Tower International Reports Second Quarter Results and Affirms Earnings and Free Cash Flow Outlook for 2018

Tower International Reports Second Quarter Results and Affirms Earnings and Free Cash Flow Outlook for 2018

LIVONIA, Mich., July 31, 2018 /PRNewswire/ — Tower International, Inc. (NYSE: TOWR), a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced second quarter 2018 results and affirmed its earnings and free cash flow outlook for 2018.

  • Revenue for the second quarter was $556 million compared with $490 million in the second quarter of 2017 representing a 13 percent increase.
  • Net income was $22.4 million or $1.07 per share increasing from $19.2 million or $0.92 per share in the second quarter last year. As detailed below, this year's second quarter included certain items that, in aggregate, decreased results by $468 thousand. Excluding these items and comparable items in the second quarter of 2017, adjusted earnings per share amounted to $1.09, an increase of 12 percent from the $0.97 reported a year ago.
  • Adjusted EBITDA for the quarter was $58.2 million slightly ahead of the Company's outlook and up 10 percent from $52.8 million a year ago.
  • For the quarter, net cash provided by continuing operating activities was $49 million. Cash disbursed for purchases of equipment totaled $40 million resulting in Free Cash Flow of $9 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 of $4.10 per share; and
    • Free Cash Flow of $50 million, with strong free cash flow in the second half of the year more than offsetting the cash outflow in the first half of the year.
  • The Company's outlook for third quarter 2018 includes revenue of $525 million, Adjusted EBITDA of $57 million and Diluted Adjusted Earnings Per Share of $1.04.

"We remain balanced in our approach of growing profitably, reducing leverage – as evidenced by our July pay down of $50 million of Term Loan debt, and returning capital to shareholders," said CEO Jim Gouin. "Tower delivered solid financial results in the second quarter as Adjusted EBITDA and Adjusted EPS both increased by more than 10 percent. Revenue for the quarter increased 13 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 16 percent while the industry production declined by 2 percent. These trends, in combination with our solid backlog of net new business, gives us further confidence that we will continue to grow our revenue faster than the industry in total."

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

Tower will discuss its second 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. #5089747. 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 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 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 third quarter earnings and revenues, full year earnings, cash flow and revenues, net new business backlog, business growth, adjusted EBITDA, adjusted EBITDA margin and free cash flow. 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
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,

2018

2017

2018

2017

Revenues

$ 556,007

$ 489,925

$ 1,119,513

$ 987,515

Cost of sales

491,948

428,807

995,608

870,097

Gross profit

64,059

61,118

123,905

117,418

Selling, general, and administrative expenses

30,869

29,007

63,103

58,232

Amortization expense

108

113

220

216

Restructuring and asset impairment charges, net

269

3,337

1,817

7,248

Operating income

32,813

28,661

58,765

51,722

Interest expense

5,255

1,807

10,417

2,260

Interest income

112

86

269

133

Net periodic benefit income

559

479

1,117

958

Other expense

977

977

575

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

discontinued operations

27,252

27,419

48,757

49,978

Provision for income taxes

5,539

7,672

10,606

14,168

Income from continuing operations

21,713

19,747

38,151

35,810

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

663

(489)

1,525

861

Net income

22,376

19,258

39,676

36,671

Less: Net income attributable to the noncontrolling interests

42

110

Net income attributable to Tower International, Inc.

$ 22,376

$ 19,216

$ 39,676

$ 36,561

Weighted average basic shares outstanding

20,597,482

20,508,890

20,577,161

20,467,281

Weighted average diluted shares outstanding

20,986,122

20,805,931

20,969,142

20,813,100

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

Income per share from continuing operations

$ 1.05

$ 0.96

$ 1.85

$ 1.74

Income / (loss) per share from discontinued operations

0.03

(0.02)

0.07

0.04

Income per share

1.09

0.94

1.93

1.79

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

Income per share from continuing operations

$ 1.04

$ 0.95

$ 1.82

$ 1.72

Income / (loss) per share from discontinued operations

0.03

(0.02)

0.07

0.04

Income per share

1.07

0.92

1.89

1.76

Dividends declared per share

$ 0.12

$ 0.11

$ 0.24

$ 0.22

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands – unaudited)

June 30,

December 31,

2018

2017

ASSETS

Cash and cash equivalents

$ 72,107

$ 123,688

Accounts receivable, net of allowance of $1,531 and $1,385

293,093

239,319

Inventories

86,398

78,745

Assets held for sale

32,361

44,250

Prepaid tooling, notes receivable, and other

59,715

78,481

Total current assets

543,674

564,483

Property, plant, and equipment, net

550,434

535,272

Goodwill

62,118

63,665

Deferred tax asset

76,890

83,035

Other assets, net

14,005

13,642

Total assets

$ 1,247,121

$ 1,260,097

LIABILITIES AND EQUITY

Short-term debt and current maturities of capital lease obligations

$ 28,899

$ 42,048

Accounts payable

319,243

323,271

Accrued liabilities

105,361

113,949

Liabilities held for sale

13,818

17,336

Total current liabilities

467,321

496,604

Long-term debt, net of current maturities

343,790

344,738

Deferred tax liability

4,660

4,807

Pension liability

43,159

47,813

Other non-current liabilities

90,488

96,263

Total non-current liabilities

482,097

493,621

Total liabilities

949,418

990,225

Stockholders' equity:

Common stock

224

223

Additional paid in capital

345,980

344,153

Treasury stock

(36,882)

(36,408)

Accumulated surplus

60,603

29,712

Accumulated other comprehensive loss

(72,222)

(67,808)

Total stockholders' equity

297,703

269,872

Total liabilities and stockholders' equity

$ 1,247,121

$ 1,260,097

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands – unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

2018

2017

OPERATING ACTIVITIES:

Net income

$ 22,376

$ 19,258

$ 39,676

$ 36,671

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

663

(489)

1,525

861

Income from continuing operations

$ 21,713

$ 19,747

$ 38,151

$ 35,810

Adjustments required to reconcile income from continuing operations to net
cash provided by / (used in) continuing operating activities:

Deferred income tax provision

$ 3,966

$ 6,010

$ 7,133

$ 9,965

Depreciation and amortization

20,756

18,766

42,151

36,532

Non-cash share-based compensation

905

599

1,609

1,098

Pension income, net of contributions

(2,418)

(2,500)

(4,655)

(4,851)

Change in working capital and other operating items

3,760

(4,286)

(51,862)

(88,794)

Net cash provided by / (used in) continuing operating activities

$ 48,682

$ 38,336

$ 32,527

$ (10,240)

INVESTING ACTIVITIES:

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

$ (39,639)

$ (20,252)

$ (68,581)

$ (44,161)

Proceeds from disposition of joint venture, net

4,314

15,944

4,314

15,944

Net cash used in continuing investing activities

$ (35,325)

$ (4,308)

$ (64,267)

$ (28,217)

FINANCING ACTIVITIES:

Proceeds from borrowings

$ 41,175

$ 137,109

$ 45,184

$ 373,853

Repayments of borrowings

(43,307)

(143,606)

(59,273)

(336,032)

Original issuance discount

(1,808)

Debt financing costs

(664)

(4,747)

Dividend payment to Tower stockholders

(2,472)

(2,256)

(4,937)

(4,498)

Proceeds from stock options exercised

107

114

219

1,052

Purchase of treasury stock

(1)

(474)

(762)

Net cash provided by / (used in) continuing financing activities

$ (4,497)

$ (9,304)

$ (19,281)

$ 27,058

Discontinued operations:

Net cash from discontinued operating activities

$ 2,779

$ 644

$ 4,384

$ 74

Net cash used in discontinued investing activities

(789)

(604)

(2,001)

(1,010)

Net cash from / (used in) discontinued financing activities

(469)

423

(924)

920

Net cash used in discontinued operations

$ 1,521

$ 463

$ 1,459

$ (16)

Effect of exchange rate changes on continuing cash and cash equivalents

$ (3,876)

$ 2,084

$ (2,019)

$ 3,421

NET CHANGE IN CASH AND CASH EQUIVALENTS

$ 6,505

$ 27,271

$ (51,581)

$ (7,994)

CASH AND CASH EQUIVALENTS:

Beginning of period

$ 65,602

$ 27,523

$ 123,688

$ 62,788

End of period

$ 72,107

$ 54,794

$ 72,107

$ 54,794

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands – unaudited)

Segment Data

Three Months Ended June 30,

2018

2017

Revenues

Adjusted
EBITDA

Revenues

Adjusted
EBITDA

Europe

$ 173,844

$ 10,442

$ 160,229

$ 13,628

North America

382,163

47,777

329,696

39,137

Consolidated

$ 556,007

$ 58,219

$ 489,925

$ 52,765

Six Months Ended June 30,

2018

2017

Revenues

Adjusted
EBITDA

Revenues

Adjusted
EBITDA

Europe

$ 345,483

$ 19,171

$ 320,381

$ 24,800

North America

774,030

92,157

667,134

73,690

Consolidated

$ 1,119,513

$ 111,328

$ 987,515

$ 98,490

Adjusted EBITDA Reconciliation

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

2018

2017

Net income attributable to Tower International, Inc.

$ 22,376

$ 19,216

$ 39,676

$ 36,561

Restructuring and asset impairment charges, net

269

3,337

1,817

7,248

Depreciation and amortization

20,756

18,766

42,151

36,532

Lease expense

2,450

4,900

Acquisition costs and other

200

109

301

184

Long-term compensation expense

1,731

1,892

3,394

2,804

Interest expense, net

5,143

1,721

10,148

2,127

Net periodic benefit income

(559)

(479)

(1,117)

(958)

Other expense

977

977

575

Provision for income taxes

5,539

7,672

10,606

14,168

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

(663)

489

(1,525)

(861)

Net income attributable to noncontrolling interests

42

110

Adjusted EBITDA

$ 58,219

$ 52,765

$ 111,328

$ 98,490

Free Cash Flow Reconciliation

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

2018

2017

Net cash provided by continuing operating activities

$ 48,682

$ 38,336

$ 32,527

$ (10,240)

Cash disbursed for purchases of PP&E

(39,639)

(20,252)

(68,581)

(44,161)

Free cash flow

$ 9,043

$ 18,084

$ (36,054)

$ (54,401)

Net Debt Reconciliation

June 30,

December 31,

2018

2017

Short-term debt and current maturities of capital lease obligations

$ 28,899

$ 42,048

Long-term debt, net of current maturities

351,262

352,886

Debt issue costs

(7,472)

(8,148)

Total debt

372,689

386,786

Less: Cash and cash equivalents

(72,107)

(123,688)

Net debt

$ 300,582

$ 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

June 30,

June 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

$ (388)

$ (2,006)

$ (543)

$ (3,157)

Interest expense

Mark-to-market gain on derivative financial instruments

1,631

2,630

Other Expense

Acquisition related diligence costs

(743)

(977)

Discontinued operations

Loss on sale of joint venture

(2,596)

(2,596)

Income from discontinued operations

663

2,108

663

2,108

Noncontrolling interests

Net income attributable to noncontrolling interests*

(42)

(42)

Total items included in net income, net of tax

$ (468)

$ (905)

Net income attributable to Tower International, Inc.

$ 22,376

$ 19,216

Memo: Average shares outstanding (in thousands)

Basic

20,597

20,509

Diluted

20,986

20,806

Income per common share (GAAP)

Basic

$ 1.09

$ 0.94

Diluted

1.07

0.92

Diluted adjusted earnings per share (non-GAAP)

$ 1.09

$ 0.97

* 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

Six Months Ended

Six Months Ended

June 30,

June 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

$ (1,223)

$ (4,161)

$ (1,658)

$ (6,633)

Interest expense

Mark-to-market gain on derivative financial instruments

4,286

6,912

Other Expense

Debt refinancing costs

(357)

(575)

Acquisition related diligence costs

(743)

(977)

Discontinued operations

Loss on sale of joint venture

(2,596)

(2,596)

Income from discontinued operations

1,525

3,458

1,525

3,458

Noncontrolling interests

Net income attributable to noncontrolling interests*

(110)

(110)

Total items included in net income, net of tax

$ (441)

$ 520

Net income attributable to Tower International, Inc.

$ 39,676

$ 36,561

Memo: Average shares outstanding (in thousands)

Basic

20,577

20,467

Diluted

20,969

20,813

Income per common share (GAAP)

Basic

$ 1.93

$ 1.79

Diluted

1.89

1.76

Diluted adjusted earnings per share (non-GAAP)

$ 1.91

$ 1.73

* Amounts attributable to noncontrolling interests of discontinued operations

Cision View original content:http://www.prnewswire.com/news-releases/tower-international-reports-second-quarter-results-and-affirms-earnings-and-free-cash-flow-outlook-for-2018-300688764.html

SOURCE Tower International, Inc.

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