Basis of Presentation | 9 Months Ended |
Sep. 26, 2014 |
Basis of Presentation [Abstract] | ' |
Basis of Presentation | ' |
3. Basis of Presentation |
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These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 14, 2014. |
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These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements. These financial statements include all adjustments (consisting primarily of normal, recurring adjustments) considered necessary for a fair presentation of the financial position, results of operations and cash flows of the Company. Operating results for the three and nine months ended September 26, 2014 are not necessarily indicative of results that may be expected for the year ending December 31, 2014. |
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The Company follows a fiscal calendar that ends on December 31. However, each fiscal quarter has three periods consisting of one five week period and two four week periods. Each quarterly period ends on a Friday, with the possible exception of the final quarter of the year, which always ends on December 31. |
Earnings Per Share. Basic earnings per share are calculated by dividing net earnings by the weighted average shares outstanding during the period. Diluted earnings per share reflect the weighted average impact of all potentially dilutive securities from the date of issuance, including stock options, RSUs, SSARs and Performance Units. Further, if the inclusion of shares potentially issuable for the Company's 3.50% exchangeable senior unsecured notes (see Note 12) is more dilutive than the inclusion of the interest expense for those exchangeable notes, the Company utilizes the “if-converted” method to calculate diluted earnings per share. Under the if-converted method, the Company adjusts net earnings to add back interest expense and amortization of the discount recognized on the exchangeable notes and includes the number of shares potentially issuable related to the exchangeable notes in the weighted average shares outstanding. |
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If the average market price of the Company's common stock exceeds the exercise price of stock options outstanding or the fair value on the date of grant of the SSARs, the treasury stock method is used to determine the incremental number of shares to be included in the diluted earnings per share computation. |
Net earnings attributable to TRW and the weighted average shares outstanding used in calculating basic and diluted earnings per share were: | | | | | | | | | |
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| | | Three Months Ended | | Nine Months Ended | | | | | | | | |
| | | September 26, | | September 27, | | September 26, | | September 27, | | | | | | | | |
| | | 2014 | | 2013 | | 2014 | | 2013 | | | | | | | | |
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| | | (In millions, except per share amounts) | | | | | | | | |
| Net earnings attributable to TRW | $ | 189 | | | $ | 197 | | | $ | 653 | | | $ | 607 | | | | | | | | | |
| Interest expense on exchangeable notes, net of tax | | - | | | | 1 | | | | 2 | | | | 3 | | | | | | | | | |
| Amortization of discount on exchangeable notes, net of tax | | 1 | | | | 1 | | | | 3 | | | | 3 | | | | | | | | | |
| Net earnings attributable to TRW for purposes of calculating diluted earnings per share | $ | 190 | | | $ | 199 | | | $ | 658 | | | $ | 613 | | | | | | | | | |
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| Basic: | | | | | | | | | | | | | | | | | | | | | | | |
| | Weighted average shares outstanding | | 111.1 | | | | 117 | | | | 111.7 | | | | 118.5 | | | | | | | | | |
| | Basic earnings per share | $ | 1.7 | | | $ | 1.68 | | | $ | 5.85 | | | $ | 5.12 | | | | | | | | | |
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| Diluted: | | | | | | | | | | | | | | | | | | | | | | | |
| | Weighted average shares outstanding | | 111.1 | | | | 117 | | | | 111.7 | | | | 118.5 | | | | | | | | | |
| | Effect of dilutive stock options, RSUs and SSARs | | 1.7 | | | | 1.3 | | | | 1.6 | | | | 1.2 | | | | | | | | | |
| | Shares applicable to exchangeable notes | | 5 | | | | 5.9 | | | | 5 | | | | 5.9 | | | | | | | | | |
| | Diluted weighted average shares outstanding | | 117.8 | | | | 124.2 | | | | 118.3 | | | | 125.6 | | | | | | | | | |
| | Diluted earnings per share | $ | 1.61 | | | $ | 1.6 | | | $ | 5.56 | | | $ | 4.88 | | | | | | | | | |
For the three and nine months ended September 26, 2014, de minimis and approximately 0.6 million securities, respectively, were excluded from the calculation of diluted earnings per share because the inclusion of such securities in the calculation would have been anti-dilutive. |
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For the three and nine months ended September 27, 2013, approximately 0.4 million and 1.6 million securities, respectively, were excluded from the calculation of diluted earnings per share because the inclusion of such securities in the calculation would have been anti-dilutive. |
Equity. The following tables present a rollforward of the changes in equity attributable to TRW shareholders and to the noncontrolling interest. |
| | | Three Months Ended |
| | | 26-Sep-14 | | 27-Sep-13 |
| | | Total | | TRW Shareholders | | Noncontrolling Interest | | Total | | TRW Shareholders | | Noncontrolling Interest |
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| | | (Dollars in millions) |
Beginning balance of equity | | $ | 4,539 | | | $ | 4,324 | | | $ | 215 | | | $ | 3,853 | | | $ | 3,654 | | | $ | 199 | |
Net earnings | | | 198 | | | | 189 | | | | 9 | | | | 206 | | | | 197 | | | | 9 | |
Other comprehensive (losses) earnings | | | -131 | | | | -130 | | | | -1 | | | | 81 | | | | 78 | | | | 3 | |
Changes related to share-based compensation | | | -17 | | | | -17 | | | | - | | | | 19 | | | | 19 | | | | - | |
Repurchase of capital stock | | | - | | | | - | | | | - | | | | -260 | | | | -260 | | | | - | |
Ending balance of equity | | $ | 4,589 | | | $ | 4,366 | | | $ | 223 | | | $ | 3,899 | | | $ | 3,688 | | | $ | 211 | |
| | | Nine Months Ended |
| | | 26-Sep-14 | | 27-Sep-13 |
| | | Total | | TRW Shareholders | | Noncontrolling Interest | | Total | | TRW Shareholders | | Noncontrolling Interest |
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| | | (Dollars in millions) |
Beginning balance of equity | | $ | 4,396 | | | $ | 4,194 | | | $ | 202 | | | $ | 3,769 | | | $ | 3,578 | | | $ | 191 | |
Net earnings | | | 682 | | | | 653 | | | | 29 | | | | 639 | | | | 607 | | | | 32 | |
Other comprehensive (losses) earnings | | | -75 | | | | -70 | | | | -5 | | | | -80 | | | | -83 | | | | 3 | |
Dividends paid to noncontrolling interest | | | -3 | | | | - | | | | -3 | | | | -15 | | | | - | | | | -15 | |
Changes related to share-based compensation | | | -11 | | | | -11 | | | | - | | | | 46 | | | | 46 | | | | - | |
Repurchase of capital stock | | | -400 | | | | -400 | | | | - | | | | -460 | | | | -460 | | | | - | |
Ending balance of equity | | $ | 4,589 | | | $ | 4,366 | | | $ | 223 | | | $ | 3,899 | | | $ | 3,688 | | | $ | 211 | |
The following tables present changes in accumulated other comprehensive earnings (losses) attributable to TRW by component: |
| | | | | Foreign Currency Translation | | Retirement Obligations | | Deferred Cash Flow Hedges | | Total | | | | | | | | | | |
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| | | | | (Dollars in millions) | | | | | | | | | | |
For the three months ended September 26, 2014: | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance attributable to TRW, net of tax | | $ | 78 | | $ | -406 | | $ | 8 | | $ | -320 | | | | | | | | | | |
| | Other comprehensive (losses) earnings before reclassifications, net of tax | | | -152 | | | 14 | | | 7 | | | -131 | | | | | | | | | | |
| | Amounts reclassified from accumulated other comprehensive earnings, net of tax | | | - | | | 1(a) | | | - | | | 1 | | | | | | | | | | |
Other comprehensive (losses) earnings, net of tax | | | -152 | | | 15 | | | 7 | | | -130 | | | | | | | | | | |
Ending balance attributable to TRW, net of tax | | $ | -74 | | $ | -391 | | $ | 15 | | $ | -450 | | | | | | | | | | |
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For the three months ended September 27, 2013: | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance attributable to TRW, net of tax | | $ | -34 | | $ | -577 | | $ | -16 | | $ | -627 | | | | | | | | | | |
| | Other comprehensive earnings (losses) before reclassifications, net of tax | | | 67 | | | -10 | | | 16 | | | 73 | | | | | | | | | | |
| | Amounts reclassified from accumulated other comprehensive earnings (losses), net of tax | | | - | | | 5(b) | | | - | | | 5 | | | | | | | | | | |
Other comprehensive earnings (losses), net of tax | | | 67 | | | -5 | | | 16 | | | 78 | | | | | | | | | | |
Ending balance attributable to TRW, net of tax | | $ | 33 | | $ | -582 | | $ | - | | $ | -549 | | | | | | | | | | |
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(a) | Includes actuarial gains of $4 million, reduced by prior service cost of $3 million, net of tax of a de minimis amount. | | | | | | | | | | |
(b) | Includes actuarial gains of $11 million, reduced by prior service cost of $4 million, net of tax of $2 million. | | | | | | | | | | |
| | | | | Foreign Currency Translation | | Retirement Obligations | | Deferred Cash Flow Hedges | | Total | | | | | | | | | | |
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| | | | | (Dollars in millions) | | | | | | | | | | |
For the nine months ended September 26, 2014: | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance attributable to TRW, net of tax | | $ | 41 | | $ | -405 | | $ | -16 | | $ | -380 | | | | | | | | | | |
| | Other comprehensive (losses) earnings before reclassifications, net of tax | | | -115 | | | 11 | | | 27 | | | -77 | | | | | | | | | | |
| | Amounts reclassified from accumulated other comprehensive earnings, net of tax | | | - | | | 3(a) | | | 4 | | | 7 | | | | | | | | | | |
Other comprehensive (losses) earnings, net of tax | | | -115 | | | 14 | | | 31 | | | -70 | | | | | | | | | | |
Ending balance attributable to TRW, net of tax | | $ | -74 | | $ | -391 | | $ | 15 | | $ | -450 | | | | | | | | | | |
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For the nine months ended September 27, 2013: | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance attributable to TRW, net of tax | | $ | 83 | | $ | -559 | | $ | 10 | | $ | -466 | | | | | | | | | | |
| | Other comprehensive losses before reclassifications, net of tax | | | -50 | | | -37 | | | -9 | | | -96 | | | | | | | | | | |
| | Amounts reclassified from accumulated other comprehensive earnings (losses), net of tax | | | - | | | 14(b) | | | -1 | | | 13 | | | | | | | | | | |
Other comprehensive losses, net of tax | | | -50 | | | -23 | | | -10 | | | -83 | | | | | | | | | | |
Ending balance attributable to TRW, net of tax | | $ | 33 | | $ | -582 | | $ | - | | $ | -549 | | | | | | | | | | |
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(a) | Includes actuarial gains of $13 million, reduced by prior service cost of $9 million, net of tax of $1 million. | | | | | | | | | | |
(b) | Includes actuarial gains of $33 million, reduced by prior service cost of $13 million, net of tax of $6 million. | | | | | | | | | | |
Warranties. Product warranty liabilities are recorded based upon management estimates including such factors as the written agreement with the customer, the length of the warranty period, the historical performance of the product and likely changes in performance of newer products and the mix and volume of products sold. Product warranty liabilities are reviewed on a regular basis and adjusted to reflect actual experience. |
| The following table presents the movement in the product warranty liability for the periods indicated: | | | | | | | | | | | | | | | | |
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| | | Nine Months Ended | | | | | | | | | | | | | | | | |
| | | September 26, | | September 27, | | | | | | | | | | | | | | | | |
| | | 2014 | | 2013 | | | | | | | | | | | | | | | | |
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| | | (Dollars in millions) | | | | | | | | | | | | | | | | |
| Beginning balance | | $ | 152 | | | $ | 140 | | | | | | | | | | | | | | | | | |
| Current period accruals, net of changes in estimates | | | 33 | | | | 44 | | | | | | | | | | | | | | | | | |
| Accruals related to divestitures | | | -2 | | | | - | | | | | | | | | | | | | | | | | |
| Used for purposes intended | | | -28 | | | | -30 | | | | | | | | | | | | | | | | | |
| Effects of foreign currency translation | | | -5 | | | | -1 | | | | | | | | | | | | | | | | | |
| Ending balance | | $ | 150 | | | $ | 153 | | | | | | | | | | | | | | | | | |
Recently Issued Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which provides a single revenue recognition model intended to improve comparability over a range of industries, companies and geographical boundaries and is intended to enhance disclosures. The standard is effective retrospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2016. Early adoption is not permitted. The Company is currently assessing the potential impact on its operations and financial statements. |
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In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40),” which requires management to evaluate, at each annual and interim reporting period, whether there is substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued and provide related footnote disclosures. The standard is effective for the annual period ending after December 15, 2016 and for the annual and interim periods thereafter. Early adoption is permitted. This standard is not expected to have a material impact on the Company's financial statements. |
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