Tower International, Inc. (NYSE: TOWR), a leading integrated global manufacturer of engineered automotive structural metal components and assemblies, today announced fourth quarter 2014 results, provided a preliminary outlook for 2015, and discussed related business developments.
To facilitate comparisons with prior guidance, the following financial results for fourth quarter 2014 are presented on a non-GAAP basis to include two China joint ventures that were held for sale as of year-end 2014 and are being accounted for as discontinued operations; a reconciliation to results for continuing operations is provided in the attached financial tables.
- Revenue for the fourth quarter was $534 million, up 3 percent from $517 million in the fourth quarter 2013.
- Adjusted EBITDA for the quarter was $55.5 million, up 12 percent from $49.6 million a year ago. The improvement primarily reflected favorable net cost performance.
- Excluding certain items in the fourth quarter 2014, as detailed below, and comparable items in the fourth quarter of 2013, diluted adjusted earnings per share were $0.84 per share, up 87 percent.
On a GAAP basis (excluding the China joint ventures held for sale), fourth quarter 2014 results included revenue of $502 million and a net loss of $21 million, which was more than explained by a projected non-cash book loss of $23 million from the planned sale of one of the joint ventures. An anticipated book gain of $18 million from the sale of the other joint venture will be recognized when the sale closes.
Tower has reached preliminary agreement to sell one of its China joint ventures, subject to Chinese government approval, with closing expected mid-year 2015. The Company also is in early-stage discussions to sell a second China JV. In 2014, these joint ventures together provided consolidated Tower revenue of $114 million, adjusted EBITDA of $15 million, and diluted adjusted earnings per share of 21 cents; these results were down from 2013. The projected enterprise value to be received from the planned sales is about $95 million, or about 6.3 times 2014 adjusted EBITDA.
The preliminary outlook for 2015 and comparisons with 2014 discussed below are for continuing operations (excluding the China JVs held for sale).
- The preliminary revenue outlook for 2015 is $2 billion, compared with $2.068 billion in 2014; the projected decline is more than explained by currency translation, including an assumed average value for the Euro of $1.12. At constant exchange rates and excluding the previously disclosed sale of a plant in Italy, this reflects organic revenue growth of 5% in 2015, on top of 6% organic growth (at constant exchange) in 2014.
- Adjusted EBITDA in 2015 is projected at about $200 million (or about $215 million at 2014 exchange rates), compared with$204 million in 2014.
- Despite the currency translation headwinds, Tower’s anticipated 2015 diluted adjusted earnings per share of $3.10 are up from $3.02 in 2014. At constant exchange, 2015 earnings would be projected at $3.60.
- Adjusted free cash flow is projected at $60 million in 2015. This would represent about an 11% yield relative to Tower’s present stock market value.
- Achievement of Tower’s present financial plans for 2015 would reduce year-end net debt to about $240 million and leverage to about 1.2 times adjusted EBITDA, each being a major improvement of about one-third from year-end 2014.
In other business developments:
- Tower has won a major new business award to support OEM outsourcing in the U.S. This award, with start of production in 2017, plus assumed future awards of planned follow-on models are projected to represent approximately $100 million of annual revenue when fully launched in 2019. We consider this significant award to be meaningful validation of an anticipated OEM trend and a positive indicator of Tower’s competitiveness and prospects for future profitable organic growth.
- Tower achieved record quality performance in 2014 of only 11 customer-reported defects per million parts. We believe this is world-class quality and is a meaningful contributor to Tower’s organic growth achievements and future prospects.
- Last month, Tower re-couponed its Euro debt swap (which was initiated last October), resulting in a cash gain of $22 millionand a reduction in the fixed interest rate from 4.0% to 3.7%. This Euro debt swap, which matures in 2020, provides an ongoing partial enterprise-value hedge against Euro currency translation relative to the dollar.
“2014 was another year of Tower delivering on its commitments. Despite the markets in Brazil and Europe not living up to initial expectations, our team found a way to get it done,” said President and CEO Mark Malcolm. “We will not waver in taking actions intended to strengthen our capabilities and outlook, as evidenced by the planned China transactions, which we expect to further demonstrate that the sum value of Tower’s regional businesses far surpasses the company’s present stock-price valuation. For those focused mainly on the near term, Tower is projecting for 2015 what we believe is sector-leading, double-digit free cash flow yield. And for those also focused on longer-term prospects, our world-class quality and the recent OEM outsourcing award signal what we believe will be a bright future of profitable growth prospects for Tower.”
