Tower International (TOWR) 8-K Results of Operations and Financial Condition

 

FOR IMMEDIATE RELEASE

Tower International Reports Solid Third Quarter,

Increases 2013 Adjusted EPS Outlook, and

Highlights 2014 EPS and Free Cash Flow Tail-winds

LIVONIA, Mich., October 30, 2013 – Tower International, Inc. [NYSE: TOWR], a leading integrated global manufacturer of engineered structural metal components and assemblies, today announced third quarter 2013 results and updated its outlook.

· Revenue for the third quarter was $495 million, up 1 percent from $492 million in the third quarter 2012.

· Adjusted EBITDA for the quarter was $48.4 million, up 8 percent from $44.7 million a year ago. Unfavorable volume and mix outside of North America was more than offset by favorable net cost performance. This reflected good overall operating performance and some favorable period benefits.

· Net income of $3.3 million in the third quarter 2013 compared with a net loss of $4.0 million a year ago. As detailed below, this year’s third quarter included certain items, primarily one-time charges related to re-financing, that adversely impacted results by $6.8 million. Excluding these items and comparable items in the third quarter of 2012, diluted adjusted earnings were $0.48 per share, up substantially from $0.01 per share a year ago.

· Free cash flow was positive $21 million in the quarter and is positive for the first nine months of the year.

· For full year 2013, Tower is increasing its outlook for diluted adjusted earnings per share by 35 cents or 18%, to $2.25 per share. The improvement reflects in part interest savings from a re-financing in the third quarter and a more favorable geographic mix of earnings. Revenue is now projected at $2.1 billion; $15 million lower than the prior outlook, reflecting modest adjustments in Brazil and China. The outlook for Adjusted EBITDA is affirmed at $210 million, as is projected positive free cash flow of $25-$30 million for the full year.

“With consistently good operating execution and lower interest cost, we’re pleased to deliver on our projections for positive free cash flow,” said President and CEO Mark Malcolm. “Other things being equal, we can also now look forward to some meaningful favorable tail-winds in 2014, with the already accomplished re-financing actions boosting next year’s adjusted earnings per share by about 45 cents and free cash flow by about $15 million, compared with the partial-year savings achieved in 2013.”

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

Tower will discuss its third quarter 2013 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 websitewww.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. #88939581. 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”, “free cash flow”, “net debt”, and “diluted adjusted earnings per share” (or “EPS”). 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. Free cash flow is defined as net cash provided by or used in operating activities less cash disbursed for purchases of property, plant and equipment. Net debt is defined as total debt less cash and cash equivalents. Diluted adjusted earnings per share exclude the impact of certain items as described in the reconciliations provided in this press release that are included in our net income / (loss). We use Adjusted EBITDA 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. We believe these items as well as the non-GAAP financial measures of net debt and diluted adjusted income / (loss) per share are useful to investors as they provide an additional tool for investors to use in evaluating operating results and trends, and in comparing our financial results with other companies. 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 are not measures of performance under GAAP and 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. In addition, 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.

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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, free cash flow and diluted adjusted earnings per share and statements regarding 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@towerautomotive.com

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TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts - unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenues	$	495,197		$	492,127		$	1,585,215		$	1,576,770
Cost of sales		439,222			438,799			1,401,713			1,396,482
Gross profit		55,975			53,328			183,502			180,288
Selling, general, and administrative expenses		31,290			32,254			98,235			101,251
Amortization expense		646			1,120			2,134			3,439
Restructuring and asset impairment charges, net		1,575			3,186			18,906			7,953
Operating income		22,464			16,768			64,227			67,645
Interest expense		9,410			13,530			44,375			41,249
Interest income		283			358			898			831
Other expense		7,490			-			48,418			-
Income / (loss) before provision for income taxes and equity in loss of joint venture		5,847			3,596			(27,668	)		27,227
Provision for income taxes		1,423			3,047			8,557			17,713
Equity in loss of joint venture, net of tax		(208	)		-			(373	)		-
Income / (loss) from continuing operations		4,216			549			(36,598	)		9,514
Loss from discontinued operations, net of tax		-			(2,931	)		-			(578	)
Net income / (loss)		4,216			(2,382	)		(36,598	)		8,936
Less: Net income attributable to the noncontrolling interests		898			1,593			2,647			4,627
Net income / (loss) attributable to Tower International, Inc.	$	3,318		$	(3,975	)	$	(39,245	)	$	4,309
Weighted average common shares outstanding
Basic		20,449,920			20,246,797			20,358,641			20,098,355
Diluted		21,106,471			20,246,797			20,358,641			20,533,788
Basic income / (loss) per share attributable to Tower International, Inc.:
Income / (loss) per share from continuing operations	$	0.16		$	(0.05	)	$	(1.93	)	$	0.24
Loss per share from discontinued operations		-			(0.15	)		-			(0.03	)
Income / (loss) per share		0.16			(0.20	)		(1.93	)		0.21
Diluted income / (loss) per share attributable to Tower International, Inc.:
Income / (loss) per share from continuing operations	$	0.16		$	(0.05	)	$	(1.93	)	$	0.24
Loss per share from discontinued operations		-			(0.15	)		-			(0.03	)
Income / (loss) per share		0.16			(0.20	)		(1.93	)		0.21

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TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data - unaudited)
	September 30, 2013			December 31, 2012
ASSETS
Cash and cash equivalents	$	106,348		$	113,943
Accounts receivable, net of allowance of $2,294 and $4,105		331,898			266,138
Inventories		81,682			81,336
Deferred tax asset - current		7,901			10,447
Prepaid tooling, notes receivable, and other		77,278			96,349
Total current assets		605,107			568,213
Property, plant, and equipment, net		529,176			573,148
Goodwill		66,118			64,793
Investment in joint venture		7,975			-
Deferred tax asset - non-current		2,851			3,149
Other assets, net		27,891			28,819
Total assets	$	1,239,118		$	1,238,122
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt and current maturities of capital lease obligations	$	69,428		$	74,605
Accounts payable		309,898			264,897
Accrued liabilities		120,962			134,664
Total current liabilities		500,288			474,166
Long-term debt, net of current maturities		451,790			411,590
Obligations under capital leases, net of current maturities		10,154			10,783
Deferred tax liability - non-current		10,003			13,021
Pension liability		87,426			100,780
Other non-current liabilities		83,173			86,908
Total non-current liabilities		642,546			623,082
Total liabilities		1,142,834			1,097,248
Stockholders' Equity:
Tower International, Inc.'s stockholders' equity
Common stock, $0.01 par value, 350,000,000 authorized, 21,074,337 issued and 20,467,947 outstanding at September 30, 2013 and 20,830,425 issued and 20,247,134 outstanding at December 31, 2012		211			208
Additional paid in capital		326,759			321,032
Treasury stock, at cost, 606,390 shares as of September 30, 2013 and 583,291 shares as of December 31, 2012		(8,594	)		(8,297	)
Accumulated deficit		(276,457	)		(237,212	)
Accumulated other comprehensive loss		(8,477	)		(12,484	)
Total Tower International, Inc.'s stockholders' equity		33,442			63,247
Noncontrolling interests in subsidiaries		62,842			77,627
Total stockholders' equity		96,284			140,874
Total liabilities and stockholders' equity	$	1,239,118		$	1,238,122

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TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands - unaudited)
	Nine Months Ended September 30,
	2013			2012
OPERATING ACTIVITIES:
Net income / (loss)	$	(36,598	)	$	8,936
Add:  Loss from discontinued operations, net of tax		-			(578	)
Income / (loss) from continuing operations		(36,598	)		9,514
Adjustments required to reconcile income / (loss) from continuing operations to net cash provided by operating activities:
Non-cash restructuring and asset impairments, net		11,006			-
Premium on notes redemption and other fees		48,418			-
Deferred income tax provision		373			12,590
Depreciation and amortization		70,933			68,213
Non-cash share-based compensation		3,660			8,485
Pension expense / (income),  net of contributions		(13,354	)		(15,949	)
Change in working capital and other operating items		(34,669	)		(45,076	)
Net cash provided by continuing operating activities	$	49,769		$	37,777
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant, and equipment, net	$	(47,224	)	$	(84,703	)
Investment in joint venture		(6,293	)		-
Net proceeds from sale of property, plant, and equipment		12,040			-
Net cash used in continuing investing activities	$	(41,477	)	$	(84,703	)
FINANCING ACTIVITIES:
Purchase of treasury stock	$	(297	)	$	(3,167	)
Proceeds from borrowings		457,352			465,261
Repayments of  borrowings		(484,847	)		(411,026	)
Proceeds from borrowings on Term Loan Credit Facility		417,900			-
Rredemption of notes		(361,992	)		-
Premium paid on notes redemption and other fees		(43,078	)		-
Debt financing costs		(9,437	)		-
Premium paid on re-pricing of Term Loan B and other fees		(4,378	)		-
Proceeds from stock options exercised		2,067			-
Noncontrolling interest dividends		(6,748	)		-
Net cash provided by / (used in) continuing financing activities	$	(33,458	)	$	51,068
Discontinued operations:
Net cash from discontinued operating activities	$	-		$	(11,936	)
Net cash from discontinued investing activities		15,694			(21,878	)
Net cash from discontinued financing activities		-			11,575
Net cash from discontinued operations	$	15,694		$	(22,239	)
Effect of exchange rate changes on continuing cash and cash equivalents	$	1,877		$	2,083
NET CHANGE IN CASH AND CASH EQUIVALENTS	$	(7,595	)	$	(16,014	)
CASH AND CASH EQUIVALENTS:
Beginning of period	$	113,943		$	134,984
End of period	$	106,348		$	118,970
Supplemental Cash Flow Information:
Interest paid, net of amounts capitalized	$	40,865		$	48,674
Income taxes paid		8,036			6,738
Non-cash Activities:
Capital expenditures in liabilities for purchases of property, plant, and equipment	$	15,590		$	9,907

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TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands - unaudited)

Segment Data	Three Months Ended September 30,
	2013				2012
	Revenues		Adjusted EBITDA		Revenues		Adjusted EBITDA
International	$	219,250	$	12,795	$	209,848	$	17,590
Americas		275,947		35,617		282,279		27,088
Consolidated	$	495,197	$	48,412	$	492,127	$	44,678

	Nine Months Ended September 30,
	2013				2012
	Revenues		Adjusted EBITDA		Revenues		Adjusted EBITDA
International	$	706,253	$	56,791	$	710,017	$	63,275
Americas		878,962		105,902		866,753		90,109
Consolidated	$	1,585,215	$	162,693	$	1,576,770	$	153,384

Adjusted EBITDA reconciliation	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Adjusted EBITDA	$	48,412		$	44,678		$	162,693		$	153,384
Restructuring and asset impairment charges, net		(1,575	)		(3,186	)		(18,906	)		(7,953	)
Depreciation and amortization		(22,296	)		(23,498	)		(70,933	)		(68,213	)
Acquisition costs and other		(335	)		(87	)		(904	)		(273	)
Long-term compensation expense		(1,742	)		(1,139	)		(4,888	)		(9,300	)
Interest expense, net		(9,127	)		(13,172	)		(43,477	)		(40,418	)
Other expense		(7,490	)		-			(48,418	)		-
Closure of Tower Defense & Aerospace		-			-			(2,835	)		-
Provision for income taxes		(1,423	)		(3,047	)		(8,557	)		(17,713	)
Equity in loss of joint venture		(208	)		-			(373	)		-
Loss from discontinued operations, net of tax		-			(2,931	)		-			(578	)
Net income attributable to noncontrolling interests		(898	)		(1,593	)		(2,647	)		(4,627	)
Net income / (loss) attributable to Tower International, Inc.	$	3,318		$	(3,975	)	$	(39,245	)	$	4,309

Free cash flow reconciliation	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
Net cash provided by continuing operating activities	$	37,967		$	7,831	$	49,769		$	37,777
Cash disbursed for purchases of PP&E, net		(17,032	)		13,365		(47,224	)		(84,703	)
Free cash flow	$	20,935		$	21,196	$	2,545		$	(46,926	)

Net debt reconciliation	September 30,			December 31,
	2013			2012
Short-term debt and current maturities of capital lease obligations	$	69,428		$	74,605
Long-term debt, net of current maturities		451,790			411,590
Obligations under capital leases, net of current maturities		10,154			10,783
Total debt		531,372			496,978
Less: cash and cash equivalents		(106,348	)		(113,943	)
Net debt	$	425,024		$	383,035

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TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CERTAIN ITEMS INCLUDED IN NET INCOME
(Amounts in thousands, except per share amounts - unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Expense items included in net income, net of tax:
Cost of sales
Closure of Tower Defense & Aerospace	$	-		$	-		$	(4,414	)	$	-
Selling, general, and administrative expenses
Incentive compensation related to funding events		-			-			-			(6,128	)
Acquisition costs and other		-			-			(327	)		-
Restructuring expense
One-time restructuring actions		(425	)		-			(1,025	)		(1,203	)
Plant relocation		-			(1,683	)		-			(2,871	)
Facility closure		-			-			(3,575	)		-
Asset impairment charges		-			(575	)		(10,705	)		(575	)
Interest expense
Acceleration of the amortization of debt issue costs and OID		(1,195	)		-			(11,342	)		-
Other expense
Premium on redemption of senior secured notes		(2,150	)		-			(42,470	)		-
Premium and other fees for re-pricing of Term Loan		(4,540	)		-			(4,540	)		-
Secondary stock offering transaction costs		(800	)		-			(800	)		-
Breakage of Letter of Credit Facility		-			-			(608	)		-
Provision for income taxes
Foreign subsidiary tax audit		2,300			1,087			2,300			1,087
Valuation allowance in Brazil		-			-			-			(6,494	)
Discontinued operations
Income from discontinued operations		-			(2,931	)		-			(2,931	)
Total items included in net income	$	(6,810	)	$	(4,102	)	$	(77,506	)	$	(19,115	)
Net income / (loss) attributable to Tower International, Inc.	$	3,318		$	(3,975	)	$	(39,245	)	$	4,309
Memo:  Average shares outstanding (in thousands)
Basic		20,450			20,247			20,359			20,098
Diluted		21,106			20,247			20,359			20,534
Income / (loss) per common share (GAAP)
Basic	$	0.16		$	(0.20	)	$	(1.93	)	$	0.21
Diluted		0.16			(0.20	)		(1.93	)		0.21
Diluted adjusted income per share (non-GAAP)*		0.48			0.01			1.83			1.14

* Excludes the certain items shown above.  For the three months ended September 30, 2012, diluted share count of 20.4 million was used to calculate diluted adjusted income per share. For the nine months ended September 30, 2013, diluted share count of 20.9 million was used to calculate diluted adjusted income per share.