News Release

Tower International Reports Second Quarter Results and Maintains Full-Year 2017 Outlook for Earnings and Free Cash Flow

LIVONIA, Mich., July 26, 2017 /PRNewswire/ -- Tower International, Inc. (NYSE: TOWR), a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced second quarter 2017 results and updated its business outlook through 2017. 

  • Revenue for the second quarter was $490 million compared with $505 million in the second quarter of 2016.
  • Net income was $19.2 million or 92 cents per diluted share, compared with net loss of $4.8 million or 23 cents per share in the second quarter last year, which included non-cash impairments related to discontinued operations. As detailed below, this year's second quarter included certain items that adversely impacted results by $0.9 million. Excluding these items and comparable items in the second quarter of 2016, diluted adjusted earnings were 97 cents per share, compared with 81 cents a year ago.
  • Adjusted EBITDA for the quarter was $53.2 million, an increase of 6 percent compared with $50.3 million a year ago. Adjusted EBITDA Margin increased by 90 basis points to 10.9 percent.
  • Free Cash Flow, as defined below, totaled $18 million for the quarter and was significantly favorable to outlook.
  • Current outlook for full year revenue of $1.97 billion is expected to be $45 million higher than previous outlook, as higher European steel prices and favorable foreign exchange more than offset modest production decreases on Tower contented vehicles in Europe. The Company is re-affirming its outlook for full year 2017 Adjusted EBITDA of $210 million, Adjusted EPS of $3.60 per share and positive free cash flow of $55 million.
  • During the second half of 2017, Tower has significant launches in North America on a number of platforms, which in total represent approximately 20 percent of ongoing revenue for the region.

"Tower delivered solid financial results in the quarter as revenue and earnings were largely in-line with our previous outlook and free cash flow was better than expected," said CEO Jim Gouin.  "We continue to invest in the growth of Tower and are well positioned to grow our business at a faster pace than the industry over the coming years.  Program launches in the second half of the year exemplify how the emerging secular trends related to outsourcing are fueling Tower's revenue growth." 

Tower to Host Conference Call Today at 1 p.m. EDT

Tower will discuss its second quarter 2017 results and other related matters in a conference call at 1 p.m. EDT today.  Participants may listen to the audio portion of the conference call either through a live audio webcast on the Company's website or by telephone.  The slide presentation and webcast can be accessed via the investor relations portion of Tower's website www.towerinternational.com.  To dial into the conference call, domestic callers should dial (866) 393-4576, international callers should dial (706) 679-1462.  An audio recording of the call will be available approximately two hours after the completion of the call.  To access this recording, please dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and reference Conference I.D. #55515739.  A webcast replay will also be available and may be accessed via Tower's website.

Non-GAAP Financial Measures

This press release includes the following non-GAAP financial measures: "adjusted EBITDA", "adjusted EBITDA margin", "adjusted earnings per share", and "free cash flow".  We define adjusted EBITDA as net income/(loss) before interest, taxes, depreciation, amortization, restructuring items and other adjustments described in the reconciliations provided in this press release.  Adjusted EBITDA margin is defined as adjusted EBITDA divided by revenue.  Adjusted earnings per share exclude certain income and expense items described in the reconciliation provided in this press release.  Free cash flow is defined as cash provided by continuing operating activities less cash disbursed for purchases of property, plant and equipment.  We use adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share, and free cash flow as supplements to information provided in accordance with generally accepted accounting principles ("GAAP") in evaluating our business and they are included in this press release because they are principal factors upon which our management assesses performance and in certain instances in measuring performance for compensation purposes.  Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP are set forth below.  The non-GAAP measures presented above are not measures of performance under GAAP.  These measures should not be considered as alternatives for the most directly comparable financial measures calculated in accordance with GAAP.  Other companies in our industry may define these non-GAAP measures differently than we do and, as a result, these non-GAAP measures may not be comparable to similarly titled measures used by other companies in our industry; and certain of our non-GAAP financial measures exclude financial information that some may consider important in evaluating our performance.  Given the inherent uncertainty regarding mark to market adjustments of financial instruments, potential gain or loss on our Discontinued Operations, potential restructuring expenses, and expenses related to our long-term incentive compensation programs in any future period, a reconciliation of forward-looking financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP is not feasible.  Consequently, any attempt to disclose such reconciliations would imply a degree of precision that could be confusing or misleading to investors. The magnitude of these items, however, may be significant.

Forward-Looking Statements and Risk Factors

This press release contains statements which constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding the Company's projected full year earnings, cash flow and revenues, Adjusted EBITDA and free cash flow. The forward-looking statements can be identified by words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "project," "target," and other similar expressions.  Forward-looking statements are made as of the date of this press release and are based upon management's current expectations and beliefs concerning future developments and their potential effects on us.  Such forward-looking statements are not guarantees of future performance.  The following important factors, as well as risk factors described in our reports filed with the SEC, could cause our actual results to differ materially from estimates or expectations reflected in such forward-looking statements:

  • global automobile production volumes;
  • the financial condition of our customers and suppliers;
  • our ability to make scheduled payments of principal or interest on our indebtedness and comply with the covenants and restrictions contained in the instruments governing our indebtedness;
  • our ability to refinance our indebtedness;
  • risks associated with our non-U.S. operations, including foreign exchange risks and economic uncertainty in some regions;
  • any increase in the expense and funding requirements of our pension and other postretirement benefits;
  • our customers' ability to obtain equity and debt financing for their businesses;
  • our dependence on our largest customers;
  • pricing pressure from our customers;
  • work stoppages or other labor issues affecting us or our customers or suppliers;
  • our ability to integrate acquired businesses;
  • risks associated with business divestitures; and
  • costs or liabilities relating to environmental and safety regulations.

We do not assume any obligation to update or revise the forward-looking statements contained in this press release.

Contact:
Derek Fiebig
Executive Director, Investor & External Relations
(248) 675-6457
fiebig.derek@towerinternational.com

 


TOWER INTERNATIONAL, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


(Amounts in thousands, except share and per share amounts - unaudited)














Three Months Ended June 30,


Six Months Ended June 30,




2017


2016


2017


2016












Revenues


$                        489,925


$                505,131


$                  987,515


$                994,325


Cost of sales


428,328


442,989


869,139


875,094


Gross profit


61,597


62,142


118,376


119,231


Selling, general, and administrative expenses


29,007


32,050


58,232


64,902


Amortization expense 


113


116


216


232


Restructuring and asset impairment charges, net 


3,337


840


7,248


1,586


  Operating income


29,140


29,136


52,680


52,511


Interest expense 


1,807


4,987


2,260


12,569


Interest income


86


40


133


68


Other expense


-


2,905


575


6,481


Income before provision for income taxes and income / (loss) from
discontinued operations


27,419


21,284


49,978


33,529


Provision  for income taxes 


7,672


6,015


14,168


9,531


Income  from continuing operations


19,747


15,269


35,810


23,998


Income / (loss) from discontinued operations, net of tax 


(489)


(20,021)


861


(20,366)


        Net income / (loss)


19,258


(4,752)


36,671


3,632


Less: Net income attributable to the noncontrolling interests


42


89


110


95


Net income / (loss) attributable to Tower International, Inc.


$                          19,216


$                  (4,841)


$                    36,561


$                    3,537












Weighted average basic shares outstanding


20,508,890


21,164,505


20,467,281


21,145,588


Weighted average diluted shares outstanding


20,805,931


21,489,161


20,813,100


21,469,818












Basic income per share attributable to Tower International, Inc.:










Income per share from continuing operations 


$                              0.96


$                      0.72


$                        1.74


$                      1.13


Income / (loss) per share from discontinued operations 


(0.02)


(0.95)


0.04


(0.96)


Income / (loss) per share 


0.94


(0.23)


1.79


0.17












Diluted income per share attributable to Tower International, Inc.:










Income per share from continuing operations 


$                              0.95


$                      0.71


$                        1.72


$                      1.11


Income / (loss) per share from discontinued operations 


(0.02)


(0.93)


0.04


(0.95)


Income / (loss) per share 


0.92


(0.23)


1.76


0.16












Dividends declared per share


$                              0.11


$                      0.10


$                        0.22


$                      0.20











 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands - unaudited)








June 30,


December 31,



2017


2016






ASSETS





Cash and cash equivalents


$                  54,794


$                  62,788

Accounts receivable, net of allowance of $1,298 and $961


253,139


178,251

Inventories 


74,965


71,710

Assets held for sale 


42,699


102,252

Prepaid tooling, notes receivable, and other


136,054


103,023

Total current assets


561,651


518,024






Property, plant, and equipment, net


495,840


465,569

Goodwill 


61,669


56,383

Deferred tax asset


116,917


112,645

Other assets, net


10,464


9,902

Total assets


$             1,246,541


$             1,162,523






LIABILITIES AND EQUITY





Short-term debt and current maturities of capital lease obligations 


$                  51,024


$                  34,211

Accounts payable 


273,623


258,129

Accrued liabilities


 

125,648


114,079

Liabilities held for sale 


16,909


53,310

Total current liabilities


467,204


459,729






Long-term debt, net of current maturities 


375,562


351,232

Obligations under capital leases, net of current maturities 


-


4,863

Deferred tax liability


5,354


5,594

Pension liability 


56,777


61,627

Other non-current liabilities


86,443


65,539

Total non-current liabilities 


524,136


488,855

Total liabilities


991,340


948,584











Stockholders' equity:





Tower International, Inc.'s stockholders' equity





Common stock


$                       223


$                       221

Additional paid in capital


342,773


340,623

Treasury stock


(36,407)


(35,645)

Accumulated surplus/ (deficit)


23,371


(14,021)

Accumulated other comprehensive loss 


(74,759)


(83,383)

     Total Tower International, Inc.'s stockholders' equity


255,201


207,795

Noncontrolling interests in subsidiaries 


-


6,144

Total stockholders' equity


255,201


213,939






Total liabilities and stockholders' equity


$             1,246,541


$              1,162,523











 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands - unaudited)












Three Months Ended June 30,


Six Months Ended June 30,



2017


2016


2017


2016










OPERATING ACTIVITIES:









Net income / (loss)


$              19,258


$            (4,752)


$              36,671


$                  3,632

Less: Income / (loss) from discontinued operations, net of tax


(489)


(20,021)


861


(20,366)

Income from continuing operations


19,747


15,269


35,810


23,998










Adjustments required to reconcile income from continuing operations to net cash provided by
/ (used in) continuing operating activities:









Deferred income tax provision


$                6,010


$              5,120


$              9,965


$                  8,116

Depreciation and amortization


18,766


18,207


36,532


35,483

Non-cash share-based compensation


599


505


1,098


1,034

Pension income, net of contributions


(2,500)


(2,320)


(4,851)


(4,467)

Change in working capital and other operating items


(4,286)


(24,650)


(88,794)


(41,769)

Net cash provided by / (used in) continuing operating activities


$              38,336


$            12,131


$            (10,240)


$                22,395










INVESTING ACTIVITIES:









Cash disbursed for purchases of property, plant, and equipment, net


$            (20,252)


$          (35,230)


$          (44,161)


$              (60,926)

Proceeds from disposition of joint venture, net


15,944


-


15,944


-

Net cash used in continuing investing activities


$              (4,308)


$          (35,230)


$          (28,217)


$               (60,926)










FINANCING ACTIVITIES:









Proceeds from borrowings


$              137,109


$            149,577


$            373,853


$               295,904

Repayments of  borrowings


(143,606)


(134,239)


(336,032)


(272,437)

Repayments on Term Loan Credit Facility


-


-


-


(50,000)

Original issuance discount


-


-


(1,808)


-

Debt financing costs


(664)


-


(4,747)


-

Dividend payment to Tower stockholders


(2,256)


(2,118)


(4,498)


(4,229)

Proceeds from stock options exercised


114


25


1,052


25

Purchase of treasury stock


(1)


-


(762)


(621)

Net cash provided by / (used in) continuing financing activities


$                (9,304)


$              13,245


$              27,058


$              (31,358)










Discontinued operations:









Net cash from discontinued operating activities


$                      644


$                    227


$                     74


$                   3,074

Net cash used in discontinued investing activities


(604)


(1,489)


(1,010)


(1,907)

Net cash from / (used in) discontinued financing activities


423


474


920


(2,635)

Net cash from / (used in) discontinued operations


$                      463


$                  (788)


$                   (16)


$                 (1,468)










Effect of exchange rate changes on continuing cash and cash equivalents


$                   2,084


$                  (399)


$                3,421


$                   1,540










NET CHANGE IN CASH AND CASH EQUIVALENTS


$                 27,271


$             (11,041)


$              (7,994)


$               (69,817)










CASH AND CASH EQUIVALENTS:









Beginning of period


$                 27,523


$               62,818


$              62,788


$               121,594










End of period


$                 54,794


$               51,777


$              54,794


$                 51,777










 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands - unaudited)




























Segment Data


Three Months Ended June 30,



2017


2016



Revenues


Adjusted EBITDA


Revenues


Adjusted EBITDA

Europe


$              160,229


$                13,628


$              175,044


$                13,708

North America


329,696


39,616


330,087


36,550

Consolidated


$              489,925


$                53,244


$              505,131


$                50,258












Six Months Ended June 30,



2017


2016



Revenues


Adjusted EBITDA


Revenues


Adjusted EBITDA

Europe


$              320,381


$                24,800


$              336,142


$                25,202

North America


667,134


74,648


658,183


70,151

Consolidated


$              987,515


$                99,448


$              994,325


$                95,353




























Adjusted EBITDA Reconciliation


Three Months Ended June 30,


Six Months Ended June 30,



2017


2016


2017


2016

Adjusted EBITDA


$                53,244


$                50,258


$                99,448


$                95,353

Restructuring and asset impairment charges, net


(3,337)


(840)


(7,248)


(1,586)

Depreciation and amortization


(18,766)


(18,207)


(36,532)


(35,483)

Acquisition costs and other


(109)


(154)


(184)


(178)

Long-term compensation expense


(1,892)


(1,921)


(2,804)


(5,595)

Interest expense, net


(1,721)


(4,947)


(2,127)


(12,501)

Other expense


-


(2,905)


(575)


(6,481)

Provision for income taxes


(7,672)


(6,015)


(14,168)


(9,531)

Income / (loss) from discontinued operations, net of tax 


(489)


(20,021)


861


(20,366)

Net income attributable to noncontrolling interests


(42)


(89)


(110)


(95)

Net income / (loss) attributable to Tower International, Inc.


$                19,216


$                (4,841)


$                36,561


$                  3,537



















Free Cash Flow Reconciliation


Three Months Ended June 30,


Six Months Ended June 30,



2017


2016


2017


2016

Net cash provided by / (used in) continuing operating activities


$                38,336


$                12,131


$              (10,240)


$                22,395

Cash disbursed for purchases of PP&E


(20,252)


(35,230)


(44,161)


(60,926)

Free cash flow


$                18,084


$              (23,099)


$              (54,401)


$              (38,531)



















Net Debt Reconciliation


June 30,


December 31,







2017


2016





Short-term debt and current maturities of capital lease obligations


$                51,024


$                34,211





Long-term debt, net of current maturities


384,509


357,298





Debt issue costs


(8,947)


(6,066)





Obligations under capital leases, net of current maturities


-


4,863





Total debt


426,586


390,306





Less: Cash and cash equivalents


(54,794)


(62,788)





Net debt


$              371,792


$              327,518














 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CERTAIN ITEMS INCLUDED IN NET INCOME

(Amounts in thousands, except per share amounts - unaudited)












After tax


Before tax



Three Months Ended


Three Months Ended



June 30,


June 30,



2017


2016


2017


2016










Income / (expense) items included in net income, net of tax:









Selling, general, and administrative expenses









  One-time CEO compensation awards


$                 -


$             203


$                 -


$             299

Restructuring and asset impairment charges, net









  One-time restructuring actions


(2,006)


-


(3,157)


-

Interest expense









  Mark-to-market loss on derivative financial instruments


1,631


(242)


2,630


(356)

Other expense









  European divestiture expenses


-


(2,112)


-


(2,905)

Discontinued operations









  Loss on sale of joint venture


(2,596)


-


(2,596)


-

  Income from discontinued operations


2,108


(20,021)


2,108


(20,021)

Noncontrolling interests









  Net income attributable to noncontrolling interests*


(42)


(89)


(42)


(89)

   Total items included in net income, net of tax


$             (905)


$      (22,261)














Net income / (loss) attributable to Tower International, Inc.


$         19,216


$        (4,841)














Memo:  Average shares outstanding (in thousands)









Basic


20,509


21,165





Diluted


20,806


21,489














Income / (loss) per common share (GAAP)









Basic


$             0.94


$          (0.23)





Diluted


0.92


(0.23)














Diluted adjusted earnings per share (non-GAAP) 


$             0.97


$            0.81














* Amounts attributable to noncontrolling interests of discontinued operations









 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CERTAIN ITEMS INCLUDED IN NET INCOME

(Amounts in thousands, except per share amounts - unaudited)












After tax


Before tax



Six Months Ended


Six Months Ended



June 30,


June 30,



2017


2016


2017


2016










Income / (expense) items included in net income, net of tax:









Selling, general, and administrative expenses









  One-time CEO compensation awards


$                 -


$           (444)




$           (653)

Restructuring and asset impairment charges, net









  One-time restructuring actions


(4,161)


-


(6,633)


-

Interest expense









  Mark-to-market loss on derivative financial instruments


4,286


(1,892)


6,912


(2,782)

  Acceleration of the amortization of debt issue costs and OID


-


(503)


-


(740)

Other expense









  European divestiture expenses


-


(4,544)


-


(6,481)

   Debt refinancing costs 


(357)




(575)


-

Discontinued operations









  Loss on sale of joint venture


(2,596)


-


(2,596)


-

  Income / (loss) from discontinued operations


3,458


(20,366)


3,458


(20,366)

Noncontrolling interests









  Net income attributable to noncontrolling interests*


(110)


(95)


(110)


(95)

  Total items included in net income, net of tax


$              520


$      (27,844)














Net income attributable to Tower International, Inc.


$         36,561


$          3,537














Memo:  Average shares outstanding (in thousands)









Basic


20,467


21,146





Diluted


20,813


21,470














Income per common share (GAAP)









Basic


$             1.79


$            0.17





Diluted


1.76


0.16














Diluted adjusted earnings per share (non-GAAP) 


$             1.73


$            1.46














* Amounts attributable to noncontrolling interests of discontinued operations


















 

 

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