News Release

<< Back
Tower International Reports Third Quarter Results

LIVONIA, Mich., Nov. 2, 2016 /PRNewswire/ -- Tower International, Inc. (NYSE: TOWR), a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced third quarter 2016 results, updated its business outlook for the fourth quarter and full year 2016, and discussed other business developments.  (Unless otherwise noted, all information refers to Tower's continuing operations in North America and Europe.)

  • Revenue for the third quarter was $457 million, up 3% from $442 million in the third quarter of 2015, reflecting organic new-business growth in North America.
  • Net income from continuing and discontinued operations was a record for the third quarter, at $18.2 million or 86 cents per diluted share, compared with net income of $16.3 million or 76 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 $0.9 million. Excluding these items and comparable items in the third quarter of 2015, diluted adjusted earnings were 90 cents per share, 20% better than a year ago.
  • Adjusted EBITDA for the quarter was $50.1 million, up 14% from $43.8 million a year ago. Adjusted EBITDA margin was an all-time best for a third quarter, at 11%, up 1.1 percentage points. These significant improvements reflected the combined positive effects of our organic revenue growth, higher-margin new business, and favorable year-over-year net cost performance at this stage of our new-business phase-in.
  • The same basic factors that provided the strong earnings comparisons in the third quarter are also presently projected to drive strong fourth quarter comparisons, including year-over-year improvements of about 20% in adjusted EBITDA and about 25% in diluted adjusted earnings per share. Adjusted EBITDA margin in the fourth quarter is projected to increase to about 12%, which would be an all-time record for any quarter, and free cash flow is projected to be about $60 million, which would meaningfully improve Tower's balance-sheet leverage. (Fourth quarter 2016 GAAP net income and EPS, while positive, will be lower than fourth quarter 2015, which benefited from the reversal of approximately $130 million of tax valuation allowances.)
  • The strong financial results achieved in the third quarter and presently projected for the fourth quarter take into account the downward production adjustments recently taken and presently planned by our OEM customers. Based on the latest production schedules, full year results are now projected at revenue of $1.915 billion, adjusted EBITDA of $200-$202 million, and adjusted EPS of $3.30.
  • Tower also reported the following other business developments:

- Agreements have been reached to sell the Company's remaining businesses in China.  Cash proceeds after taxes are expected to be about $25 million.
- The outlook for adjusted EPS is improved by about 10-15 cents per year for the next few years because of expected R&D tax credits.
- The latest projection is that Tower will not become a U.S. cash taxpayer until 2020, or one year later than the prior estimate.
- Consistent with the Company's positive business and cash-flow outlook, the dividend was increased by 10% and about 4% of outstanding shares have been repurchased through September 30.

"It was a strong quarter for Tower, in some ways our best ever," said CEO Mark Malcolm.  "We presently believe that industry volume in 2017 will be roughly the same as 2016.  Tower is, however, relatively well-positioned regardless of your volume outlook.  This reflects the underlying strength and tailwinds at Tower from the higher-margin new business coming on board over the next few years that, absent lower industry volume, is expected to drive further increases in overall margin and best-ever free cash flow."

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

Tower will discuss its third quarter 2016 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. #4577487.  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 (EPS)", 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 as a percentage of 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.  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, fair value adjustments to our pension plan, 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 revenues, earnings, EBITDA, margin, free cash flow, and statements regarding the Company's tax position and future business outlook, including plans to divest of the Company's discontinued operations. 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

CONSOLIDATED STATEMENTS OF OPERATIONS

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





Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


2016


2015




Revenues

$

457,042


$

442,190


$

1,451,367


$

1,341,181

Cost of sales


396,806



388,989



1,271,900



1,171,682


Gross profit


60,236



53,201



179,467



169,499

Selling, general, and administrative expenses


31,223



30,869



96,125



90,602

Amortization expense


112



249



344



249

Restructuring and asset impairment charges, net


1,196



784



2,782



6,984


Operating income


27,705



21,299



80,216



71,664

Interest expense


5,598



6,223



18,167



17,821

Interest income


40



6



108



16

Other expense


-



-



6,481



-


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


22,147



15,082



55,676



53,859

Provision  for income taxes


4,239



1,456



13,770



5,287


Income  from continuing operations


17,908



13,626



41,906



48,572

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


367



3,246



(19,999)



1,560


        Net income


18,275



16,872



21,907



50,132


Less: Net income attributable to the noncontrolling interests


118



589



213



1,162


Net income attributable to Tower International, Inc

$

18,157


$

16,283


$

21,694


$

48,970














Weighted average basic shares outstanding


20,830,203



21,107,477



21,039,305



21,087,691

Weighted average diluted shares outstanding


21,182,149



21,422,859



21,372,875



21,395,797














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












Income per share from continuing operations

$

0.85


$

0.62


$

1.98


$

2.25

Income / (loss) per share from discontinued operations


0.02



0.15



(0.95)



0.07

Income per share


0.87



0.77



1.03



2.32














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












Income per share from continuing operations

$

0.84


$

0.61


$

1.95


$

2.22

Income / (loss) per share from discontinued operations


0.02



0.15



(0.93)



0.07

Income per share


0.86



0.76



1.02



2.29














Dividends declared per share

$

0.10


$

-


$

0.30


$

-

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands, except share data - unaudited)








September 30,


December 31,



2016


2015






ASSETS





Cash and cash equivalents


$                   47,216


$                 121,594

Accounts receivable, net of allowance of $797 and $1,277


242,338


223,735

Inventories 


77,402


66,648

Assets held for sale 


104,482


113,664

Prepaid tooling, notes receivable, and other


134,089


68,242

Total current assets


605,527


593,883






Property, plant, and equipment, net


452,541


427,887

Goodwill 


60,215


59,340

Deferred tax asset


119,584


127,207

Other assets, net


8,867


7,180

Total assets


$              1,246,734


$              1,215,497






LIABILITIES AND EQUITY





Short-term debt and current maturities of capital lease obligations 


$                   35,380


$                   29,492

Accounts payable 


292,224


268,008

Accrued liabilities


110,918


100,529

Liabilities held for sale 


51,355


44,157

Total current liabilities


489,877


442,186






Long-term debt, net of current maturities 


399,052


409,116

Obligations under capital leases, net of current maturities 


5,445


5,984

Deferred tax liability


6,586


6,167

Pension liability 


57,773


65,621

Other non-current liabilities


78,448


79,704

Total non-current liabilities 


547,304


566,592

Total liabilities


1,037,181


1,008,778











Stockholders' equity:





Tower International, Inc.'s stockholders' equity





Common stock


$                        221


$                        220

  Additional paid in capital


339,477


337,864

Treasury stock


(34,600)


(16,067)

Accumulated deficit


(28,670)


(44,030)

Accumulated other comprehensive loss 


(73,926)


(80,492)

     Total Tower International, Inc.'s stockholders' equity


202,502


197,495

Noncontrolling interests in subsidiaries 


7,051


9,224

Total stockholders' equity


209,553


206,719






Total liabilities and stockholders' equity


$              1,246,734


$              1,215,497

 

 




Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


2016


2015










OPERATING ACTIVITIES:









Net income


$                18,275


$               16,872


$              21,907


$                 50,132

Less: Income from discontinued operations, net of tax


367


3,246


(19,999)


1,560

Income from continuing operations


17,908


13,626


41,906


48,572










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









Deferred income tax provision


$                   2,135


$                   (345)


$               10,251


$                     (238)

Depreciation and amortization


17,900


18,381


53,383


54,227

Non-cash share-based compensation


511


512


1,545


1,814

Pension income, net of contributions


(3,384)


(4,039)


(7,851)


(10,267)

Change in working capital and other operating items


(25,107)


(1,562)


(66,876)


(55,620)

Net cash provided by continuing operating activities


$                   9,963


$                26,573


$               32,358


$                 38,488










INVESTING ACTIVITIES:









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


$                (12,610)


$              (28,205)


$             (73,536)


$                (56,438)

Proceeds from disposition of China JVs, net


-


9,947


-


9,947

Acquisition, net of cash


-


(21,740)


-


(21,740)

Net cash used in continuing investing activities


$                (12,610)


$              (39,998)


$             (73,536)


$                (68,231)










FINANCING ACTIVITIES:









Proceeds from borrowings


$               162,848


$                30,580


$             458,752


$                 93,952

Repayments of  borrowings


(145,228)


(33,414)


(417,664)


(95,834)

Repayments on Term Loan Credit Facility


-


-


(50,000)


(25,000)

Proceeds from termination of cross currency swaps


-


-


-


32,377

Dividend payment to Tower shareholders


(2,105)


-


(6,334)


-

Proceeds from stock options exercised


43


10


68


160

Purchase of treasury stock


(17,912)


(2)


(18,533)


(6,551)

Net cash used in continuing financing activities


$                  (2,353)


$                (2,826)


$             (33,711)


$                     (896)










Discontinued operations:









Net cash from discontinued operating activities


$                      639


$                14,145


$                 3,714


$                 21,551

Net cash used in discontinued investing activities


(203)


(6,151)


(2,110)


(8,953)

Net cash used in discontinued financing activities


(263)


(6,655)


(2,899)


(9,650)

Net cash from / (used in) discontinued operations


$                      173


$                  1,339


$               (1,295)


$                   2,948










Effect of exchange rate changes on continuing cash and cash equivalents


$                      266


$                (1,220)


$                 1,806


$                  (3,719)










NET CHANGE IN CASH AND CASH EQUIVALENTS


$                  (4,561)


$              (16,132)


$             (74,378)


$                (31,410)










CASH AND CASH EQUIVALENTS:









Beginning of period


$                 51,777


$              117,406


$             121,594


$               132,684










End of period


$                 47,216


$              101,274


$               47,216


$               101,274

 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands - unaudited)




























Segment Data


Three Months Ended September 30,



2016


2015



Revenues


Adjusted
EBITDA


Revenues


Adjusted
EBITDA

Europe


$              147,964


$                12,084


$              154,900


$                12,983

North America


309,078


38,039


287,290


30,847

Consolidated


$              457,042


$                50,123


$              442,190


$                43,830












Nine Months Ended September 30,



2016


2015



Revenues


Adjusted
EBITDA


Revenues


Adjusted
EBITDA

Europe


$              484,064


$                37,307


$              496,001


$                41,194

North America


967,303


108,170


845,180


101,249

Consolidated


$           1,451,367


$              145,477


$           1,341,181


$              142,443




























Adjusted EBITDA Reconciliation


Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


2016


2015

Adjusted EBITDA


$                50,123


$                43,830


$              145,477


142,443

Restructuring and asset impairment charges, net


(1,196)


(784)


(2,782)


(6,984)

Depreciation and amortization


(17,900)


(18,381)


(53,383)


(54,227)

Acquisition costs and other


(47)


(436)


(318)


(675)

Long-term compensation expense


(3,275)


(2,870)


(8,778)


(8,870)

Interest expense, net


(5,558)


(6,277)


(18,059)


(17,828)

Other expense


-


-


(6,481)


-

Provision for income taxes


(4,239)


(1,456)


(13,770)


(5,287)

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


367


3,246


(19,999)


1,560

Net income attributable to noncontrolling interests


(118)


(589)


(213)


(1,162)

Net income attributable to Tower International, Inc.


$                18,157


$                16,283


$                21,694


$                48,970



















Adjusted Free Cash Flow Reconciliation


Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


2016


2015

Net cash provided by continuing operating activities


$                  9,963


$                26,573


$                32,358


$                38,488

Cash disbursed for purchases of PP&E


(12,610)


(28,205)


(73,536)


(56,438)

Free cash flow


(2,647)


(1,632)


(41,178)


(17,950)

Net cash received / (disbursed) for customer-owned tooling


(31,318)


(19,312)


(52,069)


(39,805)

Adjusted free cash flow


$                28,671


$                17,680


$                10,891


$                21,855




























Net Debt Reconciliation






September 30,


December 31,







2016


2015

Short-term debt and current maturities of capital lease obligations






$                35,380


$                29,492

Long-term debt, net of current maturities






405,716


418,078

Debt issue costs






(6,664)


(8,962)

Obligations under capital leases, net of current maturities






5,445


5,984

Total debt






439,877


444,592

Less: Cash and cash equivalents






(47,216)


(121,594)

Add: Cash attributable to discontinued operations






-


8,720

Net debt






$              392,661


$              331,718

 

 

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,



2016


2015


2016


2015










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









Selling, general, and administrative expenses









One-time CEO compensation awards


$             (710)


$           (933)


$          (1,044)


$           (933)

Acquisition costs


-


(393)


-


(393)

Restructuring and asset impairment charges, net









One-time restructuring actions


-


(192)


-


(192)

Interest expense









Mark-to-market loss on derivative financial instruments


(428)


(1,006)


(629)


(1,006)

Discontinued operations









Income from discontinued operations


367


3,246


367


3,246

Noncontrolling interests









Net income attributable to noncontrolling interests*


(118)


(589)


(118)


(589)

Total items included in net income, net of tax


$             (889)


$             133














Net income attributable to Tower International, Inc


$         18,157


$        16,283














Memo:  Average shares outstanding (in thousands)









Basic


20,830


21,107





Diluted


21,182


21,423














Income per common share (GAAP)









Basic


$             0.87


$            0.77





Diluted


0.86


0.76














Diluted adjusted earnings per share (non-GAAP)


$             0.90


$            0.75
































* 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



September 30,


September 30,



2016


2015


2016


2015










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









Selling, general, and administrative expenses









One-time CEO compensation awards


$          (1,154)


$        (2,799)


$          (1,697)


$        (2,799)

Acquisition costs


-


(393)


-


(393)

Restructuring and asset impairment charges, net









One-time restructuring actions


-


(192)


-


(192)

Change in estimated future rent


-


(4,760)


-


(4,760)

Interest expense









Mark-to-market loss on derivative financial instruments


(2,320)


(1,280)


(3,412)


(1,280)

Acceleration of the amortization of debt issue costs and OID


(503)


(440)


(740)


(440)

Other expense









European divestiture expenses


(4,544)


-


(6,481)


-

Discontinued operations









Income / (loss) from discontinued operations


(19,999)


1,560


(19,999)


1,560

Noncontrolling interests









Net income attributable to noncontrolling interests*


(213)


(1,162)


(213)


(1,162)

Total items included in net income, net of tax


$        (28,733)


$        (9,466)














Net income attributable to Tower International, Inc.


$         21,694


$        48,970














Memo:  Average shares outstanding (in thousands)









Basic


21,039


21,088





Diluted


21,373


21,396














Income per common share (GAAP)









Basic


$             1.03


$            2.32





Diluted


1.02


2.29














Diluted adjusted earnings per share (non-GAAP) 


$             2.36


$            2.73
































* Amounts attributable to noncontrolling interests of discontinued operations









 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/tower-international-reports-third-quarter-results-300355524.html

SOURCE TOWER INTERNATIONAL