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
[email protected]
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 | 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 | ||||||||
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 | Revenues | Adjusted | |||||
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 | Revenues | Adjusted | |||||
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 | ||||||||
SOURCE Tower International, Inc.
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