<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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
incorporation or organization) Identification No.)
1900 Richmond Road, Cleveland, Ohio 44124
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(216) 291-7000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of September 30, 1997, there were 123,159,966 shares of
TRW Common Stock, $0.625 par value, outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
<TABLE>
<CAPTION>
Statements of Earnings (unaudited)
TRW Inc. and subsidiaries
- -------------------------------------------------------------------------------------------------------------------
Third quarter ended Nine months ended
September 30 September 30
In millions except per share data 1997 1996 1997 1996
- ---------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Sales $2,521 $2,320 $8,033 $7,406
Cost of sales 2,055 2,187 6,551 6,331
- ---------------------------------------------------------------------------------- ----------------------------
Gross profit 466 133 1,482 1,075
Administrative and selling expenses 165 157 501 487
Research and development expenses 115 100 338 305
Interest expense 20 37 57 76
Other (income)expense-net - 57 6 72
- ---------------------------------------------------------------------------------- ----------------------------
Earnings(loss) from continuing
operations before income taxes 166 (218) 580 135
Income taxes 58 (72) 218 62
- ---------------------------------------------------------------------------------- ----------------------------
Earnings(loss) from continuing 108 (146) 362 73
operations
Discontinued operations:
Earnings from operations - 10 - 38
Gain on disposal - 242 - 242
- ---------------------------------------------------------------------------------- ----------------------------
Net earnings $ 108 $ 106 $ 362 $ 353
- ---------------------------------------------------------------------------------- ----------------------------
- ---------------------------------------------------------------------------------- ----------------------------
PER SHARE OF COMMON STOCK
Fully diluted
Continuing operations $ .85 $(1.10) $ 2.82 $ .53
Discontinued operations:
Earnings from operations - .07 - .28
Gain on disposal - 1.82 - 1.82
- ---------------------------------------------------------------------------------- ----------------------------
Net earnings per share $ .85 $ .79 $ 2.82 $ 2.63
- ---------------------------------------------------------------------------------- ----------------------------
Primary
Continuing operations $ .86 $(1.13) $ 2.85 $ .54
Discontinued operations:
Earnings from operations - .08 - .29
Gain on disposal - 1.86 - 1.83
- ---------------------------------------------------------------------------------- ----------------------------
Net earnings per share $ .86 $ .81 $ 2.85 $ 2.66
- ---------------------------------------------------------------------------------- ----------------------------
- ---------------------------------------------------------------------------------- ----------------------------
Shares used in computing per share
amounts
Fully diluted 126.8 132.3 128.3 133.9
Primary 126.4 130.5 127.1 132.5
- ---------------------------------------------------------------------------------- ----------------------------
- ---------------------------------------------------------------------------------- ----------------------------
Dividends declared $ .31 $ .275 $ .62 $ .55
- ---------------------------------------------------------------------------------- ----------------------------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Statements of Cash Flows (unaudited)
TRW Inc. and subsidiaries
- ----------------------------------------------------------------------------------------------------------------------------
Nine months ended
September 30
In millions 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net earnings $ 362 $ 353
Adjustments to reconcile net earnings to net cash
provided by continuing operations:
Discontinued operations - (280)
Depreciation and amortization 366 327
Deferred income taxes 21 38
Other-net 9 4
Changes in assets and liabilities, net of effects of businesses acquired or
sold:
Accounts receivable (66) (143)
Inventories and prepaid expenses (48) (13)
Accounts payable and other accruals (141) 143
Other-net 19 (69)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 522 360
- ----------------------------------------------------------------------------------------------------------------------------
Investing activities:
Capital expenditures (361) (276)
Proceeds from divestitures - 965
Acquisitions, net of cash acquired (415) -
Other-net (34) 33
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (810) 722
- ----------------------------------------------------------------------------------------------------------------------------
Financing activities:
Increase(decrease) in short-term debt 258 (54)
Proceeds from debt in excess of 90 days 107 31
Principal payments on debt in excess of 90 days (37) (76)
Reacquisition of common stock (202) (257)
Dividends paid (116) (109)
Other-net 37 45
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 47 (420)
- ----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (9) (1)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (250) 661
Cash and cash equivalents at beginning of period 386 59
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 136 $ 720
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Balance Sheets (unaudited)
TRW Inc. and subsidiaries
- -------------------------------------------------------------------------------------------------------------------------------
September 30 December 31
In millions 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 136 $ 386
Accounts receivable 1,489 1,378
Inventories 578 524
Prepaid expenses 91 69
Deferred income taxes 214 424
- -------------------------------------------------------------------------------------------------------------------------------
Total current assets 2,508 2,781
Property, plant and equipment-on the basis of cost 6,114 5,880
Less accumulated depreciation and amortization 3,511 3,400
- -------------------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment-net 2,603 2,480
Intangible assets
Intangibles arising from acquisitions 517 258
Other 56 31
- -------------------------------------------------------------------------------------------------------------------------------
573 289
Less accumulated amortization 90 78
- -------------------------------------------------------------------------------------------------------------------------------
Total intangible assets-net 483 211
Other assets 487 427
- -------------------------------------------------------------------------------------------------------------------------------
$6,081 $5,899
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' investment
Current liabilities
Short-term debt $ 364 $ 52
Accounts payable 743 781
Current portion of long-term debt 70 72
Other current liabilities 1,217 1,252
- -------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,394 2,157
Long-term liabilities 731 767
Long-term debt 531 458
Deferred income taxes 95 272
Minority interests in subsidiaries 105 56
Capital stock 77 81
Other capital 465 437
Retained earnings 2,264 1,978
Cumulative translation adjustments (61) 47
Treasury shares-cost in excess of par value (520) (354)
- -------------------------------------------------------------------------------------------------------------------------------
Total shareholders' investment 2,225 2,189
- -------------------------------------------------------------------------------------------------------------------------------
$6,081 $5,899
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Results by Business Segments (unaudited)
TRW Inc. and subsidiaries
- ----------------------------------------------------------------------------------------------------------------------------
Third quarter ended Nine months ended
September 30 September 30
In millions 1997 1996 1997 1996
- --------------------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Sales
Automotive $1,570 $1,500 $5,239 $4,881
Space & Defense 951 820 2,794 2,525
- --------------------------------------------------------------------------------------- --------------------------------
Sales $2,521 $2,320 $8,033 $7,406
- --------------------------------------------------------------------------------------- --------------------------------
Operating profit(loss)
Automotive $ 136 $ (105) $ 485 $ 205
Space & Defense 77 (48) 235 76
- --------------------------------------------------------------------------------------- --------------------------------
Operating profit(loss) 213 (153) 720 281
Company Staff and other (29) (24) (77) (59)
Minority interest in earnings of
consolidated subsidiaries (3) (2) (14) (9)
Interest expense (20) (37) (57) (76)
Earnings(loss) from affiliates 5 (2) 8 (2)
- --------------------------------------------------------------------------------------- --------------------------------
Earnings(loss) from continuing
operations before income taxes $ 166 $ (218) $ 580 $ 135
- --------------------------------------------------------------------------------------- --------------------------------
</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Principles of Consolidation
- ---------------------------
The financial statements include the accounts of the Company and its
subsidiaries except for two insurance subsidiaries. The wholly-owned insurance
subsidiaries and the majority of investments in affiliated companies, which are
not significant individually or in the aggregate, are accounted for by the
equity method.
Environmental Costs
- -------------------
During the first quarter of 1997, the Company adopted the provisions of AICPA
Statement of Position (SOP) 96-1, Environmental Remediation Liabilities. There
was no financial statement effect of the adoption as the Company's previous
method of accounting for environmental costs was in accordance with SOP 96-1.
Discontinued Operations
- -----------------------
In September 1996, the Company sold substantially all of the businesses of its
Information Systems and Services segment. Net proceeds of approximately $965
million in cash resulted in a gain of $468 million ($242 million after tax,
$1.82 per share). The financial statements reflect as discontinued operations
for all periods presented that segment's operating results as well as the
related transaction gain. Sales of the discontinued operations were $140 million
and $453 million for the third quarter and first nine months of 1996,
respectively.
Special Charges
- ---------------
In the third quarter of 1996, the Company recorded a before-tax charge of $365
million ($233 million after tax or $1.76 per share) for actions taken in the
automotive and space and defense businesses.
The components of the charge included plant closure and severance costs of $102
million, contract reserves of $99 million, litigation and warranty expenses of
$94 million, asset write-downs of $53 million and other items of $17 million.
<PAGE> 7
The charges are included in the Statement of Earnings for 1996 as follows: $289
million included in cost of sales; $18 million included in interest expense; and
$58 million included in other(income) expense-net.
Acquisition
- -----------
In February 1997, the Company completed its purchase of an eighty percent equity
interest in the air bag and steering wheel business of Magna International. The
purchase price of approximately $450 million has been tentatively allocated to
the net assets acquired based on their fair values.
Inventories
- -----------
Inventories consist of the following:
(In millions)
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
---- ----
<S> <C> <C>
Finished products and work in process $300 $295
Raw materials and supplies 278 229
--- ---
$578 $524
=== ===
</TABLE>
Long-Term Liabilities
- ---------------------
Long-term liabilities at September 30, 1997 and December 31, 1996, include $654
million and $681 million, respectively, relating to postretirement benefits
other than pensions.
Other (Income)Expense-Net
- -------------------------
Other (income)expense included the following:
(In millions)
<TABLE>
<CAPTION>
Third quarter ended Nine months ended
September 30 September 30
1997 1996 1997 1996
----------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Other income $ (19) $ (17) $ (47) $ (36)
Other expense 18 73 48 104
Foreign currency translation 1 1 5 4
---- ---- --- ----
$ - $ 57 $ 6 $ 72
==== ===== === =====
</TABLE>
Other expense for the third quarter and first nine months of 1996 includes
expenses related to the settlement of a lawsuit.
<PAGE> 8
Earnings Per Share
- ------------------
Fully diluted earnings per share have been computed based on the weighted
average number of shares of Common Stock outstanding during each period,
including common stock equivalents and assuming the conversion of the Serial
Preference Stock II--Series 1 and 3. Primary earnings per share have been
computed based on the weighted average number of shares of Common Stock
outstanding during each period including common stock equivalents.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. There is an immaterial impact of Statement No.
128 on the calculation of primary and fully diluted earnings per share for the
third quarter and first nine months of 1997 and 1996.
In April 1997, the number of authorized shares of TRW Common Stock was increased
from 250,000,000 to 500,000,000 shares.
Supplemental Cash Flow Information
- ----------------------------------
<TABLE>
<CAPTION>
Nine months ended
(In millions) September 30
----------------------------------
1997 1996
---- ----
<S> <C> <C>
Interest paid (net of amount capitalized) $56 $ 75
Income taxes paid (net of refunds) $36 $214
</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.
Other Contingencies
- -------------------
During 1996, the Company was advised by the Department of Justice ("DOJ") that
it had been named as a defendant in two lawsuits brought by a former employee
and filed under seal in 1994 and 1995, respectively, in the United States
District Court for the Central District of California under the QUI TAM
provisions of the civil False Claims Act. The Act permits an individual to bring
suit in the name of the United States and share in any recovery. The allegations
in the lawsuit relate to the classification of costs incurred by the Company
that were charged
<PAGE> 9
to certain of its federal contracts. Under the law, the government must
investigate the allegations and determine whether it wishes to intervene and
take responsibility for the lawsuits. The actions remain under seal until the
government completes its investigations and determines whether to intervene.
However, permission from the court has been obtained by the Company to make the
disclosures contained herein. The Company is cooperating with the DOJ's
investigation and is engaged in ongoing discussions with them regarding the
allegations. The Company cannot presently predict the outcome of these matters,
although management believes that the Company would have meritorious defenses if
either the government decides to pursue the lawsuits or the former employee
decides to do so without government participation.
TRW Vehicle Safety Systems Inc. ("VSSI") has reported to the Arizona Department
of Environmental Quality ("ADEQ") potential violations of the Arizona hazardous
waste law at its Queen Creek, Arizona facility for failure properly to label and
dispose of waste water that might be classified as hazardous waste. ADEQ is
conducting an investigation into these potential violations and VSSI is
cooperating with the investigation. If ADEQ initiates proceedings against VSSI
with respect to such matters, VSSI could be liable for penalties and fines and
other relief. Management is unable to make a meaningful estimate of the amount
or range of possible liability at this time.
Interim Statements
- ------------------
The financial statements are based in part on approximations and are subject to
adjustments that may develop, such as unsettled contract and renegotiation
matters and matters that arise in connection with the annual audit of the
financial statements; however, in the opinion of management, all adjustments
(which consist of normal recurring accruals) necessary for a fair presentation
of the results of operations for the periods presented have been included.
Results of operations for any interim period are not necessarily indicative of
the results to be expected for the full year.
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(In millions except per share data)
Nine Months Ended
Third Quarter September 30
------------------------------ ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $2,521 $2,320 $8,033 $7,406
Operating profit (loss) $ 213 $ (153) $ 720 $ 281
Earnings (loss) from
continuing operations $ 108 $ (146) $ 362 $ 73
Earnings from discontinued
operations - $ 252 - $ 280
Fully diluted earnings
per share $ .85 $ .79 $ 2.82 $ 2.63
Effective tax rate on
continuing operations 34.4% 33.0% 37.5% 45.9%
</TABLE>
The increase in sales for the third quarter and first nine months of 1997 was
primarily due to the sales contribution from acquisitions and from higher volume
in the Automotive and Space and Defense segments. The sales increase was
moderated by the effect of a strong U.S. dollar.
The higher operating profit was due to the acquisitions, continued
cost-reduction efforts, and profit from the higher sales volume in the
Automotive and Space and Defense segments, partially offset by the effect of
lower pricing in the Automotive segment. Operating profit (loss) for the third
quarter and first nine months of 1996 included a before-tax charge of $344
million for actions taken in the automotive and space and defense businesses.
See "Special Charges" note in the Notes to Financial Statements for further
information. Operating profit for the first nine months of 1996 included a $15
million before tax charge related to the initial application of Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
Earnings(loss) from continuing operations for the first nine months of 1996
included a $12 million benefit from an insurance claim settlement primarily
related to previously divested businesses, offset by a $13 million noncash
charge related to the initial application of SFAS No. 121.
<PAGE> 11
Earnings from discontinued operations includes the earnings from operations and
the gain on the third quarter sale of substantially all of the businesses in the
Information Systems and Services segment. See the "Discontinued Operations" note
in the Notes to Financial Statements for further information.
Interest expense was $57 million for the first nine months of 1997 compared to
$76 million for the first nine months of 1996. Third quarter 1996 interest
expense included $18 million related to the interest component of a litigation
settlement.
The reduction in the third quarter effective tax rate was primarily attributable
to federal and state tax incentives and the tax benefit from the realignment of
certain foreign operations.
<TABLE>
<CAPTION>
Automotive
(In millions)
Nine Months Ended
Third Quarter September 30
------------------------------------------ ----------------------------------------------
Percent Percent
1997 1996 Inc(Dec) 1997 1996 Inc(Dec)
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Sales $1,570 $1,500 5% $5,239 $4,881 7%
Operating profit
(loss)as reported $ 136 $ (105) $ 485 $ 205
Special charges - $ 235 - $ 235
-------- ----- -------- -----
Adjusted operating
profit $ 136 $ 130 5% $ 485 $ 440 10%
</TABLE>
The increase in sales for the third quarter and first nine months of 1997 was
primarily due to the sales contribution from the acquisitions of airbag and
steering wheel operations and from higher volume in the air bag, seat belt,
steering and engine component businesses. The sales increase was moderated by
the effect of a strong U.S. dollar, as well as lower pricing.
The higher operating profit for the third quarter and first nine months of 1997
resulted from the acquisitions, higher sales volume, and continued
cost-reduction efforts, partially offset by the effect of lower pricing and the
effect of a strong U.S. dollar. Operating profit for the first nine months of
1996 included a $15 million before-tax charge related to the initial adoption of
SFAS No. 121.
<PAGE> 12
Special charges recorded during the third quarter of 1996 related to
reconfiguration of manufacturing plants, litigation and warranty expenses and
asset write-downs. See "Special Charges" note in the Notes to Financial
Statements for further information.
<TABLE>
<CAPTION>
Space & Defense
(In millions)
Nine Months Ended
Third Quarter September 30
--------------------------------------------- ---------------------------------------------
Percent Percent
1997 1996 Inc (Dec) 1997 1996 Inc (Dec)
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales $951 $820 16% $2,794 $2,525 11%
Operating profit
(loss) $ 77 $(48) 260% $ 235 $ 76 209%
</TABLE>
Sales and operating profit for the third quarter and first nine months of 1997
increased primarily due to the successful conversion of recent contract awards
into revenue growth as well as strong ongoing program performance.
Operating profit(loss) for the third quarter and first nine months of 1996
includes charges for certain contract reserves. Excluding these charges,
operating profit was $61 million and $185 million for the third quarter and
first nine months of 1996, respectively.
LIQUIDITY AND FINANCIAL POSITION
In the first nine months of 1997, cash flow provided by operating activities of
$522 million, a net increase in debt of $328 million, and a net decrease of $6
million in other items were used to fund business acquisitions of $415 million,
capital expenditures of $361 million, reacquisition of common stock of $202
million, and dividend payments of $116 million. As a result, cash and cash
equivalents decreased by $250 million.
Net debt (short-term debt, the current portion of long-term debt and long-term
debt less cash and cash equivalents) was $829 million at September 30, 1997,
compared to $196 million at December 31, 1996. The ratio of net debt to total
capital (net debt, minority interests and shareholders' investment) at September
30, 1997 was 26 percent compared to 8 percent at December 31, 1996.
<PAGE> 13
During the first nine months of 1997, the Company issued $80 million in
medium-term notes under its shelf registration statements. The notes were used
to refinance short-term debt. After this issuance, $420 million remains
available for borrowing under the Company's shelf registration statements.
During the first nine months of 1997, the Company amended the terms of its U.S.
and multicurrency revolving credit agreements to extend the expiration date of
the agreements from July 1, 2001 to July 1, 2002. Also, one additional bank
joined the bank group providing the U.S. revolving credit agreement and one
additional bank joined the bank group providing the multicurrency revolving
credit agreement.
During the first nine months of 1997, 3.8 million shares of TRW Common Stock
were repurchased for approximately $202 million.
Implementation of the Odyssey program has gone more slowly than anticipated, due
to the delays in attracting the necessary financial investors. However, we are
continuing to explore a variety of options, including attracting new investors,
and are considering strategic alternatives for capitalizing on our technology.
Management believes that funds generated from operations and existing borrowing
capacity will be adequate to fund the Company's current share repurchase program
and to support and finance planned growth, capital expenditures,
company-sponsored research and development programs and dividends payments to
shareholders.
OTHER MATTERS
During 1996, the Company was advised by the Department of Justice that it had
been named as a defendant in two lawsuits brought by a former employee and filed
under seal under the QUI TAM provisions of the civil False Claims Act. See
"Other Contingencies" note in the Notes to Financial Statements for further
information.
TRW Vehicle Safety Systems Inc. ("VSSI") has reported to the Arizona Department
of Environmental Quality ("ADEQ") potential violations of the Arizona hazardous
waste law at its Queen Creek, Arizona facility for failure properly to label and
dispose of waste water that might be classified as hazardous waste. ADEQ is
conducting an investigation into these potential violations and VSSI is
cooperating with the investigation. If ADEQ initiates proceedings against VSSI
with respect to such matters, VSSI could
<PAGE> 14
be liable for penalties and fines and other relief. Management is unable to make
a meaningful estimate of the amount or range of possible liability at this time.
FORWARD-LOOKING STATEMENTS
Statements in this filing that are not historical facts are forward-looking
statements, which involve risks and uncertainties that could affect the
Company's actual results. Information regarding the important factors that could
cause TRW's actual results to differ materially from the forward-looking
statements contained in this filing can be found in TRW's reports filed with the
Securities and Exchange Commission, including TRW's Form 8-K filed on May 20,
1997.
<PAGE> 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
On July 21, 1997, the United States Environmental Protection Agency
("EPA") issued a notice of violation to the Company under the Clean Air Act with
respect to air emissions at the former Izumi Industries, Corporation, Inc.
facility in Yaphank, New York. TRW acquired this facility in November 1996. On
August 15, 1997, the New York State Department of Environmental Conservation
("DEC") commenced an administrative enforcement action against the Company under
the New York Environmental Conservation Law with respect to such emissions. On
September 11, 1997, the Company agreed to an Order of Consent with the DEC,
pursuant to which the Company has paid a $300,000 civil penalty to the DEC and
has initiated certain specified actions to bring the facility into compliance
with applicable regulatory standards relating to air emissions. These matters
are not expected to have a material effect on TRW's financial position. TRW is
seeking reimbursement from Izumi Industries, Corporation, Inc. for the costs
arising from such Order of Consent.
TRW Vehicle Safety Systems Inc. ("VSSI") has reported to the Arizona
Department of Environmental Quality ("ADEQ") potential violations of the Arizona
hazardous waste law at its Queen Creek, Arizona facility for failure properly to
label and dispose of waste water that might be classified as hazardous waste.
ADEQ is conducting an investigation into these potential violations and VSSI is
cooperating with the investigation. If ADEQ initiates proceedings against VSSI
with respect to such matters, VSSI could be liable for penalties and fines and
other relief. Management is unable to make a meaningful estimate of the amount
or range of possible liability at this time.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits:
10(a) Amendment to Multi-Year Revolving Credit Agreement (as amended
and restated as of May 8, 1996), dated as of August 7, 1997
among TRW Inc. and various financial institutions.
10(b) Consulting Agreement dated September 18, 1997 between TRW Inc.
and G. H. Heilmeier.
11 Computation of Earnings Per Share -- Unaudited.
27 Financial Data Schedule.
99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited
(Supplement to Exhibit 12 of the following Form S-3
Registration Statements of the Company: No. 33-61711, filed
August 10, 1995, and No. 33-42870, filed September 20, 1991).
(b) Reports on Form 8-K:
None
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRW Inc.
Date: October 20, 1997 By: /s/ William B. Lawrence
-----------------------------
William B. Lawrence
Executive Vice President and
Secretary
Date: October 20, 1997 By: /s/ Carl G. Miller
------------------------
Carl G. Miller
Executive Vice President
and Chief Financial Officer
<PAGE> 17
FORM 10-Q
Quarterly Report for Quarter Ended September 30, 1997
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
10(a) Amendment to Multi-Year Revolving Credit Agreement (as amended
and restated as of May 8, 1996), dated as of August 7, 1997
among TRW Inc. and various financial institutions.
10(b) Consulting Agreement dated September 18, 1997 between TRW Inc.
and G. H. Heilmeier.
11 Computation of Earnings Per Share --Unaudited.
27 Financial Data Schedule.
99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited
(Supplement to Exhibit 12 of the following Form S-3
Registration Statements of the Company: No. 33-61711, filed
August 10, 1995, and No. 33-42870, filed September 20, 1991).
<PAGE> 1
Exhibit 10(a)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDMENT TO
MULTI-YEAR REVOLVING CREDIT AGREEMENT
(as amended and restated as of May 8, 1996)
dated as of August 7, 1997
among
TRW INC.
and
THE FINANCIAL INSTITUTIONS
LISTED ON THE SIGNATURE
PAGES HEREOF
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT TO
MULTI-YEAR REVOLVING CREDIT AGREEMENT
(as amended and restated as of May 8, 1996)
This Amendment to Multi-Year Revolving Credit Agreement, dated as of August
7, 1997 (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, March 1, 1994, February 28, 1995, and amended and
restated as of May 8, 1996 (such agreement, as amended and restated, 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 "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) July 1, 2002,
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.
1.2 AMENDMENT OF OTHER INDEBTEDNESS CROSS-DEFAULT. Section 11.1.2 shall be
amended to read in its entirety as follows:
11.1.2 NONPAYMENT OF OTHER INDEBTEDNESS FOR BORROWED MONEY. Default in
the payment when due at maturity (subject to any applicable grace period)
or by acceleration of any other indebtedness for borrowed money having a
principal amount in excess of 50,000,000 U.S. Dollars of, or guaranteed by,
the Company ("Other Indebtedness"), or default in the performance or
observance of any obligation or condition with respect to any such Other
Indebtedness if such default results in the
-1-
<PAGE> 3
acceleration of the maturity of any such Other Indebtedness; provided,
that, if such default shall subsequently be remedied, cured, or waived
prior to either the termination of Commitments or the declaration that all
Loans are immediately due and payable, in each case pursuant to Section
11.2 hereof, and as a result the payment of such Other Indebtedness is no
longer due, the Event of Default existing hereunder by reason thereof shall
likewise be deemed thereupon to be remedied, cured, or waived and no longer
in existence, all without any further action by the parties hereto.
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, such
Note shall be substantially in the form of Exhibit A to the Agreement with the
dates therein changed to reflect this Amendment. Contemporaneously with the
issuance of such Notes, the Notes dated May 8, 1996 currently pertaining to the
Agreement shall be deemed null and void and each Bank shall cancel and return to
the Company each such Note pertaining to the Agreement currently in such Bank's
possession.
2.2 OTHER TERMS AND CONDITIONS. Unless amended hereby, all other terms and
conditions of the Agreement shall remain in full force and effect without
change.
2.3 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.
2.4 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-
<PAGE> 4
2.5 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/ Jeanne R. Sydenstricker
---------------------------
Jeanne R. Sydenstricker
Vice President and Treasurer
1900 Richmond Road
Cleveland, Ohio 44124
Telephone 216/291-7566
Facsimile: 216/291-7831
-3-
<PAGE> 5
BANKS:
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Bank of America National Trust
----- and Savings Association
By: /s/ Deborah J. Graziano
-----------------------
Name: Deborah J. Graziano
Title: Vice President
DOMESTIC OFFICE
Bank of America NT & SA
1850 Gateway Boulevard
Concord, California 94520
Telephone: (510) 675-7178
Facsimile: (510) 675-7531
Attention: Mandy Sneary
EUROCURRENCY OFFICE
Bank of America NT & SA
1850 Gateway Boulevard
Concord, California 94520
Telephone: (510) 675-7178
Facsimile: (510) 675-7531
Attention: Mandy Sneary
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Bank of America
ABA Routing No. 121000358
Account No.: 12331-83980
Account Name: Incoming Money Transfer
Reference No.: TRW Commitment Fee
-4-
<PAGE> 6
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Barclays Bank PLC
-----
By: /s/ Gary F. Albanese
-----------------------
Name: Gary F. Albanese
Title: Associate Director
DOMESTIC OFFICE
Barclays Bank PLC
222 Broadway
New York, New York 10038
Telephone: (212) 412-3728
Facsimile: (212) 412-5306
EUROCURRENCY OFFICE
Barclays Nassau, Bahamas Branch
c/o Barclays Bank PLC
222 Broadway
New York, New York 10038
Telephone: (212) 412-3728
Facsimile: (212) 412-5306
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Barclays Bank PLC-New York
ABA Routing No.: 026-002-574
Account No.: 050-019-104
Account Name: TRW
Reference No.: TRW Commitment Fee;
C. Tenn Sing Que
-5-
<PAGE> 7
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % The Chase Manhattan Bank
-----
By: /s/ Joan F. Garvin
------------------
Name: Joan F. Garvin
Title: Managing Director
DOMESTIC OFFICE
The Chase Manhattan Bank
270 Park Avenue
10th Floor
New York, New York 10017-2070
Telephone: (212) 270-5730
Facsimile: (212) 270-5127
EUROCURRENCY OFFICE
The Chase Manhattan Bank
One Chase Manhattan Plaza
Eighth Floor
New York, New York 10081
Telephone: (212) 552-7472
Facsimile: (212) 552-5662
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Chase Manhattan Bank
ABA Routing No.: 021-000021
Account No.:
Account Name: Commercial Loan Opns.
Reference No.: TRW Commitment Fee
-6-
<PAGE> 8
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Citibank, N.A.
-----
By: /s/ Mark Stanfield Packard
--------------------------
Name: Mark Stanfield Packard
Title: Vice President
DOMESTIC OFFICE
Citibank, N.A.
c/o Citicorp Securities, Inc.
200 S. Wacker Dr.
Chicago, IL 60606
Telephone: 312-993-3871
Facsimile: 312-993-6840
EUROCURRENCY OFFICE
Citibank, N.A.
c/o Citicorp Securities, 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: Chicago NEO Loan Acct.
Reference No.: TRW Commitment Fee
-7-
<PAGE> 9
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Morgan Guaranty Trust Company
----- of New York
By: /s/ Patricia P. Lunka
----------------------
Name: Patricia P. Lunka
Title: Vice President
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: Morgan Guaranty Trust
ABA Routing No.:021000238
Account No.: 999-99-090
Account Name: ____________
Reference No.: TRW Com. Fee
Corp. Proc. Module 30
-8-
<PAGE> 10
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % National City Bank
-----
By: /s/ David R. Bonner
----------------------
Name: David 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: National City Bank
ABA Routing No.: 041000124
Account No.: 2537557
Account Name: _____________
Reference No.: TRW Commitment Fee
-9-
<PAGE> 11
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % The Sumitomo Bank, Limited
-----
By: /s/ John H. Kemper
------------------
Name: John H. Kemper
Title: Senior Vice President
DOMESTIC OFFICE
The Sumitomo Bank, Limited
Chicago Branch
Sears Tower
233 South Wacker Drive, Suite 4800
Chicago, Illinois 60606-6448
Telephone: (312) 876-6444
Facsimile: (312) 876-6436
EUROCURRENCY OFFICE
The Sumitomo Bank, Limited
Chicago Branch
Sears Tower
233 South Wacker Drive, Suite 4800
Chicago, Illinois 60606-6448
Telephone: (312) 879-7668
Facsimile: (312) 876-0523
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: FNB of Chicago
ABA Routing No. 071000013
Account No.: 15-01208
Account Name: Sumitomo Bank Ltd,
Chicago Branch.
Reference No.: TRW Commitment Fee
-10-
<PAGE> 12
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$45,000,000 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: (312) 977-2211
Facsimile: (312) 977-1380
EUROCURRENCY OFFICE
Banque Nationale de Paris
Chicago Branch
Rookery Building
209 South LaSalle, 5th Floor
Chicago, Illinois 60604
Telephone: (312) 977-2211
Facsimile: (312) 977-1380
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Banque Nationale de Paris,
New York Branch
ABA Routing No.: 026007689
Account No.: 14119400189
Account Name: BNP, Chicago Branch
Reference No.: TRW Commitment Fee
-11-
<PAGE> 13
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$45,000,000 6 % Dresdner Bank AG
-----
By: /s/ D. Slusavczyk
-----------------
Name: D. Slusavczyk
Title: Vice President
By: /s/ A. R. Morris
-----------------
Name: A. R. Morris
Title: Vice President
DOMESTIC OFFICE
Dresdner Bank AG New York Branch
75 Wall Street
New York, New York 10005
Telephone: (212) 429-2244
Facsimile: (212) 429-2524
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) 429-2244
Facsimile: (212) 429-2524
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
Reference No.: TRW Commitment Fee
-12-
<PAGE> 14
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$45,000,000 6 % NBD Bank
-----
By: /s/ William J. McCaffrey
------------------------
Name: William J. McCaffrey
Title: Vice President
DOMESTIC OFFICE
NBD Bank
Attention: Mid-Corporate Banking
611 Woodward
Detroit, Michigan 48226
Telephone: (313) 225-3444
Facsimile: (313) 225-3269
EUROCURRENCY OFFICE
NBD Bank, N.A.
Attention: Mid-Corporate Banking
611 Woodward
Detroit, Michigan 48226
Telephone: (313) 225-3444
Facsimile: (313) 225-3269
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: NBD Bank
ABA Routing No.:072000326
Account No.: 1424183
Account Name: Commercial Loans
Reference No.: TRW Commitment Fee
-13-
<PAGE> 15
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$45,000,000 6 % Royal Bank of Canada
-----
By: /s/ Patrick Shields
------------------------
Name: Patrick Shields
Title: Senior Manager
DOMESTIC OFFICE
Royal Bank of Canada
Grand Cayman (North America No. 1) Branch
c/o New York Branch
32 Old Slip
New York, New York 10005-3531
Telephone: (212) 428-6323
Facsimile: (212) 428-2372
EUROCURRENCY OFFICE
Royal Bank of Canada
Grand Cayman (North America No. 1) Branch
c/o New York Branch
32 Old Slip
New York, New York 10005-3531
Telephone: (212) 428-6323
Facsimile: (212) 428-2372
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Chase Manhattan, NY
ABA Routing No.: 021000021
Account No.: 9201033363
Account Name: Royal Bank
Reference No.: TRW Commitment Fee
-14-
<PAGE> 16
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % KeyBank National Association
-----
By: /s/ Marianne Meil
-----------------
Name: Marianne Meil
Title: Vice President
DOMESTIC OFFICE
KeyBank National Association
127 Public Square
Cleveland, Ohio 44114
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
KeyBank National Association
127 Public Square
Cleveland, Ohio 44114
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: KeyBank National Association
ABA Routing No.:041001039
Account No.: 00100-39140
Account Name: Commercial Loan Opns
Reference No.: TRW Commitment Fee
-15-
<PAGE> 17
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % The Sakura Bank, Limited
-----
By: /s/ Shunji Sakurai
------------------
Name: Shunji Sakurai
Title: Joint General Manager
DOMESTIC OFFICE
The Sakura Bank, Limited
Chicago Branch
227 West Monroe Street
Suite 4700
Chicago, Illinois 60606
Telephone: (312) 580-3276
Facsimile: (312) 332-5345
EUROCURRENCY OFFICE
The Sakura Bank, Limited
Chicago Branch
227 West Monroe Street
Suite 4700
Chicago, Illinois 60606
Telephone: (312) 580-3276
Facsimile: (312) 332-5345
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: FNB of Chicago
ABA Routing No.: 071000013
Account No.: 1512951
Account Name: Sakura Bank, Chicago
Reference No.: TRW Commitment Fee
-16-
<PAGE> 18
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % 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: FNB of Chicago
ABA Routing No.: 071000013
Account No.: 15-08997
Account Name: Tokai Bank, Chicago Branch
Reference No.: TRW Commitment Fee
Loan Administration
-17-
<PAGE> 19
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % Union Bank of Switzerland
-----
By: /s/ Dieter Hoeppli
------------------
Name: Dieter Hoeppli
Title: Vice President
By: /s/ Samuel Azizo
------------------
Name: Samuel Azizo
Title: Vice President
DOMESTIC OFFICE
Union Bank of Switzerland
New York Branch
299 Park Avenue
New York, New York 10171
Telephone: (212) 821-3415
Facsimile: (212) 821-3383
EUROCURRENCY OFFICE
Union Bank of Switzerland
New York Branch
299 Park Avenue
New York, New York 10171
Telephone: (212) 821-3415
Facsimile: (212) 821-3383
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Union Bank of Switzerland
ABA Routing No.: 026008439
Account No.: 519243USICC1
Account Name: Credit Corporate Clearing
Reference No.: TRW Commitment Fee
-18-
<PAGE> 20
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$15,000,000 2 % Bank of China, New York Branch
-----
By: /s/ Zhu, ZhiCheng
-----------------
Name: Zhu, ZhiCheng
Title: General Manager, USA
DOMESTIC OFFICE
Bank of China
New York Branch
410 Madison Avenue
New York, New York 10017
Telephone: (212) 935-3101 ext. 475
Facsimile: (212) 688-0919
EUROCURRENCY OFFICE
Bank of China
New York Branch
410 Madison Avenue
New York, New York 10017
Telephone: (212) 935-3101 ext. 475
Facsimile: (212) 688-0919
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Bank of China, New York Branch
ABA Routing No.: 026003269
Account No.: 160081555553-001-001
. Reference No.: TRW Commitment Fee
-19-
<PAGE> 21
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$15,000,000 2 % Wells Fargo Bank, N.A.
-----
By: /s/ Edith R. Lim
-----------------
Name: Edith R. Lim
Title: Vice President
By: /s/ Frieda Youlios
-----------------
Name: Frieda Youlios
Title: Vice President
DOMESTIC OFFICE
Wells Fargo Bank, N.A.
707 Wilshire Blvd., 16th. Floor
Los Angeles, CA 90017
Telephone: (213) 614-5038
Facsimile: (213) 614-2305
EUROCURRENCY OFFICE
Wells Fargo Bank, N.A.
707 Wilshire Blvd., 16th. Floor
Los Angeles, CA 90017
Telephone: (213) 614-5038
Facsimile: (213) 614-2305
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Wells Fargo Bank, N.A.
ABA Routing No.: 121-000-248
Account No.: 451-8054341
Account Name: SYNDIC/WFB CORP/ACH
Reference No.: TRW Ref No 9118583038
- ------------ ----
$750,000,000 100% Total
-20-
<PAGE> 1
Exhibit 10(b)
September 18, 1997
Dr. George H. Heilmeier
Bell Communications Research
Morris Corporate Center (MCC)
445 South Street
Morristown, NJ 07960-6438
Dear George:
This letter will confirm our understanding relating to your engagement by TRW as
a Consultant. The attached terms and conditions (Exhibit A) also apply fully to
the engagement and, together with this letter, constitute our "Agreement".
We will request your general consulting services from time to time. 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, 1998 and will continue for
two years, terminating on December 31, 1999. 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 $210,000
per year, to be paid in monthly installments. This payment is not eligible for
the Directors' Deferred Compensation Plan.
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 should be
submitted to me for processing and approval. During the term of this Agreement
and any renewals, we will also reimburse you for required secretarial and other
appropriate services.
<PAGE> 2
Page two
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,
/s/ Joseph T. Gorman
- --------------------
Joseph T. Gorman
ACCEPTED:
/s/George H. Heilmeier
- ----------------------
George H. Heilmeier
Date: September 25, 1997
<PAGE> 3
EXHIBIT A
- ---------
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 or affiliates
(hereinafter referred to as "TRW") that TRW protects against unrestricted
disclosure to others, are not openly communicated or made accessible by TRW to
third parties and that Consultant obtains from TRW, its employees, subsidiaries
or affiliates, or otherwise acquires while engaged hereunder, including
information of a third party as to which TRW has a nondisclosure obligation.
Additionally, TRW Confidential Information will include any and all reports to
TRW made by Contractor hereunder or the contents thereof. In view of the
sensitive information to which Consultant will have access during Consultant's
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,
subcontractors or representatives 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
In the event that Consultant or its employees, subcontractors, or
representatives receives a request to disclose all or any part of the TRW
Confidential Information under the terms of a valid and effective subpoena or
order issued by a court of competent jurisdiction or by a governmental body,
Consultant shall
1. As soon as possible upon receipt, notify TRW of the existence,
terms and circumstances surrounding such a request, so that it
may seek an appropriate protective order and/or waive
Consultant's compliance with the provisions of this Agreement;
and
2. If disclosure of such TRW Confidential Information is required
in the opinion of Consultant's counsel, cooperate with TRW in
obtaining reliable assurances that confidential treatment will
be accorded to the disclosed TRW Confidential Information.
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, its subsidiaries or affiliates, 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, and shall cause its employees to
transfer, 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.
Initialed ____________
-2-
<PAGE> 5
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.
VI. NO CONFLICT
Except with the prior written approval of TRW after full disclosure of
all relevant facts, Consultant 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. TRW understands that Consultant will enter into
consulting agreement with Science Applications International Corporation (SAIC).
TRW agrees not to request Consultant to perform any work that would be in
conflict with Consultant's agreement with Bell Communications Research
(Bellcore) and SAIC.
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 may be terminated by TRW or Consultant in whole or in
part upon 15 days' prior written notice. This Agreement will terminate forthwith
upon receipt of written notice from TRW if Consultant is unable to perform
Consultant's duties hereunder for a period of thirty consecutive days. 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 survive the
termination of this Agreement.
Initialed ____________
-3-
<PAGE> 6
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.
X. RECORDS
Consultant shall maintain a written record of all work performed and
data generated in the course of performance under this Agreement and shall
prepare a written summary of all work performed hereunder. 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.
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 Consultant 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 Consultant's conduct was
unlawful.
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 Consultant's 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
Consultant 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
such action or proceeding; or (iv) TRW shall authorize Consultant to employ
separate counsel at TRW's 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.
Initialed ____________
-5-
<PAGE> 8
Consultant hereby agrees to indemnify, defend and save TRW, its
officers, directors, employees and agents 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 bad faith, willful misconduct,
recklessness or unlawful conduct or the bad faith, willful misconduct,
recklessness or unlawful conduct of Consultant's employees, agents,
subcontractors, suppliers or other third parties utilized in connection with
Consultant's performance. In agreeing to indemnify TRW under this section,
Consultant expressly waives any immunity from liability Consultant may be
entitled to under Section 35, Article II of the Ohio Constitution and Ohio
Revised Code Section 4123.74 which provides immunity to complying employers from
actions for damages by employees injured in the course of or arising out of
their employment. Nothing in this indemnification shall limit the protection
otherwise available to TRW employees or other persons performing emergency
first-aid services under Ohio Revised Code Sections 2305.23 and 4731.90.
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
Notwithstanding any provision to the contrary herein or otherwise,
except as TRW grants prior written approval, Consultant shall not publicize the
existence or terms of, or work performed under, this Agreement.
Initialed ____________
-6-
<PAGE> 9
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 without such consent with respect to any corporate reorganization,
merger, transfer of assets or similar transactions 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.
Initialed ____________
-7-
<PAGE> 1
Exhibit 11
TRW Inc. and Subsidiaries
-------------------------
COMPUTATION OF EARNINGS PER SHARE - UNAUDITED
---------------------------------------------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
PRIMARY (A) 1997 1996
- ----------- ---- ----
<S> <C> <C>
Earnings from continuing operations $ 362.3 $ 72.4
Less preference dividend requirements 0.4 0.5
------- -------
Earnings applicable to common shares
and common share equivalents 361.9 71.9
Earnings from discontinued operations 0.0 37.9
Gain on disposal of discontinued operations 0.0 242.4
------- -------
Net earnings applicable to common shares
and common share equivalents $ 361.9 $ 352.2
======= =======
Average common shares outstanding 124.0 129.6
Stock options and performance share rights, based on
the treasury stock method using average market price 3.1 2.9
------- -------
Average common shares and common share
equivalents 127.1 132.5
======= =======
Primary earnings per share from continuing operations $ 2.85 $ 0.54
Primary earnings per share from discontinued operations 0.00 0.29
Primary earnings per share from gain on disposal of
discontinued operations 0.00 1.83
------- -------
Primary earnings per share $ 2.85 $ 2.66
======= =======
FULLY DILUTED (B)
Earnings from continuing operations applicable
to common shares and common share equivalents $ 361.9 $ 71.9
Dividends assuming conversion of other
dilutive securities: (B)
Dilutive preference dividends 0.4 0.5
------- -------
Earnings from continuing operations applicable
to fully diluted shares 362.3 72.4
Earnings from discontinued operations 0.0 37.9
Gain on disposal of discontinued operations 0.0 242.4
------- -------
Net earnings applicable to fully diluted shares $ 362.3 $ 352.7
======= =======
Average common shares outstanding 124.0 129.6
Common shares assuming conversion of
other dilutive securities: (B)
Dilutive preference shares 1.0 1.1
Stock options and performance share rights, based on the treasury stock
method using closing market price if higher than
average market price 3.3 3.2
------- -------
Average fully diluted shares 128.3 133.9
======= =======
Fully diluted earnings per share from continuing operations $ 2.82 $ 0.53
Fully diluted earnings per share from discontinued operations 0.00 0.28
Fully diluted earnings per share from gain on disposal
of discontinued operations 0.00 1.82
------- -------
Fully diluted earnings per share $ 2.82 $ 2.63
======= =======
<FN>
(A) In accordance with APB#15, the shares and per share amounts reflect a
two-for-one stock split (in the form of a 100% stock dividend) of the
company's common stock which is effective as of November 8, 1996.
(B) Assuming the conversion of the Serial Preference Stock II - Series 1 and
Series 3.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 136
<SECURITIES> 0
<RECEIVABLES> 1,489
<ALLOWANCES> 0
<INVENTORY> 578
<CURRENT-ASSETS> 2,508
<PP&E> 6,114
<DEPRECIATION> 3,511
<TOTAL-ASSETS> 6,081
<CURRENT-LIABILITIES> 2,394
<BONDS> 531
<COMMON> 77
0
0
<OTHER-SE> 2,148
<TOTAL-LIABILITY-AND-EQUITY> 6,081
<SALES> 8,033
<TOTAL-REVENUES> 8,033
<CGS> 6,551
<TOTAL-COSTS> 6,551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> 580
<INCOME-TAX> 218
<INCOME-CONTINUING> 362
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 362
<EPS-PRIMARY> 2.85
<EPS-DILUTED> 2.82
</TABLE>
<PAGE> 1
EXHIBIT 99
TRW Inc. and Subsidiaries
Computation of Ratio of Earnings
to Fixed Charges - Unaudited
(In millions except ratio data)
<TABLE>
<CAPTION>
Nine Months Years Ended December 31
ended -------------------------------------------------------------------------------
September 30, 1997 1996 1995 1994 1993 1992
------------------ ---------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before income
taxes $579.7 $302.2(A) $625.5 $435.5 $289.2 $276.4
Unconsolidated affiliates (5.7) 1.4 1.3 (0.6) 0.7 (0.9)
Minority earnings 14.1 11.5 10.8 7.7 1.4 0.1
Fixed charges excluding
capitalized interest 90.5 129.0 137.2 145.3 177.5 208.1
---- ----- ----- ----- ----- -----
Earnings $678.6 $444.1 $774.8 $587.9 $468.8 $483.7
------ ------ ------ ------ ------ ------
Fixed Charges:
Interest expense $56.8 $84.2 $94.7 $104.7 $137.4 $162.1
Capitalized interest 3.1 3.5 5.1 6.6 7.9 12.7
Portion of rents representa-
tive of interest factor 33.7 43.2 41.4 39.2 37.9 45.8
Interest expense of uncon-
solidated affiliates 0.0 1.6 1.1 1.4 2.2 0.2
--- --- --- --- --- ---
Total fixed charges $93.6 $132.5 $142.3 $151.9 $185.4 $220.8
----- ----- ------ ------ ------ ------
Ratio of earnings to fixed 7.2x 3.4x 5.4x 3.9x 2.5x 2.2x
charges ---- ---- ---- ---- ---- ----
<FN>
(A) The 1996 earnings from continuing operations before income taxes of
$302.2 million includes a charge of $384.8 million as a result of actions
taken in the automotive and space and defense businesses.
</TABLE>
