<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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
--------------------------------------------------
(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 April 3, 1998, there were 122,650,314 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
- ----------------------------------------------------------------------------------------------------------------------
Quarter ended
March 31
In millions except per share data 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales $ 3,095 $ 2,660
Cost of sales 2,575 2,178
- -------------------------------------------------------------------------------------------------------------------
Gross profit 520 482
Administrative and selling expenses 199 159
Research and development expenses 121 106
Interest expense 38 20
Other (income) expense-net (42) 2
- -------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 204 195
Income taxes 75 76
- -------------------------------------------------------------------------------------------------------------------
Net earnings $ 129 $ 119
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK
Diluted earnings per share $ 1.03 $ .92
Basic earnings per share $ 1.05 $ .95
Dividends declared $ .00 $ .00
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Shares used in computing per share amounts
Diluted 126.2 129.4
Basic 122.6 125.2
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Balance Sheets (unaudited)
TRW Inc. and subsidiaries
- -------------------------------------------------------------------------------------------------------------------
March 31 December 31
In millions 1998 1997
- -------------------------------------------------------------------------------------------------------------------
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents $ 92 $ 70
Accounts receivable 1,772 1,617
Inventories 589 573
Prepaid expenses 91 79
Deferred income taxes 158 96
- -------------------------------------------------------------------------------------------------------------
Total current assets 2,702 2,435
Property, plant and equipment-on the basis of cost 6,223 6,074
Less accumulated depreciation and amortization 3,617 3,453
- -------------------------------------------------------------------------------------------------------------
Total property, plant and equipment-net 2,606 2,621
Intangible assets
Intangibles arising from acquisitions 750 673
Other 308 232
- -------------------------------------------------------------------------------------------------------------
1,058 905
Less accumulated amortization 104 94
- -------------------------------------------------------------------------------------------------------------
Total intangible assets-net 954 811
Investments in affiliated companies 197 139
Other assets 440 404
- -------------------------------------------------------------------------------------------------------------
$ 6,899 $ 6,410
- -------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' investment
Current liabilities
Short-term debt $ 694 $ 411
Accounts payable 840 859
Current portion of long-term debt 25 128
Other current liabilities 1,225 1,321
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 2,784 2,719
Long-term liabilities 826 788
Long-term debt 1,423 1,117
Deferred income taxes 52 57
Minority interests in subsidiaries 87 105
Capital stock 77 79
Other capital 454 450
Retained earnings 1,844 1,778
Accumulated other comprehensive income (141) (120)
Treasury shares-cost in excess of par value (507) (563)
- -------------------------------------------------------------------------------------------------------------
Total shareholders' investment 1,727 1,624
- -------------------------------------------------------------------------------------------------------------
$ 6,899 $ 6,410
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Statements of Cash Flows (unaudited)
TRW Inc. and subsidiaries
- -------------------------------------------------------------------------------------------------------------------
Quarter ended
March 31
In millions 1998 1997
- ----------------------------------------------------------------------------------------------------------------
Operating activities
<S> <C> <C>
Net earnings $ 129 $ 119
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 135 127
Deferred income taxes (68) 5
Other-net 5 10
Changes in assets and liabilities, net of effects of businesses acquired:
Accounts receivable (162) (156)
Inventories and prepaid expenses (23) 7
Accounts payable and other accruals (29) (43)
Other-net (33) (13)
- ----------------------------------------------------------------------------------------------------------------
Net cash provided(used in) by operating activities (46) 56
- ----------------------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures (119) (99)
Acquisitions, net of cash acquired (228) (415)
Other-net (8) 16
- ----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (355) (498)
- ----------------------------------------------------------------------------------------------------------------
Financing activities
Increase(decrease) in short-term debt (40) 223
Proceeds from debt in excess of 90 days 620 10
Principal payments on debt in excess of 90 days (110) (11)
Reacquisition of common stock (24) (77)
Dividends paid (38) (39)
Other-net 14 13
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 422 119
- ----------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 1 (4)
- ----------------------------------------------------------------------------------------------------------------
Increase(decrease) in cash and cash equivalents 22 (327)
Cash and cash equivalents at beginning of quarter 70 386
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of quarter $ 92 $ 59
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Results by Business Segments (unaudited)
TRW Inc. and subsidiaries
- ----------------------------------------------------------------------------------------------------------------------
Quarter ended
March 31
In millions 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
Sales
<S> <C> <C>
Automotive $ 1,886 $ 1,793
Space, Defense & Information Systems 1,209 867
- ----------------------------------------------------------------------------------------------------------------------
Sales $ 3,095 $ 2,660
- ----------------------------------------------------------------------------------------------------------------------
Operating profit
Automotive $ 147 $ 167
Space, Defense & Information Systems 115 77
- ----------------------------------------------------------------------------------------------------------------------
Operating profit 262 244
Company Staff and other (16) (24)
Minority interest in earnings of consolidated subsidiaries (5) (6)
Interest expense (38) (20)
Earnings from affiliates 1 1
- ----------------------------------------------------------------------------------------------------------------------
Earnings before income taxes $ 204 $ 195
- ----------------------------------------------------------------------------------------------------------------------
</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, are accounted for by the equity method.
Comprehensive Income
- --------------------
Effective January 1, 1998 the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." Statement 130
establishes new rules for the reporting and display of comprehensive income and
its components. The adoption of this Statement requires unrealized gains or
losses on the Company's available-for-sale securities, foreign currency
translation and minimum pension liability adjustments be included in other
comprehensive income, which prior to adoption were reported separately in
shareholders' equity. Prior year financial statements have been reclassified to
conform to the requirements of Statement 130.
The components of comprehensive income, net of related tax, for the first
quarter of 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Quarter ended
(In millions) March 31
-----------------------------------
1998 1997
---- ----
<S> <C> <C>
Net earnings $ 129 $ 119
Unrealized gains on securities 2 -
Foreign currency translation adjustments (23) (63)
---- ----
Comprehensive income $ 108 $ 56
---- ----
</TABLE>
The components of accumulated other comprehensive income, net of related tax, at
March 31, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
March 31 December 31
(In millions) 1998 1997
-------------------- ---------------------
<S> <C> <C>
Unrealized gains on securities $ 14 $ 12
Foreign currency translation adjustments (153) (130)
Minimum pension liability adjustments (2) (2)
---- ----
Accumulated other comprehensive income $(141) $(120)
---- ----
</TABLE>
<PAGE> 7
Inventories
- -----------
Inventories consist of the following:
<TABLE>
<CAPTION>
(In millions) March 31 December 31
1998 1997
----------------------------------------
<S> <C> <C>
Finished products and work in process $326 $292
Raw materials and supplies 263 281
--- ---
$589 $573
--- ---
</TABLE>
Long-Term Liabilities
- ---------------------
Long-term liabilities at March 31, 1998, and December 31, 1997, include $660
million and $653 million, respectively, relating to postretirement benefits
other than pensions.
Other (Income)Expense-Net
- -------------------------
Other (income)expense-net included the following:
<TABLE>
<CAPTION>
(In millions) Quarter ended
March 31
------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Other income $(66) $(16)
Other expense 22 16
Foreign currency translation 2 2
--- ---
$(42) $ 2
---- ---
</TABLE>
First quarter 1998 other income included a $48.5 million benefit from the
settlement of certain patent litigation.
Supplemental Cash Flow Information
- ----------------------------------
<TABLE>
<CAPTION>
Quarter ended
(In millions) March 31
---------------------------------------
1998 1997
---- ----
<S> <C> <C>
Interest paid (net of amount capitalized) $ 30 $ 20
Income taxes paid (net of refunds) $ 41 $ (37)
</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.
<PAGE> 8
Earnings Per Share
- ------------------
In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share." Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. All earnings per share amounts for all periods
presented have been restated to conform to Statement 128 requirements.
<TABLE>
<CAPTION>
In millions except per share data Quarter ended
March 31
----------------------------------------
1998 1997
---- ----
NUMERATOR
<S> <C> <C>
Net earnings $129.4 $119.2
Preferred stock dividends .2 .1
----- -----
Numerator for basic earnings per
share--earnings available to common
shareholders 129.2 119.1
Effect of dilutive securities
Preferred stock dividends .2 .1
----- -----
Numerator for diluted earnings per share--
earnings available to common
shareholders after assumed conversions $129.4 $119.2
----- -----
DENOMINATOR
Denominator for basic earnings per
share--weighted-average common shares 122.6 125.2
Effect of dilutive securities
Convertible preferred stock .9 1.0
Employee stock options 2.7 3.2
----- -----
Dilutive potential common shares 3.6 4.2
Denominator for diluted earnings per
share--adjusted weighted-average shares and
assumed conversions 126.2 129.4
----- -----
Basic earnings per share $ 1.05 $ .95
----- -----
Diluted earnings per share $ 1.03 $ .92
----- -----
</TABLE>
Contingencies
- -------------
During 1997, TRW Vehicle Safety Systems Inc., a wholly owned subsidiary of the
Company, reported to the Arizona Department of Environmental Quality ("ADEQ")
potential violations of the Arizona hazardous waste law at its Queen Creek,
Arizona facility for the possible failure to properly label and dispose of
wastewater that might be classified as hazardous waste. ADEQ is conducting an
investigation into these potential violations and the Company is cooperating
with the investigation. If ADEQ initiates proceedings against the Company with
respect to such matters, the Company could be liable for penalties and fines and
other relief. The Company has been apprised by state and federal officials that
there are ongoing civil and criminal investigations with
<PAGE> 9
respect to these potential violations. Management is currently evaluating this
matter and is unable to make a meaningful estimate of the amount or range of
possible liability, if any, at this time, although management believes that the
Company would have meritorious defenses.
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 of
the Company's former Space & Technology Group and originally 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 lawsuits relate to the
classification of costs incurred by the Company that were charged 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. On February 13, 1998, the DOJ intervened in the litigation. On
February 19, 1998 and March 4, 1998, the former employee filed amended
complaints in the Central District of California that realleged certain of the
claims included in the 1994 and 1995 lawsuits and omitted the remainder. The
amended complaints allege that the United States has incurred substantial
damages and that the Company should be ordered to cease and desist from
violations of the civil False Claims Act and is liable for treble damages,
penalties, costs, including attorneys' fees, and such other relief as deemed
proper by the court. On March 17, 1998, the DOJ filed its complaint against the
Company upon intervention in the 1994 lawsuit, which set forth a limited number
of the allegations in the 1994 lawsuit and other allegations not in the 1994
lawsuit. The DOJ elected not to pursue the other claims in the 1994 lawsuit or
the claims in the 1995 lawsuit. The DOJ's complaint alleges that the Company is
liable for treble damages, penalties, interest, costs and "other proper relief."
On March 18, 1998, the former employee withdrew the first amended complaint in
the 1994 lawsuit at the request of the DOJ. The Company expects to file
responses to the former employee's first amended complaint in the 1995 lawsuit
and the DOJ's complaint during the second quarter of 1998 and intends to defend
itself vigorously. The Company cannot presently predict the outcome of these
lawsuits, although management believes that their ultimate resolution will not
have a material effect on the Company's financial condition or results of
operations.
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
(In millions except per share data)
<TABLE>
<CAPTION>
First Quarter
-------------------------------------------------------
Percent
1998 1997 Inc(Dec)
--------------- ---------------- ----------------
<S> <C> <C> <C>
Sales $3,095 $2,660 16%
Operating Profit 262 244 7%
Net Earnings 129 119 8%
Diluted Earnings Per Share 1.03 .92 12%
Effective Tax Rate 36.50% 38.75%
</TABLE>
The increase in sales resulted primarily from the acquisition of BDM and from
higher volume in the Automotive and Space, Defense & Information Systems
segments partially offset by a strong U.S. dollar and unfavorable pricing in
the Automotive segment. The higher operating profit was due to the higher sales
and continued cost-reduction efforts partially offset by higher research and
development expenditures, start-up costs and lower pricing in the Automotive
segment. First quarter 1998 earnings included a $31.5 million benefit from the
settlement of certain patent litigation, offset in part by $21.8 million in
charges for litigation and contract reserves and severance costs relating to
the combination of the Company's systems integration business with BDM.
Interest expense was $38 million for the first quarter of 1998, compared to $20
million for the first quarter of 1997, primarily due to financing the
acquisition of BDM.
Automotive
(In millions)
<TABLE>
<CAPTION>
First Quarter
-------------------------------------------------------
Percent
1998 1997 Inc(Dec)
--------------- ---------------- ----------------
<S> <C> <C> <C>
Sales $1,886 $1,793 5 %
Operating Profit $ 147 $ 167 (12)%
</TABLE>
The increase in sales resulted primarily from higher volume in most product
lines, particularly steering systems, seat belts and electronics, partially
offset by the effect of a strong U.S. dollar and lower pricing. The decline in
operating profit resulted in part from higher research and development and costs
associated with new product introductions and start-up facilities. The decline
in operating profit was also affected by the continuation of severe pricing
pressures. The Company is taking appropriate action with its customers to
mitigate the pressure on price as well as accelerate additional cost reduction
initiatives.
<PAGE> 11
Space, Defense & Information Systems
(In millions)
<TABLE>
<CAPTION>
First Quarter
-------------------------------------------------------
Percent
1998 1997 Inc(Dec)
--------------- ---------------- ----------------
<S> <C> <C> <C>
Sales $1,209 $867 39%
Operating Profit $ 115 $ 77 49%
</TABLE>
Sales increased due to the effect of the acquisition of BDM, which contributed
$232 million, new contract awards and higher volume in continuing programs. The
higher operating profit was due to the acquisition of BDM, continued success in
commercial gallium arsenide (GaAs) technology programs, and the benefit from the
settlement of certain patent litigation, which was offset in part by charges for
litigation and contract reserves and severance costs relating to the combination
of the Company's systems integration business with BDM.
LIQUIDITY AND FINANCIAL POSITION
In the first quarter of 1998, a net increase in debt of $470 million and a net
increase of $7 million in other items, were used to fund business acquisitions
of $228 million, capital expenditures of $119 million, reacquisition of common
stock of $24 million of which $5 million was for the settlement of shares
repurchased in 1997, dividend payments of $38 million and operating activities
of $46 million. As a result, cash and cash equivalents increased by $22 million.
Net debt (short-term debt, the current portion of long-term debt and long-term
debt less cash and cash equivalents) was $2,050 million at March 31, 1998,
compared to $1,586 million at December 31, 1997. The ratio of net debt to total
capital (net debt, minority interests and shareholders' investment) was 53.0
percent at March 31, 1998, compared to 47.8 percent at December 31, 1997.
During January 1998, the Company refinanced short-term debt by issuing $500
million of notes and debentures which mature at various dates through 2028.
During the first quarter 1998, the Company established a $1 billion Universal
Shelf Registration Statement. Securities that may be issued under this shelf
registration statement include: debt securities, common stock, warrants to
purchase debt securities and warrants to purchase common stock. No securities
were issued under this shelf registration statement during the first quarter.
As of the end of the first quarter 1998, $300 million of short-term debt was
reclassified to long-term debt as the Company intends to refinance the
borrowings on a long-term basis and has the ability to do so under its U.S.
revolving credit agreements.
During the first quarter of 1998, 350,810 shares of TRW common stock were
repurchased for approximately $19 million.
<PAGE> 12
Management believes that funds generated from operations and existing borrowing
capacity are adequate to fund the current share repurchase program and finance
planned growth, capital expenditures, working capital requirements including tax
requirements, company-sponsored research and development programs and dividend
payments to shareholders.
OTHER MATTERS
During 1997, TRW Vehicle Safety Systems Inc., a wholly owned subsidiary of the
Company, reported to ADEQ potential violations of the Arizona hazardous waste
law at its Queen Creek, Arizona facility for the possible failure to properly
label and dispose of wastewater that might be classified as hazardous waste. If
ADEQ initiates proceedings against the Company with respect to such matters, the
Company could be liable for penalties and fines and other relief. Management is
currently evaluating this matter and is unable to make a meaningful estimate of
the amount or range of possible liability, if any, at this time, although
management believes that the Company would have meritorious defenses.
During 1996, the Company was advised by the 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 Company cannot presently predict the outcome of these lawsuits,
although management believes that their ultimate resolution will not have a
material effect on the Company's financial condition or results of operations.
Refer to the "Contingencies" footnote in the Notes to Financial Statements for
further discussion of these matters.
<PAGE> 13
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 the Company's actual results to differ materially from the forward-looking
statements contained in this filing can be found in the Company's reports filed
with the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
There have been no material changes in market risk exposures during the first
quarter of 1998 that affect the disclosures presented in the Company's Annual
Report to Shareholders for the year ended December 31, 1997.
<PAGE> 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
During 1996, the Company was advised by the DOJ that it had been named
as a defendant in two lawsuits brought by Richard D. Bagley, a former employee
of the Company's former Space & Technology Group, and originally 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 lawsuits relate
to the classification of costs incurred by the Company that were charged 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. On February 13, 1998, the DOJ intervened in the
litigation. On February 19, 1998 and March 4, 1998, Bagley filed amended
complaints in the Central District of California that realleged certain of the
claims included in the 1994 and 1995 lawsuits and omitted the remainder. The
amended complaints allege that the United States has incurred substantial
damages and that the Company should be ordered to cease and desist from
violations of the civil False Claims Act and is liable for treble damages,
penalties, costs, including attorneys' fees, and such other relief as deemed
proper by the court. On March 17, 1998, the DOJ filed its complaint against the
Company upon intervention in the 1994 lawsuit, which set forth a limited number
of the allegations in the 1994 lawsuit and other allegations not in the 1994
lawsuit. The DOJ elected not to pursue the other claims in the 1994 lawsuit or
the claims in the 1995 lawsuit. The DOJ's complaint alleges that the Company is
liable for treble damages, penalties, interest, costs and "other proper relief."
On March 18, 1998, Bagley withdrew the first amended complaint in the 1994
lawsuit at the request of the DOJ. The Company expects to file responses to
Bagley's first amended complaint in the 1995 lawsuit and the DOJ's complaint
during the second quarter of 1998 and intends to defend itself vigorously. The
Company cannot presently predict the outcome of these lawsuits, although
management believes that their ultimate resolution will not have a material
effect on the Company's financial condition or results of operations.
In 1992, Vinnell Mining & Minerals Corporation ("VMMC") and Atlas
Corporation ("Atlas"), an unrelated third party, entered into a Consent Decree
with the United States Environmental Protection Agency ("EPA") with respect to
an operable unit of the Atlas Asbestos Mine Superfund site in Fresno County,
California. VMMC is a wholly owned indirect subsidiary of BDM International,
Inc. that was acquired by the Company in December 1997. The Consent Decree
provides, among other things, for the remediation of the site and reimbursement
of oversight costs upon submission of appropriate documentation to VMMC and
Atlas. On March 31, 1998, VMMC and Atlas filed a Motion to Enforce the Consent
Decree in the U.S. District Court for the Eastern District of California to
obtain judicial review of the oversight cost documentation requirements. On
April 6, 1998, the EPA issued a Statement of Decision stating that VMMC and
Atlas must pay the contested oversight costs, plus interest. The EPA has also
taken the position that VMMC and Atlas are subject to stipulated daily
penalties under the Consent Decree as of March 20, 1998. The Consent Decree
provides for maximum daily penalties of up to $6,250. Management believes that
the ultimate resolution of this matter will not have a material effect on the
Company's financial condition or results of operations.
<PAGE> 15
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits:
4.1 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).
4.2 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).
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. 333-48443, filed March 23, 1998).
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.
(b) Reports on Form 8-K:
Current Report on Form 8-K dated April 13, 1998 as to Medium-Term
Notes.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRW Inc.
Date: May 1, 1998 By: /s/ William B. Lawrence
-----------------------
William B. Lawrence
Executive Vice President and Secretary
Date: May 1, 1998 By: /s/ Carl G. Miller
------------------
Carl G. Miller
Executive Vice President
and Chief Financial Officer
<PAGE> 16
FORM 10-Q
Quarterly Report for Quarter Ended March 31, 1998
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
4.1 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).
4.2 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).
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.
333-48443, filed March 23, 1998).
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 92
<SECURITIES> 0
<RECEIVABLES> 1,772
<ALLOWANCES> 0
<INVENTORY> 589
<CURRENT-ASSETS> 2,702
<PP&E> 6,223
<DEPRECIATION> 3,617
<TOTAL-ASSETS> 6,899
<CURRENT-LIABILITIES> 2,784
<BONDS> 1,423
0
0
<COMMON> 77
<OTHER-SE> 1,650
<TOTAL-LIABILITY-AND-EQUITY> 6,899
<SALES> 3,095
<TOTAL-REVENUES> 3,095
<CGS> 2,575
<TOTAL-COSTS> 2,575
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> 204
<INCOME-TAX> 75
<INCOME-CONTINUING> 129
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.03
</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>
Years Ended December 31
Three Months ended -------------------------------------------------------------------------
March 31, 1998 1997 1996 1995 1994 1993
------------------ ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before income
taxes $203.8 $239.7(A) $302.2(B) $625.5 $435.5 $289.2
Unconsolidated affiliates (2.5) (8.0) 1.4 1.3 (0.6) 0.7
Minority earnings 4.6 20.2 11.5 10.8 7.7 1.4
Fixed charges excluding
capitalized interest 51.8 123.9 129.0 137.2 145.3 177.5
------ ------ ------ ------ ------ ------
Earnings $257.7 $375.8 $444.1 $774.8 $587.9 $468.8
------ ------ ------ ------ ------ ------
Fixed Charges:
Interest expense $ 38.5 $ 75.4 $ 84.2 $ 94.7 $104.7 $137.4
Capitalized interest 1.2 4.5 3.5 5.1 6.6 7.9
Portion of rents representative
of interest factor 13.3 48.5 43.2 41.4 39.2 37.9
Interest expense of
unconsolidated affiliates 0.0 0.0 1.6 1.1 1.4 2.2
------ ------ ------ ------ ------ ------
Total fixed charges $ 53.0 $128.4 $132.5 $142.3 $151.9 $185.4
------ ------ ------ ------ ------ ------
Ratio of earnings to fixed
charges 4.9x 2.9x 3.4x 5.4x 3.9x 2.5x
------ ------ ------ ------ ------ ------
<FN>
(A) The 1997 earnings from continuing operations before income taxes of $239.7
million includes a $548 million earnings charge for purchased in-process
research and development. See "Acquisitions" footnote in the Notes to
Financial Statements of the Company's 1997 Annual Report to Shareholders.
(B) 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. See "Divestiture and
special charges" footnote in the Notes to Financial Statements of the
Company's 1996 Annual Report to Shareholders.
</TABLE>
