Tower International, Inc. (NYSE: TOWR), a leading integrated global manufacturer of engineered automotive structural metal components and assemblies, today announced second quarter 2015 results, updated its outlook for full year 2015, and discussed related business developments.
- Revenue for the second quarter was $490 million, matching the company’s guidance. At constant exchange rates, revenue was $541 million, compared with $549 million in the second quarter 2014. The quarterly revenue comparison was adversely affected by the timing of customer model changes in North America; Tower North America remains on track for 5% or better growth for full year 2015.
- Adjusted EBITDA for the quarter was $53.3 million, compared with $55.2 million a year ago. The decline was more than explained by unfavorable currency translation. Adjusted EBITDA was $1.3 million better than guidance. Adjusted EBITDA margin was 10.9%, up from 10.1% last year, reflecting good net cost performance that was aided in part by favorable calendarization timing.
- Net income was $18.6 million, compared with $16.1 million last year. 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 2014, diluted adjusted earnings were $1.05 per share, up 19 percent from 88 cents a year ago.
- Net debt (excluding cash attributable to discontinued operations) was $342 million at June 30, an improvement of $45 million from a year ago. Liquidity was $345 million, up $32 million.
- The Company’s growth prospects in North America have recently been further bolstered in two ways: a major follow-on new business award and the acquisition of a stamping supplier in Mexico. The new business award is projected to add about $70 million of booked annual revenue, achieving the high end of the potential range discussed last quarter. The acquisition in Mexico provides a further foothold in that high-growth market and is expected to be immediately accretive, adding about 10 cents to earnings per share on an annual basis. Present annual revenue is about $40 million; industry production growth in Mexico is projected at about an 8% annual rate through 2020, and we expect to grow this business at about a 10% rate during this period. The purchase price (net of acquired net cash) was about $21 million, or approximately four times projected 2015 adjusted EBITDA.
- Revenue and earnings guidance for full 2015 are largely unchanged, with the main factors expected to be essentially offsetting this year. Revenue is now anticipated to be about $1,970 million, up $20 million from prior guidance, with projected favorable currency translation (including the Euro assumed at $1.10 in the second half) and the Mexican acquisition overcoming significantly lower industry and customer volumes in Brazil. The full year earnings outlook remains the same, with adjusted EBITDA at $190 million and diluted adjusted earnings per share at $3.15. In addition to the above revenue-related factors, up-front expenses for the additional new business award are expected to be offset by further improvements in Europe and North America.
- With the additional investment required this year to support the new business award, adjusted free cash flow is now projected at about breakeven for the full year, reflecting capital deployment to enhance future growth. Excluding investment for the major new award that is expected to meaningfully benefit revenue beginning next year, adjusted free cash flow would be forecast at $55 million; also including the cash gains realized earlier this year from re-pricing Tower’s debt swaps, the outlook for full year 2015 adjusted free cash flow would be about $87 million.
“We are effectively managing our way through several factors that are affecting near-term results, including the major volume downturn in Brazil, currency changes, and start-up expenses related to major new business. Looking beyond these factors, the underlying positives are very encouraging,” said President and CEO Mark Malcolm. “In Europe, our business is improving margin, reflecting both industry and company improvements, and in North America, our already strong momentum has accelerated further. We now project about 15% organic revenue growth for Tower North America from 2015 to 2017, plus the recent acquisition. This bodes well for Tower’s future.”
