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As filed with the Securities and Exchange Commission on October 8, 2010

Registration No. 333-165200

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 10

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Tower Automotive, LLC

to be converted as described herein to a corporation named

TOWER INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		3714		20-8879584
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code number)		(I.R.S. Employer Identification Number)

17672 Laurel Park Drive North, Suite 400E

Livonia, Michigan 48152

(248) 675-6000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

James Gouin

Chief Financial Officer

17672 Laurel Park Drive North, Suite 400E

Livonia, Michigan 48152

(248) 675-6000

(Name, address, including zip code and telephone number, including area code, of agent for service)

Please address a copy of all communications to:

 

Peter H. Ehrenberg, Esq. Michael J. Reinhardt, Esq. Lowenstein Sandler PC 1251 Avenue of the Americas New York, New York 10020 (212) 262-6700		Joseph A. Hall, Esq. Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 (212) 450-4000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

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.

 

Large accelerated filer  ¨		Accelerated filer  ¨		Non-accelerated filer  x		Smaller reporting company  ¨
				(Do not check if a smaller reporting company)

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion

Preliminary Prospectus dated October 8, 2010

 

PROSPECTUS 6,250,000 Shares

Tower International, Inc.

Common Stock

 

 

This is Tower International, Inc.’s initial public offering. We are selling 6,250,000 shares of our common stock.

We expect the public offering price to be between $15.00 and $17.00 per share. Currently, no public market exists for the shares. Our shares have been approved for listing on the New York Stock Exchange under the symbol “TOWR.”

Investing in our common stock involves risks that are described under “Risk Factors” beginning on page 20 of this prospectus.

 

 

 

		Per Share			Total
Public offering price		$			$
Underwriting discount		$			$
Proceeds, before expenses, to us		$			$

The underwriters may also purchase up to an additional 937,500 shares from us, at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments, if any.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares against payment in New York, New York on or about                 , 2010.

 

Goldman, Sachs & Co.		Citi				J.P. Morgan

Wells Fargo Securities		Baird		Lazard Capital Markets

The date of this prospectus is                     , 2010.

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TABLE OF CONTENTS

 

		Page
Prospectus Summary		1
Risk Factors		20
Special Note Regarding Forward-Looking Statements		44
Use of Proceeds		45
Dividend Policy		46
Capitalization		47
Dilution		51
Selected Historical Consolidated Financial Data		53
Management’s Discussion and Analysis of Financial Condition and Results of Operations		56
Business		95
Management		113
Compensation Discussion and Analysis		120
Certain Relationships and Related Person Transactions		142
Principal Stockholders		145
Description of Certain Indebtedness		147
Description of Capital Stock		153
Shares Eligible for Future Sale		157
Material United States Federal Income and Estate Tax Considerations for Non-U.S. Holders		159
Underwriting		162
Conflicts of Interest		169
Legal Matters		169
Experts		169
Where You Can Find More Information		170
Index to Financial Statements		F-1

We have not authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

Through and including                     , 2010 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

MARKET AND INDUSTRY DATA

Market and industry data used throughout this prospectus, including information relating to our relative position in the vehicle structural component and assemblies industry, is based on the good faith estimates of management, which in turn are based upon management’s review of internal surveys, independent industry surveys and publications and other publicly available information, including reports and information prepared by CSM Worldwide^®, a global forecasting service for automotive production. The reports prepared by CSM Worldwide^® are subscription-based. All references in this prospectus to historical industry production volumes, projections, estimates or other data attributable to CSM Worldwide^® are based on data available from the CSM Worldwide^® August 2010 forecast.

 

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TRADEMARKS AND TRADE NAMES

We own or have rights to trademarks or trade names that we use in conjunction with the operation of our business. In addition, our name, logo and website name and address are our service marks or trademarks. Each trademark, trade name or service mark by any other company appearing in this prospectus belongs to its holder. Our principal trademark or trade name that we use is Tower Automotive^®.

CORPORATE CONVERSION

Immediately prior to the consummation of this offering, we will convert from a Delaware limited liability company to a Delaware corporation and will change our name from Tower Automotive, LLC to Tower International, Inc. We refer to this transaction as the Corporate Conversion. See “Business—Our History and Corporate Structure—Our Corporate Conversion.”

 

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RISK FACTORS

An investment in our common stock is subject to a number of risks. You should carefully consider the risks described below together with all the other information contained in this prospectus before deciding whether to purchase our common stock. If any of the following risks occurs, our business, financial condition, prospects and results of operations could be harmed. In such an event, the trading price of our common stock could decline and you may lose part or all of your investment.

Risk Factors Relating to Our Industry and Our Business

The recent deterioration in the global economy, the global credit markets and the financial services industry has severely and negatively affected demand for automobiles and automobile parts and our business, financial condition, results of operations and cash flows.

Demand for and pricing of our products are subject to economic conditions and other factors present in the various domestic and international markets where our products are sold. The level of demand for our products depends primarily upon the level of consumer demand for new vehicles that are manufactured with our products. The level of new vehicle purchases is cyclical, affected by such factors as general economic conditions, interest rates, consumer confidence, consumer preferences, patterns of consumer spending, fuel costs and the automobile replacement cycle.

The global economic crisis that has existed for at least the last two years and continues to exist has resulted in delayed and reduced purchases of durable consumer goods, such as automobiles. As a result, our OEM customers have significantly reduced their production. According to CSM Worldwide^®, vehicle production during 2009 decreased by 32% and 43% in North America and by 20% and 25% in Europe, as compared to 2008 and 2007, respectively. This was the principal reason our revenues declined by $537 million, or 25%, from 2008 to 2009. These unprecedented conditions have had a severe and negative impact on our business, financial condition, results of operations and cash flows.

In addition, there has recently been significant economic instability in several countries in the European Union where we conduct business. Such instability could adversely affect our business, financial condition, results of operations and cash flows.

Further deterioration in the United States and world economies could exacerbate the difficulties experienced by our customers and suppliers in obtaining financing, which, in turn, could materially and adversely impact our business, financial condition, results of operations and cash flows.

Lending institutions have suffered and may continue to suffer losses due to their lending and other financial relationships, especially because of the general weakening of the global economy and the increased financial instability of many borrowers. Longer-term disruptions in the credit markets could further 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 have 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 and suppliers, or if its cost is prohibitively high, their businesses would be negatively impacted, which could result in their restructuring or even reorganization/liquidation under applicable bankruptcy laws. Any such negative impact, in turn, could materially and negatively affect our company either through the loss of revenues to any of our customers so affected, or due to our inability to meet our commitments without excess expense resulting from disruptions in supply caused by the suppliers so affected.

A number of automobile manufacturers are, and over the last several years have been, facing severe financial difficulties. Many automobile manufacturers have undertaken significant restructuring actions in an effort to improve profitability and remain solvent. Weaknesses in the capital markets combined with a slowdown

 

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in global automotive demand have increased the pressure on our customers and their cash reserves. Automobile manufacturers are burdened with substantial structural and embedded costs, such as facility overhead, pension expenses and healthcare costs, that have caused some manufacturers, including GM and Chrysler, to seek government financing and, ultimately, file for bankruptcy protection. Due to the declining economic situation, the United States government granted General Motors and Chrysler government loans to assist them in obtaining the necessary capital to continue to operate. In spite of the government programs, Chrysler filed for bankruptcy on April 30, 2009 and GM filed for bankruptcy on June 1, 2009. Chrysler and GM emerged from bankruptcy on June 10, 2009 and July 10, 2009, respectively. Other automakers are likewise experiencing difficulties from a weakened economy, tightening credit and reduced demand for their products. For example, certain automakers have sought and been granted government assistance in countries such as Germany, Sweden, Brazil, France, Britain, Portugal, Spain, and Canada in an attempt to sustain viability. We may be adversely affected by either a bankruptcy filing or merger or sale of an OEM. We cannot assure you that governmental responses to these disruptions will restore consumer confidence or improve the liquidity of the financial markets.

Given the significant decline in global automotive demand, many automotive suppliers have experienced a significant drop in their cash flow, which has caused certain of such companies to breach some of their debt covenants. Due to the tight credit market, there can be no assurance that these companies will be able to amend their debt covenants on commercially reasonable terms. This, in turn, may cause significant supply issues that could materially and adversely affect us.

Financial difficulties experienced by any major customer could have a material adverse impact on us if such customer were unable to pay for the products we provide or 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.

The automobile industry is highly cyclical and cyclical downturns in our domestic or international business segments negatively impact our business, financial condition, results of operations and cash flows.

The volume of automotive production in North America, Europe and the rest of the world has fluctuated, sometimes significantly from year-to-year, and such fluctuations give rise to fluctuations in demand for our products. Because we have significant fixed production costs, relatively modest declines in our customers’ production levels can have a significant adverse impact on our results of operations. Our results of operations have been negatively impacted over the last several years in part due to declines in North American production levels from prior periods. According to CSM Worldwide^®, vehicle production during 2009 decreased by 32% and 43% in North America and by 20% and 25% in Europe as compared to 2008 and 2007, respectively.

The highly cyclical nature of the automotive industry presents a risk that is outside our control and that cannot be accurately predicted. For example, many believe that the current global economic crisis will continue throughout 2010 and we cannot assure you that we will be able to maintain or improve our results of operations in a stagnant or diminishing economic environment. Moreover, a number of factors that we cannot predict can and have impacted cyclicality in the past. Further decreases in demand for automobiles generally, or in the demand for our products in particular, could materially and adversely impact our business, financial condition, results of operations and cash flows.

Product recalls by OEMs could negatively impact their production levels and therefore have a material adverse impact on our business, financial condition, results of operations and cash flows.

There have recently been significant product recalls by some of the world’s largest automobile manufacturers. Toyota, for example, has engaged in a recall of some of its most popular models. Recalls may result in decreased production levels due to (i) an OEM focusing its efforts on addressing the problems underlying the recall, as opposed to generating new sales volume, and (ii) consumers’ electing not to purchase

 

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automobiles manufactured by the OEM initiating the recall, or by OEMs in general, while such recalls persist. Any reductions in OEM production volumes, especially those OEMs that are our existing customers, could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Product liability claims could cause us to incur losses and damage our reputation.

Many of our products are critical to the structural integrity of a vehicle. As such, we face an inherent business risk of exposure to product liability claims in the event of the failure of our products to perform to specifications, or if our products are alleged to result in property damage, bodily injury or death. In addition, if any of our products are, or are alleged to be, defective, we may be required to participate in a recall involving those products. We are generally required under our customer contracts to indemnify our customers for product liability claims in respect of our products. In addition, we do not have insurance covering product recalls. Accordingly, we may be materially and adversely impacted by product liability claims.

The decreasing number of automotive parts customers could make it more difficult for us to compete favorably.

Our business, financial condition, results of operations and cash flows could be materially and adversely affected because the OEM customer base is consolidating. As a result, we are competing for business from fewer customers. Due to the cost focus of these major customers, we have been, and expect to continue to be, requested to reduce prices as part of our initial business quotations and over the life of contracts we have been awarded. We cannot be certain that we will be able to generate cost savings and operational improvements in the future that are sufficient to offset price reductions requested by customers and to make us profitable and position us to win additional business.

The decreasing number of automotive parts suppliers could make it more difficult for us to compete favorably.

Consolidation and bankruptcies among automotive parts suppliers are resulting in fewer and larger competitors who benefit from purchasing and distribution economies of scale. If we cannot compete favorably in the future with these larger suppliers, our business, financial condition, results of operations and cash flows could be adversely affected due to a reduction of, or inability to increase, revenues.

We may have difficulty competing favorably in the highly competitive automotive parts industry.

The automotive parts industry is highly competitive. Although the overall number of competitors has decreased due to ongoing industry consolidation, we face significant competition within each of our major product areas, including from new competitors entering the markets that we serve, and from OEMs seeking to integrate vertically. The principal competitive factors include price, quality, global presence, service, product performance, design and engineering capabilities, new product innovation and timely delivery. We cannot assure you that we will be able to continue to compete favorably in these competitive markets or that increased competition will not have a material adverse effect on our business by reducing our ability to increase or maintain sales and profit margins. A number of our major OEM customers manufacture products which compete with our products. Our OEM customers tend to outsource less when they have idle capacity.

We principally compete for new business at the beginning of the development of new models and upon the redesign of existing models by major OEM customers. New model development generally begins three-to-five years prior to the marketing of such models to the public. Redesign of existing models begins during the life cycle of a platform, usually at least two-to-three years before the end of the platform’s life cycle. The failure to obtain new business on new models or to retain or increase business on redesigned existing models, could adversely affect our business, financial condition, results of operations, and cash flows. In addition, as a result of the relatively long lead times required for many of our structural components, it may be difficult in the short term for us to obtain new revenues to replace any unexpected decline in the sale of existing products.

 

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

Our working capital requirements can vary significantly, depending in part on the level, variability and timing of our customers’ worldwide vehicle production and the payment terms with our customers and suppliers. Our liquidity could also be adversely impacted 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 availability for borrowings under our credit facilities to satisfy those needs, as well as potential sources of additional capital, which may not be available on satisfactory terms and in adequate amounts, if at all.

Capital markets conditions have made it difficult for companies, including ours, to raise and maintain the liquidity necessary to operate. While we believe that we have sufficient liquidity to operate, there can be no assurance that we, our customers and our suppliers will continue to have such ability. This may increase the risk that we cannot produce our products or will have to pay higher prices for our inputs. These higher prices may not be recovered in our selling prices.

Our suppliers often seek to obtain credit insurance based on the strength of the financial condition of our subsidiary with the payment obligation, which may be less robust than our consolidated financial condition. 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. Our failure to receive such terms from our suppliers could have a material adverse effect on our liquidity.

We may incur material costs related to product warranties and other legal proceedings, which could have a material adverse impact on our business, financial condition, results of operations and cash flows.

If our warranty expense estimates differ materially from our actual claims, or if we are unable to estimate future warranty expense for new products, our business and financial results could be harmed. Currently, we have limited exposure to warranty claims with our present products and historically we have incurred limited expense in relation to warranty claims; however, as we transition to new products in the future, including within our solar business, we may incur substantial warranty expense related to these products.

From time to time, we are involved in legal proceedings, claims or investigations that are incidental to the conduct of our business. Some of these proceedings allege damages against us relating to environmental liabilities, personal injury claims, taxes, employment matters or commercial or contractual disputes.

We cannot assure you that the costs, charges and liabilities associated with these matters will not be material, or that those costs, charges and liabilities will not exceed any amounts reserved for them in our consolidated financial statements. In future periods, we could be subject to cash costs or non-cash charges to earnings if any of these matters is resolved unfavorably to us.

We are dependent on 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 impact on us.

We depend on major vehicle manufacturers for our revenues. For example, during 2009, Volkswagen, Fiat and Ford accounted for 17%, 13% and 13% 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 by limiting our ability to spread our fixed costs over a larger revenue base. We may make fewer sales to these customers for a variety of reasons, including, but not limited to:

 

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loss of awarded business;

 

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OEMs’ insourcing business they have traditionally outsourced to us;

 

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See “—Further deterioration in the United States and world economies could exacerbate the difficulties experienced by our customers and suppliers in obtaining financing, which, in turn, could materially and adversely impact our business, financial condition, results of operations and cash flows.”

In addition, Ford has sold Volvo Car Corporation to Geely, a privately-owned Chinese OEM. The change in ownership may adversely impact our ability to win new business from Volvo. We cannot predict how Volvo will be operated in the future.

The loss of key customer platforms could materially and adversely affect our business.

Our typical sales contract with a customer provides for supplying that customer’s requirements for a particular platform, rather than manufacturing a specific quantity of components. Our revenues contracts generally run for the life of the platform, usually three to ten years, and do not require the purchase by our customers of any minimum number of components. The loss or significant reduction in demand for vehicles for which we produce components could have a material adverse effect on our existing and future revenues and net income. The loss of one or more significant platforms, or a significant decrease in purchases from us in respect of such platforms, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may be unable to realize revenues represented by our awarded business, which could materially and adversely impact 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. Prior to 2008, substantially all of our North American customers had slowed or maintained at relatively flat levels new vehicle production for several years. During 2009, new vehicle production decreased dramatically as a result of the global economic crisis. In addition, we have agreed with our customers, that during the course of our awarded business, and as sales volume increases, we will lower the per unit cost of our products, and such savings will, in part, be passed on to our customers. Accordingly, we cannot assure you that we will realize any or all of the future revenues represented by our awarded business. Any failure to realize these revenues could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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, typically the terms and conditions of the agreements with our customers provide that they have the contractual right to unilaterally terminate our contracts with them with no notice or 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 undepreciated 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 forecasted production volume during the length of time we expect the related vehicle to be in production. We use a third-party forecasting service, CSM Worldwide^®, to provide long-term forecasts which allows us to determine how long a vehicle is expected to be in production. Lifetime revenues associated with a particular platform are not guaranteed and are not equivalent to backlog. If we over-estimate the production units or if a customer reduces

 

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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. See “—Our ability to recognize revenues from our agreement with Stirling Energy Systems, or SES, is subject to several risks, any one of which could materially and adversely impact our business, financial condition, results of operations and cash flows.”

Typically, it takes two to five 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. Although we have been successful in recovering these costs under appropriate circumstances in the past, we cannot assure you that our results of operations will not be materially adversely impacted in the future if we are unable to recover these types of pre-production costs related to our customers’ cancellation of awarded business.

Shifts in demand away from light trucks and sport utility vehicles could materially and adversely impact our business, financial condition, results of operations and cash flows.

In our North American operations, we are heavily dependent on SUVs and pickup trucks, which accounted for approximately 61% of North American revenues in 2009. As fuel prices increased significantly during the first half of 2008, consumers began to shift their purchases from these types of vehicles to cross-over utility vehicles, or CUVs, and passenger cars. CUVs are vehicles built on car platforms but that have many features similar to a traditional SUV. While gas prices have moderated, there has not been a substantial shift back to SUVs and pickup trucks. These trends could adversely affect our North American operations as the product life cycles are long and it will take time to diversify the North American portfolio.

Our joint venture partners may have interests that are not consistent with those of the joint venture, thereby resulting in our joint venture failing to achieve the results we desire.

We have two joint ventures in China. In both instances, 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 are not in the best interest of the joint venture. More specifically, when acting on behalf of a customer, our joint venture partners effectively receive 100% of the benefits of revenues terms, but when acting as a joint venture partner we must share with them any benefits received by the joint venture. This may create a misalignment of incentives between us and our joint venture partners that could have a material adverse impact on our business.

Our ability to recognize revenues from our agreement with Stirling Energy Systems, or SES, is subject to several risks, any one of which could materially and adversely impact our business, financial condition, results of operations and cash flows.

There are several risks directly associated with our solar agreement with SES. SES must secure significant financing in order to be in a position to purchase the products we have agreed to manufacture. There can be no assurances when or if financing will be made available to SES. In order for us to produce large stamped mirror-facet panels and welded support structures for SES, we must equip a facility for production that we are leasing in Arizona. We may not be able to recover the costs we incur in establishing this facility if the contractual arrangement with SES is not a long-term success.

Our anticipated revenue from our solar agreement is based on a number of assumptions and subject to significant uncertainties and contingencies, including non-binding and uncertain volume estimates and pricing targets. The amount of revenues that we may generate will depend in part upon the extent of the financing SES is able to raise for its solar projects. The term of the agreement is five years, except that it will automatically extend if necessary to assure that a specified production volume threshold has been met. There is no guarantee that the

 

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SES agreement will produce the expected revenues. SES is not required to purchase a minimum number of mirror-facet components and welded support structures from us. The revenues that we obtain from our solar agreement are entirely dependent on the sales that SES achieves for its products. Additionally, SES has the right to terminate the agreement with us if, among other reasons, the products we sell to SES are persistently and verifiably uncompetitive with the products sold by another company at similar volumes and with similar capital investment requirements. Under no circumstances should the existence of our solar agreement be regarded as a representation or prediction that we will achieve or are likely to achieve any particular results. Additionally, we do not have prior experience manufacturing components for the solar industry and therefore cannot assure you that we will be able to produce solar components in mass volume or that our margins associated with solar revenues will be comparable to our margins in our automotive business.

We have agreed to provide a three-year warranty on the products that we sell to SES. We will warrant to SES that, among other things, our products are free from defects, conform to specifications and have been manufactured in compliance with all applicable laws. Should the products we sell to SES be found to be defective or otherwise violate our warranties to SES, we could face significant expenses to comply with our SES warranty obligations.

The termination of, or damage to, one or more of our relationships with key third-party suppliers could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We obtain raw materials and components, including some of our steel, from third-party suppliers. Any delay in receiving supplies could impair our ability to deliver products to our customers and, accordingly, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Some of our suppliers are the sole source for a particular supply item. Loss of or damage to our relationships with these suppliers could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Various factors could result in the termination of our relationship with any supplier or the inability of suppliers to continue to meet our requirements on favorable terms. For example, the volatility in the financial markets and uncertainty in the automotive sector could result in exposure related to the financial viability of certain of our key third-party suppliers. Severe financial difficulties at any of our major suppliers could have a material adverse effect on us if we were unable to obtain, on a timely basis, on similar economic terms, the quantity and quality of components and raw materials we require to produce our products. In response to financial pressures, suppliers may also exit certain business lines, or change the terms on which they are willing to provide raw material and components to us.

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

The automotive supply chain has been faced with severe cash flow problems as a result of the significantly lower production of vehicles, increases in certain raw material, commodity and energy costs and restricted access to additional liquidity. Several automotive suppliers have filed for bankruptcy protection or ceased operations. Severe financial difficulties, including bankruptcy, of any automotive supplier could have a significant disruptive effect on the entire automotive industry, leading to, among other things, supply chain disruptions and labor unrest. For example, if a parts supplier were to cease operations, it could force the automotive manufacturers to whom the supplier provides parts to shut down their operations. This, in turn, could force other suppliers, including us, to shut down production at plants that are producing products for these automotive manufacturers.

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 customer pricing, the change in the cost to procure steel from the mills, and the change in our recovery of scrap steel, which we refer to as offal.

 

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While we strive to achieve a neutral net steel impact over time, we are not always successful in achieving that goal. Changes in steel prices may affect our liquidity because of the time difference between our payment for our steel and our collection of cash from our 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 where we are on resale programs, or in the product pricing that is negotiated regarding increases and decreases in the steel price in cases where we purchase steel directly from the mills. In either situation, we may be impacted by the fluctuation in scrap steel prices, either positive or negative, in relation to our various customer agreements. Since scrap steel prices generally increase and decrease as steel prices increase and decrease, our sale of offal may mitigate the severity of steel price increases and limit the benefits we achieve through steel price declines. Any dislocation in offal and steel prices could negatively affect our business, financial condition, results of operations and cash flows.

The seasonality we experience in our business may negatively impact our quarterly results of operations, cash flows and liquidity.

Our business is seasonal. Our customers in Europe typically shut down vehicle production during portions of July or August and during one week in our fourth quarter. Our North American customers typically shut down vehicle production for approximately two weeks during July and for one week during December. Such seasonality may adversely affect our results of operations, cash flows and liquidity during the third and fourth quarters of our fiscal year.

We have significant operating lease obligations and our failure to meet those obligations could adversely affect our business, financial condition, results of operations and cash flows.

We lease many of our manufacturing facilities and certain capital equipment. Our lease expense under these operating leases was $24.1 million for the year ended December 31, 2009 and $10.9 million for the six months ended June 30, 2010. A failure to pay our lease obligations would constitute a default allowing the applicable landlord or lessor to pursue remedies available to it under our leases and applicable law, which could include taking possession of property that we utilize in our business and, in the case of facilities leases, evicting us. In addition, we are party to two master leases with entities affiliated with a single commercial real estate company that cover a number of our leased properties. These master leases require us to continue to perform under the leases with respect to certain properties that we are no longer using. Such obligations negatively impact our results of operations.

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

If we must close additional manufacturing locations because of loss of business or consolidation of manufacturing facilities, the employee severance, asset retirement and other costs, including reimbursement costs relating to public subsidies, to close these facilities may be significant. In certain locations that are subject to leases, we may continue to incur material costs consistent with the initial lease terms. Due to the current state of the global economy, there is no assurance that additional plants will not have to be closed. We continually attempt to align production capacity with demand, which may result in additional closures. Historically, we have incurred significant costs related to the closure of our facilities and can provide no assurance that such costs will not be material in the future.

Our ability to operate effectively could be impaired if we are unable to recruit and retain key personnel.

Our success depends, in part, on the efforts of our executive officers and other key senior managers and employees. Our senior management team has reoriented our business towards anticipated future demand and

 

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potential alternative markets and has implemented significant productivity initiatives. The loss of members of our senior management team could jeopardize our ability to execute these business strategies and could adversely impact our efforts to improve our cost competitiveness. In addition, our future success will depend on, among other factors, our ability to continue to attract and retain qualified personnel. For example, we will also need to attract engineers with experience in non-automotive areas in order to continue our efforts in the solar industry and explore opportunities in other non-automotive industries. The loss of the services of our executive officers, senior managers or other key employees, or the failure to attract or retain qualified employees, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The hourly workforce in the automotive industry is highly unionized and our business could be adversely affected by labor disruptions.

As of December 31, 2009, we had approximately 7,400 employees, of whom approximately 5,000 were covered under collective bargaining agreements. If major work disruptions involving our employees were to occur, our business could be adversely affected by a variety of factors, including a loss of revenues, increased costs and reduced profitability. We cannot assure you that we will not experience a material labor disruption at one or more of our facilities in the future in the course of renegotiation of our labor arrangements or otherwise. In addition, substantially all of the hourly employees of North American vehicle manufacturers and many of their suppliers are represented by the United Automobile, Aerospace and Agricultural Implement Workers of America under collective bargaining agreements. Vehicle manufacturers and suppliers and their employees in other countries are also subject to labor agreements. A work stoppage or strike at our production facilities, at those of a significant customer, or at a significant supplier of ours, such as the 2008 strike at American Axle that resulted in 30 General Motors facilities in North America being idled for several months, could have a material adverse impact on us by disrupting demand for our products or our ability to manufacture our products. Also, we cannot assure you that the labor rate following a renegotiation of any of our current collective bargaining agreements will be beneficial to us.

We sponsor a defined benefit pension plan that is underfunded and will require substantial cash payments. Additionally, 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. Although the Predecessor ceased benefit accruals under the plan, we anticipate that the plan may require substantial cash payments in order to meet our funding obligations. These cash contributions may be significant in future periods and could adversely impact our cash flow.

Additionally, our earnings may be positively or negatively impacted by the amount of income or expense recorded for our pension plan. GAAP requires that income or expense for pension plans be calculated at the annual measurement date using actuarial assumptions and calculations. These calculations reflect certain 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. As a result of current economic instability, the investment portfolio of the pension plan has experienced volatility and a decline in fair value. 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, but such impact cannot be determined at this time.

 

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We are subject to environmental requirements and risks as a result of which we may incur significant costs, liabilities and obligations.

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 greenhouse gases, or 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.

Under certain environmental requirements, we could be responsible for costs relating to any contamination at our or a predecessor entity’s current or former 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 assure you 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.

We may incur material costs related to the return or retirement of leased and owned assets, which could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Facility leases generally require that the premises be returned to the owner or lessor in the original condition. Asset leases also may require the disassembly and removal of heavy equipment at the termination of the lease. Costs are incurred in connection with the removal of equipment and general cleanup resulting from past operations and/or equipment removal. In addition, environmental assessments, notifications to regulatory authorities and cancellation of permits may be required. Finally, costs associated with the removal and/or mitigation of asbestos-containing materials also may be incurred in connection with lease terminations, improvements to facilities or otherwise. We have established reserves for these asset retirement obligations based, in part, on past experiences at other facilities that we have operated. Although we believe our estimates of costs associated with asset retirement obligations are reasonable, future experience may require us to revise these estimates. We could be subject to material cash or non-cash charges to earnings if we are required to incur material additional costs based on our ongoing analyses of the asset retirement obligations at our properties.

We are subject to risks related to our international operations.

Our international operations include manufacturing facilities in China, South Korea, Brazil and Europe, and we sell our products in each of these areas. For the year ended December 31, 2009, approximately 71% of our revenues were derived from operations outside the United States. International operations are subject to various risks that could have a material adverse effect on those operations and our business as a whole, including:

 

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exposure to local economic conditions;

 

•

exposure to local political conditions, including the risk of seizure of assets by a foreign government;

 

•

exposure to local social unrest, including any resultant acts of war, terrorism or similar events;

 

•

exposure to local public health issues and the resultant impact on economic and political conditions;

 

•

foreign currency exchange rate fluctuations;

 

•

hyperinflation in certain foreign countries;

 

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the risk of government-sponsored competition;

 

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•

controls on the repatriation of cash, including the imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries; and

 

•

export and import restrictions.

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

As a result of our international operations, we are subject to risk because we generate a significant portion of our revenues and incur a significant portion of our expenses in currencies other than the U.S. dollar. To the extent that we have significantly more costs than revenues generated in a foreign currency, we are subject to risk if the foreign currency in which our costs are paid appreciates against the currency in which we generate revenues because the appreciation effectively increases our cost in that country. The financial condition, results of operations and cash flows of some of our operating entities are reported in foreign currencies and then translated into U.S. dollars at the applicable foreign exchange rate for inclusion in our consolidated financial statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact 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. A significant amount of our revenues are denominated in Euros. Economic instability in the European Union and the related decline in the value of the Euro could have a material adverse effect on our business, financial condition, results of operations and cash flows.

To the extent we are unable to match revenues received in foreign currencies with costs paid in the same currency, foreign exchange rate fluctuations in that currency could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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 impact resulting from foreign currency variations. Gains or losses associated with hedging activities also may negatively impact operating results.

We will have increased exposure to depreciation in the Euro due to the exchange of U.S. dollar for Euro denominated debt as a result of our retirement of our outstanding first lien term loan and the issuance of the notes in August 2010. We intend to evaluate our hedging activities in light of such exposure, but there is no guarantee we will be able to effectively mitigate such risk.

Entering new markets, such as our entry into solar power, poses new competitive threats and commercial risks.

As we seek to expand into markets beyond vehicle structural components and assemblies, we expect to diversify our product revenues by leveraging our development, engineering and manufacturing capabilities in order to source necessary parts and components for other industries. Such diversification requires investments and resources that may not be available as needed. While we have signed a contract with a customer in the solar energy industry, we cannot guarantee that we will win additional solar energy or other contracts in new markets. Furthermore, even if we sign contracts in new markets, we cannot guarantee that we will be successful in leveraging our capabilities into these new markets and thus in meeting the needs of these new customers and competing favorably in these new markets. If these customers experience reduced demand for their products or financial difficulties, our future prospects will be negatively affected as well.

Any acquisitions 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 acquisitions of complementary companies, products or technologies. Acquisitions involve numerous risks, including difficulties in the assimilation of the acquired businesses, the diversion of our management’s attention from other business concerns, the assumption of unknown liabilities,

 

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undisclosed risks impacting the target and potential adverse effects on existing business relationships with current customers and suppliers. In addition, any acquisitions could involve the incurrence of substantial additional indebtedness or dilution to our stockholders. We cannot assure you that we will be able to successfully integrate any acquisitions that we undertake or that such acquisitions will perform as planned or prove to be beneficial to our operations and cash flow. Any such failure could seriously harm our financial condition, results of operations and cash flows.

Our historical financial information is not comparable to our current financial condition, results of operations and cash flows because of our use of purchase accounting in connection with the purchase of assets from the bankruptcy estate of the Predecessor (which resulted in a new valuation for our assets and liabilities to their fair values).

It may be difficult for you to compare both our historical and future results to our results for the period before August 1, 2007. The acquisition of our assets from the Predecessor was accounted for utilizing purchase accounting, which resulted in a new valuation for our assets and liabilities to their fair values. This new basis of accounting began on August 1, 2007. In addition, we expect future acquisitions, if any, will also be accounted for using purchase accounting and, therefore, similar limitations regarding comparability of historical and subsequent results could arise.

The mix of profits and losses in various jurisdictions may have an impact on our overall tax rate, which in turn, may adversely affect our profitability.

Our overall effective tax rate is equal to our total tax expense as a percentage of our total operating profit or loss before tax. However, tax expenses and benefits are determined separately for each of our taxpaying entities or groups of entities that is consolidated for tax purposes in each jurisdiction. Losses in such jurisdictions may provide no current financial statement tax benefit. As a result, changes in the mix of projected profits and losses between jurisdictions, among other factors, could have a significant impact on our overall effective tax rate.

Negative or unexpected results from tax audits could adversely affect us.

We are currently subject to tax audits by governmental authorities in the United States and numerous non-United States jurisdictions. Because the results of tax audits are inherently uncertain, negative or unexpected results from one or more such tax audits could adversely affect us.

Proposed future United States federal income tax legislation could adversely impact our effective tax rate.

In May 2009, President Obama’s administration announced proposed future tax legislation that would if enacted into law substantially modify the rules governing the United States taxation of owners of certain non-United States subsidiaries. In February 2010, President Obama’s administration delivered a proposed budget reflecting similar proposed future tax legislation. These potential changes include, but are not limited to: limitations on the deferral of United States taxation of foreign earnings; limitations on the ability to claim and utilize foreign tax credits; and deferral of various tax deductions until non-United States earnings are repatriated to the United States. Each of these proposals would be effective for taxable years beginning after December 31, 2010. Many details of the proposals remain unknown, although if any of these proposals are enacted into law they could adversely impact our effective tax rate.

The value of our deferred tax assets could become impaired, which could materially and adversely affect our operating results.

As of December 31, 2009, we had approximately $5.6 million in net deferred income tax assets. These deferred tax assets include net operating loss carryforwards that can be used to offset taxable income in future periods and reduce income taxes payable in those future periods. We periodically determine the probability of the

 

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realization of deferred tax assets, using significant judgments and estimates with respect to, among other things, historical operating results, expectations of future earnings and tax planning strategies. If we determine in the future that there is not sufficient positive evidence to support the valuation of these assets, due to the factors described above or other factors, we may be required to further adjust the valuation allowance to reduce our deferred tax assets. Such a reduction could result in material non-cash expenses in the period in which the valuation allowance is adjusted and could have a material adverse effect on our results of operations.

Our ability to utilize our net operating loss carryforwards may be limited and delayed. As of December 31, 2009, we had U.S. net operating loss carryforwards of approximately $148.5 million. Certain provisions of the United States tax code could limit our annual utilization of the net operating loss carryforwards. There can be no assurance that we will be able to utilize all of our net operating loss carryforwards and any subsequent net operating loss carryforwards in the future.

In addition, adverse changes in the underlying profitability and financial outlook of our operations in several foreign jurisdictions could lead to changes in our valuation allowances against deferred tax assets and other tax accruals that could adversely affect our financial results.

Further, subsequent to consummation of this offering, we may have an “ownership change” for purposes of Section 382 of the Internal Revenue Code if, under certain circumstances, our existing stockholders were to sell within a specified period a sufficient amount of our common stock that they then possess to cause an ownership change. If we do experience an ownership change, we may be further limited, pursuant to Section 382 of the Internal Revenue Code, in using our then-current net operating losses to offset taxable income for taxable periods (or portions thereof) beginning after such ownership change. Consequently, in the future we may be required to pay increased cash income taxes because of the Section 382 limitations on our ability to use our net operating loss carryforwards. Increased cash taxes would reduce our after-tax cash flow.

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

Goodwill represents the amount by which the cost of an acquisition accounted for using the purchase method exceeds the fair value of the net assets acquired. GAAP requires that goodwill be periodically evaluated for impairment based on the fair value of the reporting unit. A significant percentage of our total assets represent goodwill primarily associated with the purchase of our assets from the Predecessor in 2007. 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 in net income.

As of June 30, 2010, we had approximately $60.7 million of goodwill on our consolidated balance sheet that could be subject to impairment. In addition, if we acquire new businesses in the future, we may recognize additional goodwill, which could be significant. We could also be required to recognize additional impairments in the future and such an impairment charge could have a material adverse effect on our financial position and results of operations in the period of recognition.

We may face risks relating to climate change that could have an adverse impact on our business.

GHG emissions have increasingly become the subject of substantial international, national, regional, state and local attention. GHG emission regulations have been promulgated in certain of the jurisdictions in which we operate, and additional GHG requirements are in various stages of development. For example, the United States Congress is considering legislation that would establish a nationwide limit on GHGs. In addition, the United States Environmental Protection Agency (EPA) has finalized regulations that will affect GHG emissions from mobile and stationary sources pursuant to the federal Clean Air Act. When effective, such measures could require us to modify existing or obtain new permits, implement additional pollution control technology, curtail operations or increase our operating costs. In addition, our OEM customers may seek price reductions from us to

 

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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. Thus, any additional regulation of GHG emissions, including through a cap-and-trade system, technology mandate, emissions tax, reporting requirement or other program, could adversely affect our business, results of operations, financial condition, reputation, product demand and liquidity.

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, to obtain financing in the future and to react to changes in our business, and which could adversely affect the price of our common stock.

We have substantial indebtedness for borrowed money. As of June 30, 2010, on a pro forma basis after giving effect to the notes offering and the application of the net proceeds from the notes offering as well as the use of $5.9 million of our cash to retire our first lien term loan (other than the synthetic letter of credit facility portion thereof), we would have had indebtedness for borrowed money (including capital leases) of $641.3 million in the aggregate (net of $12.8 million original issue discount in respect of the issuance of the notes) with interest rates ranging from 2.18% to 14.57%.

Our significant amount of debt could limit our ability to satisfy our obligations, limit our ability to operate our businesses and impair our competitive position. For example, it could:

 

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adversely affect our stock price;

 

•

make it more difficult for us to satisfy our obligations under our financing documents;

 

•

increase our vulnerability to adverse economic and general industry conditions, including interest rate fluctuations, because a portion of our borrowings are, and will continue to be, at variable rates of interest;

 

•

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;

 

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limit our flexibility in planning for, or reacting to, changes in our business and industry;

 

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place us at a disadvantage compared to competitors that may have proportionately less debt;

 

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limit our ability to obtain additional debt or equity financing due to applicable financial and restrictive covenants in our debt agreements; and

 

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increase our cost of borrowing.

We may not be able to refinance any of our debt or we may not be able to refinance our debt on commercially reasonable terms.

As of June 30, 2010, on a pro forma basis after giving effect to the notes offering and the application of the net proceeds from the notes offering as well as the use of $5.9 million of our cash to retire our first lien term loan (other than the synthetic letter of credit facility portion thereof), $109.9 million of our indebtedness (including capital leases) had a maturity of one year or less. We cannot assure you that we will be able to refinance, extend the maturity or otherwise amend the terms of our existing indebtedness, or whether 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 and/or other indebtedness issued to refinance our existing indebtedness will be the same or as favorable as those under our existing indebtedness.

 

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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. 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:

 

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sales of assets;

 

•

sales of equity; or

 

•

negotiations with lenders and their respective agents to restructure the applicable debt.

Our debt instruments may restrict, or 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 and in the case of the notes, a change in control may lead to one or more noteholders exercising their change of control put right.

Despite our current indebtedness levels, we may still be able to incur substantially more debt. This could exacerbate the risks associated with our substantial leverage.

Although we expect to use the net proceeds from this offering to retire existing indebtedness, we may incur additional indebtedness in the future or refinance existing debt prior to the respective maturities of such debt. After giving pro forma effect to the notes offering and the application of the net proceeds from the notes offering as well as the use of $5.9 million of our cash to retire our first lien term loan, as of June 30, 2010 (other than the synthetic letter of credit facility portion of the first lien term loan, which was not repaid), we would have had $56.8 million of availability for additional borrowings of senior secured indebtedness under our revolving credit facility and would have been able to cause the issuance of $4.4 million of additional letters of credit under our synthetic letter of credit facility. We could also incur indebtedness under other existing as well as additional financing arrangements. If new debt or other liabilities are added to our current debt levels, the related risks that we now face could intensify.

We may be unable to generate sufficient cash to service all of our indebtedness and 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 and to financial, business and other factors beyond our control. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay or refinance our indebtedness, including the notes and our revolving credit facility.

If we are unable to service our debt or pay our other obligations, we will be forced to take actions such as revising or delaying our strategic plans, reducing or delaying capital expenditures, selling assets, restructuring or refinancing such debt, or seeking additional equity capital. We may be unable to effect any of these remedies on satisfactory terms, or at all. Our revolving credit facility, our synthetic letter of credit facility and the indenture governing the notes restrict our ability to dispose of assets and use the proceeds from such disposition. We may not be able to consummate those dispositions or to use those proceeds to meet any debt service obligations then due. For more information, see “Description of Certain Indebtedness.”

If we cannot make scheduled payments on our debt, we will be in default and, as a result:

 

•

the indenture trustee or the noteholders who collectively hold at least 25% in principal amount of the outstanding notes could declare all outstanding principal and interest to be due and payable;

 

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•

the lenders under our revolving credit facility, our synthetic letter of credit facility and the agreements governing certain of our other indebtedness could terminate their commitments to lend to us and to issue letters of credit, and such lenders could foreclose against the assets securing our borrowings; and

 

•

we could be forced into bankruptcy or liquidation.

Certain of our debt is owned by Cerberus, which controls our controlling stockholder, and in certain instances such as in the event of a default under the financing documents governing such debt, the interests of Cerberus in its capacity as a lender may be adverse to the interests of our stockholders.

As of August 26, 2010, Cerberus, which controls our controlling stockholder, owned all $27.5 million of the commitments under our synthetic letter of credit facility. Cerberus may have interests as a lender which differ from the interests of our stockholders. In the event that Cerberus seeks to exercise certain rights that it has pursuant to the financing documents governing our indebtedness, such actions could be adverse to the interests of our stockholders. In addition, Cerberus and our controlling stockholder may have an incentive to cause us to refinance such debt, even if the terms available in the market are not as attractive as the terms contained in our existing indebtedness.

Our debt instruments restrict our current and future operations.

The financing documents 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;

 

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declare or make distributions to our stockholders, repurchase equity or prepay certain debt;

 

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make loans and certain investments;

 

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make certain acquisitions of equity or assets;

 

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enter into certain transactions with affiliates;

 

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enter into mergers, acquisitions and other business combinations;

 

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consolidate, transfer, sell or otherwise dispose of certain assets;

 

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use the proceeds from sales of assets and stock;

 

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enter into sale and leaseback transactions;

 

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enter into restrictive agreements;

 

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make capital expenditures;

 

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change our fiscal year;

 

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amend or modify organizational documents; and

 

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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.

Any one or more of the risks mentioned herein, as well as events not yet contemplated, could result in our failing to meet such covenants and restrictions. Our ability to comply with these covenants and restrictions may be affected by events beyond our control, and an adverse development affecting our business could require us to

 

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seek waivers or amendments of such covenants or restrictions or alternative or additional sources of financing. We cannot assure you that these waivers, amendments or alternative or additional financings could be obtained, or if obtained, would be on terms acceptable to us.

A breach of any of the covenants or restrictions contained in any of our existing or future financing agreements, including our inability to comply with the financial maintenance covenants in such financing documents, could result in an event of default under those financing documents. Any such event of default could permit the agent or lenders under our financing documents, if such documents so provide, to discontinue lending, to accelerate the related debt as well as any other debt to which a cross acceleration or cross default provision applies, and to declare all borrowings outstanding under our financing arrangements to be immediately due and payable and institute enforcement proceedings against those assets that secure the extensions of credit under our outstanding indebtedness. In addition, the agent or lenders could terminate any commitments they had made to supply us with further funds. If the agent or lenders require immediate repayments, we may not be able to repay them in full. This could adversely affect our financial results, liquidity and cash flow and our ability to service our indebtedness and could lead to our bankruptcy.

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

As of June 30, 2010, on a pro forma basis after giving effect to the notes offering and the application of the net proceeds therefrom as well as the use of $5.9 million of our cash to retire our first lien term loan (other than the synthetic letter of credit facility portion thereof), there was $600.5 million (net of $12.8 million original issue discount in respect of the issuance of the notes) of secured indebtedness outstanding under our financing arrangements. Substantially all of our subsidiaries’ assets are pledged as collateral for these borrowings. As of June 30, 2010, on a pro forma basis after giving effect to the notes offering and the application of the net proceeds therefrom as well as the use of $5.9 million of our cash to retire our first lien term loan (other than the synthetic letter of credit facility portion thereof), our secured financing arrangements permitted additional borrowings of up to a maximum of $65.4 million and an additional $4.4 million of available letters of credit to be issued under our synthetic letter of credit facility. 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 guarantees. 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.

We operate as a holding company and depend on our subsidiaries for cash to satisfy the obligations of the holding company.

Tower International, Inc. is a holding company. Our subsidiaries conduct all of our operations and own substantially all of our assets. Our cash flow and our ability to meet our obligations depends on the cash flow of our subsidiaries. In addition, the payment of funds in the form of dividends, intercompany payments, tax sharing payments and other forms are in certain instances subject to restrictions under the terms of our subsidiaries’ financing arrangements.

Our variable rate indebtedness exposes us to interest rate risk, which could cause our debt costs to increase significantly.

A significant portion of our borrowings are at variable rates of interest and expose us to interest rate risks. As of June 30, 2010, on a pro forma basis after giving effect to the notes offering and the application of the net proceeds therefrom to retire our first lien term loan (other than the synthetic letter of credit facility portion thereof), approximately 26% of our total debt would have been at variable interest rates. Based on amounts outstanding of our variable rate debt as of June 30, 2010, on a pro forma basis after giving effect to the notes offering and the application of the net proceeds therefrom to retire our first lien term loan (other than the synthetic letter of credit facility portion thereof), a 1% increase in the per annum interest rate for our variable rate

 

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debt would increase our interest expense by approximately $1.7 million annually. An increase in borrowings under our revolving credit facility or any similar replacement facilities which provide for variable interest rates would increase our exposure to increases in market interest rates.

Our ability to borrow under our revolving credit facility is subject to an annual appraisal of certain of our assets. Such appraisal could result in the reduction of available borrowings under this facility, thereby negatively impacting our liquidity.

The borrowings available under our revolving credit facility are subject to the calculation of a borrowing base, which is based upon the value of certain of our assets, including accounts receivable, inventory and property, plant and equipment, which we refer to as PP&E. The administrative agent for this facility causes a third party to perform an appraisal of the assets included in the calculation of the borrowing base either on an annual basis or, if our availability under the facility is less than $30,000,000 during any twelve month period, as frequently as on a semi-annual basis. In addition, if certain material defaults under the facility have occurred and are continuing, the administrative agent has the right to perform any such appraisal as often as it deems necessary in its sole discretion. During 2008 and 2009, the appraised value of our PP&E was less than the value of such assets used in the calculation of the borrowing base at the time of the previous appraisal, thereby reducing available borrowings under our revolving credit facility. If any such appraisal results in a significant reduction of the borrowing base, a portion of the outstanding indebtedness under the facility could become immediately due and payable.

Risk Factors Relating to Our Common Stock and This Offering

The price of our common stock may be volatile.

The price at which our common stock will trade after this offering 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’ and financial analysts’ perception of the business risks and conditions of our business;

 

•

changes in, or our failure to meet, earning estimates and 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;

 

•

depth of the trading market in our common stock;

 

•

failure of securities analysts to cover our common stock after this offering;

 

•

termination of the lock-up agreement or other restrictions on the ability of our existing stockholders to sell shares after this offering;

 

•

future sales of our common stock;

 

•

the granting or exercise of employee stock options or other equity awards;

 

•

increased competition;

 

•

realization of any of the risks described elsewhere under “Risk Factors”; and

 

•

general market and economic conditions.

 

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In addition, equity markets have experienced significant price and volume fluctuations that have affected the market prices for the securities of newly public companies for a number of reasons, including reasons that may be unrelated to our business or operating performance. These 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.

The shares you purchase in this offering will experience immediate and substantial dilution.

The initial public offering price of our common stock will be substantially higher than the net tangible book value per share of our outstanding common stock. Assuming an initial public offering price of $16.00 per share, representing the midpoint of the range on the cover page of this prospectus, purchasers of our common stock will effectively incur dilution of $12.95 per share in the net tangible book value of their purchased shares. Conversely, the shares of our common stock owned by existing stockholders will receive a material increase in net tangible book value per share. You may experience additional dilution if we issue common stock in the future. As a result of this dilution, you may receive significantly less than the full purchase price you paid for the shares in the event of liquidation.

Upon consummating this offering, Tower International, Inc. will be a “controlled company” within the meaning of the New York Stock Exchange corporate governance standards and, as a result, will qualify for, and intends to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to these requirements.

Upon completion of this offering, Cerberus, through our controlling stockholder, will continue to control a majority of our outstanding common stock. As a result, we will be a “controlled company” within the meaning of the New York Stock Exchange corporate governance standards. Under these standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

•

the requirement that a majority of the board of directors consist of independent directors;

 

•

the requirement that we have a nominating/corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

•

the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

•

the requirement for an annual performance evaluation of the nominating/corporate governance and compensation committees.

Following this offering, we intend to utilize these exemptions. As a result, we may not have a majority of independent directors and our nominating and corporate governance and compensation committees will not consist entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements. As of August 26, 2010, Cerberus also owned 100 percent of our synthetic letter of credit facility.

The interests of our controlling stockholder in its capacity as a stockholder may be adverse to the interests of our other stockholders.

After this offering, our controlling stockholder will continue to be able to control the election of our directors, determine our corporate and management policies and determine, without the consent of our other stockholders, the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate transactions. Our controlling stockholder will also have sufficient voting power to amend our organizational documents.

 

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We cannot assure you that the interests of our controlling stockholder will coincide with the interests of other holders of our common stock. Additionally, Cerberus, which controls our controlling stockholder, is in the business of making investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. Our certificate of incorporation provides that neither Cerberus or its affiliates, nor members of our board of directors who are not our employees (including any directors who also serve as officers) or their affiliates, have any duty to refrain from engaging, directly or indirectly, in the same or similar business activities or lines of business in which we operate. Cerberus and our controlling stockholder may also pursue, for their own accounts, acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. So long as our controlling stockholder continues to own a significant amount of our common stock, it will continue to be able to strongly influence or effectively control our decisions, including director and officer appointments, potential mergers or acquisitions, asset sales and other significant corporate transactions. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are directed by Cerberus, its affiliates or our directors to themselves or their other affiliates instead of to us.

For a description of Cerberus’ interest as a lender to our company, see “— Certain of our debt is owned by Cerberus, which controls our controlling stockholder, and in certain instances such as in the event of a default under the financing documents governing such debt, the interests of Cerberus in its capacity as a lender may be adverse to the interests of our stockholders.”

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 after this offering, 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. Upon completion of this offering, our certificate of incorporation will authorize us to issue 350,000,000 shares of common stock and we will have 18,717,866 shares of common stock outstanding. Of these outstanding shares, the 6,250,000 shares of common stock sold in this offering will be freely tradable, without restriction, in the public market unless purchased by our affiliates. The remaining 12,467,866 shares of common stock will be “restricted securities,” as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), which will be freely tradable subject to applicable holding period, volume and other limitations under Rule 144 or Rule 701 of the Securities Act.

Upon completion of this offering, the restricted securities will be subject to a lock-up agreement with the underwriters, restricting the sale of such shares for 180 days after the date of this offering. This lock-up agreement is subject to a number of exceptions, however, and holders may be released from these agreements without prior notice at the discretion of each of the representatives of the underwriters. Moreover, after expiration of the lock-up our controlling stockholder, as the holder of an aggregate of 12,467,866 shares of our common stock, will have rights, subject to some conditions, to require us to file registration statements covering its shares or to include its shares in registration statements that we may file for ourselves or other stockholders. Once we register these shares, they can be freely sold in the public market upon issuance.

A trading market may not develop for our common stock, and you may not be able to sell your stock.

There is no established trading market for our common stock, and the market for our common stock may be highly volatile or may decline regardless of our operating performance. You may not be able to sell your shares at or above the initial public offering price.

Prior to this offering, you could not buy or sell our equity publicly. Our common stock has been approved for listing on the New York Stock Exchange. However, an active public market for our common stock may not develop or be sustained after this offering. If a market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all.

 

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The initial public offering price will be determined through negotiation between us and representatives of the underwriters, and may not be indicative of the market price for our common stock after this offering.

Reports published by securities or industry analysts, including projections in those reports that exceed our actual results, could adversely affect our common stock price and trading volume.

We currently expect that securities research analysts, including those affiliated with our underwriters, will establish and publish their own periodic projections for our business. These projections may vary widely from one another and may not accurately predict the results we actually achieve. Our stock price may decline if our actual results do not match securities research analysts’ projections. Similarly, if one or more of the analysts who writes reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price could decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, our stock price or trading volume could decline. While we expect securities research analyst coverage, if no securities or industry analysts commence coverage of our company, the trading price for our stock and the trading volume could be adversely affected.

We have never operated as a public company and the obligations incident to being a public company will require additional expenditures of both time and resources.

Although the Predecessor was a public company, we have never operated as a public company, and we expect that the obligations of being a public company, including substantial public reporting, auditing and investor relations obligations, will require significant additional expenditures, place additional demands on our management and require the hiring of additional personnel. These obligations will increase our operating expenses and could divert our management’s attention from our operations. The Sarbanes-Oxley Act of 2002 and the SEC rules and regulations implementing that Act, as well as various New York Stock Exchange rules, will require us to implement additional corporate governance practices and may require further changes. These rules and regulations will increase our legal and financial compliance costs, and make some activities more difficult, time-consuming and/or costly. We also expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance. We may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified independent members of our board of directors and qualified members of our management team.

If we are unable to favorably assess the effectiveness of our internal control over financial reporting, or if our independent registered public accounting firm is not able to provide an unqualified attestation report on the effectiveness of our internal controls over financial reporting, our stock price could be materially adversely affected.

We will be required to certify to and report on, and our independent registered public accounting firm may be required to attest to, the effectiveness of our internal control over financial reporting on an annual basis, beginning with the second Annual Report on Form 10-K that we file with the SEC after completion of this offering. Following this offering, we expect to devote considerable resources, including management’s time and other internal resources, to a continuing effort to comply with regulatory requirements relating to internal controls, as we were not subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 while we were a private company. If we cannot favorably assess the effectiveness of our internal control over financial reporting, or if we require an attestation report from our independent registered public accounting firm and that firm is unable to provide an unqualified attestation report on the effectiveness of our internal controls over financial reporting, investor confidence and, in turn, our stock price could be materially adversely affected.

 

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We will have broad discretion over the use of the proceeds to us from this offering, and we may not use these funds in a manner of which you would approve or which would enhance the market price of our common stock.

We will have broad discretion to use the net proceeds from this offering, and you will be relying on the judgment of our board of directors and management regarding the use of these proceeds. Although we intend to use a portion of the net proceeds from this offering to repay the outstanding balance on our revolving credit facility and the remainder of the net proceeds to retire existing indebtedness, we have not yet determined which indebtedness will be repaid with the remainder of the net proceeds and cannot assure you that we will retire indebtedness in a manner of which you would approve.

There are material limitations with making estimates of our results for current or prior periods prior to the completion of our and our auditors’ normal review procedures for such periods.

The description of certain management expectations regarding our results of operations for the three months ended September 30, 2010 contained in “Prospectus Summary—Recent Developments” is based on management’s current expectations and not on financial statements that have been reviewed by us or reviewed or audited by our independent registered public accounting firm. In preparing these financial statements and completing our customary quarterly review process, we may discover information that differs from our current expectations. We cannot assure you that our actual results for the quarter ended September 30, 2010 will not differ materially from our current expectations. If our actual results differ materially from the expectations described in this prospectus, the release of such information may adversely impact our stock price.

Provisions in our charter documents, certain agreements governing our indebtedness and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.

Provisions in our certificate of incorporation and our bylaws that are effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among others, these provisions:

 

•

establish a staggered board of directors such that not all members of the board are elected at one time;

 

•

on or after such date that our controlling stockholder, its affiliates, or any person who is an express assignee or designee of our controlling stockholder’s rights under our certificate of incorporation and such assignee’s or designee’s affiliates, ceases to beneficially own (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), in the aggregate, at least 50% of the outstanding shares of our common stock, which we refer to as the 50% Trigger Date, allow the authorized number of our directors to be changed only by resolution of our board of directors (and prior to such date, only by stockholders having the right to vote at least fifty percent in voting power of our outstanding voting stock, voting together as a single class, which holders, prior to such date, may also fill vacancies and newly created directorships resulting from any increases in authorized directors);

 

•

on or after the 50% Trigger Date, limit the manner in which stockholders can remove directors from our board (and prior to such date, stockholders having the right to vote at least fifty percent in voting power of our outstanding voting stock, voting together as a single class, may remove a director with or without cause);

 

•

on or after such date that our controlling stockholder, its affiliates, or any person who is an express assignee or designee of our controlling stockholder’s rights under our certificate of incorporation and

 

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such assignee’s or designee’s affiliates, ceases to beneficially own (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), in the aggregate, at least 33-1/3% of the outstanding shares of our common stock, which we refer to as the 33-1/3% Trigger Date, prohibit stockholders from proposing business to be conducted at special meetings of stockholders:

 

•

establish advance notice requirements for nominations by stockholders of directors to our board of directors;

 

•

on or after the 33-1/3% Trigger Date, require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;

 

•

on or after the 33-1/3% Trigger Date, limit who may call stockholder meetings to the chairman of our board of directors or our board of directors pursuant to a resolution approved by a majority of the whole board (prior to that time, special meetings of stockholders may be called by the chairman of our board of directors, by our board of directors pursuant to a resolution approved by a majority of the whole board or by any of our controlling stockholder, its affiliates, or any express assignee or designee of our controlling stockholder under our certificate of incorporation, and such assignee’s or designee’s affiliates or any director employed by any of them);

 

•

require any stockholder, or group of stockholders acting in concert, who seeks to transact business at a meeting or nominate directors for election to submit a list of derivative and other interests in our company’s securities, including any short interests and synthetic equity interests held by such proposing stockholder;

 

•

require any stockholder, or group of stockholders acting in concert, who seeks to nominate directors for election to submit a description of all material relationships and related party transactions between such stockholders or group of stockholders, and their respective affiliates and associates, with the proposed nominee(s) and their respective affiliates or associates;

 

•

establish that our bylaws may be amended or repealed by a majority vote of our board of directors or, on or after the 50% Trigger Date, by stockholders having the right to vote at least two-thirds in voting power of our outstanding voting stock, voting together as a single class (and prior to such date, by stockholders having the right to vote at least 50% in voting power of our outstanding shares of voting stock, voting together as a single class);

 

•

limit our ability to engage in business combinations with certain interested stockholders; and

 

•

authorize our board of directors to cause the issuance of preferred stock without stockholder approval, which could work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors.

Our certificate of incorporation authorizes the board of directors to issue up to 50,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be fixed by resolution of our board of directors without further action by the stockholders. These terms may include voting rights, preferences as to dividends and liquidation, conversion rights, redemption rights, and sinking fund provisions. The issuance of preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of our common stock. In addition, specific rights granted to holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to issue preferred stock could delay, discourage, prevent or make it more difficult or costly to acquire or effect a change in control, thereby preserving the current stockholders’ control.

We have no present intention to pay dividends and, even if we change that policy, we may be restricted from paying dividends on our common stock.

We do not intend to pay dividends for the foreseeable future. If we change that policy and commence paying dividends, we will not be obligated to continue those dividends and our stockholders will not be guaranteed, or

 

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have contractual or other rights, to receive dividends. If we commence paying dividends in the future, our board of directors may decide, in its discretion, at any time, to decrease the amount of dividends, otherwise modify or repeal the dividend policy or discontinue entirely the payment of dividends.

Our ability to pay dividends will be restricted by certain of the agreements governing our indebtedness, and may be restricted by agreements governing any of our future indebtedness. Furthermore, we are permitted under the terms of certain of the agreements governing our indebtedness to incur additional indebtedness (under certain circumstances) which in turn may severely restrict or prohibit the payment of dividends.

Under the DGCL, our board of directors may not authorize the payment of a dividend unless it is either paid out of our surplus, as calculated in accordance with the DGCL, or if we do not have a surplus, it is paid out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains statements which constitute forward-looking statements, including statements relating to trends in the operations and financial results and the business and the products of our company as well as other statements including words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend” and other similar expressions. Forward-looking statements are made 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, and those important factors described elsewhere in this prospectus, including the matters set forth under the section entitled “Risk Factors,” could affect (and in some cases have affected) our actual results and could cause such results to differ materially from estimates or expectations reflected in such forward-looking statements:

 

Ÿ

OEM automobile production volumes;

 

Ÿ

the financial condition of the OEMs;

 

Ÿ

our ability to make scheduled payments of principal or interest on our indebtedness;

 

Ÿ

our ability to refinance our indebtedness;

 

Ÿ

our ability to generate non-automotive revenues, including revenues from our solar agreement with SES;

 

Ÿ

our ability to comply with the covenants and restrictions contained in the instruments governing our indebtedness;

 

Ÿ

our customers’ ability to obtain equity and debt financing for their respective businesses;

 

Ÿ

our dependence on our largest customers;

 

Ÿ

significant recalls experienced by OEMs;

 

Ÿ

pricing pressure from our customers;

 

Ÿ

strengthening of the U.S. dollar and other foreign currency exchange rate fluctuations impacting our results;

 

Ÿ

work stoppages or other labor issues at our facilities or at the facilities of our customers or suppliers;

 

Ÿ

risks associated with non-U.S. operations, including foreign exchange risks and economic instability in some regions, including Europe;

 

Ÿ

costs or liabilities relating to environmental and safety regulations, including those relating to GHG emissions;

 

Ÿ

any increase in the expense and funding requirements of our pension and other postretirement benefits; and

 

Ÿ

the possibility that our controlling stockholder’s interests will conflict with our other stockholders’ interests.

This prospectus 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. 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.

Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update 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. Except as required by law, we undertake no obligation to publicly revise our forward-looking statements to reflect events or circumstances that arise after the date of this prospectus.

 

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USE OF PROCEEDS

We estimate that the net proceeds from the shares offered by us will be approximately $87.5 million, after deducting the underwriting discount and estimated expenses of this offering and assuming we sell the shares for $16.00 per share, representing the midpoint of the range on the cover page of this prospectus. Our June 30, 2010 consolidated balance sheet gives effect to our payment at or prior to June 30, 2010 of $2.5 million of the expenses relating to this offering.

A $1.00 increase or decrease in the assumed initial public offering price of $16.00 per share would increase or decrease the net proceeds to us from this offering by approximately $5.8 million, assuming the number of shares offered by us, as listed on the cover page of this prospectus, remains the same.

We intend to use $53.5 million of the proceeds from this offering to reduce the outstanding balance on our revolving credit facility and the balance of such proceeds plus $3 million of our cash to reduce other indebtedness and to pay expenses of this offering not paid as of June 30, 2010. The amount outstanding under our revolving credit facility varies frequently and at the closing of this offering may be less than or greater than the balance reflected in this prospectus as outstanding at June 30, 2010. To the extent that such proceeds from this offering exceed the amount outstanding on our revolving credit facility, we intend to apply such remaining proceeds to reduce outstanding indebtedness under any one or more of: our foreign subsidiary indebtedness, the notes or our capital leases. The precise amount of debt reduction with respect to any specific type of indebtedness has not yet been determined, as such determination will depend primarily upon market conditions at the time this offering is consummated. Pending application of the net proceeds to repay indebtedness, we intend to invest the net proceeds in short term investments.

At June 30, 2010, the weighted average interest rate in effect on our revolving credit facility was 2.6%. Such indebtedness matures on July 31, 2012. For a description of the interest rates and the maturity dates with respect to our foreign subsidiary indebtedness and the notes, see “Description of Certain Indebtedness.”

Contemporaneous with the closing of this offering, we will pay a total of $1.2 million to certain executive officers pursuant to a special incentive program. In addition, we expect to grant RSUs to our executive officers, a board member and a consultant and to grant stock options to our executive officers and other employees. Such RSUs and stock options are subject to vesting requirements. See footnote 2 in “Prospectus Summary—Summary Consolidated Financial Data.” We have agreed to establish a bonus pool for certain employees who are not executive officers pursuant to our Value Creation Plan. However, we will not be required to fund that pool if the price to the public equals the mid-point of the price range on the cover page of this prospectus and there is no change to the number of shares of common stock offered hereby.

 

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DIVIDEND POLICY

We do not expect to pay any cash dividends for the foreseeable future.

We are not required to pay dividends, and our stockholders will not have contractual or other rights to receive dividends. The declaration and payment of any dividends will be at the sole discretion of our board of directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends, and other considerations that our board of directors deems relevant. If we commence paying dividends at any time, our board of directors may decide, in its discretion, at any time thereafter, to decrease the amount or dividends, otherwise modify or repeal the dividend policy or discontinue entirely the payment of dividends.

The agreements governing our indebtedness contain, and agreements governing any of our future indebtedness may contain, various covenants that limit our ability to pay dividends. We are also a holding company that does not conduct any business operations of our own. As a result, we are dependent upon cash dividends and distributions and other transfers from our subsidiaries to make dividend payments on our common stock. In addition, our subsidiaries are permitted to pay dividends to us subject to general restrictions imposed on dividend payments under the jurisdiction of incorporation or organization of each subsidiary. See “Risk Factors—Risk Factors Relating to Our Common Stock and This Offering—We have no present intention to pay dividends and, even if we change that policy, we may be restricted from paying dividends on our common stock.”

The ability of our board of directors to declare a dividend is also subject to limits imposed by Delaware corporate law. Under Delaware law, our board of directors and the boards of directors of our corporate subsidiaries incorporated in Delaware, may declare dividends only to the extent of “surplus,” which is defined as total assets at fair market value minus total liabilities, minus statutory capital, or if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization on a consolidated basis as of June 30, 2010:

 

•

on an actual basis;

 

•

on an adjusted basis, giving effect to the notes offering, in connection with which:

 

•

we received gross proceeds of $417.2 million (representing $430 million aggregate principal amount less $12.8 million of original issue discount);

 

•

Cerberus caused one of its affiliates to forgive $25 million aggregate principal amount of our first lien term loan in exchange for an equity interest in Tower Automotive, LLC;

 

•

we used the gross proceeds from the notes offering, together with $5.9 million of our cash, to retire the balance of our first lien term loan (other than our synthetic letter of credit facility) and to pay related fees and expenses; and

 

•

all of the equity interests in Tower Automotive, LLC, including the preferred units, were converted into capital units of Tower Automotive, LLC; and

 

•

on an as further adjusted basis, also giving effect to:

 

•

the Corporate Conversion;

 

•

the sale by us of 6,250,000 shares of common stock in this offering at an assumed initial public offering price of $16.00 per share, representing the midpoint of the range on the cover page of this prospectus, and the receipt of the net proceeds thereof, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us other than expenses paid as of June 30, 2010;

 

•

the assumed use of $53.5 million of the net proceeds from this offering to repay outstanding indebtedness under our revolving credit facility; and

 

•

the assumed use of the balance of such proceeds and $3 million of our cash to repay other indebtedness.

We became obligated to pay a total of $5.5 million of compensation to our executive officers pursuant to a special incentive program in connection with the closing of the notes offering and we have also committed to pay an additional $1.2 million under that program to certain executive officers upon the earlier of the consummation of this offering or August 24, 2011. Neither of these amounts is reflected in the following table.

 

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The as adjusted and as further adjusted information below is illustrative only and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. This table should be read in conjunction with “Use of Proceeds,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

 

		Actual				As Adjusted for the Notes Offering						As Further Adjusted for this Offering(1)
		(in millions)
Cash and cash equivalents		$	149.6			$	143.7	(2)				$	140.7	(3)
Total debt (including current portion):
Asset based revolving credit facility(4)		$	53.5			$	53.5					$	—
First lien term loan:
U.S. dollar denominated tranche			203.3				—						—
Euro denominated tranche(5)			226.7				—						—
Notes			—				417.2	(6)		}
Other foreign subsidiary indebtedness(7)			152.1				152.1						548.3	(8)
Capital leases			18.5				18.5
Total debt, including current portion(9)		$	654.1			$	641.3					$	548.3
Mezzanine equity: Redeemable preferred units(10)		$	179.5			$	—					$	—
Stockholders’ equity (deficit):
Limited liability company interests, no par or stated value			12.9				217.4	(11)					—
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding, actual, as adjusted, and as further adjusted			—				—						—
Common stock, $0.01 par value, 350,000,000 shares authorized; no shares issued and outstanding, actual and as adjusted; and 18,717,866 shares issued and outstanding, as further adjusted			—				—						0.2
Additional paid-in capital			—				—						304.7
Retained earnings (deficit)			(156.2	)			(161.7	)					(161.7	)
Accumulated other comprehensive income (loss)			(57.4	)			(57.4	)					(57.4	)
Total equity before noncontrolling interest (deficit)			(200.7	)			(1.7	)					85.8
Noncontrolling interests in subsidiaries			44.4				44.4						44.4
Total members/stockholders’ equity (deficit)		$	(156.3	)		$	42.7					$	130.2
Total capitalization (including current portion of long-term debt)		$	677.3			$	684.0					$	678.5

 

The table above reflects the use of $53.5 million of the proceeds from this offering to reduce the amount outstanding under our revolving credit facility. The amount outstanding under our revolving credit facility varies frequently and at the closing of this offering may be less than or greater than the balance reflected in this prospectus as outstanding as of June 30, 2010. To the extent that the proceeds from this offering exceed the amount outstanding on our revolving credit facility, we intend to apply the balance of such proceeds plus $3 million of our cash to (i) reduce outstanding indebtedness under any one or more of our foreign subsidiary indebtedness, the notes or our capital leases and (ii) pay expenses of this offering not paid as of June 30, 2010. The precise amount of debt reduction with respect to any specific type of indebtedness has not yet been determined, as such determination will depend primarily upon market conditions at the time this offering is consummated.

 

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(1)

A $1.00 increase or decrease in the assumed initial public offering price of $16.00 per share, representing the midpoint of the range on the cover page of this prospectus, would result in an approximately $5.8 million increase or decrease in each of the as further adjusted additional paid-in capital, as further adjusted total stockholders’ equity (deficit) and as further adjusted total capitalization, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus (assuming that the Corporate Conversion had taken place and excluding shares reserved for issuance under RSUs issuable pursuant to one of our benefit plans in connection with the consummation of this offering), remains the same and after deducting the commissions and discounts and estimated offering expenses payable by us. An increase or decrease of 1.0 million shares in the number of shares offered by us would result in an approximately $14.9 million increase or decrease in each of the as further adjusted additional paid-in capital, as further adjusted total stockholders’ equity (deficit) and as further adjusted total capitalization, assuming the assumed initial public offering price of $16.00 per share, representing the midpoint of the range on the cover page of this prospectus, remains the same and after deducting the commissions and discounts and estimated offering expenses payable by us.

(2)

Net proceeds from the notes offering are expected to be $409.4 million, after all expenses are determined. As adjusted cash and cash equivalents gives effect to the use of $5.9 million of our cash to fund the balance of the cash needed to retire our first lien term loan (other than the synthetic letter of credit facility portion thereof) and to repay all fees and expenses related to the notes offering. Cash and cash equivalents as adjusted for the notes offering and as further adjusted for this offering does not reflect the payment of $5.5 million under our special incentive program that arose in connection with the closing of the notes offering or the payment of $1.2 million under such program that will occur in connection with the consummation of this offering. See footnote 2 to “Prospectus Summary—Summary Consolidated Financial Data.”

(3)	Reflects the use of $3 million of cash to reduce indebtedness.

(4)	Consists of a $150 million senior secured asset based revolving credit facility. As of June 30, 2010, there was a $110.3 million borrowing base under this revolving credit facility, and $53.5 million of borrowings and no letters of credit were outstanding under this facility.

(5)	At June 30, 2010, the Euro denominated tranche was €185.3 million and was translated into US dollars at a foreign currency exchange rate of $1.2229 per Euro.

(6)	Gives effect to the issuance of $430 million aggregate principal amount of notes (net of $12.8 million of original issue discount).

(7)	Consists primarily of borrowings in South Korea and Brazil and receivable factoring in Italy.

(8)

Represents aggregate indebtedness in respect of the notes, foreign subsidiary indebtedness and capital leases, as adjusted to reflect the payment of $39.5 million to reduce a portion of such indebtedness. The precise amount of debt retirement with respect to any of the notes, foreign subsidiary indebtedness and capital leases has not yet been determined, as such determination will depend primarily upon market conditions at the time this offering is consummated.

(9)	For further information regarding our long-term debt, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt,” “Description of Certain Indebtedness” and note 8 to our consolidated financial statements.

(10)

Represents preferred equity interests in Tower Automotive, LLC. See Note 18 to our consolidated financial statements as of June 30, 2010 and for the six month periods ended June 30, 2010 and 2009. On August 12, 2010, all of the equity interests in Tower Automotive, LLC, including the preferred units, were converted into capital units of Tower Automotive, LLC.

(11)

Gives effect to (i) the conversion of preferred units, common units and management incentive plan units of Tower Automotive, LLC into capital units of Tower Automotive, LLC and (ii) the cancellation by Cerberus of $25 million aggregate principal amount of our first lien term loan in exchange for equity in Tower Automotive, LLC in connection with the consummation of the notes offering. More specifically, the amount of distributions Cerberus and its affiliates are entitled to receive under Tower Automotive, LLC’s operating agreement prior to the capital units held on behalf of management becoming vested increased by $25 million, together with interest thereon. See note 18 to our financial statements for the six months ended June 30, 2010.

 

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The table that we have presented above assumes that 12,467,866 shares of common stock are issued pursuant to the Corporate Conversion and excludes (i) 1,763,625 shares reserved for issuance under RSUs which we expect to grant to our executive officers, a board member and a consultant pursuant to one of our benefit plans in connection with the consummation of this offering and (ii) 455,496 shares issuable upon the exercise of stock options which we expect to grant in connection with the consummation of this offering to our executive officers, board members and other employees. See “Compensation Discussion and Analysis—Components of Compensation—Equity-Based Incentive Awards—Long Term Incentive Compensation Awards” and “Compensation Discussion and Analysis—Components of Compensation—Equity-Based Incentive Awards—2010 Equity Incentive Plan.” For additional information regarding such RSUs and stock options, as well as information regarding bonus pools for employees who are not executive officers, see footnote 2 in “Prospectus Summary—Summary Consolidated Financial Data.”

 

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DILUTION

Purchasers of the common stock in this offering will suffer an immediate dilution in net tangible book value per share. Dilution is the amount by which the price paid by the purchasers of common stock in this offering will exceed the pro forma net tangible book value per share of common stock immediately after this offering. Our net tangible book value (deficit) of our common stock at June 30, 2010 was $(229.2) million or $(18.40) per share of common stock after giving effect to the Corporate Conversion as if it had occurred on June 30, 2010 (which we refer to as Actual Book Value). Net tangible book value per share represents our tangible assets less total liabilities, divided by the number of shares of common stock outstanding as of June 30, 2010. After giving effect to the consummation of the Corporate Conversion and the notes offering and the application of the net proceeds therefrom, our pro forma net tangible book value as of June 30, 2010 would have been $(30.3) million or $(2.43) per share of common stock. After giving effect to the consummation of (i) the Corporate Conversion (ii) this offering, assuming an initial public offering price of $16.00 per share, representing the midpoint of the range on the cover page of this prospectus, and the application of the net proceeds therefrom, and (iii) the notes offering and the application of the net proceeds therefrom, our pro forma net tangible book value as of June 30, 2010 would have been $57.2 million or $3.05 per share of common stock (which we refer to as As Fully Adjusted Book Value). The difference between Actual Book Value and As Fully Adjusted Book Value represents an immediate increase in pro forma net tangible book value to existing stockholders of $21.45 per share of common stock and an immediate dilution to new investors of $12.95 per share of common stock. The following table illustrates this per share dilution:

 

Assumed initial public offering price per share						$	16.00
Net tangible book value per share as of June 30, 2010		$	(18.40	)
Increase in pro forma net tangible book value per share resulting from the Corporate Conversion and this offering		$	21.45
Pro forma net tangible book value per share after this offering							3.05
Pro forma dilution per share to new investors						$	12.95

A $1.00 increase or decrease in the assumed initial public offering price of $16.00 per share, representing the midpoint of the range on the cover page of this prospectus, would increase or decrease our net tangible book value by $5.8 million, the net tangible book value per share of common stock after this offering by $0.31 per share of common stock, and the dilution per share of common stock to new investors by $0.69 per share of common stock, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the commissions and discounts and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares from us in full, the following will occur:

 

•

the pro forma percentage of shares of our common stock held by existing stockholders will decrease to approximately 63% of the total number of pro forma shares of our common stock outstanding after this offering; and

 

•

the pro forma number of shares of our common stock held by new public investors will increase to approximately 37% of the total pro forma number of shares of our common stock outstanding after this offering.

 

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The following table summarizes, as of June 30, 2010, the number of shares purchased or to be purchased from us, the total consideration paid (net of preferred redemptions, but after giving effect to the cancellation of $25 million aggregate principal amount of indebtedness in exchange for equity in Tower Automotive, LLC on August 24, 2010) or to be paid to us, and the average price per share paid or to be paid to us by existing stockholders and new investors purchasing shares of our common stock in this offering, assuming an initial public offering price of $16.00 per share, representing the midpoint of the range on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses payable by us. As the table below shows, new investors purchasing shares of our common stock in this offering will pay an average price per share that is greater than our existing stockholders paid.

 

		Units /Shares Purchased					Total Consideration
		Number		Percent			Amount			Percent			Average Price Per Share
		(in millions)
Existing Stockholders		12,467,866		67	%		$	181.6		65	%		$	14.57
New Investors		6,250,000		33	%			100.0		35	%		$	16.00
Total		18,717,866		100.0	%		$	281.6		100.0	%

The number of shares of common stock outstanding as of June 30, 2010 is based on giving effect to 12,467,866 shares of common stock issuable pursuant to our Corporate Conversion and excludes shares reserved for issuance under RSUs which we expect to grant to our executive officers, a board member and a consultant pursuant to one of our benefit plans in connection with the consummation of this offering.

If the RSUs which we expect to grant upon consummation of this offering had vested as of June 30, 2010 and our Corporate Conversion had occurred as of June 30, 2010, our pro forma net tangible book value as of June 30, 2010 would have been approximately $(18.09) per share, and the pro forma net tangible book value after giving effect to this offering would have been $1.41 per share, representing dilution in our pro forma net tangible book value per share to new investors of $14.59. For purposes of this paragraph, we have assumed that 1,763,625 RSUs will be issued upon consummation of this offering. If such RSUs had been granted and had vested on June 30, 2010 and our Corporate Conversion had occurred as of such date, and assuming a grant date value of such RSUs based on $16 per share of underlying common stock, representing the mid-point of the price range set forth on the cover page of this prospectus, our net loss for the six months ended June 30, 2010 would have increased by $(28.2) million to $(30.8) million, as opposed to a net loss of $(2.6) million as reflected in our financial statements. Such as adjusted net loss of $(30.8) million assumes simultaneous granting and vesting of the RSUs as of June 30, 2010. We expect, however, that the RSUs will vest over an 18 month period, in which case the grant date value of the RSUs, less an estimated forfeiture amount, will be charged as a compensation expense against earnings over the vesting period, commencing in 2010. See “Compensation Discussion and Analysis—Components of Compensation—Equity-Based Incentive Awards— Long Term Incentive Compensation Awards.”

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table sets forth our selected historical consolidated financial data as of the dates and for the periods indicated. The selected consolidated balance sheet data of the Successor as of December 31, 2009 and 2008, the selected consolidated statement of operations data and the selected consolidated statement of cash flows data of the Successor for the years ended December 31, 2009 and 2008 and for the five months ended December 31, 2007 and the selected consolidated statement of operations data and the selected consolidated statement of cash flows data of the Predecessor for the seven months ended July 31, 2007 have been derived from our audited consolidated financial statements and related notes that we have included elsewhere in this prospectus. The selected consolidated balance sheet data of the Successor as of December 31, 2007 and of the Predecessor as of December 31, 2006 and 2005 and the selected consolidated statement of operations and the statement of cash flows data of the Predecessor for the years ended December 31, 2006 and 2005 have been derived from audited consolidated financial statements, which are not presented in this prospectus. The selected consolidated balance sheet data, the selected consolidated statement of operations data and the selected consolidated statement of cash flows data as of June 30, 2010 and for the six month periods ended June 30, 2010 and 2009 have been derived from our unaudited consolidated financial statements and related notes included elsewhere in this prospectus. In the opinion of our management, such unaudited financial statements have been prepared on the same basis as the audited financial statements and reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our results of operations and financial position for such periods.

The selected historical consolidated financial data as of any date and for any period are not necessarily indicative of the results that may be achieved as of any future date or for any future period. As a result of the implementation of applicable accounting pronouncements relating to our acquisition of the Predecessor’s assets, the financial statements and financial data presented in this prospectus for dates and for periods ending on or before July 31, 2007 are not comparable with the financial statements and financial data for periods after July 31, 2007.

The following table also presents certain selected unaudited pro forma and adjusted pro forma summary of operations data for the year ended December 31, 2009 and the six months ended June 30, 2010, giving effect to the items described in footnotes 2, 3 and 4 to the table. The selected unaudited pro forma and adjusted pro forma summary of operations data is presented for informational purposes only and does not purport to represent what our results of operations would have been had the referenced events occurred on the dates indicated or to project our results of operations for any future period.

 

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You should read the following selected historical consolidated financial data in conjunction with the more detailed information contained in “Capitalization,” “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 prospectus.

 

		Successor																				Predecessor
		Six  Months Ended June 30,								Year Ended December 31,								Five Months Ended December 31, 2007				Seven  Months Ended July 31, 2007				Year Ended December 31,
		2010				2009				2009				2008												2006				2005
		(in millions except unit/share and per unit/share data)
Statement of Operations Data:
Revenues		$	980.8			$	697.9			$	1,634.4			$	2,171.7			$	1,086.1			$	1,455.5			$	2,539.4			$	2,932.2
Cost of sales			872.0				681.9				1,536.8				1,991.3				970.5				1,325.9				2,389.2				2,752.1
Gross profit			108.8				16.0				97.6				180.4				115.6				129.6				150.2				180.1
Gross profit margin			11.1	%			2.3	%			6.0	%			8.3	%			10.6	%			8.9	%			5.9	%			6.1	%
Selling, general and administrative expenses(1)		$	65.0			$	53.3			$	118.3			$	138.6			$	57.0			$	77.2			$	131.5			$	149.7
Amortization expense			1.5				1.3				2.8				3.0				1.2				—				—				—
Restructuring and related asset impairment charges, net			4.7				(1.1	)			13.4				4.8				1.8				22.4				70.5				116.4
Operating income/(loss)			37.6				(37.5	)			(36.9	)			34.0				55.5				30.0				(51.1	)			(78.3	)
Operating income/(loss) margin			3.8	%			(5.4	)%			(2.3	)%			1.6	%			5.1	%			2.1	%			(2.0	)%			(2.7	)%
Interest expense, net.		$	27.3			$	27.2			$	56.9			$	60.2			$	34.0			$	65.5			$	95.3			$	101.8
Chapter 11 and related reorganization items			—				—				—				—				—				62.2				66.2				167.4
Income/(loss) from continuing operations			1.9				(35.0	)			(59.0	)			(45.7	)			18.2				(100.3	)			(199.4	)			(346.9	)
Cumulative effect of accounting change			—				—				—				—				—				—				—				(7.8	)
Net income/(loss)			1.9				(35.0	)			(59.0	)			(45.7	)			18.2				(100.6	)			(195.4	)			(368.4	)
Net income attributable to the non-controlling interests			4.5				3.9				8.9				6.6				3.0				5.4				6.7				5.0
Net income/(loss) attributable to Tower Automotive, LLC			(2.6	)			(39.0	)			(67.9	)			(52.3	)			15.2				(106.0	)			(202.1	)			(373.4	)
Preferred unit dividends			8.6				7.9				16.1				14.9				8.8				—				—				—
Income/(loss) available to common unitholders/stockholders			(11.2	)			(46.9	)			(84.0	)			(67.3	)			6.4				(106.0	)			(202.1	)			(373.4	)
Basic and diluted income/(loss) per unit/share:
Income/(loss) from continuing operations			(1,320	)			(5,516	)			(9,885	)			(7,917	)			748				(1.79	)			(3.51	)			(6.00	)
Income/(loss) from discontinued operations			—				—				—				—				—				(0.01	)			0.07				(0.23	)
Cumulative effect of accounting change			—				—				—				—				—				—				—				(0.14	)
Income/(loss) per unit/share			(1,320	)			(5,516	)			(9,885	)			(7,917	)			748				(1.80	)			(3.44	)			(6.37	)
Weighted average basic and diluted units/shares outstanding (in thousands)			8.5				8.5				8.5				8.5				8.5				58,807				58,659				58,645
Cash dividends declared per unit			—				—				—				—				—				—				—				—
										Six Months Ended June 30, 2010												Year Ended December 31,  2009
										Actual				As Adjusted				As Further Adjusted				Actual				As Adjusted				As Further Adjusted
Basic and diluted pro forma loss per share										$(0.21)(2)				$(0.01)(3)				$(0.31)(4)				$(5.45)(2)				$(3.38)(3)				$(3.91)(4)

 

		Successor															Predecessor
		June  30, 2010				December 31,											December 31,
						2009				2008				2007			2006				2005
		(in millions)
Balance Sheet Data:
Cash and cash equivalents		$	149.6			$	149.8			$	126.8			$	96.8		$	64.3			$	65.8
Total assets			1,300.7				1,334.4				1,269.8				1,582.9			2,107.0				2,291.2
Total debt(5)			654.1				669.5				628.1				691.7			1,681.0				1,625.9
Redeemable preferred units(6)			179.5				170.9				155.2				145.9			—				—
Total members’/stockholders’ equity (deficit)			(156.3	)			(147.2	)			(88.5	)			32.6			(662.7	)			(487.6	)

 

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(1)

In connection with the closing of the notes offering, we agreed to repay a total of $5.5 million of compensation to our executive officers pursuant to a special incentive program. We have also committed to pay an additional $1.2 million under that program to certain executive officers upon the earlier of the consummation of this offering or August 24, 2011. See “Compensation Discussion and Analysis—Components of Compensation—Special Incentive Compensation.” This latter cash benefit will vest fully upon consummation of the closing of this offering. The payments of such $1.2 million vest immediately upon the closing of this offering because at such time there will be no further conditions to payment of that compensation. The full amount of the compensation paid pursuant to the special incentive program will be charged as a compensation expense against earnings in the year or years in which such compensation is paid.

(2)

Pro forma loss per share gives effect to the Corporate Conversion as if it had occurred on the first day of the periods presented. It has been calculated by dividing the net loss attributable to Tower Automotive, LLC by 12,467,866, constituting the number of shares of common stock to be issued pursuant to the Corporate Conversion.

(3)

Adjusted pro forma loss per share also adjusts pro forma loss per share to give effect to the repayment of $53.5 million of our revolving credit facility with a portion of the net proceeds from this offering and to give effect to the use of the balance of such net proceeds and $3 million of our cash to repay other debt, as described under “Use of Proceeds.” As we have made no determination as to the debt to be repaid other than indebtedness under our revolving credit facility, we have assumed that the other debt to be repaid would have an interest rate equal to the weighted average interest rate applicable to such other debt. For purposes of this calculation, during the periods presented we have reduced the net loss attributable to Tower Automotive, LLC by the interest expense on the debt to be repaid, net of applicable taxes. The interest expense on the debt to be repaid for the six months ended June 30, 2010 was $2.5 million, consisting of an interest expense of $1 million for our revolving credit facility and $1.5 million for other debt to be repaid, and the interest expense for the year ended 2009 was $4.7 million, consisting of an interest expense of $1.7 million for our revolving credit facility and $3 million for other debt to be repaid. We refer to such net loss, as so adjusted, as the “IPO adjusted net loss attributable to Tower Automotive, LLC”. We have then divided the IPO adjusted net loss attributable to Tower Automotive, LLC by 18,717,866, constituting the sum of (i) the number of shares of common stock to be issued pursuant to the Corporate Conversion and (ii) the number of shares to be sold in this offering. The interest expense amounts used in such calculation for our revolving credit facility were based on the interest rate in effect at the end of each quarter during the pro forma period, which interest rates ranged from 2% to 3.45%. The weighted average interest rate used in such calculation for our other debt to be repaid was 7.55% per annum.

(4)

As further adjusted pro forma loss per share further adjusts pro forma loss per share to give effect to the notes offering as if it occurred on the first day of the periods presented and the concurrent retirement of our first lien term loan. For purposes of this calculation, during the periods presented we have further adjusted the IPO adjusted net loss attributable to Tower Automotive, LLC by adding to interest expense the difference between the interest expense on the notes and the interest expense on our first lien term loan after giving effect to hedging arrangements applicable to the first lien term loan. If we had consummated the notes offering and the retirement of our first lien term loan on January 1, 2009, on an as adjusted unaudited basis (i) we would have incurred interest expense of $67.8 million for the year ended December 31, 2009, as compared to $57.9 million reflected in our financial statements, thereby increasing our net loss by $9.9 million for such period, and (ii) we would have incurred interest expense of $33.6 million for the six months ended June, 2010, as compared with $27.8 million reflected in our financial statements, thereby increasing our net loss by $5.8 million for the applicable period. The increased interest expense amounts described in the preceding sentence were calculated based on the average balance on the first lien term loan during the applicable period, measured quarterly, multiplied by the weighted average annualized interest rate. We refer to the IPO adjusted net loss attributable to Tower Automotive, LLC, as further adjusted to give effect to the notes offering, as the “IPO/Notes adjusted net loss attributable to Tower Automotive, LLC”. We have then divided the IPO/Notes adjusted net loss attributable to Tower Automotive, LLC by 18,717,866, constituting the sum of (i) the number of shares of common stock to be issued pursuant to the Corporate Conversion and (ii) the number of shares to be sold in this offering. The interest expense amounts used in such calculations for the first lien term loan were calculated based on the average balance on the first lien term loan during such period, measured quarterly, multiplied by the weighted average annualized interest rate.

(5)	Consists of short-term and long-term debt, current portion of long-term debt and capital lease obligations.

(6)

Represents preferred equity interests in Tower Automotive, LLC. See Note 18 to our consolidated financial statements as of June 30, 2010 and for the six month periods ended June 30, 2010 and 2009. On August 12, 2010, the preferred units, common units and management incentive plan units of Tower Automotive, LLC, which constituted all of the equity interests in Tower Automotive, LLC, were converted into capital units of Tower Automotive, LLC.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations together with the “Selected Historical Consolidated Financial Data” and the historical consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under “Risk Factors,” where we have described the material risks applicable to us. Actual results may differ materially from those contained in any forward-looking statements. Certain monetary amounts, percentages and other figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

Overview of the Business

We are a leading integrated global manufacturer of engineered structural metal components and assemblies primarily serving automotive 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 SUVs. We have also recently entered the utility-scale solar energy market with an agreement to supply large stamped mirror-facet panels and welded support structures.

Our products are manufactured at 32 production facilities strategically located near our customers in North America, South America, Europe and Asia. We support our manufacturing operations through nine engineering and sales locations throughout 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 160 vehicle models globally. Our 10 largest vehicle models represented approximately 36% of our 2009 revenues.

We are a disciplined, process-driven company with an experienced management team which has a history of implementing sustainable operational improvements. From January 1, 2008 through December 31, 2009, we achieved $195 million in manufacturing and purchasing cost reductions. We achieved these cost reductions in large part through successful implementation of Lean Six Sigma principles and rigorous application of global best practices. These cost reductions helped us achieve a 6% gross profit margin and a 7.6% Adjusted EBITDA margin in 2009 during an historically challenging environment in the automotive industry.

We believe that our product capabilities, our geographic, customer and product diversification and the cost reductions that we achieved in 2008 and 2009 position us to benefit from a recovery in global automotive industry production. We intend to leverage our program management and engineering experience to pursue growth opportunities outside our existing automotive markets, as demonstrated by our solar agreement. The solar industry shows promise for us, as many applications require highly engineered large stampings and complex welded structural assemblies that must be produced in high volume at repeatable tight tolerances similar to our product requirements in the automotive industry. Pursuant to our solar agreement, we are to supply large stamped mirror-facet panels and welded support structures to SES. The amount of revenues that we may generate from this agreement will depend in part upon the extent of the financing SES is able to raise for its solar projects. We cannot be sure when production will commence or when revenues will be generated from these projects until SES secures appropriate financing. See “Risk Factors—Our ability to recognize revenues from our agreement with Stirling Energy Systems, or SES, is subject to several risks, any one of which could materially and adversely impact our business, financial condition, results of operations and cash flows.”

While we plan to invest approximately $30 to $35 million (net of government and other incentives) to support this agreement, we cannot yet predict the extent to which such spending will be made in 2010 or in subsequent periods. Our capital expenditures for these projects would include investing in a new facility in the southwest United States that could provide a base for additional expansion.

 

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We believe the solar industry in the United States and globally has the potential to grow at an average rate substantially greater than the longer term trend rate for the automotive industry. Beyond solar, we believe there may be similar opportunities in the future to apply and extend our core skills in other industries, such as defense, wind or appliances.

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 the latter half of 2008 and throughout 2009, the automotive industry experienced an unprecedented downturn, led by the recession in the United States and followed by declines in many major markets around the world. The economic crisis in general, and the decline in consumer spending and the financial market turmoil in particular, had a severe and detrimental impact upon the global automotive market. In response to both the lack of strong consumer demand and the tightening of access to financial markets, OEMs reduced production volumes throughout the automotive industry, significantly impacting the revenues of both OEMs and their suppliers.

As measured by CSM Worldwide^®, global industry production of cars and light trucks peaked at 69 million in 2007 and declined to 57 million in 2009. This decline was more pronounced in the more mature markets: North American and European production levels declined from 37 million vehicles in 2007 to 25 million vehicles in 2009. In response to the unprecedented economic crisis, certain governments, including the United States, enacted tax incentives and took other affirmative steps to spur consumer purchases of automobiles in 2009. These steps may have limited the adverse effects of the global economic crisis on the automotive industry and may help to position the industry for recovery. Over the long term, CSM Worldwide^® projects production will reach 83 million vehicles by 2013, reflecting a recovery in both the North American and European markets as well as continued growth in emerging markets such as China and Brazil. We believe that we are well positioned to benefit from this long-term 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:

 

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Diversification of our customer base.    Our revenues are impacted by the popularity of the OEMs for which we supply structural metal components and their respective market shares. By diversifying our customer base, we limit the risks associated with a downturn in any one OEM’s product portfolio. For example, we have reduced our exposure to Ford, General Motors and Chrysler—the “Detroit 3”—from 66% of our Predecessor’s revenues in 2002 to 18% of our revenues in 2009, and have focused our efforts mainly on automotive manufacturers with a global presence.

 

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Diversification of our vehicle mix.    Similar to shifts in popularity of OEMs, shifts in consumer preferences directly influence the types and quantities of vehicles that OEMs manufacture, which in turn directly influences the structural components that we produce. By diversifying the vehicle types that we supply components for, we limit the risks associated with a downturn in any one of our vehicle segments. In 2009, our revenue mix was: 49%—small cars; 21%—large cars, including multi-purpose vehicles; 18%—North American framed vehicles; and 12%—other—light trucks. See “Business—Our Competitive Strengths—Platform Diversification” for definitions of the terms “small cars”, “large cars” and “North American framed vehicles.”

 

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•

Diversification of our product offerings.    Our OEM customers rely upon us to efficiently produce structural metal components for the platforms that they design and to respond quickly to platform and vehicle enhancements that they develop. OEMs value the extent to which we are able to integrate multiple stampings and assemblies into offerings, thereby reducing the extent to which they must devote their focus and capital to integrating components they purchase from their suppliers.

 

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Geographic diversification.    Given the high costs and difficulties associated with transporting large structural metal components that we manufacture, it is critical that our facilities are in close proximity to our customers. We believe that countries such as Brazil and China, as well as other regions including Eastern Europe, will experience significant growth in vehicle demand and associated production volumes during the next five years as projected by CSM Worldwide®. We currently have 7 manufacturing facilities in Poland, Slovakia, Brazil and China and a technical center in India. As such, our geographic footprint is positioned to benefit as these markets expand and ultimately influence our revenue growth.

 

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Opportunities to pursue non-automotive revenues.    Our ability to produce large engineered structural components and assemblies is not confined to automotive markets. We have entered into an agreement to manufacture large stamped mirror-facet panels and welded support structures for SES. We cannot be sure when production will commence or when revenues will be generated from this agreement until our customer secures appropriate financing. In addition to our solar agreement, we intend to consider and pursue other applications of our core competencies to develop other sources of non-automotive revenues.

 

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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 with periods of two to five years before these models are marketed to the public. 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.

 

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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 impacts our revenues. In unusual circumstances, we have been able to negotiate year-over-year price increases as well.

 

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Steel pricing.    We require significant quantities of steel in the manufacture of our products. Although changing steel prices 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 increases as steel prices increase and decreases 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.

 

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Seasonality.    Our business is seasonal. Our customers in Europe typically shut down vehicle production during portions of July or August and during one week in our fourth quarter. Our North American customers typically shut down vehicle production for approximately two weeks during July and for one week during December. Our results of operations, cash flows and liquidity in our third and fourth quarters may be impacted by these seasonal practices.

 

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Foreign exchange.    Our foreign exchange transaction risk is generally limited, primarily because we purchase and produce products in the same country where we sell to our final customer. However, the

 

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translation of foreign currencies back to the U.S. dollar may have a significant impact on our revenues and financial results. Foreign exchange has an unfavorable impact on revenues when the U.S. dollar is relatively strong as compared with foreign currencies and a favorable impact on revenues when the U.S. dollar is relatively weak as compared with foreign currencies. The functional currency of our foreign operations is the local currency. Assets and liabilities of our foreign operations are translated into U.S. dollars using the applicable period-end rates of exchange. 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 in our consolidated statements of stockholders’ 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 prospectus, are included in net income (loss).

Factors Affecting Our Expenses

Our expenses are principally driven by the following factors:

 

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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 the mill, and the change in our recovery of scrap steel, which we refer to as offal. Our strategy is to be economically indifferent 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. Depending upon when a steel price 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 scrap steel. Imbalances in any one particular fiscal period may be reversed in a subsequent fiscal period, although we can not assure you if or when these reversals will occur.

 

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Purchase of steel.    As noted above, we purchase a portion of our steel from our customers through our customers’ resale programs and a portion of our steel directly from the 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.

 

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Sale of scrap steel.    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 where we are on resale programs, or in the product pricing that is negotiated regarding increases and decreases in the steel price in cases where we purchase steel directly from the mills. In either situation, we may be impacted by the fluctuation in scrap steel prices, either positive or negative, in relation to our various customer agreements. Since scrap steel prices generally increase and decrease as steel prices increase and decrease, our sale of offal may mitigate the severity of steel price increases and limit the benefits we achieve through steel price declines. Recoveries related to sales of offal reduce cost of sales.

 

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Other manufacturing expenses.    Our cost of sales includes raw material costs, labor expenses and other expenses that we incur to operate our plants. In addition to steel, our cost of sales is directly impacted by:

 

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the number of employees engaged in manufacturing and the wages and benefits that we pay to those employees;

 

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depreciation;

 

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energy expenses;

 

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the costs we incur to purchase raw materials other than steel;

 

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non-production materials;

 

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shipping and handling expenses; and

 

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lease expenses associated with our production facilities.

 

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Selling, general and administrative expenses.    Our selling, general and administrative, or SG&A, expenses include costs associated with our sales efforts; engineering; centralized finance, human resources, purchasing, and information technology services; and other administrative functions. We have implemented compensation programs associated with this offering and our notes offering that will result in compensation charges against earnings in 2010 and subsequent years, including the following:

 

 

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We have committed to pay $5.5 million in cash to our executive officers as a result of our notes offering and to pay an additional $1.2 million in cash to certain executive officers upon consummation of this offering. The $5.5 million was charged as a compensation expense against earnings at consummation of our notes offering and the $1.2 million will be charged as a compensation expense against earnings during the fourth quarter of 2010.

 

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Upon completion of our notes offering, we also established a bonus pool of up to $7.5 million for the benefit of approximately 70 employees. Actual payments of these bonuses will be subject to nine and eighteen month vesting requirements. Any payments made will be charged as a compensation expense against earnings over the applicable vesting periods.

 

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We expect to grant RSUs covering an aggregate of 1,763,625 shares of our common stock to our executive officers, a board member and a consultant. The grant date value of the RSUs, less an estimated forfeiture amount, will be charged as a compensation expense against earnings over the 18 month vesting period of the RSUs, commencing in 2010.

 

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We expect to grant stock options covering an aggregate of 455,496 shares of our common stock to our executive officers and other employees, each with an exercise price equal to the price to the public of our common stock sold in this offering. The grant date value of the stock options, less an estimated forfeiture amount, will be charged as a compensation expense against earnings over the vesting periods of the stock options, commencing in 2010.

 

•For information regarding charges against earnings that we will recognize in connection with certain compensation programs, see footnote 2 in “Prospectus Summary—Summary Consolidated Financial Data.”

 

 

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Amortization expense.    Our amortization expense consists of the charges we incur to amortize certain intangible assets. The intangible assets relate to key customer relationships in Europe and Brazil and land rights in China. Our intangible assets are amortized over their estimated useful lives as determined when the intangible asset is initially recorded. See note 4 to our consolidated financial statements.

 

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Restructuring and related asset impairment charges.    Our restructuring expenses are incurred when we establish reserves for particular restructuring actions and when we incur costs that are expensed as incurred related to particular restructuring actions. We have implemented several restructuring plans in recent years in order to realign our manufacturing capacity to meet global automotive production demands and to improve the utilization of our facilities.

 

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Interest expense.    Our interest expense relates to costs associated with our debt instruments and reflects both the amount of our indebtedness and the rates we are required to pay. Our primary debt instruments consist of our notes and our asset-based revolving credit facility. We also have debt at our foreign subsidiaries, consisting of borrowings in South Korea and Brazil and a factoring facility in Italy. Our interest expense is also affected by the amortization of our debt issuance costs. On August 23, 2010, the Issuers consummated the sale of $430 million aggregate principal amount of the 10.625% Senior Secured Notes due 2017. If we had consummated the notes offering and the retirement

 

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of our first lien term loan on January 1, 2009, on an as adjusted unaudited basis (i) we would have incurred interest expense of $67.8 million for the year ended December 31, 2009, as compared to $57.9 million reflected in our financial statements, thereby increasing our net loss by $9.9 million for such period, and (ii) we would have incurred interest expense of $33.6 million for the six months ended June, 2010, as compared with $27.8 million reflected in our financial statements, thereby increasing our net loss by $5.8 million for such period. The increased interest expense amounts described in the preceding sentence were calculated based on the average balance on the first lien term loan during the applicable period, measured quarterly, multiplied by the weighted average annualized interest rate. The as adjusted unaudited data presented above is presented for informational purposes only and does not purport to represent what our results of operations actually would have been had the referenced events occurred on the dates indicated or to project our results of operations as of any future date or for any future period.

 

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Provision for income taxes.    We make estimates of the amounts to recognize for income taxes in each tax jurisdiction in which we operate. In addition, provisions are established for withholding taxes related to the transfer of cash between jurisdictions and for uncertain tax positions taken. As a result of Cerberus’ cancellation of $25 million aggregate principal amount of our first lien term loan in connection with the notes offering, we may experience cancellation of indebtedness income of up to $25 million for tax purposes. At December 31, 2009, we had approximately $148.5 million in net operating losses which we may use to offset any income tax payable as a result of any such cancellation of indebtedness income. Any such cancellation of indebtedness income will not be recorded as income under GAAP on our financial statements.

 

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Efficiencies.    Our ability to control our costs is directly linked to our ability to offset price reductions and other cost increases with reductions in operating costs through the implementation of various manufacturing, purchasing, administrative and other efficiencies. We seek to drive costs out of our operations through several ongoing initiatives, including the following:

 

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Manufacturing efficiencies.    We have achieved cost savings in our core manufacturing operations through several ongoing initiatives, including:

 

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Implementation of Lean Six Sigma principles.    Lean and Six Sigma are industry-recognized methodologies which our management utilizes to reduce waste, improve quality and improve our ability to respond to customer demand rates by focusing on reductions in manufacturing lead times.

 

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Labor best practices standardization.    We studied how other companies utilize their production related labor. As a result of that study, we developed benchmark labor standards for our production processes. We then applied those standards and processes consistently across our manufacturing facilities.

 

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Real-time production reporting and throughput analysis.    Many of our manufacturing facilities are equipped with production count systems that interface directly with our general ledger system. These reports enable us to reduce the costs we incur to manufacture our products. Real-time production reporting allows us to:

 

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perform bottleneck management analysis, which allows us to analyze production bottlenecks and improve efficiency and cycle times;

 

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complete shift-to-shift assessments, which help us to reduce the number of employees needed to meet production during any given shift; and

 

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perform press changeover time analysis, which helps us to reduce the time in which equipment is not in production.

 

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Purchasing efficiencies.    We actively negotiate with our supply base to achieve year-over-year price reductions in the components and supplies that we purchase.

 

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SG&A reductions.    We have reduced the amount of our SG&A expense necessary to operate our business. We have centralized and continue to centralize several administrative functions which we previously performed on a decentralized basis, including purchasing, customer quoting and product costing, product engineering and accounting. In addition, we have instituted policies and procedures on discretionary spending to reduce our costs.

Adjusted EBITDA

We use the term Adjusted EBITDA throughout this prospectus. 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 prospectus. Adjusted EBITDA is not a measure of performance defined in accordance with GAAP. We use Adjusted EBITDA as a supplement to our GAAP results in evaluating our business.

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

We believe that Adjusted EBITDA is useful to investors in evaluating our performance because EBITDA is a commonly used financial metric for measuring and comparing the operating performance of companies in our industry. We believe that the disclosure of Adjusted EBITDA offers an additional financial metric that, when coupled with 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, (i) other companies in our industry may define Adjusted EBITDA differently than we do and, as a result, it may not be comparable to similarly titled measures used by other companies in our industry; and (ii) Adjusted EBITDA excludes certain financial information that some may consider important in evaluating our performance.

We compensate for these limitations by providing disclosure of the differences between Adjusted EBITDA and GAAP results, including providing a reconciliation of Adjusted EBITDA to GAAP results, to enable investors to perform their own analysis of our operating results. For a reconciliation of consolidated Adjusted EBITDA to its most directly comparable GAAP measure, net income (loss), see footnote 12 in “Prospectus Summary—Summary Consolidated Financial Data.”

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. See our consolidated financial statements and the related notes included elsewhere in this prospectus.

Bases of Presentation

2007 Acquisition

On July 31, 2007, we acquired substantially all of the assets, including the name, of Tower Automotive, Inc. and 25 of its United States subsidiaries in exchange for a purchase price of $779.3 million, which amount is net

 

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of cash acquired of $82.1 million and includes direct acquisition costs of $27 million. We also acquired the stock of substantially all of the sellers’ foreign affiliates. In addition to the purchase price that we paid for these assets, we assumed foreign debt and debt-like instruments of $235.7 million, resulting in aggregate consideration of approximately $1 billion.

Previously, in February 2005, Tower Automotive, Inc. and its United States subsidiaries, which we refer to collectively as the debtors, filed a voluntary petition for relief under the United States bankruptcy laws. From February 2005 until our acquisition on July 31, 2007, the debtors operated their business in the normal course as debtors-in-possession. The assets of the debtors that we did not acquire were transferred into a liquidation trust. Pursuant to the plan of reorganization confirmed by the United States Bankruptcy Court, the only liabilities of the United States debtors that we assumed were certain current liabilities and pension and other post-retirement benefit obligations. Concurrent with the closing of the 2007 acquisition, the debtors ceased all operations.

The acquisition was accounted for as a purchase in accordance with FASB ASC No. 805. As a result, we allocated the purchase price to the assets acquired and liabilities assumed at the date of acquisition, based on their estimated fair values as of the closing date, in accordance with FASB ASC No. 805. The excess of the cost of the acquisition over the net amounts assigned to the fair value of the assets acquired and the liabilities assumed was recorded as goodwill. As a result of the application of FASB ASC No. 805, the financial statements and financial data presented in this prospectus for dates and for periods ending on or before July 31, 2007 are not comparable with the financial statements and financial data presented in this prospectus for periods after July 31, 2007. We refer to our acquisition of the assets of the debtors and the acquisition of substantially all of the stock of the debtors’ foreign affiliates as the 2007 acquisition.

The accounting pronouncements applicable to the Predecessor while it was undergoing reorganization do not change the application of GAAP in the preparation of the Predecessor’s financial statements. However, those pronouncements do require that the financial statements, for periods including and subsequent to the filing of the bankruptcy petition, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the Predecessor.

The debtors incurred certain professional and other expenses directly associated with their bankruptcy proceedings. In addition, the debtors made certain provisions to adjust the carrying value of certain pre-petition liabilities to reflect the debtors’ estimate of allowed claims. We have classified these costs and expenses as Chapter 11 and related reorganization items in our consolidated statements of operations for the seven months ended July 31, 2007.

2010 Corporate Conversion

We have been organized as a limited liability company since the 2007 acquisition. Prior to the consummation of this offering, (i) all of our existing equity owners will transfer their equity interests in Tower Automotive, LLC to a newly created limited liability company, Tower International Holdings, LLC, (ii) Tower Automotive, LLC will convert into a Delaware corporation, which will be named Tower International, Inc., and (iii) all of the equity interests in Tower Automotive, LLC will be converted into common stock of Tower International, Inc. Thus, immediately prior to the consummation of this offering, all of our outstanding common stock will be owned by Tower International Holdings, LLC. We refer to this transaction as the Corporate Conversion.

Our Segments

Our management reviews our operating results and makes decisions based upon two reportable segments: the Americas and International, each of which has its own president and leadership team. For accounting purposes, we have identified four operating segments, which we have aggregated into two reportable segments. See Note 16 to our consolidated financial statements. Through June 30, 2010, our businesses have had similar economic characteristics, including the nature of our products, our production processes and our customers.

 

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Results of Operations—Six Months Ended June 30, 2010 Compared with the Six Months Ended June 30, 2009

Automobile production volumes increased during the six months ended June 30, 2010 in all major markets compared to the six months ended June 30, 2009. The following table presents production volumes in specified regions according to CSM Worldwide^® for the six months ended June 30, 2010 compared to the six months ended June 30, 2009 (in millions of units produced):

 

		Europe			Korea			China			North America			Brazil
Six Months Ended June 30, 2010		9.7			2.1			7.1			6.0			1.5
Six Months Ended June 30, 2009		7.7			1.5			4.8			3.5			1.4
Increase/(decrease)		2.0			0.6			2.3			2.5			0.1
Percentage change		26	%		38	%		49	%		72	%		13	%

According to CSM Worldwide^®, vehicle production for the full year of 2010 is expected to increase over 2009, but not to the same extent as the increase for the first six months of 2010 over the first six months of 2009. According to CSM Worldwide^® , full year vehicle production is expected to increase by 37% in North America and 9% in Europe during 2010 as compared to 2009.

The following table presents selected financial information for the six months ended June 30, 2010 and 2009 (in millions):

 

		International						Americas							Consolidated
		Six Months Ended June 30,						Six Months Ended June 30,							Six Months Ended June 30,
		2010			2009			2010			2009				2010				2009
Revenues		$	558.6		$	438.2		$	422.2		$	259.7			$	980.8			$	697.9
Cost of sales			489.2			397.8			382.8			284.1				872.0				681.9
Gross profit			69.4			40.4			39.4			(24.4	)			108.8				16.0
Selling, general and administrative
expenses			30.5			28.0			34.5			25.3				65.0				53.3
Amortization			1.1			1.0			0.4			0.3				1.5				1.3
Restructuring			2.9			2.0			1.8			(3.1	)			4.7				(1.1	)
Operating income/(loss)		$	34.9		$	9.4		$	2.7		$	(46.9	)			37.6				(37.5	)
Interest expense, net																27.3				27.2
Other (income)/loss, net																—				(32.4	)
Provision/(benefit) for income taxes																8.4				2.8
Noncontrolling interest, net of tax																4.5				3.9
Net loss attributable to Tower Automotive, LLC															$	(2.6	)		$	(39.0	)

Comparison of Periods—GAAP Analysis of Consolidated Results

Revenues

Total revenues increased during the six months ended June 30, 2010 by $282.9 million or 41% from the six months ended June 30, 2009, reflecting primarily higher volume in both our Americas segment ($155.4 million) and our International segment ($151 million). Revenues were also positively impacted by the strengthening of foreign currencies against the U.S. dollar, both in our Americas segment, primarily the Brazilian Real ($16.2 million), and in our International segment, primarily the Korean Won ($13.8 million), offset partially by the strengthening of the U.S. dollar against the Euro in our International segment ($10 million). Revenues were negatively impacted by unfavorable pricing and economics ($41.7 million), primarily related to lower steel recoveries and prices.

 

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Gross Profit

When we analyze our total gross profit, we separately categorize external factors—volume, product mix and foreign exchange—and all other factors which 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 increased by $92.8 million or 580% from the six months ended June 30, 2009 to the six months ended June 30, 2010, and our gross profit margin increased from 2.3% during the 2009 period to 11.1% in the 2010 period, as partially explained by higher volume ($72.8 million), favorable product mix ($4.3 million), and favorable foreign exchange ($0.9 million). All other factors were net favorable by $14.7 million. Cost of sales was reduced by manufacturing, purchasing and other efficiencies ($24.5 million) and savings from restructuring actions undertaken in 2008 and 2009 ($3.1 million). Total gross profit was also positively impacted by a reduction in the depreciation included in cost of sales from $76.4 million during the six months ended June 30, 2009 to $55.1 million during the six months ended June 30, 2010. The reduction reflected primarily a portion of our fixed assets becoming fully depreciated in July 2009 as a result of having been assigned estimated lives of two years at the time of our acquisition in 2007 and accelerated depreciation in 2009 related to certain restructuring actions taken in the Americas segment. These factors more than offset unfavorable pricing and economics ($20.8 million), the non-recurrence of customer cost recoveries ($9.5 million), and higher launch costs ($4.1 million).

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

Total SG&A increased $11.7 million or 22% from the six months ended June 30, 2009, reflecting higher bonus and salary costs and increased personnel costs, primarily for engineers ($8.1 million), the strengthening of foreign currencies against the U.S. dollar, primarily the Korean Won and Brazilian Real ($2.1 million), and acquisition costs related to the acquisition of a manufacturing plant in Artern, Germany during the first quarter of 2010 ($0.7 million). In addition, SG&A for the six months ended June 30, 2010 includes a charge for compensation costs related to the Special Incentive Program ($0.5 million) described under “Compensation Discussion and Analysis—Components of Compensation—Special Incentive Compensation.”

Amortization Expense

Total amortization expense increased $0.2 million from the six months ended June 30, 2009 reflecting primarily the amortization of an intangible asset recorded in Artern at the end of the first quarter of 2010 and the strengthening of foreign currencies against the U.S. dollar. Our amortization expense consists of the charges we incur to amortize certain intangible assets.

Restructuring Expense

Total restructuring expense increased $5.8 million from the six months ended June 30, 2009 related primarily to an impairment charge taken on our press shop in Bergisch Gladbach, Germany as we put it up for sale and the non-recurrence of restructuring income which offset the charges incurred during 2009 in our Americas segment.

Interest Expense, net 

Interest expense, net, remained consistent between the six month periods as borrowings were similar in both of the periods. An increase in borrowings in Europe, South Korea, and Brazil were offset by a decrease in borrowings in North America.

 

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Provision/(Benefit) for Income Taxes

Income tax expense increased $5.6 million from the six months ended June 30, 2009. The change in income tax expense varies each period depending on the level and mix of income and losses generated in the various jurisdictions. Our income tax expense is disproportionately higher than our statutory rate primarily due to valuation allowances recorded against tax benefits on losses incurred in certain countries, including the U.S. The increased operating income in the Americas segment (primarily in the U.S.) is offset by net operating losses that are subject to valuation allowances which, when reduced, do not benefit the current tax provision. We have recorded the valuation allowances due to the uncertainty of the future realization of the tax benefits associated with the losses.

Noncontrolling Interest, Net of Tax

The adjustment to our earnings required to give effect to the elimination of noncontrolling interests increased by $0.6 million from the six months ended June 30, 2009 reflecting increased earnings in our Chinese joint ventures.

Comparison of Periods—Non-GAAP Analysis of Adjusted EBITDA

A reconciliation of Adjusted EBITDA to net loss attributable to Tower Automotive, LLC for the six month periods presented is set forth below (in millions):

 

		International								Americas								Consolidated
		Six Months Ended June 30,								Six Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009				2010				2009
Adjusted EBITDA		$	65.5			$	46.0			$	36.9			$	(5.0	)		$	102.4			$	41.0
Intercompany charges			3.5				3.2				(3.5	)			(3.2	)			—				—
Restructuring			(2.9	)			(2.0	)			(1.8	)			3.1				(4.7	)			1.1
Depreciation and amortization			(30.4	)			(37.6	)			(28.3	)			(41.8	)			(58.7	)			(79.4	)
Receivable factoring charges and other			(0.1	)			(0.2	)			(0.1	)			—				(0.2	)			(0.2	)
Acquisition costs			(0.7	)			—				—				—				(0.7	)			—
Compensation pursuant to the special incentive program			—				—				(0.5	)			—				(0.5	)			—
Operating income		$	34.9			$	9.4			$	2.7			$	(46.9	)			37.6				(37.5	)
Interest expense, net																			(27.3	)			(27.2	)
Other Income																			—				32.4
(Provision)/benefit for income taxes																			(8.4	)			(2.8	)
Noncontrolling interest, net of tax																			(4.5	)			(3.9	)
Net loss attributable to Tower Automotive, LLC																		$	(2.6	)		$	(39.0	)

See footnote 12 in “Prospectus Summary—Summary Consolidated Financial Data.”

 

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The following table presents revenues (a GAAP measure) and Adjusted EBITDA (a non-GAAP measure) for the six months ended June 30, 2010 and 2009 (in millions) as well as an explanation of variances:

 

		International								Americas								Consolidated
		Revenues				Adjusted EBITDA(a)				Revenues				Adjusted EBITDA(a)				Revenues				Adjusted EBITDA(a)
Six Months Ended June 30, 2010 results		$	558.6			$	65.5			$	422.2			$	36.9			$	980.8			$	102.4
Six Months Ended June 30, 2009 results			438.2				46.0				259.7				(5.0	)			697.9				41.0
Variance		$	120.4			$	19.5			$	162.5			$	41.9			$	282.9			$	61.4
Variance attributable to:
Volume and mix		$	151.0			$	30.7			$	155.4			$	46.4			$	306.4			$	77.1
Foreign exchange			3.8				(1.7	)			16.2				0.5				20.0				(1.2	)
Pricing and economics			(35.0	)			(18.1	)			(6.7	)			(10.7	)			(41.7	)			(28.8	)
Manufacturing and purchasing efficiencies			—				11.4				—				18.9				—				30.3
Selling, general and administrative expenses and other items(b)			0.6				(2.8	)			(2.4	)			(13.2	)			(1.8	)			(16.0	)
Total		$	120.4			$	19.5			$	162.5			$	41.9			$	282.9			$	61.4

 

(a)	We have presented a reconciliation of Adjusted EBITDA to net loss attributable to Tower Automotive, LLC above.

(b)	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, (iii) one-time items and (iv) other efficiencies.

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.”

Total Company: Total Adjusted EBITDA improved by $61.4 million or 150% from the six months ended June 30, 2009, as explained by higher volume ($72.8 million) and favorable product mix ($4.3 million) offset partially by unfavorable foreign exchange ($1.2 million). All other factors were net unfavorable by $14.5 million; manufacturing and purchasing efficiencies ($30.3 million) were more than offset by unfavorable pricing and economics ($28.8 million) and unfavorable SG&A expenses and other items ($16 million).

International Segment: In our International segment, Adjusted EBITDA improved by $19.5 million or 42% from the six months ended June 30, 2009, reflecting higher volumes ($34.5 million) offset partially by unfavorable product mix ($3.8 million) and unfavorable foreign exchange ($1.7 million). All other factors were net unfavorable by $9.5 million. Unfavorable pricing and economics ($18.1 million), principally product pricing and labor costs, were offset partially by manufacturing and purchasing efficiencies ($11.4 million). In addition, SG&A and other items contributed unfavorably during the six months ended June 30, 2010 ($2.8 million), resulting from the non-recurrence of customer cost recoveries ($2.7 million) and higher launch costs ($1.6 million), offset partially by savings from restructuring actions undertaken in 2008 and 2009 ($1.4 million).

Americas Segment: In our Americas segment, Adjusted EBITDA improved by $41.9 million from the six months ended June 30, 2009, reflecting primarily higher volumes ($38.3 million) and favorable product mix ($8.1 million). Foreign exchange had a negligible impact. All other factors were net unfavorable by $5 million. Unfavorable pricing and economics ($10.7 million), principally product pricing and labor costs including higher bonus and salary costs, and higher SG&A expenses and other items ($13.2 million) were offset partially by manufacturing and purchasing efficiencies ($18.9 million). The adverse impact from SG&A spending and other items resulted from the non-recurrence of customer cost recoveries ($6.8 million), higher launch costs ($2.5 million) and increased personnel costs, primarily for engineers ($2.5 million), offset partially by savings from restructuring actions undertaken in 2008 and 2009 ($1.7 million).

 

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Results of Operations—Year Ended December 31, 2009 Compared with the Year Ended December 31, 2008

Due to the downturn in the global economy, automobile production volumes decreased significantly during 2009 in all major markets except China and Brazil. The following table presents production volumes in specified regions according to CSM Worldwide^® for 2009 compared to 2008 (in millions of units produced).

 

		Europe			Korea			China			North America			Brazil
2009 production		16.3			3.4			11.1			8.6			2.9
2008 production		20.5			3.7			7.3			12.6			2.9
Increase/(decrease)		(4.2	)		(0.3	)		3.8			(4.0	)		0.0
Percentage change		(20	)%		(8	)%		52	%		(32	)%		2	%

The following table presents selected financial information for the years ended December 31, 2009 and 2008 (in millions). In the discussion that follows, all references to “2009” are to the year ended December 31, 2009 and all references to “2008” are to the year ended December 31, 2008.

 

		International						Americas								Consolidated
		2009			2008			2009				2008				2009				2008
Revenues		$	990.5		$	1,251.4		$	643.9			$	920.3			$	1,634.4			$	2,171.7
Cost of sales			889.9			1,104.5			646.9				886.8				1,536.8				1,991.3
Gross profit			100.6			146.9			(3.0	)			33.5				97.6				180.4
Selling, general and administrative expenses			57.7			63.3			60.6				75.3				118.3				138.6
Amortization			2.0			2.2			0.8				0.8				2.8				3.0
Restructuring			12.6			1.4			0.8				3.4				13.4				4.8
Operating income/(loss)		$	28.3		$	80.0		$	(65.2	)		$	(46.0	)			(36.9	)			34.0
Interest expense, net																	56.9				60.2
Other (income)/loss, net																	(33.7	)			—
Provision/(benefit) for income taxes																	(1.1	)			19.5
Noncontrolling interest, net of tax																	8.9				6.6
Net loss attributable to Tower Automotive, LLC																$	(67.9	)		$	(52.3	)

Comparison of Periods—GAAP Analysis of Consolidated Results

Revenues

Total revenues declined in 2009 by $537.3 million or 25% from 2008, reflecting primarily lower volume in both our Americas segment ($262 million) and our International segment ($167.1 million) and the effect of the strengthened U.S. dollar against foreign currencies in our International segment, primarily the Euro and Korean Won ($96.6 million), and against foreign currencies in our Americas segment, primarily the Brazilian Real ($19.8 million).

Gross Profit

Total gross profit declined in 2009 by $82.8 million or 46% from 2008 and gross profit margin decreased from 8.3% in 2008 to 6% in 2009, as explained by lower volume ($103.2 million), unfavorable product mix ($43.8 million), and unfavorable foreign exchange primarily in the International segment ($17.3 million, excluding the impact on depreciation). All other factors were net favorable by $81.5 million—cost of sales was reduced primarily by manufacturing, purchasing and other efficiencies ($90 million) that more than offset unfavorable pricing and economics ($35.5 million). The unfavorable pricing and economics was attributable

 

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principally to product pricing and net steel impact ($46.7 million), offset partially by reductions in our workers’ compensation and healthcare costs ($11.2 million) associated with reductions in our workforce and improvements in our plant safety record in the Americas segment. Gross profit was positively impacted by the achievement of savings in 2009 from restructuring actions undertaken in 2008 and 2009 ($10.2 million) and was negatively impacted by a one-time provision associated with a value-added tax audit in Brazil ($4.7 million).

Total gross profit was also positively impacted by a reduction in the depreciation included in cost of goods sold from $164.1 million in 2008 to $141.1 million in 2009. The reduction reflected primarily a portion of our fixed assets becoming fully depreciated in July 2009 as a result of having been assigned estimated lives of two years at the time of our acquisition in 2007, as well as the strengthening of the U.S. dollar against foreign currencies, primarily in the International segment, offset partially by accelerated depreciation in 2009 related to certain restructuring actions taken in the Americas segment.

Selling, General and Administrative Expenses

Total SG&A decreased $20.3 million or 15% from 2008, reflecting a reduction in personnel and related expenses associated with the decline in production and a reduction in other spending undertaken to control costs ($17.1 million) primarily in the Americas segment and the strengthening of the U.S. dollar against foreign currencies resulting in less SG&A costs ($4.8 million, excluding the impact of depreciation) primarily in the International segment.

Amortization Expense

Total amortization expense decreased by $0.2 million due to the strengthening of the U.S. dollar against foreign currencies.

Restructuring Expense

Total restructuring increased by $8.6 million or 179% from 2008 due to higher restructuring charges incurred in 2009, related primarily to the closure of our press shop in Bergisch Gladbach, Germany.

Interest Expense, net

Interest expense, net, decreased in 2009 by $3.3 million or 5.5% as compared to 2008, related primarily to declining debt balances in the Americas segment due to a debt repurchase in the second quarter and declining rates on the portion of our first lien term loan not covered by an interest rate swap.

Other Income

During 2009, we amended certain terms of our revolving credit facility, first lien term loan agreement and synthetic letter of credit facility. As part of the amendments, we reduced our $200 million revolving credit facility to $150 million, reduced our synthetic letter of credit facility from $60 million to $27.5 million and repurchased $32.9 million of the U.S. tranche of our first lien term loan. In connection with these transactions, we recognized gains of $33.7 million which we recognized as other income.

Provision (Benefit) for Income Taxes

Income tax expense declined $20.6 million or 106% in 2009 from 2008 reflecting primarily the substantial decrease in overall income, a tax benefit from gain recognition in other comprehensive income and a shift in the mix of income among jurisdictions.

 

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Noncontrolling Interest, Net of Tax

The adjustment to our earnings required to give effect to the elimination of minority interests increased by $2.3 million in 2009 from 2008 reflecting increased earnings in our Chinese joint ventures.

Comparison of Periods—Non-GAAP Analysis of Adjusted EBITDA

A reconciliation of Adjusted EBITDA to net loss attributable to Tower Automotive, LLC for the periods presented is set forth below (in millions):

 

		International								Americas								Consolidated
		2009				2008				2009				2008				2009				2008
Adjusted EBITDA		$	108.7			$	163.9			$	16.3			$	49.0			$	125.0			$	212.9
Intercompany charges			8.0				3.0				(8.0	)			(3.0	)			—				—
Restructuring			(12.6	)			(1.4	)			(0.8	)			(3.4	)			(13.4	)			(4.8	)
Depreciation and amortization			(75.1	)			(82.4	)			(72.6	)			(87.9	)			(147.7	)			(170.3	)
Receivable factoring charges			(0.7	)			—				(0.1	)			(0.7	)			(0.8	)			(0.7	)
Other adjustments			—				(3.1	)			—				—				—				(3.1	)
Operating income/(loss)		$	28.3			$	80.0			$	(65.2	)		$	(46.0	)			(36.9	)			34.0
Interest expense, net																			(56.9	)			(60.2	)
Other income																			33.7				—
(Provision)/benefit for income taxes																			1.1				(19.5	)
Noncontrolling interest, net of tax																			(8.9	)			(6.6	)
Net loss attributable to Tower Automotive, LLC																		$	(67.9	)		$	(52.3	)

See footnote 12 in “Prospectus Summary—Summary Consolidated Financial Data.”

The following table presents revenues (a GAAP measure) and Adjusted EBITDA (a non-GAAP measure) for the years ended December 31, 2009 and 2008 (in millions) as well as an explanation of variances:

 

		International								Americas								Consolidated
		Revenues				Adjusted EBITDA(a)				Revenues				Adjusted EBITDA(a)				Revenues				Adjusted EBITDA(a)
2009 results		$	990.5			$	108.7			$	643.9			$	16.3			$	1,634.4			$	125.0
2008 results			1,251.4				163.9				920.3				49.0				2,171.7				212.9
Variance		$	(260.9	)		$	(55.2	)		$	(276.4	)		$	(32.7	)		$	(537.3	)		$	(87.9	)
Variance attributable to:
Volume and mix		$	(167.1	)		$	(60.4	)		$	(262.0	)		$	(86.6	)		$	(429.1	)		$	(147.0	)
Foreign exchange			(96.6	)			(12.3	)			(19.8	)			(0.2	)			(116.4	)			(12.5	)
Pricing and economics			3.3				(23.8	)			4.3				(10.6	)			7.6				(34.4	)
Manufacturing and purchasing efficiencies			—				39.7				—				48.6				—				88.3
Selling, general and administrative expenses and other items			(0.5	)			1.6				1.1				16.1				0.6				17.7
Total		$	(260.9	)		$	(55.2	)		$	(276.4	)		$	(32.7	)		$	(537.3	)		$	(87.9	)

 

(a)	We have presented a reconciliation of Adjusted EBITDA to net loss attributable to Tower Automotive, LLC above.

 

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Adjusted EBITDA

Total Company: Total Adjusted EBITDA declined in 2009 by $87.9 million or 41% from 2008, as explained by lower volume ($103.2 million), unfavorable product mix ($43.8 million) and unfavorable foreign exchange ($12.5 million). All other factors were net favorable by $71.6 million; manufacturing and purchasing efficiencies ($88.3 million) and a decrease in SG&A and other items ($17.7 million) more than offset unfavorable pricing and economics ($34.4 million).

The favorable impact of manufacturing and purchasing efficiencies more than offset general cost increases. We were able to achieve this gain in 2009 because of the continued implementation of our competitive cost structure initiatives. Our focus in 2010 and beyond is to retain the benefit of these achieved cost savings as anticipated volume recovery occurs. Our objective is to continue to achieve operating efficiencies large enough to at least offset general cost increases.

International Segment: In our International segment, Adjusted EBITDA declined by $55.2 million or 34% from 2008, reflecting lower volumes ($37.4 million), unfavorable product mix ($23 million) and unfavorable foreign exchange ($12.3 million). All other factors were net favorable by $17.5 million; unfavorable pricing and economics ($23.8 million), principally product pricing and labor costs, were more than offset by operational efficiencies ($39.7 million). In addition, SG&A and other items contributed favorably in 2009, primarily because restructuring savings were achieved in 2009 from restructuring actions undertaken in 2008 and 2009 ($5.2 million), offset partially by higher launch costs in Europe.

Americas Segment: In our Americas segment, Adjusted EBITDA declined by $32.7 million or 67% from 2008, reflecting primarily lower volumes ($65.8 million) and unfavorable product mix ($20.8 million). Foreign exchange had a negligible impact. All other factors were net favorable by $54.1 million, due principally to operational efficiencies ($48.6 million) and reduced SG&A expenses and other items ($16.1 million). The positive impact from SG&A spending and other items resulted from a reduction in personnel and related expenses and a reduction in other spending undertaken to control costs ($17.1 million) and savings from restructuring actions undertaken in 2008 and 2009 ($5 million). These other factors were offset partially by unfavorable pricing and economics ($10.6 million) and a one-time provision associated with a value added tax audit in Brazil ($4.7 million). The unfavorable pricing and economics reflects principally unfavorable product pricing and net steel impact ($21.8 million), offset partially by reductions in our workers’ compensation and healthcare costs ($11.2 million) associated with reductions in our workforce and improvements in our plant safety record. Our net steel impact was adversely impacted by lower offal recoveries in 2009.

Results of Operations—Year Ended December 31, 2008 Compared with the Year Ended December 31, 2007

As a result of our acquiring our business from the debtors on July 31, 2007, our financial results for 2007 have been separately presented in our consolidated financial statements for the Predecessor for the period January 1, 2007 through July 31, 2007 and for the Successor for the period August 1, 2007 through December 31, 2007. We have presented below two separate analyses, one comparing our results for the five month periods ended December 31, 2008 and 2007 and one comparing our results for the seven month periods ended July 31, 2008 and 2007.

 

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Five Months Ended December 31, 2008 Compared to the Five Months Ended December 31, 2007

Automotive production volumes decreased significantly during the last five months of 2008 in all major markets due to the downturn in the global economy. The following table presents production volumes in specified regions according to CSM Worldwide^® for the five months ended December 31, 2008 compared to the five months ended December 31, 2007 (in millions of units produced):

 

		Europe			Korea			China			North America			Brazil
Five months ended December 31, 2008		6.9			1.5			2.8			4.8			1.1
Five months ended December 31, 2007		8.7			1.7			3.0			6.3			1.2
Increase / (decrease)		(1.8	)		(0.2	)		(0.2	)		(1.5	)		(0.1	)
Percentage change		(21	)%		(14	)%		(8	)%		(23	)%		(10	)%

The following table presents selected financial information for the five months ended December 31, 2008 and December 31, 2007 (in millions):

 

		International						Americas								Consolidated
		Five Months Ended December 31,						Five Months Ended December 31,								Five Months Ended December 31,
		2008			2007			2008				2007				2008				2007
Revenues		$	433.1		$	577.1		$	281.8			$	509.0			$	714.9			$	1,086.1
Cost of sales			381.5			506.7			286.0				463.8				667.5				970.5
Gross profit			51.6			70.4			(4.2	)			45.2				47.4				115.6
Selling, general and administrative expenses			33.7			27.2			20.5				29.8				54.2				57.0
Amortization			0.8			0.9			0.3				0.4				1.1				1.3
Restructuring			1.3			2.4			7.2				(0.6	)			8.5				1.8
Operating income/(loss)		$	15.8		$	39.9		$	(32.2	)		$	15.6				(16.4	)			55.5
Interest expense, net																	24.0				34.0
Provision for income taxes																	6.7				10.4
Equity in joint venture																	—				(7.1	)
Noncontrolling interest, net of tax																	2.5				3.0
Net income/(loss) attributable to Tower Automotive, LLC																$	(49.6	)		$	15.2

Comparison of Periods—GAAP Analysis of Consolidated Results

Revenues

Total revenues declined during the five months ended December 31, 2008 by $371.2 million or 34% from the five months ended December 31, 2007, reflecting primarily lower volume in both our Americas segment ($236.4 million) and our International segment ($118 million) and the effect of the strengthening of the U.S. dollar against foreign currencies in our International segment, primarily the Euro and Korean Won ($38.6 million), and against foreign currencies in our Americas segment, primarily the Brazilian Real ($3.9 million), offset partially by favorable pricing and economics ($24 million), primarily related to higher steel prices that were passed on to our customers.

Gross Profit

Total gross profit declined during the five months ended December 31, 2008 by $68.2 million or 59% from the five months ended December 31, 2007 and gross profit margin decreased from 10.6% for the five months ended December 31, 2007 to 6.6% for the five months ended December 31, 2008, reflecting primarily lower

 

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volume ($85.6 million), unfavorable product mix ($11.2 million) and unfavorable foreign exchange ($5.4 million, excluding the impact on depreciation). All other factors were net favorable by $34 million—cost of sales was reduced primarily by manufacturing, purchasing and other efficiencies ($59.6 million) and the favorable impact of the buyout of an operating lease ($8 million) in 2008 in our International segment, offset partially by unfavorable pricing and economics ($34.7 million). In addition, a one-time inventory charge was recorded in 2007 in our Americas segment ($4.2 million).

Total gross profit was also adversely impacted by an increase in the depreciation included in cost of goods sold from $59.8 million during the five months ended December 31, 2007 compared to $61.8 million during the five months ended December 31, 2008. The increase reflected primarily the buyout of an operating lease in 2008 in our International segment as mentioned above.

Selling, General and Administrative Expenses

Total SG&A decreased $2.8 million or 5% from the five months ended December 31, 2007, reflecting primarily a reduction in spending undertaken to control costs.

Restructuring Expense

Total restructuring increased $6.7 million from the five months ended December 31, 2007 to the five months ended December 31, 2008 due to the closure of our Traverse City facility in our Americas segment in September 2008.

Interest Expense, net

Interest expense, net, decreased during the five months ended December 31, 2008 by $10 million or 29% as compared to the five months ended December 31, 2007. Interest expense decreased primarily due to the repayment of our second lien term loan prior to the five months ended December 31, 2008.

Provision for Income Taxes

Provision for income taxes decreased $3.7 million or 36% during the five months ended December 31, 2008 from the five months ended December 31, 2007, reflecting primarily the decrease in pre-tax income and the mix of income in various foreign jurisdictions.

Equity in Earnings of Joint Ventures, Net of Tax

Equity in earnings of joint ventures decreased by $7.1 million during the five months ended December 31, 2008 from the five months ended December 31, 2007 due to our selling our 40% joint venture interest in Metalsa in December 2007.

Noncontrolling Interest, Net of Tax

The adjustment to our earnings required to give effect to the elimination of minority interests decreased by $0.5 million during the five months ended December 31, 2008 from the five months ended December 31, 2007, reflecting lower earnings at our Chinese joint ventures.

 

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Comparison of Periods—Non-GAAP Analysis of Adjusted EBITDA

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

 

		International								Americas								Consolidated
		Five Months Ended December 31,								Five Months Ended December 31,								Five Months Ended December 31,
		2008				2007				2008				2007				2008				2007
Adjusted EBITDA		$	56.8			$	67.2			$	(0.3	)		$	56.4			$	56.5			$	123.6
Intercompany Charges			(7.6	)			1.1				7.6				(1.1	)			—				—
Restructuring			(1.3	)			(2.4	)			(7.2	)			0.6				(8.5	)			(1.8	)
Depreciation & Amortization			(32.0	)			(26.7	)			(32.3	)			(34.6	)			(64.3	)			(61.3	)
Receivable factoring charges			—				—				—				(1.6	)			—				(1.6	)
Other adjustments			(0.1	)			0.7				—				(4.1	)			(0.1	)			(3.4	)
Operating income (loss)		$	15.8			$	39.9			$	(32.2	)		$	15.6				(16.4	)			55.5
Interest expense, net																			(24.0	)			(34.0	)
Provision for income taxes																			(6.7	)			(10.4	)
Equity in joint venture																			—				7.1
Noncontrolling interest, net of tax																			(2.5	)			(3.0	)
Net income/(loss) attributable to Tower Automotive, LLC																		$	(49.6	)		$	15.2

See footnote 12 in “Prospectus Summary—Summary Consolidated Financial Data.”

The following table presents revenues (a GAAP measure) and Adjusted EBITDA (a non-GAAP measure) for the five months ended December 31, 2008 and December 31, 2007 (in millions) as well as an explanation of variances:

 

		International								Americas								Consolidated
		Revenues				Adjusted EBITDA(a)				Revenues				Adjusted EBITDA(a)				Revenues				Adjusted EBITDA(a)
Five months ended December 31, 2008 results		$	433.1			$	56.8			$	281.8			$	(0.3	)		$	714.9			$	56.5
Five months ended December 31, 2007 results			577.1				67.2				509.0				56.4				1,086.1				123.6
Variance		$	(144.0	)		$	(10.4	)		$	(227.2	)		$	(56.7	)		$	(371.2	)		$	(67.1	)
Variance attributable to:
Volume and mix		$	(118.0	)		$	(28.3	)		$	(236.4	)		$	(68.5	)		$	(354.4	)		$	(96.8	)
Foreign exchange			(38.6	)			(3.7	)			(3.9	)			0.3				(42.5	)			(3.4	)
Pricing and economics.			13.2				(7.2	)			10.8				(27.5	)			24.0				(34.7	)
Manufacturing and purchasing efficiencies			—				21.8				—			</