UNITED STATES 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, 2006

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

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

(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 a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12(b)-2 of the Securities and Exchange Act.

Large Accelerated Filer o     Accelerated Filer o     Non-Accelerated Filer þ

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

Yes o   No þ 

The number of shares outstanding of the Registrant’s Common Stock, par value $.01 per share, at January 31, 2007, was 58,548,801 shares.

 

 

Tower Automotive, Inc.
Form 10-Q

Table of Contents

		Page
PART I. Financial Information
Item 1. Financial Statements (unaudited):
Condensed Consolidated Balance Sheets at September 30, 2006 and December 31, 2005			1
Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2006 and 2005			2
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005			3
Notes to Condensed Consolidated Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3. Quantitative and Qualitative Disclosure About Market Risk			35
Item 4. Controls and Procedures			36
PART II. Other Information
Item 1. Legal Proceedings			37
Item 1A Risk Factors			37
Item 6. Exhibits			38
Signatures
Certification of Chief Executive Officer Pursuant to Rules 13a-15(e) and 15d-15(e)
Certification of Chief Financial Officer Pursuant to Rules 13a-15(e) and 15d-15(e)
Certification Pursuant to Section 906

PART 1 — FINANCIAL INFORMATION

ITEM 1. Financial Statements.

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands — Unaudited)

		September 30, 2006				December 31, 2005
ASSETS
Current assets:
Cash and cash equivalents		$	103,443			$	65,791
Accounts receivable			371,427				363,040
Inventories			125,744				123,433
Prepaid tooling and other			114,727				185,646
Total current assets			715,341				737,910
Property, plant and equipment, net			964,184				1,038,794
Investments in joint ventures			246,514				228,634
Goodwill			163,096				153,037
Other assets, net			125,855				132,851
Total assets		$	2,214,990			$	2,291,226
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities not subject to compromise:
Current maturities of long-term debt and capital lease obligations		$	134,158			$	151,755
Current portion of debtor-in-possession borrowings			650,000				—
Accounts payable			327,396				378,816
Accrued liabilities			186,907				169,248
Total current liabilities			1,298,461				699,819
Liabilities subject to compromise			1,279,838				1,284,217
Non-current liabilities not subject to compromise:
Long-term debt, net of current maturities			105,514				107,823
Debtor-in-possession borrowings			—				531,000
Capital lease obligations, net of current maturities			29,632				30,308
Other non-current liabilities			114,714				125,682
Total non-current liabilities			249,860				794,813
Stockholders’ deficit:
Preferred stock			—				—
Common stock			666				666
Additional paid-in-capital			681,843				681,102
Accumulated deficit			(1,257,729	)			(1,106,840	)
Deferred compensation plans			—				(6,798	)
Accumulated other comprehensive income (loss)			11,375				(6,429	)
Treasury stock			(49,324	)			(49,324	)
Total stockholders’ deficit			(613,169	)			(487,623	)
Total liabilities and stockholders’ deficit		$	2,214,990			$	2,291,226

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

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts — Unaudited)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2006				2005				2006				2005
Revenues		$	615,668			$	712,664			$	2,152,295			$	2,551,558
Cost of sales			607,788				688,602				2,036,498				2,383,316
Gross profit			7,880				24,062				115,797				168,242
Selling, general and administrative expenses			32,176				36,200				99,257				118,828
Restructuring and asset impairment charges, net			22,793				37,693				53,657				108,877
Other operating income			—				—				(520	)			—
Operating loss			(47,089	)			(49,831	)			(36,597	)			(59,463	)
Interest expense (contractual interest of $41,913 and $121,723 in 2006 and $40,006 and $143,288 in 2005)			23,590				21,872				67,060				88,434
Interest income			(339	)			(362	)			(1,551	)			(911	)
Chapter 11 and related reorganization items			2,742				6,615				58,013				151,524
Loss before provision for income taxes, equity in earnings of joint ventures, and minority interest			(73,082	)			(77,956	)			(160,119	)			(298,510	)
(Benefit) provision for income taxes			(5,847	)			1,522				3,883				17,344
Loss before equity in earnings of joint ventures, and minority interest			(67,235	)			(79,478	)			(164,002	)			(315,854	)
Equity in earnings of joint ventures, net of tax			4,065				4,316				18,282				10,801
Minority interest, net of tax			(1,995	)			(1,394	)			(5,167	)			(3,951	)
Net loss		$	(65,165	)		$	(76,556	)		$	(150,887	)		$	(309,004	)
Basic and diluted loss per share		$	(1.11	)		$	(1.31	)		$	(2.57	)		$	(5.27	)
Weighted average basic and diluted shares outstanding			58,661				58,643				58,659				58,646

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

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands — Unaudited)

		Nine Months Ended September 30,
		2006				2005
OPERATING ACTIVITIES:
Net loss		$	(150,887	)		$	(309,004	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Chapter 11 and related reorganization items, net			36,058				133,171
Non-cash restructuring and impairment, net			35,372				101,632
Depreciation			120,892				135,788
Deferred income tax provision (benefit)			(13,105	)			12,863
Equity in earnings of joint ventures, net			(18,282	)			(10,801	)
Change in working capital and other operating items			3,849				(189,450	)
Net cash provided by (used in) operating activities			13,897				(125,801	)
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant and equipment			(93,671	)			(104,540	)
Cash proceeds from asset disposal			32,664				—
Net cash used in investing activities			(61,007	)			(104,540	)
FINANCING ACTIVITIES:
Proceeds from borrowings			22,621				36,702
Repayments of borrowings			(56,859	)			(465,583	)
Proceeds from DIP credit facility			564,500				1,054,285
Repayments of DIP credit facility			(445,500	)			(498,647	)
Net cash provided by financing activities			84,762				126,757
NET CHANGE IN CASH AND CASH EQUIVALENTS			37,652				(103,584	)
Cash and cash equivalents, beginning of period			65,791				149,101
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	103,443			$	45,517
Supplemental cash flow information:
Interest paid, net of amounts capitalized		$	59,280			$	47,081
Income taxes paid (refunded)		$	7,291			$	(291	)
Non-cash investing activities:
Net decrease in liabilities for purchases of property, plant and equipment		$	(18,261	)		$	(27,425	)

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

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 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 “SEC”). 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 disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the SEC. 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 consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. The interim results for the periods presented are not indicative of the Company’s actual annual results.

As indicated in Note 2, Tower Automotive, Inc. and 25 of its U.S. Subsidiaries (collectively, the “Debtors”) are operating pursuant to Chapter 11 of the United States Bankruptcy Code (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 9; (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 Debtors’ future obligations. 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 confirmed plan of reorganization will 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”), apply to the Debtors’ financial statements while the Debtors operate under the provisions of Chapter 11. SOP 90-7 does not change the application of U.S. GAAP 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 Company.

Change in Accounting Principle

Effective January 1, 2006, the Company accounts for stock-based compensation utilizing the fair value approach described in Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation (Revised 2004)” (“SFAS No. 123 (R)”), as this statement has been amended and revised. On September 20, 2005, the Company fully vested the entire unvested portion of its outstanding stock options. Therefore, the adoption of SFAS No. 123 (R) had no material impact on the Company’s financial statements (see Note 12).

Prior to the adoption of SFAS No. 123 (R), the Company accounted for stock options granted to employees in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB Opinion No. 25”).

Note 2. Chapter 11 Reorganization Proceedings

On February 2, 2005 (the “Petition Date”), the Debtors filed a voluntary petition for relief under the Bankruptcy Code in the United States Bankruptcy Court Southern District of New York (“Bankruptcy Court”). The cases were consolidated for administrative purposes. The filing was made necessary by: 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 affecting the Debtor’s liquidity and financial condition, all of which raise substantial doubt as to the Company’s ability to continue as a going

concern. 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.

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 9 for a description of the DIP financing. While the Debtors are in bankruptcy, 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’ operational and financial 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. The Company requested an extension of the required due date for the filing of its plan of reorganization and the Bankruptcy Court approved an extension of the due date to February 28, 2007.

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 Condensed Consolidated Balance Sheets at September 30, 2006 and December 31, 2005 (see Note 9).

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,				December 31,
		2006				2005
Debt:
5.75% Convertible senior debentures		$	124,999			$	124,999
6.75% Subordinated debentures			258,750				258,750
9.25% Senior Euro notes			190,065				177,600
12% Senior notes			258,000				258,000
Total debt			831,814				819,349
Pension and other post-retirement benefits			141,669				162,886
Pre-petition accounts payable and accruals			169,557				195,294
Accrued interest on debt subject to compromise			21,343				21,343
Executory contracts			115,455				85,345
Total liabilities subject to compromise		$	1,279,838			$	1,284,217

The Debtors have incurred certain professional and other expenses directly associated with the bankruptcy proceedings. The Company disbursed cash of approximately $5.2 million and $5.0 million relating to these expenses during the three months ended September 30, 2006 and 2005, respectively and $21.8 million and $18.3 million for the nine months ended September 30, 2006 and 2005,

respectively. 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 months ended September 30, 2006 and 2005 and for the nine months ended September 30, 2006 and 2005 and consist of the following (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2006				2005				2006				2005
Professional fees directly related to the filing		$	7,807			$	4,547			$	28,943			$	24,511
Key employee retention (forfeitures) costs			(738	)			1,675				3,098				3,368
Write off of deferred financing costs			—				—				—				29,135
Estimated executory contract rejection (recoveries) damages			(181	)			393				30,118				94,313
Other (reversals) expenses directly attributable to the Company’s reorganization			(4,146	)			—				(4,146	)			197
Total		$	2,742			$	6,615			$	58,013			$	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 combined 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 condensed consolidated financial statements.

Debtors’ Condensed Combined Balance Sheet
Debtors- in-Possession
(Amounts in thousands)

		September 30,				December 31,
		2006				2005
ASSETS
Current assets:
Cash and cash equivalents		$	34,491			$	858
Accounts receivable			146,119				173,206
Inventories			62,244				60,068
Prepaid tooling and other			17,115				65,882
Total current assets			259,969				300,014
Property, plant and equipment, net			507,427				538,598
Investments in and advances to non-debtor subsidiaries			857,915				796,662
Other assets, net			45,899				60,959
Total assets		$	1,671,210			$	1,696,233
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities not subject to compromise:
Current maturities of long-term debt and capital lease obligations		$	15,156			$	14,257
Current portion of debtor-in-possession borrowings			650,000				—
Accounts payable			115,703				134,069
Accrued liabilities			103,285				87,098
Total current liabilities			884,144				235,424
Liabilities subject to compromise			1,296,201				1,300,580
Non-current liabilities not subject to compromise:
Long-term debt, net of current maturities			84,751				84,754
Long-term portion of debtor-in-possession borrowings			—				531,000
Other noncurrent liabilities			19,283				32,098
Total noncurrent liabilities			104,034				647,852
Total stockholders’ deficit			(613,169	)			(487,623	)
Total liabilities and stockholders’ deficit		$	1,671,210			$	1,696,233

Debtors’ Condensed Combined Statement of Operations
Debtors-in-Possession
(Amounts in thousands)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2006				2005				2006				2005
Revenues		$	295,061			$	418,485			$	1,135,103			$	1,553,624
Cost of sales			303,972				412,218				1,105,667				1,476,718
Gross profit			(8,911	)			6,267				29,436				76,906
Selling, general and administrative expenses			18,056				22,420				57,543				76,479
Restructuring and asset impairment charges, net			14,734				37,453				24,998				106,886
Other operating income			(828	)			—				(2,943	)			—
Operating loss			(40,873	)			(53,606	)			(50,162	)			(106,459	)
Interest expense			20,927				18,754				58,964				78,841
Interest income			(322	)			(9	)			(1,281	)			(135	)
Intercompany interest income			(7,366	)			(5,411	)			(19,896	)			(17,009	)
Chapter 11 and related reorganization items			2,742				6,615				58,013				151,524
Loss before provision for income taxes, equity in earnings of joint ventures and equity in earnings from non-Debtor subsidiaries			(56,854	)			(73,555	)			(145,962	)			(319,680	)
Provision (benefit) for income taxes			1,248				(2,806	)			3,352				5,409
Loss before equity in earnings of joint ventures and equity in earnings of non-Debtor subsidiaries			(58,102	)			(70,749	)			(149,314	)			(325,089	)
Equity in earnings of joint ventures, net of tax			79				48				215				48
Equity in earnings (losses) of non-Debtor subsidiaries, net of tax			(7,142	)			(5,855	)			(1,788	)			16,037
Net loss		$	(65,165	)		$	(76,556	)		$	(150,887	)		$	(309,004	)

Debtors’ Condensed Combined Statements of Cash Flows
Debtors- in-Possession
(Amounts in thousands)

		Nine Months Ended September 30,
		2006				2005
OPERATING ACTIVITIES:		$	(150,887	)		$	(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			36,058				133,171
Non-cash restructuring and impairment, net			14,016				100,065
Depreciation			68,126				81,522
Equity in earnings of joint ventures and subsidiaries, net			1,573				(16,085	)
Change in working capital and other operating items			(13,358	)			(186,100	)
Net cash used for operating activities			(44,472	)			(196,431	)
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant and equipment			(40,886	)			(34,743	)
Net cash used for investing activities			(40,886	)			(34,743	)
FINANCING ACTIVITIES:			—				—
Repayments of borrowings			(9	)			(430,370	)
Proceeds from DIP credit facility			564,500				1,054,285
Repayments of DIP credit facility			(445,500	)			(498,647	)
Net cash provided by financing activities			118,991				125,268
NET CHANGE IN CASH AND CASH EQUIVALENTS			33,633				(105,906	)
Cash and cash equivalents, beginning of period			858				107,081
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	34,491			$	1,175

Note 3. New Accounting Pronouncements.

FASB Interpretation No. 48 — In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”)” which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact of this standard on the Company’s Condensed Consolidated Financial Statements.

SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”) — In September 2006, the FASB issued SFAS No. 157, which establishes a framework for reporting fair value and expands disclosures about fair value measurements. SFAS No. 157 becomes effective beginning with our first quarter 2008 period. In accordance with SOP 90-7, early adoption is required when an entity emerges from bankruptcy at the time fresh-start reporting is adopted. We are currently evaluating the impact of this standard on the Company’s Condensed Consolidated Financial Statements.

SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”) — Effective for our year ending 2006, we will be required to fully recognize the assets and obligations associated with our defined benefit plans and measure a plan’s assets and liabilities. In accordance with SOP 90-7, early adoption is required when an entity emerges from bankruptcy at the time fresh-start reporting is adopted. Also, a change of measurement date is required as of December 31, 2007. We are currently evaluating the impact of this standard on the Company’s Condensed Consolidated Financial Statements.

SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB No. 108”) — In September 2006, the SEC issued SAB No. 108. Due to diversity in practice among registrants, SAB No. 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for the purpose of determining whether financial statements restatement is necessary. SAB No. 108 is effective for fiscal years ending after November 15, 2006. The Company believes that SAB No. 108 will not have a material effect on the Company’s Condensed Consolidated Financial Statements upon adoption.

Note 4. 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 pursuant to the Bankruptcy Code.

Note 5. 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,
		2006				2005
Raw materials		$	60,353			$	56,309
Work in process			27,671				30,710
Finished goods			37,720				36,414
		$	125,744			$	123,433

Note 6. Goodwill

The following summarizes the changes in goodwill for the international segment (in thousands):

Balance at December 31, 2005		$	153,037
Currency translation adjustment and other			10,059
Balance at September 30, 2006		$	163,096

Note 7. Investments in Joint Ventures

On February 10, 2004, the Company announced that a decision had been finalized by DaimlerChrysler to move the current 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 for the three months ended September 30, 2005 and $96.9 million for the nine months ended September 30, 2005. The Company recognized no material revenue associated with the Dodge Ram frame program during the three and nine months ended September 30, 2006. 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. In addition, the Company and Metalsa have a technology sharing arrangement. Metalsa has manufacturing facilities in Monterrey and San Luis Potosi, Mexico and Roanoke, Virginia.

Note 8. 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 improvement of 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.

In February 2006, the Company announced that it would begin discussions with the union at its Greenville, Michigan manufacturing facility regarding closing the facility. During the first quarter of 2006 the Company finalized its decision to close the facility. Such closure is expected to be completed by December 2006. During the fourth quarter of 2006, the Company expects to incur approximately $7.5 million of employee termination costs, including potential costs to withdraw from a multi-employer retirement plan. In addition, the Company expects to incur approximately $2.9 million of other cash costs related to the relocation of equipment and other closure costs.

In May 2006, the Company announced its intention to enter into decision bargaining to downsize its Bluffton, OH facility and move work to other facilities in the U.S. In August 2006, the Company announced the ratification of revised collective bargaining agreements with the United Auto Workers union and the United Steelworkers union covering hourly employees at the Company’s Bluffton, Ohio and Elkton, Michigan facilities, as well as a contract extension and severance agreement at the Company’s Clinton, Michigan and Milan, Tennessee facilities respectively. The tentative agreement previously announced on July 19, 2006 covered hourly employees at nine of the Company’s North American facilities, but was subsequently modified to govern only the four facilities that ratified the agreement. The U.S. Bankruptcy Court overseeing the Company’s Chapter 11 case must still approve the agreement.

On June 26, 2006, the Company announced that it would phase out production at its Toronto, Ontario aluminum foundry and mini-mill on August 31, 2006, as part of its ongoing restructuring plan. This action is part of the Company’s ongoing strategy to improve operational efficiency and cost competitiveness while focusing on its core business of automotive structural stampings and assemblies. Total estimated costs associated with this action amount to approximately $17.3 million, which is comprised of employee related costs of $3.8 million and asset impairment charges of $13.5 million. Future cash expenditures for these actions are estimated at $4.7 million.

On September 14, 2006, the Company announced that production from its Upper Sandusky, Ohio plant will be consolidated into other Tower facilities in North America as part of its ongoing restructuring plan. This action is part of the Company’s ongoing strategy to reduce excess manufacturing capacity and enhance operational efficiency. The moves will begin immediately and are expected to be completed early next year. Total estimated costs associated with this action amount to approximately $9.2 million, which is comprised of employee related costs of $1.1 million, asset impairment charges of $4.3 million, other non-cash charges of $1.5 million and other costs of $2.3 million. Future cash expenditures for these actions are estimated at $3.4 million.

The table below summarizes the accrual for the Company’s various restructuring actions for the nine months ended September 30, 2006 (in thousands):

		Asset Impairments				Severance				Other Costs				Total
Balance at December 31, 2005		$	—			$	523			$	—			$	523
Provision			16,455				17,137				13,277				46,869
Cash usage			—				(6,514	)			(8,163	)			(14,677	)
Non-cash usage and revisions of estimates			(16,455	)			—				(5,114	)			(21,569	)
Balance at September 30, 2006		$	—			$	11,146			$	—			$	11,146

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

The restructuring and asset impairment charges caption in the accompanying Consolidated Statements of Operations is comprised of both restructuring and non-restructuring related asset impairments. The components of that caption are as follows for the nine months ended September 30, 2006 (in thousands):

Restructuring and related asset impairments, net		$	46,869
Revision of estimate			—
Other asset impairments			6,788
Total		$	53,657

The $6.8 million of other asset impairments is primarily related to asset disposals, impairments and write-offs of approximately $16.8 million offset by $11.3 million of ongoing recoveries of a cancellation claim of a customer program.

During the second quarter of 2006, the Company disposed of the Oslamt, Italy facility, which manufactured tooling. An asset impairment charge of $1.8 million was recorded during the second quarter of 2006. Also, during the second quarter of 2006, the Company recorded a $8.9 million write-off related to the movement of the Ranger frame line from the Milwaukee facility to the Bellevue facility.

During the third quarter of 2006, the Company disposed of the Hanam, South Korea facility, which manufactured body structures. The manufacturing was phased out during the first quarter of 2006. In accordance with SFAS No. 144, an asset impairment charge of $6.1 million was recorded during the third quarter of 2006.

Note 9. Debt

Chapter 11 Impact

Under the terms of the Company’s pre-petition credit agreement, the Chapter 11 filing created an event of default. Outstanding obligations under the pre-petition credit agreement were $425 million, which were 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 Subordinated Debentures (see Note 2).

Pursuant to SOP 90-7, the Company ceased recognizing interest expense on the Convertible Debentures, Senior Notes, Senior Euro Notes and Subordinated Debentures effective February 2, 2005. Contractual interest not accrued during the period from January 1, 2006 through September 30, 2006 is $54.7 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 pre-petition 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% prior to the Amendment and 2.75%, as amended, in the case of a loan under the revolving facility, or 2.25% prior to the Amendment and 3.5%, as amended 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% prior to the Amendment and 3.75%, as amended, in the case of a loan under the revolving facility, or 3.25% prior to the Amendment and 4.5%, as amended 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, 2006, $43.0 million was available for borrowing under the revolving credit and letter of credit facility. For the period of January 1, 2006 through September 30, 2006, the weighted average interest rate associated with borrowings pertaining to the DIP Agreement was 8.07%. DIP commitment fees totaled $0.3 million during the period of January 1, 2006 through September 30, 2006. The DIP Agreement matures on August 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. On September 22, 2006, the Company circulated for approval by the lenders under its DIP Agreement the seventh amendment to the DIP Agreement (the “Amendment”). On October 6, 2006, the DIP Agreement was amended by the lenders. The Amendment amends certain covenants contained in the DIP Agreement. In addition, the Amendment amends certain provisions to allow for dividends to be declared and paid by less than wholly-owned subsidiaries of the Company and waives any existing covenant technical breaches related to previously declared and paid dividends by less than wholly-owned subsidiaries of the Company. The Amendment also amended certain interest rates based on the current economic environment. On January 30, 2007, the Company obtained approval by the lenders under its DIP Agreement the eighth amendment to the DIP Agreement. The eighth amendment extends the maturity date from February 2, 2007 to August 2, 2007, amends certain covenants contained in the DIP Agreement, and amends certain interest rates based on the current economic environment.

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, in the event any second lien lender under the pre-petition credit agreement wishes to assign its deposits, rights and obligations after the Chapter 11 filing, the Finance Company agrees to take by assignment any such second lien holder’s deposits, rights and obligations in an aggregate amount not to exceed $155 million.

Draws made against the second lien letters of credit totaled $41 million as of September 30, 2006.

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 $15.2 million, respectively, are classified as liabilities not subject to compromise on the Company’s Condensed Consolidated Balance Sheet at September 30, 2006. The Company’s foreign subsidiary indebtedness of $169.4 million at September 30, 2006, is also 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, 2006, no amounts remain deferred in other comprehensive income (loss) as the remaining term of the contract expired during the quarter ended September 30, 2005.

Note 10. Comprehensive Loss

The following table presents comprehensive loss:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2006			2005				2006				2005
Net loss		$	(65,165	)		$	(76,556	)		$	(150,887	)		$	(309,004	)
Change in cumulative translation adjustment			(1,126	)			964				17,804				(16,097	)
Unrealized gain on qualifying cash flow hedges			—				1,132				—				4,460
Comprehensive loss		$	(66,291	)		$	(74,460	)		$	(133,083	)		$	(320,641	)

Note 11. Income Taxes

During the three and nine months ended September 30, 2006, the Company recognized an income tax benefit of $5.8 million and an income tax expense of $3.9 million, respectively, in relation to a pre-tax loss of $73.1 million and $160.1 million, respectively. The Company recorded income tax expense that resulted from foreign income taxes related to the Company’s international operations and U.S. state taxes. Full valuation allowances were provided for U.S. Federal income tax benefits generated during the 2006 period. These collective income tax provisions include a $0.4 million expense related to international provision to tax return adjustments and were offset by an $8.1 million tax benefit related to the reversal of a valuation allowance for certain tax loss carry-overs during the nine months ended September 30, 2006. The reversal of the valuation allowance resulted from the reorganization, completed in the first quarter of 2006, at certain of the Company’s international operations. Such reorganization resulted in the ability to utilize tax loss carry-overs in future periods over a sufficiently long carry-forward period to cause the probability of their realization to be considered more likely than not.

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 a pre-tax net loss of $78.0 million and $298.5 million, respectively. This income tax provision resulted primarily from the recognition of foreign income taxes and state taxes. Full valuation allowances were provided for U.S. Federal income tax benefits generated during the 2005 period.

Note 12. Stockholders’ Deficit

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 for all periods presented during 2006 and 2005.

Stock-Based Compensation

Effective January 1, 2006, the Company adopted the fair value approach described in SFAS No. 123 (R), “Accounting for Stock-Based Compensation (Revised 2004),” as this statement has been amended and revised, to account for its stock-based compensation.

For the three months and nine months ended September 30, 2005, the Company accounted for stock options using the intrinsic value approach in accordance with APB Opinion 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 or greater than 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 using a fair value approach 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, 2005				September 30, 2005
Net loss
As Reported		$	(76,556	)		$	(309,004	)
Add: Stock—based employee compensation expense included in reported net loss, net of tax related effects			106				617
Deduct: Total stock-based employee compensation (expense) income determined under fair value based method for all awards, net of related tax effects			(1,204	)			(550	)
Pro forma net loss		$	(77,654	)		$	(308,937	)
Basic loss per share as reported		$	(1.31	)		$	(5.27	)
Pro forma			(1.32	)			(5.27	)
Diluted loss per share as reported		$	(1.31	)		$	(5.27	)
Pro forma			(1.32	)			(5.27	)

As of September 30, 2005, the Company fully vested all outstanding stock options. No expense was recognized related to these options.

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 for the 2005 period: risk free interest rate of 3.89%; expected life of seven years; expected volatility of 61.21%; and no expected dividends. No options were granted or exercised during the 2006 period.

Stock Option Plans

Pursuant to the 1994 Key Employee Stock Option Plan (the “Stock Option Plan”), which was approved by stockholders, any person who is a full-time, salaried employee of the Company (excluding non-management directors) is eligible to participate (a “Colleague Participant”) in the Stock Option Plan. A committee of the Board of Directors selects the Colleague Participants and determines the terms and conditions of the options.

The Stock Option Plan provides for the issuance of options to purchase up to 3,000,000 shares of common stock at exercise prices equal to the market price of the common stock on the date of grant, subject to certain adjustments reflecting changes in the Company’s capitalization. As of September 30, 2006, 1,169,660 shares of common stock were available for issuance under the Stock Option Plan.

The only option activity under the Stock Option Plan during the nine months ended September 30, 2006 was forfeitures of 8,500 shares with a weighted-average exercise price of $11.61. The aggregate intrinsic value is zero as the fair value of all options was less than the exercise price.

A summarization of stock options outstanding related to the Stock Option Plan at September 30, 2006 follows:

Number

Options Outstanding

Options Exercisable

Range of

Outstanding

Weighted-Average

Weighted-

Number

Weighted-

Exercisable

At

Remaining

Average

Exercisable

Average

Options

9/30/06

Contractual Life

Exercise Price

9/30/06

Exercise Price

$17.13 — $22.97

91,500

1.91

$

18.23

91,500

$

18.23

Incentive Plan

The Tower Automotive, Inc. Long Term Incentive Plan (“Incentive Plan”), which was approved by stockholders and adopted in 1999, is designed to promote the long-term success of the Company through stock-based compensation by aligning the interests of participants with those of its stockholders. Eligible participants under the Incentive Plan include key company colleagues, directors, and outside consultants. Awards under the Incentive Plan may include stock options, stock appreciation rights, performance shares and other stock-based awards. The option exercise price must be at least equal to the fair value of the Common Stock at the time the option is granted. The Company’s Board of Directors determines vesting at the date of grant and in no event can be less than six months from the date of grant. The Incentive Plan provides for the issuance of up to 3,000,000 shares of common stock. As of September 30, 2006, 1,703,833 shares of common stock were available for issuance under the Incentive Plan. A committee of the Board of Directors is responsible for administration, participant selection and determination of terms and conditions of the Incentive Plan.

The only option activity under the Incentive Plan during the nine months ended September 30, 2006 was forfeitures of 339,960 shares with a weighted-average exercise price of $10.88. The aggregate intrinsic value is zero as the fair value all options was less than the exercise price.

The following table summarizes certain information pertaining to stock options outstanding under the Incentive Plan:

		Number				Options Outstanding								Options Exercisable
Range of		Outstanding				Weighted-Average				Weighted-				Number				Weighted-
Exercisable		At				Remaining				Average				Exercisable				Average
Options		9/30/06				Contractual Life				Exercise Price				9/30/06				Exercise Price
$1.99 — $7.08			648,975				7.40			$	3.39				648,975			$	7.40
11.33 — 15.56			817,090				4.38				12.76				817,090				4.38
26.81			121,490				2.56				26.81				121,490				2.56

Director Option Plan

In February 1996, the Company’s Board of Directors approved the Tower Automotive, Inc. Independent Director Stock Option Plan (the “Director Option Plan”) that provides for the grant of options to independent directors, as defined in the plan, to acquire up to 200,000 shares of the Company’s Common Stock, subject to certain adjustments reflecting changes in the Company’s capitalization. As of September 30, 2006, 84,800 shares of common stock were available for issuance under the Director Option Plan. The option exercise price must be at least equal to the fair value of the Common Stock at the time the option is granted. The Company’s Board of Directors determines vesting at the date of grant and in no event can be less than six months from the date of grant.

The only option activity under the Director Option Plan during the nine months ended September 30, 2006 was forfeitures of 15,000 shares with a weighted-average exercise price of $7.56. The aggregate intrinsic value is zero as the fair value all options was less than the exercise price.

The following table summarizes certain information pertaining to stock options outstanding under the Director Option Plan follows:

Number

Options Outstanding

Options Exercisable

Range of

Outstanding

Weighted-Average

Weighted-

Number

Weighted-

Exercisable

At

Remaining

Average

Exercisable

Average

Options

9/30/06

Contractual Life

Exercise Price

9/30/06

Exercise Price

$18.94 — $22.97

85,200

1.33

$

19.63

85,200

$

19.63

Note 13. 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
		2006				2005				2006				2005
Service cost		$	1,065			$	819			$	—			$	82
Interest cost			3,771				3,906				2,188				2,172
Expected return on plan assets			(3,238	)			(3,835	)			—				—
Amortization of prior service cost			315				621				—				—
Amortization of net losses			764				1,009				1,210				3,204
Net periodic benefit cost		$	2,677			$	2,520			$	3,398			$	5,458

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
		2006				2005				2006				2005
Service cost		$	3,195			$	4,259			$	125			$	482
Interest cost			11,313				11,485				6,427				6,302
Expected return on plan assets			(9,714	)			(11,179	)			—				—
Amortization of prior service cost			945				3,084				—				—
Amortization of net losses			2,292				3,063				5,029				9,663
Net periodic benefit cost		$	8,031			$	10,712			$	11,581			$	16,447

The Company previously disclosed in its Consolidated Financial Statements for the year ended December 31, 2005 that it expects its minimum pension funding requirements to be $24.5 million during 2006. During the three and nine months ended September 30, 2006, the Company made contributions of $10.8 million and $23.0 million, respectively, to its pension plans. The Company presently anticipates contributing an additional $1.5 million to fund its pension plans in 2006 for a total of $24.5 million based upon the Company’s most recent estimate. The Company has recorded the obligations under these retirement plans as subject to compromise as part of the Company’s bankruptcy proceedings.

The Company contributed $1.8 million and $5.6 million during the three and nine months ended September 30, 2006, respectively, to its defined contribution employee savings plans.

In April 2006, the Company submitted for approval to the Bankruptcy court settlement agreements with two groups representing current and future retirees. Both settlements include modifications of retiree health care benefits for both retired salaried employees as well as current and future retirees of the Company’s Milwaukee, WI facility.

In May 2006, the Bankruptcy Court approved the agreements with the official committee representing the Company’s salaried retirees (the “Retiree Committee Stipulation”) and with the unions representing retirees at the Company’s Milwaukee, WI facility (the “Milwaukee Stipulation”). Pursuant to the Retiree Committee Stipulation, salaried retirees continued to receive current benefits through June 30, 2006. The salaried retirees established a Voluntary Employee Benefit Association (“VEBA”) trust to administer benefits after June 30, 2006. The Company contributed cash of $0.6 million to the VEBA on June 30, 2006. The Company will also provide certain cash and equity consideration to the VEBA upon emergence from bankruptcy. Such consideration will total approximately $5 million. The Company will provide certain supplemental cash payments to the VEBA, until such time as the Company emerges from bankruptcy.

Under the Milwaukee Stipulation, the Company continued current benefit payments through June 30, 2006. A separate VEBA was established and began administering benefits for retirees and their dependents beginning July 1, 2006. The Company contributed cash of approximately $2.5 million on June 30, 2006. The Company will contribute additional amounts upon emergence from bankruptcy. In addition, the Company may make additional cash contributions to the VEBA if the reorganized Company meets certain financial

targets. The Company will make certain supplemental cash payments to the VEBA, until such time as the Company emerges from bankruptcy. In addition, the Company will make payments totaling approximately $3.5 million in settlement of all other outstanding matters with the impacted employees.

The Official Committee of Unsecured Creditors in the Company Chapter 11 cases has appealed the Bankruptcy Court’s approval of the Retiree Committee Stipulation and the Milwaukee Stipulation (the “1114 Appeal”). The appeal is currently pending in the United States District Court for the Southern District of New York, Case No. 1:06-cv-04996 (VM).

In August 2006, the Company submitted for approval to the Bankruptcy Court settlement agreements (the “UAW/IUE-CWA Stipulation”) with two groups representing current retirees at certain closed plants (the “Closed Plant Retirees”) which were represented by the United Automobile, Aerospace and Agricultural Implement Workers of America (the “UAW”) and with retirees from the Company’s Greenville, MI facility (the “Greenville Retirees”), which were represented by the IUE, the Industrial Division of the Communication Workers of America, AFL-CIO (the “IUE-CWA”).

In August 2006, the Bankruptcy Court approved the UAW/IUE-CWA Stipulation. Under the UAW/IUE-CWA Stipulation, the Company continued current benefit payments for the Greenville Retirees through August 31, 2006 and for the Closed Plant Retirees through September 30, 2006. A VEBA was established and began administering benefits for Greenville Retirees and their dependents beginning September 1, 2006. The Company contributed a cash payment of approximately $0.5 million to the VEBA on September 1, 2006. The Company made a cash payment to a trust for the benefit of the Closed Plant Retirees on October 1, 2006.

The Official Committee of Unsecured Creditors in the Company’s Chapter 11 cases has appealed the Bankruptcy Court’s approval of the UAW/IUE-CWA Stipulation, which appeal is pending and has been consolidated with the 1114 appeal.

For accounting purposes, the Company has concluded that the postretirement medical benefits to be paid by the VEBAs and the Company’s related contribution obligations should be treated as defined benefit postretirement plans. As such, while the Company’s only obligation to the VEBAs is to contribute additional amounts, which are predetermined, the Company must account for net periodic postretirement benefit costs in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits other than Pensions,” and record any difference between the assets of each VEBA and its accumulated postretirement benefit obligation (“APBO”) in the Company’s financial statements. As of September 30, 2006, the Milwaukee Union and Non-Union VEBAs are included in the APBO. The Greenville Union VEBA will be included during the fourth quarter of 2006.

Note 14. 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. 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, 2006:
Revenues		$	299,899			$	315,769			$	615,668
Restructuring and asset impairment charges			15,012				7,781				22,793
Operating loss			(43,914	)			(3,175	)			(47,089	)
Total assets		$	1,077,157			$	1,137,833			$	2,214,990
Three months ended September 30, 2005:
Revenues		$	427,437			$	285,227			$	712,664
Restructuring and asset impairment charges			37,454				239				37,693
Operating income (loss)			(55,675	)			5,844				(49,831	)
Total assets		$	1,202,898			$	1,118,176			$	2,321,074
Nine months ended September 30, 2006:
Revenues		$	1,157,109			$	995,186			$	2,152,295
Restructuring and asset impairment charges			42,636				11,021				53,657
Operating income (loss)			(73,708	)			37,111				(36,597	)
Total assets		$	1,077,157			$	1,137,833			$	2,214,990
Nine months ended September 30, 2005:
Revenues		$	1,587,442			$	964,116			$	2,551,558
Restructuring and asset impairment charges			106,887				1,990				108,877
Operating income (loss)			(111,872	)			52,409				(59,463	)
Total assets		$	1,202,898			$	1,118,176			$	2,321,074

Inter-segment revenues are not significant for any period presented.

Note 15. Commitments and Contingencies

Key Employee Retention Plan Agreements

On March 30, 2005, the Bankruptcy Court entered an order approving the execution and implementation of a Key Employee Retention Program by the Company and the assumption of certain executive contracts. Under the order, three separate retention funds were made available, including specific retention incentives for approximately 100 Key Employees (“the Core KERP Agreements”). Under the Core KERP Agreements, the Company agreed 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. In addition, a transition incentive pool was established for Key Employees whose roles will be phased out, but whose employment during such phase out remains critical and a discretionary fund was made available to address unanticipated retention needs. The cost of the Key Employee Retention Program and the assumption of certain executive contracts is approximately $13.2 million. During the three and nine months ended September 30, 2006, the Company recognized income of $0.8 million and expense of $3.1 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.

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, 2006 and December 31, 2005, the Company had accrued approximately $12.0 million and $11.4 million, respectively, for environmental remediation.

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. The Bankruptcy Court approved an extension of the due date to February 28, 2007.

Following the above-referenced filing, certain claims were filed against certain current and former officers and directors of Tower Automotive, Inc., alleging various (1) violations of the federal securities laws (the “Securities Litigation”), and (2) breaches of fiduciary duties to participants in and beneficiaries of the Company’s various 401(k) retirement plans in connection with the availability of the Common Stock of Tower Automotive, Inc. as an investment option under the plans (the “ERISA Litigation”). Defendants have moved to dismiss the claims in each of the cases. The motions are pending in federal court in the Southern District of New York. On December 13, 2006, Tower Automotive, Inc. reached an agreement in principal with counsel for plaintiffs to settle the ERISA Litigation, subject to appropriate documentation and necessary court approvals. On January 18, 2007, Tower Automotive, Inc. filed in the bankruptcy court a motion seeking approval of its participation in the proposed settlement. That motion remains pending in the bankruptcy court.

On November 29, 2005, the Company’s joint venture partner in Metalsa, Proeza, filed a lawsuit in Mexico against Tower Mexico and Metalsa. In the lawsuit, Proeza alleges that Tower Mexico breached certain of its obligations under the governing documents of the joint venture by failing to notify Proeza of purported changes in control of Tower Mexico. Based on these allegations, Proeza seeks either the rescission of the joint venture relationship or the redemption of Tower Mexico’s investment in Metalsa at a discounted value. The Company believes that Proeza’s claims are without merit and has vigorously defended this matter, including the venue of the litigation. To date, however, the Mexican courts have exercised jurisdiction over Proeza’s lawsuit and, on December 21, 2006, the Mexican trial court issued a ruling in favor of Proeza on liability. Tower Mexico has appealed this ruling.

The Company believes that Proeza is prosecuting the Mexico lawsuit in violation of the dispute resolution provisions of the governing documents of the Metalsa joint venture. Accordingly, Tower Mexico filed an adversary proceeding against Proeza in the Chapter 11 proceedings seeking an order staying the Mexico lawsuit and compelling Proeza to arbitrate the claims raised therein before International Chamber of Commerce (“ICC”) in Paris France. In addition, Tower Mexico initiated such an arbitration proceeding before the ICC. The bankruptcy court declined to exercise jurisdiction over Tower Mexico’s adversary complaint against Proeza. The arbitration before the ICC, however, is now proceeding.

Note 16. Subsequent Events

On September 22, 2006, the Company circulated for approval by the lenders under its DIP Agreement the seventh amendment to the DIP Agreement (the “Amendment”). On October 6, 2006, the DIP Agreement was amended by the lenders. The Amendment amends certain covenants contained in the DIP Agreement. In addition, the Amendment amends certain provisions to allow for dividends to be declared and paid by less than wholly-owned subsidiaries of the Company and waives any existing covenant technical breaches related to previously declared and paid dividends by less than wholly-owned subsidiaries of the Company. The Amendment also amended certain interest rates based on the current economic environment. On January 30, 2007, the Company obtained approval by the lenders under its DIP Agreement the eighth amendment to the DIP Agreement (the “Amendment”). The Amendment extends the maturity date from February 2, 2007 to August 2, 2007. The Amendment amends certain covenants contained in the DIP Agreement. In addition, the Amendment amends certain interest rates based on the current economic environment.

On November 9, 2006, the Company announced that production from its Kendallville, Indiana plant will be consolidated into other Tower facilities in North America as part of its ongoing restructuring plan.

On December 20, 2006, the Company announced in a press release that it has filed a commitment letter and restructuring term sheet with the U.S. Bankruptcy Court for the Southern District of New York. On January 11, 2007, the Company announced in a press release that on January 10, 2007, investment funds managed by Strategic Value Partners LLC, Wayzata Investment Partners LLC and Stark Investments notified Tower that they terminated their December 19, 2006 Commitment Letter to underwrite an equity rights offering.

On December 22, 2006, the Company and Tower Automotive Lansing, LLC completed the sale of the Lansing, Michigan facility and related assets to a designee of General Motors in accordance with the Order of the Bankruptcy Court dated August 10, 2005, for the price of $20 million.

As part of the bankruptcy process, the Company may undertake additional actions in the future to rationalize and consolidate its operations.

Note 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 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 to investors.

TOWER AUTOMOTIVE INC.

Consolidating Balance Sheet at September 30, 2006

(Amounts in thousands)

														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		$	34,470			$	—			$	21			$	68,714			$	238			$	—			$	103,443
Accounts receivable			2,144				3,337				140,638				204,740				20,568				—				371,427
Inventories			—				—				62,244				50,482				13,018				—				125,744
Prepaid tooling and other			2,438				—				14,677				74,145				23,467				—				114,727
Total current assets			39,052				3,337				217,580				398,081				57,291				—				715,341
Property, plant and equipment, net			402				—				507,025				304,208				152,549				—				964,184
Investments in and advances to (from) affiliates and joint ventures			554,969				(224,918	)			(810,860	)			16,838				(2,449	)			712,934				246,514
Goodwill			—				—				—				163,096				—				—				163,096
Other assets, net			19,535				—				26,364				63,889				16,067				—				125,855
		$	613,958			$	(221,581	)		$	(59,891	)		$	946,112			$	223,458			$	712,934			$	2,214,990
Liabilities and Stockholders’ Investment (Deficit)
Current liabilities not subject to compromise:
Current maturities of long-term debt and capital lease obligations		$	—			$	—			$	15,156			$	12,244			$	106,758			$	—			$	134,158
Current portion debtor-in-possession borrowings			650,000				—				—				—				—				—				650,000
Accounts payable			12,453				—				103,250				170,399				41,294				—				327,396
Accrued liabilities			34,079				—				69,206				75,458				8,164				—				186,907
Total current liabilities			696,532				—				187,612				258,101				156,216				—				1,298,461
Liabilities subject to compromise			609,479				391,588				295,134				—				—				(16,363	)			1,279,838
Non-current liabilities not subject to compromise:
Long-term debt, net of current maturities			40,986				—				43,765				4,798				15,965				—				105,514
Obligations under capital leases, net of current maturities			—				—				—				29,632				—				—				29,632
Other noncurrent liabilities			1,406				—				17,877				80,579				14,852				—				114,714
Total noncurrent liabilities			42,392				—				61,642				115,009				30,817				—				249,860
Stockholders’ investment (deficit)			(734,445	)			(613,169	)			(604,279	)			573,002				36,425				729,297				(613,169	)
		$	613,958			$	(221,581	)		$	(59,891	)		$	946,112			$	223,458			$	712,934			$	2,214,990

TOWER AUTOMOTIVE INC.

Consolidating Statement of Operations for the Three Months Ended September 30, 2006

(Amounts in thousands)

														Non-Guarantor				Non-Guarantor
		R.J. Tower				Parent				Guarantor				Restricted				Unrestricted
		Corporation				Guarantor				Companies				Companies				Companies				Eliminations				Consolidated
Revenues		$	—			$	—			$	295,061			$	252,931			$	67,676			$	—			$	615,668
Cost of sales			(1,628	)			—				305,600				234,009				69,807				—				607,788
Gross profit			1,628				—				(10,539	)			18,922				(2,131	)			—				7,880
Selling, general and administrative expenses			(12,060	)			—				30,116				12,081				2,039				—				32,176
Restructuring and asset impairment charges, net			45				(3,582	)			18,271				1,999				6,060				—				22,793
Other operating expense/(income)			(6,700	)			—				5,872				828				—				—				—
Operating income (loss)			20,343				3,582				(64,798	)			4,014				(10,230	)			—				(47,089	)
Interest expense			19,434				—				1,493				697				1,966				—				23,590
Interest income			(322	)			—				—				133				(150	)			—				(339	)
Intercompany interest expense/(income)			(7,366	)			—				—				7,711				(345	)			—				—
Chapter 11 and related reorganization items			2,742				—				—				—				—				—				2,742
Income (loss) before provision (benefit) for income taxes, equity in earnings (loss) of joint ventures and subsidiaries, and minority interest			5,855				3,582				(66,291	)			(4,527	)			(11,701	)			—				(73,082	)
Provision (benefit) for income taxes			1,156				68				24				(2,671	)			(4,424	)			—				(5,847	)
Income (loss) before equity in earnings (loss) of joint ventures and subsidiaries, and minority interest			4,699				3,514				(66,315	)			(1,856	)			(7,277	)			—				(67,235	)
Equity in earnings (loss) of joint ventures and subsidiaries, net of tax			(73,378	)			(68,679	)			—				3,986				—				142,136				4,065
Minority interest, net of tax			—				—				—				(1,995	)			—				—				(1,995	)
Net income (loss)		$	(68,679	)		$	(65,165	)		$	(66,315	)		$	135			$	(7,277	)		$	142,136			$	(65,165	)