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

LIVONIA, Mich., July 31, 2018 /PRNewswire/ -- Tower International, Inc. (NYSE: TOWR), a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced second quarter 2018 results and affirmed its earnings and free cash flow outlook for 2018. 

  • Revenue for the second quarter was $556 million compared with $490 million in the second quarter of 2017 representing a 13 percent increase.
  • Net income was $22.4 million or $1.07 per share increasing from $19.2 million or $0.92 per share in the second quarter last year.  As detailed below, this year's second quarter included certain items that, in aggregate, decreased results by $468 thousand.  Excluding these items and comparable items in the second quarter of 2017, adjusted earnings per share amounted to $1.09, an increase of 12 percent from the $0.97 reported a year ago. 
  • Adjusted EBITDA for the quarter was $58.2 million slightly ahead of the Company's outlook and up 10 percent from $52.8 million a year ago. 
  • For the quarter, net cash provided by continuing operating activities was $49 million.  Cash disbursed for purchases of equipment totaled $40 million resulting in Free Cash Flow of $9 million.
  • Full year 2018 outlook includes
    • Revenue of $2.17 billion, reflecting primarily net new business of $125 million, favorable foreign exchange and higher steel prices;
    • Adjusted EBITDA of $230 million;
    • Diluted Adjusted EPS of $4.10 per share; and
    • Free Cash Flow of $50 million, with strong free cash flow in the second half of the year more than offsetting the cash outflow in the first half of the year.
  • The Company's outlook for third quarter 2018 includes revenue of $525 million, Adjusted EBITDA of $57 million and Diluted Adjusted Earnings Per Share of $1.04.

"We remain balanced in our approach of growing profitably, reducing leverage – as evidenced by our July pay down of $50 million of Term Loan debt, and returning capital to shareholders," said CEO Jim Gouin.  "Tower delivered solid financial results in the second quarter as Adjusted EBITDA and Adjusted EPS both increased by more than 10 percent.  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.  Tower's North American revenue continued to significantly outpace the market, growing by 16 percent while the industry production declined by 2 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 second 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. #5089747.  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 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 third quarter earnings and revenues, 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;
  • changes to U.S. trade and tariff policies and the reaction of other countries thereto;
  • 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 June 30,


Six Months Ended June 30,



2018


2017


2018


2017










Revenues


$                  556,007


$                  489,925


$               1,119,513


$                  987,515

Cost of sales


491,948


428,807


995,608


870,097

Gross profit


64,059


61,118


123,905


117,418

Selling, general, and administrative expenses


30,869


29,007


63,103


58,232

Amortization expense 


108


113


220


216

Restructuring and asset impairment charges, net 


269


3,337


1,817


7,248

  Operating income


32,813


28,661


58,765


51,722

Interest expense 


5,255


1,807


10,417


2,260

Interest income


112


86


269


133

Net periodic benefit income


559


479


1,117


958

Other expense


977


-


977


575

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

discontinued operations


27,252


27,419


48,757


49,978

Provision  for income taxes 


5,539


7,672


10,606


14,168

Income from continuing operations


21,713


19,747


38,151


35,810

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


663


(489)


1,525


861

        Net income


22,376


19,258


39,676


36,671

      Less: Net income attributable to the noncontrolling interests


-


42


-


110

Net income attributable to Tower International, Inc.


$                    22,376


$                    19,216


$                    39,676


$                    36,561










Weighted average basic shares outstanding


20,597,482


20,508,890


20,577,161


20,467,281

Weighted average diluted shares outstanding


20,986,122


20,805,931


20,969,142


20,813,100










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









Income per share from continuing operations 


$                        1.05


$                        0.96


$                        1.85


$                        1.74

Income / (loss) per share from discontinued operations 


0.03


(0.02)


0.07


0.04

Income per share 


1.09


0.94


1.93


1.79










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









Income per share from continuing operations 


$                        1.04


$                        0.95


$                        1.82


$                        1.72

Income / (loss) per share from discontinued operations 


0.03


(0.02)


0.07


0.04

Income per share 


1.07


0.92


1.89


1.76










Dividends declared per share


$                        0.12


$                        0.11


$                        0.24


$                        0.22

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands - unaudited)








June 30,


December 31,



2018


2017






ASSETS





Cash and cash equivalents


$                   72,107


$                 123,688

Accounts receivable, net of allowance of $1,531 and $1,385


293,093


239,319

Inventories 


86,398


78,745

Assets held for sale 


32,361


44,250

Prepaid tooling, notes receivable, and other


59,715


78,481

Total current assets


543,674


564,483






Property, plant, and equipment, net


550,434


535,272

Goodwill 


62,118


63,665

Deferred tax asset


76,890


83,035

Other assets, net


14,005


13,642

Total assets


$              1,247,121


$              1,260,097






LIABILITIES AND EQUITY





Short-term debt and current maturities of capital lease obligations 


$                   28,899


$                   42,048

Accounts payable 


319,243


323,271

Accrued liabilities


 

105,361


113,949

Liabilities held for sale 


 

13,818


17,336

Total current liabilities


467,321


496,604






Long-term debt, net of current maturities 


343,790


344,738

Deferred tax liability


4,660


4,807

Pension liability 


43,159


47,813

Other non-current liabilities


90,488


96,263

Total non-current liabilities 


482,097


493,621

Total liabilities


949,418


990,225






Stockholders' equity:





Common stock


224


223

Additional paid in capital


345,980


344,153

Treasury stock


(36,882)


(36,408)

Accumulated surplus


60,603


29,712

Accumulated other comprehensive loss 


(72,222)


(67,808)

  Total stockholders' equity


297,703


269,872






Total liabilities and stockholders' equity


$              1,247,121


$              1,260,097

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands - unaudited)












Three Months Ended June 30,


Six Months Ended June 30,



2018


2017


2018


2017










OPERATING ACTIVITIES:









Net income


$                   22,376


$                   19,258


$                   39,676


$                   36,671

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


663


(489)


1,525


861

Income from continuing operations


$                   21,713


$                   19,747


$                   38,151


$                   35,810










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









Deferred income tax provision


$                     3,966


$                     6,010


$                     7,133


$                     9,965

Depreciation and amortization


20,756


18,766


42,151


36,532

Non-cash share-based compensation


905


599


1,609


1,098

Pension income, net of contributions


(2,418)


(2,500)


(4,655)


(4,851)

Change in working capital and other operating items


3,760


(4,286)


(51,862)


(88,794)

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


$                   48,682


$                   38,336


$                   32,527


$                 (10,240)










INVESTING ACTIVITIES:









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


$                 (39,639)


$                 (20,252)


$                 (68,581)


$                 (44,161)

Proceeds from disposition of joint venture, net


4,314


15,944


4,314


15,944

   Net cash used in continuing investing activities


$                 (35,325)


$                   (4,308)


$                 (64,267)


$                 (28,217)










FINANCING ACTIVITIES:









Proceeds from borrowings


$                   41,175


$                 137,109


$                   45,184


$                 373,853

Repayments of  borrowings


(43,307)


(143,606)


(59,273)


(336,032)

Original issuance discount


-


-


-


(1,808)

Debt financing costs


-


(664)


-


(4,747)

Dividend payment to Tower stockholders


(2,472)


(2,256)


(4,937)


(4,498)

Proceeds from stock options exercised


107


114


219


1,052

Purchase of treasury stock


-


(1)


(474)


(762)

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


$                   (4,497)


$                   (9,304)


$                 (19,281)


$                   27,058










Discontinued operations:









Net cash from discontinued operating activities


$                     2,779


$                        644


$                     4,384


$                          74

Net cash used in discontinued investing activities


(789)


(604)


(2,001)


(1,010)

Net cash from / (used in) discontinued financing activities


(469)


423


(924)


920

   Net cash used in discontinued operations


$                     1,521


$                        463


$                     1,459


$                        (16)










Effect of exchange rate changes on continuing cash and cash equivalents


$                   (3,876)


$                     2,084


$                   (2,019)


$                     3,421










NET CHANGE IN CASH AND CASH EQUIVALENTS


$                     6,505


$                   27,271


$                 (51,581)


$                   (7,994)










CASH AND CASH EQUIVALENTS:









Beginning of period


$                   65,602


$                   27,523


$                 123,688


$                   62,788










End of period


$                   72,107


$                   54,794


$                   72,107


$                   54,794

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands - unaudited)




























Segment Data


Three Months Ended June 30,



2018


2017



Revenues


Adjusted
EBITDA


Revenues


Adjusted
EBITDA

Europe


$              173,844


$                10,442


$              160,229


$                13,628

North America


382,163


47,777


329,696


39,137

Consolidated


$              556,007


$                58,219


$              489,925


$                52,765





















Six Months Ended June 30,



2018


2017



Revenues


Adjusted
EBITDA


Revenues


Adjusted
EBITDA

Europe


$              345,483


$                19,171


$              320,381


$                24,800

North America


774,030


92,157


667,134


73,690

Consolidated


$           1,119,513


$              111,328


$              987,515


$                98,490



















Adjusted EBITDA Reconciliation


Three Months Ended June 30,


Six Months Ended June 30,



2018


2017


2018


2017

Net income attributable to Tower International, Inc.


$                22,376


$                19,216


$                39,676


$                36,561

Restructuring and asset impairment charges, net


269


3,337


1,817


7,248

Depreciation and amortization


20,756


18,766


42,151


36,532

Lease expense


2,450


-


4,900


-

Acquisition costs and other


200


109


301


184

Long-term compensation expense


1,731


1,892


3,394


2,804

Interest expense, net


5,143


1,721


10,148


2,127

Net periodic benefit income


(559)


(479)


(1,117)


(958)

Other expense


977


-


977


575

Provision for income taxes


5,539


7,672


10,606


14,168

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


(663)


489


(1,525)


(861)

Net income attributable to noncontrolling interests


-


42


-


110

Adjusted EBITDA


$                58,219


$                52,765


$              111,328


$                98,490



















Free Cash Flow Reconciliation


Three Months Ended June 30,


Six Months Ended June 30,



2018


2017


2018


2017

Net cash provided by continuing operating activities


$                48,682


$                38,336


$                32,527


$              (10,240)

Cash disbursed for purchases of PP&E


(39,639)


(20,252)


(68,581)


(44,161)

Free cash flow


$                  9,043


$                18,084


$              (36,054)


$              (54,401)



















Net Debt Reconciliation


June 30,


December 31,







2018


2017





Short-term debt and current maturities of capital lease obligations


$                28,899


$                42,048





Long-term debt, net of current maturities


351,262


352,886





Debt issue costs


(7,472)


(8,148)





Total debt


372,689


386,786





Less: Cash and cash equivalents


(72,107)


(123,688)





Net debt


$              300,582


$              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



June 30,


June 30,



2018


2017


2018


2017










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









Restructuring and asset impairment charges, net









   One-time restructuring actions


$             (388)


$        (2,006)


$             (543)


$        (3,157)

Interest expense









   Mark-to-market gain on derivative financial instruments


-


1,631


-


2,630

Other Expense









   Acquisition related diligence costs 


(743)


-


(977)


-

Discontinued operations









   Loss on sale of joint venture


-


(2,596)


-


(2,596)

   Income from discontinued operations


663


2,108


663


2,108

Noncontrolling interests









   Net income attributable to noncontrolling interests*


-


(42)


-


(42)

  Total items included in net income, net of tax


$             (468)


$           (905)














Net income attributable to Tower International, Inc.


$         22,376


$        19,216














Memo:  Average shares outstanding (in thousands)









Basic


20,597


20,509





Diluted


20,986


20,806














Income per common share (GAAP)









Basic


$             1.09


$            0.94





Diluted


1.07


0.92














Diluted adjusted earnings per share (non-GAAP)


$             1.09


$            0.97














* 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,



2018


2017


2018


2017










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









Restructuring and asset impairment charges, net









   One-time restructuring actions


$          (1,223)


$        (4,161)


$          (1,658)


$        (6,633)

Interest expense









   Mark-to-market gain on derivative financial instruments


-


4,286


-


6,912

Other Expense









   Debt refinancing costs


-


(357)


-


(575)

   Acquisition related diligence costs 


(743)


-


(977)


-

Discontinued operations









   Loss on sale of joint venture


-


(2,596)


-


(2,596)

   Income from discontinued operations


1,525


3,458


1,525


3,458

Noncontrolling interests









   Net income attributable to noncontrolling interests*


-


(110)


-


(110)

  Total items included in net income, net of tax


$             (441)


$             520














Net income attributable to Tower International, Inc.


$         39,676


$        36,561














Memo:  Average shares outstanding (in thousands)









Basic


20,577


20,467





Diluted


20,969


20,813














Income per common share (GAAP)









Basic


$             1.93


$            1.79





Diluted


1.89


1.76














Diluted adjusted earnings per share (non-GAAP)


$             1.91


$            1.73














* Amounts attributable to noncontrolling interests of discontinued operations

 

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SOURCE Tower International, Inc.