sponsored boycotts of the
Company's products or services for noncommercial reasons. Most of the
identifiable assets associated with TRW's foreign operations are located in
countries where the Company believes such risks to be minimal.
Reference is made to the information relating to the dollar amounts of
sales, operating profit and identifiable assets by geographic area for each of
the years 1992 through 1994 presented under the note entitled "Geographic
segments" in the Notes to Financial Statements on page 39 of the TRW 1994 Annual
Report. Such information is incorporated herein by reference.
GENERAL
COMPETITION
TRW encounters intense competition in substantially all segments of its
business. The Company's competitive position varies for its different products
and services. However, TRW believes that it is a significant supplier of many of
the products it manufactures and of many of the services it provides.
In the Automotive segment, competitors include independent suppliers of
parts and components as well as the Company's original equipment customers, many
of whom are integrated manufacturers and produce or could produce substantial
portions of their requirements for parts and components internally. The original
equipment markets characteristically have relatively few competitors, have high
capital requirements and require high engineering content. In such markets, the
principal methods of competition are price, engineering excellence, product
quality, customer service, delivery time and proprietary position.
TRW competes for contracts covering a variety of United States Government
projects and programs, principally in the Space & Defense segment of its
business. Such competition is based primarily on technical ability, product
quality and price. TRW's competitors for United States Government contracts
typically are large, technically-competent firms with substantial assets.
In its Information Systems & Services segment, TRW competes in markets for
consumer and business credit information services, real estate information
services, marketing services and imaging systems engineering and integration
2
<PAGE> 6
services with other large firms doing business nationally and with many smaller
local and regional firms. Competitive factors in this business include
proprietary position, product quality, customer service, delivery time and
price.
CUSTOMERS
Sales, directly and indirectly, to the United States Government, including
the Department of Defense, the National Aeronautics and Space Administration and
other agencies, constituted 28% of TRW's sales for 1994 and 34% for 1993, or
$2,545 million and $2,708 million, respectively. Sales to the United States
Government represented 90% of the sales of the Space & Defense segment in 1994
and 97% in 1993, or $2,528 million and $2,691 million, respectively.
Companies engaged in United States Government contracting are subject to
certain unique business risks, including dependence on Congressional
appropriations and administrative allotment of funds, changes in Government
policies that may reflect military and political developments, time required for
design and development, significant changes in contract scheduling, complexity
of designs and the rapidity with which they become obsolete, necessity of design
improvements, difficulty in forecasting costs and schedules when bidding on
developmental and highly sophisticated technical work and other factors
characteristic of the industry.
United States Government contracting laws also provide that the Government
is to do business only with responsible contractors. In this regard, the United
States Department of Defense and other federal agencies have the authority,
under certain circumstances, to suspend or debar a contractor or organizational
parts of a contractor from further Government contracting for a certain period
"to protect the Government's interest." Such action may be taken for, among
other reasons, commission of fraud or a criminal offense in connection with a
United States Government contract. A suspension may also be imposed if a
contractor is indicted for such matters. In the event of any suspension or
debarment, the Company's existing contracts would continue unless terminated or
canceled by the United States Government under applicable contract provisions.
The Company voluntarily disclosed to appropriate authorities Government
contracting irregularities that occurred at existing and former Company units,
and has resolved them as set forth in "Item 3. -- Legal Proceedings."
Other than the United States Government, TRW's largest customers
(determined by including sales to their affiliates throughout the world but
excluding sales to such customers or their affiliates that ultimately result in
sales to the United States Government) are Ford Motor Company, General Motors
Corporation and Chrysler Corporation. Such sales by TRW's Automotive segment to
Ford, General Motors, Chrysler and their respective subsidiaries during 1994
accounted for 24%, 10% and 10%, respectively, of total sales of the Automotive
segment, compared to 24%, 11% and 9%, respectively, during 1993.
BACKLOG
The backlog of orders for TRW's domestic operations at December 31, 1994
and December 31, 1993 is estimated to have been approximately $4,640 million and
$5,051 million, respectively, of which it is estimated that, directly or
indirectly, United States Government business accounted for approximately $3,895
million and $4,370 million, respectively. Of the total domestic backlog at
December 31, 1994 and at December 31, 1993, 89% and 90%, respectively, were
attributable to the Space & Defense segment, and virtually all of the backlog
attributable to United States Government business related to that segment.
The determination of TRW's backlog involves substantial estimating,
particularly with respect to customer requirements contracts and long-term
contracts of a cost-reimbursement or incentive nature. A substantial portion of
the variations in the estimated backlog of TRW in recent years is attributable
to the timing of the award and performance of United States Government and
certain other contracts. Subject to various qualifications, including those set
forth herein, and assuming no terminations, cancellations or changes and
completion of orders in the normal course, TRW has estimated that approximately
53% of the December 31, 1994 backlog will be delivered in 1995, 24% in 1996 and
23% thereafter.
United States Government contracts and related customer orders generally
are subject to termination in whole or in part at the convenience of the
Government whenever the Government believes that such termination would be in
its best interest. Multi-year Government contracts and related orders are
subject to cancellation if funds for contract performance for any subsequent
contract year become unavailable. If any of its Government contracts were to be
terminated or canceled under these circumstances, TRW generally would be
entitled to receive payment for work completed and allowable termination or
cancellation costs. Whether the occurrence of any such termination or
cancellation would have an adverse effect on TRW would depend upon the
particular contract and the circumstances of the termination or cancellation.
3
<PAGE> 7
Backlog data and comparisons thereof as of different dates may not be
reliable indicators of either future sales or the ratio of future direct and
indirect United States Government sales to other sales.
INTELLECTUAL PROPERTY
TRW owns significant intellectual property, including a large number of
patents, copyrights and trade secrets, and is involved in numerous licensing
arrangements. Although TRW's intellectual property plays an important role in
maintaining TRW's competitive position in a number of the markets that it
serves, no single patent, copyright, trade secret or license, or group of
related patents, copyrights, trade secrets or licenses, is, in the opinion of
management, of such value to TRW that the business of TRW or of any industry
segment of TRW would be materially affected by the expiration or termination
thereof. TRW's general policy is to apply for patents on an ongoing basis in the
United States and appropriate other countries on its significant patentable
developments. TRW is party to a lawsuit involving air bag patents and
technology. See "Item 3. -- Legal Proceedings" for a further discussion of this
suit.
TRW also views its name and mark as significant to its business as a whole.
In addition, TRW owns a number of other trade names and marks applicable to
certain of its businesses and products that it views as important to such
businesses and products.
RESEARCH AND DEVELOPMENT
Research and development costs totaled $1,515 million, $1,737 million and
$1,787 million in 1994, 1993 and 1992, respectively, of which customer-funded
research and development was $963 million in 1994, $1,223 million in 1993 and
$1,261 million in 1992. Company-funded research and development costs, which
included research and development for commercial products, independent research
and development and bid and proposal work related to government products and
services, totaled $412 million in 1994, $378 million in 1993 and $393 million in
1992. A portion of the cost incurred for independent research and development
and bid and proposal work is recoverable through overhead charged to government
contracts. Company-funded product development costs, including engineering and
field support for new customer requirements, were $140 million in 1994, $136
million in 1993 and $133 million in 1992.
EMPLOYEES
At December 31, 1994, TRW had approximately 64,200 employees, of whom
approximately 38,300 were employed in the United States and Canada.
RAW MATERIALS AND SUPPLIES
Materials used by TRW include or contain steel, stainless steel, pig iron,
ferro-chrome, aluminum, brass, copper, tin, platinum, special alloys, sodium
azide, glass, ceramics, plastic powders and laminations, carbon and plastic
materials, synthetic rubber, paper, and gold, silver, nickel, zinc and copper
plating materials. TRW also purchases from suppliers various types of equipment
and component parts that may include such materials. TRW's operations are
dependent upon the ability of its suppliers of materials, equipment and
component parts to meet performance and quality specifications and delivery
schedules. In some cases, there is only a limited number of suppliers for a
material or product due to the specialized nature of the item. Shortages of
certain raw materials, equipment and component parts have existed in the past
and may exist again in the future. TRW has taken a number of steps to protect
against and to minimize the effect of such shortages. However, any future
inability of TRW to obtain raw materials, equipment or component parts could
have a material adverse effect on the Company. TRW's operations also are
dependent on adequate supplies of energy. TRW has continued its programs to
conserve energy used in its operations.
ENVIRONMENTAL REGULATIONS
Federal, state and local requirements relating to the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, have had and will continue to have an effect on TRW and its
operations. The Company has made and continues to make expenditures for projects
relating to the environment, including pollution control devices for new and
existing facilities. The Company is conducting a number of environmental
investigations and remedial actions at current and former Company locations to
comply with various federal, state and local laws and, along with other
companies, has been named a potentially responsible party for certain waste
management sites. Each of these matters is subject to various uncertainties, and
some of these matters may be resolved unfavorably to the Company. A reserve
estimate reflecting cost ranges is established using standard engineering cost
estimating techniques for each matter for which sufficient information is
available. In the determination of cost ranges, consideration is given to the
professional judgment of the Company's environmental engineers in consultation
with outside environmental specialists when necessary. At multi-party sites, the
reserve estimate also reflects the expected allocation of total project costs
among the
4
<PAGE> 8
various potentially responsible parties. At December 31, 1994, the Company had
reserves for environmental matters of $98 million, including $17 million of
accruals recorded during the year. The Company aggressively pursues
reimbursement for environmental costs from its insurance carriers. Insurance
recoveries are recorded as a reduction of environmental costs when fixed and
determinable. The Company does not believe that compliance with environmental
protection laws and regulations will have a material effect upon its capital
expenditures or competitive position, and TRW's capital expenditures for
environmental control facilities during 1995 and 1996 are not expected to be
material to the Company. The Company believes that any liability that may result
from the resolution of environmental matters for which sufficient information is
available to support cost estimates will not have a material adverse effect on
the Company's earnings. However, the Company cannot predict the effect on future
earnings of expenditures for aspects of certain matters for which there is
insufficient information. In addition, the Company cannot predict the effect on
future earnings of compliance with environmental laws and regulations with
respect to currently unknown environmental matters or the possible effect on
future earnings of compliance with environmental requirements imposed in the
future.
CAPITAL EXPENDITURES
During the five years ended December 31, 1994, TRW's capital expenditures
and the net book value of its assets retired or sold were:
<TABLE>
<CAPTION>
(IN MILLIONS)
----------------------------------------------------------------
CAPITAL EXPENDITURES
-------------------------------------------
LAND, NET BOOK
BUILDINGS MACHINERY VALUE OF
YEAR ENDED AND LEASEHOLD AND ASSETS RETIRED
DECEMBER 31, IMPROVEMENTS EQUIPMENT TOTAL OR SOLD
------------------------------- --------------- ----------- ------- ----------------
<S> <C> <C> <C> <C>
1994................. $ 93 $ 413 $ 506 $ 21
1993................. 77 405 482 61
1992................. 95 435 530 74
1991................. 73 464 537 71
1990................. 126 461 587 51
</TABLE>
On an industry segment basis, capital expenditures during 1994 and 1993
were as follows: Automotive, $388 million and $367 million, respectively; Space
& Defense, $98 million and $90 million, respectively; and Information Systems &
Services, $18 million and $23 million, respectively. Of total capital
expenditures, 64% in 1994 and 70% in 1993 were invested in the United States.
ITEM 2. PROPERTIES
------- ----------
As of December 31, 1994, TRW's operations included approximately 93
significant manufacturing, research and development and warehousing facilities
located in 25 states in the United States and 82 such facilities in 19 other
countries. TRW owned approximately 58% of the domestic facilities and 87% of the
foreign facilities; the remainder were leased. Of the domestic facilities,
approximately 42% were used by the Automotive segment, 50% were used by the
Space & Defense segment and 8% were used by the Information Systems & Services
segment. Of the foreign facilities, substantially all were used by the
Automotive segment.
In addition to the facilities described above, the Company owns or leases
certain smaller research and development properties and administrative,
processing, marketing, sales and office facilities throughout the United States
and in various parts of the world. TRW also operates facilities on property
owned directly or indirectly by the United States Government. The Company owns
its world headquarters in Lyndhurst, Ohio and its regional headquarters for its
Space & Defense segment in Redondo Beach, California.
In the opinion of management, the Company's facilities are generally well
maintained and are suitable and adequate for their intended use.
Reference is made to the information concerning long-term rental
obligations under operating leases presented under the note entitled "Lease
commitments" in the Notes to Financial Statements on page 35 of the TRW 1994
Annual Report. Such information is incorporated herein by reference.
5
<PAGE> 9
ITEM 3. LEGAL PROCEEDINGS
TRW reached a settlement with the Department of Justice on April 15, 1994
involving a lawsuit filed by three former employees on April 4, 1986 in the
United States District Court for the Northern District of Ohio, regarding
government contract accounting irregularities at two former TRW divisions. TRW
had voluntarily disclosed the irregularities to the government. Under terms of
the settlement, TRW agreed to pay the government $12.6 million as part of a
total settlement of $29 million. TRW had previously paid the government $16.4
million in 1987 and 1988 as part of its efforts to resolve the matter and make
restitution. The 1994 payment had no effect on 1994 TRW earnings.
In a separate settlement agreement dated April 15, 1994, TRW and the
Defense Logistics Agency ("DLA") agreed to a final resolution of a matter
involving TRW Military Electronic & Avionics Division's voluntary disclosure of
government accounting irregularities in December 1986. The terms of the
agreement require TRW to pay DLA $1.5 million plus interest in three
installments over a three-year period. The Justice Department has closed its
file on TRW's voluntary disclosure relating to its Sunnyvale, California
facility. The matter will be resolved administratively.
On December 15, 1987, the Commissioner of the Indiana Department of
Environmental Management issued an Order to TRW and several other respondents
relating to alleged contamination of the public water supply in Shelbyville,
Indiana by, among other sources, two closed facilities that were formerly
operated by TRW's Connectors Division. The Order requires the respondents to
fund the relocation of the main well field for Shelbyville to a location that
can provide a safe source of potable water and to perform a remedial
investigation of the source and extent of contamination within a one-mile radius
of the well field. The Order also requires the respondents to pay civil
penalties of $25,000 per day for violations of law which allegedly occurred
prior to issuance of the Order. TRW has filed a petition for review of the
Order. The Order is not expected to have a material effect on the Company's
financial position.
A proposed settlement has been reached in two shareholder derivative
actions initiated in 1991 on behalf of the Company in the Court of Common Pleas,
Cuyahoga County, Ohio, against the Company, as a nominal defendant, the
Company's current Directors (other than M. H. Armacost, 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,
are virtually identical and allege 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 proposed settlement, which was presented to the Company's
shareholders in early November 1994 and considered by the Court on December 15,
1994, includes the adoption of certain therapeutic measures involving the
oversight of TRW's consumer credit reporting business. In addition, TRW sought
approval of its intention to indemnify the individual defendants for their
litigation expenses. No shareholders appeared at the hearing to oppose the
proposed settlement. In addition, counsel for the plaintiffs applied to the
court for an award of attorneys' fees and costs not to exceed $565,000.
Defendants opposed the plaintiffs' application. As of March 23, 1995, the Court
had not yet ruled.
On February 15, 1994, TRW filed suit in the United States District Court
for the District of Arizona against Talley Industries, Inc., and certain Talley
subsidiary companies. The suit relates to TRW's 1989 purchase of Talley's air
bag business. In the complaint, TRW claimed that, among other violations of
TRW's rights, Talley breached the non-compete provision contained in the
purchase agreement by providing products and services to competitors of TRW. As
a result of the breach, TRW exercised its rights under the agreement and the
license from Talley to TRW to make a one-time payment of $26.5 million to Talley
for a paid-up royalty-free license to use Talley's air bag patents and
technology. On March 1, 1994, Talley filed an answer and counterclaims against
TRW alleging that TRW had acted improperly in making the $26.5 million payment
and requesting that TRW be ordered to pay immediately to Talley the value of all
anticipated royalties, claimed by Talley to be not less than $250 million. On
May 19, 1994, the court granted Talley's motion for an injunction requiring TRW
to continue to make quarterly royalty payments pursuant to the 1989 asset
purchase agreement and ancillary agreements pending trial of TRW's claims. The
Company has appealed the court's order granting the injunction and intends to
defend vigorously Talley's counterclaims. The counterclaims are not expected to
have a material effect on the Company's financial position. The court has set an
April 5, 1995 trial date for TRW's claims and some of Talley's counterclaims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of 1994.
6
<PAGE> 10
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of, and the positions and offices held by, each person
designated an executive officer of the Company as of March 24, 1995, together
with the offices held by each such person during the last five years, are listed
below. For purposes hereof, the term "executive officer" includes the Chairman
of the Board, the President, each Vice President in charge of a principal
business function and any other officer who performs a policy-making function
for the Company. Each executive officer is elected annually and, unless the
executive officer resigns or terminates employment with the Company or is
removed from office by action of the Company's Directors, will hold office for
the ensuing year or until a successor is elected in accordance with the
Company's Regulations. None of the Company's executive officers has a family
relationship to any other executive officer.
<TABLE>
<CAPTION>
POSITIONS AND BUSINESS EXPERIENCE
NAME AGE DURING THE PAST FIVE YEARS
------------------ ----- -----------------------------------------------------------
<S> <C> <C>
M. A. Coyle 53 Executive Vice President (1989 to the present), General
Counsel (1980 to the present) and Secretary (1976 to the
present)
J. T. Gorman 57 Chairman of the Board and Chief Executive Officer (1988 to
the present) and Director (1984 to the present)
President (1985 - 1991)
T. W. Hannemann 52 Executive Vice President and General Manager, TRW Space &
Electronics Group (1993 to the present)
Executive Vice President and General Manager, TRW Space &
Defense Sector (1991 - 1992)
Vice President and General Manager, TRW Electronic Systems
Group (1989 - 1991)
P. S. Hellman 45 President and Chief Operating Officer and Director (January
1995 to the present)
Executive Vice President and Assistant President (1994)
Executive Vice President, Chief Financial Officer and
Assistant President (1994)
Executive Vice President and Chief Financial Officer (1991
- 1994)
Vice President and Treasurer (1989 - 1991)
J. A. Janitz 52 Executive Vice President and General Manager, TRW Occupant
Restraint Systems Group (1994 to the present)
Vice President and General Manager, TRW Vehicle Safety
Systems, Inc. (1991 - 1994)
Vice President and General Manager, TRW Steering &
Suspension Systems, North America (1990 - 1991)
President, Wickes Manufacturing Company (1985 - 1990)
H. V. Knicely 59 Executive Vice President, Human Resources and
Communications (January 1995 to the present)
Executive Vice President, Human Resources, Communications &
Information Resources (1989 - 1994)
R. J. Kohler 57 Executive Vice President and General Manager, TRW Avionics
& Surveillance Group (1994 to the present)
Vice President and General Manager, TRW Avionics &
Surveillance Group (1990 -1994)
W. B. Lawrence 50 Executive Vice President, Planning, Development &
Government Affairs (1989 to the present)
P. Lemaitre 45 Executive Vice President and General Manager, TRW
Automotive Electronics Group (1994 to the present)
Vice President and General Manager, TRW Transportation
Electronics Division (1990 - 1994)
Vice President of Planning and Development, TRW Automotive
Sector (1989 - 1990)
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
POSITIONS AND BUSINESS EXPERIENCE
NAME AGE DURING THE PAST FIVE YEARS
------------------ ----- -----------------------------------------------------------
<S> <C> <C>
C. O. Macey 57 Executive Vice President and General Manager, TRW Steering,
Suspension & Engine Group (1994 to the present)
Executive Vice President and General Manager, TRW Steering
Systems Group (1991 - 1994)
Vice President and General Manager, TRW Steering Systems
Group (1987 - 1991)
D. V. Skilling 61 Executive Vice President and General Manager, TRW
Information Systems & Services Group (1989 to the
present)
J. P. Stenbit 54 Executive Vice President and General Manager, TRW Systems
Integration Group (1994 to the present)
Vice President and General Manager, TRW Systems Integration
Group (1990 - 1994)
R. D. Sugar 46 Executive Vice President and Chief Financial Officer (1994
to the present)
Vice President, Group Development, TRW Space & Electronics
Group (1992 - 1994)
Vice President, Strategic Business Development, TRW Space &
Defense Sector (1992)
Vice President and General Manager, TRW Space
Communications Division (1987 - 1992)
R. G. Williams 64 Vice President and Deputy General Manager, TRW Space and
Electronics Group (1993 to the present)
Vice President and General Manager, TRW Space and
Technology Group (1992)
Vice President and General Manager, TRW Federal Systems
Division (1988 - 1992)
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------- ---------------------------------------------------------------------
Reference is made to the information set forth in the table presented under
"Stock prices and dividends (unaudited)" on page 40 of the TRW 1994 Annual
Report and to the information presented under the note entitled "Debt and credit
agreements" in the Notes to Financial Statements on pages 34 and 35 of the TRW
1994 Annual Report. The information contained in such table and the information
contained in the fifth paragraph of text on page 35 in such note to financial
statements are incorporated herein by reference.
The Company's Common Stock is traded principally on the New York Stock
Exchange and is also traded on the Chicago, Pacific, Philadelphia, London and
Frankfurt exchanges.
On March 3, 1995, there were 31,098 shareholders of record of the Company's
Common Stock.
8
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
------- -----------------------
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Sales........................................ $9,087 $7,948 $8,311 $7,913 $8,169
Net earnings (loss).......................... 333 195 (156) (140) 208
Per share of Common Stock:
Fully diluted earnings (loss).............. 5.01 2.97 (2.51) (2.30) 3.36
Primary earnings (loss).................... 5.05 3.01 (2.51) (2.30) 3.39
Cash dividends declared.................... 1.97 1.88 1.84 1.80 1.76
Total assets................................. 5,636 5,336 5,458 5,635 5,555
Long-term debt............................... 694 870 941 1,213 1,042
Shares used in computing per share amounts:
Fully diluted.............................. 66.4 65.7 62.3 61.2 61.9
Primary.................................... 65.8 64.7 62.3 61.2 61.0
</TABLE>
In 1993, the Company adopted Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits," and took a
one-time charge of $25 million, or $.38 per share, for the prior years'
cumulative effect of the accounting change. The effect of this accounting change
on 1993 operating results, after recording the cumulative effect for years prior
to 1993, was immaterial.
In 1992, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," for its U.S. and Canadian retiree health care and life insurance
plans and Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," and took a one-time charge of $350 million, or $5.60 per share,
for the prior years' cumulative effect of the accounting changes. In 1992, net
earnings were reduced by $23 million for the change in accounting for
postretirement benefits and were increased by $11 million for the change in
accounting for income taxes.
In December 1991, TRW announced a restructuring plan. Net earnings (loss)
for 1991 include the effect of an aftertax charge of $256 million, or $4.18 per
share, to cover costs associated with divestiture and restructuring activities,
including reserves relating to environmental costs.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
Reference is made to the information presented under the heading
"Management's Discussion and Analysis of the Results of Operations and Financial
Condition" on pages 19 through 22 of the TRW 1994 Annual Report. Such
information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------- -------------------------------------------
Reference is made to the financial statements headed "Statements of
Earnings," "Balance Sheets," "Statements of Cash Flows" and "Statements of
Changes in Shareholders' Investment," and the accompanying notes thereto, on
pages 23 through 39 of the TRW 1994 Annual Report. Reference is also made to the
information included in the table presented under the heading "Quarterly
financial information (unaudited)" on page 40 of such report. Such statements,
the accompanying notes and such table are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------- --------------------------------------------------
Reference is made to the information relating to TRW's Directors which is
presented under the heading "Election of Directors" on pages 2 through 6 of the
TRW Proxy Statement dated March 14, 1995, as filed with the Securities and
Exchange Commission (the "TRW Proxy Statement"). Such information, beginning
with the third full paragraph on
9
<PAGE> 13
page 2 and ending with the second paragraph on page 6, is incorporated herein by
reference. Reference is made to the information relating to Section 16(a)
compliance which is presented under the heading "Section 16(a) Compliance" on
page 8 of the TRW Proxy Statement. Such information is incorporated herein by
reference.
See the information presented in Part I of this Report under the heading
"Executive Officers of the Registrant" for information relating to TRW's
executive officers.
ITEM 11. EXECUTIVE COMPENSATION
-------- ----------------------
Reference is made to the information presented under the heading
"Compensation of Executive Officers" on pages 16 through 20 of the TRW Proxy
Statement. Reference is also made to the information presented under the heading
"Relationships and Transactions" on page 8 of the TRW Proxy Statement. Such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------- --------------------------------------------------------------
Reference is made to the information presented under the heading "Ownership
of Shares" on page 7 of the TRW Proxy Statement. Reference is also made to the
information presented under the heading "Outstanding Securities" on page 22 of
the TRW Proxy Statement. Such information is incorporated herein by reference.
There are no agreements or arrangements known to TRW that might, at a
subsequent date, result in a change in control of TRW.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------- ----------------------------------------------
Reference is made to the information presented under the heading
"Relationships and Transactions" on page 8 of the TRW Proxy Statement. Such
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
-------- ----------------------------------------------------------------
(A) FINANCIAL STATEMENTS AND SCHEDULES
(1) FINANCIAL STATEMENTS
The following financial statements of the registrant and its
subsidiaries included in the TRW 1994 Annual Report are incorporated
herein by reference:
Statements of Earnings -- Years ended December 31, 1994, 1993 and
1992 (page 23)
Balance Sheets -- December 31, 1994 and 1993 (pages 24 and 25)
Statements of Cash Flows -- Years ended December 31, 1994, 1993
and 1992 (page 26)
Statements of Changes in Shareholders' Investment -- Years ended
December 31, 1994, 1993 and 1992 (page 27)
Notes to Financial Statements -- (pages 28 - 39)
(2) FINANCIAL STATEMENT SCHEDULES
All Schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and,
therefore, have been omitted.
Financial statements and summarized financial information of
unconsolidated subsidiaries and 50% or less owned persons accounted for
by the equity method have been omitted because such subsidiaries and
persons, considered individually or in the aggregate, do not constitute
a significant subsidiary.
(3) EXHIBITS
<TABLE>
<S> <C>
3(a) Amended Articles of Incorporation as amended December 14, 1988 (Exhibit 3(a) to TRW
Annual Report on Form 10-K for the year ended December 31, 1988 is incorporated herein
by reference).
3(b) Regulations as amended April 30, 1980 (Exhibit 3(b) to TRW Annual Report on Form 10-K
for the year ended December 31, 1980 is incorporated herein by reference).
</TABLE>
10
<PAGE> 14
<TABLE>
<S> <C>
4(a) Rights Agreement dated as of December 14, 1988 between TRW Inc. and Bankers Trust
Company as Rights Agent (Exhibit 2 to TRW Form 8-A Registration Statement dated
December 21, 1988 is incorporated herein by reference).
4(b) Indenture between TRW Inc. and The Chase Manhattan Bank (National Association), as
successor Trustee, dated as of May 1, 1986 (Exhibit 2 to TRW Form 8-A Registration
Statement dated July 3, 1986 is incorporated herein by reference).
4(c) First Supplemental Indenture between TRW Inc. and The Chase Manhattan Bank (National
Association), as successor Trustee, dated as of July 26, 1989 (Exhibit 4(b) to TRW Form
S-3 Registration Statement, File No. 33-30350, is incorporated herein by reference).
*10(a) 1967, 1973 and 1979 Stock Option Plans as amended April 28, 1982 (Exhibit A to TRW
Proxy Statement dated March 18, 1982 is incorporated herein by reference).
*10(b) TRW Operational Incentive Plan (Exhibit 10(b) to TRW Annual Report on Form 10-K for the
year ended December 31, 1989 is incorporated herein by reference).
*10(c) TRW Executive Health Care Plan as amended effective March 1989 (Exhibit 10(c) to TRW
Annual Report on Form 10-K for the year ended December 31, 1990 is incorporated herein
by reference).
*10(d) 1984 Stock Option Plan (Exhibit A to TRW Proxy Statement dated March 19, 1984 is
incorporated herein by reference).
*10(e) 1989 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement dated March 17,
1989 is incorporated herein by reference).
*10(f) 1994 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement dated March 17,
1994 is incorporated herein by reference).
*10(g) Form of Strategic Incentive Grant.
*10(h) Form of Nonqualified Stock Option Agreement.
*10(i) Deferred Compensation Plan for Non-Employee Directors of TRW Inc. reflecting amendments
effective August 1, 1990 (Exhibit 10(k) to TRW Annual Report on Form 10-K for the year
ended December 31, 1990 is incorporated herein by reference).
*10(j) TRW Directors' Pension Plan as amended and restated effective August 1, 1990 (Exhibit
10(l) to TRW Annual Report on Form 10-K for the year ended December 31, 1990 is
incorporated herein by reference).
*10(k) Form of Employment Continuation Agreements with executive officers (Exhibit 10(j) to
TRW Annual Report on Form 10-K for the year ended December 31, 1988 is incorporated
herein by reference).
*10(l) Consulting Agreement dated December 5, 1994 between TRW Inc. and E. D. Dunford.
*10(m) Description of Restricted Stock Grants (Exhibit 10(s) to TRW Annual Report on Form 10-K
for the year ended December 31, 1992 is incorporated herein by reference).
10(n) Three Year Revolving Credit Agreement dated July 1, 1992 among TRW Inc. and various
financial institutions (Exhibit 19.1 to TRW Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992 is incorporated herein by reference).
10(o) Agreement of Purchase and Sale between Federal-Mogul Corporation and TRW Inc. dated as
of August 23, 1992 (Exhibit 19.1 to TRW Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992 is incorporated herein by reference).
10(p) Amendment dated September 22, 1992 to Agreement of Purchase and Sale between
Federal-Mogul Corporation and TRW Inc. dated as of August 23, 1992 (Exhibit 19.2 to TRW
Quarterly Report on Form 10-Q for the quarter ended September 30, 1992 is incorporated
herein by reference).
10(q) Amendment dated October 20, 1992 to Agreement of Purchase and Sale between
Federal-Mogul Corporation and TRW Inc. dated as of August 23, 1992 (Exhibit 19.3 to TRW
Quarterly Report on Form 10-Q for the quarter ended September 30, 1992 is incorporated
herein by reference).
10(r) Amendment dated June 30, 1993 to Three Year Revolving Credit Agreement dated July 1,
1992 among TRW Inc. and various financial institutions. (Exhibit 10.1 to TRW Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993 is incorporated herein by
reference).
*10(s) TRW Inc. Stock Plan for Non-Employee Directors, as amended and restated. (Exhibit 10.1
to TRW Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 is
incorporated herein by reference).
</TABLE>
11
<PAGE> 15
<TABLE>
<S> <C> <C>
10(t) Amendment dated as of March 1, 1994 to Three Year Revolving Credit Agreement dated July
1, 1992 among TRW Inc. and various financial institutions. (Exhibit 10(cc) to TRW
Annual Report on Form 10-K for the year ended December 31, 1993 is incorporated herein
by reference).
10(u)
Amendment dated February 28, 1995 to Multi-Year Revolving Credit Agreement (formerly
entitled Three Year Revolving Credit Agreement) dated July 1, 1992 among TRW Inc. and
various financial institutions.
*10(v)
TRW Inc. Deferred Compensation Plan (as Amended and Restated August 1, 1994) (Exhibit
10.1 to TRW Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 is
incorporated herein by reference).
*10(w)
TRW Benefits Equalization Plan (as Amended and Restated, effective August 1, 1994)
(Exhibit 10.2 to TRW Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
is incorporated herein by reference).
*10(x)
TRW Supplementary Retirement Income Plan (as Amended and Restated, effective August 1,
1994) (Exhibit 10.3 to TRW Quarterly Report on Form 10-Q for the quarter ended June 30,
1994 is incorporated herein by reference).
11
Computation of Earnings per Share.
12
Computation of Ratio of Earnings to Fixed Charges - Unaudited.
13
Portions of the TRW Annual Report to Security Holders for the year ended December 31,
1994 incorporated by reference herein.
21
Subsidiaries of the Registrant.
24(a)
Consent of Independent Auditors.
24(b)
Consent of Independent Auditors (with respect to financial statements of The TRW Canada
Stock Savings Plan).
25(a)
Power of Attorney.
25(b)
Certified Resolutions.
27
Financial Data Schedule
28(a)
Financial Statements of The TRW Employee Stock Ownership and Stock Savings Plan for the
year ended December 31, 1994.
28(b)
Financial Statements of The TRW Canada Stock Savings Plan for the year ended December
31, 1994.
</TABLE>
Certain instruments with respect to long-term debt have not been filed as
exhibits as the total amount of securities authorized under any one of such
instruments does not exceed 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis. The registrant agrees to furnish to the
Commission a copy of each such instrument upon request.
*Management contract, compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of this report.
(B) REPORTS ON FORM 8-K
None.
12
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 24, 1995 By /s/ MARTIN A. COYLE
------------------------------
MARTIN A. COYLE,
EXECUTIVE VICE PRESIDENT AND
SECRETARY
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------- ----------------------------- --------------
<S> <C> --- <C>
J. T. GORMAN* Chairman of the Board, |
Chief Executive Officer |
and Director |
P. S. HELLMAN* Chief Operating Officer, |
President and Director |
R. D. SUGAR* Executive Vice President |
and Chief Financial Officer |
C. G. MILLER* Vice President and Corporate |
Controller |
M. H. ARMACOST* Director |
C. T. DUNCAN* Director |-- March 24, 1995
M. FELDSTEIN* Director |
R. M. GATES* Director |
C. H. HAHN* Director |
G. H. HEILMEIER* Director |
K. N. HORN* Director |
E. B. JONES* Director |
W. S. KISER* Director |
J. T. LYNN* Director |
R. W. POGUE* Director |
---
</TABLE>
MARTIN A. COYLE, by signing his name hereto, does hereby sign and execute
this report on behalf of each of the above-named officers and Directors of TRW
Inc., pursuant to a power of attorney executed by each of such officers and
Directors and filed with the Securities and Exchange Commission as an exhibit to
this report.
*By /s/ MARTIN A. COYLE March 24, 1995
---------------------------------
MARTIN A. COYLE, ATTORNEY-IN-FACT
30
13
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
Shareholders and Directors
TRW Inc.
We have audited the consolidated financial statements of TRW Inc. and
subsidiaries listed in Item 14(a)(1) of the annual report on Form 10-K of TRW
Inc. for the year ended December 31, 1994. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of TRW Inc. and
subsidiaries at December 31, 1994 and 1993, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in the notes to financial statements, effective January 1,
1993, the company changed its method of accounting for postemployment benefits
and, effective January 1, 1992, its methods of accounting for postretirement
benefits other than pensions and income taxes.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
January 23, 1995
F-1
<PAGE> 1
Exhibit 10(g)
STRATEGIC [TRW Logo]
INCENTIVE
GRANT
Date of Grant: April 27, 1994
To: <<name>>
-----------------------------------------------
Unit: Company Staff
-----------------------------------------------
As a key employee of TRW Inc. ("TRW"), you are hereby granted the right (the
"Right") to receive <<amount>> (or up to 200 percent thereof in certain
circumstances) shares of Common Stock, par value $0.625, of TRW ("TRW Common"),
subject to the terms and conditions below. This performance share right is
granted to you pursuant to the 1994 TRW Long-Term Incentive Plan approved by
the shareholders of TRW in April 1994.
TRW INC.
By:_____________________________
Secretary
----------------------------------------------------------------------
TERMS AND CONDITIONS
1. THE RIGHT.
This Right entitles you to receive shares of TRW Common in the event that
certain improvements in return on assets employed ("ROAE") for TRW are achieved
with respect to the calendar years 1994 through 1997 (the "Performance Period").
2. PERFORMANCE CRITERIA.
The definition of ROAE, for purposes of this Right, is set forth in
Exhibit A. The inclusion of the effects of acquisitions, divestitures and
similar unusual items in the calculation of ROAE shall be at the complete
discretion of the Compensation and Stock Option Committee of the Directors of
TRW (the "Committee").
A TRW matrix which consists of various ROAE figures for TRW for each
year of the Performance Period and percentage award levels related to each of
those figures is set forth in Exhibit B.
3. ISSUANCE OF TRW COMMON.
Promptly following the availability of year-end financial information
for TRW for each year in the Performance Period, a firm of certified public
accountants chosen by TRW will certify to TRW the ROAE of TRW for each such
year. That number of shares of TRW Common determined by multiplying the target
grant listed on Exhibit B by the applicable percentage shown next to the ROAE
figure (pro rata between ROAE figures shown) certified as described above for
the applicable calendar year will be issued to you as soon as practicable
thereafter. In the event you are entitled to receive for any applicable
calendar year a number of shares greater than that number of shares determined
by multiplying the target percentage for such year times your target grant, you
will be paid the cash equivalent for such excess shares unless the Committee
determines in its sole discretion to issue shares in lieu of cash. Such excess
shares will be valued at the average of the high and low sales prices of a share
of TRW Common on the New York Stock Exchange Composite Transactions Listing on
the day immediately prior to the date of payment.
4. TAXES.
Upon any issuance of shares of TRW Common pursuant to this Right, TRW
shall withhold delivery of the certificates evidencing such shares until you
make arrangements satisfactory to TRW to pay any withholding, transfer or other
taxes due as a result of such issuance. You may elect, in accordance with
applicable regulations of the Committee, to pay a portion or all of the amount
of required withholding taxes in shares of TRW Common, either by delivering to
TRW previously held shares of TRW Common or by having shares of TRW Common
withheld from the shares issued to you hereunder.
5. SECURITIES LAWS.
Shares of TRW Common shall not be issued hereunder if such issuance
would violate any Federal or state securities law. TRW will use its best
efforts to make such filings and initiate such proceedings as may be necessary
to prevent such violations unless the Directors of TRW determine, in their sole
discretion, that such filings or proceedings would result in undue expense or
hardship for TRW. TRW may place appropriate legends on the certificates for the
shares issued hereunder, give stop-transfer instructions to its transfer agents
or take any other action to achieve compliance with those laws in connection
with any issuance of shares hereunder or your resale of such shares.
6. TRANSFERABILITY.
This Right is not transferable other than by will or the laws of descent and
distribution.
7. DEATH.
In the event of your death, your estate or those so designated by will
or the laws of descent and distribution will be entitled to receive, at such
times as you would have received them, such shares of TRW Common as would have
been issued to you hereunder if you had remained employed throughout the entire
year in which your death occurred and the following year of the Performance
Period, if any.
8. TERMINATION OF EMPLOYMENT.
This Right shall terminate on the date of your termination of employment
and you shall not be entitled to any additional shares hereunder except for any
shares of TRW Common which may be issuable with respect to calendar years prior
to your termination. However, if your employment is terminated during the last
half of a calendar year, and if the Committee gives written consent on or
prior to the date on which shares of TRW Common are issuable pursuant to this
Right with respect to such year, you will be entitled to receive such number of
shares of
<PAGE> 2
TRW Common as would have been issued to you hereunder if you remained
employed through the end of the calendar year during which your employment
terminated multiplied by the fraction representing the number of months
employed during such year.
9. DISABILITY.
Notwithstanding the foregoing, if your termination of employment is due to
disability (as defined in the TRW long-term disability plan applicable to you),
you will be entitled to receive such shares of TRW Common as would have been
issued to you hereunder if you had remained employed for the entire year in
which the disability occurred and the following year of the Performance
Period, if any.
10. ADJUSTMENTS.
The Committee shall make such adjustments in the number and kind of
securities issuable pursuant hereto as it may determine are equitably required
to prevent dilution or enlargement of your rights that would otherwise result
from any stock dividend, stock split, combination of shares, recapitalization
or other change in the capital structure of TRW, merger, consolidation,
reorganization, partial or complete liquidation or other corporate transaction
or event having an effect similar to any of the foregoing.
11. AMENDMENTS.
In addition to the authority to make adjustments as provided in Section 10,
the Committee shall have the authority, until such time as a Change in Control
as defined in Section 12 occurs, to amend otherwise this grant provided that no
amendment shall contain terms and conditions inconsistent with the provisions of
the 1994 TRW Long-Term Incentive Plan. Notwithstanding the foregoing, if you
transfer positions or change responsibilities within TRW, the Committee may
amend this Right to reflect such changed circumstances; provided, however, that
any such amendment after a Change in Control occurs shall not reduce the value
of this Right to you.
12. CHANGE IN CONTROL.
In the event of a Change in Control of TRW, this Right will remain in effect so
long as you continue to be employed by TRW. For purposes of this Right, the
definition of Change in Control is the same as the definition contained in
resolutions adopted by the Committee on July 26, 1989. Such resolutions, in
summary, provide that a Change in Control is a change occurring (a) by virtue of
TRW's merger, consolidation or reorganization into or with, or transfer of
assets to, another corporation or (b) by virtue of a change in the majority of
the Directors during any two-year period unless the election of each new
Director was approved by a two-thirds vote of the Directors in office at the
beginning of such period or (c) through the acquisition of shares representing
20 percent or more of the voting power of TRW or (d) through any other change in
control reported in any filing with the Securities and Exchange Commission,
excluding, however, the acquisition of shares, or any report of such
acquisition, by TRW, a subsidiary of TRW or a TRW-sponsored employee benefit
plan. The language in the resolutions controls over this summary language.
If a Change in Control occurs after April 27, 1994, you will be entitled to
receive any shares of TRW Common issuable to you but not yet issued with respect
to the calendar year preceding the Change in Control. In addition, with respect
to remaining years in the Performance Period, you will be entitled to receive
shares of TRW Common equal to the greater of (a) such number of shares of TRW
Common as shall be determined by the Committee, prior to the Change in Control,
to be appropriate and consistent with this Right after taking into account prior
performance, trends in performance and anticipated future performance based on
information available at the time of the Committee's determination and (b) a
minimum number of shares of TRW Common as follows:
The minimum number of shares would be based on the 12-month ROAE for
TRW (calculated by determining the ROAE for TRW for the first 12 months of
the 15-month period ending on the last day of the month immediately
preceding the month in which the Change in Control occurred). The number
of shares for the year in which the Change in Control occurred would be
determined by applying such 12-month ROAE figure to the column of the TRW
matrix relating to the year in which the Change in Control occurred. The
number of shares for each subsequent year of the Performance Period would
be determined by using, in that year's TRW matrix column, the ROAE
appearing in the same row (or, using an arithmetic interpolation, the same
position between rows) of the TRW matrix as was used to determine the
payout for the year in which the Change in Control occurred. For example,
if the 12-month ROAE figure were two rows below the target level on the TRW
matrix for the calendar year in which the Change in Control occurred, it
would be assumed that the ROAE for any additional years remaining in the
Performance Period would be two rows below the target level for those
years. The aggregate number of shares of TRW Common payable with respect
to the year of the Change in Control and subsequent years in the
Performance Period, determined as set forth above, would be issued to you
promptly following the Change in Control.
If you continue employment with TRW after the Change in Control, shares of
TRW Common will be issued to you in accordance with this Right provided that the
number of shares of TRW Common that you are entitled to receive with respect to
a calendar year will be reduced by the number of shares of TRW Common previously
issued to you with respect to such year in accordance with the foregoing
paragraph.
13. MISCELLANEOUS.
This Right shall not be construed as giving you any right to continue in the
employ of TRW and is subject to the terms and conditions of the 1994 TRW
Long-Term Incentive Plan. Subject to the requirements and limitations in
Sections 10, 11 and 12 above, the Committee has authority to interpret and
construe any provision of this grant and any such interpretation and
construction shall be binding and conclusive. Except as provided in Section 12
above, no rights hereunder shall accrue to you with respect to any year in the
Performance Period until such year is completed and the ROAE for TRW for such
year has been certified to TRW as provided in Section 3 above. Thereafter your
rights will be limited to those expressly given by this Right. Any reference
in this grant to the Directors of TRW includes the Executive Committee of the
Directors.
14. ENTIRE AGREEMENT.
This Right sets forth the entire understanding between you and TRW with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, whether oral or written, relating hereto.
<PAGE> 1
Exhibit 10(h)
[TRW Logo]
NONQUALIFIED
STOCK OPTION
AGREEMENT
Date of Grant: February 8, 1995
To: <<Name>>
-----------------------------------------------------
<<SS Number>>
-----------------------------------------------------
(Social Security Number)
There hereby is granted to you, as a key employee of TRW Inc. ("TRW") or of a
subsidiary, an option to purchase <<Amount>> shares of Common Stock, par value
$0.625 each, of TRW ("TRW Common") at an option price of $64.63 per share. This
option is granted to you pursuant to the 1994 TRW Long-Term Incentive Plan and
is subject to the terms and conditions set forth below.
This option is not intended to be an incentive stock option as defined in
Section 422A of the Internal Revenue Code.
TRW INC.
By:_________________________________
Authorized Officer
______________________________________________________________________
TERMS AND CONDITIONS
1. PURCHASE RIGHTS.
This option cannot be exercised before the first anniversary of the date of
grant. After that you will be entitled to purchase up to 33-1/3% of the shares
covered by this option, rounded down to the nearest whole share for each of the
first two years, for each full year of your continuous employment with TRW
after the date of grant. The purchase rights accumulate as shown in the
following table.
<TABLE>
<CAPTION>
Cumulative Maximum
Number of Full Years Percentage of
of Continuous Service Optioned Shares That
After Date of Grant May Be Purchased
-------------------------------------------------------
<S> <C>
1 33-1/3%
2 66-2/3%
3 100%
</TABLE>
Notwithstanding the foregoing, in the event of a change in control of TRW, this
option will immediately become exercisable in respect of all of the shares
covered by this grant. For purposes of this agreement, a change in control is
defined in resolutions adopted by the Compensation and Stock Option Committee
of the Directors of TRW on July 26, 1989, which, in summary, provide that a
change in control is a change occurring (a) by virtue of TRW's merger,
consolidation or reorganization into or with, or transfer of assets to, another
corporation or (b) by virtue of a change in the majority of the Directors of
TRW during any two-year period unless the election of each new Director was
approved by a two-thirds vote of the Directors in office at the beginning of
such period or (c) through the acquisition of shares representing 20% or more
of the voting power of TRW or (d) through any other change in control reported
in any filing with the Securities and Exchange Commission; provided that no
change in control is deemed to have occurred by the acquisition of shares, or
any report of such acquisition, by TRW, a subsidiary of TRW or a TRW-sponsored
employee benefit plan. The language of the resolutions controls over this
summary language.
2. EXERCISE IN WHOLE OR PART.
To the extent this option has become exercisable, you may purchase on any date
or dates all or any part of the shares which you are then entitled to purchase.
However, no fractional shares may be purchased.
3. TERM OF OPTION.
To the extent this option has become exercisable in accordance with paragraph 1
above, it may be exercised by you at any time during the 10-year period
beginning on the date of grant. To the extent this option remains unexercised
at the end of the 10-year period, your unexercised purchase rights will
terminate. To the extent unexercised, this stock option will terminate before
the end of such 10-year period in the following cases:
(a) If your employment with TRW terminates before you reach age 55, your
unexercised purchase rights will terminate three months after the date your
employment terminates.
(b) If the Directors of TRW shall find that you intentionally committed an act
materially inimical to the interests of TRW or a subsidiary, your unexercised
purchase rights will terminate as of the time you committed such act, as
determined by the Directors.
<PAGE> 2
If your employment is terminated by death or disability, your purchase rights
will not be subject to termination under clause (a) above and will continue for
the entire 10-year period. Nothing contained in this option shall extend this
option beyond a 10-year period beginning on the date of grant or shall limit
whatever right TRW or a subsidiary might otherwise have to terminate your
employment at any time.
4. PAYMENT OF OPTION PRICE.
The option price shall be payable at the time of exercise. The option price
shall be paid at the Office of Secretary at TRW's corporate headquarters or at
any other place designated by the Secretary. The option price may be paid in
cash, in full shares of TRW Common, or in a combination of both, in accordance
with such procedures and subject to such further conditions as the Secretary of
TRW may establish from time to time. Notwithstanding the foregoing, the
Compensation and Stock Option Committee of TRW at any time may suspend or
terminate your right to pay any or all of the option price in shares of TRW
Common.
Cash payments shall be made in United States dollars, except that, if at the
time of exercise you are employed by or on assignment for TRW or a subsidiary
at a location outside the United States, a cash payment may, with the prior
approval of the Secretary of TRW, be made in the official currency used at such
location in an amount specified by the Secretary as equivalent to the same
amount in United States dollars.
Shares delivered in payment of the option price shall be valued at their fair
market value on the date of exercise. For purposes of this option, "fair
market value" is the mean of the high and low sales prices of a share of TRW
Common on the date of exercise on the New York Stock Exchange Composite
Transactions Listing as reported in the Midwest edition of The Wall Street
Journal (or if there are no sales on such date, then the closing sale price on
such Listing on the nearest date before the date of exercise) or such other
method or procedure for determining fair market value as the Compensation and
Stock Option Committee of TRW in its sole discretion may determine. For
purposes of this option, the "date of exercise" is the date on which written
notice, accompanied by the option price, is received by the Secretary of TRW or
his designee that you have elected to exercise all or part of this option.
5. TAXES.
Upon any exercise of this option, TRW may withhold delivery of certificates for
the purchased shares until you make arrangements satisfactory to TRW to pay any
withholding, transfer or other taxes due as a result of such exercise. You may
elect, in accordance with applicable regulations of the Compensation and Stock
Option Committee of TRW, to pay a portion or all of the amount of required
withholding taxes in shares of TRW Common, either by delivering to TRW
previously held shares of TRW Common or by having shares of TRW Common withheld
from the shares purchased hereunder.
6. SECURITIES LAWS.
This option shall not be exercisable if such exercise would violate any Federal
or state securities law. TRW will use its best efforts to make such filings
and initiate such proceedings as may be necessary to prevent such violations
unless the Directors of TRW determine, in their sole discretion, that such
filings or proceedings would result in undue expense or hardship for TRW. TRW
may place appropriate legends on the certificates for the optioned shares, give
stop-transfer instructions to its transfer agents or take any other action to
achieve compliance with those laws in connection with any exercise of this
option or your resale of the optioned shares.
7. TRANSFERABILITY.
This option is not transferable other than by will or the laws of descent and
distribution and shall be exercisable during your lifetime only by you or your
guardian or legal representative.
8. LEAVES OF ABSENCE.
If you take a leave of absence for illness, military or governmental service or
other reasons, and such leave has been specifically approved by the Chairman of
the Board or the President of TRW for purposes of this option, then such leave
will not be treated as an interruption of your employment.
9. ADJUSTMENTS.
The Compensation and Stock Option Committee of TRW may make such adjustments in
the option price and in the number or kind of shares of TRW Common or other
securities covered by this option as it in its sole discretion may determine
are equitably required to prevent dilution or enlargement of your rights that
would otherwise result from any stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of TRW,
merger, consolidation, reorganization, partial or complete liquidation or other
corporate transaction or event having an effect similar to any of the
foregoing.
10. CERTAIN DEFINITIONS.
For purposes of this option, employment with a subsidiary will be treated as
equivalent to employment with TRW itself, and your continuous employment will
not be deemed to be interrupted by reason of your transfer among TRW and its
subsidiaries. "Subsidiary" means a corporation or other entity in an unbroken
chain of entities beginning with TRW if each of the entities other than the
last entity in the unbroken chain owns stock or other ownership interests
possessing 50% or more of the total outstanding combined voting power of all
classes of stock or other interests in the next entity in the chain.
11. MISCELLANEOUS.
This stock option is subject to all the terms and conditions of the TRW plan
pursuant to which it is granted. The Compensation and Stock Option Committee
of TRW has authority to interpret and construe any provision of this instrument
and the TRW plan pursuant to which this stock option is granted, and any such
interpretation and construction shall be binding and conclusive. Any reference
in this option to the Directors of TRW includes the Executive Committee of the
Directors.
<PAGE> 1
Exhibit 10(l)
December 5, 1994
E. D. Dunford
301 Rocky Point Road
Palos Verdes, CA 90274
Dear Ed:
This letter will confirm our understanding relating to your consulting
agreement with TRW upon your termination of employment as President and Chief
Operating Officer. The attached terms and conditions, together with this
letter, constitute our "Agreement".
We will request your general consulting services and advice primarily for the
Space and Defense businesses, and the timing and extent of your activities will
be flexible. However, you will not be obligated to devote more than 15 percent
of your time in any year to such services. Your consulting services will be
rendered at such times and places as are mutually satisfactory and TRW will
have no control over any reasonable manner or methods used by you in rendering
such services.
Our arrangement will become effective on January 1, 1995 and will continue for
two years, terminating on December 31, 1996. Thereafter, this Agreement may be
renewed from year to year on mutually agreeable terms and conditions. The
Agreement may be terminated by either of us in accordance with the attached
terms and conditions.
As compensation for your services as a Consultant, TRW will pay to you $150,000
per year, to be paid in monthly installments.
TRW will also reimburse you for first-class airfare and all other reasonable
out-of-pocket travel, entertainment, telephone and other business expenses
incurred by you in performing your duties. Receipts for such expenses,
accompanied by an expense report substantially the same as the TRW expense
report form with which you are familiar should be submitted to me for
processing and approval. For the convenience of TRW, during the term of this
Agreement and any renewals, we will also provide or reimburse you for required
secretarial and other appropriate services.
<PAGE> 2
For purposes of Article VI of the attached terms and conditions, your serving
as an employee, officer, Director, Chairman of the Board or consultant of
Thiokol Corporation or as a Director of Cooper Tire & Rubber Co. is hereby
approved, provided that, and so long as, the respective businesses of the
companies remain substantially the same as they were on November 1, 1994.
If you agree, please sign at the bottom of this letter and initial each page of
the attached terms and conditions and return them to me. Please keep a copy of
the letter and the terms and conditions for your records.
Sincerely,
Peter S. Hellman
ACCEPTED: /s/ E. D. Dunford
----------------------------
E. D. Dunford
Date: December 12, 1994
-----------------
PSH/ai
<PAGE> 3
TERMS AND CONDITIONS
--------------------
I. CONFIDENTIAL INFORMATION
The term "TRW Confidential Information" refers to all data, reports,
drawings, tapes, formulas, interpretations, forecasts, business plans and
analyses, records, trade secrets, customer lists, documents, proposals,
information regarding products, pricing, terms of sale, processes, research and
development, apparatus and application methods and all other information
reflecting upon or concerning TRW Inc., its subsidiaries and affiliates ("TRW")
that TRW protects against unrestricted disclosure to others and that Consultant
obtains from TRW, its employees, subsidiaries and affiliates, or otherwise
acquires while engaged hereunder, including information of a third party as to
which TRW has a nondisclosure obligation. In view of the sensitive information
to which Consultant will have access during his engagement hereunder, any
information reflecting upon or concerning TRW and known, communicated or
accessible to Consultant shall be deemed to be TRW Confidential Information
unless such information has been published by TRW in publicly available
documents.
Such TRW Confidential Information includes, but is not limited to, secret
or confidential matters (a) of a technical nature, (b) of a business nature,
and (c) of either nature pertaining to future development. Consultant:
(a) agrees that TRW Confidential Information is the sole property
of TRW and that such TRW Confidential Information shall be used
only in providing consulting services hereunder for TRW;
(b) will hold the TRW Confidential Information in confidence and not
disclose it in any manner whatsoever, in whole or in part, to any
person except to employees of TRW, or to employees of Consultant
who need to know in order to perform their duties and who agree in
writing to use the Confidential Information only to assist
Consultant in performance of Consultant's duties hereunder;
(c) will take or cause to be taken all reasonable precautions to
prevent the disclosure or communication of TRW Confidential
Information to third parties;
(d) agrees that each reproduction, duplication, or copy of any portion
of TRW Confidential Information will be deemed TRW Confidential
Information for all purposes hereunder; and
(e) will, upon expiration or termination of the Agreement,
discontinue all use of TRW Confidential Information and return all
documents containing TRW Confidential Information to TRW.
Initialed ________
<PAGE> 4
II. INVENTIONS
Consultant shall disclose promptly to TRW all ideas, inventions,
discoveries or improvements, whether or not patentable, which were or are
conceived or first reduced to practice by Consultant, whether solely or jointly
with employees of TRW, in the course of performing work hereunder or as a
result of knowledge acquired while performing services under this Agreement
("TRW Inventions"). Consultant agrees that all TRW Inventions shall be the
sole property of TRW. During and subsequent to the term of this Agreement,
Consultant will execute and deliver to TRW all documents and take such other
action as may be reasonably required by TRW to assist TRW in obtaining patents
in the United States and foreign countries and in vesting title thereto in TRW
for said TRW Inventions. At TRW's request and expense, Consultant shall
cooperate with TRW and do all things reasonably and lawfully appropriate to
assist TRW, or its successors, assigns and nominees, to obtain and enforce
patents relating to such TRW Inventions.
III. COPYRIGHTS
Neither Consultant nor any of Consultant's employees or independent
contractors shall knowingly incorporate in any work prepared under this
Agreement any copyrighted or proprietary material of TRW or any other person.
Further, any work of authorship created under this Agreement shall constitute a
"work made for hire", when so defined by the Copyright Act, and as to any work
not so defined, Consultant hereby transfers to TRW any and all right, title and
interest Consultant may have in and to the copyright in such work for the
entire term of the copyright. No rights are reserved to Consultant in any work
prepared under this Agreement.
IV. LICENSE
Consultant hereby grants to TRW a fully paid-up, nonexclusive and perpetual
right and license to use any and all of Consultant's know-how and trade secrets
which are necessary to the implementation of work by TRW pursuant to the
reports and recommendations made by Consultant.
V. CLASSIFIED MATERIAL
TRW shall advise Consultant which information or items provided to
Consultant constitute classified material, and Consultant shall comply with all
security requirements imposed by the United States Government or TRW. If it
becomes necessary for Consultant to store classified material at Consultant's
place of work, other than TRW premises, a facility clearance shall be required.
In that event, Consultant shall enter into a security agreement with the
applicable Government agency and maintain a system of security controls in
accordance with such security agreement. All such classified material shall be
promptly returned to TRW on request or upon termination of the security
agreement or this Agreement, whichever first occurs.
Initialed ________
- 2 -
<PAGE> 5
VI. NONCOMPETE
Except as a member of the Chief Executive Office of TRW grants specific
prior written approval after full disclosure of all relevant facts, Consultant,
until two years from the date hereof (provided, however, that if the term of
this Agreement extends beyond two years from the date hereof, the termination
of these provisions shall extend until the termination of this Agreement), (a)
shall refrain from accepting work, engagements or appointments from any third
party which could conflict with, or impede an unbiased performance of,
Consultant's work hereunder or the protection of TRW Confidential Information
and (b) shall not, directly or indirectly, as owner, manager, officer,
director, employee, consultant or in any other capacity, become financially
interested in or otherwise connected with a third party which engages in
business activity which is competitive with the business activities of TRW or
with work performed under this Agreement; provided, however, this limitation
shall not preclude Consultant from making a nominal equity investment in a firm
whose stock is listed on a national securities exchange or NASDAQ.
VII. COMPLIANCE
Consultant warrants that Consultant has the right to enter into this
Agreement and that performance of the work specified shall not cause Consultant
to be in violation of any federal, state or local law or regulation, or any
contractual agreement entered into by the Consultant. Consultant shall comply
with TRW's policies, directives and standards, including without limitation
TRW's standards regarding legal and ethical conduct and government contracting
and with all applicable federal, state and local laws and regulations.
Consultant shall file all tax returns and reports required to be filed pursuant
to law.
VIII. TERMINATION
This Agreement will terminate upon the death of Consultant or, if
Consultant is unable to perform Consultant's duties hereunder for a period of
thirty consecutive days, forthwith upon receipt of written notice from TRW.
This Agreement may also be terminated as set forth in the attached letter
agreement. Payment shall be made for services and expenses rendered or
incurred through the date of termination. Advance payments shall be prorated
through the termination date. The covenants set forth in these Terms and
Conditions shall be permanent and shall survive the termination of the
Agreement.
IX. FORCE MAJEURE
Neither party shall incur liability to the other party on account of any
loss or damage resulting from any delay or failure to perform any part of this
Agreement where such delay or failure was caused in whole or in part by events,
occurrences, or causes beyond the reasonable control of such party.
Initialed ________
- 3 -
<PAGE> 6
X. RECORDS
Consultant shall maintain a written record of all work performed and data
generated in the course of performance. Such written material shall be the
sole property of TRW and shall be made available on request. TRW shall have
the right to request preliminary reports from Consultant which represent the
findings and conclusions of Consultant based on the information which exists at
that time. Upon completion of each specific project or termination of this
Agreement, Consultant shall, if requested by TRW, promptly furnish TRW a
complete report, together with all supporting contract data.
XI. CHANGES
TRW may order changes in the description of services to be performed by
Consultant. If Consultant believes that any change requested will require
additional compensation to Consultant or will adversely affect the schedule for
rendering services, before proceeding with any work on the change, Consultant
will so advise TRW and thereafter Consultant will not proceed with any such
change until Consultant has received written authorization from TRW to do so.
This Agreement may not be amended, modified or otherwise changed except by an
instrument in writing signed by TRW and Consultant.
XII. INDEPENDENT CONTRACTOR
Consultant agrees that in the performance of this Agreement, Consultant
shall act as an independent contractor, and not as an employee of TRW, and all
of Consultant's agents and employees shall be subject solely to the control,
supervision and authority of Consultant. Consultant understands and agrees
that TRW will not cover Consultant or Consultant's employees or agents with
Worker's Compensation, Unemployment Insurance, State Disability Insurance,
public liability insurance or other benefits that may be available to employees
of TRW. Consultant shall refrain from any representation that Consultant is an
employee, agent or legal representative of TRW, or from incurring liabilities
or obligations of any kind in the name, or on behalf, of TRW.
It is agreed that (a) Consultant shall be responsible for Social Security
taxes, if any, which may be applicable and for any other applicable fees or
taxes (federal, state or local) which may be required; and (b) Consultant and
Consultant's employees, agents, heirs, successors and assigns shall not be
entitled, by virtue of any work done under this Agreement, to any benefits
under any medical or travel accident insurance, pension, sick leave, life
insurance, vacation, or disability, or other employees' benefit plan or plans
maintained by TRW for its employees; and (c) Consultant shall hereby indemnify
and hold TRW, its agents, and employees harmless from and against any expense,
claim, action, loss or liability to any third party that results from or is
caused by, directly or indirectly, Consultant's willful misconduct in the
course of performing work under this Agreement, or the willful misconduct of
Consultant's employees, agents, subcontractors, suppliers or other third
parties utilized in connection with Consultant's performance.
Initialed ________
-4-
<PAGE> 7
XIII. INDEMNIFICATION
TRW agrees to indemnify and hold Consultant harmless from and against any
losses, claims, damages, liabilities, or actions related to or arising out of
this engagement and Consultant's role in connection therewith, and will
reimburse Consultant for all expenses (including reasonable counsel fees)
incurred by Consultant in connection with investigating, preparing or defending
any such action or claim, whether or not in connection with pending or
threatened litigation in which Consultant is a party, if Consultant acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of TRW and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. TRW
agrees that Consultant shall not have any liability (whether direct or
indirect, in contract or tort or otherwise) to TRW for or in connection with
such engagement, except for any such liability for losses, claims, damages,
liabilities or expenses incurred by TRW that result primarily from Consultant's
bad faith or breach of any obligation to TRW pursuant to such engagement.
If any action or proceeding is brought against Consultant in respect of
which indemnity may be sought against TRW pursuant hereto, Consultant shall
promptly notify TRW in writing of the commencement of such action or
proceeding, but the omission so to notify TRW shall not relieve TRW from any
other obligation or liability which TRW may have to Consultant otherwise than
under this Agreement or with respect to any other action or proceeding. In
case any such action or proceeding shall be brought against Consultant, TRW
shall be entitled to participate in such action or proceeding, and, after a
written notice from TRW to Consultant, to assume the defense of such action or
proceeding with counsel of TRW's choice at its expense (in which case TRW shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by Consultant); provided, however, that such counsel shall be
reasonably satisfactory to Consultant in the exercise of his reasonable
judgment.
Notwithstanding TRW's election to assume the defense of such action or
proceeding, Consultant shall have the right to employ separate counsel and to
participate in the defense of such action or proceeding. TRW shall bear the
reasonable fees, costs and expenses of one such separate counsel (and shall pay
such fees, costs and expenses at least quarterly) if TRW approves in advance
the separate counsel selected by Consultant and if: (i) the use of counsel
chosen by TRW to represent Consultant would present such counsel with a
conflict of interest; (ii) the defendants in, or targets of, any such action or
proceeding include both Consultant and TRW, and, upon advice of counsel,
Consultant shall have reasonably concluded that there may be legal defenses
available to him which are materially different from those available to TRW (in
which case TRW shall not have the right to direct the defense of such action or
proceeding on behalf of Consultant); (iii) TRW shall not have employed counsel
reasonably satisfactory to Consultant in the exercise of reasonable judgment to
represent Consultant within a reasonable time after notice of the institution
of
Initialed ________
-5-
<PAGE> 8
such action or proceeding; or (iv) TRW shall authorize Consultant to employ
separate counsel at its expense.
TRW and Consultant understand that the indemnity provisions contained in
this Agreement shall be in addition to any and all other rights and remedies
which the parties may have at law or in equity or otherwise, including, but not
limited to, any right of contribution.
Notwithstanding anything contained herein to the contrary, it is the
intention of TRW and Consultant that the indemnification provided herein by TRW
to Consultant shall not be more than that provided to a presently serving
elected officer of TRW Inc.
XIV. NONDISCRIMINATION
Consultant: (a) will not discriminate against any applicant for employment
on the basis of race, color, non-job related handicap, veteran status,
religion, sex, national origin or age; (b) will take affirmative action to
ensure that applicants are employed and employees are treated during employment
without regard to their race, color, religion, sex, national origin, veteran
status or non-job related handicap; and (c) will otherwise at all times comply
with all applicable federal, state and local laws, rules, regulations, orders
and ordinances relating to equal employment opportunity. Without limiting the
generality of the foregoing, Consultant shall at all times comply fully with
the provisions of the following regulations and Executive Orders, as the same
may be amended or modified from time to time, and all rules and regulations
promulgated thereunder or relating thereto or to such Executive Orders, as so
amended or modified, such rules and regulations being herein incorporated by
this reference: (i) Executive Order 11246, as amended by Executive Order 11375
(relating to nondiscrimination in employment by Government contracts and trade
contractors); (ii) Executive Order 11625 (relating to utilization of minority
business enterprises); (iii) Executive Order 11701 and 41 CFR 60-250 (relating
to employment of certain veterans); (iv) Executive Order 11758 and 41 CFR
60-741:4 (relating to employment of handicapped persons); and (v) Executive
Order 11141 (relating to nondiscrimination on the basis of age). Consultant
shall, upon request of TRW, provide TRW with such certifications and undertake
such other actions as TRW may deem appropriate to verify and assure
Consultant's compliance with such Executive Orders and regulations.
XV. PUBLICITY
Except as TRW grants prior written approval, Consultant shall not publicize
the existence or terms of, or work performed under, this Agreement.
XVI. ASSIGNMENT
This Agreement shall not be assignable by either party without the prior
written consent of the other party, except that TRW may assign this Agreement
Initialed ________
-6-
<PAGE> 9
without such consent with respect to any corporate reorganization, merger,
transfer of assets or similar transaction pursuant to which all of TRW's rights
and obligations hereunder are transferred by operation of law or otherwise.
XVII. ENTIRE AGREEMENT
This Agreement, including the engagement letter and these terms and
conditions, sets forth the entire understanding between the parties relating to
the subject matter contained herein and merges all prior discussions between
them. Neither party shall be bound by any condition, warranty, or
representation other than as expressly stated in this Agreement or as
subsequently set forth in writing signed by the parties. If prior agreements,
letters or proposals relating to the subject matter of this Agreement are
inconsistent with the terms and conditions of the Agreement, this Agreement
shall govern. Should any term of this Agreement be deemed illegal, invalid or
unenforceable in any respect in any jurisdiction, neither the legality, the
validity or enforceability of the remaining terms of this Agreement nor the
legality, validity or enforceability of such term under the law of any other
jurisdiction shall in any way be affected or impaired thereby.
Initialed ________
-7-
<PAGE> 1
Exhibit 10(u)
AMENDMENT TO
MULTI-YEAR REVOLVING CREDIT AGREEMENT
This Amendment to Multi-Year Revolving Credit Agreement, dated as of
February 28, 1995 (this "Amendment"), is among TRW Inc., an Ohio corporation
(the "Company") and the financial institutions listed on the signature pages
hereof together with their successors or assigns (collectively, the "Banks" and
individually, a "Bank").
W I T N E S S E T H:
-------------------
WHEREAS, on July 1, 1992, the Company and the Banks entered into the
Three Year Revolving Credit Agreement (as it was then titled), which agreement
was amended on June 30, 1993 and on March 1, 1994 (the agreement as amended is
known hereinafter as the "Agreement"); and
WHEREAS, the Company and the Banks have agreed to make such changes to
the Agreement as are reflected in this Amendment;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
SECTION 1 THE AMENDMENTS
1.1 AMENDMENT TO "APPLICABLE COMMITMENT FEE" DEFINITION. The
definition to "Applicable Commitment Fee" set forth in Section 13 shall be
amended to read in its entirety as follows:
"APPLICABLE COMMITMENT FEE" means the percentage in effect from
time to time as set forth in the following table opposite the highest
of the then-current rating assigned to the Company's senior unsecured
long-term debt by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("S&P"):
<TABLE>
<CAPTION>
Rating Applicable
(Moody's/S&P) Commitment Fee
------------- --------------
<S> <C>
higher than A3/A- 0.100%
A3/A- 0.100%
Baa1/BBB+ 0.125%
Baa2/BBB 0.150%
Baa3/BBB- 0.200%
lower than Baa3/BBB- 0.325%
</TABLE>
-1-
<PAGE> 2
1.2 AMENDMENT TO "APPLICABLE MARGIN" DEFINITION. The definition
to "Applicable Margin" set forth in Section 13 shall be amended to read in its
entirety as follows:
"APPLICABLE MARGIN" means, at any time, the percentage set forth in
the following table opposite the highest of the then-current rating
assigned to the Company's senior unsecured long-term debt by Moody's
or S&P:
<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin for
Rating Domestic CD Eurocurrency
(Moody's/S&P) Loans Loans
-------------------------------------------------------------------------------
<S> <C> <C>
higher than A3/A- 0.325% 0.225%
A3/A- 0.350% 0.250%
Baa1/BBB+ 0.475% 0.375%
Baa2/BBB 0.600% 0.500%
Baa3/BBB- 0.750% 0.650%
lower than Baa3/BBB- 0.950% 0.850%
</TABLE>
1.3 AMENDMENT TO "TERMINATION DATE" DEFINITION. The definition of
"Termination Date" set forth in Section 13 shall be amended to read in its
entirety as follows:
"TERMINATION DATE" means the earlier to occur of (a) February 28,
2000, subject to extension for one or more successive one-year periods
as to any Bank or Banks pursuant to Section 1.2, or (b) such other
date on which the Commitments shall terminate pursuant to Section
11.2.
SECTION 2 GENERAL.
2.1 REISSUANCE OF NOTES. In connection with the effectiveness of
this Amendment, the Company shall issue to each of the Banks Notes in the
principal amounts set forth next to such Bank's name in the signature blocks
below. Contemporaneously with the issuance of such Notes, the Notes dated
March 1, 1994 currently pertaining to the Agreement shall be deemed null and
void and each Bank shall cancel and return to the Company such Note pertaining
to the Agreement currently in such Bank's possession.
2.2 EFFECTIVENESS OF FEE CHANGES. All fee and interest rate
changes set forth in this Amendment shall be effective only on a prospective
basis from the date hereof.
-2-
<PAGE> 3
2.3 OTHER TERMS AND CONDITIONS. Unless amended hereby, all other
terms and conditions of the Agreement shall remain in full force and effect
without change.
2.4 GOVERNING LAW. This Amendment and each Note issued pursuant
hereto shall be a contract made under and governed by the internal laws of the
State of Ohio. Wherever possible each provision of this Amendment shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Amendment shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Amendment. All obligations of the Company and
rights of the Banks and any other holders of the Notes expressed herein or in
the Notes shall be in addition to and not in limitation of those provided by
applicable law.
2.5 COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Amendment. When counterparts
executed by all the parties shall have been lodged with the Company (or, in the
case of any Bank as to which an executed counterpart shall not have been so
lodged, the Company shall have received telegraphic, telex, or other written
confirmation from such Bank of execution of a counterpart hereof by such Bank),
this Amendment shall become effective as of the date hereof.
2.6 CAPTIONS. Section captions used in this Amendment are for
convenience only, and shall not affect the construction of this Amendment.
Delivered at Cleveland, Ohio, as of the day and year first above written.
TRW INC.
By /s/ William C. Seeger Jr.
-------------------------
William C. Seeger Jr.
Vice President and Treasurer
1900 Richmond Road
Cleveland, Ohio 44124
Telephone 216/291-7540
Facsimile: 216/291-7831
-3-
<PAGE> 4
BANKS:
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$44,000,000 8 % Bank of America National Trust
--- and Savings Association
By: /s/ Arlene S. Pedovitch
-----------------------
Name: Arlene S. Pedovitch
Title: Vice President
DOMESTIC OFFICE
Bank of America NT & SA
1850 Gateway Boulevard
Concord, California 94520
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Bank of America NT & SA
1850 Gateway Boulevard
Concord, California 94520
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-4-
<PAGE> 5
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$44,000,000 8 % Barclays Bank PLC
---
By: /s/ Philip S. A. Capparis
-------------------------
Name: Philip S. A. Capparis
Title: Associate Director
DOMESTIC OFFICE
Barclays Bank PLC
222 Broadway
New York, New York 10038
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Barclays Nassau, Bahamas Branch
c/o Barclays Bank PLC
222 Broadway
New York, New York 10038
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-5-
<PAGE> 6
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$44,000,000 8 % The Chase Manhattan Bank, N.A.
---
By: /s/ Claudia Stone
------------------
Name: Claudia Stone
Title: Managing Director
DOMESTIC OFFICE
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
Fifth Floor
New York, New York 10081
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
Fifth Floor
New York, New York 10081
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-6-
<PAGE> 7
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$44,000,000 8 % Citibank N.A.
---
By: /s/ Barbara A. Cohen
--------------------
Name: Barbara A. Cohen
Title: Vice President
DOMESTIC OFFICE
Citibank, N.A.
c/o Citicorp N.A., Inc.
200 S. Wacker Dr.
Chicago, IL 60606
Telephone: 312-993-3871
Facsimile: 312-993-6840
EUROCURRENCY OFFICE
Citibank, N.A.
c/o Citicorp N.A., Inc.
200 S. Wacker Dr.
Chicago, IL 60606
Telephone: 312-993-3871
Facsimile: 312-993-6840
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Citibank, N.A., New York
ABA Routing No.: 021000089
Account No.: 38483095
Account Name: _____________
Reference No.: TRW Inc.
</TABLE>
-7-
<PAGE> 8
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$ 44,000,000 8 % Morgan Guaranty Trust Company
-- of New York
By: /s/ Timothy S. Broadbent
-------------------------
Name: Timothy S. Broadbent
Title:
DOMESTIC OFFICE
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260-0060
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Morgan Guaranty Trust Company
of New York
Nassau, Bahamas Office
c/o J.P. Morgan Services Inc.
Euro-Loan Servicing Unit
902 Market Street
Wilmington, Delaware 19801
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-8-
<PAGE> 9
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$44,000,000 8 % National City Bank
---
By: /s/ Davis R. Bonner
-------------------
Name: Davis R. Bonner
Title: Vice President
DOMESTIC OFFICE
National City Bank
National City Center
P. O. Box 5756
Cleveland, Ohio 44101-0756
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
National City Bank
National City Center
P. O. Box 5756
Cleveland, Ohio 44101-0756
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-9-
<PAGE> 10
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$44,000,000 8 % The Sumitomo Bank, Limited
---
By: /s/ Katsuyasu Iwasawa
---------------------
Name: Katsuyasu Iwasawa
Title: Joint General Manager
DOMESTIC OFFICE
The Sumitomo Bank, Limited
Chicago Branch
Sears Tower
233 South Wacker Drive, Suite 4800
Chicago, Illinois 60606-6448
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
The Sumitomo Bank, Limited
Chicago Branch
Sears Tower
233 South Wacker Drive, Suite 4800
Chicago, Illinois 60606-6448
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-10-
<PAGE> 11
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$30,800,000 5.6 % Dresdner Bank AG
----
By: /s/ D. Slusarczyk
-----------------
Name: D. Slusarczyk
Title: Vice President
By: /s/ Robert Grella
-----------------
Name: Robert Grella
Title: Vice President
DOMESTIC OFFICE
Dresdner Bank AG New York Branch
75 Wall Street
New York, New York 10005
Telephone: 212-574-0244
Facsimile: 212-574-0130
EUROCURRENCY OFFICE
Dresdner Bank AG Grand Cayman
Branch
c/o Dresdner Bank AG New York Branch
75 Wall Street
New York, New York 10005
Telephone: 212-574-0244
Facsimile: 212-574-0130
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Chase Manhattan
(NY,NY)
ABA Routing No.: 021-000-021
Account No.: 920-1-059-079
Account Name: Dresdner Bank AG,
New York Branch
For further credits to 101679-15
Ref.: TRW
</TABLE>
-11-
<PAGE> 12
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$30,800,000 5.6 % First Interstate Bank of California
----
By: /s/ Arthur W. McAllister
------------------------
Name: Arthur W. McAllister
Title: Vice President
By: /s/ Wendy V. C. Purcell
-----------------------
Name: Wendy V. C. Purcell
Title: Assistant Vice President
DOMESTIC OFFICE
First Interstate Bank of California
Corporate Loan Operations
707 Wilshire Boulevard, W7-21
Los Angeles, California 90017
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
First Interstate Bank of California
Corporate Loan Operations
707 Wilshire Boulevard, W7-21
Los Angeles, California 90017
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-12-
<PAGE> 13
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$30,800,000 5.6 % NBD Bank, N.A.
----
By: /s/ Andrew W. Strait
---------------------
Name: Andrew W. Strait
Title: Vice President
DOMESTIC OFFICE
NBD Bank, N.A.
Attention: Midwest Banking Division
611 Woodward
Detroit, Michigan 48226
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
NBD Bank, N.A.
Attention: Midwest Banking Division
611 Woodward
Detroit, Michigan 48226
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-13-
<PAGE> 14
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$30,800,000 5.6 % Royal Bank of Canada
----
By: /s/ Raymond A. M. Boland
------------------------
Name: Raymond A. M. Boland
Title: Sr. Manager, Corporate Banking
DOMESTIC OFFICE
Royal Bank of Canada
New York Operations Center
Pierrepont Plaza
300 Cadman Plaza West
Brooklyn, New York 11201-2701
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Royal Bank of Canada
New York Operations Center
Pierrepont Plaza
300 Cadman Plaza West
Brooklyn, New York 11201-2701
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-14-
<PAGE> 15
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$19,800,000 3.6 % Banque Nationale De Paris
----
By: /s/ Arnaud Collin du Bocage
---------------------------
Name: Arnaud Collin du Bocage
Title: Executive Vice President and
General Manager
DOMESTIC OFFICE
Banque Nationale De Paris
Chicago Branch
Rookery Building
209 South LaSalle, 5th Floor
Chicago, Illinois 60604
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Banque Nationale De Paris
Chicago Branch
Rookery Building
209 South LaSalle, 5th Floor
Chicago, Illinois 60604
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-15-
<PAGE> 16
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$19,800,000 3.6 % Credit Lyonnais Chicago Branch
----
By: /s/ Sandra E. Horwitz
----------------------
Name: Sandra E. Horwitz
Title: Vice President
Credit Lyonnais Cayman Island Branch
By: /s/ Sandra E. Horwitz
---------------------
Name: Sandra E. Horwitz
Title: Authorized Signature
DOMESTIC OFFICE
Credit Lyonnais Chicago Branch
227 West Monroe Street
Chicago, Illinois 60606
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Credit Lyonnais Cayman Island Branch
c/o Credit Lyonnais Chicago Branch
227 West Monroe Street
Chicago, Illinois 60606
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: ___________ __
</TABLE>
-16-
<PAGE> 17
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$19,800,000 3.6 % The Sakura Bank, Limited
----
By: /s/ Hajime Miyagi
------------------
Name: Hajime Miyagi
Title: Deputy General Manager
DOMESTIC OFFICE
The Sakura Bank, Limited
Chicago Branch
227 West Monroe Street
Suite 4700
Chicago, Illinois 60606
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
The Sakura Bank, Limited
Chicago Branch
227 West Monroe Street
Suite 4700
Chicago, Illinois 60606
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-17-
<PAGE> 18
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$19,800,000 3.6 % Society National Bank
----
By: /s/ Helen France
----------------
Name: Helen France
Title: Vice President
DOMESTIC OFFICE
Society National Bank
127 Public Square
Cleveland, Ohio 44114
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Society National Bank
127 Public Square
Cleveland, Ohio 44114
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-18-
<PAGE> 19
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$19,800,000 3.6 % The Tokai Bank, Limited
----
By: /s/ Hiroshi Tanaka
------------------
Name: Hiroshi Tanaka
Title: General Manager
DOMESTIC OFFICE
The Tokai Bank, Limited
Chicago Branch
Attention: Corporate Finance
181 West Madison Street, Suite 3600
Chicago, Illinois 60602
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
The Tokai Bank, Limited
Chicago Branch
Attention: Corporate Finance
181 West Madison Street, Suite 3600
Chicago, Illinois 60602
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
</TABLE>
-19-
<PAGE> 20
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -----------
<S> <C> <C>
$19,800,000 3.6 % Union Bank of Switzerland
----
By: /s/ Steven M. Dadmun
---------------------
Name: Steven M. Dadmun
Title: Vice President
By: /s/ David E. Collignon
----------------------
Name: David E. Collignon
Title: Lending Officer
DOMESTIC OFFICE
Union Bank of Switzerland
Chicago Branch
30 South Wacker Drive, Suite 40
Chicago, Illinois 60606
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Union Bank of Switzerland
Chicago Branch
30 South Wacker Drive, Suite 40
Chicago, Illinois 60606
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: ____________
ABA Routing No.: ___________
Account No.: _______________
Account Name: _____________
Reference No.: _____________
------------ ----------
$550,000,000 100% Total
</TABLE>
-20-
<PAGE> 1
<TABLE>
<CAPTION>
Exhibit 11
TRW INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In Millions Except Per Share Amounts)
-------------------------------------------------------------------------------------------------------------------------------
Years ended December 31
-------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PRIMARY
-------
Net earnings(loss) before cumulative effect $332.7 $ 220.1 $ 193.7
of accounting changes
Less preference dividend requirements 0.7 0.8 0.9
-------------------------------------------------------------------------------------------------------------------------------
332.0 219.3 192.8
Cumulative effect of accounting changes - (24.7) (349.4)
-------------------------------------------------------------------------------------------------------------------------------
Net earnings(loss) applicable to common shares
(and common share equivalents in 1994 and 1993) $332.0 $ 194.6 ($156.6)
===============================================================================================================================
Average common shares outstanding 64.6 63.5 62.3
Stock options and performance share rights,
based on the treasury stock method using
average market price 1.2 1.2 - (A)
-------------------------------------------------------------------------------------------------------------------------------
Average common shares (and common share
equivalents in 1994 and 1993) 65.8 64.7 62.3
===============================================================================================================================
Primary earnings(loss) per share before cumulative
effect of accounting changes $ 5.05 $ 3.39 $ 3.09
Cumulative effect of accounting changes - (0.38) (5.60)
-------------------------------------------------------------------------------------------------------------------------------
Primary earnings(loss) per share $ 5.05 $ 3.01 ($2.51)
===============================================================================================================================
FULLY DILUTED
-------------
Net earnings(loss) before cumulative effect
of accounting changes applicable to common
shares (and common share equivalents in 1994 and 1993) $332.0 $ 219.3 $ 192.8
Dividends assuming conversion of other
dilutive securities: (B)
Dilutive preference dividends 0.7 0.8 0.9
-------------------------------------------------------------------------------------------------------------------------------
332.7 220.1 193.7
Cumulative effect of accounting changes - (24.7) (349.4)
-------------------------------------------------------------------------------------------------------------------------------
Net earnings(loss) applicable to fully diluted shares $332.7 $ 195.4 ($155.7)
===============================================================================================================================
Average common shares outstanding 64.6 63.5 62.3
Common shares assuming conversion of
other dilutive securities: (B)
Dilutive preference shares 0.6 0.7 0.8
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 1.2
-------------------------------------------------------------------------------------------------------------------------------
Average fully diluted shares 66.4 65.7 64.3
===============================================================================================================================
Fully diluted earnings(loss) per share before cumulative
effect of accounting changes $ 5.01 $ 3.35 $ 3.01
Cumulative effect of accounting changes - (0.38) (5.43)
-------------------------------------------------------------------------------------------------------------------------------
Fully diluted earnings(loss) per share $ 5.01 $ 2.97 ($2.42)(C)
===============================================================================================================================
<FN>
(A) In accordance with Paragraph 30 of APB Opinion No. 15 the common share equivalents are excluded from the primary computation in
1992 as they produce an anti-dilutive result.
(B) Assuming the conversion of the Serial Preference Stock II Series 1 and Series 3.
(C) This calculation is submitted in accordance with the Securities Exchange Act of 1934 Release No. 9083 although it is contrary
to Paragraph 40 of APB Opinion No. 15 as it produces an anti-dilutive result.
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
Exhibit 12
TRW Inc. and Subsidiaries
Computation of Ratio of Earnings
to Fixed Charges - Unaudited
(In millions except ratio data)
Years Ended December 31
--------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings(loss) before income
taxes and cumulative effect
of accounting changes $534.5 $359.1 $347.6 $(129.4)(A) $343.1
Unconsolidated affiliates (0.6) 0.7 (0.9) (1.0) (13.2)
Minority earnings 5.2 5.7 2.6 (7.8) (0.5)
Fixed charges excluding
capitalized interest 160.9 194.0 227.1 254.3 252.0
--------------------------------------------------------------------------------------------------------------
Earnings $700.0 $559.5 $576.4 $ 116.1 $581.4
--------------------------------------------------------------------------------------------------------------
Fixed charges:
Interest expense $104.8 $137.8 $162.9 $ 189.6 $186.9
Capitalized interest 6.6 7.9 12.7 10.1 7.6
Portion of rents representa-
tive of interest factor 54.7 54.0 64.0 64.4 64.6
Interest expense of uncon-
solidated affiliates 1.4 2.2 0.2 0.3 0.5
--------------------------------------------------------------------------------------------------------------
Total fixed charges $167.5 $201.9 $239.8 $ 264.4 $259.6
--------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed
charges 4.2x 2.8x 2.4x 0.4x(A) 2.2x
--------------------------------------------------------------------------------------------------------------
<FN>
(A) The 1991 loss before income taxes of $129.4 million includes a charge of $343 million to cover costs associated with
restructuring activities. Excluding this charge, the ratio of earnings to fixed charges would have been 1.7x.
</TABLE>
<PAGE> 1
<TABLE>
18 Exhibit 13
Ten-Year Summary of Operations TRW Inc.
TRW Inc. and subsidiaries
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
In millions except per share data 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS DATA
Sales $9,087 $7,948 $8,311 $7,913 $8,169 $7,340 $6,982 $6,821 $6,036 $5,917
Gross profit 1,817 1,580 1,694 1,606 1,722 1,561 1,417 1,531 1,358 1,331
Interest expense 105 138 163 190 187 138 130 126 96 77
Earnings(loss) from continuing
operations before income
taxes and cumulative effect
of accounting changes 535 359 348 (129) 343 399 420 415 370 235
Percent of sales 6% 5% 4% (2%) 4% 5% 6% 6% 6% 4%
----------------------------------------------------------------------------------------------------------------------------------
Income taxes $ 202 $ 139 $ 154 $ 11 $ 135 $ 136 $ 159 $ 172 $ 152 $ 101
Earnings(loss) from continuing
operations before cumulative
effect of accounting changes 333 220 194 (140) 208 263 261 243 218 134
Percent of sales 4% 3% 2% (2%) 3% 4% 4% 4% 4% 2%
Net earnings(loss) (A) $ 333 $ 195 $ (156) $ (140) $208 $ 263 $ 261 $ 243 $ 218 $ (7)
----------------------------------------------------------------------------------------------------------------------------------
International sales $3,151 $2,463 $2,702 $2,501 $2,574 $2,060 $1,961 $1,792 $1,581 $1,497
Percent of sales 35% 31% 33% 32% 32% 28% 28% 26% 26% 25%
----------------------------------------------------------------------------------------------------------------------------------
U.S. Government sales $2,545 $2,708 $2,851 $2,959 $3,231 $3,080 $3,096 $3,081 $2,697 $2,550
Percent of sales 28% 34% 34% 37% 40% 42% 44% 45% 45% 43%
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK
Fully diluted earnings(loss)
from continuing operations (A) $ 5.01 $ 2.97 $(2.51) $(2.30) $ 3.36 $ 4.25 $ 4.23 $ 3.95 $ 3.55 $ 1.90
Cash dividends paid 1.94 1.88 1.82 1.80 1.74 1.72 1.63 1.60 1.525 1.50
Cash dividends declared 1.97 1.88 1.84 1.80 1.76 1.72 1.66 1.60 1.55 1.50
Book value per share 27.91 23.77 22.31 27.12 31.11 28.60 25.70 23.41 19.93 16.98
----------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Current assets $2,215 $1,994 $2,116 $2,262 $2,237 $2,295 $2,105 $1,986 $1,749 $1,684
Current liabilities 1,986 1,826 2,012 1,982 1,947 1,794 1,396 1,496 1,352 1,429
Working capital 229 168 104 280 290 501 709 490 397 255
Total assets 5,636 5,336 5,458 5,635 5,555 5,259 4,442 4,378 3,909 3,735
Long-term debt 694 870 941 1,213 1,042 1,063 863 870 786 698
Shareholders' investment 1,822 1,534 1,416 1,685 1,907 1,749 1,566 1,417 1,198 1,015
----------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Capital expenditures $ 506 $ 482 $ 530 $ 537 $ 587 $ 452 $ 417 $ 452 $ 431 $ 412
Depreciation and amortization
of property, plant and equipment 402 388 392 392 381 349 324 306 260 227
----------------------------------------------------------------------------------------------------------------------------------
Common stock outstanding
at year-end 64.9 64.1 62.9 61.6 60.8 60.6 60.2 59.7 58.9 58.1
Shares used in computing
per share amounts
Fully diluted 66.4 65.7 62.3 61.2 61.9 61.9 61.6 61.6 61.3 69.3
Primary 65.8 64.7 62.3 61.2 61.0 60.8 60.5 60.3 59.6 69.3
----------------------------------------------------------------------------------------------------------------------------------
In thousands
Number of employees 64.2 61.2 64.1 71.3 75.6 74.3 73.2 77.9 78.6 93.2
----------------------------------------------------------------------------------------------------------------------------------
Number of common
shareholders 31.3 30.1 32.8 34.1 34.9 37.1 38.2 36.1 37.7 34.7
----------------------------------------------------------------------------------------------------------------------------------
<FN>
(A) 1993 and 1992 amounts include cumulative effect of accounting changes.
</TABLE>
<PAGE> 2
19
Management's Discussion and Analysis of the Results of Operations and Financial
Condition TRW Inc.
RESULTS OF OPERATIONS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
92 93 94
-------------------------------------
<S> <C> <C> <C>
Sales in Billions $8.31 $7.95 $9.09
Net Earnings in Millions ($156) $195 $333
Net Earnings per Share ($2.51) $2.97 $5.01
</TABLE>
Consolidated sales in 1994 rose 14 percent to $9.09 billion from $7.95 billion
reported in 1993. Compared to 1992 sales of $8.31 billion, 1994 sales increased
9 percent. Net earnings of $333 million in 1994 exceeded the reported earnings
of $195 million in 1993 and net loss of $156 million in 1992. Fully diluted
earnings(loss) per share were $5.01 in 1994, $2.97 in 1993 and ($2.51) in 1992.
Sales, net earnings and earnings per share recorded during 1994 were the
highest in our 94-year history. This achievement reflects the realization of
the strategic decisions we made regarding our core products and services. All
three of our industry segments made positive contributions during 1994.
Increased volume and profitability in our worldwide automotive business was a
significant factor in achieving the record results. Sales in our Space and
Defense segment increased for the first time since 1990 and our Information
Systems and Services segment posted record operating profit for the year.
Higher productivity from all our TRW employees contributed to the record year.
In 1993, the company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits," and took a one-time
noncash charge of $25 million, or $.38 per share, for the prior years'
cumulative effect of the accounting change. Earnings before the cumulative
effect of the accounting change were $220 million, or $3.35 per share.
In 1992, the company adopted Statements of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
and No. 109, "Accounting for Income Taxes," and took a
one-time noncash charge of $350 million, or $5.60 per share, for the prior
years' cumulative effect of the accounting changes. Earnings before the
cumulative effect of these accounting changes were $194 million or $3.09 per
share.
Excluding the effects of restructuring, operating profit from our three
industry segments in 1994 was $747 million, a 27 percent increase over 1993
operating profit of $587 million, and a 33 percent increase over 1992 operating
profit of $562 million. A detailed discussion of the operating results of each
industry segment is presented below.
Interest expense in 1994 was $105 million compared to $138 million in 1993 and
$163 million in 1992. The lower interest expense in 1994 was due to the
restructuring of our Brazilian debt, lower average debt levels as well as lower
foreign interest rates. The decrease in interest expense from 1992 to 1993 was
due to lower average debt balances as well as lower interest rates partially
offset by higher Brazilian interest expense.
The effective tax rate in 1994 was 37.8 percent, compared to 38.7 percent in
1993 and 44.3 percent in 1992. The lower effective tax rate in 1994 was
primarily attributable to tax benefits derived from the utilization of non-U.S.
tax loss carryforwards, partially offset by the combination of higher foreign
earnings subject to tax rates in excess of the U.S. rate, higher non-deductible
expenses in the United States, and the absence of a restructuring benefit
recognized in 1993.
AUTOMOTIVE
Sales in 1994 rose to a record $5.68 billion, up 25 percent from 1993 sales of
$4.54 billion. Operating profit in 1994 increased 54 percent to $476 million
from the $304 million reported in 1993, excluding restructuring. The increase
in sales was due to higher volume in the North American and European occupant
restraint, steering systems and automotive electronics businesses. The
operating profit increase was due to the higher volume in the North American
and European occupant restraint and steering systems businesses.
Sales of $4.54 billion in 1993 were 2 percent lower than 1992 sales of $4.62
billion. Excluding restructuring, operating profit in 1993 increased 15 percent
to $304 million from the $264 million reported in 1992. An increase in sales
resulting from higher volume in North America primarily in the occupant
restraint and steering systems businesses was more than offset by lower volume
in Europe, the absence of sales from divested businesses and the effect of
unfavorable exchange rates. The increase in operating profit was
<PAGE> 3
20
Management's Discussion and Analysis of the Results of Operations and Financial
Condition TRW Inc.
RESULTS OF OPERATIONS (CONTINUED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
92 93 94
-------------------------------------
<S> <C> <C> <C>
Sales in Billions $4.62 $4.54 $5.68
Operating Profit in Millions $264 $304 $476
</TABLE>
due to the higher North American volume and the absence of certain warranty
reserves taken in 1992. Partially offsetting the operating profit improvement
was the effect of the lower volume in Europe and the absence of operating
profit from businesses divested in 1992.
TRW provides automotive systems and components with substantial value-added
content to the worldwide automotive industry. The company will continue to
invest in areas of significant future growth, such as air bag systems, power
rack and pinion steering and advanced electronic and electrical components. In
addition, TRW is poised to take advantage of the increasing opportunities in
the emerging markets of the world through internal growth and strategic
alliances in these regions.
The company anticipates that the North American automotive industry will remain
strong throughout 1995, with the current trend of vehicle builds continuing
into 1996. Any significant increase in 1995 short-term interest rates could
affect U.S. vehicle builds and therefore affect TRW's revenue forecast. The
European recovery which began during mid-1994 is expected to gain strength
throughout 1995. Although economic uncertainty is expected to continue in both
Brazil and Mexico, the diversity of our customers, markets and products in
conjunction with increased application rates and automotive platform awards in
key product lines will allow for continued growth throughout the world. We are
dedicated to technological leadership, continuous improvement, reducing costs
and break-even points, and focusing on a consistent achievement of high
quality in all of our products and services in order to increase our
competitive position on a worldwide basis.
SPACE & DEFENSE
Sales in 1994 of $2.81 billion increased from the 1993 sales of $2.79 billion.
Operating profit of $175 million was 14 percent lower than the operating profit
of $205 million reported in 1993, excluding restructuring. The sales increase
was due to higher volume in space and electronics and tactical reconnaissance
systems as well as in systems engineering resulting from both existing and new
contract awards. Partially offsetting the sales increase was the effect of
several contract completions and terminations. The operating profit resulting
from the higher volume and the absence of 1993 reserves for certain programs
was more than offset by investments for new business opportunities and the
establishment of a contract reserve in 1994.
Sales in 1993 declined 5 percent to $2.79 billion from 1992's sales of $2.93
billion. Excluding restructuring, operating profit of $205 million in 1993 was
11 percent lower than the operating profit of $230 million reported in 1992.
Reflecting the continuing decline in the level of U.S. Government spending and
the competitiveness of the business, operating profit margin, excluding
restructuring, was 7.3 percent in 1993 compared to 7.9 percent in 1992. Sales
declined due to lower volume in space and electronics systems and in systems
engineering and the effects of several contract completions. Partially
offsetting the sales decline were sales from new contract awards. The decline
in operating profit was attributed to the sales decline and the establishment
of reserves for certain programs.
Continuing pressure on the Department of Defense, NASA, and other U.S.
Government agency budgets could affect the level of future revenues and
operating profits. However, the company believes it is well positioned in key
space and defense businesses of continuing high national priority. In addition
to aggressive efforts to maintain or increase the company's position in these
businesses, the company continues to successfully pursue opportunities with
other U.S. Government agencies, state and municipal governments and commercial
and international markets.
<TABLE>
<CAPTION>
92 93 94
-------------------------------------
<S> <C> <C> <C>
Sales in Billions $2.93 $2.79 $2.81
Operating Profit in Millions $230 $205 $175
</TABLE>
<PAGE> 4
21
Management's Discussion and Analysis of the Results of Operations and Financial
Condition TRW Inc.
RESULTS OF OPERATIONS (CONTINUED)
-------------------------------------------------------------------------------
Backlog estimates at the end of 1994 totaled $4.12 billion compared to the
$4.52 billion reported at the end of 1993. The maintenance of this high backlog
level reflects continuing restricted program contract awards and our
successful penetration into non-defense related areas.
INFORMATION SYSTEMS & SERVICES
The record operating profit of $96 million in 1994 represented a 24 percent
increase over 1993 operating profit of $78 million, excluding restructuring.
Revenues of $596 million declined 4 percent from the $618 million reported in
1993. The revenue decline resulted from the absence of sales from a previously
divested business.
<TABLE>
<CAPTION>
92 93 94
------------------------------------
<S> <C> <C> <C>
Sales in Millions $754 $618 $596
Operating Profit in Millions $67 $78 $96
</TABLE>
Higher volume in the Information Services business combined with continued
cost controls contributed to the increase in operating profit. Operating
profit in 1994 also includes a gain on the sale of a product line partially
offset by the establishment of certain contract reserves in the Information
Systems business.
Revenues of $618 million in 1993 declined 18 percent from the $754 million
reported in 1992. The decline was due to the absence of revenue from divested
nonstrategic businesses partially offset by higher volume in the Information
Services business. Excluding restructuring, operating profit of $78 million in
1993 increased 16 percent from the 1992 amount of $67 million. The operating
profit increase resulted from continued cost-control actions and the effect of
higher volume in the Information Services business.
We expect to improve operating profit margins and maintain revenue growth in
this segment during 1995. However, the level of revenue and operating profit
will remain sensitive to several key U.S. economic variables including interest
rates, consumer spending on durable goods and housing activities.
INTERNATIONAL OPERATIONS
International sales were $3.15 billion, or 35 percent of TRW sales in 1994;
$2.46 billion, or 31 percent of sales in 1993; and $2.70 billion, or 33 percent
of sales in 1992. U.S. export sales included in those amounts were $638 million
in 1994, $438 million in 1993 and $352 million in 1992. Most of TRW's non-U.S.
operations are included in the Automotive segment and are located in Europe,
Canada, Brazil and the Pacific basin. TRW's non-U.S. operations are subject to
the usual risks that may affect such operations; however, most of the assets of
its non-U.S. operations are in countries where the company believes such risks
to be minimal.
LIQUIDITY AND FINANCIAL POSITION
Cash flow from operations in 1994 of $972 million was used primarily for
capital expenditures, the repayment of debt and dividend payments to
shareholders. Debt at December 31, 1994 was $973 million compared to debt of
$1.21 billion at the end of 1993. The ratio of total debt (short-term debt,
current portion of long-term debt and long-term debt) to total capital
(total debt, minority interests, total deferred income taxes and shareholders'
investment) was 34 percent at December 31, 1994 compared to 43 percent
at December 31, 1993. The percentage of fixed-rate debt to total debt was
78 percent at the end of 1994.
At year-end, the company had two committed U.S. revolving credit agreements
with a group of 18 banks. The first agreement allows the company to borrow up
to $400 million and extends to July 1998. The second agreement allows the
company to borrow up to $150 million and extends through February 1995 with an
option to extend the term to a final maturity no later than July 1998.
In addition to providing liquidity, these agreements support the company's
commercial paper borrowings. At December 31, 1994, there were no outstanding
borrowings under these agreements.
TRW's non-U.S. operations are generally financed by borrowings from banks or
through intercompany loans in the local currency of the borrower. There are no
significant restrictions on the remittance of funds by the company's non-U.S.
subsidiaries to the United States. During 1994, the company entered into a
committed multi-currency revolving credit agreement consisting of two tranches
with 13 banks. The first tranche allows the company to borrow up to $100
million and extends through February 1995. The second tranche allows the
company to borrow up to $100 million and extends through July 1997. The
interest rate under the agreement is based on various interest rate indices.
At December 31, 1994, there were no outstanding borrowings under the
multi-currency credit agreement.
<PAGE> 5
22
Management's Discussion and Analysis of the Results of Operations and Financial
Condition TRW Inc.
RESULTS OF OPERATIONS (CONTINUED)
The company is subject to inherent risks attributed to operating in a global
economy. It is the company's policy to utilize derivative financial instruments
to manage its interest rate and foreign currency exchange risks. The company
uses derivatives to hedge its exposure to short-term interest rate changes as a
lower cost substitute for the issuance of fixed-rate debt after taking into
consideration account-related counterparty risk. The company manages cash flow
transactional foreign exchange risk pursuant to a written company policy.
Forward contracts and to a lesser extent options are utilized to protect the
company's cash flow from adverse movements in exchange rates. The company is
exposed to credit loss in the event of nonperformance by the counterparties to
the derivative financial instruments. The company diversifies the
counterparties used as a means to limit this exposure and anticipates that the
counterparties will fully satisfy their obligations under the contracts.
Derivative financial instruments are viewed by the company as a risk management
tool and are not used for speculative or trading purposes.
Capital expenditures were $506 million in 1994, $482 million in 1993 and $530
million in 1992. The company will maintain a capital program with estimated
expenditures for 1995 totaling about $590 million. Approximately 72 percent
of these expenditures will be invested in the Automotive segment, 23 percent
in the Space & Defense segment and 5 percent in the Information Systems &
Services segment. The company will continue to invest in its automotive growth
businesses, including air bag systems, power rack and pinion steering and
automotive electronic technologies. The balance of the capital expenditures
will be used to acquire equipment to support and develop advanced and next
generation technologies, data processing hardware and telecommunications
equipment for product development enhancement, and support for new products.
We believe that the company's current financing arrangements allow flexibility
in worldwide financing activities and permit us to respond to changing
conditions in credit markets. The existing arrangements are not indicative of
the company's potential borrowing capacity. We believe that funds generated
from operations and existing borrowing capacity are adequate to support and
finance planned growth, capital expenditures, company-sponsored research and
development programs and dividend payments to shareholders.
OTHER MATTERS
Federal, state and local requirements relating to the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, have had and will continue to have an effect on TRW and its
operations. The company is conducting a number of environmental investigations
and remedial actions at current and former company locations and, along with
other companies, has been named a potentially responsible party for certain
waste management sites. Each of these matters is subject to various
uncertainties, and it is possible that some of these matters may be resolved
unfavorably to the company. A reserve estimate for each matter is established
using standard engineering cost estimating techniques. In the determination of
such costs, consideration is given to the professional judgment of company
environmental engineers in consultation with outside environmental specialists
when necessary. At multi-party sites, the reserve estimate also reflects the
expected allocation of total project costs among the various potentially
responsible parties. At December 31, 1994, the company had reserves for
environmental matters of $98 million, including $17 million of additional
accruals recorded during the year. The company aggressively pursues
reimbursement for environmental costs from its insurance carriers. However,
insurance recoveries are not recorded as a reduction of environmental costs
until they are fixed and determinable. The company believes that any liability
that may result from the resolution of environmental matters for which
sufficient information is available to support these cost estimates will not
have a material adverse effect on the company's future results of operations
and cash flows. However, the company cannot predict the effect on the company's
future results of operations and cash flows of expenditures for aspects of
certain matters for which there is insufficient information. In addition, the
company cannot predict the effect of compliance with environmental laws and
regulations with respect to unknown environmental matters or the possible
effect of compliance with environmental requirements imposed in the future.
As of December 31, 1994, the company increased the discount rate used to
measure the obligations for its pension and other postretirement benefit plans
from 7-1/2 percent to 8-1/2 percent, in recognition of higher prevailing
long-term interest rates. The effect of the discount rate change on 1995
pension and other postretirement benefit costs is not expected to be material.
The determination of pension and other postretirement benefit costs beyond 1995
will depend on various factors, including long-term interest rates, investment
returns, health care cost trend rates, other actuarial assumptions, benefit
levels, and demographic changes.
<PAGE> 6
<TABLE>
<CAPTION>
23
Financial Statements TRW Inc.
STATEMENTS OF EARNINGS
--------------------------------------------------------------------------------------
TRW Inc. and subsidiaries
--------------------------------------------------------------------------------------
In millions except per share data
--------------------------------------------------------------------------------------
Years ended December 31 1994 1993 1992
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $9,087 $7,948 $8,311
Cost of sales 7,270 6,368 6,617
--------------------------------------------------------------------------------------
Gross profit 1,817 1,580 1,694
Administrative and selling expenses 756 707 826
Research and development expenses 412 378 393
Restructuring expense(income) - 7 (29)
Interest expense 105 138 163
Other expense(income)-net 9 (9) (7)
--------------------------------------------------------------------------------------
Earnings before income taxes and
cumulative effect of accounting changes 535 359 348
Income taxes 202 139 154
--------------------------------------------------------------------------------------
Earnings before cumulative effect
of accounting changes 333 220 194
Cumulative effect at beginning of the year
of accounting changes, net of income taxes - (25) (350)
--------------------------------------------------------------------------------------
Net earnings(loss) $ 333 $ 195 $ (156)
======================================================================================
PER SHARE OF COMMON STOCK
Fully diluted
Before cumulative effect of accounting
changes $ 5.01 $ 3.35 $ 3.09
Cumulative effect of accounting changes - (.38) (5.60)
--------------------------------------------------------------------------------------
Net earnings(loss) per share $ 5.01 $ 2.97 $(2.51)
--------------------------------------------------------------------------------------
Primary
Before cumulative effect of accounting
changes $ 5.05 $ 3.39 $ 3.09
Cumulative effect of accounting changes - (.38) (5.60)
--------------------------------------------------------------------------------------
Net earnings(loss) per share $ 5.05 $ 3.01 $(2.51)
======================================================================================
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
24
Financial Statements TRW Inc.
BALANCE SHEETS
--------------------------------------------------------------------------------------
TRW Inc. and subsidiaries
--------------------------------------------------------------------------------------
In millions
--------------------------------------------------------------------------------------
December 31 1994 1993
--------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 109 $ 79
Accounts receivable 1,338 1,219
Inventories
Finished products and work in process 246 237
Raw materials and supplies 224 173
--------------------------------------------------------------------------------------
Total inventories 470 410
Prepaid expenses 59 69
Deferred income taxes 239 217
--------------------------------------------------------------------------------------
Total current assets 2,215 1,994
Property, plant and equipment-on the basis of cost
Land 104 104
Buildings 1,527 1,461
Machinery and equipment 3,925 3,555
--------------------------------------------------------------------------------------
5,556 5,120
Less accumulated depreciation and amortization 3,067 2,793
--------------------------------------------------------------------------------------
Total property, plant and equipment-net 2,489 2,327
Intangible assets
Intangibles arising from acquisitions 477 499
Capitalized data files 441 421
Other 69 36
--------------------------------------------------------------------------------------
987 956
Less accumulated amortization 331 279
--------------------------------------------------------------------------------------
Total intangible assets-net 656 677
Other assets 276 338
--------------------------------------------------------------------------------------
$5,636 $5,336
======================================================================================
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
25
Financial Statements TRW Inc.
BALANCE SHEETS (CONTINUED)
--------------------------------------------------------------------------------------
TRW Inc. and subsidiaries
--------------------------------------------------------------------------------------
In millions
--------------------------------------------------------------------------------------
December 31 1994 1993
--------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities
Short-term debt $ 122 $ 295
Accrued compensation 346 281
Trade accounts payable 737 563
Other accruals 541 599
Dividends payable 33 30
Income taxes 50 10
Current portion of long-term debt 157 48
--------------------------------------------------------------------------------------
Total current liabilities 1,986 1,826
Long-term liabilities 796 803
Long-term debt 694 870
Deferred income taxes 269 235
Minority interests in subsidiaries 69 68
Shareholders' investment
Serial Preference Stock II
(involuntary liquidation $10 million and $11 million) 1 1
Common stock (shares outstanding 64.9 million and
64.1 million) 40 40
Other capital 354 293
Retained earnings 1,383 1,178
Cumulative translation adjustments 66 36
Treasury shares -- cost in excess of par value (22) (14)
--------------------------------------------------------------------------------------
Total shareholders' investment 1,822 1,534
--------------------------------------------------------------------------------------
$5,636 $5,336
======================================================================================
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
26
Financial Statements TRW Inc.
STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------------
TRW Inc. and subsidiaries
--------------------------------------------------------------------------------------
In millions
--------------------------------------------------------------------------------------
Years ended December 31 1994 1993 1992
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings(loss) $ 333 $ 195 $(156)
Adjustments to reconcile net
earnings(loss) to net cash
provided by operating activities:
Cumulative effect of accounting
changes, net of taxes - 25 350
Depreciation and amortization 476 458 481
Restructuring (23) (61) (96)
Deferred income taxes 8 49 5
Other-net 26 18 25
Changes in assets and liabilities,
net of effects of businesses
acquired or sold:
Accounts receivable (112) (46) (104)
Inventories and prepaid expenses (33) (5) (46)
Accounts payable and other accruals 262 (107) 227
Other-net 35 (30) (42)
--------------------------------------------------------------------------------------
Net cash provided by operating activities 972 496 644
INVESTING ACTIVITIES
Capital expenditures (506) (482) (530)
Proceeds from divestitures 22 97 371
Investments in other assets (81) (51) (62)
Proceeds from sales of property,
plant and equipment 16 24 11
Other-net 7 (11) 11
--------------------------------------------------------------------------------------
Net cash used in investing activities (542) (423) (199)
FINANCING ACTIVITIES
Increase(decrease) in short-term debt (270) 104 (229)
Proceeds from debt in excess of 90 days 176 255 198
Principal payments on debt in excess
of 90 days (154) (344) (351)
Dividends paid (126) (120) (114)
Other-net 9 27 18
--------------------------------------------------------------------------------------
Net cash used in financing activities (365) (78) (478)
Effect of exchange rate changes on cash (35) 18 24
--------------------------------------------------------------------------------------
Increase(decrease) in cash and cash equivalents 30 13 (9)
Cash and cash equivalents at beginning of year 79 66 75
--------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 109 $ 79 $ 66
======================================================================================
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
27
Financial Statements TRW Inc.
STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT
------------------------------------------------------------------------------------------------------------------------------------
TRW Inc. and subsidiaries
------------------------------------------------------------------------------------------------------------------------------------
In millions
------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SERIAL PREFERENCE STOCK II
Series 1
Balance at January 1 and December 31 .1 $ - .1 $ - .1 $ -
------------------------------------------------------------------------------------------------------------------------------------
Series 3
Balance at January 1 .1 1 .1 1 .1 1
Converted into common stock - - - - - -
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31 .1 1 .1 1 .1 1
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
Balance at January 1 64.1 40 62.9 39 61.6 38
Sale of stock and other .8 - 1.2 1 1.3 1
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31 64.9 40 64.1 40 62.9 39
------------------------------------------------------------------------------------------------------------------------------------
OTHER CAPITAL
Balance at January 1 293 222 184
Sale of stock and other 61 71 38
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31 354 293 222
------------------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at January 1 1,178 1,105 1,377
Net earnings(loss) 333 195 (156)
Other - (1) -
Dividends declared
Preference stock (1) (1) (1)
Common stock ($1.97, $1.88 and $1.84 per share) (127) (120) (115)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31 1,383 1,178 1,105
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance at January 1 36 53 98
Translation adjustments 30 (17) (45)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31 66 36 53
------------------------------------------------------------------------------------------------------------------------------------
TREASURY SHARES-COST IN EXCESS OF PAR VALUE
Balance at January 1 (14) (4) (13)
ESOP funding - - 12
Purchase of shares (8) (10) (6)
Sold under stock options - - 3
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31 (22) (14) (4)
------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' investment $1,822 $1,534 $1,416
====================================================================================================================================
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 11
28
Notes to Financial Statements TRW Inc.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------------------------
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.
Long-term contracts -- The percentage-of-completion (cost-to-cost) method is
used to estimate sales under fixed-price and fixed-price incentive contracts.
Sales under cost-reimbursement contracts are recorded as costs are incurred.
Fees based on cost, award fees and incentive fees are included in sales at the
time such amounts are reasonably estimable. Losses on contracts are recognized
when determinable. For contracts entered into after December 31, 1990, changes
in fee estimates are recognized based on costs incurred to date whereas for
contracts entered into prior to such date, changes in fee estimates are
recognized prospectively based on costs to be incurred.
Accounts receivable -- Accounts receivable at December 31, 1994 and 1993
included $492 million and $595 million, respectively, related to long-term
contracts, of which $269 million and $370 million, respectively, were unbilled.
Unbilled costs, fees and claims represent revenues earned and billable in the
following month as well as revenues earned but not billable under terms of the
contracts. A substantial portion of such amounts are expected to be billed
during the following year. Retainage receivables and receivables subject to
negotiation are not significant.
Inventories -- Inventories are stated at the lower of cost or market. At
December 31, 1994 and 1993, inventories valued using the last-in, first-out
(LIFO) method were $25 million and $26 million, respectively. Inventories not
valued by the LIFO method are principally on the first-in, first-out (FIFO)
method. Had the cost of all inventories been determined by the FIFO method,
which approximates current cost, inventories would have been greater by $30
million at December 31, 1994 and 1993. Inventories applicable to long-term
contracts are not significant.
Depreciation -- Depreciation is computed using the straight-line method for the
majority of the company's depreciable assets. The remaining assets are
depreciated using accelerated methods.
Intangible assets -- Intangible assets are stated on the basis of cost.
Intangibles arising from acquisitions prior to 1971 ($75 million) are not being
amortized because there is no indication of diminished value. Intangibles
arising from acquisitions after 1970 are being amortized by the straight-line
method principally over 40 years. Capitalized data files are amortized by the
straight-line method over periods not exceeding 15 years. The carrying value of
intangible assets is assessed for impairment on a quarterly basis.
Forward exchange contracts -- The company enters into forward exchange
contracts the majority of which hedge firm foreign currency commitments and
certain intercompany transactions. At December 31, 1994, the company had
contracts outstanding amounting to approximately $162 million denominated in
the German mark, the Swiss franc, the British pound, the Canadian dollar, the
U.S. dollar and the European currency unit, maturing at various dates through
December 1995. Changes in market value of the contracts are included in the
basis of the transactions. The company is exposed to credit loss in the event
of nonperformance by the counterparties to the foreign exchange contracts. No
collateral is held in relation to the contracts and the company anticipates
that the counterparties will satisfy their obligations under the contracts.
Concentrations of credit risk -- At December 31, 1994 and 1993, accounts
receivable in the Automotive segment were $774 million and $556 million,
respectively, and accounts receivable in the Space & Defense segment,
principally from agencies of the U.S. Government, were $491 million and $583
million, respectively. The company generally does not require collateral from
its customers. The company has established receivable reserves of $23 million
and $20 million at December 31, 1994 and 1993, respectively.
Fair values of financial instruments -- The carrying amount reported in the
balance sheets for cash and cash equivalents approximates their fair value.
Short and long-term debt -- The carrying amounts of the company's short-term and
floating rate long-term borrowings approximate their fair values. The fair
values of the company's fixed rate long-term debt was $7 million less than
their carrying value at December 31, 1994 and exceeded their carrying value by
$84 million at December 31, 1993, and are estimated using discounted cash flow
analyses, based on the company's current borrowing rates for similar types of
borrowing arrangements.
Interest rate swap agreements -- The fair value of the company's interest rate
swap agreements was a net liability of $5 million and $18 million at December
31, 1994 and 1993, respectively, and are based on quoted market prices of
offsetting contracts. The fair value of the swap agreements is not recognized
in the financial statements.
Foreign currency exchange contracts -- The fair values of the company's foreign
currency exchange contracts are estimated based on quoted market prices of
offsetting contracts and were not material at December 31, 1994 and 1993.
<PAGE> 12
29
Notes to Financial Statements TRW, Inc.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------------------------
Accounting change -- Effective January 1, 1993, the company adopted
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," which requires accruals of the cost of benefits
provided to former or inactive employees after employment but before
retirement. The company's previous practice was to record the cost of certain
of these benefits as incurred. The company recognized the cumulative effect of
this accounting change as of January 1, 1993, resulting in a one-time charge of
$25 million (after a reduction for income taxes of $16 million). The effect of
this accounting change on both 1994 and 1993 operating results, after recording
the cumulative effect for years prior to 1993, was immaterial.
Income taxes -- Deferred income taxes arise from temporary differences between
income tax and financial reporting and principally relate to income recognition
on long-term contracts, depreciation, postretirement benefits other than
pensions and certain accruals. It is the company's intention to reinvest
undistributed earnings of certain of its non-U.S. subsidiaries and thereby
indefinitely postpone their remittance. Accordingly, deferred income taxes have
not been provided for accumulated undistributed earnings of
$237 million at December 31, 1994.
Environmental costs -- TRW participates in environmental assessments and
remedial efforts at operating facilities, previously owned or operated
facilities, and Superfund or other waste sites. Costs related to these
locations are accrued when it is probable that a liability has been incurred
and the amount of that liability can be reasonably estimated. Estimated costs
are recorded at undiscounted amounts based on experience and assessments, and
are regularly evaluated as efforts proceed. Insurance recoveries are recorded
as a reduction of environmental costs when fixed and determinable.
Earnings(loss) per share -- Fully diluted earnings(loss) per share have been
computed based on the weighted average number of shares of common stock
outstanding during each year, and in 1994 and 1993 including common stock
equivalents (stock options) and assuming the conversion of the Serial
Preference Stock II - Series 1 and 3.
Primary earnings(loss) per share have been computed based on the weighted
average number of shares of common stock outstanding during each year,
including common stock equivalents in 1994 and 1993.
Fully diluted and primary earnings(loss) per share for 1992 are the same
because the effect of including common stock equivalents and assuming the
conversion of the Serial Preferred Stock is anti-dilutive.
<TABLE>
RESEARCH AND DEVELOPMENT
----------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------
In millions 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Customer-funded $ 963 $1,223 $1,261
Company-funded
Research and development 412 378 393
Product development 140 136 133
-------------------------------------------------------------------------------
552 514 526
-------------------------------------------------------------------------------
$1,515 1,737 $1,787
-------------------------------------------------------------------------------
</TABLE>
Company-funded research and development programs include research and
development for commercial products and independent research and development
and bid and proposal work related to government products and services. A
portion of the cost incurred for independent research and development and bid
and proposal work is recoverable through overhead charged to government
contracts. Product development costs include engineering and field support for
new customer requirements.
RESTRUCTURING
-----------------------------------------------------------------------
For balance sheet purposes, other accruals in 1994 and 1993 include $33
million and $115 million, respectively, relating to restructuring
reserves. The $82 million decrease in the reserve during 1994 resulted
from the divestiture of a nonstrategic business in the Information
Systems & Services segment and the downsizing and streamlining of certain
businesses in the Automotive segment.
The restructuring reserve balance at December 31, 1993 declined by $46 million
from December 31, 1992. The decline in the reserve resulted principally from
the divestiture of a nonstrategic business in the Information
<PAGE> 13
30
Notes to Financial Statements TRW, Inc.
RESTRUCTURING (CONTINUED)
---------------------------------------------------------------------
Systems & Services segment and the downsizing and streamlining of certain
businesses in the Automotive and Space & Defense segments.
Restructuring expense(income) in 1993 consists of restructuring charges of $23
million, principally in the Automotive segment, resulting from additional
management decisions reduced by gains of $16 million from the sales of certain
businesses in the Automotive segment.
Restructuring expense(income) in 1992 includes gains from the sales of certain
of the company's automotive businesses totaling $116 million ($67 million after
tax, $1.08 per share), and net restructuring charges of $87 million ($63
million after tax, $1.01 per share) resulting from additional management
decisions in 1992 related to the company's restructuring program. In addition,
a charge of $5 million ($4 million after tax, 7 cents per share) for other
matters is included in different captions in the statements of earnings.
<TABLE>
OTHER EXPENSE(INCOME)-NET
----------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------
In millions 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Other income $ (66) $ (69) $ (71)
Other expense 60 42 53
Gain on sale of assets (28) (4) -
Gain on sale of investments in affiliates - - (7)
Foreign currency translation 43 22 18
-------------------------------------------------------------------------------
$ 9 $ (9) $ (7)
-------------------------------------------------------------------------------
</TABLE>
Gain on sale of assets in 1994 includes a gain on the sale of a product line in
the Information Systems and Services segment.
Income Taxes
-----------------------------------------------------------------------
Effective January 1, 1992, the company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The cumulative effect of adopting this Statement as of January 1, 1992
was immaterial to net earnings.
<TABLE>
<CAPTION>
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES
-------------------------------------------------------------------------------
In millions 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. $ 387 $ 362 $ 213
Non-U.S. 148 (3) 135
-------------------------------------------------------------------------------
$ 535 $ 359 $ 348
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PROVISION FOR INCOME TAXES
-------------------------------------------------------------------------------
In millions 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
U.S. federal $ 106 $ 34 $ 60
Non-U.S. 40 24 59
U.S. state and local 24 (1) 21
-------------------------------------------------------------------------------
170 57 140
Deferred
U.S. federal 28 78 13
Non-U.S. 5 (10) 3
U.S. state and local (1) 14 (2)
-------------------------------------------------------------------------------
32 82 14
-------------------------------------------------------------------------------
$ 202 $ 139 $ 154
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
31
Notes to Financial Statements TRW Inc.
INCOME TAXES (CONTINUED)
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROVISION FOR DEFERRED INCOME TAXES
------------------------------------------------------------------------------------------
In millions 1994 1993 1992
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income recognition on long-term contracts $ 11 $ 32 $ 40
Difference between tax and book depreciation
and amortization 15 (35) (1)
Reserves and accruals 9 42 17
Alternative minimum tax 23 9 (10)
State and local taxes (1) 14 (2)
Interest expense (14) 12 (4)
Vacation accrual not currently deductible (1) (2) -
Insurance accruals 10 (11) (7)
Pensions and postretirement benefits other than pensions (7) 1 (12)
Other (13) 20 (7)
------------------------------------------------------------------------------------------
$ 32 $ 82 $ 14
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EFFECTIVE INCOME TAX RATE
------------------------------------------------------------------------------------------
1994 1993 1992
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory income tax rate 35.0% 35.0% 34.0%
Restructuring (benefits)losses - (2.8) 3.6
Non-deductible expenses 1.6 .4 .5
U.S. state and local income taxes net of U.S. federal tax benefit 2.7 2.4 3.6
Non-U.S. tax rate variances net of foreign tax credits (.4) 4.1 4.2
Translation adjustments net of monetary correction - .2 .6
Other (1.1) (.6) (2.2)
------------------------------------------------------------------------------------------
Effective income tax rate 37.8% 38.7% 44.3%
------------------------------------------------------------------------------------------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 1994 and
1993, the company had unused tax benefits of $40 million and $50 million,
respectively, related to non-U.S. net operating loss carryforwards for income
tax purposes, of which $23 million and $29 million can be carried forward
indefinitely and the balance expires at various dates through 1999.
A valuation allowance at December 31, 1994 and 1993 of $26 million and $42
million, respectively, has been recognized to offset the related deferred tax
assets due to the uncertainty of realizing the benefit of the loss
carryforwards. Certain prior year deferred tax assets have been reclassified to
conform to the 1994 presentation. The following is a summary of the significant
components of the company's deferred tax assets and liabilities as of December
31, 1994 and 1993.
<TABLE>
<CAPTION>
Deferred tax Deferred tax
assets liabilities
--------------------------------------------------------------------------------------------------------------------
In millions 1994 1993 1994 1993
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pensions and postretirement benefits other than pensions $ 259 $ 259 $ 43 $ 32
Completed contract method of accounting for long-term contracts 43 27 407 379
State and local taxes 29 34 9 15
Reserves and accruals 107 107 - -
Depreciation and amortization 19 20 130 129
Insurance accruals 28 38 - -
Alternative minimum tax - 23 - -
Non-U.S. net operating loss carryforwards 40 50 - -
Other 109 70 49 49
--------------------------------------------------------------------------------------------------------------------
634 628 638 604
Valuation allowance for deferred tax assets (26) (42) - -
--------------------------------------------------------------------------------------------------------------------
Total $ 608 $ 586 $ 638 $ 604
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 15
32
Notes to Financial Statements TRW Inc.
PENSION PLANS
-------------------------------------------------------------------------
The company has defined benefit pension plans (generally noncontributory except
for those in the United Kingdom) for substantially all employees. Plans for
most salaried employees provide pay-related benefits based on years of service.
Plans for hourly employees generally provide benefits based on flat-dollar
amounts and years of service.
Under the company's funding policy, annual contributions are made to fund the
plans during the participants' working lifetimes, except for unfunded plans in
Germany and certain non-qualified plans in the U.S. which are funded as
benefits are paid to participants. Annual contributions to funded plans have
met or exceeded ERISA's minimum funding requirements or amounts required by
local law or custom.
The company sponsors a contributory stock savings plan for which a majority of
its U.S. employees are eligible. The company matches employee contributions up
to 3 percent of the participant's qualified compensation. The company
contributions are held in an unleveraged employee stock ownership plan. The
company also sponsors other defined contribution pension plans covering
employees at some of its operations.
The following is a summary of the components of net periodic pension cost and
the total cost for the defined contribution and stock savings plans.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
In millions 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Defined benefit plans
Service cost--benefits earned during the year $ 60 $ 13 $ 52 $ 12 $ 78 $ 14
Interest cost on projected benefit obligation 149 24 150 23 175 27
Actual (return)loss on plan assets 40 11 (319) (51) (191) (33)
Deferred gain(loss) on plan assets (230) (31) 138 34 (20) 9
Net amortization and other (7) 3 (12) 1 52 2
---------------------------------------------------------------------------------------------------------------------------
Total pension cost of defined benefit plans 12 20 9 19 94 19
Defined contribution plans 1 3 1 2 - 1
Stock savings plan 36 - 36 - 42 -
---------------------------------------------------------------------------------------------------------------------------
$ 49 $ 23 $ 46 $ 21 $ 136 $ 20
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Special early retirement incentive benefits provided to U.S. employees are
reflected in pension expense in the amount of $5 million for 1994 and $66
million for 1992.
The following table sets forth the funded status and amounts recognized in the
company's balance sheets at December 31, 1994 and 1993, for its defined benefit
pension plans.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
In millions 1994 1993
-------------------------------------------------------------------------------------------------------------------
U.S. Non-U.S. U.S. Non-U.S.
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation $1,546 $ 275 $1,717 $ 266
-------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $1,675 $ 282 $1,866 $ 276
-------------------------------------------------------------------------------------------------------------------
Projected benefit obligation $1,810 $ 311 $2,050 $ 319
Plan assets at fair value (primarily listed stocks and bonds) 2,207 245 2,352 256
-------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than) projected benefit obligation 397 (66) 302 (63)
Unrecognized net gain (218) (26) (155) (5)
Unrecognized net assets from January 1, 1986
(January 1, 1989 for non-U.S. plans) (77) (6) (95) (8)
Unrecognized prior service cost 42 9 40 9
Additional minimum liability (18) (6) (10) (2)
-------------------------------------------------------------------------------------------------------------------
Net pension asset(liability) recognized in the balance sheet $ 126 $ (95) $ 82 $ (69)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 16
33
Notes to Financial Statements TRW Inc.
PENSION PLANS (CONTINUED)
--------------------------------------------------------------------------
At December 31, 1994, the accumulated benefit obligation and plan assets at
fair value for non-U.S. overfunded plans totaled $182 million and $220 million,
respectively, and for non-U.S. underfunded plans totaled $100 million and $25
million, respectively. At December 31, 1993, the accumulated benefit obligation
and plan assets at fair value for non-U.S. overfunded plans totaled $174
million and $234 million, respectively, and for non-U.S. underfunded plans
totaled $102 million and $22 million, respectively.
For U.S. plans, as of December 31, 1994 and 1993, the discount rate used in
determining the actuarial present value of benefit obligations was 8-1/2
percent and 7-1/2 percent, respectively, and the projected rate of increase in
future compensation levels was 3 percent in both years. The expected long-term
rate of return on assets was 9 percent for 1994 and 1993 and 10 percent for
1992.
For non-U.S. plans, as of December 31, 1994 and 1993, the discount rate used in
determining the actuarial present value of benefit obligations ranged from 8
percent to 8-3/4 percent and from 6-1/2 percent to 8-1/2 percent, respectively,
and the projected rate of increase in future compensation levels ranged from 5
percent to 5-3/4 percent and from 4 percent to 6 percent, respectively. The
expected long-term rate of return on assets ranged from 6 percent to 9-1/2
percent for 1994, and 8 percent to 11-1/2 percent for 1993 and 8 percent to 13
percent for 1992.
The change in discount rate at December 31, 1994, reflects higher prevailing
interest rates.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
-------------------------------------------------------------------------
The company provides health care and life insurance benefits for a majority of
its retired employees in the United States and Canada. The health care plans
provide for cost sharing, in the form of employee contributions, deductibles,
and coinsurance, between the company and its retirees. The postretirement
health care plan covering a majority of employees who retired since August 1,
1988 limits the annual increase in the company's contribution toward the plan's
cost to a maximum of the lesser of 50 percent of medical inflation or 4
percent. Life insurance benefits are generally noncontributory. The company's
policy is to fund the cost of postretirement health care and life insurance
benefits in amounts determined at the discretion of management. Retirees in
certain other countries are provided similar benefits by plans sponsored by
their governments.
Effective January 1, 1992, the company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," for its U.S. and Canadian plans. This Statement
requires accrual of the expected cost of providing postretirement benefits
during employees' active service lives. The company's previous practice was to
record the cost of these benefits on a claims-incurred basis. The company
elected to recognize immediately the transition obligation, measured as of
January 1, 1992, as the cumulative effect of an accounting change. This
resulted in a one-time charge of $350 million (after a reduction for income
taxes of $225 million), which does not include amounts accrued in prior years
for previously divested businesses.
<TABLE>
The following table sets forth the funded status and amounts recognized in the
company's balance sheets at December 31, 1994 and 1993 for its postretirement
benefit plans.
<CAPTION>
--------------------------------------------------------------
In millions 1994 1993
--------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation
Retirees $ 420 $ 440
Fully eligible active participants 37 43
Other active participants 194 226
--------------------------------------------------------------
651 709
Plan assets at fair value
(primarily listed stocks and bonds) 32 17
--------------------------------------------------------------
Accumulated postretirement benefit
obligation in excess of plan assets (619) (692)
Unrecognized prior service cost (7) (7)
Unrecognized net gain (89) (16)
--------------------------------------------------------------
Net liability recognized in the
balance sheet $(715) $(715)
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Net periodic postretirement benefit cost included the following components:
------------------------------------------------------
In millions 1994 1993 1992
------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 13 $ 13 $ 15
Interest cost 53 59 57
Actual return on plan assets - (1) -
Net amortization and deferral (3) (1) 4
------------------------------------------------------
$ 63 $ 70 $ 76
------------------------------------------------------
</TABLE>
<PAGE> 17
34
Notes to Financial Statements TRW Inc.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
-----------------------------------------------------------------------
The discount rate used in determining the accumulated postretirement benefit
obligation as of December 31, 1994 and 1993 was 8-1/2 percent and 7-1/2
percent, respectively. At December 31, 1994, the 1995 annual rate of increase
in the per capita cost of covered health care benefits was assumed to be 10
percent for participants under age 65 and 9 percent for participants age 65 or
older. The rates were assumed to decrease gradually to 6 percent and 5 percent,
respectively, in the year 2021 and remain at that level thereafter. At December
31, 1993, the 1994 annual rate of increase in the per capita cost of covered
health care benefits was assumed to be 11 percent for participants under age 65
and 10 percent for participants age 65 or older. The rates were assumed to
decrease gradually to 6 percent and 5 percent, respectively, in the year 2021
and remain at that level thereafter. A one percent annual increase in these
assumed cost trend rates would increase the accumulated postretirement benefit
obligation at December 31, 1994 by approximately 8 percent, and the aggregate
of the service and interest cost components of net periodic postretirement
benefit cost for 1994 by approximately 9 percent. The expected long-term rate
of return on plan assets was 9 percent for 1994 and 1993. The trust holding the
plan assets is not subject to federal income taxes.
The change in discount rate at December 31, 1994, reflects higher prevailing
interest rates.
DEBT AND CREDIT AGREEMENTS
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM DEBT
-------------------------------------------------------
In millions 1994 1993
-------------------------------------------------------
<S> <C> <C>
U.S. borrowings $ - $ 35
Non-U.S. borrowings 122 260
-------------------------------------------------------
$122 $295
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM DEBT
-------------------------------------------------------
In millions 1994 1993
-------------------------------------------------------
<S> <C> <C>
U.S. borrowings $ 26 $175
Non-U.S. borrowings 148 50
7.3% ESOP obligations due 1997 95 95
Medium-term notes:
9.35% Notes due 2020 (due 2000 at
option of note holder) 100 100
9 3/8% Notes due 2021 100 100
Other medium-term notes 309 284
Other 73 114
-------------------------------------------------------
Total long-term debt 851 918
Less current portion 157 48
-------------------------------------------------------
$694 $870
-------------------------------------------------------
</TABLE>
TRW maintains two committed U.S. revolving credit agreements with 18 banks. The
first agreement allows the company to borrow up to $400 million and extends to
July 1998. The second agreement allows the company to borrow up to $150 million
and extends through February 1995 with an option to extend the term to a final
maturity no later than July 1998. The interest rate under the agreements is
either a negotiated rate, the banks' prime rates, a rate based upon the banks'
costs of funds in the secondary certificate of deposit market or a rate based
upon an Interbank Offered Rate. TRW's commercial paper borrowings are supported
by these agreements. At December 31, 1994, there were no outstanding
borrowings under the U.S. revolving credit agreements. At December 31, 1994,
$26 million of short-term U.S. borrowings have been reclassified as long-term
debt because the company intends to refinance these borrowings on a long-term
basis and has the ability to do so under its U.S. revolving credit agreements.
The weighted average interest rate on short-term borrowings outstanding at
December 31, 1994 and 1993 is 7.2 percent and 6.5 percent, respectively.
During 1994, the company entered into a committed multi-currency revolving
credit agreement consisting of two tranches with 13 banks. The first tranche
allows the company to borrow up to $100 million and extends through February
1995. The second tranche allows the company to borrow up to $100 million and
extends to July 1997. The interest rate under the agreement is based on various
interest rate indices. At December 31, 1994, there were no outstanding
borrowings under the multi-currency credit agreement. At December 31, 1994, $98
million of short-term non-U.S. borrowings have been reclassified to long-term
non-U.S. borrowings because the company intends to refinance these borrowings
on a long-term basis and has the ability to do so under its multi-currency
revolving credit agreement.
As of December 31, 1994, the company has interest rate swap agreements for
notional borrowings of $208 million in which the company pays a fixed rate and
receives a floating rate. The weighted average pay rate and receive rate under
these agreements is 7.9 percent and 5.8 percent, respectively. These agreements
mature at various dates through 1998. The company also has interest rate swap
agreements for notional borrowings of $100 million in which the company pays a
floating rate and receives a fixed rate. The weighted average pay rate and
receive rate under these agreements is 5.9 percent
<PAGE> 18
35
Notes to Financial Statements TRW Inc.
DEBT AND CREDIT AGREEMENTS (CONTINUED)
-----------------------------------------------------------------------
and 4.4 percent, respectively. These agreements mature at various dates through
1995. The floating rates under the interest rate swap agreements are based on
both commercial paper and LIBOR rates and have been calculated using these
rates at December 31, 1994. Net payments or receipts under the agreements are
recognized as an adjustment to interest expense. The company is exposed to
credit loss in the event of nonperformance by the counterparties to the
interest rate swap agreements. No collateral is held in relation to the
agreements and the company anticipates that the counterparties will satisfy
their obligations under the agreements.
The other medium-term notes bear interest at rates ranging from 4.33 percent to
9.25 percent and mature at various dates through 2020.
Non-U.S. borrowings bear interest, stated in terms of the local currency
borrowing, at rates ranging from 3.0 percent to 10.325 percent at December 31,
1994, and mature at various dates through 2004.
The maturities of long-term debt are, in millions: 1995-$157; 1996-$80;
1997-$167; 1998-$41; 1999-$16 and $390 thereafter.
The indentures and other debt agreements impose, among other covenants,
restrictions on funded debt and maintenance of minimum tangible net worth.
Under the most restrictive interpretation of these covenants, the payment of
dividends was limited to approximately $900 million at December 31, 1994.
Compensating balance arrangements and commitment fees were not material.
LEASE COMMITMENTS
-----------------------------------------------------------------------
TRW leases certain offices, manufacturing and research buildings, machinery,
automobiles and data processing and other equipment. Such leases, some of which
are noncancelable and in many cases include renewals, expire at various dates.
The company pays most maintenance, insurance and tax expenses relating to
leased assets. Rental expense for operating leases was $164 million for 1994,
$162 million for 1993 and $192 million for 1992.
At December 31, 1994, future minimum lease payments for noncancelable operating
leases totaled $419 million and are payable as follows: 1995-$110; 1996-$88;
1997-$60; 1998-$41; 1999-$29; and $91 thereafter.
CAPITAL STOCK
----------------------------------------------------------------------
Serial Preference Stock II -- cumulative - stated at $2.75 a share; 5 million
shares authorized.
Series 1 -- each share convertible into 4.4 shares of common; redeemable at $104
per share; involuntary liquidation price $104 per share; dividend rate of $4.40
per annum.
Series 3 -- each share convertible into 3.724 shares of common; redeemable at
$100 per share; involuntary liquidation price $40 per share; dividend rate of
$4.50 per annum.
Series 4 -- not convertible into common shares; redemption price and involuntary
liquidation price of $125 per one one-hundredth of a share; annual dividend
rate per one one-hundredth of a share of the lesser of $4.00 or the current
dividend on common stock; no shares outstanding at December 31, 1994.
Common stock -- $0.625 par value; authorized 250 million shares; shares
outstanding were reduced by treasury shares of .4 million in 1994 and .3
million in 1993.
TRW has a shareholder purchase rights plan under which each shareholder of
record as of January 6, 1989 received one right for each TRW common share held.
Each right entitles the holder, upon the occurrence of certain events, to buy
one one-hundredth of a share of Cumulative Redeemable Serial Preference Stock
II, Series 4, at a price of $125. Should certain additional events occur, each
right allows the shareholder to purchase $250 of the surviving entity's common
shares at a 50 percent discount. The company may redeem these rights at its
option at one cent per right under certain circumstances.
At December 31, 1994, 7.7 million shares of common stock were reserved for the
exercise and issuance of stock options and conversion of the Serial Preference
Stock II, Series 1 and 3. There were .6 million shares of Cumulative Redeemable
Serial Preference Stock II, Series 4, reserved for the shareholder purchase
rights plan.
<PAGE> 19
36
Notes to Financial Statements TRW Inc.
STOCK OPTIONS
-----------------------------------------------------------------------
TRW has granted incentive and nonqualified stock options to certain employees
to purchase the company's common stock at the market price on the date of
grant. Subject to certain exceptions, incentive stock options become
exercisable to the extent of one-half of the optioned shares for each full year
of employment following the date of grant, and nonqualified stock options
granted prior to 1987 become exercisable to the extent of one-fourth of the
optioned shares for each full year of employment following the date of grant.
Nonqualified stock options granted after 1986 become exercisable to the extent
of one-third of the optioned shares for each full year of employment following
the date of grant. Generally, both incentive and nonqualified stock options
expire 10 years after the date of grant.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
1994 1993
--------------------------------------------------------------------------------------------------------------------
Millions Millions
of shares Option price of shares Option price
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 4.5 $ 31.44 to $ 64.07 5.5 $ 31.44 to $ 56.94
Granted .9 65.75 - 64.07
Became exercisable .6 39.75 to 64.07 .8 39.75 to 55.69
Exercised .6 31.44 to 56.94 .8 31.44 to 56.94
Canceled, expired or terminated .1 31.44 to 65.75 .2 31.44 to 56.94
Outstanding at end of year 4.7 39.285 to 65.75 4.5 31.44 to 64.07
Exercisable 3.8 39.285 to 64.07 3.8 31.44 to 56.94
--------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1994, approximately 800 employees were participants in the
plans. As of that date, the average exercise price of options outstanding was
$50.17 per share and the expiration dates ranged from July 1995 to April 2004.
TRW grants performance share rights to certain employees under which the
employees are entitled to receive shares of the company's common stock based on
the achievement of a certain return on assets employed. The rights specify a
target number of shares which the employee would receive for each year that
goals for returns on assets employed are met. If the goals are exceeded, the
employee could receive up to 200 percent of the target shares, with the excess
over 100 percent payable in cash (unless the Compensation and Stock Option
Committee of the Board of Directors determines to pay the excess in shares). If
the goals are not met, the employee would receive fewer than the target shares
or no shares. At December 31, 1994 and 1993, the target number of performance
share rights granted to employees and still outstanding were .4 million and .1
million, respectively.
SUPPLEMENTAL CASH FLOW INFORMATION
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
In millions 1994 1993 1992
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest paid (net of amount capitalized) $ 112 $ 174 $ 153
Income taxes paid (net of refunds) $ 93 $ 96 $ 85
----------------------------------------------------------------------------------------------------------------
</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.
Interest capitalized as part of the construction of assets was $7 million in
1994, $8 million in 1993 and $13 million in 1992.
<PAGE> 20
37
Notes to Financial Statements TRW Inc.
CONTINGENCIES
-----------------------------------------------------------------------
The company is subject to various investigations, claims and legal proceedings
covering a wide range of matters that arise in the ordinary course of its
business activities. In addition, the company is conducting a number of
environmental investigations and remedial actions at current and former company
locations and, along with other companies, has been named a potentially
responsible party for certain waste management sites. Each of these matters is
subject to various uncertainties, and some of these matters may be resolved
unfavorably to the company. The company has established accruals for matters
that are probable and reasonably estimable including $98 million for
environmental matters at December 31, 1994. The company believes that any
liability that may result from the resolution of environmental matters for
which sufficient information is available to support cost estimates will not
have a material adverse effect on the company's financial position. However,
the company cannot predict the effect on the company's financial position of
expenditures for aspects of certain matters for which there is insufficient
information. In addition, the company cannot predict the effect of compliance
with environmental laws and regulations with respect to unknown environmental
matters or the possible effect of compliance with environmental requirements
imposed in the future.
Further, product liability claims may be asserted in the future for events not
currently known by management. Although the ultimate liability from these
potential claims cannot be ascertained at December 31, 1994, management does
not anticipate that any related liability, after consideration of insurance
recovery, would have a material adverse effect on the company's financial
position.
INDUSTRY SEGMENTS
-----------------------------------------------------------------------
The company operates in the following industry segments:
Automotive -- Steering systems, including power and manual rack and pinion
steering for light vehicles, hydraulic steering systems for commercial truck
and off-highway vehicles and suspension systems. Occupant restraint systems,
including air bag and seat belt systems; electrical and electronic controls;
and engineered fasteners. Engine valves and valve train parts, pistons and stud
welding and control systems. Products are used in cars, trucks, buses, farm
machinery and off-highway vehicles and are distributed directly to original
equipment manufacturers and through independent distributors.
Space & Defense -- Spacecraft, including the design and manufacture of military
and civilian spacecraft equipment, propulsion subsystems, electro-optical and
instrument systems, spacecraft payloads, high-energy lasers and laser
technology and other high-reliability components. Software and systems
engineering support services in the fields of military command and control,
earth observation, environmental monitoring and nuclear waste management,
antisubmarine warfare, security and counterterrorism, undersea surveillance and
other high-technology space, defense, and civil government support systems.
Electronic systems, equipment and services, including the design and
manufacture of space communication systems, airborne reconnaissance systems,
unmanned aerial vehicles, avionics systems and other electronic technologies
for tactical and strategic space, defense and selected commercial applications.
Products and services are provided directly to defense, other government and
commercial customers.
Information Systems & Services -- Information systems and services, including
consumer and commercial credit information and related services, direct
marketing, real estate information and services and imaging systems engineering
and integration. Information and services are provided to businesses,
credit-granting organizations, financial institutions and individual consumers.
Other -- Beginning in 1994, all activity previously reported in the "Other"
segment is reflected in the respective "Company Staff" lines. Prior year
amounts have been restated to conform to the current year's presentation.
<PAGE> 21
38
Notes to Financial Statements TRW Inc.
INDUSTRY SEGMENTS (CONTINUED)
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
In millions
----------------------------------------------------------------------------------------------------------------
Years ended December 31 1994 1993 1992
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES
Automotive $5,679 62% $4,538 57% $4,616 56%
Space & Defense 2,812 31 2,792 35 2,941 35
Information Systems & Services 596 7 618 8 754 9
----------------------------------------------------------------------------------------------------------------
Sales $9,087 100% $7,948 100% $8,311 100%
----------------------------------------------------------------------------------------------------------------
OPERATING PROFIT
Automotive $ 476 64% $ 309 53% $ 314 52%
Space & Defense 175 23 199 34 213 36
Information Systems & Services 96 13 74 13 74 12
----------------------------------------------------------------------------------------------------------------
Operating profit 747 100% 582 100% 601 100%
Company Staff and other (111) (91) (94)
Interest expense (105) (138) (163)
Earnings from affiliates 4 6 4
----------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative
effect of accounting changes $ 535 $ 359 $ 348
----------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Automotive $3,481 67% $3,004 60% $2,919 58%
Space & Defense 1,111 21 1,253 25 1,337 26
Information Systems & Services 622 12 752 15 812 16
----------------------------------------------------------------------------------------------------------------
Identifiable assets 5,214 100% 5,009 100% 5,068 100%
Eliminations (28) (46) (32)
Company Staff assets 380 317 353
Investments in affiliates 70 56 69
----------------------------------------------------------------------------------------------------------------
Total assets $5,636 $5,336 $5,458
----------------------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT
AND EQUIPMENT
Automotive $ 264 $ 238 $ 216
Space & Defense 111 116 132
Information Systems & Services 20 26 33
Company Staff 7 8 11
----------------------------------------------------------------------------------------------------------------
$ 402 $ 388 $ 392
----------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Automotive $ 388 $ 367 $ 404
Space & Defense 98 90 104
Information Systems & Services 18 23 17
Company Staff 2 2 5
----------------------------------------------------------------------------------------------------------------
$ 506 $ 482 $ 530
----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 22
39
Notes to Financial Statements TRW Inc.
INDUSTRY SEGMENTS (CONTINUED)
-----------------------------------------------------------------------
Restructuring gains(losses) included in operating profit were: $5 million in
1993 and $50 million in 1992 for Automotive; $(6) million in 1993 and $(17)
million in 1992 for Space & Defense; and $(4) million in 1993 and $7 million in
1992 for Information Systems & Services.
Company Staff assets consist principally of cash and cash equivalents, current
deferred income taxes and administrative facilities. Intersegment sales were
not significant. Sales to agencies of the U.S. Government, primarily by the
Space & Defense segment, were $2,545 million in 1994, $2,708 million in 1993
and $2,851 million in 1992. Sales to Ford Motor Company by the Automotive
segment were $1,363 million in 1994, $1,096 million in 1993 and $972 million in
1992.
GEOGRAPHIC SEGMENTS
-----------------------------------------------------------------------
TRW's operations are located primarily in the United States and Europe.
Interarea sales are not significant to the total revenue of any
geographic area. Restructuring gains(losses) included in operating profit were:
$4 million in 1993 and $45 million in 1992 for United States operations; $(7)
million in 1993 and $23 million in 1992 for Europe; and $(2) million in 1993
and $(28) million in 1992 for Other.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
In millions 1994 1993 1992
------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES
United States $6,290 $5,643 $5,676
Europe 1,965 1,522 1,917
Other 832 783 718
------------------------------------------------------------------------------------
$9,087 $7,948 $8,311
------------------------------------------------------------------------------------
OPERATING PROFIT
United States $ 528 $ 461 $ 382
Europe 143 50 176
Other 76 71 43
------------------------------------------------------------------------------------
$ 747 $ 582 $ 601
------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
United States $3,444 $3,536 $3,540
Europe 1,289 1,047 1,113
Other 531 461 459
------------------------------------------------------------------------------------
Identifiable assets 5,264 5,044 5,112
Eliminations (78) (81) (76)
Company Staff assets 380 317 353
Investments in affiliates 70 56 69
------------------------------------------------------------------------------------
Total assets $5,636 $5,336 $5,458
------------------------------------------------------------------------------------
</TABLE>
<PAGE> 23
40
Notes to Financial Statements TRW Inc.
<TABLE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
-----------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
-------------------------------------------------------------------------------------------------------------------
In millions except per share data 1994 1993 1994 1993 1994 1993 1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(A)
Sales $2,159 2,029 $2,317 2,011 $2,165 $1,903 2,446 $2,005
Gross profit 439 411 471 408 451 377 456 384
Earnings before income taxes and
cumulative effect of accounting
change 107 87 139 93 133 85 156 94
Net earnings 64 26 87 55 82 51 100 63
Net earnings per share
Fully diluted .97 .40 1.31 .85 1.24 .76 1.49 .96
Primary .97 .41 1.33 .85 1.26 .77 1.49 .98
-------------------------------------------------------------------------------------------------------------------
<FN>
(A) The first quarter of 1993 includes a decrease in net earnings of $25 million ($.38 per share) for the cumulative effect on prior
years for a change in accounting principle effective January 1, 1993. The first three quarters of 1993 have not been restated
to reflect the change in accounting principle as the effect on each quarter is immaterial.
</TABLE>
STOCK PRICES AND DIVIDENDS (UNAUDITED)
-----------------------------------------------------------------------
The book value per common share at December 31, 1994 was $27.91 compared to
$23.77 at the end of 1993. Our directors declared the 226th consecutive
quarterly dividend during December 1994. Dividends declared per share in 1994
were $1.97, up 5 percent from $1.88 in 1993. The following table highlights the
market prices of our common and preference stocks and dividends paid for the
quarters of 1994 and 1993.
<TABLE>
<CAPTION>
Price of Price of Dividends
traded shares traded shares paid per share
-----------------------------------------------------------------------------------------------------------------------
Quarter 1994 1993 1994 1993
-----------------------------------------------------------------------------------------------------------------------
High Low High Low
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock 1 $ 77-1/2 $ 65-3/4 $ 63-7/8 $ 52-1/2 $ .47 $ .47
Par value $0.625 per share 2 71-1/4 61 69-5/8 61-5/8 .47 .47
3 75-1/8 63-5/8 67-1/2 60-5/8 .50 .47
4 74-3/4 62 70-1/4 61-5/8 .50 .47
-----------------------------------------------------------------------------------------------------------------------
Cumulative Serial 1 326 320 253 244 1.10 1.10
Preference Stock II 2 350 250 283 277-3/4 1.10 1.10
$4.40 Convertible 3 325 325 282 271 1.10 1.10
Series 1 4 316 275 294 279 1.10 1.10
-----------------------------------------------------------------------------------------------------------------------
Cumulative Serial 1 256-1/2 256-1/2 220 197 1.125 1.125
Preference Stock II 2 244 232 242 233 1.125 1.125
$4.50 Convertible 3 272 272 244-1/2 222 1.125 1.125
Series 3 4 238 232 248 236 1.125 1.125
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 24
41
Management and Auditors' Reports TRW Inc.
REPORT OF MANAGEMENT
-----------------------------------------------------------------------
Management of TRW is responsible for the preparation of the accompanying
consolidated financial statements of the company and its subsidiaries. The
financial statements have been prepared in conformity with generally accepted
accounting principles and include the estimates and judgments of management.
The financial statements have been audited by Ernst & Young LLP, independent
auditors, whose report appears below.
Management has established and is responsible for maintaining a system of
internal accounting controls that it believes provides reasonable assurance
that assets are safeguarded and transactions are executed and recorded in
accordance with management's authorization. The system is tested and evaluated
regularly by the company's internal auditors as well as by the independent
auditors in connection with their annual audit.
TRW has an audit committee composed of five directors who are not members of
management. The committee meets regularly with management, the internal
auditors and the independent auditors in connection with its review of matters
relating to the company's financial statements, the company's internal audit
program, the company's system of internal accounting controls and the services
of the independent auditors. The committee also meets with the internal
auditors as well as the independent auditors, without management present, to
discuss appropriate matters. The committee also recommends to the directors the
designation of the independent auditors.
/s/ Joseph T. Gorman
Joseph T. Gorman
Chairman and Chief Executive Officer
/s/ Ronald D. Sugar
Ronald D. Sugar
Executive Vice President and
Chief Financial Officer
/s/ Carl G. Miller
Carl G. Miller
Vice President and Corporate Controller
January 23, 1995
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
-----------------------------------------------------------------------
Shareholders and Directors
TRW Inc.
We have audited the accompanying consolidated balance sheets of TRW Inc. and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of earnings, cash flows and changes in shareholders' investment for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above (appearing on pages
23 through 39 of this annual report) present fairly, in all material respects,
the consolidated financial position of TRW Inc. and subsidiaries at December
31, 1994 and 1993, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31, 1994,
in conformity with generally accepted accounting principles.
As discussed in the notes to financial statements, effective January 1, 1993,
the company changed its method of accounting for postemployment benefits and,
effective January 1, 1992, its methods of accounting for postretirement
benefits other than pensions and income taxes.
/s/ Ernst & Young LLP
Cleveland, Ohio
January 23, 1995
<PAGE> 25
42
Corporate Data and Directors TRW Inc.
CORPORATE DATA
-----------------------------------------------------------------------
Annual meeting -- The annual meeting of TRW Inc. shareholders will be held at
8:30 a.m. Wednesday, April 26, 1995, at the company's headquarters, 1900
Richmond Road, Cleveland, Ohio. Proxy materials and a formal notice of the
meeting will be sent to shareholders beforehand.
Stock listings -- TRW's common stock (ticker symbol: TRW) and Serial Preference
Stock II, Series 1 (ticker symbol: TRWB), and Serial Preference Stock II,
Series 3 (ticker symbol: TRWD), are traded principally on the New York Stock
Exchange. TRW common shares also are traded on the Midwest, Pacific,
Philadelphia, London and Frankfurt exchanges.
Form 10-K report-- The company files an annual report with the Securities and
Exchange Commission on Form 10-K. Shareholders may obtain a copy of this report
without charge after April 15, 1995, by writing Joseph E. Durk, Director,
Financial Services, TRW Inc., 1900 Richmond Road, Cleveland, Ohio 44124-3760.
Dividend reinvestment -- TRW offers an automatic dividend reinvestment service
for individual shareholders. The service provides for the reinvestment of
quarterly cash dividends in the company's common stock. Shareholders may also
buy additional shares each quarter. A discounted brokerage commission is
charged. For more information, write to Joseph E. Durk, Director, Financial
Services, TRW Inc., 1900 Richmond Road, Cleveland, Ohio 44124-3760.
Investor Questions -- Questions concerning dividend payments, certificates,
stock transfers and other administrative subjects should be addressed to
Financial Services, TRW Inc., 1900 Richmond Road, Cleveland, Ohio 44124-3760.
Investment questions from security analysts, portfolio managers and
shareholders about TRW should be directed to Thomas A. Myers, Director,
Investor Relations, TRW Inc., telephone 216.291.7506.
Auditors -- Ernst & Young LLP, Cleveland, Ohio
Registrars -- National City Bank, Cleveland, and First Chicago Trust Company
of New York
Transfer agents -- TRW Inc. and First Chicago Trust Company of New York
Rights agent -- National City Bank, Cleveland
DIRECTORS
-----------------------------------------------------------------------
Michael H. Armacost 2,6 -- Distinguished fellow and visiting professor at the
Asia/Pacific Research Center, Stanford University; age 57; director since 1993
Charles T. Duncan 2,5 -- Member, Iran-United States Claims Tribunal; age 70;
director since 1983
Martin Feldstein 3,6 -- Professor of economics, Harvard University; age 55;
served as a director in 1981 and 1982 and has been a director since 1984
Robert M. Gates 2,5 -- Consultant, author and lecturer; former director, U.S.
Central Intelligence Agency; age 51; director since 1994
Joseph T. Gorman 1 -- Chairman and chief executive officer, TRW Inc.; age 57;
director since 1984
Carl H. Hahn 3,4,5 -- Retired chairman of the board, Volkswagen AG; age 68;
director since 1993
George H. Heilmeier 4,5 -- President and chief executive officer, Bell
Communications Research Inc.; age 58; director since 1992
Peter S. Hellman 1 -- President and chief operating officer, TRW Inc.; age 45;
director since January 1995
Karen N. Horn 2,3,4 -- Chairman and chief executive officer, Bank One,
Cleveland; age 51; director since 1990
E. Bradley Jones 1,2,4 -- Retired chairman, Republic Steel Corporation; age 67;
director since 1982
William S. Kiser 1,3,6 -- Vice chairman and chief medical officer, Primary
Health Systems, L.P.; retired chairman of the board of governors and chief
executive officer, The Cleveland Clinic Foundation; age 67; director since 1985
James T. Lynn 4,6 -- Retired chairman of the board and chief executive officer,
Aetna Life and Casualty Company; senior advisor, Lazard Freres & Co.; age 67;
director since 1993
Richard W. Pogue 4,5 -- Senior advisor, Dix & Eaton;
age 66; director since 1994
1 Executive Committee
2 Audit Committee
3 Compensation and Stock Option Committee
4 Nominating Committee
5 Public Policy Committee
6 Retirement Funding Committee
Recycled Paper Symbol Printed on recycled paper.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
TRW has no parent or parents. As of December 31, 1994, certain of its
subsidiaries, some of which also have subsidiaries, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
ORGANIZED UNDER VOTING SECURITIES
NAME THE LAWS OF OWNED (1)
---- ---------------------- ---------------------
<S> <C> <C>
TRW U.K. Limited which owns United Kingdom 100.00%
TRW Remanufactured Steering Systems Limited United Kingdom 100.00%
TRW Steering Systems Limited United Kingdom 100.00%
TRW Ceramics Limited United Kingdom 100.00%
TRW Connectors Limited United Kingdom 100.00%
TRW Reda Pump Limited United Kingdom 100.00%
TRW Repa Limited United Kingdom 90.00%
TRW Transportation Electronics Limited United Kingdom 100.00%
TRW United-Carr Limited United Kingdom 100.00%
TRW Automotive Systems Limited United Kingdom 100.00%
ESL Incorporated California 100.00%
TRW Vehicle Safety Systems Inc. which owns Delaware 100.00%
TRW Technar Inc. California 100.00%
TRW Vehicle Safety Systems de Mexico, Mexico 100.00%
S.A. de C.V.
TRW Safety Systems Holding Company Delaware 100.00%
TRW Occupant Restraints
de Chihuahua S.A. de C.V. Mexico 100.00%
TRW Automotive Products Inc. which, together
with TRW International Holding Corporation,
directly or indirectly owns Delaware 100.00%
TRW GmbH fur industrielle Beteiligungen
which, in turn (in some cases together with
TRW Inc.), directly or indirectly owns Germany 100.00%
TRW Autoelektronika s.r.o. Czechoslovakia 100.00%
TRW Carr CSRS s.r.o. Czechoslovakia 100.00%
TRW-DAS, a.s. Czechoslovakia 92.40%
TRW Electro-Automation GmbH & Co. KG Germany 76.00%
TRW Fahrwerksysteme GmbH & Co. KG Germany 100.00%
TRW Fahrzeugelektrik GmbH & Co. KG Germany 100.00%
TRW FahrzeugelektrikVerwaltungs-GmbH Germany 100.00%
TRW Motorkomponenten GmbH & Co. KG Germany 100.00%
TRW Nelson Bolzenschweiss-Technik GmbH Germany 100.00%
TRW Presswerk Krefeld GmbH & Co. KG Germany 100.00%
TRW Repa GmbH Germany 90.00%
TRW United-Carr GmbH & Co. KG Germany 100.00%
TRW Steering Systems Japan Co. Ltd. Japan 100.00%
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
PERCENTAGE OF
ORGANIZED UNDER VOTING SECURITIES
Name THE LAWS OF OWNED (1)
---- --------------- -----------------
TRW Canada Limited which owns Canada 100.00%
TRW Vehicle Safety Systems Limited Canada 100.00%
Quality Safety Systems Company Canada 60.00%
TRW do Brasil, S.A. Brazil 98.8%
TRW Components International Inc. Virginia 100.00%
TRW Italia S.p.A. which owns Italy 100.00%
TRW SIPEA S.p.A. Italy 100.00%
TRW France S.A. which owns France 100.00%
TRW Carr France SNC France 100.00%
TRW Koyo Steering Systems Company Tennessee 51.00%
TRW Export Trading Corporation which owns Delaware 100.00%
TRW Export Sales Corporation U.S. Virgin Islands 100.00%
TRW System Services Company Delaware 100.00%
TRW Financial Systems, Inc. which owns California 100.00%
TRW Financial Systems Nederland B.V. Netherlands 100.00%
TRW Financial Systems of Norway AS Norway 100.00%
TRW Sabelt S.p.A. Italy 90.00%
TRW Air Bag Systems s.r.l. Italy 100.00%
</TABLE>
_______________
(1) Total percentages held by TRW and/or its subsidiaries, disregarding
Directors' qualifying shares, if any.
The names of certain subsidiaries, which considered in the aggregate
would not constitute a "significant subsidiary" as such term is defined in the
regulations under the federal securities laws, have been omitted from the
foregoing list.
<PAGE> 1
Exhibit 24(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements
Nos. 33-42870 on Form S-3, 033-52859 on Form S-8, 033-52865 on Form S-8,
033-53503 on Form S-8, 33-29751 on Form S-8, 2-90748 on Form S-8, 2-64035 on
Form S-8, 2-47665 on Form S-8 and 2-26362 on Form S-8 of our report dated
January 23, 1995 with respect to the consolidated financial statements of TRW
Inc. included in the Annual Report (Form 10-K) for the year ended December 31,
1994.
We also consent to the incorporation by reference in TRW Inc.'s
Registration Statement No. 033-52859 on Form S-8 pertaining to The TRW Employee
Stock Ownership and Stock Savings Plan and the related prospectus of our report
dated March 17, 1995 with respect to the financial statements of The TRW
Employee Stock Ownership and Stock Savings Plan for the fiscal year ended
December 31, 1994 included as Exhibit 28(a) to the TRW Inc. Annual Report (Form
10-K) for the year ended December 31, 1994.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
March 24, 1995
<PAGE> 1
Exhibit 24(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in TRW Inc.'s Registration
Statement No. 033-52865 on Form S-8 pertaining to The TRW Canada Stock Savings
Plan and the related prospectus of our report dated March 17, 1995 with respect
to the financial statements of The TRW Canada Stock Savings Plan for the year
ended December 31, 1994 included as Exhibit 28(b) to the TRW Inc. Annual Report
(Form 10-K) for the year ended December 31, 1994.
/s/ Ernst & Young
ERNST & YOUNG
Hamilton, Ontario
March 24, 1995
<PAGE> 1
Exhibit 25(a)
POWER OF ATTORNEY
Directors and Certain Officers of
TRW Inc.
THE UNDERSIGNED Directors and Officers of TRW Inc. hereby appoint
M. A. Coyle, C. T. Harvie, W. S. Page, III and J. L. Manning, Jr., and each of
them, as attorneys for the undersigned, with full power of substitution and
resubstitution, for and in the name, place and stead of the undersigned in the
capacity specified, to prepare or cause to be prepared, to execute and to file
with the Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended (the "Act"), an annual report on Form 10-K for the year
ended December 31, 1994 relating to TRW Inc., such other periodic reports as
may be required pursuant to the Act, amendments and exhibits to any of the
foregoing and any and all other documents to be filed with the Securities and
Exchange Commission or elsewhere pertaining to such reports, with full power
and authority to take such other action which in the judgment of such person
may be necessary or appropriate to effect the filing of such documents.
EXECUTED the dates set forth below.
<TABLE>
<S> <C> <C>
/s/ J. T. Gorman /s/ P. S. Hellman /s/ R. D. Sugar
------------------------ --------------------------- ------------------------------
J. T. Gorman, P. S. Hellman, R. D. Sugar,
Chairman of the Board, President, Executive Vice President and
Chief Executive Officer Chief Operating Officer Chief Financial Officer
and Director and Director February 8, 1995
February 8, 1995 February 8, 1995
/s/ C. G. Miller /s/ M. H. Armacost /s/ C. T. Duncan
-------------------------- ----------------------------- -------------------------------
C. G. Miller, Vice President M. H. Armacost, Director C. T. Duncan, Director
and Controller February 8, 1995 February 8, 1995
February 8, 1995
/s/ M. Feldstein /s/ C. H. Hahn /s/ G. H. Heilmeier
---------------------- ------------------------------ --------------------
M. Feldstein, Director C. H. Hahn, Director G. H. Heilmeier, Director
February 8, 1995 February 8, 1995 February 8, 1995
/s/ K. N. Horn /s/ E. B. Jones /s/ W. S. Kiser
-------------------- ------------------------ ---------------------------
K. N. Horn, Director E. B. Jones, Director W. S. Kiser, Director
February 8, 1995 February 8, 1995 February 8, 1995
/s/ J. T. Lynn /s/ R. W. Pogue /s/ R. M. Gates
--------------------- ------------------------ ---------------------------
J. T. Lynn, Director R. W. Pogue, Director R. M. Gates, Director
February 8, 1995 February 8, 1995 February 8, 1995
</TABLE>
<PAGE> 1
Exhibit 25(b)
C E R T I F I C A T E
I, Jean M. Schmidt, do hereby certify that I am a duly
elected, qualified and acting Assistant Secretary of TRW Inc. ("TRW"), an Ohio
corporation; that attached hereto and marked as "Exhibit A" is a true and
correct copy of resolutions duly adopted by the Directors of TRW at a meeting
thereof duly called and held on February 8, 1995, at which meeting a quorum was
present and acting throughout; and that said resolutions have not been
modified, revoked or rescinded in any manner and are now in full force and
effect.
IN WITNESS WHEREOF, I have hereunto set my hand and have
caused the seal of TRW to be affixed hereto at Lyndhurst, Ohio this 24th day of
March, 1995.
/s/ Jean M. Schmidt
-----------------------------
Assistant Secretary
<PAGE> 2
EXHIBIT A
RESOLVED that any officer or assistant officer of the Corporation is authorized
and empowered, for and on behalf of the Corporation, to prepare or cause to be
prepared, to execute and to file with the Securities and Exchange Commission,
Washington, D. C. (the "Commission"), the Corporation's Annual Report on Form
10-K for the year ended December 31, 1994, such other periodic reports as may
be required pursuant to the Securities Exchange Act of 1934, as amended (the
"Act"), amendments and exhibits to any of the foregoing and any and all other
documents to be filed with the Commission or elsewhere pertaining to such
reports, and to take such other action as may be necessary and appropriate to
effect the filing of all such reports under the Act, including the execution of
a power of attorney evidencing the authority set forth herein; and
FURTHER RESOLVED that Walter S. Page, III and J. Lawrence Manning, Jr. and each
of them is appointed an attorney for the Corporation, with full power of
substitution and resubstitution, to execute and file, for and on behalf of the
Corporation, such Annual Report on Form 10-K, such other periodic reports,
amendments and exhibits to any of the foregoing and any and all other documents
to be filed with the Commission or elsewhere pertaining to such reports, with
full power and authority to take or cause to be taken all other actions which
in the judgment of such person may be necessary and appropriate to effect the
purposes of the foregoing resolution.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 109
<SECURITIES> 0
<RECEIVABLES> 1,361
<ALLOWANCES> 23
<INVENTORY> 470
<CURRENT-ASSETS> 2,215
<PP&E> 5,556
<DEPRECIATION> 3,067
<TOTAL-ASSETS> 5,636
<CURRENT-LIABILITIES> 1,986
<BONDS> 694
<COMMON> 40
1
0
<OTHER-SE> 1,781
<TOTAL-LIABILITY-AND-EQUITY> 5,636
<SALES> 9,087
<TOTAL-REVENUES> 9,087
<CGS> 7,270
<TOTAL-COSTS> 7,270
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105
<INCOME-PRETAX> 535
<INCOME-TAX> 202
<INCOME-CONTINUING> 333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 333
<EPS-PRIMARY> 5.05
<EPS-DILUTED> 5.01
</TABLE>
<PAGE> 1
Exhibit 28(a)
Audited Financial Statements
THE TRW EMPLOYEE STOCK
OWNERSHIP AND STOCK SAVINGS PLAN
December 31, 1994 and 1993
[ERNST & YOUNG LLP Logo]
<PAGE> 2
[ERNST & YOUNG LLP Logo]
Report of Independent Auditors
Board of Administration
The TRW Employee Stock Ownership and
Stock Savings Plan
We have audited the accompanying statements of net assets available for
benefits of The TRW Employee Stock Ownership and Stock Savings Plan as of
December 31, 1994 and 1993, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of The TRW
Employee Stock Ownership and Stock Savings Plan as of December 31, 1994 and
1993, and the changes in net assets available for benefits for the years then
ended, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule
of assets held for investment purposes as of December 31, 1994, and the
schedule of reportable transactions for the year then ended are presented for
purposes of complying with the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974, and are not a required part of the basic financial statements. The
supplemental schedules have been subjected to the auditing procedures applied
in our audit of the 1994 financial statements and, in our opinion, are fairly
stated in all material respects in relation to the 1994 basic financial
statements taken as a whole.
/s/ Ernst & Young LLP
Cleveland, Ohio
March 17, 1995
1
<PAGE> 3
The TRW Employee Stock Ownership and
Stock Savings Plan
Statements of Net Assets Available for Benefits
TRW Stock Fund
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
--------------------------------
<S> <C> <C>
ASSETS
Investments:
TRW Inc. Common Stock $684,611,928 $693,942,478
Bankers Trust Pyramid Directed Account
Cash Fund 7,274,957 9,379,058
Receivable from TRW Inc. 332,652 47,864
Participant loans receivable 14,999,193 14,831,779
Interest receivable 55,109 32,787
Receivable from other funds 162,638
--------------------------------
TOTAL ASSETS 707,436,477 718,233,966
LIABILITIES
Payable to other funds 492,217
Accrued expenses 338,943 232,221
--------------------------------
TOTAL LIABILITIES 338,943 724,438
--------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $707,097,534 $717,509,528
================================
Employee Stock Ownership Plan $453,004,709 $466,874,664
Stock Savings Plan 254,092,825 250,634,864
--------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $707,097,534 $717,509,528
================================
</TABLE>
See notes to financial statements.
2
<PAGE> 4
The TRW Employee Stock Ownership and
Stock Savings Plan
Statements of Changes in Net Assets Available for Benefits
TRW Stock Fund
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993
--------------------------------
<S> <C> <C>
Investment income:
Dividends--TRW Inc. Common Stock $ 19,781,025 $ 18,788,802
Interest 428,269 487,714
--------------------------------
INVESTMENT INCOME 20,209,294 19,276,516
Contributions:
Participants 18,401,168 17,094,227
TRW Inc. 36,366,932 36,709,646
--------------------------------
CONTRIBUTIONS 54,768,100 53,803,873
Net realized gain on distribution of TRW Inc.
Common Stock to participants 17,467,154 18,248,044
Unrealized appreciation of investments 95,060,294
Transfers from other funds 21,550,048 9,934,047
Interest income on participant loans 1,080,012 933,755
--------------------------------
115,074,608 197,256,529
LESS
Withdrawals and distributions:
Cash 4,915,031 6,046,819
TRW Inc. Common Stock 572,810 shares in 1994 and
689,206 shares in 1993 39,798,271 43,481,968
--------------------------------
44,713,302 49,528,787
Distribution of dividends on TRW Inc.
Common Stock 12,766,959 12,019,063
Unrealized depreciation of investments 49,322,621
Administrative expenses 795,500 787,079
Transfers to other funds 17,888,220 24,915,877
--------------------------------
125,486,602 87,250,806
--------------------------------
(DECREASE) INCREASE IN NET ASSETS FOR YEAR (10,411,994) 110,005,723
Net assets available for benefits at beginning of year 717,509,528 607,503,805
--------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $707,097,534 $717,509,528
================================
</TABLE>
See notes to financial statements.
3
<PAGE> 5
The TRW Employee Stock Ownership and
Stock Savings Plan
Statements of Net Assets Available for Benefits
Equity Fund
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
--------------------------------
<S> <C> <C>
ASSETS
Investment:
Bankers Trust Pyramid Equity Index Fund $264,983,112 $259,363,285
Receivable from TRW Inc. 152,832 22,047
Participant loans receivable 14,012,797 15,434,395
--------------------------------
TOTAL ASSETS 279,148,741 274,819,727
LIABILITIES
Accrued expenses 130,502 111,636
Payable to other funds 354,256 237,795
--------------------------------
TOTAL LIABILITIES 484,758 349,431
--------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $278,663,983 $274,470,296
================================
</TABLE>
See notes to financial statements.
4
<PAGE> 6
The TRW Employee Stock Ownership and
Stock Savings Plan
Statements of Changes in Net Assets Available for Benefits
Equity Fund
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993
--------------------------------
<S> <C> <C>
Investment income:
Interest and dividends $ 1,380 $ 2,594
--------------------------------
INVESTMENT INCOME 1,380 2,594
Contributions from participants 23,943,347 24,686,081
Net realized gain on disposition of investments 6,862,404 5,308,926
Unrealized appreciation of investments 16,834,016
Transfers from other funds 11,710,877 15,229,451
Interest income on participant loans 1,081,952 1,123,250
--------------------------------
43,599,960 63,184,318
LESS
Unrealized depreciation of investments 3,292,084
Cash withdrawals and distributions 14,968,131 14,525,342
Administrative expenses 346,800 397,056
Transfers to other funds 20,799,258 20,240,752
--------------------------------
39,406,273 35,163,150
--------------------------------
INCREASE IN NET ASSETS FOR YEAR 4,193,687 28,021,168
Net assets available for benefits at beginning of year 274,470,296 246,449,128
--------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $278,663,983 $274,470,296
================================
</TABLE>
See notes to financial statements.
5
<PAGE> 7
The TRW Employee Stock Ownership and
Stock Savings Plan
Statements of Net Assets Available for Benefits
Insured Return Fund
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
--------------------------------
<S> <C> <C>
ASSETS
Investments:
Guaranteed investment contracts $491,100,036 $459,538,205
Bankers Trust Pyramid Directed Account
Cash Fund 7,617,449 7,794,067
Receivable from TRW Inc. 209,102 28,698
Participant loans receivable 22,507,748 23,657,721
Interest receivable 2,821,391 2,768,586
--------------------------------
TOTAL ASSETS 524,255,726 493,787,277
LIABILITIES
Payable to other funds 21,270 855,242
Accrued expenses 193,046 171,304
--------------------------------
TOTAL LIABILITIES 214,316 1,026,546
--------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $524,041,410 $492,760,731
================================
</TABLE>
See notes to financial statements.
6
<PAGE> 8
The TRW Employee Stock Ownership and
Stock Savings Plan
Statements of Changes in Net Assets Available for Benefits
Insured Return Fund
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993
---------------------------------
<S> <C> <C>
Interest income $ 33,880,102 $ 33,647,678
Contributions from participants 31,556,814 35,914,172
Interest income on participant loans 1,680,507 1,899,761
Transfers from other funds 38,048,599 28,035,056
---------------------------------
105,166,022 99,496,667
LESS
Cash withdrawals and distributions 36,371,252 44,387,413
Administrative expenses 897,500 935,692
Transfers to other funds 36,616,591 43,751,804
---------------------------------
73,885,343 89,074,909
---------------------------------
INCREASE IN NET ASSETS FOR YEAR 31,280,679 10,421,758
Net assets available for benefits at beginning of year 492,760,731 482,338,973
---------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $524,041,410 $492,760,731
=================================
</TABLE>
See notes to financial statements.
7
<PAGE> 9
The TRW Employee Stock Ownership and
Stock Savings Plan
Statement of Net Assets Available for Benefits
Bond Index Fund
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
-----------------------------
<S> <C> <C>
ASSETS
Investments:
Bankers Trust Pyramid Intermediate Government
Corporate Bond Index Fund $10,392,015 $ 9,970,897
Receivable from TRW Inc. 16,345 1,964
Participant loans receivable 877,341 811,192
Receivable from other funds 299,912
-----------------------------
TOTAL ASSETS 11,285,701 11,083,965
LIABILITIES
Payable to other funds 9,311
Accrued expenses 14,775 3,391
-----------------------------
TOTAL LIABILITIES 24,086 3,391
-----------------------------
NET ASSETS AVAILABLE FOR BENEFITS $11,261,615 $11,080,574
=============================
</TABLE>
See notes to financial statements.
8
<PAGE> 10
The TRW Employee Stock Ownership and
Stock Savings Plan
Statement of Changes in Net Assets Available for Benefits
Bond Index Fund
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993
--------------------------------
<S> <C> <C>
Interest income $ 18 $ 131
Contributions from participants 2,076,882 1,113,553
Net realized gain on disposition of investments 3,224 15,460
Unrealized appreciation of investments 355,749
Transfers from other funds 4,330,911 11,451,858
Interest income on participant loans 63,963 30,229
--------------------------------
6,474,998 12,966,980
LESS
Cash withdrawals and distributions 609,362 236,579
Unrealized depreciation of investments 375,586
Administrative expenses 32,618 10,001
Transfers to other funds 5,276,391 1,639,826
--------------------------------
6,293,957 1,886,406
--------------------------------
INCREASE IN NET ASSETS FOR YEAR 181,041 11,080,574
Net assets available for benefits at beginning of year 11,080,574 0
--------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $11,261,615 $11,080,574
================================
</TABLE>
See notes to financial statements.
9
<PAGE> 11
The TRW Employee Stock Ownership and
Stock Savings Plan
Statement of Net Assets Available for Benefits
Small Company Equity Fund
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
-------------------------------
<S> <C> <C>
ASSETS
Investment:
Bankers Trust Pyramid Russell 2500 Index Fund $36,216,916 $26,191,139
Receivable from TRW Inc. 65,479 4,616
Participant loans receivable 3,288,946 2,681,730
Receivable from other funds 222,199 1,285,342
Other receivable 1,288
-------------------------------
TOTAL ASSETS 39,793,540 30,164,115
-------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $39,793,540 $30,164,115
===============================
</TABLE>
See notes to financial statements.
10
<PAGE> 12
The TRW Employee Stock Ownership and
Stock Savings Plan
Statement of Changes in Net Assets Available for Benefits
Small Company Equity Fund
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993
-------------------------------
<S> <C> <C>
Interest income $ 46 $ 87
Contributions from participants 7,643,495 3,338,349
Net realized gain on disposition of investments 56,836 115
Unrealized appreciation of investments 1,547,469
Transfers from other funds 16,257,873 27,354,363
Interest income on participant loans 234,880 115,620
-------------------------------
24,193,130 32,356,003
LESS
Cash withdrawals and distributions 2,133,545 720,507
Unrealized depreciation of investments 1,025,812
Administrative expenses 86,500 14,865
Transfers to other funds 11,317,848 1,456,516
-------------------------------
14,563,705 2,191,888
-------------------------------
INCREASE IN NET ASSETS FOR YEAR 9,629,425 30,164,115
Net assets available for benefits at beginning of year 30,164,115 0
-------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $39,793,540 $30,164,115
===============================
</TABLE>
See notes to financial statements.
11
<PAGE> 13
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements
December 31, 1994
A. SIGNIFICANT ACCOUNTING POLICIES
Investments in the TRW Stock Fund consist primarily of TRW Inc. (TRW) common
stock which is traded on the New York Stock Exchange and valued at the last
reported sales price on the last business day of the fiscal year.
Investments in the Equity Fund are valued at the redemption price established
by the Trustee, which is based on the fair value of the Bankers Trust Pyramid
Equity Index Fund assets. This Fund is constructed and maintained with the
objective of providing investment results which approximate the overall
performance of the Standard & Poor's Composite Index of 500 stocks. Income is
accumulated and reinvested in the Fund and included in the determination of
unit values.
The Insured Return Fund consists of fully benefit responsive investment
contracts with insurance companies, banks and other financial institutions and
short term investment funds. Benefit responsive contracts provide contract
value payments for participant disbursements, loans and investment transfers as
allowed under the plan. There are exceptions for payments to participants who,
as a result of a corporate event, cease to be employed by TRW. A corporate
event includes a divestiture of an operating unit (for example, a subsidiary or
a division), a significant special early retirement program or other corporate
action that could be construed as causing increased Plan payments to
participants.
Investment contracts provide a stated rate of interest on principal for a
stated period of time. All investment contracts are accounted for at contract
value because they are fully benefit responsive. In accordance with Statement
of Position 94-4, which the plan adopted effective January 1, 1994, contract
value equals fair value because no event has occurred that affects the value of
any contracts. The investment contracts are of three types: general account,
separate account, and synthetic investment contracts. Investment contracts in
the general account of an insurance company where assets are not specifically
identifiable have fixed rates of interest or an indexed rate of interest for
the life of the contract. Investment contracts in separate accounts of an
insurance company have underlying assets that are specifically identifiable and
held for the benefit of the Plan. Under synthetic investment contracts, the
Plan owns assets with an investment contract from an insurance company, bank or
other financial institution surrounding the asset. Both separate account and
synthetic contracts have periodic interest rate resets (monthly, quarterly, or
semi-annually) based on the performance of the underlying assets. All separate
account and synthetic contracts have a guaranteed return of principal. As of
December 31, 1994, approximately $223 million was invested in general account
assets, $110 million in separate account assets, and $158 million in assets
owned by the Plan.
12
<PAGE> 14
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
A. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
The weighted average yield (excluding administrative expenses) for all
investment contracts was 7.29% in 1994 and 7.68% in 1993. The crediting
interest rate for all investment contracts was 7.26% at December 31, 1994 and
7.43% at December 31, 1993.
Investments in the Bond Index Fund are valued at the redemption price
established by the Trustee, which is based on the fair value of the Bankers
Trust Pyramid Intermediate Government Corporate Bond Index Fund. The Bankers
Trust Pyramid Intermediate Government Corporate Bond Index Fund is constructed
and maintained with the objective of providing investment results which
approximate the overall performance of the high quality U.S. government and
corporate bonds included in the Lehman Brothers Government/Corporate Index.
Income is accumulated and reinvested in the fund and included in the
determination of unit values.
Investments in the Small Company Equity Fund are valued at the redemption price
established by the Trustee, which is based on the fair value of the Bankers
Trust Pyramid Russell 2500 Index Fund Assets. The Small Company Equity Fund is
constructed and maintained with the objective of providing investment results
which approximate the overall performance of the 2,500 common stocks included
in the Russell 2500 Equity Index. Income is accumulated and reinvested in the
Fund and included in the determination of unit values.
The cost of securities sold is determined by the average cost method for
purposes of determining realized gains and losses.
B. DESCRIPTION OF THE PLAN
The Plan is a defined contribution plan, and is comprised of the TRW Stock
Fund, Equity Fund, Insured Return Fund, Bond Index Fund and Small Company
Equity Fund (the Funds). Effective January 4, 1993, the Bond Index Fund and
Small Company Equity Fund were made available as Plan investment options.
Participation in the Plan is available to substantially all domestic employees
of TRW who have been employed for at least twelve months. The Plan is governed
by the Internal Revenue Code and related legislation.
13
<PAGE> 15
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
PARTICIPANT CONTRIBUTIONS
The Plan allows eligible employees to contribute up to 13% of qualifying
compensation on a before-tax basis by way of salary reduction; such
contributions are made in increments of one-tenth of one percent of qualifying
compensation and could not exceed $9,240 in 1994 and $8,994 in 1993.
Participants may also elect to contribute, in increments of one percent, up to
10% of qualifying compensation on an after-tax basis. Annual contributions to
a participant's account (including before-tax, after-tax and TRW matching
contributions) and to any other defined contribution plan is limited to the
lesser of $30,000 or 25% of the participant's annual compensation reduced by
the amount of before-tax contributions.
Participants determine the funds in which to invest their contributions.
Employee contributions may be invested, in multiples of 10 percent, in one or
more of the five investment funds. Investment options may be changed at any
time but no more than twice each month.
TRW CONTRIBUTIONS
TRW contributes to the Plan each month, out of current or accumulated earnings,
an amount equal to 100% of each participant's before-tax contributions for such
month without exceeding three percent of the participant's qualifying
compensation. Participants immediately vest in the TRW contributions. All TRW
matching contributions are invested in the ESOP portion of the TRW Stock Fund.
TRW contributions always remain in the TRW Stock Fund and may not be
transferred. TRW contributions may be in the form of cash or treasury or
authorized and unissued shares of TRW Common Stock. TRW Common Stock
contributed is to be valued by any reasonable method selected by TRW.
14
<PAGE> 16
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
The amount and type of TRW contributions are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
------------------------------
<S> <C> <C>
TRW Common Stock $23,398,464 $22,979,004
Cash 12,968,468 13,730,642
------------------------------
$36,366,932 $36,709,646
==============================
</TABLE>
WITHDRAWALS AND DISTRIBUTIONS
Upon termination of employment, a participant may elect to receive his or her
account, less the unpaid balance of any loan outstanding, in a single sum or
elect to defer the payment until the year following termination except a
participant whose account balance exceeds $3,500 may defer such payments until
he or she reaches age 70. Generally, distributions from the TRW Stock Fund
will be paid only in whole shares of TRW Common Stock with the balance in cash.
If a participant elects to defer payment of his or her account, the
undistributed account balance remains invested in the Plan. The following is
the total value of the accounts subject to deferred elections (8,772 as of
December 31, 1994 and 8,778 as of December 31, 1993) that are included in the
net assets of the funds:
<TABLE>
<CAPTION>
1994 1993
---------------------------------
<S> <C> <C>
TRW Stock Fund $177,471,974 $175,574,685
Equity Fund 64,261,772 58,859,470
Insured Return Fund 168,485,775 151,008,794
Bond Index Fund 2,066,316 1,876,080
Small Company Equity Fund 6,275,367 4,458,732
---------------------------------
$418,561,204 $391,777,761
=================================
</TABLE>
15
<PAGE> 17
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
Effective January 1, 1988, participants who have attained age 55 as of the end
of the preceding fiscal year-end and commenced participation in the Plan at
least ten years prior may elect, within an election period during each of the
succeeding five consecutive plan years, to receive a special ESOP distribution.
The amount eligible for this special distribution is 50% of the prior fiscal
year-end value (including previous withdrawals) of TRW Common Stock acquired
for the participant's account by the ESOP since 1986, reduced by any previous
withdrawals.
PARTICIPANT LOANS
Participants can borrow from $1,000 to $50,000 (in increments of $100) of their
before-tax contributions, but such borrowings cannot exceed 50% of a
participant's total Plan balance. The interest rate is fixed (prime rate at
the end of the preceding quarter plus one percent) and the repayment period
cannot be less than one year or more than five years.
OTHER
Although it has not expressed any intent to do so, TRW reserves the right to
suspend or terminate the Plan. In the event of termination, the amount of each
participant's account may be retained in trust for the benefit of the
participant.
The above description of the Plan provides only general information.
Participants should refer to the Summary Plan Description, which is available
from the Stock Savings Plan's Participant Service Center, and annual prospectus
for a more complete description of the Plan's provisions.
16
<PAGE> 18
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
C. INVESTMENTS
The fair value of individual investments that represent 5% or more of the
Plan's total assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
---------------------------------
<S> <C> <C>
TRW Inc. Common Stock $684,611,928 $693,942,478
Bankers Trust Pyramid Equity
Index Fund 264,983,112 259,363,285
</TABLE>
The net realized gain on disposition of investments is as follows:
<TABLE>
<CAPTION>
TRW STOCK FUND
1994 1993
--------------------------------
<S> <C> <C>
Value realized $39,868,378 $43,481,968
Average cost 22,401,224 25,233,924
--------------------------------
NET REALIZED GAIN $17,467,154 $18,248,044
================================
</TABLE>
<TABLE>
<CAPTION>
EQUITY FUND
1994 1993
--------------------------------
<S> <C> <C>
Value realized $29,104,446 $25,615,761
Average cost 22,242,042 20,306,835
--------------------------------
NET REALIZED GAIN $ 6,862,404 $ 5,308,926
================================
</TABLE>
<TABLE>
<CAPTION>
BOND INDEX FUND
1994 1993
------------------------------
<S> <C> <C>
Value realized $3,043,048 $1,186,983
Average cost 3,039,824 1,171,523
------------------------------
NET REALIZED GAIN $ 3,224 $ 15,460
==============================
</TABLE>
17
<PAGE> 19
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
C. INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
SMALL COMPANY EQUITY FUND
1994 1993
-------------------------
<S> <C> <C>
Value realized $5,248,954 $4,368
Average cost 5,192,118 4,253
---------- ------
NET REALIZED GAIN $ 56,836 $ 115
=========================
</TABLE>
The net unrealized appreciation of investments included in net assets is as
follows:
<TABLE>
<CAPTION>
TRW Stock Equity Bond Index Small Company
Fund Fund Fund Equity Fund
---------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $220,270,572 $51,679,152 $ 0 $ 0
Increase for the year 95,060,294 16,834,016 355,749 1,547,470
---------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 315,330,866 68,513,168 355,749 1,547,470
(Decrease) for the year (49,322,621) (3,292,084) (375,586) (1,025,812)
---------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 $266,008,245 $65,221,084 $ (19,837) $ 521,658
===============================================================
</TABLE>
On a revalued basis, which is in accordance with Department of Labor Form 5500
requirements, the realized and unrealized gains (losses) are not available at
the date of the Report of Independent Auditors. A separate schedule will be
included in the Form 5500 when filed.
D. ADMINISTRATIVE EXPENSES
Generally, salaries and wages of the administrative staff are paid by TRW.
Expenses relating to investment advisor fees, management fees, trustee fees,
audit fees, printing and postage are paid from Plan assets. Expenses directly
attributable to any one fund are charged to that fund. Expenses not directly
attributable to any one fund are allocated to each fund in the proportion that
the market value of the assets of each fund bears to the total market value of
all Plan assets. Brokerage fees and commissions incident to the purchase or
sale of securities are paid by the fund in which they are incurred and are
included in the cost of securities purchased or sold.
18
<PAGE> 20
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
E. FEDERAL INCOME TAX STATUS OF THE PLAN
The Plan is exempt from federal income taxes as a qualified profit sharing
plan. The Plan has received a favorable determination letter from the Internal
Revenue Service as to the tax qualified status of the Plan. This letter does
not express an opinion as to whether the Plan satisfies the provisions of the
Tax Reform Act of 1986. The Plan was amended to comply with the Act and a new
determination letter was requested during December 1994. The Plan's Board of
Administration believes that the Plan is in operational compliance with the
Internal Revenue Code of 1986 and will remain qualified and exempt from federal
income taxes.
F. TRANSACTIONS WITH PARTIES-IN-INTEREST
Party-in-interest transactions include the purchase and sale of short-term
investments managed by the Plan's Trustee, Bankers Trust Company.
At December 31, 1994 and 1993, the Bankers Trust Pyramid Equity Index Fund
holds 193,086 and 269,103 shares of TRW Inc. Common Stock having a fair value
of $12,743,676 and $18,635,383, respectively.
Bankers Trust Company managed assets of the Plan of approximately $326,484,449
and $312,698,446 at December 31, 1994 and 1993, respectively, and received
trustee fees of $679,021 and $712,846 in 1994 and 1993, respectively.
There were no party-in-interest transactions which were prohibited under
Department of Labor Regulations.
19
<PAGE> 21
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
G. NUMBER OF PARTICIPANTS (UNAUDITED)
The summary below sets forth the number of contributing participants by their
current investment option(s):
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
------------------------
<S> <C> <C>
TRW Stock Fund 12,208 12,113
Equity Fund 13,397 13,785
Insured Return Fund 16,020 17,871
Bond Index Fund 2,631 1,786
Small Company Equity Fund 5,121 3,162
</TABLE>
The total number of participants in the Plan is less than the sum of the number
of employees shown above because many are participating in more than one fund.
20
<PAGE> 22
The TRW Employee Stock Ownership and
Stock Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1994
<TABLE>
<CAPTION>
Crediting
Interest Fair Value
Shares Maturity Date Rate Cost (see Note A)
---------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK
10,372,908 TRW Inc. $418,603,683 $684,611,928
-----------------------------
TOTAL COMMON STOCK 418,603,683 684,611,928
SHORT-TERM INVESTMENTS
Bankers Trust Pyramid Directed Account Cash Fund 14,892,406 14,892,406
---------------------------
TOTAL SHORT-TERM INVESTMENTS 14,892,406 14,892,406
GUARANTEED INVESTMENT CONTRACTS
Bankers Trust:
Contract 93-515 September 30, 2000 5.67% 43,811,734 43,811,734
Provident Life & Accident:
Contract 630-05575 September 1, 2003 5.71 37,815,901 37,815,901
-----------------------------
81,627,635 81,627,635
SEPARATE ACCOUNT CONTRACTS
Aetna Life Insurance Co.:
Contract 014460 November 15, 2002 7.96 27,777,106 27,777,106
Crown Life Insurance Co.:
Contract 9005876 March 3, 1998 4.02 5,795,705 5,795,705
John Hancock Mutual Life:
Contract 7441 May 1, 2004 7.14 11,259,063 11,259,063
Contract 7441-2 June 30, 1997 7.14 22,038,013 22,038,013
Metropolitan Life Insurance Co:
Contract 12702 January 2, 2001 5.50 30,090,238 30,090,238
Contract 18544-B December 31, 1998 6.95 2,694,853 2,694,853
Prudential Insurance Co. of American:
Contract 6581-1 January 15, 2001 9.39 3,163,885 3,163,885
Contract 6661-2 May 15, 2001 9.57 5,395,879 5,395,879
Contract 6702-3 November 20, 2000 8.45 1,596,781 1,596,781
-----------------------------
109,811,523 109,811,523
</TABLE>
21
<PAGE> 23
The TRW Employee Stock Ownership and
Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
<TABLE>
<CAPTION>
Crediting
Interest Fair Value
Shares Maturity Date Rate Cost (see Note A)
---------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GUARANTEED INVESTMENT CONTRACTS--CONTINUED
SYNTHETIC INVESTMENT CONTRACTS
Bankers Trust (Del) Basic:
Contract 92-310 October 25, 1995 6.34 4,156,811 4,156,811
Contract 92-352 November 27, 1995 5.42 3,248,963 3,248,963
People Security Life:
Contract 00025TR-1 June 25, 1997 4.68 6,000,368 6,000,368
Contract 00025TR-2 May 25, 1998 5.22 5,003,948 5,003,948
Contract 00025TR-3 September 25, 1998 5.63 3,962,846 3,962,846
Contract 00025TR-4 January 15, 1998 5.40 2,471,757 2,471,757
Contract 00025TR-5 August 25, 1998 5.21 2,503,401 2,503,401
Contract 00025TR-6 August 25, 1998 5.27 4,299,078 4,299,078
Contract 00025TR-7 July 15, 1997 5.13 1,039,845 1,039,845
Contract 00025TR-8 November 15, 2000 6.50 4,771,681 4,771,681
Contract 00025TR-9 November 15, 2000 7.18 4,629,265 4,629,265
Contract 00025TR-10 May 17, 1999 6.99 9,420,951 9,420,951
Contract 00025TR-11 February 16, 1999 7.11 944,177 944,177
Contract 00025TR-12 April 26, 1999 7.57 4,766,193 4,766,193
Provident Life & Accident:
Contract 630-05751 October 25, 1999 7.35 1,793,505 1,793,505
--------------------------
59,012,789 59,012,789
COLLATERALIZED
CDC Investment Management Corp.:
Contract 115-01 April 15, 1998 6.45 5,126,164 5,126,164
Contract 115-02 April 30, 1999 7.14 6,036,078 6,036,078
Contract 115-03 April 31, 1998 7.19 6,000,000 6,000,000
--------------------------
17,162,242 17,162,242
FIXED RATE AND FIXED TERM
Aetna Life Insurance Company:
Contract 13822-001 March 5, 1997 9.69 14,135,910 14,135,910
Contract 13822-002 September 30, 1997 9.77 14,138,515 14,138,515
Allstate Life Insurance Company:
Contract 4914 April 3, 1995 9.00 15,159,071 15,159,071
</TABLE>
22
<PAGE> 24
The TRW Employee Stock Ownership and
Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
<TABLE>
<CAPTION>
Crediting
Interest Fair Value
Shares Maturity Date Rate Cost (see Note A)
---------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GUARANTEED INVESTMENT CONTRACTS--CONTINUED
Canada Life Assurance Company:
Contract 45229 March 26, 1995 8.78 10,590,915 10,590,915
Contract 45299 June 21, 1995 9.60 5,207,621 5,207,621
Contract 45377 November 1, 1995 9.10 10,069,439 10,069,439
Contract 45800 June 1, 1998 5.23 5,228,535 5,228,535
Contract 45839 June 16, 1999 7.06 6,191,386 6,191,386
Commonwealth Life Ins. Company:
Contract ADA0314FR July 3, 1995 9.30 7,403,341 7,403,341
Continental Assurance Company:
Contract 12619 July 1, 1996 8.50 13,570,460 13,570,460
Contract 12619-026 February 1, 1995 6.55 6,009,485 6,009,485
Contract 12619-B November 1, 1996 8.42 13,357,357 13,357,357
John Hancock Mutual Life
Contract 5660 August 15, 1997 9.43 7,374,621 7,374,621
Contract 7314 January 14, 1999 5.44 10,502,765 10,502,765
Mass Mutual Life Insurance Company:
Contract 10062 November 3, 1997 9.70 14,592,549 14,592,549
Metropolitan Life Ins. Company:
Contract 18544-A January 3, 1995 8.70 539,416 539,416
New York Life Ins. Company:
Contract 6232 August 1, 1996 8.42 10,350,641 10,350,641
Contract GA06216 June 3, 1996 8.42 10,442,915 10,442,915
Peoples Security Life:
Contract BDA0243FR January 15, 1996 8.21 2,143,249 2,143,249
Principal Mutual Life:
Contract 78599 January 3, 1995 9.15 1,607,131 1,607,131
Prudential Ins. Co. of America:
Contract 6569-501 May 1, 1996 8.41 13,046,338 13,046,338
</TABLE>
23
<PAGE> 25
The TRW Employee Stock Ownership and
Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
<TABLE>
<CAPTION>
Crediting
Interest Fair Value
Shares Maturity Date Rate Cost (see Note A)
---------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GUARANTEED INVESTMENT CONTRACTS--CONTINUED
Sun Life Ass. Canada (US):
Contract S-0882-G July 31, 1998 5.54 7,496,639 7,496,639
Contract S-0910-G August 2, 1999 7.39 5,130,597 5,130,597
United of Omaha Life Ins.:
Contract 8552 August 1, 1995 9.00 3,090,247 3,090,247
------------------------------
207,379,143 207,379,143
VARIABLE RATE AND FIXED TERM
Hardford Life Insurance Company:
Contract 9382 March 20, 1995 6.91 10,133,914 10,133,914
------------------------------
10,133,914 10,133,914
VARIABLE RATE AND TERM
People Security Life:
Contract BDA0185ST March 31, 1995 6.02 5,972,790 5,972,790
------------------------------
TOTAL GUARANTEED INVESTMENT CONTRACTS 491,100,036 491,100,036
COMMON TRUST FUNDS
Bankers Trust Pyramid Equity Index Fund 199,762,028 264,983,112
Bankers Trust Pyramid Russell 2,500 Index Fund 35,695,258 36,216,916
Bankers Trust Pyramid Fixed Income Index Fund 10,411,852 10,392,015
------------------------------
TOTAL COMMON TRUST FUNDS 245,869,138 311,592,043
Participant loans 7.00%-11.50% 55,686,025 55,686,025
------------------------------
TOTAL INVESTMENTS $1,226,151,288 $1,557,882,438
==============================
</TABLE>
24
<PAGE> 26
The TRW Employee Stock Ownership and
Stock Savings Plan
Schedule of Reportable Transactions
Year Ended December 31, 1994
<TABLE>
<CAPTION>
Fair
Value
of Asset on
Purchase Selling Cost Transaction Net Gain
Identity of Party Involved Description Price Price of Asset Date (Loss)
of Assets
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS IN EXCESS
OF 5% OF THE FAIR VALUE OF
PLAN ASSETS
There were no single transactions in excess of 5% of the fair value of Plan assets.
SERIES OF TRANSACTIONS IN
EXCESS OF 5% OF THE
FAIR VALUE OF PLAN ASSETS
Bankers Trust: BT Pyramid Directed Account
279 Purchases Cash Fund $162,409,252 $162,409,252 $162,409,252 $0
87 Sales $164,689,971 164,689,971 164,689,971 0
</TABLE>
25
<PAGE> 1
Exhibit 28(b)
FINANCIAL STATEMENTS
THE TRW CANADA STOCK
SAVINGS PLAN
DECEMBER 31, 1994 AND 1993
[ERNST & YOUNG LOGO]
<PAGE> 2
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
To the Participants and the Board of Administration of
THE TRW CANADA STOCK SAVINGS PLAN
We have audited the statements of financial condition of the TRW Stock Fund,
Pooled Money Market Fund Employees Profit Sharing Plan, Pooled Balanced Fund
Registered Retirement Savings Plan and Pooled Money Market Fund Registered
Retirement Savings Plan [constituting THE TRW CANADA STOCK SAVINGS PLAN] as at
December 31, 1994 and 1993 and the related statements of operations and changes
in fund equity for these funds for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the several funds of THE TRW CANADA STOCK
SAVINGS PLAN as at December 31, 1994 and 1993 and the results of their
operations and the changes in fund equity for the years then ended in
accordance with accounting principles generally accepted in Canada.
Hamilton, Canada,
March 17, 1995.
/s/ Ernst & Young
Chartered Accountants
[ERNST & YOUNG LOGO]
<PAGE> 3
--------------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
TRW STOCK FUND
STATEMENTS OF FINANCIAL CONDITION
--------------------------------------------------------------------------------
As at December 31
<TABLE>
<CAPTION>
1994 1993
$ $
---------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash 56,984 30,438
Receivable from TRW Canada Limited 9,608 22,789
Investments at quoted market value
TRW Inc. common stock
8,018 shares [cost $736,255] in 1994 and
9,190 shares [cost $713,962] in 1993 741,825 841,140
---------------------------------------------------------------------------------------------------
808,417 894,367
===================================================================================================
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short term distributions 664,220 747,502
Fund equity [including net unrealized appreciation of investments] 144,197 146,865
---------------------------------------------------------------------------------------------------
808,417 894,367
===================================================================================================
NUMBER OF SHARES OUTSTANDING AT DECEMBER 31 8,018 9,190
===================================================================================================
FUND EQUITY PER SHARE AT DECEMBER 31 17.9842 15.9810
===================================================================================================
</TABLE>
See accompanying notes
[ERNST & YOUNG LOGO]
<PAGE> 4
--------------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
TRW STOCK FUND
STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY
--------------------------------------------------------------------------------
Years ended December 31
<TABLE>
<CAPTION>
1994 1993
$ $
----------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INVESTMENT INCOME
Dividends on TRW Inc. common stock 10,458 11,579
Interest 159 275
----------------------------------------------------------------------------------------------------
10,617 11,854
----------------------------------------------------------------------------------------------------
CONTRIBUTIONS
Participants 387,848 371,565
TRW Canada Limited
50% of total participants' contributions to all funds 370,938 381,419
----------------------------------------------------------------------------------------------------
758,786 752,984
----------------------------------------------------------------------------------------------------
Net realized gain on transfer
of investments to participants [note 4] 116,865 132,939
Unrealized depreciation of investments [note 4] (121,608) (21,021)
----------------------------------------------------------------------------------------------------
(4,743) 111,918
----------------------------------------------------------------------------------------------------
764,660 876,756
----------------------------------------------------------------------------------------------------
Less withdrawals and terminations in respect
of the current year
Paid
Cash 4,025 3,111
TRW Inc. common stock
1,048 shares in 1994; 1,725 shares in 1993 99,083 140,595
----------------------------------------------------------------------------------------------------
103,108 143,706
----------------------------------------------------------------------------------------------------
Payable
Cash 17,330 18,026
TRW Inc. common stock
6,992 shares in 1994; 7,970 shares in 1993 646,890 729,476
----------------------------------------------------------------------------------------------------
664,220 747,502
----------------------------------------------------------------------------------------------------
767,328 891,208
----------------------------------------------------------------------------------------------------
DECREASE IN FUND EQUITY (2,668) (14,452)
Fund equity at January 1 146,865 161,317
----------------------------------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 144,197 146,865
====================================================================================================
</TABLE>
See accompanying notes
[ERNST & YOUNG LOGO]
<PAGE> 5
--------------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND EMPLOYEES PROFIT SHARING PLAN
STATEMENTS OF FINANCIAL CONDITION
--------------------------------------------------------------------------------
As at December 31
<TABLE>
<CAPTION>
1994 1993
$ $
------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash 13,100 12,082
Receivable from TRW Canada Limited 2,339 4,322
Interest receivable 1,132 982
Investment at market value
Royal Trust Company Classified Money Market Fund
19,967 units [cost $199,667] in 1994 and
21,978 units [cost $219,775] in 1993 199,667 219,775
----------------------------------------------------------------------------
216,238 237,161
============================================================================
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short term distributions 190,553 209,101
Fund equity 25,685 28,060
----------------------------------------------------------------------------
216,238 237,161
============================================================================
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 2,568.5 2,806.0
============================================================================
FUND EQUITY PER UNIT AT DECEMBER 31 10.0 10.0
============================================================================
</TABLE>
See accompanying notes
[ERNST & YOUNG LOGO]
<PAGE> 6
--------------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND EMPLOYEES PROFIT SHARING PLAN
STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY
------------------------------------------------------------------------
Years ended December 31
<TABLE>
<CAPTION>
1994 1993
$ $
------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INTEREST INCOME 7,018 7,989
PARTICIPANTS' CONTRIBUTIONS 208,002 233,107
------------------------------------------------------------------------
215,020 241,096
------------------------------------------------------------------------
Less cash withdrawals and terminations
Paid 26,842 51,580
Payable 190,553 209,101
------------------------------------------------------------------------
217,395 260,681
------------------------------------------------------------------------
DECREASE IN FUND EQUITY (2,375) (19,585)
Fund equity at January 1 28,060 47,645
------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 25,685 28,060
========================================================================
</TABLE>
See accompanying notes
[ERNST & YOUNG LOGO]
<PAGE> 7
--------------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
POOLED BALANCED FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF FINANCIAL CONDITION
--------------------------------------------------------------------------------
As at December 31
<TABLE>
<CAPTION>
1994 1993
$ $
------------------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash 4,258 4,810
Receivable from TRW Canada Limited 1,942 3,761
Interest receivable 10,095 7,915
Receivable from Pooled Money Market Fund Registered
Retirement Savings Plan -- 1,948
Investments at quoted market value
Royal Trust Company Classified Balanced Fund
16,966.3907 units [cost $201,864] in 1994 and
14,200.6884 units [cost $164,198] in 1993 199,962 184,792
------------------------------------------------------------------------------------------------------------
216,257 203,226
============================================================================================================
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short term distributions 17,478 3,807
Fund equity [including net unrealized appreciation of investments] 198,779 199,419
------------------------------------------------------------------------------------------------------------
216,257 203,226
============================================================================================================
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 16,966.3907 14,200.6884
============================================================================================================
FUND EQUITY PER UNIT AT DECEMBER 31 11.716 14.043
============================================================================================================
</TABLE>
See accompanying notes
[ERNST & YOUNG LOGO]
<PAGE> 8
--------------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
POOLED BALANCED FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY
--------------------------------------------------------------------------------
Years ended December 31
<TABLE>
<CAPTION>
1994 1993
$ $
--------------------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INCOME 19,205 14,857
--------------------------------------------------------------------------------------------------------------
CONTRIBUTIONS
Participants' contributions 90,583 84,617
Transfer from Pooled Money Market Fund Registered
Retirement Savings Plan -- 8,290
--------------------------------------------------------------------------------------------------------------
90,583 92,907
--------------------------------------------------------------------------------------------------------------
Net realized gain on disposition of investments [note 4] 2,140 719
Unrealized appreciation (depreciation) of investments [note 4] (22,496) 17,870
--------------------------------------------------------------------------------------------------------------
(20,356) 18,589
--------------------------------------------------------------------------------------------------------------
89,432 126,353
--------------------------------------------------------------------------------------------------------------
Less cash withdrawals and terminations
Paid 72,594 40,300
Payable 17,478 3,807
--------------------------------------------------------------------------------------------------------------
90,072 44,107
--------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND EQUITY (640) 82,246
Fund equity at January 1 199,419 117,173
--------------------------------------------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 198,779 199,419
==============================================================================================================
</TABLE>
See accompanying notes
[ERNST & YOUNG LOGO]
<PAGE> 9
--------------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF FINANCIAL CONDITION
--------------------------------------------------------------------------------
As at December 31
<TABLE>
<CAPTION>
1994 1993
$ $
-----------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash 1,598 3,284
Receivable from TRW Canada Limited 2,470 3,672
Interest receivable 1,192 874
Investment at market value
Royal Trust Company Classified Pooled Money Market Fund
20,374.5 units [cost $203,745] in 1994 and 19,054.8 units
[cost $190,548] in 1993 203,745 190,548
-----------------------------------------------------------------------------------------------------
209,005 198,378
=====================================================================================================
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short term distributions 14,282 1,563
Payable to Pooled Balanced Fund Registered Retirement
Savings Plan -- 1,948
Fund equity 194,723 194,867
-----------------------------------------------------------------------------------------------------
209,005 198,378
=====================================================================================================
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 19,472.3 19,486.7
=====================================================================================================
FUND EQUITY PER UNIT AT DECEMBER 31 10.0 10.0
=====================================================================================================
</TABLE>
See accompanying notes
[ERNST & YOUNG LOGO]
<PAGE> 10
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY
--------------------------------------------------------------------------------
Years ended December 31
<TABLE>
<CAPTION>
1994 1993
$ $
------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INTEREST INCOME 10,729 10,052
PARTICIPANTS' CONTRIBUTIONS 55,440 73,538
------------------------------------------------------------------------------------
66,169 83,590
------------------------------------------------------------------------------------
Less cash withdrawals and terminations
Paid
Cash 52,031 40,325
Transfer to Pooled Balanced Fund Registered Retirement
Savings Plan -- 6,342
------------------------------------------------------------------------------------
52,031 46,667
------------------------------------------------------------------------------------
Payable
Cash 14,282 1,563
Transfer to Pooled Balanced Fund Registered Retirement
Savings Plan -- 1,948
------------------------------------------------------------------------------------
14,282 3,511
------------------------------------------------------------------------------------
66,313 50,178
------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND EQUITY (144) 33,412
Fund equity at January 1 194,867 161,455
------------------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 194,723 194,867
====================================================================================
</TABLE>
See accompanying notes
[ERNST & YOUNG LOGO]
<PAGE> 11
-----------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
December 31, 1994 and 1993
1. GENERAL PLAN PROVISIONS
The investment programs of the TRW Canada Stock Savings Plan [the "Plan"] are
as follows:
PARTICIPANT CONTRIBUTIONS
Upon enrollment or re-enrollment, each participant directs that his
contributions [computed in increments of one percent, from two per cent to six
per cent of qualifying compensation] are to be invested in accordance with any
of the following investment options:
[a] 100% in the TRW Stock Fund [the common stock of TRW Inc. in
accordance with the trust agreement and the Plan].
[b] 100% in the Pooled Money Market Fund Employees Profit Sharing
Plan. At present, the Trustee invests all of the Pooled Money
Market Fund amounts in the Royal Trust Company, Classified Money
Market Fund in accordance with the Trust agreement and the Plan.
[c] 100% in the Pooled Balanced Fund Registered Retirement Savings
Plan. At present, the Trustee invests all of the Pooled Balanced
Fund amounts in the Royal Trust Company, Classified Balanced Fund,
in accordance with the Trust agreement and the Plan.
[d] 100% in the Pooled Money Market Fund Registered Retirement Savings
Plan. At present, the Trustee invests all of the Pooled Money
Market Fund amounts in the Royal Trust Company, Classified Pooled
Money Market Fund in accordance with the Trust agreement and the
Plan.
[e] A combination of options [a] through [d] in multiples of 25%.
Such direction may be revised on 30 days prior notice, effective January 1 of
any year.
TRW CANADA LIMITED CONTRIBUTIONS
TRW Canada Limited shall contribute to the plan for each month, out of current
or accumulated earnings, an amount equal to 50% of participant contributions
for such month. TRW Canada Limited contributions vest immediately.
All TRW Canada Limited contributions are invested in the TRW Stock Fund.
TRW Canada Limited does not charge a fee for administering the Plans.
1
[ERNST & YOUNG LOGO]
<PAGE> 12
--------------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
December 31, 1994 and 1993
The number of participants in each Fund at December 31 is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRW Stock Fund 269 267
Pooled Money Market Fund Employees Profit Sharing Plan 110 112
Pooled Balanced Fund Registered Retirement Savings Plan 66 64
Pooled Money Market Fund Registered Retirement Savings Plan 49 56
</TABLE>
The total number of participants in the Plan is less than the sum of the number
of participants shown above because many are participating in more than one
Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada, and are within the framework of the
accounting policies summarized below.
GAIN AND LOSSES ON INVESTMENTS
The realized gain or loss on disposition or transfer of an investment is
determined from the market value of the investment at the date of disposition
or transfer and the average cost base of that specific pool of investments
prior to the disposition or transfer.
Unrealized gains or losses are determined as the net effect of the change in
appreciation/depreciation of the investments from January 1 to December 31,
based on market values and the average cost base of each investment at those
respective dates.
INCOME RECOGNITION
Dividends are recognized as earned.
Interest income is recognized as it is earned consistent with the accrual basis
of accounting.
2
[ERNST & YOUNG LOGO]
<PAGE> 13
--------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------
December 31, 1994 and 1993
3. INCOME TAXES
The Plan is exempt from Canadian federal income taxes under provisions of the
Income Tax Act. Federal income tax consequences to the participants under the
Plan are as provided in the Income Tax Act. TRW Canada Limited contributions
are taxable to the participants as is the income and all post-1971 capital
gains less post-1971 capital losses of the Plan, all of which are allocated to
the participants by the Trustee during the year, whether or not such amounts
are paid to the participants by the Trustee during the year. In some
circumstances, the amounts taxable could exceed the amounts allocated. The
amount of foreign non-business income tax paid on foreign source income by the
trusts under the Plan for the year is allocated to and deemed to have been paid
by the participants for Canadian federal income tax purposes. Participants who
are non-resident taxpayers are subject to special rules depending on whether
they have performed duties in Canada during the year and are subject to 15%
withholding tax on amounts paid or credited to them under the Plan.
4. UNREALIZED AND REALIZED (LOSSES) GAINS
Investments are stated at their quoted market value. The net unrealized
appreciation (depreciation) of investments included in fund equity is as
follows:
<TABLE>
<CAPTION>
TRW POOLED
STOCK BALANCED
FUND FUND
$ $
-------------------------------------------------------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1992 148,199 2,724
Change for the year
Market value (21,021) 17,870
-------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 127,178 20,594
Change for the year
Market value (121,608) (22,496)
-------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 5,570 (1,902)
==============================================================
</TABLE>
3
[ERNST & YOUNG LOGO]
<PAGE> 14
----------------------------------------------------------------------------
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
----------------------------------------------------------------------------
December 31, 1994 and 1993
The net realized gain on disposition of investments is summarized as follows:
<TABLE>
<CAPTION>
TRW STOCK FUND
----------------------
1994 1993
$ $
-----------------------------------------------------
<S> <C> <C>
AMOUNT REALIZED 837,779 884,176
Cost - average 720,914 751,237
-----------------------------------------------------
NET REALIZED GAIN 116,865 132,939
=====================================================
<CAPTION>
POOLED BALANCED FUND
REGISTERED RETIREMENT
SAVINGS PLAN
----------------------
1994 1993
$ $
----------------------------------------------------
<S> <C> <C>
AMOUNT REALIZED 32,470 11,050
Cost - average 30,330 10,331
----------------------------------------------------
NET REALIZED GAIN 2,140 719
====================================================
</TABLE>
5. RELATED PARTY TRANSACTIONS
All expenses related to the TRW Canada Stock Savings Plan are paid by TRW
Canada Limited.
4
[ERNST & YOUNG LOGO]
