Tower International Reports Third Quarter Results and Affirms Earnings and Free Cash Flow Outlook for 2018
LIVONIA, Mich., Oct. 29, 2018 /PRNewswire/ -- Tower International, Inc. (NYSE: TOWR), a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced third quarter 2018 results and affirmed its earnings and free cash flow outlook for 2018.
-- Revenue for the third quarter was $525 million compared with $462
million in the third quarter of 2017 representing a 14 percent increase.
-- Net income was $22.6 million or $1.07 per share increasing from $14.9
million or $0.72 per share in the third quarter last year. As detailed
below, this year's third quarter included certain items that, in
aggregate, decreased results by $117 thousand. Excluding these items and
comparable items in the third quarter of 2017, adjusted earnings per
share amounted to $1.08, an increase of 27 percent from the $0.85
reported a year ago.
-- Adjusted EBITDA for the quarter was $57.1 million in-line with the
Company's outlook and up 18 percent from $48.5 million a year ago.
-- For the quarter, net cash provided by continuing operating activities
was $43 million. Cash disbursed for purchases of equipment totaled $25
million resulting in Free Cash Flow of $18 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 is increased by 10 cents to $4.20 per share;
and
-- Free Cash Flow is maintained at $50 million.
-- The Company's outlook for fourth quarter 2018 includes revenue of $526
million, Adjusted EBITDA of $61.6 million and Diluted Adjusted Earnings
Per Share of $1.20.
"We remain balanced in our approach to capital allocation, remaining focused on growing profitably, reducing leverage - as evidenced by our $50 million pay-down of Term Loan debt, and returning capital to shareholders - as evidenced by our recent increase of our quarterly dividend," said CEO Jim Gouin. "Tower delivered solid financial results in the third quarter, growing revenue organically well in excess of the overall auto market and expanding Adjusted EBITDA margins. Revenue for the quarter increased 14 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 20 percent from a year ago."
Tower to Host Conference Call Today at 11 a.m. EDT
Tower will discuss its third 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. #4576237. 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 excludes 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 fourth quarter earnings and revenues, full year earnings, free cash flow and revenues, business growth and adjusted EBITDA.. 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts - unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Revenues $524,566 $462,372 $1,644,079 $1,449,887
Cost of sales 462,941 404,332 1,458,549 1,274,429
Gross profit 61,625 58,040 185,530 175,458
Selling, general, and administrative expenses 29,954 29,667 93,057 87,899
Amortization expense 110 117 330 333
Restructuring and asset impairment charges, net 491 1,131 2,308 8,379
Operating income 31,070 27,125 89,835 78,847
Interest expense 6,048 5,673 16,465 7,933
Interest income 93 64 362 197
Net periodic benefit income 558 713 1,675 1,671
Other expense 977 575
Income before provision for income taxes and income from discontinued 25,673 22,229 74,430 72,207
operations
Provision for income taxes 3,996 8,002 14,602 22,170
Income from continuing operations 21,677 14,227 59,828 50,037
Income from discontinued operations, net of tax 903 704 2,428 1,565
Net income 22,580 14,931 62,256 51,602
Less: Net income attributable to the noncontrolling interests 110
Net income attributable to Tower International, Inc. $22,580 $14,931 $62,256 $51,492
Weighted average basic shares outstanding 20,605,168 20,522,001 20,586,599 20,485,722
Weighted average diluted shares outstanding 21,035,802 20,787,405 20,991,606 20,804,441
Basic income per share attributable to Tower International, Inc.:
Income per share from continuing operations $1.05 $0.69 $2.91 $2.44
Income per share from discontinued operations 0.04 0.03 0.12 0.08
Income per share 1.10 0.73 3.02 2.51
Diluted income per share attributable to Tower International, Inc.:
Income per share from continuing operations $1.03 $0.68 $2.85 $2.40
Income per share from discontinued operations 0.04 0.03 0.12 0.08
Income per share 1.07 0.72 2.97 2.48
Dividends declared per share $0.12 $0.11 $0.36 $0.33
TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands - unaudited)
September 30,
December 31,
2018 2017
ASSETS
Cash and cash equivalents $47,744 $123,688
Accounts receivable, net of allowance of $1,387 and $1,385 280,973 239,319
Inventories 93,655 78,745
Assets held for sale 28,686 44,250
Prepaid tooling, notes receivable, and other 48,212 78,481
Total current assets 499,270 564,483
Property, plant, and equipment, net 547,127 535,272
Goodwill 62,164 63,665
Deferred tax asset 74,410 83,035
Other assets, net 27,809 13,642
Total assets $1,210,780 $1,260,097
LIABILITIES AND EQUITY
Short-term debt and current maturities of capital lease obligations $23,136 $42,048
Accounts payable 303,016 323,271
Accrued liabilities 121,532 113,949
Liabilities held for sale 12,667 17,336
Total current liabilities 460,351 496,604
Long-term debt, net of current maturities 294,300 344,738
Deferred tax liability 4,629 4,807
Pension liability 39,749 47,813
Other non-current liabilities 93,843 96,263
Total non-current liabilities 432,521 493,621
Total liabilities 892,872 990,225
Stockholders' equity:
Common stock 224 223
Additional paid in capital 346,915 344,153
Treasury stock (36,882) (36,408)
Retained earnings 80,711 29,712
Accumulated other comprehensive loss (73,060) (67,808)
Total stockholders' equity 317,908 269,872
Total liabilities and stockholders' equity $1,210,780 $1,260,097
TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands - unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
OPERATING ACTIVITIES:
Net income $22,580 $14,931 $62,256 $51,602
Less: Income from discontinued operations, net of tax 903 704 2,428 1,565
Income from continuing operations 21,677 14,227 59,828 50,037
Adjustments required to reconcile income from continuing operations to net cash used in
continuing operating activities:
Deferred income tax provision $2,201 $5,402 $9,334 $15,367
Depreciation and amortization 20,334 18,321 62,485 54,853
Non-cash share-based compensation 903 559 2,512 1,657
Pension income, net of contributions (3,408) (5,055) (8,063) (9,906)
Change in working capital and other operating items 1,378 12,699 (50,484) (76,095)
Net cash provided by continuing operating activities $43,085 $46,153 $75,612 $35,913
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant, and equipment, net $(25,184) $(32,526) $(93,765) $(76,687)
Proceeds from disposition of joint venture, net 4,314 15,944
Net proceeds from sale of property, plant, and equipment 14,883 14,883
Net cash used in continuing investing activities $(10,301) $(32,526) $(74,568) $(60,743)
FINANCING ACTIVITIES:
Proceeds from borrowings $92,512 $162,073 $137,696 $535,926
Repayments of borrowings (97,150) (185,997) (156,423) (522,029)
Repayments on Term Loan Credit Facility (50,000) (50,000)
Debt financing costs (4,747)
Original issuance discount (1,808)
Dividend payment to Tower shareholders (2,472) (2,258) (7,409) (6,756)
Proceeds from stock options exercised 32 42 251 1,094
Purchase of treasury stock (1) (474) (763)
Net cash provided by / (used in) continuing financing activities $(57,078) $(26,141) $(76,359) $917
Discontinued operations:
Net cash from / (used in) discontinued operating activities $2,943 $(396) $7,327 $(322)
Net cash used in discontinued investing activities (770) (241) (2,771) (1,251)
Net cash from / (used in) discontinued financing activities (1,718) 217 (2,642) 1,137
Net cash used in discontinued operations $455 $(420) $1,914 $(436)
Effect of exchange rate changes on continuing cash and cash equivalents $(524) $1,737 $(2,543) $5,158
NET CHANGE IN CASH AND CASH EQUIVALENTS $(24,363) $(11,197) $(75,944) $(19,191)
CASH AND CASH EQUIVALENTS:
Beginning of period $72,107 $54,794 $123,688 $62,788
End of period $47,744 $43,597 $47,744 $43,597
TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(Amounts in thousands - unaudited)
Segment Data
Three Months Ended September 30,
2018 2017
Revenues
Adjusted
Revenues
Adjusted
EBITDA EBITDA
Europe $146,192 $7,583 $146,559 $8,219
North America 378,374 49,534 315,813 40,262
Consolidated $524,566 $57,117 $462,372 $48,481
Nine Months Ended September 30,
2018 2017
Revenues
Adjusted
Revenues
Adjusted
EBITDA EBITDA
Europe $491,655 $26,774 $466,956 $33,019
North America 1,152,424 141,671 982,931 113,952
Consolidated $1,644,079 $168,445 $1,449,887 $146,971
Adjusted EBITDA Reconciliation Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Net income attributable to Tower International, Inc. $22,580 $14,931 $62,256 $51,492
Restructuring and asset impairment charges, net 491 1,131 2,308 8,379
Depreciation and amortization 20,334 18,321 62,485 54,853
Acquisition costs and other 114 90 415 273
Long-term compensation expense 2,677 1,814 6,071 4,619
Lease expense 2,431 7,332
Interest expense, net 5,955 5,609 16,103 7,736
Other expense 977 575
Net periodic benefit income (558) (713) (1,675) (1,671)
Provision for income taxes 3,996 8,002 14,602 22,170
Income from discontinued operations, net of tax (903) (704) (2,428) (1,565)
Net income attributable to noncontrolling interests 110
Adjusted EBITDA $57,117 $48,481 $168,445 $146,971
Free Cash Flow Reconciliation Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Net cash used in continuing operating activities $43,085 $46,153 $75,612 $35,913
Cash disbursed for purchases of PP&E (25,184) (32,526) (93,765) (76,687)
Free cash flow $17,901 $13,627 $(18,153) $(40,774)
Net Debt Reconciliation
September 30,
December 31,
2018 2017
Short-term debt and current maturities of capital lease obligations $23,136 $42,048
Long-term debt, net of current maturities 300,731 352,886
Debt issue costs (6,431) (8,148)
Total debt 317,436 386,786
Less: Cash and cash equivalents (47,744) (123,688)
Net debt $269,692 $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
September 30, September 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 $(285) $(419) $(398) $(651)
Interest expense
Acceleration of the amortization of debt issue costs and OID (735) (967) -
Mark-to-market loss on derivative financial instruments (614) (991)
Provision for income taxes
Establishment of valuation allowance (2,448) (2,448)
Discontinued operations
Income from discontinued operations 903 704 903 704
Total items included in net income, net of tax $(117) $(2,777)
Net income attributable to Tower International, Inc. $22,580 $14,931
Memo: Average shares outstanding (in thousands)
Basic 20,605 20,522
Diluted 21,036 20,787
Income per common share (GAAP)
Basic $1.10 $0.73
Diluted 1.07 0.72
Diluted adjusted earnings per share (non-GAAP) $1.08 $0.85
TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CERTAIN ITEMS INCLUDED IN NET INCOME
(Amounts in thousands, except per share amounts - unaudited)
After tax Before tax
Nine Months Ended Nine Months Ended
September 30, September 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 $(1,676) $(4,580) $(2,055) $(7,284)
Interest expense
Acceleration of the amortization of debt issue costs and OID (735) (967) -
Mark-to-market loss on derivative financial instruments 3,672 5,921
Other expense
Premium and other fees for re-pricing of Term Loan (743) (977)
Debt refinancing costs (357) (575)
Provision for income taxes
Establishment of valuation allowance (2,448) (2,448)
Discontinued operations
Income from discontinued operations 2,428 4,161 2,428 4,161
Loss of 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 $(726) $(2,258)
Net income attributable to Tower International, Inc. $62,256 $51,492
Memo: Average shares outstanding (in thousands)
Basic 20,587 20,486
Diluted 20,992 20,804
Income per common share (GAAP)
Basic $3.02 $2.51
Diluted 2.97 2.48
Diluted adjusted earnings per share (non-GAAP) $3.00 $2.58
* Amounts attributable to noncontrolling interests of discontinued operations
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SOURCE Tower International, Inc.
