Tower International, Inc. (NYSE: TOWR), a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced third quarter 2016 results, updated its business outlook for the fourth quarter and full year 2016, and discussed other business developments. (Unless otherwise noted, all information refers to Tower’s continuing operations in North America and Europe.)
- Revenue for the third quarter was $457 million, up 3% from $442 million in the third quarter of 2015, reflecting organic new-business growth in North America.
- Net income from continuing and discontinued operations was a record for the third quarter, at $18.2 million or 86 cents per diluted share, compared with net income of $16.3 million or 76 cents per share in the third quarter last year. As detailed below, this year’s third quarter included certain items that adversely impacted results by $0.9 million. Excluding these items and comparable items in the third quarter of 2015, diluted adjusted earnings were 90 cents per share, 20% better than a year ago.
- Adjusted EBITDA for the quarter was $50.1 million, up 14% from $43.8 million a year ago. Adjusted EBITDA margin was an all-time best for a third quarter, at 11%, up 1.1 percentage points. These significant improvements reflected the combined positive effects of our organic revenue growth, higher-margin new business, and favorable year-over-year net cost performance at this stage of our new-business phase-in.
- The same basic factors that provided the strong earnings comparisons in the third quarter are also presently projected to drive strong fourth quarter comparisons, including year-over-year improvements of about 20% in adjusted EBITDA and about 25% in diluted adjusted earnings per share. Adjusted EBITDA margin in the fourth quarter is projected to increase to about 12%, which would be an all-time record for any quarter, and free cash flow is projected to be about $60 million, which would meaningfully improve Tower’s balance-sheet leverage. (Fourth quarter 2016 GAAP net income and EPS, while positive, will be lower than fourth quarter 2015, which benefited from the reversal of approximately $130 million of tax valuation allowances.)
- The strong financial results achieved in the third quarter and presently projected for the fourth quarter take into account the downward production adjustments recently taken and presently planned by our OEM customers. Based on the latest production schedules, full year results are now projected at revenue of $1.915 billion, adjusted EBITDA of $200-$202 million, and adjusted EPS of $3.30.
- Tower also reported the following other business developments:
– Agreements have been reached to sell the Company’s remaining businesses in China. Cash proceeds after taxes are expected to be about $25 million.
– The outlook for adjusted EPS is improved by about 10-15 cents per year for the next few years because of expected R&D tax credits.
– The latest projection is that Tower will not become a U.S. cash taxpayer until 2020, or one year later than the prior estimate.
– Consistent with the Company’s positive business and cash-flow outlook, the dividend was increased by 10% and about 4% of outstanding shares have been repurchased through September 30.
“It was a strong quarter for Tower, in some ways our best ever,” said CEO Mark Malcolm. “We presently believe that industry volume in 2017 will be roughly the same as 2016. Tower is, however, relatively well-positioned regardless of your volume outlook. This reflects the underlying strength and tailwinds at Tower from the higher-margin new business coming on board over the next few years that, absent lower industry volume, is expected to drive further increases in overall margin and best-ever free cash flow.”
Tower to Host Conference Call Today at 11 a.m. EDT
Tower will discuss its third quarter 2016 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. #4577487. A webcast replay will also be available and may be accessed via Tower’s website.
