10-K405 1 TRW 10-K405 1 [TRW logo] 1994 SEC FORM 10-K 2 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 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 IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 1900 RICHMOND ROAD, CLEVELAND, OHIO 44124 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (216) 291-7000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ----------------------------------------- ---------------------------- Common Stock, par value $0.625 per share New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange Philadelphia Stock Exchange Rights to Purchase Cumulative Redeemable New York Stock Exchange Serial Preference Stock II, Series 4 Chicago Stock Exchange Pacific Stock Exchange Philadelphia Stock Exchange Cumulative Serial Preference Stock II, New York Stock Exchange $4.40 Convertible Series 1 Cumulative Serial Preference Stock II, New York Stock Exchange $4.50 Convertible Series 3
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the registrant's voting stock held by non-affiliates was $4,229,613,216 as of March 3, 1995. This amount was computed on the basis of the closing price of the registrant's voting securities included in the NYSE-Composite Transactions report for such date, as published in the Midwest edition of The Wall Street Journal or, in the case of the registrant's voting cumulative preference stock, for the date of the most recent trade, as reported in the Dow Jones News Retrieval Service. As of March 3, 1995 there were 64,862,758 shares of TRW Common Stock, $0.625 par value, outstanding. The following documents have been incorporated herein by reference to the extent indicated herein: TRW Proxy Statement dated March 14, 1995 Part III TRW Annual Report to Security Holders for the year ended December 31, 1994 Parts I, II and IV
3 TRW INC. INDEX TO ANNUAL REPORT ON FORM 10-K FOR YEAR ENDED DECEMBER 31, 1994
PART I PAGE ------ ---- Item 1. Business............................................................................... 1 Item 2. Properties............................................................................. 5 Item 3. Legal Proceedings...................................................................... 6 Item 4. Submission of Matters to a Vote of Security Holders.................................... 6 Executive Officers of the Registrant............................................................. 7 PART II ------- Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................................................... 8 Item 6. Selected Financial Data................................................................ 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................................... 9 Item 8. Financial Statements and Supplementary Data............................................ 9 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................... 9 PART III -------- Item 10. Directors and Executive Officers of the Registrant.................................................................... 9 Item 11. Executive Compensation................................................................. 10 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................................. 10 Item 13. Certain Relationships and Related Transactions......................................... 10 PART IV ------- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................................................... 10
4 PART I ITEM 1. BUSINESS ------- -------- INDUSTRY SEGMENTS AND PRODUCT CLASSIFICATIONS TRW is an international company that provides advanced technology products and services. The principal businesses of TRW and its subsidiaries are the design, manufacture and sale of products and the performance of systems engineering, research and technical services for industry and the United States Government in three industry segments: Automotive; Space & Defense; and Information Systems & Services. TRW's principal products and services include automotive systems and components; spacecraft; software and systems engineering support services; electronic systems, equipment and services; and information systems and services. TRW was incorporated under the laws of Ohio on June 17, 1916. As used herein the terms "TRW" and the "Company" refer to TRW Inc. or to TRW Inc. and its subsidiaries or to a subsidiary of TRW Inc. AUTOMOTIVE TRW's Automotive segment designs, manufactures and sells a broad range of steering, suspension, engine, safety, engineered fastening, electrical, electronic, electromechanical and other components and systems as original equipment for passenger cars, commercial vehicles, trucks, buses, farm machinery and off-highway vehicles. These products include occupant safety systems such as seat belt systems and inflatable restraint systems, manual and power steering gears, engine valves and valve train components, suspension components, electronic monitoring and control systems, electromechanical assemblies, fasteners, stud welding systems and other components. TRW also manufactures and sells, for use as aftermarket parts, a broad line of engine and chassis parts for cars, trucks, off-highway vehicles and other miscellaneous uses. Automotive original equipment included in this industry segment is sold primarily to original equipment manufacturers. Aftermarket parts manufactured by TRW are sold to original equipment manufacturers and others for resale through their own independent distribution networks. SPACE & DEFENSE TRW's Space & Defense segment includes spacecraft, software and systems engineering support services and electronic systems, equipment and services. The Company's spacecraft activities include the design and manufacture of spacecraft equipment, propulsion subsystems, electro-optical and instrument systems, spacecraft payloads, high-energy lasers and laser technology and other high-reliability components. TRW's software and systems engineering support services are in the fields of command and control, security for defense and nondefense applications, counterterrorism, undersea surveillance, antisubmarine warfare and other high-technology space and defense mission support systems, management of radioactive waste, automated fingerprint matching, upgrading of the nation's air traffic control program and other civilian applications. The Company's electronic systems, equipment and services include the design and manufacture of communications systems, avionics systems (such as unmanned aerial vehicles) and other electronic technologies for space and defense applications. Products and services in this industry segment are sold and distributed principally to the United States Government. TRW's spacecraft business involves the sale to the United States Government of subsystems and components for space propulsion and unmanned spacecraft for defense, scientific research and communications purposes. TRW has designed and built a significant number of unmanned spacecraft and is currently participating in a number of spacecraft programs. Sales to the United States Government of software and systems engineering support services include a wide variety of computer software systems and analytical services for space and defense applications. Sales to the United States Government of electronic systems, equipment and services consist of systems and subsystems for defense and space applications, including communications, command and control, guidance, navigation, electric power, sensing and electronic display equipment. While classified projects are not discussed herein, the operating results relating to classified projects are included in the Company's consolidated financial statements and the business risks associated with such projects do not differ materially from those of other projects for the United States Government. TRW also performs diverse testing and general research projects in many of the technical disciplines related to its Space & Defense products and services under both private and United States Government contracts, including several advanced defense system projects. 1 5 INFORMATION SYSTEMS & SERVICES TRW's Information Systems & Services segment includes consumer credit information services, real estate information services, direct marketing services, imaging systems engineering and integration services and business credit information services. Products and services in this industry segment are sold primarily to commercial entities. Consumer and business credit information services are sold primarily to credit-granting organizations and businesses. Real estate information services are sold to financial institutions, title companies and other customers. Marketing services are sold primarily to direct marketing customers. Imaging systems engineering and integration services are sold to financial institutions and other businesses. RESULTS BY INDUSTRY SEGMENT Reference is made to the information relating to the Company's industry segments, including sales, operating profit and identifiable assets attributable to each segment for each of the years 1992 through 1994, presented under the note entitled "Industry segments" in the Notes to Financial Statements on pages 37 through 39 of the TRW 1994 Annual Report. Such information is incorporated herein by reference. FOREIGN AND DOMESTIC OPERATIONS TRW manufactures products and has facilities in various countries throughout the world. TRW's principal operations outside the United States are in Australia, Austria, Brazil, Canada, Czech Republic, France, Germany, India, Italy, Japan, Malaysia, Mexico, Poland, South Korea, Spain, Taiwan, Thailand, the United Kingdom and Venezuela. TRW also exports products manufactured by it in the United States. Such export sales accounted for 7% of total sales during 1994, 6% of total sales during 1993 and 4% during 1992, or $638 million, $438 million and $352 million, respectively. TRW's foreign operations are subject to the usual risks that may affect such operations. These include, among other things, customary exchange controls and currency restrictions, currency fluctuations, changes in local economic conditions, exposure to possible expropriation or other government actions, unsettled political conditions and foreign government-sponsored boycotts of the Company's products or services for noncommercial reasons. Most of the identifiable assets associated with TRW's foreign operations are located in countries where the Company believes such risks to be minimal. Reference is made to the information relating to the dollar amounts of sales, operating profit and identifiable assets by geographic area for each of the years 1992 through 1994 presented under the note entitled "Geographic segments" in the Notes to Financial Statements on page 39 of the TRW 1994 Annual Report. Such information is incorporated herein by reference. GENERAL COMPETITION TRW encounters intense competition in substantially all segments of its business. The Company's competitive position varies for its different products and services. However, TRW believes that it is a significant supplier of many of the products it manufactures and of many of the services it provides. In the Automotive segment, competitors include independent suppliers of parts and components as well as the Company's original equipment customers, many of whom are integrated manufacturers and produce or could produce substantial portions of their requirements for parts and components internally. The original equipment markets characteristically have relatively few competitors, have high capital requirements and require high engineering content. In such markets, the principal methods of competition are price, engineering excellence, product quality, customer service, delivery time and proprietary position. TRW competes for contracts covering a variety of United States Government projects and programs, principally in the Space & Defense segment of its business. Such competition is based primarily on technical ability, product quality and price. TRW's competitors for United States Government contracts typically are large, technically-competent firms with substantial assets. In its Information Systems & Services segment, TRW competes in markets for consumer and business credit information services, real estate information services, marketing services and imaging systems engineering and integration 2 6 services with other large firms doing business nationally and with many smaller local and regional firms. Competitive factors in this business include proprietary position, product quality, customer service, delivery time and price. CUSTOMERS Sales, directly and indirectly, to the United States Government, including the Department of Defense, the National Aeronautics and Space Administration and other agencies, constituted 28% of TRW's sales for 1994 and 34% for 1993, or $2,545 million and $2,708 million, respectively. Sales to the United States Government represented 90% of the sales of the Space & Defense segment in 1994 and 97% in 1993, or $2,528 million and $2,691 million, respectively. Companies engaged in United States Government contracting are subject to certain unique business risks, including dependence on Congressional appropriations and administrative allotment of funds, changes in Government policies that may reflect military and political developments, time required for design and development, significant changes in contract scheduling, complexity of designs and the rapidity with which they become obsolete, necessity of design improvements, difficulty in forecasting costs and schedules when bidding on developmental and highly sophisticated technical work and other factors characteristic of the industry. United States Government contracting laws also provide that the Government is to do business only with responsible contractors. In this regard, the United States Department of Defense and other federal agencies have the authority, under certain circumstances, to suspend or debar a contractor or organizational parts of a contractor from further Government contracting for a certain period "to protect the Government's interest." Such action may be taken for, among other reasons, commission of fraud or a criminal offense in connection with a United States Government contract. A suspension may also be imposed if a contractor is indicted for such matters. In the event of any suspension or debarment, the Company's existing contracts would continue unless terminated or canceled by the United States Government under applicable contract provisions. The Company voluntarily disclosed to appropriate authorities Government contracting irregularities that occurred at existing and former Company units, and has resolved them as set forth in "Item 3. -- Legal Proceedings." Other than the United States Government, TRW's largest customers (determined by including sales to their affiliates throughout the world but excluding sales to such customers or their affiliates that ultimately result in sales to the United States Government) are Ford Motor Company, General Motors Corporation and Chrysler Corporation. Such sales by TRW's Automotive segment to Ford, General Motors, Chrysler and their respective subsidiaries during 1994 accounted for 24%, 10% and 10%, respectively, of total sales of the Automotive segment, compared to 24%, 11% and 9%, respectively, during 1993. BACKLOG The backlog of orders for TRW's domestic operations at December 31, 1994 and December 31, 1993 is estimated to have been approximately $4,640 million and $5,051 million, respectively, of which it is estimated that, directly or indirectly, United States Government business accounted for approximately $3,895 million and $4,370 million, respectively. Of the total domestic backlog at December 31, 1994 and at December 31, 1993, 89% and 90%, respectively, were attributable to the Space & Defense segment, and virtually all of the backlog attributable to United States Government business related to that segment. The determination of TRW's backlog involves substantial estimating, particularly with respect to customer requirements contracts and long-term contracts of a cost-reimbursement or incentive nature. A substantial portion of the variations in the estimated backlog of TRW in recent years is attributable to the timing of the award and performance of United States Government and certain other contracts. Subject to various qualifications, including those set forth herein, and assuming no terminations, cancellations or changes and completion of orders in the normal course, TRW has estimated that approximately 53% of the December 31, 1994 backlog will be delivered in 1995, 24% in 1996 and 23% thereafter. United States Government contracts and related customer orders generally are subject to termination in whole or in part at the convenience of the Government whenever the Government believes that such termination would be in its best interest. Multi-year Government contracts and related orders are subject to cancellation if funds for contract performance for any subsequent contract year become unavailable. If any of its Government contracts were to be terminated or canceled under these circumstances, TRW generally would be entitled to receive payment for work completed and allowable termination or cancellation costs. Whether the occurrence of any such termination or cancellation would have an adverse effect on TRW would depend upon the particular contract and the circumstances of the termination or cancellation. 3 7 Backlog data and comparisons thereof as of different dates may not be reliable indicators of either future sales or the ratio of future direct and indirect United States Government sales to other sales. INTELLECTUAL PROPERTY TRW owns significant intellectual property, including a large number of patents, copyrights and trade secrets, and is involved in numerous licensing arrangements. Although TRW's intellectual property plays an important role in maintaining TRW's competitive position in a number of the markets that it serves, no single patent, copyright, trade secret or license, or group of related patents, copyrights, trade secrets or licenses, is, in the opinion of management, of such value to TRW that the business of TRW or of any industry segment of TRW would be materially affected by the expiration or termination thereof. TRW's general policy is to apply for patents on an ongoing basis in the United States and appropriate other countries on its significant patentable developments. TRW is party to a lawsuit involving air bag patents and technology. See "Item 3. -- Legal Proceedings" for a further discussion of this suit. TRW also views its name and mark as significant to its business as a whole. In addition, TRW owns a number of other trade names and marks applicable to certain of its businesses and products that it views as important to such businesses and products. RESEARCH AND DEVELOPMENT Research and development costs totaled $1,515 million, $1,737 million and $1,787 million in 1994, 1993 and 1992, respectively, of which customer-funded research and development was $963 million in 1994, $1,223 million in 1993 and $1,261 million in 1992. Company-funded research and development costs, which included research and development for commercial products, independent research and development and bid and proposal work related to government products and services, totaled $412 million in 1994, $378 million in 1993 and $393 million in 1992. A portion of the cost incurred for independent research and development and bid and proposal work is recoverable through overhead charged to government contracts. Company-funded product development costs, including engineering and field support for new customer requirements, were $140 million in 1994, $136 million in 1993 and $133 million in 1992. EMPLOYEES At December 31, 1994, TRW had approximately 64,200 employees, of whom approximately 38,300 were employed in the United States and Canada. RAW MATERIALS AND SUPPLIES Materials used by TRW include or contain steel, stainless steel, pig iron, ferro-chrome, aluminum, brass, copper, tin, platinum, special alloys, sodium azide, glass, ceramics, plastic powders and laminations, carbon and plastic materials, synthetic rubber, paper, and gold, silver, nickel, zinc and copper plating materials. TRW also purchases from suppliers various types of equipment and component parts that may include such materials. TRW's operations are dependent upon the ability of its suppliers of materials, equipment and component parts to meet performance and quality specifications and delivery schedules. In some cases, there is only a limited number of suppliers for a material or product due to the specialized nature of the item. Shortages of certain raw materials, equipment and component parts have existed in the past and may exist again in the future. TRW has taken a number of steps to protect against and to minimize the effect of such shortages. However, any future inability of TRW to obtain raw materials, equipment or component parts could have a material adverse effect on the Company. TRW's operations also are dependent on adequate supplies of energy. TRW has continued its programs to conserve energy used in its operations. ENVIRONMENTAL REGULATIONS Federal, state and local requirements relating to the discharge of materials into the environment, or otherwise relating to the protection of the environment, have had and will continue to have an effect on TRW and its operations. The Company has made and continues to make expenditures for projects relating to the environment, including pollution control devices for new and existing facilities. The Company is conducting a number of environmental investigations and remedial actions at current and former Company locations to comply with various federal, state and local laws and, along with other companies, has been named a potentially responsible party for certain waste management sites. Each of these matters is subject to various uncertainties, and some of these matters may be resolved unfavorably to the Company. A reserve estimate reflecting cost ranges is established using standard engineering cost estimating techniques for each matter for which sufficient information is available. In the determination of cost ranges, consideration is given to the professional judgment of the Company's environmental engineers in consultation with outside environmental specialists when necessary. At multi-party sites, the reserve estimate also reflects the expected allocation of total project costs among the 4 8 various potentially responsible parties. At December 31, 1994, the Company had reserves for environmental matters of $98 million, including $17 million of accruals recorded during the year. The Company aggressively pursues reimbursement for environmental costs from its insurance carriers. Insurance recoveries are recorded as a reduction of environmental costs when fixed and determinable. The Company does not believe that compliance with environmental protection laws and regulations will have a material effect upon its capital expenditures or competitive position, and TRW's capital expenditures for environmental control facilities during 1995 and 1996 are not expected to be material to the Company. The Company believes that any liability that may result from the resolution of environmental matters for which sufficient information is available to support cost estimates will not have a material adverse effect on the Company's earnings. However, the Company cannot predict the effect on future earnings of expenditures for aspects of certain matters for which there is insufficient information. In addition, the Company cannot predict the effect on future earnings of compliance with environmental laws and regulations with respect to currently unknown environmental matters or the possible effect on future earnings of compliance with environmental requirements imposed in the future. CAPITAL EXPENDITURES During the five years ended December 31, 1994, TRW's capital expenditures and the net book value of its assets retired or sold were:
(IN MILLIONS) ---------------------------------------------------------------- CAPITAL EXPENDITURES ------------------------------------------- LAND, NET BOOK BUILDINGS MACHINERY VALUE OF YEAR ENDED AND LEASEHOLD AND ASSETS RETIRED DECEMBER 31, IMPROVEMENTS EQUIPMENT TOTAL OR SOLD ------------------------------- --------------- ----------- ------- ---------------- 1994................. $ 93 $ 413 $ 506 $ 21 1993................. 77 405 482 61 1992................. 95 435 530 74 1991................. 73 464 537 71 1990................. 126 461 587 51
On an industry segment basis, capital expenditures during 1994 and 1993 were as follows: Automotive, $388 million and $367 million, respectively; Space & Defense, $98 million and $90 million, respectively; and Information Systems & Services, $18 million and $23 million, respectively. Of total capital expenditures, 64% in 1994 and 70% in 1993 were invested in the United States. ITEM 2. PROPERTIES ------- ---------- As of December 31, 1994, TRW's operations included approximately 93 significant manufacturing, research and development and warehousing facilities located in 25 states in the United States and 82 such facilities in 19 other countries. TRW owned approximately 58% of the domestic facilities and 87% of the foreign facilities; the remainder were leased. Of the domestic facilities, approximately 42% were used by the Automotive segment, 50% were used by the Space & Defense segment and 8% were used by the Information Systems & Services segment. Of the foreign facilities, substantially all were used by the Automotive segment. In addition to the facilities described above, the Company owns or leases certain smaller research and development properties and administrative, processing, marketing, sales and office facilities throughout the United States and in various parts of the world. TRW also operates facilities on property owned directly or indirectly by the United States Government. The Company owns its world headquarters in Lyndhurst, Ohio and its regional headquarters for its Space & Defense segment in Redondo Beach, California. In the opinion of management, the Company's facilities are generally well maintained and are suitable and adequate for their intended use. Reference is made to the information concerning long-term rental obligations under operating leases presented under the note entitled "Lease commitments" in the Notes to Financial Statements on page 35 of the TRW 1994 Annual Report. Such information is incorporated herein by reference. 5 9 ITEM 3. LEGAL PROCEEDINGS TRW reached a settlement with the Department of Justice on April 15, 1994 involving a lawsuit filed by three former employees on April 4, 1986 in the United States District Court for the Northern District of Ohio, regarding government contract accounting irregularities at two former TRW divisions. TRW had voluntarily disclosed the irregularities to the government. Under terms of the settlement, TRW agreed to pay the government $12.6 million as part of a total settlement of $29 million. TRW had previously paid the government $16.4 million in 1987 and 1988 as part of its efforts to resolve the matter and make restitution. The 1994 payment had no effect on 1994 TRW earnings. In a separate settlement agreement dated April 15, 1994, TRW and the Defense Logistics Agency ("DLA") agreed to a final resolution of a matter involving TRW Military Electronic & Avionics Division's voluntary disclosure of government accounting irregularities in December 1986. The terms of the agreement require TRW to pay DLA $1.5 million plus interest in three installments over a three-year period. The Justice Department has closed its file on TRW's voluntary disclosure relating to its Sunnyvale, California facility. The matter will be resolved administratively. On December 15, 1987, the Commissioner of the Indiana Department of Environmental Management issued an Order to TRW and several other respondents relating to alleged contamination of the public water supply in Shelbyville, Indiana by, among other sources, two closed facilities that were formerly operated by TRW's Connectors Division. The Order requires the respondents to fund the relocation of the main well field for Shelbyville to a location that can provide a safe source of potable water and to perform a remedial investigation of the source and extent of contamination within a one-mile radius of the well field. The Order also requires the respondents to pay civil penalties of $25,000 per day for violations of law which allegedly occurred prior to issuance of the Order. TRW has filed a petition for review of the Order. The Order is not expected to have a material effect on the Company's financial position. A proposed settlement has been reached in two shareholder derivative actions initiated in 1991 on behalf of the Company in the Court of Common Pleas, Cuyahoga County, Ohio, against the Company, as a nominal defendant, the Company's current Directors (other than M. H. Armacost, R. M. Gates, C. H. Hahn, G. H. Heilmeier, P. S. Hellman, J. T. Lynn and R. W. Pogue), certain former Directors, D. V. Skilling, Executive Vice President and General Manager, Information Systems & Services, and two other current or former employees. The complaints, which were filed on July 12, 1991 and July 30, 1991, respectively, are virtually identical and allege that the individual defendants acted with negligence, gross negligence, recklessness and in breach of their fiduciary duties by failing to manage properly TRW's Information Systems & Services business. The proposed settlement, which was presented to the Company's shareholders in early November 1994 and considered by the Court on December 15, 1994, includes the adoption of certain therapeutic measures involving the oversight of TRW's consumer credit reporting business. In addition, TRW sought approval of its intention to indemnify the individual defendants for their litigation expenses. No shareholders appeared at the hearing to oppose the proposed settlement. In addition, counsel for the plaintiffs applied to the court for an award of attorneys' fees and costs not to exceed $565,000. Defendants opposed the plaintiffs' application. As of March 23, 1995, the Court had not yet ruled. 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 requiring TRW to continue to make quarterly royalty payments pursuant to the 1989 asset purchase agreement and ancillary agreements pending trial of TRW's claims. The Company has appealed the court's order granting the injunction and intends to defend vigorously Talley's counterclaims. The counterclaims are not expected to have a material effect on the Company's financial position. The court has set an April 5, 1995 trial date for TRW's claims and some of Talley's counterclaims. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None during the fourth quarter of 1994. 6 10 EXECUTIVE OFFICERS OF THE REGISTRANT The names and ages of, and the positions and offices held by, each person designated an executive officer of the Company as of March 24, 1995, together with the offices held by each such person during the last five years, are listed below. For purposes hereof, the term "executive officer" includes the Chairman of the Board, the President, each Vice President in charge of a principal business function and any other officer who performs a policy-making function for the Company. Each executive officer is elected annually and, unless the executive officer resigns or terminates employment with the Company or is removed from office by action of the Company's Directors, will hold office for the ensuing year or until a successor is elected in accordance with the Company's Regulations. None of the Company's executive officers has a family relationship to any other executive officer.
POSITIONS AND BUSINESS EXPERIENCE NAME AGE DURING THE PAST FIVE YEARS ------------------ ----- ----------------------------------------------------------- M. A. Coyle 53 Executive Vice President (1989 to the present), General Counsel (1980 to the present) and Secretary (1976 to the present) J. T. Gorman 57 Chairman of the Board and Chief Executive Officer (1988 to the present) and Director (1984 to the present) President (1985 - 1991) T. W. Hannemann 52 Executive Vice President and General Manager, TRW Space & Electronics Group (1993 to the present) Executive Vice President and General Manager, TRW Space & Defense Sector (1991 - 1992) Vice President and General Manager, TRW Electronic Systems Group (1989 - 1991) P. S. Hellman 45 President and Chief Operating Officer and Director (January 1995 to the present) Executive Vice President and Assistant President (1994) Executive Vice President, Chief Financial Officer and Assistant President (1994) Executive Vice President and Chief Financial Officer (1991 - 1994) Vice President and Treasurer (1989 - 1991) J. A. Janitz 52 Executive Vice President and General Manager, TRW Occupant Restraint Systems Group (1994 to the present) Vice President and General Manager, TRW Vehicle Safety Systems, Inc. (1991 - 1994) Vice President and General Manager, TRW Steering & Suspension Systems, North America (1990 - 1991) President, Wickes Manufacturing Company (1985 - 1990) H. V. Knicely 59 Executive Vice President, Human Resources and Communications (January 1995 to the present) Executive Vice President, Human Resources, Communications & Information Resources (1989 - 1994) R. J. Kohler 57 Executive Vice President and General Manager, TRW Avionics & Surveillance Group (1994 to the present) Vice President and General Manager, TRW Avionics & Surveillance Group (1990 -1994) W. B. Lawrence 50 Executive Vice President, Planning, Development & Government Affairs (1989 to the present) P. Lemaitre 45 Executive Vice President and General Manager, TRW Automotive Electronics Group (1994 to the present) Vice President and General Manager, TRW Transportation Electronics Division (1990 - 1994) Vice President of Planning and Development, TRW Automotive Sector (1989 - 1990)
7 11
POSITIONS AND BUSINESS EXPERIENCE NAME AGE DURING THE PAST FIVE YEARS ------------------ ----- ----------------------------------------------------------- C. O. Macey 57 Executive Vice President and General Manager, TRW Steering, Suspension & Engine Group (1994 to the present) Executive Vice President and General Manager, TRW Steering Systems Group (1991 - 1994) Vice President and General Manager, TRW Steering Systems Group (1987 - 1991) D. V. Skilling 61 Executive Vice President and General Manager, TRW Information Systems & Services Group (1989 to the present) J. P. Stenbit 54 Executive Vice President and General Manager, TRW Systems Integration Group (1994 to the present) Vice President and General Manager, TRW Systems Integration Group (1990 - 1994) R. D. Sugar 46 Executive Vice President and Chief Financial Officer (1994 to the present) Vice President, Group Development, TRW Space & Electronics Group (1992 - 1994) Vice President, Strategic Business Development, TRW Space & Defense Sector (1992) Vice President and General Manager, TRW Space Communications Division (1987 - 1992) R. G. Williams 64 Vice President and Deputy General Manager, TRW Space and Electronics Group (1993 to the present) Vice President and General Manager, TRW Space and Technology Group (1992) Vice President and General Manager, TRW Federal Systems Division (1988 - 1992)
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ------- --------------------------------------------------------------------- Reference is made to the information set forth in the table presented under "Stock prices and dividends (unaudited)" on page 40 of the TRW 1994 Annual Report and to the information presented under the note entitled "Debt and credit agreements" in the Notes to Financial Statements on pages 34 and 35 of the TRW 1994 Annual Report. The information contained in such table and the information contained in the fifth paragraph of text on page 35 in such note to financial statements are incorporated herein by reference. The Company's Common Stock is traded principally on the New York Stock Exchange and is also traded on the Chicago, Pacific, Philadelphia, London and Frankfurt exchanges. On March 3, 1995, there were 31,098 shareholders of record of the Company's Common Stock. 8 12 ITEM 6. SELECTED FINANCIAL DATA ------- -----------------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) -------------------------------------------------- YEARS ENDED DECEMBER 31, -------------------------------------------------- 1994 1993 1992 1991 1990 ------ ------ ------ ------ ------ Sales........................................ $9,087 $7,948 $8,311 $7,913 $8,169 Net earnings (loss).......................... 333 195 (156) (140) 208 Per share of Common Stock: Fully diluted earnings (loss).............. 5.01 2.97 (2.51) (2.30) 3.36 Primary earnings (loss).................... 5.05 3.01 (2.51) (2.30) 3.39 Cash dividends declared.................... 1.97 1.88 1.84 1.80 1.76 Total assets................................. 5,636 5,336 5,458 5,635 5,555 Long-term debt............................... 694 870 941 1,213 1,042 Shares used in computing per share amounts: Fully diluted.............................. 66.4 65.7 62.3 61.2 61.9 Primary.................................... 65.8 64.7 62.3 61.2 61.0
In 1993, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," and took a one-time charge of $25 million, or $.38 per share, for the prior years' cumulative effect of the accounting change. The effect of this accounting change on 1993 operating results, after recording the cumulative effect for years prior to 1993, was immaterial. In 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," for its U.S. and Canadian retiree health care and life insurance plans and Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," and took a one-time charge of $350 million, or $5.60 per share, for the prior years' cumulative effect of the accounting changes. In 1992, net earnings were reduced by $23 million for the change in accounting for postretirement benefits and were increased by $11 million for the change in accounting for income taxes. In December 1991, TRW announced a restructuring plan. Net earnings (loss) for 1991 include the effect of an aftertax charge of $256 million, or $4.18 per share, to cover costs associated with divestiture and restructuring activities, including reserves relating to environmental costs. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ------- ----------------------------------------------------------------------- OF OPERATIONS ------------- Reference is made to the information presented under the heading "Management's Discussion and Analysis of the Results of Operations and Financial Condition" on pages 19 through 22 of the TRW 1994 Annual Report. Such information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------- ------------------------------------------- Reference is made to the financial statements headed "Statements of Earnings," "Balance Sheets," "Statements of Cash Flows" and "Statements of Changes in Shareholders' Investment," and the accompanying notes thereto, on pages 23 through 39 of the TRW 1994 Annual Report. Reference is also made to the information included in the table presented under the heading "Quarterly financial information (unaudited)" on page 40 of such report. Such statements, the accompanying notes and such table are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND ------- --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------- -------------------------------------------------- Reference is made to the information relating to TRW's Directors which is presented under the heading "Election of Directors" on pages 2 through 6 of the TRW Proxy Statement dated March 14, 1995, as filed with the Securities and Exchange Commission (the "TRW Proxy Statement"). Such information, beginning with the third full paragraph on 9 13 page 2 and ending with the second paragraph on page 6, is incorporated herein by reference. Reference is made to the information relating to Section 16(a) compliance which is presented under the heading "Section 16(a) Compliance" on page 8 of the TRW Proxy Statement. Such information is incorporated herein by reference. See the information presented in Part I of this Report under the heading "Executive Officers of the Registrant" for information relating to TRW's executive officers. ITEM 11. EXECUTIVE COMPENSATION -------- ---------------------- Reference is made to the information presented under the heading "Compensation of Executive Officers" on pages 16 through 20 of the TRW Proxy Statement. Reference is also made to the information presented under the heading "Relationships and Transactions" on page 8 of the TRW Proxy Statement. Such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------- -------------------------------------------------------------- Reference is made to the information presented under the heading "Ownership of Shares" on page 7 of the TRW Proxy Statement. Reference is also made to the information presented under the heading "Outstanding Securities" on page 22 of the TRW Proxy Statement. Such information is incorporated herein by reference. There are no agreements or arrangements known to TRW that might, at a subsequent date, result in a change in control of TRW. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -------- ---------------------------------------------- Reference is made to the information presented under the heading "Relationships and Transactions" on page 8 of the TRW Proxy Statement. Such information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K -------- ---------------------------------------------------------------- (A) FINANCIAL STATEMENTS AND SCHEDULES (1) FINANCIAL STATEMENTS The following financial statements of the registrant and its subsidiaries included in the TRW 1994 Annual Report are incorporated herein by reference: Statements of Earnings -- Years ended December 31, 1994, 1993 and 1992 (page 23) Balance Sheets -- December 31, 1994 and 1993 (pages 24 and 25) Statements of Cash Flows -- Years ended December 31, 1994, 1993 and 1992 (page 26) Statements of Changes in Shareholders' Investment -- Years ended December 31, 1994, 1993 and 1992 (page 27) Notes to Financial Statements -- (pages 28 - 39) (2) FINANCIAL STATEMENT SCHEDULES All Schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable and, therefore, have been omitted. Financial statements and summarized financial information of unconsolidated subsidiaries and 50% or less owned persons accounted for by the equity method have been omitted because such subsidiaries and persons, considered individually or in the aggregate, do not constitute a significant subsidiary. (3) EXHIBITS 3(a) Amended Articles of Incorporation as amended December 14, 1988 (Exhibit 3(a) to TRW Annual Report on Form 10-K for the year ended December 31, 1988 is incorporated herein by reference). 3(b) Regulations as amended April 30, 1980 (Exhibit 3(b) to TRW Annual Report on Form 10-K for the year ended December 31, 1980 is incorporated herein by reference).
10 14 4(a) Rights Agreement dated as of December 14, 1988 between TRW Inc. and Bankers Trust Company as Rights Agent (Exhibit 2 to TRW Form 8-A Registration Statement dated December 21, 1988 is incorporated herein by reference). 4(b) Indenture between TRW Inc. and The Chase Manhattan Bank (National Association), as successor Trustee, dated as of May 1, 1986 (Exhibit 2 to TRW Form 8-A Registration Statement dated July 3, 1986 is incorporated herein by reference). 4(c) First Supplemental Indenture between TRW Inc. and The Chase Manhattan Bank (National Association), as successor Trustee, dated as of July 26, 1989 (Exhibit 4(b) to TRW Form S-3 Registration Statement, File No. 33-30350, is incorporated herein by reference). *10(a) 1967, 1973 and 1979 Stock Option Plans as amended April 28, 1982 (Exhibit A to TRW Proxy Statement dated March 18, 1982 is incorporated herein by reference). *10(b) TRW Operational Incentive Plan (Exhibit 10(b) to TRW Annual Report on Form 10-K for the year ended December 31, 1989 is incorporated herein by reference). *10(c) TRW Executive Health Care Plan as amended effective March 1989 (Exhibit 10(c) to TRW Annual Report on Form 10-K for the year ended December 31, 1990 is incorporated herein by reference). *10(d) 1984 Stock Option Plan (Exhibit A to TRW Proxy Statement dated March 19, 1984 is incorporated herein by reference). *10(e) 1989 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement dated March 17, 1989 is incorporated herein by reference). *10(f) 1994 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement dated March 17, 1994 is incorporated herein by reference). *10(g) Form of Strategic Incentive Grant. *10(h) Form of Nonqualified Stock Option Agreement. *10(i) Deferred Compensation Plan for Non-Employee Directors of TRW Inc. reflecting amendments effective August 1, 1990 (Exhibit 10(k) to TRW Annual Report on Form 10-K for the year ended December 31, 1990 is incorporated herein by reference). *10(j) TRW Directors' Pension Plan as amended and restated effective August 1, 1990 (Exhibit 10(l) to TRW Annual Report on Form 10-K for the year ended December 31, 1990 is incorporated herein by reference). *10(k) Form of Employment Continuation Agreements with executive officers (Exhibit 10(j) to TRW Annual Report on Form 10-K for the year ended December 31, 1988 is incorporated herein by reference). *10(l) Consulting Agreement dated December 5, 1994 between TRW Inc. and E. D. Dunford. *10(m) Description of Restricted Stock Grants (Exhibit 10(s) to TRW Annual Report on Form 10-K for the year ended December 31, 1992 is incorporated herein by reference). 10(n) Three Year Revolving Credit Agreement dated July 1, 1992 among TRW Inc. and various financial institutions (Exhibit 19.1 to TRW Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 is incorporated herein by reference). 10(o) Agreement of Purchase and Sale between Federal-Mogul Corporation and TRW Inc. dated as of August 23, 1992 (Exhibit 19.1 to TRW Quarterly Report on Form 10-Q for the quarter ended September 30, 1992 is incorporated herein by reference). 10(p) Amendment dated September 22, 1992 to Agreement of Purchase and Sale between Federal-Mogul Corporation and TRW Inc. dated as of August 23, 1992 (Exhibit 19.2 to TRW Quarterly Report on Form 10-Q for the quarter ended September 30, 1992 is incorporated herein by reference). 10(q) Amendment dated October 20, 1992 to Agreement of Purchase and Sale between Federal-Mogul Corporation and TRW Inc. dated as of August 23, 1992 (Exhibit 19.3 to TRW Quarterly Report on Form 10-Q for the quarter ended September 30, 1992 is incorporated herein by reference). 10(r) Amendment dated June 30, 1993 to Three Year Revolving Credit Agreement dated July 1, 1992 among TRW Inc. and various financial institutions. (Exhibit 10.1 to TRW Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 is incorporated herein by reference). *10(s) TRW Inc. Stock Plan for Non-Employee Directors, as amended and restated. (Exhibit 10.1 to TRW Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 is incorporated herein by reference).
11 15 10(t) Amendment dated as of March 1, 1994 to Three Year Revolving Credit Agreement dated July 1, 1992 among TRW Inc. and various financial institutions. (Exhibit 10(cc) to TRW Annual Report on Form 10-K for the year ended December 31, 1993 is incorporated herein by reference). 10(u) Amendment dated February 28, 1995 to Multi-Year Revolving Credit Agreement (formerly entitled Three Year Revolving Credit Agreement) dated July 1, 1992 among TRW Inc. and various financial institutions. *10(v) TRW Inc. Deferred Compensation Plan (as Amended and Restated August 1, 1994) (Exhibit 10.1 to TRW Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 is incorporated herein by reference). *10(w) TRW Benefits Equalization Plan (as Amended and Restated, effective August 1, 1994) (Exhibit 10.2 to TRW Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 is incorporated herein by reference). *10(x) TRW Supplementary Retirement Income Plan (as Amended and Restated, effective August 1, 1994) (Exhibit 10.3 to TRW Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 is incorporated herein by reference). 11 Computation of Earnings per Share. 12 Computation of Ratio of Earnings to Fixed Charges - Unaudited. 13 Portions of the TRW Annual Report to Security Holders for the year ended December 31, 1994 incorporated by reference herein. 21 Subsidiaries of the Registrant. 24(a) Consent of Independent Auditors. 24(b) Consent of Independent Auditors (with respect to financial statements of The TRW Canada Stock Savings Plan). 25(a) Power of Attorney. 25(b) Certified Resolutions. 27 Financial Data Schedule 28(a) Financial Statements of The TRW Employee Stock Ownership and Stock Savings Plan for the year ended December 31, 1994. 28(b) Financial Statements of The TRW Canada Stock Savings Plan for the year ended December 31, 1994.
Certain instruments with respect to long-term debt have not been filed as exhibits as the total amount of securities authorized under any one of such instruments does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees to furnish to the Commission a copy of each such instrument upon request. *Management contract, compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of this report. (B) REPORTS ON FORM 8-K None. 12 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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: March 24, 1995 By /s/ MARTIN A. COYLE ------------------------------ MARTIN A. COYLE, EXECUTIVE VICE PRESIDENT AND SECRETARY Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------------- ----------------------------- -------------- --- J. T. GORMAN* Chairman of the Board, | Chief Executive Officer | and Director | P. S. HELLMAN* Chief Operating Officer, | President and Director | R. D. SUGAR* Executive Vice President | and Chief Financial Officer | C. G. MILLER* Vice President and Corporate | Controller | M. H. ARMACOST* Director | C. T. DUNCAN* Director |-- March 24, 1995 M. FELDSTEIN* Director | R. M. GATES* Director | C. H. HAHN* Director | G. H. HEILMEIER* Director | K. N. HORN* Director | E. B. JONES* Director | W. S. KISER* Director | J. T. LYNN* Director | R. W. POGUE* Director | ---
MARTIN A. COYLE, by signing his name hereto, does hereby sign and execute this report on behalf of each of the above-named officers and Directors of TRW Inc., pursuant to a power of attorney executed by each of such officers and Directors and filed with the Securities and Exchange Commission as an exhibit to this report. *By /s/ MARTIN A. COYLE March 24, 1995 --------------------------------- MARTIN A. COYLE, ATTORNEY-IN-FACT 30 13 17 REPORT OF INDEPENDENT AUDITORS Shareholders and Directors TRW Inc. We have audited the consolidated financial statements of TRW Inc. and subsidiaries listed in Item 14(a)(1) of the annual report on Form 10-K of TRW Inc. for the year ended December 31, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TRW Inc. and subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in the notes to financial statements, effective January 1, 1993, the company changed its method of accounting for postemployment benefits and, effective January 1, 1992, its methods of accounting for postretirement benefits other than pensions and income taxes. /s/ Ernst & Young LLP ERNST & YOUNG LLP Cleveland, Ohio January 23, 1995 F-1
EX-10.G 2 TRW EX-10(G) 1 Exhibit 10(g) STRATEGIC [TRW Logo] INCENTIVE GRANT Date of Grant: April 27, 1994 To: <> ----------------------------------------------- Unit: Company Staff ----------------------------------------------- As a key employee of TRW Inc. ("TRW"), you are hereby granted the right (the "Right") to receive <> (or up to 200 percent thereof in certain circumstances) shares of Common Stock, par value $0.625, of TRW ("TRW Common"), subject to the terms and conditions below. This performance share right is granted to you pursuant to the 1994 TRW Long-Term Incentive Plan approved by the shareholders of TRW in April 1994. TRW INC. By:_____________________________ Secretary ---------------------------------------------------------------------- TERMS AND CONDITIONS 1. THE RIGHT. This Right entitles you to receive shares of TRW Common in the event that certain improvements in return on assets employed ("ROAE") for TRW are achieved with respect to the calendar years 1994 through 1997 (the "Performance Period"). 2. PERFORMANCE CRITERIA. The definition of ROAE, for purposes of this Right, is set forth in Exhibit A. The inclusion of the effects of acquisitions, divestitures and similar unusual items in the calculation of ROAE shall be at the complete discretion of the Compensation and Stock Option Committee of the Directors of TRW (the "Committee"). A TRW matrix which consists of various ROAE figures for TRW for each year of the Performance Period and percentage award levels related to each of those figures is set forth in Exhibit B. 3. ISSUANCE OF TRW COMMON. Promptly following the availability of year-end financial information for TRW for each year in the Performance Period, a firm of certified public accountants chosen by TRW will certify to TRW the ROAE of TRW for each such year. That number of shares of TRW Common determined by multiplying the target grant listed on Exhibit B by the applicable percentage shown next to the ROAE figure (pro rata between ROAE figures shown) certified as described above for the applicable calendar year will be issued to you as soon as practicable thereafter. In the event you are entitled to receive for any applicable calendar year a number of shares greater than that number of shares determined by multiplying the target percentage for such year times your target grant, you will be paid the cash equivalent for such excess shares unless the Committee determines in its sole discretion to issue shares in lieu of cash. Such excess shares will be valued at the average of the high and low sales prices of a share of TRW Common on the New York Stock Exchange Composite Transactions Listing on the day immediately prior to the date of payment. 4. TAXES. Upon any issuance of shares of TRW Common pursuant to this Right, TRW shall withhold delivery of the certificates evidencing such shares until you make arrangements satisfactory to TRW to pay any withholding, transfer or other taxes due as a result of such issuance. You may elect, in accordance with applicable regulations of the Committee, to pay a portion or all of the amount of required withholding taxes in shares of TRW Common, either by delivering to TRW previously held shares of TRW Common or by having shares of TRW Common withheld from the shares issued to you hereunder. 5. SECURITIES LAWS. Shares of TRW Common shall not be issued hereunder if such issuance would violate any Federal or state securities law. TRW will use its best efforts to make such filings and initiate such proceedings as may be necessary to prevent such violations unless the Directors of TRW determine, in their sole discretion, that such filings or proceedings would result in undue expense or hardship for TRW. TRW may place appropriate legends on the certificates for the shares issued hereunder, give stop-transfer instructions to its transfer agents or take any other action to achieve compliance with those laws in connection with any issuance of shares hereunder or your resale of such shares. 6. TRANSFERABILITY. This Right is not transferable other than by will or the laws of descent and distribution. 7. DEATH. In the event of your death, your estate or those so designated by will or the laws of descent and distribution will be entitled to receive, at such times as you would have received them, such shares of TRW Common as would have been issued to you hereunder if you had remained employed throughout the entire year in which your death occurred and the following year of the Performance Period, if any. 8. TERMINATION OF EMPLOYMENT. This Right shall terminate on the date of your termination of employment and you shall not be entitled to any additional shares hereunder except for any shares of TRW Common which may be issuable with respect to calendar years prior to your termination. However, if your employment is terminated during the last half of a calendar year, and if the Committee gives written consent on or prior to the date on which shares of TRW Common are issuable pursuant to this Right with respect to such year, you will be entitled to receive such number of shares of 2 TRW Common as would have been issued to you hereunder if you remained employed through the end of the calendar year during which your employment terminated multiplied by the fraction representing the number of months employed during such year. 9. DISABILITY. Notwithstanding the foregoing, if your termination of employment is due to disability (as defined in the TRW long-term disability plan applicable to you), you will be entitled to receive such shares of TRW Common as would have been issued to you hereunder if you had remained employed for the entire year in which the disability occurred and the following year of the Performance Period, if any. 10. ADJUSTMENTS. The Committee shall make such adjustments in the number and kind of securities issuable pursuant hereto as it may determine are equitably required to prevent dilution or enlargement of your rights that would otherwise result from any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of TRW, merger, consolidation, reorganization, partial or complete liquidation or other corporate transaction or event having an effect similar to any of the foregoing. 11. AMENDMENTS. In addition to the authority to make adjustments as provided in Section 10, the Committee shall have the authority, until such time as a Change in Control as defined in Section 12 occurs, to amend otherwise this grant provided that no amendment shall contain terms and conditions inconsistent with the provisions of the 1994 TRW Long-Term Incentive Plan. Notwithstanding the foregoing, if you transfer positions or change responsibilities within TRW, the Committee may amend this Right to reflect such changed circumstances; provided, however, that any such amendment after a Change in Control occurs shall not reduce the value of this Right to you. 12. CHANGE IN CONTROL. In the event of a Change in Control of TRW, this Right will remain in effect so long as you continue to be employed by TRW. For purposes of this Right, the definition of Change in Control is the same as the definition contained in resolutions adopted by the Committee on July 26, 1989. Such resolutions, in summary, provide that a Change in Control is a change occurring (a) by virtue of TRW's merger, consolidation or reorganization into or with, or transfer of assets to, another corporation or (b) by virtue of a change in the majority of the Directors during any two-year period unless the election of each new Director was approved by a two-thirds vote of the Directors in office at the beginning of such period or (c) through the acquisition of shares representing 20 percent or more of the voting power of TRW or (d) through any other change in control reported in any filing with the Securities and Exchange Commission, excluding, however, the acquisition of shares, or any report of such acquisition, by TRW, a subsidiary of TRW or a TRW-sponsored employee benefit plan. The language in the resolutions controls over this summary language. If a Change in Control occurs after April 27, 1994, you will be entitled to receive any shares of TRW Common issuable to you but not yet issued with respect to the calendar year preceding the Change in Control. In addition, with respect to remaining years in the Performance Period, you will be entitled to receive shares of TRW Common equal to the greater of (a) such number of shares of TRW Common as shall be determined by the Committee, prior to the Change in Control, to be appropriate and consistent with this Right after taking into account prior performance, trends in performance and anticipated future performance based on information available at the time of the Committee's determination and (b) a minimum number of shares of TRW Common as follows: The minimum number of shares would be based on the 12-month ROAE for TRW (calculated by determining the ROAE for TRW for the first 12 months of the 15-month period ending on the last day of the month immediately preceding the month in which the Change in Control occurred). The number of shares for the year in which the Change in Control occurred would be determined by applying such 12-month ROAE figure to the column of the TRW matrix relating to the year in which the Change in Control occurred. The number of shares for each subsequent year of the Performance Period would be determined by using, in that year's TRW matrix column, the ROAE appearing in the same row (or, using an arithmetic interpolation, the same position between rows) of the TRW matrix as was used to determine the payout for the year in which the Change in Control occurred. For example, if the 12-month ROAE figure were two rows below the target level on the TRW matrix for the calendar year in which the Change in Control occurred, it would be assumed that the ROAE for any additional years remaining in the Performance Period would be two rows below the target level for those years. The aggregate number of shares of TRW Common payable with respect to the year of the Change in Control and subsequent years in the Performance Period, determined as set forth above, would be issued to you promptly following the Change in Control. If you continue employment with TRW after the Change in Control, shares of TRW Common will be issued to you in accordance with this Right provided that the number of shares of TRW Common that you are entitled to receive with respect to a calendar year will be reduced by the number of shares of TRW Common previously issued to you with respect to such year in accordance with the foregoing paragraph. 13. MISCELLANEOUS. This Right shall not be construed as giving you any right to continue in the employ of TRW and is subject to the terms and conditions of the 1994 TRW Long-Term Incentive Plan. Subject to the requirements and limitations in Sections 10, 11 and 12 above, the Committee has authority to interpret and construe any provision of this grant and any such interpretation and construction shall be binding and conclusive. Except as provided in Section 12 above, no rights hereunder shall accrue to you with respect to any year in the Performance Period until such year is completed and the ROAE for TRW for such year has been certified to TRW as provided in Section 3 above. Thereafter your rights will be limited to those expressly given by this Right. Any reference in this grant to the Directors of TRW includes the Executive Committee of the Directors. 14. ENTIRE AGREEMENT. This Right sets forth the entire understanding between you and TRW with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether oral or written, relating hereto. EX-10.H 3 TRW EX-10(H) 1 Exhibit 10(h) [TRW Logo] NONQUALIFIED STOCK OPTION AGREEMENT Date of Grant: February 8, 1995 To: <> ----------------------------------------------------- <> ----------------------------------------------------- (Social Security Number) There hereby is granted to you, as a key employee of TRW Inc. ("TRW") or of a subsidiary, an option to purchase <> shares of Common Stock, par value $0.625 each, of TRW ("TRW Common") at an option price of $64.63 per share. This option is granted to you pursuant to the 1994 TRW Long-Term Incentive Plan and is subject to the terms and conditions set forth below. This option is not intended to be an incentive stock option as defined in Section 422A of the Internal Revenue Code. TRW INC. By:_________________________________ Authorized Officer ______________________________________________________________________ TERMS AND CONDITIONS 1. PURCHASE RIGHTS. This option cannot be exercised before the first anniversary of the date of grant. After that you will be entitled to purchase up to 33-1/3% of the shares covered by this option, rounded down to the nearest whole share for each of the first two years, for each full year of your continuous employment with TRW after the date of grant. The purchase rights accumulate as shown in the following table.
Cumulative Maximum Number of Full Years Percentage of of Continuous Service Optioned Shares That After Date of Grant May Be Purchased ------------------------------------------------------- 1 33-1/3% 2 66-2/3% 3 100%
Notwithstanding the foregoing, in the event of a change in control of TRW, this option will immediately become exercisable in respect of all of the shares covered by this grant. For purposes of this agreement, a change in control is defined in resolutions adopted by the Compensation and Stock Option Committee of the Directors of TRW on July 26, 1989, which, in summary, provide that a change in control is a change occurring (a) by virtue of TRW's merger, consolidation or reorganization into or with, or transfer of assets to, another corporation or (b) by virtue of a change in the majority of the Directors of TRW during any two-year period unless the election of each new Director was approved by a two-thirds vote of the Directors in office at the beginning of such period or (c) through the acquisition of shares representing 20% or more of the voting power of TRW or (d) through any other change in control reported in any filing with the Securities and Exchange Commission; provided that no change in control is deemed to have occurred by the acquisition of shares, or any report of such acquisition, by TRW, a subsidiary of TRW or a TRW-sponsored employee benefit plan. The language of the resolutions controls over this summary language. 2. EXERCISE IN WHOLE OR PART. To the extent this option has become exercisable, you may purchase on any date or dates all or any part of the shares which you are then entitled to purchase. However, no fractional shares may be purchased. 3. TERM OF OPTION. To the extent this option has become exercisable in accordance with paragraph 1 above, it may be exercised by you at any time during the 10-year period beginning on the date of grant. To the extent this option remains unexercised at the end of the 10-year period, your unexercised purchase rights will terminate. To the extent unexercised, this stock option will terminate before the end of such 10-year period in the following cases: (a) If your employment with TRW terminates before you reach age 55, your unexercised purchase rights will terminate three months after the date your employment terminates. (b) If the Directors of TRW shall find that you intentionally committed an act materially inimical to the interests of TRW or a subsidiary, your unexercised purchase rights will terminate as of the time you committed such act, as determined by the Directors. 2 If your employment is terminated by death or disability, your purchase rights will not be subject to termination under clause (a) above and will continue for the entire 10-year period. Nothing contained in this option shall extend this option beyond a 10-year period beginning on the date of grant or shall limit whatever right TRW or a subsidiary might otherwise have to terminate your employment at any time. 4. PAYMENT OF OPTION PRICE. The option price shall be payable at the time of exercise. The option price shall be paid at the Office of Secretary at TRW's corporate headquarters or at any other place designated by the Secretary. The option price may be paid in cash, in full shares of TRW Common, or in a combination of both, in accordance with such procedures and subject to such further conditions as the Secretary of TRW may establish from time to time. Notwithstanding the foregoing, the Compensation and Stock Option Committee of TRW at any time may suspend or terminate your right to pay any or all of the option price in shares of TRW Common. Cash payments shall be made in United States dollars, except that, if at the time of exercise you are employed by or on assignment for TRW or a subsidiary at a location outside the United States, a cash payment may, with the prior approval of the Secretary of TRW, be made in the official currency used at such location in an amount specified by the Secretary as equivalent to the same amount in United States dollars. Shares delivered in payment of the option price shall be valued at their fair market value on the date of exercise. For purposes of this option, "fair market value" is the mean of the high and low sales prices of a share of TRW Common on the date of exercise on the New York Stock Exchange Composite Transactions Listing as reported in the Midwest edition of The Wall Street Journal (or if there are no sales on such date, then the closing sale price on such Listing on the nearest date before the date of exercise) or such other method or procedure for determining fair market value as the Compensation and Stock Option Committee of TRW in its sole discretion may determine. For purposes of this option, the "date of exercise" is the date on which written notice, accompanied by the option price, is received by the Secretary of TRW or his designee that you have elected to exercise all or part of this option. 5. TAXES. Upon any exercise of this option, TRW may withhold delivery of certificates for the purchased shares until you make arrangements satisfactory to TRW to pay any withholding, transfer or other taxes due as a result of such exercise. You may elect, in accordance with applicable regulations of the Compensation and Stock Option Committee of TRW, to pay a portion or all of the amount of required withholding taxes in shares of TRW Common, either by delivering to TRW previously held shares of TRW Common or by having shares of TRW Common withheld from the shares purchased hereunder. 6. SECURITIES LAWS. This option shall not be exercisable if such exercise would violate any Federal or state securities law. TRW will use its best efforts to make such filings and initiate such proceedings as may be necessary to prevent such violations unless the Directors of TRW determine, in their sole discretion, that such filings or proceedings would result in undue expense or hardship for TRW. TRW may place appropriate legends on the certificates for the optioned shares, give stop-transfer instructions to its transfer agents or take any other action to achieve compliance with those laws in connection with any exercise of this option or your resale of the optioned shares. 7. TRANSFERABILITY. This option is not transferable other than by will or the laws of descent and distribution and shall be exercisable during your lifetime only by you or your guardian or legal representative. 8. LEAVES OF ABSENCE. If you take a leave of absence for illness, military or governmental service or other reasons, and such leave has been specifically approved by the Chairman of the Board or the President of TRW for purposes of this option, then such leave will not be treated as an interruption of your employment. 9. ADJUSTMENTS. The Compensation and Stock Option Committee of TRW may make such adjustments in the option price and in the number or kind of shares of TRW Common or other securities covered by this option as it in its sole discretion may determine are equitably required to prevent dilution or enlargement of your rights that would otherwise result from any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of TRW, merger, consolidation, reorganization, partial or complete liquidation or other corporate transaction or event having an effect similar to any of the foregoing. 10. CERTAIN DEFINITIONS. For purposes of this option, employment with a subsidiary will be treated as equivalent to employment with TRW itself, and your continuous employment will not be deemed to be interrupted by reason of your transfer among TRW and its subsidiaries. "Subsidiary" means a corporation or other entity in an unbroken chain of entities beginning with TRW if each of the entities other than the last entity in the unbroken chain owns stock or other ownership interests possessing 50% or more of the total outstanding combined voting power of all classes of stock or other interests in the next entity in the chain. 11. MISCELLANEOUS. This stock option is subject to all the terms and conditions of the TRW plan pursuant to which it is granted. The Compensation and Stock Option Committee of TRW has authority to interpret and construe any provision of this instrument and the TRW plan pursuant to which this stock option is granted, and any such interpretation and construction shall be binding and conclusive. Any reference in this option to the Directors of TRW includes the Executive Committee of the Directors.
EX-10.L 4 EXHIBIT 10.L 1 Exhibit 10(l) December 5, 1994 E. D. Dunford 301 Rocky Point Road Palos Verdes, CA 90274 Dear Ed: This letter will confirm our understanding relating to your consulting agreement with TRW upon your termination of employment as President and Chief Operating Officer. The attached terms and conditions, together with this letter, constitute our "Agreement". We will request your general consulting services and advice primarily for the Space and Defense businesses, and the timing and extent of your activities will be flexible. 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, 1995 and will continue for two years, terminating on December 31, 1996. 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 $150,000 per year, to be paid in monthly installments. 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, accompanied by an expense report substantially the same as the TRW expense report form with which you are familiar should be submitted to me for processing and approval. For the convenience of TRW, during the term of this Agreement and any renewals, we will also provide or reimburse you for required secretarial and other appropriate services. 2 For purposes of Article VI of the attached terms and conditions, your serving as an employee, officer, Director, Chairman of the Board or consultant of Thiokol Corporation or as a Director of Cooper Tire & Rubber Co. is hereby approved, provided that, and so long as, the respective businesses of the companies remain substantially the same as they were on November 1, 1994. 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, Peter S. Hellman ACCEPTED: /s/ E. D. Dunford ---------------------------- E. D. Dunford Date: December 12, 1994 ----------------- PSH/ai 3 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 and affiliates ("TRW") that TRW protects against unrestricted disclosure to others and that Consultant obtains from TRW, its employees, subsidiaries and affiliates, or otherwise acquires while engaged hereunder, including information of a third party as to which TRW has a nondisclosure obligation. In view of the sensitive information to which Consultant will have access during his 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 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 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, 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 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. 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. Initialed ________ - 2 - 5 VI. NONCOMPETE Except as a member of the Chief Executive Office of TRW grants specific prior written approval after full disclosure of all relevant facts, Consultant, until two years from the date hereof (provided, however, that if the term of this Agreement extends beyond two years from the date hereof, the termination of these provisions shall extend until the termination of this Agreement), (a) 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 and (b) shall not, directly or indirectly, as owner, manager, officer, director, employee, consultant or in any other capacity, become financially interested in or otherwise connected with a third party which engages in business activity which is competitive with the business activities of TRW or with work performed under this Agreement; provided, however, this limitation shall not preclude Consultant from making a nominal equity investment in a firm whose stock is listed on a national securities exchange or NASDAQ. 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 will terminate upon the death of Consultant or, if Consultant is unable to perform Consultant's duties hereunder for a period of thirty consecutive days, forthwith upon receipt of written notice from TRW. This Agreement may also be terminated as set forth in the attached letter agreement. 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 be permanent and shall survive the termination of the Agreement. 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. Initialed ________ - 3 - 6 X. RECORDS Consultant shall maintain a written record of all work performed and data generated in the course of performance. 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; and (c) Consultant shall hereby indemnify and hold TRW, its agents, and employees 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 willful misconduct in the course of performing work under this Agreement, or the willful misconduct of Consultant's employees, agents, subcontractors, suppliers or other third parties utilized in connection with Consultant's performance. 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 he 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 his conduct was unlawful. TRW agrees that Consultant shall not have any liability (whether direct or indirect, in contract or tort or otherwise) to TRW for or in connection with such engagement, except for any such liability for losses, claims, damages, liabilities or expenses incurred by TRW that result primarily from Consultant's bad faith or breach of any obligation to TRW pursuant to such engagement. 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 his 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 him 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 Initialed ________ -5- 8 such action or proceeding; or (iv) TRW shall authorize Consultant to employ separate counsel at its 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. 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 Except as TRW grants prior written approval, Consultant shall not publicize the existence or terms of, or work performed under, this Agreement. 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 Initialed ________ -6- 9 without such consent with respect to any corporate reorganization, merger, transfer of assets or similar transaction 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. Should any term of this Agreement be deemed illegal, invalid or unenforceable in any respect in any jurisdiction, neither the legality, the validity or enforceability of the remaining terms of this Agreement nor the legality, validity or enforceability of such term under the law of any other jurisdiction shall in any way be affected or impaired thereby. Initialed ________ -7- EX-10.U 5 TRW EX-10(U) 1 Exhibit 10(u) AMENDMENT TO MULTI-YEAR REVOLVING CREDIT AGREEMENT This Amendment to Multi-Year Revolving Credit Agreement, dated as of February 28, 1995 (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 and on March 1, 1994 (the agreement as amended 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 "APPLICABLE COMMITMENT FEE" DEFINITION. The definition to "Applicable Commitment Fee" set forth in Section 13 shall be amended to read in its entirety as follows: "APPLICABLE COMMITMENT FEE" means the percentage in effect from time to time as set forth in the following table opposite the highest of the then-current rating assigned to the Company's senior unsecured long-term debt by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P"):
Rating Applicable (Moody's/S&P) Commitment Fee ------------- -------------- higher than A3/A- 0.100% A3/A- 0.100% Baa1/BBB+ 0.125% Baa2/BBB 0.150% Baa3/BBB- 0.200% lower than Baa3/BBB- 0.325%
-1- 2 1.2 AMENDMENT TO "APPLICABLE MARGIN" DEFINITION. The definition to "Applicable Margin" set forth in Section 13 shall be amended to read in its entirety as follows: "APPLICABLE MARGIN" means, at any time, the percentage set forth in the following table opposite the highest of the then-current rating assigned to the Company's senior unsecured long-term debt by Moody's or S&P:
Applicable Applicable Margin for Margin for Rating Domestic CD Eurocurrency (Moody's/S&P) Loans Loans ------------------------------------------------------------------------------- higher than A3/A- 0.325% 0.225% A3/A- 0.350% 0.250% Baa1/BBB+ 0.475% 0.375% Baa2/BBB 0.600% 0.500% Baa3/BBB- 0.750% 0.650% lower than Baa3/BBB- 0.950% 0.850%
1.3 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) February 28, 2000, 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. 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. Contemporaneously with the issuance of such Notes, the Notes dated March 1, 1994 currently pertaining to the Agreement shall be deemed null and void and each Bank shall cancel and return to the Company such Note pertaining to the Agreement currently in such Bank's possession. 2.2 EFFECTIVENESS OF FEE CHANGES. All fee and interest rate changes set forth in this Amendment shall be effective only on a prospective basis from the date hereof. -2- 3 2.3 OTHER TERMS AND CONDITIONS. Unless amended hereby, all other terms and conditions of the Agreement shall remain in full force and effect without change. 2.4 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. 2.5 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. 2.6 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/ William C. Seeger Jr. ------------------------- William C. Seeger Jr. Vice President and Treasurer 1900 Richmond Road Cleveland, Ohio 44124 Telephone 216/291-7540 Facsimile: 216/291-7831 -3- 4 BANKS:
Amount of Percentage of Commitment Commitments ---------- ----------- $44,000,000 8 % Bank of America National Trust --- and Savings Association By: /s/ Arlene S. Pedovitch ----------------------- Name: Arlene S. Pedovitch Title: Vice President DOMESTIC OFFICE Bank of America NT & SA 1850 Gateway Boulevard Concord, California 94520 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE Bank of America NT & SA 1850 Gateway Boulevard Concord, California 94520 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
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Amount of Percentage of Commitment Commitments ---------- ----------- $44,000,000 8 % Barclays Bank PLC --- By: /s/ Philip S. A. Capparis ------------------------- Name: Philip S. A. Capparis Title: Associate Director DOMESTIC OFFICE Barclays Bank PLC 222 Broadway New York, New York 10038 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE Barclays Nassau, Bahamas Branch c/o Barclays Bank PLC 222 Broadway New York, New York 10038 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
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Amount of Percentage of Commitment Commitments ---------- ----------- $44,000,000 8 % The Chase Manhattan Bank, N.A. --- By: /s/ Claudia Stone ------------------ Name: Claudia Stone Title: Managing Director DOMESTIC OFFICE The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza Fifth Floor New York, New York 10081 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza Fifth Floor New York, New York 10081 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
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Amount of Percentage of Commitment Commitments ---------- ----------- $44,000,000 8 % Citibank N.A. --- By: /s/ Barbara A. Cohen -------------------- Name: Barbara A. Cohen Title: Vice President DOMESTIC OFFICE Citibank, N.A. c/o Citicorp N.A., Inc. 200 S. Wacker Dr. Chicago, IL 60606 Telephone: 312-993-3871 Facsimile: 312-993-6840 EUROCURRENCY OFFICE Citibank, N.A. c/o Citicorp N.A., 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: _____________ Reference No.: TRW Inc.
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Amount of Percentage of Commitment Commitments ---------- ----------- $ 44,000,000 8 % Morgan Guaranty Trust Company -- of New York By: /s/ Timothy S. Broadbent ------------------------- Name: Timothy S. Broadbent Title: 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: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
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Amount of Percentage of Commitment Commitments ---------- ----------- $44,000,000 8 % National City Bank --- By: /s/ Davis R. Bonner ------------------- Name: Davis 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: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
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Amount of Percentage of Commitment Commitments ---------- ----------- $44,000,000 8 % The Sumitomo Bank, Limited --- By: /s/ Katsuyasu Iwasawa --------------------- Name: Katsuyasu Iwasawa Title: Joint General Manager DOMESTIC OFFICE The Sumitomo Bank, Limited Chicago Branch Sears Tower 233 South Wacker Drive, Suite 4800 Chicago, Illinois 60606-6448 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE The Sumitomo Bank, Limited Chicago Branch Sears Tower 233 South Wacker Drive, Suite 4800 Chicago, Illinois 60606-6448 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
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Amount of Percentage of Commitment Commitments ---------- ----------- $30,800,000 5.6 % Dresdner Bank AG ---- By: /s/ D. Slusarczyk ----------------- Name: D. Slusarczyk Title: Vice President By: /s/ Robert Grella ----------------- Name: Robert Grella Title: Vice President DOMESTIC OFFICE Dresdner Bank AG New York Branch 75 Wall Street New York, New York 10005 Telephone: 212-574-0244 Facsimile: 212-574-0130 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: 212-574-0244 Facsimile: 212-574-0130 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 For further credits to 101679-15 Ref.: TRW
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Amount of Percentage of Commitment Commitments ---------- ----------- $30,800,000 5.6 % First Interstate Bank of California ---- By: /s/ Arthur W. McAllister ------------------------ Name: Arthur W. McAllister Title: Vice President By: /s/ Wendy V. C. Purcell ----------------------- Name: Wendy V. C. Purcell Title: Assistant Vice President DOMESTIC OFFICE First Interstate Bank of California Corporate Loan Operations 707 Wilshire Boulevard, W7-21 Los Angeles, California 90017 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE First Interstate Bank of California Corporate Loan Operations 707 Wilshire Boulevard, W7-21 Los Angeles, California 90017 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
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Amount of Percentage of Commitment Commitments ---------- ----------- $30,800,000 5.6 % NBD Bank, N.A. ---- By: /s/ Andrew W. Strait --------------------- Name: Andrew W. Strait Title: Vice President DOMESTIC OFFICE NBD Bank, N.A. Attention: Midwest Banking Division 611 Woodward Detroit, Michigan 48226 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE NBD Bank, N.A. Attention: Midwest Banking Division 611 Woodward Detroit, Michigan 48226 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
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Amount of Percentage of Commitment Commitments ---------- ----------- $30,800,000 5.6 % Royal Bank of Canada ---- By: /s/ Raymond A. M. Boland ------------------------ Name: Raymond A. M. Boland Title: Sr. Manager, Corporate Banking DOMESTIC OFFICE Royal Bank of Canada New York Operations Center Pierrepont Plaza 300 Cadman Plaza West Brooklyn, New York 11201-2701 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE Royal Bank of Canada New York Operations Center Pierrepont Plaza 300 Cadman Plaza West Brooklyn, New York 11201-2701 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
-14- 15
Amount of Percentage of Commitment Commitments ---------- ----------- $19,800,000 3.6 % 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: _____________ Facsimile: _____________ EUROCURRENCY OFFICE Banque Nationale De Paris Chicago Branch Rookery Building 209 South LaSalle, 5th Floor Chicago, Illinois 60604 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
-15- 16
Amount of Percentage of Commitment Commitments ---------- ----------- $19,800,000 3.6 % Credit Lyonnais Chicago Branch ---- By: /s/ Sandra E. Horwitz ---------------------- Name: Sandra E. Horwitz Title: Vice President Credit Lyonnais Cayman Island Branch By: /s/ Sandra E. Horwitz --------------------- Name: Sandra E. Horwitz Title: Authorized Signature DOMESTIC OFFICE Credit Lyonnais Chicago Branch 227 West Monroe Street Chicago, Illinois 60606 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE Credit Lyonnais Cayman Island Branch c/o Credit Lyonnais Chicago Branch 227 West Monroe Street Chicago, Illinois 60606 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: ___________ __
-16- 17
Amount of Percentage of Commitment Commitments ---------- ----------- $19,800,000 3.6 % The Sakura Bank, Limited ---- By: /s/ Hajime Miyagi ------------------ Name: Hajime Miyagi Title: Deputy General Manager DOMESTIC OFFICE The Sakura Bank, Limited Chicago Branch 227 West Monroe Street Suite 4700 Chicago, Illinois 60606 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE The Sakura Bank, Limited Chicago Branch 227 West Monroe Street Suite 4700 Chicago, Illinois 60606 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
-17- 18
Amount of Percentage of Commitment Commitments ---------- ----------- $19,800,000 3.6 % Society National Bank ---- By: /s/ Helen France ---------------- Name: Helen France Title: Vice President DOMESTIC OFFICE Society National Bank 127 Public Square Cleveland, Ohio 44114 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE Society National Bank 127 Public Square Cleveland, Ohio 44114 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
-18- 19
Amount of Percentage of Commitment Commitments ---------- ----------- $19,800,000 3.6 % 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: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________
-19- 20
Amount of Percentage of Commitment Commitments ---------- ----------- $19,800,000 3.6 % Union Bank of Switzerland ---- By: /s/ Steven M. Dadmun --------------------- Name: Steven M. Dadmun Title: Vice President By: /s/ David E. Collignon ---------------------- Name: David E. Collignon Title: Lending Officer DOMESTIC OFFICE Union Bank of Switzerland Chicago Branch 30 South Wacker Drive, Suite 40 Chicago, Illinois 60606 Telephone: _____________ Facsimile: _____________ EUROCURRENCY OFFICE Union Bank of Switzerland Chicago Branch 30 South Wacker Drive, Suite 40 Chicago, Illinois 60606 Telephone: _____________ Facsimile: _____________ ELECTRONIC PAYMENT INSTRUCTIONS Receiving Bank: ____________ ABA Routing No.: ___________ Account No.: _______________ Account Name: _____________ Reference No.: _____________ ------------ ---------- $550,000,000 100% Total
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EX-11 6 TRW EX-11 1
Exhibit 11 TRW INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (In Millions Except Per Share Amounts) ------------------------------------------------------------------------------------------------------------------------------- Years ended December 31 ------------------------------------------------------------------------------------------------------------------------------- 1994 1993 1992 ------------------------------------------------------------------------------------------------------------------------------- PRIMARY ------- Net earnings(loss) before cumulative effect $332.7 $ 220.1 $ 193.7 of accounting changes Less preference dividend requirements 0.7 0.8 0.9 ------------------------------------------------------------------------------------------------------------------------------- 332.0 219.3 192.8 Cumulative effect of accounting changes - (24.7) (349.4) ------------------------------------------------------------------------------------------------------------------------------- Net earnings(loss) applicable to common shares (and common share equivalents in 1994 and 1993) $332.0 $ 194.6 ($156.6) =============================================================================================================================== Average common shares outstanding 64.6 63.5 62.3 Stock options and performance share rights, based on the treasury stock method using average market price 1.2 1.2 - (A) ------------------------------------------------------------------------------------------------------------------------------- Average common shares (and common share equivalents in 1994 and 1993) 65.8 64.7 62.3 =============================================================================================================================== Primary earnings(loss) per share before cumulative effect of accounting changes $ 5.05 $ 3.39 $ 3.09 Cumulative effect of accounting changes - (0.38) (5.60) ------------------------------------------------------------------------------------------------------------------------------- Primary earnings(loss) per share $ 5.05 $ 3.01 ($2.51) =============================================================================================================================== FULLY DILUTED ------------- Net earnings(loss) before cumulative effect of accounting changes applicable to common shares (and common share equivalents in 1994 and 1993) $332.0 $ 219.3 $ 192.8 Dividends assuming conversion of other dilutive securities: (B) Dilutive preference dividends 0.7 0.8 0.9 ------------------------------------------------------------------------------------------------------------------------------- 332.7 220.1 193.7 Cumulative effect of accounting changes - (24.7) (349.4) ------------------------------------------------------------------------------------------------------------------------------- Net earnings(loss) applicable to fully diluted shares $332.7 $ 195.4 ($155.7) =============================================================================================================================== Average common shares outstanding 64.6 63.5 62.3 Common shares assuming conversion of other dilutive securities: (B) Dilutive preference shares 0.6 0.7 0.8 Stock options and performance share rights, based on the treasury stock method using closing market price if higher than average market price 1.2 1.5 1.2 ------------------------------------------------------------------------------------------------------------------------------- Average fully diluted shares 66.4 65.7 64.3 =============================================================================================================================== Fully diluted earnings(loss) per share before cumulative effect of accounting changes $ 5.01 $ 3.35 $ 3.01 Cumulative effect of accounting changes - (0.38) (5.43) ------------------------------------------------------------------------------------------------------------------------------- Fully diluted earnings(loss) per share $ 5.01 $ 2.97 ($2.42)(C) =============================================================================================================================== (A) In accordance with Paragraph 30 of APB Opinion No. 15 the common share equivalents are excluded from the primary computation in 1992 as they produce an anti-dilutive result. (B) Assuming the conversion of the Serial Preference Stock II Series 1 and Series 3. (C) This calculation is submitted in accordance with the Securities Exchange Act of 1934 Release No. 9083 although it is contrary to Paragraph 40 of APB Opinion No. 15 as it produces an anti-dilutive result.
EX-12 7 TRW EX-12 1
Exhibit 12 TRW Inc. and Subsidiaries Computation of Ratio of Earnings to Fixed Charges - Unaudited (In millions except ratio data) Years Ended December 31 -------------------------------------------------------------------------------------------------------------- 1994 1993 1992 1991 1990 -------------------------------------------------------------------------------------------------------------- Earnings(loss) before income taxes and cumulative effect of accounting changes $534.5 $359.1 $347.6 $(129.4)(A) $343.1 Unconsolidated affiliates (0.6) 0.7 (0.9) (1.0) (13.2) Minority earnings 5.2 5.7 2.6 (7.8) (0.5) Fixed charges excluding capitalized interest 160.9 194.0 227.1 254.3 252.0 -------------------------------------------------------------------------------------------------------------- Earnings $700.0 $559.5 $576.4 $ 116.1 $581.4 -------------------------------------------------------------------------------------------------------------- Fixed charges: Interest expense $104.8 $137.8 $162.9 $ 189.6 $186.9 Capitalized interest 6.6 7.9 12.7 10.1 7.6 Portion of rents representa- tive of interest factor 54.7 54.0 64.0 64.4 64.6 Interest expense of uncon- solidated affiliates 1.4 2.2 0.2 0.3 0.5 -------------------------------------------------------------------------------------------------------------- Total fixed charges $167.5 $201.9 $239.8 $ 264.4 $259.6 -------------------------------------------------------------------------------------------------------------- Ratio of earnings to fixed charges 4.2x 2.8x 2.4x 0.4x(A) 2.2x -------------------------------------------------------------------------------------------------------------- (A) The 1991 loss before income taxes of $129.4 million includes a charge of $343 million to cover costs associated with restructuring activities. Excluding this charge, the ratio of earnings to fixed charges would have been 1.7x.
EX-13 8 TRW EX-13 1 18 Exhibit 13 Ten-Year Summary of Operations TRW Inc. TRW Inc. and subsidiaries ----------------------------------------------------------------------------------------------------------------------------------
In millions except per share data 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 ---------------------------------------------------------------------------------------------------------------------------------- EARNINGS DATA Sales $9,087 $7,948 $8,311 $7,913 $8,169 $7,340 $6,982 $6,821 $6,036 $5,917 Gross profit 1,817 1,580 1,694 1,606 1,722 1,561 1,417 1,531 1,358 1,331 Interest expense 105 138 163 190 187 138 130 126 96 77 Earnings(loss) from continuing operations before income taxes and cumulative effect of accounting changes 535 359 348 (129) 343 399 420 415 370 235 Percent of sales 6% 5% 4% (2%) 4% 5% 6% 6% 6% 4% ---------------------------------------------------------------------------------------------------------------------------------- Income taxes $ 202 $ 139 $ 154 $ 11 $ 135 $ 136 $ 159 $ 172 $ 152 $ 101 Earnings(loss) from continuing operations before cumulative effect of accounting changes 333 220 194 (140) 208 263 261 243 218 134 Percent of sales 4% 3% 2% (2%) 3% 4% 4% 4% 4% 2% Net earnings(loss) (A) $ 333 $ 195 $ (156) $ (140) $208 $ 263 $ 261 $ 243 $ 218 $ (7) ---------------------------------------------------------------------------------------------------------------------------------- International sales $3,151 $2,463 $2,702 $2,501 $2,574 $2,060 $1,961 $1,792 $1,581 $1,497 Percent of sales 35% 31% 33% 32% 32% 28% 28% 26% 26% 25% ---------------------------------------------------------------------------------------------------------------------------------- U.S. Government sales $2,545 $2,708 $2,851 $2,959 $3,231 $3,080 $3,096 $3,081 $2,697 $2,550 Percent of sales 28% 34% 34% 37% 40% 42% 44% 45% 45% 43% ---------------------------------------------------------------------------------------------------------------------------------- PER SHARE OF COMMON STOCK Fully diluted earnings(loss) from continuing operations (A) $ 5.01 $ 2.97 $(2.51) $(2.30) $ 3.36 $ 4.25 $ 4.23 $ 3.95 $ 3.55 $ 1.90 Cash dividends paid 1.94 1.88 1.82 1.80 1.74 1.72 1.63 1.60 1.525 1.50 Cash dividends declared 1.97 1.88 1.84 1.80 1.76 1.72 1.66 1.60 1.55 1.50 Book value per share 27.91 23.77 22.31 27.12 31.11 28.60 25.70 23.41 19.93 16.98 ---------------------------------------------------------------------------------------------------------------------------------- BALANCE SHEET DATA Current assets $2,215 $1,994 $2,116 $2,262 $2,237 $2,295 $2,105 $1,986 $1,749 $1,684 Current liabilities 1,986 1,826 2,012 1,982 1,947 1,794 1,396 1,496 1,352 1,429 Working capital 229 168 104 280 290 501 709 490 397 255 Total assets 5,636 5,336 5,458 5,635 5,555 5,259 4,442 4,378 3,909 3,735 Long-term debt 694 870 941 1,213 1,042 1,063 863 870 786 698 Shareholders' investment 1,822 1,534 1,416 1,685 1,907 1,749 1,566 1,417 1,198 1,015 ---------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Capital expenditures $ 506 $ 482 $ 530 $ 537 $ 587 $ 452 $ 417 $ 452 $ 431 $ 412 Depreciation and amortization of property, plant and equipment 402 388 392 392 381 349 324 306 260 227 ---------------------------------------------------------------------------------------------------------------------------------- Common stock outstanding at year-end 64.9 64.1 62.9 61.6 60.8 60.6 60.2 59.7 58.9 58.1 Shares used in computing per share amounts Fully diluted 66.4 65.7 62.3 61.2 61.9 61.9 61.6 61.6 61.3 69.3 Primary 65.8 64.7 62.3 61.2 61.0 60.8 60.5 60.3 59.6 69.3 ---------------------------------------------------------------------------------------------------------------------------------- In thousands Number of employees 64.2 61.2 64.1 71.3 75.6 74.3 73.2 77.9 78.6 93.2 ---------------------------------------------------------------------------------------------------------------------------------- Number of common shareholders 31.3 30.1 32.8 34.1 34.9 37.1 38.2 36.1 37.7 34.7 ---------------------------------------------------------------------------------------------------------------------------------- (A) 1993 and 1992 amounts include cumulative effect of accounting changes.
2 19 Management's Discussion and Analysis of the Results of Operations and Financial Condition TRW Inc. RESULTS OF OPERATIONS -------------------------------------------------------------------------------
92 93 94 ------------------------------------- Sales in Billions $8.31 $7.95 $9.09 Net Earnings in Millions ($156) $195 $333 Net Earnings per Share ($2.51) $2.97 $5.01
Consolidated sales in 1994 rose 14 percent to $9.09 billion from $7.95 billion reported in 1993. Compared to 1992 sales of $8.31 billion, 1994 sales increased 9 percent. Net earnings of $333 million in 1994 exceeded the reported earnings of $195 million in 1993 and net loss of $156 million in 1992. Fully diluted earnings(loss) per share were $5.01 in 1994, $2.97 in 1993 and ($2.51) in 1992. Sales, net earnings and earnings per share recorded during 1994 were the highest in our 94-year history. This achievement reflects the realization of the strategic decisions we made regarding our core products and services. All three of our industry segments made positive contributions during 1994. Increased volume and profitability in our worldwide automotive business was a significant factor in achieving the record results. Sales in our Space and Defense segment increased for the first time since 1990 and our Information Systems and Services segment posted record operating profit for the year. Higher productivity from all our TRW employees contributed to the record year. In 1993, the company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," and took a one-time noncash charge of $25 million, or $.38 per share, for the prior years' cumulative effect of the accounting change. Earnings before the cumulative effect of the accounting change were $220 million, or $3.35 per share. In 1992, the company adopted Statements of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and No. 109, "Accounting for Income Taxes," and took a one-time noncash charge of $350 million, or $5.60 per share, for the prior years' cumulative effect of the accounting changes. Earnings before the cumulative effect of these accounting changes were $194 million or $3.09 per share. Excluding the effects of restructuring, operating profit from our three industry segments in 1994 was $747 million, a 27 percent increase over 1993 operating profit of $587 million, and a 33 percent increase over 1992 operating profit of $562 million. A detailed discussion of the operating results of each industry segment is presented below. Interest expense in 1994 was $105 million compared to $138 million in 1993 and $163 million in 1992. The lower interest expense in 1994 was due to the restructuring of our Brazilian debt, lower average debt levels as well as lower foreign interest rates. The decrease in interest expense from 1992 to 1993 was due to lower average debt balances as well as lower interest rates partially offset by higher Brazilian interest expense. The effective tax rate in 1994 was 37.8 percent, compared to 38.7 percent in 1993 and 44.3 percent in 1992. The lower effective tax rate in 1994 was primarily attributable to tax benefits derived from the utilization of non-U.S. tax loss carryforwards, partially offset by the combination of higher foreign earnings subject to tax rates in excess of the U.S. rate, higher non-deductible expenses in the United States, and the absence of a restructuring benefit recognized in 1993. AUTOMOTIVE Sales in 1994 rose to a record $5.68 billion, up 25 percent from 1993 sales of $4.54 billion. Operating profit in 1994 increased 54 percent to $476 million from the $304 million reported in 1993, excluding restructuring. The increase in sales was due to higher volume in the North American and European occupant restraint, steering systems and automotive electronics businesses. The operating profit increase was due to the higher volume in the North American and European occupant restraint and steering systems businesses. Sales of $4.54 billion in 1993 were 2 percent lower than 1992 sales of $4.62 billion. Excluding restructuring, operating profit in 1993 increased 15 percent to $304 million from the $264 million reported in 1992. An increase in sales resulting from higher volume in North America primarily in the occupant restraint and steering systems businesses was more than offset by lower volume in Europe, the absence of sales from divested businesses and the effect of unfavorable exchange rates. The increase in operating profit was 3 20 Management's Discussion and Analysis of the Results of Operations and Financial Condition TRW Inc. RESULTS OF OPERATIONS (CONTINUED) -------------------------------------------------------------------------------
92 93 94 ------------------------------------- Sales in Billions $4.62 $4.54 $5.68 Operating Profit in Millions $264 $304 $476
due to the higher North American volume and the absence of certain warranty reserves taken in 1992. Partially offsetting the operating profit improvement was the effect of the lower volume in Europe and the absence of operating profit from businesses divested in 1992. TRW provides automotive systems and components with substantial value-added content to the worldwide automotive industry. The company will continue to invest in areas of significant future growth, such as air bag systems, power rack and pinion steering and advanced electronic and electrical components. In addition, TRW is poised to take advantage of the increasing opportunities in the emerging markets of the world through internal growth and strategic alliances in these regions. The company anticipates that the North American automotive industry will remain strong throughout 1995, with the current trend of vehicle builds continuing into 1996. Any significant increase in 1995 short-term interest rates could affect U.S. vehicle builds and therefore affect TRW's revenue forecast. The European recovery which began during mid-1994 is expected to gain strength throughout 1995. Although economic uncertainty is expected to continue in both Brazil and Mexico, the diversity of our customers, markets and products in conjunction with increased application rates and automotive platform awards in key product lines will allow for continued growth throughout the world. We are dedicated to technological leadership, continuous improvement, reducing costs and break-even points, and focusing on a consistent achievement of high quality in all of our products and services in order to increase our competitive position on a worldwide basis. SPACE & DEFENSE Sales in 1994 of $2.81 billion increased from the 1993 sales of $2.79 billion. Operating profit of $175 million was 14 percent lower than the operating profit of $205 million reported in 1993, excluding restructuring. The sales increase was due to higher volume in space and electronics and tactical reconnaissance systems as well as in systems engineering resulting from both existing and new contract awards. Partially offsetting the sales increase was the effect of several contract completions and terminations. The operating profit resulting from the higher volume and the absence of 1993 reserves for certain programs was more than offset by investments for new business opportunities and the establishment of a contract reserve in 1994. Sales in 1993 declined 5 percent to $2.79 billion from 1992's sales of $2.93 billion. Excluding restructuring, operating profit of $205 million in 1993 was 11 percent lower than the operating profit of $230 million reported in 1992. Reflecting the continuing decline in the level of U.S. Government spending and the competitiveness of the business, operating profit margin, excluding restructuring, was 7.3 percent in 1993 compared to 7.9 percent in 1992. Sales declined due to lower volume in space and electronics systems and in systems engineering and the effects of several contract completions. Partially offsetting the sales decline were sales from new contract awards. The decline in operating profit was attributed to the sales decline and the establishment of reserves for certain programs. Continuing pressure on the Department of Defense, NASA, and other U.S. Government agency budgets could affect the level of future revenues and operating profits. However, the company believes it is well positioned in key space and defense businesses of continuing high national priority. In addition to aggressive efforts to maintain or increase the company's position in these businesses, the company continues to successfully pursue opportunities with other U.S. Government agencies, state and municipal governments and commercial and international markets.
92 93 94 ------------------------------------- Sales in Billions $2.93 $2.79 $2.81 Operating Profit in Millions $230 $205 $175
4 21 Management's Discussion and Analysis of the Results of Operations and Financial Condition TRW Inc. RESULTS OF OPERATIONS (CONTINUED) ------------------------------------------------------------------------------- Backlog estimates at the end of 1994 totaled $4.12 billion compared to the $4.52 billion reported at the end of 1993. The maintenance of this high backlog level reflects continuing restricted program contract awards and our successful penetration into non-defense related areas. INFORMATION SYSTEMS & SERVICES The record operating profit of $96 million in 1994 represented a 24 percent increase over 1993 operating profit of $78 million, excluding restructuring. Revenues of $596 million declined 4 percent from the $618 million reported in 1993. The revenue decline resulted from the absence of sales from a previously divested business.
92 93 94 ------------------------------------ Sales in Millions $754 $618 $596 Operating Profit in Millions $67 $78 $96
Higher volume in the Information Services business combined with continued cost controls contributed to the increase in operating profit. Operating profit in 1994 also includes a gain on the sale of a product line partially offset by the establishment of certain contract reserves in the Information Systems business. Revenues of $618 million in 1993 declined 18 percent from the $754 million reported in 1992. The decline was due to the absence of revenue from divested nonstrategic businesses partially offset by higher volume in the Information Services business. Excluding restructuring, operating profit of $78 million in 1993 increased 16 percent from the 1992 amount of $67 million. The operating profit increase resulted from continued cost-control actions and the effect of higher volume in the Information Services business. We expect to improve operating profit margins and maintain revenue growth in this segment during 1995. However, the level of revenue and operating profit will remain sensitive to several key U.S. economic variables including interest rates, consumer spending on durable goods and housing activities. INTERNATIONAL OPERATIONS International sales were $3.15 billion, or 35 percent of TRW sales in 1994; $2.46 billion, or 31 percent of sales in 1993; and $2.70 billion, or 33 percent of sales in 1992. U.S. export sales included in those amounts were $638 million in 1994, $438 million in 1993 and $352 million in 1992. Most of TRW's non-U.S. operations are included in the Automotive segment and are located in Europe, Canada, Brazil and the Pacific basin. TRW's non-U.S. operations are subject to the usual risks that may affect such operations; however, most of the assets of its non-U.S. operations are in countries where the company believes such risks to be minimal. LIQUIDITY AND FINANCIAL POSITION Cash flow from operations in 1994 of $972 million was used primarily for capital expenditures, the repayment of debt and dividend payments to shareholders. Debt at December 31, 1994 was $973 million compared to debt of $1.21 billion at the end of 1993. The ratio of total debt (short-term debt, current portion of long-term debt and long-term debt) to total capital (total debt, minority interests, total deferred income taxes and shareholders' investment) was 34 percent at December 31, 1994 compared to 43 percent at December 31, 1993. The percentage of fixed-rate debt to total debt was 78 percent at the end of 1994. At year-end, the company had two committed U.S. revolving credit agreements with a group of 18 banks. The first agreement allows the company to borrow up to $400 million and extends to July 1998. The second agreement allows the company to borrow up to $150 million and extends through February 1995 with an option to extend the term to a final maturity no later than July 1998. In addition to providing liquidity, these agreements support the company's commercial paper borrowings. At December 31, 1994, there were no outstanding borrowings under these agreements. TRW's non-U.S. operations are generally financed by borrowings from banks or through intercompany loans in the local currency of the borrower. There are no significant restrictions on the remittance of funds by the company's non-U.S. subsidiaries to the United States. During 1994, the company entered into a committed multi-currency revolving credit agreement consisting of two tranches with 13 banks. The first tranche allows the company to borrow up to $100 million and extends through February 1995. The second tranche allows the company to borrow up to $100 million and extends through July 1997. The interest rate under the agreement is based on various interest rate indices. At December 31, 1994, there were no outstanding borrowings under the multi-currency credit agreement. 5 22 Management's Discussion and Analysis of the Results of Operations and Financial Condition TRW Inc. RESULTS OF OPERATIONS (CONTINUED) The company is subject to inherent risks attributed to operating in a global economy. It is the company's policy to utilize derivative financial instruments to manage its interest rate and foreign currency exchange risks. The company uses derivatives to hedge its exposure to short-term interest rate changes as a lower cost substitute for the issuance of fixed-rate debt after taking into consideration account-related counterparty risk. The company manages cash flow transactional foreign exchange risk pursuant to a written company policy. Forward contracts and to a lesser extent options are utilized to protect the company's cash flow from adverse movements in exchange rates. The company is exposed to credit loss in the event of nonperformance by the counterparties to the derivative financial instruments. The company diversifies the counterparties used as a means to limit this exposure and anticipates that the counterparties will fully satisfy their obligations under the contracts. Derivative financial instruments are viewed by the company as a risk management tool and are not used for speculative or trading purposes. Capital expenditures were $506 million in 1994, $482 million in 1993 and $530 million in 1992. The company will maintain a capital program with estimated expenditures for 1995 totaling about $590 million. Approximately 72 percent of these expenditures will be invested in the Automotive segment, 23 percent in the Space & Defense segment and 5 percent in the Information Systems & Services segment. The company will continue to invest in its automotive growth businesses, including air bag systems, power rack and pinion steering and automotive electronic technologies. The balance of the capital expenditures will be used to acquire equipment to support and develop advanced and next generation technologies, data processing hardware and telecommunications equipment for product development enhancement, and support for new products. We believe that the company's current financing arrangements allow flexibility in worldwide financing activities and permit us to respond to changing conditions in credit markets. The existing arrangements are not indicative of the company's potential borrowing capacity. We believe that funds generated from operations and existing borrowing capacity are adequate to support and finance planned growth, capital expenditures, company-sponsored research and development programs and dividend payments to shareholders. OTHER MATTERS Federal, state and local requirements relating to the discharge of materials into the environment, or otherwise relating to the protection of the environment, have had and will continue to have an effect on TRW and its operations. The company is conducting a number of environmental investigations and remedial actions at current and former company locations and, along with other companies, has been named a potentially responsible party for certain waste management sites. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably to the company. A reserve estimate for each matter is established using standard engineering cost estimating techniques. In the determination of such costs, consideration is given to the professional judgment of company environmental engineers in consultation with outside environmental specialists when necessary. At multi-party sites, the reserve estimate also reflects the expected allocation of total project costs among the various potentially responsible parties. At December 31, 1994, the company had reserves for environmental matters of $98 million, including $17 million of additional accruals recorded during the year. The company aggressively pursues reimbursement for environmental costs from its insurance carriers. However, insurance recoveries are not recorded as a reduction of environmental costs until they are fixed and determinable. The company believes that any liability that may result from the resolution of environmental matters for which sufficient information is available to support these cost estimates will not have a material adverse effect on the company's future results of operations and cash flows. However, the company cannot predict the effect on the company's future results of operations and cash flows of expenditures for aspects of certain matters for which there is insufficient information. In addition, the company cannot predict the effect of compliance with environmental laws and regulations with respect to unknown environmental matters or the possible effect of compliance with environmental requirements imposed in the future. As of December 31, 1994, the company increased the discount rate used to measure the obligations for its pension and other postretirement benefit plans from 7-1/2 percent to 8-1/2 percent, in recognition of higher prevailing long-term interest rates. The effect of the discount rate change on 1995 pension and other postretirement benefit costs is not expected to be material. The determination of pension and other postretirement benefit costs beyond 1995 will depend on various factors, including long-term interest rates, investment returns, health care cost trend rates, other actuarial assumptions, benefit levels, and demographic changes. 6
23 Financial Statements TRW Inc. STATEMENTS OF EARNINGS -------------------------------------------------------------------------------------- TRW Inc. and subsidiaries -------------------------------------------------------------------------------------- In millions except per share data -------------------------------------------------------------------------------------- Years ended December 31 1994 1993 1992 -------------------------------------------------------------------------------------- Sales $9,087 $7,948 $8,311 Cost of sales 7,270 6,368 6,617 -------------------------------------------------------------------------------------- Gross profit 1,817 1,580 1,694 Administrative and selling expenses 756 707 826 Research and development expenses 412 378 393 Restructuring expense(income) - 7 (29) Interest expense 105 138 163 Other expense(income)-net 9 (9) (7) -------------------------------------------------------------------------------------- Earnings before income taxes and cumulative effect of accounting changes 535 359 348 Income taxes 202 139 154 -------------------------------------------------------------------------------------- Earnings before cumulative effect of accounting changes 333 220 194 Cumulative effect at beginning of the year of accounting changes, net of income taxes - (25) (350) -------------------------------------------------------------------------------------- Net earnings(loss) $ 333 $ 195 $ (156) ====================================================================================== PER SHARE OF COMMON STOCK Fully diluted Before cumulative effect of accounting changes $ 5.01 $ 3.35 $ 3.09 Cumulative effect of accounting changes - (.38) (5.60) -------------------------------------------------------------------------------------- Net earnings(loss) per share $ 5.01 $ 2.97 $(2.51) -------------------------------------------------------------------------------------- Primary Before cumulative effect of accounting changes $ 5.05 $ 3.39 $ 3.09 Cumulative effect of accounting changes - (.38) (5.60) -------------------------------------------------------------------------------------- Net earnings(loss) per share $ 5.05 $ 3.01 $(2.51) ====================================================================================== See notes to financial statements.
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24 Financial Statements TRW Inc. BALANCE SHEETS -------------------------------------------------------------------------------------- TRW Inc. and subsidiaries -------------------------------------------------------------------------------------- In millions -------------------------------------------------------------------------------------- December 31 1994 1993 -------------------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $ 109 $ 79 Accounts receivable 1,338 1,219 Inventories Finished products and work in process 246 237 Raw materials and supplies 224 173 -------------------------------------------------------------------------------------- Total inventories 470 410 Prepaid expenses 59 69 Deferred income taxes 239 217 -------------------------------------------------------------------------------------- Total current assets 2,215 1,994 Property, plant and equipment-on the basis of cost Land 104 104 Buildings 1,527 1,461 Machinery and equipment 3,925 3,555 -------------------------------------------------------------------------------------- 5,556 5,120 Less accumulated depreciation and amortization 3,067 2,793 -------------------------------------------------------------------------------------- Total property, plant and equipment-net 2,489 2,327 Intangible assets Intangibles arising from acquisitions 477 499 Capitalized data files 441 421 Other 69 36 -------------------------------------------------------------------------------------- 987 956 Less accumulated amortization 331 279 -------------------------------------------------------------------------------------- Total intangible assets-net 656 677 Other assets 276 338 -------------------------------------------------------------------------------------- $5,636 $5,336 ======================================================================================
8
25 Financial Statements TRW Inc. BALANCE SHEETS (CONTINUED) -------------------------------------------------------------------------------------- TRW Inc. and subsidiaries -------------------------------------------------------------------------------------- In millions -------------------------------------------------------------------------------------- December 31 1994 1993 -------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities Short-term debt $ 122 $ 295 Accrued compensation 346 281 Trade accounts payable 737 563 Other accruals 541 599 Dividends payable 33 30 Income taxes 50 10 Current portion of long-term debt 157 48 -------------------------------------------------------------------------------------- Total current liabilities 1,986 1,826 Long-term liabilities 796 803 Long-term debt 694 870 Deferred income taxes 269 235 Minority interests in subsidiaries 69 68 Shareholders' investment Serial Preference Stock II (involuntary liquidation $10 million and $11 million) 1 1 Common stock (shares outstanding 64.9 million and 64.1 million) 40 40 Other capital 354 293 Retained earnings 1,383 1,178 Cumulative translation adjustments 66 36 Treasury shares -- cost in excess of par value (22) (14) -------------------------------------------------------------------------------------- Total shareholders' investment 1,822 1,534 -------------------------------------------------------------------------------------- $5,636 $5,336 ====================================================================================== See notes to financial statements.
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26 Financial Statements TRW Inc. STATEMENTS OF CASH FLOWS -------------------------------------------------------------------------------------- TRW Inc. and subsidiaries -------------------------------------------------------------------------------------- In millions -------------------------------------------------------------------------------------- Years ended December 31 1994 1993 1992 -------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings(loss) $ 333 $ 195 $(156) Adjustments to reconcile net earnings(loss) to net cash provided by operating activities: Cumulative effect of accounting changes, net of taxes - 25 350 Depreciation and amortization 476 458 481 Restructuring (23) (61) (96) Deferred income taxes 8 49 5 Other-net 26 18 25 Changes in assets and liabilities, net of effects of businesses acquired or sold: Accounts receivable (112) (46) (104) Inventories and prepaid expenses (33) (5) (46) Accounts payable and other accruals 262 (107) 227 Other-net 35 (30) (42) -------------------------------------------------------------------------------------- Net cash provided by operating activities 972 496 644 INVESTING ACTIVITIES Capital expenditures (506) (482) (530) Proceeds from divestitures 22 97 371 Investments in other assets (81) (51) (62) Proceeds from sales of property, plant and equipment 16 24 11 Other-net 7 (11) 11 -------------------------------------------------------------------------------------- Net cash used in investing activities (542) (423) (199) FINANCING ACTIVITIES Increase(decrease) in short-term debt (270) 104 (229) Proceeds from debt in excess of 90 days 176 255 198 Principal payments on debt in excess of 90 days (154) (344) (351) Dividends paid (126) (120) (114) Other-net 9 27 18 -------------------------------------------------------------------------------------- Net cash used in financing activities (365) (78) (478) Effect of exchange rate changes on cash (35) 18 24 -------------------------------------------------------------------------------------- Increase(decrease) in cash and cash equivalents 30 13 (9) Cash and cash equivalents at beginning of year 79 66 75 -------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 109 $ 79 $ 66 ====================================================================================== See notes to financial statements.
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27 Financial Statements TRW Inc. STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT ------------------------------------------------------------------------------------------------------------------------------------ TRW Inc. and subsidiaries ------------------------------------------------------------------------------------------------------------------------------------ In millions ------------------------------------------------------------------------------------------------------------------------------------ Years ended December 31 1994 1993 1992 ------------------------------------------------------------------------------------------------------------------------------------ Shares Dollars Shares Dollars Shares Dollars ------------------------------------------------------------------------------------------------------------------------------------ SERIAL PREFERENCE STOCK II Series 1 Balance at January 1 and December 31 .1 $ - .1 $ - .1 $ - ------------------------------------------------------------------------------------------------------------------------------------ Series 3 Balance at January 1 .1 1 .1 1 .1 1 Converted into common stock - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31 .1 1 .1 1 .1 1 ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK Balance at January 1 64.1 40 62.9 39 61.6 38 Sale of stock and other .8 - 1.2 1 1.3 1 ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31 64.9 40 64.1 40 62.9 39 ------------------------------------------------------------------------------------------------------------------------------------ OTHER CAPITAL Balance at January 1 293 222 184 Sale of stock and other 61 71 38 ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31 354 293 222 ------------------------------------------------------------------------------------------------------------------------------------ RETAINED EARNINGS Balance at January 1 1,178 1,105 1,377 Net earnings(loss) 333 195 (156) Other - (1) - Dividends declared Preference stock (1) (1) (1) Common stock ($1.97, $1.88 and $1.84 per share) (127) (120) (115) ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31 1,383 1,178 1,105 ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TRANSLATION ADJUSTMENTS Balance at January 1 36 53 98 Translation adjustments 30 (17) (45) ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31 66 36 53 ------------------------------------------------------------------------------------------------------------------------------------ TREASURY SHARES-COST IN EXCESS OF PAR VALUE Balance at January 1 (14) (4) (13) ESOP funding - - 12 Purchase of shares (8) (10) (6) Sold under stock options - - 3 ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31 (22) (14) (4) ------------------------------------------------------------------------------------------------------------------------------------ Total shareholders' investment $1,822 $1,534 $1,416 ==================================================================================================================================== See notes to financial statements.
11 28 Notes to Financial Statements TRW Inc. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ---------------------------------------------------------------------- Principles of consolidation -- The financial statements include the accounts of the company and its subsidiaries except for an insurance subsidiary. The wholly-owned insurance subsidiary and the majority of investments in affiliated companies, which are not significant individually or in the aggregate, are accounted for by the equity method. Long-term contracts -- The percentage-of-completion (cost-to-cost) method is used to estimate sales under fixed-price and fixed-price incentive contracts. Sales under cost-reimbursement contracts are recorded as costs are incurred. Fees based on cost, award fees and incentive fees are included in sales at the time such amounts are reasonably estimable. Losses on contracts are recognized when determinable. For contracts entered into after December 31, 1990, changes in fee estimates are recognized based on costs incurred to date whereas for contracts entered into prior to such date, changes in fee estimates are recognized prospectively based on costs to be incurred. Accounts receivable -- Accounts receivable at December 31, 1994 and 1993 included $492 million and $595 million, respectively, related to long-term contracts, of which $269 million and $370 million, respectively, were unbilled. Unbilled costs, fees and claims represent revenues earned and billable in the following month as well as revenues earned but not billable under terms of the contracts. A substantial portion of such amounts are expected to be billed during the following year. Retainage receivables and receivables subject to negotiation are not significant. Inventories -- Inventories are stated at the lower of cost or market. At December 31, 1994 and 1993, inventories valued using the last-in, first-out (LIFO) method were $25 million and $26 million, respectively. Inventories not valued by the LIFO method are principally on the first-in, first-out (FIFO) method. Had the cost of all inventories been determined by the FIFO method, which approximates current cost, inventories would have been greater by $30 million at December 31, 1994 and 1993. Inventories applicable to long-term contracts are not significant. Depreciation -- Depreciation is computed using the straight-line method for the majority of the company's depreciable assets. The remaining assets are depreciated using accelerated methods. Intangible assets -- Intangible assets are stated on the basis of cost. Intangibles arising from acquisitions prior to 1971 ($75 million) are not being amortized because there is no indication of diminished value. Intangibles arising from acquisitions after 1970 are being amortized by the straight-line method principally over 40 years. Capitalized data files are amortized by the straight-line method over periods not exceeding 15 years. The carrying value of intangible assets is assessed for impairment on a quarterly basis. Forward exchange contracts -- The company enters into forward exchange contracts the majority of which hedge firm foreign currency commitments and certain intercompany transactions. At December 31, 1994, the company had contracts outstanding amounting to approximately $162 million denominated in the German mark, the Swiss franc, the British pound, the Canadian dollar, the U.S. dollar and the European currency unit, maturing at various dates through December 1995. Changes in market value of the contracts are included in the basis of the transactions. The company is exposed to credit loss in the event of nonperformance by the counterparties to the foreign exchange contracts. No collateral is held in relation to the contracts and the company anticipates that the counterparties will satisfy their obligations under the contracts. Concentrations of credit risk -- At December 31, 1994 and 1993, accounts receivable in the Automotive segment were $774 million and $556 million, respectively, and accounts receivable in the Space & Defense segment, principally from agencies of the U.S. Government, were $491 million and $583 million, respectively. The company generally does not require collateral from its customers. The company has established receivable reserves of $23 million and $20 million at December 31, 1994 and 1993, respectively. Fair values of financial instruments -- The carrying amount reported in the balance sheets for cash and cash equivalents approximates their fair value. Short and long-term debt -- The carrying amounts of the company's short-term and floating rate long-term borrowings approximate their fair values. The fair values of the company's fixed rate long-term debt was $7 million less than their carrying value at December 31, 1994 and exceeded their carrying value by $84 million at December 31, 1993, and are estimated using discounted cash flow analyses, based on the company's current borrowing rates for similar types of borrowing arrangements. Interest rate swap agreements -- The fair value of the company's interest rate swap agreements was a net liability of $5 million and $18 million at December 31, 1994 and 1993, respectively, and are based on quoted market prices of offsetting contracts. The fair value of the swap agreements is not recognized in the financial statements. Foreign currency exchange contracts -- The fair values of the company's foreign currency exchange contracts are estimated based on quoted market prices of offsetting contracts and were not material at December 31, 1994 and 1993. 12 29 Notes to Financial Statements TRW, Inc. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) --------------------------------------------------------------------- Accounting change -- Effective January 1, 1993, the company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," which requires accruals of the cost of benefits provided to former or inactive employees after employment but before retirement. The company's previous practice was to record the cost of certain of these benefits as incurred. The company recognized the cumulative effect of this accounting change as of January 1, 1993, resulting in a one-time charge of $25 million (after a reduction for income taxes of $16 million). The effect of this accounting change on both 1994 and 1993 operating results, after recording the cumulative effect for years prior to 1993, was immaterial. Income taxes -- Deferred income taxes arise from temporary differences between income tax and financial reporting and principally relate to income recognition on long-term contracts, depreciation, postretirement benefits other than pensions and certain accruals. It is the company's intention to reinvest undistributed earnings of certain of its non-U.S. subsidiaries and thereby indefinitely postpone their remittance. Accordingly, deferred income taxes have not been provided for accumulated undistributed earnings of $237 million at December 31, 1994. Environmental costs -- TRW participates in environmental assessments and remedial efforts at operating facilities, previously owned or operated facilities, and Superfund or other waste sites. Costs related to these locations are accrued when it is probable that a liability has been incurred and the amount of that liability can be reasonably estimated. Estimated costs are recorded at undiscounted amounts based on experience and assessments, and are regularly evaluated as efforts proceed. Insurance recoveries are recorded as a reduction of environmental costs when fixed and determinable. Earnings(loss) per share -- Fully diluted earnings(loss) per share have been computed based on the weighted average number of shares of common stock outstanding during each year, and in 1994 and 1993 including common stock equivalents (stock options) and assuming the conversion of the Serial Preference Stock II - Series 1 and 3. Primary earnings(loss) per share have been computed based on the weighted average number of shares of common stock outstanding during each year, including common stock equivalents in 1994 and 1993. Fully diluted and primary earnings(loss) per share for 1992 are the same because the effect of including common stock equivalents and assuming the conversion of the Serial Preferred Stock is anti-dilutive. RESEARCH AND DEVELOPMENT ----------------------------------------------------------------------
------------------------------------------------------------------------------- In millions 1994 1993 1992 ------------------------------------------------------------------------------- Customer-funded $ 963 $1,223 $1,261 Company-funded Research and development 412 378 393 Product development 140 136 133 ------------------------------------------------------------------------------- 552 514 526 ------------------------------------------------------------------------------- $1,515 1,737 $1,787 -------------------------------------------------------------------------------
Company-funded research and development programs include research and development for commercial products and independent research and development and bid and proposal work related to government products and services. A portion of the cost incurred for independent research and development and bid and proposal work is recoverable through overhead charged to government contracts. Product development costs include engineering and field support for new customer requirements. RESTRUCTURING ----------------------------------------------------------------------- For balance sheet purposes, other accruals in 1994 and 1993 include $33 million and $115 million, respectively, relating to restructuring reserves. The $82 million decrease in the reserve during 1994 resulted from the divestiture of a nonstrategic business in the Information Systems & Services segment and the downsizing and streamlining of certain businesses in the Automotive segment. The restructuring reserve balance at December 31, 1993 declined by $46 million from December 31, 1992. The decline in the reserve resulted principally from the divestiture of a nonstrategic business in the Information 13 30 Notes to Financial Statements TRW, Inc. RESTRUCTURING (CONTINUED) --------------------------------------------------------------------- Systems & Services segment and the downsizing and streamlining of certain businesses in the Automotive and Space & Defense segments. Restructuring expense(income) in 1993 consists of restructuring charges of $23 million, principally in the Automotive segment, resulting from additional management decisions reduced by gains of $16 million from the sales of certain businesses in the Automotive segment. Restructuring expense(income) in 1992 includes gains from the sales of certain of the company's automotive businesses totaling $116 million ($67 million after tax, $1.08 per share), and net restructuring charges of $87 million ($63 million after tax, $1.01 per share) resulting from additional management decisions in 1992 related to the company's restructuring program. In addition, a charge of $5 million ($4 million after tax, 7 cents per share) for other matters is included in different captions in the statements of earnings. OTHER EXPENSE(INCOME)-NET ----------------------------------------------------------------------
------------------------------------------------------------------------------- In millions 1994 1993 1992 ------------------------------------------------------------------------------- Other income $ (66) $ (69) $ (71) Other expense 60 42 53 Gain on sale of assets (28) (4) - Gain on sale of investments in affiliates - - (7) Foreign currency translation 43 22 18 ------------------------------------------------------------------------------- $ 9 $ (9) $ (7) -------------------------------------------------------------------------------
Gain on sale of assets in 1994 includes a gain on the sale of a product line in the Information Systems and Services segment. Income Taxes ----------------------------------------------------------------------- Effective January 1, 1992, the company changed its method of accounting for income taxes from the deferred method to the liability method required by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The cumulative effect of adopting this Statement as of January 1, 1992 was immaterial to net earnings.
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES ------------------------------------------------------------------------------- In millions 1994 1993 1992 ------------------------------------------------------------------------------- U.S. $ 387 $ 362 $ 213 Non-U.S. 148 (3) 135 ------------------------------------------------------------------------------- $ 535 $ 359 $ 348 -------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES ------------------------------------------------------------------------------- In millions 1994 1993 1992 ------------------------------------------------------------------------------- Current U.S. federal $ 106 $ 34 $ 60 Non-U.S. 40 24 59 U.S. state and local 24 (1) 21 ------------------------------------------------------------------------------- 170 57 140 Deferred U.S. federal 28 78 13 Non-U.S. 5 (10) 3 U.S. state and local (1) 14 (2) ------------------------------------------------------------------------------- 32 82 14 ------------------------------------------------------------------------------- $ 202 $ 139 $ 154 -------------------------------------------------------------------------------
14 31 Notes to Financial Statements TRW Inc. INCOME TAXES (CONTINUED) --------------------------------------------------------------------------
PROVISION FOR DEFERRED INCOME TAXES ------------------------------------------------------------------------------------------ In millions 1994 1993 1992 ------------------------------------------------------------------------------------------ Income recognition on long-term contracts $ 11 $ 32 $ 40 Difference between tax and book depreciation and amortization 15 (35) (1) Reserves and accruals 9 42 17 Alternative minimum tax 23 9 (10) State and local taxes (1) 14 (2) Interest expense (14) 12 (4) Vacation accrual not currently deductible (1) (2) - Insurance accruals 10 (11) (7) Pensions and postretirement benefits other than pensions (7) 1 (12) Other (13) 20 (7) ------------------------------------------------------------------------------------------ $ 32 $ 82 $ 14 ------------------------------------------------------------------------------------------
EFFECTIVE INCOME TAX RATE ------------------------------------------------------------------------------------------ 1994 1993 1992 ------------------------------------------------------------------------------------------ U.S. statutory income tax rate 35.0% 35.0% 34.0% Restructuring (benefits)losses - (2.8) 3.6 Non-deductible expenses 1.6 .4 .5 U.S. state and local income taxes net of U.S. federal tax benefit 2.7 2.4 3.6 Non-U.S. tax rate variances net of foreign tax credits (.4) 4.1 4.2 Translation adjustments net of monetary correction - .2 .6 Other (1.1) (.6) (2.2) ------------------------------------------------------------------------------------------ Effective income tax rate 37.8% 38.7% 44.3% ------------------------------------------------------------------------------------------
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 1994 and 1993, the company had unused tax benefits of $40 million and $50 million, respectively, related to non-U.S. net operating loss carryforwards for income tax purposes, of which $23 million and $29 million can be carried forward indefinitely and the balance expires at various dates through 1999. A valuation allowance at December 31, 1994 and 1993 of $26 million and $42 million, respectively, has been recognized to offset the related deferred tax assets due to the uncertainty of realizing the benefit of the loss carryforwards. Certain prior year deferred tax assets have been reclassified to conform to the 1994 presentation. The following is a summary of the significant components of the company's deferred tax assets and liabilities as of December 31, 1994 and 1993.
Deferred tax Deferred tax assets liabilities -------------------------------------------------------------------------------------------------------------------- In millions 1994 1993 1994 1993 -------------------------------------------------------------------------------------------------------------------- Pensions and postretirement benefits other than pensions $ 259 $ 259 $ 43 $ 32 Completed contract method of accounting for long-term contracts 43 27 407 379 State and local taxes 29 34 9 15 Reserves and accruals 107 107 - - Depreciation and amortization 19 20 130 129 Insurance accruals 28 38 - - Alternative minimum tax - 23 - - Non-U.S. net operating loss carryforwards 40 50 - - Other 109 70 49 49 -------------------------------------------------------------------------------------------------------------------- 634 628 638 604 Valuation allowance for deferred tax assets (26) (42) - - -------------------------------------------------------------------------------------------------------------------- Total $ 608 $ 586 $ 638 $ 604 --------------------------------------------------------------------------------------------------------------------
15 32 Notes to Financial Statements TRW Inc. PENSION PLANS ------------------------------------------------------------------------- The company has defined benefit pension plans (generally noncontributory except for those in the United Kingdom) for substantially all employees. Plans for most salaried employees provide pay-related benefits based on years of service. Plans for hourly employees generally provide benefits based on flat-dollar amounts and years of service. Under the company's funding policy, annual contributions are made to fund the plans during the participants' working lifetimes, except for unfunded plans in Germany and certain non-qualified plans in the U.S. which are funded as benefits are paid to participants. Annual contributions to funded plans have met or exceeded ERISA's minimum funding requirements or amounts required by local law or custom. The company sponsors a contributory stock savings plan for which a majority of its U.S. employees are eligible. The company matches employee contributions up to 3 percent of the participant's qualified compensation. The company contributions are held in an unleveraged employee stock ownership plan. The company also sponsors other defined contribution pension plans covering employees at some of its operations. The following is a summary of the components of net periodic pension cost and the total cost for the defined contribution and stock savings plans.
--------------------------------------------------------------------------------------------------------------------------- In millions 1994 1993 1992 --------------------------------------------------------------------------------------------------------------------------- U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. --------------------------------------------------------------------------------------------------------------------------- Defined benefit plans Service cost--benefits earned during the year $ 60 $ 13 $ 52 $ 12 $ 78 $ 14 Interest cost on projected benefit obligation 149 24 150 23 175 27 Actual (return)loss on plan assets 40 11 (319) (51) (191) (33) Deferred gain(loss) on plan assets (230) (31) 138 34 (20) 9 Net amortization and other (7) 3 (12) 1 52 2 --------------------------------------------------------------------------------------------------------------------------- Total pension cost of defined benefit plans 12 20 9 19 94 19 Defined contribution plans 1 3 1 2 - 1 Stock savings plan 36 - 36 - 42 - --------------------------------------------------------------------------------------------------------------------------- $ 49 $ 23 $ 46 $ 21 $ 136 $ 20 ---------------------------------------------------------------------------------------------------------------------------
Special early retirement incentive benefits provided to U.S. employees are reflected in pension expense in the amount of $5 million for 1994 and $66 million for 1992. The following table sets forth the funded status and amounts recognized in the company's balance sheets at December 31, 1994 and 1993, for its defined benefit pension plans.
------------------------------------------------------------------------------------------------------------------- In millions 1994 1993 ------------------------------------------------------------------------------------------------------------------- U.S. Non-U.S. U.S. Non-U.S. ------------------------------------------------------------------------------------------------------------------- Actuarial present value of benefit obligations Vested benefit obligation $1,546 $ 275 $1,717 $ 266 ------------------------------------------------------------------------------------------------------------------- Accumulated benefit obligation $1,675 $ 282 $1,866 $ 276 ------------------------------------------------------------------------------------------------------------------- Projected benefit obligation $1,810 $ 311 $2,050 $ 319 Plan assets at fair value (primarily listed stocks and bonds) 2,207 245 2,352 256 ------------------------------------------------------------------------------------------------------------------- Plan assets in excess of (less than) projected benefit obligation 397 (66) 302 (63) Unrecognized net gain (218) (26) (155) (5) Unrecognized net assets from January 1, 1986 (January 1, 1989 for non-U.S. plans) (77) (6) (95) (8) Unrecognized prior service cost 42 9 40 9 Additional minimum liability (18) (6) (10) (2) ------------------------------------------------------------------------------------------------------------------- Net pension asset(liability) recognized in the balance sheet $ 126 $ (95) $ 82 $ (69) -------------------------------------------------------------------------------------------------------------------
16 33 Notes to Financial Statements TRW Inc. PENSION PLANS (CONTINUED) -------------------------------------------------------------------------- At December 31, 1994, the accumulated benefit obligation and plan assets at fair value for non-U.S. overfunded plans totaled $182 million and $220 million, respectively, and for non-U.S. underfunded plans totaled $100 million and $25 million, respectively. At December 31, 1993, the accumulated benefit obligation and plan assets at fair value for non-U.S. overfunded plans totaled $174 million and $234 million, respectively, and for non-U.S. underfunded plans totaled $102 million and $22 million, respectively. For U.S. plans, as of December 31, 1994 and 1993, the discount rate used in determining the actuarial present value of benefit obligations was 8-1/2 percent and 7-1/2 percent, respectively, and the projected rate of increase in future compensation levels was 3 percent in both years. The expected long-term rate of return on assets was 9 percent for 1994 and 1993 and 10 percent for 1992. For non-U.S. plans, as of December 31, 1994 and 1993, the discount rate used in determining the actuarial present value of benefit obligations ranged from 8 percent to 8-3/4 percent and from 6-1/2 percent to 8-1/2 percent, respectively, and the projected rate of increase in future compensation levels ranged from 5 percent to 5-3/4 percent and from 4 percent to 6 percent, respectively. The expected long-term rate of return on assets ranged from 6 percent to 9-1/2 percent for 1994, and 8 percent to 11-1/2 percent for 1993 and 8 percent to 13 percent for 1992. The change in discount rate at December 31, 1994, reflects higher prevailing interest rates. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS ------------------------------------------------------------------------- The company provides health care and life insurance benefits for a majority of its retired employees in the United States and Canada. The health care plans provide for cost sharing, in the form of employee contributions, deductibles, and coinsurance, between the company and its retirees. The postretirement health care plan covering a majority of employees who retired since August 1, 1988 limits the annual increase in the company's contribution toward the plan's cost to a maximum of the lesser of 50 percent of medical inflation or 4 percent. Life insurance benefits are generally noncontributory. The company's policy is to fund the cost of postretirement health care and life insurance benefits in amounts determined at the discretion of management. Retirees in certain other countries are provided similar benefits by plans sponsored by their governments. Effective January 1, 1992, the company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," for its U.S. and Canadian plans. This Statement requires accrual of the expected cost of providing postretirement benefits during employees' active service lives. The company's previous practice was to record the cost of these benefits on a claims-incurred basis. The company elected to recognize immediately the transition obligation, measured as of January 1, 1992, as the cumulative effect of an accounting change. This resulted in a one-time charge of $350 million (after a reduction for income taxes of $225 million), which does not include amounts accrued in prior years for previously divested businesses. The following table sets forth the funded status and amounts recognized in the company's balance sheets at December 31, 1994 and 1993 for its postretirement benefit plans.
-------------------------------------------------------------- In millions 1994 1993 -------------------------------------------------------------- Accumulated postretirement benefit obligation Retirees $ 420 $ 440 Fully eligible active participants 37 43 Other active participants 194 226 -------------------------------------------------------------- 651 709 Plan assets at fair value (primarily listed stocks and bonds) 32 17 -------------------------------------------------------------- Accumulated postretirement benefit obligation in excess of plan assets (619) (692) Unrecognized prior service cost (7) (7) Unrecognized net gain (89) (16) -------------------------------------------------------------- Net liability recognized in the balance sheet $(715) $(715) --------------------------------------------------------------
Net periodic postretirement benefit cost included the following components: ------------------------------------------------------ In millions 1994 1993 1992 ------------------------------------------------------ Service cost $ 13 $ 13 $ 15 Interest cost 53 59 57 Actual return on plan assets - (1) - Net amortization and deferral (3) (1) 4 ------------------------------------------------------ $ 63 $ 70 $ 76 ------------------------------------------------------
17 34 Notes to Financial Statements TRW Inc. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) ----------------------------------------------------------------------- The discount rate used in determining the accumulated postretirement benefit obligation as of December 31, 1994 and 1993 was 8-1/2 percent and 7-1/2 percent, respectively. At December 31, 1994, the 1995 annual rate of increase in the per capita cost of covered health care benefits was assumed to be 10 percent for participants under age 65 and 9 percent for participants age 65 or older. The rates were assumed to decrease gradually to 6 percent and 5 percent, respectively, in the year 2021 and remain at that level thereafter. At December 31, 1993, the 1994 annual rate of increase in the per capita cost of covered health care benefits was assumed to be 11 percent for participants under age 65 and 10 percent for participants age 65 or older. The rates were assumed to decrease gradually to 6 percent and 5 percent, respectively, in the year 2021 and remain at that level thereafter. A one percent annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation at December 31, 1994 by approximately 8 percent, and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for 1994 by approximately 9 percent. The expected long-term rate of return on plan assets was 9 percent for 1994 and 1993. The trust holding the plan assets is not subject to federal income taxes. The change in discount rate at December 31, 1994, reflects higher prevailing interest rates. DEBT AND CREDIT AGREEMENTS -----------------------------------------------------------------------
SHORT-TERM DEBT ------------------------------------------------------- In millions 1994 1993 ------------------------------------------------------- U.S. borrowings $ - $ 35 Non-U.S. borrowings 122 260 ------------------------------------------------------- $122 $295 -------------------------------------------------------
LONG-TERM DEBT ------------------------------------------------------- In millions 1994 1993 ------------------------------------------------------- U.S. borrowings $ 26 $175 Non-U.S. borrowings 148 50 7.3% ESOP obligations due 1997 95 95 Medium-term notes: 9.35% Notes due 2020 (due 2000 at option of note holder) 100 100 9 3/8% Notes due 2021 100 100 Other medium-term notes 309 284 Other 73 114 ------------------------------------------------------- Total long-term debt 851 918 Less current portion 157 48 ------------------------------------------------------- $694 $870 -------------------------------------------------------
TRW maintains two committed U.S. revolving credit agreements with 18 banks. The first agreement allows the company to borrow up to $400 million and extends to July 1998. The second agreement allows the company to borrow up to $150 million and extends through February 1995 with an option to extend the term to a final maturity no later than July 1998. The interest rate under the agreements is either a negotiated rate, the banks' prime rates, a rate based upon the banks' costs of funds in the secondary certificate of deposit market or a rate based upon an Interbank Offered Rate. TRW's commercial paper borrowings are supported by these agreements. At December 31, 1994, there were no outstanding borrowings under the U.S. revolving credit agreements. At December 31, 1994, $26 million of short-term U.S. borrowings have been reclassified as long-term debt because the company intends to refinance these borrowings on a long-term basis and has the ability to do so under its U.S. revolving credit agreements. The weighted average interest rate on short-term borrowings outstanding at December 31, 1994 and 1993 is 7.2 percent and 6.5 percent, respectively. During 1994, the company entered into a committed multi-currency revolving credit agreement consisting of two tranches with 13 banks. The first tranche allows the company to borrow up to $100 million and extends through February 1995. The second tranche allows the company to borrow up to $100 million and extends to July 1997. The interest rate under the agreement is based on various interest rate indices. At December 31, 1994, there were no outstanding borrowings under the multi-currency credit agreement. At December 31, 1994, $98 million of short-term non-U.S. borrowings have been reclassified to long-term non-U.S. borrowings because the company intends to refinance these borrowings on a long-term basis and has the ability to do so under its multi-currency revolving credit agreement. As of December 31, 1994, the company has interest rate swap agreements for notional borrowings of $208 million in which the company pays a fixed rate and receives a floating rate. The weighted average pay rate and receive rate under these agreements is 7.9 percent and 5.8 percent, respectively. These agreements mature at various dates through 1998. The company also has interest rate swap agreements for notional borrowings of $100 million in which the company pays a floating rate and receives a fixed rate. The weighted average pay rate and receive rate under these agreements is 5.9 percent 18 35 Notes to Financial Statements TRW Inc. DEBT AND CREDIT AGREEMENTS (CONTINUED) ----------------------------------------------------------------------- and 4.4 percent, respectively. These agreements mature at various dates through 1995. The floating rates under the interest rate swap agreements are based on both commercial paper and LIBOR rates and have been calculated using these rates at December 31, 1994. Net payments or receipts under the agreements are recognized as an adjustment to interest expense. The company is exposed to credit loss in the event of nonperformance by the counterparties to the interest rate swap agreements. No collateral is held in relation to the agreements and the company anticipates that the counterparties will satisfy their obligations under the agreements. The other medium-term notes bear interest at rates ranging from 4.33 percent to 9.25 percent and mature at various dates through 2020. Non-U.S. borrowings bear interest, stated in terms of the local currency borrowing, at rates ranging from 3.0 percent to 10.325 percent at December 31, 1994, and mature at various dates through 2004. The maturities of long-term debt are, in millions: 1995-$157; 1996-$80; 1997-$167; 1998-$41; 1999-$16 and $390 thereafter. The indentures and other debt agreements impose, among other covenants, restrictions on funded debt and maintenance of minimum tangible net worth. Under the most restrictive interpretation of these covenants, the payment of dividends was limited to approximately $900 million at December 31, 1994. Compensating balance arrangements and commitment fees were not material. LEASE COMMITMENTS ----------------------------------------------------------------------- TRW leases certain offices, manufacturing and research buildings, machinery, automobiles and data processing and other equipment. Such leases, some of which are noncancelable and in many cases include renewals, expire at various dates. The company pays most maintenance, insurance and tax expenses relating to leased assets. Rental expense for operating leases was $164 million for 1994, $162 million for 1993 and $192 million for 1992. At December 31, 1994, future minimum lease payments for noncancelable operating leases totaled $419 million and are payable as follows: 1995-$110; 1996-$88; 1997-$60; 1998-$41; 1999-$29; and $91 thereafter. CAPITAL STOCK ---------------------------------------------------------------------- Serial Preference Stock II -- cumulative - stated at $2.75 a share; 5 million shares authorized. Series 1 -- each share convertible into 4.4 shares of common; redeemable at $104 per share; involuntary liquidation price $104 per share; dividend rate of $4.40 per annum. Series 3 -- each share convertible into 3.724 shares of common; redeemable at $100 per share; involuntary liquidation price $40 per share; dividend rate of $4.50 per annum. Series 4 -- not convertible into common shares; redemption price and involuntary liquidation price of $125 per one one-hundredth of a share; annual dividend rate per one one-hundredth of a share of the lesser of $4.00 or the current dividend on common stock; no shares outstanding at December 31, 1994. Common stock -- $0.625 par value; authorized 250 million shares; shares outstanding were reduced by treasury shares of .4 million in 1994 and .3 million in 1993. TRW has a shareholder purchase rights plan under which each shareholder of record as of January 6, 1989 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 $125. Should certain additional events occur, each right allows the shareholder to purchase $250 of the surviving entity's common shares at a 50 percent discount. The company may redeem these rights at its option at one cent per right under certain circumstances. At December 31, 1994, 7.7 million shares of common stock were reserved for the exercise and issuance of stock options and conversion of the Serial Preference Stock II, Series 1 and 3. There were .6 million shares of Cumulative Redeemable Serial Preference Stock II, Series 4, reserved for the shareholder purchase rights plan. 19 36 Notes to Financial Statements TRW Inc. STOCK OPTIONS ----------------------------------------------------------------------- TRW has granted incentive and nonqualified stock options to certain employees to purchase the company's common stock at the market price on the date of grant. Subject to certain exceptions, incentive stock options become exercisable to the extent of one-half of the optioned shares for each full year of employment following the date of grant, and nonqualified stock options granted prior to 1987 become exercisable to the extent of one-fourth of the optioned shares for each full year of employment following the date of grant. Nonqualified stock options granted after 1986 become exercisable to the extent of one-third of the optioned shares for each full year of employment following the date of grant. Generally, both incentive and nonqualified stock options expire 10 years after the date of grant.
-------------------------------------------------------------------------------------------------------------------- 1994 1993 -------------------------------------------------------------------------------------------------------------------- Millions Millions of shares Option price of shares Option price -------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year 4.5 $ 31.44 to $ 64.07 5.5 $ 31.44 to $ 56.94 Granted .9 65.75 - 64.07 Became exercisable .6 39.75 to 64.07 .8 39.75 to 55.69 Exercised .6 31.44 to 56.94 .8 31.44 to 56.94 Canceled, expired or terminated .1 31.44 to 65.75 .2 31.44 to 56.94 Outstanding at end of year 4.7 39.285 to 65.75 4.5 31.44 to 64.07 Exercisable 3.8 39.285 to 64.07 3.8 31.44 to 56.94 --------------------------------------------------------------------------------------------------------------------
At December 31, 1994, approximately 800 employees were participants in the plans. As of that date, the average exercise price of options outstanding was $50.17 per share and the expiration dates ranged from July 1995 to April 2004. TRW grants performance share rights to certain employees under which the employees are entitled to receive shares of the company's common stock based on the achievement of a certain return on assets employed. The rights specify a target number of shares which the employee would receive for each year that goals for returns on assets employed are met. If the goals are exceeded, the employee could receive up to 200 percent of the target shares, with the excess over 100 percent payable in cash (unless the Compensation and Stock Option Committee of the Board of Directors determines to pay the excess in shares). If the goals are not met, the employee would receive fewer than the target shares or no shares. At December 31, 1994 and 1993, the target number of performance share rights granted to employees and still outstanding were .4 million and .1 million, respectively. SUPPLEMENTAL CASH FLOW INFORMATION -----------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------- In millions 1994 1993 1992 ---------------------------------------------------------------------------------------------------------------- Interest paid (net of amount capitalized) $ 112 $ 174 $ 153 Income taxes paid (net of refunds) $ 93 $ 96 $ 85 ----------------------------------------------------------------------------------------------------------------
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. Interest capitalized as part of the construction of assets was $7 million in 1994, $8 million in 1993 and $13 million in 1992. 20 37 Notes to Financial Statements TRW Inc. CONTINGENCIES ----------------------------------------------------------------------- The company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. In addition, the company is conducting a number of environmental investigations and remedial actions at current and former company locations and, along with other companies, has been named a potentially responsible party for certain waste management sites. Each of these matters is subject to various uncertainties, and some of these matters may be resolved unfavorably to the company. The company has established accruals for matters that are probable and reasonably estimable including $98 million for environmental matters at December 31, 1994. The company believes that any liability that may result from the resolution of environmental matters for which sufficient information is available to support cost estimates will not have a material adverse effect on the company's financial position. However, the company cannot predict the effect on the company's financial position of expenditures for aspects of certain matters for which there is insufficient information. In addition, the company cannot predict the effect of compliance with environmental laws and regulations with respect to unknown environmental matters or the possible effect of compliance with environmental requirements imposed in the future. Further, product liability claims may be asserted in the future for events not currently known by management. Although the ultimate liability from these potential claims cannot be ascertained at December 31, 1994, management does not anticipate that any related liability, after consideration of insurance recovery, would have a material adverse effect on the company's financial position. INDUSTRY SEGMENTS ----------------------------------------------------------------------- The company operates in the following industry segments: Automotive -- Steering systems, including power and manual rack and pinion steering for light vehicles, hydraulic steering systems for commercial truck and off-highway vehicles and suspension systems. Occupant restraint systems, including air bag and seat belt systems; electrical and electronic controls; and engineered fasteners. Engine valves and valve train parts, pistons and stud welding and control systems. Products are used in cars, trucks, buses, farm machinery and off-highway vehicles and are distributed directly to original equipment manufacturers and through independent distributors. Space & Defense -- Spacecraft, including the design and manufacture of military and civilian spacecraft equipment, propulsion subsystems, electro-optical and instrument systems, spacecraft payloads, high-energy lasers and laser technology and other high-reliability components. Software and systems engineering support services in the fields of military command and control, earth observation, environmental monitoring and nuclear waste management, antisubmarine warfare, security and counterterrorism, undersea surveillance and other high-technology space, defense, and civil government support systems. Electronic systems, equipment and services, including the design and manufacture of space communication systems, airborne reconnaissance systems, unmanned aerial vehicles, avionics systems and other electronic technologies for tactical and strategic space, defense and selected commercial applications. Products and services are provided directly to defense, other government and commercial customers. Information Systems & Services -- Information systems and services, including consumer and commercial credit information and related services, direct marketing, real estate information and services and imaging systems engineering and integration. Information and services are provided to businesses, credit-granting organizations, financial institutions and individual consumers. Other -- Beginning in 1994, all activity previously reported in the "Other" segment is reflected in the respective "Company Staff" lines. Prior year amounts have been restated to conform to the current year's presentation. 21 38 Notes to Financial Statements TRW Inc. INDUSTRY SEGMENTS (CONTINUED) -----------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------- In millions ---------------------------------------------------------------------------------------------------------------- Years ended December 31 1994 1993 1992 ---------------------------------------------------------------------------------------------------------------- SALES Automotive $5,679 62% $4,538 57% $4,616 56% Space & Defense 2,812 31 2,792 35 2,941 35 Information Systems & Services 596 7 618 8 754 9 ---------------------------------------------------------------------------------------------------------------- Sales $9,087 100% $7,948 100% $8,311 100% ---------------------------------------------------------------------------------------------------------------- OPERATING PROFIT Automotive $ 476 64% $ 309 53% $ 314 52% Space & Defense 175 23 199 34 213 36 Information Systems & Services 96 13 74 13 74 12 ---------------------------------------------------------------------------------------------------------------- Operating profit 747 100% 582 100% 601 100% Company Staff and other (111) (91) (94) Interest expense (105) (138) (163) Earnings from affiliates 4 6 4 ---------------------------------------------------------------------------------------------------------------- Earnings before income taxes and cumulative effect of accounting changes $ 535 $ 359 $ 348 ---------------------------------------------------------------------------------------------------------------- IDENTIFIABLE ASSETS Automotive $3,481 67% $3,004 60% $2,919 58% Space & Defense 1,111 21 1,253 25 1,337 26 Information Systems & Services 622 12 752 15 812 16 ---------------------------------------------------------------------------------------------------------------- Identifiable assets 5,214 100% 5,009 100% 5,068 100% Eliminations (28) (46) (32) Company Staff assets 380 317 353 Investments in affiliates 70 56 69 ---------------------------------------------------------------------------------------------------------------- Total assets $5,636 $5,336 $5,458 ---------------------------------------------------------------------------------------------------------------- DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT Automotive $ 264 $ 238 $ 216 Space & Defense 111 116 132 Information Systems & Services 20 26 33 Company Staff 7 8 11 ---------------------------------------------------------------------------------------------------------------- $ 402 $ 388 $ 392 ---------------------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES Automotive $ 388 $ 367 $ 404 Space & Defense 98 90 104 Information Systems & Services 18 23 17 Company Staff 2 2 5 ---------------------------------------------------------------------------------------------------------------- $ 506 $ 482 $ 530 ----------------------------------------------------------------------------------------------------------------
22 39 Notes to Financial Statements TRW Inc. INDUSTRY SEGMENTS (CONTINUED) ----------------------------------------------------------------------- Restructuring gains(losses) included in operating profit were: $5 million in 1993 and $50 million in 1992 for Automotive; $(6) million in 1993 and $(17) million in 1992 for Space & Defense; and $(4) million in 1993 and $7 million in 1992 for Information Systems & Services. Company Staff assets consist principally of cash and cash equivalents, current deferred income taxes and administrative facilities. Intersegment sales were not significant. Sales to agencies of the U.S. Government, primarily by the Space & Defense segment, were $2,545 million in 1994, $2,708 million in 1993 and $2,851 million in 1992. Sales to Ford Motor Company by the Automotive segment were $1,363 million in 1994, $1,096 million in 1993 and $972 million in 1992. GEOGRAPHIC SEGMENTS ----------------------------------------------------------------------- TRW's operations are located primarily in the United States and Europe. Interarea sales are not significant to the total revenue of any geographic area. Restructuring gains(losses) included in operating profit were: $4 million in 1993 and $45 million in 1992 for United States operations; $(7) million in 1993 and $23 million in 1992 for Europe; and $(2) million in 1993 and $(28) million in 1992 for Other.
------------------------------------------------------------------------------------ In millions 1994 1993 1992 ------------------------------------------------------------------------------------ SALES United States $6,290 $5,643 $5,676 Europe 1,965 1,522 1,917 Other 832 783 718 ------------------------------------------------------------------------------------ $9,087 $7,948 $8,311 ------------------------------------------------------------------------------------ OPERATING PROFIT United States $ 528 $ 461 $ 382 Europe 143 50 176 Other 76 71 43 ------------------------------------------------------------------------------------ $ 747 $ 582 $ 601 ------------------------------------------------------------------------------------ IDENTIFIABLE ASSETS United States $3,444 $3,536 $3,540 Europe 1,289 1,047 1,113 Other 531 461 459 ------------------------------------------------------------------------------------ Identifiable assets 5,264 5,044 5,112 Eliminations (78) (81) (76) Company Staff assets 380 317 353 Investments in affiliates 70 56 69 ------------------------------------------------------------------------------------ Total assets $5,636 $5,336 $5,458 ------------------------------------------------------------------------------------
23 40 Notes to Financial Statements TRW Inc. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) -----------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------- First Second Third Fourth ------------------------------------------------------------------------------------------------------------------- In millions except per share data 1994 1993 1994 1993 1994 1993 1994 1993 ------------------------------------------------------------------------------------------------------------------- (A) Sales $2,159 2,029 $2,317 2,011 $2,165 $1,903 2,446 $2,005 Gross profit 439 411 471 408 451 377 456 384 Earnings before income taxes and cumulative effect of accounting change 107 87 139 93 133 85 156 94 Net earnings 64 26 87 55 82 51 100 63 Net earnings per share Fully diluted .97 .40 1.31 .85 1.24 .76 1.49 .96 Primary .97 .41 1.33 .85 1.26 .77 1.49 .98 ------------------------------------------------------------------------------------------------------------------- (A) The first quarter of 1993 includes a decrease in net earnings of $25 million ($.38 per share) for the cumulative effect on prior years for a change in accounting principle effective January 1, 1993. The first three quarters of 1993 have not been restated to reflect the change in accounting principle as the effect on each quarter is immaterial.
STOCK PRICES AND DIVIDENDS (UNAUDITED) ----------------------------------------------------------------------- The book value per common share at December 31, 1994 was $27.91 compared to $23.77 at the end of 1993. Our directors declared the 226th consecutive quarterly dividend during December 1994. Dividends declared per share in 1994 were $1.97, up 5 percent from $1.88 in 1993. The following table highlights the market prices of our common and preference stocks and dividends paid for the quarters of 1994 and 1993.
Price of Price of Dividends traded shares traded shares paid per share ----------------------------------------------------------------------------------------------------------------------- Quarter 1994 1993 1994 1993 ----------------------------------------------------------------------------------------------------------------------- High Low High Low ----------------------------------------------------------------------------------------------------------------------- Common stock 1 $ 77-1/2 $ 65-3/4 $ 63-7/8 $ 52-1/2 $ .47 $ .47 Par value $0.625 per share 2 71-1/4 61 69-5/8 61-5/8 .47 .47 3 75-1/8 63-5/8 67-1/2 60-5/8 .50 .47 4 74-3/4 62 70-1/4 61-5/8 .50 .47 ----------------------------------------------------------------------------------------------------------------------- Cumulative Serial 1 326 320 253 244 1.10 1.10 Preference Stock II 2 350 250 283 277-3/4 1.10 1.10 $4.40 Convertible 3 325 325 282 271 1.10 1.10 Series 1 4 316 275 294 279 1.10 1.10 ----------------------------------------------------------------------------------------------------------------------- Cumulative Serial 1 256-1/2 256-1/2 220 197 1.125 1.125 Preference Stock II 2 244 232 242 233 1.125 1.125 $4.50 Convertible 3 272 272 244-1/2 222 1.125 1.125 Series 3 4 238 232 248 236 1.125 1.125 -----------------------------------------------------------------------------------------------------------------------
24 41 Management and Auditors' Reports TRW Inc. REPORT OF MANAGEMENT ----------------------------------------------------------------------- Management of TRW is responsible for the preparation of the accompanying consolidated financial statements of the company and its subsidiaries. The financial statements have been prepared in conformity with generally accepted accounting principles and include the estimates and judgments of management. The financial statements have been audited by Ernst & Young LLP, independent auditors, whose report appears below. Management has established and is responsible for maintaining a system of internal accounting controls that it believes provides reasonable assurance that assets are safeguarded and transactions are executed and recorded in accordance with management's authorization. The system is tested and evaluated regularly by the company's internal auditors as well as by the independent auditors in connection with their annual audit. TRW has an audit committee composed of five directors who are not members of management. The committee meets regularly with management, the internal auditors and the independent auditors in connection with its review of matters relating to the company's financial statements, the company's internal audit program, the company's system of internal accounting controls and the services of the independent auditors. The committee also meets with the internal auditors as well as the independent auditors, without management present, to discuss appropriate matters. The committee also recommends to the directors the designation of the independent auditors. /s/ Joseph T. Gorman Joseph T. Gorman Chairman and Chief Executive Officer /s/ Ronald D. Sugar Ronald D. Sugar Executive Vice President and Chief Financial Officer /s/ Carl G. Miller Carl G. Miller Vice President and Corporate Controller January 23, 1995 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS ----------------------------------------------------------------------- Shareholders and Directors TRW Inc. We have audited the accompanying consolidated balance sheets of TRW Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of earnings, cash flows and changes in shareholders' investment for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above (appearing on pages 23 through 39 of this annual report) present fairly, in all material respects, the consolidated financial position of TRW Inc. and subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in the notes to financial statements, effective January 1, 1993, the company changed its method of accounting for postemployment benefits and, effective January 1, 1992, its methods of accounting for postretirement benefits other than pensions and income taxes. /s/ Ernst & Young LLP Cleveland, Ohio January 23, 1995 25 42 Corporate Data and Directors TRW Inc. CORPORATE DATA ----------------------------------------------------------------------- Annual meeting -- The annual meeting of TRW Inc. shareholders will be held at 8:30 a.m. Wednesday, April 26, 1995, at the company's headquarters, 1900 Richmond Road, Cleveland, Ohio. Proxy materials and a formal notice of the meeting will be sent to shareholders beforehand. Stock listings -- TRW's common stock (ticker symbol: TRW) and Serial Preference Stock II, Series 1 (ticker symbol: TRWB), and Serial Preference Stock II, Series 3 (ticker symbol: TRWD), are traded principally on the New York Stock Exchange. TRW common shares also are traded on the Midwest, Pacific, Philadelphia, London and Frankfurt exchanges. Form 10-K report-- The company files an annual report with the Securities and Exchange Commission on Form 10-K. Shareholders may obtain a copy of this report without charge after April 15, 1995, by writing Joseph E. Durk, Director, Financial Services, TRW Inc., 1900 Richmond Road, Cleveland, Ohio 44124-3760. Dividend reinvestment -- TRW offers an automatic dividend reinvestment service for individual shareholders. The service provides for the reinvestment of quarterly cash dividends in the company's common stock. Shareholders may also buy additional shares each quarter. A discounted brokerage commission is charged. For more information, write to Joseph E. Durk, Director, Financial Services, TRW Inc., 1900 Richmond Road, Cleveland, Ohio 44124-3760. Investor Questions -- Questions concerning dividend payments, certificates, stock transfers and other administrative subjects should be addressed to Financial Services, TRW Inc., 1900 Richmond Road, Cleveland, Ohio 44124-3760. Investment questions from security analysts, portfolio managers and shareholders about TRW should be directed to Thomas A. Myers, Director, Investor Relations, TRW Inc., telephone 216.291.7506. Auditors -- Ernst & Young LLP, Cleveland, Ohio Registrars -- National City Bank, Cleveland, and First Chicago Trust Company of New York Transfer agents -- TRW Inc. and First Chicago Trust Company of New York Rights agent -- National City Bank, Cleveland DIRECTORS ----------------------------------------------------------------------- Michael H. Armacost 2,6 -- Distinguished fellow and visiting professor at the Asia/Pacific Research Center, Stanford University; age 57; director since 1993 Charles T. Duncan 2,5 -- Member, Iran-United States Claims Tribunal; age 70; director since 1983 Martin Feldstein 3,6 -- Professor of economics, Harvard University; age 55; served as a director in 1981 and 1982 and has been a director since 1984 Robert M. Gates 2,5 -- Consultant, author and lecturer; former director, U.S. Central Intelligence Agency; age 51; director since 1994 Joseph T. Gorman 1 -- Chairman and chief executive officer, TRW Inc.; age 57; director since 1984 Carl H. Hahn 3,4,5 -- Retired chairman of the board, Volkswagen AG; age 68; director since 1993 George H. Heilmeier 4,5 -- President and chief executive officer, Bell Communications Research Inc.; age 58; director since 1992 Peter S. Hellman 1 -- President and chief operating officer, TRW Inc.; age 45; director since January 1995 Karen N. Horn 2,3,4 -- Chairman and chief executive officer, Bank One, Cleveland; age 51; director since 1990 E. Bradley Jones 1,2,4 -- Retired chairman, Republic Steel Corporation; age 67; director since 1982 William S. Kiser 1,3,6 -- Vice chairman and chief medical officer, Primary Health Systems, L.P.; retired chairman of the board of governors and chief executive officer, The Cleveland Clinic Foundation; age 67; director since 1985 James T. Lynn 4,6 -- Retired chairman of the board and chief executive officer, Aetna Life and Casualty Company; senior advisor, Lazard Freres & Co.; age 67; director since 1993 Richard W. Pogue 4,5 -- Senior advisor, Dix & Eaton; age 66; director since 1994 1 Executive Committee 2 Audit Committee 3 Compensation and Stock Option Committee 4 Nominating Committee 5 Public Policy Committee 6 Retirement Funding Committee Recycled Paper Symbol Printed on recycled paper.
EX-21 9 TRW EX-21 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT TRW has no parent or parents. As of December 31, 1994, certain of its subsidiaries, some of which also have subsidiaries, were as follows:
PERCENTAGE OF ORGANIZED UNDER VOTING SECURITIES NAME THE LAWS OF OWNED (1) ---- ---------------------- --------------------- TRW U.K. Limited which owns United Kingdom 100.00% TRW Remanufactured Steering Systems Limited United Kingdom 100.00% TRW Steering Systems Limited United Kingdom 100.00% TRW Ceramics Limited United Kingdom 100.00% TRW Connectors Limited United Kingdom 100.00% TRW Reda Pump Limited United Kingdom 100.00% TRW Repa Limited United Kingdom 90.00% TRW Transportation Electronics Limited United Kingdom 100.00% TRW United-Carr Limited United Kingdom 100.00% TRW Automotive Systems Limited United Kingdom 100.00% ESL Incorporated California 100.00% TRW Vehicle Safety Systems Inc. which owns Delaware 100.00% TRW Technar Inc. California 100.00% TRW Vehicle Safety Systems de Mexico, Mexico 100.00% S.A. de C.V. TRW Safety Systems Holding Company Delaware 100.00% TRW Occupant Restraints de Chihuahua S.A. de C.V. Mexico 100.00% TRW Automotive Products Inc. which, together with TRW International Holding Corporation, directly or indirectly owns Delaware 100.00% TRW GmbH fur industrielle Beteiligungen which, in turn (in some cases together with TRW Inc.), directly or indirectly owns Germany 100.00% TRW Autoelektronika s.r.o. Czechoslovakia 100.00% TRW Carr CSRS s.r.o. Czechoslovakia 100.00% TRW-DAS, a.s. Czechoslovakia 92.40% TRW Electro-Automation GmbH & Co. KG Germany 76.00% TRW Fahrwerksysteme GmbH & Co. KG Germany 100.00% TRW Fahrzeugelektrik GmbH & Co. KG Germany 100.00% TRW FahrzeugelektrikVerwaltungs-GmbH Germany 100.00% TRW Motorkomponenten GmbH & Co. KG Germany 100.00% TRW Nelson Bolzenschweiss-Technik GmbH Germany 100.00% TRW Presswerk Krefeld GmbH & Co. KG Germany 100.00% TRW Repa GmbH Germany 90.00% TRW United-Carr GmbH & Co. KG Germany 100.00% TRW Steering Systems Japan Co. Ltd. Japan 100.00%
2 PERCENTAGE OF ORGANIZED UNDER VOTING SECURITIES Name THE LAWS OF OWNED (1) ---- --------------- ----------------- TRW Canada Limited which owns Canada 100.00% TRW Vehicle Safety Systems Limited Canada 100.00% Quality Safety Systems Company Canada 60.00% TRW do Brasil, S.A. Brazil 98.8% TRW Components International Inc. Virginia 100.00% TRW Italia S.p.A. which owns Italy 100.00% TRW SIPEA S.p.A. Italy 100.00% TRW France S.A. which owns France 100.00% TRW Carr France SNC France 100.00% TRW Koyo Steering Systems Company Tennessee 51.00% TRW Export Trading Corporation which owns Delaware 100.00% TRW Export Sales Corporation U.S. Virgin Islands 100.00% TRW System Services Company Delaware 100.00% TRW Financial Systems, Inc. which owns California 100.00% TRW Financial Systems Nederland B.V. Netherlands 100.00% TRW Financial Systems of Norway AS Norway 100.00% TRW Sabelt S.p.A. Italy 90.00% TRW Air Bag Systems s.r.l. Italy 100.00%
_______________ (1) Total percentages held by TRW and/or its subsidiaries, disregarding Directors' qualifying shares, if any. The names of certain subsidiaries, which considered in the aggregate would not constitute a "significant subsidiary" as such term is defined in the regulations under the federal securities laws, have been omitted from the foregoing list.
EX-24.A 10 TRW EX-24(A) 1 Exhibit 24(a) CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statements Nos. 33-42870 on Form S-3, 033-52859 on Form S-8, 033-52865 on Form S-8, 033-53503 on Form S-8, 33-29751 on Form S-8, 2-90748 on Form S-8, 2-64035 on Form S-8, 2-47665 on Form S-8 and 2-26362 on Form S-8 of our report dated January 23, 1995 with respect to the consolidated financial statements of TRW Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 1994. We also consent to the incorporation by reference in TRW Inc.'s Registration Statement No. 033-52859 on Form S-8 pertaining to The TRW Employee Stock Ownership and Stock Savings Plan and the related prospectus of our report dated March 17, 1995 with respect to the financial statements of The TRW Employee Stock Ownership and Stock Savings Plan for the fiscal year ended December 31, 1994 included as Exhibit 28(a) to the TRW Inc. Annual Report (Form 10-K) for the year ended December 31, 1994. /s/ Ernst & Young LLP ERNST & YOUNG LLP Cleveland, Ohio March 24, 1995 EX-24.B 11 TRW EX-24(B) 1 Exhibit 24(b) CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in TRW Inc.'s Registration Statement No. 033-52865 on Form S-8 pertaining to The TRW Canada Stock Savings Plan and the related prospectus of our report dated March 17, 1995 with respect to the financial statements of The TRW Canada Stock Savings Plan for the year ended December 31, 1994 included as Exhibit 28(b) to the TRW Inc. Annual Report (Form 10-K) for the year ended December 31, 1994. /s/ Ernst & Young ERNST & YOUNG Hamilton, Ontario March 24, 1995 EX-25.A 12 TRW EX-25(A) 1 Exhibit 25(a) POWER OF ATTORNEY Directors and Certain Officers of TRW Inc. THE UNDERSIGNED Directors and Officers of TRW Inc. hereby appoint M. A. Coyle, C. T. Harvie, W. S. Page, III and J. L. Manning, Jr., and each of them, as attorneys for the undersigned, with full power of substitution and resubstitution, for and in the name, place and stead of the undersigned in the capacity specified, to prepare or cause to be prepared, to execute and to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Act"), an annual report on Form 10-K for the year ended December 31, 1994 relating to TRW Inc., such other periodic reports as may be required pursuant to the Act, amendments and exhibits to any of the foregoing and any and all other documents to be filed with the Securities and Exchange Commission or elsewhere pertaining to such reports, with full power and authority to take such other action which in the judgment of such person may be necessary or appropriate to effect the filing of such documents. EXECUTED the dates set forth below. /s/ J. T. Gorman /s/ P. S. Hellman /s/ R. D. Sugar ------------------------ --------------------------- ------------------------------ J. T. Gorman, P. S. Hellman, R. D. Sugar, Chairman of the Board, President, Executive Vice President and Chief Executive Officer Chief Operating Officer Chief Financial Officer and Director and Director February 8, 1995 February 8, 1995 February 8, 1995 /s/ C. G. Miller /s/ M. H. Armacost /s/ C. T. Duncan -------------------------- ----------------------------- ------------------------------- C. G. Miller, Vice President M. H. Armacost, Director C. T. Duncan, Director and Controller February 8, 1995 February 8, 1995 February 8, 1995 /s/ M. Feldstein /s/ C. H. Hahn /s/ G. H. Heilmeier ---------------------- ------------------------------ -------------------- M. Feldstein, Director C. H. Hahn, Director G. H. Heilmeier, Director February 8, 1995 February 8, 1995 February 8, 1995 /s/ K. N. Horn /s/ E. B. Jones /s/ W. S. Kiser -------------------- ------------------------ --------------------------- K. N. Horn, Director E. B. Jones, Director W. S. Kiser, Director February 8, 1995 February 8, 1995 February 8, 1995 /s/ J. T. Lynn /s/ R. W. Pogue /s/ R. M. Gates --------------------- ------------------------ --------------------------- J. T. Lynn, Director R. W. Pogue, Director R. M. Gates, Director February 8, 1995 February 8, 1995 February 8, 1995
EX-25.B 13 TRW EX-25(B) 1 Exhibit 25(b) C E R T I F I C A T E I, Jean M. Schmidt, do hereby certify that I am a duly elected, qualified and acting Assistant Secretary of TRW Inc. ("TRW"), an Ohio corporation; that attached hereto and marked as "Exhibit A" is a true and correct copy of resolutions duly adopted by the Directors of TRW at a meeting thereof duly called and held on February 8, 1995, at which meeting a quorum was present and acting throughout; and that said resolutions have not been modified, revoked or rescinded in any manner and are now in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand and have caused the seal of TRW to be affixed hereto at Lyndhurst, Ohio this 24th day of March, 1995. /s/ Jean M. Schmidt ----------------------------- Assistant Secretary 2 EXHIBIT A RESOLVED that any officer or assistant officer of the Corporation is authorized and empowered, for and on behalf of the Corporation, to prepare or cause to be prepared, to execute and to file with the Securities and Exchange Commission, Washington, D. C. (the "Commission"), the Corporation's Annual Report on Form 10-K for the year ended December 31, 1994, such other periodic reports as may be required pursuant to the Securities Exchange Act of 1934, as amended (the "Act"), amendments and exhibits to any of the foregoing and any and all other documents to be filed with the Commission or elsewhere pertaining to such reports, and to take such other action as may be necessary and appropriate to effect the filing of all such reports under the Act, including the execution of a power of attorney evidencing the authority set forth herein; and FURTHER RESOLVED that Walter S. Page, III and J. Lawrence Manning, Jr. and each of them is appointed an attorney for the Corporation, with full power of substitution and resubstitution, to execute and file, for and on behalf of the Corporation, such Annual Report on Form 10-K, such other periodic reports, amendments and exhibits to any of the foregoing and any and all other documents to be filed with the Commission or elsewhere pertaining to such reports, with full power and authority to take or cause to be taken all other actions which in the judgment of such person may be necessary and appropriate to effect the purposes of the foregoing resolution. EX-27 14 TRW EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 109 0 1,361 23 470 2,215 5,556 3,067 5,636 1,986 694 40 1 0 1,781 5,636 9,087 9,087 7,270 7,270 0 0 105 535 202 333 0 0 0 333 5.05 5.01
EX-28.A 15 TRW EX-28(A) 1 Exhibit 28(a) Audited Financial Statements THE TRW EMPLOYEE STOCK OWNERSHIP AND STOCK SAVINGS PLAN December 31, 1994 and 1993 [ERNST & YOUNG LLP Logo] 2 [ERNST & YOUNG LLP Logo] Report of Independent Auditors Board of Administration The TRW Employee Stock Ownership and Stock Savings Plan We have audited the accompanying statements of net assets available for benefits of The TRW Employee Stock Ownership and Stock Savings Plan as of December 31, 1994 and 1993, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of The TRW Employee Stock Ownership and Stock Savings Plan as of December 31, 1994 and 1993, and the changes in net assets available for benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedule of assets held for investment purposes as of December 31, 1994, and the schedule of reportable transactions for the year then ended are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the basic financial statements. The supplemental schedules have been subjected to the auditing procedures applied in our audit of the 1994 financial statements and, in our opinion, are fairly stated in all material respects in relation to the 1994 basic financial statements taken as a whole. /s/ Ernst & Young LLP Cleveland, Ohio March 17, 1995 1 3 The TRW Employee Stock Ownership and Stock Savings Plan Statements of Net Assets Available for Benefits TRW Stock Fund
DECEMBER 31 1994 1993 -------------------------------- ASSETS Investments: TRW Inc. Common Stock $684,611,928 $693,942,478 Bankers Trust Pyramid Directed Account Cash Fund 7,274,957 9,379,058 Receivable from TRW Inc. 332,652 47,864 Participant loans receivable 14,999,193 14,831,779 Interest receivable 55,109 32,787 Receivable from other funds 162,638 -------------------------------- TOTAL ASSETS 707,436,477 718,233,966 LIABILITIES Payable to other funds 492,217 Accrued expenses 338,943 232,221 -------------------------------- TOTAL LIABILITIES 338,943 724,438 -------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $707,097,534 $717,509,528 ================================ Employee Stock Ownership Plan $453,004,709 $466,874,664 Stock Savings Plan 254,092,825 250,634,864 -------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $707,097,534 $717,509,528 ================================
See notes to financial statements. 2 4 The TRW Employee Stock Ownership and Stock Savings Plan Statements of Changes in Net Assets Available for Benefits TRW Stock Fund
YEAR ENDED DECEMBER 31 1994 1993 -------------------------------- Investment income: Dividends--TRW Inc. Common Stock $ 19,781,025 $ 18,788,802 Interest 428,269 487,714 -------------------------------- INVESTMENT INCOME 20,209,294 19,276,516 Contributions: Participants 18,401,168 17,094,227 TRW Inc. 36,366,932 36,709,646 -------------------------------- CONTRIBUTIONS 54,768,100 53,803,873 Net realized gain on distribution of TRW Inc. Common Stock to participants 17,467,154 18,248,044 Unrealized appreciation of investments 95,060,294 Transfers from other funds 21,550,048 9,934,047 Interest income on participant loans 1,080,012 933,755 -------------------------------- 115,074,608 197,256,529 LESS Withdrawals and distributions: Cash 4,915,031 6,046,819 TRW Inc. Common Stock 572,810 shares in 1994 and 689,206 shares in 1993 39,798,271 43,481,968 -------------------------------- 44,713,302 49,528,787 Distribution of dividends on TRW Inc. Common Stock 12,766,959 12,019,063 Unrealized depreciation of investments 49,322,621 Administrative expenses 795,500 787,079 Transfers to other funds 17,888,220 24,915,877 -------------------------------- 125,486,602 87,250,806 -------------------------------- (DECREASE) INCREASE IN NET ASSETS FOR YEAR (10,411,994) 110,005,723 Net assets available for benefits at beginning of year 717,509,528 607,503,805 -------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $707,097,534 $717,509,528 ================================
See notes to financial statements. 3 5 The TRW Employee Stock Ownership and Stock Savings Plan Statements of Net Assets Available for Benefits Equity Fund
DECEMBER 31 1994 1993 -------------------------------- ASSETS Investment: Bankers Trust Pyramid Equity Index Fund $264,983,112 $259,363,285 Receivable from TRW Inc. 152,832 22,047 Participant loans receivable 14,012,797 15,434,395 -------------------------------- TOTAL ASSETS 279,148,741 274,819,727 LIABILITIES Accrued expenses 130,502 111,636 Payable to other funds 354,256 237,795 -------------------------------- TOTAL LIABILITIES 484,758 349,431 -------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $278,663,983 $274,470,296 ================================
See notes to financial statements. 4 6 The TRW Employee Stock Ownership and Stock Savings Plan Statements of Changes in Net Assets Available for Benefits Equity Fund
YEAR ENDED DECEMBER 31 1994 1993 -------------------------------- Investment income: Interest and dividends $ 1,380 $ 2,594 -------------------------------- INVESTMENT INCOME 1,380 2,594 Contributions from participants 23,943,347 24,686,081 Net realized gain on disposition of investments 6,862,404 5,308,926 Unrealized appreciation of investments 16,834,016 Transfers from other funds 11,710,877 15,229,451 Interest income on participant loans 1,081,952 1,123,250 -------------------------------- 43,599,960 63,184,318 LESS Unrealized depreciation of investments 3,292,084 Cash withdrawals and distributions 14,968,131 14,525,342 Administrative expenses 346,800 397,056 Transfers to other funds 20,799,258 20,240,752 -------------------------------- 39,406,273 35,163,150 -------------------------------- INCREASE IN NET ASSETS FOR YEAR 4,193,687 28,021,168 Net assets available for benefits at beginning of year 274,470,296 246,449,128 -------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $278,663,983 $274,470,296 ================================
See notes to financial statements. 5 7 The TRW Employee Stock Ownership and Stock Savings Plan Statements of Net Assets Available for Benefits Insured Return Fund
DECEMBER 31 1994 1993 -------------------------------- ASSETS Investments: Guaranteed investment contracts $491,100,036 $459,538,205 Bankers Trust Pyramid Directed Account Cash Fund 7,617,449 7,794,067 Receivable from TRW Inc. 209,102 28,698 Participant loans receivable 22,507,748 23,657,721 Interest receivable 2,821,391 2,768,586 -------------------------------- TOTAL ASSETS 524,255,726 493,787,277 LIABILITIES Payable to other funds 21,270 855,242 Accrued expenses 193,046 171,304 -------------------------------- TOTAL LIABILITIES 214,316 1,026,546 -------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $524,041,410 $492,760,731 ================================
See notes to financial statements. 6 8 The TRW Employee Stock Ownership and Stock Savings Plan Statements of Changes in Net Assets Available for Benefits Insured Return Fund
YEAR ENDED DECEMBER 31 1994 1993 --------------------------------- Interest income $ 33,880,102 $ 33,647,678 Contributions from participants 31,556,814 35,914,172 Interest income on participant loans 1,680,507 1,899,761 Transfers from other funds 38,048,599 28,035,056 --------------------------------- 105,166,022 99,496,667 LESS Cash withdrawals and distributions 36,371,252 44,387,413 Administrative expenses 897,500 935,692 Transfers to other funds 36,616,591 43,751,804 --------------------------------- 73,885,343 89,074,909 --------------------------------- INCREASE IN NET ASSETS FOR YEAR 31,280,679 10,421,758 Net assets available for benefits at beginning of year 492,760,731 482,338,973 --------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $524,041,410 $492,760,731 =================================
See notes to financial statements. 7 9 The TRW Employee Stock Ownership and Stock Savings Plan Statement of Net Assets Available for Benefits Bond Index Fund
DECEMBER 31 1994 1993 ----------------------------- ASSETS Investments: Bankers Trust Pyramid Intermediate Government Corporate Bond Index Fund $10,392,015 $ 9,970,897 Receivable from TRW Inc. 16,345 1,964 Participant loans receivable 877,341 811,192 Receivable from other funds 299,912 ----------------------------- TOTAL ASSETS 11,285,701 11,083,965 LIABILITIES Payable to other funds 9,311 Accrued expenses 14,775 3,391 ----------------------------- TOTAL LIABILITIES 24,086 3,391 ----------------------------- NET ASSETS AVAILABLE FOR BENEFITS $11,261,615 $11,080,574 =============================
See notes to financial statements. 8 10 The TRW Employee Stock Ownership and Stock Savings Plan Statement of Changes in Net Assets Available for Benefits Bond Index Fund
YEAR ENDED DECEMBER 31 1994 1993 -------------------------------- Interest income $ 18 $ 131 Contributions from participants 2,076,882 1,113,553 Net realized gain on disposition of investments 3,224 15,460 Unrealized appreciation of investments 355,749 Transfers from other funds 4,330,911 11,451,858 Interest income on participant loans 63,963 30,229 -------------------------------- 6,474,998 12,966,980 LESS Cash withdrawals and distributions 609,362 236,579 Unrealized depreciation of investments 375,586 Administrative expenses 32,618 10,001 Transfers to other funds 5,276,391 1,639,826 -------------------------------- 6,293,957 1,886,406 -------------------------------- INCREASE IN NET ASSETS FOR YEAR 181,041 11,080,574 Net assets available for benefits at beginning of year 11,080,574 0 -------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $11,261,615 $11,080,574 ================================
See notes to financial statements. 9 11 The TRW Employee Stock Ownership and Stock Savings Plan Statement of Net Assets Available for Benefits Small Company Equity Fund
DECEMBER 31 1994 1993 ------------------------------- ASSETS Investment: Bankers Trust Pyramid Russell 2500 Index Fund $36,216,916 $26,191,139 Receivable from TRW Inc. 65,479 4,616 Participant loans receivable 3,288,946 2,681,730 Receivable from other funds 222,199 1,285,342 Other receivable 1,288 ------------------------------- TOTAL ASSETS 39,793,540 30,164,115 ------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $39,793,540 $30,164,115 ===============================
See notes to financial statements. 10 12 The TRW Employee Stock Ownership and Stock Savings Plan Statement of Changes in Net Assets Available for Benefits Small Company Equity Fund
YEAR ENDED DECEMBER 31 1994 1993 ------------------------------- Interest income $ 46 $ 87 Contributions from participants 7,643,495 3,338,349 Net realized gain on disposition of investments 56,836 115 Unrealized appreciation of investments 1,547,469 Transfers from other funds 16,257,873 27,354,363 Interest income on participant loans 234,880 115,620 ------------------------------- 24,193,130 32,356,003 LESS Cash withdrawals and distributions 2,133,545 720,507 Unrealized depreciation of investments 1,025,812 Administrative expenses 86,500 14,865 Transfers to other funds 11,317,848 1,456,516 ------------------------------- 14,563,705 2,191,888 ------------------------------- INCREASE IN NET ASSETS FOR YEAR 9,629,425 30,164,115 Net assets available for benefits at beginning of year 30,164,115 0 ------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $39,793,540 $30,164,115 ===============================
See notes to financial statements. 11 13 The TRW Employee Stock Ownership and Stock Savings Plan Notes to Financial Statements December 31, 1994 A. SIGNIFICANT ACCOUNTING POLICIES Investments in the TRW Stock Fund consist primarily of TRW Inc. (TRW) common stock which is traded on the New York Stock Exchange and valued at the last reported sales price on the last business day of the fiscal year. Investments in the Equity Fund are valued at the redemption price established by the Trustee, which is based on the fair value of the Bankers Trust Pyramid Equity Index Fund assets. This Fund is constructed and maintained with the objective of providing investment results which approximate the overall performance of the Standard & Poor's Composite Index of 500 stocks. Income is accumulated and reinvested in the Fund and included in the determination of unit values. The Insured Return Fund consists of fully benefit responsive investment contracts with insurance companies, banks and other financial institutions and short term investment funds. Benefit responsive contracts provide contract value payments for participant disbursements, loans and investment transfers as allowed under the plan. There are exceptions for payments to participants who, as a result of a corporate event, cease to be employed by TRW. A corporate event includes a divestiture of an operating unit (for example, a subsidiary or a division), a significant special early retirement program or other corporate action that could be construed as causing increased Plan payments to participants. Investment contracts provide a stated rate of interest on principal for a stated period of time. All investment contracts are accounted for at contract value because they are fully benefit responsive. In accordance with Statement of Position 94-4, which the plan adopted effective January 1, 1994, contract value equals fair value because no event has occurred that affects the value of any contracts. The investment contracts are of three types: general account, separate account, and synthetic investment contracts. Investment contracts in the general account of an insurance company where assets are not specifically identifiable have fixed rates of interest or an indexed rate of interest for the life of the contract. Investment contracts in separate accounts of an insurance company have underlying assets that are specifically identifiable and held for the benefit of the Plan. Under synthetic investment contracts, the Plan owns assets with an investment contract from an insurance company, bank or other financial institution surrounding the asset. Both separate account and synthetic contracts have periodic interest rate resets (monthly, quarterly, or semi-annually) based on the performance of the underlying assets. All separate account and synthetic contracts have a guaranteed return of principal. As of December 31, 1994, approximately $223 million was invested in general account assets, $110 million in separate account assets, and $158 million in assets owned by the Plan. 12 14 The TRW Employee Stock Ownership and Stock Savings Plan Notes to Financial Statements--Continued A. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED The weighted average yield (excluding administrative expenses) for all investment contracts was 7.29% in 1994 and 7.68% in 1993. The crediting interest rate for all investment contracts was 7.26% at December 31, 1994 and 7.43% at December 31, 1993. Investments in the Bond Index Fund are valued at the redemption price established by the Trustee, which is based on the fair value of the Bankers Trust Pyramid Intermediate Government Corporate Bond Index Fund. The Bankers Trust Pyramid Intermediate Government Corporate Bond Index Fund is constructed and maintained with the objective of providing investment results which approximate the overall performance of the high quality U.S. government and corporate bonds included in the Lehman Brothers Government/Corporate Index. Income is accumulated and reinvested in the fund and included in the determination of unit values. Investments in the Small Company Equity Fund are valued at the redemption price established by the Trustee, which is based on the fair value of the Bankers Trust Pyramid Russell 2500 Index Fund Assets. The Small Company Equity Fund is constructed and maintained with the objective of providing investment results which approximate the overall performance of the 2,500 common stocks included in the Russell 2500 Equity Index. Income is accumulated and reinvested in the Fund and included in the determination of unit values. The cost of securities sold is determined by the average cost method for purposes of determining realized gains and losses. B. DESCRIPTION OF THE PLAN The Plan is a defined contribution plan, and is comprised of the TRW Stock Fund, Equity Fund, Insured Return Fund, Bond Index Fund and Small Company Equity Fund (the Funds). Effective January 4, 1993, the Bond Index Fund and Small Company Equity Fund were made available as Plan investment options. Participation in the Plan is available to substantially all domestic employees of TRW who have been employed for at least twelve months. The Plan is governed by the Internal Revenue Code and related legislation. 13 15 The TRW Employee Stock Ownership and Stock Savings Plan Notes to Financial Statements--Continued B. DESCRIPTION OF THE PLAN--CONTINUED PARTICIPANT CONTRIBUTIONS The Plan allows eligible employees to contribute up to 13% of qualifying compensation on a before-tax basis by way of salary reduction; such contributions are made in increments of one-tenth of one percent of qualifying compensation and could not exceed $9,240 in 1994 and $8,994 in 1993. Participants may also elect to contribute, in increments of one percent, up to 10% of qualifying compensation on an after-tax basis. Annual contributions to a participant's account (including before-tax, after-tax and TRW matching contributions) and to any other defined contribution plan is limited to the lesser of $30,000 or 25% of the participant's annual compensation reduced by the amount of before-tax contributions. Participants determine the funds in which to invest their contributions. Employee contributions may be invested, in multiples of 10 percent, in one or more of the five investment funds. Investment options may be changed at any time but no more than twice each month. TRW CONTRIBUTIONS TRW contributes to the Plan each month, out of current or accumulated earnings, an amount equal to 100% of each participant's before-tax contributions for such month without exceeding three percent of the participant's qualifying compensation. Participants immediately vest in the TRW contributions. All TRW matching contributions are invested in the ESOP portion of the TRW Stock Fund. TRW contributions always remain in the TRW Stock Fund and may not be transferred. TRW contributions may be in the form of cash or treasury or authorized and unissued shares of TRW Common Stock. TRW Common Stock contributed is to be valued by any reasonable method selected by TRW. 14 16 The TRW Employee Stock Ownership and Stock Savings Plan Notes to Financial Statements--Continued B. DESCRIPTION OF THE PLAN--CONTINUED The amount and type of TRW contributions are summarized as follows:
1994 1993 ------------------------------ TRW Common Stock $23,398,464 $22,979,004 Cash 12,968,468 13,730,642 ------------------------------ $36,366,932 $36,709,646 ==============================
WITHDRAWALS AND DISTRIBUTIONS Upon termination of employment, a participant may elect to receive his or her account, less the unpaid balance of any loan outstanding, in a single sum or elect to defer the payment until the year following termination except a participant whose account balance exceeds $3,500 may defer such payments until he or she reaches age 70. Generally, distributions from the TRW Stock Fund will be paid only in whole shares of TRW Common Stock with the balance in cash. If a participant elects to defer payment of his or her account, the undistributed account balance remains invested in the Plan. The following is the total value of the accounts subject to deferred elections (8,772 as of December 31, 1994 and 8,778 as of December 31, 1993) that are included in the net assets of the funds:
1994 1993 --------------------------------- TRW Stock Fund $177,471,974 $175,574,685 Equity Fund 64,261,772 58,859,470 Insured Return Fund 168,485,775 151,008,794 Bond Index Fund 2,066,316 1,876,080 Small Company Equity Fund 6,275,367 4,458,732 --------------------------------- $418,561,204 $391,777,761 =================================
15 17 The TRW Employee Stock Ownership and Stock Savings Plan Notes to Financial Statements--Continued B. DESCRIPTION OF THE PLAN--CONTINUED Effective January 1, 1988, participants who have attained age 55 as of the end of the preceding fiscal year-end and commenced participation in the Plan at least ten years prior may elect, within an election period during each of the succeeding five consecutive plan years, to receive a special ESOP distribution. The amount eligible for this special distribution is 50% of the prior fiscal year-end value (including previous withdrawals) of TRW Common Stock acquired for the participant's account by the ESOP since 1986, reduced by any previous withdrawals. PARTICIPANT LOANS Participants can borrow from $1,000 to $50,000 (in increments of $100) of their before-tax contributions, but such borrowings cannot exceed 50% of a participant's total Plan balance. The interest rate is fixed (prime rate at the end of the preceding quarter plus one percent) and the repayment period cannot be less than one year or more than five years. OTHER Although it has not expressed any intent to do so, TRW reserves the right to suspend or terminate the Plan. In the event of termination, the amount of each participant's account may be retained in trust for the benefit of the participant. The above description of the Plan provides only general information. Participants should refer to the Summary Plan Description, which is available from the Stock Savings Plan's Participant Service Center, and annual prospectus for a more complete description of the Plan's provisions. 16 18 The TRW Employee Stock Ownership and Stock Savings Plan Notes to Financial Statements--Continued C. INVESTMENTS The fair value of individual investments that represent 5% or more of the Plan's total assets are as follows:
DECEMBER 31 1994 1993 --------------------------------- TRW Inc. Common Stock $684,611,928 $693,942,478 Bankers Trust Pyramid Equity Index Fund 264,983,112 259,363,285
The net realized gain on disposition of investments is as follows:
TRW STOCK FUND 1994 1993 -------------------------------- Value realized $39,868,378 $43,481,968 Average cost 22,401,224 25,233,924 -------------------------------- NET REALIZED GAIN $17,467,154 $18,248,044 ================================
EQUITY FUND 1994 1993 -------------------------------- Value realized $29,104,446 $25,615,761 Average cost 22,242,042 20,306,835 -------------------------------- NET REALIZED GAIN $ 6,862,404 $ 5,308,926 ================================
BOND INDEX FUND 1994 1993 ------------------------------ Value realized $3,043,048 $1,186,983 Average cost 3,039,824 1,171,523 ------------------------------ NET REALIZED GAIN $ 3,224 $ 15,460 ==============================
17 19 The TRW Employee Stock Ownership and Stock Savings Plan Notes to Financial Statements--Continued C. INVESTMENTS--CONTINUED
SMALL COMPANY EQUITY FUND 1994 1993 ------------------------- Value realized $5,248,954 $4,368 Average cost 5,192,118 4,253 ---------- ------ NET REALIZED GAIN $ 56,836 $ 115 =========================
The net unrealized appreciation of investments included in net assets is as follows:
TRW Stock Equity Bond Index Small Company Fund Fund Fund Equity Fund --------------------------------------------------------------- BALANCE AT DECEMBER 31, 1992 $220,270,572 $51,679,152 $ 0 $ 0 Increase for the year 95,060,294 16,834,016 355,749 1,547,470 --------------------------------------------------------------- BALANCE AT DECEMBER 31, 1993 315,330,866 68,513,168 355,749 1,547,470 (Decrease) for the year (49,322,621) (3,292,084) (375,586) (1,025,812) --------------------------------------------------------------- BALANCE AT DECEMBER 31, 1994 $266,008,245 $65,221,084 $ (19,837) $ 521,658 ===============================================================
On a revalued basis, which is in accordance with Department of Labor Form 5500 requirements, the realized and unrealized gains (losses) are not available at the date of the Report of Independent Auditors. A separate schedule will be included in the Form 5500 when filed. D. ADMINISTRATIVE EXPENSES Generally, salaries and wages of the administrative staff are paid by TRW. Expenses relating to investment advisor fees, management fees, trustee fees, audit fees, printing and postage are paid from Plan assets. Expenses directly attributable to any one fund are charged to that fund. Expenses not directly attributable to any one fund are allocated to each fund in the proportion that the market value of the assets of each fund bears to the total market value of all Plan assets. Brokerage fees and commissions incident to the purchase or sale of securities are paid by the fund in which they are incurred and are included in the cost of securities purchased or sold. 18 20 The TRW Employee Stock Ownership and Stock Savings Plan Notes to Financial Statements--Continued E. FEDERAL INCOME TAX STATUS OF THE PLAN The Plan is exempt from federal income taxes as a qualified profit sharing plan. The Plan has received a favorable determination letter from the Internal Revenue Service as to the tax qualified status of the Plan. This letter does not express an opinion as to whether the Plan satisfies the provisions of the Tax Reform Act of 1986. The Plan was amended to comply with the Act and a new determination letter was requested during December 1994. The Plan's Board of Administration believes that the Plan is in operational compliance with the Internal Revenue Code of 1986 and will remain qualified and exempt from federal income taxes. F. TRANSACTIONS WITH PARTIES-IN-INTEREST Party-in-interest transactions include the purchase and sale of short-term investments managed by the Plan's Trustee, Bankers Trust Company. At December 31, 1994 and 1993, the Bankers Trust Pyramid Equity Index Fund holds 193,086 and 269,103 shares of TRW Inc. Common Stock having a fair value of $12,743,676 and $18,635,383, respectively. Bankers Trust Company managed assets of the Plan of approximately $326,484,449 and $312,698,446 at December 31, 1994 and 1993, respectively, and received trustee fees of $679,021 and $712,846 in 1994 and 1993, respectively. There were no party-in-interest transactions which were prohibited under Department of Labor Regulations. 19 21 The TRW Employee Stock Ownership and Stock Savings Plan Notes to Financial Statements--Continued G. NUMBER OF PARTICIPANTS (UNAUDITED) The summary below sets forth the number of contributing participants by their current investment option(s):
DECEMBER 31 1994 1993 ------------------------ TRW Stock Fund 12,208 12,113 Equity Fund 13,397 13,785 Insured Return Fund 16,020 17,871 Bond Index Fund 2,631 1,786 Small Company Equity Fund 5,121 3,162
The total number of participants in the Plan is less than the sum of the number of employees shown above because many are participating in more than one fund. 20 22 The TRW Employee Stock Ownership and Stock Savings Plan Schedule of Assets Held for Investment Purposes December 31, 1994
Crediting Interest Fair Value Shares Maturity Date Rate Cost (see Note A) ---------- --------------------------------------------------------------- COMMON STOCK 10,372,908 TRW Inc. $418,603,683 $684,611,928 ----------------------------- TOTAL COMMON STOCK 418,603,683 684,611,928 SHORT-TERM INVESTMENTS Bankers Trust Pyramid Directed Account Cash Fund 14,892,406 14,892,406 --------------------------- TOTAL SHORT-TERM INVESTMENTS 14,892,406 14,892,406 GUARANTEED INVESTMENT CONTRACTS Bankers Trust: Contract 93-515 September 30, 2000 5.67% 43,811,734 43,811,734 Provident Life & Accident: Contract 630-05575 September 1, 2003 5.71 37,815,901 37,815,901 ----------------------------- 81,627,635 81,627,635 SEPARATE ACCOUNT CONTRACTS Aetna Life Insurance Co.: Contract 014460 November 15, 2002 7.96 27,777,106 27,777,106 Crown Life Insurance Co.: Contract 9005876 March 3, 1998 4.02 5,795,705 5,795,705 John Hancock Mutual Life: Contract 7441 May 1, 2004 7.14 11,259,063 11,259,063 Contract 7441-2 June 30, 1997 7.14 22,038,013 22,038,013 Metropolitan Life Insurance Co: Contract 12702 January 2, 2001 5.50 30,090,238 30,090,238 Contract 18544-B December 31, 1998 6.95 2,694,853 2,694,853 Prudential Insurance Co. of American: Contract 6581-1 January 15, 2001 9.39 3,163,885 3,163,885 Contract 6661-2 May 15, 2001 9.57 5,395,879 5,395,879 Contract 6702-3 November 20, 2000 8.45 1,596,781 1,596,781 ----------------------------- 109,811,523 109,811,523
21 23 The TRW Employee Stock Ownership and Stock Savings Plan Schedule of Assets Held for Investment Purposes--Continued
Crediting Interest Fair Value Shares Maturity Date Rate Cost (see Note A) ---------- --------------------------------------------------------------- GUARANTEED INVESTMENT CONTRACTS--CONTINUED SYNTHETIC INVESTMENT CONTRACTS Bankers Trust (Del) Basic: Contract 92-310 October 25, 1995 6.34 4,156,811 4,156,811 Contract 92-352 November 27, 1995 5.42 3,248,963 3,248,963 People Security Life: Contract 00025TR-1 June 25, 1997 4.68 6,000,368 6,000,368 Contract 00025TR-2 May 25, 1998 5.22 5,003,948 5,003,948 Contract 00025TR-3 September 25, 1998 5.63 3,962,846 3,962,846 Contract 00025TR-4 January 15, 1998 5.40 2,471,757 2,471,757 Contract 00025TR-5 August 25, 1998 5.21 2,503,401 2,503,401 Contract 00025TR-6 August 25, 1998 5.27 4,299,078 4,299,078 Contract 00025TR-7 July 15, 1997 5.13 1,039,845 1,039,845 Contract 00025TR-8 November 15, 2000 6.50 4,771,681 4,771,681 Contract 00025TR-9 November 15, 2000 7.18 4,629,265 4,629,265 Contract 00025TR-10 May 17, 1999 6.99 9,420,951 9,420,951 Contract 00025TR-11 February 16, 1999 7.11 944,177 944,177 Contract 00025TR-12 April 26, 1999 7.57 4,766,193 4,766,193 Provident Life & Accident: Contract 630-05751 October 25, 1999 7.35 1,793,505 1,793,505 -------------------------- 59,012,789 59,012,789 COLLATERALIZED CDC Investment Management Corp.: Contract 115-01 April 15, 1998 6.45 5,126,164 5,126,164 Contract 115-02 April 30, 1999 7.14 6,036,078 6,036,078 Contract 115-03 April 31, 1998 7.19 6,000,000 6,000,000 -------------------------- 17,162,242 17,162,242 FIXED RATE AND FIXED TERM Aetna Life Insurance Company: Contract 13822-001 March 5, 1997 9.69 14,135,910 14,135,910 Contract 13822-002 September 30, 1997 9.77 14,138,515 14,138,515 Allstate Life Insurance Company: Contract 4914 April 3, 1995 9.00 15,159,071 15,159,071
22 24 The TRW Employee Stock Ownership and Stock Savings Plan Schedule of Assets Held for Investment Purposes--Continued
Crediting Interest Fair Value Shares Maturity Date Rate Cost (see Note A) ---------- --------------------------------------------------------------- GUARANTEED INVESTMENT CONTRACTS--CONTINUED Canada Life Assurance Company: Contract 45229 March 26, 1995 8.78 10,590,915 10,590,915 Contract 45299 June 21, 1995 9.60 5,207,621 5,207,621 Contract 45377 November 1, 1995 9.10 10,069,439 10,069,439 Contract 45800 June 1, 1998 5.23 5,228,535 5,228,535 Contract 45839 June 16, 1999 7.06 6,191,386 6,191,386 Commonwealth Life Ins. Company: Contract ADA0314FR July 3, 1995 9.30 7,403,341 7,403,341 Continental Assurance Company: Contract 12619 July 1, 1996 8.50 13,570,460 13,570,460 Contract 12619-026 February 1, 1995 6.55 6,009,485 6,009,485 Contract 12619-B November 1, 1996 8.42 13,357,357 13,357,357 John Hancock Mutual Life Contract 5660 August 15, 1997 9.43 7,374,621 7,374,621 Contract 7314 January 14, 1999 5.44 10,502,765 10,502,765 Mass Mutual Life Insurance Company: Contract 10062 November 3, 1997 9.70 14,592,549 14,592,549 Metropolitan Life Ins. Company: Contract 18544-A January 3, 1995 8.70 539,416 539,416 New York Life Ins. Company: Contract 6232 August 1, 1996 8.42 10,350,641 10,350,641 Contract GA06216 June 3, 1996 8.42 10,442,915 10,442,915 Peoples Security Life: Contract BDA0243FR January 15, 1996 8.21 2,143,249 2,143,249 Principal Mutual Life: Contract 78599 January 3, 1995 9.15 1,607,131 1,607,131 Prudential Ins. Co. of America: Contract 6569-501 May 1, 1996 8.41 13,046,338 13,046,338
23 25 The TRW Employee Stock Ownership and Stock Savings Plan Schedule of Assets Held for Investment Purposes--Continued
Crediting Interest Fair Value Shares Maturity Date Rate Cost (see Note A) ---------- --------------------------------------------------------------- GUARANTEED INVESTMENT CONTRACTS--CONTINUED Sun Life Ass. Canada (US): Contract S-0882-G July 31, 1998 5.54 7,496,639 7,496,639 Contract S-0910-G August 2, 1999 7.39 5,130,597 5,130,597 United of Omaha Life Ins.: Contract 8552 August 1, 1995 9.00 3,090,247 3,090,247 ------------------------------ 207,379,143 207,379,143 VARIABLE RATE AND FIXED TERM Hardford Life Insurance Company: Contract 9382 March 20, 1995 6.91 10,133,914 10,133,914 ------------------------------ 10,133,914 10,133,914 VARIABLE RATE AND TERM People Security Life: Contract BDA0185ST March 31, 1995 6.02 5,972,790 5,972,790 ------------------------------ TOTAL GUARANTEED INVESTMENT CONTRACTS 491,100,036 491,100,036 COMMON TRUST FUNDS Bankers Trust Pyramid Equity Index Fund 199,762,028 264,983,112 Bankers Trust Pyramid Russell 2,500 Index Fund 35,695,258 36,216,916 Bankers Trust Pyramid Fixed Income Index Fund 10,411,852 10,392,015 ------------------------------ TOTAL COMMON TRUST FUNDS 245,869,138 311,592,043 Participant loans 7.00%-11.50% 55,686,025 55,686,025 ------------------------------ TOTAL INVESTMENTS $1,226,151,288 $1,557,882,438 ==============================
24 26 The TRW Employee Stock Ownership and Stock Savings Plan Schedule of Reportable Transactions Year Ended December 31, 1994
Fair Value of Asset on Purchase Selling Cost Transaction Net Gain Identity of Party Involved Description Price Price of Asset Date (Loss) of Assets ------------------------------------------------------------------------------------------------------------------------------------ SINGLE TRANSACTIONS IN EXCESS OF 5% OF THE FAIR VALUE OF PLAN ASSETS There were no single transactions in excess of 5% of the fair value of Plan assets. SERIES OF TRANSACTIONS IN EXCESS OF 5% OF THE FAIR VALUE OF PLAN ASSETS Bankers Trust: BT Pyramid Directed Account 279 Purchases Cash Fund $162,409,252 $162,409,252 $162,409,252 $0 87 Sales $164,689,971 164,689,971 164,689,971 0
25
EX-28.B 16 TRW EX-28(B) 1 Exhibit 28(b) FINANCIAL STATEMENTS THE TRW CANADA STOCK SAVINGS PLAN DECEMBER 31, 1994 AND 1993 [ERNST & YOUNG LOGO] 2 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT AUDITORS -------------------------------------------------------------------------------- To the Participants and the Board of Administration of THE TRW CANADA STOCK SAVINGS PLAN We have audited the statements of financial condition of the TRW Stock Fund, Pooled Money Market Fund Employees Profit Sharing Plan, Pooled Balanced Fund Registered Retirement Savings Plan and Pooled Money Market Fund Registered Retirement Savings Plan [constituting THE TRW CANADA STOCK SAVINGS PLAN] as at December 31, 1994 and 1993 and the related statements of operations and changes in fund equity for these funds for the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the several funds of THE TRW CANADA STOCK SAVINGS PLAN as at December 31, 1994 and 1993 and the results of their operations and the changes in fund equity for the years then ended in accordance with accounting principles generally accepted in Canada. Hamilton, Canada, March 17, 1995. /s/ Ernst & Young Chartered Accountants [ERNST & YOUNG LOGO] 3 -------------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN TRW STOCK FUND STATEMENTS OF FINANCIAL CONDITION -------------------------------------------------------------------------------- As at December 31
1994 1993 $ $ --------------------------------------------------------------------------------------------------- [expressed in Canadian dollars] ASSETS Cash 56,984 30,438 Receivable from TRW Canada Limited 9,608 22,789 Investments at quoted market value TRW Inc. common stock 8,018 shares [cost $736,255] in 1994 and 9,190 shares [cost $713,962] in 1993 741,825 841,140 --------------------------------------------------------------------------------------------------- 808,417 894,367 =================================================================================================== LIABILITIES AND FUND EQUITY LIABILITIES Withdrawals, terminations and short term distributions 664,220 747,502 Fund equity [including net unrealized appreciation of investments] 144,197 146,865 --------------------------------------------------------------------------------------------------- 808,417 894,367 =================================================================================================== NUMBER OF SHARES OUTSTANDING AT DECEMBER 31 8,018 9,190 =================================================================================================== FUND EQUITY PER SHARE AT DECEMBER 31 17.9842 15.9810 ===================================================================================================
See accompanying notes [ERNST & YOUNG LOGO] 4 -------------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN TRW STOCK FUND STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY -------------------------------------------------------------------------------- Years ended December 31
1994 1993 $ $ ---------------------------------------------------------------------------------------------------- [expressed in Canadian dollars] INVESTMENT INCOME Dividends on TRW Inc. common stock 10,458 11,579 Interest 159 275 ---------------------------------------------------------------------------------------------------- 10,617 11,854 ---------------------------------------------------------------------------------------------------- CONTRIBUTIONS Participants 387,848 371,565 TRW Canada Limited 50% of total participants' contributions to all funds 370,938 381,419 ---------------------------------------------------------------------------------------------------- 758,786 752,984 ---------------------------------------------------------------------------------------------------- Net realized gain on transfer of investments to participants [note 4] 116,865 132,939 Unrealized depreciation of investments [note 4] (121,608) (21,021) ---------------------------------------------------------------------------------------------------- (4,743) 111,918 ---------------------------------------------------------------------------------------------------- 764,660 876,756 ---------------------------------------------------------------------------------------------------- Less withdrawals and terminations in respect of the current year Paid Cash 4,025 3,111 TRW Inc. common stock 1,048 shares in 1994; 1,725 shares in 1993 99,083 140,595 ---------------------------------------------------------------------------------------------------- 103,108 143,706 ---------------------------------------------------------------------------------------------------- Payable Cash 17,330 18,026 TRW Inc. common stock 6,992 shares in 1994; 7,970 shares in 1993 646,890 729,476 ---------------------------------------------------------------------------------------------------- 664,220 747,502 ---------------------------------------------------------------------------------------------------- 767,328 891,208 ---------------------------------------------------------------------------------------------------- DECREASE IN FUND EQUITY (2,668) (14,452) Fund equity at January 1 146,865 161,317 ---------------------------------------------------------------------------------------------------- FUND EQUITY AT DECEMBER 31 144,197 146,865 ====================================================================================================
See accompanying notes [ERNST & YOUNG LOGO] 5 -------------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN POOLED MONEY MARKET FUND EMPLOYEES PROFIT SHARING PLAN STATEMENTS OF FINANCIAL CONDITION -------------------------------------------------------------------------------- As at December 31
1994 1993 $ $ ------------------------------------------------------------------------------------ [expressed in Canadian dollars] ASSETS Cash 13,100 12,082 Receivable from TRW Canada Limited 2,339 4,322 Interest receivable 1,132 982 Investment at market value Royal Trust Company Classified Money Market Fund 19,967 units [cost $199,667] in 1994 and 21,978 units [cost $219,775] in 1993 199,667 219,775 ---------------------------------------------------------------------------- 216,238 237,161 ============================================================================ LIABILITIES AND FUND EQUITY LIABILITIES Withdrawals, terminations and short term distributions 190,553 209,101 Fund equity 25,685 28,060 ---------------------------------------------------------------------------- 216,238 237,161 ============================================================================ NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 2,568.5 2,806.0 ============================================================================ FUND EQUITY PER UNIT AT DECEMBER 31 10.0 10.0 ============================================================================
See accompanying notes [ERNST & YOUNG LOGO] 6 -------------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN POOLED MONEY MARKET FUND EMPLOYEES PROFIT SHARING PLAN STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY ------------------------------------------------------------------------ Years ended December 31
1994 1993 $ $ ------------------------------------------------------------------------ [expressed in Canadian dollars] INTEREST INCOME 7,018 7,989 PARTICIPANTS' CONTRIBUTIONS 208,002 233,107 ------------------------------------------------------------------------ 215,020 241,096 ------------------------------------------------------------------------ Less cash withdrawals and terminations Paid 26,842 51,580 Payable 190,553 209,101 ------------------------------------------------------------------------ 217,395 260,681 ------------------------------------------------------------------------ DECREASE IN FUND EQUITY (2,375) (19,585) Fund equity at January 1 28,060 47,645 ------------------------------------------------------------------------ FUND EQUITY AT DECEMBER 31 25,685 28,060 ========================================================================
See accompanying notes [ERNST & YOUNG LOGO] 7 -------------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN POOLED BALANCED FUND REGISTERED RETIREMENT SAVINGS PLAN STATEMENTS OF FINANCIAL CONDITION -------------------------------------------------------------------------------- As at December 31
1994 1993 $ $ ------------------------------------------------------------------------------------------------------------ [expressed in Canadian dollars] ASSETS Cash 4,258 4,810 Receivable from TRW Canada Limited 1,942 3,761 Interest receivable 10,095 7,915 Receivable from Pooled Money Market Fund Registered Retirement Savings Plan -- 1,948 Investments at quoted market value Royal Trust Company Classified Balanced Fund 16,966.3907 units [cost $201,864] in 1994 and 14,200.6884 units [cost $164,198] in 1993 199,962 184,792 ------------------------------------------------------------------------------------------------------------ 216,257 203,226 ============================================================================================================ LIABILITIES AND FUND EQUITY LIABILITIES Withdrawals, terminations and short term distributions 17,478 3,807 Fund equity [including net unrealized appreciation of investments] 198,779 199,419 ------------------------------------------------------------------------------------------------------------ 216,257 203,226 ============================================================================================================ NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 16,966.3907 14,200.6884 ============================================================================================================ FUND EQUITY PER UNIT AT DECEMBER 31 11.716 14.043 ============================================================================================================
See accompanying notes [ERNST & YOUNG LOGO] 8 -------------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN POOLED BALANCED FUND REGISTERED RETIREMENT SAVINGS PLAN STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY -------------------------------------------------------------------------------- Years ended December 31
1994 1993 $ $ -------------------------------------------------------------------------------------------------------------- [expressed in Canadian dollars] INCOME 19,205 14,857 -------------------------------------------------------------------------------------------------------------- CONTRIBUTIONS Participants' contributions 90,583 84,617 Transfer from Pooled Money Market Fund Registered Retirement Savings Plan -- 8,290 -------------------------------------------------------------------------------------------------------------- 90,583 92,907 -------------------------------------------------------------------------------------------------------------- Net realized gain on disposition of investments [note 4] 2,140 719 Unrealized appreciation (depreciation) of investments [note 4] (22,496) 17,870 -------------------------------------------------------------------------------------------------------------- (20,356) 18,589 -------------------------------------------------------------------------------------------------------------- 89,432 126,353 -------------------------------------------------------------------------------------------------------------- Less cash withdrawals and terminations Paid 72,594 40,300 Payable 17,478 3,807 -------------------------------------------------------------------------------------------------------------- 90,072 44,107 -------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN FUND EQUITY (640) 82,246 Fund equity at January 1 199,419 117,173 -------------------------------------------------------------------------------------------------------------- FUND EQUITY AT DECEMBER 31 198,779 199,419 ==============================================================================================================
See accompanying notes [ERNST & YOUNG LOGO] 9 -------------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN POOLED MONEY MARKET FUND REGISTERED RETIREMENT SAVINGS PLAN STATEMENTS OF FINANCIAL CONDITION -------------------------------------------------------------------------------- As at December 31
1994 1993 $ $ ----------------------------------------------------------------------------------------------------- [expressed in Canadian dollars] ASSETS Cash 1,598 3,284 Receivable from TRW Canada Limited 2,470 3,672 Interest receivable 1,192 874 Investment at market value Royal Trust Company Classified Pooled Money Market Fund 20,374.5 units [cost $203,745] in 1994 and 19,054.8 units [cost $190,548] in 1993 203,745 190,548 ----------------------------------------------------------------------------------------------------- 209,005 198,378 ===================================================================================================== LIABILITIES AND FUND EQUITY LIABILITIES Withdrawals, terminations and short term distributions 14,282 1,563 Payable to Pooled Balanced Fund Registered Retirement Savings Plan -- 1,948 Fund equity 194,723 194,867 ----------------------------------------------------------------------------------------------------- 209,005 198,378 ===================================================================================================== NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 19,472.3 19,486.7 ===================================================================================================== FUND EQUITY PER UNIT AT DECEMBER 31 10.0 10.0 =====================================================================================================
See accompanying notes [ERNST & YOUNG LOGO] 10 THE TRW CANADA STOCK SAVINGS PLAN POOLED MONEY MARKET FUND REGISTERED RETIREMENT SAVINGS PLAN STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY -------------------------------------------------------------------------------- Years ended December 31
1994 1993 $ $ ------------------------------------------------------------------------------------ [expressed in Canadian dollars] INTEREST INCOME 10,729 10,052 PARTICIPANTS' CONTRIBUTIONS 55,440 73,538 ------------------------------------------------------------------------------------ 66,169 83,590 ------------------------------------------------------------------------------------ Less cash withdrawals and terminations Paid Cash 52,031 40,325 Transfer to Pooled Balanced Fund Registered Retirement Savings Plan -- 6,342 ------------------------------------------------------------------------------------ 52,031 46,667 ------------------------------------------------------------------------------------ Payable Cash 14,282 1,563 Transfer to Pooled Balanced Fund Registered Retirement Savings Plan -- 1,948 ------------------------------------------------------------------------------------ 14,282 3,511 ------------------------------------------------------------------------------------ 66,313 50,178 ------------------------------------------------------------------------------------ INCREASE (DECREASE) IN FUND EQUITY (144) 33,412 Fund equity at January 1 194,867 161,455 ------------------------------------------------------------------------------------ FUND EQUITY AT DECEMBER 31 194,723 194,867 ====================================================================================
See accompanying notes [ERNST & YOUNG LOGO] 11 ----------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS ----------------------------------------------------------------------------- December 31, 1994 and 1993 1. GENERAL PLAN PROVISIONS The investment programs of the TRW Canada Stock Savings Plan [the "Plan"] are as follows: PARTICIPANT CONTRIBUTIONS Upon enrollment or re-enrollment, each participant directs that his contributions [computed in increments of one percent, from two per cent to six per cent of qualifying compensation] are to be invested in accordance with any of the following investment options: [a] 100% in the TRW Stock Fund [the common stock of TRW Inc. in accordance with the trust agreement and the Plan]. [b] 100% in the Pooled Money Market Fund Employees Profit Sharing Plan. At present, the Trustee invests all of the Pooled Money Market Fund amounts in the Royal Trust Company, Classified Money Market Fund in accordance with the Trust agreement and the Plan. [c] 100% in the Pooled Balanced Fund Registered Retirement Savings Plan. At present, the Trustee invests all of the Pooled Balanced Fund amounts in the Royal Trust Company, Classified Balanced Fund, in accordance with the Trust agreement and the Plan. [d] 100% in the Pooled Money Market Fund Registered Retirement Savings Plan. At present, the Trustee invests all of the Pooled Money Market Fund amounts in the Royal Trust Company, Classified Pooled Money Market Fund in accordance with the Trust agreement and the Plan. [e] A combination of options [a] through [d] in multiples of 25%. Such direction may be revised on 30 days prior notice, effective January 1 of any year. TRW CANADA LIMITED CONTRIBUTIONS TRW Canada Limited shall contribute to the plan for each month, out of current or accumulated earnings, an amount equal to 50% of participant contributions for such month. TRW Canada Limited contributions vest immediately. All TRW Canada Limited contributions are invested in the TRW Stock Fund. TRW Canada Limited does not charge a fee for administering the Plans. 1 [ERNST & YOUNG LOGO] 12 -------------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- December 31, 1994 and 1993 The number of participants in each Fund at December 31 is as follows:
--------------------------------------------------------------------------------------------------------- TRW Stock Fund 269 267 Pooled Money Market Fund Employees Profit Sharing Plan 110 112 Pooled Balanced Fund Registered Retirement Savings Plan 66 64 Pooled Money Market Fund Registered Retirement Savings Plan 49 56
The total number of participants in the Plan is less than the sum of the number of participants shown above because many are participating in more than one Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with accounting principles generally accepted in Canada, and are within the framework of the accounting policies summarized below. GAIN AND LOSSES ON INVESTMENTS The realized gain or loss on disposition or transfer of an investment is determined from the market value of the investment at the date of disposition or transfer and the average cost base of that specific pool of investments prior to the disposition or transfer. Unrealized gains or losses are determined as the net effect of the change in appreciation/depreciation of the investments from January 1 to December 31, based on market values and the average cost base of each investment at those respective dates. INCOME RECOGNITION Dividends are recognized as earned. Interest income is recognized as it is earned consistent with the accrual basis of accounting. 2 [ERNST & YOUNG LOGO] 13 -------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------- December 31, 1994 and 1993 3. INCOME TAXES The Plan is exempt from Canadian federal income taxes under provisions of the Income Tax Act. Federal income tax consequences to the participants under the Plan are as provided in the Income Tax Act. TRW Canada Limited contributions are taxable to the participants as is the income and all post-1971 capital gains less post-1971 capital losses of the Plan, all of which are allocated to the participants by the Trustee during the year, whether or not such amounts are paid to the participants by the Trustee during the year. In some circumstances, the amounts taxable could exceed the amounts allocated. The amount of foreign non-business income tax paid on foreign source income by the trusts under the Plan for the year is allocated to and deemed to have been paid by the participants for Canadian federal income tax purposes. Participants who are non-resident taxpayers are subject to special rules depending on whether they have performed duties in Canada during the year and are subject to 15% withholding tax on amounts paid or credited to them under the Plan. 4. UNREALIZED AND REALIZED (LOSSES) GAINS Investments are stated at their quoted market value. The net unrealized appreciation (depreciation) of investments included in fund equity is as follows:
TRW POOLED STOCK BALANCED FUND FUND $ $ ------------------------------------------------------------- BALANCE AT DECEMBER 31, 1992 148,199 2,724 Change for the year Market value (21,021) 17,870 ------------------------------------------------------------- BALANCE AT DECEMBER 31, 1993 127,178 20,594 Change for the year Market value (121,608) (22,496) ------------------------------------------------------------- BALANCE AT DECEMBER 31, 1994 5,570 (1,902) ==============================================================
3 [ERNST & YOUNG LOGO] 14 ---------------------------------------------------------------------------- THE TRW CANADA STOCK SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS ---------------------------------------------------------------------------- December 31, 1994 and 1993 The net realized gain on disposition of investments is summarized as follows:
TRW STOCK FUND ---------------------- 1994 1993 $ $ ----------------------------------------------------- AMOUNT REALIZED 837,779 884,176 Cost - average 720,914 751,237 ----------------------------------------------------- NET REALIZED GAIN 116,865 132,939 ===================================================== POOLED BALANCED FUND REGISTERED RETIREMENT SAVINGS PLAN ---------------------- 1994 1993 $ $ ---------------------------------------------------- AMOUNT REALIZED 32,470 11,050 Cost - average 30,330 10,331 ---------------------------------------------------- NET REALIZED GAIN 2,140 719 ====================================================
5. RELATED PARTY TRANSACTIONS All expenses related to the TRW Canada Stock Savings Plan are paid by TRW Canada Limited. 4 [ERNST & YOUNG LOGO]