Tower International Management Discusses Q1 2013 Results - Earnings Call Transcript

May. 2.13 | About: Tower International, (TOWR)

Tower International (NYSE:TOWR)

Q1 2013 Earnings Call

May 02, 2013 1:00 pm ET

Executives

Derek Fiebig - Executive Director of Investor and External Relations

Mark Malcolm - Chief Executive Officer, President and Director

James C. Gouin - Chief Financial Officer and Executive Vice President

Analysts

Itay Michaeli - Citigroup Inc, Research Division

Ryan Brinkman - JP Morgan Chase & Co, Research Division

Aditya Oberoi - Goldman Sachs Group Inc., Research Division

David H. Lim - Wells Fargo Securities, LLC, Research Division

David Leiker - Robert W. Baird & Co. Incorporated, Research Division

Operator

Good afternoon. My name is Beverly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Tower International First Quarter Earnings Conference Call. [Operator Instructions] Thank you.

Mr. Fiebig, you may begin your conference.

Derek Fiebig

Thanks, Beverly, and good afternoon, everyone. I'd like to welcome you to the Tower International First Quarter 2013 Earnings Call. Materials for today's presentation were posted to our website earlier this morning.

Throughout today's presentation, we will reference the non-GAAP financial measures of adjusted EBITDA, free cash flow and adjusted EPS. Reconciliations of these non-GAAP financial measures and the most directly comparable financial measures are calculated in accordance with GAAP and included in the appendix of this presentation.

As a reminder, today's presentation contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to revenue, adjusted EBITDA, free cash flow, adjusted EPS, trends in our operations and expected future contracts.

Forward-looking statements are made as of today's presentation and are based upon management's current expectations and beliefs concerning future developments and their potential effects on us. Such forward-looking statements are not guarantees of future performance, and we do not assume any obligation to update or revise the forward-looking statement. Additional information and risk factors are available in today's materials and in our regular filings with the SEC.

Presenting on today's call are Mark Malcolm, our President and CEO; and Jim Gouin, Executive Vice President and CFO. Also joining us in the room is Jeff Kersten, Senior Vice President and Corporate Controller. Following our formal remarks, we will open up the phone lines for questions and answers.

Now I'll turn the call over to Mark.

Mark Malcolm

Thanks, Derek. Let's start on Slide 3, with the intended key takeaways. I'm pleased to report that both earnings and free cash flow well surpassed our expectations for the first quarter. I'd highlight 2 main reasons to explain the better-than-expected performance. Most important was strong execution. Want to thank the Tower team for doing an exceptional job identifying and delivering savings and managing costs in our factories and by working collaboratively and well with customers and suppliers. Some of the first quarter good news relates to calendarization timing versus second quarter, but delivering good news sooner certainly isn't a bad thing.

In addition to good company execution, revenue in the first quarter also was slightly better than we had expected. Revenue good news versus expectations mainly occurred in Europe, which ironically was the only region where Tower had lower revenue than a year ago. But the decline in Europe was not quite as much as we had expected.

The second and third bullet points on Slide 3 summarize a couple recent action, the decision to sell Tower Defense & Aerospace and the opportunistic and highly accretive debt tender and refinancing that will significantly strengthen Tower's ongoing free cash flow and earnings per share. We've got slides to review each of these actions in more detail. Based on the refinancing, the first quarter performance and the latest outlook for the balance of the year, we're providing updated guidance today that includes meaningful improvements of the full year 2013 outlook for adjusted earnings per share and free cash flow.

Slide 4 discusses the planned sale of Tower Defense & Aerospace or TDA. The first bullet point provides a reminder context of the original vision for TDA, which we acquired 2 years ago. The business objective was to supplement automotive revenue growth by leveraging Tower's core skills in this adjacent industry involving structural metal components. We mitigated some risk by acquiring a financially distressed company that had high operating leverage upside. Existing assets had revenue capacity of about $200 million per year versus run rate revenue of about $50 million. Margins were at or above automotive, with good cash conversion potential because of relatively low CapEx requirement.

Normally, the main risk in pursuing an adjacency involves company execution and realization of anticipated synergies in a less familiar business. In the case of TDA, that was not the problem. Tower significantly upgraded TDA's performance and capabilities, as validated by existing and potential new customers. I did not, however, anticipate the sea change in the macro environment, resulting in a dramatic slowing and present lack of business for TDA's defense customers. Following extensive discussions with the customers, our best judgment is that the severely depressed business conditions are likely to continue for the foreseeable future. We're going to confront that reality and sell TDA to avoid continued losses.

It will take until midyear for TDA to produce its remaining contractual orders. The sale process is underway, and we won't speculate on potential cash proceeds other than to say they won't be material for Tower. Our best preliminary estimate is that there will be a noncash write-down of up to $12 million in the second quarter. As described in the last bullet point, we plan to exclude this year's operating loss and write-down for TDA from Tower's 2013 adjusted EBITDA and adjusted earnings per share.

Now I'll turn it over to Jim.

James C. Gouin

Thanks, Mark, and good afternoon, everyone.

Slide 5 provides an overview of the refinancing completed in late April. Let me start with some reminder background. In August of 2010, before Tower's IPO, we issued $430 million of 7-year senior secured notes. These notes were issued at a discount with a 10.625% coupon and an effective rate in excess of 11%. The notes included an annual redemption feature for up to 10% of the face value at a price of 105. The company had previously redeemed $68 million of these notes, leaving $362 million outstanding. The first call date for all outstanding notes was September 2014 at a price of 105.3. As you know, we had previously discussed our strong desire to address the high interest cost of these notes as soon as possible, preferably before the September 2014 call date if feasible.

In March, market conditions were right, and we launched a tender offer for up to $276 million, with plans to address the remaining $86 million using the available 105 redemptions, $43 million in April and $43 million at the next available opportunity in the third quarter. 100% of the notes were tendered, and our blended cost for taking all $362 million out will be a little under 112. The redemption of the bonds and related fees were funded by a new $420 million senior secured term loan maturing in 2020. The loan's interest rate is a spread of 450 basis points over a LIBOR floor of 1.25%, resulting in a current interest rate of 5.75%. That makes the new effective interest rate more than 500 basis points lower than the prior high-yield notes.

As shown in the green box, this will improve Tower's ongoing free cash flow by about $14 million a year and increase annual earnings per share by $0.75. For 2013, shown on the far right column, interest expense will be reduced by about $8 million or $0.40 per share. Because interest payments are moving from semiannual to quarterly, there will not be a significant change to free cash flow in 2013. That benefit will occur in full next year. Needless to say, we are delighted to pull ahead these major refinancing savings while extending the company's debt maturities and improving our financial flexibility.

Slide 6 shows summary financial information for the first quarter. Revenue of $534 million was up 1% from the first quarter of 2012, while adjusted EBITDA of $52.1 million was up 13%. Adjusted EBITDA margin for the quarter was 9.8%, up 110 basis points from last year. Adjusted EPS was $0.32 for the quarter, up 45%. All in all, I believe it was a very solid quarter.

Slide 7 explains the year-over-year change in adjusted EBITDA during the first quarter. The volume and mix improved adjusted EBITDA by $3 million versus a year ago, as lower customer production in Europe was more than offset by higher production in all other Tower markets. There was no net impact from foreign exchange translation. All other cost and pricing factors, excluding volume mix, were net favorable by an additional $3 million, including lower launch-related costs and the non-recurrence of TDA's inefficiencies a year ago. Our manufacturing and purchasing efficiencies were sufficient to fully offset customer price reduction and labor and overhead economics.

As shown on Slide 8, free cash flow for the first quarter was negative $13 million. As explained in the footnote, that excludes net proceeds of $16 million received in January for the second payment on the Korean sale. As we have discussed in the past, first quarter is typically seasonally negative for us for free cash flow, largely reflecting working capital recovery following the year-end shutdown. This quarter's free cash flow was, however, significantly better than our guidance, reflecting primarily CapEx timing and higher adjusted EBITDA.

Net debt, leverage and liquidity are shown on Slide 9. As of March 31, we had cash of $111 million and $491 million of debt, resulting in net debt of $380 million. Leverage was 2.4x on a gross basis and 1.9x on a net basis. And we ended the quarter with good liquidity of $209 million. On a pro forma basis, including the impact of the refinancing, liquidity is unchanged, and net debt leverage increases to 2.2x. This 0.3x increase in net debt leverage will be naturally addressed over time by the ongoing free cash flow benefit of the cash interest savings from the new term loan.

And with that, I'll turn the call back over to Mark.

Mark Malcolm

Slide 10 provides updated guidance for the full year and additional guidance for the second quarter. Second quarter outlook reflects customer production schedules for Tower content vehicles plus refined calendarization based on first quarter actions and results. As a reminder, the second quarter is when we will experience the previously mentioned lost revenue from a vehicle that was discontinued by one of our Chinese customers.

As shown by the 2 highlighted green boxes on the right side of the slide, we are now forecasting higher adjusted EBITDA and better free cash flow on the first half of 2013 not included in our original outlook. For the full year, we continue to believe there is downside risk to IHS's industry production forecast for Europe in the second half of the year and potential upside in North America. On balance, we are holding our prior midpoint guidance for full year revenue.

The larger green box in the middle of the slide shows improved full year outlooks. For adjusted EBITDA, the $205 million to $210 million; for adjusted earnings per share, to $1.65, reflecting this year's interest savings from the refinancing, that's up $0.40 or more than 30% from the earlier midpoint target; and for free cash flow, to $25 million. While it is still relatively early in the year, Tower's good first quarter actual results and first half outlook have increased our confidence for 2013 by somewhat lessening or partially de-risking the reliance on forecasted second half industry increases versus 2012.

Slide 11 updates Tower's business model regarding ongoing free cash flow. As Jim mentioned, the debt tender and refinancing will improve Tower's ongoing free cash flow by about $14 million a year beginning in 2014. With this improvement, we are increasing Tower's demonstrated free cash flow capability to 2% of revenue at normalized conditions. This would represent a cash yield equal to about 13% of Tower's market cap at yesterday's close, and we continue to see a realistically achievable path to grow ongoing free cash flow to 3% of revenue by about 2015. EBITDA less CapEx can contribute the additional percentage point of improvement, with industry recovery in Europe and with recent expansion investments in China and Brazil behind us. In my opinion, the accretive sale of our Korean operation in late December, the strong execution and results in the first quarter and the successful debt refinancing in April have materially strengthened Tower's present financial condition and future business outlook.

That concludes our presentation. Let's please turn now to Qs and As.

Derek Fiebig

Beverly, if you could please remind participants how to get in queue for questions?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Itay Michaeli of Citigroup.

Itay Michaeli - Citigroup Inc, Research Division

First question, just want to get into a little bit more detail about what went so right in the quarter. It seems like the $3 million of all other improvement is already at the high end of your full year guidance, and the incremental margins look really strong. I know last quarter, you talked about some volume-related fixed-cost increases of about $15 million. If you can maybe quantify how much of that may have hit in the first quarter. Then if you just talk about how much of this strength is sustainable and how much may have, as you mentioned, may have been pulled through from future quarters?

Mark Malcolm

Yes, Itay, it's Mark. A little bit is pulled ahead from the second quarter. We had some commercial things we expected to get resolved in the second quarter that people got done late in the quarter, retroactive for the quarter, and that helped versus expectations. So the calendarization is good. It's at least as strong on the non-volume factors as we expected at the beginning of the year, and you could probably tell from my tone, I think it's the first time in 11 quarters I've ever used the term exceptional. It was good. It certainly gives me a lot more confidence for the year. The fixed costs coming in, yes, they came in about what we expected, maybe a little bit lighter if you were calendarizing, in part because a portion of those fixed costs were related to ramp-up for one of our Chinese customers. And we talked about that in our guidance and tied that to the revenue forecast and other things as well, and it is ramping up more slowly. And in fact, that particular revenue is running a little bit lighter than we anticipated. But you can see we've maintained overall by being able to shut down a lot of the costs, so it's not creating a problem overall. Itay, if I go back and you take a look at the 110 basis points improvement in margin, you've heard me talk about lumpiness. Last year's first quarter had some things like press breakdowns that we didn't incur this year. 9.8% on the type of revenue that we had, I think, is a reasonably fair portrayal of where we're running right now as a company. The comparison is better than we expected, in part because of volume and in part because the team hit things very well in the quarter. But give or take, 9.8% is pretty close to what we're talking about for the year, and I think you saw it in reality in the first quarter.

Itay Michaeli - Citigroup Inc, Research Division

Yes, absolutely. And then a question on cash flow as we start to think out into 2014. You're doing very well this year. You'll have another bump up from the refinancing benefits. You've got some backlog next year as well. Anything else we should think about in terms of the walk for free cash flow the next 12 to 18 months in terms of CapEx? And it looked like CapEx came in pretty low in the quarter, so maybe some updated thoughts there? Pension contributions, just wanted to maybe get a sense of the cash flow walk, if I'm thinking about the right way.

Mark Malcolm

I think you are thinking about it the right way, and that's what that slide was intended to say without getting totally ahead of ourselves for next year. As I sit here right now, we expect kind of a "normal" year for CapEx. A lot of it will depend as to how exactly does this year end and do we have something that affects us in the back half of next year that we can't see right now. But other things being equal, other things being equal, the big change year-over-year will be the additional interest savings. So directionally speaking, and again, I'm not providing any 2014 great guidance, but you've got that incremental. That was the message I was trying to convey, and you've got it exactly right.

Itay Michaeli - Citigroup Inc, Research Division

Perfect. And then just lastly, could you just update us on the backlog that's still about $100 million for next year? How's your booking activity? And then, as you start to generate some free cash flow in the second half of the year, do you feel like you have enough flexibility right now to pursue the new business that may be out there for you?

Mark Malcolm

Yes, a couple of parts to that. Next year, again, we don't try to update that a lot. There aren't programs we're winning now that are going to affect next year in any material way, given the lead times. So actual next year, that $100 million will refine a little bit up or a little bit down, depending on the volume outlook for the affected vehicles, which I think is the best time to talk about it when we get to the beginning part of next year, Itay. The -- for 2015, again, I've been loathe in the past, and I'll probably be somewhat less than totally forthcoming in terms of our builds for the forward-year order book in part because -- and I know you know it, but for everyone's benefit, it comes in lumpy. The orders have to be there and -- I mean, the quotes have to be there. So it's not the type of thing that's like a steady stream throughout the year. And I'm afraid if I ever give a number, people will annualized it, and it just can mislead where it is. What I will tell you is that we're net positive and making progress already towards 2015. And I'll ask everybody to just please be patient as we go through the year to let us get a little bit more result. In terms of the free cash flow generation, I think you've got an excellent point. There is the potential for additional growth then we'll see. That's why I'm personally so excited. Yes, it is great to have the earnings per share high. It is great to get this down so much, get this refinancing done quicker than we had anticipated. But the best thing it does is allow us to keep balancing further improvements in our balance sheet along with growth. And as you all know, who have been following us, we've had this kind of back and forth. And we've said they're both important to us, and we have to work. What we have now with the free cash flow generation coming through is more tools in the toolkit to be able to do it. It won't burn a hole in our pocket. We're not going to spend it just for the sake of spending it. But having that capability, if an opportunity comes around to be able to pursue it, other things being equal, is a good thing. It's a better outlook in terms of longer-term growth, talking to you this quarter than last quarter, because of that refinancing getting done.

Operator

Your next question comes from the line of Ryan Brinkman of JPMorgan.

Ryan Brinkman - JP Morgan Chase & Co, Research Division

Maybe my first question is just on the better quarter. I think you had earlier guided for 1Q EBITDA to be down year-over-year, but you beat that handily, up $6 million. And then on 2Q, I think you'd previously guided for sort of flat to minus 5 and planning something like 57.5 to 62.5 or so, whereas you're now guiding to more like 55 to 58. So my question is really was there anything about the stronger result in 1Q that may be represented some sort of pull-forward of performance in 2Q?

Mark Malcolm

A little bit in terms of the, again, the timing of some of the commercial settlements. We start the year also in the factories with -- we just don't start saying, "Come tomorrow and try to do better." We've got a plan. When we're guiding here, we've got a plan of things to execute in terms of cost savings, projects, and more of it done in the first quarter that some things we'd expect that wouldn't happen until the second quarter. And that's why I think it's a fair view when I tried to show the comparison now for where we are for the first half compared with our original outlook, which is up on everything. And did we have perfect line of sight in terms of the calendarization? I never have perfect line of sight in terms of the calendarization. But for the first half now, what we can see importantly, again, how we do it. I'm not coming off of IHS industry. We're looking at exact schedules for vehicles on which we're contented. And I'm able to factor in some of these pull-aheads that we had for the first quarter -- or from the second quarter into the first quarter in terms of both commercial and factory savings. That's what's in the guidance in that regard. And I'd ask -- suggest to anybody, when you take a look quarter-over-quarter, don't forget. And why I mentioned this is the quarter that, that Chinese vehicle goes away, which was $75 million of annual revenue, so call it $15 million to $20 million worth of quarterly sequential revenue that we lose, you make that adjustment, I think you'll see that the quarter-over-quarter revenue that we're on right now probably is, I think, better than you're seeing in terms of the IHS industry production sequentials. So it's just later in and more insight is what I'd say, Ryan.

Ryan Brinkman - JP Morgan Chase & Co, Research Division

That's great. The clarity is super helpful. Let me squeeze just one more in. It seems that the nature of the sale of Defense & Aerospace is quite different from the sale of the Korean operations, with TDA maybe being more about avoiding losses, whereas the Korean sale was more about actual real monetization of a more breakeven-type asset to accelerate deleverage. So as you look across your operations all around the world, are there other potential dispositions that fit either of those 2 molds? And then maybe, just second to that, if there are other potential dispositions that fit the Korean mold, how do you think about the deleveraging opportunity associated with that type of an asset sale versus potential equity issuance, which might begin to start becoming more of a relevant question with the strong trend in your share price including today?

Mark Malcolm

We'll then make sure -- hold on the line, Ryan, in case I miss some of those in my answer.

Ryan Brinkman - JP Morgan Chase & Co, Research Division

Sure, I will.

Mark Malcolm

TDA disposition, totally different than Korea. You're exactly right on that. That was an adjacency. It was a calculated risk reward that I made, with limited downside and potential tremendous upside. The world has changed dramatically for us to get enough scale in there at this point in time to fulfill the original vision. We've said all along, when we pursue the adjacencies, we could see a way, if they were to supplement and add a lot of value. But we wouldn't stay wedded to them, we would not bet the company. So that's an adjacency that has not worked and I think we've made the appropriate and decisive action to move on at this point in time. I wish that weren't true, but I'm responsible and accountable. We're not hanging on to things gone wrong in that regard. Now in terms of the rest of the globe and what can be there, I just -- just by a matter of policy, I'll never speculate on what we would do or not do just as we didn't speculate in advance on Korea. I think people just had to take us in terms of how we act. If there are opportunities that we think make sense overall for the business, we take them. Having said that, where we are right now in terms of our footprint provides a fit in terms of going forward. You can see the results that are pulling through. Korea was at below average, as we talked about, and it's 9.8%. And being in growth markets like Brazil and China, you start going over 20% to 25% of our revenue. It's a different, better footprint that we come from right now. I'm not saying what we would do or not do in terms of deleveraging and ways to get there. Same thing. I mean, we are opportunistic. We have been very clear and transparent from the time of the IPO that our longer-term leverage targets are 1.5x gross and 1x net. That hasn't changed. Generating free cash flow, which we're doing right now, is a great step. Growing EBITDA over time can work it. So I think we have a lot of ways that don't necessarily rely on either asset sales or issuing equity. But in the past, we have tried to balance as best we can, maintaining and improving the balance sheet, with growing the business and positioning ourselves. Now with 11 quarters under our belt, people can see how we act and behave. That was still the mission, still what we're going to do. And there are opportunities, both on the balance sheet and in terms of growth and growing EBITDA, and we're going to pursue both sides.

Operator

Your next question comes from the line of Aditya Oberoi of Goldman Sachs.

Aditya Oberoi - Goldman Sachs Group Inc., Research Division

I had a question on your revenue guidance. Like what was the key driver that made you like shave off the top end of your revenue guidance? Was it just the slower ramp in China or are there any other regions that are underperforming versus your initial expectations?

Mark Malcolm

Yes, we have pluses and minuses in there, Adi. I'll just remind everybody when we had the discussion a quarter ago, I said we kind of indicated one way or another, we're going to make sure we're not losing money in TDA. The first attempt there was in talking with customers to try to get enough revenue to have critical mass to pull through. Well, I just cut out TDA and give or take, $20 million, $25 million of TDA revenue that would've been in that guidance, that now will be gone. That alone would have pulled things down. If you take that out, you can arguably say that the automotive revenue has offset that on the way up. Now the other part, I said at the time, $2.1 billion would've been IHS's forecast, if I just took their volumes and multiplied it. And the upper end, was always our view that they will -- I just didn't believe how conservative they were on the mix of our vehicles. That gap between ourselves and IHS now is closer to $25 million. So that's a lot of moving parts in there, but this is actually slightly more bullish if anybody 9 months out thinks they can call that revenue within $25 million. The part in my mind I pay attention to is when the revenue comes, are we pulling it through? And I think we are. And I'm confident, if, in fact, volumes do turn out better overall, if Europe's second half is better than I think it might be, I'm very confident we will pull that through to the bottom line. But from a planning perspective where we are right now, to keep us focused on the non-volume factors, try to keep managing those as well as we are, that forecast is meant to be as balanced and appropriate from a planning point of view as we can make at this point in time.

Aditya Oberoi - Goldman Sachs Group Inc., Research Division

Got it. That's very helpful. One housekeeping question. On the debt that you guys redeemed, even though the -- you guys redeemed it at a premium to the par value, right? So what was the actual cash outflow related to that?

Mark Malcolm

Well, let me try, and Jim's trying to get what the number would be overall. Again, we financed it all. We didn't take any cash off the balance sheet to do it. And that -- you would see that in our -- on the pro forma slide that Jim put in, and that's the important part. We are maintaining our liquidity so that we are positioned either to use that liquidity however we want to going forward.

James C. Gouin

If you look at the entire $420 million less the $362 million, that was the incremental debt, if you will, we had to pick up for both the premium, the accrued interest and fees.

Operator

From the line of David Lim of Wells Fargo Securities.

David H. Lim - Wells Fargo Securities, LLC, Research Division

Just wanted to ask about on the backlog, not exactly specifically on the backlog itself, but on possible new business wins. Are you seeing more of that coming from North America or Europe or Asia? I just wanted to see if you could provide some color on that, please.

Mark Malcolm

Yes, the color is it's in all the regions right now. Probably the region right now where we don't have a lot of incremental business to quote on is in Brazil, and that's only because we've got so much coming down the pike here over the next couple years for our customers, we're just in kind of a lull for their product cycle. But we've already got considerable growth booked there, but there are opportunities basically across the board right now.

David H. Lim - Wells Fargo Securities, LLC, Research Division

Can you sort of characterize which geographies are probably doing better than others?

Mark Malcolm

Well, you're still asking about in terms of...

David H. Lim - Wells Fargo Securities, LLC, Research Division

Business wins.

Mark Malcolm

Yes, business wins. No -- yes, I think it's -- I'll just remind here, the last number we gave, which was for next year, is $100 million. At that time we said it is, without me getting more precise than it deserves, it was about equally split between our 4 regions. That's an important part for us to maintain that kind of geographic spread as we go things. So some of that is how we manage it, but I think it's indicative of the fact that the OEMs are giving us an opportunity to win business in all the regions we do business.

David H. Lim - Wells Fargo Securities, LLC, Research Division

And finally, are you seeing any kind of program delays on your current customers, as in like new launches over the next couple years?

Mark Malcolm

Few months here, few months there. I'm not seeing it for -- it doesn't feel to me like it's for economic reasons. It's the typical type of launch-related issues that people want to make sure they get it right. If there's an exception there it might be China, where some of our customers, as I've mentioned, their sales haven't ramped up quite as they have anticipated. So some of that probably has them kind of managing the timing as it goes.

Operator

[Operator Instructions] Your next question comes from the line of David Leiker of Baird.

David Leiker - Robert W. Baird & Co. Incorporated, Research Division

Mark, just looking at the guidance, and I want to make sure I'm understanding everything correctly, if you're going to be excluding the operating losses from TDA but you're keeping the guidance x the interest savings unchanged, does that mean the core results for basically the auto business have moved a little bit lower into the remaining 3 quarters?

Mark Malcolm

I don't think so, Joe (sic) [David] in fact, they haven't. Really, our guidance say it one way or another. And I think I may have been pretty blunt and used the term almost like this, so that one way or another, TDA is going to be breakeven. I would've preferred to do it by getting the revenue up higher, and that's what was in our guidance. But I assumed 0 in the original guidance, and you're getting 0 now.

David Leiker - Robert W. Baird & Co. Incorporated, Research Division

Okay. Okay, that's helpful. And then just maybe talking about the revenue trends this quarter, given your exposure to Ford and Nissan in North America, both of who had pretty good production during the quarter, I would've actually thought your America revenue would've been up more and then in Europe, given your exposure to all your customers down more. So is maybe the read there that more of your new business that is launching this year is in a region like Europe and that kind of helps you weather the storm a little bit more?

Mark Malcolm

And again, I can't see inside your model, Joe (sic) [David]. My guess is the differences aren't big. I'll tell you that the reais, for example, devalued on a year-over-year basis. That probably cost us, give or take, $5 million worth of revenue in the Americas that you wouldn't have had in what you were looking at. Nissan, again, the reminder for Nissan is we're on their frame vehicles almost exclusively for our Nissan revenue. So the Nissan cars, I think, what you've seen have done very well. So a Nissan read across in total doesn't necessarily translate. It does not translate to Tower. You're right, Ford has been good. Chrysler, our Chrysler vehicles have been good as well. And in Europe, we were slightly better than the numbers that IHS is showing for the industry now, but just a little bit better.

David Leiker - Robert W. Baird & Co. Incorporated, Research Division

Okay, great. And then my last one, and maybe this is one for Jim, with the free cash flow, would you consider taking out any of the foreign debts? Or is that maybe not the best way to use it right now and you may be pursuing some more organic investments than targeting the capital structure?

James C. Gouin

I think Mark has said it earlier. We're opportunistic around the board. And when it comes to the leverage of the company, and I think we'll look at it the same way. We do have areas of other debt that's other foreign debt that is high cost. And we'll assess that as we go forward when the cash flow comes in.

Operator

There are currently no other questions in queue.

Derek Fiebig

Okay. Thanks, Beverly. Thank you, everyone, who's joined us on the call. I'll be around the rest of the day to answer any questions you might have. Thanks.

Operator

This concludes today's conference call. You may now disconnect.

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