-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VnSTTVGgMKD9n1YJMcJj11k0jzudxTZKXLs07fhKKhg136oSMu0bNRJAyrQnDv+X H3HSko6wZRuwIYb2CmCypQ== 0000912057-96-016497.txt : 19960808 0000912057-96-016497.hdr.sgml : 19960808 ACCESSION NUMBER: 0000912057-96-016497 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960807 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRW INC CENTRAL INDEX KEY: 0000100030 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 340575430 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02384 FILM NUMBER: 96605071 BUSINESS ADDRESS: STREET 1: 1900 RICHMOND RD CITY: CLEVELAND STATE: OH ZIP: 44124 BUSINESS PHONE: 2162917000 MAIL ADDRESS: STREET 1: 1900 RICHMOND ROAD CITY: CLEVELAND STATE: OH ZIP: 44124 10-Q 1 FORM 10-Q 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 June 30, 1996 ------------- 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 August 2, 1996, there were 64,423,611 shares of TRW Common Stock, $0.625 par value, outstanding. PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS
Statements of Earnings (unaudited) TRW Inc. and subsidiaries - ---------------------------------------------------------------------------------------------------- Second quarter ended Six months ended June 30 June 30 In millions except per share data 1996 1995 1996 1995 - ---------------------------------------------------------------------- --------------------- Sales $2,729 $2,712 $5,399 $5,308 Cost of sales 2,186 2,184 4,329 4,257 - ---------------------------------------------------------------------- --------------------- Gross profit 543 528 1,070 1,051 Administrative and selling expenses 199 184 397 385 Research and development expenses 117 123 225 226 Interest expense 20 24 39 48 Other (income)expense-net (3) - 10 5 - ---------------------------------------------------------------------- --------------------- Earnings before income taxes 210 197 399 387 Income taxes 80 74 152 149 - ---------------------------------------------------------------------- --------------------- Net earnings $ 130 $ 123 $ 247 $ 238 - ---------------------------------------------------------------------- --------------------- - ---------------------------------------------------------------------- --------------------- PER SHARE OF COMMON STOCK Fully diluted $ 1.94 $ 1.81 $ 3.67 $ 3.53 Primary $ 1.96 $ 1.84 $ 3.70 $ 3.58 Dividends declared $ .55 $ .50 $ .55 $ .50 - ---------------------------------------------------------------------- --------------------- - ---------------------------------------------------------------------- --------------------- Shares used in computing per share amounts Fully diluted 66.9 68.0 67.4 67.4 Primary 66.5 66.7 66.8 66.3 - ---------------------------------------------------------------------- ---------------------
Balance Sheets (unaudited) TRW Inc. and subsidiaries - ------------------------------------------------------------------------------- June 30 December 31 In millions 1996 1995 - ------------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 64 $ 59 Accounts receivable 1,558 1,428 Inventories 517 534 Prepaid expenses 110 78 Deferred income taxes 113 237 - ------------------------------------------------------------------------------- Total current assets 2,362 2,336 Property, plant and equipment-on the basis of cost 5,867 5,866 Less accumulated depreciation and amortization 3,399 3,303 - ------------------------------------------------------------------------------- Total property, plant and equipment-net 2,468 2,563 Intangible assets Intangibles arising from acquisitions 476 483 Capitalized data files 509 488 Other 91 92 - ------------------------------------------------------------------------------- 1,076 1,063 Less accumulated amortization 431 405 - ------------------------------------------------------------------------------- Total intangible assets-net 645 658 Other assets 448 333 - ------------------------------------------------------------------------------- $5,923 $5,890 - ------------------------------------------------------------------------------- Liabilities and shareholders' investment Current liabilities Short-term debt $ 239 $ 133 Accounts payable 717 807 Current portion of long-term debt 68 80 Other current liabilities 1,097 992 - ------------------------------------------------------------------------------- Total current liabilities 2,121 2,012 Long-term liabilities 789 779 Long-term debt 513 541 Deferred income taxes 184 313 Minority interests in subsidiaries 80 73 Capital stock 41 41 Other capital 432 398 Retained earnings 1,898 1,688 Cumulative translation adjustments 48 76 Treasury shares-cost in excess of par value (183) (31) - ------------------------------------------------------------------------------- Total shareholders' investment 2,236 2,172 - ------------------------------------------------------------------------------- $5,923 $5,890 - ------------------------------------------------------------------------------- Statements of Cash Flows (unaudited) TRW Inc. and subsidiaries - ------------------------------------------------------------------------------- Six months ended June 30 In millions 1996 1995 - ------------------------------------------------------------------------------- Operating activities Net earnings $ 247 $ 238 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 262 260 Deferred income taxes (3) 11 Other-net 4 20 Changes in assets and liabilities, net of effects of businesses acquired or sold: Accounts receivable (141) (162) Inventories and prepaid expenses 2 (28) Accounts payable and other accruals (30) (4) Other-net (1) (12) - ------------------------------------------------------------------------------- Net cash provided by operating activities 340 323 - ------------------------------------------------------------------------------- Investing activities Capital expenditures (182) (197) Proceeds from divestitures 1 10 Investments in other assets (36) (28) Other-net 7 - - ------------------------------------------------------------------------------- Net cash used in investing activities (210) (215) - ------------------------------------------------------------------------------- Financing activities Increase(decrease) in short-term debt 91 (24) Proceeds from debt in excess of 90 days 21 15 Principal payments on debt in excess of 90 days (44) (65) Reacquisition of common stock (155) (15) Dividends paid (73) (65) Other-net 34 23 - ------------------------------------------------------------------------------- Net cash used in financing activities (126) (131) - ------------------------------------------------------------------------------- Effect of exchange rate changes on cash 1 (26) - ------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 5 (49) Cash and cash equivalents at beginning of period 59 109 - ------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 64 $ 60 - -------------------------------------------------------------------------------
Results by Business Segments (unaudited) TRW Inc. and subsidiaries - ---------------------------------------------------------------------------------------------------- Second quarter ended Six months ended June 30 June 30 In millions 1996 1995 1996 1995 - ----------------------------------------------------------------------- ---------------------- Sales Automotive $1,700 $1,719 $3,381 $3,460 Space & Defense 872 842 1,705 1,548 Information Systems & Services 157 151 313 300 - ----------------------------------------------------------------------- ---------------------- Sales $2,729 $2,712 $5,399 $5,308 - ----------------------------------------------------------------------- ---------------------- Operating profit Automotive $ 170 $ 172 $ 310 $ 345 Space & Defense 64 54 124 99 Information Systems & Services 24 22 47 43 - ----------------------------------------------------------------------- ---------------------- Operating profit 258 248 481 487 Company Staff and other (30) (27) (43) (52) Interest expense (20) (24) (39) (48) Earnings from affiliates 2 - - - - ----------------------------------------------------------------------- ---------------------- Earnings before income taxes $ 210 $ 197 $ 399 $ 387 - ----------------------------------------------------------------------- ----------------------
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. ACCOUNTING CHANGE Effective January 1, 1996, the company initially applied the provisions of Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Net earnings for the first six months of 1996 have been decreased by $13 million ($.19 per share) reflecting the initial application of this Statement. INVENTORIES Inventories consist of the following: (In millions) June 30 December 31 1996 1995 ---- ---- Finished products and work in process $298 $298 Raw materials and supplies 219 236 ---- ---- $517 $534 ---- ---- ---- ---- CAPITAL STOCK In April 1996, the company adopted an updated shareholder purchase rights plan under which each shareholder of record as of May 17, 1996, received one right for each TRW common share held. Each right entitles the holder, upon the occurrence of certain events, to buy one one-hundredth of a share of Cumulative Redeemable Serial Preference Stock II, Series 4, at a price of $300. In certain other events, each right will entitle the holder (other than the acquiring party) to purchase $600 of TRW common stock or common stock of another person at a 50 percent discount. The company may redeem these rights at its option at one cent per right under certain circumstances. The rights outstanding under the company's former shareholder purchase rights plan were redeemed at one cent per right. LONG-TERM LIABILITIES For balance sheet purposes, long-term liabilities at June 30, 1996 and December 31, 1995, include $693 million and $680 million, respectively, relating to postretirement benefits other than pensions. OTHER (INCOME)EXPENSE-NET Other (income)expense included the following: (In millions) Second quarter ended Six months ended June 30 June 30 1996 1995 1996 1995 ---------------- ---------------- Other income $(23) $(13) $(35) $(28) Other expense 19 10 42 25 Foreign currency translation 1 3 3 8 ---- ---- ---- ---- $ (3) $ - $ 10 $ 5 ---- ---- ---- ---- ---- ---- ---- ---- EARNINGS PER SHARE Fully diluted earnings per share have been computed based on the weighted average number of shares of Common Stock outstanding during each period, including common stock equivalents and assuming the conversion of the Serial Preference Stock II--Series 1 and 3. Primary earnings per share have been computed based on the weighted average number of shares of Common Stock outstanding during each period including common stock equivalents. SUPPLEMENTAL CASH FLOW INFORMATION Six months ended (In millions) June 30 ---------------------------- 1996 1995 ---- ---- Interest paid (net of amount capitalized) $ 30 $ 44 Income taxes paid (net of refunds) $136 $136 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. PROPOSED SALE OF BUSINESS In February 1996, the company entered into an agreement to sell substantially all of the businesses in the Information Systems & Services segment. The sale, which is expected to be completed in the second half of 1996, is subject to certain conditions to closing. 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. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (In millions except per share data) Six Months Ended Second Quarter June 30 -------------------------------- -------------------------------- Percent Percent 1996 1995 Inc (Dec) 1996 1995 Inc (Dec) ---- ---- -------- ---- ---- -------- Sales $2,729 $2,712 1% $5,399 $5,308 2% Operating Profit $ 258 $ 248 4% $ 481 $ 487 (1)% Net Earnings $ 130 $ 123 6% $ 247 $ 238 4% Fully Diluted Earnings Per Share $ 1.94 $ 1.81 7% $ 3.67 $ 3.53 4% Effective Tax Rate 38% 37.5% 38% 38.5%
The increase in sales for the second quarter and first six months of 1996 was primarily due to higher volume in the Space and Defense segment partially offset by lower sales in the Automotive segment. Operating profit increased in the second quarter of 1996 due to the profit contribution from the higher sales in the Space and Defense segment partially offset by the profit effect of the lower Automotive segment sales. Operating profit for the first six months of 1996 includes a $15 million before tax charge related to the initial application of Statement of Financial Accounting Standards (SFAS) No. 121. Net earnings for the first six 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. Interest expense was $39 million for the first six months of 1996 compared to $48 million for the first half of 1995. The decrease in interest expense was primarily due to lower average debt levels and lower interest rates.
Automotive (In millions) Six Months Ended Second Quarter June 30 ---------------------------------- ---------------------------------- Percent Percent 1996 1995 Inc (Dec) 1996 1995 Inc (Dec) ----- ----- --------- ----- ----- --------- Sales $1,700 $1,719 (1)% $3,381 $3,460 (2)% Operating Profit $ 170 $ 172 (1)% $ 310 $ 345 (10)%
The decrease in sales and operating profit for the second quarter and first six months of 1996 resulted from the effect of lower pricing in the worldwide airbag and North American seatbelt businesses partially offset by higher volume in the airbag, steering and automotive electronics businesses. Unfavorable exchange rates also contributed to the sales decline for the first six months of 1996. Operating profit for the first six months of 1996 includes a $15 million before tax charge related to the initial adoption of SFAS No. 121.
Space & Defense (In millions) Six Months Ended Second Quarter June 30 ------------------------------- --------------------------------- Percent Percent 1996 1995 Inc (Dec) 1996 1995 Inc (Dec) ---- ---- --------- ----- ----- --------- Sales $872 $842 4% $1,705 $1,548 10% Operating Profit $ 64 $ 54 17% $ 124 $ 99 25%
Sales for the second quarter and first six months of 1996 increased primarily due to the successful conversion of recent contract awards into revenue growth, as well as strong ongoing program performance. The increase in operating profit for the second quarter and first six months of 1996 resulted from the profit contribution from new business, strong ongoing program performance and the absence of program profit adjustments.
Information Systems & Services (In millions) Six Months Ended Second Quarter June 30 ------------------------------ -------------------------------- Percent Percent 1996 1995 Inc (Dec) 1996 1995 Inc (Dec) ---- ---- --------- ----- ----- --------- Sales $157 $151 4% $313 $300 4% Operating Profit $ 24 $ 22 11% $ 47 $ 43 9%
The sales and operating profit increase for the second quarter and first six months of 1996 resulted from higher volume in the Information Services business, partially offset by lower revenue in the Information Systems and Real Estate Information Services businesses. The increase in operating profit for the first six months of 1996 also resulted from the absence of project reserves recorded in 1995 in the Information Systems businesses. In February 1996, the company entered into an agreement to sell substantially all of the businesses in the Information Systems & Services segment. The sale, which is expected to be completed in the second half of 1996, is subject to certain conditions to closing. LIQUIDITY AND FINANCIAL POSITION In the first six months of 1996, cash flow provided by operating activities of $340 million, a net increase in debt of $68 million, and a net increase of $7 million in other items, were used primarily for capital expenditures of $182 million, reacquisition of common stock of $155 million, and dividend payments of $73 million. As a result, cash and cash equivalents increased by $5 million. Total debt (short-term debt, the current portion of long-term debt and long-term debt) was $820 million at June 30, 1996, compared to $754 million at December 31, 1995. The ratio of total debt to total capital (total debt, minority interests and shareholders' investment) at June 30, 1996 was 26 percent compared to 25 percent at December 31, 1995. During the second quarter of 1996, the company renegotiated the terms of its multi-year U.S. revolving credit agreement. The credit agreement, which previously allowed the company to borrow up to $550 million, has been revised to allow the company to borrow up to $750 million. The revised agreement now extends through June 2001 and contains lower commitment fees and borrowing rates. Also during the second quarter of 1996, the company renegotiated the term of its multi-currency revolving credit agreement. The credit agreement, which previously allowed the company to borrow up to $200 million, has been revised to allow the company to borrow up to $250 million. The revised agreement now extends through June 2001 and contains lower commitment fees and borrowing rates. During the first six months of 1996, 1,793,410 shares of TRW Common Stock were repurchased for approximately $164 million, of which approximately $9 million was settled in July. Management believes that funds generated from operations and existing borrowing capacity will be adequate to support and finance planned growth, capital expenditures, company-sponsored research and development programs and dividend payments to shareholders. These sources of funds, together with proceeds from the proposed sale of businesses in the Information Systems & Services segment, are expected to be sufficient to fund the company's current share repurchase program. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. On February 15, 1994, TRW filed suit in the United States District Court for the District of Arizona against Talley Industries, Inc. and certain Talley subsidiary companies. The suit relates to TRW's 1989 purchase of Talley's air bag business. In the complaint, TRW claimed that, among other violations of TRW's rights, Talley breached the non-compete provision contained in the purchase agreement by providing products and services to competitors of TRW. As a result of the breach, TRW exercised its rights under the agreement and the license from Talley to TRW to make a one-time payment of $26.5 million to Talley for a paid-up royalty-free license to use Talley's air bag patents and technology. On March 1, 1994, Talley filed an answer and counterclaims against TRW alleging that TRW had acted improperly in making the $26.5 million payment and requesting that TRW be ordered to pay immediately to Talley the value of all anticipated royalties, claimed by Talley to be not less than $250 million. On May 19, 1994, the court granted Talley's motion for an injunction. On May 30, 1995, at the close of all the evidence, the trial judge directed a verdict against TRW on TRW's claims against Talley, ruling that there was not sufficient evidence to send TRW's claims to the jury. On June 6, 1995, the jury entered its verdict on Talley's counterclaims that Talley was entitled to the present value of the future royalty stream in the sum of $138 million on the contract claim, but that TRW had not acted in bad faith and that the technology on which royalties were due was limited to that in existence when TRW purchased Talley's air bag business. TRW timely filed a notice of appeal on July 12, 1995. TRW also appealed the judge's ruling requiring that TRW continue to pay the royalties pending appeal; however, the Ninth Circuit U.S. Court of Appeals denied TRW's appeal without prejudice and accelerated the schedule for the appeal on the judge's decision. On June 21, 1996, the Ninth Circuit, in a two-to-one panel decision, affirmed the lower court's decision. TRW filed a petition for rehearing EN BANC with the Ninth Circuit, which was denied on July 30, 1996. The judgment will not have a material adverse effect on the Company's financial position. There remain pending in the suit additional claims by TRW and by Talley. These claims are currently set for trial on September 24, 1996 in the United States District Court for the District of Arizona. They are not expected to have a material adverse effect on the Company's financial position. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a) The Company held its 1996 Annual Meeting of Shareholders on April 24, 1996. (b) Proxies for the Annual Meeting of Shareholders were solicited pursuant to Regulation 14 under the Act; there was no solicitation in opposition to management's nominees as listed in the proxy statement; and all of such nominees were elected. (c) Martin Feldstein was elected a Director of the Company with 59,637,871 votes for election and 573,233 votes withheld from voting. Robert M. Gates was elected a Director of the Company with 59,613,999 votes for election and 597,105 votes withheld from voting. E. Bradley Jones was elected a Director of the Company with 59,614,873 votes for election and 596,231 votes withheld from voting. David B. Lewis was elected a Director of the Company with 59,617,915 votes for election and 593,189 votes withheld from voting. James T. Lynn was elected a Director of the Company with 59,632,656 votes for election and 578,448 votes withheld from voting. The shareholders ratified the appointment of Ernst & Young LLP as the Company's independent auditors for the 1996 fiscal year with 59,938,191 votes for, 141,349 votes against and 131,564 votes abstaining. A shareholder proposal concerning a report to shareholders on research and development of space weapons was defeated, with 5,913,810 votes for, 47,864,697 votes against, 3,350,227 votes abstaining and 3,082,370 broker non-votes. (d) None. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: 10(a) TRW Benefits Equalization Plan (as Amended and Restated effective August 1, 1996). 10(b) TRW Supplementary Retirement Income Plan (as Amended and Restated effective August 1, 1996). 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. 33-42870, filed September 20, 1991, and No. 33-61711, filed August 10, 1995). (b) Reports on Form 8-K: Current Report on Form 8-K dated April 25, 1996. 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: August 7, 1996 By: /S/ James C. Diggs ------------------ James C. Diggs Assistant Secretary Date: August 7, 1996 By: /S/ Carl G. Miller ------------------- Carl G. Miller Executive Vice President and Chief Financial Officer FORM 10-Q Quarterly Report for Quarter Ended June 30, 1996 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 10(a) TRW Benefits Equalization Plan (as Amended and Restated effective August 1, 1996). 10(b) TRW Supplementary Retirement Income Plan (as Amended and Restated effective August 1, 1996). 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. 33-42870, filed September 20, 1991, and No. 33-61711, filed August 10, 1995). EX-10.A 2 EX 10.A Exhibit 10 (a) TRW BENEFITS EQUALIZATION PLAN Amended and Restated Effective August 1, 1996 1. PURPOSE. The purpose of the TRW Benefits Equalization Plan ("BEP"), as amended and restated effective August 1, 1996, is to provide supplemental retirement and death benefits to those management and highly-compensated employees of TRW Inc. and its subsidiaries ("TRW") whose benefits under The TRW Employee Stock Ownership and Stock Savings Plan (the "Stock Savings Plan") are limited by reason of: a. the limitations on compensation under Section 401(a)(17) of the Internal Revenue Code of 1986 ("Code"); b. the dollar limitations on elective deferrals under Code Section 402(g)(1); c. the limitations on the amount that TRW can contribute as "TRW Matching Contributions" as defined under the Stock Savings Plan without exceeding the amount provided by Code Section 415(c)(1)(A); and d. the exclusion of compensation otherwise included as "Compensation" under the Stock Savings Plan but for the fact that (i) such compensation was deferred under the provisions of the TRW Inc. Deferred Compensation Plan ("DC Plan") rather than received or (ii) a determination was made by TRW that such inclusion could violate the regulations under Code Section 401(a)(4). The BEP is unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act ("ERISA") and is designed to provide benefits which mirror the provisions of the Stock Savings Plan but cannot be paid from the Stock Savings Plan because of certain Code limitations. 2. ELIGIBILITY. Employees (i) whose base pay and bonus paid in any year (or deferred pursuant to the DC Plan) exceed the compensation limitations of Code Section 401(a)(17) for such year will be eligible to participate in the BEP provided they are otherwise eligible, and have elected, to participate in the Stock Savings Plan and have timely elected to participate in the BEP. Once such employees have met the eligibility requirements under this section, they will continue to be eligible to participate in subsequent years even if their base pay and bonus paid fall below the compensation limit of Code Section 401(a)(17). 3. ACCOUNTS. a. An account ("Account") shall be established in the name of each eligible employee into which shall be credited monthly the following amounts: i. that percentage of the participant's current compensation which the participant elected to contribute to the Stock Savings Plan as "Before-Tax Contributions" and that percentage of the participant's current compensation which the Company would have contributed to the Stock Savings Plan as "TRW Matching Contributions" (both terms as defined under the Stock Savings Plan) to the extent that such amounts cannot be contributed to the Stock Savings Plan due to any of the reasons identified in Section 1; provided, however, that the percentage of the participant's compensation credited to the Account, when combined with the percentage elected under the Stock Savings Plan, may not at any time be greater than that amount of "Before-Tax Contributions" which the participant would be permitted to contribute, as a highly-compensated participant, to the Stock Savings Plan without regard to the above-referenced limitations; and further provided, that the TRW Matching Contributions credited to the Account shall be reduced by any amounts actually contributed for the participant by the Company to the Stock Savings Plan as TRW Matching Contributions; plus ii. earnings on the amounts credited under subparagraph i. above in accordance with the participant's election as provided in Section 4 below. b. The participant's annual election to participate in the BEP by having his Account credited as provided in paragraph a. shall be filed with the Committee on a prescribed form and shall be filed at such time as the Committee may specify, but in all cases prior to the time such compensation is to be earned by the participant. No changes in the percentage of compensation credited to the Account shall be made during the calendar year following the election, unless the participant elects 0%. c. Participants shall have, at all times, a nonforfeitable interest in the amounts credited to their Account, subject to the provisions of Section 6e. d. Participants shall receive an annual statement of their Account established under the BEP within a reasonable period after the end of each calendar year. 4. EARNINGS. a. Each participant in the BEP shall be able to elect to have monies credited to his or her Account based upon the performance of: (i) prior to January 1, 1997, the Equity Fund or the Insured Return Fund (also sometimes referred to as the Stable Value Fund) of the Stock Savings Plan; and (ii) on and after January 1, 1997, the same investment fund options offered to participants under the Stock Savings Plan. -2- Such election may be made by allocating the entire Account to one of the earnings options or by allocating the Account between selected investment fund options in 25 percent multiples. Each participant may change his or her election at the middle or end of any month by contacting the Committee or its delegee. b. All TRW Matching Contributions allocated to a participant's Account will be credited in the same manner as the participant's election under Section a. 5. TIME OF PAYMENT. a. Except as otherwise provided herein, payment of the Account to the participant (or, in the event of his death, to his beneficiary as designated in writing to the Committee) shall be made as of the January following the following events: i. the participant's becoming disabled as defined by the terms and conditions of the Stock Savings Plan; ii. the death of the participant; or iii. the termination of the participant's employment with TRW through retirement or otherwise. b. Notwithstanding Section aiii., if the participant's termination of employment is the result of the divestiture of TRW Information Systems and Services, and the participant continues employment with the entity that acquired such operations ("successor employer"), the BEP benefit shall not be payable until such participant's termination of employment with the successor employer, except as provided under Section 6d. c. Notwithstanding the above, the Directors/Committee, upon determining that the participant has suffered an emergency event beyond his control which would impose an immediate and heavy financial hardship if the payment of his benefits were not made, may pay to the participant that part of his Account which is needed to satisfy such hardship. 6. PAYMENT OF BENEFITS. a. Subject to Section b, the automatic form of payment of monies in the Account shall be ten equal annual installments, payable during the month of January; provided, however, that the participant can petition the Directors or the Committee at any time at least two months prior to the participant's eligibility for payout from the Stock Savings Plan to change such payment to any lesser number of annual installments or to a single sum. If annual installments are paid, the balance of the Account shall continue to be credited with earnings as previously elected by the participant in accordance with Section 4. -3- b. Upon approval by the Directors/Committee, any election of a form of payment other than the automatic form of payment provided in this Section shall be irrevocable. c. Payment of the Account shall be made in the form of cash unless the Directors/Committee determines in its discretion that it is appropriate to pay that portion of the participant's Account attributable to TRW Matching Contributions and earnings thereon in shares of TRW common stock, in which event such distribution of shares shall occur no earlier than six months following the date that the participant is last employed by TRW. d. If the balance in the participant's Account under the BEP, determined as of any of the events described in Section 5 above, is less than $3,500, said Account balance shall automatically be paid out in a single sum in the first January following said event. e. Payments under the BEP shall be made by TRW, with any appropriate reimbursement being made by subsidiaries of TRW. The BEP shall be unfunded, and TRW shall not be required to establish any special or separate fund nor to make any other segregation of assets in order to assure the payment of any amounts under the BEP. Participants in the BEP have the status of general unsecured creditors of TRW and the BEP constitutes a mere promise by TRW to make benefit payments in the future. 7. NON-ALIENATION OF BENEFITS. Neither a participant or any other person shall have any right to sell, assign, transfer, pledge, mortgage or otherwise encumber, in advance of actual receipt, any BEP benefit. Any such attempted assignment or transfer shall be ineffective; TRW's sole obligation under the BEP shall be to pay benefits to the participant, his beneficiary or his estate, as appropriate. No part of any BEP benefit shall, prior to actual payment, be subject to the payment of any debts, judgments, alimony or separate maintenance owed by a participant or any other person; nor shall any BEP benefit be transferable by operation of law in the event of a participant's or any other person's bankruptcy or insolvency, except as required or permitted by law. 8. DIRECTORS/COMMITTEE. For purposes of the BEP, "Directors" shall mean the Compensation and Stock Option Committee of the Directors of TRW with respect to the approval of benefits of any participant who is, or ever was, either a Director of TRW, a member of the Chief Executive Office, or a member of the Management Committee. With respect to the approval of benefits of other participants, "Committee" shall refer to an Administrative Committee consisting of those three employees of TRW who occupy the most senior positions in the Company Staff Finance, Human Resources, and Law Departments. The Committee or its delegate shall interpret the provisions of the BEP, determine the rights and status of participants and beneficiaries hereunder, and handle the general administration of the BEP. Such interpretations and determinations shall be final and conclusive as to all interested persons. -4- 9. CLAIMS PROCEDURE. If a claim for a BEP benefit is denied, in whole or in part, a written notice of denial provided to the participant shall state the reasons for denial, a description of any additional material or information required; and an explanation of the claim review procedure. Any person whose claim, upon his written request for review, is again denied may make a second request for review. A decision on such second request shall normally be made within sixty days. 10. AMENDMENT AND TERMINATION. Nothing herein shall be construed to constitute a contract between TRW and the participants to continue the BEP, and TRW's Directors in their sole discretion may terminate or discontinue the BEP at any time and may at any time and from time to time amend any or all of its provisions; provided, however, that no termination or amendment shall reduce amounts credited prior to such termination or amendment. 11. MISCELLANEOUS PROVISIONS. a. As used in this document, the masculine gender shall include the feminine and the singular shall include the plural. To the extent that any term is not defined under the BEP, it shall have the same meaning as defined in the Stock Savings Plan. b. Employment rights with TRW shall not be enlarged or affected by the existence of the BEP. c. In case any provision of the BEP shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions d. The BEP shall be governed by the laws of the State of Ohio. 7/96 -5- EX-10.B 3 EX 10.B Exhibit 10 (b) TRW SUPPLEMENTARY RETIREMENT INCOME PLAN Amended and Restated Effective August 1,1996 1. PURPOSE. The purpose of the TRW Supplementary Retirement Income Plan (SRIP), as amended and restated effective August 1, 1996, is to provide supplemental retirement and death benefits to those: (i) employees, including officers, of TRW Inc. and its subsidiaries ("TRW") whose benefits under the qualified defined benefit pension plans maintained by such entities ("d.b. plans") shall have been limited by virtue of Section 415 of the Internal Revenue Code of 1986 ("Code"); (ii) management and highly-compensated employees of TRW whose benefits under the d.b. plans are limited by Code Section 401(a)(17); (iii) management and highly-compensated employees of TRW whose compensation otherwise included as pensionable earnings received by such individual within the meaning of the d.b. plan could not be so included because such compensation was deferred in accordance with the provisions of the TRW Inc. Deferred Compensation Plan ("DC Plan"); and (iv) management and highly-compensated employees of TRW whose compensation otherwise included as "Earnings" under the d.b. plan and service otherwise included as Benefit Service under the d.b. plan would not be so included because of a determination by TRW that such inclusion could violate the regulations under Code Section 401(a)(4). The SRIP is unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act ("ERISA") and is designed to provide benefits which mirror the provisions of the applicable d.b. plan but cannot be paid from the d.b. plan because of certain Code limitations. 2. ELIGIBILITY. Employees whose base pay and bonus paid in any year (or deferred pursuant to the DC Plan) exceed the limitations of Code Section 401(a)(17) shall automatically be covered under the SRIP. All d.b. plan participants who are eligible to receive benefits from a d.b. plan shall automatically receive a benefit from the SRIP if their benefit cannot be fully provided under the d.b. plan because of the limits under Code Section 415. 3. BENEFITS. The amount of the benefit payable under the SRIP shall be equal to the amount which would be payable to or in respect of a participant under the d.b. plan if the limitations identified in Section 1 above were inapplicable, less the amount of the benefit payable under the d.b. plan, taking into account such limitations. The amount of benefit payable under the SRIP to a participant shall also be reduced to the extent that any other nonqualified plan established by TRW pays benefits to the participant that are attributable to limits imposed upon d.b. plans other than those identified in Section 1 above. 4. PAYMENT OF BENEFITS. a. No benefit is payable from the SRIP, even if the participant has terminated his/her employment, unless a participant has five years of vesting service as defined under the d.b. plan and has attained age fifty-five. b. If a participant who has five or more years of vesting service dies before his/her benefit commencement date under the d.b. plan, the SRIP benefit shall be paid in the same form and shall commence at the same time as a pre- retirement survivor benefit under the d.b. plan. c. Except as provided in paragraph g., any participant in the d.b. plan and the SRIP who is entitled to a vested or deferred vested pension under such d.b. plan shall have his SRIP benefit (i) commence at the same time as his benefit commencement date under the d.b. plan and (ii) paid in the same form and with the same designated joint annuitant, if any, as his form of payment under the d.b. plan unless otherwise provided under the terms of any Qualified Domestic Relations Order applicable to said participant or unless otherwise determined by the Committee in its sole discretion. d. Except as provided above or in paragraph g., payment of benefits under the SRIP shall be made commencing with the January following the date the participant becomes eligible, having terminated his employment with TRW, for benefits under the d.b. plan; provided, however, that if the participant's termination of employment is the result of a divestiture of the TRW unit or operation where the participant worked prior to termination of employment and the participant obtains employment with the entity that acquired such unit or operations, then the SRIP benefit shall not be payable until such participant is eligible for and receives (or commences to receive) his d.b. plan benefit (even if the SRIP benefit is less than $3,500). e. Except as provided above and in paragraph g., the automatic form of benefit payable under the Plan shall be, for an unmarried participant, a single life annuity, and, for a married participant, a 50% joint and survivor annuity, with the participant's eligible spouse being the survivor annuitant. Notwithstanding the above, the participant may petition the Directors or the Committee at any time at least two months prior to termination of employment to change such form of payment into a single sum or annual installments from two to ten years, or any other payment form approved by the Directors or the Committee in their or its discretion. If annual installment payments are elected, interest, if any, on such installments shall be determined by the Actuary, subject to approval by TRW. -2- f. Upon approval by the Directors/Committee, any election of a form of payment or benefit commencement date other than the automatic form and commencement date shall be irrevocable. g. If the present value of a participant's interest in the SRIP, determined as of the later of the participant's age 55 or termination of EMPLOYMENT, is less than an amount which, if converted to a single sum equals $3,500, the benefit shall be paid out in a single sum, either at the same time as his benefit commencement date under the d.b. plan or at another date as determined by the Committee in its sole discretion. h. Payments to be made pursuant to the SRIP shall be made by TRW, with any appropriate reimbursement being made by subsidiaries of TRW. The SRIP shall be unfunded, and TRW shall not be required to establish any special or separate fund nor to make any other segregation of assets in order to assure the payment of any amounts under the SRIP. Participants of the SRIP shall have the status of general unsecured creditors of TRW and the SRIP constitutes a mere promise by TRW to make benefit payments in the future. 5. NON-ALIENATION OF BENEFITS. Neither a participant or any other person shall have any right to sell, assign, transfer, pledge, mortgage or otherwise encumber, in advance of actual receipt, any SRIP benefit. Any such attempted assignment or transfer shall be ineffective; TRW's sole obligation under the SRIP shall be to pay benefits to the participant, his beneficiary or his estate, as appropriate. No part of any SRIP benefit shall, prior to actual payment, be subject to the payment of any debts, judgments, alimony or separate maintenance owed by a participant or any other person; nor shall any SRIP benefit be transferable by operation of law in the event of a participant's or any other person's bankruptcy or insolvency, except as required or permitted by law. 6. DIRECTORS/COMMITTEE. For purposes of the SRIP, the term "Directors" shall mean the Compensation and Stock Option Committee of the Directors of TRW with respect to the approval of benefits of any participant who is, or ever was, either a Director of TRW, a member of the Chief Executive Office, or a member of the Management Committee. With respect to the approval of benefits of other participants, the term "Committee" shall refer to an Administrative Committee consisting of those three employees of TRW who occupy the most senior positions in the Company Staff Finance, Human Resources, and Law Departments. The Committee or its delegate shall interpret the provisions of the SRIP and determine the rights and status of participants and beneficiaries hereunder and handle the general administration of the SRIP. Such interpretations and determinations shall be final and conclusive as to all interested persons. 7. CLAIMS PROCEDURE. If a claim for a SRIP benefit is denied, in whole or in part, a written notice of denial provided to the participant shall state the reasons for denial, a description of any additional material or information required; and an explanation of the claim review procedure. Any person whose -3- claim, upon his written request for review, is again denied may make a second request for review. A decision on such second request shall normally be made within sixty days. 8. AMENDMENT AND TERMINATION. Nothing herein shall be construed to constitute a contract between TRW and the participants to continue the SRIP. The Directors may terminate the SRIP at any time and may at any time and from time to time amend any or all of its provisions. 9. MISCELLANEOUS. a. As used herein, the masculine gender shall include the feminine gender. To the extent that any term is not defined under the SRIP, it shall have the same meaning as defined in the d.b. plan. b. Employment rights with TRW shall not be enlarged or affected by the existence of the SRIP. c. In case any provision of the SRIP shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions. d. The SRIP shall be governed by the laws of the State of Ohio. 7/96 -4- EX-11 4 EX 11 Exhibit 11 TRW COMPUTATION OF EARNINGS PER SHARE - UNAUDITED (In Millions Except Per Share Amounts) Six Months Ended June 30 ------------------------ PRIMARY 1996 1995 ---- ---- Net earnings $ 247.5 $ 237.8 Less preference dividend requirements 0.3 0.4 -------- -------- Net earnings applicable to common shares and common share equivalents $ 247.2 $ 237.4 -------- -------- -------- -------- Average common shares outstanding 65.3 65.0 Stock options and performance share rights, based on the treasury stock method using average market price 1.5 1.3 -------- -------- Average common shares and common share equivalents 66.8 66.3 -------- -------- -------- -------- Primary earnings per share $3.70 $3.58 -------- -------- -------- -------- FULLY DILUTED Net earnings applicable to common shares and common share equivalents $ 247.2 $ 237.4 Dividends assuming conversion of other dilutive securities: (A) Dilutive preference dividends 0.3 0.4 -------- -------- Net earnings applicable to fully diluted shares $ 247.5 $ 237.8 -------- -------- -------- -------- Average common shares outstanding 65.3 65.0 Common shares assuming conversion of other dilutive securities: (A) Dilutive preference shares 0.6 0.6 Stock options and performance share rights, based on the treasury stock method using closing market price if higher than average market price 1.5 1.8 -------- -------- Average fully diluted shares 67.4 67.4 -------- -------- -------- -------- Fully diluted earnings per share $ 3.67 $ 3.53 -------- -------- -------- -------- (A) Assuming the conversion of the Serial Preference Stock II - Series 1 and Series 3. EX-27 5 EX 27
5 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 64 0 1,558 0 517 2,362 5,867 3,399 5,923 2,121 513 0 0 41 2,195 5,923 5,399 5,399 4,329 4,329 0 0 39 399 152 247 0 0 0 247 3.70 3.67
EX-99 6 EX 99 EXHIBIT 99 TRW INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - UNAUDITED (IN MILLIONS EXCEPT RATIO DATA)
SIX MONTHS ENDED YEARS ENDED DECEMBER 31 ------------------------------------------------------------------------ JUNE 30, 1996 1995 1994 1993 1992 1991 ------------- ---------- ---------- ----------- ----------- -------------- EARNINGS(LOSS) BEFORE INCOME TAXES $399.1 $708.2 $534.5 $359.1 $347.6 $(129.4)(A) UNCONSOLIDATED AFFILIATES (2.5) 2.3 (0.6) 0.7 (0.9) (1.0) MINORITY EARNINGS 7.6 13.8 5.2 5.7 2.6 (7.8) FIXED CHARGES EXCLUDING CAPITALIZED INTEREST 72.0 155.6 160.9 194.0 227.1 254.3 ---- ----- ----- ----- ----- ----- EARNINGS $476.2 $879.9 $700.0 $559.5 $576.4 $116.1 ------ ------ ------ ------ ------ ------ FIXED CHARGES: INTEREST EXPENSE $38.8 $94.9 $104.8 $137.8 $162.9 $189.6 CAPITALIZED INTEREST 1.3 5.1 6.6 7.9 12.7 10.1 PORTION OF RENTS REPRESENTA- TIVE OF INTEREST FACTOR 32.1 59.6 54.7 54.0 64.0 64.4 INTEREST EXPENSE OF UNCON- SOLIDATED AFFILIATES 1.1 1.1 1.4 2.2 0.2 0.3 --- --- --- --- --- --- TOTAL FIXED CHARGES $73.3 $160.7 $167.5 $201.9 $239.8 $264.4 ----- ------ ------ ------ ------ ------ RATIO OF EARNINGS TO FIXED CHARGES 6.5X 5.5X 4.2X 2.8X 2.4X 0.4X(A) --- --- --- --- --- ---
(A) The 1991 loss before income taxes of $129.4 million includes a charge of $343 million to cover costs associated with divestment and restructuring activities. Excluding this charge, the ratio of earnings to fixed charges would have been 1.7x. -----END PRIVACY-ENHANCED MESSAGE-----