Tower Automotive Reports Second Quarter 2004 Results
NOVI, Mich.--July 27, 2004--Tower Automotive, Inc. today announced financial results for the second quarter ended June 30, 2004, and updated earnings guidance.Second-Quarter Highlights:
-- Met guidance, excluding charges
-- New business launches remain on track
-- Completed refinancing
-- Earnings still bear costs of launching new business backlog
-- Revenues of $783 million up 5 percent from prior year
Tower Automotive's second quarter revenues totaled $783 million compared to $743 million in the 2003 second quarter. The company reported a net loss of $2.7 million, or $0.05 per diluted share, versus net income of $2.6 million, or $0.05 per diluted share, for the year-ago period.
"Importantly, our new business launches remain on track," stated Kathleen Ligocki, president and chief executive officer of Tower Automotive. "Although the launch costs are challenging, we are meeting our timing and quality commitments. Our second-quarter achievements also include completing the company's refinancing, which improves our liquidity and enables us to focus on continuing to drive operational excellence across the enterprise."
Earnings in the 2004 second quarter were reduced approximately $4.6 million, or $0.08 per diluted share, by certain items net of tax, including: the write-off of debt issuance fees of $2.3 million; a call premium related to the company's convertible subordinated notes of $0.9 million; mark-to-market expense on the company's new senior convertible debentures of $1.2 million; and restructuring expense of $0.2 million. Earnings in the 2003 second quarter were reduced by approximately $11.9 million, or $0.20 per diluted share, by certain items, net of tax, including restructuring and asset impairment charges of $10.1 million, and other items aggregating $1.8 million.
For the six months, revenues totaled $1.6 billion compared to $1.5 billion in the prior-year period. Net income was $9.4 million, or $0.16 per diluted share, versus $14.2 million, or $0.25 per diluted share, in the first half of last year.
Tower Automotive generated Adjusted EBITDA (a non-GAAP financial measure the company defines as earnings before interest, taxes, depreciation and amortization, non-cash restructuring and asset impairment charges/income and certain other non-recurring, non-cash charges) of approximately $72.9 million in the 2004 second quarter. (A reconciliation of Adjusted EBITDA to net income computed in accordance with GAAP is attached in Table C.) The company incurred net capital expenditures of $77.8 million in the quarter, and had cash on hand of $192.9 million at June 30, 2004.
During the 2004 second quarter, Tower Automotive completed a refinancing plan that included $580 million in new senior secured credit facilities and an additional $125 million of convertible debentures. Proceeds of the refinancing were used to repay existing senior credit facilities and convertible notes, as well as for general corporate purposes.
Updated Third-Quarter and Full-Year 2004 Outlook
The company anticipates 2004 third-quarter revenues to be between $725 million and $735 million, with a loss ranging from $0.18 to $0.22 per diluted share. Adjusted EBITDA of approximately $45 million to $55 million is expected in the third quarter.
Full-year 2004 revenues are estimated to be approximately $3.15 billion, up from $2.8 billion in 2003, but down by $50 million from the company's previous guidance of $3.2 billion, due to lower production volumes than previously forecast. Excluding restructuring charges, divestiture gains and certain non-recurring, non-cash charges, earnings per share are estimated in the range of $0.00 to $0.08 for the full year 2004. The change in earnings outlook is due to lower production volumes, increased financing costs and higher launch costs. The company anticipates full-year Adjusted EBITDA of between $265 million and $280 million.
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts - unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- -----------------------
2004 2003 (a) 2004 2003 (a)
---------- ---------- ----------- -----------
Revenues $783,213 $743,179 $1,564,449 $1,475,757
Cost of sales 714,499 664,731 1,435,090 1,322,785
---------- ---------- ----------- -----------
Gross profit 68,714 78,448 129,359 152,972
Selling, general and
administrative expenses 35,141 39,135 69,295 73,811
Restructuring and asset
impairment charge 304 15,378 (5,303) 15,378
---------- ---------- ----------- -----------
Operating income 33,269 23,935 65,367 63,783
Interest expense, net 37,878 18,083 69,348 34,852
Unrealized loss on
derivative 1,850 -- 1,850 --
---------- ---------- ----------- -----------
Income (loss) before
provision for
income taxes (6,459) 5,852 (5,831) 28,931
Provision (benefit) for
income taxes (2,196) 1,994 (1,718) 9,841
---------- ---------- ----------- -----------
Income (loss) before
equity in earnings of
joint ventures and
minority interest (4,263) 3,858 (4,113) 19,090
Equity in earnings of
joint ventures, net 3,522 3,144 6,969 3,788
Minority interest, net (1,916) (4,356) (3,227) (8,660)
Gain on sale of joint
venture -- -- 9,732 --
========== ========== =========== ===========
Net income (loss) $(2,657) $2,646 $9,361 $14,218
========== ========== =========== ===========
Basic earnings (loss) per
common share: $(0.05) $0.05 $0.16 $0.25
========== ========== =========== ===========
Weighted average basic
shares outstanding 58,067 56,556 57,705 56,375
========== ========== =========== ===========
Diluted earnings (loss)
per common share: $(0.05) $0.05 $0.16 $.25
========== ========== =========== ===========
Weighted average diluted
shares outstanding 58,067 57,054 58,500 56,632
========== ========== =========== ===========
(a) As previously disclosed in Tower Automotive's Annual Report on
Form 10-K for the year ended December 31, 2003, the 2003 amounts
have been restated to reverse the pension curtailment loss
initially recorded in the second quarter of 2003, which should
have been recorded in the 2003 third quarter. This restatement
increased reported results by $5.1 million, net of tax, or $0.09
per diluted share. (A reconciliation of previously reported
results to restated results for the 2003 second quarter is
included in Table B.)
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
June 30, Dec. 31,
Assets 2004 2003
---------------------------------------------- ----------- -----------
(unaudited)
Current assets:
Cash and cash equivalents $192,885 $160,899
Accounts receivable 373,393 325,599
Inventories 138,041 130,004
Deferred income taxes, net 14,973 20,116
Prepaid tooling and other 158,838 91,662
----------- -----------
Total current assets 878,130 728,280
----------- -----------
Property, plant and equipment, net 1,151,900 1,055,873
Investments in joint ventures 207,779 248,133
Deferred income taxes 149,672 146,944
Goodwill 493,495 498,663
Other assets, net 162,540 168,516
----------- -----------
$3,043,516 $2,846,409
=========== ===========
Liabilities and Stockholders' Investment
----------------------------------------------
Current liabilities:
Current maturities of long-term debt and
capital lease obligations $ 105,602 $ 99,597
Convertible senior debentures 35,745 --
Convertible subordinated notes, 5% due 2004 -- 199,984
Accounts payable 646,984 556,036
Accrued liabilities 267,953 249,984
----------- -----------
Total current liabilities 1,056,284 1,105,601
----------- -----------
Long-term debt, net of current maturities 1,233,018 1,060,859
Convertible senior debentures 76,802 --
Obligations under capital leases, net of
current maturities 36,924 42,798
Other noncurrent liabilities 220,910 223,641
----------- -----------
Total noncurrent liabilities 1,567,654 1,327,298
----------- -----------
Stockholders' investment:
Common stock 663 661
Additional paid-in capital 681,466 680,608
Retained deficit (172,488) (181,849)
Deferred compensation plans (8,488) (9,609)
Accumulated other comprehensive loss (32,251) (22,751)
Treasury stock (49,324) (53,550)
----------- -----------
Total stockholders' investment 419,578 413,510
----------- -----------
$3,043,516 $2,846,409
=========== ===========
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands - unaudited)
Six Months Ended
June 30,
-----------------------
2004 2003
----------- -----------
OPERATING ACTIVITIES:
Net income $9,361 $14,218
Adjustments required to reconcile net income
(loss) to net cash provided by operating
activities -
Restructuring and asset impairment charge (6,276) 15,368
Customer recovery related to program
cancellation 15,600
Depreciation 76,353 79,106
Deferred income tax benefit (9,652) 811
Deferred compensation plans 724 94
Gain on sale of JV investment (9,732) --
Equity in earnings of joint ventures, net (6,969) (3,788)
Change in working capital and other
operating items (23,360) (8,333)
----------- -----------
Net cash provided by operating activities 30,449 113,076
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures, net (131,027) (98,726)
Acquisitions, including joint venture
interests, earnout payments and dividends (21,299) 274
Divestiture of subsidiary 51,700 --
Other -- 3,232
----------- -----------
Net cash used in investing activities (100,626) (95,220)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from borrowings 576,491 1,487,428
Repayments of debt (474,393) (1,314,182)
Net proceeds from issuance of stock 65 482
----------- -----------
Net cash provided by financing activities 102,163 173,728
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 31,986 191,584
CASH AND CASH EQUIVALENTS:
Beginning of period 160,899 13,699
----------- -----------
End of period $192,885 $205,283
=========== ===========
SUPPLEMENTAL TABLES
TABLE A
----------------------------------------------------------------------
Items impacting the Second Quarter of 2004
----------------------------------------------------------------------
----------------------------------------------------------------------
($ in thousands, except per share amounts) Per share
---------
----------------------------------------------------------------------
Write off of debt issuance fees, net of tax $2,310 $0.04
----------------------------------------------------------------------
Call premium on convertible subordinated notes, net
of tax $942 $0.02
----------------------------------------------------------------------
Option mark-to-market, net of tax $1,221 $0.02
----------------------------------------------------------------------
Restructuring expense, net of tax $201 $0.00
----------------------------------------------------------------------
Per share impact $0.08
----------------------------------------------------------------------
----------------------------------------------------------------------
Items impacting the Second Quarter of 2003
----------------------------------------------------------------------
----------------------------------------------------------------------
($ in thousands, except per share amounts) Per share
---------
----------------------------------------------------------------------
Write off of debt issuance fees, net of tax $292 $0.01
----------------------------------------------------------------------
Production interruption costs, net of tax $769 $0.01
----------------------------------------------------------------------
Restructuring and asset impairment charge, net of
tax $10,149 $0.17
----------------------------------------------------------------------
Lawsuit settlement at joint venture, net of tax $660 $0.01
----------------------------------------------------------------------
Per share impact $0.20
----------------------------------------------------------------------
TABLE B
----------------------------------------------------------------------
Reconciliation of previously reported results to
restated results for the 2003 second quarter
----------------------------------------------------------------------
----------------------------------------------------------------------
($ in thousands, except per share amounts) Actual Per share
------ ---------
----------------------------------------------------------------------
Net loss, as previously reported $(2,423) $(0.04)
----------------------------------------------------------------------
Plus: reversal of pension curtailment loss, net of
tax $5,069 $0.09
----------------------------------------------------------------------
Net income, as restated $2,646 $0.05
----------------------------------------------------------------------
TABLE C
----------------------------------------------------------------------
Reconciliation of Adjusted EBITDA to Net Income
----------------------------------------------------------------------
Actual Actual
----------------------------------------------------------------------
($ in thousands) Q2 2004 Q2 2003
----------------------------------------------------------------------
----------------------------------------------------------------------
Adjusted EBITDA $72,871 $75,991
----------------------------------------------------------------------
Less: Interest expense 37,878 18,083
----------------------------------------------------------------------
Less: Provision for income taxes (2,196) 1,994
----------------------------------------------------------------------
Less: Depreciation expense 37,996 40,055
----------------------------------------------------------------------
Less: Option mark-to-market 1,850 -
----------------------------------------------------------------------
Less: Non-cash restructuring charge - 15,378
----------------------------------------------------------------------
Plus: Lawsuit settlement - 1,000
----------------------------------------------------------------------
Plus: Production interruption cost - 1,165
----------------------------------------------------------------------
Net income (loss) $(2,657) $2,646
----------------------------------------------------------------------
----------------------------------------------------------------------
Reconciliation of Adjusted EBITDA to Net Income
----------------------------------------------------------------------
Forecast Forecast
----------------------------------------------------------------------
($ in thousands) Q3 2004 2004
----------------------------------------------------------------------
----------------------------------------------------------------------
Adjusted EBITDA $54,500 $280,000
----------------------------------------------------------------------
Less: Interest expense 35,000 140,000
----------------------------------------------------------------------
Less: Provision for income taxes (8,000) (4,500)
----------------------------------------------------------------------
Less: Depreciation expense 38,000 147,000
----------------------------------------------------------------------
Plus: Non-cash restructuring charge reversal -- 6,000
----------------------------------------------------------------------
Plus: Divestiture gains -- 10,000
----------------------------------------------------------------------
Net income (loss) $(10,500) $13,500
----------------------------------------------------------------------