TRW Automotive improves leverage with better profitability, cash flow

By Jennifer Lanning Drey

Portland, Ore., May 5 - TRW Automotive Holdings Corp.'s increased profitability and improved cash performance in the first quarter allowed the company to reduce its net debt to last-12-months EBITDA ratio to a record 1.2 times at quarter-end, TRW's chief executive officer John Plant said Wednesday during its first-quarter earnings conference call.

TRW had $2.22 billion of debt at April 2. Net debt was $1.59 billion.

The company reported first-quarter net earnings of $204 million on sales of $3.6 billion. The figures compared with a net loss of $131 million on sales of $2.4 billion for the same three months in 2009.

Higher production volumes helped boost sales, along with favorable currency translation, Joseph Cantie, chief financial officer of TRW, said during the call.

The improved profits, coupled with TRW's continued control over capital deployment, led to net cash flow provided by operating activities of $21 million for the period. The figure was up from a use of $254 million in the prior-year period.

"The strong cash flow outcome demonstrates our continued focus on managing every dollar earned and certainly bodes well for the level of expected full-year cash flow," Cantie said.

TRW is also benefiting from a lower cost structure, and managing costs will remain a priority in 2010, Plant said.

"Generally speaking, we're feeling good right now, given the higher levels of vehicle build, our improved cost structure, stronger customer security with their improved balance sheets and our very improved capital structure position," he said.

Term loan paydown

Based on TRW's strong start to 2010, its capital structure and comfort with the near-term outlook, TRW permanently paid down $100 million of bank term loans in the first quarter.

Subsequent to the end of the quarter, the company has paid down an additional $75 million of term loans, eliminating its entire term loan B position, Cantie said.

The company had $1.6 billion of available liquidity at quarter-end.

TRW is an automotive supplier based in Livonia, Mich.

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