10-K 1 v432044_10-k.htm FORM 10-K

  

  

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

Form 10-K



 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the fiscal year ended:   Commission file number:
December 31, 2015   001-34903


 

TOWER INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)



 

 
Delaware   27-3679414
(State of Incorporation)   (IRS Employer Identification Number)

 
17672 Laurel Park Drive North, Suite 400 E
Livonia, Michigan
  48152
(Address of Principal Executive Offices)   (Zip Code)

Registrant's telephone number, including area code: (248) 675-6000



 

Securities registered pursuant to Section 12(b) of the Act:

 
Title of each class   Name of each exchange on which registered
Common Stock, par value $.01 per share   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None



 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15d of the Act.Yes o No x

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

     
Large accelerated filer x   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x

The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price of the common stock as of the closing of trading on June 30, 2015, was approximately $527,349,271.

There were 21,111,610 shares of the registrant’s common stock outstanding at February 22, 2016.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions, as expressly described in this report, of the Registrant’s Proxy Statement for the 2016 Annual Meeting of Stockholders are incorporated by reference into Part III.

 

 


 
 

TABLE OF CONTENTS

TOWER INTERNATIONAL, INC. — FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015
 
TABLE OF CONTENTS

 
  10-K
Pages
PART I
        

Item 1.

Business

    1  

Item 1A.

Risk Factors

    12  

Item 1B.

Unresolved Staff Comments

    21  

Item 2.

Properties

    21  

Item 3.

Legal Proceedings

    22  

Item 4.

Mine Safety Disclosures

    22  
PART II
        

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

    23  

Item 6.

Selected Financial Data

    24  

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

    25  

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

    51  

Item 8.

Financial Statements and Supplementary Data

    53  

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

    100  

Item 9A.

Controls and Procedures

    100  

Item 9B.

Other Information

    102  
PART III
        

Item 10.

Directors, Executive Officers, and Corporate Governance

    103  

Item 11.

Executive Compensation

    103  

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

    103  

Item 13.

Certain Relationships and Related Transactions, and Director Independence

    103  

Item 14.

Principal Accounting Fees and Services

    104  
PART IV
        

Item 15.

Exhibits and Financial Statement Schedules

    105  
Signatures
        
Exhibit Index
        
Exhibits
        
EX-21
        
EX-23
        
EX-31.1
        
EX-31.2
        
EX-32.1
        
EX-32.2
        
EX-101.DEF
        
EX-101.INS
        
EX-101.SCH
        
EX-101.CAL
        
EX-101.LAB
        
EX-101.PRE
        

i


 
 

TABLE OF CONTENTS

PART I

Item 1. Business

Our Company

We are a leading global manufacturer of engineered automotive structural metal components and assemblies primarily serving original equipment manufacturers (“OEMs”). We offer our automotive customers a broad product portfolio, supplying body-structure stampings, frame and other chassis structures, and complex welded assemblies for small and large cars, crossovers, pickups, and sport utility vehicles (“SUVs”).

Our products are manufactured at 27 facilities, strategically located near our customers in North America, Europe, Brazil and China. We support our manufacturing operations through seven engineering and sales locations around the world. We are a disciplined, process-driven company with an experienced management team that has a history of implementing sustainable operational improvements. For the year ended December 31, 2015, we generated revenues of $2 billion and net income attributable to Tower International, Inc. of $194.1 million. In addition, we had Adjusted EBITDA of $190.7 million and an Adjusted EBITDA margin of 9.8% for the year ended December 31, 2015. (Item 7 of this Annual Report and Note 14 to our Consolidated Financial Statements include a discussion of Adjusted EBITDA as a non-GAAP measure).

We believe that our engineering, manufacturing, and program management capabilities, our competitive cost and quality, our financial discipline, and our colleague engagement position us for long-term success.

Our History and Corporate Structure

Our Corporate History

On October 15, 2010, our common stock began trading on the New York Stock Exchange following our initial public offering (“IPO”). On July 31, 2013, Tower International Holdings, LLC, an affiliate of Cerberus, completed the sale of 7,888,122 shares of our common stock in a secondary public offering. Upon completion of the sale, Cerberus no longer controlled a majority of our outstanding common stock and therefore, we ceased being a “controlled company” within the meaning of the New York Stock Exchange corporate governance standards. On November 6, 2013, Tower International Holdings, LLC, completed the sale of 3,000,000 shares of our common stock in another secondary public offering. In addition, Tower International Holdings, LLC completed multiple transactions during the fourth quarter of 2013 whereby it sold additional shares of our common stock in the open market. As a result of these sales, Tower International Holdings, LLC and Cerberus held no shares of our common stock at December 31, 2013.

Sale of China Joint Ventures

On December 6, 2015, the Company completed the sale of our equity interest in our Xiangtan DIT Automotive Products Co. and Ltd. (“Xiangtan”) joint venture. The sale agreement provided for the repayment of $9.9 million of the Company’s shareholder loans to the joint venture, and the purchase of the Company’s equity in the joint venture for $3.5 million, net of tax.

On December 31, 2015, the Company completed the sale of our equity interest in our Changchun Tower Golden Ring Automotive Products Co., Ltd. (“TGR”) joint venture. The sale agreement provided for the purchase of the Company’s equity in the joint venture for $29.4 million, and the payment of a dividend of $14.8 million, net of tax.

As of December 31, 2015, all proceeds from both transactions were received. Both TGR and Xiangtan have been presented as discontinued operations in our Consolidated Financial Statements, in accordance with FASB ASC No. 205, Discontinued Operations.

Sale of Brazil Facility

On December 21, 2015, the Company sold one of its two operations in Brazil. Net cash proceeds from this sale were $9.5 million. This operation did not meet the criteria to be considered held for sale in accordance with FASB ASC No. 360, Property, Plant, and Equipment, and was not presented as discontinued operations in our Consolidated Financial Statements, in accordance with FASB ASC No. 205, Discontinued Operations.

Potential Sale of European Operations

On November 10, 2015, the Company announced plans to investigate the potential sale of our European Operations (“Tower Europe”). Tower Europe generated revenues of $652.6 million (€587.8 million),

1


 
 

TABLE OF CONTENTS

$767.9 million (€576.9 million), and $798 million (€577.5 million) for the years ended December 31, 2015, 2014, and 2013, respectively. Regarding the potential sale of Tower Europe, multiple strategic bidders have been invited to continue in the bid process, based on indicative, non-binding offers received before year-end. The process remains on track for the Company to reach a go/no-go decision by about late first quarter 2016. No further status updates are presently contemplated prior to reaching and announcing the final outcome. There is, of course, no assurance that a sale will be completed on terms that the Company deems superior to the option of retaining and operating the European business.

Our Industry

We believe OEMs produce a majority of their structural metal components and assemblies internally. While OEM policies differ and may be especially impacted by their own capacity utilization, the capital expenditures associated with internal production can be substantial. Because of this capital and fixed cost-intensity, we believe that longer term, OEMs will outsource a greater proportion of their stamping requirements and we may benefit from this shift in our customer’s preferences. In addition, we believe OEMs will increasingly favor larger, more capable, financially strong regional suppliers. Given our manufacturing, engineering, and operational program management capabilities, we believe we are particularly well-positioned in North America to take advantage of these potential opportunities.

Our Strategy

We seek to:

Execute a business model that generates sustainable ongoing adjusted free cash flow, providing flexibility for capital allocation and resilience during cyclical downturns;
Achieve organic growth above industry levels through strong competitive capabilities in engineering, manufacturing, and program management that contribute to leading positions in cost and quality;
Opportunistically pursue accretive acquisitions;
Achieve and maintain appropriate net debt leverage of about 1 times Adjusted EBITDA, which we consider to be integral to a financially strong and capable automotive parts supplier;
Return capital to shareholders through regular dividends and, when appropriate, other actions; and
Manage risk through financial discipline.

Execute Business Model Focused on Adjusted Free Cash Flow

Adjusted free cash flow (defined as net cash provided by operating activities less cash disbursed for purchases of property, plant, and equipment, excluding cash received or disbursed for customer tooling) is one of our most important financial metrics. Our focus on sustainable ongoing adjusted free cash flow keeps us disciplined regarding product pricing and margins, as well as determining and prioritizing affordable capital expenditures. To further our alignment with our business model, adjusted free cash flow is a major component of our annual bonus program for salaried and hourly colleagues. (Item 7 of this Annual Report includes a discussion of free cash flow and adjusted free cash flow as non-GAAP measures.)

We estimate that the demonstrated present capability of our business model (at normalized conditions) generates positive adjusted free cash flow equal to about 3% of revenues. This is the approximate level achieved in 2015 and targeted for 2016, prior to deploying capital to support major new business awarded in 2015. When these programs are at full production, we are targeting adjusted free cash flow equal to 4% of revenues.

Achieve Organic Growth Above Industry and Opportunistically Pursue Accretive Acquisitions

We have demonstrated the ability to win significant net new business from our customers from a combination of share gains from competitors via conquest wins, OEM outsourcing, and new models. We believe our ability to win new business at a return in excess of our cost of capital is a direct reflection of our core engineering strength, competitive cost and quality, and proven ability to manage complex new-model launches for OEM customers. We use processes such as Lean Six Sigma, labor best practices standardization, and advanced product quality planning (APQP) to drive productivity and quality while managing new programs on time and on budget.

2


 
 

TABLE OF CONTENTS

We believe Tower is positioned for organic growth well above industry through at least 2017 as a result of major new business awards in North America in 2015 that are anticipated to provide about $240 million of annual ongoing revenue. We also believe there can be future upside growth opportunities from accretive acquisitions. During 2015, Tower completed the accretive acquisition of a small stamping company in the high-growth Mexico market.

Achieve and Maintain Appropriate Leverage

Achieving and maintaining net debt leverage (defined as total debt less cash and cash equivalents divided by annual Adjusted EBITDA) at our target of 1 times Adjusted EBITDA is an important business priority for optimizing cost of capital and maintaining appropriate financial strength. As of December 31, 2015, our net debt was $306 million, representing net debt leverage of 1.6 times, a decrease of 0.1 times from a year ago. Potential additional asset sales may accelerate the achievement of our leverage target. (Item 7 of this Annual Report includes a discussion of net debt as a non-GAAP measure.)

Return Capital to Shareholders

With our long-term leverage target in sight, we are now in a position to begin returning capital to shareholders. During 2015, Tower initiated a quarterly dividend of 10 cents per share. In the future, we may initiate other actions.

Manage Risk

We consider risk management to be an important part of our ability to operate predictably and successfully in the cyclical automotive parts industry. Foremost in managing risk is financial discipline, beginning during the evaluation and approval of new programs to ensure sound assumptions and projected returns in excess of our cost of capital. During each year, we carefully monitor and manage all elements of cost, with an objective of achieving productivity and other savings that offset customer price reductions and labor and overhead inflation. Through our commercial agreements, we are largely shielded from changes in steel prices.

Customer and Vehicle Portfolio

We believe we have a well diversified customer mix, as eight different OEMs individually accounted for 5% or more of our revenues in 2015. The following table summarizes our customer mix as a percent of revenues for the year ended December 31, 2015.

 
Customer  
Ford     25 % 
Chrysler     16 % 
VW Group     12 % 
Fiat     8 % 
Volvo     7 % 
Nissan     7 % 
Toyota     6 % 
Daimler     5 % 
Chery     4 % 
BMW     2 % 
Honda     2 % 
Other     6 % 
Total     100 % 

3


 
 

TABLE OF CONTENTS

Geographic Regions

The following table summarizes our geographic mix as a percent of revenues for the year ended December 31, 2015.

 
Region  
North America     59 % 
Europe     33 % 
South America     4 % 
Asia     4 % 
Total     100 % 

Platform Diversification

We supply products for approximately 170 vehicles globally to 11 of the 12 largest global OEMS, reflecting the balanced portfolio approach of our business model and the breadth of our product capabilities. The following table summarizes our vehicle platform mix as a percent of revenues for the year ended December 31, 2015.

 
Vehicle Platform  
Light trucks     29 % 
Small cars     28 % 
Large cars     19 % 
North American framed vehicles     18 % 
Other (primarily Tier 2)     6 % 
Total     100 % 

IHS Automotive® (“IHS”) classifies these vehicle platforms as:

“Light trucks” refers to SUVs that are based on a unibody structure, minivans, and light trucks in the international regions;
“Small cars” refers to passenger cars that are classified in the smallest three of IHS’s four categories of passenger cars;
“Large cars” refers to the largest category of passenger cars, multi-purpose vehicles, and cross-over vehicles that are based on a unibody structure; and
“North American framed vehicles” refers to vehicles, such as pick-up trucks and SUVs, which are built on a full-frame structure.
“Tier 2” refers to other suppliers (who then supply to OEM customers.)

The reports prepared by IHS referred to in this Annual Report are subscription-based. All references in this report to historical industry production volumes, projections, estimates, or other data attributable to IHS, are based on data available from the IHS January 2016 forecast.

4


 
 

TABLE OF CONTENTS

Our Products

We produce a broad range of structural components and assemblies, many of which are critical to the structural integrity of a vehicle. Images of some of the products we offer are presented below.

Product Offerings

[GRAPHIC MISSING]

Body structures and assemblies

Body structures and assemblies form the basic upper body structure of the vehicle and include structural metal components such as body pillars, roof rails, and side sills. This category also includes Class A surfaces and assemblies, which are components of the “exterior skin” of the vehicle — body sides, hoods, doors, fenders, and pickup truck boxes. These components form the appearance of the vehicle, requiring flawless surface finishes.

Chassis and lower vehicle structures

Lower vehicle frames and structures include chassis structures that make up the “skeleton” of a vehicle and which are critical to overall performance, particularly in the areas of noise, vibration and harshness, handling, and crash management. These products include pickup truck and SUV full frames, automotive engine and rear suspension cradles, floor pan components, and cross members that form the basic lower body structure of the vehicle. These heavy gauge metal stampings carry the load of the vehicle, provide crash integrity, and are critical to the strength and safety of vehicles.

Complex body-in-white assemblies

Complex body-in-white assemblies are comprised of multiple components and sub-assemblies welded to form major portions of the vehicle’s body structure. We refer to body-in-white as the manufacturing stage in which the vehicle body sheet metal has been assembled but before the components and trim have been added. Examples of complex assemblies include front and rear floor pan assemblies and door/pillar assemblies.

5


 
 

TABLE OF CONTENTS

Product mix

We believe we have a diversified product group mix, as each of our product groups individually accounted for 15% or more of our revenues in 2015. The following table summarizes our product group mix as a percent of revenues for the year ended December 31, 2015:

 
Product Group  
Body structures and assemblies     60 % 
Complex body-in-white assemblies     24 % 
Chassis and lower vehicle structures     16 % 
Total     100 % 

The following table presents the major vehicle models for which we supply products:

   
OEM   Models   Product Type
North America
         
Ford   Econoline   Frame Assembly
     Explorer   Complex Assembly
     Expedition/Navigator   Body Structures
     F-Series   Frame Assembly/Body Structures
     Focus   Body Structures
     Taurus/MKS   Complex Assembly
     Escape   Body Structures & Complex Assembly
     C-Max   Body Structures
Chrysler   Grand Caravan/Town & Country   Body Structures
     Grand Cherokee/Durango Wrangler   Body Structures
Frame Assembly
     Dart   Body Structures
     200   Body Structures
     Cherokee   Body Structures
Nissan   Frontier   Body Structures & Frame Assembly
     NV Series   Frame Assembly
     Titan   Frame Assembly
     Altima   Body Structures
Toyota   Camry   Body Structures
     Corolla   Body Structures
     Tacoma   Body Structures
Honda   Accord   Body Structures
Europe
         
Volvo   V40/S60/XC60   Complex Assembly
VW   Touareg   Body Structures & Complex Assembly
     Caddy Van   Body Structures
     Citigo/Mii/Up!   Body Structures
     Octavia   Body Structures
     Superb   Body Structures
     Fabia   Body Structures
Porsche   Macan   Body Structures
     Cayenne   Body Structures & Complex Assembly

6


 
 

TABLE OF CONTENTS

   
OEM   Models   Product Type
Europe (continued)
         
BMW   1/3 Series   Body Structures
Daimler   Sprinter   Body Structures & Complex Assembly
Fiat   500   Body Structures
     500X   Body Structures
     Ducato   Body Structures
     Giuletta   Body Structures
     Punto   Body Structures
     Renegade   Body Structures
Opel   Astra   Body Structures
China
         
Chery   A3   Chassis
     Cowin 3   Chassis
     Tiggo   Chassis
South America
         
VW   Gol   Body Structures
     Fox   Body Structures
     Saveiro   Body Structures
     Up!   Body Structures
Honda   Civic   Body Structures
     Fit   Body Structures
     City   Body Structures
PSA   Picasso   Body Structures

International Operations

We have significant manufacturing operations outside the United States. In 2015, 42% of our revenues originated outside the United States. For information regarding potential risks associated with our international operations, see Risk Factors Relating to Our Industry and Our Business — “Our substantial international operations make us vulnerable to risks associated with doing business in foreign countries”. See Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 14 to our Consolidated Financial Statements for further information regarding our international operations.

Manufacturing and Operations

Our manufacturing operations consist primarily of stamping and welding operations, system and modular assembly operations, coating, and other ancillary operations. Stamping involves passing metal through dies in a stamping press to form the metal into three-dimensional parts. We produce stamped parts using precision single-stage, progressive, and transfer presses, ranging in size from 100 to 4,500 tons, which perform multiple functions to convert raw material into finished products. We invest in our press technology to increase flexibility, improve safety, and minimize die changeover time.

We feed stampings into assembly operations that produce complex assemblies through the combination of multiple parts that are welded or fastened together. Our assembly operations are performed on either dedicated, high-volume welding/fastening machines or on flexible, cell-oriented robotic lines. The assembly machines attach additional parts, fixtures, or stampings to the original metal stampings. In addition to standard production capabilities, our assembly machines are also able to perform various statistical control functions and identify improper welds and attachments.

Our products use various grades and thicknesses of steel and aluminum, including high-strength, hot- and cold-rolled, galvanized, organically coated, stainless, and aluminized steel. Although changing steel prices

7


 
 

TABLE OF CONTENTS

affect our results, we seek to be neutral with respect to steel pricing over time, with the intention of neither making nor losing money as steel prices fluctuate. The pricing of our products includes a component for steel which can increase as steel prices increase and decrease as steel prices decrease. For our North American customers and several of our other customers, we purchase steel through our customers’ resale programs, where our customers actually negotiate the cost of steel for us. In other cases, we procure steel directly from the mills, negotiating our own price and seeking to pass through steel price increases and decreases to our customers.

We focus on achieving superior product quality at the lowest operating costs possible and concentrate on improving our manufacturing processes to drive out inefficiencies. We seek to continually improve our processes through efforts to improve our cost competitiveness and achieve higher quality.

We are committed to sustaining Lean Six Sigma principles throughout our manufacturing processes and as of December 31, 2015, we employed 91 certified black belts. We utilize Lean Six Sigma principles to increase the efficiency of our operations and to reduce operating costs, thereby improving our cost competitiveness. We have accomplished efficiency improvements, while at the same time improving our quality.

Supply Base — Manufactured Components and Raw Materials

We purchase various manufactured components and raw materials for use in our manufacturing processes. All of these components and raw materials are available from numerous sources. We employ just-in-time manufacturing and sourcing systems, enabling us to meet customer requirements for faster deliveries, while minimizing our need to carry significant inventory levels. The primary raw material used to produce the majority of our products is steel. A portion of our steel is purchased from certain of our customers through various OEM resale programs. The remainder of our steel purchasing requirements is met through contracts with steel producers and market purchases. In addition, we procure small- and medium-sized stampings, fasteners, tubing, and rubber products.

Sales, Marketing, and Distribution

Our sales and marketing efforts are designed to create awareness of our engineering, program management, manufacturing and assembly expertise, and to translate our leadership position into contract wins. We have developed a sales team that consists of an integrated group of professionals, including skilled engineers and program managers, whom we believe provide the appropriate mix of operational and technical expertise needed to interface successfully with OEMs. We sell directly to OEMs through our sales and engineering teams at our technical centers, which are strategically located around the world. Bidding on automotive OEM platforms typically encompasses many months of engineering and business development activity. We integrate our sales force directly into our operating team and work closely with our customers throughout the process of developing and manufacturing a product. Our proximity to our customer base enables us to enjoy close relationships with our customers and positions us well to seek future business awards.

Customers

We have developed long-standing business relationships with our automotive customers around the world. We work together with our customers in various stages of production, including development, component sourcing, quality assurance, manufacturing, and delivery. With a diverse mix of products and facilities in major markets worldwide, we believe we are well-positioned to meet customer needs. We believe we have a strong, established reputation with customers for providing high-quality products at competitive prices, as well as for timely delivery and customer service. Given that the automotive OEM business involves long-term production contracts awarded on a platform-by-platform basis, we believe that we can leverage our strong customer relationships to obtain new platform awards. Contracts are typically sole-sourced to one supplier for individual platforms.

8


 
 

TABLE OF CONTENTS

Customer Support

We have seven engineering and sales locations throughout the world, including a 24-hour engineering support center in India. We believe that we provide effective customer solutions, products, and service to our customers. Our customer service group is organized into customer-dedicated teams within regions to provide more focused service to our clients.

Seasonality

Our customers in North America and Europe typically shut down vehicle production during portions of July - August and for one week in late December. Our quarterly results of operations, cash flows, and liquidity may be impacted by these seasonal practices. For example, working capital is typically a use of cash during the first quarter of the year and a source of cash generation in the fourth quarter. See Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion on working capital.

Competition

We principally compete for new business at the beginning of the development of new models and on the redesign of existing models. New-model development generally begins two to three years before the marketing of such models to the public. Once a supplier has been designated to supply parts for a new program, an OEM will usually continue to purchase those parts from the designated producer for the life of the program, although not necessarily for a major redesign. OEMs typically evaluate suppliers based on many criteria such as quality, price/cost competitiveness, system and product performance, reliability and timeliness of delivery, new product and technology development capability, excellence and flexibility in operations, location relative to the customer’s assembly plant, effectiveness of customer service, and overall management capability.

We believe that we compete effectively with other leading suppliers in our sector. Our main tier one competitors include: Magna International, Inc. (Cosma division), Gestamp Automocion, Martinrea International, Metalsa, S.A. de C.V., Gruppo Magnetto, and Benteler Automotive. We compete with other competitors with respect to certain of our products and in particular geographic markets. The number of our competitors has decreased in recent years and we believe that number will continue to decline due to supplier consolidation. In addition, most of our OEM customers manufacture similar products that compete with our products. We believe the recent trend has been for OEMs, on average, to increase outsourcing, and we expect that trend to continue, which may provide above-industry growth opportunities for key suppliers like Tower.

Joint Ventures

As of December 31, 2015, we had two joint ventures in China. One of the joint ventures is consolidated; the other is accounted for as a cost method investment.

Employees

As of December 31, 2015, we had approximately 8,300 employees worldwide, of whom approximately 5,100 were covered under collective bargaining agreements that expire at various times. We are not aware of any work stoppages since the formation of Tower Automotive Inc., our predecessor (the “Predecessor Company”), in 1993. A strike or slow-down by one of our unions could have a material adverse effect on our business. We believe that our relations with our employees are satisfactory.

Environmental Matters

We are subject to various domestic and foreign federal, state and local laws and regulations governing the protection of the environment and health and safety, including those regulating the following: soil, surface water, and groundwater contamination; the generation, storage, handling, use, disposal, and transportation of hazardous materials; the emission and discharge of materials, including greenhouse gases (“GHGs”) into the environment; and the health and safety of our employees. We are also required to obtain environmental permits from governmental authorities for certain operations. We have taken steps to comply with the numerous and sometimes complex laws, regulations, and permits. We have also achieved ISO 14001 registration for substantially all of our facilities, which means we have implemented environmental management systems to improve our environmental performance. Compliance with environmental

9


 
 

TABLE OF CONTENTS

requirements has not had a material impact on our capital expenditures, earnings, or competitive position and we have made, and will continue to make, capital and other expenditures pursuant to such requirements. If we violate or fail to comply with these requirements, we could be subject to fines, penalties, enforcement actions, or lawsuits.

Environmental laws, regulations, and permits, and the enforcement thereof, change frequently and have become more stringent over time. In particular, more rigorous GHG emission requirements are in various stages of development. For example, the United States Environmental Protection Agency (“U.S. EPA”) has promulgated the GHG Reporting Rule, which requires reporting of GHG data and other relevant information from large sources and suppliers in the United States and the GHG Tailoring Rule, which requires certain facilities with significant GHG emissions to obtain emissions permits under the authority of the Clean Air Act (typically limited to only the largest stationary sources of GHGs.) The United States Congress has also considered imposing additional restrictions on GHG emissions. Any additional regulation of GHG emissions by either the United States Congress and/or the U.S. EPA could include a cap-and-trade system, technology mandate, emissions tax, reporting requirement, or other program, and could subject us to significant costs, including those relating to emission credits, pollution control equipment, monitoring, and reporting, as well as increased energy and raw material prices. In addition, our OEM customers may seek price reductions from us to account for their increased costs resulting from GHG regulations. Further, growing pressure to reduce GHG emissions from mobile sources could reduce automobile sales, thereby reducing demand for our products, and ultimately our revenues. At this time, none of our facilities are required to report GHG emissions or participate in any cap-and-trade system programs under the existing regulatory scheme. However, there is still significant uncertainty surrounding the scope, timing, and effect of future GHG regulation, and any changes to the current laws or regulations could have a material adverse impact on our business, financial condition, results of operations, reputation, product demand, and liquidity.

We are also responsible for certain costs relating to contamination at our, or the Predecessor Company’s, current or formerly owned or operated properties or third party waste disposal sites, even if we are not at fault. Certain locations have been impacted by environmental releases and soil or groundwater contamination is being addressed at certain of these sites. In addition to potentially significant investigation and remediation costs, contamination can give rise to third party claims, including fines or penalties, natural resource damages, personal injury, or property damage. Our costs and liabilities associated with environmental contamination could be substantial and may be material to our business, financial condition, results of operations, or cash flows. Refer to Note 15 to our Consolidated Financial Statements for information regarding our environmental liabilities.

Segment Overview

Refer to Note 14 to our Consolidated Financial Statements for information regarding our operating and reportable segments.

Public Information

We maintain a website at http://www.towerinternational.com. We will make available on our website, free of charge, the proxy statements and reports on Forms 8-K, 10-K, and 10-Q that we file with the United States Securities and Exchange Commission (“SEC”) as soon as reasonably practicable, after such material is electronically filed with, or furnished to, the SEC. Additionally, we have adopted and posted on our website a Code of Business Conduct and Ethics that applies to, among other people, our principal executive officer, principal financial officer, and principal accounting officer. We intend to disclose any waivers of the Code of Business Conduct and Ethics on our website. We will provide, free of charge, a copy of our Code of Business Conduct and Ethics to any person who requests a copy. All such requests should be directed to our Executive Director, Investor & External Relations, c/o Tower International, Inc., 17672 Laurel Park Drive North, Suite 400 E, Livonia, Michigan 48152. Except as otherwise stated, the information contained on our website or available by hyperlink from our website is not incorporated into this Annual Report on Form 10-K or other documents we file with, or furnish to, the SEC.

10


 
 

TABLE OF CONTENTS

Disclosure Regarding Forward-Looking Statements

This Annual Report contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to trends in the operations, financial results, business and products of our Company, and anticipated production trends. The forward-looking statements can be identified by words such as “anticipate”, “believe”, “plan”, “estimate”, “expect”, “intend”, “project”, as well as other similar expressions and statements regarding our intent, belief, current plans, or expectations. Our forward looking statements also include, without limitation, statements regarding our anticipated future financial condition, operating results, free cash flows, adjusted free cash flows, net debt leverage, Adjusted EBITDA, and business and financing plans and models. Forward-looking statements are made as of the date of this report and are based upon management’s current expectations and beliefs concerning future developments and their potential effects on us. Such forward-looking statements are not guarantees of future performance. The following important factors, as well as those important factors described elsewhere in this Annual Report, including the matters set forth under the captions entitled “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk”, could cause our actual results to differ materially from estimates or expectations reflected in such forward-looking statements:

global automobile production volumes;
the financial condition of our customers and suppliers;
our ability to make scheduled payments of principal or interest on our indebtedness and comply with the covenants and restrictions contained in the instruments governing our indebtedness;
our ability to refinance our indebtedness;
risks associated with non-U.S. operations, including foreign exchange risks and economic uncertainty in some regions;
any increase in the expense and funding requirements of our pension and postretirement benefits;
our customers’ ability to obtain equity and debt financing for their businesses;
our dependence on our large customers;
pricing pressure from our customers;
our ability to integrate acquired businesses;
risks associated with business divestitures including volatility in the capital markets, the capacity of potential bidders to finance transactions and the difficulty of predicting the outcome of negotiations; and
costs or liabilities related to environmental and safety regulations.

Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

This Annual Report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified the statistical and other industry data generated by independent parties that are contained in this Annual Report and, accordingly, we cannot assure you of the accuracy or completeness of such data. In addition, projections, assumptions, and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk.

11


 
 

TABLE OF CONTENTS

Item 1A. Risk Factors

Our business is subject to a number of risks. In addition to the various risks described elsewhere in this Annual Report, the following risk factors should be considered.

Risk Factors Relating to Our Industry and Our Business

A downturn in the global economy could adversely affect demand for automobiles that are manufactured with our products and therefore, could adversely affect our business, financial condition, results of operations, and cash flows.

The level of demand for our products depends primarily upon the level of consumer demand for new vehicles that are manufactured with our products. As experienced in 2008 and 2009, a global economic recession can have a significant adverse effect on our business, customers, and suppliers, and can contribute to delayed and reduced purchases of automobiles, including those manufactured with our products. If the global economy were to undergo a significant downturn, depending upon its length, duration, and severity, our financial condition, results of operations, and cash flow could be materially adversely affected.

Demand for and pricing of our products is also subject to economic conditions and other factors (e.g., energy costs, fuel costs, climate change concerns, vehicle age, consumer spending and preferences, materials used in production, changing technology, etc.) present in the various domestic and international markets in which our products are sold.

Our substantial international operations make us vulnerable to risks associated with doing business in foreign countries.

Our international operations include manufacturing facilities in Europe, China, Brazil, and Mexico. For the year ended December 31, 2015, approximately 42% of our revenues were derived from operations outside the United States. Our International operations are subject to various risks that could have a material adverse effect on those operations and our business as a whole, including, but not limited to, exposure to the following in certain locations:

local economic and political conditions;
local civil and social unrest, including any resultant acts of war, terrorism or similar events;
local public health issues;
local tax requirements and obligations;
foreign currency exchange rate fluctuations;
high inflationary conditions;
the risk of government-sponsored competition;
legal and regulatory concerns, including difficulty enforcing agreements and collecting receivables;
controls on the repatriation of cash, including the imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries;
export and import restrictions;
the ability to attract and retain qualified personnel;
labor disruptions and operational shutdowns;
natural and man-made disasters; and
local environmental regulations.

Additionally, the economic instability in Brazil and other countries in which we operate could adversely affect our business, financial condition, results of operations and cash flows, as well as adversely affect our access to, and cost of, capital.

12


 
 

TABLE OF CONTENTS

Our previously announced plans to investigate a sale of Tower Europe may not result in a consummated transaction.

On November 10, 2015, we announced that we were planning to investigate the potential sale of Tower Europe. We stated at that time that Tower Europe would only be sold if we receive a satisfactory offer. We do not presently anticipate making a further public statement regarding the status of this process before the end of the first quarter of 2016. We cannot provide any assurances at this time as to whether this process will result in a consummated transaction.

We may be unable to realize revenues represented by our awarded business, which could materially and adversely affect our business, financial condition, results of operations and cash flows.

The realization of future revenues from awarded business is inherently subject to a number of important risks and uncertainties, including the number of vehicles that our customers will actually produce, the timing of that production, and the mix of options that our customers may choose.

In addition to not having a commitment from our customers regarding the minimum number of products they must purchase from us if we obtain awarded business, the terms and conditions of the agreements with our customers typically provide that they have the contractual right to unilaterally terminate our contracts with them without notice or with only limited notice. If such contracts are terminated by our customers, our ability to obtain compensation from our customers for such termination is generally limited to the direct out-of-pocket costs that we incurred for raw materials and work-in-progress, and in certain instances, un-depreciated capital expenditures.

We base a substantial part of our planning on the anticipated lifetime revenues of particular products. We calculate the lifetime revenues of a product by multiplying our expected price for a product by the forecasted production volume for that product during the length of time we expect the related vehicle to be in production. In addition to applying our experienced judgement to customer projections, we use IHS, a third-party forecasting service, to provide long-term forecasts. If we over-estimate the production units or if a customer reduces its level of anticipated purchases of a particular platform as a result of reduced demand, our actual revenues for that platform may be substantially less than the lifetime revenues we had anticipated for that platform.

Typically, it takes two to three years from the time a manufacturer awards a program until the program is launched and production begins. In many cases, we must commit substantial resources in preparation for production under awarded customer business well in advance of the customer’s production start date. We cannot provide assurance that our results of operations will not be materially adversely affected in the future if we are unable to recover these types of pre-production costs related to our customers’ cancellation of awarded business.

We are dependent upon large customers for current and future revenues. The loss of any of these customers, or the loss of market share by these customers, could have a material adverse effect on us.

Our customers are major vehicle manufacturers. During 2015, our largest volume customers, Ford, Chrysler, Volkswagen, Fiat, Volvo, Nissan, Toyota, and Daimler, accounted for 25%, 16%, 12%, 8%, 7%, 7%, 6%, and 5% of our revenues, respectively. The loss of all or a substantial portion of our sales to any of our large-volume customers could have a material adverse effect on our business, financial condition, results of operations, and cash flows by reducing cash flows and limiting our ability to spread our fixed costs over a larger revenue base. A variety of reasons could lead to a reduction of sales to our customers, including, but not limited to:

loss of awarded business;
reduced or delayed customer requirements;
OEMs’ choosing to insource business that has been traditionally outsourced to us;
strikes or other work stoppages affecting customer production; or
reduced demand for our customers’ products.

13


 
 

TABLE OF CONTENTS

The automobile industry is highly cyclical and a downturn would adversely affect our business, financial condition, results of operations, and cash flows.

Our business is directly related to the volume of automotive production. Automotive production and sales are highly cyclical and depend on general economic conditions and other factors, including interest rates, consumer confidence, consumer preferences, patterns of consumer spending, fuel costs, and the automobile replacement cycle. Automotive production and sales may fluctuate significantly from year-to-year and such fluctuations may give rise to changes in demand for our products. Because we have significant fixed production costs, declines in our customers’ production levels can have a significant adverse effect on our results of operations.

The highly cyclical nature of the automotive industry presents a risk that is outside our control and that cannot be accurately predicted. Moreover, a number of factors that we cannot reasonably predict could affect cyclicality in the automotive industry, and have affected cyclicality in the past. Decreases in demand for automobiles generally, or decreases in demand for our products in particular, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Foreign exchange rate fluctuations could cause a decline in our financial condition, results of operations, and cash flows.

We generate a significant portion of our revenues and incur a significant portion of our expenses in currencies other than the U.S. dollar. Appreciation of the U.S. dollar against these foreign currencies will generally have an adverse effect on our reported sales and profits, while depreciation of the U.S. dollar against these foreign currencies will generally have a positive effect on reported revenues and profits.

We may use a combination of natural hedging techniques and financial derivatives to protect against certain foreign currency exchange rate risks. Such hedging activities may be ineffective or may not offset more than a portion of the adverse financial effect resulting from foreign currency variations. The gains or losses associated with hedging activities may adversely affect our results of operations.

On January 23, 2015, we terminated the existing cross currency swap entered into on October 17, 2014 and then we entered into a €178 million cross currency swap based on the U.S. Dollar/Euro exchange rate of $1.1265 which was the prevailing rate at the time of the transaction to hedge our net investment in our European subsidiaries. The maturity date for this swap instrument was April 16, 2020. The Euro notional amount was increased from €157.1 million to €178 million and the interest rate was lowered from 3.97% to 3.70%, per annum.

On March 13, 2015, we terminated the existing cross currency swap entered into on January 23, 2015 and then we entered into a new cross currency swap based on the U.S. dollar/Euro exchange spot rate of $1.0480. The maturity date for this swap instrument is April 16, 2020. The Euro notional amount remained the same but the interest rate was lowered from 3.70% to 3.40% per annum. Refer to Note 8 to our Consolidated Financial Statements for further information regarding this foreign currency swap transaction.

Deterioration in the United States and world economies could adversely affect our customers’ and suppliers’ ability to access the capital markets, which may affect our business, financial condition, results of operations, and cash flows.

The capital and credit markets provide companies with liquidity to help operate and grow their businesses, beyond that which is provided by operating cash flows. Disruptions in the capital and credit markets could adversely affect our customers by making it increasingly difficult for them to obtain financing for their businesses and for their customers to obtain financing for automobile purchases. Our OEM customers typically require significant financing for their respective businesses. In addition, our OEM customers typically have related finance companies that provide financing to their dealers and customers. These finance companies have historically been active participants in the securitization markets, which experienced severe disruptions during the global economic crisis. Our suppliers, as well as the other suppliers to our customers, may face similar difficulties in obtaining financing for their businesses. If capital is not available to our customers or suppliers, or if the cost of capital is prohibitively high, their businesses would be adversely affected, which could result in their restructuring or even reorganization or liquidation under applicable bankruptcy laws. Any such adverse

14


 
 

TABLE OF CONTENTS

effect on our customers or suppliers could materially and adversely affect our Company, either through loss of revenues from any of our customers so affected, or due to our inability to meet our commitments without excess expense, as a result of disruptions in supply caused by the suppliers so affected.

Financial difficulties experienced by any of our major customers could have a material adverse effect on us if such customer were unable to pay for the products we provide or if we experienced a loss of, or material reduction in, business from such customer. As a result of such difficulties, we could experience lost revenues, significant write-offs of accounts receivable, significant impairment charges, or additional restructurings beyond the steps we have taken to date.

Any acquisitions or divestitures we make could disrupt our business and materially harm our financial condition, results of operations and cash flows.

We may, from time to time, consider certain acquisitions or divestitures. Acquisitions and divestitures involve numerous risks, including identifying attractive target acquisitions, undisclosed risks affecting the target, difficulties integrating acquired businesses, the assumption of unknown liabilities, potential adverse effects on existing business relationships with current customers and suppliers, the diversion of our management’s attention from other business concerns, and decreased geographic or customer diversification.

We cannot provide assurance that any acquisitions or divestitures will perform as planned or prove to be beneficial to our operations and cash flow, or that we will be able to successfully integrate any acquisitions that we undertake. Any such failure could seriously harm our financial condition, results of operations and cash flows.

We sponsor a defined benefit pension plan that is underfunded and requires annual cash payments. If the performance of the assets in our pension plan does not meet our expectations, or if other actuarial assumptions are modified, our required contributions may be higher than we expect.

We sponsor a defined benefit pension plan that is underfunded. While this plan is frozen as benefit accruals under the plan have ceased, the plan will require annual cash payments in order to meet our funding obligations, which adversely affects our cash flow.

Additionally, our earnings may be affected by the amount of income or expense recorded for our pension plan. GAAP requires that income or expense of a pension plan be calculated at the annual measurement date using actuarial assumptions, the most significant of which relate to the capital markets, interest rates, and other economic conditions. Changes in key economic indicators can change these assumptions. These assumptions, along with the actual value of assets at the measurement date, will impact the calculation of pension expense for the year. Although GAAP expense and pension contributions are not directly related, the key economic indicators that affect GAAP expense also affect the amount of cash that we would contribute to our pension plan. The investment portfolio of the pension plan has experienced volatility. Because the values of these pension plan assets have fluctuated, and will fluctuate in response to changing market conditions, the amount of gains or losses that will be recognized in subsequent periods, the impact on the funded status of the pension plan, and the future minimum required contributions, if any, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The decreasing number of automotive parts suppliers and pricing pressures from our automotive customers could make it more difficult for us to compete in the highly competitive automotive industry.

The automotive parts industry is highly competitive and bankruptcies and consolidation among automotive parts suppliers are reducing the number of competitors and resulting in larger competitors who benefit from purchasing and distribution economies of scale. Our inability to compete with these larger suppliers in the future could result in a reduction of, or inability to increase, revenues, which would materially adversely affect our business, financial condition, results of operations, and cash flows.

Although the overall number of competitors is decreasing due to ongoing industry consolidation, we face significant competition within each of our major product areas. The principal competitive factors include quality, global presence, service, cost, product performance, design and engineering capabilities, new product innovation, and timely delivery. We also face significant competitive pricing pressures from our automotive

15


 
 

TABLE OF CONTENTS

customers. Because of their purchasing size, our automotive customers can influence market participants to compete on price terms. If we are not able to offset pricing reductions resulting from these pressures by improving operating efficiencies and reducing expenditures, those pricing reductions may have a material adverse effect on our business.

We cannot provide assurance that we will be able to continue to compete in the highly competitive automotive industry or that increased competition will not have a material adverse effect on our business.

The volatility of steel prices may adversely affect our results of operations.

We utilize steel and various purchased steel products in virtually all of our products. We refer to the “net steel impact” as the combination of the change in steel prices that are reflected in the price of our products, the change in the cost to procure steel from mills, and the change in our recovery of scrap steel (which we refer to as “offal”.) Our strategy is to be economically neutral to steel pricing by having these factors offset each other. While we strive to achieve a neutral net steel impact, we are not always successful in achieving that goal, in large part due to timing differences. The timing of a change in the price for steel may occur in separate periods and if a change occurs, that change may have a disproportionate effect on our liquidity because of the time difference between our payment for steel and our collection of cash from customers. We tend to pay for replacement materials, which are more expensive when steel prices are rising, over a much shorter period. As a result, rising steel prices may cause us to draw greater than anticipated amounts from our credit lines to cover the cash flow cycle from our steel purchases to cash collection for related accounts receivable. This cash requirement for working capital is higher in periods when we are increasing our inventory quantities.

A by-product of our production process is the generation of offal. We typically sell offal in secondary markets, which are similar to the steel markets. We generally share our recoveries from sales of offal with our customers either through scrap sharing agreements, in cases in which we are participating in resale programs, or through product pricing, in cases in which we purchase steel directly from steel mills. In either situation, we may be affected by the fluctuation in scrap steel prices, either positively or negatively, in relation to our various customer agreements. As offal prices generally increase and decrease as steel prices increase and decrease, our sale of offal may mitigate the impact of the volatility of steel price increases, as well as limit the benefits reaped from steel price declines. Any volatility in offal and steel prices could materially adversely affect our business, financial condition, results of operations, and cash flows.

We have a material amount of goodwill, which, if it becomes impaired, would result in a reduction in our net income and equity.

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. GAAP requires that goodwill be periodically evaluated for impairment based upon the fair value of the reporting unit. As of December 31, 2015, we had $59.3 million of goodwill that could be subject to impairment. Declines in our profitability or the value of comparable companies may impact the fair value of our reporting units, which could result in a write-down of goodwill and a reduction of net income.

Disruptions in the automotive supply chain could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Automotive industry conditions could adversely affect the original equipment supply base. The automotive supply chain is subject to disruptions because we, along with our customers and suppliers, attempt to maintain low inventory levels.

Disruptions could result from a multitude of potential problems, such as the closure of one of our or our suppliers’ plants or critical manufacturing lines due to strikes, mechanical breakdowns, electrical outages, fires, explosions, or political upheaval. Disruptions could also result from logistical complications due to weather, earthquakes, or other natural or nuclear disasters, mechanical failures, technology disruptions, or delayed customs processing.

If we are the cause for a customer being forced to halt production, the customer may seek to recoup all of its losses and expenses from us. Any disruptions affecting us or caused by us could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

16


 
 

TABLE OF CONTENTS

The inability for us, our customers, or our suppliers to obtain and maintain sufficient credit insurance or capital financing, including working capital lines, may adversely affect the liquidity and financial condition of us, our customers, and our suppliers.

Our working capital requirements can vary significantly, depending, in part, on the level, variability and timing of our customers’ vehicle production and the payment terms we have with our customers and suppliers. Our liquidity could also be adversely affected if our suppliers were to suspend normal trade credit terms and require payment in advance or payment on delivery. If our available cash flows from operations are not sufficient to fund our ongoing cash needs, we would be required to look to our cash balances and borrowing availability under our credit facilities to satisfy those needs, as well as look to potential sources of additional capital, which may not be available on satisfactory terms or in adequate amounts, if at all.

There can be no assurance that we, our customers, or our suppliers will continue to have the ability to maintain sufficient capital financing. This may increase the risk of not being able to produce our products or having to pay higher prices for our inputs that may not be recovered in our selling prices. Our suppliers often seek to obtain credit insurance based on our consolidated financial condition and strength, which may be less robust. If we were to experience liquidity issues, our suppliers may not be able to obtain credit insurance and, in turn, would likely not be able to offer us payment terms that we have historically received, which could have a material adverse effect on our liquidity.

We may incur costs of a material nature related to plant closings, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

If we must close manufacturing locations because of lost business or consolidation of manufacturing facilities, the employee termination costs, asset retirements, and other exit costs associated with the closure of these facilities may be significant. In certain circumstances, we may close a manufacturing facility that is operated under a lease agreement and we may continue to incur material costs in accordance with the lease agreement. We attempt to align production capacity with demand; however, we cannot provide assurance that plants will not have to be closed.

Our operations in China are conducted through joint ventures, which have unique risks that could have a material adverse effect on our business and customer relationships.

We have two joint ventures in China. In our joint ventures, we share ownership and management of a company with one or more parties who may not have the same goals, strategies, priorities, or resources as we do and may compete with us outside the joint venture. Joint ventures are intended to be operated for the equal benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities as well as time-consuming procedures for sharing information and making decisions. In joint ventures, we are required to pay more attention to our relationship with our co-owners as well as with the joint venture, and if a co-owner changes or relationships deteriorate, our success in the joint venture could be materially adversely affected. The benefits from a successful joint venture are shared among the co-owners, so that we do not receive all the benefits from our successful joint ventures.

At one of the joint ventures, our joint venture partner is also affiliated with the largest customer of the joint venture. As such, these partners may negotiate on behalf of customers of the joint venture for sales terms that may not be in the best interest of the joint venture.

We are subject to environmental risks and requirements and we may incur significant costs, liabilities, and obligations associated with those risks and requirements.

We are subject to a variety of environmental and pollution control laws, regulations, and permits that govern, among other things, soil, surface water, and groundwater contamination; the generation, storage, handling, use, disposal, and transportation of hazardous materials; the emission and discharge of materials, including GHGs, into the environment; and health and safety. If we fail to comply with these laws, regulations, or permits, we could be fined or otherwise sanctioned by regulators or become subject to litigation. Environmental and pollution control laws, regulations, and permits, and the enforcement thereof, change frequently, have tended to become more stringent over time, and may necessitate substantial capital expenditures or operating costs.

17


 
 

TABLE OF CONTENTS

Under certain environmental requirements, we could be responsible for costs relating to any contamination at our, or the Predecessor Company’s, currently or formerly owned or operated properties or third-party waste-disposal sites, even if we were not at fault. Soil and groundwater contamination is being addressed at certain of these locations. In addition to potentially significant investigation and cleanup costs, contamination can give rise to third-party claims for fines or penalties, natural resource damages, personal injury, or property damage.

We cannot provide assurance that our costs, liabilities, and obligations relating to environmental matters will not have a material adverse effect on our business, financial condition, results of operations, and cash flows.

A disruption in our information technology systems, including a disruption related to cybersecurity, could adversely affect our financial performance.

We rely on the accuracy, capacity and security of our information technology systems. Despite the security measures that we have implemented, including those measures related to cybersecurity, our systems could be breached or damaged by computer viruses, natural or man-made incidents or disasters or unauthorized physical or electronic access. A breach could result in business disruption, theft of our intellectual property, trade secrets or customer information and unauthorized access to personnel information. To the extent that our business is interrupted or data is lost, destroyed or inappropriately used or disclosed, such disruptions could materially and adversely affect our competitive position, relationships with our customers, financial condition, operating results and cash flows. In addition, we may be required to incur significant costs to protect against the damage caused by these disruptions or security breaches in the future.

Risk Factors Relating to Our Indebtedness

We have a substantial amount of indebtedness, which could have a material adverse effect on our financial health and our ability to fund our operations, obtain financing in the future, and react to changes in our business.

As of December 31, 2015, our total debt, including capital lease obligations and net of debt issue costs, was $448.6 million. That indebtedness could:

adversely affect our stock price;
make it more difficult for us to satisfy our obligations under our financing arrangements;
increase our vulnerability to adverse economic and general industry conditions, including interest rate fluctuations, because a portion of our borrowings have, and will continue to have, variable interest rates;
require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which would reduce the availability of our cash flow from operations to fund working capital, capital expenditures or other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and industry;
place us at a disadvantage compared to competitors that may have proportionately less debt;
limit our ability to obtain additional debt or equity financing due to financial and restrictive covenants included in our debt agreements; and
increase our cost of borrowing.

Our primary debt instrument is the Term Loan Credit Facility which bears interest at (i) the Alternate Base Rate plus a margin of 2.00% or (ii) the Adjusted LIBO Rate (calculated by multiplying the applicable LIBOR by a statutory reserve rate, with a floor of 1.00%) plus a margin of 3.00%. As of December 31, 2015, the balance on the term loan was $415.9 million (net of a $1.2 million discount). If the LIBOR rates increase in excess of 1%, we will incur higher debt service requirements, which could adversely affect our cash flow and operating results. While we periodically enter into agreements designed to limit our exposure to higher interest rates, any such agreements do not offer complete protection from this risk.

18


 
 

TABLE OF CONTENTS

We may not be able to refinance our debt on commercially reasonable terms, if at all.

We cannot provide assurance that we will be able to refinance, extend the maturity of, or otherwise amend the terms of our existing indebtedness, or that any refinancing, extension, or amendment will be on commercially reasonable terms. The indebtedness issued in any refinancing of our existing indebtedness could have a significantly higher rate of interest and greater costs than our existing indebtedness. There can be no assurance that the financial terms or covenants of any new credit facility or other indebtedness issued to refinance our existing indebtedness will be the same or as favorable as those under our existing indebtedness.

Our ability to complete a refinancing of our existing indebtedness prior to their respective maturities is subject to a number of conditions beyond our control. For example, if a disruption in the financial markets were to occur at the time that we intended to refinance this indebtedness, we might be restricted in our ability to access the financial markets. Also, if we were unable to make payments or refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as:

sales of assets;
sales of equity; or
negotiations with lenders and their respective agents to restructure the applicable debt.

Our debt instruments may restrict, and market or business conditions may limit, our ability to employ some of our options.

In addition, under our credit agreements, a change in control may lead the lenders to exercise remedies such as acceleration of the loan, termination of their obligations to fund additional advances and collection against the collateral securing such loan.

We may be unable to generate sufficient cash to service all of our indebtedness and we may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations, certain of which have short-term maturities, depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions, as well as financial, business, and other factors beyond our control. We cannot provide assurance that we will maintain a level of cash flows from operating activities sufficient to permit us to pay or refinance our indebtedness.

Our debt instruments restrict our current and future operations.

The financing agreements governing our indebtedness impose significant operating and financial restrictions on us. These restrictions limit our ability and the ability of our subsidiaries to, among other things:

incur or guarantee additional debt, incur liens, or issue certain equity;
declare or make distributions to our stockholders, repurchase equity, or prepay certain debt;
make loans or certain investments;
make certain acquisitions of equity or assets;
enter into certain transactions with affiliates;
enter into mergers, acquisitions, or other business combinations;
consolidate, transfer, sell, or otherwise dispose of certain assets;
use the proceeds from sales of assets and stock;
enter into sale and leaseback transactions;
enter into restrictive agreements;
make capital expenditures;

19


 
 

TABLE OF CONTENTS

change our fiscal year;
amend or modify organizational documents; and
engage in businesses other than the businesses we currently conduct.

In addition to the restrictions and covenants listed above, certain of our financing documents require us, under certain circumstances, to comply with specified financial maintenance covenants. Any of these restrictions or covenants could limit our ability to plan for or react to market conditions or meet certain capital needs and could otherwise restrict our corporate activities.

Substantially all of our subsidiaries’ assets are pledged as collateral under our secured financing arrangements.

As of December 31, 2015, we had $448.6 million (net of $9 million debt issue costs associated with the Term Loan Credit Facility) of secured debt. Substantially all of our subsidiaries’ assets are pledged as collateral for our borrowings under our secured financing arrangements. Most of our domestic subsidiaries are either primary obligors or guarantors under a secured financing arrangement. Substantially all of our domestic subsidiaries’ assets are pledged as collateral for these obligations. If we are unable to repay all secured borrowings when due, whether at maturity or if declared due and payable following a default, the agent or the lenders, as applicable, would have the right to proceed against the collateral pledged to secure the indebtedness and may sell the assets pledged as collateral in order to repay those borrowings, which could have a material adverse effect on our businesses, financial condition, results of operations, and cash flows.

Risk Factors Relating to Our Common Stock

The price of our common stock may be volatile.

The price at which our common stock trades may be volatile due to a number of factors, including:

actual or anticipated fluctuations in our financial condition or annual or quarterly results of operations;
changes in investors’ or financial analysts’ perception of our business risks or condition of our business;
changes in, or our failure to meet, earnings estimates or other performance expectations of investors or financial analysts;
unfavorable commentary or downgrades of our stock by equity research analysts;
our success or failure in implementing our growth plans;
changes in the market valuations of companies viewed as similar to us;
changes or proposed changes in governmental regulations affecting our business;
changes in key personnel;
volume of our common stock trading in the market;
failure of securities analysts to cover our common stock;
future sales of our common stock; and
the granting or exercise of employee stock options or other equity awards.

Broad market fluctuations may result in a material decline in the market price of our common stock and you may not be able to sell your shares at prices you deem acceptable. In the past, following periods of volatility in the equity markets, securities class action lawsuits have been instituted against public companies. Such litigation, if instituted against us, could result in substantial cost and the diversion of management attention.

20


 
 

TABLE OF CONTENTS

Shares eligible for future sale may cause the market price of our common stock to decline, even if our business is doing well.

Sales of substantial amounts of our common stock in the public market, or the perception that these sales may occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. Our certificate of incorporation authorizes us to issue up to 350,000,000 shares of common stock and as of February 22, 2016 we had 21,111,610 shares of common stock outstanding.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We are headquartered in Livonia, Michigan in a 76,000 square foot facility, which we lease. This facility is utilized for management offices, as well as certain accounting, customer service, engineering, human resources, information technology, finance, purchasing, and treasury functions. We believe that this facility is suitable for the activities conducted there.

Our manufacturing is conducted in 27 manufacturing facilities strategically located throughout North America, Europe, Brazil, and China. Our manufacturing facilities are supported by seven engineering and sales locations throughout the world.

The following table sets forth selected information regarding each of our facilities:

       
Facility   Country   Description of Use   Square Feet   Ownership
Americas Locations
                                   
Aruja     Brazil       Manufacturing/ Technical Center       334,880       Owned  
Mexico City (4 locations)     Mexico       Manufacturing       184,100       Leased  
Ramos     Mexico       Manufacturing       67,500       Leased  
Auburn, Indiana     United States       Manufacturing       162,800       Leased  
Bardstown, Kentucky (2 locations)     United States       Manufacturing       448,700       Owned/Leased(1)
 
Bellevue, Ohio (2 locations)     United States       Manufacturing       361,400       Owned  
Bluffton, Ohio     United States       Manufacturing       196,200       Leased  
Chicago, Illinois     United States       Manufacturing       412,800       Leased  
Clinton Township, Michigan     United States       Manufacturing       392,300       Leased  
Elkton, Michigan     United States       Manufacturing       1,100,000       Owned  
Goodyear, Arizona     United States       Manufacturing       458,800       Leased(2)  
Grand Rapids, Michigan     United States       Office       5,900       Leased  
Fountain Inn, South Carolina     United States       Manufacturing       205,700       Leased  
Livonia, Michigan     United States       Corporate Office/
Technical Center
      76,300       Leased  
Madison, Mississippi     United States       Manufacturing       270,000       Leased  
Meridian, Mississippi     United States       Manufacturing       420,000       Leased  
Plymouth, Michigan     United States       Manufacturing       290,100       Leased  
Shepherdsville, Kentucky     United States       Manufacturing       219,100       Leased  
International Locations
                                   
Gent     Belgium       Manufacturing       346,700       Leased  
Neprevazka     Czech Republic       Manufacturing       69,200       Leased  
Artern     Germany       Manufacturing       164,600       Owned  
Buchholz     Germany       Manufacturing       79,900       Owned  
Duisburg     Germany       Manufacturing       116,700       Owned  
Kaarst     Germany       Office       3,300       Leased  

21


 
 

TABLE OF CONTENTS

       
Facility   Country   Description of Use   Square Feet   Ownership
Cologne     Germany       Corporate Office/
Technical Center
      32,530       Leased  
Zwickau     Germany       Manufacturing       505,500       Owned/Leased(1)
 
Caserta     Italy       Manufacturing       262,500       Owned  
Melfi     Italy       Manufacturing       73,600       Owned  
Turin     Italy       Technical Center       23,100       Leased  
Opole     Poland       Manufacturing       146,000       Owned/Leased(1)
 
Malacky     Slovakia       Manufacturing       542,500       Owned  
Dalian     China       Manufacturing       72,700       (3)  
Shanghai     China       Corporate Office/
Technical Center
      475       Leased  
Wuhu     China       Manufacturing       308,500       (3)  
Hyderabad     India       Technical Center       8,700       Leased  
Yokohama     Japan       Technical Center       2,500       Leased  

(1) Facility consists of two buildings — one building is leased and one building is owned.
(2) Facility is closed, but we remain subject to obligations under the operating lease.
(3) The building is owned by the joint venture.

Item 3. Legal Proceedings

From time to time, we are involved in legal proceedings, claims, or investigations that are incidental to the conduct of our business. We vigorously defend ourselves against such claims. In future periods, we could be subject to cash costs or non-cash charges to earnings if a matter is resolved on unfavorable terms. However, although the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including our assessment of the merits of the particular claims, we do not expect that our pending legal proceedings or claims will have a material impact on our future consolidated financial condition, results of operations, or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

22


 
 

TABLE OF CONTENTS

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Market Information — Our common stock trades on the New York Stock Exchange under the symbol “TOWR”. Our stock began trading on October 15, 2010, in conjunction with our IPO. As of February 22, 2016, we had 21,111,610 shares of common stock, $0.01 par value, outstanding, two holders of record and 5,544 beneficial shareholders of our common stock. The transfer agent and registrar for our common stock is Broadridge Financial Solutions, Inc.

The following table presents the reported high and low closing prices per share of our common stock during 2015 and 2014:

       
  2015   2014
High and Low Closing Prices per Share   High Price   Low Price   High Price   Low Price
Fourth Quarter   $ 31.30     $ 23.78     $ 26.66     $ 20.74  
Third Quarter     28.42       22.39       36.74       25.19  
Second Quarter     28.87       25.29       36.84       26.15  
First Quarter     28.18       22.11       27.22       20.54  

Performance Graph — The following chart shows the cumulative total stockholder return for our common stock from October 15, 2010, the date our common stock commenced trading on the New York Stock Exchange in connection with our IPO, to December 31, 2015. Five year historical data is not presented as we did not have common stock prior to our IPO. The graph also shows the cumulative returns of the S&P 500 Index and the S&P Supercomposite Auto Parts and Equipment Index. The comparison assumes $100 was invested on October 15, 2010. Each of the indices shown assumes that all dividends paid were reinvested.

Comparison of Cumulative Total Return

[GRAPHIC MISSING]

             
  10/15/2010   12/31/2010   12/31/2011   12/31/2012   12/31/2013   12/31/2014   12/31/2015
Tower International, Inc.   $ 100.00     $ 130.55     $ 79.26     $ 59.41     $ 157.93     $ 188.56     $ 210.85  
S&P 500     100.00       106.81       106.81       121.12       156.98       176.68       173.59  
S&P 500 Supercomposite Auto Parts and Equipment Index     100.00       121.91       104.50       103.08       167.39       170.75       156.88  

Dividends — On October 16, 2015, our Board of Directors declared a regular quarterly dividend of $0.10 per common share, which was paid on December 10, 2015 to shareholders of record as of close of business on November 10, 2015. On January 29, 2016 our Board of Directors declared a quarterly dividend of $0.10 per common share, which was paid on February 29, 2016. We did not declare or pay any common stock dividends

23


 
 

TABLE OF CONTENTS

during 2014. The payment of future quarterly dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net earnings, financial condition, cash requirements, future prospects, and other factors that our Board of Directors deems relevant to its analysis and decision making.

Issuer’s Purchases of Equity Securities — We did not repurchase any of our common stock during the fourth quarter of 2015.

Item 6. Selected Financial Data

The following tables set forth selected consolidated balance sheet data as of December 31, 2015 and 2014 and selected consolidated statement of operations data for the years ended December 31, 2015, 2014, and 2013, which have been derived from our audited Consolidated Financial Statements and related notes that are included in this Annual Report. The selected consolidated balance sheet data as of December 31, 2013, 2012, and 2011 and the selected consolidated statement of operations data for the years ended December 2012 and 2011 set forth below, have been derived from previously filed audited consolidated financial statements that are not presented in this Annual Report. As with our Consolidated Financial Statements for the years ended December 31, 2015, 2014, and 2013, we adjusted the information in the consolidated financial statements for the years ended December 31, 2012 and 2011, where appropriate, to account for discontinued operations.

You should read the following selected historical consolidated financial data in conjunction with the more detailed information contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements and the related notes that we have presented elsewhere in this Annual Report.

         
  2015   2014   2013   2012   2011
     (in millions except share and per share data)
Statements of Operations Data:
                                            
Revenues   $ 1,955.7     $ 2,067.8     $ 1,966.5     $ 1,925.8     $ 1,933.2  
Cost of sales(a)     1,737.2       1,838.6       1,736.2       1,729.5       1,746.9  
Gross profit     218.5       229.2       230.3       196.3       186.3  
Gross profit margin     11.2 %      11.1 %      11.7 %      10.2 %      9.6 % 
Selling, general, and administrative expenses(b)   $ 130.7     $ 132.6     $ 132.8     $ 133.2     $ 148.2  
Amortization expense     0.2       1.5       2.8       4.6       4.6  
Restructuring and asset impairment charges, net     8.6       14.2       21.2       10.7       2.7  
Operating income     79.0       80.8       73.5       47.8       30.8  
Operating income margin     4.0 %      3.9 %      3.7 %      2.5 %      1.6 % 
Interest expense, net   $ 23.7     $ 34.2     $ 50.7     $ 54.6     $ 53.8  
Income/(loss) from continuing operations     178.3       36.5       (26.3 )      (20.6 )      (33.7 ) 
Net income/(loss)(c)(d)(e)     195.8       27.1       (16.1 )      25.0       (18.2 ) 
Net income attributable to the noncontrolling interests     1.7       5.6       4.2       7.0       5.1  
Net income/(loss) attributable to Tower International, Inc.   $ 194.1     $ 21.5     $ (20.3 )    $ 18.0     $ (23.3 ) 
Basic income/(loss) per share:
                                            
Income/(loss) per share from continuing operations   $ 8.37     $ 1.50     $ (1.50 )    $ (1.37 )    $ (2.00 ) 
Income/(loss) per share from discontinued operations     0.83       (0.46 )      0.50       2.27       0.80  
Income/(loss) per share     9.20       1.04       (0.99 )      0.90       (1.20 ) 
Weighted average basic shares outstanding (in thousands)     21,093       20,662       20,387       20,081       19,364  

24


 
 

TABLE OF CONTENTS

         
  2015   2014   2013   2012   2011
     (in millions except share and per share data)
Diluted income/(loss) per share:
                                            
Income/(loss) per share from continuing operations   $ 8.25     $ 1.45     $ (1.50 )    $ (1.37 )    $ (2.00 ) 
Income/(loss) per share from discontinued operations     0.81       (0.44 )      0.50       2.27       0.80  
Income/(loss) per share     9.06       1.01       (0.99 )      0.90       (1.20 ) 
Weighted average diluted shares outstanding (in thousands)     21,408       21,391       20,387       20,081       19,364  

         
  December 31,
     2015   2014   2013   2012   2011
     (in millions)
Balance Sheets Data:
                                            
Cash and cash equivalents   $ 142.6     $ 148.6     $ 134.9     $ 113.9     $ 135.0  
Total assets(f)     1,215.5       1,165.2       1,163.8       1,222.8       1,382.2  
Total debt(f)(g)     448.6       484.2       492.0       489.5       574.3  
Total stockholders' equity     206.7       99.8       136.9       140.9       97.5  

(a) During the years ended December 31, 2015, 2014, 2012 and 2011, non-cash actuarial pension losses of $9.1 million, $4.2 million, $19.2 million and $33.2 million, respectively, were recorded.
(b) In connection with the closing of a notes offering and the IPO, we incurred charges of $6.2 million and $18.4 million related to one-time compensation plans for our executive officers during the years ended December 31, 2012 and 2011, respectively.
(c) During the year ended December 31, 2013, we recorded $42.5 million related to premiums paid and fees incurred in connection with notes repurchases, $5.1 million related to term loan re-pricings, and $0.8 million related to certain secondary offerings. During the year ended December 31, 2012, we recorded a gain of $31.2 million related to the divestiture of the Company’s Korean subsidiary.
(d) During the year ended December 31, 2014, the Company recorded a loss in discontinued operations of $22.9 million (net of tax) and an actuarial pension loss of $4.2 million.
(e) During the year ended December 31, 2015, net income included a $131 million deferred tax benefit primarily due to the release of the valuation allowance in the United States and Italy. Refer to Note 9 to our Consolidated Financial Statements for further information regarding our valuation allowances.
(f) For all years presented, total assets and total debt have been adjusted to reflect the adoption of FASB ASU No. 2015-03 and FASB ASU No. 2015-17. Refer to Note 2 for additional information on these accounting pronouncements.
(g) Consists of short-term and long-term debt (net of debt issue costs), current portion of long-term debt, and capital lease obligations.

Item 7. 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 original equipment manufacturers (“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 (“SUVs”). Our products are manufactured at 27 facilities strategically located near our customers in North America, Europe, Brazil, and China. We support our manufacturing operations through seven 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 2015 production volumes.

We believe that our engineering, manufacturing, and program management capabilities, our competitive cost, our financial discipline, and our colleague engagement position us for long-term success.

25


 
 

TABLE OF CONTENTS

Factors Affecting Our Industry

Our business and our revenues are primarily driven by the strength of the global automotive industry, which tends to be cyclical and highly correlated to general global macroeconomic conditions. The strength of the automotive market dictates the volume of purchases of our products by our OEM customers to ultimately satisfy consumer demand. We manufacture products pursuant to written agreements with each of our OEM customers. However, those agreements do not dictate the volume requirements of our customers; instead, OEMs monitor their inventory and the inventory levels of their dealers and adjust the volume of their purchases from us based on consumer demand for their products.

During 2015, industry production volumes increased from 2014 in three of our four major markets, the exception being a decline in Brazil. According to IHS, industry production is projected to increase in 2016 in three of our four major markets, the exception being Brazil. Any increase may be offset by adverse changes for our customers or products.

As measured by IHS, global industry production of cars and light trucks was 89 million vehicles in 2015 compared to 86 million vehicles in 2014. IHS projects production will reach 96 million vehicles by 2019, reflecting growth in each of our four major markets. We believe that we are well positioned to benefit from this trend, but we are not insulated from short-term fluctuations in the global automotive industry.

Factors Affecting Our Revenues

While overall production volumes are largely driven by economic factors outside of our direct control, we believe that the following elements of our business also impact our revenues:

Life cycle of our agreements:  Our agreements with OEMs typically follow one of two patterns: Agreements for new models of vehicles normally cover the lifetime of the platform, often awarded two to three years before these models are marketed to the public, while agreements covering design improvements to existing automobiles have shorter expected life cycles, typically with shorter pre-production and development periods. Typically, once a supplier has been designated to supply components for a new platform, an OEM will continue to purchase those parts from the designated manufacturer for the life of the program. For any given agreement, our revenues depend, in part, upon the life cycle status of the applicable product platform. Overall, our revenues are enhanced to the extent that the products we are assembling and producing are in the peak production periods of their life cycles.
Product pricing:  Generally, our customers negotiate annual price reductions with us during the term of their contracts. When negotiated price reductions are expected to be retroactive, we accrue for such amounts as a reduction of revenues as products are shipped. The extent of our price reductions negatively affects our revenues. We have also been able to negotiate year-over-year price increases in select circumstances.
Steel pricing:  We require significant quantities of steel in the manufacture of our products. The pricing of our products includes a component for steel which increases as steel prices increase and decreases as steel prices decrease. Depending upon when a steel price change occurs, that change may have a disproportionate effect on our revenues within any particular fiscal period. We purchase a portion of our steel from certain of our customers through various OEM resale programs, where our customers actually negotiate the cost of steel for us. The purchases through customer resale programs have buffered the impact of price swings associated with the procurement of steel. The remainder of our steel purchasing requirements are met through contracts with steel mills, in which we negotiate our own price and seek to pass through steel price increases and decreases to our customers.
Foreign exchange:  Our foreign exchange transaction risk is limited because we generally purchase materials and produce products in the same currency in which we sell those products to our final customers. However, the translation of foreign currencies back to U.S. dollars may have a significant impact on our revenues, results of operations, cash flows, or stockholders’ equity. Foreign exchange has an unfavorable impact on revenues when the U.S. dollar is relatively strong when compared to foreign currencies and a favorable impact on revenues when the U.S. dollar is relatively weak when

26


 
 

TABLE OF CONTENTS

compared to foreign currencies. The results of operations and financial condition of our businesses outside of the U.S. are principally measured in their respective local currency and translated into U.S. dollars. Assets and liabilities of our foreign operations are translated into U.S. dollars at foreign currency exchange rates in effect as of the end of each reporting period. Results of operations are translated at applicable average rates prevailing throughout the period. Translation gains or losses are reported as a separate component of accumulated other comprehensive income/(loss) in our Consolidated Statements of Equity/(Deficit). Gains and losses resulting from foreign currency transactions, the amounts of which were not material in any of the periods presented in this Annual Report, are included in net income/(loss).

Factors Affecting Our Expenses

Our largest expense is steel material, which is driven by the following factors:

Cost of steel:  We utilize steel and various purchased steel products in virtually all of our products. We refer to the “net steel impact” as the combination of the change in steel prices that are reflected in the price of our products, the change in the cost to procure steel from mills, and the change in our recovery of offal. Our strategy is to be economically neutral to steel pricing by having these factors offset each other. While we strive to achieve a neutral net steel impact, we are not always successful in achieving that goal, in large part due to timing differences. The timing of a change in the price for steel may occur in separate periods and if a change occurs, that change may have a disproportionate effect, within any particular fiscal period, on our product pricing, our steel costs, and the results of our sales of offal. Net imbalances in any one particular fiscal period may be reversed in a subsequent fiscal period, although we cannot provide assurances that, or when, these reversals will occur. Over the past several years, we have not experienced a material net impact from these factors.
Purchase of steel:  As noted above, we purchase a portion of our steel from certain of our customers through various OEM resale programs and the remaining portion of our steel directly from steel mills. Whether our customer negotiates the cost of steel for us in a customer resale program or we negotiate the cost of steel with the mills, the price we pay is charged directly to our cost of sales, just as the component of product pricing relating to steel is included within our revenues.
Sale of offal:  A by-product of our production process is the generation of offal. We typically sell offal in secondary markets, which are influenced by similar market forces. We generally share our recoveries from sales of offal with our customers either through scrap sharing agreements, in cases in which we are participating in resale programs, or through product pricing, in cases in which we purchase steel directly from steel mills. In either situation, we may be affected by the fluctuation in scrap steel prices, either positively or negatively, in relation to our various customer agreements. As offal prices generally increase or decrease as steel prices increase or decrease, our sale of offal may mitigate the impact of the volatility of steel price increases, as well as limit the benefits reaped from steel price declines. Recoveries related to the sales of offal reduce cost of sales.

Adjusted EBITDA

We use the term Adjusted EBITDA throughout this Annual 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 U.S. GAAP. We use Adjusted EBITDA as a supplement to our GAAP results in evaluating our business.

Adjusted EBITDA is included in this Annual 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.

27


 
 

TABLE OF CONTENTS

We believe that Adjusted EBITDA is useful in evaluating our performance as it 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 the 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, 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 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 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.

Our Segments

Our management reviews our operating results and makes decisions based upon two reportable segments: the Americas and International. For accounting purposes, we have identified four operating segments, which we have aggregated into the two reportable segments. Refer to Note 14 to our Consolidated Financial Statements for further information regarding our operating and reportable segments. Through December 31, 2015, our businesses have had similar economic characteristics, including the nature of the products, margins, production processes, distribution channels, and customers.

Results of Operations — Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014

Automobile production volumes increased during the year ended December 31, 2015 in three of our four major markets compared to the year ended December 31, 2014, the exception being a decline in Brazil. The following table presents production volumes in specified regions according to IHS for the year ended December 31, 2015 compared to the year ended December 31, 2014 (in millions of units produced):

       
  Europe   China   North America   Brazil
2015 production volumes     20.9       22.4       17.5       2.3  
2014 production volumes     20.0       21.3       17.0       3.0  
Increase/(decrease)     0.9       1.1       0.5       (0.7 ) 
Percentage change     5 %      5 %      3 %      (23 )% 

28


 
 

TABLE OF CONTENTS

The following table presents selected financial information for the years ended December 31, 2015 and 2014 (in millions).

           
  International   Americas   Consolidated
     Year Ended
December 31,
  Year Ended
December 31,
  Year Ended
December 31,
     2015   2014   2015   2014   2015   2014
Revenues   $ 724.9     $ 842.3     $ 1,230.8     $ 1,225.5     $ 1,955.7     $ 2,067.8  
Cost of sales     648.0       763.1       1,089.2       1,075.5       1,737.2       1,838.6  
Gross profit     76.9       79.2       141.6       150.0       218.5       229.2  
Selling, general, and administrative expenses     36.6       43.8       94.1       88.9       130.7       132.7  
Amortization           1.1       0.2       0.4       0.2       1.5  
Restructuring and asset impairment charges, net     0.2       4.0       8.4       10.2       8.6       14.2  
Operating income   $ 40.1     $ 30.3     $ 38.9     $ 50.5       79.0       80.8  
Interest expense, net                                         23.7       34.2  
Other expense                                               0.1  
Provision/(benefit) for income taxes                                         (123.0 )      9.3  
Equity in loss of joint venture                                               (0.7 ) 
Income/(loss) from discontinued operations, net of tax                                         17.5       (9.4 ) 
Net income attributable to noncontrolling interest                             1.7       5.6  
Net income attributable to Tower International, Inc.                           $ 194.1     $ 21.5  

Comparison of Periods — GAAP Analysis of Consolidated Results

Revenues

Total revenues decreased during the year ended December 31, 2015 by $112.1 million, or 5%, from the year ended December 31, 2014, despite higher volume in our Americas segment ($47.3 million) and in our International segment ($26.5 million). Revenues were negatively impacted by the strengthening of the U.S. dollar against the Euro in our International segment ($128.8 million), and the strengthening of the U.S. dollar against the Brazilian Real ($39.2 million) in our Americas segment. Revenues were also adversely impacted by unfavorable pricing ($17.9 million).

Gross Profit

When we analyze our total gross profit, we separately categorize external factors — volume, product mix, and foreign exchange — from all other factors that impact gross profit, which we refer to as “other factors”. When we refer to “mix” we are referring to the relative composition of revenues and profitability of the products we sell in any given period. When we refer to “pricing and economics” we are referring to (i) the impact of adjustments in the pricing of particular products, which we refer to as product pricing; (ii) the impact of steel price changes, taking into account the component of our product pricing attributable to steel, the cost of steel included in our cost of sales, and the amounts recovered on the sale of offal, which in total we refer to as the net steel impact; and (iii) the impact of inflation and changes in operating costs, such as labor, utilities, and fuel, which we refer to as economics.

Total gross profit decreased by $10.7 million from the year ended December 31, 2014 while our gross profit margin increased from 11.1% during 2014 to 11.2% during 2015. The decline in gross profit reflected unfavorable foreign exchange ($14.7 million, excluding the impact on depreciation), and unfavorable product mix ($1.3 million), offset partially by higher volume ($11.8 million). All other factors were net unfavorable by $6.5 million. Cost of sales was negatively impacted by unfavorable pricing and economics ($35.6 million), higher launch costs ($6.6 million), a larger pension actuarial loss ($4.9 million), and the loss on the sale of facility in Brazil ($0.7 million). These factors were offset partially by favorable efficiencies ($29.5 million),

29


 
 

TABLE OF CONTENTS

and the non-recurrence of a one-time unfavorable retroactive commercial settlement during the prior period related to 2010 to 2013 scrap ($6 million).

Total gross profit was also positively impacted by a decrease in the depreciation included in cost of sales from $79.7 million during the year ended December 31, 2014 to $74.5 million during the year ended December 31, 2015.

Selling, General, and Administrative Expenses (“SG&A”)

Total SG&A decreased $2.0 million from the year ended December 31, 2014, reflecting favorable foreign exchange, offset partially by higher incentive compensation costs.

Amortization Expense

Total amortization expense decreased $1.3 million from the year ended December 31, 2014. During 2015, the amortization expense reflects the amortization of customer relationships in North America related to a Mexican acquisition. During 2014, the amortization expense reflects primarily the amortization of customer relationships in Europe and Brazil, which became fully amortized during 2014.

Restructuring and Asset Impairment Expense

Total restructuring and asset impairment expense decreased $5.6 million from the year ended December 31, 2014. During 2015, we incurred charges in the Americas segment related to a liability established to reflect a change in estimated future rents on a previously closed facility, ongoing maintenance expense of facilities closed as a result of prior actions, and severance charges to reduce fixed costs. During 2014, we incurred charges related to the buyout of a lease on a previously closed facility, a goodwill impairment charge in Brazil, ongoing maintenance expense of facilities closed as a result of prior actions, severance charges to reduce fixed costs, and an impairment charge on a facility in None, Italy, which was sold during the fourth quarter.

Interest Expense, net

Interest expense, net decreased $10.5 million, or 31%, from the year ended December 31, 2014, reflecting primarily lower interest due to lower borrowings in Brazil ($3.9 million), mark-to-market gains on our derivative financial instruments ($3.1 million), and lower expense on our Term Loan ($2.3 million).

Other Expense

Other expense decreased $0.1 million from the year ended December 31, 2014.

Provision for Income Taxes

Income tax expense from continuing operations decreased $132.3 million from the year ended December 31, 2014, reflecting a net $131 million deferred tax benefit recorded in the U.S. and Italy in the fourth quarter. The deferred tax benefits recorded in the fourth quarter were primarily attributable to releasing beginning of the year valuation allowances on our deferred tax assets, less current year utilization of some of the deferred tax assets, in both of these countries. The Company would have recorded tax expense of $8.5 million without the release of the two valuation allowances.

We released the U.S. valuation allowance primarily because we believe U.S. automobile production levels will continue at 2015 volume levels until at least 2017. At current U.S. production volumes, over the past two years the Company has achieved U.S. profits that we believe are sustainable. We have also obtained new business in the U.S. that we believe will increase our future profitability. Furthermore, lower interest rates have allowed the Company to reduce our borrowing costs and improve U.S. profits significantly. We expect these positive economic conditions will continue. Therefore, given the positive objective performance of the last two years coupled with our belief that U.S. production volumes will continue due to favorable economic conditions, we believe it is more likely than not that we will fully utilize our U.S. deferred tax assets.

After releasing the U.S. valuation allowance, the U.S. has approximately $118.1 million of deferred tax assets after subtracting deferred tax liabilities and a remaining valuation allowance on state tax credits. These U.S. deferred tax assets primarily consist of $51.1 million of Federal net operating loss carryforwards, $18.6 million of research credits and $40 million of future deductible temporary differences for pension and

30


 
 

TABLE OF CONTENTS

compensation related liabilities. These deductible temporary differences will become deductions when they are paid or funded. We believe the utilization of these deferred tax assets will enable the Company to effectively eliminate our U.S. cash tax liability until 2019, except for some immaterial amounts for alternative minimum tax and state income taxes.

Beginning in 2016, as we utilize these deferred tax assets, we will begin to book non-cash Federal and state deferred income tax expense at an estimated effective tax rate of 35% of pre-tax income for our U.S. operations.

Previously, we estimated that if our U.S. valuation allowance were released, we would realize a U.S. tax benefit of approximately $80 million. The actual deferred tax asset recorded was $118.1 million, as certain “tax extender” legislation was approved by the U.S. government in late December 2015. As a result, we were able to obtain additional tax benefits than previously estimated. At the time of the preliminary estimate, we could not assume that these tax extenders would be approved. The tax extenders that were favorable to the Company were the permanent extension of the Federal research credit, the extension until 2019 of accelerated bonus tax depreciation and the look through provisions on foreign related party intercompany dividends and interest.

During 2013, Cerberus, our principal stockholder at the time, sold its ownership in the Company. The sale constituted an ownership change under Section 382 of the Internal Revenue Code. Under Section 382, the amount of U.S. net operating losses generated before the ownership change that can be utilized after the change is limited. We do not anticipate the 382 limitation will have any material impact on our ability to reduce our U.S. cash tax liability.

We expect the Internal Revenue Service to complete the examination of tax years 2011 – 2013 in the first half of 2016.

Noncontrolling Interest, Net of Tax

The adjustment to our earnings required to give effect to the elimination of noncontrolling interests decreased by $3.9 million from the year ended December 31, 2014, reflecting decreased earnings in our consolidated Chinese joint venture during 2015.

Comparison of Periods — Non-GAAP Analysis of Adjusted EBITDA

A reconciliation of Adjusted EBITDA to net income attributable to Tower International, Inc. for the periods presented is set forth below (in millions):

           
  International   Americas   Consolidated
     Year Ended
December 31,
  Year Ended
December 31,
  Year Ended
December 31,
     2015   2014   2015   2014   2015   2014
Adjusted EBITDA   $ 61.2     $ 64.4     $ 129.5     $ 139.8     $ 190.7     $ 204.2  
Intercompany charges     7.6       5.4       (7.6 )      (5.4 )             
Restructuring and asset impairment charges, net     (0.2 )      (4.0 )      (8.4 )      (10.2 )      (8.6 )      (14.2 ) 
Depreciation and amortization     (28.5 )      (35.1 )      (51.3 )      (52.1 )      (79.8 )      (87.2 ) 
Acquisition costs and other           (0.4 )      (0.8 )      (0.1 )      (0.8 )      (0.5 ) 
Long-term non-cash compensation(a)                 (12.7 )      (11.3 )      (12.7 )      (11.3 ) 
Loss on sale of a Brazil facility(b)                 (0.7 )            (0.7 )       
Commercial settlement related to 2010-13 scrap(c)                       (6.0 )            (6.0 ) 
Pension actuarial loss                 (9.1 )      (4.2 )      (9.1 )      (4.2 ) 
Operating income   $ 40.1     $ 30.3     $ 38.9     $ 50.5       79.0       80.8  
Interest expense, net                                         (23.7 )      (34.2 ) 
Other expense                                               (0.1 ) 
Benefit/(provision) for income taxes                                         123.0       (9.3)  

31


 
 

TABLE OF CONTENTS

           
  International   Americas   Consolidated
     Year Ended
December 31,
  Year Ended
December 31,
  Year Ended
December 31,
     2015   2014   2015   2014   2015   2014
Equity in loss of joint venture                                               (0.7 ) 
Income/(loss) from discontinued operations, net of tax(d)                                         17.5       (9.4 ) 
Net income attributable to noncontrolling interest                             (1.7 )      (5.6 ) 
Net income attributable to Tower International, Inc.                           $ 194.1     $ 21.5  

(a) Represents the compensation expense related to stock options, restricted stock units, one-time CEO compensation awards, and certain compensation programs intended to benefit our long-term success and growth. The compensation charges are incurred during the applicable vesting periods of each program.
(b) Represents the loss on the sale of one of our two operations in Brazil. Net cash proceeds from this sale were $9.5 million. This operation did not meet the criteria to be considered held for sale in accordance with FASB ASC No. 360 Property, Plant, and Equipment, and was not presented as discontinued operations in our Consolidated Financial Statements, in accordance with FASB ASC No. 205, Discontinued Operations.
(c) Represents a one-time retroactive commercial settlement related to 2010-13 scrap.
(d) Represents the loss on discontinued operations for the years ended 2015 and 2014. Included in 2015 is the gain on the sale of China joint ventures ($19 million, net).

The following table presents revenues (a GAAP measure) and Adjusted EBITDA (a non-GAAP measure) for the years ended December 31, 2015 and 2014 (in millions) as well as explanations of variances:

           
  International   Americas   Consolidated
     Revenues   Adjusted EBITDA(e)   Revenues   Adjusted EBITDA(e)   Revenues   Adjusted EBITDA(e)
2015 results   $ 724.9     $ 61.2     $ 1,230.8     $ 129.5     $ 1,955.7     $ 190.7  
2014 results     842.3       64.4       1,225.5       139.8       2,067.8       204.2  
Variance   $ (117.4 )    $ (3.2 )    $ 5.3     $ (10.3 )    $ (112.1 )    $ (13.5 ) 
Variance attributable to:
                                                     
Volume and mix   $ 26.5     $ 8.9     $ 47.3     $ 1.6     $ 73.8     $ 10.5  
Foreign exchange     (128.8 )      (12.5 )      (39.2 )      1.3       (168.0 )      (11.2 ) 
Pricing and economics     (15.1 )      (12.1 )      (2.8 )      (25.5 )      (17.9 )      (37.6 ) 
Efficiencies           13.2             16.3             29.5  
Selling, general, and administrative expenses and other items(f)           (0.7 )            (4.0 )            (4.7 ) 
Total   $ (117.4 )    $ (3.2 )    $ 5.3     $ (10.3 )    $ (112.1 )    $ (13.5 ) 

(e) We have presented a reconciliation of Adjusted EBITDA to net income/(loss) attributable to Tower International, Inc, above.
(f) When we refer to “selling, general, and administrative expenses and other items”, the “other items” refer to (i) savings which we generate after implementing restructuring actions, (ii) the costs associated with launching new products, and (iii) one-time items which may include reimbursement of costs.

Adjusted EBITDA

When we analyze Adjusted EBITDA, we separately categorize external factors — volume, product mix, and foreign exchange — and all other factors which impact Adjusted EBITDA, which we refer to as “other factors.”

32


 
 

TABLE OF CONTENTS

Consolidated Company:  Consolidated Adjusted EBITDA decreased by $13.5 million, or 7%, from the year ended December 31, 2014, despite higher volume ($11.8 million), offset partially by unfavorable foreign exchange ($11.2 million), and unfavorable product mix ($1.3 million). All other factors were net unfavorable by $12.8 million. Unfavorable pricing and economics ($37.6 million) and unfavorable SG&A expenses and other items, reflecting primarily higher launch costs ($4.7 million), were offset partially by favorable efficiencies ($29.5 million).

International Segment:  In our International segment, Adjusted EBITDA decreased by $3.2 million, or 5%, from the year ended December 31, 2014, despite higher volume ($10.2 million), offset partially by unfavorable product mix ($1.3 million), and unfavorable foreign exchange ($12.5 million). All other factors were net favorable by $0.4 million. Favorable efficiencies ($13.2 million) were offset partially by unfavorable pricing and economics ($12.1 million), principally product pricing and labor costs, and unfavorable SG&A and other items ($0.7 million).

Americas Segment:  In our Americas segment, Adjusted EBITDA decreased by $10.3 million, or 7%, from the year ended December 31, 2014, despite higher volumes ($1.6 million) and favorable foreign exchange ($1.3 million). All other factors were net unfavorable by $13.2 million. Favorable efficiencies ($16.3 million) were offset by unfavorable pricing and economics ($25.5 million), principally product pricing and labor costs, and unfavorable SG&A expenses and other items ($4 million). SG&A expenses and other items reflect primarily higher launch costs ($5 million).

Results of Operations — Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013

Automobile production volumes increased during the year ended December 31, 2014 in each of our four major markets compared to the year ended December 31, 2013. The following table presents production volumes in specified regions according to IHS for the year ended December 31, 2014 compared to the year ended December 31, 2013 (in millions of units produced):

       
  Europe   China   North America   Brazil
2014 production volumes     20.0       21.3       17.0       3.0  
2013 production volumes     19.4       19.5       16.2       3.5  
Increase/(decrease)     0.6       1.8       0.8       (0.5 ) 
Percentage change     3 %      10 %      5 %      (14 )% 

The following table presents select financial information for the years ended December 31, 2014 and 2013 (in millions).

           
  International   Americas   Consolidated
     Year Ended
December 31,
  Year Ended
December 31,
  Year Ended
December 31,
     2014   2013   2014   2013   2014   2013
Revenues   $ 842.3     $ 815.5     $ 1,225.5     $ 1,151.0     $ 2,067.8     $ 1,966.5  
Cost of sales     763.1       732.4       1,075.5       1,003.8       1,838.6       1,736.2  
Gross profit     79.2       83.1       150.0       147.2       229.2       230.3  
Selling, general, and administrative expenses     43.8       45.5       88.9       87.3       132.7       132.8  
Amortization     1.1       2.1       0.4       0.7       1.5       2.8  
Restructuring and asset impairment charges, net     4.0       2.7       10.2       18.5       14.2       21.2  
Operating income   $ 30.3     $ 32.8     $ 50.5     $ 40.7       80.8       73.5  
Interest expense, net                                         34.2       50.7  
Other expense                                         0.1       48.4  
Provision for income taxes                                         9.3       0.2  
Equity in loss of joint venture                                         (0.7 )      (0.6)  

33


 
 

TABLE OF CONTENTS

           
  International   Americas   Consolidated
     Year Ended
December 31,
  Year Ended
December 31,
  Year Ended
December 31,
     2014   2013   2014   2013   2014   2013
Income/(loss) from discontinued operations, net of tax                             (9.4 )      10.3  
Net income attributable to noncontrolling interest                             5.6       4.2  
Net income/(loss) attributable to Tower International, Inc.                           $ 21.5     $ (20.3 ) 

Comparison of Periods — GAAP Analysis of Consolidated Results

Revenues

Total revenues increased during the year ended December 31, 2014 by $101.3 million, or 5%, from the year ended December 31, 2013, reflecting primarily higher volume in our Americas segment ($79.5 million) and in our International segment ($48.3 million). Revenues were positively impacted by the strengthening of the Euro against the U.S. dollar in our International segment ($1.8 million), but were negatively impacted by the strengthening of the U.S. dollar against the Brazilian Real ($17.3 million) in our Americas segment and the Chinese Rmb ($0.2 million) in our International segment. Revenues were also adversely impacted by unfavorable pricing ($10.8 million).

Gross Profit

Total gross profit decreased by $1.1 million, or 1%, from the year ended December 31, 2013 and our gross profit margin decreased from 11.7% during the 2013 period to 11.1% during the 2014 period, as explained by unfavorable product mix ($8.3 million), additional volume-related fixed costs ($5 million), and unfavorable foreign exchange ($2.8 million, excluding the impact on depreciation), offset partially by higher volume ($28.4 million). All other factors were net unfavorable by $13.4 million. Cost of sales was negatively impacted by unfavorable pricing and economics ($28.7 million), a one-time unfavorable retroactive commercial settlement during the current period related to 2010 to 2013 scrap ($6 million), higher launch costs ($5.7 million), a pension actuarial loss ($4.2 million), the non-recurrence of the gain recognized in connection with the de-consolidation of our Chinese joint venture ($1.5 million) in 2013, and the non-recurrence of the reversal of a loss contingency in Brazil related to favorable settlements ($1.5 million) in 2013. These factors were offset partially by favorable efficiencies ($28.2 million).

Total gross profit was also positively impacted by a decrease in the depreciation included in cost of sales from $81.1 million during the year ended December 31, 2013 to $79.7 million during the year ended December 31, 2014.

Selling, General, and Administrative Expenses (“SG&A”)

Total SG&A decreased $0.1 million from the year ended December 31, 2013.

Amortization Expense

Total amortization expense decreased $1.3 million, or 46%, from the year ended December 31, 2013, reflecting primarily the amortization of customer relationships in Europe and Brazil, which became fully amortized during 2014. No further amortization expense related to these intangibles will be incurred beyond 2014.

Restructuring and Asset Impairment Expense

Total restructuring and asset impairment expense decreased $7 million from the year ended December 31, 2013. During 2014 we incurred charges related to the buyout of a lease on a previously closed facility, a goodwill impairment charge in Brazil, ongoing maintenance expense of facilities closed as a result of prior actions, severance charges to reduce fixed costs, and an impairment charge on a facility in None, Italy, which was sold during the fourth quarter. During 2013 we incurred charges related to the closure of Tower Defense & Aerospace, LLC (“TD&A”), the ongoing maintenance expense of facilities closed as a result of prior

34


 
 

TABLE OF CONTENTS

actions, an impairment charge on a facility we ceased using in our Americas segment, an impairment charge on a facility classified as held for sale and sold during 2013 in our International segment, charges related to the relocation of a facility in our International segment, and severance related charges to reduce fixed costs.

Interest Expense, net

Interest expense, net decreased $16.5 million, or 33%, from the year ended December 31, 2013, reflecting primarily lower interest expense associated with notes repurchased in connection with a tender offer in 2013 (the “Tender Offer”) and the issuance of our Term Loan Credit Facility during the second quarter of 2013 ($10.6 million), the accelerated amortization of the original issue discount and debt issue costs associated with the notes repurchase ($8.3 million), the accelerated amortization of the original issue discount and debt issue costs in connection with the redemption of notes in May and August 2013 ($2.5 million), and lower interest expense associated with our ABL Revolver ($2.1 million), offset partially by mark-to-market losses on our derivative financial instruments ($5.8 million).

Other Expense

Other expense represents the fees paid in connection with the Second Refinancing Term Loan Amendment and Additional Term Loan Amendment, which were entered into during the first quarter of 2014 ($0.1 million).

Provision for Income Taxes

Income tax expense from continuing operations increased $9.1 million from the year ended December 31, 2013, reflecting primarily the non-recurrence of a $10.8 million benefit for the intraperiod allocation of actuarial pension gains recognized in accumulated other comprehensive income (“AOCI”) and the non-recurrence of a $2.6 million tax benefit from a favorable conclusion of a tax audit in our International segment in 2013.

We did not record deferred income tax expense on 2014 U.S. profits because the utilization of deferred tax assets — primarily net operating losses — released an associated U.S. valuation allowance. Therefore, the net income tax effect on U.S. profits was only $0.3 million for alternative minimum tax expense. At December 31, 2014, we continue to maintain a U.S. valuation allowance against U.S. deferred tax assets. In evaluating the need for the U.S. valuation allowance we reviewed both positive and negative evidence and placed greater reliance on objective historical evidence than on subjective estimates of future profitability. We also adjusted historical profits and losses for one-time events and tax planning in order to estimate future profitability. These nonrecurring adjustments included items such as the 2013 debt refinancing and the impact of restructuring loan agreements with our foreign affiliates. After making these adjustments, as of the end of 2014, our U.S. operations were still in a three year cumulative loss. However, we expect our U.S. operations to be in a three-year cumulative income position sometime in 2015, if U.S. automotive production volumes hold. These three year cumulative tests are not the sole determinates of the need for a valuation allowance. Given the historic volatility of U.S. automotive suppliers’ profits, we believe that achieving a period of sustained profitability is also critical in determining whether a valuation allowance should be released.

During 2013, Cerberus, our principal stockholder, sold its ownership in us. The sale constituted an ownership change under Section 382 of the Internal Revenue Code. Under Section 382, the amount of U.S. net operating losses generated before the ownership change that can be utilized after the change is limited. Notwithstanding the Section 382 limitation, we do not anticipate paying any material income taxes in the U.S. until 2018 or 2019.

Noncontrolling Interest, Net of Tax

The adjustment to our earnings required to give effect to the elimination of noncontrolling interests increased by $1.4 million from the year ended December 31, 2013, reflecting increased earnings in our consolidated Chinese joint ventures during 2014.

35


 
 

TABLE OF CONTENTS

Comparison of Periods — Non-GAAP Analysis of Adjusted EBITDA

A reconciliation of Adjusted EBITDA to net income/(loss) attributable to Tower International, Inc. for the periods presented is set forth below (in millions):

           
  International   Americas   Consolidated
     Year Ended
December 31,
  Year Ended
December 31,
  Year Ended
December 31,
     2014   2013   2014   2013   2014   2013
Adjusted EBITDA   $ 64.4     $ 63.9     $ 139.8     $ 130.0     $ 204.2     $ 193.9  
Intercompany charges     5.4       8.3       (5.4 )      (8.3 )             
Restructuring and asset impairment charges, net     (4.0 )      (2.7 )      (10.2 )      (18.5 )      (14.2 )      (21.2 ) 
Depreciation and amortization     (35.1 )      (35.8 )      (52.1 )      (53.0 )      (87.2 )      (88.8 ) 
Acquisition costs and other     (0.4 )      (0.9 )      (0.1 )      (0.1 )      (0.5 )      (1.0 ) 
Long-term non-cash compensation(a)                 (11.3 )      (6.6 )      (11.3 )      (6.6 ) 
Commercial settlement related to 2010 – 13 scrap(b)                 (6.0 )            (6.0 )       
Pension actuarial loss                 (4.2 )            (4.2 )       
Closure of TD&A(c)                       (2.8 )            (2.8 ) 
Operating income   $ 30.3     $ 32.8     $ 50.5     $ 40.7       80.8       73.5  
Interest expense, net                                         (34.2 )      (50.7 ) 
Other expense(d)                                         (0.1 )      (48.4 ) 
Provision for income taxes                                         (9.3 )      (0.2 ) 
Equity in loss of joint venture(e)                                         (0.7 )      (0.6 ) 
Income/(loss) from discontinued operations, net of tax                                         (9.4 )      10.3  
Net income attributable to noncontrolling interest                             (5.6 )      (4.2 ) 
Net income/(loss) attributable to Tower International, Inc.                           $ 21.5     $ (20.3 ) 

(a) Represents the compensation expense related to stock options, restricted stock units, one-time CEO compensation awards, and certain compensation programs intended to benefit our long-term success and growth. The compensation charges are incurred during the applicable vesting periods of each program.
(b) Represents a one-time retroactive commercial settlement related to 2010-13 scrap.
(c) Represents the exclusion of the non-recurring losses associated with the closing of TD&A in 2013. These losses do not relate to the operations of our core business.
(d) Represents the fees paid in connection with our Second Term Loan Amendment during the first quarter of 2014, the premium paid and tender fee incurred in connection with the Tender Offer and the repurchase of our notes, the premium paid and fees incurred in connection with the re-pricing of our Term Loan Credit Facility, the premium paid in connection with the redemption of $43 million of our notes during the second quarter of 2013, the premium paid in connection with the redemption of the remaining $43 million of our notes during the third quarter of 2013, the transaction costs incurred in connection with secondary offerings during 2013, and the breakage fee incurred to reduce the Letter of Credit Facility in the second quarter of 2013.
(e) Represents the net loss attributable to our Ningbo joint venture, which we do not consolidate in our financial statements given the non-controlling nature of our interest in this entity. The financial results of Ningbo are consolidated within our financial statements for periods prior to a change in control of the joint venture, which occurred during the second quarter of 2013.

36


 
 

TABLE OF CONTENTS

The following table presents revenues (a GAAP measure) and Adjusted EBITDA (a non-GAAP measure) for the years ended December 31, 2014 and 2013 (in millions) as well as an explanation of variances:

           
  International   Americas   Consolidated
     Revenues   Adjusted EBITDA(f)   Revenues   Adjusted EBITDA(f)   Revenues   Adjusted EBITDA(f)
2014 results   $ 842.3     $ 64.4     $ 1,225.5     $ 139.8     $ 2,067.8     $ 204.2  
2013 results     815.5       63.9       1,151.0       130.0       1,966.5       193.9  
Variance   $ 26.8     $ 0.5     $ 74.5     $ 9.8     $ 101.3     $ 10.3  
Variance attributable to:
                                                     
Volume and mix   $ 48.3     $ 7.6     $ 79.5     $ 7.5     $ 127.8     $ 15.1  
Foreign exchange     1.6       0.1       (17.3 )      (1.2 )      (15.7 )      (1.1 ) 
Pricing and economics     (23.1 )      (14.7 )      12.3       (10.4 )      (10.8 )      (25.1 ) 
Efficiencies           8.6             19.6             28.2  
Selling, general, and administrative expenses and other items(g)           (1.1 )            (5.7 )            (6.8 ) 
Total   $ 26.8     $ 0.5     $ 74.5     $ 9.8     $ 101.3     $ 10.3  

(f) We have presented a reconciliation of Adjusted EBITDA to net income/(loss) attributable to Tower International, Inc, above.
(g) When we refer to “selling, general, and administrative expenses and other items”, the “other items” refer to (i) savings which we generate after implementing restructuring actions, (ii) the costs associated with launching new products, and (iii) one-time items which may include reimbursement of costs.

Adjusted EBITDA

Consolidated Company:  Consolidated Adjusted EBITDA increased by $10.3 million, or 5%, from the year ended December 31, 2013, reflecting primarily higher volume ($28.4 million), offset partially by unfavorable product mix ($8.3 million), additional volume-related fixed costs ($5 million), and unfavorable foreign exchange ($1.1 million). All other factors were net unfavorable by $3.7 million. Unfavorable pricing and economics ($25.1 million) and unfavorable SG&A expenses and other items ($6.8 million) were offset partially by favorable efficiencies ($28.2 million).

International Segment:  In our International segment, Adjusted EBITDA increased by $0.5 million, or 1%, from the year ended December 31, 2013, reflecting primarily higher volume ($8.1 million) and favorable product mix ($0.4 million), offset partially by additional volume-related fixed costs ($0.9 million). Foreign exchange had a negligible impact. All other factors were net unfavorable by $7.2 million. Unfavorable pricing and economics ($14.7 million), principally product pricing and labor costs, and unfavorable SG&A and other items ($1.1 million) were offset partially by favorable efficiencies ($8.6 million). SG&A expenses and other items reflect primarily higher launch costs ($2.6 million).

Americas Segment:  In our Americas segment, Adjusted EBITDA increased by $9.8 million, or 8%, from the year ended December 31, 2013, reflecting primarily higher volumes ($20.3 million), offset partially by unfavorable product mix ($8.7 million), additional volume-related fixed costs ($4.1 million), and unfavorable foreign exchange ($1.2 million). All other factors were net favorable by $3.5 million. Favorable efficiencies ($19.6 million) were offset partially by unfavorable pricing and economics ($10.4 million), principally product pricing and labor costs and unfavorable SG&A expenses and other items ($5.7 million). SG&A spending and other items reflect primarily higher launch costs ($3.1 million) and the non-recurrence of the reversal of a loss contingency in Brazil in 2013 due to favorable tax settlements ($1.5 million).

37


 
 

TABLE OF CONTENTS

Restructuring and Asset Impairments

The following table sets forth our net restructuring and asset impairment charges by type for the periods presented (in millions):

     
  Year Ended December 31,
     2015   2014   2013
Employee termination costs   $ 1.0     $ 1.6     $ 2.3  
Other exit costs     7.6       8.0       7.7  
Asset impairment charges           4.6       11.2  
Total restructuring expense   $ 8.6     $ 14.2     $ 21.2  

We restructure our global operations in an effort to align our capacity with demand and to reduce our costs. Restructuring costs include employee termination benefits and other incremental costs resulting from restructuring activities. These incremental costs principally include equipment and personnel relocation costs. Restructuring costs are recognized in our Consolidated Financial Statements in accordance with FASB ASC No. 420, Exit or Disposal Obligations, and are presented in our Consolidated Statements of Operations as restructuring and asset impairment charges, net. We believe the restructuring actions discussed below will help our efficiency and results of operations on a going forward basis.

The charges incurred in our Americas segment during 2015 related to a liability established to reflect a change in estimated future rents on a previously closed facility, ongoing maintenance expense of facilities closed as a result of prior actions and severance charges to reduce fixed costs. The charges incurred in the International segment related to severance charges to reduce fixed costs and a revision of a previous estimate.

The charges incurred in our Americas segment during 2014 related to the buyout of a lease on a previously closed facility, a goodwill impairment charge in Brazil, ongoing maintenance expense of facilities closed as a result of prior actions, and severance charges to reduce fixed costs. The charges incurred in our International segment related to an impairment charge on a facility in None, Italy, which was sold during the fourth quarter, and severance charges in Europe to reduce fixed costs.

In April 2013, our Board determined to close the operations of TD&A. In June 2013, we received $9.1 million in cash proceeds for the sale of substantially all of TD&A’s assets. In connection with the closure, we incurred $11.5 million of restructuring charges, of which $8.2 million represents an impairment charge, $2.8 million represents other exit costs, and $0.5 million represents severance costs. No additional restructuring charges were incurred with respect to TD&A.

The charges incurred in our Americas segment during 2013 related to the closure of TD&A, the ongoing maintenance expense of facilities closed as a result of prior actions, and an impairment charge on a facility we ceased using during the first quarter of 2013 and sold during the third quarter of 2013. The charges incurred in our International segment during 2013 related to an impairment charge on our Bergisch facility, which was considered held for sale during the second quarter of 2013 and was sold during the third quarter of 2013, charges related to the relocation of a facility, and severance charges to reduce fixed costs.

We expect to continue to incur additional restructuring expense in 2016 related primarily to previously announced restructuring actions and we may engage in new actions if business conditions warrant further actions. We do not anticipate any additional expense that will be significant with respect to previously announced actions.

Liquidity and Capital Resources

General

We generally expect to fund expenditures for operations, administrative expenses, capital expenditures, and debt service obligations with internally generated funds from operations and we generally expect to satisfy working capital needs from time-to-time with borrowings under our revolving credit facility or cash on hand. As of December 31, 2015, we had available liquidity of approximately $371.7 million, which we believe is adequate to fund our working capital requirements for at least the next twelve months. We believe that we

38


 
 

TABLE OF CONTENTS

will be able to meet our debt service obligations and fund operating requirements for at least the next twelve months with cash flow from operations, cash on hand, and borrowings under our revolving credit facility.

Cash Flows and Working Capital

The following table shows the components of our cash flows from continuing operations for the periods presented (in millions):

     
  Year Ended December 31,
     2015   2014   2013
Net cash provided by/(used in):
                          
Operating activities   $ 102.6     $ 112.6     $ 127.8  
Investing activities     (136.9 )      (99.2 )      (72.3 ) 
Financing activities     (10.4 )      (2.6 )      (61.1 ) 

Net Cash Provided by Operating Activities

During the year ended December 31, 2015, we generated $102.6 million of cash flow from operations, compared with $112.6 million during the year ended December 31, 2014. The primary reason for this decrease was unfavorable timing of the net effect of payments and receipts of customer funded tooling, offset partially by a favorable fluctuation in working capital, and lower cash interest and lower cash taxes.

During the year ended December 31, 2013, we generated $127.8 million of cash flow from operations. The primary reason for the decrease in 2014 when compared to 2013 was an unfavorable fluctuation in working capital items offset partially by lower cash interest during 2014 when compared to 2013. During the year ended December 31, 2014, we utilized $9.1 million of cash from working capital items, compared to $27.7 million of cash generated during 2013. The $36.8 million change reflects primarily the unfavorable fluctuation in net trade accounts receivable and payable of $27.5 million and the unfavorable timing of the net effect of payments and receipts of customer funded tooling of $20.9 million, offset partially by a favorable inventory fluctuation of $3 million.

Net Cash Used in Investing Activities

Net cash utilized in investing activities was $136.9 million during 2015, compared to $99.2 million during 2014. The $37.7 million change in cash used reflects increased capital expenditures, related primarily to the timing of program launches, and the acquisition of a facility in Mexico, offset partially by the sale of a facility in Brazil.

Net cash utilized in investing activities was $72.3 million during 2013. The $26.9 million change in cash used in 2014 compared to 2013 reflects primarily increased capital expenditures, related primarily to the timing of program launches, reflecting an opportunistic conquest award and growth opportunities in Mexico, offset partially by the deconsolidation of our Ningbo joint venture during the second quarter of 2013.

Net Cash Used In Financing Activities

Net cash used in financing activities was $10.4 million during 2015, compared to $2.6 million during 2014. The $7.8 million change was attributable primarily to net repayment of borrowings, purchase of treasury stock, and dividend payments, offset partially by proceeds received from the termination of cross currency swaps.

Net cash used in financing activities was $61.1 million during 2013. The $58.5 million change in cash used in 2014 compared to 2013 was attributable primarily to the non-recurrence of premiums paid on the redemption of our notes in 2013, the proceeds received from the additional term loans of approximately $33 million, and lower debt financing costs paid in 2014 when compared to 2013, offset partially by decreased borrowings.

Working Capital

We manage our working capital by monitoring key metrics principally associated with inventory, accounts receivable, and accounts payable. Our quarterly average inventory days on hand remained constant at 16 days during the fourth quarter of 2015 and the fourth quarter of 2014. Our inventory levels increased from $69.8 million at December 31, 2014 to $70.6 million at December 31, 2015.

39


 
 

TABLE OF CONTENTS

Our accounts receivable balance increased from $230.4 million as of December 31, 2014 to $250.9 million as of December 31, 2015. The change reflects primarily the increase of accounts receivable related to customer funded tooling, which resulted from the timing of customer funded programs.

Our accounts payable balance increased from $257 million as of December 31, 2014 to $297.7 million as of December 31, 2015. The change reflects primarily the increase of trade accounts payable, reflecting primarily the matching of terms with our customers and vendors, and the increase of accounts payable related to customer funded tooling, which resulted from the timing of customer programs.

Our working capital usage is seasonal in nature. During the first half of the year, production and sales typically increase substantially, which causes our working capital to increase because our accounts receivable and inventory increase. In addition, we make our annual incentive bonus plan payments during the second quarter. In the second half of the year, production and sales typically decline as a result of scheduled customer shutdowns. The lower production and sales generally results in a reduction of accounts receivables and inventory, which decreases our working capital.

Our working capital is also impacted by our net position in regard to customer funded tooling with our customers. Tooling costs represent costs incurred by us in the development of new tooling used in the manufacture of our products. Generally, when a customer awards a contract to us, the customer agrees to reimburse us for certain of our tooling costs. As the tooling is developed, we experience cash outflows because we bear the costs and we typically do not receive reimbursement from our customers until the manufacture of the particular program commences. This timing delay causes our working capital to fluctuate between periods due to the timing of the cash inflows and outflows.

On December 31, 2015 and 2014, we had working capital balances of $99.7 million and $177.3 million, respectively. This decrease primarily reflects working capital that was included in assets and liabilities held for sale in 2014.

Sources and Uses of Liquidity

Our available liquidity at December 31, 2015 was $371.7 million, which consisted of $142.6 million of cash on hand, and unutilized borrowing availability under our U.S. and foreign credit facilities of $190.4 million and $38.7 million, respectively. A portion of our cash balance is located at foreign subsidiaries and is presently being used to fund operations at and investment in those locations. As of December 31, 2014 and 2013, we had available liquidity of approximately $363.7 million and $288 million, respectively, excluding the cash and unutilized borrowing availability at our discontinued operations.

As of December 31, 2015, we had short-term debt of $29.4 million, of which $22.7 million related to receivables factoring in Europe, $1.3 million related to other indebtedness in Europe, $4.5 million related to current maturities of our Term Loan Credit Facility, and $0.9 million related to debt in Brazil. Historically, we have been successful in renewing this debt as it becomes due, but we cannot provide assurance that this debt will continue to be renewed or, if renewed, that this debt will continue to be renewed under the same terms. The receivables factoring in Europe consists of uncommitted demand facilities, which are subject to termination at the discretion of the banks, although we have not experienced any terminations by the banks. We believe that we will be able to continue the receivables factoring in Europe.

40


 
 

TABLE OF CONTENTS

Free Cash Flow and Adjusted Free Cash Flow

Free cash flow and adjusted free cash flow are non-GAAP measures. Free cash flow is defined as cash provided by operating activities less cash disbursed for purchases of property, plant, and equipment. Adjusted free cash flow is defined as free cash flow excluding cash received or disbursed for customer tooling. We believe these metrics provide useful information to our investors because management regularly reviews these metrics as important indicators of how much cash is generated by our normal business operations, net of capital expenditures and cash provided or disbursed for customer-owned tooling, and makes decisions based upon them. Management also views these metrics as a measure of cash available to reduce debt and grow the business. Free cash flow and adjusted free cash flow are calculated as follows (in millions):

     
  Year Ended December 31,
     2015   2014   2013
Net cash provided by continuing operating activities   $ 102.6     $ 112.6     $ 127.8  
Cash disbursed for purchases of property, plant, and equipment, net     (124.6 )      (98.4 )      (78.0 ) 
Free cash flow     (22.0 )      14.2       49.8  
Less: Net cash provided/(disbursed) for customer-owned tooling     (32.7 )      (5.3 )      15.5  
Adjusted free cash flow   $ 10.7     $ 19.5     $ 34.3  

Adjusted free cash flow was $10.7 million during 2015, compared to $19.5 million during 2014. The $8.8 million difference in adjusted free cash flow reflects primarily lower adjusted EBITDA.

Adjusted free cash flow was $34.3 million during 2013. The $14.8 million difference in adjusted free cash flow from 2014 reflects primarily increased capital spending.

Debt

As of December 31, 2015, we had outstanding indebtedness, excluding capital lease obligations, of approximately $441.6 million, which consisted of the following:

$415.9 million (net of a $1.2 million discount) indebtedness outstanding under our Term Loan Credit Facility
$34.7 million of foreign subsidiary indebtedness
$9 million of debt issue costs netted against our indebtedness

In January 2016, the Company made a $50 million voluntary repayment on the Term Loan credit facility further reducing our indebtedness.

Term Loan Credit Facility

On April 23, 2013, we and our subsidiaries, Tower Automotive Holdings USA, LLC, Tower Automotive Holdings I, LLC, Tower Automotive Holdings II(a) LLC, Tower Automotive Holdings II(b) LLC and the domestic subsidiary and domestic affiliate guarantors named therein, entered into a Term Loan and Guaranty Agreement (the “Term Loan Credit Agreement”) whereby we obtained a term loan of $420 million. The maturity date for the initial term loan disbursed under the Term Loan Credit Agreement was April 23, 2020.

On July 29, 2013, we further amended the Term Loan and Credit Agreement, by entering into the First Refinancing Term Loan Amendment to Term Loan Credit Agreement (the “First Term Loan Amendment”), by and among Tower Automotive Holdings USA, LLC, as borrower, us, Tower Automotive Holdings I, LLC, Tower Automotive Holdings II(a), LLC, Tower Automotive Holdings II(b), LLC and the subsidiary guarantors named therein, as Guarantors, each of the financial institutions from time to time party thereto as lenders, and Citibank, N.A., as administrative agent for the lenders.

41


 
 

TABLE OF CONTENTS

The purpose of the First Term Loan Amendment was to re-price the Term Loan Credit Facility. The maturity date of the Term Loan Credit Facility remains April 23, 2020. The Term Loan Credit Facility bears interest at (i) the Alternate Base Rate (which is the highest of the Prime Rate, the Federal Funds Effective Rate plus 0.50% and the Adjusted LIBO Rate (as each such term is defined in the Term Loan Credit Agreement) for a one month interest period plus 1.00%) plus a margin of 2.75% or (ii) the Adjusted LIBO Rate (calculated by multiplying the applicable LIBOR rate by a statutory reserve rate, with a floor of 1.00%) plus a margin of 3.75%.

In connection with the re-pricing described above, we incurred charges of approximately $4.5 million in the third quarter of 2013 that was recognized as other expense. These charges related to a premium paid by us and expenses associated with the re-pricing.

On January 31, 2014, we amended the Term Loan Credit Agreement by entering into the Second Refinancing Term Loan Amendment and Additional Term Loan Amendment (the “Second Term Loan Amendment”), pursuant to which, among other things, the outstanding term loans under the Term Loan Credit Agreement were refinanced in full, and additional term loans in an aggregate principal amount of approximately $33 million (the “Additional Term Loans”) were disbursed. After giving effect to the disbursement of the Additional Term Loans, there were term loans (the “Term Loans”) in the aggregate principal amount of $450 million outstanding under the Term Loan Credit Agreement. The term loans bear interest at (i) the Alternate Base Rate plus a margin of 2.00% or (ii) the Adjusted LIBO Rate (calculated by multiplying the applicable LIBOR rate by a statutory reserve rate, with a floor of 1.00%) plus a margin of 3.00%.

Our Term Loan Credit Facility contains customary covenants applicable to certain of our subsidiaries, including a financial covenant (the “Total Net Leverage Ratio”) based on the ratio of Total Net Debt to Consolidated EBITDA (each as defined in the Term Loan Credit Agreement). As of the last day of each fiscal quarter, we are required to maintain a Total Net Leverage Ratio of not more than 3.75 to 1.00 on a rolling four quarter basis. Our financial condition and liquidity would be adversely impacted by the violation of any of our covenants.

Amended Revolving Credit Facility

On September 17, 2014, we entered into a Third Amended and Restated Revolving Credit and Guaranty Agreement (“Third Amended Revolving Credit Facility Agreement”) by and among Tower Automotive Holdings USA, LLC, us, Tower Automotive Holdings I, LLC, Tower Automotive Holdings II(a), LLC, Tower Automotive Holdings II(b), LLC, the subsidiary guarantors named therein, the financial institutions from time to time party thereto as Lenders, and JPMorgan Chase Bank, N.A. as Issuing Lender, as Swing Line Lender, and as Administrative Agent for the Lenders.

The Third Amended Revolving Credit Facility Agreement amended and restated, in its entirety, the Second Amended Revolving Credit Facility Agreement, dated as of June 19, 2013, by and among the Borrower, its domestic affiliate and domestic subsidiary guarantors named therein, and the lenders party thereto, and the Agent. The Third Amended Revolving Credit Facility Agreement provides for a cash flow revolving credit facility (the “Amended Revolving Credit Facility”) in the aggregate amount of up to $200 million. Our Third Amended Revolving Credit Facility Agreement also provides for the issuance of letters of credit in an aggregate amount not to exceed $50 million, provided that the total amount of credit (inclusive of revolving loans and letters of credit) extended under our Third Amended Revolving Credit Facility Agreement is subject to an overall cap, on any date, of $200 million. We may request the issuance of Letters of Credit denominated in Dollars or Euros. As of December 31, 2015, we had no borrowings outstanding under our Amended Revolving Credit Facility and $9.6 million of letters of credit outstanding under the Third Amended Revolving Credit Facility Agreement. Thus, we could have borrowed an additional $190.4 million under the Third Amended Revolving Credit Facility Agreement as of December 31, 2015, calculated as follows (in millions):