Tower International Reports First Quarter 2019 in-line with Outlook, Closes on Sale of Europe and Affirms 2020 Outlook
LIVONIA, Mich., May 2, 2019 /PRNewswire/ — Tower International, Inc. (NYSE: TOWR), a leading manufacturer of engineered automotive structural metal components and assemblies, today announced First Quarter 2019 results and updated its business outlook.
During the First Quarter 2019, Tower completed the sale of its European operations. In December 2018, Tower entered into an agreement to sell all of its European operations to Financière SNOP Dunois S.A. (“FSD”), a privately owned French auto supplier. The sale price represents an Enterprise Value of € 255 million, or an EV / Adjusted EBITDA multiple of 5.4x 2018 full year earnings. The transaction closed March 1, 2019. Tower received $250 million in net proceeds after fees and settlement of fixed rate Term Loan swaps. Upon completion of the divestiture, a payment of $50 million was made on the Term Loan, reducing the balance to $253 million.
Revenue for the First Quarter was $379 million compared with $407 million in 2018, and previous Outlook of $375 million. The year over year revenue decrease reflects primarily lower sales resulting from launch cadence and program changeover, offset partially by higher revenue from new platforms.
Income from continuing operations for the First Quarter 2019 was $7.7 million compared with $16.5 million in 2018. Including discontinued operations, GAAP net income was negative $5.1 million for the first quarter or $(0.24) per share, compared with net income of $17.3 million or $0.83 per diluted share last year. As detailed below, this year's results included certain items which adversely impacted net income by $9.8 million. Excluding these items and comparable items in 2018, earnings per diluted share for the First Quarter 2019 was $0.23 compared with $0.82 a year ago and previous Outlook of $0.18 per share.
Adjusted EBITDA for the First Quarter 2019 was $30.4 million compared with $43.0 million a year ago and previous Outlook of $30 million.
“Tower delivered First Quarter 2019 results in-line with our Outlook. The sale of Tower Europe further strengthens our balance sheet and positions Tower to capitalize on the healthy and growing light truck and SUV market in North America. We continue to balance our capital allocation, by investing in profitable growth, reducing debt and returning capital to shareholders,” said CEO Jim Gouin. “Near-term results will continue to be impacted by significant launch activity. However, with the completion of these launches, projected second half 2019 performance will result in higher run rate revenue, EBITDA and Free Cash Flow leading the way to a step function improvement in financial results for Full Year 2020.”
Full Year 2019 Outlook includes:
Revenue of $1.575 billion to $1.6 billion;
Adjusted EBITDA of $165 million to $170 million;
Adjusted EPS of $2.10 to $2.30 per diluted share which is adversely impacted by the adoption of ASC 842 and a higher tax rate; and
Positive Full Year Free Cash Flow, with strong Free Cash Flow in the second half of the year more than offsetting the expected cash outflow in the first half of the year.
With the completion of significant launch activity in 2019, financial results are expected to improve substantially. Full Year 2020 Outlook includes:
Revenue of $1.69 billion to $1.74 billion;
Adjusted EBITDA of $200 million to $210 million;
Adjusted EBITDA margin of approximately 12 percent; and
Free Cash Flow of more than $60 million.
Tower to Host Conference Call Today at 1:00 p.m. EDT
Tower will discuss its First Quarter 2019 results and other related matters in a conference call at 1:00 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. # 1508207. 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”, 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. We define adjusted EBITDA margin as 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 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 fair value adjustments to our pension plan, potential restructuring expenses, adjustments related to our long-term incentive compensation programs in any future period, and earnings that occur within the separate tax jurisdictions in which we have operations, a quantitative reconciliation of forward-looking financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP is not feasible.
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 prospective program launches, business growth, and the Company's projected earnings, free cash flow, revenues, Adjusted EBITDA and Adjusted EBITDA margin. 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;
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;
our ability to take advantage of emerging secular trends;
risks related to changes to U.S. trade policies;
risks associated with our non-U.S. operations, including foreign exchange risks and economic uncertainty in some regions;
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,
2019
2018
Revenues
$ 378,738
$ 407,233
Cost of sales
341,971
359,049
Gross profit
36,767
48,184
Selling, general, and administrative expenses
25,186
23,345
Amortization expense
109
112
Restructuring and asset impairment charges, net
123
1,243
Operating income
11,349
23,484
Interest expense
5,640
4,67..
