SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2005

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

For the transition period from                      to                     

TOWER AUTOMOTIVE, INC.

(Exact name of Registrant as specified in its charter)

Delaware		41-1746238
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

27175 Haggerty Road		48377
Novi, Michigan		(Zip Code)
(Address of principal executive offices)

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes  þ          No  o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes  o          No  þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o          No  þ

The number of shares outstanding of the Registrant’s Common Stock, par value $.01 per share, at December 30, 2005, was 58,528,801 shares.

 

 

Tower Automotive, Inc.
Form 10-Q

Table of Contents

PART I Financial Information
		Item 1.		Financial Statements:
				Condensed Consolidated Balance Sheets (unaudited) at September 30, 2005 and December 31, 2004
				Condensed Consolidated Statements of Operations (unaudited) for the Three Months and Nine Months Ended September 30, 2005 and 2004
				Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2005 and 2004
				Notes to Condensed Consolidated Financial Statements (unaudited)
		Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
		Item 3.		Quantitative and Qualitative Disclosures About Market Risk See “Market Risk” section of Part I, Item 2
		Item 4.		Controls and Procedures
PART II Other Information
		Item 1.		Legal Proceedings
		Item 6.		Exhibits
Signatures
Fifth Amendment to Revolving Credit, Term Loan and Guaranty Agreement, Dated October 3, 2005
Certification of the Chief Executive Officer Pursuant to Section 302
Certification of the Chief Financial Officer Pursuant to Section 302
Certification of the Chief Executive Officer Pursuant to Section 906
Certification of the Chief Financial Officer Pursuant to Section 906

PART 1 — FINANCIAL INFORMATION

ITEM 1. Financial Statements.

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		September 30, 2005				December 31, 2004
ASSETS
Current Assets:
Cash and cash equivalents		$	45,517			$	149,101
Accounts receivable			441,588				346,031
Inventories			139,112				159,034
Prepaid tooling and other			149,475				124,938
Total current assets			775,692				779,104
Property, plant and equipment, net			1,047,852				1,205,640
Investments in joint ventures			222,282				227,740
Goodwill			155,388				174,563
Other assets, net			119,860				173,727
Total assets		$	2,321,074			$	2,560,774
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities Not Subject to Compromise:
Current maturities of long-term debt and capital lease obligations		$	142,081			$	133,156
Accounts payable			322,198				638,118
Accrued liabilities			247,338				286,262
Total current liabilities			711,617				1,057,536
Liabilities subject to compromise			1,134,974				—
Non-Current Liabilities Not Subject to Compromise:
Long-term debt, net of current maturities			88,964				1,239,562
Debtor-in-possession borrowings			553,764				—
Convertible senior debentures			—				121,723
Obligations under capital leases, net of current maturities			30,048				36,823
Other noncurrent liabilities			242,612				226,062
Total noncurrent liabilities			915,388				1,624,170
Stockholders’ deficit:
Preferred Stock			—				—
Common stock			666				666
Additional paid-in-capital			681,264				681,084
Retained deficit			(1,024,761	)			(715,754	)
Deferred compensation plans			(7,146	)			(7,636	)
Accumulated other comprehensive loss			(41,604	)			(29,968	)
Treasury stock			(49,324	)			(49,324	)
Total stockholders’ deficit			(440,905	)			(120,932	)
Total liabilities and stockholders’ deficit		$	2,321,074			$	2,560,774

The accompanying notes are an integral part of these condensed consolidated financial statements.

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Revenues		$	712,664			$	722,334			$	2,551,558			$	2,286,783
Cost of sales			688,602				689,950				2,383,316				2,125,040
Gross profit			24,062				32,384				168,242				161,743
Selling, general and administrative expenses			36,200				33,503				118,828				102,798
Restructuring and asset impairment charges, net			37,693				2,020				108,877				(3,283	)
Operating income (loss)			(49,831	)			(3,139	)			(59,463	)			62,228
Interest expense, net (Contractual interest of $39,644 and $136,370 in 2005)			21,510				36,061				87,523				105,409
Chapter 11 and related reorganization items			6,615				—				151,524				—
Unrealized gain on derivative			—				(5,710	)			—				(3,860	)
Loss before provision for income taxes, equity in earnings of joint ventures and minority interest			(77,956	)			(33,490	)			(298,510	)			(39,321	)
Provision (benefit) for income taxes			1,522				(12,700	)			17,344				(14,418	)
Loss before equity in earnings of joint ventures, minority interest and gain on sale of joint venture			(79,478	)			(20,790	)			(315,854	)			(24,903	)
Equity in earnings of joint ventures, net of tax			4,316				2,124				10,801				9,093
Minority interest, net of tax			(1,394	)			(1,552	)			(3,951	)			(4,779	)
Gain on sale of joint venture, net of tax			—				—				—				9,732
Net loss		$	(76,556	)		$	(20,218	)		$	(309,004	)		$	(10,857	)
Basic and diluted loss per share		$	(1.31	)		$	(0.35	)		$	(5.27	)		$	(0.19	)
Weighted average basic and diluted shares outstanding			58,643				58,293				58,646				57,901

     The accompanying notes are an integral part of these condensed consolidated financial statements.

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Nine Months Ended September 30,
		2005				2004
OPERATING ACTIVITIES:						(as corrected)
Net loss		$	(309,004	)		$	(10,857	)
Adjustments required to reconcile net loss to net cash provided by (used in) operating activities:
Chapter 11 and related reorganization expenses, net			133,171				—
Non-cash restructuring and impairment			101,632				(6,276	)
Depreciation			135,788				114,354
Deferred income tax			12,863				(25,199	)
Gain on sale of joint venture investment			—				(9,732	)
Equity in earnings of joint ventures, net			(10,801	)			(9,093	)
Unrealized gain on derivative			—				(3,860	)
Change in working capital and other operating items			(189,450	)			(38,298	)
Net cash provided by (used in) operating activities			(125,801	)			11,039
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant and equipment			(104,540	)			(147,580	)
Proceeds from sale of joint venture investment			—				51,700
Acquisitions			—				(21,299	)
Net cash used in investing activities			(104,540	)			(117,179	)
FINANCING ACTIVITIES:
Proceeds from borrowings			36,702				580,037
Repayments of borrowings			(465,583	)			(489,891	)
Proceeds from DIP credit facility			1,054,285				—
Repayments of DIP credit facility			(498,647	)			—
Net proceeds from issuance of stock			—				75
Net cash provided by (used in) financing activities			126,757				90,221
NET CHANGE IN CASH AND CASH EQUIVALENTS		$	(103,584	)		$	(15,919	)
Cash and cash equivalents, beginning of period		$	149,101			$	160,899
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	45,517			$	144,980
Supplemental Cash Flow Information:
Interest paid, net of amounts capitalized		$	47,081			$	92,329
Income taxes paid (refunded)		$	(291	)		$	(1,174	)
Net (decrease) increase in liabilities for purchases of property, plant and equipment			(27,425	)			29,268

The accompanying notes are an integral part of these condensed consolidated financial statements.

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by Tower Automotive, Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in the condensed consolidated financial statements includes primarily normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Although the Company believes that the disclosures are adequate to make the information presented not misleading, these condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto for the year ended December 31, 2004.

As indicated in Note 2, Tower Automotive, Inc. and 25 of its U.S. Subsidiaries (collectively the “Debtors”) are operating pursuant to Chapter 11 under the Bankruptcy Code and continuation of the Company as a going concern is contingent upon, among other things, the Debtors’ ability: (i) to comply with the terms and conditions of the Debtor-in-Possession financing agreement described in Note 4; (ii) to obtain confirmation of a plan of reorganization under the Bankruptcy Code; (iii) to undertake certain restructuring actions relative to the Company’s operations in North America; (iv) to reduce unsustainable debt and other liabilities and simplify the Company’s complex and restrictive capital structure through the bankruptcy process; (v) to return to profitability; (vi) to generate sufficient cash flow from operations and; (vii) to obtain financing sources to meet the Company’s future obligations. These matters create uncertainty regarding the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of liabilities that might result from the outcome of these uncertainties. In addition, a plan of reorganization could materially change amounts reported in the Company’s consolidated financial statements, which do not give effect to any adjustments of the carrying value of assets and liabilities that are necessary as a consequence of reorganization under Chapter 11.

Subsequent to the bankruptcy filing date, the provisions in Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (“SOP 90-7”) applies to the Debtors’ financial statements while the Debtors operate under the provisions of Chapter 11. SOP 90-7 does not change the application of generally accepted accounting principles in the preparation of financial statements. However, SOP 90-7 does require that the financial statements, for periods including and subsequent to the filing of the Chapter 11 petition, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

Revenues and operating results for the three and nine months ended September 30, 2005 are not necessarily indicative of the results to be expected for the full year or any future period.

Cash Flow Statement Presentation Correction

On December 22, 2005, based upon a review of management’s recommendation, the Audit Committee of the Board of Directors of the Company concluded that the Company must correct the presentation of its Consolidated Statements of Cash Flows for certain prior periods. During those periods, the Company was reporting capital expenditures in its consolidated statements of cash flows on an accrual basis rather than on a cash basis. Accordingly, the Company previously reported capital expenditures in the consolidated statements of cash flows in the period in which the Company acquired legal title to the related property, plant or equipment rather than when the Company actually paid the vendor for such property, plant or equipment. The impact of correcting this presentation in the consolidated statements of cash flows from an accrual basis to a cash basis decreases or increases cash provided by operations with corresponding decreases or increases in cash utilized in investing activities. The presentation of the Consolidating Statement of Cash Flows for the nine months ended September 30, 2004 contained in Note 17 has also been corrected.

This correction does not affect the results of operations, financial position or net changes in cash and cash equivalents for any of those periods.

A summary of the impact of this correction is as follows (in thousands):

		Six Months Ended								Three Months Ended
		June 30, 2005								March 31, 2005
		As				As				As				As
		reported				corrected				reported				corrected
Net cash provided by (used in) operating activities		$	(149,724	)		$	(116,169	)		$	(176,855	)		$	(155,664	)
Net cash used in investing activities			(51,537	)			(85,092	)			(31,977	)			(53,168	)
Net decrease in liabilities for purchases of property, plant and equipment			—				(33,555	)			—				(21,191	)

		Nine Months Ended								Six Months Ended
		September 30, 2004								June 30, 2004
		As				As				As				As
		reported				corrected				reported				corrected
Net cash provided by (used in) operating activities		$	40,307			$	11,039			$	30,449			$	1,202
Net cash used in investing activities			(146,447	)			(117,179	)			(100,626	)			(71,379	)
Net increase in liabilities for purchases of property, plant and equipment			—				29,268				—				29,247

		Three Months Ended								Year Ended
			March 31, 2004								December 31, 2004
		As				As				As				As
		reported				corrected				reported				corrected
Net cash provided by (used in) operating activities		$	(62,884	)		$	(71,902	)		$	74,760			$	51,710
Net cash used in investing activities			(19,890	)			(10,872	)			(180,525	)			(157,475	)
Net increase in liabilities for purchases of property, plant and equipment			—				9,018				—				23,050

2. Chapter 11 Reorganization Proceedings

On February 2, 2005 (the “Petition Date”), the Debtors filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (“Bankruptcy Code”) in the United States Bankruptcy Court Southern District of New York (“Bankruptcy Court”). The cases were consolidated for administrative purposes. An extensive liquidity deficiency in early 2005 and a significant amount of indebtedness, incurred through internal growth and acquisition activity, made the filing necessary. The Debtors are operating their businesses as debtors-in-possession (“DIP”) pursuant to the Bankruptcy Code. An official committee of unsecured creditors has been appointed.

Customer pricing pressures, North American automotive production cuts, significantly higher material costs (primarily steel) and the termination of accelerated payment programs of certain customers adversely affected the Debtors’ operations and financial condition.

Pursuant to the provisions of the Bankruptcy Code, all actions to collect upon any of the Debtors’ liabilities as of the petition date or to enforce pre-petition date contractual obligations are automatically stayed. As a general rule, absent approval from the Bankruptcy Court, the Debtors are prohibited from paying pre-petition obligations. In addition, as a consequence of the Chapter 11 filing, pending litigation against the Debtors is generally stayed, and no party may take any action to collect pre-petition claims except pursuant to an order of the Bankruptcy Court. However, the Debtors have requested that the Bankruptcy Court approve certain pre-petition liabilities, such as employee wages and benefits and certain other pre-petition obligations. Since the filing, all orders sufficient to enable the Debtors to conduct normal business activities, including the approval of the Debtors’ DIP financing, have been entered by the Bankruptcy Court. See Note 4 for a description of the DIP financing. While the Debtors are subject to Chapter 11, transactions of the Debtors outside the ordinary course of business will require the prior approval of the Bankruptcy Court.

The objectives of the Chapter 11 filing were to protect and preserve the value of assets and to restructure and improve the Debtors’ financial and operational affairs in order to return to profitability. While the Company believes it will be able to significantly reduce the Debtors’ unsustainable liabilities and simplify its complex and restrictive capital structure through the bankruptcy process, there can be no certainty that it will be successful in doing so.

The Debtors intend to file a plan of reorganization with the Bankruptcy Court. The Company is unable to estimate what recovery such a plan of reorganization will provide holders of the Debtors’ unsecured pre-petition debt. While the Debtors filed for Chapter 11 to gain relief from significant pre-petition debt levels and to address needed operational restructuring of the business, the extent to which such relief will be achieved is uncertain at this time.

Financial Statement Classification

The majority of the Debtors’ pre-petition debt is in default and is classified as “Liabilities Subject to Compromise” in the accompanying Consolidated Balance Sheet at September 30, 2005 (See Note 4).

In addition to the Debtors’ pre-petition debt which is in default, liabilities subject to compromise reflects the Debtors’ other liabilities incurred prior to the commencement of the bankruptcy proceedings. These amounts represent the Company’s estimate of known or potential pre-petition claims to be resolved in connection with the bankruptcy proceedings. Such claims remain subject to future adjustments. Future adjustments may result from: (i) negotiations; (ii) actions of the Bankruptcy Court; (iii) further developments with respect to disputed claims; (iv) rejection of executory contracts and leases; (v) the determination of value of any collateral securing claims; (vi) proofs of claims; or (vii) other events. Payment terms for these claims will be established in connection with a plan of reorganization.

Liabilities subject to compromise consist of the following (in thousands):

		September
		30, 2005
Debt:
5.75% Convertible senior debentures		$	124,999
6.75% Due to Tower Automotive Capital Trust			258,750
9.25% Senior Euro notes			180,435
12% Senior notes			258,000
Total debt			822,184
Pre-petition accounts payable and accruals			189,525
Accrued interest on debt subject to compromise			21,343
Executory Contracts			101,922
Consolidated liabilities subject to compromise			1,134,974
Inter-company payable to non-Debtor subsidiaries			16,363
Total liabilities subject to compromise		$	1,151,337

The Debtors have incurred certain professional and other expenses directly associated with the bankruptcy proceedings. In addition, the Debtors have made certain provisions to adjust the carrying value of certain pre-petition liabilities to reflect the Debtors’ estimate of allowed claims. Such costs are classified as Chapter 11 and related reorganization items in the accompanying Statements of Operations for the three and nine months ended September 30, 2005 and consist of the following (in thousands):

		Three Months				Nine Months
		Ended				Ended
		September 30,				September 30,
		2005				2005
Professional fees directly related to the filing		$	4,547			$	24,511
Key employee retention costs			1,675				3,368
Write off of deferred financing costs			—				29,135
Estimated executory contract rejection damages			393				94,313
Other expenses directly attributable to the Company’s reorganization			—				197
Total		$	6,615			$	151,524

Pursuant to the Bankruptcy Code, the Debtors have filed schedules with the Bankruptcy Court setting forth the assets and liabilities of the Debtors as of the Petition Date. The Debtors have issued proof of claim forms to current and prior employees, known creditors, vendors and other parties with whom the Debtors have previously conducted business. To the extent the recipients disagree with the claims quantified on these forms, the recipient may file discrepancies with the Bankruptcy Court. Differences between the amounts recorded by the Debtors and claims filed by creditors will be investigated and resolved as part of the bankruptcy proceedings. The Bankruptcy Court ultimately will determine liability amounts that will be allowed for these claims. The Company is in the process of receiving, cataloging and reconciling claims received in conjunction with this process. Because the Debtors have not received all claims and have not completed the evaluation of the claims received in connection with this process, the ultimate number and allowed amount of such claims is not presently known. The resolution of such claims could result in a material adjustment to the Company’s financial statements.

Debtors’ Financial Statements

Presented below are the condensed consolidated financial statements of the Debtors. These statements reflect the financial position, results of operations and cash flows of the combined Debtors, including certain transactions and resulting assets and liabilities between the Debtors and non-Debtor subsidiaries of the Company, which are eliminated in the Company’s consolidated financial statements.

Debtors’ Condensed Consolidated Balance Sheet

(Amounts in thousands — unaudited)

		September 30,
		2005
ASSETS
Current Assets:
Cash and cash equivalents		$	1,175
Accounts receivable			222,619
Inventories			70,594
Prepaid tooling and other			37,670
Total current assets			332,058
Property, plant and equipment, net			552,180
Investments in non-Debtor subsidiaries			408,560
Inter-company receivables			413,465
Other assets, net			67,203
Total assets		$	1,773,466
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities Not Subject to Compromise:
Current maturities of long-term debt and capital lease obligations		$	14,257
Accounts payable			104,050
Accrued liabilities			153,647
Total current liabilities			271,954
Liabilities subject to compromise			1,151,337
Non-Current Liabilities Not Subject to Compromise:
Long-term debt, net of current maturities			43,771
DIP borrowings			553,764
Other noncurrent liabilities			193,545
Total noncurrent liabilities			791,080
Total stockholders’ deficit			(440,905	)
Total liabilities and stockholders’ deficit		$	1,773,466

Debtors’ Condensed Consolidated Statements of Operations

Debtors-in- Possession

(Amounts in thousands — unaudited)

		Three Months				Nine Months
		Ended				Ended
		September 30,				September 30,
		2005				2005
Revenues		$	418,485			$	1,553,624
Cost of sales			412,218				1,476,718
Gross profit			6,267				76,906
Selling, general and administrative expenses			22,420				76,479
Restructuring and asset impairment charges, net			37,453				106,886
Chapter 11 and related reorganization items			6,615				151,524
Operating loss			(60,221	)			(257,983	)
Interest expense, net			18,745				78,706
Inter-company interest income			(5,411	)			(17,009	)
Loss before provision for income taxes, equity in earnings of joint ventures and equity in earnings from non-Debtor subsidiaries			(73,555	)			(319,680	)
Provision (benefit) for income taxes			(2,806	)			5,409
Loss before equity in earnings of joint ventures and equity in earnings of non-Debtor subsidiaries			(70,749	)			(325,089	)
Equity in earnings of joint ventures, net of tax			48				48
Equity in earnings (loss) of non-Debtor subsidiaries			(5,855	)			16,037
Net loss		$	(76,556	)		$	(309,004	)

Debtors’ Condensed Consolidated Statements of Cash Flows

Debtors- in-Possession

(Amounts in thousands — unaudited)

		Nine Months
		Ended
		September 30,
		2005
OPERATING ACTIVITIES:		$	(309,004	)
Net loss
Adjustments required to reconcile net loss to net cash provided by (used in) operating activities:
Chapter 11 and related reorganization items, net			133,171
Non-cash restructuring and impairment			100,065
Depreciation			81,522
Equity in earnings of non-Debtor subsidiaries			(16,037	)
Equity in earnings of joint ventures, net			(48	)
Change in working capital and other operating items			(186,100	)
Net cash used in operating activities			(196,431	)
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant and equipment			(34,743	)
Net cash used for investing activities			(34,743	)
FINANCING ACTIVITIES:
Repayments of pre-petition borrowings			(430,370	)
Proceeds from DIP borrowings			1,054,285
Repayments of DIP borrowings			(498,647	)
Net cash provided by financing activities			125,268
NET CHANGE IN CASH AND CASH EQUIVALENTS			(105,906	)
Cash and cash equivalents, beginning of period			107,081
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	1,175

3. Inventories

Inventories are valued at the lower of first-in-first-out (“FIFO”) cost or market, and consist of the following (in thousands):

		September 30,				December 31,
		2005				2004
Raw materials		$	72,284			$	91,220
Work in process			31,106				26,820
Finished goods			35,722				40,994
		$	139,112			$	159,034

4. Debt

Chapter 11 Impact

Under the terms of the Company’s pre-petition credit agreement, the Chapter 11 filing created an event of default. Upon the Chapter 11 filing, the lenders’ obligation to loan additional money to the Company terminated, the outstanding principal of all obligations became immediately due and payable and the Debtors were required to immediately deposit funds into a collateral account to cover the outstanding amounts under the letters of credit issued pursuant to the Company’s pre-petition credit agreement (“Credit Agreement”). Outstanding obligations under the Credit Agreement were $425 million, which was refinanced through the DIP financing described below.

In addition, the Chapter 11 filing caused a default on the Convertible Debentures, Senior Notes, Senior Euro Notes and the amount due to the Tower Automotive Capital Trust (see Note 2).

Pursuant to SOP 90-7, the Company ceased recognizing interest expense on the Convertible Debentures, Senior Notes, Senior Euro Notes and the amount due to the Tower Automotive Capital Trust effective February 2, 2005. Contractual interest not accrued or paid during the period from February 2, 2005 through September 30, 2005 is $48.8 million.

The debt of the Company’s foreign subsidiaries is not subject to compromise in the bankruptcy proceedings as the Company’s operating foreign subsidiaries are not included in the Chapter 11 filing.

DIP Financing

In February 2005, the Bankruptcy Court approved a Revolving Credit, Term Loan and Guaranty Agreement, as amended, (“DIP Agreement”) between the Company and a national banking institution as agent for the lenders (“Lenders”) and each of the Lenders.

The DIP Agreement provides for a $725 million commitment of debtor-in-possession financing comprised of a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $300 million and a term loan in the aggregate principal amount of $425 million. The proceeds of the term loan have been used to refinance the Debtors’ obligations of amounts outstanding under the Credit Agreement. The proceeds of the revolving credit loans shall be used to fund the working capital requirements of the Debtors during the Chapter 11 proceedings. Obligations under the DIP Agreement are secured by a lien on the assets of the Debtors (such lien shall have first priority with respect to a significant portion of the Debtors’ assets) and by a super-priority administrative expense claim in each of the bankruptcy cases.

Advances under the DIP Agreement bear interest at a fixed rate per annum equal to (x) the greatest (as of the date the advance is made) of the prime rate, the Base CD Rate (as defined in the DIP Agreement) plus 1%, or the Federal Funds Effective Rate (as defined in the DIP Agreement) plus 0.5%, plus (y) 1.75%, in the case of a loan under the revolving facility, or 2.25% in the case of the term loan. Alternatively, the Debtors may request that advances be made at a variable rate equal to (x) the Adjusted LIBO Rate (as defined in the DIP Agreement), for a one-month, three-month, six-month, or nine-month period, at the election of the Debtors, plus (y) 2.75%, in the case of a loan under the revolving facility, or 3.25% in the case of the term loan. In addition, the DIP Agreement obligates the Debtors to pay certain fees to the Lenders as described in the DIP Agreement. At September 30, 2005, $170 million was available for borrowing under the revolving credit and letter of credit facility. For the period of February 2, 2005 through September 30, 2005, the weighted average interest rate associated with borrowings pertaining to the DIP Agreement was 6.88%. DIP commitment fees totaled $10.9 million during the period of February 2, 2005 through September 30, 2005. The DIP Agreement matures on February 2, 2007; however, the Debtors are obligated to repay all borrowings made pursuant to the DIP Agreement upon substantial consummation of a plan of reorganization of the Debtors that is confirmed pursuant to an order of the Bankruptcy Court.

The DIP Agreement contains various representations, warranties and covenants by the Debtors that are customary for transactions of this nature, including (without limitation) reporting requirements and maintenance of financial covenants.

The Debtors’ obligations under the DIP Agreement may be accelerated following certain events of default, including (without limitation) any breach by the Debtors of any of the representations, warranties, or covenants made in the DIP Agreement or the conversion of any of the bankruptcy cases to a case under Chapter 7 of the Bankruptcy Code or the appointment of a trustee pursuant to Chapter 7 of the Bankruptcy Code.

Back-Stop Agreement

The Debtors have entered into a Back-Stop Agreement with a finance company (“Finance Company”). Under the Back-Stop Agreement, the Finance Company agreed to take by assignment any second lien holder’s rights and obligations as a second lien holder in association with second lien letters of credit under the Credit Agreement in an aggregate amount not to exceed $155 million.

Draws were made against the second lien letters of credit of $15.8 million as of September 30, 2005. In October 2005, additional draws of $25.2 million were made against the second lien letters of credit.

Debt Classified as Not Subject to Compromise

The Company’s industrial development revenue bonds and the debt associated with the Company’s variable interest entity of $43.8 million and $14.2 million, respectively, are classified as liabilities not subject to compromise on the Company’s Condensed Consolidated Balance Sheet at September 30, 2005. The Company’s foreign subsidiary indebtedness of $203.0 million at September 30, 2005, is not subject to compromise as the Company’s operating foreign subsidiaries are not included in the bankruptcy proceedings.

Interest Rate Swap Contracts

In February 2005, the Company’s interest rate swap contracts were terminated. The Company had previously de-designated one of the contracts as a cash flow hedge. Amounts previously deferred in other comprehensive income were deferred over the initial term of the contract, as the Company expected that the cash flows originally hedged would continue to occur. As of September 30, 2005, no amounts remain deferred in other comprehensive loss as the remaining term of the contract expired during the quarter ended September 30, 2005.

Unrealized Gain on Derivative

The Company’s pre-petition Convertible Debentures contain an embedded conversion option. The initial value associated with the embedded conversion option was $12.6 million and was being marked to market through the Company’s Statement of Operations during the period of May 24, 2004 through September 19, 2004. During the three and nine months ended September 30, 2004, the Company recognized income of approximately $5.7 million and $3.9 million, respectively, in relation to the change in fair value of the embedded conversion option, which is included in Unrealized Gain on Derivative in the accompanying Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2004. As of September 20, 2004, mark-to-market adjustments were no longer required, as the Company’s stockholders approved the issuance of the Convertible Debentures and the common stock issuable upon conversion or repurchase of the Convertible Debentures.

5. Accounts Receivable Securitization Facility

On December 30, 2004, the Company, a qualifying special purpose entity (“QSPE”) and a third-party lender entered into a $50.0 million accounts receivable securitization facility agreement (the “Facility”). Pursuant to the terms of the Facility, the Company unconditionally sold certain accounts receivable to the QSPE on an ongoing basis. The QSPE funded its purchases of the accounts receivable through borrowings from the third-party lender. A security interest with respect to such accounts receivable was granted to the third-party lender. In addition, the Company was allowed, from time to time, to contribute capital to the QSPE in the form of contributed receivables or cash. The Facility allowed the Company to earn fees for performing collection and administrative functions associated with the Facility. The Facility had an

expiration date of the earlier of 36 months subsequent to December 30, 2004 or the occurrence of a termination event as defined in the agreement. The accounts receivable sold were removed from the consolidated balance sheet of the Company as these receivables and the QSPE met the applicable criteria of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” The Facility became unavailable on February 2, 2005, the date on which the Debtors filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.

During the nine months ended September 30, 2005, the Company received $74.0 million in cash proceeds from receivables sold to the QSPE and reinvested $78.1 million in cash collections in revolving securitizations with the QSPE. The Company recognized interest expense of $0.8 million associated with the Facility, which represents the discount on the sale of the receivables to the QSPE.

6. Income Taxes

During the three and nine months ended September 30, 2005, the Company recognized income tax expense of $1.5 million and $17.3 million, respectively, in relation to pre-tax losses of $78.0 million and $298.5 million, respectively. These income tax provisions resulted primarily from foreign income taxes and state taxes. Full valuation allowances were provided for U.S. Federal income tax benefits generated during the 2005 periods.

As a result of changes in non-U.S. income tax regulations, the Company made an election under the U.S. Internal Revenue Code to exclude one of its non-U.S. subsidiaries from its U.S. Federal income tax return in the third quarter of 2005. This non-U.S. subsidiary had previously been included in the Company’s U.S. Federal income tax return. As a result of this election, taxable income of approximately $60 million was generated for U.S. Federal income tax purposes, the tax impact of which has been entirely offset through the utilization of the Company’s existing U.S. Federal net operating losses and corresponding adjustment to its valuation allowance.

7. Stockholders’ Deficit

Earnings (Loss) Per Share

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. The effects of common stock equivalents have not been included in diluted loss per share for all periods presented, as the effect would be anti-dilutive. Common stock equivalents totaled 96.5 million shares, 96.6 million shares, 9.1 million shares and 14.2 million shares for the three and nine months ended September 30, 2005 and the three and nine months ended September 30, 2004, respectively.

Stock-Based Compensation

The Company accounts for stock options under the provisions of Accounting Principles Board Opinion (“APB”) No. 25, under which no compensation expense is recognized when the stock options are granted to colleagues and directors with an exercise price equal to fair market value of the stock as of the grant date. The grant date represents the measurement date of the stock options. The Company may also grant stock options to outside consultants. The fair value of options granted to outside consultants is expensed over the period services are rendered based on the Black-Scholes valuation model.

The Company has three stock option plans and three stock purchase plans: the 1994 Key Employee Stock Option Plan; the Long Term Incentive Plan; and the Independent Director Stock Option Plan; and, the Employee Stock Purchase Plan; the Key Leadership Deferred Income Stock Purchase Plan; and the Director Deferred Income Stock Purchase Plan, respectively. Had compensation expense for these plans been determined as required under SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” the Company’s pro forma net loss and pro forma net loss per share would have been as follows (in thousands, except per share data):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Net loss as reported		$	(76,556	)		$	(20,218	)		$	(309,004	)		$	(10,857	)
Add: Stock-based compensation included in reported net loss, net of related tax effects			106				65				617				637
Deduct: Stock-based compensation determined under fair value based method for all awards, net of related tax effects			(1,204	)			(432	)			(550	)			(1,568	)
Pro Forma net loss		$	(77,654	)		$	(20,585	)		$	(308,937	)		$	(11,788	)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Basic loss per share as reported		$	(1.31	)		$	(0.35	)		$	(5.27	)		$	(0.19	)
Pro Forma			(1.32	)			(0.35	)			(5.27	)			(0.20	)
Diluted loss per share as reported		$	(1.31	)		$	(0.35	)		$	(5.27	)		$	(0.19	)
Pro Forma			(1.32	)			(0.35	)			(5.27	)			(0.20	)

As of September 20, 2005, the Company fully vested all outstanding stock options. The Company has recognized no expense in relation to these options in its Statements of Operations in accordance with APB 25.

The pro forma net loss for the nine months ended September 30, 2005 is less than the reported net loss for that period as a result of the recognition of forfeitures exceeding fair value stock-based compensation expense for the first and second quarters of 2005.

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 3.89% in the 2005 periods and a risk free interest rate of 4.33% and 3.92% in the 2004 periods; expected life of seven years for the 2005 and 2004 periods; expected volatility of 61.21% in the 2005 periods and 61.21% and 58.00% in the 2004 periods; and no expected dividends in both the 2005 and 2004 periods.

8. Acquisitions

Effective February 27, 2004, the Company acquired the remaining 34% ownership interest in Seojin Industrial Company Limited (“Seojin”) for consideration of approximately $21.3 million. Such consideration consisted of cash of $21.3 million offset by the repayment of $11.0 million of loans to

Seojin’s minority shareholder, resulting in a net cash outflow of $10.3 million. Seojin is a supplier of frames, modules and structural components to the Korean automotive industry, primarily Hyundai/ Kia. The Company financed the acquisition through Korean debt facilities, which are not covered under the Company’s credit facilities described in Note 4. The acquisition was accounted for under the purchase method of accounting and, accordingly, the assets acquired and liabilities assumed have been recorded at fair value at the date of acquisition.

9. Investments in Joint Ventures

In March 2004, the Company sold its 30.76% ownership interest in Yorozu Corporation (“Yorozu”) to Yorozu, through a share buy-back transaction on the Tokyo Stock Exchange. Yorozu is a supplier of suspension modules and structural parts to the Asian and North American automotive markets. The Company received proceeds of approximately $51.7 million through this sale. The consideration for the sale was based on the prevailing price of Yorozu, as traded on the Tokyo Stock Exchange. The Company recognized a gain on the sale of $9.7 million during the nine months ended September 30, 2004. The proceeds of this divestiture were utilized for tooling purchases and other capital expenditures.

On February 10, 2004, the Company announced that a decision had been finalized by DaimlerChrysler to move the production of the frame assembly for the Dodge Ram light truck from the Company’s Milwaukee, Wisconsin facility to the Company’s joint venture partner, Metalsa S. de R.L. (“Metalsa”) headquartered in Monterrey, Mexico. The Dodge Ram frame program produced in the Milwaukee facility was expected to run through 2009. Production at the Milwaukee facility related to this program ceased in June 2005. The Company recognized revenue associated with the Dodge Ram frame program in the amount of $8.2 million and $43.7 million, respectively, for the three months ended September 30, 2005 and 2004 and $96.9 million and $162.9 million, respectively, for the nine months ended September 30, 2005 and 2004. The Company is a 40% partner in Metalsa with Promotora de Empresas Zano, S.A. de C.V. (“Proeza”). Metalsa is the largest supplier of vehicle frames and structures in Mexico.

10. Retirement Plans

The following table provides the components of net periodic pension benefit cost and other post-retirement benefit cost for the three months ended September 30, (in thousands):

		Pension Benefits								Other Benefits
		2005				2004				2005				2004
Service cost		$	819			$	2,140			$	82			$	94
Interest cost			3,906				3,626				2,172				1,935
Expected return on plan assets			(3,835	)			(3,045	)			—				—
Amortization of transition assets			—				(1	)			—				—
Amortization of prior service cost			621				1,054				—				—
Amortization of net losses			1,009				941				3,204				1,495
Net periodic benefit cost		$	2,520			$	4,715			$	5,458			$	3,524

The following table provides the components of net periodic pension benefit cost and other post retirement benefit cost for the nine months ended September 30, (in thousands):

		Pension Benefits								Other Benefits
		2005				2004				2005				2004
Service cost		$	4,259			$	6,420			$	482			$	283
Interest cost			11,485				10,879				6,302				5,804
Expected return on plan assets			(11,179	)			(9,134	)			—				—
Amortization of transition assets			—				(4	)			—				—
Amortization of prior service cost			3,084				3,162				—				—
Amortization of net losses			3,063				2,824				9,663				4,485
Net periodic benefit cost		$	10,712			$	14,147			$	16,447			$	10,572

The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2004 that it expects its minimum pension funding requirements to be $32.4 million during 2005. During

the three and nine months ended September 30, 2005, the Company made contributions of $8.1 million and $21.2 million, respectively to its pension plans. The Company presently anticipates contributing an additional $6.2 million to fund its pension plans in 2005 for a total of $27.4 million based upon the Company’s most recent estimate.

The Company contributed $1.5 million and $6.9 million, respectively, during the three and nine months ended September 30, 2005 to its defined contribution employee savings plans.

The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2004 that it expects minimum funding requirements in relation to its postretirement plans to be $20.6 million during 2005. During the three and nine months ended September 30, 2005, the Company made contributions of $4.8 million and $16.0 million, respectively, to its postretirement plans. The Company presently anticipates contributing an additional $6.5 million to fund its postretirement plans in 2005 for a total of $22.5 million based upon the Company’s most recent estimate.

11. Segment Information

The Company produces a broad range of assemblies and modules for vehicle body structures and suspension systems for the global automotive industry. The Company’s operations have similar characteristics including the nature of products, production processes and customers. The Company’s products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems and suspension components for the automotive industry. Management reviews the operating results of the Company and makes decisions based upon two operating segments: North America and International. Financial information by segment is as follows (in thousands):

		North America				International				Total
Three months ended September 30, 2005:
Revenues		$	427,437			$	285,227			$	712,664
Operating income (loss)			(55,675	)			5,844				(49,831	)
Restructuring and asset impairment charges			37,454				239				37,693
Total assets			1,202,898				1,118,176				2,321,074
Three months ended September 30, 2004:
Revenues		$	465,044			$	257,290			$	722,334
Operating income (loss)			(15,174	)			12,035				(3,139	)
Restructuring and asset impairment charges			2,020				—				2,020
Total assets			2,035,586				990,403				3,025,989
Nine months ended September 30, 2005:
Revenues		$	1,587,442			$	964,116			$	2,551,558
Operating income (loss)			(111,872	)			52,409				(59,463	)
Restructuring and asset impairment charges			106,887				1,990				108,877
Total assets			1,202,898				1,118,176				2,321,074
Nine months ended September 30, 2004:
Revenues		$	1,516,394			$	770,389			$	2,286,783
Operating income			13,736				48,492				62,228
Restructuring and asset impairment charges			(3,283	)			—				(3,283	)
Total assets			2,035,586				990,403				3,025,989

		Inter-segment revenues are not significant for any period presented.
		The change in the carrying amount of goodwill for the nine months ended September 30, 2005, by operating segment follows (in thousands):

		International
Balance at December 31, 2004		$	174,563
Currency translation adjustment			(19,175	)
Balance at September 30, 2005		$	155,388

12. Restructuring and Asset Impairment Charges

The Company has executed various restructuring plans and may execute additional plans in the future to respond to its bankruptcy proceedings, customer sourcing decisions, realignment of manufacturing capacity to prevailing global automotive production and to improve the utilization of remaining facilities. Estimates of restructuring charges are based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially recorded. Accordingly, the Company may record revisions of previous estimates by adjusting previously established reserves. All lease rejection costs are contained in “Chapter 11 and related reorganization items” on the Company’s statements of operations.

On April 15, 2005, the Company committed to a plan to close its Belcamp, MD, Bowling Green, KY and Corydon, IN facilities. The facilities ceased production in June 2005. In addition, as a result of the closing of the Corydon, IN facility, the Company reduced the number of employees at its Granite City, IL facility. These actions resulted in the elimination of approximately 800 positions. These restructuring initiatives are designed to reduce excess capacity and associated costs and improve overall efficiency.

Total costs associated with these actions amount to approximately $63.4 million, which is comprised of employee termination benefits of $3.8 million, asset impairment charges of $32.1 million, related lease costs of $25.0 million and other costs of $2.5 million. The $25 million of related lease costs are contained in Chapter 11 and related reorganization items on the Condensed Consolidated Statement of Operations for the nine months ended September 30, 2005. The $32.1 million of asset impairment charges were recognized in the three months ended March 31, 2005. Cash expenditures for these actions are estimated at $4.5 million. These amounts do not include approximately $4.7 million of cash expenditures to be incurred for training and relocation of colleagues and equipment. These actions are contained in the North America operating segment.

On October 5, 2005, the Company notified employees at its Milwaukee, WI facility that production of the Ford Ranger Truck frame would be moved to its Bellevue, OH facility. This action was taken to reduce costs and improve overall operating efficiency and is contained in the North America operating segment. Production in Milwaukee will end in March 2006.

Total estimated costs associated with this action are approximately $6 million, which is comprised of employee termination benefits of $4 million, asset impairment charges of $1 million and other costs of $1 million. Future cash expenditures for these actions are estimated at $5 million. These amounts do not include approximately $8 million of cash expenditures to move and install equipment in Bellevue. The asset impairment charges were recognized during the third quarter of 2005.

On October 13, 2005, the Company notified employees at its Granite City, IL and Milan, TN operations, of the Company’s intention to close these two manufacturing facilities. This action is part of the Company’s ongoing rationalization and consolidation of its North American operations to reduce excess capacity, reduce costs and improve overall operating efficiency. These facility closures are expected to be completed by December 2006.

Total estimated costs associated with these actions are approximately $65 million, which is comprised of employee termination benefits of $7 million, asset impairment charges of $20 million, non-cash lease rejection and restructuring charges of $31 million and other costs of $7 million. Future cash expenditures for these actions are estimated at $14 million. These amounts do not include approximately $38 million of cash expenditures for new building and consolidation and relocation costs. The asset impairment charges were recognized during the third quarter of 2005.

The Company recognized other restructuring charges contained in the North America operating segment relating primarily to the Milwaukee facility, including certain pension and postretirement curtailment charges, during the three and nine months ended September 30, 2005. The Company recognized approximately $15.5 million of net costs as a results of these actions.

During the second quarter of 2005, the Company determined that certain property, plant and equipment in North America would not be utilized through the date originally estimated. Cash flow projections were prepared which indicated that there were not sufficient projected cash flows to support the carrying value of such property, plant and equipment, which resulted in an asset impairment charge of $29.6 million included in restructuring and asset impairment charges in the accompanying statement of operations for the nine months ended September 30, 2005.

The table below summarizes the accrual for the Company’s various restructuring actions for the nine months ended September 30, 2005 (in thousands):

		Severance				Other Costs				Total
Balance at December 31, 2004		$	2,615			$	4,349			$	6,964
Provision			6,595				—				6,595
Cash usage			(3,848	)			—				(3,848	)
Non-cash charges and revisions of estimates			(1,069	)			(4,349	)			(5,418	)
Balance at September 30, 2005		$	4,293			$	—			$	4,293

Except as disclosed above, the Company does not anticipate incurring additional material cash charges associated with these actions.

13. Comprehensive Income (Loss)

The following table presents comprehensive income (loss), net of tax (in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Net loss		$	(76,556	)		$	(20,218	)		$	(309,004	)		$	(10,857	)
Change in cumulative translation adjustment			964				4,235				(16,097	)			(8,610	)
Unrealized gain on qualifying cash flow hedges, net of tax of $-, $575, $- and $2,299, respectively			1,132				1,118				4,460				4,463
Comprehensive income (loss)		$	(74,460	)		$	(14,865	)		$	(320,641	)		$	(15,004	)

14. Commitments and Contingencies

Environmental Matters

The Company owns properties which have been impacted by environmental releases. The Company is liable for costs associated with investigation and/or remediation of contamination in one or more environmental media at some of these properties. The Company is actively involved in investigation and/or remediation at several of these locations. At certain of these locations, costs incurred for environmental investigation/remediation are being paid partly or completely out of funds placed into escrow by previous property owners. Nonetheless, total costs associated with remediation of environmental contamination at these properties could be substantial and may have an adverse impact on the Company’s financial condition, results of operations or cash flows.

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. The established liability for environmental matters is based upon management’s best estimates of expected investigation/remediation costs related to environmental contamination. It is possible that actual costs associated with these matters will exceed the

environmental reserves established by the Company. Inherent uncertainties exist in the estimates, primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability and evolving technologies for handling site remediation and restoration. As of September 30, 2005 and December 31, 2004, the Company had accrued approximately $11.6 million and $16.3 million, respectively.

Litigation

The Company is subject to various legal actions and claims incidental to its business. Litigation is subject to many uncertainties and the outcome of individual litigated matters is not predictable with assurance. After discussions with counsel, it is the opinion of management that the outcome of such matters will not have a material adverse impact on the Company’s financial position, results of operations or cash flows.

On February 2, 2005, the Debtors filed a voluntary petition for relief under the Bankruptcy Code. The cases of each of the Debtors were consolidated for the purpose of joint administration (See Note 2). As a result of the commencement of the Chapter 11 proceedings by the Debtors, an automatic stay has been imposed against the commencement or continuation of legal proceedings, pertaining to claims existing as of February 2, 2005, against the Debtors outside of the Bankruptcy Court. Claimants against the Debtors may assert their claims in the Chapter 11 proceedings by filing a proof of claim, to which the Debtors may object and seek a determination from the Bankruptcy Court as to the allowability of the claim. Claimants who desire to liquidate their claims in legal proceedings outside of the Bankruptcy Court will be required to obtain relief from the automatic stay by order of the Bankruptcy Court. If such relief is granted, the automatic stay will remain in effect with respect to the collection of liquidated claim amounts. Generally, all claims against the Debtors that seek a recovery from assets of the Debtors’ estates will be addressed in the Chapter 11 proceedings and paid only pursuant to the terms of a confirmed plan of reorganization.

The Company requested an extension of the required due date for the filing of its plan of reorganization. On September 21, 2005, the Bankruptcy Court approved an extension of the due date from September 30, 2005 to January 27, 2006.

Key Employee Retention Plan Agreements

On March 30, 2005, the Bankruptcy Court entered an order approving the execution and implementation by the Company of Key Employee Retention Plan Agreements (the “KERP Agreements”) and the assumption of certain executive contracts.

The Company entered into the KERP Agreements to ensure the continued contributions of its key employees during the Company’s Chapter 11 bankruptcy proceedings. Under each KERP Agreement, the Company agrees to pay the applicable employee a retention incentive. The total amount of the retention incentive (which varies by employee from 40% to 110% of base salary) is payable in four installments of 25% each, conditioned upon the employee’s continued employment by the Company through each of the scheduled payment dates. The four scheduled payment dates are (1) May 2, 2005; (2) November 2, 2005; (3) the confirmation of a plan of reorganization in the Company’s Chapter 11 proceedings; and (4) six months after the confirmation of a plan of reorganization in the Company’s Chapter 11 proceedings. The approximate cost of the KERP Agreements and the assumption of certain executive contracts is approximately $13.2 million. During the three and nine months ended September 30, 2005, the Company recognized expense of $1.7 million and $3.4 million, respectively, in relation to this plan.

Pursuant to each KERP Agreement, if the employee’s employment by the Company is voluntarily terminated by the employee (other than upon retirement) or is terminated by the Company for cause (as defined in the KERP Agreement) prior to a scheduled payment date, the employee forfeits all unpaid amounts of the retention incentive. If an employee’s employment by the Company is terminated by the Company other than for cause or is terminated as a result of retirement, disability or death, the Company is obligated to pay the employee (or his or her estate) a prorated portion of the unpaid amount of the retention incentive, based upon the date of termination of employment.

15. Recently Issued Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), “Share-Based Payment.” SFAS 123(R) applies to all transactions involving the issuance of equity instruments (stock, stock options and other equity instruments) for goods or services, or the incurrence of liabilities for goods or services that are based on the fair value of an entity’s equity or may be settled in an entity’s equity. Under this standard, the fair value of all employee share-based payment awards will be expensed through the statement of operations over any applicable vesting period. SFAS 123(R) requires the use of a fair value valuation method to measure share-based payment awards. This standard is effective for the Company on January 1, 2006. The Company shall be required to recognize compensation expense, over an applicable vesting period, for all awards granted subsequent to adoption of this standard. In addition, the Company shall be required to recognize compensation expense pertaining to the unvested portion of previously granted awards outstanding as of the date of adoption as those awards continue to vest. The Company anticipates that adoption of SFAS 123(R) will not have a material impact on its consolidated financial statements.

In May 2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections.” SFAS 154 replaces Accounting Principles Board Opinion No. 20, “Accounting Changes” and SFAS 3, “Reporting Accounting Changes in Interim Financial Statements” and changes the requirements for the accounting and reporting of a change in accounting principle. This statement requires that retrospective application of a change in accounting principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle should be recognized in the period of the accounting change. This statement also requires that a change in depreciation or amortization method for long-lived, non-financial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. This standard is effective for the Company on January 1, 2006. The Company anticipates that SFAS 154 will not have a material effect on its consolidated financial statements.

16. Subsequent Events

In October 2005, the Bankruptcy Court approved a settlement agreement between the Company and a vendor. As a result of this settlement, the Company will recognize a gain of $7.7 million in the fourth quarter of 2005.

17. Consolidating Guarantor and Non-Guarantor Financial Information

The following consolidating financial information presents balance sheets, statements of operations and cash flow information related to the Company’s business. Certain foreign subsidiaries of R.J. Tower Corporation, a 100% owned subsidiary of Tower Automotive, Inc., are subject to restrictions on their ability to pay dividends or otherwise distribute cash to R. J. Tower Corporation because they are subject to financing arrangements that restrict them from paying dividends. Each Guarantor, as defined, is a direct or indirect 100% owned subsidiary of the Company and has fully and unconditionally guaranteed the 9.25% senior unsecured Euro notes issued by R. J. Tower Corporation in 2000, the 12% senior unsecured notes issued by R. J. Tower Corporation in 2003 and the DIP financing entered into by R. J. Tower Corporation in February 2005. Tower Automotive, Inc. (the parent company) has also fully and unconditionally guaranteed the notes and the DIP financing and is reflected as the Parent Guarantor in the consolidating financial information. The Non-Guarantor Restricted Companies are the Company’s foreign subsidiaries except for Seojin Industrial Company Limited, which is reflected as the Non-Guarantor Unrestricted Company in the consolidating financial information. As a result of the Chapter 11 filing by the Debtors, the above-mentioned notes are subject to compromise pursuant to the bankruptcy proceedings. Separate financial statements and other disclosures concerning the Guarantors have not been presented because management believes that such information is not material.

TOWER AUTOMOTIVE, INC.
Consolidating Balance Sheets at September 30, 2005
(Amounts in thousands — unaudited)

														Non-Guarantor				Non-Guarantor
		R.J. Tower				Parent				Guarantor				Restricted				Unrestricted
		Corporation				Guarantor				Companies				Companies				Companies				Eliminations				Consolidated
Assets
Current assets:
Cash and cash equivalents		$	1,713			$	—			$	(537	)		$	44,108			$	233			$	—			$	45,517
Accounts receivable			7,455				—				215,164				206,387				12,582				—				441,588
Inventories			—				—				70,594				53,002				15,516				—				139,112
Prepaid tooling and other			2,230				—				35,440				84,842				26,963				—				149,475
Total current assets			11,398				—				320,661				388,339				55,294				—				775,692
Property, plant and equipment, net			684				—				551,498				302,717				192,953				—				1,047,852
Investments in and advances to (from) affiliates			765,476				(49,817	)			(668,156	)			(183,171	)			(3,141	)			361,091				222,282
Goodwill			—				—				—				155,388				—				—				155,388
Other assets, net			17,937				—				49,785				28,318				23,820				—				119,860
		$	795,495			$	(49,817	)		$	253,788			$	691,591			$	268,926			$	361,091			$	2,321,074
Liabilities and Stockholders’ Investment (Deficit)
Current liabilities:
Current maturities of long-term debt and capital lease obligations		$	—			$	—			$	14,257			$	16,256			$	111,568			$	—			$	142,081
Accounts payable			9,858				—				94,192				177,534				40,614								322,198
Accrued liabilities			45,352				—				111,006				82,988				7,992				—				247,338
Total current liabilities			55,210				—				219,455				276,778				160,174				—				711,617
Liabilities subject to compromise			557,311				391,088				186,575				—				—				—				1,134,974
Non-Current Liabilities Not Subject to Compromise:
Long-term debt, net of current maturities			—				—				43,770				8,435				36,759				—				88,964
Debtor-in-possession borrowings, net of current maturities			553,764				—				—				—				—				—				553,764
Obligations under capital leases, net of current maturities			—				—				—				30,048				—				—				30,048
Other noncurrent liabilities			43,575				—				144,792				35,319				18,926				—				242,612
Total noncurrent liabilities			597,339				—				188,562				73,802				55,685				—				915,388
Stockholders’ investment (deficit)			(414,365	)			(440,905	)			(340,804	)			341,011				53,067				361,091				(440,905	)
		$	795,495			$	(49,817	)		$	253,788			$	691,591			$	268,926			$	361,091			$	2,321,074

TOWER AUTOMOTIVE, INC.
Consolidating Statement of Operations for the Three Months Ended September 30, 2005
(Amounts in thousands — unaudited)

														Non-Guarantor				Non-Guarantor
		R.J. Tower				Parent				Guarantor				Restricted				Unrestricted
		Corporation				Guarantor				Companies				Companies				Companies				Eliminations				Consolidated
Revenues		$	—			$	—			$	418,484			$	226,204			$	67,976			$	—			$	712,664
Cost of sales			(1,731	)			—				414,663				200,092				75,578				—				688,602
Gross profit			1,731				—				3,821				26,112				(7,602	)			—				24,062
Selling, general and administrative expenses			(9,274	)			—				31,694				10,989				2,791				—				36,200
Restructuring and asset impairment charge			(2,787	)			—				40,240				240				—				—				37,693
Operating income (loss)			13,792				—				(68,113	)			14,883				(10,393	)			—				(49,831	)
Interest expense (income), net			16,802				—				1,803				960				1,945				—				21,510
Chapter 11 and related reorganization items			6,615				—				—				—				—				—				6,615
Income (loss) before provision for income taxes, equity in earnings of joint ventures and minority interest			(9,625	)			—				(69,916	)			13,923				(12,338	)			—				(77,956	)
Provision (benefit) for income taxes			—				—				129				4,505				(3,112	)			—				1,522
Income (loss) before equity in earnings of joint ventures and minority interest			(9,625	)			—				(70,045	)			9,418				(9,226	)			—				(79,478	)
Equity earnings in joint ventures and subsidiaries, net			(66,931	)			(76,556	)			—				—				—				147,803				4,316
Minority interest, net			—				—				—				(1,394	)			—				—				(1,394	)
Net income (loss)		$	(76,556	)		$	(76,556	)		$	(70,045	)		$	8,024			$	(9,226	)		$	147,803			$	(76,556	)

TOWER AUTOMOTIVE, INC.
Consolidating Statement of Operations for the Nine Months Ended September 30, 2005
(Amounts in thousands — unaudited)

														Non-Guarantor				Non-Guarantor
		R.J. Tower				Parent				Guarantor				Restricted				Unrestricted
		Corporation				Guarantor				Companies				Companies				Companies				Eliminations				Consolidated
Revenues		$	—			$	—			$	1,553,622			$	728,527			$	269,409			$	—			$	2,551,558
Cost of sales			(5,072	)			—				1,484,297				638,665				265,426				—				2,383,316
Gross profit			5,072				—				69,325				89,862				3,983				—				168,242
Selling, general and administrative expenses			(21,176	)			—				97,656				33,457				8,891				—				118,828
Restructuring and asset impairment charge			(2,284	)			—				109,170				1,991				—				—				108,877
Operating income (loss)			28,532				—				(137,501	)			54,414				(4,908	)			—				(59,463	)
Interest expense (income), net			69,720				2,221				6,590				3,445				5,547				—				87,523
Chapter 11 and related reorganization items			151,524				—				—				—				—				—				151,524
Income (loss) before provision for income taxes, equity in earnings of joint ventures and minority interest			(192,712	)			(2,221	)			(144,091	)			50,969				(10,455	)			—				(298,510	)
Provision (benefit) for income taxes			—				—				1,887				17,283				(1,826	)			—				17,344
Income (loss) before equity in earnings of joint ventures and minority interest			(192,712	)			(2,221	)			(145,978	)			33,686				(8,629	)			—				(315,854	)
Equity earnings in joint ventures and subsidiaries, net			(114,071	)			(306,783	)			—				—				—				431,655				10,801
Minority interest, net			—				—				—				(3,951	)			—				—				(3,951	)
Net income (loss)		$	(306,783	)		$	(309,004	)		$	(145,978	)		$	29,735			$	(8,629	)		$	431,655			$	(309,004	)