[LOGO OF TRW]
1999
SEC FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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 Identification
incorporation or organization) No.)
1900 Richmond Road, Cleveland, Ohio 44124
(Address of principal executive offices) (Zip Code)
(216) 291-7000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, par value $0.625 per share New York Stock Exchange
Chicago Stock Exchange
Pacific Exchange
Philadelphia Stock Exchange
Cumulative Serial Preference Stock II, New York Stock Exchange
$4.40 Convertible Series 1
Cumulative Serial Preference Stock II, New York Stock Exchange
$4.50 Convertible Series 3
Securities registered pursuant to Section 12(g) of the Act:
None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the registrant's voting and non-voting common
equity held by non-affiliates was $6,539,816,584 as of March 1, 2000. This
amount was computed on the basis of the closing price of the registrant's
voting securities included in the NYSE-Composite Transactions report for such
date, as published in the Midwest edition of The Wall Street Journal.
As of March 1, 2000 there were 122,273,759 shares of TRW Common Stock, $0.625
par value, outstanding.
The following documents have been incorporated herein by reference to the
extent indicated herein:
TRW Proxy Statement dated March 17, 2000 Part III
TRW Annual Report to Security Holders for the year ended Parts I, II
December 31, 1999 and IV
TRW INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1999
Page
----
Part I
------
Item 1. Business...................................................... 1
Item 2. Properties.................................................... 12
Item 3. Legal Proceedings............................................. 15
Item 4. Submission of Matters to a Vote of Security Holders........... 16
Executive Officers of the Registrant.................................... 17
Part II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters....................................................... 19
Item 6. Selected Financial Data....................................... 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 20
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.... 20
Item 8. Financial Statements and Supplementary Data................... 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................... 20
Part III
--------
Item 10. Directors and Executive Officers of the Registrant............ 20
Item 11. Executive Compensation........................................ 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................... 21
Item 13. Certain Relationships and Related Transactions................ 21
Part IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K........................................................... 21
PART I
ITEM 1. BUSINESS.
INDUSTRY SEGMENTS AND PRODUCT CLASSIFICATIONS
TRW is an international company that provides advanced technology products and
services. The principal businesses of TRW and its subsidiaries are the design,
manufacture and sale of products and the performance of systems engineering,
research and technical services for industry and the United States Government
in the automotive and aerospace and information systems markets. TRW operates
its business in the following seven operating segments:
. Occupant Safety Systems;
. Chassis Systems;
. Automotive Electronics;
. Other Automotive;
. Space & Electronics;
. Systems & Information Technology; and
. Aeronautical Systems.
TRW was incorporated under the laws of Ohio on June 17, 1916. When used in
this report, the terms "TRW" and the "Company" refer to TRW Inc. or to TRW
Inc. and its subsidiaries.
Automotive
TRW's automotive businesses design, manufacture and sell a broad range of
steering, suspension, braking, engine, safety, electronic, engineered
fastening and other components and systems for passenger cars, light trucks
and commercial vehicles through four operating segments. TRW sells the
products included in these businesses primarily to automotive original
equipment manufacturers. In addition, TRW sells its automotive components for
use as aftermarket and service parts to automotive original equipment
manufacturers and others for resale through their own independent distribution
networks.
Occupant Safety Systems
TRW's Occupant Safety Systems business focuses on the design, manufacture and
sale of:
. inflatable restraint systems, including complete air bag systems for driver,
passenger, side-impact and rollover applications in cars and light trucks;
. seat belt systems, including retractor and buckle assemblies, pyrotechnic
retractor and buckle assemblies, energy management devices, height
adjusters, seat integrated restraints and integrated child restraints; and
. steering wheel systems, including steering wheel and air bag covers and a
full range of steering wheels, from base wheels to top-of-the-line, that
incorporate leather, wood, multifunctional switches and integral air bag
modules.
TRW sells the products included in its Occupant Safety Systems business to
major vehicle manufacturers worldwide.
1
Chassis Systems
TRW's Chassis Systems business focuses on the design, manufacture and sale of:
. steering systems and components, including hydraulic and electrically
assisted power and manual rack and pinion steering systems;
. suspension components;
. chassis modules and integrated vehicle control systems;
. vehicle dynamic control systems, consisting of two-wheel and four-wheel
anti-lock braking systems (ABS), ABS sensors and proportioning valves,
traction control systems, vehicle stability management systems,
electrohydraulic braking systems, electronic brake management systems and
adaptive cruise control systems;
. foundation brake systems, consisting of disc brake assemblies and
components, drum brake assemblies and components, brake proportioning valves
and wheel cylinders;
. brake actuation systems, consisting of mechanically and electronically
actuated boosters and master cylinders;
. brake modules, consisting of front and rear corner modules, brake and axle
modular assemblies and pedal box modules; and
. aftermarket operations, including parts, service and technical and
diagnostic support.
TRW sells the products included in its Chassis Systems business to major
original equipment (OE) vehicle manufacturers worldwide and to their
suppliers.
Automotive Electronics
TRW's Automotive Electronics business focuses on the design, manufacture and
sale of:
. safety electronics systems, including front and side air bag crash sensors,
air bag diagnostic modules, vehicle rollover sensors, active safety products
and "smart" restraint electronics;
. access and security electronics systems, including remote keyless entry
systems, integrated control units, body computers, advanced theft-deterrent
and security systems, vehicle communications systems, tire pressure sensing,
lock cylinders and key sets;
. vehicle dynamics electronics, including antilock braking, electrically
powered steering, electrically powered hydraulic steering and adaptive
cruise control systems;
. display and heating, ventilating and air conditioning electronics, including
heating, ventilating and air conditioning controls and actuators, air vents,
motors, instrument clusters, overhead consoles, panel controls and secondary
displays;
. power management controls, including fuse boxes, power supply, variable
voltage systems and intelligent distribution systems;
. man/machine interface controls and switches, including a wide array of
automotive ergonomic applications such as steering column and wheel
switches, rotary connectors, instrument panel switches, climate controls,
rotary light switches, seat controls, window lift switches, convenience
controllers, rain sensors, transmission switches and air bag disable
switches;
. engineered, plastic and metal fasteners and precision plastic moldings and
assemblies; and
. control systems, including rotary, linear and bi-directional actuators,
packaged switches and variable reluctance sensors for automotive and
industrial applications; silicon micro-machined die and pressure sensors for
medical and automotive applications; rotary, linear and tilt position
sensors for industrial applications; and silicone rubber keypads and switch
assemblies for cellular phones and hand-held devices.
TRW sells the products included in its Automotive Electronics business
primarily to major OE vehicle manufacturers worldwide and to their suppliers.
2
Other Automotive
TRW's Other Automotive businesses focus on the design, manufacture and sale
of:
. engine components and systems, including engine valves, valve cotters, valve
rotators, valve stem guides, valve retaining caps, valve train systems and
valve seat inserts; and
. commercial steering systems and components, including integral power
steering gears, power steering pumps, steering columns, intermediate
steering shafts, steering cylinders, steering linkages, torque rods, tie
rods, control rods, drag links, suspension ball joints, shifter linkages,
pitman arms and ball sockets.
TRW sells its engine components and systems to major OE vehicle manufacturers
worldwide and to their suppliers. TRW's commercial steering systems and
components are sold to heavy duty vehicle manufacturers in North and South
America, Europe and the Asia Pacific region.
Also included within TRW's Other Automotive segment in 1999 were its Lucas
Diesel Systems, TRW Nelson Stud Welding and the LucasVarity wiring businesses.
Lucas Diesel Systems designs, manufactures and sells diesel fuel injection
equipment for automotive and industrial engines. The sale of Lucas Diesel was
substantially completed on January 7, 2000. TRW Nelson Stud Welding designs,
manufactures and sells stud welding systems and related stud fasteners to
industrial, metal working, transportation and construction markets, as well as
to automotive manufacturers, worldwide. In January 2000, the Company reached a
definitive agreement to sell TRW Nelson Stud Welding. The transaction is
expected to close by the end of the first quarter of 2000. The LucasVarity
wiring businesses design, manufacture and sell wiring harnesses and components
for automotive vehicle manufacturers. The sale of one of these businesses was
completed during the fourth quarter of 1999 and the sale of the remaining
business was completed during the first quarter of 2000.
Aerospace & Information Systems
TRW's aerospace and information systems businesses include: spacecraft systems
and subsystems; electronic systems, equipment, components and services;
systems integration, systems engineering services and software development;
information technology systems and services; and aeronautical systems.
TRW sells and distributes its products and services in its aerospace and
information systems businesses principally to the United States Government,
agencies of the United States Government, state, local and foreign governments
and international and commercial customers.
While classified projects are not discussed in this report, the operating
results relating to classified projects are included in the Company's
consolidated financial statements, and the business risks associated with
these projects do not differ materially from those of other projects for the
U.S. Government.
TRW also performs diverse testing and general research projects in many of the
technical disciplines related to its aerospace and information systems
products and services under both private and U.S. Government contracts.
Space & Electronics
TRW's Space & Electronics business focuses on the design and manufacture of:
. spacecraft systems and subsystems;
. electronic systems, including communication systems for space and defense;
. commercial telecommunications products;
. digital broadband space payloads;
. space science instruments;
. advanced avionics systems;
. high energy laser systems; and
. spacecraft products, including solar arrays and reflectors.
3
TRW's Space & Electronics business also offers systems engineering and
advanced technology research and development services to its customers.
TRW's Space & Electronics business sells its products and services primarily
to the U.S. Government for both military and civilian applications, as well as
to international and commercial customers.
Systems & Information Technology
TRW's Systems & Information Technology business offers its customers systems
engineering, systems integration, software development, modeling and
simulation, test and evaluation, training and information technology for high
technology systems, products and services in the fields of:
. command and control;
. strategic missiles;
. missile and air defense;
. airborne reconnaissance;
. unmanned aerial vehicles;
. intelligence management and processing;
. earth observation;
. nuclear waste management;
. air traffic control;
. counterterrorism;
. security;
. criminal justice;
. health and human services;
. integrated supply chain;
. warehousing;
. logistics;
. tax; and
. finance.
The programs and services offered by TRW's Systems & Information Technology
business are sold to the U.S. Government and its agencies, state and local
government agencies, foreign governments and commercial customers.
Aeronautical Systems
TRW's Aeronautical Systems business is comprised entirely of the former
LucasVarity aerospace business, acquired in connection with TRW's acquisition
of LucasVarity in March 1999.
TRW's Aeronautical Systems business designs and manufactures high integrity
systems and equipment in the following product areas:
. cargo systems;
. engine controls;
. flight controls;
. power generation and management;
. hoists and winches;
. missile actuation; and
. equipment services.
TRW sells its aeronautical systems to the world's major airlines and aircraft
producers, as well as to the U.S. Government and international governments and
agencies.
4
RESULTS BY SEGMENT
Reference is made to the information relating to the Company's industry
segments, including sales, profit before taxes and segment assets attributable
to each segment for each of the years 1997 through 1999, presented under the
note entitled "Operating Segments" in the Notes to Financial Statements on
pages 60 through 62 of the TRW 1999 Annual Report. This information is
incorporated herein by reference.
FOREIGN AND DOMESTIC OPERATIONS
TRW manufactures products or has principal facilities in 29 countries
throughout the world. TRW's operations outside the United States are in
Argentina, Australia, Austria, Bahrain, Brazil, Canada, China, the Czech
Republic, Egypt, France, Germany, India, Italy, Japan, Malaysia, Mexico, the
Netherlands, Oman, Poland, Portugal, Saudi Arabia, South Africa, South Korea,
Spain, Taiwan, Thailand, Turkey and the United Kingdom. TRW also exports
products manufactured by it in the United States. Such export sales accounted
for:
. 6 percent of total sales during 1999, or $1,039 million;
. 6 percent of total sales during 1998, or $674 million; and
. 7 percent of total sales during 1997, or $732 million.
TRW's foreign operations are subject to the usual risks that may affect such
operations, including, among other things:
. customary exchange controls and currency restrictions;
. currency fluctuations and devaluations;
. changes in local economic conditions;
. exposure to possible expropriation or other government actions;
. unsettled political conditions; and
. foreign government-sponsored boycotts of the Company's products or services
for noncommercial reasons.
Most of the identifiable assets associated with TRW's foreign operations are
located in countries where the Company believes such risks to be minimal. In
recent years, economic conditions in the Asia Pacific region and Latin
America, primarily Brazil, have had a negative impact on the Company's
operations. Future economic conditions in these regions could have continued
unfavorable effects in 2000.
Reference is made to the information relating to the dollar amounts of sales
and property, plant and equipment-net by geographic area for each of the years
1997 through 1999 presented under the note entitled "Operating Segments" in
the Notes to Financial Statements on pages 60 through 62 of the TRW 1999
Annual Report. This information is incorporated herein by reference.
5
GENERAL
Competition
TRW encounters intense competition in substantially all segments of its
business. The Company's competitive position varies for its different products
and services. However, TRW believes that it is a significant supplier of many
of the products it manufactures and of many of the services it provides.
In the automotive businesses, competitors include independent suppliers of
parts and components as well as the Company's original equipment customers,
many of whom are integrated manufacturers who produce or could produce
substantial portions of their requirements for parts and components
internally. Some of the integrated manufacturers are becoming more aggressive
in attempting to sell components to other automotive manufacturers and have or
are considering spinning off all or a portion of their components operations
which might also make such operations more aggressive competitors. Depending
on the particular product, the number of the Company's competitors varies
significantly and many of the products have high capital requirements and
require high engineering content. In the automotive businesses and in the
Aeronautical Systems business, the principal methods of competition are:
. price;
. engineering excellence;
. product quality;
. customer service;
. delivery time; and
. proprietary position.
TRW competes for contracts covering a variety of U.S. Government and
commercial projects and programs in the Space & Electronics and Systems &
Information Technology businesses of its aerospace and information systems
business. Such competition is based primarily on:
. technical ability;
. product quality; and
. price.
TRW's competitors for U.S. Government contracts typically are large,
technically-competent firms with substantial assets, some of which have become
considerably larger in recent years.
Customers
Sales, directly and indirectly, to the United States Government, including the
Department of Defense, the National Aeronautics & Space Administration and
other agencies, represented the following percentages of TRW's total sales:
. 25 percent for 1999, or $4,248 million;
. 35 percent for 1998, or $4,119 million; and
. 33 percent for 1997, or $3,523 million.
6
Sales, directly and indirectly, to the United States Government, including the
Department of Defense, the National Aeronautics & Space Administration and
other agencies, represented the following percentages of the sales of the
aerospace and information systems businesses:
Systems & Information
Space & Electronics Technology Aeronautical Systems
---------------------- ---------------------- ----------------------
Year Percent $(In millions) Percent $(In millions) Percent $(In millions)
- ---- ------- -------------- ------- -------------- ------- --------------
1999 31% $1,748 43% $2,438 1% $51
1998 39% 1,804 49% 2,314 -- --
1997 50% 1,881 43% 1,641 -- --
As with all companies engaged in U.S. Government contracting, TRW is subject
to certain unique business risks, including:
. dependence on Congressional appropriations and administrative allotment of
funds;
. changes in U.S. Government policies that may reflect military and political
developments;
. time required for design and development;
. significant changes in contract scheduling;
. complexity of designs and the rapidity with which they become obsolete;
. necessity of design improvements;
. difficulty in forecasting costs and schedules when bidding on developmental
and highly sophisticated technical work; and
. other factors characteristic of the industry.
United States Government contracting laws also provide that the United States
Government is to do business only with responsible contractors. In this
regard, the United States Department of Defense and other federal agencies
have the authority, under certain circumstances, to suspend or debar a
contractor or organizational parts of a contractor from further U.S.
Government contracting for a certain period "to protect the Government's
interest." Such action may be taken for, among other reasons, commission of
fraud or a criminal offense in connection with a U.S. Government contract. A
suspension may also be imposed if a contractor is indicted for such matters.
In the event of any suspension or debarment, TRW's existing contracts would
continue unless terminated or canceled by the U.S. Government under applicable
contract provisions.
Other than the United States Government, TRW's largest customers (determined
by including sales to their affiliates throughout the world but excluding
sales to such customers or their affiliates that ultimately result in sales to
the United States Government) are Ford Motor Company, DaimlerChrysler AG,
General Motors Corporation and Volkswagen AG. Such sales by each of TRW's
automotive segments to Ford, DaimlerChrysler, General Motors and Volkswagen,
and their respective subsidiaries, accounted for the following percentages of
the sales of each of the automotive segments:
7
Ford:
Occupant Safety Automotive
Year Systems Chassis Systems Electronics Other Automotive
- ---- --------------- --------------- ----------- ----------------
1999 33% 16% 11% 9%
1998 33% 11% 14% 5%
1997 33% 12% 15% 7%
DaimlerChrysler:
Occupant Safety Automotive
Year Systems Chassis Systems Electronics Other Automotive
- ---- --------------- --------------- ----------- ----------------
1999 10% 15% 19% 7%
1998 9% 16% 21% 9%
1997/1/ 4% 13% 21% --
General Motors:
Occupant Safety Automotive
Year Systems Chassis Systems Electronics Other Automotive
- ---- --------------- --------------- ----------- ----------------
1999 10% 12% 9% 8%
1998 10% 7% 7% 14%
1997 9% 3% 6% 15%
Volkswagen:
Occupant Safety Automotive
Year Systems Chassis Systems Electronics Other Automotive
- ---- --------------- --------------- ----------- ----------------
1999 14% 9% 8% 4%
1998 16% 12% 11% 8%
1997 12% 13% 9% 9%
Such sales by TRW's automotive businesses to Ford and its subsidiaries
accounted for the following percentages of TRW's total sales:
. 13 percent for 1999, or $2,143 million;
. 12 percent for 1998, or $1,423 million; and
. 14 percent for 1997, or $1,469 million.
- --------
/1/1997 sales to DaimlerChrysler pre-date the merger of Chrysler Corporation
and DaimlerBenz AG and reflect only sales by TRW's automotive businesses to
Chrysler Corporation.
8
Backlog
The backlog of orders for TRW's operations is estimated to have been
approximately $7.2 billion at December 31, 1999 and $6.0 billion at December
31, 1998. Of those amounts, U.S. Government business, directly or indirectly,
is estimated to have accounted for approximately $5.6 billion at December 31,
1999 and $5.1 billion at December 31, 1998, substantially all of which is
related to the aerospace and information systems businesses. Reported backlog
at December 31, 1999 and 1998 does not include approximately $5.2 billion and
$5.8 billion, respectively, of negotiated and priced, but unexercised, options
of the Company's customers to purchase products and services from TRW for
defense and non-defense programs. The exercise of options is at the discretion
of the customer and, in the case of U.S. Government contracts, is dependent on
future government funding. Of the total backlog, 98 percent at December 31,
1999 and 96 percent at December 31, 1998 was attributable to the aerospace and
information systems business. Of the backlog attributable to the aerospace and
information systems business, the following percentages were attributable to
each of the segments comprising that business:
Systems &
Space & Information Aeronautical
Year Electronics Technology Systems
- ---- ----------- ----------- ------------
1999 43% 52% 5%
1998 47% 53% --
The determination of TRW's backlog involves substantial estimating,
particularly with respect to customer requirements contracts and long-term
contracts of a cost-reimbursement or incentive nature. A substantial portion
of the variations in TRW's estimated backlog in recent years is attributable
to the timing of the award and performance of U.S. Government and certain
other contracts. Subject to various qualifications, including those set forth
herein, and assuming no terminations, cancellations or changes and completion
of orders in the normal course of business, TRW has estimated that
approximately 54 percent of the December 31, 1999 backlog will be delivered in
2000, 32 percent in 2001 and 14 percent thereafter.
United States Government contracts and related customer orders generally may
be terminated in whole or in part at the convenience of the United States
Government whenever the United States Government believes that such
termination would be in its best interest. Multi-year U.S. Government
contracts and related orders may be canceled if funds for contract performance
for any subsequent contract year become unavailable. If any of its U.S.
Government contracts were terminated or canceled under these circumstances,
TRW generally would be entitled to receive payment for work completed and
allowable termination or cancellation costs. Whether the occurrence of any
such termination or cancellation would have an adverse effect on TRW would
depend upon the particular contract and the circumstances of the termination
or cancellation.
Backlog data and comparisons as of different dates may not be reliable
indicators of either future sales or the ratio of future direct and indirect
U.S. Government sales to other sales.
Intellectual Property
TRW owns significant intellectual property, including a large number of
patents, copyrights and trade secrets, and is involved in numerous licensing
arrangements. Although TRW's intellectual property plays an important role in
maintaining TRW's competitive position in a number of the markets that it
serves, no single patent, copyright, trade secret or license, or group of
related patents, copyrights, trade secrets or licenses, is, in the opinion of
management, of such value to TRW that the business of TRW or of any industry
segment of TRW would be materially affected by the expiration or termination
thereof. TRW's general policy is to apply for patents on an ongoing basis in
the United States and appropriate other countries on its significant
patentable developments.
9
TRW also views its name and mark as significant to its business as a whole. In
addition, TRW owns a number of other trade names and marks applicable to
certain of its businesses and products that it views as important to such
businesses and products.
Research and Development
Research and development costs totaled:
. $2,168 million in 1999;
. $2,143 million in 1998; and
. $2,146 million in 1997.
Of these amounts, customer-funded research and development was:
. $1,249 million in 1999;
. $1,425 million in 1998; and
. $1,501 million in 1997.
Company-funded research and development costs, which included research and
development for commercial products, independent research and development and
bid and proposal work related to government products and services, totaled:
. $609 million in 1999;
. $522 million in 1998; and
. $461 million in 1997.
A portion of the cost incurred for independent research and development and
bid and proposal work is recoverable through overhead charged to government
contracts.
Company-funded product development costs, including engineering and field
support for new customer requirements, were:
. $310 million in 1999;
. $196 million in 1998; and
. $184 million in 1997.
The 1999 and 1997 research and development costs exclude the $85 million and
$548 million charges for purchased in-process research and development
associated with the acquisitions of LucasVarity plc and BDM International,
Inc., respectively. Reference is made to the information concerning these
charges in "Management's Discussion and Analysis of the Results of Operations
and Financial Condition" under the caption "Acquisitions" on pages 33 through
35 of the TRW 1999 Annual Report and the note entitled "Acquisitions" in the
Notes to Financial Statements on pages 48 through 50 of the TRW 1999 Annual
Report. This information is incorporated herein by reference.
Employees
At December 31, 1999, TRW had approximately 122,000 employees, of whom
approximately 45,000 were employed in the United States and 48,000 were
employed in Europe.
10
Raw Materials and Supplies
Materials used by TRW include or contain:
. steel . sodium azide
. aluminum . glass
. carbon and plastic . ceramics
materials . plastic powders and
. stainless steel laminations
. pig iron . synthetic rubber
. ferro-chrome . paper
. brass . gold, silver, nickel, zinc and
. copper copper plating materials
. tin . electronics
. platinum . friction materials
. special alloys
TRW also purchases from suppliers various types of equipment and component
parts that may include these materials. TRW's operations depend upon the
ability of its suppliers of materials, equipment and component parts to meet
performance and quality specifications and delivery schedules. In some cases,
there are only a limited number of suppliers for a material or product due to
the specialized nature of the item. Shortages of certain raw materials,
equipment and component parts have existed in the past and may exist again in
the future. TRW has taken a number of steps to protect against and to minimize
the effect of such shortages. However, any future inability of TRW to obtain
raw materials, equipment or component parts could have a material adverse
effect on the Company. TRW's operations also depend on adequate supplies of
energy. TRW has continued its programs to conserve energy used in its
operations and has available alternative sources of energy.
Environmental Regulations
Federal, state and local requirements relating to the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, have had, and will continue to have, an effect on TRW and its
operations. TRW has made and continues to make expenditures for projects
relating to the environment, including pollution control devices for new and
existing facilities. TRW is conducting a number of environmental
investigations and remedial actions at current and former TRW locations to
comply with various federal, state and local laws and, along with other
companies, has been named a potentially responsible party for certain waste
management sites. Each of these matters is subject to various uncertainties,
and some of these matters may be resolved unfavorably to TRW.
A reserve estimate reflecting cost ranges is established using standard
engineering cost estimating techniques for each matter for which sufficient
information is available. In the determination of cost ranges, the
professional judgment of TRW's environmental engineers, in consultation with
outside environmental specialists, when necessary, is considered. At multi-
party sites, the reserve estimate also reflects the expected allocation of
total project costs among the various potentially responsible parties. At
December 31, 1999, TRW had reserves for environmental matters of $136 million,
including $13 million of additional expense recorded during the year and $66
million of reserves relating to the LucasVarity acquisition. TRW aggressively
pursues reimbursement for environmental costs from its insurance carriers.
Insurance recoveries are recorded as a reduction of environmental costs when
fixed and determinable.
TRW does not believe that compliance with environmental protection laws and
regulations will have a material effect upon its capital expenditures or
competitive position, and TRW's capital expenditures for environmental control
facilities during 2000 and 2001 are not expected to be material to the
Company. TRW believes that any liability that may result from the resolution
of environmental matters for which sufficient information is available to
support cost estimates will not have a material adverse effect on the
Company's earnings. However, TRW cannot predict the effect on the Company's
earnings of expenditures for aspects of certain matters for which
11
there is insufficient information. See also "Legal Proceedings" on page 15 of
this Annual Report on Form 10-K. In addition, TRW cannot predict the effect on
the Company's earnings of compliance with environmental laws and regulations
with respect to currently unknown environmental matters or the possible effect
on the Company's earnings of compliance with environmental requirements
imposed in the future.
Capital Expenditures -- Property, Plant and Equipment
During the five years ended December 31, 1999, TRW's capital expenditures and
the net book value of its assets retired or sold were:
Capital Expenditures
(In Millions) (In Millions)
------------------------------- -----------------
Land, Buildings Machinery Net Book Value
Year Ended and Leasehold and of Assets Retired
December 31, Improvements Equipment Total or Sold
- ------------ --------------- --------- ----- -----------------
1999........................ $98 $691 $789 $111
1998........................ 92 452 544 40
1997........................ 86 463 549 54
1996........................ 76 424 500 29
1995........................ 74 392 466 21
On a segment basis, capital expenditures during 1999 and 1998 were as follows:
Capital Expenditures
(In Millions)
-------------------------
Year Ended Year Ended
December 31, December 31,
1999 1998
------------ ------------
Occupant Safety Systems............................... $118 $152
Chassis Systems....................................... 267 107
Automotive Electronics................................ 84 86
Other Automotive...................................... 126 45
Space & Electronics................................... 99 115
Systems & Information Technology...................... 38 32
Aeronautical Systems.................................. 55 --
Of total capital expenditures, 42 percent in 1999 and 52 percent in 1998 were
invested in the United States.
ITEM 2. PROPERTIES.
TRW's operations include numerous manufacturing, research and development and
warehousing facilities. TRW owns or leases principal facilities located in 25
states plus the District of Columbia in the United States and in 28 other
countries. Approximately 46 percent of the principal domestic facilities are
used by the automotive businesses, 52 percent are used by the aerospace and
information systems businesses and 2 percent are used at the corporate level.
The automotive businesses use a substantial majority of the foreign
facilities.
Of the total number of principal facilities operated by TRW, approximately 56
percent of such facilities are owned, 35 percent are leased, 5 percent are
held by joint ventures in which TRW has a majority interest and 4 percent are
operated on property owned directly or indirectly by the U.S. Government. The
Company owns its world headquarters in Lyndhurst, Ohio as well as the
headquarters for its Space & Electronics segment in Redondo Beach, California,
its Aeronautical Systems segment in Birmingham, England and its Occupant
Safety Systems segment in Washington, Michigan.
12
The Company also owns, leases or operates on government-owned property,
certain smaller research and development properties and administrative,
marketing, sales and office facilities throughout the United States and in
various parts of the world.
A summary of TRW's principal facilities, by segment, type of facility and
geographic region, is set forth in the following tables. The multi-purpose
facilities are listed under each category for which a portion of the square
footage of that facility is used. For example, TRW's headquarters for its
Space & Electronics segment in Redondo Beach, California is categorized as a
manufacturing facility, a research and development facility and as office
space, as significant portions of its square footage are utilized for each of
these purposes. Additionally, where more than one segment utilizes a single
facility, that facility will be categorized by the purposes for which it is
used by each such segment. For example, TRW's Redondo Beach facility serves
not only as the headquarters and a manufacturing and research and development
facility for its Space & Electronics business but is also utilized by its
Systems & Information Technology business as both office space and a research
and development facility. As such, this facility will appear in the following
tables under both Space & Electronics and Systems & Information Technology.
Automotive Segments
Occupant Safety Systems
North Asia
Principal Use of Facility America Europe Pacific Other Total
------------------------- ------- ------ ------- ----- -----
Research and Development..................... 2 -- -- -- 2
Manufacturing................................ 10 16 1 2 29
Warehouse.................................... 2 1 -- -- 3
Office....................................... 3 -- -- -- 3
Total........................................ 17 17 1 2 37
Chassis Systems
North Asia
Principal Use of Facility America Europe Pacific Other Total
------------------------- ------- ------ ------- ----- -----
Research and Development..................... 1 -- -- -- 1
Manufacturing................................ 22 28 10 7 67
Warehouse.................................... 4 6 -- 1 11
Office....................................... 2 2 -- -- 4
Total........................................ 29 36 10 8 83
Automotive Electronics
North Asia
Principal Use of Facility America Europe Pacific Other Total
------------------------- ------- ------ ------- ----- -----
Research and Development..................... 1 1 -- 1 3
Manufacturing................................ 14 20 4 1 39
Office....................................... 2 -- -- -- 2
Total........................................ 17 21 4 2 44
13
Other Automotive
North Asia
Principal Use of Facility America Europe Pacific Other Total
------------------------- ------- ------ ------- ----- -----
Research and Development..................... -- 1 -- -- 1
Manufacturing................................ 7 9 1 2 19
Warehouse.................................... -- 1 -- -- 1
Office....................................... 1 -- -- -- 1
Total........................................ 8 11 1 2 22
Aerospace & Information Systems Segments
Space & Electronics
North Asia
Principal Use of Facility America Europe Pacific Other Total
------------------------- ------- ------ ------- ----- -----
Research and Development..................... 4 -- -- -- 4
Manufacturing................................ 2 -- -- -- 2
Warehouse.................................... 1 -- -- -- 1
Office....................................... 6 -- -- -- 6
Total........................................ 13 -- -- -- 13
Systems & Information Technology
North Asia
Principal Use of Facility America Europe Pacific Other Total
------------------------- ------- ------ ------- ----- -----
Research and Development..................... 2 -- -- -- 2
Warehouse.................................... 5 -- -- -- 5
Office....................................... 36 1 -- 6 43
Total........................................ 43 1 -- 6 50
Aeronautical Systems
North Asia
Principal Use of Facility America Europe Pacific Other Total
------------------------- ------- ------ ------- ----- -----
Manufacturing................................ 4 11 -- -- 15
Office....................................... 4 3 -- -- 7
Total........................................ 8 14 -- -- 22
In addition to the facilities set forth in the foregoing tables, TRW also
maintains approximately eleven facilities that it utilizes as office space at
the corporate level. Two of such facilities are located in North America, one
in Europe and the remaining eight facilities are located in the Asia Pacific
region.
In the opinion of management, the Company's facilities are generally well
maintained and are suitable and adequate for their intended use.
For additional information concerning TRW's long-term rental obligations under
operating leases, see the note entitled "Lease Commitments" in the Notes to
Financial Statements on page 57 of the TRW 1999 Annual Report. This
information is incorporated herein by reference.
14
ITEM 3. LEGAL PROCEEDINGS.
During 1996, the United States Department of Justice, or the DOJ, advised the
Company that it had been named as a defendant in two lawsuits brought by
Richard D. Bagley, a former employee of the Company's former Space &
Technology Group, and originally 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. The Act
permits an individual to bring suit in the name of the United States and share
in any recovery. The allegations in the lawsuits relate to the classification
of 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. On February 13, 1998, the DOJ intervened in the litigation. On
February 19, 1998 and March 4, 1998, Bagley filed amended complaints in the
Central District of California that realleged certain of the claims included
in the 1994 and 1995 lawsuits and omitted the remainder. The amended
complaints allege that the United States has incurred substantial damages and
that the Company should be ordered to cease and desist from violations of the
civil False Claims Act and is liable for treble damages, penalties, costs,
including attorneys' fees, and such other relief as deemed proper by the
court. On March 17, 1998, the DOJ filed its complaint against the Company upon
intervention in the 1994 lawsuit, which set forth a limited number of the
allegations in the 1994 lawsuit and certain additional allegations. The DOJ
elected not to pursue the other claims in the 1994 lawsuit or the claims in
the 1995 lawsuit. The DOJ's complaint alleges that the Company is liable for
treble damages, penalties, interest, costs and "other proper relief." On March
18, 1998, Bagley withdrew the first amended complaint in the 1994 lawsuit at
the request of the DOJ. On May 18, 1998, the Company filed answers to Bagley's
first amended complaint in the 1995 lawsuit and to the DOJ's complaint,
denying all substantive allegations contained therein. At the same time, the
Company filed counterclaims against both Bagley and the federal government. On
July 20, 1998, both Bagley and the DOJ filed motions seeking to dismiss the
Company's counterclaims. On November 23, 1998 (entered as an Order on January
21, 1999), the court dismissed certain counterclaims asserted against Bagley
and the federal government and took under advisement Bagley's motion to
dismiss certain other counterclaims. On March 15, 1999, the DOJ was granted
leave to file a First Amended Complaint, which adds certain allegations
concerning the Company's subcontracts. On August 6, 1999, the Government filed
its Second Amended Complaint, which incorporated vouchers, progress payment
requests, and invoices submitted by TRW to higher tier Government contractors
among the class of allegedly false claims challenged by the Government. On
September 29, 1999, Bagley filed his Second Amended Complaint, which
incorporated subcontracts performed by TRW for higher tier Government
contractors among the class of contracts under which allegedly false claims
were presented, and added allegations relating to certain of Bagley's pre-
existing claims. The Company cannot presently predict the outcome of these
lawsuits, although management believes that their ultimate resolution will not
have a material effect on the Company's financial condition or results of
operations.
On December 15, 1987, the Commissioner of the Indiana Department of
Environmental Management issued an Order to TRW and several other respondents
relating to alleged contamination of the public water supply in Shelbyville,
Indiana by, among other sources, two closed facilities that were formerly
operated by TRW's Connectors Division. The Order requires the respondents to
fund the relocation of the main well field for Shelbyville to a location that
can provide a safe source of potable water and to perform a remedial
investigation of the source and extent of contamination within a one-mile
radius of the well field. The Order also requires the respondents to pay civil
penalties of $25,000 per day for violations of law that allegedly occurred
prior to issuance of the Order. TRW has filed a petition for review of the
Order. The Order is not expected to have a material effect on the Company's
financial position.
15
TRW Vehicle Safety Systems Inc., a wholly-owned subsidiary of the Company,
reported to the Arizona Department of Environmental Quality, or ADEQ, in 1997,
potential violations of the Arizona hazardous waste law at its Queen Creek,
Arizona facility for the possible failure to properly label and dispose of
wastewater that might be classified as hazardous waste. ADEQ, the United
States Environmental Protection Agency, the United States Department of
Justice and the Arizona State Attorney General are conducting civil and
criminal investigations into these potential violations and the Company is
cooperating with these investigations. If proceedings were to be initiated
against the Company with respect to such matters, the Company could be liable
for penalties and fines and other relief. The Company is currently engaged in
settlement discussions with state and federal officials. The Company is not
able to predict the outcome of these discussions at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None during the fourth quarter of 1999.
16
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages of and the positions and offices held by, each person
designated an executive officer of the Company as of March 1, 2000, together
with the offices held by each such person during the last five years, are
listed below. Each executive officer is elected annually and, unless the
executive officer resigns or terminates employment with the Company or is
removed from office by action of the Company's Directors, will hold office for
the ensuing year or until a successor is elected in accordance with the
Company's Regulations.
Positions and Business Experience
Name Age During the Past Five Years
---- --- ---------------------------------
J. T. Gorman 62 Chairman and Chief Executive Officer (1988 to the present)
and Director (1984 to the present)
D. M. Cote 47 President and Chief Operating Officer and Director (1999
to the present)
Senior Vice President, General Electric Company and
President and Chief Executive Officer, GE Appliances
(1996 - 1999)
Vice President and General Manager, GE Silicones (1994 -
1996)
T. W. Hannemann 57 Executive Vice President and General Manager, TRW Space &
Electronics (1993 to the present)
H. V. Knicely 63 Executive Vice President, Human Resources and
Communications (1995 to the present)
Executive Vice President, Human Resources, Communications
& Information Resources (1989 - 1994)
W. B. Lawrence 55 Executive Vice President, General Counsel and Secretary
(1997 to the present)
Executive Vice President, Planning, Development &
Government Affairs (1989 - 1997)
W. K. Maciver 60 Executive Vice President and General Manager, TRW
Aeronautical Systems (1999 to the present)
Managing Director and President, Lucas Aerospace (1995 -
1999)
Managing Director, Lucas Braking Systems (1992 - 1995)
C. G. Miller 57 Executive Vice President and Chief Financial Officer (1996
to the present)
Executive Vice President, Chief Financial Officer and
Controller (1996)
Vice President and Controller (1990 - 1996)
P. A. Odeen 64 Executive Vice President, Washington Operations (2000 to
the present)
Executive Vice President and General Manager, TRW Systems
& Information Technology (1998 - 1999)
President, Chief Executive Officer and Director, BDM
International, Inc. (1992 - 1997)
H. Pfannschmidt 52 Executive Vice President and General Manager, TRW
Automotive Electronics (1999 to the present)
Vice President and General Manager, TRW Automotive
Electronics (1999)
Vice President and Managing Director, TRW Inflatable
Restraint Systems (1997 - 1998)
Executive Vice President, Hella KG Hueck & Co. (1994 -
1997)
17
Positions and Business Experience
Name Age During the Past Five Years
---- --- ---------------------------------
J. C. Plant 46 Executive Vice President and General Manager, TRW Chassis
Systems (1999 to the present)
Executive Vice President and General Manager, TRW
Automotive (1999)
President, LucasVarity Automotive (1998 - 1999)
Managing Director, Electrical and Electronic Division,
Lucas Automotive (1991 - 1998)
J. S. Remick 61 Executive Vice President and General Manager, TRW Engine
Components & Commercial Steering Systems (1999 to the
present)
Executive Vice President and Acting General Manager, TRW
Automotive (1999)
Executive Vice President and General Manager, TRW Occupant
Restraint Systems Group (1996 - 1998)
Executive Vice President and General Manager, TRW Steering,
Suspension & Engine Group (1995 - 1996)
Vice President and Deputy General Manager, Automotive
Operations (1995)
Vice President and General Manager, TRW Steering &
Suspension Systems, North and South America (1991 - 1995)
J. F. Smith 53 Executive Vice President and General Manager, TRW Occupant
Safety Systems (1999 to the present)
Vice President and General Manager, TRW Inflatable
Restraint Systems
(1989 - 1999)
P. Staudhammer 66 Vice President, Science & Technology (1993 to the present)
R. D. Sugar 51 President and Chief Operating Officer, TRW Aerospace &
Information Systems (1999 to the present)
Executive Vice President (1999)
Executive Vice President and General Manager, TRW
Automotive Electronics Group (1996 - 1998)
Executive Vice President and Chief Financial Officer
(1994 - 1996)
D. C. Winter 51 Executive Vice President and General Manager, TRW Systems &
Information Technology (2000 to the present)
Vice President and Deputy General Manager for Group
Development, TRW Space & Electronics (1998 - 1999)
Vice President and General Manager of the Defense Systems
Division, TRW Space & Electronics Group (1990 - 1997)
18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Reference is made to the information set forth in the table presented under
"Stock Prices and Dividends (Unaudited)" on page 64 of the TRW 1999 Annual
Report, and to the information presented under the notes entitled "Debt and
Credit Agreements" and "Events Subsequent to Date of Report of Independent
Auditors (Unaudited)" in the Notes to Financial Statements on pages 56 and 57
and page 63, respectively, of the TRW 1999 Annual Report. The information
contained in such table and the information contained in the second-to-last
paragraph of text of the "Debt and Credit Agreements" note and in the last
paragraph of the "Events Subsequent to Date of Report of Independent Auditors
(Unaudited)" note to financial statements is incorporated herein by reference.
The Company's Common Stock is traded principally on the New York Stock
Exchange and is also traded on the Chicago, Pacific, Philadelphia, London and
Frankfurt exchanges.
On March 1, 2000, there were 23,062 shareholders of record of the Company's
Common Stock.
ITEM 6. SELECTED FINANCIAL DATA.
Years Ended December 31,
--------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------ ------
(In Millions, Except Per Share
Amounts)
Sales................................... $16,969 $11,886 $10,831 $9,857 $9,568
Earnings(loss) from continuing
operations............................. 469 477 (49) 182 395
Per share of Common Stock:
Diluted earnings(loss) -- continuing
operations........................... 3.80 3.83 (.40) 1.37 2.94
Basic earnings(loss) -- continuing
operations........................... 3.87 3.93 (.40) 1.41 3.02
Cash dividends declared................. 1.32 1.28 1.24 1.17 1.05
Total assets............................ 18, 266 7,340 6,410 5,899 5,670
Long-term debt.......................... 5,369 1,353 1,117 458 539
Shares used in computing per share
amounts:
Diluted............................... 123.5 124.4 123.7 132.8 134.4
Basic................................. 121.0 121.3 123.7 128.7 130.6
In 1999, earnings(loss) from continuing operations include an $85 million,
$.69 per share, one-time noncash charge related to in-process research and
development associated with the acquisition of LucasVarity.
In 1997, earnings(loss) from continuing operations include a $548 million,
$4.43 per share, one-time noncash charge related to in-process research and
development associated with the acquisition of BDM.
In 1996, the Company recorded special charges of $202 million after tax, $1.52
per share, primarily for actions taken, in part, to enhance the Company's
competitiveness. Also during 1996, the Company 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,"
resulting in the recognition of $50 million after tax, $0.38 per share, of
impairment losses which were primarily a result of technological changes and
the decision to close certain facilities in its automotive business.
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Reference is made to the information presented under the heading "Management's
Discussion and Analysis of the Results of Operations and Financial Condition"
on pages 27 through 39 of the TRW 1999 Annual Report. This information is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Reference is made to the information presented under the heading "Management's
Discussion and Analysis of the Results of Operations and Financial Condition"
on pages 27 through 39 of the TRW 1999 Annual Report. Reference is also made
to the information presented under the heading "Summary of Significant
Accounting Policies" in the Notes to Financial Statements on pages 45 through
47 of the TRW 1999 Annual Report. This information is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to the financial statements headed "Statements of
Operations," "Balance Sheets," "Statements of Cash Flows" and "Statements of
Changes in Shareholders' Investment," and the accompanying notes thereto, on
pages 41 through 62 of the TRW 1999 Annual Report. Reference is also made to
the information included in the table presented under the heading "Quarterly
Financial Information (Unaudited)" on page 63 of the report. These statements,
the accompanying notes and the table are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to the information relating to TRW's Directors which is
presented under the heading "Board of Directors" on pages 4 through 8 of the
TRW Proxy Statement dated March 17, 2000, as filed with the Securities and
Exchange Commission (the "TRW Proxy Statement"). Reference is made to the
information relating to Section 16(a) compliance which is presented under the
heading "Section 16(a) Beneficial Ownership Reporting Compliance" on page 33
of the TRW Proxy Statement. This information is incorporated herein by
reference.
See the information presented in Part I of this Report under the heading
"Executive Officers of the Registrant" for information relating to TRW's
executive officers.
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the information presented under the heading "Compensation
of Executive Officers" on pages 17 through 28 of the TRW Proxy Statement.
Reference is also made to the information presented under the heading
"Director Compensation" on page 11 of the TRW Proxy Statement. This
information is incorporated herein by reference.
20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the information presented under the heading "Management
Ownership of Shares" on page 16 of the TRW Proxy Statement. Reference is also
made to the information presented under the caption "Outstanding Securities"
on page 33 of the TRW Proxy Statement. This information is incorporated herein
by reference.
There are no agreements or arrangements known to TRW that might, at a
subsequent date, result in a change in control of TRW.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the information presented under the heading "Director
Compensation" on page 11 of the TRW Proxy Statement. This information is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements and Schedules
(1) Financial Statements
The following financial statements of the registrant and its subsidiaries
included in the TRW 1999 Annual Report are incorporated herein by
reference:
Statements of Operations -- Years ended December 31, 1999, 1998 and 1997
(page 41)
Balance Sheets -- December 31, 1999 and 1998 (page 42)
Statements of Cash Flows -- Years ended December 31, 1999, 1998 and 1997
(page 43)
Statements of Changes in Shareholders' Investment -- Years ended December
31, 1999, 1998 and 1997 (page 44)
Notes to Financial Statements -- (pages 45 - 62)
(2) Financial Statement Schedules
All Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are not applicable and, therefore, have
been omitted.
Financial statements and summarized financial information of
unconsolidated subsidiaries and 50 percent or less owned persons
accounted for by the equity method have been omitted because such
subsidiaries and persons, considered individually or in the aggregate, do
not constitute a significant subsidiary.
21
(3) Exhibits
2(a) Offer to Purchase dated February 6, 1999 (Exhibit (a)(1) to TRW's
Schedule 14D-1 dated February 5, 1999, is incorporated herein by
reference).
2(b) Form of Irrevocable Undertakings executed by each director of
LucasVarity plc (Exhibit (c)(1) to TRW's Schedule 14D-1 dated
February 5, 1999, is incorporated herein by reference).
2(c) Break-up Fee Agreement, dated January 28, 1999 between TRW and
LucasVarity plc (Exhibit (c)(2) to TRW's Schedule 14D-1 dated
February 5, 1999, is incorporated herein by reference).
3(a) Amended Articles of Incorporation as amended May 5, 1997 (Exhibit
3(a) to TRW Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, is incorporated herein by reference).
3(b) Regulations as amended April 30, 1980 (Exhibit 3(b) to TRW Annual
Report on Form 10-K for the year ended December 31, 1980, is
incorporated herein by reference).
4(a) Indenture between TRW Inc. and The Chase Manhattan Bank (National
Association), as successor Trustee, dated as of May 1, 1986
(Exhibit 2 to TRW Form 8-A Registration Statement dated July 3,
1986, is incorporated herein by reference).
4(b) First Supplemental Indenture between TRW Inc. and The Chase
Manhattan Bank (National Association), as successor Trustee, dated
as of July 26, 1989 (Exhibit 4(b) to TRW Form
S-3 Registration Statement, File No. 33-30350, is incorporated
herein by reference).
4(c) Second Supplemental Indenture between TRW Inc. and The Chase
Manhattan Bank, as successor Trustee, dated as of June 2, 1999
(Exhibit 4(c) to TRW Registration Statement on Form S-4, filed July
20, 1999, File No. 333-83227, is incorporated herein by reference).
4(d) Third Supplemental Indenture between TRW Inc. and The Chase
Manhattan Bank, as successor Trustee, dated as of June 2, 1999
(Exhibit 4(d) to TRW Registration Statement on Form S-4, filed July
20, 1999, File No. 333-83227, is incorporated herein by reference).
4(e) Fourth Supplemental Indenture between TRW Inc. and The Chase
Manhattan Bank, as successor Trustee, dated as of June 2, 1999
(Exhibit 4(e) to TRW Registration Statement on Form S-4, filed July
20, 1999, File No. 333-83227, is incorporated herein by reference).
4(f) Fifth Supplemental Indenture between TRW Inc. and The Chase
Manhattan Bank, as successor Trustee, dated as of June 2, 1999
(Exhibit 4(f) to TRW Registration Statement on Form S-4, filed July
20, 1999, File No. 333-83227, is incorporated herein by reference).
4(g) Sixth Supplemental Indenture between TRW Inc. and The Chase
Manhattan Bank, as successor Trustee, dated as of June 2, 1999
(Exhibit 4(g) to TRW Registration Statement on Form S-4, filed July
20, 1999, File No. 333-83227, is incorporated herein by reference).
4(h) Distribution Agreement, dated April 13, 1998, between TRW Inc. and
each of Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co. and
J.P. Morgan Securities Inc., regarding $1,000,000,000 Medium-Term
Notes, Series D, due nine months or more from the date of issuance
(Exhibit 1 to TRW Inc.'s Current Report on Form 8-K dated April 13,
1998, is incorporated herein by reference).
4(i) Form of Medium Term Note, Series D (Exhibit 4 to TRW Inc.'s Current
Report on Form 8-K dated April 13, 1998, is incorporated herein by
reference).
4(j) Registration Rights Agreement, dated May 26, 1999, among TRW and
Morgan Stanley & Co. Incorporated, J.P. Morgan Securities Inc. and
Salomon Smith Barney Inc., as representatives of the initial
purchasers (Exhibit 4(m) to TRW Registration Statement on Form S-4,
filed July 20, 1999, File No. 333-83227, is incorporated herein by
reference).
22
4(k) Registration Rights Agreement, dated June 23, 1999, among TRW and
Goldman, Sachs & Co., as representative of the initial purchasers
(Exhibit 4(n) to TRW Registration Statement on Form S-4, filed July
20, 1999, File No. 333-83227, is incorporated herein by reference).
4(l) Distribution Agreement, dated November 17, 1999, between TRW Inc.
and each of Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co.
and J.P. Morgan Securities Inc., regarding $2,500,000,000 Medium-
Term Notes, Series E, due nine months or more from the date of
issue (Exhibit 1 to TRW Inc.'s Current Report on Form 8-K dated
November 18, 1999, is incorporated herein by reference).
4(m) Form of Medium Term Note, Series E (Exhibit 2 to TRW Inc.'s Current
Report on Form 8-K dated November 18, 1999, is incorporated herein
by reference).
*10(a) 1979 Stock Option Plan as amended April 28, 1982 (Exhibit A to TRW
Proxy Statement dated March 18, 1982, is incorporated herein by
reference).
*10(b) TRW Operational Incentive Plan (Exhibit 10(b) to TRW Annual Report
on Form 10-K for the year ended December 31, 1989, is incorporated
herein by reference).
*10(c) TRW Executive Health Care Plan as amended and restated effective
August 1, 1995 (Exhibit 10(c) to TRW Annual Report on Form 10-K for
the year ended December 31, 1995, is incorporated herein by
reference).
*10(d) 1984 Stock Option Plan (Exhibit A to TRW Proxy Statement dated
March 19, 1984, is incorporated herein by reference).
*10(e) 1989 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement
dated March 17, 1989, is incorporated herein by reference).
*10(f) 1994 TRW Long-Term Incentive Plan as amended and restated effective
February 4, 1997 (Exhibit 10(f) to TRW Annual Report on Form 10-K
for the year ended December 31, 1996, is incorporated herein by
reference).
*10(g) 1997 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement
dated March 12, 1997, is incorporated herein by reference).
*10(h) Amendment dated as of December 9, 1998 to 1997 TRW Long-Term
Incentive Plan (Exhibit 10(h) to TRW Annual Report on Form 10-K for
the year ended December 31, 1998, is incorporated herein by
reference).
*10(i) Form of Nonqualified Stock Option Agreement.
*10(j) Form of Transferable Nonqualified Stock Option Agreement.
*10(k) Form of Director Transferable Nonqualified Stock Option Agreement
(Exhibit 10(k) to TRW Annual Report on Form 10-K for the year ended
December 31, 1997, is incorporated herein by reference).
*10(l) Form of Stock Option Agreement Qualified under the laws of France.
*10(m) Deferred Compensation Plan for Non-Employee Directors of TRW Inc.
dated July 1, 1997 (Exhibit 10(d) to TRW Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, is incorporated herein by
reference).
*10(n) TRW Directors' Pension Plan as amended and restated effective
August 1, 1990 (Exhibit 10(l) to TRW Annual Report on Form 10-K for
the year ended December 31, 1990, is incorporated herein by
reference).
*10(o) Amendment to the TRW Directors' Pension Plan (as Amended and
Restated Effective August 1, 1990) effective June 30, 1997 (Exhibit
10(n) to TRW Annual Report on Form
10-K for the year ended December 31, 1997, is incorporated herein
by reference).
23
*10(p) Form of Amended and Restated Employment Continuation Agreements
with executive officers (Exhibit 10(k) to TRW Annual Report on
Form 10-K for the year ended December 31, 1995, is incorporated
herein by reference).
*10(q) TRW Inc. Deferred Compensation Plan (as Amended and Restated
Effective January 1, 1999) (Exhibit 10(r) to TRW Annual Report on
Form 10-K for the year ended December 31, 1998, is incorporated
herein by reference).
*10(r) TRW Benefits Equalization Plan (as Amended and Restated Effective
January 1, 1999) (Exhibit 10(s) to TRW Annual Report on Form 10-K
for the year ended December 31, 1998, is incorporated herein by
reference).
*10(s) TRW Supplementary Retirement Income Plan (as Amended and Restated
Effective January 1, 1999) (Exhibit 10(t) to TRW Annual Report on
Form 10-K for the year ended December 31, 1998, is incorporated
herein by reference).
*10(t) TRW Inc. Key Executive Life Insurance Plan dated as of February 7,
1996 (Exhibit 10(v) to TRW Annual Report on Form 10-K for the year
ended December 31, 1995, is incorporated herein by reference).
*10(u) TRW Inc. Financial Counseling Program (Exhibit 10(w) to TRW Annual
Report on Form 10-K for the year ended December 31, 1995, is
incorporated herein by reference).
*10(v) Consulting Agreement dated September 18, 1997 between TRW Inc. and
G. H. Heilmeier (Exhibit 10(b) to TRW Quarterly Report on Form 10-
Q for the quarter ended September 30, 1997, is incorporated herein
by reference).
*10(w) Amendment dated December 7, 1999 to Consulting Agreement dated
September 18, 1997, between TRW Inc. and G.H. Heilmeier.
*10(x) Letter Agreement, dated April 28, 1999, between TRW and Carl Hahn
regarding services as an Advisory Director of TRW (Exhibit 10(c)
to TRW Quarterly Report on Form 10-Q for the quarter ended June
30, 1999, is incorporated herein by reference).
*10(y) TRW Inc. Stock Plan for Non-Employee Directors (as Amended and
Restated Effective August 1, 1995) (Exhibit 10.1 to TRW Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995, is
incorporated herein by reference).
*10(z) Employment Agreement dated as of November 20, 1997 between TRW
Inc. and Philip A. Odeen (Exhibit 10(ff) to TRW Annual Report on
Form 10-K for the year ended December 31, 1997, is incorporated
herein by reference).
*10(aa) Letter Agreement between TRW Inc. and Peter S. Hellman (Exhibit
10.3 to the TRW Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, is incorporated herein by reference).
*10(bb) Employment Agreement by and between TRW Inc. and David M. Cote,
dated as of November 11, 1999 (Exhibit 10(d) to the TRW Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999, is
incorporated herein by reference).
*10(cc) Form of 1998-2000 Strategic Incentive Program Grant.
10(dd) Five-Year Credit Agreement dated as of January 25, 2000 among TRW
Inc., the lenders party thereto, the Chase Manhattan Bank as
Administrative Agent, Chase Manhattan International Limited as
London Agent and Salomon Smith Barney Inc. as Syndication Agent.
10(ee) 364-Day Credit Agreement dated as of January 25, 2000 among TRW
Inc., the lenders party thereto, the Chase Manhattan Bank as
Administrative Agent and Salomon Smith Barney Inc. as Syndication
Agent.
24
10(ff) Purchase Agreement, dated May 26, 1999, between TRW and Morgan
Stanley & Co. Incorporated, J.P. Morgan Securities Inc. and Salomon
Smith Barney Inc., as representatives of the initial purchasers
named therein (Exhibit 10(a) to TRW Quarterly Report on Form
10-Q for the quarter ended June 30, 1999, is incorporated herein by
reference).
10(gg) Purchase Agreement, dated June 18, 1999, between TRW and Goldman,
Sachs & Co., as representative of the initial purchasers named
therein (Exhibit 10(b) to TRW Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, is incorporated herein by reference).
12 Computation of Ratio of Earnings to Fixed Charges -- Unaudited
(Supplement to Exhibit 12 of the following Registration Statements
of the Company: No. 333-83227 on Form S-4, No. 333-89133 on Form S-
3 and No. 333-48443 on Form S-3).
13 Portions of the TRW Annual Report to Security Holders for the year
ended December 31, 1999, incorporated herein by reference.
21 Subsidiaries of the Registrant.
23(a) Consent of Independent Auditors.
23(b) Consent of Independent Auditors (with respect to financial
statements of The TRW Canada Stock Savings Plan).
24 Power of Attorney.
27 Financial Data Schedule.
99(a) Financial Statements of The TRW Canada Stock Savings Plan for the
year ended December 31, 1999.
Certain instruments with respect to long-term debt have not been
filed as exhibits as the total amount of securities authorized under
any one of such instruments does not exceed 10 percent of the total
assets of the registrant and its subsidiaries on a consolidated
basis. The registrant agrees to furnish to the Commission a copy of
each such instrument upon request.
* Management contract, compensatory plan or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of this report.
(b) Reports on Form 8-K
Current report on Form 8-K, dated November 12, 1999, as to the election
of David M. Cote as President, Chief Operating Officer and a Director.
Current Report on Form 8-K, dated November 12, 1999, as to the
Company's new segment reporting procedures.
Current Report on Form 8-K, dated November 12, 1999, attaching certain
unaudited pro forma and balance sheet information related to the
acquisition of LucasVarity.
Current Report on Form 8-K, dated November 18, 1999, as to the issuance
of Medium Term Notes.
Current Report on Form 8-K, dated November 23, 1999, as to the sale of
Lucas Diesel Systems.
Current Report on Form 8-K, dated December 10, 1999, as to the
discontinuation of the MARC product and the Cybershield software
security product line.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 17, 2000
/s/ William B. Lawrence
By __________________________________
William B. Lawrence,
Executive Vice President, General
Counsel and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
J. T. GORMAN* Chairman of the Board, Chief Executive
Officer and Director
D. M. COTE* President, Chief Operating Officer and
Director
C. G. MILLER* Executive Vice President and Chief
Financial Officer
T. A. CONNELL* Vice President and Corporate Controller
M. H. ARMACOST* Director
M. FELDSTEIN* Director
R. M. GATES* Director
G. H. HEILMEIER* Director March 17, 2000
K. N. HORN* Director
E. B. JONES* Director
W. S. KISER* Director
D. B. LEWIS* Director
L. M. MARTIN* Director
J. D. ONG* Director
R. W. POGUE* Director
William B. Lawrence, by signing his name hereto, does hereby sign and execute
this report on behalf of each of the above-named officers and Directors of TRW
Inc., pursuant to a power of attorney executed by each of such officers and
Directors and filed with the Securities and Exchange Commission as an exhibit
to this report.
March 17, 2000
/s/ William B. Lawrence
*By _______________________________________
William B. Lawrence, Attorney-in-fact
26
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Directors, TRW Inc.
We have audited the consolidated financial statements of TRW Inc. and
subsidiaries listed in Item 14(a)(1) of the Annual Report on Form 10-K of TRW
Inc. for the year ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of TRW Inc. and
subsidiaries at December 31, 1999 and 1998, and the consolidated results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Ernst & Young LLP
Cleveland, Ohio
January 21, 2000
F-1