<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 1-12733
TOWER AUTOMOTIVE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 41-1746238
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4508 IDS CENTER 55402
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal executive offices)
(612) 342-2310
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
---- ----
The number of shares outstanding of the Registrant's common stock, par value
$.01 per share, at July 15, 1997 was 22,854,117 shares.
<PAGE>
ITEM 1 - FINANCIAL INFORMATION
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Three Months Ended June 30,
------------------------------
1997 1996
------------ ------------
(Note 6)
Revenues $ 327,272 $ 96,521
Cost of sales 281,336 81,170
----------- -----------
Gross profit 45,936 15,351
Selling, general and administrative expenses 15,362 4,569
Amortization expense 2,004 475
----------- -----------
Operating income 28,570 10,307
Interest expense, net 6,605 1,465
----------- -----------
Income before provision for income taxes 21,965 8,842
Provision for income taxes 8,784 3,540
----------- -----------
Net income before extraordinary item 13,181 5,302
Extraordinary item - loss on early
extinguishment of debt, net of
income taxes 2,434 -
----------- -----------
Net income $ 10,747 $ 5,302
----------- -----------
----------- -----------
Income applicable to common stockholders:
Before extraordinary item $ 13,216 $ 5,340
----------- -----------
----------- -----------
Net income $ 10,782 $ 5,340
----------- -----------
----------- -----------
Net income per share:
Before extraordinary item $ 0.60 $ 0.44
Extraordinary loss (0.11) -
------------ -----------
Net income $ 0.49 $ 0.44
------------ -----------
------------ -----------
Weighted average shares outstanding 21,942 12,275
------------ -----------
------------ -----------
The accompanying notes are an integral part
of these condensed consolidated statements.
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<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Six Months Ended June 30,
---------------------------------
1997 1996
------------ -------------
(Note 6)
Revenues $ 452,389 $ 165,442
Cost of sales 387,441 139,576
----------- -----------
Gross profit 64,948 25,866
Selling, general and administrative expenses 21,174 8,083
Amortization expense 2,664 850
----------- -----------
Operating income 41,110 16,933
Interest expense, net 7,953 2,773
----------- -----------
Income before provision for income taxes 33,157 14,160
Provision for income taxes 13,258 5,670
----------- -----------
Net income before extraordinary item 19,899 8,490
Extraordinary item - loss on early
extinguishment of debt, net of
income taxes 2,434 -
----------- -----------
Net income $ 17,465 $ 8,490
----------- -----------
----------- -----------
Income applicable to common stockholders:
Before extraordinary item $ 19,969 $ 8,572
----------- -----------
----------- -----------
Net income $ 17,535 $ 8,572
----------- -----------
----------- -----------
Net income per share:
Before extraordinary item $ 1.08 $ 0.71
Extraordinary loss (0.13) -
----------- -----------
Net $ 0.95 $ 0.71
----------- -----------
----------- -----------
Weighted average shares outstanding 18,459 12,004
----------- -----------
----------- -----------
The accompanying notes are an integral part
of these condensed consolidated statements.
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<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
June 30, December 31,
Assets 1997 1996
- ------------------------------------------ ------------- -------------
(unaudited)
Current assets:
Cash and cash equivalents $ 34,599 $ 39,596
Accounts receivable 197,869 61,073
Inventories 74,921 21,864
Other current assets 109,123 14,433
------------- --------------
Total current assets 416,512 136,966
Property, plant and equipment, net 669,643 156,248
Restricted cash 11,130 10,833
Goodwill and other assets, net 366,268 94,560
------------- --------------
$ 1,463,553 $ 398,607
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------------- --------------
Liabilities and Stockholders' Investment
- ------------------------------------------
Current liabilities:
Current maturities of long-term debt $ 722 $ 722
Accounts payable 156,038 32,280
Accrued liabilities 78,711 22,429
------------- --------------
Total current liabilities 235,471 55,431
Long-term debt, net of current maturities 600,338 113,460
Other noncurrent liabilities 142,526 47,839
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Stockholders' investment:
Preferred stock -- --
Common stock 228 143
Warrants to acquire common stock 2,000 2,000
Additional paid-in capital 422,474 136,759
Retained earnings 60,615 43,150
Subscriptions receivable (99) (175)
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Total stockholders' investment 485,218 181,877
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$ 1,463,553 $ 398,607
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The accompanying notes are an integral part
of these condensed consolidated balance sheets.
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TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS - UNAUDITED)
Six Months Ended June 30,
---------------------------------
1997 1996
------------ -------------
OPERATING ACTIVITIES:
Net income $ 17,465 $ 8,490
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation and amortization 16,087 5,739
Extraordinary loss on extinguishment of debt 2,434 -
Changes in other operating items 10,887 5,412
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Net cash provided by operating activities 46,873 19,641
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INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (774,882) (80,303)
Capital expenditures, net (46,435) (4,279)
Change in restricted cash (297) 4,052
----------- -------------
Net cash used in investing activities (821,614) (80,530)
----------- -------------
FINANCING ACTIVITIES:
Proceeds from borrowings 551,878 191,833
Repayment of debt (64,924) (124,323)
Net proceeds on issuance of common stock 285,796 46,350
Cash portion of extraordinary loss on
extinguishment of debt (3,010) -
Other, net 4 345
----------- -------------
Net cash provided by financing activities 769,744 114,205
----------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (4,997) 53,316
CASH AND CASH EQUIVALENTS:
Beginning of period 39,596 957
----------- -------------
End of period $ 34,599 $ 54,273
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----------- -------------
The accompanying notes are an integral part
of these condensed consolidated statements.
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<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed consolidated financial statements have been
prepared by Tower Automotive, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished in the condensed consolidated
financial statements includes normal recurring adjustments and reflects
all adjustments which are, in the opinion of management, necessary for
a fair presentation of such financial statements. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
Although the Company believes that the disclosures are adequate to make
the information presented not misleading, it is suggested that these
condensed consolidated financial statements be read in conjunction with
the audited financial statements and the notes thereto included in the
Company's 1996 Annual Report to Stockholders.
Revenues and operating results for the three and six months ended June 30,
1997 are not necessarily indicative of the results to be expected for the
full year.
2. Inventories consisted of the following (in thousands):
June 30, 1997 Dec. 31, 1996
------------- -------------
Raw materials $ 19,283 $ 9,517
Work in process 45,105 5,949
Finished goods 10,533 6,398
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$ 74,921 $ 21,864
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3. Net income per share is computed by dividing net income applicable to
common stockholders by the weighted average number of common and common
stock equivalent shares outstanding during each period presented.
Common stock issued and common stock options granted within one year
immediately preceding the initial public offering of common stock at
prices below the public offering price have been reflected in the net
income per share calculation as if they had been outstanding for all
periods presented. Net income for purposes of computing primary and
fully-diluted net income per share reflects the elimination of interest
expense on the convertible subordinated notes, net of the related
income tax benefit. On a fully-diluted basis, both net income
applicable to common stockholders and weighted average shares
outstanding are adjusted to assume the conversion of the Notes (see
Note 5). Actual primary and fully-diluted net income per share were
not materially different for the three and six-month periods ended June
30, 1997 and 1996.
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<PAGE>
During March 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share," which requires the disclosure of basic earnings
per share and diluted earnings per share. The Company will adopt SFAS
128 effective December 31, 1997. The Company has not yet determined
the effect on earnings per share of adopting SFAS 128.
4. On May 31, 1996, the Company acquired all of the outstanding common stock
of MascoTech Stamping Technologies, Inc. (MSTI), a wholly owned
subsidiary of MascoTech, Inc. (MascoTech). Consideration consisted of
$55 million in cash, 785,000 shares of the Company's Common Stock and
warrants to acquire 200,000 shares of the Company's Common Stock at an
exercise price of $18 per share. The Company may also make additional
payments of up to $30 million to MascoTech if certain operating targets
are achieved by the MSTI facilities in the first three years following
the acquisition. The amounts to be paid to MascoTech are equal to two
times the amount by which operating profit, as defined, of the MSTI
facilities exceeds $24 million each year. Based on results of
operations of the MSTI facilities through June 30, 1997, $4 million in
contingent payments are due and have been accrued and recorded as
additional goodwill in the accompanying condensed consolidated balance
sheet. MSTI manufactures metal chassis and suspension components and
assemblies for the North American automotive industry from facilities
in Ohio, Indiana and Michigan.
The acquisition of MSTI has been accounted for using the purchase
method of accounting and, accordingly, the assets acquired and
liabilities assumed have been recorded at fair value as of the
acquisition date. The final allocation of the purchase price was not
materially different than the preliminary allocation. The purchase
price in excess of the fair value of the net assets acquired is
included in goodwill in the accompanying condensed consolidated balance
sheets. Results of operations from MSTI have been included in the
accompanying condensed consolidated financial statements from the date
of acquisition. Unaudited pro forma results of consolidated operations
for the three and six months ended June 30, 1996 as if the acquisition
of MSTI was completed at the beginning of 1996 is included in Note 6.
5. Long-term debt consisted of the following (in thousands):
June 30, December 31,
1997 1996
------------- ---------------
Revolving credit facility $ 551,750 $ -
Senior Notes - 65,000
Industrial development revenue
bonds 46,643 46,643
Convertible subordinated notes 2,474 2,508
Other 193 31
------------- ---------------
601,060 114,182
Less-current maturities (722) (722)
------------- ---------------
Total long-term debt $ 600,338 $ 113,460
------------- ---------------
------------- ---------------
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<PAGE>
On April 18, 1997, the Company entered into a new revolving credit
facility that provides for borrowings of up to $750 million on an
unsecured basis. The amount available under the revolving credit
facility reduces to $675 million in April 2000, $600 million in April
2001 and $500 million in April 2002. The credit facility has a final
maturity of April 2003. Interest on the credit facility is at the
prime rate or LIBOR plus a margin ranging from 17 to 50 basis points
depending upon the ratio of the consolidated indebtedness of the
Company to its total capitalization. The weighted average interest
rate for such borrowings was 6.5% at June 30, 1997. The new credit
facility requires the Company to meet certain financial covenants,
including but not limited to minimum interest coverage, minimum
debt/capital and maximum leverage ratio. The Company was in compliance
with all covenants as of June 30, 1997.
The Company financed the cash portion of the MSTI acquisition through
the issuance of two series of Senior Notes having an aggregate
principal amount of $65 million, with interest rates of 7.65% and 7.82%
and final maturities of 2006 and 2008. The Senior Notes were retired
in connection with the transactions described in Note 6.
On July 29, 1997, the Company completed the sale of $200,000,000 of 5%
Convertible Subordinated Notes (the "Notes") pursuant to a Rule 144A
private offering. The Notes are due on August 1, 2004 and are
convertible into Tower Automotive common stock at a conversion price of
$51.75 per share. The Notes are unsecured and may not be redeemed
until August 1, 2000, except in the event of a change in control.
Proceeds from the Notes were used to repay outstanding indebtedness
under the revolving credit facility. Neither the Notes nor the common
stock issuable upon the conversion of the Notes have been registered
under the Securities Act of 1933 (the "Act") and may not be offered or
sold in the United States absent registration or an applicable
exemption from the registration requirements of the Act.
6. On April 18, 1997, the Company completed the following transactions:
(a) Issued 8,500,000 shares of Common Stock in a public offering at
an offering price of $35 per share (the "Offering"). Net proceeds
to the Company, after underwriting discounts and offering expenses,
were approximately $285 million.
(b) Repaid, in full, the outstanding Senior Notes plus accrued
interest. In connection with the repayment, the Company paid
prepayment penalties and wrote off deferred financing costs
which resulted in an extraordinary loss, net of income taxes, of
approximately $2.4 million.
(c) Acquired and assumed substantially all of the assets and
liabilities of Automotive Products Company (APC), a division of
A.O. Smith Corporation. The aggregate purchase price consisted
of approximately $725 million in cash, including management's
estimate of certain adjustments associated with the net assets of
APC at closing, as defined, and was financed with the proceeds from
the Offering and borrowings under the new credit facility described
above. APC, which has 15 facilities, designs and manufactures frames,
frame components, engine cradles, suspension components and modules
for the North American automotive and heavy truck industries. This
acquisition has been accounted for as a purchase and, accordingly,
APC's assets and
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<PAGE>
liabilities have been recorded at fair value as of the acquisition
date, with the excess purchase price recorded as goodwill. The
assets and liabilities of APC have been recorded based upon
preliminary estimates of fair value as of the date of acquisition.
The Company has engaged an independent appraiser to determine the
fair value of the property, plant and equipment included in the
acquisition of APC and is evaluating certain other assets, including
the investment in the China joint venture, and liabilities assumed in
connection with the APC acquisition. As a result, the final
allocation will likely result in adjustments to the preliminary
allocation, which may result in changes to goodwill. The Company
does not expect that such adjustments will have a material effect on
its results of operations.
Following are unaudited pro forma condensed results of operations for
the six months ended June 30, 1997 as if the acquisition of
APC, the Offering and the sale of the Notes were completed at the
beginning of the period and for the six months ended
June 30, 1996 as if the following were completed at the beginning of the
period: (i) the acquisition of APC, (ii) the Offering, (iii) the
sale of the Notes, (iv) the acquisition of MSTI, and (v) the June
1996 public offering of 2,232,900 shares of Common Stock (in
thousands, except per share data):
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenues $ 737,363 $ 685,231
---------- ----------
---------- ----------
Operating income $ 45,042 $ 60,806
---------- ----------
---------- ----------
Net income applicable to
common stockholders, before
extraordinary item $ 17,651 $ 26,538
---------- ----------
---------- ----------
Weighted average shares
outstanding 23,418 23,522
---------- ----------
---------- ----------
Net income per share before
extraordinary item $ .75 $ 1.13
---------- ----------
---------- ----------
</TABLE>
The unaudited pro forma financial information does not purport to represent what
the Company's results of operations would actually have been if such
transactions had occurred on such dates.
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<PAGE>
7. On May 9, 1997, the Company acquired all of the outstanding common stock of
Societa Industria Meccanica e Stampaggio S.p.A. ("SIMES"). SIMES,
headquartered in Turin, Italy, has annual revenues of approximately $70
million. SIMES designs and manufactures structural metal components in two
facilities in Italy, principally for Fiat. The purchase price, which
consists of $50.7 million in cash, was financed with borrowings under the
Company's revolving credit facility. The Company may pay an additional $3
million in the future based upon the operating performance of SIMES. The
results of operations of SIMES are not significant to the operating results
of the Company as a whole and have therefore been excluded from the pro
forma presentation included in Note 6.
8. Supplemental cash flow information (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Cash paid for -
Interest $ 5,215 $ 1,899 $ 5,974 $ 3,035
Income taxes 4,540 2,985 7,080 3,225
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<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1997 TO THE THREE MONTHS ENDED
JUNE 30, 1996
REVENUES - Revenues for the three months ended June 30, 1997 increased by
$230.8 million to $327.3 million compared to $96.5 million for the three
months ended June 30, 1996. Approximately $227.0 million of the increase in
revenues over 1996 is attributable to the acquisitions of Automotive Products
Company ("APC") in April 1997, MascoTech Stamping Technologies, Inc. ("MSTI")
in May 1996 and Societa Industria Meccanica e Stampaggio S.p.A. ("SIMES") in
May 1997. The remaining increase is due to new business awarded to the
Company, including business relating to the Ford Escort, Econoline and
Expedition, Dodge Ram Club Cab pick-up and Toyota Camry.
COST OF SALES - Cost of sales as a percentage of revenues for the three months
ended June 30, 1997 was 86.0% compared to 84.1% for the three months ended June
30, 1996. The decrease in gross margin was due to a higher proportion of
components purchased from outside suppliers as a result of the MSTI and APC
acquisitions and launch costs associated with new business. These decreases
were partially offset by operating efficiencies and enhanced productivity.
S, G & A EXPENSES - Selling, general and administrative expenses increased to
$15.4 million, or 4.7% of revenues, for the three months ended June 30, 1997
compared to $4.6 million, or 4.7% of revenues, for the three months ended June
30, 1996. The increased expense was due primarily to incremental costs
associated with the Company's acquisitions of MSTI in 1996, APC and SIMES in
1997.
AMORTIZATION EXPENSE - Amortization expense for the three months ended June 30,
1997 was $2.0 million compared to $475,000 for the three months ended June 30,
1996. The increase was due to incremental goodwill amortization related to the
acquisitions of MSTI, APC and SIMES.
INTEREST EXPENSE - Interest expense for the three month period ended June 30,
1997 was $6.6 million and $1.5 million for the three months ended June 30, 1996.
Interest expense was affected by increased borrowings incurred to fund the
acquisitions of MSTI, APC and SIMES, more favorable terms related to the
Company's borrowings under the new credit agreement entered into in April 1997,
and by the application of the proceeds from the June 1996 offering of 2,232,900
shares of common stock at $24.50 per share and from the proceeds from the April
1997 offering of 8,500,000 shares of Common Stock at $35 per share.
INCOME TAXES - The effective income tax rate was 40% for the three months
ended June 30, 1997 and 1996. The effective rates differed from the statutory
rates primarily as a result of state taxes and non-deductible goodwill
amortization.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 TO THE SIX MONTHS ENDED JUNE
30, 1996
REVENUES - Revenues for the six months ended June 30, 1997 increased by
$287.0 million to $452.4 million compared to $165.4 million for the six
months ended June 30, 1996. Approximately $270.0 million of the increase in
revenues over 1996 is attributable to the
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<PAGE>
acquisitions of MSTI, APC and SIMES. The remaining increase is due to new
business awarded to the Company, including business relating to the Ford Escort,
Econoline and Expedition, Dodge Ram Club Cab pick-up and Toyota Camry.
COST OF SALES - Cost of sales as a percentage of revenues for the six months
ended June 30, 1997 was 85.6% compared to 84.4% for the six months ended June
30, 1996. The decrease in gross margin was due to a higher proportion of
components purchased from outside suppliers as a result of the MSTI acquisition
and launch costs associated with new business. These decreases were partially
offset by operating efficiencies and enhanced productivity.
S, G & A EXPENSES - Selling, general and administrative expenses increased to
$21.2 million, or 4.7% of revenues, for the six months ended June 30, 1997
compared to $8.1 million, or 4.9% of revenues, for the six months ended June 30,
1996. The percentage decrease related to revenues reflects the economies of
scale of higher gross sales. The increased expense was due primarily to
incremental costs associated with the Company's acquisitions of MSTI, APC and
SIMES.
AMORTIZATION EXPENSE - Amortization expense for the six months ended June 30,
1997 was $2.7 million compared to $850,000 for the six months ended June 30,
1996. The increase was due to incremental goodwill amortization related to the
acquisitions of MSTI, APC and SIMES.
INTEREST EXPENSE - Interest expense for the six month period ended June 30,
1997 was $8.0 million and $2.8 million for the six month period ended June 30,
1996. Interest expense was affected by increased borrowings incurred to fund
the acquisitions of MSTI, APC and SIMES, more favorable terms related to the
Company's borrowings under the new credit agreement entered into in April 1997,
and by the application of the proceeds from the June 1996 offering of 2,232,900
shares of common stock at $24.50 per share and the proceeds from the April 1997
offering of 8,500,000 shares of Common Stock at $35.00 per share.
INCOME TAXES - The effective income tax rate was 40% for the six months ended
June 30, 1997 and 1996. The effective rates differed from the statutory rates
primarily as a result of state taxes and non-deductible goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES
On April 18, 1997, the Company entered into a new revolving credit facility that
provides for borrowings of up to $750 million on an unsecured basis. The amount
available under the revolving credit facility reduces to $675 million in April
2000, $600 million in April 2001 and $500 million in April 2002. The credit
facility has a final maturity of April 2003. Interest on the credit facility is
at the prime rate or LIBOR plus a margin ranging from 17 to 50 basis points
depending upon the ratio of the consolidated indebtedness of the Company to its
total capitalization. The weighted average interest rate for such borrowings
was 6.5% at June 30, 1997. The new credit facility requires the Company to meet
certain financial covenants, including but not limited to minimum interest
coverage, minimum debt to total capital and maximum leverage ratio. The Company
was in compliance with all covenants as of June 30, 1997.
As of June 30, 1997, the Company also had approximately $2.9 million in
outstanding indebtedness relating to industrial development revenue bonds issued
in connection with the
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<PAGE>
construction of its Auburn, Indiana plant. The bonds are collateralized by a
letter of credit, certain equipment and a mortgage on the Company's Auburn,
Indiana plant. The bonds are payable in annual installments of $720,000 through
September 2000 and bear interest at a floating rate which is adjusted weekly as
determined by the bond remarketing agent (3.5% at June 30, 1997 and 4.4% at
December 31, 1996).
The Company also has $43.8 million of indebtedness outstanding pursuant to
industrial development revenue bonds (IRB's) issued with the City of Bardstown,
Kentucky. Proceeds from the IRB's were used to finance construction of a
240,000 square foot manufacturing facility and the related purchase of
equipment. The bonds, which are due July 1, 2024 and March 1, 2025, are
collateralized by a letter of credit. As of June 30, 1997, approximately $33.9
million of the proceeds had been expended or committed for the first phase of
the facility and related equipment. The unexpended proceeds from the bonds of
approximately $11.1 million at June 30, 1997, are invested in treasury
securities and will be used to finance the second phase of the facility. The
bonds bear interest at a floating rate which is adjusted weekly as determined by
the bond remarketing agent (5.6% at June 30, 1997 and 5.8% at December 31,
1996).
On May 31, 1996, the Company purchased all of the outstanding common stock of
MSTI from MascoTech, Inc. (MascoTech) for an aggregate purchase price of
approximately $79 million, including payment of related fees and expenses.
Pursuant to the terms of the acquisition, the Company is required to make
additional payments to MascoTech if certain operating targets are achieved by
the MSTI facilities in the first three years following the acquisition. If all
such operating targets are met, the total payments will not exceed $30 million.
Based on results of operations of the MSTI facilities through June 30, 1997, $4
million of contingent payments are due and have been accrued and recorded as
additional goodwill.
The Company financed the cash portion of the purchase price of MSTI through the
issuance of two series of Senior Notes having an aggregate principal amount of
$65.0 million, interest rates ranging from 7.65% to 7.82% and final maturities
of 2006 to 2008. The Senior Notes were retired in connection with the
transactions described below.
In June 1996, the Company completed an offering of 2,232,900 shares of Common
Stock at an offering price of $24.50 per share. Approximately $32 million of
the net proceeds from the Offering were used by the Company to retire borrowings
under its Credit Agreement.
On April 18, 1997, the Company completed the following transactions:
(a) Issued 8,500,000 shares of Common Stock in a public offering at an
offering price of $35 per share (the "Offering"). Net proceeds to the
Company, after underwriting discounts and offering expenses, were
approximately $285 million.
(b) Repaid, in full, the outstanding Senior Notes plus accrued interest.
In connection with the repayment, the Company paid prepayment
penalties and wrote off deferred financing costs which resulted in an
extraordinary loss, net of income taxes of approximately $2.4 million.
The Company recognized this charge during the second quarter of 1997.
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<PAGE>
(c) Acquired and assumed substantially all of the assets and liabilities
of Automotive Products Company (APC), a division of A.O. Smith
Corporation. The aggregate purchase price consisted of approximately
$725 million in cash, including management's estimate of certain
adjustments associated with the net assets of APC at closing, as
defined, and was financed with the proceeds from the Offering and
borrowings under the new credit facility described above. APC, which
has 15 facilities, designs and manufactures frames, frame components,
engine cradles, suspension components and modules for the North
American automotive and heavy truck industries.
On May 9, 1997, the Company acquired all of the outstanding common stock of
Societa Industria Meccanica e Stampaggio S.p.A. ("SIMES"). SIMES, headquartered
in Turin, Italy, has annual revenues of approximately $70 million. SIMES
designs and manufactures structural metal components in two facilities in Italy,
principally for Fiat. The purchase price, which consisted of approximately
$50.7 million in cash, was financed with borrowings under the Company's
revolving credit facility.
On July 29, 1997, the Company completed the sale of $200,000,000 of 5%
Convertible Subordinated Notes (the "Notes") pursuant to a Rule 144A private
offering. The Notes are due on August 1, 2004 and are convertible into Tower
Automotive common stock at a conversion price of $51.75 per share. The Notes
are unsecured and may not be redeemed until August 1, 2000, except in the
event of a change in control. Proceeds from the Notes were used to repay
outstanding indebtedness under the revolving credit facility. In addition,
the Company may seek to refinance a portion of its borrowings under the new
credit agreement to increase its financial flexibility and to extend the
maturity of such borrowings. Such refinancing could increase the Company's
overall interest expense.
On July 22, 1997, the Company entered into an agreement with Promotora de
Empresas Zano, S.A. de C.V. ("Proeza") to become a partner in Metalsa S.A. de
C.V. ("Metalsa"), the largest supplier of vehicle structural components in
Mexico. From an operational standpoint, the agreement contemplates that the
Company and Metalsa will immediately begin working together to secure additional
business. Under the terms of the agreement, the Company will ultimately acquire
a 40% ownership interest in Metalsa, subject to required governmental and other
approvals. Metalsa is headquartered in Monterrey, Mexico and has manufacturing
facilities in Monterrey and San Luis Potosi, Mexico. Metalsa's customers
include Chrysler, General Motors, Ford, Nissan and Mercedes-Benz. The purchase
price for such ownership interest is subject to further negotiation among the
parties. The Company anticipates that its investment, which will be funded
through borrowings under the new credit agreement, will be made by the end of
1997.
During the six months ended June 30, 1997, the Company generated $46.9 million
of cash from operations, which was used to partially fund capital expenditures.
The Company has made substantial investments in manufacturing technology and
product design capability to support its products. The Company made capital
expenditures of approximately $46.4 million during the six months ended June 30,
1997, primarily for equipment and dedicated tooling purchases related to new or
replacement programs.
-14-
<PAGE>
The Company believes the borrowing availability under the new credit agreement,
together with funds generated by operations, should provide the Company with the
liquidity and capital resources to pursue its business strategy through 1997,
with respect to working capital, capital expenditures and other operating needs.
Under present conditions, management does not believe access to funds will
restrict its ability to pursue its acquisition strategy.
NEW ACCOUNTING PRONOUNCEMENT
During March 1997, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share,"
which requires the disclosure of basic earnings per share and diluted earnings
per share. The Company expects to adopt SFAS 128 effective December 31, 1997.
The Company has not yet determined the effect on earnings per share of adopting
SFAS 128.
EFFECTS OF INFLATION
Inflation generally affects the Company by increasing the interest expense of
floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. Management believes that inflation has not significantly
effected the Company's business over the past 12 months. However, because
selling prices generally cannot be increased until a model changeover, the
effects of inflation must be offset by productivity improvements and volume from
new business awards.
-15-
<PAGE>
PART II. OTHER INFORMATION
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings:
None
Item 2. Change in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
The registrant held its Annual Meeting of Stockholders on May 20,
1997 and, as adjourned, on June 2, 1997. Proxies for the meeting
were solicited pursuant to Regulation 14; there was no
solicitation in opposition to management's nominees for directors
as listed in the Proxy Statement, and all such nominees (S.A.
Johnson, Adrian Vander Starre, Dugald K. Campbell, James R.
Lozelle, Scott D. Rued, W.H. Clement, Eric J. Rosen, Matthew O.
Diggs, F.J. Loughrey and Kim B. Clark) were elected. Of the
12,347,383 shares voted, at least 12,148,903 shares granted
authority to vote for these directors and no more than 198,480
abstaining votes were cast.
The amendment to the 1994 Key Employee Stock Option Plan was approved
by the stockholders. A total of 11,549,201 affirmative votes, 459,536
negative votes and 338,646 abstaining votes were cast.
The retention of Arthur Andersen LLP as independent public
accountants of the Company was approved by the stockholders. A
total of 12,252,216 affirmative votes, 820 negative votes and
94,347 abstaining votes were cast.
The proposed amendment to the Company's Amended and Restated
Certificate of Incorporation which provided for an increase in
authorized Common Stock from 30,000,000 to 200,000,000 shares was
approved by the stockholders. A total of 7,194,296 affirmative
votes, 5,150,470 negative votes and 2,617 abstaining votes were
cast.
-16-
<PAGE>
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits: Sequential
Page Number
-----------
11 Statement of Computation of Earnings Per Share For 19
the Three and Six Months Ended June 30, 1997 and 1996.
27 Financial Data Schedule
(b) During the quarter, the Company filed the following Form
8-K Current Reports with the Securities and Exchange Commission:
1. The Company's Current Report on Form 8-K, dated
April 2, 1997 (Commission File No. 1-12733).
2. The Company's Current Report on Form 8-K, as
amended by Amendment No. 1 to Current Report on Form 8-K/A, both
dated April 11, 1997 (Commission File No. 1-12733).
3. The Company's Current Report on Form 8-K dated
April 18, 1997 (Commission File No. 1-12733).
-17-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TOWER AUTOMOTIVE, INC.
Date: August 14, 1997 By /s/ Anthony A. Barone
---------------------
Anthony A. Barone
Vice President, Chief Financial
Officer (principal accounting
and financial officer)
-18-
<PAGE>
EXHIBIT 11
TOWER AUTOMOTIVE, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended June 30,
-----------------------------------
1997 1996
--------------- ---------------
Net income $ 10,747 $ 5,302
Interest expense on convertible
subordinated notes 35 38
--------------- ---------------
Net income applicable to common
stockholders $ 10,782 $ 5,340
--------------- ---------------
--------------- ---------------
Weighted average number of common
and common equivalent shares 21,260 11,476
Dilutive effect of outstanding stock
options and warrants after application
of the treasury stock method 274 122
Dilutive effect of convertible subordinated
notes assuming conversion 408 677
--------------- --------------
Common and common equivalent
shares outstanding 21,942 12,275
--------------- --------------
--------------- --------------
Net income per share (1) $ 0.49 $ 0.44
--------------- --------------
--------------- --------------
(1) The calculation of net income per share for the three month periods ended
June 30, 1997 and 1996 are the same on a primary and fully-diluted basis.
-19-
<PAGE>
EXHIBIT 11
(CONTINUED)
TOWER AUTOMOTIVE, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Six Months Ended June 30,
----------------------------
1997 1996
------------ ------------
Net income $ 17,465 $ 8,490
Interest expense on convertible
subordinated notes 70 82
------------ ------------
Net income applicable to
common stockholders $ 17,535 $ 8,572
------------ ------------
------------ ------------
Weighted average number of
common and common
equivalent shares 17,799 11,157
Dilutive effect of outstanding
stock options after application
of the treasury stock method 252 96
Dilutive effect of convertible
subordinated notes assuming
conversion 408 751
----------- ------------
Common and common equivalent
shares outstanding 18,459 12,004
----------- ------------
----------- ------------
Net income per share (1) $ 0.95 $ 0.71
----------- ------------
----------- ------------
(1) The calculation of net income per share for the six months ended June 30,
1997 and 1996 are the same on a primary and fully-diluted basis.
-20-
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS FOUND ON
PAGES 2 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR TO DATE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 34,599
<SECURITIES> 0
<RECEIVABLES> 197,869
<ALLOWANCES> 0
<INVENTORY> 74,921
<CURRENT-ASSETS> 109,123
<PP&E> 703,630
<DEPRECIATION> (33,987)
<TOTAL-ASSETS> 1,463,553
<CURRENT-LIABILITIES> 235,471
<BONDS> 0
0
0
<COMMON> 228
<OTHER-SE> 484,990
<TOTAL-LIABILITY-AND-EQUITY> 1,463,553
<SALES> 452,389
<TOTAL-REVENUES> 452,389
<CGS> 387,441
<TOTAL-COSTS> 387,441
<OTHER-EXPENSES> 23,838
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,953
<INCOME-PRETAX> 33,157
<INCOME-TAX> 13,258
<INCOME-CONTINUING> 19,899
<DISCONTINUED> 0
<EXTRAORDINARY> 2,434
<CHANGES> 0
<NET-INCOME> 17,465
<EPS-PRIMARY> .95
<EPS-DILUTED> .95
</TABLE>
