Exhibit 99.1

 

 

 

 

FOR IMMEDIATE RELEASE

 

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

 

LIVONIA, Mich., February 12, 2019 – 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:
oRevenue of $1.65 billion, reflecting primarily net new business of $175 million, offset partially by adverse program mix of $90 million;
oAdjusted EBITDA of $175 million;
oDiluted Adjusted EPS of $2.50 per share which is adversely impacted by the adoption of ASC 842 and a higher tax rate; and
oFree 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:
oRevenue of $1.69 to $1.74 billion;
oAdjusted EBITDA of $200 to $210 million;
oAdjusted EBITDA Margin of approximately 12 percent; and
oFree 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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