Tower International Reports Solid Second Quarter Results and Further Bolsters Growth Outlook in North America

Jul 30, 2015, 07:00 ET from Tower International, Inc.

LIVONIA, Mich., July 30, 2015 /PRNewswire/ -- Tower International, Inc. (NYSE: TOWR), a leading integrated global manufacturer of engineered automotive structural metal components and assemblies,  today announced second quarter 2015 results, updated its outlook for full year 2015, and discussed related business developments.   

  • Revenue for the second quarter was $490 million, matching the company's guidance. At constant exchange rates, revenue was $541 million, compared with $549 million in the second quarter 2014. The quarterly revenue comparison was adversely affected by the timing of customer model changes in North America; Tower North America remains on track for 5% or better growth for full year 2015.
  • Adjusted EBITDA for the quarter was $53.3 million, compared with $55.2 million a year ago. The decline was more than explained by unfavorable currency translation. Adjusted EBITDA was $1.3 million better than guidance. Adjusted EBITDA margin was 10.9%, up from 10.1% last year, reflecting good net cost performance that was aided in part by favorable calendarization timing.
  • Net income was $18.6 million, compared with $16.1 million last year. As detailed below, this year's second quarter included certain items that adversely impacted results by $3.9 million. Excluding these items and comparable items in the second quarter of 2014, diluted adjusted earnings were $1.05 per share, up 19 percent from 88 cents a year ago.
  • Net debt (excluding cash attributable to discontinued operations) was $342 million at June 30, an improvement of $45 million from a year ago. Liquidity was $345 million, up $32 million.
  • The Company's growth prospects in North America have recently been further bolstered in two ways: a major follow-on new business award and the acquisition of a stamping supplier in Mexico. The new business award is projected to add about $70 million of booked annual revenue, achieving the high end of the potential range discussed last quarter. The acquisition in Mexico provides a further foothold in that high-growth market and is expected to be immediately accretive, adding about 10 cents to earnings per share on an annual basis. Present annual revenue is about $40 million; industry production growth in Mexico is projected at about an 8% annual rate through 2020, and we expect to grow this business at about a 10% rate during this period. The purchase price (net of acquired net cash) was about $21 million, or approximately four times projected 2015 adjusted EBITDA.
  • Revenue and earnings guidance for full 2015 are largely unchanged, with the main factors expected to be essentially offsetting this year. Revenue is now anticipated to be about $1,970 million, up $20 million from prior guidance, with projected favorable currency translation (including the Euro assumed at $1.10 in the second half) and the Mexican acquisition overcoming significantly lower industry and customer volumes in Brazil. The full year earnings outlook remains the same, with adjusted EBITDA at $190 million and diluted adjusted earnings per share at $3.15. In addition to the above revenue-related factors, up-front expenses for the additional new business award are expected to be offset by further improvements in Europe and North America.
  • With the additional investment required this year to support the new business award, adjusted free cash flow is now projected at about breakeven for the full year, reflecting capital deployment to enhance future growth. Excluding investment for the major new award that is expected to meaningfully benefit revenue beginning next year, adjusted free cash flow would be forecast at $55 million; also including the cash gains realized earlier this year from re-pricing Tower's debt swaps, the outlook for full year 2015 adjusted free cash flow would be about $87 million.

"We are effectively managing our way through several factors that are affecting near-term results, including the major volume downturn in Brazil, currency changes, and start-up expenses related to major new business.  Looking beyond these factors, the underlying positives are very encouraging," said President and CEO Mark Malcolm.  "In Europe, our business is improving margin, reflecting both industry and company improvements, and in North America, our already strong momentum has accelerated further.  We now project about 15% organic revenue growth for Tower North America from 2015 to 2017, plus the recent acquisition.  This bodes well for Tower's future."

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

Tower will discuss its second quarter 2015 results, the outlook for full year 2015, 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. #88713369.  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)", "free cash flow", "adjusted free cash flow", and "net debt."  We define adjusted EBITDA as net income / (loss) before interest, taxes, depreciation, amortization, restructuring items and other adjustments described in the reconciliations accompanying 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 accompanying 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.  Net debt represents total debt less cash and cash equivalents.  We use adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share, free cash flow, adjusted free cash flow and net debt 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 revenue, adjusted EBITDA, diluted adjusted earnings per share, adjusted free cash flow and statements regarding growth prospects, organic revenue growth, the projected impact of the referenced new business award and Mexican acquisition, industry production growth, projected currency translation, future financial results 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 June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Revenues

$               490,268

$               548,467

$              986,896

$           1,067,730

Cost of sales

427,948

486,118

868,086

944,592

  Gross profit

62,320

62,349

118,810

123,138

Selling, general, and administrative expenses

31,796

31,606

63,328

65,711

Amortization expense 

-

667

-

1,324

Restructuring and asset impairment charges, net 

5,493

4,716

6,524

6,105

  Operating income

25,031

25,360

48,958

49,998

Interest expense 

4,001

7,337

11,851

14,505

Interest income

101

133

226

265

Other expense

-

-

-

87

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

21,131

18,156

37,333

35,671

Provision for income taxes 

2,374

2,661

4,473

5,495

Equity in loss of joint venture, net of tax

(283)

(222)

(189)

(381)

  Income from continuing operations

18,474

15,273

32,671

29,795

Income from discontinued operations, net of tax 

665

1,677

589

2,433

       Net income

19,139

16,950

33,260

32,228

    Less: Net income attributable to the noncontrolling interests

493

854

573

1,277

   Net income attributable to Tower International, Inc.

$                 18,646

$                 16,096

$                32,687

$                30,951

Weighted average basic shares outstanding

21,104,735

20,651,097

21,077,633

20,582,140

Weighted average diluted shares outstanding

21,403,354

21,373,867

21,382,041

21,318,515

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

Income per share from continuing operations 

$                     0.85

$                     0.70

$                    1.52

$                    1.39

Income per share from discontinued operations 

0.03

0.08

0.03

0.11

Income per share 

0.88

0.78

1.55

1.50

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

Income per share from continuing operations 

$                     0.84

$                     0.67

$                    1.50

$                    1.34

Income per share from discontinued operations 

0.03

0.08

0.03

0.11

Income per share 

0.87

0.75

1.53

1.45

      

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands, except share data - unaudited)

June 30,

December 31,

2015

2014

ASSETS

Cash and cash equivalents

$                136,002

$                   148,561

Accounts receivable, net of allowance of $1,404 and $1,181

274,501

230,377

Inventories 

71,497

69,775

Deferred tax asset - current

6,571

6,900

Assets held for sale 

128,579

141,295

Prepaid tooling, notes receivable, and other

67,264

41,986

Total current assets

684,414

638,894

Property, plant, and equipment, net

426,342

451,126

Goodwill 

52,202

56,691

Investment in joint venture

7,567

7,752

Deferred tax asset - non-current

3,622

3,608

Other assets, net

10,996

12,969

Total assets

$             1,185,143

$                1,171,040

LIABILITIES AND EQUITY

Short-term debt and current maturities of capital lease obligations 

$                  36,415

$                     31,139

Accounts payable 

286,619

257,011

Accrued liabilities

98,831

105,772

Liabilities held for sale 

56,854

67,707

Total current liabilities

478,719

461,629

Long-term debt, net of current maturities 

416,767

445,303

Obligations under capital leases, net of current maturities 

6,633

7,740

Deferred tax liability - non-current

12,087

12,972

Pension liability 

62,359

68,637

Other non-current liabilities

89,801

74,981

Total non-current liabilities 

587,647

609,633

Total liabilities

1,066,366

1,071,262

Commitments and contingencies 

Stockholders' equity:

Tower International, Inc.'s stockholders' equity

Preferred stock, $0.01 par value, 50,000,000 authorized and 0 issued and outstanding

-

-

Common stock, $0.01 par value, 350,000,000 authorized, 21,998,972 issued and 21,106,826 outstanding at June 30, 2015 and  21,393,592 issued and 20,752,226 outstanding at December 31, 2014 

220

214

Additional paid in capital

336,781

335,338

Treasury stock, at cost, 892,146 and 641,366 shares as of June 30, 2015 and December 31, 2014

(16,065)

(9,516)

Accumulated deficit

(203,277)

(235,971)

Accumulated other comprehensive loss 

(56,054)

(46,914)

Total Tower International, Inc.'s stockholders' equity

61,605

43,151

Noncontrolling interests in subsidiaries *

57,172

56,627

Total stockholders' equity

118,777

99,778

Total liabilities and stockholders' equity

$             1,185,143

$                1,171,040

* Balances include $47.4 million and $47.2 million minority interest attributable to discontinued operations, respectively.

      

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands - unaudited)

Six Months Ended June 30,

2015

2014

OPERATING ACTIVITIES:

Net income

$      33,260

$      32,228

Less: Income from discontinued operations, net of tax

589

2,433

Income from continuing operations

32,671

29,795

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

Premium on notes redemption and other fees

-

87

Deferred income tax provision

107

700

Depreciation and amortization

39,644

45,598

Non-cash share-based compensation

1,302

2,409

Pension income, net of contributions

(6,228)

(8,061)

Change in working capital and other operating items

(54,123)

(51,242)

Net cash provided by continuing operating activities

$      13,373

$      19,286

INVESTING ACTIVITIES:

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

$    (29,448)

$    (28,201)

Investment in joint venture

-

(760)

Net cash used in continuing investing activities

$    (29,448)

$    (28,961)

FINANCING ACTIVITIES:

Proceeds from borrowings

$      66,439

$      70,376

Repayments of  borrowings

(62,862)

(65,391)

Borrowings/(Repayments) on Term Loan Credit Facility

(25,000)

33,145

Debt financing costs

-

(917)

Proceeds from termination of cross currency swaps

32,377

-

Secondary stock offering transaction costs

-

(75)

Proceeds from stock options exercised

148

2,173

Purchase of treasury stock

(6,549)

(910)

Noncontrolling interest dividends

-

(2,529)

Net cash provided by continuing financing activities

$        4,553

$      35,872

Discontinued operations:

Net cash from discontinued operating activities

$        8,669

$        3,467

Net cash from discontinued investing activities

(1,587)

7,756

Net cash from discontinued financing activities

(5,620)

(2,319)

         Net cash from discontinued operations

$        1,462

$        8,904

Effect of exchange rate changes on continuing cash and cash equivalents

$      (2,499)

$         (762)

NET CHANGE IN CASH AND CASH EQUIVALENTS

$    (12,559)

$      34,339

CASH AND CASH EQUIVALENTS:

Beginning of period

$    148,561

$    134,880

End of period

$    136,002

$    169,219

      

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands - unaudited)

Segment Data

Three Months Ended June 30,

2015

2014

Revenues

Adjusted EBITDA

Revenues

Adjusted EBITDA

International

$              186,931

$                16,356

$              228,787

$                18,513

Americas

303,337

36,916

319,680

36,637

Consolidated

$              490,267

$                53,272

$              548,467

$                55,150

Six Months Ended June 30,

2015

2014

Revenues

Adjusted EBITDA

Revenues

Adjusted EBITDA

International

$              376,754

$                30,500

$              449,552

$                37,080

Americas

610,142

70,843

618,178

69,694

Consolidated

$              986,896

$              101,343

$           1,067,730

$              106,774

Adjusted EBITDA Reconciliation

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Adjusted EBITDA

$                53,272

$                55,150

$              101,343

$              106,774

Restructuring and asset impairment charges, net

(5,493)

(4,716)

(6,524)

(6,105)

Depreciation and amortization

(19,736)

(22,745)

(39,644)

(45,598)

Acquisition costs and other

(128)

(103)

(218)

(210)

Long-term compensation expense

(2,884)

(2,226)

(5,999)

(4,863)

Interest expense, net

(3,900)

(7,204)

(11,625)

(14,240)

Other expense

-

-

-

(87)

Provision for income taxes

(2,374)

(2,661)

(4,473)

(5,495)

Equity in loss of joint venture, net of tax

(283)

(222)

(189)

(381)

Income from discontinued operations, net of tax 

665

1,677

589

2,433

Net income attributable to noncontrolling interests

(493)

(854)

(573)

(1,277)

Net income attributable to Tower International, Inc.

$                18,646

$                16,096

$                32,687

$                30,951

Adjusted Free Cash Flow Reconciliation

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Net cash provided by continuing operating activities

$                20,167

$                  4,093

$                13,373

$                19,286

Cash disbursed for purchases of PP&E

(19,886)

(19,538)

(29,448)

(28,201)

Free cash flow

281

(15,445)

(16,075)

(8,915)

Less:  Cash disbursed for customer-owned tooling

(14,033)

(7,749)

(24,147)

(16,149)

Adjusted free cash flow

$                14,314

$                (7,696)

$                  8,072

$                  7,234

Net Debt Reconciliation

June 30,

December 31,

2015

2014

Short-term debt and current maturities of capital lease obligations

$                36,415

$                31,139

Long-term debt, net of current maturities

426,968

457,179

Debt issue costs

(10,201)

(11,876)

Obligations under capital leases, net of current maturities

6,633

7,740

Total debt

459,815

484,182

Less: Cash and cash equivalents

(136,002)

(148,561)

Add: Cash attributable to discontinued operations

17,556

16,025

Net debt

$              341,369

$              351,646

        

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CERTAIN ITEMS INCLUDED IN NET INCOME

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

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

Selling, general, and administrative expenses

One-time CEO compensation awards

(933)

-

(1,866)

-

Restructuring and asset impairment charges, net

Restructuring actions*

(211)

(440)

(377)

(806)

Change in estimated future rent for a closed facility

(4,760)

-

(4,760)

-

Lease buyout of previously closed facility

-

(3,448)

(3,448)

Interest expense

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

1,630

-

(274)

-

Acceleration of the amortization of debt issue costs and OID

-

-

(440)

-

Other expense

-

-

Term Loan re-pricing fees

-

-

-

(87)

Discontinued operations

Income / (loss) from discontinued operations

665

1,677

589

2,433

Noncontrolling interests

Net income attributable to noncontrolling interests**

(290)

(576)

(281)

(776)

Total items included in net income, net of tax

$       (3,899)

$      (2,787)

$        (7,409)

$      (2,684)

Net income attributable to Tower International, Inc.

$       18,646

$     16,096

$        32,687

$     30,951

Memo:  Average shares outstanding (in thousands)

Basic

21,105

20,651

21,078

20,582

Diluted

21,403

21,374

21,382

21,319

Income / (loss) per common share (GAAP)

Basic

$           0.88

$         0.78

$            1.55

$         1.50

Diluted

0.87

0.75

1.53

1.45

Diluted adjusted earnings per share (non-GAAP) ***

1.05

0.88

1.88

1.58

*   Amount is net of tax of $0k , $29k, $31k , and $86k, respectively 

** Amounts attributible to noncontrolling interests of discontinued operations

*** Excludes the certain items shown above. 

        

SOURCE Tower International, Inc.



RELATED LINKS

http://www.towerinternational.com