-----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, HmBk8LtsHRydzCZ0PwF12dUy++xLy2wKG243OtcRn2P69YuKgWf746U5dlyjwgvw w9QQPYR7JBDHO7uG04W5Hg== 0000950152-97-007282.txt : 19971021 0000950152-97-007282.hdr.sgml : 19971021 ACCESSION NUMBER: 0000950152-97-007282 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971020 SROS: NONE 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: SEC FILE NUMBER: 001-02384 FILM NUMBER: 97697846 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 TRW, INC. FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to __________ Commission file number 1-2384 ------------------------------------------ TRW Inc. ----------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-0575430 -------------------------------- ------------------------------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 1900 Richmond Road, Cleveland, Ohio 44124 ----------------------------------------- (Address of principal executive offices) (Zip Code) (216) 291-7000 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of September 30, 1997, there were 123,159,966 shares of TRW Common Stock, $0.625 par value, outstanding. 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements --------------------
Statements of Earnings (unaudited) TRW Inc. and subsidiaries - ------------------------------------------------------------------------------------------------------------------- Third quarter ended Nine months ended September 30 September 30 In millions except per share data 1997 1996 1997 1996 - ---------------------------------------------------------------------------------- ---------------------------- Sales $2,521 $2,320 $8,033 $7,406 Cost of sales 2,055 2,187 6,551 6,331 - ---------------------------------------------------------------------------------- ---------------------------- Gross profit 466 133 1,482 1,075 Administrative and selling expenses 165 157 501 487 Research and development expenses 115 100 338 305 Interest expense 20 37 57 76 Other (income)expense-net - 57 6 72 - ---------------------------------------------------------------------------------- ---------------------------- Earnings(loss) from continuing operations before income taxes 166 (218) 580 135 Income taxes 58 (72) 218 62 - ---------------------------------------------------------------------------------- ---------------------------- Earnings(loss) from continuing 108 (146) 362 73 operations Discontinued operations: Earnings from operations - 10 - 38 Gain on disposal - 242 - 242 - ---------------------------------------------------------------------------------- ---------------------------- Net earnings $ 108 $ 106 $ 362 $ 353 - ---------------------------------------------------------------------------------- ---------------------------- - ---------------------------------------------------------------------------------- ---------------------------- PER SHARE OF COMMON STOCK Fully diluted Continuing operations $ .85 $(1.10) $ 2.82 $ .53 Discontinued operations: Earnings from operations - .07 - .28 Gain on disposal - 1.82 - 1.82 - ---------------------------------------------------------------------------------- ---------------------------- Net earnings per share $ .85 $ .79 $ 2.82 $ 2.63 - ---------------------------------------------------------------------------------- ---------------------------- Primary Continuing operations $ .86 $(1.13) $ 2.85 $ .54 Discontinued operations: Earnings from operations - .08 - .29 Gain on disposal - 1.86 - 1.83 - ---------------------------------------------------------------------------------- ---------------------------- Net earnings per share $ .86 $ .81 $ 2.85 $ 2.66 - ---------------------------------------------------------------------------------- ---------------------------- - ---------------------------------------------------------------------------------- ---------------------------- Shares used in computing per share amounts Fully diluted 126.8 132.3 128.3 133.9 Primary 126.4 130.5 127.1 132.5 - ---------------------------------------------------------------------------------- ---------------------------- - ---------------------------------------------------------------------------------- ---------------------------- Dividends declared $ .31 $ .275 $ .62 $ .55 - ---------------------------------------------------------------------------------- ----------------------------
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Statements of Cash Flows (unaudited) TRW Inc. and subsidiaries - ---------------------------------------------------------------------------------------------------------------------------- Nine months ended September 30 In millions 1997 1996 - ---------------------------------------------------------------------------------------------------------------------------- Operating activities: Net earnings $ 362 $ 353 Adjustments to reconcile net earnings to net cash provided by continuing operations: Discontinued operations - (280) Depreciation and amortization 366 327 Deferred income taxes 21 38 Other-net 9 4 Changes in assets and liabilities, net of effects of businesses acquired or sold: Accounts receivable (66) (143) Inventories and prepaid expenses (48) (13) Accounts payable and other accruals (141) 143 Other-net 19 (69) - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 522 360 - ---------------------------------------------------------------------------------------------------------------------------- Investing activities: Capital expenditures (361) (276) Proceeds from divestitures - 965 Acquisitions, net of cash acquired (415) - Other-net (34) 33 - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities (810) 722 - ---------------------------------------------------------------------------------------------------------------------------- Financing activities: Increase(decrease) in short-term debt 258 (54) Proceeds from debt in excess of 90 days 107 31 Principal payments on debt in excess of 90 days (37) (76) Reacquisition of common stock (202) (257) Dividends paid (116) (109) Other-net 37 45 - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 47 (420) - ---------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (9) (1) - ---------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (250) 661 Cash and cash equivalents at beginning of period 386 59 - ---------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 136 $ 720 - ----------------------------------------------------------------------------------------------------------------------------
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Balance Sheets (unaudited) TRW Inc. and subsidiaries - ------------------------------------------------------------------------------------------------------------------------------- September 30 December 31 In millions 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 136 $ 386 Accounts receivable 1,489 1,378 Inventories 578 524 Prepaid expenses 91 69 Deferred income taxes 214 424 - ------------------------------------------------------------------------------------------------------------------------------- Total current assets 2,508 2,781 Property, plant and equipment-on the basis of cost 6,114 5,880 Less accumulated depreciation and amortization 3,511 3,400 - ------------------------------------------------------------------------------------------------------------------------------- Total property, plant and equipment-net 2,603 2,480 Intangible assets Intangibles arising from acquisitions 517 258 Other 56 31 - ------------------------------------------------------------------------------------------------------------------------------- 573 289 Less accumulated amortization 90 78 - ------------------------------------------------------------------------------------------------------------------------------- Total intangible assets-net 483 211 Other assets 487 427 - ------------------------------------------------------------------------------------------------------------------------------- $6,081 $5,899 - ------------------------------------------------------------------------------------------------------------------------------- Liabilities and shareholders' investment Current liabilities Short-term debt $ 364 $ 52 Accounts payable 743 781 Current portion of long-term debt 70 72 Other current liabilities 1,217 1,252 - ------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 2,394 2,157 Long-term liabilities 731 767 Long-term debt 531 458 Deferred income taxes 95 272 Minority interests in subsidiaries 105 56 Capital stock 77 81 Other capital 465 437 Retained earnings 2,264 1,978 Cumulative translation adjustments (61) 47 Treasury shares-cost in excess of par value (520) (354) - ------------------------------------------------------------------------------------------------------------------------------- Total shareholders' investment 2,225 2,189 - ------------------------------------------------------------------------------------------------------------------------------- $6,081 $5,899 - -------------------------------------------------------------------------------------------------------------------------------
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Results by Business Segments (unaudited) TRW Inc. and subsidiaries - ---------------------------------------------------------------------------------------------------------------------------- Third quarter ended Nine months ended September 30 September 30 In millions 1997 1996 1997 1996 - --------------------------------------------------------------------------------------- -------------------------------- Sales Automotive $1,570 $1,500 $5,239 $4,881 Space & Defense 951 820 2,794 2,525 - --------------------------------------------------------------------------------------- -------------------------------- Sales $2,521 $2,320 $8,033 $7,406 - --------------------------------------------------------------------------------------- -------------------------------- Operating profit(loss) Automotive $ 136 $ (105) $ 485 $ 205 Space & Defense 77 (48) 235 76 - --------------------------------------------------------------------------------------- -------------------------------- Operating profit(loss) 213 (153) 720 281 Company Staff and other (29) (24) (77) (59) Minority interest in earnings of consolidated subsidiaries (3) (2) (14) (9) Interest expense (20) (37) (57) (76) Earnings(loss) from affiliates 5 (2) 8 (2) - --------------------------------------------------------------------------------------- -------------------------------- Earnings(loss) from continuing operations before income taxes $ 166 $ (218) $ 580 $ 135 - --------------------------------------------------------------------------------------- --------------------------------
6 NOTES TO FINANCIAL STATEMENTS (unaudited) Principles of Consolidation - --------------------------- The financial statements include the accounts of the Company and its subsidiaries except for two insurance subsidiaries. The wholly-owned insurance subsidiaries and the majority of investments in affiliated companies, which are not significant individually or in the aggregate, are accounted for by the equity method. Environmental Costs - ------------------- During the first quarter of 1997, the Company adopted the provisions of AICPA Statement of Position (SOP) 96-1, Environmental Remediation Liabilities. There was no financial statement effect of the adoption as the Company's previous method of accounting for environmental costs was in accordance with SOP 96-1. Discontinued Operations - ----------------------- In September 1996, the Company sold substantially all of the businesses of its Information Systems and Services segment. Net proceeds of approximately $965 million in cash resulted in a gain of $468 million ($242 million after tax, $1.82 per share). The financial statements reflect as discontinued operations for all periods presented that segment's operating results as well as the related transaction gain. Sales of the discontinued operations were $140 million and $453 million for the third quarter and first nine months of 1996, respectively. Special Charges - --------------- In the third quarter of 1996, the Company recorded a before-tax charge of $365 million ($233 million after tax or $1.76 per share) for actions taken in the automotive and space and defense businesses. The components of the charge included plant closure and severance costs of $102 million, contract reserves of $99 million, litigation and warranty expenses of $94 million, asset write-downs of $53 million and other items of $17 million. 7 The charges are included in the Statement of Earnings for 1996 as follows: $289 million included in cost of sales; $18 million included in interest expense; and $58 million included in other(income) expense-net. Acquisition - ----------- In February 1997, the Company completed its purchase of an eighty percent equity interest in the air bag and steering wheel business of Magna International. The purchase price of approximately $450 million has been tentatively allocated to the net assets acquired based on their fair values. Inventories - ----------- Inventories consist of the following: (In millions)
September 30 December 31 1997 1996 ---- ---- Finished products and work in process $300 $295 Raw materials and supplies 278 229 --- --- $578 $524 === ===
Long-Term Liabilities - --------------------- Long-term liabilities at September 30, 1997 and December 31, 1996, include $654 million and $681 million, respectively, relating to postretirement benefits other than pensions. Other (Income)Expense-Net - ------------------------- Other (income)expense included the following: (In millions)
Third quarter ended Nine months ended September 30 September 30 1997 1996 1997 1996 ----------------- ----------------- ------------- ------------- Other income $ (19) $ (17) $ (47) $ (36) Other expense 18 73 48 104 Foreign currency translation 1 1 5 4 ---- ---- --- ---- $ - $ 57 $ 6 $ 72 ==== ===== === =====
Other expense for the third quarter and first nine months of 1996 includes expenses related to the settlement of a lawsuit. 8 Earnings Per Share - ------------------ Fully diluted earnings per share have been computed based on the weighted average number of shares of Common Stock outstanding during each period, including common stock equivalents and assuming the conversion of the Serial Preference Stock II--Series 1 and 3. Primary earnings per share have been computed based on the weighted average number of shares of Common Stock outstanding during each period including common stock equivalents. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. There is an immaterial impact of Statement No. 128 on the calculation of primary and fully diluted earnings per share for the third quarter and first nine months of 1997 and 1996. In April 1997, the number of authorized shares of TRW Common Stock was increased from 250,000,000 to 500,000,000 shares. Supplemental Cash Flow Information - ----------------------------------
Nine months ended (In millions) September 30 ---------------------------------- 1997 1996 ---- ---- Interest paid (net of amount capitalized) $56 $ 75 Income taxes paid (net of refunds) $36 $214
For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Other Contingencies - ------------------- During 1996, the Company was advised by the Department of Justice ("DOJ") that it had been named as a defendant in two lawsuits brought by a former employee and filed under seal in 1994 and 1995, respectively, in the United States District Court for the Central District of California under the QUI TAM provisions of the civil False Claims Act. The Act permits an individual to bring suit in the name of the United States and share in any recovery. The allegations in the lawsuit relate to the classification of costs incurred by the Company that were charged 9 to certain of its federal contracts. Under the law, the government must investigate the allegations and determine whether it wishes to intervene and take responsibility for the lawsuits. The actions remain under seal until the government completes its investigations and determines whether to intervene. However, permission from the court has been obtained by the Company to make the disclosures contained herein. The Company is cooperating with the DOJ's investigation and is engaged in ongoing discussions with them regarding the allegations. The Company cannot presently predict the outcome of these matters, although management believes that the Company would have meritorious defenses if either the government decides to pursue the lawsuits or the former employee decides to do so without government participation. TRW Vehicle Safety Systems Inc. ("VSSI") has reported to the Arizona Department of Environmental Quality ("ADEQ") potential violations of the Arizona hazardous waste law at its Queen Creek, Arizona facility for failure properly to label and dispose of waste water that might be classified as hazardous waste. ADEQ is conducting an investigation into these potential violations and VSSI is cooperating with the investigation. If ADEQ initiates proceedings against VSSI with respect to such matters, VSSI could be liable for penalties and fines and other relief. Management is unable to make a meaningful estimate of the amount or range of possible liability at this time. Interim Statements - ------------------ The financial statements are based in part on approximations and are subject to adjustments that may develop, such as unsettled contract and renegotiation matters and matters that arise in connection with the annual audit of the financial statements; however, in the opinion of management, all adjustments (which consist of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented have been included. Results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. 10 Item 2. Management's Discussion and Analysis of Financial Condition ----------------------------------------------------------- and Results of Operations ------------------------- RESULTS OF OPERATIONS
(In millions except per share data) Nine Months Ended Third Quarter September 30 ------------------------------ --------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Sales $2,521 $2,320 $8,033 $7,406 Operating profit (loss) $ 213 $ (153) $ 720 $ 281 Earnings (loss) from continuing operations $ 108 $ (146) $ 362 $ 73 Earnings from discontinued operations - $ 252 - $ 280 Fully diluted earnings per share $ .85 $ .79 $ 2.82 $ 2.63 Effective tax rate on continuing operations 34.4% 33.0% 37.5% 45.9%
The increase in sales for the third quarter and first nine months of 1997 was primarily due to the sales contribution from acquisitions and from higher volume in the Automotive and Space and Defense segments. The sales increase was moderated by the effect of a strong U.S. dollar. The higher operating profit was due to the acquisitions, continued cost-reduction efforts, and profit from the higher sales volume in the Automotive and Space and Defense segments, partially offset by the effect of lower pricing in the Automotive segment. Operating profit (loss) for the third quarter and first nine months of 1996 included a before-tax charge of $344 million for actions taken in the automotive and space and defense businesses. See "Special Charges" note in the Notes to Financial Statements for further information. Operating profit for the first nine months of 1996 included a $15 million before tax charge related to the initial application of Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. Earnings(loss) from continuing operations for the first nine months of 1996 included a $12 million benefit from an insurance claim settlement primarily related to previously divested businesses, offset by a $13 million noncash charge related to the initial application of SFAS No. 121. 11 Earnings from discontinued operations includes the earnings from operations and the gain on the third quarter sale of substantially all of the businesses in the Information Systems and Services segment. See the "Discontinued Operations" note in the Notes to Financial Statements for further information. Interest expense was $57 million for the first nine months of 1997 compared to $76 million for the first nine months of 1996. Third quarter 1996 interest expense included $18 million related to the interest component of a litigation settlement. The reduction in the third quarter effective tax rate was primarily attributable to federal and state tax incentives and the tax benefit from the realignment of certain foreign operations.
Automotive (In millions) Nine Months Ended Third Quarter September 30 ------------------------------------------ ---------------------------------------------- Percent Percent 1997 1996 Inc(Dec) 1997 1996 Inc(Dec) ---- ---- -------- ---- ---- -------- Sales $1,570 $1,500 5% $5,239 $4,881 7% Operating profit (loss)as reported $ 136 $ (105) $ 485 $ 205 Special charges - $ 235 - $ 235 -------- ----- -------- ----- Adjusted operating profit $ 136 $ 130 5% $ 485 $ 440 10%
The increase in sales for the third quarter and first nine months of 1997 was primarily due to the sales contribution from the acquisitions of airbag and steering wheel operations and from higher volume in the air bag, seat belt, steering and engine component businesses. The sales increase was moderated by the effect of a strong U.S. dollar, as well as lower pricing. The higher operating profit for the third quarter and first nine months of 1997 resulted from the acquisitions, higher sales volume, and continued cost-reduction efforts, partially offset by the effect of lower pricing and the effect of a strong U.S. dollar. Operating profit for the first nine months of 1996 included a $15 million before-tax charge related to the initial adoption of SFAS No. 121. 12 Special charges recorded during the third quarter of 1996 related to reconfiguration of manufacturing plants, litigation and warranty expenses and asset write-downs. See "Special Charges" note in the Notes to Financial Statements for further information.
Space & Defense (In millions) Nine Months Ended Third Quarter September 30 --------------------------------------------- --------------------------------------------- Percent Percent 1997 1996 Inc (Dec) 1997 1996 Inc (Dec) ---- ---- --------- ---- ---- --------- Sales $951 $820 16% $2,794 $2,525 11% Operating profit (loss) $ 77 $(48) 260% $ 235 $ 76 209%
Sales and operating profit for the third quarter and first nine months of 1997 increased primarily due to the successful conversion of recent contract awards into revenue growth as well as strong ongoing program performance. Operating profit(loss) for the third quarter and first nine months of 1996 includes charges for certain contract reserves. Excluding these charges, operating profit was $61 million and $185 million for the third quarter and first nine months of 1996, respectively. LIQUIDITY AND FINANCIAL POSITION In the first nine months of 1997, cash flow provided by operating activities of $522 million, a net increase in debt of $328 million, and a net decrease of $6 million in other items were used to fund business acquisitions of $415 million, capital expenditures of $361 million, reacquisition of common stock of $202 million, and dividend payments of $116 million. As a result, cash and cash equivalents decreased by $250 million. Net debt (short-term debt, the current portion of long-term debt and long-term debt less cash and cash equivalents) was $829 million at September 30, 1997, compared to $196 million at December 31, 1996. The ratio of net debt to total capital (net debt, minority interests and shareholders' investment) at September 30, 1997 was 26 percent compared to 8 percent at December 31, 1996. 13 During the first nine months of 1997, the Company issued $80 million in medium-term notes under its shelf registration statements. The notes were used to refinance short-term debt. After this issuance, $420 million remains available for borrowing under the Company's shelf registration statements. During the first nine months of 1997, the Company amended the terms of its U.S. and multicurrency revolving credit agreements to extend the expiration date of the agreements from July 1, 2001 to July 1, 2002. Also, one additional bank joined the bank group providing the U.S. revolving credit agreement and one additional bank joined the bank group providing the multicurrency revolving credit agreement. During the first nine months of 1997, 3.8 million shares of TRW Common Stock were repurchased for approximately $202 million. Implementation of the Odyssey program has gone more slowly than anticipated, due to the delays in attracting the necessary financial investors. However, we are continuing to explore a variety of options, including attracting new investors, and are considering strategic alternatives for capitalizing on our technology. Management believes that funds generated from operations and existing borrowing capacity will be adequate to fund the Company's current share repurchase program and to support and finance planned growth, capital expenditures, company-sponsored research and development programs and dividends payments to shareholders. OTHER MATTERS During 1996, the Company was advised by the Department of Justice that it had been named as a defendant in two lawsuits brought by a former employee and filed under seal under the QUI TAM provisions of the civil False Claims Act. See "Other Contingencies" note in the Notes to Financial Statements for further information. TRW Vehicle Safety Systems Inc. ("VSSI") has reported to the Arizona Department of Environmental Quality ("ADEQ") potential violations of the Arizona hazardous waste law at its Queen Creek, Arizona facility for failure properly to label and dispose of waste water that might be classified as hazardous waste. ADEQ is conducting an investigation into these potential violations and VSSI is cooperating with the investigation. If ADEQ initiates proceedings against VSSI with respect to such matters, VSSI could 14 be liable for penalties and fines and other relief. Management is unable to make a meaningful estimate of the amount or range of possible liability at this time. FORWARD-LOOKING STATEMENTS Statements in this filing that are not historical facts are forward-looking statements, which involve risks and uncertainties that could affect the Company's actual results. Information regarding the important factors that could cause TRW's actual results to differ materially from the forward-looking statements contained in this filing can be found in TRW's reports filed with the Securities and Exchange Commission, including TRW's Form 8-K filed on May 20, 1997. 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings. ------------------ On July 21, 1997, the United States Environmental Protection Agency ("EPA") issued a notice of violation to the Company under the Clean Air Act with respect to air emissions at the former Izumi Industries, Corporation, Inc. facility in Yaphank, New York. TRW acquired this facility in November 1996. On August 15, 1997, the New York State Department of Environmental Conservation ("DEC") commenced an administrative enforcement action against the Company under the New York Environmental Conservation Law with respect to such emissions. On September 11, 1997, the Company agreed to an Order of Consent with the DEC, pursuant to which the Company has paid a $300,000 civil penalty to the DEC and has initiated certain specified actions to bring the facility into compliance with applicable regulatory standards relating to air emissions. These matters are not expected to have a material effect on TRW's financial position. TRW is seeking reimbursement from Izumi Industries, Corporation, Inc. for the costs arising from such Order of Consent. TRW Vehicle Safety Systems Inc. ("VSSI") has reported to the Arizona Department of Environmental Quality ("ADEQ") potential violations of the Arizona hazardous waste law at its Queen Creek, Arizona facility for failure properly to label and dispose of waste water that might be classified as hazardous waste. ADEQ is conducting an investigation into these potential violations and VSSI is cooperating with the investigation. If ADEQ initiates proceedings against VSSI with respect to such matters, VSSI could be liable for penalties and fines and other relief. Management is unable to make a meaningful estimate of the amount or range of possible liability at this time. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) Exhibits: 10(a) Amendment to Multi-Year Revolving Credit Agreement (as amended and restated as of May 8, 1996), dated as of August 7, 1997 among TRW Inc. and various financial institutions. 10(b) Consulting Agreement dated September 18, 1997 between TRW Inc. and G. H. Heilmeier. 11 Computation of Earnings Per Share -- Unaudited. 27 Financial Data Schedule. 99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited (Supplement to Exhibit 12 of the following Form S-3 Registration Statements of the Company: No. 33-61711, filed August 10, 1995, and No. 33-42870, filed September 20, 1991). (b) Reports on Form 8-K: None 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRW Inc. Date: October 20, 1997 By: /s/ William B. Lawrence ----------------------------- William B. Lawrence Executive Vice President and Secretary Date: October 20, 1997 By: /s/ Carl G. Miller ------------------------ Carl G. Miller Executive Vice President and Chief Financial Officer 17 FORM 10-Q Quarterly Report for Quarter Ended September 30, 1997 EXHIBIT INDEX ------------- EXHIBIT NO. DESCRIPTION 10(a) Amendment to Multi-Year Revolving Credit Agreement (as amended and restated as of May 8, 1996), dated as of August 7, 1997 among TRW Inc. and various financial institutions. 10(b) Consulting Agreement dated September 18, 1997 between TRW Inc. and G. H. Heilmeier. 11 Computation of Earnings Per Share --Unaudited. 27 Financial Data Schedule. 99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited (Supplement to Exhibit 12 of the following Form S-3 Registration Statements of the Company: No. 33-61711, filed August 10, 1995, and No. 33-42870, filed September 20, 1991). EX-10.A 2 EXHIBIT 10(A) 1 Exhibit 10(a) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AMENDMENT TO MULTI-YEAR REVOLVING CREDIT AGREEMENT (as amended and restated as of May 8, 1996) dated as of August 7, 1997 among TRW INC. and THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 AMENDMENT TO MULTI-YEAR REVOLVING CREDIT AGREEMENT (as amended and restated as of May 8, 1996) This Amendment to Multi-Year Revolving Credit Agreement, dated as of August 7, 1997 (this "Amendment"), is among TRW Inc., an Ohio corporation (the "Company") and the financial institutions listed on the signature pages hereof together with their successors or assigns (collectively, the "Banks" and individually, a "Bank"). W I T N E S S E T H: -------------------- WHEREAS, on July 1, 1992, the Company and the Banks entered into the Three-Year Revolving Credit Agreement (as it was then titled), which agreement was amended on June 30, 1993, March 1, 1994, February 28, 1995, and amended and restated as of May 8, 1996 (such agreement, as amended and restated, is known hereinafter as the "Agreement"); and WHEREAS, the Company and the Banks have agreed to make such changes to the Agreement as are reflected in this Amendment; NOW, THEREFORE, in consideration of the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1 THE AMENDMENTS 1.1 AMENDMENT TO "TERMINATION DATE" DEFINITION. The definition of "Termination Date" set forth in Section 13 shall be amended to read in its entirety as follows: "TERMINATION DATE" means the earlier to occur of (a) July 1, 2002, subject to extension for one or more successive one-year periods as to any Bank or Banks pursuant to Section 1.2, or (b) such other date on which the Commitments shall terminate pursuant to Section 11.2. 1.2 AMENDMENT OF OTHER INDEBTEDNESS CROSS-DEFAULT. Section 11.1.2 shall be amended to read in its entirety as follows: 11.1.2 NONPAYMENT OF OTHER INDEBTEDNESS FOR BORROWED MONEY. Default in the payment when due at maturity (subject to any applicable grace period) or by acceleration of any other indebtedness for borrowed money having a principal amount in excess of 50,000,000 U.S. Dollars of, or guaranteed by, the Company ("Other Indebtedness"), or default in the performance or observance of any obligation or condition with respect to any such Other Indebtedness if such default results in the -1- 3 acceleration of the maturity of any such Other Indebtedness; provided, that, if such default shall subsequently be remedied, cured, or waived prior to either the termination of Commitments or the declaration that all Loans are immediately due and payable, in each case pursuant to Section 11.2 hereof, and as a result the payment of such Other Indebtedness is no longer due, the Event of Default existing hereunder by reason thereof shall likewise be deemed thereupon to be remedied, cured, or waived and no longer in existence, all without any further action by the parties hereto. SECTION 2 GENERAL 2.1 REISSUANCE OF NOTES. In connection with the effectiveness of this Amendment, the Company shall issue to each of the Banks Notes in the principal amounts set forth next to such Bank's name in the signature blocks below, such Note shall be substantially in the form of Exhibit A to the Agreement with the dates therein changed to reflect this Amendment. Contemporaneously with the issuance of such Notes, the Notes dated May 8, 1996 currently pertaining to the Agreement shall be deemed null and void and each Bank shall cancel and return to the Company each such Note pertaining to the Agreement currently in such Bank's possession. 2.2 OTHER TERMS AND CONDITIONS. Unless amended hereby, all other terms and conditions of the Agreement shall remain in full force and effect without change. 2.3 GOVERNING LAW. This Amendment and each Note issued pursuant hereto shall be a contract made under and governed by the internal laws of the State of Ohio. Wherever possible each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment. All obligations of the Company and rights of the Banks and any other holders of the Notes expressed herein or in the Notes shall be in addition to and not in limitation of those provided by applicable law. 2.4 COUNTERPARTS. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment. When counterparts executed by all the parties shall have been lodged with the Company (or, in the case of any Bank as to which an executed counterpart shall not have been so lodged, the Company shall have received telegraphic, telex, or other written confirmation from such Bank of execution of a counterpart hereof by such Bank), this Amendment shall become effective as of the date hereof. -2- 4 2.5 CAPTIONS. Section captions used in this Amendment are for convenience only, and shall not affect the construction of this Amendment. Delivered at Cleveland, Ohio, as of the day and year first above written. TRW INC. By: /s/ Jeanne R. Sydenstricker --------------------------- Jeanne R. Sydenstricker Vice President and Treasurer 1900 Richmond Road Cleveland, Ohio 44124 Telephone 216/291-7566 Facsimile: 216/291-7831 -3- 5 BANKS: Amount of Percentage of Commitment Commitments - ---------- ----------- $60,000,000 8 % Bank of America National Trust ----- and Savings Association By: /s/ Deborah J. Graziano ----------------------- Name: Deborah J. Graziano Title: Vice President DOMESTIC OFFICE Bank of America NT & SA 1850 Gateway Boulevard Concord, California 94520 Telephone: (510) 675-7178 Facsimile: (510) 675-7531 Attention: Mandy Sneary EUROCURRENCY OFFICE Bank of America NT & SA 1850 Gateway Boulevard Concord, California 94520 Telephone: (510) 675-7178 Facsimile: (510) 675-7531 Attention: Mandy Sneary ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Bank of America ABA Routing No. 121000358 Account No.: 12331-83980 Account Name: Incoming Money Transfer Reference No.: TRW Commitment Fee -4- 6 Amount of Percentage of Commitment Commitments - ---------- ----------- $60,000,000 8 % Barclays Bank PLC ----- By: /s/ Gary F. Albanese ----------------------- Name: Gary F. Albanese Title: Associate Director DOMESTIC OFFICE Barclays Bank PLC 222 Broadway New York, New York 10038 Telephone: (212) 412-3728 Facsimile: (212) 412-5306 EUROCURRENCY OFFICE Barclays Nassau, Bahamas Branch c/o Barclays Bank PLC 222 Broadway New York, New York 10038 Telephone: (212) 412-3728 Facsimile: (212) 412-5306 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Barclays Bank PLC-New York ABA Routing No.: 026-002-574 Account No.: 050-019-104 Account Name: TRW Reference No.: TRW Commitment Fee; C. Tenn Sing Que -5- 7 Amount of Percentage of Commitment Commitments - ---------- ----------- $60,000,000 8 % The Chase Manhattan Bank ----- By: /s/ Joan F. Garvin ------------------ Name: Joan F. Garvin Title: Managing Director DOMESTIC OFFICE The Chase Manhattan Bank 270 Park Avenue 10th Floor New York, New York 10017-2070 Telephone: (212) 270-5730 Facsimile: (212) 270-5127 EUROCURRENCY OFFICE The Chase Manhattan Bank One Chase Manhattan Plaza Eighth Floor New York, New York 10081 Telephone: (212) 552-7472 Facsimile: (212) 552-5662 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Chase Manhattan Bank ABA Routing No.: 021-000021 Account No.: Account Name: Commercial Loan Opns. Reference No.: TRW Commitment Fee -6- 8 Amount of Percentage of Commitment Commitments - ---------- ----------- $60,000,000 8 % Citibank, N.A. ----- By: /s/ Mark Stanfield Packard -------------------------- Name: Mark Stanfield Packard Title: Vice President DOMESTIC OFFICE Citibank, N.A. c/o Citicorp Securities, Inc. 200 S. Wacker Dr. Chicago, IL 60606 Telephone: 312-993-3871 Facsimile: 312-993-6840 EUROCURRENCY OFFICE Citibank, N.A. c/o Citicorp Securities, Inc. 200 S. Wacker Dr. Chicago, IL 60606 Telephone: 312-993-3871 Facsimile: 312-993-6840 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Citibank, N.A., New York ABA Routing No. 021000089 Account No.: 38483095 Account Name: Chicago NEO Loan Acct. Reference No.: TRW Commitment Fee -7- 9 Amount of Percentage of Commitment Commitments - ---------- ----------- $60,000,000 8 % Morgan Guaranty Trust Company ----- of New York By: /s/ Patricia P. Lunka ---------------------- Name: Patricia P. Lunka Title: Vice President DOMESTIC OFFICE Morgan Guaranty Trust Company of New York 60 Wall Street New York, New York 10260-0060 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE Morgan Guaranty Trust Company of New York Nassau, Bahamas Office c/o J.P. Morgan Services Inc. Euro-Loan Servicing Unit 902 Market Street Wilmington, Delaware 19801 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Morgan Guaranty Trust ABA Routing No.:021000238 Account No.: 999-99-090 Account Name: ____________ Reference No.: TRW Com. Fee Corp. Proc. Module 30 -8- 10 Amount of Percentage of Commitment Commitments - ---------- ----------- $60,000,000 8 % National City Bank ----- By: /s/ David R. Bonner ---------------------- Name: David R. Bonner Title: Vice President DOMESTIC OFFICE National City Bank National City Center P. O. Box 5756 Cleveland, Ohio 44101-0756 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE National City Bank National City Center P. O. Box 5756 Cleveland, Ohio 44101-0756 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: National City Bank ABA Routing No.: 041000124 Account No.: 2537557 Account Name: _____________ Reference No.: TRW Commitment Fee -9- 11 Amount of Percentage of Commitment Commitments - ---------- ----------- $60,000,000 8 % The Sumitomo Bank, Limited ----- By: /s/ John H. Kemper ------------------ Name: John H. Kemper Title: Senior Vice President DOMESTIC OFFICE The Sumitomo Bank, Limited Chicago Branch Sears Tower 233 South Wacker Drive, Suite 4800 Chicago, Illinois 60606-6448 Telephone: (312) 876-6444 Facsimile: (312) 876-6436 EUROCURRENCY OFFICE The Sumitomo Bank, Limited Chicago Branch Sears Tower 233 South Wacker Drive, Suite 4800 Chicago, Illinois 60606-6448 Telephone: (312) 879-7668 Facsimile: (312) 876-0523 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: FNB of Chicago ABA Routing No. 071000013 Account No.: 15-01208 Account Name: Sumitomo Bank Ltd, Chicago Branch. Reference No.: TRW Commitment Fee -10- 12 Amount of Percentage of Commitment Commitments - ---------- ----------- $45,000,000 6 % Banque Nationale de Paris ----- By: /s/ Arnaud Collin Du Bocage --------------------------- Name: Arnaud Collin du Bocage Title: Executive Vice President and General Manager DOMESTIC OFFICE Banque Nationale de Paris Chicago Branch Rookery Building 209 South LaSalle, 5th Floor Chicago, Illinois 60604 Telephone: (312) 977-2211 Facsimile: (312) 977-1380 EUROCURRENCY OFFICE Banque Nationale de Paris Chicago Branch Rookery Building 209 South LaSalle, 5th Floor Chicago, Illinois 60604 Telephone: (312) 977-2211 Facsimile: (312) 977-1380 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Banque Nationale de Paris, New York Branch ABA Routing No.: 026007689 Account No.: 14119400189 Account Name: BNP, Chicago Branch Reference No.: TRW Commitment Fee -11- 13 Amount of Percentage of Commitment Commitments - ---------- ----------- $45,000,000 6 % Dresdner Bank AG ----- By: /s/ D. Slusavczyk ----------------- Name: D. Slusavczyk Title: Vice President By: /s/ A. R. Morris ----------------- Name: A. R. Morris Title: Vice President DOMESTIC OFFICE Dresdner Bank AG New York Branch 75 Wall Street New York, New York 10005 Telephone: (212) 429-2244 Facsimile: (212) 429-2524 EUROCURRENCY OFFICE Dresdner Bank AG Grand Cayman Branch c/o Dresdner Bank AG New York Branch 75 Wall Street New York, New York 10005 Telephone: (212) 429-2244 Facsimile: (212) 429-2524 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Chase Manhattan (NY,NY) ABA Routing No.: 021-000-021 Account No.: 920-1-059-079 Account Name: Dresdner Bank AG, New York Branch Reference No.: TRW Commitment Fee -12- 14 Amount of Percentage of Commitment Commitments - ---------- ----------- $45,000,000 6 % NBD Bank ----- By: /s/ William J. McCaffrey ------------------------ Name: William J. McCaffrey Title: Vice President DOMESTIC OFFICE NBD Bank Attention: Mid-Corporate Banking 611 Woodward Detroit, Michigan 48226 Telephone: (313) 225-3444 Facsimile: (313) 225-3269 EUROCURRENCY OFFICE NBD Bank, N.A. Attention: Mid-Corporate Banking 611 Woodward Detroit, Michigan 48226 Telephone: (313) 225-3444 Facsimile: (313) 225-3269 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: NBD Bank ABA Routing No.:072000326 Account No.: 1424183 Account Name: Commercial Loans Reference No.: TRW Commitment Fee -13- 15 Amount of Percentage of Commitment Commitments - ---------- ----------- $45,000,000 6 % Royal Bank of Canada ----- By: /s/ Patrick Shields ------------------------ Name: Patrick Shields Title: Senior Manager DOMESTIC OFFICE Royal Bank of Canada Grand Cayman (North America No. 1) Branch c/o New York Branch 32 Old Slip New York, New York 10005-3531 Telephone: (212) 428-6323 Facsimile: (212) 428-2372 EUROCURRENCY OFFICE Royal Bank of Canada Grand Cayman (North America No. 1) Branch c/o New York Branch 32 Old Slip New York, New York 10005-3531 Telephone: (212) 428-6323 Facsimile: (212) 428-2372 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Chase Manhattan, NY ABA Routing No.: 021000021 Account No.: 9201033363 Account Name: Royal Bank Reference No.: TRW Commitment Fee -14- 16 Amount of Percentage of Commitment Commitments - ---------- ----------- $30,000,000 4 % KeyBank National Association ----- By: /s/ Marianne Meil ----------------- Name: Marianne Meil Title: Vice President DOMESTIC OFFICE KeyBank National Association 127 Public Square Cleveland, Ohio 44114 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE KeyBank National Association 127 Public Square Cleveland, Ohio 44114 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: KeyBank National Association ABA Routing No.:041001039 Account No.: 00100-39140 Account Name: Commercial Loan Opns Reference No.: TRW Commitment Fee -15- 17 Amount of Percentage of Commitment Commitments - ---------- ----------- $30,000,000 4 % The Sakura Bank, Limited ----- By: /s/ Shunji Sakurai ------------------ Name: Shunji Sakurai Title: Joint General Manager DOMESTIC OFFICE The Sakura Bank, Limited Chicago Branch 227 West Monroe Street Suite 4700 Chicago, Illinois 60606 Telephone: (312) 580-3276 Facsimile: (312) 332-5345 EUROCURRENCY OFFICE The Sakura Bank, Limited Chicago Branch 227 West Monroe Street Suite 4700 Chicago, Illinois 60606 Telephone: (312) 580-3276 Facsimile: (312) 332-5345 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: FNB of Chicago ABA Routing No.: 071000013 Account No.: 1512951 Account Name: Sakura Bank, Chicago Reference No.: TRW Commitment Fee -16- 18 Amount of Percentage of Commitment Commitments - ---------- ----------- $30,000,000 4 % The Tokai Bank, Limited ----- By: /s/ Hiroshi Tanaka ------------------ Name: Hiroshi Tanaka Title: General Manager DOMESTIC OFFICE The Tokai Bank, Limited Chicago Branch Attention: Corporate Finance 181 West Madison Street, Suite 3600 Chicago, Illinois 60602 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE The Tokai Bank, Limited Chicago Branch Attention: Corporate Finance 181 West Madison Street, Suite 3600 Chicago, Illinois 60602 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: FNB of Chicago ABA Routing No.: 071000013 Account No.: 15-08997 Account Name: Tokai Bank, Chicago Branch Reference No.: TRW Commitment Fee Loan Administration -17- 19 Amount of Percentage of Commitment Commitments - ---------- ----------- $30,000,000 4 % Union Bank of Switzerland ----- By: /s/ Dieter Hoeppli ------------------ Name: Dieter Hoeppli Title: Vice President By: /s/ Samuel Azizo ------------------ Name: Samuel Azizo Title: Vice President DOMESTIC OFFICE Union Bank of Switzerland New York Branch 299 Park Avenue New York, New York 10171 Telephone: (212) 821-3415 Facsimile: (212) 821-3383 EUROCURRENCY OFFICE Union Bank of Switzerland New York Branch 299 Park Avenue New York, New York 10171 Telephone: (212) 821-3415 Facsimile: (212) 821-3383 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Union Bank of Switzerland ABA Routing No.: 026008439 Account No.: 519243USICC1 Account Name: Credit Corporate Clearing Reference No.: TRW Commitment Fee -18- 20 Amount of Percentage of Commitment Commitments - ---------- ----------- $15,000,000 2 % Bank of China, New York Branch ----- By: /s/ Zhu, ZhiCheng ----------------- Name: Zhu, ZhiCheng Title: General Manager, USA DOMESTIC OFFICE Bank of China New York Branch 410 Madison Avenue New York, New York 10017 Telephone: (212) 935-3101 ext. 475 Facsimile: (212) 688-0919 EUROCURRENCY OFFICE Bank of China New York Branch 410 Madison Avenue New York, New York 10017 Telephone: (212) 935-3101 ext. 475 Facsimile: (212) 688-0919 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Bank of China, New York Branch ABA Routing No.: 026003269 Account No.: 160081555553-001-001 . Reference No.: TRW Commitment Fee -19- 21 Amount of Percentage of Commitment Commitments - ---------- ----------- $15,000,000 2 % Wells Fargo Bank, N.A. ----- By: /s/ Edith R. Lim ----------------- Name: Edith R. Lim Title: Vice President By: /s/ Frieda Youlios ----------------- Name: Frieda Youlios Title: Vice President DOMESTIC OFFICE Wells Fargo Bank, N.A. 707 Wilshire Blvd., 16th. Floor Los Angeles, CA 90017 Telephone: (213) 614-5038 Facsimile: (213) 614-2305 EUROCURRENCY OFFICE Wells Fargo Bank, N.A. 707 Wilshire Blvd., 16th. Floor Los Angeles, CA 90017 Telephone: (213) 614-5038 Facsimile: (213) 614-2305 ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: Wells Fargo Bank, N.A. ABA Routing No.: 121-000-248 Account No.: 451-8054341 Account Name: SYNDIC/WFB CORP/ACH Reference No.: TRW Ref No 9118583038 - ------------ ---- $750,000,000 100% Total -20- EX-10.B 3 EXHIBIT 10(B) 1 Exhibit 10(b) September 18, 1997 Dr. George H. Heilmeier Bell Communications Research Morris Corporate Center (MCC) 445 South Street Morristown, NJ 07960-6438 Dear George: This letter will confirm our understanding relating to your engagement by TRW as a Consultant. The attached terms and conditions (Exhibit A) also apply fully to the engagement and, together with this letter, constitute our "Agreement". We will request your general consulting services from time to time. However, you will not be obligated to devote more than 15 percent of your time in any year to such services. Your consulting services will be rendered at such times and places as are mutually satisfactory and TRW will have no control over any reasonable manner or methods used by you in rendering such services. Our arrangement will become effective on January 1, 1998 and will continue for two years, terminating on December 31, 1999. Thereafter, this Agreement may be renewed from year to year on mutually agreeable terms and conditions. The Agreement may be terminated by either of us in accordance with the attached terms and conditions. As compensation for your services as a Consultant, TRW will pay to you $210,000 per year, to be paid in monthly installments. This payment is not eligible for the Directors' Deferred Compensation Plan. TRW will also reimburse you for first-class airfare and all other reasonable out-of-pocket travel, entertainment, telephone and other business expenses incurred by you in performing your duties. Receipts for such expenses should be submitted to me for processing and approval. During the term of this Agreement and any renewals, we will also reimburse you for required secretarial and other appropriate services. 2 Page two If you agree, please sign at the bottom of this letter and initial each page of the attached terms and conditions and return them to me. Please keep a copy of the letter and the terms and conditions for your records. Sincerely, /s/ Joseph T. Gorman - -------------------- Joseph T. Gorman ACCEPTED: /s/George H. Heilmeier - ---------------------- George H. Heilmeier Date: September 25, 1997 3 EXHIBIT A - --------- TERMS AND CONDITIONS - -------------------- I. CONFIDENTIAL INFORMATION The term "TRW Confidential Information" refers to all data, reports, drawings, tapes, formulas, interpretations, forecasts, business plans and analyses, records, trade secrets, customer lists, documents, proposals, information regarding products, pricing, terms of sale, processes, research and development, apparatus and application methods and all other information reflecting upon or concerning TRW Inc., its subsidiaries or affiliates (hereinafter referred to as "TRW") that TRW protects against unrestricted disclosure to others, are not openly communicated or made accessible by TRW to third parties and that Consultant obtains from TRW, its employees, subsidiaries or affiliates, or otherwise acquires while engaged hereunder, including information of a third party as to which TRW has a nondisclosure obligation. Additionally, TRW Confidential Information will include any and all reports to TRW made by Contractor hereunder or the contents thereof. In view of the sensitive information to which Consultant will have access during Consultant's engagement hereunder, any information reflecting upon or concerning TRW and known, communicated or accessible to Consultant shall be deemed to be TRW Confidential Information unless such information has been published by TRW in publicly available documents. Such TRW Confidential Information includes, but is not limited to, secret or confidential matters (a) of a technical nature, (b) of a business nature and (c) of either nature pertaining to future development. Consultant: (a) agrees that TRW Confidential Information is the sole property of TRW and that such TRW Confidential Information shall be used only in providing consulting services hereunder for TRW; (b) will hold the TRW Confidential Information in confidence and not disclose it in any manner whatsoever, in whole or in part, to any person except to employees of TRW, or to employees, subcontractors or representatives of Consultant who need to know in order to perform their duties and who agree in writing to use the Confidential Information only to assist Consultant in performance of Consultant's duties hereunder; (c) will take or cause to be taken all reasonable precautions to prevent the disclosure or communication of TRW Confidential Information to third parties; (d) agrees that each reproduction, duplication, or copy of any portion of TRW Confidential Information will be deemed TRW Confidential Information for all purposes hereunder; and (e) will, upon expiration or termination of the Agreement, discontinue all use of TRW Confidential Information and return all documents containing TRW Confidential Information to TRW. Initialed ____________ 4 In the event that Consultant or its employees, subcontractors, or representatives receives a request to disclose all or any part of the TRW Confidential Information under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction or by a governmental body, Consultant shall 1. As soon as possible upon receipt, notify TRW of the existence, terms and circumstances surrounding such a request, so that it may seek an appropriate protective order and/or waive Consultant's compliance with the provisions of this Agreement; and 2. If disclosure of such TRW Confidential Information is required in the opinion of Consultant's counsel, cooperate with TRW in obtaining reliable assurances that confidential treatment will be accorded to the disclosed TRW Confidential Information. II. INVENTIONS Consultant shall disclose promptly to TRW all ideas, inventions, discoveries or improvements, whether or not patentable, which were or are conceived or first reduced to practice by Consultant, whether solely or jointly with employees of TRW, its subsidiaries or affiliates, in the course of performing work hereunder or as a result of knowledge acquired while performing services under this Agreement ("TRW Inventions"). Consultant agrees that all TRW Inventions shall be the sole property of TRW. During and subsequent to the term of this Agreement, Consultant will execute and deliver to TRW all documents and take such other action as may be reasonably required by TRW to assist TRW in obtaining patents in the United States and foreign countries and in vesting title thereto in TRW for said TRW Inventions. At TRW's request and expense, Consultant shall cooperate with TRW and do all things reasonably and lawfully appropriate to assist TRW, or its successors, assigns and nominees, to obtain and enforce patents relating to such TRW Inventions. III. COPYRIGHTS Neither Consultant nor any of Consultant's employees or independent contractors shall knowingly incorporate in any work prepared under this Agreement any copyrighted or proprietary material of TRW or any other person. Further, any work of authorship created under this Agreement shall constitute a "work made for hire", when so defined by the Copyright Act, and as to any work not so defined, Consultant hereby transfers, and shall cause its employees to transfer, to TRW any and all right, title and interest Consultant may have in and to the copyright in such work for the entire term of the copyright. No rights are reserved to Consultant in any work prepared under this Agreement. Initialed ____________ -2- 5 IV. LICENSE Consultant hereby grants to TRW a fully paid-up, nonexclusive and perpetual right and license to use any and all of Consultant's know-how and trade secrets which are necessary to the implementation of work by TRW pursuant to the reports and recommendations made by Consultant. V. CLASSIFIED MATERIAL TRW shall advise Consultant which information or items provided to Consultant constitute classified material, and Consultant shall comply with all security requirements imposed by the United States Government or TRW. If it becomes necessary for Consultant to store classified material at Consultant's place of work, other than TRW premises, a facility clearance shall be required. In that event, Consultant shall enter into a security agreement with the applicable Government agency and maintain a system of security controls in accordance with such security agreement. All such classified material shall be promptly returned to TRW on request or upon termination of the security agreement or this Agreement, whichever first occurs. VI. NO CONFLICT Except with the prior written approval of TRW after full disclosure of all relevant facts, Consultant shall refrain from accepting work, engagements or appointments from any third party which could conflict with, or impede an unbiased performance of, Consultant's work hereunder or the protection of TRW Confidential Information. TRW understands that Consultant will enter into consulting agreement with Science Applications International Corporation (SAIC). TRW agrees not to request Consultant to perform any work that would be in conflict with Consultant's agreement with Bell Communications Research (Bellcore) and SAIC. VII. COMPLIANCE Consultant warrants that Consultant has the right to enter into this Agreement and that performance of the work specified shall not cause Consultant to be in violation of any federal, state or local law or regulation, or any contractual agreement entered into by the Consultant. Consultant shall comply with TRW's policies, directives and standards, including without limitation TRW's standards regarding legal and ethical conduct and government contracting and with all applicable federal, state and local laws and regulations. Consultant shall file all tax returns and reports required to be filed pursuant to law. VIII. TERMINATION This Agreement may be terminated by TRW or Consultant in whole or in part upon 15 days' prior written notice. This Agreement will terminate forthwith upon receipt of written notice from TRW if Consultant is unable to perform Consultant's duties hereunder for a period of thirty consecutive days. Payment shall be made for services and expenses rendered or incurred through the date of termination. Advance payments shall be prorated through the termination date. The covenants set forth in these Terms and Conditions shall survive the termination of this Agreement. Initialed ____________ -3- 6 IX. FORCE MAJEURE Neither party shall incur liability to the other party on account of any loss or damage resulting from any delay or failure to perform any part of this Agreement where such delay or failure was caused in whole or in part by events, occurrences or causes beyond the reasonable control of such party. X. RECORDS Consultant shall maintain a written record of all work performed and data generated in the course of performance under this Agreement and shall prepare a written summary of all work performed hereunder. Such written material shall be the sole property of TRW and shall be made available on request. TRW shall have the right to request preliminary reports from Consultant which represent the findings and conclusions of Consultant based on the information which exists at that time. Upon completion of each specific project or termination of this Agreement, Consultant shall, if requested by TRW, promptly furnish TRW a complete report, together with all supporting contract data. XI. CHANGES TRW may order changes in the description of services to be performed by Consultant. If Consultant believes that any change requested will require additional compensation to Consultant or will adversely affect the schedule for rendering services, before proceeding with any work on the change, Consultant will so advise TRW and thereafter Consultant will not proceed with any such change until Consultant has received written authorization from TRW to do so. This Agreement may not be amended, modified or otherwise changed except by an instrument in writing signed by TRW and Consultant. XII. INDEPENDENT CONTRACTOR Consultant agrees that in the performance of this Agreement, Consultant shall act as an independent contractor, and not as an employee of TRW, and all of Consultant's agents and employees shall be subject solely to the control, supervision and authority of Consultant. Consultant understands and agrees that TRW will not cover Consultant or Consultant's employees or agents with Worker's Compensation, Unemployment Insurance, State Disability Insurance, public liability insurance or other benefits that may be available to employees of TRW. Consultant shall refrain from any representation that Consultant is an employee, agent or legal representative of TRW, or from incurring liabilities or obligations of any kind in the name, or on behalf, of TRW. It is agreed that (a) Consultant shall be responsible for Social Security taxes, if any, which may be applicable and for any other applicable fees or taxes (federal, state or local) which may be required; and (b) Consultant and Consultant's employees, agents, heirs, successors and assigns shall not be entitled, by virtue of any work done under this Agreement, to any benefits under any medical or travel accident insurance, pension, sick leave, life insurance, vacation, or disability, or other employees' benefit plan or plans maintained by TRW for its employees. Initialed ____________ -4- 7 XIII. INDEMNIFICATION TRW agrees to indemnify and hold Consultant harmless from and against any losses, claims, damages, liabilities, or actions related to or arising out of this engagement and Consultant's role in connection therewith, and will reimburse Consultant for all expenses (including reasonable counsel fees) incurred by Consultant in connection with investigating, preparing or defending any such action or claim, whether or not in connection with pending or threatened litigation in which Consultant is a party, if Consultant acted in good faith and in a manner Consultant reasonably believed to be in or not opposed to the best interests of TRW and, with respect to any criminal action or proceeding, had no reasonable cause to believe Consultant's conduct was unlawful. If any action or proceeding is brought against Consultant in respect of which indemnity may be sought against TRW pursuant hereto, Consultant shall promptly notify TRW in writing of the commencement of such action or proceeding, but the omission so to notify TRW shall not relieve TRW from any other obligation or liability which TRW may have to Consultant otherwise than under this Agreement or with respect to any other action or proceeding. In case any such action or proceeding shall be brought against Consultant, TRW shall be entitled to participate in such action or proceeding, and, after a written notice from TRW to Consultant, to assume the defense of such action or proceeding with counsel of TRW's choice at its expense (in which case TRW shall not thereafter be responsible for the fees and expenses of any separate counsel retained by Consultant); provided, however, that such counsel shall be reasonably satisfactory to Consultant in the exercise of Consultant's reasonable judgment. Notwithstanding TRW's election to assume the defense of such action or proceeding, Consultant shall have the right to employ separate counsel and to participate in the defense of such action or proceeding. TRW shall bear the reasonable fees, costs and expenses of one such separate counsel (and shall pay such fees, costs and expenses at least quarterly) if TRW approves in advance the separate counsel selected by Consultant and if: (i) the use of counsel chosen by TRW to represent Consultant would present such counsel with a conflict of interest; (ii) the defendants in, or targets of, any such action or proceeding include both Consultant and TRW, and, upon advice of counsel, Consultant shall have reasonably concluded that there may be legal defenses available to Consultant which are materially different from those available to TRW (in which case TRW shall not have the right to direct the defense of such action or proceeding on behalf of Consultant); (iii) TRW shall not have employed counsel reasonably satisfactory to Consultant in the exercise of reasonable judgment to represent Consultant within a reasonable time after notice of the institution of such action or proceeding; or (iv) TRW shall authorize Consultant to employ separate counsel at TRW's expense. TRW and Consultant understand that the indemnity provisions contained in this Agreement shall be in addition to any and all other rights and remedies which the parties may have at law or in equity or otherwise, including, but not limited to, any right of contribution. Notwithstanding anything contained herein to the contrary, it is the intention of TRW and Consultant that the indemnification provided herein by TRW to Consultant shall not be more than that provided to a presently serving elected officer of TRW Inc. Initialed ____________ -5- 8 Consultant hereby agrees to indemnify, defend and save TRW, its officers, directors, employees and agents harmless from and against any expense, claim, action, loss or liability to any third party that results from or is caused by, directly or indirectly, Consultant's bad faith, willful misconduct, recklessness or unlawful conduct or the bad faith, willful misconduct, recklessness or unlawful conduct of Consultant's employees, agents, subcontractors, suppliers or other third parties utilized in connection with Consultant's performance. In agreeing to indemnify TRW under this section, Consultant expressly waives any immunity from liability Consultant may be entitled to under Section 35, Article II of the Ohio Constitution and Ohio Revised Code Section 4123.74 which provides immunity to complying employers from actions for damages by employees injured in the course of or arising out of their employment. Nothing in this indemnification shall limit the protection otherwise available to TRW employees or other persons performing emergency first-aid services under Ohio Revised Code Sections 2305.23 and 4731.90. XIV. NONDISCRIMINATION Consultant: (a) will not discriminate against any applicant for employment on the basis of race, color, non-job related handicap, veteran status, religion, sex, national origin or age; (b) will take affirmative action to ensure that applicants are employed and employees are treated during employment without regard to their race, color, religion, sex, national origin, veteran status or non-job related handicap; and (c) will otherwise at all times comply with all applicable federal, state and local laws, rules, regulations, orders and ordinances relating to equal employment opportunity. Without limiting the generality of the foregoing, Consultant shall at all times comply fully with the provisions of the following regulations and Executive Orders, as the same may be amended or modified from time to time, and all rules and regulations promulgated thereunder or relating thereto or to such Executive Orders, as so amended or modified, such rules and regulations being herein incorporated by this reference: (i) Executive Order 11246, as amended by Executive Order 11375 (relating to nondiscrimination in employment by Government contracts and trade contractors); (ii) Executive Order 11625 (relating to utilization of minority business enterprises); (iii) Executive Order 11701 and 41 CFR 60-250 (relating to employment of certain veterans); (iv) Executive Order 11758 and 41 CFR 60-741:4 (relating to employment of handicapped persons); and (v) Executive Order 11141 (relating to nondiscrimination on the basis of age). Consultant shall, upon request of TRW, provide TRW with such certifications and undertake such other actions as TRW may deem appropriate to verify and assure Consultant's compliance with such Executive Orders and regulations. XV. PUBLICITY Notwithstanding any provision to the contrary herein or otherwise, except as TRW grants prior written approval, Consultant shall not publicize the existence or terms of, or work performed under, this Agreement. Initialed ____________ -6- 9 XVI. ASSIGNMENT This Agreement shall not be assignable by either party without the prior written consent of the other party, except that TRW may assign this Agreement without such consent with respect to any corporate reorganization, merger, transfer of assets or similar transactions pursuant to which all of TRW's rights and obligations hereunder are transferred by operation of law or otherwise. XVII. ENTIRE AGREEMENT This Agreement, including the engagement letter and these terms and conditions, sets forth the entire understanding between the parties relating to the subject matter contained herein and merges all prior discussions between them. Neither party shall be bound by any condition, warranty, or representation other than as expressly stated in this Agreement or as subsequently set forth in writing signed by the parties. If prior agreements, letters or proposals relating to the subject matter of this Agreement are inconsistent with the terms and conditions of the Agreement, this Agreement shall govern. Initialed ____________ -7- EX-11 4 EXHIBIT 11 1 Exhibit 11 TRW Inc. and Subsidiaries ------------------------- COMPUTATION OF EARNINGS PER SHARE - UNAUDITED --------------------------------------------- (IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Nine Months Ended September 30 ------------------------------ PRIMARY (A) 1997 1996 - ----------- ---- ---- Earnings from continuing operations $ 362.3 $ 72.4 Less preference dividend requirements 0.4 0.5 ------- ------- Earnings applicable to common shares and common share equivalents 361.9 71.9 Earnings from discontinued operations 0.0 37.9 Gain on disposal of discontinued operations 0.0 242.4 ------- ------- Net earnings applicable to common shares and common share equivalents $ 361.9 $ 352.2 ======= ======= Average common shares outstanding 124.0 129.6 Stock options and performance share rights, based on the treasury stock method using average market price 3.1 2.9 ------- ------- Average common shares and common share equivalents 127.1 132.5 ======= ======= Primary earnings per share from continuing operations $ 2.85 $ 0.54 Primary earnings per share from discontinued operations 0.00 0.29 Primary earnings per share from gain on disposal of discontinued operations 0.00 1.83 ------- ------- Primary earnings per share $ 2.85 $ 2.66 ======= ======= FULLY DILUTED (B) Earnings from continuing operations applicable to common shares and common share equivalents $ 361.9 $ 71.9 Dividends assuming conversion of other dilutive securities: (B) Dilutive preference dividends 0.4 0.5 ------- ------- Earnings from continuing operations applicable to fully diluted shares 362.3 72.4 Earnings from discontinued operations 0.0 37.9 Gain on disposal of discontinued operations 0.0 242.4 ------- ------- Net earnings applicable to fully diluted shares $ 362.3 $ 352.7 ======= ======= Average common shares outstanding 124.0 129.6 Common shares assuming conversion of other dilutive securities: (B) Dilutive preference shares 1.0 1.1 Stock options and performance share rights, based on the treasury stock method using closing market price if higher than average market price 3.3 3.2 ------- ------- Average fully diluted shares 128.3 133.9 ======= ======= Fully diluted earnings per share from continuing operations $ 2.82 $ 0.53 Fully diluted earnings per share from discontinued operations 0.00 0.28 Fully diluted earnings per share from gain on disposal of discontinued operations 0.00 1.82 ------- ------- Fully diluted earnings per share $ 2.82 $ 2.63 ======= ======= (A) In accordance with APB#15, the shares and per share amounts reflect a two-for-one stock split (in the form of a 100% stock dividend) of the company's common stock which is effective as of November 8, 1996. (B) Assuming the conversion of the Serial Preference Stock II - Series 1 and Series 3.
EX-27 5 EXHIBIT 27
5 1,000,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 136 0 1,489 0 578 2,508 6,114 3,511 6,081 2,394 531 77 0 0 2,148 6,081 8,033 8,033 6,551 6,551 0 0 57 580 218 362 0 0 0 362 2.85 2.82
EX-99 6 EXHIBIT 99 1 EXHIBIT 99 TRW Inc. and Subsidiaries Computation of Ratio of Earnings to Fixed Charges - Unaudited (In millions except ratio data)
Nine Months Years Ended December 31 ended ------------------------------------------------------------------------------- September 30, 1997 1996 1995 1994 1993 1992 ------------------ ---------------- ------------ ----------- ----------- ------------- Earnings from continuing operations before income taxes $579.7 $302.2(A) $625.5 $435.5 $289.2 $276.4 Unconsolidated affiliates (5.7) 1.4 1.3 (0.6) 0.7 (0.9) Minority earnings 14.1 11.5 10.8 7.7 1.4 0.1 Fixed charges excluding capitalized interest 90.5 129.0 137.2 145.3 177.5 208.1 ---- ----- ----- ----- ----- ----- Earnings $678.6 $444.1 $774.8 $587.9 $468.8 $483.7 ------ ------ ------ ------ ------ ------ Fixed Charges: Interest expense $56.8 $84.2 $94.7 $104.7 $137.4 $162.1 Capitalized interest 3.1 3.5 5.1 6.6 7.9 12.7 Portion of rents representa- tive of interest factor 33.7 43.2 41.4 39.2 37.9 45.8 Interest expense of uncon- solidated affiliates 0.0 1.6 1.1 1.4 2.2 0.2 --- --- --- --- --- --- Total fixed charges $93.6 $132.5 $142.3 $151.9 $185.4 $220.8 ----- ----- ------ ------ ------ ------ Ratio of earnings to fixed 7.2x 3.4x 5.4x 3.9x 2.5x 2.2x charges ---- ---- ---- ---- ---- ---- (A) The 1996 earnings from continuing operations before income taxes of $302.2 million includes a charge of $384.8 million as a result of actions taken in the automotive and space and defense businesses.
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