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2007 Q2 TRW Auto Earnings Presentation

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  • 1. Second Quarter 2007 Conference Call Materials August 1, 2007 “The Global Leader in Automotive Safety Systems” Materials Included Pages - Press Release 1-8 - Financial Summaries A1-A9 - Presentation P1-P19 TRW Automotive Holdings Corp.
  • 2. News Release TRW Automotive 12001 Tech Center Drive Livonia, MI 48150 Investor Relations Contact: Patrick R. Stobb (734) 855-3140 Media Contact: Manley Ford (734) 855-2616 TRW Automotive Reports Second Quarter 2007 Financial Results LIVONIA, MICHIGAN, August 1, 2007 — TRW Automotive Holdings Corp. (NYSE: TRW), the global leader in active and passive safety systems, today reported second- quarter 2007 financial results with sales of $3.8 billion, an increase of 8.5 percent compared to the same period a year ago. The Company reported second quarter net earnings of $97 million or $0.94 per diluted share, which compares to net earnings of $91 million or $0.88 per diluted share in the prior year period. During the second quarter, the Company completed the final step of its 2007 debt recapitalization plan with the successful refinancing of its $2.5 billion credit facilities in May. The debt recapitalization provides a new debt structure that lowers the Company’s borrowing costs, improves financial flexibility and extends debt maturities. The second quarter results included $8 million of costs related primarily to the refinancing of the Company’s credit facilities. Net earnings in the 2007 quarter excluding these charges were $105 million or $1.02 per diluted share. The current year benefited primarily from a lower tax rate between the two periods and a higher level of operating income. “Significant progress has been made to transform TRW into a leading supplier to the global automotive industry since becoming an independent Company just four years ago,” said John Plant, president and chief executive officer. “The strength provided by our enviable safety product portfolio, solid customer base and leading global diversification, together with intense cost reduction efforts and deleveraging activities, have been key to this progress and have helped to mitigate challenging industry conditions, particularly in North America.” 1
  • 3. Mr. Plant added, “The transformation of TRW is not complete and we look forward to the future due to strong customer acceptance of our leading safety technologies, which we expect will be further enhanced by growth in Asian emerging markets. We continue to explore strategies that will strengthen our competitiveness and help to achieve our goal of growing the Company profitably over the long term.” Second Quarter 2007 The Company reported second-quarter 2007 sales of $3.8 billion, an increase of $293 million or 8.5 percent over the prior year period. The 2007 quarter benefited from the positive effect of foreign currency translation, higher customer vehicle production in Europe and China and continued growth of safety products in all markets, including above-trend sales of lower margin modules. These positive factors were partially offset by lower vehicle production levels at our major customers in North America and price reductions provided to customers. Operating income for second-quarter 2007 was $205 million, which compares to $201 million in the prior year period. The year-to-year increase was driven by a number of factors, including higher product volumes, savings generated from cost improvement and efficiency programs, including reductions in pension and OPEB related costs, and other positive items, most notably gains related to property sales and favorable supplier resolutions. These positive factors were in part offset by pricing provided to customers, higher commodity prices, a negative mix of products sold and certain unfavorable product-related settlements. Restructuring and asset impairment expenses in the 2007 period were $11 million, which is unchanged from the previous year. Net interest and securitization expense for the second quarter of 2007 totaled $57 million, which compares to $61 million in the prior year. The year-to-year decline can be attributed to the benefits derived from the Company’s 2007 debt recapitalization. As mentioned previously, the 2007 quarter included debt retirement costs of $8 million. 2
  • 4. Second-quarter 2007 tax expense was $45 million, resulting in an effective tax rate of 32 percent, which compares to $53 million or 37 percent in the prior year. The effective tax rate in the 2007 quarter excluding debt retirement expenses was 30 percent. As mentioned previously, the lower effective tax rate in the 2007 quarter contributed to the increase in net earnings compared to the previous year. Additionally, the 2007 adjusted tax rate is below the expected full year rate primarily due to the Company’s geographic earnings profile in the quarter. The Company reported second-quarter 2007 net earnings of $97 million, or $0.94 per diluted share, which compares to $91 million or $0.88 per diluted share in the 2006 period. Net earnings in the 2007 quarter excluding previously mentioned debt retirement costs of $8 million were $105 million or $1.02 per diluted share. Earnings before interest, securitization costs, loss on retirement of debt, taxes, depreciation and amortization (“EBITDA”) were $344 million in the second quarter, which compares to the prior year level of $326 million. First Half 2007 The Company reported first-half 2007 sales of $7.3 billion, an increase of $464 million or 6.8 percent compared to prior year sales of $6.9 billion. The 2007 period benefited primarily from the positive effect of foreign currency translation and higher product volumes related to new product growth and robust industry sales in overseas markets. These positives were partially offset by the continued decline in North American customer vehicle production and price reductions provided to customers. Operating income for the first half of 2007 was $380 million, which is down from the prior year result of $428 million. The year-to-year decline was driven by a number of factors, including pricing provided to customers, negative product mix (particularly in the first quarter) and higher commodity prices. Additionally, the comparison was negatively impacted by Company specific issues predominantly in the first quarter related to a roof collapse in Brazil and underperformance in the Automotive Components segment. Savings generated from cost improvement and efficiency programs, including reductions in pension and OPEB related costs, and higher product volumes helped to offset these factors. Restructuring and asset impairment expenses in both the 2007 and 2006 periods were $19 million. 3
  • 5. Net interest and securitization expense in the first-half 2007 period was $121 million, which represents a slight improvement from the prior year result of $122 million. Benefits derived from the Company’s debt recapitalization more than offset the unfavorable impact of higher interest rates between the two periods. As a reminder, first quarter actions related to the debt recapitalization included a $1.5 billion Senior Note offering and the tender for substantially all of the Company’s outstanding $1.3 billion Notes. The 2007 period included debt retirement costs of $155 million related to the debt recapitalization. In comparison, the 2006 period included debt retirement charges of $57 million. First-half 2007 tax expense was $98 million, resulting in an effective tax rate 90 percent, which compares to $116 million or 46 percent in the prior year. The effective tax rate, excluding previously mentioned debt retirement expenses from both periods, was 37 percent in each of the years. The Company reported first-half 2007 net earnings of $11 million, or $0.11 per diluted share, which compares to $138 million or $1.34 per diluted share in the 2006 period. Net earnings excluding the previously mentioned debt retirement costs from both periods were $166 million or $1.62 per diluted share in 2007 and $195 million or $1.89 per diluted share in 2006. EBITDA was $653 million in the first half of 2007, which is down from the prior year level of $686 million primarily due to the lower level of operating income in the current year. Cash Flow and Capital Structure Second quarter net cash provided by operations was $290 million, which compares to $233 million in the prior year. Cash flow in the 2007 period included proceeds of $127 million related to outstanding borrowings under the Company’s U.S. based Accounts Receivable Securitization Facility (“Receivable Facility”). Absent these proceeds, the Company’s cash flow from operations in the 2007 quarter was $163 million, which is below the prior year result primarily due to higher working capital needs in the current year. Second quarter capital expenditures were $109 million compared to $119 million in 2006. 4
  • 6. For the six month period ended June 29, 2007, the Company generated net cash from operating activities of $69 million, which compares to $251 million in the prior year. Excluding proceeds related to outstanding borrowings under the Receivable Facility, cash flow from operations was a use of $58 million in the 2007 period. The year-to- year change resulted primarily from higher working capital requirements, including the impact of seasonal factors, and a lower level of earnings in the 2007 period. First half capital expenditures were $228 million compared to $202 million in 2006. As part of the Company’s debt recapitalization plan, on May 9, 2007, it refinanced $2.5 billion of its existing credit facilities with new credit facilities in approximately the same amount. The Company also completed its $1.5 billion Senior Note offering on March 26, 2007. Proceeds from the note offering were used to repurchase substantially all of the existing $1.3 billion Notes through a tender offer. The Company incurred debt retirement charges of approximately $155 million during the year-to-date period related to these transactions. On February 2, 2006, the Company’s wholly owned subsidiary, Lucas Industries Limited, completed the tender for its outstanding GBP 94.6 million 10⅞% bonds. As a result of the transaction, the Company incurred a $57 million charge for loss on retirement of debt. As of June 29, 2007, the Company had $3,042 million of debt and $284 million of cash and marketable securities, resulting in net debt (defined as debt less cash and marketable securities) of $2,758 million. Net debt adjusted to include proceeds of $127 million from outstanding borrowings under the Receivables Facility was $2,885 million, which represents a decrease of $70 million compared to the balance at the end of the first quarter. This lower level primarily reflects the favorable operating cash flow outcome in the second quarter. On June 4, 2007, the Company completed a secondary public offering of 11 million shares of its common stock held by an affiliate of The Blackstone Group L.P. and certain members of TRW management. The Company did not receive any proceeds related to this offering. As a result of this transaction, Blackstone’s ownership stake in TRW fell to 46.4%. Consequently, TRW has ceased to be a “controlled company” within the meaning of the New York Stock Exchange corporate governance rules. 5
  • 7. 2007 Outlook The Company updated its full year outlook to reflect the impact of the previously mentioned credit facilities refinancing transaction and to account for other changes to its forecast assumptions. The Company expects full year sales in the range of $14.1 to $14.5 billion (including third quarter sales of approximately $3.4 billion) and net earnings per diluted share in the range of $0.55 to $0.85. Net earnings excluding debt retirement expenses of $155 million are expected to be in the range of $2.05 to $2.35, which is unchanged from previous estimates. This guidance range reflects pre-tax restructuring expenses of approximately $45 million (including approximately $12 million in the third quarter). The effective tax rate after excluding debt retirement costs is expected to be in the range of approximately 40 to 44 percent. Lastly, the Company expects capital expenditures in 2007 to be approximately 4 percent of sales. Second Quarter 2007 Conference Call The Company will host its second-quarter conference call at 8:30 a.m. (EDT) today, Wednesday, August 1, to discuss financial results and other related matters. To access the conference call, U.S. locations should dial (877) 852-7898, and locations outside the U.S. should dial (706) 634-1095. A replay of the conference call will be available approximately two hours after the conclusion of the call and accessible for approximately one week. To access the replay, U.S. locations should dial (800) 642-1687, and locations outside the U.S. should dial (706) 645-9291. The replay code is 7220208. A live audio webcast and subsequent replay of the conference call will also be available on the Company’s website at www.trw.com/results. Reconciliation to GAAP In addition to GAAP results included within this press release, the Company has provided certain information which is not calculated according to GAAP (“non-GAAP”). Management believes these non-GAAP measures are useful to evaluate operating performance and/or regularly used by security analysts, institutional investors and other interested parties in the evaluation of the Company. 6
  • 8. Non-GAAP measures are not purported to be a substitute for any GAAP measure and, as calculated, may not be comparable to other similarly titled measures of other companies. For a reconciliation of non-GAAP measures to the closest GAAP measure and for share amounts used to derive earnings per share, please see the financial schedules that accompany this release. About TRW With 2006 sales of $13.1 billion, TRW Automotive ranks among the world's leading automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, operates in 28 countries and employs approximately 63,800 people worldwide. TRW Automotive products include integrated vehicle control and driver assist systems, braking systems, steering systems, suspension systems, occupant safety systems (seat belts and airbags), electronics, engine components, fastening systems and aftermarket replacement parts and services. All references to quot;TRW Automotivequot;, “TRW” or the quot;Companyquot; in this press release refer to TRW Automotive Holdings Corp. and its subsidiaries, unless otherwise indicated. TRW Automotive news is available on the internet at www.trw.com. Forward-Looking Statements This release contains statements that are not statements of historical fact, but instead are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those contained in forward-looking statements made in this release. Such risks, uncertainties and other important factors which could cause our actual results to differ materially from those contained in our forward-looking statements are set forth in our Report on Form 10-K for the fiscal year ended December 31, 2006 (the “10-K”), and include: production cuts or restructuring by our major customers; work stoppages or other labor issues at the facilities of our customers or suppliers; non-performance by, or insolvency of, our suppliers and customers, which may be exacerbated by bankruptcies and other pressures within the automotive industry; the inability of our suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; interest rate risk arising from our variable rate indebtedness; loss of market share by domestic vehicle manufacturers; efforts by our customers to consolidate their supply base; severe inflationary pressures impacting 7
  • 9. the market for commodities; escalating pricing pressures from our customers; our dependence on our largest customers; fluctuations in foreign exchange rates; our substantial leverage; product liability and warranty and recall claims and efforts by customers to alter terms and conditions concerning warranty and recall participation; limitations on flexibility in operating our business contained in our debt agreements; the possibility that our owners’ interests will conflict with ours and other risks and uncertainties set forth under “Risk Factors” in the 10-K and in our other SEC filings. We do not intend or assume any obligation to update any of these forward-looking statements. ### 8
  • 10. TRW Automotive Holdings Corp. Index of Condensed Consolidated Financial Information Page Condensed Consolidated Statements of Earnings (unaudited) for the three months ended June 29, 2007 and June 30, 2006 .................................................A2 Condensed Consolidated Statements of Earnings (unaudited) for the six months ended June 29, 2007 and June 30, 2006 .....................................................A3 Condensed Consolidated Balance Sheets as of June 29, 2007 (unaudited) and December 31, 2006 .................................................................A4 Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 29, 2007 and June 30, 2006 .....................................................A5 Reconciliation of GAAP Net Earnings to EBITDA (unaudited) for the three and six month periods ended June 29, 2007 and June 30, 2006 ..........................A6 Reconciliation of GAAP Net Earnings to Adjusted Earnings (unaudited) for the three months ended June 29, 2007 ................................................................................A7 Reconciliation of GAAP Net Earnings to Adjusted Earnings (unaudited) for the six months ended June 29, 2007....................................................................................A8 Reconciliation of GAAP Net Earnings to Adjusted Earnings (unaudited) for the six months ended June 30, 2006....................................................................................A9 The accompanying unaudited condensed consolidated financial information and reconciliation schedules should be read in conjunction with the TRW Automotive Holdings Corp. Annual Report on Form 10-K for the year ended December 31, 2006 and Quarterly Report on Form 10-Q for the period ended March 30, 2007, as filed with the United States Securities and Exchange Commission on February 23, 2007 and May 2, 2007, respectively.
  • 11. TRW Automotive Holdings Corp. Condensed Consolidated Statements of Earnings (Unaudited) Three Months Ended (In millions, except per share amounts) June 29, 2007 June 30, 2006 Sales ........................................................................................... $ 3,754 $ 3,461 Cost of sales................................................................................ 3,414 3,103 Gross profit............................................................................ 340 358 Administrative and selling expenses ........................................... 143 140 Amortization of intangible assets................................................. 9 9 Restructuring charges and asset impairments ............................ 11 11 Other income — net .................................................................... (28) (3) Operating income .................................................................. 205 201 Interest expense — net ............................................................... 56 60 Loss on retirement of debt........................................................... 8 — Accounts receivable securitization costs..................................... 1 1 Equity in earnings of affiliates, net of tax..................................... (9) (9) Minority interest, net of tax .......................................................... 7 5 Earnings before income taxes ............................................. 142 144 Income tax expense .................................................................... 45 53 Net earnings........................................................................ $ 97 $ 91 Basic earnings per share: Earnings per share .................................................................... $ 0.97 $ 0.91 Weighted average shares ......................................................... 99.5 100.3 Diluted earnings per share: Earnings per share .................................................................... $ 0.94 $ 0.88 Weighted average shares ......................................................... 103.4 103.7 A2
  • 12. TRW Automotive Holdings Corp. Condensed Consolidated Statements of Earnings (Unaudited) Six Months Ended (In millions, except per share amounts) June 29, 2007 June 30, 2006 Sales............................................................................................ $ 7,321 $ 6,857 Cost of sales ................................................................................ 6,661 6,138 Gross profit ............................................................................ 660 719 Administrative and selling expenses............................................ 275 269 Amortization of intangible assets ................................................. 18 18 Restructuring charges and asset impairments ............................ 19 19 Other income — net..................................................................... (32) (15) Operating income .................................................................. 380 428 Interest expense — net................................................................ 119 120 Loss on retirement of debt ........................................................... 155 57 Accounts receivable securitization costs ..................................... 2 2 Equity in earnings of affiliates, net of tax ..................................... (15) (13) Minority interest, net of tax........................................................... 10 8 Earnings before income taxes.............................................. 109 254 Income tax expense..................................................................... 98 116 Net earnings ........................................................................ $ 11 $ 138 Basic earnings per share: Earnings per share .................................................................... $ 0.11 $ 1.38 Weighted average shares.......................................................... 99.0 99.9 Diluted earnings per share: Earnings per share .................................................................... $ 0.11 $ 1.34 Weighted average shares.......................................................... 102.5 103.3 A3
  • 13. TRW Automotive Holdings Corp. Condensed Consolidated Balance Sheets As of (Dollars in millions) June 29, December 31, 2007 2006 (Unaudited) Assets Current assets: Cash and cash equivalents.................................................... $ 275 $ 578 Marketable securities............................................................. 9 11 Accounts receivable — net .................................................... 2,194 2,049 Receivable from affiliate ........................................................ 359 — Inventories ............................................................................. 847 768 Prepaid expenses and other current assets .......................... 303 270 Total current assets.................................................................... 3,987 3,676 Property, plant and equipment — net......................................... 2,746 2,714 Goodwill...................................................................................... 2,282 2,275 Intangible assets — net.............................................................. 725 738 Pension asset............................................................................. 1,028 979 Other assets ............................................................................... 773 751 Total assets ............................................................................ $ 11,541 $ 11,133 Liabilities, Minority Interests and Stockholders’ Equity Current liabilities: Short-term debt ..................................................................... $ 140 $ 69 Current portion of long-term debt .......................................... 31 101 Trade accounts payable........................................................ 2,218 1,977 Accrued compensation.......................................................... 295 271 Other current liabilities .......................................................... 1,166 1,257 Total current liabilities................................................................. 3,850 3,675 Long-term debt ........................................................................... 2,871 2,862 Post-retirement benefits other than pensions............................. 635 645 Pension benefits......................................................................... 700 722 Other long-term liabilities............................................................ 865 723 Total liabilities......................................................................... 8,921 8,627 Minority interests ........................................................................ 120 109 Commitments and contingencies Stockholders’ equity: Capital stock.......................................................................... 1 1 Treasury stock....................................................................... – — Paid-in-capital ....................................................................... 1,164 1,125 Retained earnings ................................................................. 319 308 Accumulated other comprehensive earnings ........................ 1,016 963 Total stockholders’ equity ........................................................... 2,500 2,397 Total liabilities, minority interests and stockholders’ equity .... $ 11,541 $ 11,133 A4
  • 14. TRW Automotive Holdings Corp. Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended (Dollars in millions) June 29,2007 June 30, 2006 Operating Activities Net earnings ..................................................................................... $ 11 $ 138 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization........................................................ 268 253 Other — net .................................................................................... 70 (20) Changes in assets and liabilities, net of effects of businesses acquired: Accounts receivable — net, and receivable from affiliate .............. (450) (288) Inventories...................................................................................... (54) 3 Trade accounts payable................................................................. 201 74 Other assets ................................................................................... (38) 3 Other liabilities................................................................................ 61 88 Net cash provided by operating activities ..................................... 69 251 Investing Activities Capital expenditures......................................................................... (228) (202) Proceeds from asset sales and divestitures, net of acquisitions ...... 11 10 Other — net...................................................................................... (12) (1) Net cash used in investing activities............................................. (229) (193) Financing Activities Change in short-term debt................................................................ 50 (19) Net proceeds from revolving credit facility........................................ 200 — Proceeds from issuance of long-term debt, net of fees.................... 2,582 22 Redemption of long-term debt.......................................................... (2,993) (273) Proceeds from exercise of stock options.......................................... 28 17 Net cash used in financing activities ............................................ (133) (253) Effect of exchange rate changes on cash ........................................ (10) 39 Decrease in cash and cash equivalents........................................... (303) (156) Cash and cash equivalents at beginning of period........................... 578 659 Cash and cash equivalents at end of period .................................... $ 275 $ 503 A5
  • 15. TRW Automotive Holdings Corp. Reconciliation of GAAP Net Earnings to EBITDA (Unaudited) The reconciliation schedule below should be read in conjunction with the TRW Automotive Holdings Corp. Annual Report on Form 10-K for the year ended December 31, 2006 and Quarterly Report on Form 10-Q for the period ended March 30, 2007, which contain summary historical data. The EBITDA measure calculated in the following schedule is a measure used by management to evaluate operating performance. Management believes that EBITDA is a useful measurement because it is frequently used by securities analysts, institutional investors and other interested parties in the evaluation of companies in our industry. EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net earnings (losses) as an indicator of operating performance, nor to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly titled measures of other companies. Three Months Ended (Dollars in millions) June 29, 2007 June 30, 2006 GAAP net earnings........................................................ $ 97 $ 91 Income tax expense ................................................ 45 53 Interest expense — net ........................................... 56 60 Loss on retirement of debt....................................... 8 — Accounts receivable securitization costs ................. 1 1 Depreciation and amortization................................. 137 121 EBITDA ......................................................................... $ 344 $ 326 Six Months Ended (Dollars in millions) June 29, 2007 June 30, 2006 GAAP net earnings ....................................................... $ 11 $ 138 Income tax expense ................................................ 98 116 Interest expense — net ........................................... 119 120 Loss on retirement of debt ...................................... 155 57 Accounts receivable securitization costs................. 2 2 Depreciation and amortization ................................ 268 253 EBITDA ......................................................................... $ 653 $ 686 A6
  • 16. TRW Automotive Holdings Corp. Reconciliation of GAAP Net Earnings to Adjusted Earnings (Unaudited) In conjunction with the Company’s tender offer and repurchases of its then outstanding 9⅜% Senior Notes and 10⅛% Senior Notes in original principal amounts of $925 million and €200 million, respectively, and 11% Senior Subordinated Notes and 11¾% Senior Subordinated Notes in original principal amounts of $300 million and €125 million, respectively, (collectively, the “Old Notes”), the Company recorded a loss on retirement of debt of $1 million during the three months ended June 29, 2007 for additional redemption premiums paid. The Company entered into its Fifth Amended and Restated Credit Agreement dated as of May 9, 2007, which provides for $2.5 billion in senior secured credit facilities, consisting of (i) a 5-year $1.4 billion Revolving Credit Facility, (ii) a 6-year $600 million Term Loan A-1 Facility and (iii) a 6.75-year $500 million Term Loan B-1 Facility (collectively, the “Facilities”). Proceeds from the Facilities were used to refinance $2.5 billion of existing senior secured credit facilities and pay fees and expenses related to the refinancing. The Company recorded a loss on retirement of debt related to the transaction of $7 million during the second quarter of 2007. The following reconciliation excludes the impact of the loss on retirement of debt. Three Months Three Months Ended Ended June 29, 2007 June 29,2007 Actual Adjustments Adjusted (In millions, except per share amounts) Sales ..................................................................... $ 3,754 $ — $ 3,754 Cost of sales ......................................................... 3,414 — 3,414 Gross profit........................................................ 340 — 340 Administrative and selling expenses..................... 143 — 143 Amortization of intangible assets .......................... 9 — 9 Restructuring charges and asset impairments...... 11 — 11 Other income — net .............................................. (28) — (28) Operating income.............................................. 205 — 205 Interest expense, net............................................. 56 — 56 (a) Loss on retirement of debt .................................... 8 (8) — Account receivable securitization costs ................ 1 — 1 Equity in earnings of affiliates, net of tax .............. (9) — (9) Minority interest, net of tax .................................... 7 — 7 Earnings before income taxes .......................... 142 8 150 Income tax expense ............................................. 45 — 45 Net earnings ..................................................... $ 97 $ 8 $ 105 Effective tax rate ................................................... 32% 30% Basic earnings per share: Earnings per share.............................................. $ 0.97 $ 1.06 Weighted average shares ................................... 99.5 99.5 Diluted earnings per share: Earnings per share.............................................. $ 0.94 $ 1.02 Weighted average shares ................................... 103.4 103.4 (a) Reflects the elimination of the loss on retirement of debt. A7
  • 17. TRW Automotive Holdings Corp. Reconciliation of GAAP Net Earnings to Adjusted Earnings (Unaudited) In conjunction with the Company’s tender offer and repurchases of its then outstanding Old Notes, the Company recorded a loss on retirement of debt of $148 million during the six months ended June 29, 2007. This loss included $112 million for redemption premiums paid, $20 million for the write-off of deferred debt issue costs, $11 million relating to the principal amount in excess of carrying value of the 9⅜% Senior Notes and $5 million of fees. The Company entered into its Fifth Amended and Restated Credit Agreement dated as of May 9, 2007, which provides for $2.5 billion in senior secured credit facilities, consisting of (i) a 5-year $1.4 billion Revolving Credit Facility, (ii) a 6-year $600 million Term Loan A-1 Facility and (iii) a 6.75-year $500 million Term Loan B-1 Facility (collectively, the “Facilities”). Proceeds from the Facilities were used to refinance $2.5 billion of existing senior secured credit facilities and pay fees and expenses related to the refinancing. The Company recorded a loss on retirement of debt related to the transaction of $7 million during the second quarter of 2007. The following reconciliation excludes the impact of the loss on retirement of debt. Six Months Six Months Ended Ended June 29, 2007 June 29, 2007 Actual Adjustments Adjusted (In millions, except per share amounts) Sales ..................................................................... $ 7,321 $ — $ 7,321 Cost of sales ......................................................... 6,661 — 6,661 Gross profit ....................................................... 660 — 660 Administrative and selling expenses..................... 275 — 275 Amortization of intangible assets .......................... 18 — 18 Restructuring charges and asset impairments ..... 19 — 19 Other income — net.............................................. (32) — (32) Operating income.............................................. 380 — 380 Interest expense, net ............................................ 119 — 119 (a) Loss on retirement of debt .................................... 155 (155) — Account receivable securitization costs................ 2 — 2 Equity in earnings of affiliates, net of tax .............. (15) — (15) Minority interest, net of tax.................................... 10 — 10 Earnings before income taxes .......................... 109 155 264 Income tax expense ............................................. 98 — 98 Net earnings ..................................................... $ 11 $ 155 $ 166 Effective tax rate ................................................... 90% 37% Basic earnings per share: Earnings per share ............................................. $ 0.11 $ 1.68 Weighted average shares................................... 99.0 99.0 Diluted earnings per share: Earnings per share ............................................. $ 0.11 $ 1.62 Weighted average shares................................... 102.5 102.5 (a) Reflects the elimination of the loss on retirement of debt. A8
  • 18. TRW Automotive Holdings Corp. Reconciliation of GAAP Net Earnings to Adjusted Earnings (Unaudited) In conjunction with the Company’s February 2, 2006 repurchase of its subsidiary Lucas Industries Limited’s £94.6 million 10⅞% bonds due 2020 for £137 million, or approximately $243 million, the Company recorded a loss on retirement of debt of £32 million, or approximately $57 million. Such loss on retirement of debt carries zero tax benefit due to the Company’s tax loss position in the respective jurisdiction. The following adjustment excludes the loss on retirement of debt to show the impact as if this transaction had not occurred. Six Months Six Months Ended Ended June 30, 2006 June 30, 2006 Actual Adjustments Adjusted (In millions, except per share amounts) Sales ................................................................... $ 6,857 $ — $ 6,857 Cost of sales........................................................ 6,138 — 6,138 Gross profit...................................................... 719 — 719 Administrative and selling expenses ................... 269 — 269 Amortization of intangible assets ........................ 18 — 18 Restructuring charges and asset impairments.... 19 — 19 Other income — net ............................................ (15) — (15) Operating income............................................ 428 — 428 Interest expense, net........................................... 120 — 120 (a) Loss on retirement of debt .................................. 57 (57) — Account receivable securitization costs .............. 2 — 2 Equity in earnings of affiliates, net of tax ............ (13) — (13) Minority interest, net of tax .................................. 8 — 8 Earnings before income taxes......................... 254 57 311 Income tax expense ........................................... 116 — 116 Net earnings ................................................... $ 138 $ 57 $ 195 Effective tax rate ................................................. 46% 37% Basic earnings per share: Earnings per share............................................ $ 1.38 $ 1.95 Weighted average shares ................................. 99.9 99.9 Diluted earnings per share: Earnings per share............................................ $ 1.34 $ 1.89 Weighted average shares ................................. 103.3 103.3 (a) Reflects the elimination of the loss on retirement of debt. A9
  • 19. Second Quarter 2007 Financial Results Presentation August 1, 2007 “The Global Leader in Automotive Safety Systems” TRW Automotive Holdings Corp.
  • 20. Introduction Patrick Stobb Director, Investor Relations Business Summary John C. Plant President and Chief Executive Officer P2 © TRW Automotive Holdings Corp. 2007
  • 21. Safe Harbor Statement This presentation contains statements that are not statements of historical fact, but instead are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those contained in forward-looking statements made in this presentation. Such risks, uncertainties and other important factors which could cause our actual results to differ materially from those contained in our forward-looking statements are set forth in our Report on Form 10-K for the fiscal year ended December 31, 2006 (the “10- K”), and include: production cuts or restructuring by our major customers; work stoppages or other labor issues at the facilities of our customers or suppliers; non-performance by, or insolvency of, our suppliers and customers, which may be exacerbated by bankruptcies and other pressures within the automotive industry; the inability of our suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; interest rate risk arising from our variable rate indebtedness; loss of market share by domestic vehicle manufacturers; efforts by our customers to consolidate their supply base; severe inflationary pressures impacting the market for commodities; escalating pricing pressures from our customers; our dependence on our largest customers; fluctuations in foreign exchange rates; our substantial leverage; product liability and warranty and recall claims and efforts by customers to alter terms and conditions concerning warranty and recall participation; limitations on flexibility in operating our business contained in our debt agreements; the possibility that our owners’ interests will conflict with ours and other risks and uncertainties set forth under “Risk Factors” in the 10-K and in our other SEC filings. We do not intend or assume any obligation to update any of these forward-looking statements. P3 © TRW Automotive Holdings Corp. 2007
  • 22. Summary Comments • Company’s strong financial performance continued during the second quarter: – Accomplished operating objectives – Executed final step of the 2007 debt recapitalization plan – Concluded a solid first half of the year • TRW Strategy – key to success: – Demand for safety (government regulations, manufacturers, and consumers) driving content growth – Well-placed to benefit from growth in emerging markets – Enviable breadth of safety, solid customer base and leading global diversification provide stability – Leading-edge technology – Effective cost management – Strategic Priorities ingrained in daily business decisions P4 © TRW Automotive Holdings Corp. 2007
  • 23. Financial Summary Second Quarter • Sales of $3.8 billion, an increase of 8.5% over the prior year period: + Foreign currency translation – + New business content and growth in emerging markets – - – Big 3 North American industry production - – Customer pricing • GAAP net earnings of $97 million or $0.94 per share – Includes $8 million of debt retirement charges • Net earnings excluding debt retirement charges were $105 million or $1.02 per diluted share(a) First Half • Sales of $7.3 billion, an increase of 6.8% over the prior year period • GAAP net earnings of $11 million or $0.11 per share – Includes $155 million of debt retirement charges • Net earnings excluding debt retirement charges were $166 million or $1.62 per diluted share(a) (a) For adjusted results comparison and reconciliation to GAAP, please see slides P10 and P12. P5 © TRW Automotive Holdings Corp. 2007
  • 24. Quarterly Developments • Recorded another quarter of steady business wins with the world’s leading vehicle manufacturers: – Pace of wins supports expectation of 4% compounded annual growth rate (CAGR) • Investment in technology helping to ensure our future growth and sustainability. Examples include: Recently surpassed 2 million units shipped – Electric Park Brake Energy consumption just 10% of – Electrically Powered Steering conventional hydraulic power steering – Rollover Curtain Airbag Features cold gas inflator and specially coated airbag to provide for up to 6 seconds of inflation • Other developments: – Signed first-of-kind agreement in China with National Center of Supervision and Vehicle Inspections to support the development of safety restraints for domestic Chinese OEMs – Recently hosted 3,000 customer employees at three very successful technology exhibitions showcasing our active and passive safety capabilities – Automotive Components performance stabilized – second half will be challenging – Capital structure changes P6 © TRW Automotive Holdings Corp. 2007
  • 25. 2007 Operating Environment 2007 Industry Production Assumptions(1) (units in millions) • North American vehicle production 15.9 ’03 forecast now at 15.1 million units, 15.8 ‘04 North North 15.8 down approximately 100K units from ‘05 America America 15.3 ‘06 previous estimate. 15.1 ‘07 • Big 3 production forecast in North 11.9 American remains flat for the ’03 11.4 ‘04 second half of 2007. Big 3 Big 3 10.9 North ‘05 North 10.2 America America • European vehicle production ‘06 9.7 ‘07 forecast unchanged. 19.2 • Persistent commodity inflation ’03 20.2 ‘04 (magnesium, nickel, and zinc) and 19.9 Europe Europe ‘05 supplier issues expected to further 20.4 ‘06 pressure the cost base. 21.0 ‘07 (1) Source: Light vehicle assumptions primarily CSM Worldwide and internal company estimates. P7 © TRW Automotive Holdings Corp. 2007
  • 26. 2007 Full Year Outlook • Expect sales in the range of $14.1 to $14.5 billion • GAAP net earnings per diluted share of $0.55 to $0.85 – Includes $155 million of debt retirement charges related to the 2007 debt recapitalization • Net earnings per diluted share excluding debt charges in the range of $2.05 to $2.35 — unchanged from previous estimates(a) • Restructuring expenses (pre-tax) of approximately $45 million • Capital spending expected to run at approximately 4% of 2007 sales • Effective tax rate excluding debt retirement charges in the range of approximately 40% - 44% (a) Per share amounts based on weighted average diluted shares outstanding of approximately 103.5 million shares. P8 © TRW Automotive Holdings Corp. 2007
  • 27. Financial Overview Joseph S. Cantie Executive Vice President and Chief Financial Officer P9 © TRW Automotive Holdings Corp. 2007
  • 28. Second Quarter Results (dollars in millions, except where noted) Q2 2007 Q2 2006 GAAP Adjusting Adjusted GAAP Results Item Results Results Sales $ 3,754 $ - $ 3,754 $ 3,461 Operating Income 205 - 205 201 Net Interest and Securitization 57 - 57 61 Loss on Retirement of Debt 8 (8) (a) - - Equity in Earnings of Affiliates (9) - (9) (9) Minority Interest 7 - 7 5 Income Tax Expense 45 - 45 53 Effective Tax Rate 32% 30% 37% Net Earnings $ 97 $ 8 $ 105 $ 91 Share Count 103.4 103.4 103.7 Earnings Per Share $ 0.94 $ 1.02 $ 0.88 (a) $8 million loss on retirement of debt related primarily to the Company’s $2.5 billion credit facilities refinancing transaction. P10 © TRW Automotive Holdings Corp. 2007
  • 29. Second Quarter EBITDA (dollars in millions, except where noted) Q2 2007 Q2 2006 GAAP Net Earnings $ 97 $ 91 Income Tax Expense 45 53 Net Interest & Securitization 57 61 Loss on Retirement of Debt 8 - Depreciation & Amortization 137 121 EBITDA (a) $ 344 $ 326 Memo: Restructuring & Asset Impairments Included in EBITDA $ 11 $ 11 (a) Please refer to slide P18 for management’s rationale for using this metric. P11 © TRW Automotive Holdings Corp. 2007
  • 30. First Half Results (dollars in millions, except where noted) First Half 2007 First Half 2006 GAAP Adjusting Adjusted GAAP Adjusting Adjusted Results Item Results Results Item Results Sales $ 7,321 $ - $ 7,321 $ 6,857 $ - $ 6,857 Operating Income 380 - 380 428 - 428 Net Interest and Securitization 121 - 121 122 - 122 (a) (b) Loss on Retirement of Debt 155 (155) - 57 (57) - Equity in Earnings of Affiliates (15) - (15) (13) - (13) Minority Interest 10 - 10 8 - 8 Income Tax Expense 98 - 98 116 - 116 Effective Tax Rate 90% 37% 46% 37% Net Earnings $ 11 $ 155 $ 166 $ 138 $ 57 $ 195 Share Count 102.5 102.5 103.3 103.3 Earnings Per Share $ 0.11 $ 1.62 $ 1.34 $ 1.89 (a) $155 million loss on retirement of debt related to the Company’s 2007 debt recapitalization. (b) $57 million loss on retirement of debt related to Lucas bond tender transaction. P12 © TRW Automotive Holdings Corp. 2007
  • 31. First Half EBITDA (dollars in millions, except where noted) First Half First Half 2007 2006 GAAP Net Earnings $ 11 $ 138 Income Tax Expense 98 116 Net Interest & Securitization 121 122 Loss on Retirement of Debt 155 57 Depreciation & Amortization 268 253 EBITDA(a) $ 653 $ 686 Memo: Restructuring & Asset Impairments Included in EBITDA $ 19 $ 19 (a) Please refer to slide P18 for management’s rationale for using this metric. P13 © TRW Automotive Holdings Corp. 2007
  • 32. Capital Structure Summary Net Debt Summary(a) $127 Million Receivable $1.5 billion Senior Note Facility Dalphimetal acquisition offering and $1.3 billion tender Proceeds increased net debt by transaction increased net debt $244 million $2,885(b) by approximately $130 million $3,437 $2,964 $2,955 $2,758 $2,656 $2,515 $2,443 $2,372 $2,560 Feb 28, Dec 31, Dec 31, Dec 31, Mar 31, June 30, Dec 31, Mar 30, June 29, 2003 2003 2004 2005 2006 2006 2006 2007 2007 • Second quarter 2007 net cash from operating activities was $290 million, which compares to $233 million in the prior year period: – Cash flow in the second quarter of 2007 included proceeds of $127 million related to outstanding borrowings under the Company’s Accounts Receivable Securitization Facility • Capital expenditures in second quarter 2007 were $109 million, which compares to $119 million in the prior year period (a) Net debt is equal to total indebtedness minus cash, cash equivalents and marketable securities. For net debt reconciliation to closest GAAP equivalent, please refer to the reconciliation on slide P19 of this presentation. (b) Net debt adjusted to include receivables facility proceeds. P14 © TRW Automotive Holdings Corp. 2007
  • 33. 2007 Outlook Detail • Prospects for the second half remain positive – however, North American vehicle build remains uncertain • Expect third quarter sales of $3.4 billion: – Based on vehicle production of 3.6 million units in North America and 4.7 million units in Europe – Lower Class 8 commercial vehicle build and increased module sales (which have lower margins) will be at full swing in the third quarter • Company continues to focus on the cost base to mitigate industry challenges, while investing to continue growth and to remain globally competitive in the future P15 © TRW Automotive Holdings Corp. 2007
  • 34. “Driving Automotive Safety” P16 © TRW Automotive Holdings Corp. 2007
  • 35. Financial Reconciliation Section P17 © TRW Automotive Holdings Corp. 2007
  • 36. EBITDA Measurement • The accompanying unaudited consolidated financial information and reconciliation of GAAP net earnings to earnings before interest, income tax, accounts receivable securitization cost, loss on retirement of debt, and depreciation and amortization (“EBITDA”) should be read in conjunction with the TRW Automotive Holdings Corp. Form 10-K for the year ended December 31, 2006, and quarterly report on Form 10-Q for the period ended March 30, 2007, as filed with the United States Securities and Exchange Commission. • The EBITDA measure calculated in this presentation is a measure used by management to evaluate operating performance. Management believes that EBITDA is a useful measurement because it is frequently used by securities analysts, institutional investors and other interested parties in the evaluation of companies in our industry. • EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net earnings (losses) as an indicator of operating performance, or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to other similarly titled measures of other companies. P18 © TRW Automotive Holdings Corp. 2007
  • 37. Net Debt Reconciliation Period-End Balances (dollars in millions) 2/28/03 12/31/03 12/31/04 12/31/05 3/31/06 6/30/06 12/31/06 3/30/07 6/29/07 Cash $ 449 $ 828 $ 790 $ 659 $ 373 $ 503 $ 578 $ 343 $ 275 Marketable securities 26 16 19 17 17 17 11 11 9 Total cash and marketable securities 475 844 809 676 390 520 589 354 284 Short term debt 168 76 40 98 98 83 69 125 140 Term loan facilities 1,510 1,480 1,512 1,593 1,588 1,585 1,582 1,579 1,100 Revolving credit facilities - - - - - - - - 200 Senior & senior subordinated notes due 2013 1,577 1,636 1,369 1,255 1,254 1,257 1,284 26 17 Senior notes due 2014 and 2017 - - - - - - - 1,467 1,469 Lucas Varity senior notes 167 189 202 181 - - - - - Other borrowings 142 45 58 109 106 110 97 112 116 Northrop seller note 348 382 - - - - - - - Total debt 3,912 3,808 3,181 3,236 3,046 3,035 3,032 3,309 3,042 Net debt $ 3,437 $ 2,964 $ 2,372 $ 2,560 $ 2,656 $ 2,515 $ 2,443 $ 2,955 $ 2,758 Memo: Receivable facility proceeds (a) - - - - - - - - $ 127 Net debt including receivables facility proceeds $ 3,437 $ 2,964 $ 2,372 $ 2,560 $ 2,656 $ 2,515 $ 2,443 $ 2,955 $ 2,885 (a) Proceeds related to outstanding borrowings under the Company’s U.S. based Accounts Receivable Securitization Facility. P19 © TRW Automotive Holdings Corp. 2007