TRW Announces Fourth Quarter and 1999 Results

Fourth Quarter Earnings Increase 48 Percent

CLEVELAND, OH. TRW Inc. (NYSE:TRW) today reported that for the quarter ended December 31, 1999, net earnings increased 48 percent to a record $164.8 million, or $1.33 per share, excluding unusual items. This compares with fourth quarter 1998 net earnings of $111.4 million, or $0.91 per share. Fourth quarter 1999 sales increased 58 percent to a record $4.6 billion, compared with $2.9 billion in the fourth quarter of 1998.

TRW s fourth quarter 1999 earnings and sales reflect the results of LucasVarity, which was acquired on March 25, 1999. Excluding LucasVarity, fourth quarter 1999 sales increased 2 percent, compared to 1998.

Including unusual items, net earnings increased 91 percent in the fourth quarter of 1999 to a record $223.9 million, or $1.81 per share, compared with $117.4 million, or $0.96 per share, in the fourth quarter of 1998. For the quarter, unusual items resulted in net earnings of $59.1 million, or $0.48 per share. After tax gains of $140.5 million from the sale of assets, primarily RF Micro Devices (RFMD) stock, were offset by $53.3 million associated with the previously announced discontinuance of certain products within the warehouse management systems and software security product lines, $19.6 million of expense pertaining to the LucasVarity acquisition, and $8.5 million for automotive restructuring charges. The fourth quarter of 1998 net earnings included automotive restructuring of $10.3 million and a benefit from an interest accrual adjustment relating to a tax litigation settlement of $16.3 million.

For the year 1999, net earnings increased 20 percent to $568.4 million, or $4.61 per share, excluding unusual items. This compares with 1998 net earnings of $474.1 million, or $3.81 per share. Sales for 1999 increased 43 percent to $17.0 billion, compared with $11.9 billion in 1998. Excluding LucasVarity, sales for the year increased 1 percent.

Including unusual items, net earnings declined 2 percent in 1999 to $468.8 million, or $3.80 per share, compared with $476.8 million, or $3.83 per share, in 1998. For the year, unusual items resulting in net after-tax charges of $99.6 million included $55.1 million for automotive restructuring; $53.3 million related to the discontinuance of certain products within the warehouse management systems and software security product lines; $147.2 million for expenses related to the LucasVarity acquisition, of which $85.3 million related to purchased in-process research and development; $51.0 million for the write-off of TRW s investment in ICO Global Communications (Holdings) Limited; and $28.1 million for losses on fixed-price type contracts. These charges were partially offset by after-tax gains of $235.1 million from asset sales, primarily related to RFMD stock.

"Driven by the acquisition of LucasVarity, the strengthening of our senior management, and the divestiture of several non-core businesses, 1999 was a year of transformation for TRW," said Joseph T. Gorman, chairman and chief executive officer. "We have entered into new business opportunities, introduced new technologies, and won key contracts, clearly indicating the exciting future of this company.

"In the brief time Dave Cote has been with us as president and chief operating officer, he has focused his total attention on our complex global automotive business," said Gorman. "With his strong operations background, I am confident that Dave will contribute much to the business created by the TRW and LucasVarity combination.

"During the quarter we continued to deliver the balance sheet, and we are on plan to reduce net debt by $2.5 billion by year-end 2000," Gorman said. "Net debt was reduced by $454 million through asset sales, primarily from the sale of RFMD stock and excess property, and improvements in operating working capital.

"Significant progress was made on the previously announced plan to divest non-core automotive operations. During the fourth quarter, we announced the sale of Lucas Diesel Systems for gross proceeds of approximately $875 million. That sale was substantially completed in January 2000. Also in January, we announced the sale of the Nelson Stud Welding operations, which is scheduled to close in the first quarter," Gorman said.

Automotive Operations

Fourth quarter sales in TRW s automotive business increased to $3.1 billion from $1.8 billion in the fourth quarter of 1998, due to the acquisition of LucasVarity. Excluding LucasVarity, fourth quarter sales were $1.8 billion, approximately even with the prior year, as higher volume was offset primarily by the effect of the strong U.S. dollar and price reductions.

Total automotive segment profit before tax and unusual items for the fourth quarter of 1999 increased to $230.1 million, compared with $145.7 million in the fourth quarter of 1998, due to the inclusion of LucasVarity. Excluding LucasVarity results and unusual items, segment profit before tax declined 20 percent to $117.2 million, compared with the fourth quarter of 1998. This decline was primarily due to price reductions, production inefficiencies, and costs associated with the introduction of new products, partially offset by cost reductions.

Calendar year 1999 sales in TRW s automotive business increased to $11.3 billion from $7.2 billion in 1998, due to the acquisition of LucasVarity. Excluding LucasVarity, 1999 sales were $7.2 billion, as the effect of higher volume was offset by price reductions and the effect of the strong U.S. dollar.

Segment profit before tax and unusual items for the year 1999 increased 44 percent to $815.1 million, compared with $567.6 million in 1998, due to the inclusion of LucasVarity. Excluding LucasVarity results and unusual items, segment profit before tax declined 11 percent to $504.3 million, compared to 1998 results. Similar to the fourth quarter variance, this decline was primarily due to price reductions, production inefficiencies, and costs associated with the introduction of new products, partially offset by cost reductions.

The occupant safety systems business continues to expand the scope of crash protection with advanced front- and side-impact and rollover technologies, and it has made significant progress in new business awards. In 1999, the occupant safety systems business was awarded more than $1 billion in annual business beginning fully in 2003. The awarded business will continue for four to five years.

Driven by the acquisition of LucasVarity, the automotive electronics business has nearly doubled in size and has significantly strengthened its market position. Through the combined operations, TRW has become a major player in most segments of that fast-growing market.

Aerospace and Information Systems

In TRW s aerospace and information systems business, fourth quarter sales increased 34 percent to $1.5 billion from $1.1 billion in the fourth quarter of 1998, due to the inclusion of LucasVarity sales and organic growth. Excluding LucasVarity, fourth quarter 1999 sales increased 5 percent, primarily due to the startup of the Astrolink contract and higher volume due to new government contracts in the systems engineering and support marketplace, and the growth of existing space and missile systems and non- defense contracts.

Total aerospace and information systems fourth quarter segment profit before tax and unusual items increased 46 percent to $159.0 million, compared with $109.2 million in the fourth quarter of 1998. Segment profit before tax and unusual items increased due to the LucasVarity acquisition. Excluding LucasVarity and unusual items, fourth quarter 1999 segment profit declined 8 percent to $100.5 million, primarily due to losses associated with the warehouse management product that is being discontinued, and the decline of the Y2K and enterprise resource planning integration business.

Calendar year 1999 sales in TRW s aerospace and information systems business increased to $5.7 billion from $4.7 billion in 1998, due to the acquisition of LucasVarity. Excluding LucasVarity, 1999 sales increased 1 percent as the effect of maturing programs in the first half of 1999 was offset by new business in the second half.

Second half 1999 sales increased 7 percent, excluding LucasVarity. Segment profit before tax and unusual items for the year 1999 increased 23 percent to $551.2 million, compared with $449.4 million in 1998, due to the inclusion of LucasVarity. Excluding LucasVarity results and unusual items, segment profit before tax declined 5 percent, compared with 1998, as improved performance on certain defense contracts were offset by the information technology issues previously described.

TRW announced an expansion of its strategic relationship with RFMD by extending RFMD s existing license for TRW s patented gallium arsenide transistor technology to include its use in commercial coaxial and other non-fiber applications, including the broadband wired market. RFMD granted TRW warrants to purchase additional RFMD shares in exchange for the license expansion.

TRW also demonstrated its continued technological leadership in advanced semiconductor materials with the development of the world s fastest digital integrated circuit--a frequency divider operating at 69 gigahertz. The chip, fabricated using indium phosphide, demonstrates the very high processing speeds that will enable the next generation of fiber-optic and wireless broadband telecommunications systems. In addition, TRW merged its Components International Inc. subsidiary with Cubic Memory Inc. to form Vertical Circuits Inc. (VCI), a company that designs, develops and produces stacked memory chips. TRW holds a 50 percent equity interest in VCI.

Astrolink, a wireless broadband satellite venture founded by TRW, Lockheed Martin, and Telecom Italia, secured substantially all of its remaining equity financing following an investment of $425 million by Liberty Media Group. Liberty Media s holdings in telecommunications, content and Internet businesses make it a strategic addition to the Astrolink partnership. In addition to TRW s equity holding in Astrolink, TRW is building the digital communications payload for the Astrolink satellites.

TRW provides advanced-technology products and services for the automotive, aerospace, and information systems markets. The company s news releases are available through TRW s corporate Web site (http://www.trw.com).

Important factors that could cause TRW s actual results to differ materially from the forward-looking statements contained in this release include the ability to reduce debt, achieve customer awards and funding, realize cost reductions, mitigate pricing pressure, and effectively implement the restructuring program and the integration of LucasVarity into the company. Additional factors can be found in Item 7, "Management s Discussion and Analysis -- Forward-Looking Statements" in the company s most recent Quarterly Report on Form 10-Q. TRW undertakes no obligation to update any forward-looking statement.

Contact:
TRW Inc.
Jay McCaffrey
Tel: 216/291-7179