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

LIVONIA, Mich., Oct. 29, 2018 /PRNewswire/ -- Tower International, Inc. (NYSE: TOWR), a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced third quarter 2018 results and affirmed its earnings and free cash flow outlook for 2018. 

  • Revenue for the third quarter was $525 million compared with $462 million in the third quarter of 2017 representing a 14 percent increase.

  • Net income was $22.6 million or $1.07 per share increasing from $14.9 million or $0.72 per share in the third quarter last year. As detailed below, this year's third quarter included certain items that, in aggregate, decreased results by $117 thousand. Excluding these items and comparable items in the third quarter of 2017, adjusted earnings per share amounted to $1.08, an increase of 27 percent from the $0.85 reported a year ago.

  • Adjusted EBITDA for the quarter was $57.1 million in-line with the Company's outlook and up 18 percent from $48.5 million a year ago.

  • For the quarter, net cash provided by continuing operating activities was $43 million. Cash disbursed for purchases of equipment totaled $25 million resulting in Free Cash Flow of $18 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 is increased by 10 cents to $4.20 per share; and
    • Free Cash Flow is maintained at $50 million.

  • The Company's outlook for fourth quarter 2018 includes revenue of $526 million, Adjusted EBITDA of $61.6 million and Diluted Adjusted Earnings Per Share of $1.20.

"We remain balanced in our approach to capital allocation, remaining focused on growing profitably, reducing leverage – as evidenced by our $50 million pay-down of Term Loan debt, and returning capital to shareholders – as evidenced by our recent increase of our quarterly dividend," said CEO Jim Gouin.  "Tower delivered solid financial results in the third quarter, growing revenue organically well in excess of the overall auto market and expanding Adjusted EBITDA margins.  Revenue for the quarter increased 14 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 20 percent from a year ago."

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

Tower will discuss its third 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. #4576237.  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 excludes 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 fourth quarter earnings and revenues, full year earnings, free cash flow and revenues, business growth and adjusted EBITDA.. 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


CONSOLIDATED STATEMENTS OF OPERATIONS


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














Three Months Ended September 30,


Nine Months Ended September 30,




2018


2017


2018


2017












Revenues


$                           524,566


$                 462,372


$                  1,644,079


$               1,449,887


Cost of sales


462,941


404,332


1,458,549


1,274,429


 Gross profit


61,625


58,040


185,530


175,458


Selling, general, and administrative expenses


29,954


29,667


93,057


87,899


Amortization expense 


110


117


330


333


Restructuring and asset impairment charges, net 


491


1,131


2,308


8,379


  Operating income


31,070


27,125


89,835


78,847


Interest expense 


6,048


5,673


16,465


7,933


Interest income


93


64


362


197


Net periodic benefit income


558


713


1,675


1,671


Other expense


-


-


977


575


    Income before provision for income taxes and income from discontinued 
    operations


25,673


22,229


74,430


72,207


Provision  for income taxes 


3,996


8,002


14,602


22,170


    Income  from continuing operations


21,677


14,227


59,828


50,037


Income from discontinued operations, net of tax 


903


704


2,428


1,565


    Net income


22,580


14,931


62,256


51,602


Less: Net income attributable to the noncontrolling interests


-


-


-


110


     Net income attributable to Tower International, Inc.


$                             22,580


$                   14,931


$                       62,256


$                    51,492












Weighted average basic shares outstanding


20,605,168


20,522,001


20,586,599


20,485,722


Weighted average diluted shares outstanding


21,035,802


20,787,405


20,991,606


20,804,441












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










Income per share from continuing operations 


$                                 1.05


$                       0.69


$                           2.91


$                        2.44


Income per share from discontinued operations 


0.04


0.03


0.12


0.08


Income per share 


1.10


0.73


3.02


2.51












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










Income per share from continuing operations 


$                                 1.03


$                       0.68


$                           2.85


$                        2.40


Income per share from discontinued operations 


0.04


0.03


0.12


0.08


Income per share 


1.07


0.72


2.97


2.48












Dividends declared per share


$                                 0.12


$                       0.11


$                           0.36


$                        0.33

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands - unaudited)








September 30,


December 31,



2018


2017






ASSETS





Cash and cash equivalents


$                   47,744


$                 123,688

Accounts receivable, net of allowance of $1,387 and $1,385


280,973


239,319

Inventories 


93,655


78,745

Assets held for sale 


28,686


44,250

Prepaid tooling, notes receivable, and other


48,212


78,481

  Total current assets


499,270


564,483






Property, plant, and equipment, net


547,127


535,272

Goodwill 


62,164


63,665

Deferred tax asset


74,410


83,035

Other assets, net


27,809


13,642

  Total assets


$              1,210,780


$              1,260,097






LIABILITIES AND EQUITY





Short-term debt and current maturities of capital lease obligations 


$                   23,136


$                   42,048

Accounts payable 


303,016


323,271

Accrued liabilities


121,532


113,949

Liabilities held for sale 


12,667


17,336

  Total current liabilities


460,351


496,604






Long-term debt, net of current maturities 


294,300


344,738

Deferred tax liability


4,629


4,807

Pension liability 


39,749


47,813

Other non-current liabilities


93,843


96,263

  Total non-current liabilities 


432,521


493,621

     Total liabilities


892,872


990,225






Stockholders' equity:





 Common stock


224


223

 Additional paid in capital


346,915


344,153

 Treasury stock


(36,882)


(36,408)

 Retained earnings


80,711


29,712

 Accumulated other comprehensive loss 


(73,060)


(67,808)

  Total stockholders' equity


317,908


269,872






Total liabilities and stockholders' equity


$              1,210,780


$              1,260,097

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands - unaudited)












Three Months Ended September 30,


Nine Months Ended September 30,



2018


2017


2018


2017










OPERATING ACTIVITIES:









Net income


$                  22,580


$                14,931


$               62,256


$                  51,602

Less: Income from discontinued operations, net of tax


903


704


2,428


1,565

  Income from continuing operations


21,677


14,227


59,828


50,037










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









  Deferred income tax provision


$                    2,201


$                  5,402


$                 9,334


$                  15,367

  Depreciation and amortization


20,334


18,321


62,485


54,853

  Non-cash share-based compensation


903


559


2,512


1,657

  Pension income, net of contributions


(3,408)


(5,055)


(8,063)


(9,906)

  Change in working capital and other operating items


1,378


12,699


(50,484)


(76,095)

     Net cash provided by continuing operating activities


$                  43,085


$                46,153


$               75,612


$                  35,913










INVESTING ACTIVITIES:









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


$                (25,184)


$              (32,526)


$             (93,765)


$                (76,687)

  Proceeds from disposition of joint venture, net


-


-


4,314


15,944

  Net proceeds from sale of property, plant, and equipment


14,883


-


14,883


-

     Net cash used in continuing investing activities


$                (10,301)


$              (32,526)


$             (74,568)


$                (60,743)










FINANCING ACTIVITIES:









  Proceeds from borrowings


$                  92,512


$              162,073


$             137,696


$                535,926

  Repayments of  borrowings


(97,150)


(185,997)


(156,423)


(522,029)

  Repayments on Term Loan Credit Facility


(50,000)


-


(50,000)


-

  Debt financing costs


-


-


-


(4,747)

  Original issuance discount


-


-


-


(1,808)

  Dividend payment to Tower shareholders


(2,472)


(2,258)


(7,409)


(6,756)

  Proceeds from stock options exercised


32


42


251


1,094

  Purchase of treasury stock


-


(1)


(474)


(763)

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


$                (57,078)


$              (26,141)


$             (76,359)


$                       917










Discontinued operations:









  Net cash from / (used in) discontinued operating activities


$                    2,943


$                   (396)


$                 7,327


$                     (322)

  Net cash used in discontinued investing activities


(770)


(241)


(2,771)


(1,251)

  Net cash from / (used in) discontinued financing activities


(1,718)


217


(2,642)


1,137

    Net cash used in discontinued operations


$                       455


$                   (420)


$                 1,914


$                     (436)










Effect of exchange rate changes on continuing cash and cash equivalents


$                     (524)


$                  1,737


$               (2,543)


$                    5,158










NET CHANGE IN CASH AND CASH EQUIVALENTS


$                (24,363)


$              (11,197)


$             (75,944)


$                (19,191)










CASH AND CASH EQUIVALENTS:









Beginning of period


$                  72,107


$                54,794


$             123,688


$                  62,788










End of period


$                  47,744


$                43,597


$               47,744


$                  43,597

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands - unaudited)




























Segment Data


Three Months Ended September 30,



2018


2017



Revenues


Adjusted
EBITDA


Revenues


Adjusted
EBITDA

Europe


$              146,192


$                  7,583


$            146,559


$                  8,219

North America


378,374


49,534


315,813


40,262

   Consolidated


$              524,566


$                57,117


$            462,372


$                48,481












Nine Months Ended September 30,



2018


2017



Revenues


Adjusted
EBITDA


Revenues


Adjusted
EBITDA

Europe


$              491,655


$                26,774


$            466,956


$                33,019

North America


1,152,424


141,671


982,931


113,952

   Consolidated


$           1,644,079


$              168,445


$         1,449,887


$              146,971



















Adjusted EBITDA Reconciliation


Three Months Ended September 30,


Nine Months Ended September 30,



2018


2017


2018


2017

Net income attributable to Tower International, Inc.


$                22,580


$                14,931


$              62,256


$                51,492

Restructuring and asset impairment charges, net


491


1,131


2,308


8,379

Depreciation and amortization


20,334


18,321


62,485


54,853

Acquisition costs and other


114


90


415


273

Long-term compensation expense


2,677


1,814


6,071


4,619

Lease expense


2,431


-


7,332


-

Interest expense, net


5,955


5,609


16,103


7,736

Other expense


-


-


977


575

Net periodic benefit income


(558)


(713)


(1,675)


(1,671)

Provision for income taxes


3,996


8,002


14,602


22,170

Income from discontinued operations, net of tax 


(903)


(704)


(2,428)


(1,565)

Net income attributable to noncontrolling interests


-


-


-


110

   Adjusted EBITDA


$                57,117


$                48,481


$            168,445


$              146,971



















Free Cash Flow Reconciliation


Three Months Ended September 30,


Nine Months Ended September 30,



2018


2017


2018


2017

Net cash used in continuing operating activities


$                43,085


$                46,153


$              75,612


$                35,913

Cash disbursed for purchases of PP&E


(25,184)


(32,526)


(93,765)


(76,687)

   Free cash flow


$                17,901


$                13,627


$            (18,153)


$              (40,774)



















Net Debt Reconciliation


September 30,


December 31,







2018


2017





Short-term debt and current maturities of capital lease obligations

$                23,136


$                42,048





Long-term debt, net of current maturities


300,731


352,886





Debt issue costs


(6,431)


(8,148)





   Total debt


317,436


386,786





Less: Cash and cash equivalents


(47,744)


(123,688)





   Net debt


$              269,692


$              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



September 30,


September 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


$             (285)


$           (419)


$             (398)


$           (651)

 Interest expense









 Acceleration of the amortization of debt issue costs and OID

(735)


-


(967)


-

 Mark-to-market loss on derivative financial instruments


-


(614)


-


(991)

 Provision for income taxes









 Establishment of valuation allowance


-


(2,448)


-


(2,448)

 Discontinued operations









 Income from discontinued operations


903


704


903


704

 Total items included in net income, net of tax


$             (117)


$        (2,777)














Net income attributable to Tower International, Inc.


$         22,580


$        14,931














Memo:  Average shares outstanding (in thousands)









Basic


20,605


20,522





Diluted


21,036


20,787














Income per common share (GAAP)









Basic


$             1.10


$            0.73





Diluted


1.07


0.72














Diluted adjusted earnings per share (non-GAAP) 


$             1.08


$            0.85





 

 

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



September 30,


September 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


$          (1,676)


$        (4,580)


$          (2,055)


$        (7,284)

 Interest expense









 Acceleration of the amortization of debt issue costs and OID

(735)


-


(967)


-

 Mark-to-market loss on derivative financial instruments


-


3,672


-


5,921

 Other expense









 Premium and other fees for re-pricing of Term Loan 


(743)


-


(977)


-

   Debt refinancing costs 


-


(357)


-


(575)

 Provision for income taxes









 Establishment of valuation allowance


-


(2,448)


-


(2,448)

 Discontinued operations









 Income from discontinued operations


2,428


4,161


2,428


4,161

 Loss of sale of Wuhu Joint Venture


-


(2,596)


-


(2,596)

 Noncontrolling interests









 Net income attributable to noncontrolling interests*


-


(110)


-


(110)

 Total items included in net income, net of tax


$             (726)


$        (2,258)














Net income attributable to Tower International, Inc.


$         62,256


$        51,492














Memo:  Average shares outstanding (in thousands)









Basic


20,587


20,486





Diluted


20,992


20,804














Income per common share (GAAP)









Basic


$             3.02


$            2.51





Diluted


2.97


2.48














Diluted adjusted earnings per share (non-GAAP) 


$             3.00


$            2.58














* Amounts attributable to noncontrolling interests of discontinued operations






 

 

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SOURCE Tower International, Inc.