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TOWR > SEC Filings for TOWR > Form 10-Q on 31-Jul-2013All Recent SEC Filings

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Form 10-Q for TOWER INTERNATIONAL, INC.


31-Jul-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Company Overview

We are a leading integrated global manufacturer of engineered structural metal components and assemblies primarily, serving automotive original equipment manufacturers, or OEMs. We offer our automotive customers a broad product portfolio, supplying body-structure stampings, frame and other chassis structures, as well as complex welded assemblies for small and large cars, crossovers, pickups, and sport utility vehicles, or SUVs. Our products are manufactured at 28 production facilities, strategically located near our customers in North America, South America, Europe, and Asia. We support our manufacturing operations through eight engineering and sales locations around the world. Our products are offered on a diverse mix of vehicle platforms, reflecting the balanced portfolio approach of our business model and the breadth of our product capabilities. We supply products to approximately 170 vehicle models globally to 11 of the 12 largest OEMs, based on 2012 production volumes.

Recent Trends

Production Volumes

During the second quarter of 2013, industry production volumes increased from 2012 in Europe, China, North America, and Brazil. IHS AutomotiveŽ expects production volumes for full year 2013 to increase in all regions in which we operate when compared to 2012, with the exception of Europe. According to IHS AutomotiveŽ, Europe volume is expected to recover in 2014 and beyond.

Pension Plan Discount Rates

The present value of our pension benefit obligation is calculated through the use of a discount rate. The discount rate used is established annually at the measurement date and reflects the construction of a yield curve analysis from a third party, which calculates the yield to maturity that mirrors the timing and amounts of future benefit payments. Our measurement date is December 31 of each year and as of December 31, 2012 the discount rate used was 3.65%. At June 30, 2013, the applicable discount rate has increased to 4.4%. No assurance can be provided that this trend will continue.

Based on our assumptions as of December 31, 2012, a change in the discount rate, holding all other assumptions constant, would have the following effect on our obligations on an annual basis:

Impact on Obligation Increase Decrease .25% change in discount rate $ (8,164,965 ) $ 8,566,970

Factors Affecting our Industry, Revenues, and Expenses

For information regarding factors that affect our industry, our revenues, and our expenses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2012.

Adjusted EBITDA

We use the term Adjusted EBITDA throughout this report. 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 report. Adjusted EBITDA is not a measure of performance defined in accordance with generally accepted accounting principles (''GAAP'') in the United States. We use Adjusted EBITDA as a supplement to our GAAP results in evaluating our business.

Adjusted EBITDA is included in this report because it is one of the principal factors upon which our management assesses performance. Our Chief Executive Officer measures the performance of our segments on the basis of Adjusted EBITDA. As an analytical tool, Adjusted EBITDA assists us in comparing our performance over various reporting periods on a consistent basis because it excludes items that we do not believe reflect our core operating performance.

We believe that Adjusted EBITDA is useful in evaluating our performance because Adjusted EBITDA is a commonly used financial metric for measuring and comparing the operating performance of companies in our industry. We believe that the disclosure of Adjusted EBITDA offers an additional financial metric that, when coupled with GAAP results and the reconciliation to GAAP results, provides a more complete understanding of our results of operations and the factors and trends affecting our business.

Adjusted EBITDA should not be considered as an alternative to net income /
(loss) as an indicator of our performance, as an alternative to net cash provided by operating activities as a measure of liquidity, or as an alternative to any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted EBITDA. Although we believe that Adjusted EBITDA may make an evaluation of our operating performance more consistent because it removes items that do not reflect our core operations, (i) other companies in our industry may define Adjusted EBITDA differently than we do and as a result, it may not be comparable to similarly titled measures used by other companies in our industry; and (ii) Adjusted EBITDA excludes certain financial information that some may consider important in evaluating our performance.

We compensate for these limitations by providing disclosure of the differences between Adjusted EBITDA and GAAP results, including providing a reconciliation of Adjusted EBITDA to GAAP results, to enable investors to perform their own analysis of our operating results. For a reconciliation of consolidated Adjusted EBITDA to its most directly comparable GAAP measure, net income / (loss), see "Results of Operations" below.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of the income generated by our business or discretionary cash available to us to invest in the growth of our business. Our management compensates for these limitations by analyzing both our GAAP results and Adjusted EBITDA.

Results of Operations-Three Months Ended June 30, 2013 Compared with the Three
Months Ended June 30, 2012



The following table presents production volumes in specified regions, according
to July IHS AutomotiveŽ, for the three months ended June 30, 2013 compared to
the three months ended June 30, 2012 (in millions of units produced):



                                       Europe           China          North America         Brazil
Three Months Ended June 30, 2013              5.1             4.6                   4.2             1.0
Three Months Ended June 30, 2012              5.0             4.2                   4.0             0.8
Increase / (decrease)                         0.1             0.4                   0.2             0.2
Percentage change                               1 %            11 %                   6 %            23 %

The following table presents selected financial information for the three months ended June 30, 2013 and 2012 (in millions):

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