-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EiZTg3zmXWMPvf/emOa0Kk3K/3Z7VmIfkmlDUZigwjqh3cPJjTtecoRIZyh+Isz+ 8/GM4XJ50zNslWcd/QopPA== 0000950152-96-006162.txt : 19961118 0000950152-96-006162.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950152-96-006162 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRW INC CENTRAL INDEX KEY: 0000100030 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 340575430 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02384 FILM NUMBER: 96665783 BUSINESS ADDRESS: STREET 1: 1900 RICHMOND RD CITY: CLEVELAND STATE: OH ZIP: 44124 BUSINESS PHONE: 2162917000 MAIL ADDRESS: STREET 1: 1900 RICHMOND ROAD CITY: CLEVELAND STATE: OH ZIP: 44124 10-Q 1 TRW 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________ to _______________________ Commission file number 1-2384 --------------------------------------------------------- TRW INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) OHIO 34-0575430 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 1900 RICHMOND ROAD, CLEVELAND, OHIO 44124 ----------------------------------------- (Address of principal executive offices) (Zip Code) (216) 291-7000 ----------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of November 1, 1996, there were 63,497,517 shares of TRW Common Stock, $0.625 par value, outstanding. 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements -------------------- Statements of Earnings (unaudited) TRW Inc. and subsidiaries
- ------------------------------------------------------------------------------------------------------- Third quarter ended Nine months ended September 30 September 30 In millions except per share data 1996 1995 1996 1995 - ------------------------------------------------------------------------------- ------------------ Sales $ 2,320 $ 2,250 $7,406 $ 7,258 Cost of sales 2,187 1,866 6,331 5,960 - ------------------------------------------------------------------------------- ------------------ Gross profit 133 384 1,075 1,298 Administrative and selling expenses 157 165 487 471 Research and development expenses 100 82 305 295 Interest expense 37 28 76 76 Other (income)expense-net 57 (10) 72 (7) - ------------------------------------------------------------------------------- ------------------ Earnings(loss) from continuing operations before income taxes (218) 119 135 463 Income taxes (72) 41 62 173 - ------------------------------------------------------------------------------- ------------------ Earnings(loss) from continuing (146) 78 73 290 operations Discontinued operations: Earnings from operations 10 15 38 41 Gain on disposal 242 -- 242 -- - ------------------------------------------------------------------------------- ------------------ Net earnings $ 106 $ 93 $ 353 $ 331 - ------------------------------------------------------------------------------- ------------------ - ------------------------------------------------------------------------------- ------------------ PER SHARE OF COMMON STOCK (*) Fully diluted Continuing operations $ (1.11) $ .59 $ .54 $ 2.16 Discontinued operations: Earnings from operations .07 .12 .28 .31 Gain on disposal 1.83 -- 1.81 -- - ------------------------------------------------------------------------------- ------------------ Net earnings per share $ .79 $ .71 $ 2.63 $ 2.47 - ------------------------------------------------------------------------------- ------------------ Primary Continuing operations $ (1.13) $ .58 $ .54 $ 2.17 Discontinued operations: Earnings from operations .08 .12 .29 .32 Gain on disposal 1.86 -- 1.83 -- - ------------------------------------------------------------------------------- ------------------ Net earnings per share $ .81 $ .70 $ 2.66 $ 2.49 - ------------------------------------------------------------------------------- ------------------ - ------------------------------------------------------------------------------- ------------------ Shares used in computing per share amounts (*) Fully diluted 132.3 133.5 133.9 134.3 Primary 130.5 134.0 132.5 133.1 - ------------------------------------------------------------------------------- ------------------ - ------------------------------------------------------------------------------- ------------------ Dividends declared (*) $ .275 $ .25 $ .55 $ .50 - ------------------------------------------------------------------------------- ------------------ (*) - Amounts have been retroactively restated to reflect a two-for-one stock split effected in the form of a 100 percent stock dividend. See Notes to Financial Statements.
3 Statements of Cash Flows (unaudited) TRW Inc. and subsidiaries
- ---------------------------------------------------------------------------------------- Nine months ended September 30 In millions 1996 1995 - ---------------------------------------------------------------------------------------- Operating activities: Net earnings $ 353 $ 331 Adjustments to reconcile net earnings to net cash provided by continuing operations: Discontinued operations (280) (41) Depreciation and amortization 327 319 Deferred income taxes 38 23 Other-net 4 19 Changes in assets and liabilities, net of effects of businesses acquired or sold: Accounts receivable (143) (59) Inventories and prepaid expenses (13) (74) Accounts payable and other accruals 143 (17) Other-net (69) 3 - ---------------------------------------------------------------------------------------- Net cash provided by operating activities of continuing operations 360 504 Net cash used by discontinued operations -- (6) - ---------------------------------------------------------------------------------------- Net cash provided by operating activities 360 498 - ---------------------------------------------------------------------------------------- Investing activities: Capital expenditures (276) (303) Proceeds from divestitures 965 9 Investments in other assets (4) (6) Other-net 37 1 - ---------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 722 (299) - ---------------------------------------------------------------------------------------- Financing activities: Increase(decrease) in short-term debt (54) 22 Proceeds from debt in excess of 90 days 31 26 Principal payments on debt in excess of 90 days (76) (161) Reacquisition of common stock (257) (16) Dividends paid (109) (98) Other-net 45 24 - ---------------------------------------------------------------------------------------- Net cash used in financing activities (420) (203) - ---------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (1) (24) - ---------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 661 (28) Cash and cash equivalents at beginning of period 59 109 - ---------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 720 $ 81 - ----------------------------------------------------------------------------------------
4 Balance Sheets (unaudited) TRW Inc. and subsidiaries
- --------------------------------------------------------------------------------------- September 30 December 31 In millions 1996 1995 - --------------------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 720 $ 59 Accounts receivable 1,467 1,327 Inventories 517 530 Prepaid expenses 88 67 Deferred income taxes 51 218 - --------------------------------------------------------------------------------------- Total current assets 2,843 2,201 Property, plant and equipment-on the basis of cost 5,744 5,710 Less accumulated depreciation and amortization 3,373 3,199 - --------------------------------------------------------------------------------------- Total property, plant and equipment-net 2,371 2,511 Intangible assets Intangibles arising from acquisitions 237 245 Other 31 43 - --------------------------------------------------------------------------------------- 268 288 Less accumulated amortization 79 79 - --------------------------------------------------------------------------------------- Total intangible assets-net 189 209 Other assets 535 311 Net assets of discontinued operations -- 437 - --------------------------------------------------------------------------------------- $ 5,938 $ 5,669 - --------------------------------------------------------------------------------------- Liabilities and shareholders' investment Current liabilities Short-term debt $ 126 $ 133 Accounts payable 710 776 Current portion of long-term debt 47 79 Other current liabilities 1,385 895 - --------------------------------------------------------------------------------------- Total current liabilities 2,268 1,883 Long-term liabilities 790 779 Long-term debt 479 539 Deferred income taxes 120 249 Minority interests in subsidiaries 57 47 Capital stock 80 82 Other capital 435 398 Retained earnings 1,928 1,647 Cumulative translation adjustments 58 76 Treasury shares-cost in excess of par value (277) (31) - --------------------------------------------------------------------------------------- Total shareholders' investment 2,224 2,172 - --------------------------------------------------------------------------------------- $ 5,938 $ 5,669 - ---------------------------------------------------------------------------------------
5 Results by Business Segments (unaudited) TRW Inc. and subsidiaries
- --------------------------------------------------------------------------------------------------------- Third quarter ended Nine months ended September 30 September 30 In millions 1996 1995 1996 1995 - ------------------------------------------------------------------------------- -------------------- Sales Automotive $ 1,500 $ 1,422 $ 4,881 $ 4,882 Space & Defense 820 828 2,525 2,376 - ------------------------------------------------------------------------------- -------------------- Sales $ 2,320 $ 2,250 $ 7,406 $ 7,258 - ------------------------------------------------------------------------------- -------------------- Operating profit(loss) Automotive $ (105) $ 116 $ 205 $ 461 Space & Defense (48) 54 76 153 - ------------------------------------------------------------------------------- -------------------- Operating profit(loss) (153) 170 281 614 Company Staff and other (26) (23) (68) (76) Interest expense (37) (28) (76) (76) Earnings(loss) from affiliates (2) -- (2) 1 - ------------------------------------------------------------------------------- -------------------- Earnings(loss) from continuing operations before income taxes $ (218) $ 119 $ 135 $ 463 - ------------------------------------------------------------------------------- --------------------
Note: The Company no longer reports an Information Systems and Services Segment, a result of the sale during the third quarter of 1996 of substantially all of the businesses previously included in that segment. 6 NOTES TO FINANCIAL STATEMENTS (unaudited) Principles Of Consolidation - --------------------------- The financial statements include the accounts of the Company and its subsidiaries except for two insurance subsidiaries. The wholly-owned insurance subsidiaries and the majority of investments in affiliated companies, which are not significant individually or in the aggregate, are accounted for by the equity method. Accounting Change - ----------------- Effective January 1, 1996, the Company initially applied the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Net earnings for the first nine months of 1996 have been decreased by $13 million ($.09 per share) reflecting the initial application of this Statement. Discontinued Operations - ----------------------- On September 19, 1996, the Company sold substantially all of the businesses of its Information Systems and Services segment to an investor group led by Bain Capital, Inc. and the Thomas H. Lee Company. The financial statements reflect as discontinued operations for all periods presented that segment's net assets and operating results, as well as the related transaction gain. Related footnotes have been restated to reflect only continuing operations. Net proceeds of approximately $965 million in cash resulted in a gain of $468 million ($242 million after tax, $1.83 per share). The proceeds will be used to pay down debt, to fund investment opportunities and to purchase the Company's Common Stock. Sales of the discontinued operations were $140 million and $152 million for the three months ended September 30, 1996 and 1995, respectively, and $453 million and $452 million for the nine months ended September 30, 1996 and 1995, respectively. Net assets of discontinued operations of $437 million at December 31, 1995 consisted primarily of goodwill and capitalized data files. 7 Special Charges - --------------- In the third quarter of 1996, the Company recorded a before-tax charge of $365 million ($233 million after tax or $1.76 per share) for actions taken in the automotive and space and defense businesses. As a result of these actions, several manufacturing facilities located throughout the world will be closed or consolidated, and employment company-wide will be reduced by approximately 2,300 people. The components of the charge include plant closure and severance costs of $102 million, contract reserves of $99 million, litigation and warranty expenses of $94 million, asset write-downs of $53 million and other items of $17 million. As of September 30, 1996, cash expenditures for these actions were insignificant. Cash expenditures related to the plant closure and severance costs are anticipated to be completed by the end of 1997. The charges are included in the Statement of Earnings as follows: $289 million included in cost of sales; $18 million included in interest expense; and $58 million included in other(income) expense-net. Inventories - ----------- Inventories consist of the following: (In millions)
September 30 December 31 1996 1995 ---- ---- Finished products and work in process $287 $294 Raw materials and supplies 230 236 ---- ---- $517 $530 ==== ====
Long-Term Liabilities - --------------------- For balance sheet purposes, long-term liabilities at September 30, 1996, and December 31, 1995, included $694 million and $680 million, respectively, relating to postretirement benefits other than pensions. 8 Other (Income)Expense-Net - ------------------------- Other (income)expense included the following: (In millions)
Third quarter ended Nine months ended September 30 September 30 1996 1995 1996 1995 ------------------- --------------------- Other income $(26) $(15) $(53) $(40) Other expense 82 4 121 24 Foreign currency translation 1 1 4 9 ---- ---- ---- ---- $ 57 $(10) $ 72 $ (7) ==== ==== ==== ====
Other expense for the third quarter and first nine months of 1996 includes expenses related to the settlement of a lawsuit. Earnings Per Share - ------------------ Fully diluted earnings per share have been computed based on the weighted average number of shares of Common Stock outstanding during each period, including common stock equivalents and assuming the conversion of the Serial Preference Stock II--Series 1 and 3. Primary earnings per share have been computed based on the weighted average number of shares of Common Stock outstanding during each period including common stock equivalents. Primary earnings per share for the third quarter of 1995 of $.70 is lower than the fully diluted earnings per share amount of $.71 due to the use of the treasury stock method for calculating share repurchase. The September 1995 calculation of fully diluted earnings per share uses the average market price. Subsequent Events - ----------------- On October 23, 1996, the Company's Board of Directors authorized a two-for-one stock split effected in the form of a 100 percent stock dividend to be distributed on December 9, 1996 to shareholders of record on November 8, 1996. Shareholders' investment has been restated to give retroactive recognition to the stock split for all periods presented by reclassifying from retained earnings to common stock the par value of the additional shares arising from the split. In addition, all references to the number of shares, per share amounts and dividends declared in the financial statements and notes thereto have been restated. On November 13, 1996, the Company sold its equity interest in Experian Corporation. The sale resulted in an after-tax gain of approximately $20 million. The Company is considering recording charges for certain actions which may offset this gain. 9 Supplemental Cash Flow Information - ----------------------------------
Nine months ended (In millions) September 30 ----------------- 1996 1995 ---- ---- Interest paid (net of amount capitalized) $ 75 $ 74 Income taxes paid (net of refunds) $214 $191
For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Other Contingencies - ------------------- The Company was advised by the Department of Justice ("DOJ") that it had been named as a defendant in two lawsuits brought by a former employee and filed under seal in 1994 and 1995, respectively, in the United States District Court for the Central District of California under the QUI TAM provisions of the civil False Claims Act, which permit an individual to bring suit in the name of the United States and share in any recovery. The allegations in the lawsuit relate to the classification of certain costs incurred by the Company that were charged to certain of its federal contracts. Under the law, the government must investigate the allegations and determine whether it wishes to intervene and take responsibility for the lawsuits. The actions remain under seal until the government completes its investigations and determines whether to intervene. However, permission from the court has been obtained by the Company to make the disclosures contained herein. The Company is cooperating with the DOJ's investigation and is engaged in ongoing discussions with them regarding the allegations. The Company cannot presently predict the outcome of these matters, although management believes that the Company would have meritorious defenses if either the government decides to pursue the lawsuits or the former employee decides to do so without government participation. Interim Statements - ------------------ The financial statements are based in part on approximations and are subject to adjustments that may develop, such as unsettled contract and renegotiation matters and matters that arise in connection with the annual audit of the financial statements; however, in the opinion of management, all adjustments (which consist of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented have been included. Results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (In millions except per share data)
Nine Months Ended Third Quarter September 30 ------------------- ------------------ 1996 1995 1996 1995 ------ ------ ------ ------ Sales $2,320 $2,250 $7,406 $7,258 Operating profit(loss) $ (153) $ 170 $ 281 $ 614 Earnings(loss) from continuing operations $ (146) $ 78 $ 73 $ 290 Earnings from discontinued operations $ 252 $ 15 $ 280 $ 41 Fully diluted earnings per share $ .79 $ .71 $ 2.63 $ 2.47 Effective tax rate on continuing operations 33.0% 34.5% 45.9% 37.4%
The increase in sales for the third quarter of 1996 was primarily due to higher volume in the Automotive segment partially offset by lower sales in the Space and Defense segment. For the first nine months of 1996, the increase in sales was due to higher volume in the Space & Defense segment partially offset by the effect of unfavorable exchange rates. Operating profit(loss) for the third quarter and first nine months includes a before-tax charge of $344 million for actions taken in the automotive and space and defense businesses. See "Special Charges" note in the Notes to Financial Statements for further information. Excluding the charge, operating profit increased due to the profit contribution from new business in the Space & Defense segment and higher volume in the Automotive segment. Operating profit for the first nine months of 1996 includes a $15 million before tax charge related to the initial application of Statement of Financial Accounting Standards (SFAS) No. 121. Earnings from discontinued operations includes the earnings from operations and the gain on the third quarter sale of substantially all of the businesses in the Information Systems and Services segment. See the "Discontinued Operations" note in the Notes to Financial Statements for further information. Interest expense was $37 million for the third quarter of 1996 compared to $28 million in 1995. Third quarter 1996 interest expense includes $18 million related to the interest component of a litigation settlement. Excluding this item, interest expense declined due primarily to lower average debt levels and lower interest rates. On October 23, 1996, the Company's Board of Directors authorized a two-for-one stock split effected in the form of a 100 percent stock dividend. Accordingly, earnings per share data has been restated to give retroactive recognition to the stock split for all periods presented. 11 The increase in the effective tax rate for the nine months ended September 30, 1996 was primarily due to the absence of a current tax benefit for certain of the special charges taken during the third quarter of 1996. Automotive (In millions)
Nine Months Ended Third Quarter September 30 --------------------------- ----------------------------- Percent Percent 1996 1995 Inc (Dec) 1996 1995 Inc (Dec) ------ ------ --------- ------ ------ --------- Sales $1,500 $1,422 6% $4,881 $4,882 --% Operating profit (loss) as reported $ (105) $ 116 $205 $ 461 Special charges 235 -- 235 -- ------ ------ ------ ------ Adjusted operating profit $ 130 $ 116 12% $ 440 $ 461 (5%)
The increase in sales for the third quarter of 1996 was due to higher volume across all product lines, offset in part by continued price pressures in air bag systems and the effect of a strong U.S. dollar. Sales for the first nine months of 1996 were relatively flat as compared to 1995 with pricing pressure in air bag systems and unfavorable exchange rates offsetting the increase in sales derived by higher volume in virtually all automotive businesses. The increase in adjusted operating profit for the third quarter of 1996 resulted primarily from higher profit experienced by the air bag and steering systems businesses. Moderating the improvement in operating profit were continued price pressures in air bag systems, higher start-up costs for new product introductions, and increased product development costs. Adjusted operating profit for the first nine months of 1996 includes a $15 million before-tax charge related to the initial adoption of SFAS No. 121. Special charges recorded during the third quarter of 1996 related to reconfiguration of manufacturing plants, litigation and warranty expenses and asset write-downs. See "Special Charges" note in the Notes to Financial Statements for further information. 12 Space & Defense (In millions)
Nine Months Ended Third Quarter September 30 ----------------------- --------------------------- Percent Percent 1996 1995 Inc (Dec) 1996 1995 Inc (Dec) ---- ---- --------- ------ ------ --------- Sales $820 $828 (1)% $2,525 $2,376 6% Operating profit(loss) $(48) $ 54 (188)% $ 76 $ 153 (50)%
The decline in sales for the third quarter of 1996 was due to an increase in sales from recent contract awards being more than offset by lower funding on certain contracts and the effects of contracts nearing completion. For the first nine months of 1996, sales increased primarily due to the successful conversion of contract awards into revenue growth, as well as strong ongoing program performance. Operating profit(loss) for the third quarter and first nine months of 1996 includes charges for certain contract reserves. Excluding these charges, operating profit was $61 million and $185 million for the third quarter and first nine months of 1996, respectively. The increase in operating profit resulted from the profit contribution from new business as well as strong ongoing program performance. Operating profit for the third quarter of 1995 included a program reserve which was offset by the benefit of a franchise tax settlement. LIQUIDITY AND FINANCIAL POSITION In the first nine months of 1996, cash flow from operating activities of $360 million, proceeds from divestitures of $965 million and $77 million of other items, were used primarily for capital expenditures of $276 million, reacquisition of Common Stock of $257 million, dividend payments of $109 million and repayment of debt of $99 million. As a result, cash and cash equivalents increased by $661 million. Total debt (short-term debt, the current portion of long-term debt and long-term debt) was $652 million at September 30, 1996, compared to $751 million at December 31, 1995. The ratio of total debt to total capital (total debt, minority interests and shareholders' investment) at September 30, 1996 was 22 percent compared to 25 percent at December 31, 1995. During the first nine months of 1996, 2,940,210 shares of TRW Common Stock were repurchased for approximately $268 million, of which approximately $11 million was settled in October. During the first nine months of 1996, the Company renegotiated the terms of its multi-year U.S. revolving credit agreement. The credit agreement, which previously allowed the Company to borrow up to $550 million, has been revised to allow the Company to borrow up to $750 million. The revised agreement now extends through June 2001 and contains lower commitment fees and borrowing rates. Also during the first nine months of 1996, the Company renegotiated the terms of the multi-currency revolving credit agreement. The credit agreement, which previously allowed the Company to borrow up to $200 million has been revised to allow the Company to borrow up to 13 $250 million. The revised agreement now extends through June 2001 and contains lower commitment fees and borrowing rates. Management believes that the current cash position, funds generated from operations and existing borrowing capacity will be adequate to fund the Company's current share repurchase program and support and finance planned growth, capital expenditures, company-sponsored research and development programs and dividend payments to shareholders. Other Matters - ------------- In the third quarter, 1996, the Company was advised by the Department of Justice that it had been named as a defendant in two lawsuits brought by a former employee and filed under seal under the QUI TAM provisions of the civil False Claims Act. See "Other Contingencies" in the Notes to Financial Statements for further information. 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings. ------------------ On February 15, 1994, TRW filed suit in the United States District Court for the District of Arizona against Talley Industries, Inc. and certain Talley subsidiary companies. The suit related to TRW's 1989 purchase of Talley's air bag business. In the complaint, TRW claimed that, among other violations of TRW's rights, Talley breached the non-compete provision contained in the purchase agreement by providing products and services to competitors of TRW. As a result of the breach, TRW exercised its rights under the agreement and the license from Talley to TRW to make a one-time payment of $26.5 million to Talley for a paid-up royalty-free license to use Talley's air bag patents and technology. On March 1, 1994, Talley filed an answer and counterclaims against TRW alleging that TRW had acted improperly in making the $26.5 million payment and requesting that TRW be ordered to pay immediately to Talley the value of all anticipated royalties, claimed by Talley to be not less than $250 million. On May 19, 1994, the court granted Talley's motion for an injunction. On May 30, 1995, at the close of all the evidence, the trial judge directed a verdict against TRW on TRW's claims against Talley, ruling that there was not sufficient evidence to send TRW's claims to the jury. On June 6, 1995, the jury entered its verdict on Talley's counterclaims that Talley was entitled to the present value of the future royalty stream in the sum of $138 million on the contract claim, but that TRW had not acted in bad faith and that the technology on which royalties were due was limited to that in existence when TRW purchased Talley's air bag business. TRW timely filed a notice of appeal on July 12, 1995. TRW also appealed the judge's ruling requiring that TRW continue to pay the royalties pending appeal; however, the Ninth Circuit U.S. Court of Appeals denied TRW's appeal without prejudice and accelerated the schedule for the appeal on the judge's decision. On June 21, 1996, the Ninth Circuit, in a two-to-one panel decision, affirmed the lower court's decision. TRW filed a petition for rehearing en banc with the Ninth Circuit, which was denied on July 30, 1996. In early August, TRW paid Talley $139.9 million in satisfaction of certain amounts due under the District Court judgment plus post-judgment interest (as adjusted to reflect certain amounts previously paid to Talley or otherwise due to TRW). On September 3, 1996, all remaining claims relating to the litigation or otherwise existing between TRW and Talley were settled. Pursuant to this settlement, TRW paid Talley an additional $16.6 million. 15 Item 6. Exhibits And Reports On Form 8-K. --------------------------------- (a) Exhibits: 2.1 Recapitalization Agreement, dated as of February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S International, Inc., Information Systems and Services, Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.1 to TRW Form 8-K Current Report dated October 4, 1996 is incorporated by reference). 2.2 Amendment No. 1, dated June 17, 1996 to Recapitalization Agreement, dated as of February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S International, Inc., Information Systems and Services, Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.2 to TRW Form 8-K Current Report dated October 4, 1996 is incorporated by reference). 2.3 Amendment No. 2, dated August 13, 1996 to Recapitalization Agreement, dated as of February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S International, Inc., Information Systems and Services, Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.3 to TRW Form 8-K Current Report dated October 4, 1996 is incorporated by reference). 2.4 Amendment No. 3, dated September 18, 1996 to Recapitalization Agreement, dated as of February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S International, Inc., Information Systems and Services, Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.4 to TRW Form 8-K Current Report dated October 4, 1996 is incorporated by reference). 11 Computation of Earnings Per Share -- Unaudited. 27 Financial Data Schedule. 99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited (Supplement to Exhibit 12 of the following Form S-3 Registration Statements of the Company: No. 33-42870, filed September 20, 1991, and No. 33-61711, filed August 10, 1995). 16 (b) Reports on Form 8-K for this quarter and filed through November 14, 1996: Current Report on Form 8-K dated October 4, 1996. Current Report on Form 8-K dated October 23, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRW Inc. Date: November 14, 1996 By: /s/ Martin A. Coyle ---------------------------------------- Martin A. Coyle Executive Vice President and Secretary Date: November 14, 1996 By: /s/ Carl G. Miller ---------------------------------------- Carl G. Miller Executive Vice President and Chief Financial Officer 17 FORM 10-Q Quarterly Report for Quarter Ended September 30, 1996 EXHIBIT INDEX EXHIBIT DESCRIPTION NO. 2.1 Recapitalization Agreement, dated as of February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S International, Inc., Information Systems and Services, Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.1 to TRW Form 8-K Current Report dated October 4, 1996 is incorporated by reference). 2.2 Amendment No. 1, dated June 17, 1996 to Recapitalization Agreement, dated as of February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S International, Inc., Information Systems and Services, Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.2 to TRW Form 8-K Current Report dated October 4, 1996 is incorporated by reference). 2.3 Amendment No. 2, dated August 13, 1996 to Recapitalization Agreement, dated as of February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S International, Inc., Information Systems and Services, Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.3 to TRW Form 8-K Current Report dated October 4, 1996 is incorporated by reference). 18 2.4 Amendment No. 3, dated September 18, 1996 to Recapitalization Agreement, dated as of February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S International, Inc., Information Systems and Services, Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.4 to TRW Form 8-K Current Report dated October 4, 1996 is incorporated by reference). 11 Computation of Earnings Per Share --Unaudited. 27 Financial Data Schedule. 99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited (Supplement to Exhibit 12 of the following Form S-3 Registration Statements of the Company: No. 33-42870, filed September 20, 1991, and No. 33-61711, filed August 10, 1995). EX-11 2 EXHIBIT 11 1 Exhibit 11 TRW COMPUTATION OF EARNINGS PER SHARE-UNAUDITED (In Millions Except Per Share Amounts)
Nine Months Ended September 30 ------------------------------ PRIMARY (A) 1996 1995 - ----------- --------- --------- Earnings from continuing operations $ 72.4 $ 290.0 Less preference dividend requirements 0.5 0.5 --------- --------- Earnings applicable to common shares and common share equivalents 71.9 289.5 Earnings from discontinued operations 37.9 41.4 Gain on disposal of discontinued operations 242.4 n/a --------- --------- Net earnings applicable to common shares and common share equivalents $ 352.2 $ 330.9 ========= ========= Average common shares outstanding 129.6 130.4 Stock options and performance share rights, based on the treasury stock method using average market price 2.9 2.7 --------- --------- Average common shares and common share equivalents 132.5 133.1 ========= ========= Primary earnings per share from continuing operations $ 0.54 $ 2.17 Primary earnings per share from discontinued operations 0.29 0.32 Primary earnings per share from gain on disposal of discontinued operations 1.83 n/a --------- --------- Primary earnings per share $ 2.66 $ 2.49 ========= ========= FULLY DILUTED (B) - ----------------- Earnings from continuing operations applicable to common shares and common share equivalents $ 71.9 $ 289.5 Dividends assuming conversion of other dilutive securities: (B) Dilutive preference dividends 0.5 0.5 --------- --------- Earnings from continuing operations applicable to fully diluted shares 72.4 290.0 Earnings from discontinued operations 37.9 41.4 Gain on disposal of discontinued operations 242.4 n/a --------- --------- Net earnings applicable to fully diluted shares $ 352.7 $ 331.4 ========= ========= Average common shares outstanding 129.6 130.4 Common shares assuming conversion of other dilutive securities: (B) Dilutive preference shares 1.1 1.2 Stock options and performance share rights, based on the treasury stock method using closing market price if higher than average market price 3.2 2.7 --------- --------- Average fully diluted shares 133.9 134.3 ========= ========= Fully diluted earnings per share from continuing operations $ 0.54 $ 2.16 Fully diluted earnings per share from discontinued operations 0.28 0.31 Fully diluted earnings per share from gain on disposal of discontinued operations 1.81 n/a --------- --------- Fully diluted earnings per share $ 2.63 $ 2.47 ========= ========= (A) In accordance with APB#15, the shares and per share amounts reflect a two-for-one stock split (in the form of a 100% stock dividend) of the company's common stock which is effective as of November 8, 1996. (B) Assuming the conversion of the Serial Preference Stock II - Series 1 and Series 3.
EX-27 3 EXHIBIT 27
5 1,000,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 720 0 1,467 0 517 2,843 5,744 3,373 5,938 2,268 479 80 0 0 2,144 5,938 7,406 7,406 6,331 6,331 0 0 76 135 62 73 280 0 0 353 2.66 2.63
EX-99 4 EXHIBIT 99 1 Exhibit 99 TRW Inc. and Subsidiaries Computation of Ratio of Earnings to Fixed Charges -- Unaudited (In millions except ratio data)
Nine months Years Ended December 31 ended ---------------------------------------------------- September 30, 1996 1995 1994 1993 1992 1991 ------------------ ------ ------ ------ ------ ------ Earnings from continuing operations before income taxes $134.7 $625.5 $435.5 $289.2 $276.4 $ 6.4 (A) (B) Unconsolidated affiliates (3.6) 1.3 (0.6) 0.7 (0.9) (1.0) Minority earnings 8.5 10.8 7.7 1.4 0.1 (4.9) Fixed charges excluding capitalized interest 110.9 138.5 146.7 178.9 209.4 242.4 ------ ------ ------ ------ ------ ------ Earnings $250.5 $776.1 $589.3 $470.2 $485.0 $242.9 ------ ------ ------ ------ ------ ------ Fixed Charges: Interest expense $ 75.9 $ 94.7 $104.7 $137.4 $162.1 $188.4 Capitalized interest 2.4 5.1 6.6 7.9 12.7 10.1 Portion of rents representative of interest factor 33.4 42.7 40.6 39.3 47.1 53.7 Interest expense of unconsolidated affiliates 1.6 1.1 1.4 2.2 0.2 0.3 ------ ------ ------ ------ ------ ------ Total fixed charges $113.3 $143.6 $153.3 $186.8 $222.1 $252.5 ------ ------ ------ ------ ------ ------ Ratio of earnings to fixed charges 2.2x 5.4x 3.8x 2.5x 2.2x 1.0x(A) ------ ------ ------ ------ ------ ------ (A) The 1996 earnings from continuing operations before income taxes of $134.7 million includes a charge of $365 million as a result of actions taken in the automotive and space and defense businesses. See "Special Charges" note in the Notes to Financial Statements for further information. (B) The 1991 earnings from continuing operations before income taxes of $6.4 million includes a charge of $164 million to cover costs associated with divestment and restructuring activities. Excluding this charge, the ratio of earnings to fixed charges would have been 1.6x.
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