News Release

Tower International Reports First Quarter Results and Affirms Earnings and Free Cash Flow Outlook for 2018

LIVONIA, Mich., May 3, 2018 /PRNewswire/ -- Tower International, Inc. (NYSE: TOWR), a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced first quarter 2018 results and affirmed its earnings and free cash flow outlook for 2018. 

  • Revenue for the first quarter was $564 million compared with $498 million in the first quarter of 2017 representing a 13 percent increase.
  • Net income was $17.3 million or $0.83 per share essentially equal to the first quarter last year. As detailed below, this year's first quarter included certain items that, in aggregate, increased results by $27 thousand. Excluding these items and comparable items in the first quarter of 2017, adjusted earnings per share amounted to $0.82, an increase of 8 percent from the $0.76 reported a year ago.
  • Adjusted EBITDA for the quarter was $53.1 million slightly ahead of the Company's outlook and up 16 percent from $45.7 million a year ago.
  • For the quarter, net cash used by continuing operating activities was $16 million. Cash disbursed for purchases of equipment totaled $29 million resulting in Free Cash Flow of negative $45 million. This compares with negative Free Cash Flow of $72 million in the first quarter 2017.
  • Full year 2018 outlook includes:
    • Revenue of $2.15 billion, reflecting primarily net new business of $125 million and favorable foreign exchange;
    • Adjusted EBITDA of $230 million;
    • Diluted Adjusted EPS of $4.10 per share – up 9 percent from 2017; and
    • Free Cash Flow of $50 million, with strong free cash flow in the second half of the year more than offsetting the expected cash outflow in the first half of the year.
  • The Company's outlook for second quarter 2018 includes revenue of $560 million, Adjusted EBITDA of $58 million and Diluted Adjusted Earnings Per Share of $1.08.

"Tower delivered solid financial results in the first quarter as Adjusted EBITDA and Adjusted EPS were slightly ahead of our previous outlook," said CEO Jim Gouin.  "Revenue for the quarter increased 13 percent as Tower continues to benefit from the secular trends of outsourcing and a continued production mix shift from cars to trucks and SUVs.  This mix shift helped Tower's North American revenue to grow by 16 percent while the industry production declined by 3 percent.  These trends, in combination with our solid backlog of net new business, gives us further confidence that we will continue to grow our revenue faster than the industry in total."

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

Tower will discuss its first quarter 2018 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. #6385526.  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 represents Adjusted EBITDA divided by revenues, 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, net new business backlog, business growth, adjusted EBITDA, adjusted EBITDA margin 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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








Three Months Ended March 31,



2018


2017






Revenues


$                 563,506


$                 497,590

Cost of sales


503,660


441,290

Gross profit


59,846


56,300

Selling, general, and administrative expenses


32,234


29,225

Amortization expense 


112


103

Restructuring and asset impairment charges, net 


1,548


3,911

  Operating income


25,952


23,061

Interest expense 


5,162


453

Interest income


157


47

Net periodic benefit income


558


479

Other expense


-


575

Income before provision for income taxes and income from discontinued operations


21,505


22,559

Provision  for income taxes 


5,067


6,496

Income from continuing operations


16,438


16,063

Income from discontinued operations, net of tax 


862


1,350

        Net income


17,300


17,413

     Less: Net income attributable to the noncontrolling interests


-


68

Net income attributable to Tower International, Inc.


$                  17,300


$                   17,345






Weighted average basic shares outstanding


20,556,613


20,425,216

Weighted average diluted shares outstanding


20,951,973


20,820,457






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





Income per share from continuing operations 


$                      0.80


$                       0.78

Income per share from discontinued operations 


0.04


0.07

Income per share 


0.84


0.85






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





Income per share from continuing operations 


$                      0.79


$                       0.77

Income per share from discontinued operations 


0.04


0.06

Income per share 


0.83


0.83






Dividends declared per share


$                      0.12


$                       0.11

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands - unaudited)








March 31,


December 31,



2018


2017






ASSETS





Cash and cash equivalents


$                   65,602


$                 123,688

Accounts receivable, net of allowance of $1,429 and $1,385


333,695


239,319

Inventories 


86,697


78,745

Assets held for sale 


44,428


44,250

Prepaid tooling, notes receivable, and other


79,755


78,481

Total current assets


610,177


564,483






Property, plant, and equipment, net


554,549


535,272

Goodwill 


65,732


63,665

Deferred tax asset


82,217


83,035

Other assets, net


14,762


13,642

Total assets


$              1,327,437


$              1,260,097






LIABILITIES AND EQUITY





Short-term debt and current maturities of capital lease obligations 


$                   31,785


$                   42,048

Accounts payable 


350,896


323,271

Accrued liabilities


142,547


113,949

Liabilities held for sale 


17,228


17,336

Total current liabilities


542,456


496,604






Long-term debt, net of current maturities 


344,218


344,738

Deferred tax liability


4,916


4,807

Pension liability 


45,577


47,813

Other non-current liabilities


98,649


96,263

Total non-current liabilities 


493,360


493,621

Total liabilities


1,035,816


990,225






Stockholders' equity:





Common stock


224


223

Additional paid in capital


344,968


344,153

Treasury stock


(36,882)


(36,408)

Accumulated surplus


40,699


29,712

Accumulated other comprehensive loss 


(57,388)


(67,808)

  Total stockholders' equity


291,621


269,872






  Total liabilities and stockholders' equity


$              1,327,437


$              1,260,097

 

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands - unaudited)








Three Months Ended March 31,



2018


2017






OPERATING ACTIVITIES:





Net income


$                  17,300


$                  17,413

Less: Income from discontinued operations, net of tax


862


1,350

Income from continuing operations


$                  16,438


$                  16,063






Adjustments required to reconcile income from continuing operations to net cash used in continuing operating activities:





Deferred income tax provision


$                    3,167


$                    3,955

Depreciation and amortization


21,395


17,766

Non-cash share-based compensation


703


499

Pension income, net of contributions


(2,237)


(2,351)

Change in working capital and other operating items


(55,620)


(84,356)

  Net cash used in continuing operating activities


$                 (16,154)


$                 (48,424)






INVESTING ACTIVITIES:





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


$                 (28,942)


$                 (23,909)

  Net cash used in continuing investing activities


$                 (28,942)


$                 (23,909)






FINANCING ACTIVITIES:





Proceeds from borrowings


$                    4,009


$                236,744

Repayments of  borrowings


(15,966)


(192,426)

Original issuance discount


-


(1,808)

Debt financing costs


-


(4,083)

Dividend payment to Tower stockholders


(2,465)


(2,242)

Proceeds from stock options exercised


112


938

Purchase of treasury stock


(474)


(761)

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


$                 (14,784)


$                  36,362






Discontinued operations:





Net cash from / (used in) discontinued operating activities


$                    1,605


$                      (570)

Net cash used in discontinued investing activities


(1,212)


(406)

Net cash from / (used in) discontinued financing activities


(455)


497

  Net cash used in discontinued operations


$                        (62)


$                      (479)






Effect of exchange rate changes on continuing cash and cash equivalents


$                    1,856


$                    1,185






NET CHANGE IN CASH AND CASH EQUIVALENTS


$                 (58,086)


$                 (35,265)






CASH AND CASH EQUIVALENTS:





Beginning of period


$                123,688


$                  62,788






End of period


$                  65,602


$                  27,523

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands - unaudited)




























Segment Data


Three Months Ended March 31,



2018


2017



Revenues


Adjusted
EBITDA


Revenues


Adjusted
EBITDA

Europe


$              171,618


$                  8,739


$              160,152


$                11,176

North America


391,888


44,370


337,438


34,549

Consolidated


$              563,506


$                53,109


$              497,590


$                45,725



















Adjusted EBITDA Reconciliation


Three Months Ended March 31,







2018


2017





Net income attributable to Tower International, Inc.


$                17,300


$                17,345





Restructuring and asset impairment charges, net


1,548


3,911





Depreciation and amortization


21,395


17,766





Lease expense


2,450


-





Acquisition costs and other


101


75





Long-term compensation expense


1,663


912





Interest expense, net


5,005


406





Net periodic benefit income


(558)


(479)





Other expense


-


575





Provision for income taxes


5,067


6,496





Income from discontinued operations, net of tax 


(862)


(1,350)





Net income attributable to noncontrolling interests


-


68





Adjusted EBITDA


$                53,109


$                45,725























Free Cash Flow Reconciliation


Three Months Ended March 31,





2018


2017





Net cash provided by continuing operating activities


$              (16,154)


$              (48,424)





Cash disbursed for purchases of PP&E


(28,942)


(23,909)





Free cash flow


$              (45,096)


$              (72,333)























Net Debt Reconciliation


March 31,


December 31,







2018


2017





Short-term debt and current maturities of capital lease obligations


$                31,785


$                42,048





Long-term debt, net of current maturities


352,074


352,886





Debt issue costs


(7,856)


(8,148)





Total debt


376,003


386,786





Less: Cash and cash equivalents


(65,602)


(123,688)





Net debt


$              310,401


$              263,098





 

 

 

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



March 31,


March 31,



2018


2017


2018


2017










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









Restructuring and asset impairment charges, net









  One-time restructuring actions


$             (835)


$        (2,155)


$          (1,115)


$        (3,476)

Interest expense









  Mark-to-market gain on derivative financial instruments


-


2,655


-


4,282

Other Expense









  Debt refinancing costs


-


(357)


-


(575)

Discontinued operations









  Income from discontinued operations


862


1,350


862


1,350

Noncontrolling interests









  Net income attributable to noncontrolling interests*


-


(68)


-


(68)

  Total items included in net income, net of tax


$                27


$          1,425














Net income attributable to Tower International, Inc.


$         17,300


$        17,345














Memo:  Average shares outstanding (in thousands)









Basic


20,557


20,425





Diluted


20,952


20,820














Income per common share (GAAP)









Basic


$             0.84


$            0.85





Diluted


0.83


0.83














Diluted adjusted earnings per share (non-GAAP)


$             0.82


$            0.76














* Amounts attributable to noncontrolling interests of discontinued operations








 

 

 

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SOURCE Tower International, Inc.