諾斯洛普·格拉曼 (NOC) 2001 Q1 法說會逐字稿

Good morning. My name is Rineda and I will be your conference facilitator today. At this time, I would like to welcome everyone to the TRW first quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press the #1 on your telephone keypad and questions will be taken in the order that they are received. If you would like to withdraw your question, press the pound key. Thank you. Now I would like to turn the call over to Mr. Joseph T. Gorman, Vice President of Investor Relations.

Good morning and welcome to TRW first quarter conference call. Dave M. Cote, TRW's Chief Executive will start the call today with some brief comments on the key developments and other highlights in the quarter. Carl Miller, our CFO will then review the first quarter financial performance. Following our prepared remarks, we will open the lines for questions from analysts and shareholders. Before we start, I would like to remind the participants that statements made during this call that are not historical facts, may be forward-looking statements. Information regarding important factors that could cause actual results to differ materially from forward-looking statements can be found in TRW's reports filed with the SEC, including our most recent Form 10-K. With that I will now hand over to Dave Cote.

Hi and thanks for calling in today. The good news is that we were able to meet expectations and that is always a good thing. Unfortunately, we recognize, like all of you did, that it is down from last year and most of that is because of the difficult auto environment that we are in. Most of the earnings decline is driven by the auto side; net profits were down by about 60% in those businesses. That equals about 71 cents of share when you put it all together. I know you all have been following light vehicles production in North America. That declined about 16% in the first quarter, and the big three, in particular declined over 20%. These were the largest year over year declines in quarterly production in 10 years. Now, just like a lot of other suppliers, the size of that decline and the way it was done, the erratic nature of it, created a lot of inefficiency in our production systems, which created issues for everyone. The other factors that affected us in auto profitability in the quarter, we had some unfavorable vehicle mix because the STV platforms like the Ford Explorer, the Blazer, the Derango, the Grange Cherokee, where we have good content had low production quarter, in that they were not getting their inventories in line and of course, there is always in autos pricing with the factor. Now on the positive side, European sales held up well as many of you probably noticed, there has been a little softening in Europe recently, who knows where that is going to go in total, we are not anticipating anything big coming out of that. Our new products like modules were also good, EPHS - our Electric Powered Hydraulic Steering did well, side air bags, curtain and rollover bags, all of these were helping to offset the production volume decline. The outlook for the rest of the year for auto production is obviously a little better than what we have experienced in the last three months, but not a lot. We are still expecting North American production to be down about 10% for the year. That is going to continue to be topping, and we have planned the year conservatively whether we can really address fixed costs. Europe, we expect will be down perhaps by 2% compared to last year. The auto environment having a negative impact on earnings, then we are obviously doing something about it. Our biggest weapon in the short term, when you look at it in the long term, when it comes out to automotive, it will just be absolutely relentless on productivity. You have heard this from me a number of times now and it still holds true. Every executive in automotive is focussed on reducing costs and we have concentrated a lot on reducing our fixed costs. During the first quarter alone, we eliminated over a thousand automotive salaried jobs in addition to the volume-related production. This is on top of about 10% cut or 8500 positions eliminated as part of the restructuring that we have done over the last two years. In addition to managing our supply base, you know, our supply is the most cost efficient where we can; we are also focussed on reducing our capital employed, particular working capital. Overall, our goal this year is to reduce fixed cost by about $150 million year-to-year and that is on a straight basis, no inflation adjustment. We have got off to a very good start in the first quarter that is part of what you see reflected in our numbers. In addition to reducing our pain in the short term, all these actions to get our fixed costs that are in line drive productivity in the supply base will benefit the future earnings profile when the auto environment becomes a little more stable. Now before leaving automotive, I would like to add that even in this difficult environment, our people have really just done such great job in maintaining quality and service levels even with the erratic nature of production and all the productivity we are going to go through.

We have recently won several awards from our major customers in the areas of quality and service. We are really pretty proud of that. Moving on to aerospace and information systems, we continue to be really encouraged by the developments and the performance in these businesses. In the systems and information technology, our core program had even better than anticipated growth in the quarter, which more than offset that the sales decline that we are anticipating from the census and Test program that you are aware off. Though we had some inefficiencies in the quarter that arose from the wrap of the Census and Test program, though we would expect to see their margin rate improve from the first quarter as we go forward through the year. I am really excited about our growth prospects. In S&ITG, we are looking at things like the public sector, things like the public safety communications and health care, and the potential for our traditional defense. This also looks very good, it is very encouraging. When we look at the space electronics business, it is continuing to work through the change in next year we have had mix for more material programs, just a newer one. We had maturing programs like DSP and Milstar. So we are not going to see a lot of sales growth in the short term in our view. But here again, I am encouraged by the number of opportunities that we see going forward to win major programs related to that core business. Our efforts, commercialized technologies in space electronics also were just doing very well. We recently signed off an additional $70 million investment, a lot of that being capital to advance our indium phosphide technologies, you probably know indium phosphide is the fastest chip in the world and we see real opportunities for that, particularly in the wireless environment. We are working with potential customers in fibre optics, Mobile Phones, and in wireless base stations. We think those joint developments initiatives are very promising for us. Recently, there has also been some really good media coverage when you look at things like the Business Week and the Wall Street Journal relating to the consortium of semiconductor chip companies that are focussed on the next generation of the chip making process. The extension of morris lock and you probably read a lot about extreme ultraviolet light lithography. We have expanded our joint development agreement with that consortium that is driving that initiative for that light source. Well, it is not going to show up in our short-term results. I am really impressed with this technology and what I think it can do for us in the long-term and that is consistent with the acquisition of cutting edge electronics ____ last year.

Lastly, when we look at aeronautical systems, they delivered their usual good performance in the first quarter. We had our flight mix change again that caused a bit of margin weakness, but they will bounce right back going forward. I am encouraged by what those guys were able to do. From a cash flow perspective, we again delivered strong performance with the usage of only $173 million in the quarter. Given the seasonality of cash flows, this was much better than anyone had anticipated and it reflects the huge amount of attention we just continue to focus on generating cash. That is a direction, I can assure you, we will continue to concentrate on. So overall, it was a tough quarter in a difficult environment. We really did a lot of good things to minimize the pain of the industry conditions and position ourselves for the future and that was both in terms of the cost base and to capture the growth available in our businesses.

Then lastly, as most of you are probably aware from the announcements, Carl has said he will be retiring from TRW once we identify and name his replacement. We are actively looking at both internal and external candidates and I would like to have Carl working through the transition period. Carl has done just a terrific job for us he will continue to drive the function and the company to deliver great results throughout the year. So, Carl, over to you.

Thank you for those comments, Dave. I appreciate those. Let me go through a brief financial overview of the quarter and then we will take your questions. First quarter sales were $4.2 billion down 9% from a year ago, while net earnings were 41 cents per share excluding unusual items compared to $22 last year. After the effect of the unusual items, we have reported earnings of 44 cents per share for the first quarter. The decline in sales of approximately $400 million occurred primarily for the following three reasons: First, the effect of the divestitures was approximately $80 million, there were several automotive businesses soldering the year, coming out of both Chassis and automotive electronics business segments. Second, the effect of currency translation that is about 50% of our automotive sales are derived outside North America was about $110 million. This includes a small portion relating to our aeronautic systems business. The remaining decline in our sales was due primarily to reduced automotive production schedules primarily in North America, partially offset by sales from new product offerings with lower margins, including electrically powered hydraulic steering - EPHS, corner modules, and new air bag offerings.

On the earning side, as Dave mentioned, most of the decline came from the automotive businesses. Let me walk down the components of the 81-cent decline in earnings per share, excluding unusual items. First approximately, 50 cents is our best estimate of the effect caused by the decline in global, predominantly North American automotive and heavy truck production, including the fact that platforms where we have good content were down more than the industry average. Partially offsetting this decline were positive contributors of firm new products. Second, 10 cents was due primarily to lower profitability from our space and electronics group as a result of the change in mix of major satellite programs from maturing to early phase and from our increased investments in technology initiatives. Third 5 cents was the effect of the currency. The average Euro/Dollar exchange rate was 97 cents during the last year's first quarter versus 92 cents this quarter, a decline of just over 5%. If the Euro/Dollar exchange rate should remain around this 92-cent rate versus the current 88-cent rate, translation will be less of a factor going forward as the comparison is made the last year. Remaining 16 cents is primarily due to earnings lost from divested businesses, automotive pricing, and other minor variances. There were a few unusual items recorded in the first quarter, which netted to earnings of $4 million or 3 cents per share after tax.

Included in the amount were $27 million of charges related to restructuring actions, mostly head count reductions. We had indicated in our Form 10-K filing that we were expecting after tax charges of $40 million, the difference of approximately $13 million will be recorded in the second quarter as the timing of a few programs did not allow us to get all the charges booked by the end of the first quarter. The $27 million of charges in the quarter were offset by $31 million of net gains related primarily to minor business and non-operational asset sales. You can find a detailed breakdown in explanation of these unusual items in the earnings supplement, which was released earlier this morning. Moving to an update on our debt situation at the end of the quarter, we had gross debts outstanding at $6.9 billion, an increase of approximately 175 million from the beginning of the year. This increase was better as Dave said, and we had planned as cash from our operations came through very nicely. Remember that the first quarter of the year is traditionally the largest outflow quarter due to seasonal factors in our businesses. In March, we issued $500 million of five-year notes with an interest rate of 7.625%. Given the favorable bond market at that time, we decided to basically pre-fund $425 million of debt we have maturing in June of this year. Of the gross debt outstanding, approximately 30% is in floating rate instruments, the largest component of which is commercial paper. The balance of our commercial paper was approximately 1.1 billion at quarter end. The weighted average interest rate on total gross debt outstanding is approximately 7.6%, which is up slightly from year-end, given the new bonds we have recently sold. We will now open the line for questions. Please go ahead.

As per the panel, I would like to remind everyone in order to ask the questions, please press #1 on your telephone keypad now. The first question comes Matthew Stover from Salomon Smith Barney Inc.

Good morning, thank you. A couple of questions, two on operations, one just on cash flow. From the operation standpoint, Dave, you talked about Europe and being a positive effect during the quarter. Can you give us any visibility as to your expectations in the second quarter and then the second thing on the operation side, it looks like you got some new business ramping up which is negatively affecting margins, I mean with volume spending. When do you expect those things to mature and should we expect could those things to have a positive impact on margin as the year goes out or is it just a continuous flow of new programs whereby you will continue to see some pressure there throughout the course of the year.

We are not taking any of the substance occurred in the quarter and changing anything that we look forward and we just try to plan conservatively for the whole of the year and we will stick to that and probably not do a lot of forecasting. I would not say that there is a lot of visibility as we go on. I am still concerned generally about the industry both in North America and in Europe and planning conservatively because that is the way to do that. When it comes to new business ramp up, we have actually done a very good job of winning a number of awards. That occurred about last year, in particular. There will be some spending for that this year, but we will of course, re-factor that in. We are expecting though, that most of the benefits that will show up in subsequent years, probably not a lot of it coming in this year.

Well, as we look at the margin impact, those factors should continue to have a, put pressure on the margins throughout the course of this year.

Well there will be investment required, you know, there is a capital expenditure aspect to it in addition to some margin head, but it is not being untoward, nothing that is going to make a major difference from anything that we have planned.

And then on the second thing, or the third thing, I guess is on the cash flow side?

Yeah,

Some money into the Astra link in the quarter, at the end of the year, you have to make another decision about Astra link? Is that correct in terms of your incremental investment you are going to make there?

Well, we do not know that, there may be none.

Okay.

And that is one of those things that we still need, it is still in the process of resolution.

Okay. When do you think we should have a sense of that issue being resolved?

Well, it is nothing immediate to my understanding. I have spent some time recently understanding that business model and I have to say I am encouraged by that business model itself, but it is good model with good prospects. They obviously do need financing to be able to continue and that is one that they are in the process of resolving.

Well, thanks very much.

Thanks, Matt.

The next question comes from Howard Rubel from Goldman, Sachs & Company.

Hi. The two questions I have on site, first could you talk a little bit more about some of the other assets on sales you might consider.

I am sorry, Howard, I cannot hear you very well.

I am sorry, let me try again. I apologize. Could you talk a little bit more about, you have some small assets divestitures so far, could you address what you are doing in terms of evaluating other opportunities that lower your debt?

Yeah, obviously the debt, as I have said many times, is the biggest strategic liability we have got and we recognize that. So we are always actively looking at, if there is an asset sale that makes sense. Well the first line of defense is we are doing a good job in generating operating cash flow. So that is the first thing that we are doing. You could see the results of that in the first quarter. The second thing is looking at all kinds of asset divestitures, small and large. We have got a number of small ones where it makes sense, we will continue to look at large ones if a deal makes sense for our shareholders in total. We would not do anything silly, we have no pressure to do it.

Thanks. I understand that.

If we can we will, but if we cannot get a good deal, it is not something we will pursue.

And then just one followup in a slightly different way is obviously you do not consider your automotive margins acceptable and you are taking some actions to reduce some salaried head counts to do that. Could you elaborate a little bit more on some other actions that you might take to improve profitability, beyond that you talked about?

Yeah, the two biggest items in any cost curve, your material cost and then labor. From a material standpoint we are working very hard with all our suppliers to try to find a better way to get this done less expensively, how can we take system costs out of the whole process? We are, it is never as good as you would like it to be, but we will continue to press on that one. When it comes to labor, we have been concentrating both on reducing the amount you need just offset volume, you have got volume coming out the plan. In addition to that, we have been working hard at taking our structure and we will keep driving that one through the, we will keep driving all three of those through the course of the year. And of course, there is all the other expenses that I either go with structure or a structural in nature indirect expense that the business leaders have really just crunched down all of that stuff.

Thank you very much.

You are welcome, Howard.

The next question comes from John Edward of Deutsche Banc.

Yes, good morning. Just a couple of questions. One is, you mentioned you wanted to take out 150 million in expenses and you mentioned that earlier on semi-process, just wondered if you could give us more detail on what the timing you expect for that.

Well, the 150 million is the fixed cost reduction that we expect to see year-to-year, 2000-2001. It has to be occurring in pieces, big pieces of it have to be occurring every quarter and at this, after the results of the first quarter, I say we are in line to get there or come close.

Okay and then, also could you, I mean you mentioned that you are increasing your allocation of capital spending towards Indium Phosphide. If you could just give a little more detail on how you see your capital spending allocation going forward, are you going to be emphasizing technology more in the future?

The way I would put it, is the way I have described the companies, we are going to focus on those businesses the most where we can differentiate with technology and performance per our customers and investors. Any business, we can do that will be willing to invest in and we will make sure that we skew our capital expenditure in a way that supports that. If we take a look at the 2001 plan, as you probably saw from the 10-K, the business is better, most likely to drive those kinds of increases right now are the technology businesses, space, systems, aeronautical systems. The auto businesses are looking at how do they support that same kind of growth process, and some of them have done extremely well on awards. And even their word is skewing our capital expenditure in the direction of those businesses. But we are going to differentiate all our capital expenditure spending based on where we can differentiate with technology and performance for our customers and our investors.

Dave, let me jump in here just for a second. The amount of increased investments that Dave referred to in indium phosphide, we actually did that very early in the quarter and that amount was included in the $825 million capital that we mentioned in our form 10-K. So this is not in addition to the 10-K.

Okay, thank you.

The next question comes from David Bradley of J. P. Morgan Securities Inc. (US)

Good morning.

Hi Dave.

You expressed, I think with appropriate enthusiasm at the beginning of your comments about the prospects on the ANIS of the business, I share the enthusiasm, but I am trying to reconcile the outlook vis-à-vis the current performance and maybe you can give a little help in terms this technical understanding here. Obviously, the earnings for all three of the separate segments reported were flat or down slightly or down significantly in the case of space electronics in the quarter and so to think about, is assume growth businesses, something has to be change from the current run rate or there is something unusual in the current numbers and I guess with space electronics, I am assuming that what is going on there is the spending on indium and other investments that you are now having to recognize equity losses in some of these partnerships. Would you have a number in terms of what their earnings run rate excluding all of that and is that continuing to show improvement, will it likely show improvement going forward?

Yeah, David, this _00:26:22_______ a low, but the equity losses that we have recorded in space electronics were about 10-11 million this quarter versus nothing last year, I think there was maybe a $million last year, so we are looking at 10 million increment for equity losses primarily and way vaster link in a couple of others. So that is one aspect of it. The second aspect of you know, what we are spending on things like indium phosphide and UV, you know, we are probably not going to break that out publicly, I am sure you can understand why we would not want to do that. There so, there is a little bit of dampening on the profit side in space electronics. But they are good investments for the future that will drive the future growth. The other thing, before I hand it back to Carl, is just in our Aston ITG business remember that they have completed two very large programs in Census and tests. So there is a current quarter hiccup, I guess I will call it to that effect.

And David, the return on sales rate as Joe indicated, was about 9.4% on the core business, before the loss or the charge for our ventures activities of approximately 11 million, which reduced that 9.4 to the 7.1 that you see in our release.

Okay, and the year ago number?

Well the year ago number was just a little bit over 10% of our 10.9, I think.

Okay. Right, but you think that the underlying secular trends are going to turn positive, going forward for these three businesses?

I really like the market dynamics and the business outlook for all three of those.

Okay, thank you.

Thanks, Dave.

Our next question comes from Brett Hoselton, McDonald Inc./Investments.

Good morning gentlemen. Can you hear me?

Oh yeah. Hi Brett.

Just want to talk about debt reduction and I do not expect you to give us any specific goals or target, that you have it necessarily in the past and I do not, that is not like you are prepared to at this point, but could you kind of prioritize how you might go about reducing your debt at this point. First, cash flow, second, assets, sales, third ..., you know how would you prioritize that, is there any general directional numbers that you would like to put on that?

Sure, actually I would say from a debt standpoint, it would be lower at the end of this year than it was when we started. I could, that much, I can assure you. We are going to drive the whole business, the whole company to make it sure that we do that. Your second question, in terms of how do we go about it. The first priority and the biggest one that is totally will be in our control is operating cash flow. We have got a major push on controlling working capital, capital expenditure, everything that we can think of that relates to operating cash flow. Well, everybody has a much better understanding of it, you could see it in the results both last year and this. The next one would be smaller assets sales and again where we can get a decent deal and that is just because it is easier to do when you are going to have a number of little assets going on that one, whether it is land or smaller businesses that you can sell to a supplier, or anything along those lines. The third one would be large asset sale and that will be driven by, you know, if it is a business that we think is better off with someone else than with us, and can we get a good deal? As I said earlier, I do not feel compelled to do anything. We do not have a liquidity issue and you know, we could, we would because we would like to get that debt sorted out, but I do not feel compelled to do anything.

Brett, just as to further, once again a comment that Dave made. During the quarter we have had working capital turnover 11 times compared to 8.7 times in the first quarter of last year. So, we are continuing to generate cash by improving our working capital management.

This may briefly related to an earlier, but capital expenditure precedes your average _30:51___ for the year as per your expectations? Any significant changes?

No, pretty much in line with Carl was saying earlier.

And then, just looking at the automotive restructuring that you have done thus far, and you mentioned two things that the ongoing restructuring program 8000 heads plus the additional 1000 salaried heads. If you are looking at the business today, Dave, and seen the changes you have already made, if you were to say, how far along are you in your opinion? I know it is a real rough question, I know it is very directional, but do you think that you achieved over 50% of the potential cost savings. Do you think there is a significant amount to go, where would you generally characterize yourself?

I would say that if you are in the automotive business, restructuring is the fact of life. Just one of those things, I do not think you are ever done. You always have to be thinking about it. I think it is a mistake for anyone to ever say, "Here it is and we are done". You always have to be thinking about it.

Thank you very much, gentlemen. Dave. Thanks, Brett. 00: 31:59

The next question comes from Mark Sylvester from Dresdner Kleinwort Wasserstein.

Good morning, everyone.

Hi, Mark.

I just wanted to clarify something about the $150 million of fixed cost reduction, is that after price reductions and also after economic cost association because indium itself it seems itself it seems like a small percentage of your overall total cost base.

As a percentage of our fixed costs, it is a pretty good chunk and all that represents is, if you take a look at how much we spent in six cars which is largely people, and you take a look at how much we spent in 2001 that will be down by 150 million bucks including offsetting inflation.

Okay.

That is not related to pricing or anything else, just looking at that line item. That is an important thing to do to reduce your break-even point.

And then in Europe, do you sound reasonably assured that going for this, the market is going to hold up reasonably well and that you would not see any negative impact here on business? I guess, why do you feel reasonably assured, given that Germany, the biggest market seems to be particularly weak, and you seemed to have a lot of exposure in that one country as well?

I think you are making me sound like more of an economist than a auto forecaster than I have ever proffered to be. I would just say at this point, if you were to take a look at my discomfort level back in the fourth quarter, I was looking at the US market and we took drastic action then in order to prepare ourselves for this year. I do not feel that same way about the Europe market right now. That is not to say that it is not going to get worse.

Okay. Where then you are on committed? Do you have more new business coming on stream now, do you have better exposure to platforms that are doing better than others.

Actually, we have done a very good job of winning a number of awards in Europe, some of which we can talk about and others, of course not, but in general, I feel pretty good about the awards we have winning there.

Okay, and then lastly, you mentioned there is some potential new business, wonder you are bidding on in space and electronics. Can you highlight a few of those programs and can you give us a sense of the annual revenue contribution that you will potentially get hit and when they would hit?

I could tell the bigger ones, I do not know about the potential annual revenue out of the top of my head, but the biggest ones are Sibrislow, NPOESS, and the ANGST, the next generation space telescope.

Okay in these, you expect some sort of award decision sometime this year?

They all will all be decided either this year or early next.

Okay.

This is the best we know today. Those things have a way of changing those, you know?

Okay and lastly, the working capital performance. If you make a strip out the cash and the debt from the current liabilities and just look at it year of the year, looks like you took out a reduced working capital by almost 500 million. Is that sort of a comparison related to the, if you like that kind of comparison throughout the rest of the year, or because you had this swell production in order. How did you reduce it further than what you would normally be able to do?

You are talking about 500 million relative to the balance at the end of the first quarter last year?

Yeah.

I do not get that, I have not looked at it that way, but focusing more on where were we year-end and how do we keep driving that cash balance forward. The way I put it is, the working capital improvement that you have seen in the first quarter, we certainly expect that to continue through the rest of the year.

Okay, thank you very much. Dave. Aye, thanks, Mark.

Your next question comes from Donald Zwyer from Lehman Brothers.

Good morning.

Hi.

As part of your cost cutting effort, does knocking anything out the cooperative expense category from the 53 million current quarterly run rate, is that part of your plan?

Yes, it is. In fact, our corporate expense that is incurred by the functions will be down year to year. It just gets masked by some accounting changes that we have to make for things like OPEP.

So, do you think we will see that the numbers, you think we will see that lower at the end of the year?

It should be below the $53 million run rate by year-end, yes.

Okay, and is the pension income of, that ran at about 53 million also? Is that sustainable through 2001, do you think?

Most of it yes, it is highly dependent upon the translation from Pound Sterling to US Dollars. As you know, that is the locus severity pension plan where we receive the pension income from, so, that is translated from pounds to dollars.

Okay, one last question, do you expect any additional employee-cuts this year on top of the thousand that were already made in the automotive area?

Yes, that will continue to work, maybe not in this large number, but they will continue to trim and reduce whatever they can. Everybody understands the need to have reduced fixed costs and I feel the business leaders are being pretty rigorous about making sure that they do not let any cost in.

You will recall in my comments, I stated that we only book 27 of the 40 million and we referred to in our 10-K, so there will be additional charges in the end, the lion share of that balance will be head count.

Okay, thank you very much.

Right, thanks, Don.

Your next question comes from Andy Casey of Prudential Securities.

Good morning.

Good morning, Andy.

I have a couple of questions, but before I get into the detailed questions, Dave, I would like to ask you if any of your vision forward TRW is going is where you think it should go has changed in the last few months?

I say it is still pretty consistent with what I said earlier, and that is, we are going to concentrate on businesses where we can differentiate with technology and performance for our customers and our investors. We are a technology company at the end of the day, and that is what we tell historically and that is way we have been able to really add value for our customers. So, we are going to make sure that we concentrate on that, well as the same time making sure that whatever technology we do focus on, in addition providing the benefits through our customers, provide the benefits to our investors.

Now, on the detailed side. First on the space and electronics, there has been a lot of investment there, I am just trying to figure out which is capitalized and which would run through R&D, is there reduction in R&D year over year or did it go up.

You know, I am sorry, I do not know. I do not think we know that, it went off the top of our heads, Andy.

Okay.

I will get back to you on that, Andy.

Okay, thanks. In the technology or in the indium phosphide, it has been somewhat of a kind of a bated hook out there for while, could you, kind of, talk about in terms of maybe a baseball analogy, what intent are we in for some sort announcement or partnership?

You plan on taking the bait at some point here, Andy?

I did, once.

Well, you should. We will be in production towards the end of this year. I am not ready to go out on a limb with any sales or margin or estimates like that. I would just say that the feedback we are getting from the customer community is encouraging at this point, but you know, my normal reluctance to quote numbers on anything until we can prove it.

Okay, just kind of ANIS altogether, the backlog is, as I recall, was lower at the end of 2000 than end of 1999. Has there been any improvement that you would add to that level or we get back to the 1999 level?

Actually, yeah, I recall it being about flat, year to year and at this stage things are getting better from the backlog standpoint.

Okay, then in auto, this will be the last one, Chassis had, kind of a steeper decline in margins and I, you know, recognize there has been some restatement in there. Could you give, kind of, you know, rank order the impact in terms of negative impact on margins of the auto production, truck production declines in the new products.

Yeah, I do not know whether I can give it to you that well. I would just say that it was driven mostly by volume and mix. We had a lot of SUB type content in our Chassis business.

Okay, thanks.

You are welcome back to TRW, Andy.

At this time, there are no further questions.

I would like to thank everybody for participating and we look forward to our next quarter call. Dave/Carl Miller: Thanks, guys.

Thank you for participating in this today's TRW first quarter conference call. You may now all disconnect.