Tower International Reports 2018 Financial Results in-line with Outlook and Provides Outlook through 2020

Published

LIVONIA, Mich., Feb. 12, 2019 /PRNewswire/ -- Tower International, Inc. (NYSE:TOWR), a leading manufacturer of engineered automotive structural metal components and assemblies, today announced fourth quarter and full year 2018 results and provided its business outlook through 2020.

During the fourth quarter 2018, Tower reached a definitive agreement to divest its European operations. As such, these operations are classified as discontinued operations. Additionally, the Company has decided to retain its operations in Brazil; accordingly, the results for the Company's Brazilian operations are now included in continuing operations. The divestiture of Tower Europe is expected to close during the first quarter 2019 and result in net cash proceeds of approximately $250 million after payment of transaction costs and fees and the unwinding of the Euro denominated swaps related to the Term Loan.

  • Revenue for the full year 2018 was $1.572 billion compared with $1.382 billion in 2017, representing a 14 percent increase. Revenue for 2018 excluded $650 million of European revenue and included $53 million of Brazilian revenue.

  • Full year net income was $48.9 million or $2.33 per share, compared with $47.6 million or $2.29 per share last year. As detailed below, this year's results included special items which adversely impacted net income by $24.5 million. Excluding these items and comparable items in 2017, adjusted earnings per share of $3.50 increased 6 percent from $3.30 from a year ago. Adjusted EPS for 2018 excluded 78 cents associated with Europe and included 8 cents associated with Brazil.

  • Adjusted EBITDA for full year 2018 was $178 million up 13 percent from $157 million a year ago. Adjusted EBITDA for 2018 excluded $58 million associated with Europe and included $5 million associated with Brazil.

  • For full year 2018, net cash provided by continuing operating activities were $98 million. Cash disbursed for purchases of equipment totaled $83 million resulting in Free Cash Flow of $15 million.

  • If European operations were included in continuing operations and Brazilian operations were not included in continuing operations, Tower's full year 2018 revenue of $2.169 billion, Adjusted EBITDA of $230 million, Adjusted EPS of $4.20 and Free Cash Flow of $41 million would have been in-line with full year outlook.

  • Tower's net new business backlog for 2019 through 2020 is now $250 million. This represents an increase of more than 10 percent from the $225 million provided last year.

"Despite a difficult macro-environment, Tower delivered 2018 results in-line with our Outlook. We continue to balance our capital allocation, by investing in profitable growth, reducing debt and returning capital to shareholders. The pending 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," said CEO Jim Gouin. "With significant program changeovers and the launch of approximately $700 million in annual run rate revenue, 2019 will be a transition year. By 2020 these major launches will be completed and we expect significant margin improvement and substantial Free Cash Flow."

  • During 2019 Tower expects to launch programs which will represent nearly $700 million of on-going revenue. These product launches combined with customer downtime associated with platform changeover will adversely impact results, particularly in the first half of the year.

  • Full year 2019 outlook includes:
    • Revenue of $1.65 billion, reflecting primarily net new business of $175 million, offset partially by adverse program mix of $90 million;
    • Adjusted EBITDA of $175 million;
    • Diluted Adjusted EPS of $2.50 per share which is adversely impacted by the adoption of ASC 842 and a higher tax rate; and
    • Free Cash Flow of $15 million, 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 to $1.74 billion;
    • Adjusted EBITDA of $200 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 11 a.m. EST

Tower will discuss its 2018 results and other related matters in a conference call at 11 a.m. EST 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. # 7888969. 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 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 completion of the divestiture of the Company's European operations, 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;
  • 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;
  • 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts - unaudited)
Three Months Ended December 31, Year Ended December 31,
2018 2017 2018 2017
Revenues $ 377,270 $ 354,806 $ 1,571,853 $ 1,382,474
Cost of sales 334,544 303,667 1,377,955 1,193,311
Gross profit 42,726 51,139 193,898 189,163
Selling, general, and administrative expenses 20,860 22,514 89,527 87,756
Amortization expense 105 110 435 443
Restructuring and asset impairment charges, net 2,213 1,540 3,380 9,098
Operating income 19,548 26,975 100,556 91,866
Interest expense 4,428 5,250 19,856 10,882
Interest income 286 287 1,058 1,138
Net periodic benefit income / (expense) (4,078) 574 (2,403) 2,245
Other expense - - 977 575
Income before provision for income taxes and income / (loss) from discontinued operations 11,328 22,586 78,378 83,792
Provision / (benefit) for income taxes (10,068) 30,728 1,259 44,089
Income / (loss) from continuing operations 21,396 (8,142) 77,119 39,703
Income / (loss) from discontinued operations, net of tax (34,752) 4,275 (28,219) 8,032
Net income / (loss) (13,356) (3,867) 48,900 47,735
Less: Net income attributable to the noncontrolling interests - - - 110
Net income / (loss) attributable to Tower International, Inc. $ (13,356) $ (3,867) $ 48,900 $ 47,625
Weighted average basic shares outstanding 20,606,735 20,536,983 20,591,674 20,498,668
Weighted average diluted shares outstanding 20,606,735 20,536,983 20,996,068 20,828,888
Basic income / (loss) per share attributable to Tower International, Inc.:
Income / (loss) per share from continuing operations $ 1.04 $ (0.40) $ 3.75 $ 1.93
Income / (loss) per share from discontinued operations (1.69) 0.21 (1.38) 0.39
Income / (loss) per share (0.65) (0.19) 2.37 2.32
Diluted income / (loss) per share attributable to Tower International, Inc.:
Income / (loss) per share from continuing operations $ 1.04 $ (0.40) $ 3.67 $ 1.90
Income / (loss) per share from discontinued operations (1.69) 0.21 (1.34) 0.39
Income / (loss) per share (0.65) (0.19) 2.33 2.29

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands - unaudited)
December 31, December 31,
2018 2017
ASSETS
Cash and cash equivalents $ 68,066 $ 96,313
Accounts receivable, net of allowance of $823 and $556 113,128 123,958
Inventories 69,434 57,495
Assets held for sale 431,613 517,783
Prepaid tooling, notes receivable, and other 27,552 43,986
Total current assets 709,793 839,535
Property, plant, and equipment, net 347,803 323,199
Goodwill 7,453 7,424
Deferred tax asset 82,832 82,077
Other assets, net 22,511 8,638
Total assets $ 1,170,392 $ 1,260,873
LIABILITIES AND EQUITY
Short-term debt $ 4,148 $ 4,744
Accounts payable 188,760 213,333
Accrued liabilities 84,306 74,040
Liabilities held for sale 167,882 210,905
Total current liabilities 445,096 503,022
Long-term debt, net of current maturities 294,457 346,011
Pension liability 45,762 47,813
Other non-current liabilities 84,163 94,155
Total non-current liabilities 424,382 487,979
Total liabilities 869,478 991,001
Stockholders' equity:
Common stock 224 223
Additional paid in capital 347,816 344,153
Treasury stock (36,882) (36,408)
Retained earnings 64,676 29,712
Accumulated other comprehensive loss (74,920) (67,808)
Total stockholders' equity 300,914 269,872
Total liabilities and stockholders' equity $ 1,170,392 $ 1,260,873

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands - unaudited)
Year Ended December 31,
2018 2017
OPERATING ACTIVITIES:
Net income $ 48,900 $ 47,735
Less: Income / (loss) from discontinued operations, net of tax (28,219) 8,032
Income from continuing operations 77,119 39,703
Adjustments required to reconcile income from continuing operations to net cash provided by continuing operating activities:
Deferred income tax provision / (benefit) (3,334) 41,702
Depreciation and amortization 54,815 50,471
Non-cash share-based compensation 3,413 2,219
Pension income, net of contributions (4,270) (11,512)
Change in working capital and other operating items (29,496) 4,408
Net cash provided by continuing operating activities $ 98,247 $ 126,991
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant, and equipment, net $ (83,141) $ (67,240)
Proceeds from disposition of joint ventures, net 4,314 15,944
Net proceeds from sale of property, plant, and equipment 14,883 -
Net cash used in continuing investing activities $ (63,944) $ (51,296)
FINANCING ACTIVITIES:
Proceeds from borrowings $ 104,303 $ 485,368
Repayments of borrowings (104,508) (498,553)
Voluntary repayments on Term Loan Credit Facility (50,000) -
Debt financing costs - (4,747)
Original issuance discount - (1,808)
Dividend payment to Tower shareholders (10,088) (9,221)
Proceeds from stock options exercised 251 1,313
Purchase of treasury stock (474) (763)
Net cash used in continuing financing activities $ (60,516) $ (28,411)
Discontinued operations:
Net cash from discontinued operating activities $ 74,455 $ 26,645
Net cash used in discontinued investing activities (47,587) (39,504)
Net cash from / (used in) discontinued financing activities (26,456) 8,649
Net cash from / (used in) discontinued operations $ 412 $ (4,210)
Effect of exchange rate changes on continuing cash and cash equivalents $ (2,446) $ 4,256
NET CHANGE IN CASH AND CASH EQUIVALENTS $ (28,247) $ 47,330
CASH AND CASH EQUIVALENTS:
Beginning of period $ 96,313 $ 48,983
End of period $ 68,066 $ 96,313

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(Amounts in thousands - unaudited)
Adjusted EBITDA Reconciliation Three Months Ended December 31, Year Ended December 31,
2018 2017 2018 2017
Net income / (loss) attributable to Tower International, Inc. $ (13,356) $ (3,867) $ 48,900 $ 47,625
Restructuring and asset impairment charges, net 2,213 1,540 3,380 9,098
Depreciation and amortization 12,941 14,872 54,815 50,471
Acquisition costs and other (36) 90 182 232
Long-term compensation expense 2,000 1,378 7,695 5,601
Lease expense 3,758 - 11,090 -
Interest expense, net 4,142 4,963 18,798 9,744
Other expense - - 977 575
Net periodic benefit expense / (income) 4,078 (574) 2,403 (2,245)
Provision / (benefit) for income taxes (10,068) 30,728 1,259 44,089
(Income) / loss from discontinued operations, net of tax 34,752 (4,275) 28,219 (8,032)
Net income attributable to noncontrolling interests - - - 110
Adjusted EBITDA $ 40,424 $ 44,855 $ 177,718 $ 157,268
Free Cash Flow Reconciliation Year Ended December 31,
2018 2017
Net cash from continuing operating activities $ 98,247 $ 126,991
Cash disbursed for purchases of PP&E (83,141) (67,240)
Free cash flow $ 15,106 $ 59,751
Net Debt Reconciliation December 31, December 31,
2018 2017
Short-term debt $ 4,148 $ 4,744
Long-term debt, net of current maturities 300,417 354,102
Debt issue costs (5,960) (8,091)
Total debt 298,605 350,755
Less: Cash and cash equivalents (68,066) (96,313)
Net debt $ 230,539 $ 254,442

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
December 31, December 31,
2018 2017 2018 2017
Income / (expense) items included in net income, net of tax:
Restructuring and asset impairment charges, net
One-time restructuring actions $ (1,516) $ (587) $ (1,995) $ (841)
Interest expense
Mark-to-market loss on derivative financial instruments - (393) - (634)
Net periodic benefit income / (expense)
Pension actuarial loss (3,978) - (5,234) -
Provision for income taxes
Reversal of valuation allowance in Brazil 14,417 - 14,417 -
Reversal of U.S. tax credits (3,029) - (3,029) -
U.S. tax reform - (27,163) - (27,163)
Discontinued operations
Income from discontinued operations 9,248 4,275 9,248 4,275
Europe fair value adjustment (44,000) - (44,000) -
Total items included in net income, net of tax $ (28,858) $ (23,868)
Net loss attributable to Tower International, Inc. $ (13,356) $ (3,867)
Memo: Average shares outstanding (in thousands)
Basic 20,607 20,537
Diluted 20,607 20,537
Loss per common share (GAAP)
Basic $ (0.65) $ (0.19)
Diluted (0.65) (0.19)
Diluted adjusted earnings per share (non-GAAP)* $ 0.74 $ 0.96
* For the three months ended December 31, 2018 and 2017 diluted share counts of 21 million and 20.9 million, respectively, were used to calculate diluted adjusted earnings per share.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CERTAIN ITEMS INCLUDED IN NET INCOME
(Amounts in thousands, except per share amounts - unaudited)
After tax Before tax
Year Ended Year Ended
December 31, December 31,
2018 2017 2018 2017
Income / (expense) items included in net income, net of tax:
Restructuring and asset impairment charges, net
One-time restructuring actions $ (2,244) $ (4,721) $ (2,894) $ (7,433)
Interest expense
Acceleration of the amortization of debt issue costs and OID (735) - (967) -
Mark-to-market gain on derivative financial instruments - 3,278 - 5,287
Net periodic benefit income / (expense)
Pension actuarial loss (3,978) - (5,234) -
Other expense
Premium and other fees for re-pricing of Term Loan (743) - (977) -
Debt refinancing costs - (357) - (575)
Provision for income taxes
Reversal of valuation allowance in Brazil 14,417 - 14,417 -
Reversal of U.S. tax credits (3,029) - (3,029) -
U.S. tax reform - (27,163) - (27,163)
Discontinued operations
Income from discontinued operations 15,781 10,628 15,781 10,628
Europe fair value adjustment (44,000) - (44,000) -
Loss on 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 $ (24,531) $ (21,041)
Net income attributable to Tower International, Inc. $ 48,900 $ 47,625
Memo: Average shares outstanding (in thousands)
Basic 20,592 20,499
Diluted 20,996 20,829
Income per common share (GAAP)
Basic $ 2.37 $ 2.32
Diluted 2.33 2.29
Diluted adjusted earnings per share (non-GAAP) $ 3.50 $ 3.30
* Amounts attributable to noncontrolling interests of discontinued operations

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SOURCE Tower International, Inc.

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