TRW Automotive Holdings Corp. (TRW) reported a 28% decline in profits (27% on per share basis) to $211 million or $1.62 per share in the first quarter of 2012 from $292 million or $2.21 in the first quarter of 2011 (all excluding restructuring and debt retirement charges), beating the Zacks Consensus Estimate by 2 cents per share. Revenues in the quarter edged up 2% to $4.2 billion. The increase in sales was attributable to strong demand for the company's active and passive safety products and higher vehicle production volumes in North America, partially offset by lower vehicle production volumes in Europe and the negative impact of currency fluctuations.
Adjusted operating profits in the quarter dropped 13% to $333 million from $382 million in the prior year. The decline was attributable to a higher mix of low-margin business, planned increases in costs in order to support future growth, higher raw material prices and adverse impact from currency fluctuations.
TRW had cash and cash equivalents of $997 million as of March 30, 2012 compared with $1.2 billion as of December 31, 2011. Total debt was almost flat at $1.5 billion as of March 30, 2012 compared with the same at the end of 2011. The debt-to-capitalization ratio went down slightly to 32% from 34% as of December 31, 2011.
In the quarter, the company had a cash outflow of $102 million from operations compared with a cash flow of $81 million in the prior-year quarter. The decline in cash flow was primarily attributable to lower earnings and higher inventories.
Capital expenditures (including other intangible assets) increased to $96 million from $67 million in the first quarter of 2011 in order to support the company's growth initiatives. Consequently, free cash flow deteriorated to the use of $198 million compared with an inflow of $14 million in the comparable period last year.
For full year 2012, TRW anticipates production of 14.7 million units in North America and 18.9 million units in Europe. Based on these production levels and expected foreign currency exchange rates, sales are expected between $16.3 billion and $16.6 billion for the year, including $4.2 billion in the second quarter.
TRW Automotive is a leading manufacturer of advanced technology products and services for the automotive markets. Headquartered in Michigan, U.S., the company operates in 27 countries through its subsidiaries.
These operations primarily involve the design, manufacture and sale of active and passive safety related products. Its major customers include Ford Motor Co. F), General Motors Company (GM) and Volkswagen AG (VLKAY). The three customers account for nearly 50% of sales.
Currently, the company retains a Zacks #3 Rank on its stock, which translates to a Hold rating for the short term (1 to 3 months), and we have reiterated a Neutral recommendation on its shares for the long term (more than 6 months).
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