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Tower International Reports Solid First Quarter, Raises Full Year 2016 Outlook, and Expects Double-Digit Earnings Growth in 2017, Including Retention of Europe Business

LIVONIA, Mich., April 28, 2016 /PRNewswire/ -- Tower International, Inc. (NYSE: TOWR), a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced first quarter 2016 results, updated its outlook for full year 2016, provided a preliminary outlook for 2017, and discussed developments regarding Tower's businesses in Europe, Brazil, and China.

  • Revenue for the first quarter was $511 million.  At constant exchange rates, revenue was $523 million, up 5% from $497 million in the first quarter of 2015.
  • Adjusted EBITDA for the quarter was $46.2 million, compared with $48.1 million a year ago.  The decline was more than explained by the planned and anticipated up-front expenses associated with the major new business awarded to Tower North America in 2015. 
  • Net income was $8.4 million, compared with $14 million last year.  As detailed below, this year's first quarter included certain items that adversely impacted results by $5.2 million.  Excluding these items and comparable items in the first quarter of 2015, diluted adjusted earnings were 63 cents per share, compared with 82 cents a year ago.  The decline was more than explained by the previously disclosed resumption this year of accrued U.S. income taxes.
  • The Company has completed its evaluation of Tower Europe and has decided to retain the business.  Tower Europe is a strong and competitive business, the European industry is recovering, and potentially significant new business opportunities have recently arisen with multiple customers, further bolstering the long-term outlook.  There is no further intention to sell this business.    
  • Tower's remaining businesses in Brazil and China are no longer considered to be core and were declared in April as held for sale.  In the Company's next quarterly report, these businesses will be accounted for as discontinued operations.  Projected 2016 financial results for these combined businesses included revenue of about $100 million (less than 5% of total Tower), with adjusted EBITDA of $3 million and an adjusted net loss of about 10 cents per TOWR share. 
  • The outlook for full year 2016 earnings from continuing operations is being raised from $3.00 to $3.20 per share.  Anticipated free cash flow (including customer tooling) is being increased by $10 million (to $20 million).
  • The preliminary directional outlook for continuing operations in 2017 includes a 10% increase from projected 2016 in adjusted EBITDA (to $225 million), a 16% increase in diluted adjusted earnings per share (to $3.70), adjusted EBITDA margin increasing to 11%, and strong free cash flow of $70 million.  The anticipated improvements in 2017 largely reflect a reduction in the up-front costs and cash outflows associated with launch of the new revenue coming on board this year.   

"Sometimes, the best deals are the ones you decide not to do," said President and CEO Mark Malcolm.  "Following 23 consecutive quarters of meeting or beating the earnings consensus, Tower's businesses in Europe and North America are now poised to deliver record results, including double-digit earnings growth and strong free cash flow." 

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

Tower will discuss its first quarter 2016 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. #98915756.  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", "adjusted free cash flow", 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 presentation.  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 operating activities less cash disbursed for purchases of property, plant and equipment.  Adjusted free cash flow is free cash flow excluding cash received or disbursed for customer tooling. We use adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share, adjusted free cash flow 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.  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 special items and other expense 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.  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 adjusted EBITDA and diluted adjusted earnings per share, earnings per share from continuing operations and free cash flows, statements regarding the projected financial results for Tower's business in Brazil and China, and statements regarding new business opportunities and the Company's future business outlook. 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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













Three Months Ended March 31,



2016


2015






Revenues


$                    511,496


$           496,628

Cost of sales


453,597


440,138

Gross profit


57,899


56,490

Selling, general, and administrative expenses


33,908


31,532

Amortization expense 


116


-

Restructuring and asset impairment charges, net 


823


1,031

  Operating income


23,052


23,927

Interest expense 


7,631


7,850

Interest income


242


125

Other expense


3,576


-

Income before provision for income taxes and equity in profit of joint
venture


12,087


16,202

Provision for income taxes 


3,703


2,099

Equity in profit of joint venture, net of tax


-


94

Income from continuing operations


8,384


14,197

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


-


(76)

        Net income


8,384


14,121

     Less: Net income attributable to the noncontrolling interests


6


80

Net income attributable to Tower International, Inc.


$                        8,378


$             14,041






Weighted average basic shares outstanding


21,126,462


21,050,230

Weighted average diluted shares outstanding


21,444,570


21,360,492






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





Income per share from continuing operations 


$                          0.40


$                 0.67

Income / (loss) per share from discontinued operations 


-


-

Income per share 


0.40


0.67






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





Income per share from continuing operations 


$                          0.39


$                 0.66

Income / (loss) per share from discontinued operations 


-


-

Income per share 


0.39


0.66






Dividends declared per share


$                          0.10


-

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands, except share data - unaudited)








March 31,


December 31,



2016


2015






ASSETS





Cash and cash equivalents


$                   74,797


$                 142,640

Accounts receivable, net of allowance of $973 and $1,287


288,641


250,933

Inventories 


76,455


70,633

Prepaid tooling, notes receivable, and other


78,117


71,487

Total current assets


518,010


535,693






Property, plant, and equipment, net


495,162


473,159

Goodwill 


61,820


59,340

Investment in joint venture


7,705


7,711

Deferred tax asset


128,406


127,633

Other assets, net


12,449


11,961

Total assets


$              1,223,552


$              1,215,497






LIABILITIES AND EQUITY





Short-term debt and current maturities of capital lease obligations 


$                   40,992


$                   30,378

Accounts payable 


314,493


297,665

Accrued liabilities


127,507


107,911

Total current liabilities


482,992


435,954






Long-term debt, net of current maturities 


362,408


412,218

Obligations under capital leases, net of current maturities 


6,018


5,984

Deferred tax liability


6,145


6,167

Pension liability 


63,475


65,621

Other non-current liabilities


83,381


82,834

Total non-current liabilities 


521,427


572,824

Total liabilities


1,004,419


1,008,778











Stockholders' equity:





Tower International, Inc.'s stockholders' equity





  Common stock


$                        221


$                        220

  Additional paid in capital


338,393


337,864

  Treasury stock


(16,689)


(16,067)

  Accumulated deficit


(37,763)


(44,030)

  Accumulated other comprehensive loss 


(72,109)


(80,492)

     Total Tower International, Inc.'s stockholders' equity


212,053


197,495

Noncontrolling interests in subsidiaries 


7,080


9,224

Total stockholders' equity


219,133


206,719






  Total liabilities and stockholders' equity


$              1,223,552


$              1,215,497

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands - unaudited)








Three Months Ended March 31,



2016


2015






OPERATING ACTIVITIES:





Net income


$                   8,384


$                14,121

Less: Income from discontinued operations, net of tax


-


(76)

Income from continuing operations


8,384


14,197






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





Deferred income tax provision


$                   2,996


$                     167

Depreciation and amortization


18,537


19,908

Non-cash share-based compensation


529


959

Pension income, net of contributions


(2,147)


(3,750)

Change in working capital and other operating items


(24,257)


(38,275)

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


$                   4,042


$                (6,794)






INVESTING ACTIVITIES:





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


$                (26,114)


$                (9,562)

Net cash used in continuing investing activities


$                (26,114)


$                (9,562)






FINANCING ACTIVITIES:





Proceeds from borrowings


$               146,327


$                30,464

Repayments of  borrowings


(139,143)


(56,845)

Repayments on Term Loan Credit Facility


(50,000)


-

Proceeds from termination of cross currency swaps


-


32,377

Dividend payment to Tower shareholders


(2,111)


-

Proceeds from stock options exercised


-


112

Purchase of treasury stock


(622)


(6,530)

Noncontrolling interest dividends and other activity


(2,164)


-

Net cash used in continuing financing activities


$                (47,713)


$                   (422)






Discontinued operations:





Net cash from discontinued operating activities


$                           -


$                  9,431

Net cash from discontinued investing activities


-


(4,484)

Net cash from discontinued financing activities


-


(2,800)

         Net cash from discontinued operations


$                           -


$                  2,147






Effect of exchange rate changes on continuing cash and cash equivalents


$                   1,942


$                (3,201)






NET CHANGE IN CASH AND CASH EQUIVALENTS


$                (67,843)


$              (17,832)






CASH AND CASH EQUIVALENTS:





Beginning of period


$               142,640


$              148,561






End of period


$                 74,797


$              130,729

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands - unaudited)




























Segment Data


Three Months Ended March 31,



2016


2015



Revenues


Adjusted
EBITDA


Revenues


Adjusted
EBITDA

International


$              173,099


$                11,891


$              189,740


$                14,145

Americas


338,397


34,311


306,888


33,925

Consolidated


$              511,496


$                46,202


$              496,628


$                48,070



















Adjusted EBITDA Reconciliation


Three Months Ended March 31,







2016


2015





Adjusted EBITDA


$                46,202


$                48,070





Restructuring and asset impairment charges, net


(823)


(1,031)





Depreciation and amortization


(18,537)


(19,908)





Acquisition costs and other


(116)


(89)





Long-term compensation expense


(3,674)


(3,115)





Interest expense, net


(7,389)


(7,725)





European divestiture expenses


(3,576)


-





Provision for income taxes


(3,703)


(2,099)





Equity in profit of joint venture, net of tax


-


94





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


-


(76)





Net income attributable to noncontrolling interests


(6)


(80)





Net income attributable to Tower International, Inc.


$                  8,378


$                14,041














Adjusted Free Cash Flow Reconciliation


Three Months Ended March 31,







2016


2015





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


$                  4,042


$                (6,794)





Cash disbursed for purchases of PP&E


(26,114)


(9,562)





Free cash flow


(22,072)


(16,356)





Less:  Cash received / (disbursed) for customer-owned tooling


(10,049)


(10,113)





Adjusted free cash flow


$              (12,023)


$                (6,243)
































Net Debt Reconciliation


March 31,


December 31,







2016


2015





Short-term debt and current maturities of capital lease obligations


$                40,992


$                30,378





Long-term debt, net of current maturities


370,233


421,180





Debt issue costs


(7,825)


(8,962)





Obligations under capital leases, net of current maturities


6,018


5,984





Total debt


409,418


448,580





Less: Cash and cash equivalents


(74,797)


(142,640)





Net debt


$              334,621


$              305,940





 

 

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,



2016


2015


2016


2015










Income / (expense) items included in net income









Selling, general, and administrative expenses









  One-time CEO compensation awards


$             (647)


$           (933)


$             (951)


$           (933)

Restructuring and asset impairment charges, net









  One-time restructuring actions


-


(166)


-


(197)

Interest expense









  Mark-to-market gain / (loss) on derivative financial instruments

(1,650)


(1,904)


(2,426)


(1,904)

  Acceleration of the amortization of debt issue costs and OID


(503)


(440)


(740)


(440)

Other expense









  European divestiture expenses


(2,432)


-


(3,576)


-

Discontinued operations









  Income / (loss) from discontinued operations


-


(76)


-


(76)

Noncontrolling interests









  Net income attributable to noncontrolling interests


-


9


-


9

 Total items included in net income


$          (5,232)


$        (3,510)














Net income attributable to Tower International, Inc.


$           8,378


$        14,041














Memo:  Average shares outstanding (in thousands)









Basic


21,126


21,050





Diluted


21,445


21,360














Income per common share (GAAP)









Basic


$             0.40


$            0.67





Diluted


0.39


0.66














Diluted adjusted earnings per share (non-GAAP) *


$             0.63


$            0.82














*  Excludes the certain items shown above. 


















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SOURCE Tower International, Inc.