News Release

Tower International Reports Third Quarter Results and Increases Outlook for Revenue and Adjusted Earnings Per Share

LIVONIA, Mich., Oct. 30, 2017 /PRNewswire/ -- Tower International, Inc. [NYSE: TOWR], a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced third quarter 2017 results and updated its business outlook through 2017. 

  • Revenue for the third quarter was $462 million compared with $457 million in the third quarter of 2016.
  • Net income was $14.9 million or 72 cents per diluted share, compared with $18.2 million or 86 cents per share in the third quarter last year.  As detailed below, this year's third quarter included certain items that adversely impacted results by $2.8 million.  Excluding these items and comparable items in the third quarter of 2016, adjusted earnings per share of 85 cents, compared with 90 cents a year ago. 
  • Adjusted EBITDA for the quarter was $49.2 million slightly ahead of the Company's outlook but down from $50.1 million a year ago. 
  • For the quarter, net cash provided by continuing operating activities amounted to $46.1 million.  Cash disbursed for purchases of equipment totaled $32.5 million resulting in Free Cash Flow of $13.6 million.
  • Present outlook for full year revenue of $1.98 billion is expected to be $10 million higher than previous outlook, as favorable foreign exchange is expected to more than offset modest production decreases on Tower contented vehicles in Europe.  The Company is raising its outlook for adjusted earnings per share by 10 cents to $3.70 per share and re-affirming its outlook for Adjusted EBITDA of $210 million and positive free cash flow of $55 million.
  • Tower remains committed to having a growing and sustainable dividend and increased the quarterly dividend by 9 percent to 12 cents per share.

"Tower delivered solid financial results in the quarter as revenue and earnings were ahead of our previous outlook," said CEO Jim Gouin.  "We continue to invest in the growth of Tower and continue to benefit from emerging industry trends.  With our existing net new business wins and exposure to trucks and SUVs in the North American market we are well positioned to grow our business at a faster pace than the industry over the coming years." 

Tower to Host Conference Call Today at 11 a.m. EDT

Tower will discuss its third quarter 2017 results and other related matters in a conference call at 11 a.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. #2170878.  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 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 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 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, business growth, 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;
  • our ability to take advantage of emerging secular trends;
  • 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 Sept. 30,


Nine Months Ended Sept. 30,



2017


2016


2017


2016










Revenues


$                           462,372


$                 457,042


$                  1,449,887


$               1,451,367

Cost of sales


403,619


396,806


1,272,758


1,271,900

Gross profit


58,753


60,236


177,129


179,467

Selling, general, and administrative expenses


29,667


31,223


87,899


96,125

Amortization expense 


117


112


333


344

Restructuring and asset impairment charges, net 


1,131


1,196


8,379


2,782

  Operating income


27,838


27,705


80,518


80,216

Interest expense 


5,673


5,598


7,933


18,167

Interest income


64


40


197


108

Other expense


-


-


575


6,481

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


22,229


22,147


72,207


55,676

Provision  for income taxes 


8,002


4,239


22,170


13,770

Income  from continuing operations


14,227


17,908


50,037


41,906

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


704


367


1,565


(19,999)

        Net income


14,931


18,275


51,602


21,907

Less: Net income attributable to the noncontrolling interests


-


118


110


213

Net income attributable to Tower International, Inc.


$                             14,931


$                   18,157


$                       51,492


$                    21,694










Weighted average basic shares outstanding


20,522,001


20,830,203


20,485,722


21,039,305

Weighted average diluted shares outstanding


20,787,405


21,182,149


20,804,441


21,372,875










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









Income per share from continuing operations 


$                                 0.69


$                       0.85


$                           2.44


$                        1.98

Income / (loss) per share from discontinued operations 


0.03


0.02


0.08


(0.95)

Income per share 


0.73


0.87


2.51


1.03










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









Income per share from continuing operations 


$                                 0.68


$                       0.84


$                           2.40


$                        1.95

Income / (loss) per share from discontinued operations 


0.03


0.02


0.08


(0.94)

Income per share 


0.72


0.86


2.48


1.02










Dividends declared per share


$                                 0.11


$                       0.10


$                           0.33


$                        0.30

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands - unaudited)








Sept. 30,


Dec. 31,



2017


2016






ASSETS





Cash and cash equivalents


$                   43,597


$                   62,788

Accounts receivable, net of allowance of $1,533 and $961


272,749


178,251

Inventories


81,127


71,710

Assets held for sale


45,065


102,252

Prepaid tooling, notes receivable, and other


120,500


103,023

Total current assets


563,038


518,024






Property, plant, and equipment, net


514,137


465,569

Goodwill


63,407


56,383

Deferred tax asset


114,399


112,645

Other assets, net


12,112


9,902

Total assets


$              1,267,093


$              1,162,523






LIABILITIES AND EQUITY





Short-term debt and current maturities of capital lease obligations


$                   42,853


$                   34,211

Accounts payable


300,292


258,129

Accrued liabilities


 

117,305


114,079

Liabilities held for sale


 

16,814


53,310

Total current liabilities


477,264


459,729






Long-term debt, net of current maturities


361,734


351,232

Obligations under capital leases, net of current maturities


-


4,863

Deferred tax liability


5,533


5,594

Pension liability


51,723


61,627

Other non-current liabilities


97,070


65,539

Total non-current liabilities


516,060


488,855

Total liabilities


993,324


948,584











Stockholders' equity:





Tower International, Inc.'s stockholders' equity





Common stock


$                        223


$                        221

Additional paid in capital


343,374


340,623

Treasury stock


(36,408)


(35,645)

Accumulated surplus/ (deficit)


36,044


(14,021)

Accumulated other comprehensive loss


(69,464)


(83,383)

     Total Tower International, Inc.'s stockholders' equity


273,769


207,795

Noncontrolling interests in subsidiaries


-


6,144

     Total stockholders' equity


273,769


213,939






Total liabilities and stockholders' equity


$              1,267,093


$              1,162,523

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands - unaudited)












Three Months Ended Sept. 30,


Nine Months Ended Sept. 30,



2017


2016


2017


2016










OPERATING ACTIVITIES:









Net income


$                  14,931


$                  18,275


$                  51,602


$                  21,907

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


704


367


1,565


(19,999)

Income from continuing operations


14,227


17,908


50,037


41,906










Adjustments required to reconcile income from continuing operations to net cash provided by continuing operating activities:









Deferred income tax provision


$                    5,402


$                    2,135


$                  15,367


$                  10,251

Depreciation and amortization


18,321


17,900


54,853


53,383

Non-cash share-based compensation


559


511


1,657


1,545

Pension income, net of contributions


(5,055)


(3,384)


(9,906)


(7,851)

Change in working capital and other operating items


12,699


(25,107)


(76,095)


(66,876)

Net cash provided by continuing operating activities


$                  46,153


$                    9,963


$                  35,913


$                  32,358










INVESTING ACTIVITIES:









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


$                 (32,526)


$                 (12,610)


$                 (76,687)


$                 (73,536)

Proceeds from disposition of joint venture, net


-


-


15,944


-

Net cash used in continuing investing activities


$                 (32,526)


$                 (12,610)


$                 (60,743)


$                 (73,536)










FINANCING ACTIVITIES:









Proceeds from borrowings


$                162,073


$                162,848


$                535,926


$                458,752

Repayments of  borrowings


(185,997)


(145,227)


(522,029)


(417,664)

Repayments on Term Loan Credit Facility


-


-


-


(50,000)

Original issuance discount


-


-


(1,808)


-

Debt issuance costs


-


-


(4,747)


-

Dividend payment to Tower stockholders


(2,258)


(2,105)


(6,756)


(6,334)

Proceeds from stock options exercised


42


43


1,094


68

Purchase of treasury stock


(1)


(17,912)


(763)


(18,533)

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


$                 (26,141)


$                   (2,353)


$                       917


$                 (33,711)










Discontinued operations:









Net cash from / (used in) discontinued operating activities


$                      (396)


$                       639


$                      (322)


$                    3,714

Net cash used in discontinued investing activities


(241)


(203)


(1,251)


(2,110)

Net cash from / (used in) discontinued financing activities


217


(263)


1,137


(2,899)

Net cash from / (used in) discontinued operations


$                      (420)


$                       173


$                      (436)


$                   (1,295)










Effect of exchange rate changes on continuing cash and cash equivalents


$                    1,737


$                       266


$                    5,158


$                    1,806










NET CHANGE IN CASH AND CASH EQUIVALENTS


$                 (11,197)


$                   (4,561)


$                 (19,191)


$                 (74,378)










CASH AND CASH EQUIVALENTS:









Beginning of period


$                  54,794


$                  51,777


$                  62,788


$                121,594










End of period


$                  43,597


$                  47,216


$                  43,597


$                  47,216

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands - unaudited)




























Segment Data


Three Months Ended Sept. 30,



2017


2016



Revenues


Adjusted
EBITDA


Revenues


Adjusted
EBITDA

Europe


$              146,559


$                  8,219


$              147,964


$                12,084

North America


315,813


40,975


309,078


38,039

Consolidated


$              462,372


$                49,194


$              457,042


$                50,123












Nine Months Ended Sept. 30,



2017


2016



Revenues


Adjusted
EBITDA


Revenues


Adjusted
EBITDA

Europe


$              466,956


$                33,019


$              484,064


$                37,307

North America


982,931


115,623


967,303


108,170

Consolidated


$           1,449,887


$              148,642


$           1,451,367


$              145,477




























Adjusted EBITDA Reconciliation


Three Months Ended Sept. 30,


Nine Months Ended Sept. 30,



2017


2016


2017


2016

Net income attributable to Tower International, Inc.


$                14,931


$                18,157


$                51,492


$                21,694

Restructuring and asset impairment charges, net


1,131


1,196


8,379


2,782

Depreciation and amortization


18,321


17,900


54,853


53,383

Acquisition costs and other


90


47


273


318

Long-term compensation expense


1,814


3,275


4,619


8,778

Interest expense, net


5,609


5,558


7,736


18,059

Other expense


-


-


575


6,481

Provision for income taxes


8,002


4,239


22,170


13,770

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


(704)


(367)


(1,565)


19,999

Net income attributable to noncontrolling interests


-


118


110


213

Adjusted EBITDA


$                49,194


$                50,123


$              148,642


$              145,477



















Free Cash Flow Reconciliation


Three Months Ended Sept. 30,


Nine Months Ended Sept. 30,



2017


2016


2017


2016

Net cash provided by continuing operating activities


$                46,153


$                  9,963


$                35,913


$                32,358

Cash disbursed for purchases of PP&E


(32,526)


(12,610)


(76,687)


(73,536)

Free cash flow


$                13,627


$                (2,647)


$              (40,774)


$              (41,178)



















Net Debt Reconciliation


Sept. 30,


Dec. 31,







2017


2016





Short-term debt and current maturities of capital lease obligations


$                42,853


$                34,211





Long-term debt, net of current maturities


370,199


357,298





Debt issue costs


(8,465)


(6,066)





Obligations under capital leases, net of current maturities


-


4,863





Total debt


404,587


390,306





Less: Cash and cash equivalents


(43,597)


(62,788)





Net debt


$              360,990


$              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



Sept. 30,


Sept. 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


$                 -


$           (710)


$                 -


$        (1,044)

Restructuring and asset impairment charges, net









One-time restructuring actions


(419)


-


(651)


-

Interest expense









Mark-to-market loss on derivative financial instruments


(614)


(428)


(991)


(629)

Provision for income taxes









Establishment of valuation allowance


(2,448)


-


(2,448)


-

Discontinued operations









Income from discontinued operations


703


367


703


367

Noncontrolling interests









Net income attributable to noncontrolling interests*


-


(118)


-


(118)

Total items included in net income, net of tax


$          (2,778)


$           (889)














Net income attributable to Tower International, Inc.


$         14,931


$        18,157














Memo:  Average shares outstanding (in thousands)









Basic


20,522


20,830





Diluted


20,787


21,182














Income per common share (GAAP)









Basic


$             0.73


$            0.87





Diluted


0.72


0.86














Diluted adjusted earnings per share (non-GAAP) 


$             0.85


$            0.90














* 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



Nine Months Ended


Nine Months Ended



Sept. 30,


Sept. 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


$                 -


$        (1,154)


$                 -


$        (1,697)

Restructuring and asset impairment charges, net









One-time restructuring actions


(4,580)


-


(7,284)


-

Interest expense









Mark-to-market loss on derivative financial instruments


3,672


(2,320)


5,921


(3,412)

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)


-

Provision for income taxes









Establishment of valuation allowance


(2,448)


-


(2,448)


-

Discontinued operations









Loss on sale of joint venture


(2,596)


-


(2,596)


-

Income / (loss) from discontinued operations


4,161


(19,999)


4,161


(19,999)

Noncontrolling interests









Net income attributable to noncontrolling interests*


(110)


(213)


(110)


(213)

Total items included in net income, net of tax


$          (2,258)


$      (28,733)














Net income attributable to Tower International, Inc.


$         51,492


$        21,694














Memo:  Average shares outstanding (in thousands)









Basic


20,486


21,039





Diluted


20,804


21,373














Income per common share (GAAP)









Basic


$             2.51


$            1.03





Diluted


2.48


1.02














Diluted adjusted earnings per share (non-GAAP) 


$             2.58


$            2.36














* Amounts attributable to noncontrolling interests of discontinued operations






 

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SOURCE Tower International