UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported): July 31, 2014

 

TOWER INTERNATIONAL, INC.

 

(Exact Name of Registrant as Specified in its Charter)

 

Delaware 001-34903 27-3679414
(State or Other (Commission (IRS Employer
Jurisdiction of Incorporation) File Number) Identification No.)
     
17672 Laurel Park Drive North, Suite 400E, Livonia, Michigan  48152
(Address of principal executive offices)  (Zip Code)

 

Registrant's telephone number, including area code: (248) 675-6000

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

  o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 
 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On July 31, 2014, Tower International, Inc. issued a press release announcing its results for the second quarter ended June 30, 2014. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

 

The information in this report, including Exhibit 99.1 hereto, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing.

  

Item 7.01. Regulation FD Disclosure.

 

See Item 2.02, “Results of Operations and Financial Condition” above.

 

Item 9.01. Financial Statements and Exhibits.

 

  (d) Exhibits

 

  99.1 Tower International, Inc. Press Release dated July 31, 2014.

 

 
 

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

  TOWER INTERNATIONAL, INC.  
     
       
  By: /s/ Jeffrey Kersten  
  Name: Jeffrey Kersten  
  Title: Senior Vice President and Corporate Controller  

 

Dated: July 31, 2014

 

 
 

  

EXHIBIT INDEX

 

  99.1 Tower International, Inc. Press Release dated July 31, 2014.

 

 

 

 

Exhibit 99.1

 

 

  

FOR IMMEDIATE RELEASE

 

Tower International Reports Solid Second Quarter Results, Raises Full Year Outlook, and

Increases Free Cash Flow Target for 2016

  

LIVONIA, Mich., July 31, 2014 – Tower International, Inc. [NYSE: TOWR], a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced second quarter 2014 results, updated its outlook for the full year, and provided a new business model target for free cash flow.

 

·Revenue for the second quarter was $577 million, up 4 percent from $556 million in the second quarter 2013. Sales were higher in all regions except Brazil.

 

·Adjusted EBITDA for the quarter was $59.1 million, compared with $62.2 million a year ago. Favorable volume and currency translation were offset by anticipated unfavorable net cost performance, reflecting a different quarterly cadence this year versus last year in commercial arrangements, manufacturing productivity, and launch costs. This quarter’s adjusted EBITDA margin was 10.2%.

 

·Net income of $16.1 million in the second quarter 2014 compared with a net loss of $45.1 million a year ago. Last year’s loss reflected charges related to redeeming high-cost debt. As detailed below, this year’s second quarter included certain items that adversely impacted results by $3.9 million. Excluding these items and comparable items in the second quarter of 2013, diluted adjusted earnings were 93 cents per share, compared with $1.03 a year ago.

 

·For full year 2014, Tower is increasing its outlook for revenue by $25-$50 million, to $2.20-$2.225 billion. The company now expects adjusted EBITDA of $217-$220 million, up $2-$5 million from prior guidance, and adjusted earnings per share of $2.95-$3.05, an increase of 5-15 cents.

 

·Tower’s business model is revised to increase the target for adjusted free cash flow to 4% of revenue in 2016, up from the prior target of 3% of revenue by 2015, reflecting anticipated further improvement in adjusted EBITDA less capital expenditures and a further decrease in interest expense.

 

“Focusing on free cash flow keeps the Tower team aligned and disciplined,” said President and CEO Mark Malcolm. “Free cash flow is also the ultimate generator of capital, which we can deploy to strengthen the business and benefit customers, shareholders, suppliers, and colleagues. That’s what makes this anticipated step-function improvement a meaningful milestone.”

 

 
 

 

Tower to Host Conference Call Today at 1 p.m. EDT

 

Tower will discuss its second quarter 2014 results and other related matters in a conference call at 1 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. #78689181. 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 (EPS)”, “free cash flow”, “adjusted free cash flow” and “net debt.” 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 presentation. 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 presentation. Free cash flow is defined as cash provided by operating activities less cash disbursed for purchases of property, plant and equipment. Adjusted free cash flow is free cash flow excluding cash received or disbursed for customer tooling. Net debt represents total debt less cash and cash equivalents. We use adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share, free cash flow, adjusted free cash flow and net debt 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. 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 special items and other expense 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. 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 revenue, adjusted EBITDA and diluted adjusted earnings per share and statements regarding net reductions in ongoing annual interest expense, new sources of profitable growth, future financial results and the Company’s future business outlook. 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;  
  · 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, 
   2014   2013   2014   2013 
                 
Revenues  $576,566   $555,878   $1,124,941   $1,090,018 
Cost of sales   512,149    486,411    998,754    962,491 
Gross profit   64,417    69,467    126,187    127,527 
Selling, general, and administrative expenses   31,828    33,575    66,158    66,945 
Amortization expense   667    656    1,324    1,488 
Restructuring and asset impairment charges, net   4,716    14,651    6,105    17,331 
Operating income   27,206    20,585    52,600    41,763 
Interest expense   7,397    21,537    14,592    34,965 
Interest income   385    341    590    615 
Other expense   -    40,928    87    40,928 
Income / (loss) before provision for income taxes and equity in loss of joint venture   20,194    (41,539)   38,511    (33,515)
Provision for income taxes   3,022    3,644    5,902    7,134 
Equity in loss of joint venture, net of tax   (222)   (165)   (381)   (165)
Net income / (loss)   16,950    (45,348)   32,228    (40,814)
Less: Net income / (loss) attributable to the noncontrolling interests   854    (237)   1,277    1,749 
Net income / (loss) attributable to Tower International, Inc.  $16,096   $(45,111)  $30,951   $(42,563)
                     
Weighted average common shares outstanding                    
Basic   20,651,097    20,362,672    20,582,140    20,312,245 
Diluted   21,373,867    20,362,672    21,318,515    20,312,245 
                     
Net income / (loss) per share attributable to Tower International, Inc.:                    
Basic  $0.78   $(2.22)  $1.50   $(2.10)
Diluted   0.75    (2.22)   1.45    (2.10)

 

 
 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data - unaudited)

 

   June 30, 2014   December 31, 2013 
         
ASSETS          
Cash and cash equivalents  $169,219   $134,880 
Accounts receivable, net of allowance of $1,967 and $2,071   332,337    255,674 
Inventories   92,174    81,278 
Deferred tax asset - current   8,590    8,649 
Prepaid tooling, notes receivable, and other   53,679    44,896 
Total current assets   655,999    525,377 
           
Property, plant, and equipment, net   559,246    549,605 
Goodwill   66,907    66,976 
Investment in joint venture   8,027    8,624 
Deferred tax asset - non-current   3,494    3,732 
Other assets, net   26,525    28,679 
Total assets  $1,320,198   $1,182,993 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Short-term debt and current maturities of capital lease obligations  $62,303   $39,704 
Accounts payable   334,974    262,425 
Accrued liabilities   134,417    129,167 
Total current liabilities   531,694    431,296 
           
Long-term debt, net of current maturities   470,299    454,073 
Obligations under capital leases, net of current maturities   9,368    10,013 
Deferred tax liability - non-current   14,187    14,381 
Pension liability   46,854    54,915 
Other non-current liabilities   80,412    81,446 
Total non-current liabilities   621,120    614,828 
Total liabilities   1,152,814    1,046,124 
Commitments and contingencies          
           
Stockholders' Equity:          
Tower International, Inc.'s stockholders' equity          
Preferred stock, $0.01 par value, 50,000,000 authorized and 0 issued and outstanding at June 30, 2014 and December 31, 2013   -    - 
Common stock, $0.01 par value, 350,000,000 authorized, 21,359,889 issued and 20,718,883 outstanding at June 30, 2014 and 21,079,027 issued and 20,472,637 outstanding at December 31, 2013   213    211 
Additional paid in capital   332,580    327,998 
Treasury stock, at cost, 641,006 shares at June 30, 2014 and 606,390 shares at December 31, 2013   (9,504)   (8,594)
Accumulated deficit   (226,536)   (257,487)
Accumulated other comprehensive income   10,816    12,247 
Total Tower International, Inc.'s stockholders' equity   107,569    74,375 
Noncontrolling interests in subsidiaries   59,815    62,494 
Total stockholders' equity   167,384    136,869 
           
Total liabilities and stockholders' equity  $1,320,198   $1,182,993 

 

 
 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands - unaudited)

 

   Six Months Ended June 30, 
   2014   2013 
         
OPERATING ACTIVITIES:          
Net income / (loss)  $32,228   $(40,814)
           
Adjustments required to reconcile net income / (loss) to net cash provided by continuing operating activities:          
Asset impairment charges   -    11,006 
Term Loan re-pricing fees   87    - 
Premium on notes redemption and other fees   -    40,928 
Deferred income tax provision   872    103 
Depreciation and amortization   49,533    48,637 
Non-cash share-based compensation   2,409    2,413 
Pension income, net of contributions   (8,061)   (7,438)
Change in working capital and other operating items   (54,315)   (43,033)
Net cash provided by continuing operating activities  $22,753   $11,802 
           
INVESTING ACTIVITIES:          
Cash disbursed for purchases of property, plant, and equipment  $(34,262)  $(30,192)
Deposit received for the sale of property, plant, and equipment   13,817    - 
Investment in joint venture   (760)   (6,293)
Net proceeds from sale of property, plant, and equipment   -    9,100 
Net cash used in continuing investing activities  $(21,205)  $(27,385)
           
FINANCING ACTIVITIES:          
Proceeds from borrowings  $73,790   $329,013 
Repayments of  borrowings   (71,124)   (325,748)
Proceeds from borrowings on Additional Term Loans   33,145    - 
Proceeds from borrowings on Term Loan Credit Facility   -    417,900 
Partial redemption of notes   -    (318,992)
Debt financing costs   (917)   (8,437)
Purchase of treasury stock   (910)   (290)
Secondary stock offering transaction costs   (75)   - 
Premium paid on partial redemption of notes and other fees   -    (40,928)
Cash restricted for notes redemption   -    (45,150)
Proceeds from stock options exercised   2,173    1,506 
Noncontrolling interest dividends   (2,529)   (4,477)
Net cash provided by continuing financing activities  $33,553   $4,397 
           
Discontinued operations:          
Net cash from discontinued investing activities  $-   $15,694 
Net cash from discontinued operations  $-   $15,694 
           
Effect of exchange rate changes on continuing cash and cash equivalents  $(762)  $(269)
           
NET CHANGE IN CASH AND CASH EQUIVALENTS  $34,339   $4,239 
           
CASH AND CASH EQUIVALENTS:          
Beginning of period  $134,880   $113,943 
           
End of period  $169,219   $118,182 

 

 
 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA AND NON-GAAP FINANCIAL MEASURE RECONCILIATIONS

(Amounts in thousands - unaudited)

 

Segment Data  Three Months Ended June 30, 
   2014   2013 
   Revenues   Adjusted EBITDA   Revenues   Adjusted EBITDA 
International  $256,915   $21,646   $242,584   $21,965 
Americas   319,651    37,450    313,294    40,250 
Consolidated  $576,566   $59,096   $555,878   $62,215 

 

   Six Months Ended June 30, 
   2014   2013 
   Revenues   Adjusted EBITDA   Revenues   Adjusted EBITDA 
International  $506,778   $42,112   $487,353   $43,996 
Americas   618,163    71,198    602,665    70,285 
Consolidated  $1,124,941   $113,310   $1,090,018   $114,281 

 

Adjusted EBITDA Reconciliation  Three Months Ended June 30,   Six Months Ended June 30, 
   2014   2013   2014   2013 
Adjusted EBITDA  $59,096   $62,215   $113,310   $114,281 
Restructuring and asset impairment charges, net   (4,716)   (14,651)   (6,105)   (17,331)
Depreciation and amortization   (24,845)   (23,465)   (49,533)   (48,637)
Acquisition costs and other   (103)   (495)   (209)   (569)
Long-term compensation expense   (2,226)   (1,784)   (4,863)   (3,146)
Interest expense, net   (7,012)   (21,196)   (14,002)   (34,350)
Closure of Tower Defense & Aerospace   -    (1,235)   -    (2,835)
Other expense   -    (40,928)   (87)   (40,928)
Provision for income taxes   (3,022)   (3,644)   (5,902)   (7,134)
Equity in loss of joint venture, net of tax   (222)   (165)   (381)   (165)
Net income / (loss) attributable to noncontrolling interests   (854)   237    (1,277)   (1,749)
Net income / (loss) attributable to Tower International, Inc.  $16,096   $(45,111)  $30,951   $(42,563)

 

Adjusted Free Cash Flow Reconciliation  Three Months Ended June 30,   Six Months Ended June 30, 
   2014   2013   2014   2013 
Net cash provided by continuing operating activities  $6,703   $10,508   $22,753   $11,802 
Cash disbursed for purchases of PP&E   (20,359)   (15,605)   (34,262)   (30,192)
Deposit received for sale of PP&E   -    -    13,817    - 
Free cash flow   (13,656)   (5,097)   2,308    (18,390)
Less:  Cash disbursed for customer-owned tooling   (8,277)   (4,066)   (16,204)   (8,350)
Adjusted free cash flow  $(5,379)  $(1,031)  $18,512   $(10,040)

 

Net Debt Reconciliation  June 30,   December 31, 
   2014   2013 
Short-term debt and current maturities of capital lease obligations  $62,303   $39,704 
Long-term debt, net of current maturities   470,299    454,073 
Obligations under capital leases, net of current maturities   9,368    10,013 
Total debt   541,970    503,790 
Less: Cash and cash equivalents   169,219    134,880 
Net debt  $372,751   $368,910 

 

 
 

 

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CERTAIN ITEMS INCLUDED IN NET INCOME

(Amounts in thousands, except per share amounts - unaudited)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2014   2013   2014   2013 
         
Expense items included in net income, net of tax:                    
Cost of sales                    
Closure of Tower Defense & Aerospace  $-   $(1,784)  $-   $(4,414)
Selling, general, and administrative expenses                    
Acquisition costs and other   -    (327)   -    (327)
Restructuring and asset impairment charges, net                    
One-time restructuring actions   (373)   (270)   (613)   (600)
Severance costs in Europe *   (67)   -    (193)   - 
Lease buyout of previously closed facility   (3,448)   -    (3,448)   - 
Asset impairment charges   -    (9,750)   -    (10,705)
Facility closure   -    (3,348)   -    (3,575)
Interest expense                    
Acceleration of the amortization of debt issue costs and OID   -    (10,147)   -    (10,147)
Other expense                    
Term Loan re-pricing fees   -    -    (87)   - 
Partial redemption of senior secured notes   -    (40,320)   -    (40,320)
Breakage of Letter of Credit Facility   -    (608)   -    (608)
Total items included in net income / (loss)  $(3,888)  $(66,553)  $(4,341)  $(70,695)
                     
Net income / (loss) attributable to Tower International, Inc.  $16,096   $(45,111)  $30,951   $(42,563)
                     
Memo:  Average shares outstanding (in thousands)                    
Basic   20,651    20,363    20,582    20,312 
Diluted   21,374    20,363    21,319    20,312 
                     
Income / (loss) per common share (GAAP)                    
Basic  $0.78   $(2.22)  $1.50   $(2.10)
Diluted   0.75    (2.22)   1.45    (2.10)
                     
Diluted adjusted earnings per share (non-GAAP) **   0.93    1.03    1.66    1.36 

 

* Amount is net of tax of $29k and $86K, respectively 
** Excludes the certain items shown above.  For the three and six months ended June 30, 2013, diluted share counts of 20.9 million and 20.8 million, respectively, were used to calculated diluted adjusted earnings per share.