##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 Form 10-K
 
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended:
    
    Commission file number:December 31, 2004
    
    1-12733
  
 Tower Automotive, Inc. (Exact name of Registrant as specified in its charter) Delaware(State of Incorporation)
    
    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:
(248) 675-6000 None(Former Name or Former Address, if Changed Since Last Report) 
 Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 per share Securities registered pursuant to Section 12(g) of the Act:
None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934, during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ no o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes þ No o As of February 28, 2005, 58,528,554 shares of Common Stock of the Registrant were outstanding. As
of February 28, 2005, the aggregate market value of the Common Stock of the Registrant (based upon
the last reported sale price of the Common Stock at that date on the Pink Sheets), excluding shares
owned beneficially by affiliates, was approximately $9,832,238.




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TOWER AUTOMOTIVE, INC. ANNUAL REPORT ON FORM 10-K  
 TABLE OF CONTENTS PagePART I
    
    
    
    1Item 1.
    
    Business
    
    1Item 2.
    
    Properties
    
    13Item 3.
    
    Legal Proceedings
    
    14Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    15PART II
    
    
    
    15Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    15Item 6.
    
    Selected Financial Data
    
    16Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    17Item 7A.
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    29Item 8.
    
    Financial Statements and Supplementary Data
    
    30Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    81Item 9A.
    
    Controls and Procedures
    
    81Item 9B.
    
    Other Information
    
    83PART III
    
    
    
    83Item 10.
    
    Directors and Executive Officers of the Registrant
    
    83Item 11.
    
    Executive Compensation
    
    87Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    91Item 13.
    
    Certain Relationships and Related Transactions
    
    92Item 14.
    
    Principal Accounting Fees and Services
    
    93PART IV
    
    
    
    93Item 15.
    
    Exhibits and Financial Statement Schedules
    
    93
  i




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PART I 
 Item 1.Business Tower Automotive, Inc. and its subsidiaries (collectively referred to as the Company or
Tower Automotive) is a leading global designer and producer of structural metal components and
assemblies used by the major automotive original equipment manufacturers (OEMs), including Ford,
DaimlerChrysler, General Motors (GM), Hyundai/Kia, Volkswagen Group, Renault/Nissan, Toyota,
Fiat, BMW, Honda, Mazda, Isuzu and Chery. The Company provides broad technical design,
engineering, and program management capabilities for products that cover the entire body structure
of a vehicle including automotive body structural stampings and assemblies, exposed sheet metal
(Class A) components, lower vehicle structural stampings and assemblies, suspension components,
modules and systems. The Company believes it is the largest independent global supplier of
structural components and assemblies to the automotive market (based on net revenues). Tower Automotive is one of only a few companies that provide a broad array of structural metal
products and services for the automotive sector. These products and services are delivered to our
customers on a global basis from more than 50 production and engineering facilities located in the
United States, Canada, Mexico, Germany, Belgium, Slovakia, Poland, Italy, France, Spain, Brazil,
Japan, Korea, China, and India. As OEMs reduce their supplier base in efforts to lower costs and
improve quality, they are more frequently awarding sole-source contracts to broadly capable
suppliers who are able to supply large and complex portions of a vehicle on a global basis rather
than to suppliers that only provide individual component parts. OEMs criteria for supplier
selection include cost, quality, responsiveness, full-service design and engineering and program
management capabilities. In addition, OEMs are increasingly requiring their suppliers to have the
capability to design and manufacture their products in multiple geographic markets. As a supplier
with strong OEM relationships, broad capabilities and technologies, scale and global presence, the
Company expects to continue to benefit from these trends going forward. Proceedings under Chapter 11 and Administration of the Bankruptcy Code On February 2, 2005, Tower Automotive, Inc. and 25 of its United States subsidiaries
(collectively, the Debtors) each 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 (the Court). The cases are jointly consolidated for administrative
purposes. The Debtors are operating as debtors-in-possession (DIP) pursuant to the Bankruptcy
Code. An official committee of unsecured creditors has been appointed. The Debtors liquidity position was adversely affected in early 2005 by customer pricing pressures,
North American automotive production cuts, significantly higher raw material costs (primarily
steel), high interest costs and the termination of accelerated payment programs of certain
customers. An extensive liquidity deficiency and a significant amount of indebtedness, incurred
through internal growth and acquisition activity, made the filing necessary. The objectives of the Chapter 11 filing are 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 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, the extent to which such relief will be achieved is uncertain at this
time. DIP Financing In February 2005, the Bankruptcy Court approved a Revolving Credit, Term Loan and Guaranty
Agreement (DIP Agreement), as amended, with a national banking institution as agent for the
lenders (Lenders) and each of the Lenders. 1




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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 pre-petition obligation
amounting to $425 million under the credit agreement existing at the time of the bankruptcy filing.
The proceeds of the revolving credit loans will be used to fund the ongoing cash requirements of
the Debtors during the Chapter 11 proceedings . 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. Going Concern As indicated above, effective February 2, 2005, 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 DIP
Agreement described above; (ii) to obtain confirmation of a plan of reorganization under the
Bankruptcy Code; (iii) to reduce unsustainable debt and simplify the Companys complex and
restrictive capital structure through the bankruptcy process; (iv) to return to profitability; (v)
to generate sufficient cash flow from operations to fund working capital and debt service
requirements; and (vi) to obtain financing sources to meet the Companys future obligations. These
matters create uncertainty regarding our ability to continue as a going concern. Overview of the Company Since its inception in April 1993, when the Company was formed to acquire R. J. Tower
Corporation, the Companys revenues have grown rapidly through internal growth and acquisitions.
From 1993 to 2004, the Company successfully completed 15 acquisitions and established five joint
ventures to create the global footprint that characterizes the Company today. As a result of
these acquisition activities and significant organic growth, Company revenues have increased from
approximately $86 million in 1993 to approximately $3.2 billion in 2004. The Companys North
American average content per vehicle has increased from $6 in 1993 to $132 in 2004. Approximately 66% of the Companys 2004 revenues were generated from sales in North America. The
Company supplies products for many car, light truck and sport utility models, including the Ford
Five Hundred/Freestyle, Taurus, Focus, Ranger and F-Series pickup trucks, Chevrolet Silverado and
GMC Sierra pickups, DaimlerChrysler Caravan/Town & Country, Dodge Ram and Dakota pickup trucks,
Toyota Camry, Avalon, Corolla and Tundra, Honda Accord and Civic and the Nissan Xterra, Pathfinder,
Titan/Armada and Infiniti QX56. Approximately 20% of the Companys 2004 revenues were generated
from sales in Europe, 12% in Asia and 2% in South America. Key vehicle programs include Volvo S40
and V50, DaimlerChrysler A-Class and Sprinter, BMW 1 & 3 series, VW Golf, Jetta and Toureg,
Hyundai/Kia Spectra, Cerato, Sportage, Carinival and Sorento, Fiat Punto Stilo, Ducato, and the
Alpha Romeo 147 and 156 and the Porsche Cayenne. The Companys principal executive offices are located at 27275 Haggerty Road, Novi, Michigan 48377,
and the telephone number is (248) 675-6000. The Company makes available, free of charge through
our internet website (www.towerautomotive.com), annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed with the Securities
Exchange Commission (SEC), as soon as reasonably practicable after those reports are filed with
the SEC. Financial information about segments See Note 15 to the Consolidated Financial Statements contained in Item 8 of this Form 10-K. 2




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Business and operating strategy Tower Automotive was created through a series of acquisitions of complementary businesses that
have allowed the Company to become the largest independent global supplier of structural metal
components and assemblies (based on net revenues) with a diverse customer portfolio and a broad
scope of product offerings. In the early years, the growth coincided with an extended period of
increased production and consolidation in the automotive industry resulting in high levels of
utilization of the Companys resources and capacity.
Unfortunately, with insufficient post-merger
integration across the acquisitions, inconsistent operational disciplines and a highly leveraged
balance sheet, when the volumes declined relative to prior periods, the Company struggled with
profitability, especially in the U.S. operations. Over the last two years, the Company successfully launched the significant backlog of new business,
which drove profitability in its international operations and helped strengthen customer
relationships. In addition, capital disciplines reduced planned capital expenditures for 2003-2004
from over $500 million to $440 million. The North America region was reorganized, cutting SG&A
while strengthening engineering, reducing excess capacity and eliminating redundant overhead costs.
Despite the restructuring activities, developments in late 2004 and early 2005 led to a
significant decline in the Companys liquidity position. These developments included the market
share and production decline at key North American OEM customers, the rise in steel prices, the
termination of accelerated payment programs by certain automakers, higher than anticipated new
program launch costs, and the continued underperformance of the North American operations. The
complex and restrictive capital structure built during the acquisition years presented a strategic
challenge as debt service required cash outflows almost as high as on-going capital expenditures
and drove the cost of capital above competitive levels. The Companys current challenge is to restructure the domestic U.S. operations under the protection
of Chapter 11 while continuing to support its flourishing international business. Our key strategies are to consolidate our competitive position as a global metal structures leader,
strengthen our financial performance for long-term health, drive operational excellence throughout
the company, leverage our scale to realize structural improvements and build a global turnaround
team. Recent initiatives implemented by the Company include:  
    
    Executed the major product launches successfully over the last two years. Since July
2003, the Company has launched seven new programs including the Volvo S40/V50, Nissan Titan
and Armada, Cadillac SRX, BMW 1 and 3 Series, DaimlerChrysler New Dakota, Ford Five
Hundred/Freestyle and Nissan Pathfinder/Xterra;
    
    Improved customer relationships while balancing Company business requirements;
    
    Consolidated corporate offices and the North American technical centers, streamlining
overhead and better aligning customer interfaces;
    
    Created a centralized process for Global Purchasing with responsibility for material,
services, capital equipment and manufacturing sourcing linked to regional leads to leverage
scale and drive faster, more efficient implementation;
    
    Implemented company-wide standards for equipment choices, tooling approaches, process
development and facilities set-up in order to better leverage and control capital spending
and reduce launch risk;
    
    Rationalized our global manufacturing footprint including plant consolidation and moving
manufacturing to lower cost locations;
    
    Improved operational effectiveness benchmarked to best-in-class practices;
    
    Demonstrated strong commitment to environmental, health and
safety through significant improvements in plant safety performance
around the world and the completion of ISO 14001 registration at the
majority of its domestic facilities and the achievement of ISO/TS
16949 at eight of its eleven European facilities; and
    
    Maintained participative and incentive-based culture to encourage transparency,
commonality, shared learning and standardized processes and cadence across Company   3




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The Company believes these and other initiatives will accelerate reductions in operational costs,
allow it to leverage economies of scale, and enhance its ability to serve its customers, creditors
and shareholders. Growth Strategy The Companys current growth strategy now focuses on cadenced organic growth. Specifically,
the Company believes that the following strengths have played, and will continue to play, an
important role in achieving the organic growth objectives:  
    
    Strong customer relationships with key domestic and foreign automotive OEMs;
    
    Broad technical capabilities in vehicle structures;
    
    Scale position as the largest independent supplier of automotive structural components
and assemblies; and
    
    Global engineering and manufacturing presence including established facilities in
China. As a result of these competitive strengths and the efforts to increase organic growth, the Company
was awarded programs during the past few years that, based on independent estimates of expected
program volumes and current expectations of program pricing, represent more than $1.3 billion in
new revenues. These programs have either launched in 2003-2004 or will launch by the end of 2005
and have helped further diversify the Companys customer base. The proportion of revenues from
Ford and DaimlerChrysler, the Companys two largest customers, has decreased from 68 percent in
2000 to 48 percent in 2004. Of the $1.3 billion in new program revenues described above, 26
percent is expected to be derived from Ford and DaimlerChrysler, 20 percent from Nissan, 19 percent
from GM, 15 percent from Volvo and 20 percent from other customers including BMW, Hyundai/Kia, VW
Group, Toyota, Honda and Fiat. Industry Trends The Companys performance and growth is directly related to certain trends within the
automotive market, including the consolidation of the component supply industry and to automotive
production levels, which is cyclical and depends on general economic conditions and consumer
confidence. The Companys strategy is to also capitalize on several important trends in the automotive industry
that have benefited Tower Automotive in the past and will continue to benefit it in the future.
These trends include: Continuation of Trend to Larger, More Capable Suppliers.In order to lower costs and improve
quality, OEMs have continued to reduce their supply base by awarding sole-source contracts to
suppliers who are able to supply greater vehicle content through complex subassemblies. OEMs
criteria for supplier selection include not only cost, quality and responsiveness, but also design
engineering and program management capabilities. As a result, the automotive supply industry has
undergone significant consolidation. Furthermore, beginning in 2001, a number of suppliers
experienced financial difficulties. These factors have combined to provide an opportunity for
further organic growth by obtaining business from smaller or troubled suppliers through providing
the scale and broad capabilities that OEMs require. OEM Shakeout.The recent acquisition and consolidation activity among select OEMs has not led to
the disadvantage of the smaller OEMs in the industry as previously predicted. Rather, smaller OEMs
such as Peugeot, Honda, Hyundai/Kia, BMW and the emerging Chinese automakers have strengthened
their position in the industry and their financial performance, while some of the larger OEMs have
struggled to successfully integrate acquisitions and manage legacy costs. The Companys global
capabilities have allowed it to continue to serve as a valuable supplier to those smaller
producers. 4




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##### Table of Contents



System/Modular Sourcing.OEMs are increasingly seeking suppliers capable of providing larger
assemblies, systems or modules. A system is a group of components, which may be dispersed
throughout the vehicle, yet operate together to provide a specific engineering function. Modules,
on the other hand, consist of sub-assemblies at a specific location in the vehicle, incorporating
components from various functional systems, which are assembled and shipped to the OEM ready for
installation in a vehicle as a unit. By outsourcing complete systems or modules, OEMs are able to
reduce their costs associated with the design and integration of different components and improve
quality by enabling their suppliers to assemble and test major portions of the vehicle prior to
production. Tower Automotive has capitalized on the system/modular sourcing trend among OEMs by
offering customers high value-added supply capabilities through a focus on the production of
assemblies consisting of multiple component parts that are welded or otherwise fastened together by
the Company. Growth in Emerging Markets.Countries and regions such as China, Korea, Thailand, India, Mexico
and Eastern Europe are expected to experience significant growth in vehicle demand over the next
ten years. OEMs are positioning themselves to reach these emerging markets in a cost-effective
manner. In order to best meet these OEM requirements, the Company has over 26 manufacturing
facilities outside North America, including locations in Germany, Italy, Belgium, Poland, Slovakia,
Mexico, Brazil, Korea and China. Products The Company produces a broad range of structural components and assemblies, many of which are
critical to the structural integrity of a vehicle. The Companys products generally can be
classified into the following categories: body structures and assemblies; lower vehicle frames and
structures; chassis modules and systems; and suspension components. A brief summary of each of the
principal product categories follows: Product Category/Description Body structures and assemblies Products that form the basic upper body structure of the vehicle and include large metal stampings
such as body pillars, roof rails, side sills, parcel shelves and intrusion beams. This category
also includes Class A surfaces and assemblies. Class A surfaces include exposed sheet metal
components such as body sides, pick-up box sides, door panels and fenders. Lower vehicle frames and structures Products that form the basic lower body structure of the vehicle which include heavy gauge metal
stampings from both traditional and hydroforming methods, such as pickup truck and SUV full frames,
automotive engine and rear suspension cradles, floor pan components and cross members. Critical to
the strength and safety of vehicles, these products carry the load of the vehicle and provide crash
integrity. Chassis modules and systems Products include axle assemblies, which consist of stamped metal trailing axles, assembled brake
shoes, hoses and tie rods, and front and rear structural suspension modules/systems. These
modules/systems consist of control arms, suspension links, value-added assemblies and powertrain
modules. Suspension components Products include stamped, formed and welded products, such as control arms, suspension links, track
bars, spring and shock towers, and trailing axles. These suspension components are critical to the
ride, handling and noise characteristics of a vehicle. Other The Company manufactures a variety of other products, including heat shields and other precision
stampings, for our OEM customers. 5




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##### Table of Contents



The following table summarizes the approximate composition by product category of the Companys
global revenues for the last three years: Years EndedDecember 31,Product Category
    
    2004
    
    
    2003
    
    
    2002Body Structures and assemblies
    
    
    47
    %
    
    
    43
    %
    
    
    38
    %Lower vehicle frames and structures
    
    
    27
    
    
    
    34
    
    
    
    40Chassis modules and systems
    
    
    16
    
    
    
    12
    
    
    
    11Suspension components
    
    
    8
    
    
    
    8
    
    
    
    8Other
    
    
    2
    
    
    
    3
    
    
    
    3Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Customers and Marketing North American automotive manufacturing has been dominated by GM, Ford, and DaimlerChrysler,
but the international automakers continue to expand their production capacity representing
approximately 28 percent of North American production in 2004 versus 26 percent in 2003. The
Companys largest customers in North America are Ford, DaimlerChrysler and GM. As a result of
past growth strategies, the Company has further expanded its global presence, and has increased
penetration into certain existing customers and added programs with customers such as Mercedes,
Fiat, BMW, Volkswagen Group, Nissan, Hyundai/Kia, Volvo and Renault. Following is a summary of the global composition of the Companys significant customers for the
last three years: Years EndedDecember 31,Customer
    
    2004
    
    
    2003
    
    
    2002Ford
    
    
    34
    %
    
    
    35
    %
    
    
    38
    %DaimlerChrysler
    
    
    14
    
    
    
    19
    
    
    
    22General Motors
    
    
    14
    
    
    
    10
    
    
    
    8Hyundai/Kia
    
    
    10
    
    
    
    9
    
    
    
    7Volkswagen Group
    
    
    7
    
    
    
    5

    
    
    
    5Renault/Nissan
    
    
    5
    
    
    
    1
    
    
    
    1Fiat
    
    
    4
    
    
    
    4
    
    
    
    4Toyota
    
    
    4
    
    
    
    3
    
    
    
    3BMW
    
    
    2
    
    
    
    2
    
    
    
    1Honda
    
    
    1
    
    
    
    2
    
    
    
    2Other
    
    
    5
    
    
    
    10
    
    
    
    9Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Following is a summary of the Companys sales by geographic region for the last three years
follows: Year s EndedDecember 31,Geographic Category
    
    2004
    
    
    2003
    
    
    2002North America
    
    
    66
    %
    
    
    71
    %
    
    
    75
    %Europe
    
    
    20
    
    
    
    15
    
    
    
    12Asia
    
    
    12
    
    
    
    13
    
    
    
    12South America
    
    
    2
    
    
    
    1
    
    
    
    1Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 6




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The following table presents an overview of the major models for which the Company supplies
products: Vehicle Manufacturer
    
    Car Models
    
    Truck ModelsFordFord
    
    §
    
    Taurus, Mustang, Focus, Crown
    
    §
    
    Explorer, Explorer Sport Trac,Victoria, Thunderbird, Street Ka, Five
    
    
    
    Freestyle, Econoline, Freestar, Escape,Hundred, GT
    
    
    
    Expedition, Excursion, Ranger, Transit,F-Series LD & HD, Medium Duty TrucksMercury
    
    §
    
    Sable, Grand Marquis, Montego
    
    §
    
    Mountaineer, Monterey, MarinerLincoln
    
    §
    
    LS, Towncar
    
    §
    
    Aviator, NavigatorMazda
    
    §
    
    6
    
    §
    
    Tribute, B-Series Pick-upVolvo
    
    §
    
    S40/V50Jaguar
    
    §
    
    XJ, S-TypeLand Rover
    
    
    
    
    
    §
    
    Range RoverDaimlerChryslerChrysler
    
    §
    
    Sebring, Sebring Convertible
    
    §
    
    Town & Country, PT Cruiser, PacificaDodge
    
    §
    
    Stratus, Neon
    
    §
    
    Ram Pickup, Dakota, CaravanJeep
    
    
    
    
    
    §
    
    Wrangler, Liberty, Grand CherokeeMercedes
    
    §
    
    A-Class, C-Class, SLK, CLK
    
    §
    
    Atego, Actros, Sprinter, VarioSmart
    
    §
    
    Fortwo, CabrioGeneral MotorsCadillac
    
    §
    
    CTS, STS
    
    §
    
    SRXGMC
    
    
    
    
    
    §
    
    Sierra, Safari, SonomaChevrolet
    
    
    
    
    
    §
    
    Silverado, Astro, S-10 PickupSaturn
    
    §
    
    LS/LW
    
    §
    
    VueOpel
    
    §
    
    Astra, Agila, Corsa, ZafiraSaab
    
    §
    
    9-3
    
    §Isuzu
    
    
    
    
    
    
    
    Rodeo, AxiomHyundai/KiaHyundai
    
    §
    
    Equus, NF Sonata, Click
    
    §
    
    Teracan, Satrex, Libero, Porter, PorterIIKia
    
    §
    
    Spectra, Rio, Optima, Cerato,
    
    §
    
    Sportage, Carens, Pregio, Carnival,Opirus, Morning, Pride
    
    
    
    Grand Carnival, Frontier, Sorento, Bongo IIIVolkswagen GroupVolkswagen
    
    §
    
    Passat, Golf, GOL, Polo, Kombi,
    
    §
    
    Caddy Van, Touareg, T5Santana, Fox, Jetta, PhaetonAudi
    
    §
    
    A3, A4, A6, Cabrio, TTSkoda
    
    §
    
    Fabia, Octavia, SuperbRenault/NissanRenault
    
    §
    
    Clio, Twingo, Megane, Kangoo,Modus, ScenicNissan
    
    §
    
    Sentra, Micra
    
    §
    
    Quest, Xterra, Frontier, Pathfinder,Titan, ArmadaInfiniti
    
    
    
    
    
    §
    
    QX56FiatFiat
    
    §
    
    Marea, Punto, Palio, Panda,
    
    §
    
    DucatoStilo, Multipla, Uno, Idea, BarchettaAlfa Romeo
    
    §
    
    147, 156, 166, GTV, SpiderLancia
    
    §
    
    Lybra, Thesis, Y, MusaToyotaToyota
    
    §
    
    Avalon, Camry, Solara, Corolla,
    
    §
    
    Sienna, Tacoma, Tundra, SequoiaVios, Xiali, CrownLexus
    
    
    
    
    
    §
    
    RX330BMWBMW
    
    §
    
    3 Series, 1 Series
    
    §
    
    X5, X3HondaHonda
    
    §
    
    Accord, Civic, Fit
    
    §
    
    Odyssey, Element, PilotAcura
    
    §
    
    EL, TL
    
    §
    
    MDXPSAPeugeot
    
    §
    
    206Citroen
    
    §
    
    C3BentleyBentley
    
    §
    
    Continental CoupePorschePorsche
    
    
    
    
    
    §
    
    CayenneSuzukiSuzuki
    
    §
    
    Wagon R+, Ignis, SwiftCheryChery
    
    §
    
    Fengyun, Oiyun, Orient Son, T11
 7




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Most of the Companys products have a lead time of two to five years from product development
to production. The selling prices of these products are generally negotiated between the Company
and its customers. Sales of the Companys products to OEMs are made directly by the sales and engineering teams,
located at its technical/customer service centers in Novi, Michigan; Yokohama, Japan; Turin, Italy;
Bergisch-Gladbach, Germany; Sao Paolo, Brazil; Seoul, Korea; Changchun and WuHu, China and
Hyderabad, India. Through its technical centers, the Company services its OEM customers and manages
its continuing programs of product design improvement and development. The Company periodically
places engineering colleagues at various customer facilities to facilitate the development of new
programs. 8




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The Companys sales and marketing efforts are designed to create overall awareness of its
engineering, program management, manufacturing and assembly expertise to acquire new business and
to provide ongoing customer service. The customer service group is organized into
customer-dedicated teams within product groups. From time to time, the Company also participates in
industry and customer specific trade and technical shows. Design, Development and Engineering Support The Company strives to maintain a technological advantage through targeted investment in
product development and advanced engineering capabilities. The Companys engineering capabilities
enable it to design and build high quality, efficient manufacturing systems, processes and
equipment and to continuously improve our production processes, systems and equipment. The
Companys manufacturing engineers are located at each of its manufacturing facilities. The
Companys engineering responsibilities range from research and development, advanced product
development, product design, testing and initial prototype development, to the design and
implementation of manufacturing processes. Because structural parts must be designed at an early stage in the development of new vehicles or
model revisions, the Company is given the opportunity to utilize its product and process
engineering competencies early in the vehicle planning process. Advanced development and
engineering resources create original engineering designs, computer aided designs, feasibility
studies, working prototypes and testing programs to meet customer specifications. The Companys
Hyderabad, India technical center allows for 24 hour engineering capabilities globally, thereby
optimizing product design and analysis capabilities, leading to reduced development costs. Manufacturing The Companys manufacturing operations consist primarily of stamping and welding operations,
system and modular assembly operations, roll-forming operations, hydroforming operations,
associated coating and other ancillary operations. Stamping involves passing metal through dies in a stamping press to form the metal into
three-dimensional parts. The Company produces stamped parts using precision single-stage,
progressive and transfer presses, ranging in size from 150 to 4,500 tons, which perform multiple
functions to convert raw material into a finished product. The Company continually invests in its
press technology to increase flexibility, improve safety and minimize die changeover time. Stampings that are to be used in assemblies are fed into cell-oriented assembly operations that
produce complex, value-added assemblies through the combination of multiple parts that are welded
or fastened together. The Companys assembly operations are performed on either dedicated,
high-volume welding/fastening machines or on flexible-cell oriented robotic lines for units with
lower volume production runs. The assembly machines attach additional parts, fixtures or stampings
to the original metal stampings. In addition to standard production capabilities, the Companys
assembly machines are also able to perform various statistical control functions and identify
improper welds and attachments. The Company works continuously with manufacturers of fixed/robotic
welding systems to develop faster, more flexible machinery. The products manufactured by the Company use various grades and thicknesses of steel and aluminum,
including high strength hot and cold rolled, galvanized, organically coated, stainless and
aluminized steel. The Company also produces exposed sheet metal components, such as exterior body
panels. See Suppliers and Raw Materials. OEMs have established quality rating systems involving rigorous inspections of suppliers
facilities and operations. OEMs factory rating programs provide a quantitative measure of a
companys success in improving the quality of its operations. The Company has received quality
awards from Ford (Q1) and DaimlerChrysler (Pentastar). The automotive industry has adopted a
quality rating system know as QS-16949. Substantially all of the Companys existing operating
facilities in North America and around the world have received QS-16949 certification in compliance
with the automotive industry requirements. 9




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##### Table of Contents



Competition The Company operates in a highly competitive, fragmented market segment of the
automotive supply industry, with a limited number of competitors generating revenues in excess of
$200 million. The number of the Companys competitors has decreased in recent years and is
expected to continue to decline due to supplier consolidation. The Companys major competitors
include: Thyssen-Budd, a subsidiary of Thyssen-Krupp AG; Magna International, Inc. (Magna); Dana
Corporation; Benteler Automotive; and divisions of OEMs with internal stamping and assembly
operations, all of which have substantial financial resources. The Company competes with other
competitors in various segments of its product lines and in various geographic markets. The
Company views Magna as its strongest competitor across most of the Companys product lines;
however, the Company believes that no single competitor can provide the same range of products and
capabilities as the Company across as broad of a geographic range. The Company principally competes for new business both at the beginning of the development of new
models and upon the redesign of existing models. New model development generally begins two to
five years before the marketing of such models to the public. Once a supplier has been designated
to supply parts for a new program, an OEM usually will continue to purchase those parts from the
designated producer for the life of the program, although not necessarily for a redesign.
Competitive factors in the market for the Companys products include product quality and
reliability, cost and timely delivery, technical expertise and development capability, new product
innovation and customer service. In addition, there is substantial and continuing pressure at the
OEMs to reduce costs, including the cost of products purchased from outside suppliers such as the
Company. Companies must be able to offset pricing givebacks to customers as well as overall
economic cost increases with improved productivity to maintain needed profitability levels. Suppliers and Raw Materials The primary raw material used to produce the majority of the Companys products is steel. The
Company purchases hot and cold rolled, galvanized, organically coated, stainless and aluminized
steel from a variety of suppliers. The Company employs just-in-time manufacturing and sourcing
systems enabling it to meet customer requirements for faster deliveries while minimizing its need
to carry significant inventory levels. The price of steel increased significantly during 2004
compared to recent historical periods due to a shortage of certain raw materials necessary to
produce steel and increased global demand, primarily in China. The Company purchases a substantial
portion of its steel from certain of its customers through the customers repurchase programs. The
purchases through customer repurchase programs have somewhat mitigated the severity of price
increases associated with the procurement of steel. The remainder of steel purchasing requirements
is met through contracts with steel producers and market purchases and, in some cases, the Company
may be unable to either mitigate increases in steel prices under existing purchasing agreements or
pass through any price increases to its customers. Customer agreements generally do not permit an
increase in selling prices for increases in raw material inputs. Other raw materials purchased by the Company include fasteners, tubing, springs, rivets and rubber
products, all of which are available from numerous sources. Colleagues As of December 31, 2004, the Company had 12,891 colleagues worldwide, of whom
8,043 are covered under collective bargaining agreements, 4,514 in the North America
and 3,529 in the international operations. These collective bargaining agreements expire between
January 2005 and January 2010. In February 2004, the Company entered into a neutrality agreement
with the United Auto Workers Union (UAW), which covers six facilities. The neutrality agreement
facilitates the organization of these facilities as it provides that the Company will take a neutral position in any organizing efforts by the UAW. Since its
inception in 1993, the Company has not experienced any work stoppages
as a result of labor issues
and considers its relations with its colleagues to be good. The Company believes that its future
success will depend in part on its ability to continue to recruit, retain and motivate qualified
personnel at all levels of the Company while competing in an ever increasingly competitive world. 10




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##### Table of Contents



Patents and Trademarks The Company has a limited number of patents worldwide. By the nature of its business, no
single patent or group of patents is material to the Companys business. The Company has trademarks pertaining to its name, Tower Automotive®, which are registered in
various countries, allowing it to market its products on a global basis. This trademark is widely
recognized in the global automotive industry. Backlog The Companys products are not sold on a firm backlog basis. The Company does not believe
that its backlog of expected product sales covered by issued purchase orders is a meaningful
indicator of future sales since orders may be rescheduled or canceled by its customers at any time.
Product sales are dependent upon the number of vehicles that the Companys customers actually
produce as well as the timing of such production. Seasonality The Companys business is somewhat seasonal. The Company typically experiences decreased
revenues and operating income during the third quarter of each year due to the impact of scheduled
OEM plant shut downs in July and August for vacations and new model changeovers. Shut downs by
OEMs of approximately a week and a half in December also have a negative impact on revenues and
operating income during the fourth quarter of each year. Environmental Matters The Company is required to comply with federal, foreign, state and local laws and regulations
governing the protection of the environment and occupational health and safety, including laws
regulating the generation, storage, handling, use and transportation of hazardous materials; the
emission and discharge of hazardous materials into soil, air or water; and the health and safety of
its colleagues. The Company is also required to obtain permits from governmental authorities for
certain operations. The Company has taken steps to assist in the compliance with the numerous and
sometimes complex regulations, such as holding environmental and safety training sessions for
representatives from its domestic facilities. The Company has achieved ISO 14001 registration for
the majority of its domestic facilities, and has achieved ISO/TS 16949 at eight of its eleven
European facilities. The Company is in the process of attempting to achieve ISO registration for
certain of its other foreign operations. The Company conducts third party or internal audits for
environmental, health, and safety compliance, and uses outside expertise to assist in the filing of
permits and reports when required. Compliance with federal, state and local provisions relating to the discharge of materials into the
environment, or otherwise relating to the protection of the environment, has not had a material
impact on the Companys capital expenditures, earnings or competitive position. The Company is not
currently aware of any significant liability exposure in respect to laws imposing liability for the
cleanup of contaminated property to which it may have sent wastes for disposal. The Company owns properties, which have been impacted by environmental releases. At some of these
properties, the Company is liable for costs associated with investigation and/or remediation of
contamination in one or more environmental media. The Company is currently actively involved in
investigation and/or remediation at several of these locations. At certain of these locations,
costs incurred for environmental investigation and/or remediation are being paid partly or
completely out of funds placed into escrow by previous property owners. Nonetheless, total costs
associated with remediating environmental contamination at these properties could be substantial
and may be material to the Companys financial condition, results of operations or cash flows. The Company has reserves of $16.3 million to cover estimated environmental liabilities associated
with its properties. This amount is based on estimates of expected investigation/remediation costs
related to environmental contamination. It is possible, however, that total costs will exceed the
environmental reserves established by the Company. 11




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##### Table of Contents



2004 Developments Relocation of Dodge Ram frame assembly to Metalsa joint venture 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) located in Monterrey, Mexico. The current Dodge Ram frame program produced in the
Milwaukee facility was expected to run through 2009. The production move to Mexico is planned for
mid-2005. The net economic impact to the Company of DaimlerChryslers decision to move the Dodge
Ram frame line has not yet been determined. The Company recognized revenue associated with the
Dodge Ram frame program of $205.5 million for calendar year 2004, $211.3 million in 2003 and $169.6
million in 2002. Acquisition of remaining shares of Seojin Industrial Company Effective February 27, 2004, Tower Automotive acquired all of the remaining outstanding shares of
Seojin Industrial Company Ltd., or Seojin, of South Korea. Previously, the Company held a 66%
equity interest in Seojin, a supplier of frames, modules and structural components to the Korean
automotive industry. The acquisition of the remaining shares was related to the settlement of an
outstanding note from the minority interest partner and was financed by Seojin through additional
borrowings of approximately $10.3 million from South Korean lenders. Seojin is headquartered in
Gunpo City and has eight manufacturing facilities and 1,300 employees across South Korea. Seojin
is a major supplier to Hyundai and Kia, two OEMs that have been gaining market share worldwide.
The acquisition of the remaining interest in Seojin will allow Tower Automotive to further leverage
this relationship and improve Seojins return on invested capital. Seojin has been consolidated in
the Companys financial statements. Seojin had sales of approximately $318.0 million in 2004,
$295.9 million in 2003 and $274.1 in 2002. Sale of equity interest in Yorozu Corporation On March 11, 2004, Tower Automotive sold its 30.76% equity interest in Yorozu Corporation of Japan
back to Yorozu through a share buy-back transaction on the Tokyo Stock Exchange. The Company
received proceeds of approximately $51.7 million from this transaction, using the net proceeds to
finance tooling purchases and other capital expenditures. Tower Automotive had been a major
shareholder in Yorozu beginning in September 2000, when it purchased a 17% equity interest. An
additional 13.76% equity interest was purchased in February 2001. The divestiture of Yorozu was
driven by the need to improve liquidity during the intense launch phase of the Company. Debt transactions On May 24, 2004, the Company issued 5.75% convertible senior debentures (the Convertible
Debentures) in the total amount of $125.0 million and entered into a new senior secured credit
facility, consisting of a $50.0 million revolving credit facility, a $375.0 million term loan and a
$155.0 million letter of credit facility. The Company repaid its old senior credit facility in the
amount of $239.5 million from the net proceeds of the offering of the debentures and from a portion
of the borrowings under the new senior credit facility. A portion of the borrowings under the new
senior credit facility were used to redeem $200.0 million of 5% convertible subordinated notes due
August 1, 2004 at a redemption price of 100.714% of the aggregate principal amount plus accrued and
unpaid interest through the redemption date. The Company borrowed the entire $50.0 million available under the new revolving credit facility at
closing, and as of December 31, 2004, no amounts were available for borrowing under that facility. In February 2005, in conjunction with our Chapter 11 filing, Tower Automotive entered into a DIP
Financing Agreement. Certain proceeds of the DIP Financing Agreement were used to refinance the
$50.0 million of borrowings pertaining to the above mentioned revolving credit facility and $375.0
million associated with the above mentioned $375.0 million term loan. 12




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##### Table of Contents



Special meeting of stockholders On September 20, 2004, a special stockholders meeting was conducted where the stockholders ratified
and approved the issuance of $125.0 million principal amount of the Convertible Debentures and the
related shares of common stock issuable upon conversion or repurchase of the Convertible
Debentures. This stockholder approval provided the Company with the option of issuing shares of
common stock in lieu of paying cash for the cash payment component of the conversion price or
redemption price of the Convertible Debentures. Accounts receivable securitization On December 30, 2004, R. J. Tower Corporation (R. J. Tower), Tower Automotive ASC, L.L.C., a
qualifying special purpose entity (QSPE) and a 100% owned subsidiary of R. J. Tower, and a lender
entered into a $50.0 million accounts receivable securitization facility. This facility became
unavailable on February 2, 2005, the date on which Tower Automotive, Inc. and its U.S. subsidiaries
filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. See
Note 6 to the Consolidated Financial Statements. Exit or Disposal Activities On April 15, 2005, the Company committed to a plan to close its Belcamp, MD, Bowling Green, KY and
Corydon, IN facilities. In addition, as a result of the closing of the Corydon, IN facility, the
Company will reduce the number of employees at its Granite City, IL facility. These actions will
result in the elimination of approximately 800 positions. Total estimated costs associated with
these actions amount to approximately $63.4 million. The facilities expected to cease production
by June 30, 2005. These operational restructuring initiatives are designed to reduce excess
capacity and associated costs and improve overall efficiency. 
 Item 2.Properties. The Companys operations are conducted in both owned and leased facilities. The Company
believes that these facilities are suitable and adequate for its activities as currently conducted.
The principal facilities in which the Companys operations are currently conducted are as follows: SquareNorth American Locations
    
    Footage
    
    Type of Interest
    
    Description of UseMilwaukee, Wisconsin.
    
    
    3,118,000
    
    
    Owned
    
    ManufacturingElkton, Michigan.
    
    
    1,100,000
    
    
    Owned
    
    ManufacturingMilan, Tennessee.
    
    
    531,000
    
    
    Leased
    
    ManufacturingChicago, Illinois.
    
    
    480,000
    
    
    Leased
    
    ManufacturingGranite City, Illinois.
    
    
    458,000
    
    
    Leased
    
    ManufacturingClinton Township, Michigan.
    
    
    385,000
    
    
    Leased
    
    ManufacturingToronto, Ontario.
    
    
    329,400
    
    
    Owned
    
    ManufacturingBardstown, Kentucky.
    
    
    300,000
    
    
    Owned
    
    ManufacturingPlymouth, Michigan.
    
    
    294,000
    
    
    Leased
    
    ManufacturingSmyrna, Tennessee
    
    
    254,000
    
    
    Leased
    
    ManufacturingLansing, Michigan.
    
    
    250,000
    
    
    Leased
    
    ManufacturingBluffton, Ohio.
    
    
    218,000
    
    
    Leased
    
    ManufacturingBellevue, Ohio (2 locations).
    
    
    200,000
    
    
    Owned
    
    ManufacturingMadison, Mississippi.
    
    
    200,000
    
    
    Leased
    
    ManufacturingTraverse City, Michigan.
    
    
    170,000
    
    
    Owned
    
    ManufacturingGreenville, Michigan.
    
    
    156,000
    
    
    Owned
    
    ManufacturingAuburn, Indiana.
    
    
    132,000
    
    
    Leased
    
    ManufacturingKendallville, Indiana.
    
    
    131,000
    
    
    Leased
    
    ManufacturingNovi, Michigan ( 2 locations)
    
    
    113,500
    
    
    Leased
    
    Corporate Office/Technical CenterUpper Sandusky, Ohio.
    
    
    56,000
    
    
    Leased
    
    ManufacturingFenton, Missouri.
    
    
    41,000
    
    
    Leased
    
    WarehouseGrand Rapids, Michigan.
    
    
    13,600
    
    
    Leased
    
    Office
 13




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##### Table of Contents



SquareInternational Locations (continued)
    
    Footage
    
    Type of Interest
    
    Description of UseCaserta, Italy (2 locations).
    
    
    751,000
    
    
    Owned
    
    ManufacturingTurin, Italy (3 locations).
    
    
    455,000
    
    
    Owned
    
    Manufacturing/OfficeWuhu, Anhui Province, China
    
    
    455,000
    
    
    
    (2
    )
    
    Manufacturing /OfficeMalacky, Slovakia.
    
    
    453,600
    
    
    Owned
    
    ManufacturingZwickau, Germany.
    
    
    409,000
    
    
    Owned
    
    ManufacturingGent, Belgium.
    
    
    376,000
    
    
    Leased
    
    ManufacturingHwaseong-si, Gyeonggi-do, Korea.
    
    
    223,000
    
    
    Owned
    
    ManufacturingGunpo-si, Gyeonggi-do, Korea.
    
    
    215,000
    
    
    Owned
    
    Manufacturing/Technical CenterSao Paolo, Brazil.
    
    
    193,000
    
    
    Owned
    
    Manufacturing/OfficeChangchun, China.
    
    
    179,200
    
    
    
    (1
    )
    
    ManufacturingKwangju Metropolitan City, Pyeongdong, Korea.
    
    
    121,000
    
    
    
    (3
    )
    
    ManufacturingKwangju Metropolitan City, Hanam,Korea.
    
    
    107,000
    
    
    Owned
    
    ManufacturingBergisch-Gladbach, Germany.
    
    
    102,000
    
    
    Owned
    
    Manufacturing/Technical CenterShiheung-si, Gyeonggi-do, Korea.
    
    
    100,000
    
    
    Owned
    
    ManufacturingChemnitz, Germany.
    
    
    76,000
    
    
    Leased
    
    ManufacturingAnsan-si, Gyeonggi-do, Korea.
    
    
    70,000
    
    
    Owned
    
    ManufacturingMinas Gerais, Brazil.
    
    
    59,000
    
    
    Owned
    
    ManufacturingBuchholz, Germany.
    
    
    54,000
    
    
    Owned
    
    ManufacturingOpole, Poland.
    
    
    54,000
    
    
    Owned
    
    ManufacturingYeongcheon-si, Korea.
    
    
    50,000
    
    
    Owned
    
    ManufacturingUlsan Metropolitan City, Korea.
    
    
    44,000
    
    
    Owned
    
    ManufacturingHyderabad, India.
    
    
    2,800
    
    
    Leased
    
    Engineering/DesignYokohama, Japan.
    
    
    1,000
    
    
    Leased
    
    Sales/Engineering
 
 (1)
    
    Facility is utilized by a joint venture in which the Company holds a 60% equity
interest. The building is owned and the land is leased.(2)
    
    Facility is utilized by a joint venture in which the Company holds an 80% equity
interest. The building is owned and the land is leased.(3)
    
    The building is owned and the land is leased. The facilities were specifically designed for the manufacturing of the Companys products. The
utilization of such facilities is dependent upon the mix of products produced and the timing of the
supply requirements pertaining to product programs from the customers. 
 Item 3.Legal Proceedings. From time-to-time, the Company is subject to claims or litigation incidental to our business.
The Company is not currently involved in any legal proceedings that, individually or in the
aggregate, are expected to have a material effect on our business, financial condition, results of
operations or cash flows. As indicated in Note 2 to the Consolidated Financial Statements and in Item 1, Business of this
Form 10-K, on February 2, 2005, Tower Automotive, Inc. and its 25 United States subsidiaries each
filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court Southern District of New York. The cases are jointly consolidated
for administrative purposes as Case No. 05-10578 (ALG). 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 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 14




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##### Table of Contents



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. See Item 10. Directors and Executive Officers of the Registrant, under the caption, Legal
Proceedings, for information on litigation associated with the Companys bankruptcy involving the
Companys officers. 
 Item 4.Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders during the fourth quarter of
2004. 
 PART II 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Companys common stock traded on the New York Stock Exchange (NYSE) under the symbol
TWR. until February 2, 2005. The following table sets forth, for the periods indicated, the high
and low closing sale prices of the Companys common stock on the NYSE. Low
    
    
    High2003First quarter
    
    $
    2.10
    
    
    $
    4.72Second quarter
    
    
    2.37
    
    
    
    3.93Third
quarter
    
    
    3.61
    
    
    
    5.37Fourth quarter
    
    
    3.29
    
    
    
    7.112004First quarter
    
    $
    4.35
    
    
    $
    7.53Second quarter
    
    
    3.33
    
    
    
    5.83Third quarter
    
    
    2.08
    
    
    
    3.72Fourth quarter
    
    
    1.20
    
    
    
    2.40
 On February 3, 2005, the NYSE suspended trading of the Companys common stock and delisted its
common stock shortly thereafter. On February 7, 2005, the Companys common stock commenced trading
over the counter on the Pink Sheets under the symbol TWRAQ. The last reported sale price of the common stock on February 28, 2005 on the Pink Sheets was $0.26.
As of February 28, 2005, there were 2,637 holders of record of the Companys outstanding common
stock. Dividend policy and restrictions Since the Companys formation in April 1993, it has never paid any cash dividends. The Companys
DIP Agreement prohibits it from paying cash dividends. Equity Repurchases The Company did not repurchase any equity securities during the fourth quarter of 2004. 15




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##### Table of Contents



Item 6.Selected Financial Data. The following table sets forth the Companys summary historical consolidated financial data
for each of the years in the five-year period ended December 31, 2004, which were derived from the
Companys consolidated financial statements. The Companys consolidated financial statements as of
and for the years ended December 31, 2004, 2003 and 2002 have been audited by Deloitte & Touche
LLP, independent registered public accounting firm, and the Companys consolidated financial
statements as of December 31, 2001 and 2000 and for the two year period ended December 31, 2001
were audited by Arthur Andersen LLP, independent auditors. The consolidated financial statements as
of December 31, 2004 and 2003 and for each of the years in the three-year period ended December 31,
2004 and the Reports of Independent Registered Public Accounting Firm thereon are included
elsewhere in this report. The consolidated financial statements as of and for the years ended
December 31, 2001 and 2000 are not included herein. This selected consolidated financial data
should be read in conjunction with Managements Discussion and Analysis of Results of Operations
and Financial Condition and the Companys Consolidated Financial Statements and Notes to
Consolidated Financial Statements, included elsewhere in this report. Years Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(in thousands)Statement of Operations Data:Revenues
    
    $
    3,178,724
    
    
    $
    2,815,749
    
    
    $
    2,754,464
    
    
    $
    2,467,433
    
    
    $
    2,531,953Cost of sales
    
    
    2,953,041
    
    
    
    2,560,689
    
    
    
    2,456,380
    
    
    
    2,190,248
    
    
    
    2,160,359Selling, general and administrative
expenses
    
    
    145,217
    
    
    
    155,500
    
    
    
    143,822
    
    
    
    139,203
    
    
    
    141,984Amortization expense (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,804
    
    
    
    21,517Restructuring and asset impairment
charges, net
    
    
    (713
    )
    
    
    157,532
    
    
    
    61,125
    
    
    
    383,739
    
    
    
    141,326Goodwill impairment charge
    
    
    337,230
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (256,051
    )
    
    
    (57,972
    )
    
    
    93,137
    
    
    
    (270,561
    )
    
    
    66,767Interest expense, net
    
    
    141,978
    
    
    
    92,747
    
    
    
    70,267
    
    
    
    73,765
    
    
    
    64,711Unrealized gain on derivative
    
    
    (3,860
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provision (benefit) for income taxes
    
    
    157,084
    
    
    
    (50,811
    )
    
    
    7,636
    
    
    
    (73,312
    )
    
    
    626Income (loss) before cumulative
effect of change in accounting
principle
    
    
    (533,905
    )
    
    
    (124,675
    )
    
    
    15,180
    
    
    
    (267,524
    )
    
    
    13,434Net income (loss)
    
    
    (533,905
    )
    
    
    (124,675
    )
    
    
    (97,606
    )
    
    
    (267,524
    )
    
    
    13,434Basic earnings (loss) per share
before cumulative effect of change
in accounting principle
    
    $
    (9.19
    )
    
    $
    (2.20
    )
    
    $
    0.26
    
    
    $
    (5.87
    )
    
    $
    0.29Diluted earnings (loss) per share
before cumulative effect of change
in accounting principle
    
    $
    (9.19
    )
    
    $
    (2.20
    )
    
    $
    0.26
    
    
    $
    (5.87
    )
    
    $
    0.28Basic earnings (loss) per share
    
    $
    (9.19
    )
    
    $
    (2.20
    )
    
    $
    (1.70
    )
    
    $
    (5.87
    )
    
    $
    0.29Diluted earnings (loss) per share
    
    $
    (9.19
    )
    
    $
    (2.20
    )
    
    $
    (1.70
    )
    
    $
    (5.87
    )
    
    $
    0.28
 Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Balance Sheet Data:Working capital (deficit)
    
    $
    (278,432
    )
    
    $
    (366,904
    )
    
    $
    (305,466
    )
    
    $
    (379,785
    )
    
    $
    78,753Total assets
    
    
    2,560,774
    
    
    
    2,846,409
    
    
    
    2,557,885
    
    
    
    2,533,436
    
    
    
    2,892,747Long-term debt and capital leases, net
    
    
    1,398,108
    
    
    
    1,103,657
    
    
    
    764,935
    
    
    
    805,688
    
    
    
    1,141,900Other long-term obligations
    
    
    226,062
    
    
    
    223,641
    
    
    
    199,477
    
    
    
    201,635
    
    
    
    200,194Mandatorily redeemable trust
convertible preferred securities (2)
    
    
    
    
    
    
    
    
    
    
    258,750
    
    
    
    258,750
    
    
    
    258,750Stockholders investment (deficit)
    
    
    (120,932
    )
    
    
    413,510
    
    
    
    512,076
    
    
    
    447,408
    
    
    
    700,095
   (2) Includes $258.8 million due to Tower Automotive Capital Trust, or Trust. In June 1998, the
Trust sold $258.8 million in aggregate liquidation preference of 6 3/4% Trust Convertible Preferred
Securities (the Trust Preferred Securities). The sole assets of the Trust are approximately
$266.8 million in aggregate principal amount of the Issuers 6 3/4% convertible subordinated
debentures due June 30, 2018, such amount being the sum of the stated liquidation preference of the
Trust Preferred Securities and the capital contributed by the Issuer in exchange for the common
securities of the Trust. During the third quarter of 2003, the Company elected to adopt the
current provisions of FASB Interpretation Number (FIN) 46, Consolidation of Variable Interest
Entities, an interpretation of ARB No. 51 as it relates to the Trust Preferred Securities, prior to
the required effective date. Under FIN 46, the 16




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Trust, which was previously consolidated by the Company, is no longer consolidated. As a result,
Tower Automotive no longer presents the Trust Preferred Securities as mezzanine financing, but
instead records a debt obligation for the proceeds, which are owed to the Trust by the Company.
Interest is recorded at 6 3/4% on the amount owed by the Issuer to the Trust, which is equal to the
amount that was previously presented as minority interest (net of tax) for the amounts paid on the
Trust Preferred Securities. Interest expense increased by $8.8 million in each of 2003
(representing six months of interest) and by $8.8 million for the six months ended June 30, 2004
related to this reclassification. Pursuant to the guidance in FIN 46, the Issuer has not
reclassified the presentation in prior periods. NOTE: On February 2, 2005, Tower Automotive, Inc. and its U.S. subsidiaries filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code. The selected financial
data set forth above does not reflect the Chapter 11 filing. Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations. Going Concern Effective February 2, 2005, 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 DIP financing agreement described in Note 10 to the
Consolidated Financial Statements; (ii) to obtain confirmation of a plan of reorganization under
the Bankruptcy Code; (iii) to reduce unsustainable debt and simplify the Companys complex and
restrictive capital structure through the bankruptcy process; (iv) to return to profitability; (v)
to generate sufficient cash flow from operations to fund working capital and debt service
requirements; and (vi) 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. Overview The Company produces a broad range of assemblies and modules for vehicle frames, upper body
structures and suspension systems for the global automotive industry. Including 100% owned
subsidiaries and investments in joint ventures, the Company has production and engineering
facilities in the United States, Canada, Mexico, Germany, Belgium, Italy, Slovakia, Poland, France,
Spain, Brazil, India, South Korea, Japan and China. The Companys products are manufactured utilizing steel and various purchased steel assemblies. The
price of steel increased significantly during 2004 compared to recent historical periods due to a
shortage of certain raw materials necessary to produce steel and increased global demand, primarily
in China. The Company purchases a substantial portion of its steel from its customers through
certain customers repurchase programs. The purchases through customers repurchase programs have
somewhat mitigated the severity of price increases associated with the procurement of steel. The
remainder of the Companys steel purchasing requirements is met through contracts with steel
producers and market purchases. Prices associated with such purchases increased rapidly during
2004. The Companys agreements with its customers generally do not permit the Company to increase
selling prices for increases in prices of raw material inputs. Steel price increases during 2004
reduced gross margin by $46.1 million. While steel price increases have abated, and in some cases decreased, the Company expects that
higher overall steel prices in 2005, relative to average prices in 2004, will have an adverse
impact on the Company. The Company is pursuing several initiatives to mitigate the impact of such
raw material price increases on its results of operations. Such initiatives include moving more
steel purchases to customer repurchase programs, pursuing selling price increases from customers
and reducing other operating costs, among other initiatives. The Company can provide no assurances
that such initiatives will be successful. During 2004, the Company realized approximately $39.1
million in steel price increase recoveries from certain foreign customers. Reductions in North American automobile production, primarily during the second half of 2004, had
an adverse impact on the Companys revenues and operating results. North American automobile
production declined by 239,937 units, or 3.5%, during 2004 in comparison to 2003. This decline
was partially offset by an increase of 198,143 units, or 2.1%, in North American truck production.
Two major customers of the Company, Ford Motor Company (Ford) and General Motors Corporation
(GM), cut overall production levels in 2004 by 243,355 units (6.5%) and 309,759 units (5.8%),
respectively, in comparison to 2003. During 2004, Ford had its lowest production year in 12
years, and General Motors produced less than 5.0 million vehicles for the first time since 1998.
The Company expects depressed levels of North American automobile production to continue into 2005.
Also, relatively high fuel prices are expected to have an adverse impact on North American truck
production. The Companys relatively high concentration of revenues associated with large vehicle
platforms exposes the Company to a significant adverse impact from reductions in OEM production
levels of these vehicles. The Companys gross margins have been declining since 1999. Generally, the Companys customers
require the reduction of selling prices of the Companys products for each year during the
respective lives of such product programs, generally five to seven years. The Companys ability to
improve its profit margins is directly linked to its ability to more than offset these price
reductions with reduced operating costs. During 2004, net selling price reductions reduced gross
profit by $21.4 million in comparison to 2003. 17




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The number of new vehicle launches also impacts the Companys gross margins. The Companys
operating costs are higher during a product launch period relative to when the vehicle has reached
normal production volumes. In addition, the Companys gross margins are impacted by the commercial
success of the vehicles to which the Company is a supplier, general global economic conditions and
vehicle production volumes as mentioned above. During 2004, the Company was adversely impacted by a
significant amount of new product launch activity compared to 2003. These launches, which are
significant both in terms of number and relative size, reduced gross profit by $14.2 million in
2004 in comparison to 2003. In addition, general economic conditions, such as labor costs and
health care, reduced gross profit by $15.4 million in 2004 compared to 2003. To address the deterioration in operating performance, management has initiated plans to: (a)
centralize and standardize processes which were previously performed on a decentralized basis,
including purchasing, customer quoting and product costing, product engineering and accounting; (b)
rationalize and reduce capital expenditures to more closely align capital spending with expected
product returns; (c) use centralization and standardization to leverage cost improvement ideas
across the Companys operating facilities globally; (d) pursue recoveries of significant steel
price increases; and (e) a number of other cost reduction initiatives. If the Company is not
successful in implementing these actions, the Company may continue to experience declining gross
margins. 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 40% owned joint venture partner, Metalsa
located in Monterrey, Mexico. The current Dodge Ram frame program produced in the Milwaukee
facility was expected to run through 2009. In June 2005, production ceased on the Dodge Ram light
truck frame at the Companys Milwaukee, Wisconsin facility. The Company leased a significant
portion of the equipment utilized to produce the Dodge Ram light truck frame and notice of
rejection of these leases was filed with the Bankruptcy Court in June 2005. In June 2005, the
Company recorded its estimate of rejection damages associated with the Lessors pre-petition claim
of approximately $75 million, but the actual rejection damages
are not known at this time. Except for the costs associated with the lease rejection, the
Company does not expect to incur additional material costs associated with the customers decision
to move the Dodge Ram light truck frame production For a more detailed description of other factors that have had, or may in the future have, a
significant impact on the Companys business, please refer to Forward Looking Statements, Market
Risks and Opportunities contained in this Managements Discussion and Analysis for insight on
opportunities, challenges and risks, such as those presented by known material trends and
uncertainties, on which the Companys management is most focused for both the short term and long
term, as well as actions management is taking to address these opportunities,
challenges and risks. Critical Accounting Policies The Companys discussion and analysis of its financial condition and results of operations is based
upon its consolidated financial statements which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these consolidated
financial statements requires the Company to make estimates and judgments that affect amounts
reported in those statements. The Company has made its best estimates of certain amounts contained
in these consolidated financial statements. However, application of the Company accounting
policies involves the exercise of judgment and use of assumptions as to future uncertainties and,
as a result, actual results could differ materially from these estimates. Management believes that
the estimates, assumptions and judgments involved in the accounting policies described below have
the greatest impact on the consolidated financial statements and require assumptions that can be
highly uncertain at the time the estimate is made. The Company bases its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities. The following represents a summary of the Companys critical accounting policies that require
managements most difficult and subjective judgments. 18




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GoodwillStatement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets (SFAS No. 142) requires that no amortization be recognized in relation to goodwill.
However, SFAS No. 142 requires a test for impairment of goodwill to be performed annually or
immediately if conditions indicate that impairment may exist. The evaluation of the Companys
reporting units in relation to impairment testing requires significant judgments and estimation.
The Company conducts formal valuation procedures utilizing a combination of valuation techniques
including the discounted cash flow approach and the market multiple approach with the assistance of
a third party specialist. Events or changes in business circumstances may indicate that the
carrying value pertaining to goodwill may not be recoverable. As a result of such an indication, a
significant charge may be required in the Companys Statement of Operations. In the fourth quarter
of 2004, the Company recognized a goodwill impairment charge of $337.2 million in the United
States/Canada operating unit in accordance with SFAS 142. This charge was precipitated by declining
estimates of forecasted results and cash flows given current economic and market conditions within
the automotive supplier industry. Upon adoption of SFAS 142 during the second quarter of 2002, the
Company recorded a transitional impairment loss of $112.8 million, representing the write-off of
all of the Companys existing goodwill in the reporting units of Asia ($29.7 million) and South
America/Mexico ($83.1 million). The Company recognized no impairment charges for the year ended
December 31, 2003. On December 31, 2004 and 2003, goodwill amounted to $174.6 million and $498.7
million, respectively, on the Companys Consolidated Balance Sheets. Income Taxes The Company is required to make estimates of provision (benefit) for income taxes,
as applicable, in each tax jurisdiction in which the Company operates. This process incorporates
an assessment of current taxes payable and/or receivable with temporary differences between the tax
bases of assets and liabilities and the corresponding reported amounts in the financial statements.
These differences result in deferred tax assets and deferred tax liabilities included in the
Companys Consolidated Balance Sheets. The Company has total net deferred tax assets (liabilities)
of $(11.3) million and $167.1 million, respectively, at December 31, 2004 and 2003, which are
inclusive of deferred tax valuation allowances of $306.8 million and $60.1 million, respectively.
The Company is required to estimate whether recoverability of its deferred tax assets are more
likely than not based on forecasts of taxable earnings in each tax jurisdiction. As disclosed in
Note 11 to the Consolidated Financial Statements, a large portion of the Companys deferred tax
assets are comprised of net operating loss carryforwards and tax credits. The Company uses
historical and projected future operating results, including a review of the eligible carryforward
period, tax planning opportunities and other relevant considerations in determining recoverability.
Key factors that could affect the determination of the need for a deferred tax valuation allowance
include variances to future projected profitability and tax law changes. Reserves The Company has recognized accruals in relation to restructuring reserves and purchase
accounting reserves, which require the use of estimates and judgment regarding risk, loss exposure
and ultimate liability. Reserves for restructuring activities are estimated primarily for
activities associated with the discontinuation and consolidation of certain of the Companys
operations. Reserves for loss contracts are estimated by determining which products are being sold
pursuant to loss contracts, the estimated loss per unit and expected sales volumes over the life of
each contract. Other reserves are estimated using consistent and appropriate methods based upon
estimated risk and loss exposure. Changes to these assumptions and estimates could materially
affect the recorded liabilities and related loss. Favorable adjustments to the Companys loss
contract reserves of approximately $7.0 million during the year ended December 31, 2002, were
recorded to reflect the discontinuance of certain contracts that the Company was fulfilling at a
loss, and the reduction of costs associated with remaining loss contracts which were transferred to
lower cost locations as part of the Companys restructuring activities. See Notes 7 and 9
to the Consolidated Financial Statements. Impairment and Depreciation of Long-Lived Assets The Companys long-lived assets, excluding
goodwill, are reviewed for impairment whenever adverse events or changes in circumstances indicate
a possible impairment. An impairment loss is recognized when the carrying value of the long-lived
assets exceeds its fair value. Significant judgments and estimates used by management when
evaluating long-lived assets for impairment include: -An assessment as to whether an adverse event or circumstance requires an impairment review; and -Undiscounted future cash flows generated by the asset. 19




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In addition, the Company follows its established accounting policy for estimated useful lives of
long-lived assets. This policy is based upon significant judgments and estimates as well as
historical experience. Actual future experience with those assets may indicate different useful
lives resulting in a significant impact on depreciation expense contained in the Companys
Statements of Operations. Pension and Other Post-Retirement Benefits The determination of the obligation and expense for
pension and other postretirement benefits is dependent on the selection of certain assumptions used
by actuaries in calculating such amounts. Those assumptions are described in Note 13 to the
Consolidated Financial Statements and include, among others, the discount rate, expected long-term
rate of return on plan assets, as well as expected increases in compensation and healthcare costs.
In accordance with generally accepted accounting principles, actual results that differ from these
assumptions are accumulated and amortized over future periods and therefore, in the U.S., generally
affect the recognized expense and recorded obligation in such future periods. While the Company
believes that its current assumptions are appropriate based on available information, significant
differences in the actual experience or significant changes in the assumptions may materially
affect the pension and other postretirement obligations and the future expense. The Company recorded pension expense in relation to its defined benefit pension plans of $18.8
million, $21.1 million and $20.9 million for 2004, 2003 and 2002, respectively. The Company
recorded other post-retirement benefit costs of $14.2 million $15.2 million and $10.5 million for
2004, 2003 and 2002, respectively. These amounts are calculated based on a number of actuarial
assumptions, most notably the discount rates used in the calculation of the Companys pension
benefit obligations of 5.50%, 5.95% and 6.75% and the discount rates used in the calculation of the
Companys post-retirement benefit obligations of 5.00%, 5.95% and 6.75% as of the Companys
September 30 measurement date in 2004, 2003 and 2002, respectively. The discount rates used by the
Company are developed based on consultation with the Companys actuary and reflects the
construction of a hypothetical portfolio of high quality instruments with maturities that mirror
the timing and amounts of future benefits. The expected rate of return on pension plan assets under SFAS 87 of 8.5% as of December 31, 2004
and 2003 is based on consultation with the Companys actuary and represents the Companys expected
long-term rate of return on plan assets. The rate of return assumptions selected by the Company
reflect the Companys estimate of the average rate of earnings expected on the funds invested or to
be invested in order to provide for future participant benefits to be paid out over time. As part
of this estimate, the Companys actuary contemplated the composition of the actual investment
policies of the Company as well as the expected long-term rates of return for the various
categories of investment vehicles within the plans. The expected rate of compensation increase reflects actual experience, the long term outlook and
estimated inflation. Results of Operations Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003 Revenues.Revenues for 2004 increased by $363.0 million, or 12.9%, to $3.18 billion from $2.82
billion during 2003. Higher volume and favorable product mix increased revenues by $275.1 million
while foreign exchange effects increased revenues by $70.2 million. In addition, steel price
recoveries from certain foreign customers exceeded net selling price reductions by $17.7 million. Gross Profit and Gross Margin. Gross margin was 7.1% in 2004 compared to 9.0% for 2003. Gross
profit declined by $29.4 million, or 11.5%, to $225.7 million during 2004 compared to $255.1
million during 2003. The decreases in gross margin and gross profit were primarily attributable to
increased costs associated with the Companys product launch activities of $14.2 million and higher
operating expenses of $71.9 million, which includes the effects of higher material costs, primarily
steel ($46.1 million), higher health care expenses ($10.4 million) and general adverse economic
conditions (i.e. general labor rate increases, higher energy costs, etc.) impacting the Company
($15.4 million). In addition, the Company recognized $3.6 million in property, plant and equipment
write offs and $12.7 million of additional expenses associated with insurance accruals and certain
leases. These declines were partially offset by operating efficiencies of $4.8 million, favorable
foreign currency effects of $6.0 million, volume and product mix effects of $44.5 million and steel
price recoveries from certain foreign customers exceeding net selling price reductions by $17.7
million. 20




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Selling, General and Administrative Expenses. Selling, general and administrative expenses
declined by $10.3 million, or 6.6%, to $145.2 million during 2004 from $155.5 million in 2003.
Selling, general and administrative expenses represented 4.6% of revenues during 2004 compared to
5.5% during 2003. The decline is primarily attributable to lower expenses resulting from the
Companys 2003 Restructuring Plan involving the Companys corporate consolidation activities. Goodwill Impairment Charge. During the fourth quarter of 2004, the Company recognized a goodwill
impairment charge of $337.2 million. There was no tax impact associated with this charge because
the Company recognized a valuation allowance in relation to that impact. This charge was
precipitated by declining estimates of forecasted results and cash flows given current economic and
market conditions within the automotive suppler industry. Operating Loss. Operating loss increased by $198.1 million to $256.1 million in 2004 from $58.0
million in 2003. The increase in operating loss for 2004 was attributable to the decline in gross
profit of $29.4 million and the goodwill impairment charge of $337.2 million, which were partially
offset by the lower selling, general and administrative expenses of $10.3 million and the decline
in restructuring and asset impairment charges of $158.2 million. Interest Expense, Net. Interest expense, net increased by $49.2 million, or 53.1%, to $142.0
million for 2004 from $92.7 million in 2003. The increase was attributable to: (i) increased
interest of $14.0 million related to the 12% senior notes issued in June 2003; (ii) $8.8 million
related to the Trust Preferred Securities, which was recorded as minority interest during the first
six months of 2003; (iii) the write off of deferred financing fees of $3.3 million related to debt
repaid in the second quarter of 2004; (iv) $1.4 million associated with a call premium pertaining
to $200 million convertible subordinated notes, which were repaid in June 2004; (v) $4.8 million
attributable to the 5.75% Convertible Debentures issued in May 2004; (vi) $17.6 million
attributable to the Companys $375 million term loan and $50 million revolver borrowing associated
with the credit agreement entered into in May 2004 (vii) $3.2 million pertaining to a decrease in
capitalized interest during 2004; (viii) $1.0 million associated with an increase in the
amortization of deferred financing costs; and (ix) a decline in interest income in the amount of
$0.5 million. These expenses were partially offset by $5.0 million in relation to interest
savings associated with the repayment of 5.0% convertible subordinated notes, which were repaid in
May 2004 and $0.4 million in relation to a decrease in foreign interest expense. Unrealized Gain on Derivative. The Company recognized an unrealized gain on derivative of $3.9
million during 2004. The embedded conversion option associated with the 5.75% Convertible
Debentures, issued in May 2004, was required to be bifurcated from the host debt contract. This
bifurcated derivative was being marked to market during the period of May 24, 2004 through
September 19, 2004. On September 20, 2004, the Companys stockholders approved the issuance of the
Convertible Debentures and the associated shares of common stock, thereby, eliminating the
characterization of the embedded conversion option as a derivative and no longer requiring mark to
market adjustments. See Note 10 to Consolidated Financial Statements. Provision (Benefit) for Income Taxes. The Company recognized a provision for income taxes
amounting to $157.1 million for 2004 compared to the recognition of a benefit for income taxes in
the amount of $50.8 million in 2003. The provision for income taxes, despite a pre tax loss,
resulted primarily from an increase to the Companys valuation allowance associated with the
Companys deferred tax assets in the amount of $218.0 million, the recognition of foreign income
taxes in the approximate amount of $7.9 million and $70.7 million relating to a certain portion of
the goodwill impairment charge not being deductible for tax return purposes. The above- mentioned
amounts were partially offset by the benefit related to the statutory tax rate applied to the
Companys pre tax loss resulting in a tax benefit of
$137.9 million. The effect of other permanent differences
resulted in a $1.6 million tax benefit. Write-Down of Joint Venture Investment to Market Value. The Companys results of operations for
2003 were adversely affected by an impairment charge of $27.4 million in relation to the Companys
investment in Yorozu. Equity in Earnings of Joint Ventures. Equity in earnings of joint ventures increased by $0.1
million in 2004 to $13.4 million in 2004 from $13.3 million during 2003. The increase primarily
resulted from the Companys share of earnings from its joint venture interest in Metalsa in the
amount of $4.3 million more than offsetting a decline in the Companys share of earnings from its
joint venture interest in Yorozu in the amount of $4.2 million. The Company sold its investment in
Yorozu in March 2004. See Note 8 to the Consolidated Financial Statements. 21




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Minority Interest. Minority interest declined by $4.9 million, or 45.9%, to $5.8 million in 2004
from $10.6 million in 2003. The year 2003 included dividends, net of income tax benefit on the
Companys Trust Preferred Securities, in the amount of $5.8 million, which is now classified as
interest expense. This decrease was partially offset by an increase of $0.9 million associated
with improved earnings at Tower Golden Ring. Gain on Sale of Joint Venture, Net of Tax. The gain on sale of joint venture of $9.7 million for
2004 represents the Companys sale of its 30.76% ownership interest in Yorozu. See Note 8 to the
Consolidated Financial Statements. Net Loss. The Company recognized a net loss of $533.9 million, or $9.19 per basic and diluted
share, in 2004 compared to the recognition of a net loss of $124.7 million, or $2.20 per basic and
diluted share for 2003. The $409.2 million increase in net loss for 2004 primarily reflected the
goodwill impairment charge, the increase in interest expense, net and the recognition of a
provision for income taxes in the amount of $157.1 million in 2004 compared to the benefit for
income taxes in the amount of $50.8 million recognized in 2003. Year Ended December 31, 2003 Compared to the Year Ended December 31, 2002 Revenues.Revenues for the year ended December 31, 2003 were $2,815.7 million, a 2.2% increase,
compared to $2,754.5 million for the year ended December 31, 2002. The $61.2 million increase was
composed of positive foreign exchange rate effects in Europe and Asia of $75.9 million, offset by a
decline in revenues of $12.3 million attributable to the sale of the Iwahri, Korea plant, which
occurred during the first quarter of 2002, and $10.4 million attributable to pricing and economic
conditions. In addition, net volume increased $8.0 million, primarily in the platforms of Dodge
Ram, GM Cadillac CTS, Ford F-Series and Lincoln SUV and various Nissan, Volkswagen and Hyundai/Kia
platforms which were offset by volume decreases primarily in the Dodge Dakota/Durango series,
Chrysler LH and Concorde platforms and the Ford Explorer, Focus and Taurus platforms. While net
volume increased $8.0 million, the Company experienced a $32.9 million decrease in value-added
revenue platforms, which was offset by a non-value-added module assembly revenue increase of $40.9
million. Gross Profit and Gross Margin.Cost of sales as a percent of total revenues for the year ended
December 31, 2003 was 90.9% compared to 89.1% for the year ended December 31, 2002. Gross margin
for 2003 was 9.1% compared to 10.8% in 2002. Gross profit decreased $43.0 million from $298.1
million in 2002 to $255.1 million in 2003 and is attributable to the combined effects of: (i) $10.4
million in a negative profit effect of pricing and cost economics, (ii) increased health care costs
of $3.3 million, (iii) $25.0 million of additional launch costs related primarily to new programs
launched for Volvo, Ford, Nissan and GM, (iv) lease expense of $4.7 million not present in the 2002
period, (v) $14.8 million decline in gross profit on value-added revenue decreases, offset by (vi)
$6.9 million in positive foreign exchange rate effects on gross profit, (vii) $1.2 million increase
in gross profit on non-value added module assembly revenues and (viii) $7.1 million in operational
performance improvements in 2003. Selling, General and Administrative Expenses.Selling, general and administrative expenses
increased to $155.5 million, or 5.5% of revenues, for the year ended December 31, 2003 compared to
$143.8 million, or 5.2 % of revenues, for the year ended December 31, 2002. The $11.7 million
increase in expense is due to increased compensation related expenses of $7.7 million due primarily
to executive leadership retirement and recruitment costs of $4.4 million, increased legal and
professional costs of $1.2 million, and increased program management costs of $2.8 million related
to engineering and support activities. Operating Income (Loss). An operating loss in the amount of $58.0 million was recognized in 2003
compared to the recognition of operating income amounting to $93.1 million for 2002. The operating
loss was attributable to a $96.4 million increase in restructuring and asset impairment charges
described below, the $43.0 million decline in gross profit and the $11.7 million increase in
selling, general and administrative expenses. Interest Expense, net.Interest expense, net of interest income, for the year ended December 31,
2003 was $92.7 million compared to $70.3 million for the year ended December 31, 2002. The $22.4
million increase in net interest expense is attributable to (i) increased interest of $17.2 million
related to the $258.8 million senior notes issued in June 2003 (ii) $9.0 million related to the
Trust Preferred Securities which was previously recorded as minority interest, and (iii) an
increase of $1.4 million due to higher short-term rates, offset by (iv) decreased interest costs of
$2.2 million due to decreased revolver borrowings during 2003 compared to 2002 and (v) increased
capitalized interest on construction projects in the 2003 period of $3.0 million. 22




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Income Taxes.The effective income tax (benefit) rate was (33.7) % and 35.0% in 2003 and 2002,
respectively. The effective income tax (benefit) rates reflect the actual rates in the tax
jurisdictions in which the Company operates, adjusted for permanent differences. Write-down of Joint Venture Investment to Market Value, net.Prior to the fourth quarter of 2003,
the Company had determined that its investment in Yorozu had not suffered an other than temporary
decline in market value. This determination was based on the strategic nature of the investment,
which supported the Companys original investment decision and the fact that the Company believed
that there was a significant premium associated with the large block of stock held in Japan. During
the fourth quarter of 2003, the Company reevaluated the strategic nature and current intent of its
investment in Yorozu. As a result, the Company recorded an impairment charge of $27.4 million to
record the investment at the December 31, 2003 traded value on the Tokyo Stock Exchange. Equity in Earnings of Joint Ventures, net.Equity in earnings of joint ventures, net of tax, was
$13.3 million and $16.8 million for the years ended December 31, 2003 and 2002, respectively. These
amounts represent the Companys share of the earnings from its joint venture interests in Metalsa,
Yorozu and DTA Development. The Companys share of joint venture earnings in Metalsa decreased by
$6.0 million in the 2003 period, partially offset by increases during the 2003 period in the
Companys share of joint venture earnings in DTA and Yorozu of $0.1 million and $2.4 million,
respectively. Minority Interest, net.Minority interest, net of tax, was $10.6 million and $15.8 million for the
years ended December 31, 2003 and 2002, respectively. Minority interest in the 2003 period
represents the minority interest held by the 40 percent joint venture partners in Tower Golden Ring
and dividends, net of income tax benefits, on the Trust Preferred Securities, through June 2003.
Minority interest in the 2002 period represents dividends, net of income tax benefits, on the Trust
Preferred Securities and the minority interest held by the 40 percent joint venture partners in
Tower Golden Ring. The decrease is due to the adoption of FASB Interpretation No. (FIN) 46 during
the third quarter of 2003, which requires the dividends previously recorded as minority interest to
be classified as interest expense. Cumulative Effect of a Change in Accounting Principle, net.The Company adopted Statement of
Financial Accounting Standards (SFAS) No. 142 relating to the accounting for goodwill and other
intangible assets as of January 1, 2002. Under SFAS No. 142, the Company designated four reporting
units: 1) United States/Canada, 2) Europe, 3) Asia and 4) South America/Mexico. During the second
quarter of 2002, the Company completed its formal valuation procedures under SFAS No. 142,
utilizing a combination of valuation techniques including the discounted cash flow approach and the
market multiple approach. As a result of this valuation process as well as the application of SFAS
No. 142, the Company recorded a transitional impairment loss of $112.8 million, representing the
write-off of all of the Companys existing goodwill in the reporting units of Asia ($29.7 million)
and South America/Mexico ($83.1 million). The write-off was recorded as a cumulative effect of a
change in accounting principle in the Companys Consolidated Statement of Operations for the year
ended December 31, 2002. There was no tax impact since the Company recorded a $24.2 million tax
valuation allowance for the deductible portion of the goodwill written off in the reporting unit of
South America/ Mexico. The Company determined that it was appropriate to record a valuation
allowance against the entire amount of the $24.2 million deferred tax asset recognized in adopting
SFAS No. 142, given the uncertainty of realization and the lack of income in the reporting unit.
The Asia goodwill was not deductible for tax purposes. RESTRUCTURING AND ASSET IMPAIRMENT On April 15, 2005, the Company committed to a plan to close its Belcamp, MD, Bowling Green, KY and
Corydon, IN facilities. In addition, as a result of the closing of the Corydon, IN facility, the
Company will reduce the number of employees at its Granite City, IL facility. These actions will
result in the elimination of approximately 800 positions. The facility closures are expected to be
completed by June 30, 2005. These operational restructuring initiatives are designed to reduce
excess capacity and associated costs and improve overall efficiency. Total estimated 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. Future 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 costs are contained in the North America operating segment. 23




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On October 28, 2004, the Company committed to a plan to consolidate the stamping operations of its
Gunpo, Korea facility (Gunpo) into its Hwasung, Korea plant (Hwasung) and to move welding
operations from Gunpo to Hwasung and the Companys facility in Shiwha, Korea. These actions were
taken for the purpose of reducing future operating costs and are expected to be completed by March
2006. Total estimated costs associated with these actions amount to approximately $1.2 million,
which is contained in the International operating segment. These costs involve cash expenditures
in the amount of $0.5 million and non-cash asset impairment charges in the amount of $0.7 million. During the third quarter of 2004, the Company committed to a plan to transfer production of its
suspension link arm business from the Companys facility in Bowling Green, Kentucky to its plant in
Milan, Tennessee to gain production efficiencies and strengthen competitiveness. In the third
quarter of 2004, the Company also committed to a plan to move manual stamping operations and
related weld assemblies from its Greenville, Michigan facility to other Company locations in
Elkton, Michigan and Kendallville, Indiana to enable the Greenville facility to concentrate on
higher-margin business in progressive stampings and complex value-added assemblies. The Company
recognized cash charges and non-cash asset impairment charges in association with these actions in
the amounts of $0.7 million and $0.3 million, respectively, during 2004. These costs are
contained within the North America operating segment. The Greenville, Michigan move was completed
during the first quarter of 2005, while the transfer of production from the Bowling Green, Kentucky
facility was completed during the fourth quarter of 2004. In October 2003, the Company announced plans to consolidate its Novi, Michigan North America
oversight and Grand Rapids, Michigan corporate office activities and close its Rochester Hills,
Michigan prototype tooling and technical center facility. In the fourth quarter of 2003, charges
relating to these activities were recognized by the Company totaling $3.7 million, comprised of
cash charges of $2.1 million and non-cash asset impairment charges of $1.6 million. These costs are
contained within the North America operating segment. On May 27, 2003, the Company announced that it would transfer the production of high-volume frame
assemblies for the Ford Ranger from its Milwaukee facility to its Bellevue, Ohio facility. During
2003, the Company recorded $25.0 million in pre-tax restructuring and asset impairment charges
relating to this event. These charges reflect estimated qualifying exit costs comprising of cash
charges of $6.1 million, pension and other post-retirement benefit plan curtailment costs of $6.3
million and non-cash asset impairment charges of $12.6 million, all within the North America
operating segment. These charges did not cover certain aspects of the 2003 Plan, including movement
of equipment and colleague relocation and training, which was recognized as incurred. On December
5, 2003, the Company announced that it had decided not to proceed with the relocation of the Ford
Ranger line based on revised economic factors from the original May 2003 decision principally due
to concessions received from the Milwaukee labor unions and a need for management to focus on its
2004 new product launch schedule. Because the Companys measurement date for pension and
post-retirement benefits is September 30, the decision to continue Ranger frame production in
Milwaukee, made in December 2003, resulted in a reversal of the post-retirement benefit plan
curtailment loss on a three-month lag, in the first quarter of 2004, as discussed above. The cash
charges of $6.1 million were incurred prior to the reversal of the original decision to move the
Ford Ranger frame production. SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived
Assets prohibits the restoration of the non-cash asset impairment charges of $12.6 million. On January 31, 2002, the Company announced that it would discontinue the remaining stamping and
ancillary processes performed at its Milwaukee Press Operations and relocate the remaining work to
other Tower locations or Tier II suppliers (the 2002 Plan). The Company substantially completed
the transfer process in 2002. As a result of these efforts, the Company recorded a restructuring
charge in the first quarter of 2002 totaling $75.4 million, which reflects the estimated qualifying
exit costs to be incurred pertaining to the 2002 Plan. During 2003, and 2002 the Company revised
its estimate pertaining to this restructuring activity by increasing cash charges by $0.7 million
and $1.2 million, respectively. During the fourth quarter of 2002, due to a favorable settlement
of anticipated other exit costs and an assessment of remaining costs, the Company subsequently
reduced the estimates associated with the 2002 Plan and restructuring plans prior to 2002 by $14.3
million, resulting in a net restructuring charge of $61.1 million for 2002. The 2002 Plan charge includes costs associated with asset impairments, severance and outplacement
costs related to colleague terminations and certain other exit costs. These costs are contained
in the North America operating segment. 24




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The Company has historically 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. LIQUIDITY AND CAPITAL RESOURCES During 2004, the Companys cash requirements were met through operations, commercial borrowings,
the issuance of 5.75% Convertible Debentures and an accounts receivable securitization facility.
At December 31, 2004, the Company had available liquidity in the amount of $149.1 million, which
consisted of cash on hand. Net cash provided by operating activities was $74.8 million during 2004 compared to net cash
provided by operating activities of $184.8 million during 2003. The amount provided in 2004
primarily resulted from an increase in accounts payable and accrued liabilities in the amount of
$163.6 million and proceeds of $44.8 million associated with a receivables securitization, which
were partially offset by increases in the Companys accounts receivable, inventory and other
operating accounts, net in the amounts of $99.6 million, $29.0 million and $5.0 million,
respectively. Net cash utilized in investing activities was $180.5 million during 2004 compared to net cash
utilized of $221.6 million in 2003. The utilization for 2004 resulted from capital expenditures of
$210.9 million and the acquisition of the remaining 34% ownership interest in Seojin Industrial
Company from the Companys joint venture partner for $21.3 million. The impact of these items was
partially offset by proceeds of $51.7 million from the sale of Yorozu. Net cash provided by financing activities amounted to $94.0 million in 2004 compared to $184.0
million of net cash provided during 2003. During 2004, the Company had proceeds from borrowings
amounting to $613.8 million and repayments of debt in the amount of $519.9 million. At December 31, 2004, the Company had negative working capital of $278.4 million. The Companys business has significant liquidity requirements. The Company has made significant
capital expenditures and incurred significant launch costs over the last several years to implement
its new program awards in advance of receiving any significant revenue from such new programs.
Capital expenditures and launch costs for 2004 were $210.9 million and $57.6 million, respectively.
These costs have had an adverse impact on the Companys liquidity position. The Company has a significant amount of indebtedness. As of December 31, 2004, the Company had
$1,531.3 million ($1,537.8 million after giving effect to unamortized bond discount on the 12%
senior notes) of outstanding indebtedness. The Companys cash interest expenditures, net of
amounts capitalized for 2004, were $130.6 million. At December 31, 2004, the Company had no
availability to borrow additional amounts under its revolving loan commitment. The Companys
ability to satisfy its liquidity requirements with cash flows from operations has been negatively
impacted by a decline in its operating performance over the past several years. Certain foreign subsidiaries of the Company are subject to restrictions on their ability to
dividend or otherwise distribute cash to the Company because they are subject to financing
arrangements that restrict them from paying dividends. During 2004, the Company took a number of actions to address its liquidity needs. In the first
quarter of 2004, the Company sold its equity investment in Yorozu, which generated cash proceeds of
$51.7 million. On May 24, 2004, the Company entered into a credit agreement involving a revolving
loan commitment, a first lien term loan commitment and a second lien letter of credit commitment
with various financial institutions. The Company also issued 5.75% Convertible Debentures. The
Company utilized the net proceeds associated with the Convertible Debentures along with borrowings
under the above-mentioned credit agreement to repay existing senior credit facilities in the amount
of $239.5 million, redeem its 5.0% convertible subordinated notes of $200.0 million due August 1,
2004, pay related fees and expenses and for other general corporate purposes. In December 2004, the Company deferred the quarterly interest payment of $4.4 million on its 63/4%
convertible subordinated debentures held by Tower Automotive Capital Trust that would have been
paid on December 31, 2004. The terms of these convertible subordinated debentures permits the
deferral of the underlying interest payments for up to 20 consecutive quarters. 25




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Despite these efforts, the Company encountered a series of developments in late 2004 and early
2005, in addition to the termination of accelerated payment programs with its key customers, that
resulted in a material reduction in the Companys liquidity position in early 2005. Production volumes of the Companys largest customers declined in the latter part of 2004 and early
2005. In North America, Ford, DaimlerChrysler and General Motors experienced declining production
volumes due, in part, to a loss in market share to foreign competitors such as Toyota, Honda and
Nissan. Since the Company typically supplies its customers on a requirements basis and is not
guaranteed any set volume of business and Ford, DaimlerChrysler and General Motors represent
approximately 62% of the Companys revenues, the decline in production has significantly impacted
the Companys liquidity position and recent results of operations. Increased costs of raw materials have also negatively impacted the Companys liquidity position in
2004. The majority of the Companys product offerings are produced from steel. Due to
significantly increased demand for steel, most notably from China, the cost of steel has increased
significantly during 2004 and the adverse impact is continuing into 2005, and some of the Companys
product program contracts are for fixed prices that do not allow the Company to pass through
increased material costs. The Companys cost-saving initiatives were unable to overcome the inability of the Company to
maintain selling price levels or to increase selling prices. Many of the Companys long-term
supply contracts call for regular price decreases. In some cases, the Company has been unable to
reach the projected cost savings necessary to offset these price decreases and, therefore, the
Companys margins on these contracts have decreased accordingly. Significant launch costs relating to new product programs had an adverse impact on the liquidity of
the Company. During 2003 and 2004, the Company had seven new product program launches. In
addition to increased capital expenditures, the management of these launches resulted in higher
than anticipated program launch costs resulting in decreased liquidity. Due to the above-mentioned factors, the Companys liquidity position deteriorated in early 2005 and
forced the Company to seek Chapter 11 protection to restructure its operations and financial
position. The objective of the bankruptcy filing is to provide relief from the Companys
burdensome pre-petition debt service and other obligations and allow the Company to make the
necessary investments in the near term to grow and sustain its business. The Company has established a plan that encompasses (i) a balance sheet restructuring in
conjunction with the bankruptcy filing that is intended to allow the Company to eliminate much of
its unsustainable debt load and simplify its complex and restrictive capital structure; (ii) the
rationalization of the Companys facilities; (iii) increasing productivity, efficiency and quality
at the plant level while optimizing capacity utilization across the Companys entire network to
reduce costs and improve operating results by managing plants as cost centers instead of profit
centers; (iv) leveraging scale by centralizing material services, capital and manufacturing
sourcing that is designed to maximize overall purchasing power with the objective of reducing
costs; (v) a manufacturing rationalization by utilizing a common approach toward processes across
all of the Companys manufacturing facilities; and (vi) focusing on profitability rather than
revenue growth and market share, with the objective that future platform launches will be in a
better position to achieve improved margins. The Companys new product launch activities and capital expenditures are expected to decline during
2005, thereby improving the Companys liquidity position. Capital expenditures for 2005 are
expected to be approximately $160.0 million. For the year ending December 31, 2005, management
expects total new program launch costs to decline to $7.4 million. Chapter 11 Impact Under the terms of the Credit Agreement, the Chapter 11 filing creates 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 Credit Agreement. Outstanding
obligations under the Credit Agreement amounted to $425.0 million, which was refinanced through the
DIP financing described below. 26




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##### Table of Contents



In addition, the Chapter 11 filing creates an event of default in relation to the Convertible
Debentures, Senior Notes, Senior Euro Notes, and the Trust Preferred Securities and underlying 6 3/4%
Convertible Subordinated Debentures. The ability of the creditors of the Debtors to seek remedies to enforce their rights under the
credit facilities described above is stayed as a result of the Chapter 11 filing, and the
creditors rights of enforcement are subject to the applicable provisions of the Bankruptcy Code. The Companys foreign subsidiaries are not included in the Chapter 11 filing. Therefore, the debt
of these subsidiaries is not subject to compromise in the bankruptcy proceedings. DIP Financing In conjunction with its Chapter 11 filing, the Debtors entered into a DIP Financing Agreement in
February 2005. The DIP Agreement provides for a $725 million 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 payoff the Companys outstanding balance of $425
million associated with its pre-petition Credit Agreement. The Company believes that the existing
DIP Agreement is adequate to provide for its future liquidity needs through the Debtors Chapter 11
bankruptcy. 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 2.75% 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 Debtors, plus (y) 2.75%, in the
case of a loan under the revolving facility, or 3.75% 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. The DIP Agreement contains various representations, warranties and covenants by 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. 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. Off Balance Sheet Arrangements On December 30, 2004, the Company entered into a $50.0 million accounts receivable securitization
facility resulting in proceeds amounting to $44.8 million on the closing date of the facility. The
Company conducted the accounts receivable securitization facility through a qualified special
purpose entity, which was not consolidated in the Companys consolidated financial statements.
This 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. See Note 6 to
the Consolidated Financial Statements. 27




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Contractual Obligations and Commercial Commitments The Companys contractual obligations and commercial commitments as of December 31, 2004 were as
follows (in thousands): Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1- 3 Years
    
    
    4- 5 Years
    
    
    5 YearsLong-term debt
    
    $
    1,370,751
    
    
    $
    124,622
    
    
    $
    63,764
    
    
    $
    416,881
    
    
    $
    765,4845.75% convertible debentures
    
    
    125,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,000Capital lease obligations
    
    
    55,484
    
    
    
    16,199
    
    
    
    15,674
    
    
    
    8,761
    
    
    
    14,850Operating leases
    
    
    437,715
    
    
    
    78,430
    
    
    
    141,125
    
    
    
    114,311
    
    
    
    103,849Total contractual obligations at December 31, 2004
    
    $
    1,988,950
    
    
    $
    219,251
    
    
    $
    220,563
    
    
    $
    539,953
    
    
    $
    1,009,183
 The table set forth above does not reflect the impact of the Chapter 11 filing made on
February 2, 2005.  
    
    Other anticipated 2005 contractual obligations (future amounts beyond 2005 are not readily
determinable):  1.
    
    cash interest payments of approximately $145 million,2.
    
    pension funding contributions of approximately $32.4 million,3.
    
    other post-retirement benefit payments of approximately $20.6 million and4.
    
    purchase obligations of approximately $70.0 million. The Companys significant purchase
obligations consist primarily of inventory, tooling and capital expenditures. The Companys
purchase orders for inventory are requirements based which do not require the Company to
purchase minimum quantities. As of December 31, 2004, the Company was obligated under
executory purchase orders for approximately $47.2 million of tooling and $22.8 million of
capital expenditures. The Companys commercial commitments included up to $155.0 million of standby letters of credit of
which $151.9 million was outstanding as of December 31, 2004. DEBT RATINGS On February 2, 2005, Standard & Poors cut its ratings on the Companys debt to D or default in
association with the voluntary Chapter 11 bankruptcy filing of the Debtors. The Companys
corporate credit rating was cut to D from CCC, and the Companys senior unsecured debt was cut
to D from CC. Following the Companys voluntary filing for Chapter 11 bankruptcy protection, Moodys Investors
Service withdrew all ratings related to debt associated with Tower Automotive, Inc. and its 100%
owned subsidiaries R.J. Tower Corporation and Tower Automotive Capital Trust. MARKET RISK The Company is exposed to various market risks, including changes in foreign currency exchange
rates and interest rates. Market risk is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency exchange and interest rates. The Companys policy is to
not enter into derivatives or other financial instruments for trading or speculative purposes. The
Company periodically enters into derivative instruments to manage and reduce the impact of changes
in interest rates. At December 31, 2004, the Company had total debt and obligations under capital leases of $1,531.3
million. The debt is composed of fixed rate debt of $1,064.4 million and floating rate debt of
$466.9 million. The pre-tax earnings and cash flow impact for the next year resulting from a one
percentage point increase in interest rates on variable rate debt would be approximately $4.7
million, holding other variables constant. A one-percentage point increase in interest rates would
not materially impact the fair value of the fixed rate debt. 28




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A portion of the Companys revenues are derived from manufacturing operations in Europe, Asia and
South America. The results of operations and financial position of the Companys foreign operations
are principally measured in their respective currency and translated into U.S. dollars. The effects
of foreign currency fluctuations in Europe, Asia and South America are somewhat mitigated by the
fact that expenses are generally incurred in the same currency in which revenues are generated. The
reported income of these subsidiaries will be higher or lower depending on a weakening or
strengthening of the U.S. dollar against the respective foreign currency. A portion of the Companys assets are based in its foreign operations and are translated into U.S.
dollars at foreign currency exchange rates in effect as of the end of each period, with the effect
of such translation reflected as a separate component of stockholders investment. Accordingly, the
Companys consolidated stockholders investment (deficit) will fluctuate depending upon the
weakening or strengthening of the U.S. dollar against the respective foreign currency. The Companys strategy for management of currency risk relies primarily upon conducting its
operations in a countrys respective currency and may, from time to time, also involve hedging
programs intended to reduce the Companys exposure to currency fluctuations. Management believes
the effect of a 100 basis point movement in foreign currency rates versus the dollar would not
materially affect the Companys financial position, results of operations or cash flows for the
periods presented. OPPORTUNITIES The Companys presence in Europe and Asia along with foreign vehicle manufacturers transplant
operations in the U.S. have reduced its reliance on Ford, DaimlerChrysler and General Motors,
increased penetration with certain existing customers and added new customers such as Fiat, BMW,
Volkswagen, Nissan and Hyundai/Kia. The Company expects this trend to continue as a result of its
anticipated organic growth outside the U.S., from recent awards to supply foreign transplant
operations in the U.S. and its efforts to diversify its customer base. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS All statements, other than statements of historical fact, included in this Form 10-K or
incorporated by reference herein, are, or may be deemed to be, forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934, as amended (the Exchange Act). When used in this Form 10-K, the words anticipate,
believe, estimate, expect, intends, project, plan and similar expressions, as they
relate to the Company, are intended to identify forward-looking statements. Such forward-looking
statements are based on the beliefs of the Companys management as well as on assumptions made by
and information currently available to the Company at the time such statements were made. Various
economic and competitive factors could cause actual results to differ materially from those
discussed in such forward-looking statements, including factors which are outside the control of
the Company, such as risks relating to: (i) confirmation of a plan of reorganization under the
Bankruptcy Code which would allow the Company to reduce unsustainable debt and other liabilities
and simplify the Companys complex and restrictive capital structure; (ii) the Companys reliance
on major customers and selected vehicle platforms; (iii) the cyclicality and seasonality of the
automotive market; (iv) the failure to realize the benefits of acquisitions and joint ventures;
(v) the Companys ability to obtain new business on new and redesigned models; (vi) the Companys
ability to achieve the anticipated volume of production from new and planned supply programs; (vii)
the general economic or business conditions affecting the automotive industry (which is dependent
on consumer spending), either nationally or regionally, being less favorable than expected; (viii)
the Companys failure to develop or successfully introduce new products; (ix) increased competition
in the automotive components supply market; (x) unforeseen problems associated with international
sales, including gains and losses from foreign currency exchange; (xi) implementation of or changes
in the laws, regulations or policies governing the automotive industry that could negatively affect
the automotive components supply industry; (xii) changes in general economic conditions in the
United States, Europe and Asia; and (xiii) various other factors beyond the Companys control. All
subsequent written and oral forward-looking statements attributable to the Company or persons
acting on behalf of the Company are expressly qualified in their entirety by such cautionary
statements. 
 Item 7A.Quantitative and Qualitative Disclosures about Market Risk See Market Risk section of Item 7. 29




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Item 8.Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Tower Automotive, Inc. Financial
Statements
Page (s)Report of Independent Registered Public Accounting Firm
31Report of Independent Registered Public Accounting Firm
32Consolidated Balance Sheets at December 31, 2004 and 2003
34Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002
35Consolidated Statements of Stockholders Investment for the years ended December 31, 2004, 2003 and 2002
36Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002
37Notes to Consolidated Financial Statements
38
 30




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of
Tower Automotive, Inc.
Novi, Michigan We have audited the accompanying consolidated balance sheets of Tower Automotive, Inc. and
Subsidiaries (the Company) as of December 31, 2004 and 2003, and the related consolidated
statements of operations, stockholders investment (deficiency), and cash flows for each of the
three years in the period ended December 31, 2004. Our audits also included the financial
statement schedules listed at Item 15 (the financial statement schedules). These financial
statements and financial statement schedules are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based on our audits. We
did not audit the consolidated financial statements of Metalsa S. de R.L. and subsidiaries
(Metalsa), the Companys investment in which is accounted for by use of the equity method. The
Companys equity of $210,425,313 and $201,137,812 in Metalsas net assets at December 31, 2004 and
2003, respectively, and of $13,833,200 and $6,318,000 in that companys net income for the
respective years then ended are included in the accompanying consolidated financial statements.
The consolidated financial statements of Metalsa were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts included for Metalsa,
is based solely on the report of such other auditors. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion. In our opinion, based on our audits and the report of the other auditors, such consolidated
financial statements present fairly, in all material respects, the financial position of Tower
Automotive, Inc. and Subsidiaries as of December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2004,
in conformity with accounting principles generally accepted in the United States of America. Also,
in our opinion, such financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all material respects, the
information set forth therein. The accompanying consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the consolidated financial statements,
the Companys recurring losses from operations, an extensive liquidity deficiency in early 2005 and
a significant amount of indebtedness raise substantial doubt about its ability to continue as a
going concern. Managements plans concerning these matters are also described in Note 3. The
consolidated financial statements do not include any adjustments that might result from the outcome
of this uncertainty. As discussed in Note 10 to the consolidated financial statements, in 2003 the Company changed its
method of accounting for certain variable interest entities to conform to Financial Accounting
Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities. We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of the Companys internal control over financial reporting
as of December 31, 2004, based on the criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
July 22, 2005 expressed an unqualified opinion on managements assessment of the effectiveness of
the Companys internal control over financial reporting and an adverse opinion on the effectiveness
of the Companys internal control over financial reporting based on our audits. DELOITTE & TOUCHE LLP Detroit, Michigan
July 22, 2005 31




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Tower Automotive, Inc.
Novi, Michigan We have audited managements assessment, included in the accompanying Managements Report on
Internal Control Over Financial Reporting, that Tower Automotive, Inc. (a Delaware corporation) and
Subsidiaries (the Company) did not maintain effective internal control over financial reporting
as of December 31, 2004, because of the effect of the material weaknesses identified in
managements assessment based on criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Companys
management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on managements assessment and an opinion on the
effectiveness of the Companys internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinions. A companys internal control over financial reporting is a process designed by, or under the
supervision of, the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A companys internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to
error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. The following material weaknesses have
been identified and included in managements assessment:  
    
    Accounting for Pensions and Other Post-Employment Benefits. As of December 31,
2004, the Company did not maintain effective controls to ensure that the accruals for pensions
and other post-employment benefits were determined based on certain key assumptions supported
by calculations. As a result of auditor inquiries, correcting adjustments were made to
actuarial assumptions used to determine the accruals for pensions and other post-employment
benefits and therefore to the financial statements and footnotes. These correcting
adjustments were material to the financial statements as a whole and represent a deficiency in
the operation of internal controls, as appropriately supporting key assumptions in determining
accruals for pensions and other post-employment benefits is required by the Companys
policies. 32




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##### Table of Contents




    
    Accounting for Income Taxes. As of December 31, 2004, the Company did not maintain
effective controls to ensure that the provision for income taxes was properly calculated. Due
in part to significant turnover in the Companys global tax department during the fourth quarter
of 2004, there existed a lack of local tax law expertise or failure to engage local tax law
expertise in certain non-U.S. locations to appropriately determine deferred tax assets and
liabilities in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, as
well as insufficient or ineffective review and approval practices with the tax and finance
organizations resulting in errors not being prevented or detected in a timely manner and
insufficient staffing in the global tax organization. As a result of these deficiencies, the
audit of the provision for income taxes resulted in correcting adjustments to the financial
statements and footnotes. These correcting adjustments were material to the financial
statements as a whole. These correcting adjustments represent a deficiency in the operation of
internal controls, as the use of appropriate local tax law expertise, effective review and
approval practices and maintenance of sufficient staffing in the global tax organization are
required by the Companys policies. Potential misstatements in the provision for income taxes
may occur during the existence of this material weakness, and could be material. These material weaknesses were considered in determining the nature, timing, and extent of audit
tests applied in our audit of the consolidated financial statements as of and for the year ended
December 31, 2004, of the Company and this report does not affect our report on such financial
statements. In our opinion, managements assessment that the Company did not maintain effective internal
control over financial reporting as of December 31, 2004, is fairly stated, in all material
respects, based on the criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, because of
the effect of the material weaknesses described above on the achievement of the objectives of the
control criteria, the Company has not maintained effective internal control over financial
reporting as of December 31, 2004, based on the criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December
31, 2004, of the Company and our report dated July 22, 2005 expressed an unqualified opinion on
those financial statements and financial statement schedules and included explanatory paragraphs regarding 1) the Companys ability
to continue as a going concern, and 2) a change in the method of
accounting for certain variable interest entities. DELOITTE & TOUCHE LLP Detroit, Michigan
July 22, 2005 33




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##### Table of Contents



TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS December 31,2004
    
    
    2003(Amounts in thousands,except per share amounts)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    149,101
    
    
    $
    160,899Accounts receivable
    
    
    346,031
    
    
    
    325,599Inventories
    
    
    159,034
    
    
    
    130,004Deferred income taxes, net
    
    
    
    
    
    
    20,116Prepaid tooling and other
    
    
    124,938
    
    
    
    91,662Total current assets
    
    
    779,104
    
    
    
    728,280Property, Plant and equipment, net
    
    
    1,205,640
    
    
    
    1,055,873Investments in joint ventures
    
    
    227,740
    
    
    
    248,133Deferred income taxes
    
    
    
    
    
    
    146,944Goodwill
    
    
    174,563
    
    
    
    498,663Other assets, net
    
    
    173,727
    
    
    
    168,516$
    2,560,774
    
    
    $
    2,846,409LIABILITIES AND STOCKHOLDERS INVESTMENT (DEFICIT)Current Liabilities:Current maturities of long-term debt and capital lease obligations
    
    $
    133,156
    
    
    $
    99,597Convertible Subordinated Notes
    
    
    
    
    
    
    199,984Accounts payable
    
    
    638,118
    
    
    
    556,036Accrued liabilities
    
    
    286,262
    
    
    
    249,984Total current liabilities
    
    
    1,057,536
    
    
    
    1,105,601Long-term debt, net of current maturities
    
    
    1,239,562
    
    
    
    1,060,859Convertible senior debentures
    
    
    121,723
    
    
    
    Obligations under capital leases, net of current maturities
    
    
    36,823
    
    
    
    42,798Other noncurrent liabilities
    
    
    226,062
    
    
    
    223,641Total noncurrent liabilities
    
    
    1,624,170
    
    
    
    1,327,298Commitments and Contingencies
    
    
    
    
    
    
    Stockholders Investment:Preferred stock, par value $1; 5,000,000 shares authorized; no shares issued
or outstanding
    
    
    
    
    
    
    Common stock, par value $.01; 200,000,000 shares authorized; 66,578,962
issued and 58,480,909 outstanding in 2004; 66,133,731 issued and 57,341,805
outstanding in 2003
    
    
    666
    
    
    
    661Additional paid-in capital
    
    
    681,084
    
    
    
    680,608Retained deficit
    
    
    (715,754
    )
    
    
    (181,849
    )Deferred compensation plans
    
    
    (7,636
    )
    
    
    (9,609
    )Accumulated other comprehensive loss
    
    
    (29,968
    )
    
    
    (22,751
    )Treasury stock, at cost: 8,098,053 shares in 2004 and 8,791,926 shares in 2003
    
    
    (49,324
    )
    
    
    (53,550
    )Total stockholders investment (deficit)
    
    
    (120,932
    )
    
    
    413,510$
    2,560,774
    
    
    $
    2,846,409
 The accompanying notes are an integral part of these consolidated financial statements. 34




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##### Table of Contents



TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31,2004
    
    
    2003
    
    
    2002(Amounts in thousands, except per share data)Revenues
    
    $
    3,178,724
    
    
    $
    2,815,749
    
    
    $
    2,754,464Cost of sales
    
    
    2,953,041
    
    
    
    2,560,689
    
    
    
    2,456,380Gross profit
    
    
    225,683
    
    
    
    255,060
    
    
    
    298,084Selling, general and administrative expenses
    
    
    145,217
    
    
    
    155,500
    
    
    
    143,822Restructuring and asset impairment charges, net
    
    
    (713
    )
    
    
    157,532
    
    
    
    61,125Goodwill impairment charges
    
    
    337,230
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (256,051
    )
    
    
    (57,972
    )
    
    
    93,137Interest expense
    
    
    143,745
    
    
    
    95,222
    
    
    
    72,555Interest income
    
    
    (1,767
    )
    
    
    (2,475
    )
    
    
    (2,288
    )Unrealized gain on derivative
    
    
    (3,860
    )
    
    
    3⁄4
    
    
    
    3⁄4Other expense, net
    
    
    
    
    
    
    3⁄4
    
    
    
    1,052Income (loss) before provision for income taxes,
equity in earnings of joint ventures, minority
interest and cumulative effect of accounting
change
    
    
    (394,169
    )
    
    
    (150,719
    )
    
    
    21,818Provision (benefit) for income taxes
    
    
    157,084
    
    
    
    (50,811
    )
    
    
    7,636Income (loss) before equity in earnings of joint
ventures, minority interest and cumulative effect
of accounting change
    
    
    (551,253
    )
    
    
    (99,908
    )
    
    
    14,182Write-down of joint venture investment to market
value, net of tax
    
    
    
    
    
    
    (27,436
    )
    
    
    Equity in earnings of joint ventures, net of tax
    
    
    13,370
    
    
    
    13,298
    
    
    
    16,822Minority interest, net of tax
    
    
    (5,754
    )
    
    
    (10,629
    )
    
    
    (15,824
    )Gain on sale of joint venture
    
    
    9,732
    
    
    
    
    
    
    
    Income (loss) before cumulative effect of
accounting change
    
    
    (533,905
    )
    
    
    (124,675
    )
    
    
    15,180Cumulative effect of change in accounting
principle, net of tax
    
    
    
    
    
    
    
    
    
    
    (112,786
    )Net loss
    
    $
    (533,905
    )
    
    $
    (124,675
    )
    
    $
    (97,606
    )Basic earnings (loss) per share:Income (loss) before cumulative effect of
accounting change
    
    $
    (9.19
    )
    
    $
    (2.20
    )
    
    $
    0.26Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (1.96
    )Net loss
    
    $
    (9.19
    )
    
    $
    (2.20
    )
    
    $
    (1.70
    )Diluted earnings (loss) per share:Income (loss) before cumulative effect of
accounting change
    
    $
    (9.19
    )
    
    $
    (2.20
    )
    
    $
    0.26Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (1.96
    )Net loss
    
    $
    (9.19
    )
    
    $
    (2.20
    )
    
    $
    (1.70
    )Weighted average basic shares outstanding
    
    
    58,077
    
    
    
    56,703
    
    
    
    57,329Weighted average diluted shares outstanding
    
    
    58,077
    
    
    
    56,703
    
    
    
    57,329
 The accompanying notes are an integral part of these consolidated financial statements. 35




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##### Table of Contents



TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS
OF STOCKHOLDERS INVESTMENT (DEFICIT) AccumulatedOtherAdditional
    
    
    Retained
    
    
    Deferred
    
    
    Comprehensive
    
    
    
    
    
    
    
    
    
    
    TotalCommon
Stock
    
    
    Paid-in
    
    
    Earnings
    
    
    Compensation
    
    
    Income
    
    

Treasury Stock
    
    
    StockholdersShares
    
    

Amount
    
    

Capital
    
    

(Deficit)
    
    

Plans
    
    

(Loss)
    
    

Shares
    
    

Amount
    
    

Investment(Amounts in thousands, except share data)BALANCE, December 31, 2001
    
    
    48,077,142
    
    
    $
    481
    
    
    $
    456,627
    
    
    $
    40,432
    
    
    $
    (15,571
    )
    
    $
    (34,561
    )
    
    
    
    
    
    $
    
    
    
    $
    447,408Exercise of options
    
    
    329,368
    
    
    
    3
    
    
    
    1,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,656Sales of stock under Employee Stock Discount Purchase Plan
    
    
    222,145
    
    
    
    2
    
    
    
    1,423
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,425Deferred Income Stock Plan deferrals
    
    
    
    
    
    
    
    
    
    
    1,387
    
    
    
    
    
    
    
    (1,387
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Stock Plan distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,781
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,781Restricted stock grants earned and forfeited
    
    
    
    
    
    
    
    
    
    
    (465
    )
    
    
    
    
    
    
    2,431
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,966Issuance of common stock
    
    
    17,250,000
    
    
    
    173
    
    
    
    222,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222,620Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,827,800
    )
    
    
    (59,860
    )
    
    
    (59,860
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97,606
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,915
    
    
    
    
    
    
    
    Unrealized loss on qualifying cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,521
    )
    
    
    
    
    
    
    Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,708
    )
    
    
    
    
    
    
    Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (106,920
    )BALANCE, December 31, 2002
    
    
    65,878,655
    
    
    
    659
    
    
    
    683,072
    
    
    
    (57,174
    )
    
    
    (10,746
    )
    
    
    (43,875
    )
    
    
    (9,827,800
    )
    
    
    (59,860
    )
    
    
    512,076Sales of stock under Employee Stock Discount Purchase Plan
    
    
    252,156
    
    
    
    2
    
    
    
    650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    652Deferred Income Stock Plan deferrals
    
    
    
    
    
    
    
    
    
    
    3,395
    
    
    
    
    
    
    
    (3,395
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Stock Plan forfeitures
    
    
    
    
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Stock Plan distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,999Deferred Income Stock Plan funding
    
    
    
    
    
    
    
    
    
    
    (6,310
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,035,874
    
    
    
    6,310
    
    
    
    Restricted stock grants earned and forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,316
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,316Restricted stock grant distributions
    
    
    2,920
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124,675
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,609
    
    
    
    
    
    
    
    Unrealized gain on qualifying cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,586
    
    
    
    
    
    
    
    Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,071
    )
    
    
    
    
    
    
    Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103,551
    )Balance, December 31, 2003
    
    
    66,133,731
    
    
    
    661
    
    
    
    680,608
    
    
    
    (181,849
    )
    
    
    (9,609
    )
    
    
    (22,751
    )
    
    
    (8,791,926
    )
    
    
    (53,550
    )
    
    
    413,510Exercise of options
    
    
    23,750
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72Sales of stock under Employee Stock Discount Purchase Plan
    
    
    15,912
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Deferred Income Stock Plan deferrals
    
    
    
    
    
    
    
    
    
    
    636
    
    
    
    
    
    
    
    (636
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Stock Plan forfeitures
    
    
    
    
    
    
    
    
    
    
    (74
    )
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Stock Plan distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,524
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,524Deferred Income Stock Plan funding
    
    
    
    
    
    
    
    
    
    
    (181
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    693,873
    
    
    
    4,226
    
    
    
    4,045Restricted stock grants earned and forfeited
    
    
    405,569
    
    
    
    5
    
    
    
    (5
    )
    
    
    
    
    
    
    1,011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,011Restricted stock grant distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (533,905
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,760
    
    
    
    
    
    
    
    Unrealized gain on qualifying cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,777
    
    
    
    
    
    
    
    Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,754
    )
    
    
    
    
    
    
    Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (541,122
    )Balance, December 31, 2004
    
    
    66,578,962
    
    
    $
    666
    
    
    $
    681,084
    
    
    $
    (715,754
    )
    
    $
    (7,636
    )
    
    $
    (29,968
    )
    
    
    (8,098,053
    )
    
    $
    (49,324
    )
    
    $
    (120,932
    )
 The accompanying notes are an integral part of these consolidated financial statements. 36




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TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31,2004
    
    
    2003
    
    
    2002(Amounts in thousands)Operating Activities:Net loss
    
    $
    (533,905
    )
    
    $
    (124,675
    )
    
    $
    (97,606
    )Adjustments required to reconcile net loss to net
cash provided by operating activities:Goodwill impairment charges
    
    
    337,230
    
    
    
    
    
    
    
    Cumulative effect of change in accounting
principle, net
    
    
    
    
    
    
    
    
    
    
    112,786Restructuring and asset impairment charges, net
    
    
    (6,276
    )
    
    
    155,750
    
    
    
    61,125Customer recovery related to program cancellation
    
    
    
    
    
    
    15,600
    
    
    
    Unrealized gain on derivative
    
    
    (3,860
    )
    
    
    
    
    
    
    Deferred income tax provision (benefit)
    
    
    167,720
    
    
    
    (36,027
    )
    
    
    2,107Depreciation and amortization
    
    
    152,156
    
    
    
    151,198
    
    
    
    136,698Gain on sale of joint venture
    
    
    (9,732
    )
    
    
    
    
    
    
    Gain on sale of plant
    
    
    
    
    
    
    
    
    
    
    (3,839
    )Write-down of joint venture investment to market
value
    
    
    
    
    
    
    27,436
    
    
    
    Equity in earnings of joint ventures, net
    
    
    (13,370
    )
    
    
    (13,298
    )
    
    
    (16,822
    )Proceeds from receivables securitization
    
    
    44,817
    
    
    
    
    
    
    
    Change in other operating items:Accounts receivable
    
    
    (99,574
    )
    
    
    (76,258
    )
    
    
    (33,638
    )Inventories
    
    
    (29,030
    )
    
    
    3,070
    
    
    
    (20,538
    )Prepaid tooling and other
    
    
    (33,276
    )
    
    
    8,771
    
    
    
    (36,486
    )Accounts payable and accrued liabilities
    
    
    163,600
    
    
    
    102,277
    
    
    
    83,314Other assets and liabilities
    
    
    (61,740
    )
    
    
    (29,046
    )
    
    
    (56,149
    )Net cash provided by operating activities
    
    
    74,760
    
    
    
    184,798
    
    
    
    130,952Investing Activities:Capital expenditures, net
    
    
    (210,926
    )
    
    
    (230,126
    )
    
    
    (158,964
    )Acquisitions, net of cash acquired, including joint
venture interests and earnout payments
    
    
    (21,299
    )
    
    
    8,503
    
    
    
    (40,802
    )Net proceeds from divestitures
    
    
    51,700
    
    
    
    
    
    
    
    4,004Proceeds from sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    50,313Net cash used for investing activities
    
    
    (180,525
    )
    
    
    (221,623
    )
    
    
    (145,449
    )Financing Activities:Proceeds from borrowings
    
    
    613,785
    
    
    
    1,664,567
    
    
    
    2,038,037Repayments of debt
    
    
    (519,921
    )
    
    
    (1,481,212
    )
    
    
    (2,197,449
    )Net proceeds from issuance of common stock
    
    
    103
    
    
    
    670
    
    
    
    225,701Payments for repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (59,860
    )Net cash provided by financing activities
    
    
    93,967
    
    
    
    184,025
    
    
    
    6,429Net Change in Cash and Cash Equivalents
    
    
    (11,798
    )
    
    
    147,200
    
    
    
    (8,068
    )Cash and Cash Equivalents, beginning of year
    
    
    160,899
    
    
    
    13,699
    
    
    
    21,767Cash and Cash Equivalents, end of year
    
    $
    149,101
    
    
    $
    160,899
    
    
    $
    13,699Supplemental Cash Flow Information:Interest paid, net of amounts capitalized
    
    $
    130,577
    
    
    $
    87,660
    
    
    $
    66,095Income taxes refunded
    
    $
    (598
    )
    
    $
    (12
    )
    
    $
    (19,820
    )Non Cash Financing Activities:Deferred Income Stock Plan
    
    $
    4,452
    
    
    $
    3,395
    
    
    $
    1,387Debt assumed by buyer upon sale of plant
    
    $
    
    
    
    $
    
    
    
    $
    11,923
 The accompanying notes are an integral part of these consolidated financial statements. 37




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TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of Business Tower Automotive, Inc. and Subsidiaries (the Company) is a global designer and producer of
vehicle structural components and assemblies used by every major automotive original equipment
manufacturer, including Ford, Daimler-Chrysler, General Motors, Honda, Toyota, Renault/ Nissan,
Fiat, Hyundai/Kia, BMW and Volkswagen Group. Products include body structures and assemblies,
lower vehicle frames and structures, chassis modules and systems and suspension components.
Including both 100% owned subsidiaries and investments in joint ventures, the Company has
facilities in the United States, Canada, Mexico, Germany, Belgium, Italy, Slovakia, Poland, France,
Spain, Brazil, India, South Korea, Japan and China. 2. Chapter 11 Reorganization Proceedings On February 2, 2005, Tower Automotive, Inc. and its U.S. subsidiaries (collectively the Debtors)
each 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 (the
Court). The cases are jointly 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 involving primarily steel and the termination of accelerated payment programs of
certain customers adversely affected the Debtors operations and financial condition causing the
Companys extensive liquidity deficiency. 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. Absent approval from the 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 Court. However, the Debtors have requested
that the Court approve certain pre-petition liabilities, such as payments for the retention of
certain legal and financial professionals, 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 Debtors DIP financing, have been
entered by the Court. While the Debtors are subject to Chapter 11, all transactions of the Debtors
outside the ordinary course of business will require the prior approval of the Court. The objectives of this 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 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, the extent to which such relief will be achieved is uncertain at this
time. See Note 10 for a description of DIP financing. 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 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. 38




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The accompanying consolidated financial statements do not reflect the Chapter 11 filing. 3. Going Concern As indicated in Note 2, 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 DIP financing agreement
described in Note 10; (ii) to obtain confirmation of a plan of reorganization under the Bankruptcy
Code; (iii) to reduce unsustainable debt and other liabilities and simplify the Companys complex
and restrictive capital structure through the bankruptcy process; (iv) to return to profitability;
(v) to generate sufficient cash flow from operations and; (vi) to obtain financing sources to meet
the Companys future obligations. These matters create uncertainty relating to the Companys
ability to continue as a going concern. The accompanying 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. 4. Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Tower Automotive, Inc.,
its 100% owned subsidiaries, and its majority-owned and majority-controlled investments. All
material inter-company accounts and transactions have been eliminated in consolidation. The Companys share of earnings or losses of investments, in which at least 20% of the voting
securities are owned and where the Company exercises significant influence, is included in the
Companys consolidated financial statements pursuant to the equity method of accounting. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with an original maturity of three
months or less. Cash equivalents are stated at cost, which approximates fair value. Inventories Inventories are stated at the lower of first-in, first-out (FIFO) cost or market. Tooling and Other Design Costs Tooling and other design costs represent costs incurred by the Company in the development of new
tooling used in the manufacture of the Companys products. The Company follows the provisions of
Emerging Issues Task Force (EITF) Issue No. 99-5, Accounting for Pre-Production Costs Related to
Long-Term Supply Arrangements. EITF Issue No. 99-5 requires all pre-production tooling costs,
incurred for tools that the Company will not own and that will be used in producing products
supplied under long-term supply agreements, to be expensed as incurred unless the supply agreement
provides the supplier with the non-cancelable right to use the tools or the reimbursement of such
costs is contractually guaranteed by the customer. At the time the customer awards a contract to
the Company, the customer agrees to reimburse the Company for certain of its tooling costs either
in the form of a lump sum payment or by reimbursement on a piece price basis. When the part for
which tooling has been developed reaches a production-ready status, the Company is reimbursed by
its customers for the cost of the tooling (in instances of lump sum payment), at which time the
tooling becomes the property of the customers. For those costs related to other tooling and design
costs reimbursed through the piece price as contractually guaranteed, the costs are capitalized as
property, plant and equipment and amortized using the straight-line method over the life of the
related product. The Company has certain other tooling costs, which are capitalized as property,
plant and equipment and amortized over the life of the related product, in relation to tools for
which the Company has the contractual right to use the tools over the life of the supply
arrangement. The components of capitalized tooling costs are as follows (in thousands): 39




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December 31,2004
    
    
    2003Reimbursable pre-production design and development costs
    
    $
    36,897
    
    
    $
    12,959Customer-owned tooling
    
    
    52,366
    
    
    
    79,796Supplier-owned tooling
    
    
    40,544
    
    
    
    43,073Total
    
    $
    129,807
    
    
    $
    135,828
 All tooling amounts owned by the customer for which the Company expects reimbursement are recorded
in other current and other long-term assets on the accompanying Consolidated Balance Sheets. A loss
is recognized if the Company forecasts that the amount of capitalized tooling and design costs
exceeds the amount to be realized through the sale of related product. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line
method over the following estimated useful lives: Buildings and improvements
    
    15 to 40 yearsMachinery and equipment
    
    3 to 20 years
 Leasehold improvements are amortized over the shorter of 10 years or the lease term. Interest is capitalized during the preparation of facilities for product programs and is amortized
over the applicable estimated lives of the programs. Interest of $4.9 million, $9.1 million and
$6.0 million was capitalized in 2004, 2003 and 2002, respectively. Costs of maintenance and repairs are charged to expense as incurred. Amounts relating to
significant improvements, which extend the useful life of the related item, are capitalized. Upon
sale or retirement of property, plant and equipment, the cost and related accumulated depreciation
are eliminated from the respective accounts, and the resulting gain or loss is recognized in the
Statement of Operations. Long-Lived Assets The Company periodically evaluates the carrying value of long-lived assets to be held and used in
the business, other than goodwill and intangible assets with indefinite lives, and assets held for
sale when events and circumstances warrant. If the carrying value of a long-lived asset is
considered impaired, a loss is recognized based on the amount by which the carrying value exceeds
the fair market value for assets to be held and used. For assets held for sale, such loss is
further increased by costs to sell. Fair market value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved. Long-lived assets
to be disposed of other than by sale are considered held and used until disposed. Goodwill On January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No.
142, Goodwill and Other Intangible Assets. SFAS 142 requires that goodwill shall not be amortized
to earnings, but must be reviewed annually for possible impairment. In accordance with SFAS No. 142, the Company has designated four reporting units: North America,
Europe, Asia and South America/Mexico. On an annual basis the Company conducts formal valuation
procedures utilizing a combination of valuation techniques including the discounted cash flow
approach and the market multiple approach with the assistance of a third-party specialist. 40




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Fair Value of Financial Instruments The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and
revolving credit facilities approximate fair value because of the short maturity of these
instruments. The fair value of the Companys Convertible Debentures, 12 % Senior Notes, 9.25%
Senior Euro Notes and Preferred Securities approximated $87.2 million, $202.5, $105.0
million and $76.3 million, respectively, at December 31, 2004. The carrying amount of the Companys
remaining long-term debt instruments and revolving credit facility approximate fair value because
of the variable interest rates pertaining to those instruments. Derivative Financial Instruments SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities, as amended,
establishes accounting and reporting standards requiring that every derivative instrument,
including certain derivative instruments embedded in other contracts be recorded on the balance
sheet as either an asset or liability measured at fair value. Changes in fair value of derivatives
designated as cash flow hedges are recorded as a separate component of other comprehensive income
(loss) to the extent such cash flow hedges are effective. Amounts are reclassified from
accumulated other comprehensive income (loss) when the underlying hedged item affects earnings.
All changes in fair value are recorded currently in earnings offset; to the extent the derivative
was effective, by changes in the fair value of the hedged item. Changes in fair value of
derivatives not designated as hedging instruments are recorded currently in earnings. The Company uses derivative financial instruments principally to manage the risk that changes in
interest rates will have on the amount of future interest payments. Interest rate swap contracts
are used to adjust the proportion of total debt that is subject to variable and fixed interest
rates. Under these agreements, the Company agrees to pay an amount equal to a specified variable
rate times a notional principal amount, and to receive an amount equal to a specified fixed rate
times the same notional principal amount or vice versa. The notional amounts of the contract are
not exchanged. No other cash payments are made unless the contract is terminated prior to maturity,
in which case the amount paid or received in settlement is established by agreement at the time of
termination, and will usually represent the net present value, at current rates of interest, of the
remaining obligation to exchange payments under the term of the contract. Revenue Recognition The Company recognizes revenue as its products are shipped to its customers at which time title and
risk of loss passes. The Company participates in certain customers steel repurchase programs.
Under these programs, the Company purchases steel directly from a customers designated steel
supplier for use in manufacturing products for such customer. The Company takes delivery and title
to such steel and bears risk of loss and obsolescence. The Company invoices its customers based
upon annually negotiated selling prices, which include a component for steel under such repurchase
programs. For sales for which the Company participates in a customers steel repurchase program,
revenue is recognized on the entire amount of such sale, including the component for purchases
under that customers steel repurchase program. The Company enters into agreements to produce products for its customers at the beginning of a
given vehicle program term. Once such agreements are entered into by the Company, fulfillment of
the customers purchasing requirements is the obligation of the Company for the entire production
periods of the vehicle programs, which range from three to ten years, and the Company has no
provisions to terminate such contracts. In certain instances, the Company may be committed under
existing agreements to supply product to its customers at selling prices, which are not sufficient
to cover the variable cost to produce such product. In such situations, the Company records a
liability for the estimated future amount of such losses. Such losses are recognized at the time
that the loss is probable and reasonably estimable and is recorded at the minimum amount necessary
to fulfill the Companys obligations to its customers. Losses are discounted and are estimated
based upon information available at the time of the estimate, including future production volume
estimates, term of the program, selling price and production cost information. 41




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Income Taxes Deferred income taxes are recognized for the future tax effects of temporary differences between
financial and income tax reporting using tax rates in effect for the years in which the differences
are expected to reverse. Federal income taxes are provided on that portion of the income of
foreign subsidiaries that is expected to be remitted to the United States and shall be taxable.
The Company evaluates as to whether or not its deferred tax assets are more likely than not
realizable based on forecasts of taxable earnings in each tax jurisdiction. As disclosed in Note
11, a significant portion of the Companys deferred tax assets are comprised of net operating loss
carryforwards and tax credits. The Company uses historical and projected future operating results,
including a review of the eligible carryforward period, tax planning opportunities and other
relevant considerations in determining recoverability. Segment Reporting In accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information,the Company uses the management approach to reporting segment disclosures. The
management approach designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the Companys reportable segments. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (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 2004, 2003 and 2002 as the effect would be
anti-dilutive. Common stock equivalents totaled 34.5 million shares, 16.6 million shares and 16.2
million shares, respectively, during 2004, 2003 and 2002. In September 2004, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards
Board reached a consensus in relation to EITF No. 04-8, The Effect of Contingently Convertible
Instruments on Diluted Earnings Per Share, which requires the Company to include the effect of the
5.75% Convertible Debentures in the calculation of diluted earnings per share, except in instances
where the impact is anti-dilutive. EITF No. 04-8 is effective commencing in the fourth quarter of
2004. For 2004, common stock equivalents related to the Convertible Debentures totaled 21.7
million shares on an if-converted basis. These common stock equivalents were not included in the
calculation of diluted loss per share for 2004 as the impact would be anti-dilutive. 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 at fair market value at date of grant, which 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. 42




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The Company has three stock option plans: the 1994 Key Employee Stock Option Plan, the Long Term
Incentive Plan and the Independent Director Stock Option Plan and three stock purchase plans: the
Employee Stock Purchase Plan, the Key Leadership Deferred Income Stock Purchase Plan and the
Director Deferred Income Stock Purchase Plan. Had compensation expense for these plans been
determined as required under SFAS No. 123, Accounting for Stock-Based Compensation, amended by
SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, the Companys
pro forma net loss and pro forma loss per share would have been as follows (in thousands, except
per share data): Years Ended December 31,2004
    
    
    2003
    
    
    2002Net lossAs Reported
    
    $
    (533,905
    )
    
    $
    (124,675
    )
    
    $
    (97,606
    )Add: Stock-based employee
compensation expense included in
reported net loss, net of
related tax effects
    
    
    758
    
    
    
    793
    
    
    
    1,225Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards, net
of related tax effects
    
    
    (1,122
    )
    
    
    (4,126
    )
    
    
    (6,543
    )Pro forma
    
    $
    (534,269
    )
    
    $
    (128,008
    )
    
    $
    (102,924
    )Basic loss per share as reported
    
    $
    (9.19
    )
    
    $
    (2.20
    )
    
    $
    (1.70
    )Pro Forma
    
    
    (9.20
    )
    
    
    (2.26
    )
    
    
    (1.80
    )Diluted loss per share as reported
    
    $
    (9.19
    )
    
    $
    (2.20
    )
    
    $
    (1.70
    )Pro forma
    
    
    (9.20
    )
    
    
    (2.26
    )
    
    
    (1.80
    )
 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 weighted average assumptions: Risk free
interest rates of 3.89%, 4.33% and 3.92% in 2004, 2.91% in 2003, and 5.02% in 2002; expected
life of seven years for 2004, 2003, and 2002; expected volatility of 61.21% and 58% percent in
2004 and 58% in 2003 and 2002; and no expected dividends in all years presented. Foreign Currency Translation Assets and liabilities of the Companys foreign operations are translated into U.S. dollars using
the applicable year-end rates of exchange. Results of operations are translated at applicable
average rates prevailing throughout the period. Translation gains or losses are reported as a
separate component of accumulated other comprehensive loss in the accompanying consolidated
statements of stockholders investment. Gains and losses resulting from foreign currency
transactions, the amounts of which are not material in all years presented are included in net
loss. Restructuring The Company defines restructuring expense to include costs related to business operation
consolidation and exit and disposal activities. Estimates The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates and assumptions, and changes in such estimates and
assumptions may affect amounts reported in future periods. Recently Issued Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (FASB) adopted 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 43




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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 is currently evaluating SFAS
123 (R) to determine its impact on the Companys consolidated financial statements. In November 2004, the FASB issued SFAS 151, Inventory Costs. SFAS 151 requires that such items
as idle facility expense, excessive spoilage, double freight and rehandling costs be recognized as
current period charges regardless of whether these costs meet the criterion of so abnormal in
Accounting Research Bulletin No. 43, Chapter 4, Inventory Pricing. In addition, SFAS 151
requires that allocation of fixed production overheads to the costs of conversion be based on the
normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred
by the Company subsequent to December 31, 2005. The Company believes that SFAS 151 will not have a
material effect on its consolidated financial statements. . In December 2004, the FASB adopted SFAS 153, Exchanges of Nonmonetary Assets. This Statement
amends Accounting Principles Board Opinion No. 29, Accounting for Nonmonetary Transactions by
eliminating the fair- value exception for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. Pursuant to SFAS 153, a nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result of the exchange.
SFAS 153 is effective in relation to the Company in the third quarter of 2005. The Company
believes that SFAS 153 will not have a material effect on its consolidated financial statements. 5. Details to Consolidated Balance Sheets Inventories consisted of the following (in thousands): December 31,2004
    
    
    2003Raw materials
    
    $
    91,220
    
    
    $
    56,100Work-in-process
    
    
    26,820
    
    
    
    23,288Finished goods
    
    
    40,994
    
    
    
    50,616$
    159,034
    
    
    $
    130,004
 Property, plant and equipment consisted of the following (in thousands): December 31,2004
    
    
    2003Land
    
    $
    50,094
    
    
    $
    4,913Buildings and improvements
    
    
    402,103
    
    
    
    277,050Machinery and equipment
    
    
    1,398,657
    
    
    
    1,209,178Construction in progress
    
    
    103,099
    
    
    
    167,1571,953,953
    
    
    
    1,658,298Less-accumulated depreciation
    
    
    (748,313
    )
    
    
    (602,425
    )Property, plant and equipment, net
    
    $
    1,205,640
    
    
    $
    1,055,873
 In April 2002, the Company entered into a sale-leaseback transaction for seven of its business unit
facilities in the United States. This transaction resulted in net proceeds of $50.3 million, net of
prepaid lease payments retained by the lessor. The Company recorded a loss on the sale of the
buildings of $0.3 million in the second quarter of 2002, which was classified as other expense. The
lease is accounted for as an operating lease and requires quarterly payments of approximately $1.6
million through 2020. 44




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The change in the carrying amount of goodwill for the years ended December 31, 2004 and 2003, by
operating segment, is as follows (in thousands): NorthAmerica
    
    
    International
    
    
    TotalBalance at January 1, 2003
    
    $
    336,653
    
    
    $
    136,314
    
    
    $
    472,967Purchase accounting revision
    
    
    (2,122
    )
    
    
    
    
    
    
    (2,122
    )Currency translation adjustment
    
    
    1,937
    
    
    
    25,881
    
    
    
    27,818Balance at December 31, 2003
    
    
    336,468
    
    
    
    162,195
    
    
    
    498,663Currency translation adjustment
    
    
    762
    
    
    
    12,368
    
    
    
    13,130Goodwill impairment charge
    
    
    (337,230
    )
    
    
    
    
    
    
    (337,230
    )Balance at December 31, 2004
    
    $
    
    
    
    $
    174,563
    
    
    $
    174,563
 In the fourth quarter of 2004, valuation procedures indicated an excess of book value over fair
value for the North America reporting unit resulting in an impairment charge totaling $337.2
million, which represents the entire amount of goodwill of that reporting unit. This impairment
charge is reflected in the Goodwill Impairment Charges line of the Consolidated Statement of
Operations for the year ended December 31, 2004 and is contained in the North America operating
segment. There was no tax impact in association with this impairment charge as the Company recorded
a valuation allowance against the associated tax benefit. This charge was precipitated by
declining estimates of forecasted results and cash flows given current economic and market
conditions within the automotive supplier industry. Upon adoption of SFAS 142, valuation procedures indicated an excess of book value over fair value
for the Asia and South America/Mexico reporting units. During the second quarter of 2002, the
Company completed its formal valuation procedures. As a result of this valuation process, the
Company recorded a transitional impairment loss of $112.8 million, representing the write-off of
all of the Companys existing goodwill in the reporting units of Asia ($29.7 million) and South
America/Mexico ($83.1 million). The write-off was recorded as a cumulative effect of a change in
accounting principle on the Companys Consolidated Statement of Operations for the year ended
December 31, 2002. There was no tax impact in association with this transitional impairment loss
since the Company recorded a $24.2 million tax valuation allowance for the deductible portion of
the goodwill written off in the reporting unit of South America/Mexico. The Company determined that
it was appropriate to record a valuation allowance against the entire amount of the $24.2 million
deferred tax asset recognized in adopting SFAS No. 142 as a result of the uncertainty of
realization and the lack of historical income in the reporting unit. The goodwill pertaining to
the Asia reporting unit was not deductible for tax purposes. The Company performed an annual
goodwill impairment test as of December 31, 2003 utilizing the above-mentioned valuation
techniques. These tests did not provide indications of goodwill impairment in relation to the
United States/Canada and Europe reporting units due to the excess of fair value over carrying value
pertaining to these reporting units at that time. During 2003, the Company reduced goodwill due to
the revision of purchase accounting reserves related to shut down cost estimates. Other non-current liabilities consisted of the following (in thousands): December 31,2004
    
    
    2003Post-retirement benefits
    
    $
    44,842
    
    
    $
    61,348Purchase accounting reserves
    
    
    16,270
    
    
    
    13,534Pension liability
    
    
    107,083
    
    
    
    78,565Minority interest
    
    
    24,794
    
    
    
    22,090Customer prepayments on capital equipment and tooling
    
    
    18,276
    
    
    
    20,362Other
    
    
    14,797
    
    
    
    27,742$
    226,062
    
    
    $
    223,641
 45




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6. Accounts Receivable Securitization Facilities 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 Lender. A security interest with respect to such accounts
receivable was granted to the 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. On December 30, 2004, the Company sold eligible accounts receivable amounting to $71.2 million to
the QSPE and contributed accounts receivable in the amount of $12.6 million as capital to the QSPE.
The Company had a retained interest in the receivables sold and contributed as capital in the
aggregate amount of $39.1 million at December 31, 2004. The Company received $44.8 million and a
subordinated note in exchange for the receivables sold. Interest expense associated with the
Facility, which represents the discount on the sale of the receivables to the QSPE, amounted to
$0.3 million for 2004, which is reflected on the Companys Consolidated Statement of Operations. The accounts receivable sold were removed from the Consolidated Balance Sheet of the Company since
these receivables and the QSPE meet 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. In June 2001, the Company entered into a financing agreement whereby its domestic operating units
sold eligible customer receivables on an ongoing basis to a newly formed, fully consolidated,
financing entity. The financing entity subsequently sold its interest in the receivables to a third
party funding agent in exchange for cash and a subordinated interest in the unfunded transferred
receivables. The Company acted as an administrative agent in the management and collection of
accounts receivable sold, such that the amount received from the funding agent was treated as an
advance and recorded in accrued liabilities in the consolidated balance sheet. During 2004, no
customer receivables were sold under this financing arrangement. During December 2003, the Company sold approximately $83.9 million of eligible accounts receivable,
retaining a subordinated interest in all of the receivables. The receivables sold represented
amounts owed to the Company from customers as of November 30, 2003. The majority of such
receivables were collected in December 2003 and as a result, the Companys retained interest in
accounts receivable was not significant as of December 31, 2003 and is not presented separately
from accounts receivable. 7. Acquisitions and Divestitures 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 with its
primary customers being Hyundai/ Kia. The Company financed the acquisition through Korean debt
facilities, which are not covered under the Companys credit facilities (Note 10). 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. As the Company
previously consolidated Seojin in its financial statements, Seojins results of operations have
been included in all periods presented and, as a result, no pro forma information is presented. 46




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##### Table of Contents



In connection with the acquisition of the remaining 34% of Seojin, the Company recorded
certain intangible assets including customer related intangibles, tradenames and a covenant not to
compete. As of December 31, 2004, the value of customer
relationships and contracts was $7.2
million, net of accumulated amortization of $0.6 million;
tradenames was $2.6 million and a
covenant not to compete was $0.1 million, net of accumulated
amortization of $0.1 million.
Customer related intangibles are being amortized over 10 years; tradenames are considered
indefinite life assets and are evaluated for impairment in accordance with SFAS No. 144; and the
covenant not to compete is amortized over 3 years, its contractual term. Effective January 1, 2000, the Company acquired all of the outstanding shares of Dr. Meleghy GmbH &
Co. KG Werkzeugbau und Presswerk, Bergisch Gladbach (Dr. Meleghy) for approximately $86 million
plus earnout payments of $26.9 million paid in 2002 and $2.7 million paid in 2001. Dr. Meleghy
designs and produces structural stampings, assemblies, exposed surface panels and modules for the
European automotive industry. Dr. Meleghy also designs and manufactures tools and dies for use in
its production activities and for the external market. Dr. Meleghy operates three facilities in
Germany and one facility in Poland. Dr. Meleghys main customers include DaimlerChrysler, Audi,
Volkswagen, Ford, Opel, and BMW. Products offered by Dr. Meleghy include body side panels, floor
pan assemblies and miscellaneous structural stampings. In conjunction with the Companys acquisition activities, reserves have been established for
certain costs associated with facility shutdown and consolidation activities involving general and
payroll related costs primarily for planned employee termination activities and provisions for
acquired loss contracts. A roll forward of these reserves follows (in millions): Facility
    
    
    Payroll
    
    
    LossShutdown Costs
    
    
    Related Costs
    
    
    ContractsDecember 31, 2001
    
    $
    5.2
    
    
    $
    1.1
    
    
    $
    17.0Utilization
    
    
    (0.7
    )
    
    
    (1.1
    )
    
    
    (3.9
    )Revision of estimate
    
    
    
    
    
    
    
    
    
    
    (7.0
    )December 31, 2002
    
    
    4.5
    
    
    
    
    
    
    
    6.1Utilization
    
    
    (0.4
    )
    
    
    
    
    
    
    (3.0
    )Revision of estimate
    
    
    (2.1
    )
    
    
    
    
    
    
    (0.2
    )December 31, 2003
    
    
    2.0
    
    
    
    
    
    
    
    2.9Utilization
    
    
    (0.4
    )
    
    
    
    
    
    
    (2.3
    )December 31, 2004
    
    $
    1.6
    
    
    $
    
    
    
    $
    0.6
 As of December 31, 2004, all of the identified facilities have been shutdown, but the Company
continues to incur costs related to maintenance, taxes and other costs related to the buildings.
The revision of estimate in 2003 for the remaining facility shut down costs resulted from an
analysis of future costs to be incurred. The $2.1 million was recorded as an adjustment to
goodwill. The Companys acquisition reserves have been utilized as originally intended and
management believes that the liabilities recorded for shutdown and consolidation activities are
adequate as of December 31, 2004. In 2002 and 2003, the Company revised its accrual for estimated loss contracts obtained in the
Companys acquisitions to reflect the discontinuation of certain contracts that the Company was
fulfilling at a loss and the reduction of costs associated with remaining loss contracts which were
transferred to lower cost locations as part of the Companys restructuring activities.
Additionally, environmental and other reserves decreased by $0.5 million based on an analysis of
outstanding exposures in 2002. A reconciliation of the purchase accounting reserves detailed in the table above to the total
purchase accounting reserves contained in Note 5 follows (in millions): December 31,2004
    
    
    2003Facility shutdown costs
    
    $
    1.6
    
    
    $
    2.0Loss contracts
    
    
    .6
    
    
    
    2.9Environmental liabilities
    
    
    7.8
    
    
    
    6.9Legal and other
    
    
    6.3
    
    
    
    1.7Total purchase accounting reserves
    
    $
    16.3
    
    
    $
    13.5
 47




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On February 1, 2002, the Company sold its Iwahri, Korea plant to a Hyundai affiliate for net
proceeds of $4.0 million after fees and debt assumed by the purchaser. The Company realized a gain
on the sale of the plant of $3.8 million in the first quarter of 2002, which was classified as
other income. The net proceeds were used to repay outstanding subsidiary indebtedness. 8. 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. The proceeds of this divestiture were
utilized for tooling purchases and other capital expenditures. On December 31, 2003, the Company recorded an impairment charge of $27.4 million in relation to its
investment in Yorozu based upon the traded value of the investment on the Tokyo Stock Exchange. 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 current Dodge Ram frame program produced in the
Milwaukee facility was expected to run through 2009. The production move to Mexico is planned for
mid-2005 (see Note 18). The Company recognized revenue associated with the Dodge Ram frame
program in the amounts of $205.5 million, $211.3 million and $169.9 million for the years ended
December 31, 2004, 2003 and 2002, respectively. 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. Summarized unaudited financial information for Metalsa and Yorozu, with Yorozu not included in the
information as of and for the year ended December 31, 2004, is as follows (in thousands): December 31,2004
    
    
    2003
    
    
    2002Condensed Statements of EarningsRevenues
    
    $
    435,465
    
    
    $
    952,965
    
    
    $
    951,402Gross profit
    
    $
    94,319
    
    
    $
    155,775
    
    
    $
    167,937Operating income
    
    $
    42,888
    
    
    $
    49,811
    
    
    $
    78,000Net income
    
    $
    34,583
    
    
    $
    27,879
    
    
    $
    35,178Condensed Balance SheetsCurrent assets
    
    $
    147,855
    
    
    $
    330,788Noncurrent assets
    
    
    354,309
    
    
    
    701,293$
    502,164
    
    
    $
    1,032,081Current liabilities
    
    $
    94,275
    
    
    $
    285,796Noncurrent liabilities
    
    
    188,693
    
    
    
    326,778Stockholders investment
    
    
    219,196
    
    
    
    419,507$
    502,164
    
    
    $
    1,032,081
 The Company earned fees from Metalsa for administrative services and technical assistance amounting
to $4.6 million, $3.6 million and $3.8 million, respectively, in 2004, 2003 and 2002. The Company
purchased components from Metalsa in the amounts of $2.5 million, $3.4 million and $3.9 million,
respectively, during 2004, 2003 and 2002. Accounts receivable related to Metalsa amounted to $3.2
million and $2.4 million, respectively, at December 31, 2004 and 2003. At December 31, 2004,
retained earnings included $70.0 million related to the undistributed earnings of Metalsa. The
Company received cash dividends from Metalsa in the amounts of $1.9 million and $3.2 million,
respectively, during 2004 and 2003. The Company received no dividends from Metalsa during 2002. 48




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##### Table of Contents



9.
    
    Restructuring and Asset Impairment Charges Transfer of Certain Operations Among Existing Facilities (2004 Actions) On October 28, 2004, the Company committed to a plan to consolidate the stamping operations of its
Gunpo, Korea facility (Gunpo) into its Hwasung, Korea plant (Hwasung) and to move welding
operations from Gunpo to Hwasung and the Companys facility in Shiwha, Korea (Shiwha). These
actions were taken for the purpose of reducing future operating costs and are expected to be
completed by March 2006. Total estimated costs associated with these actions amount to
approximately $1.2 million, which is comprised of employee termination benefits of $0.5 million and
asset impairments of $0.7 million. This production transfer is contained in the International
operating segment. In July 2004, the Company committed to a plan to transfer production of its suspension link arm
business from the Companys facility in Bowling Green, Kentucky to its plant in Milan, Tennessee.
The transfer of this production was completed in October 2004. The objective of this action is to
gain production efficiencies and strengthen the Companys competitiveness. This production
transfer is contained in the North America segment. In September 2004, the Company committed to a
plan to move manual stamping operations and related weld assemblies from its Greenville, Michigan
facility to other Company locations in Elkton, Michigan and Kendallville, Indiana. This action is
intended to enable the Greenville facility to concentrate on higher-margin business in progressive
stampings and complex value-added assemblies. The Company recognized total charges of $1.1 million
in relation to this action, which consists of cash charges in the amount of $0.8 million and
non-cash asset impairment charges of $0.3 million. This action is contained in the North America
operating segment. The transfer of this production was completed in the first quarter of 2005. Qualifying exit costs (in accordance with SFAS No.146, Accounting for Costs Associated with Exit
or Disposal Activities) relating to the above mentioned actions are included in accrued
liabilities in the accompanying Consolidated Balance Sheet at December 31, 2004. The table below summarizes the accrual for the 2004 Plan through December 31, 2004 (in thousands): Severance andAsset Impairments
    
    
    Outplacement Costs
    
    
    TotalProvision
    
    $
    1.0
    
    
    $
    1.2
    
    
    $
    2.2Cash Usage
    
    
    3⁄4
    
    
    
    (0.2
    )
    
    
    (0.2
    )Non-cash Usage
    
    
    (1.0
    )
    
    
    3⁄4
    
    
    
    (1.0
    )Balance at December 31, 2004
    
    $
    3⁄4
    
    
    $
    1.0
    
    
    $
    1.0
 The Company anticipates additional cash charges in association with these actions in the amount of
approximately $2.7 million. Milwaukee Ranger and North America/Corporate Office Consolidation Activities (2003 Plan) In October 2003, the Company announced plans to consolidate its Novi, Michigan North America
oversight and Grand Rapids, Michigan corporate office activities and close its Rochester Hills,
Michigan prototype tooling and technical center facility. Total qualifying exit costs relating to
these activities were recognized by the Company in the fourth quarter of 2003 in the amount of
$3.7 million, which is comprised of cash charges of $2.1 million and non-cash asset impairment
charges of $1.6 million. These costs are contained within the North America segment. The Company
does not anticipate any significant additional expenses relating to this restructuring activity. On May 27, 2003, the Company announced that it would transfer the production of high-volume frame
assemblies for the Ford Ranger from its Milwaukee, Wisconsin facility to its Bellevue, Ohio
facility. During 2003, the Company recorded $25.0 million of pre-tax restructuring and asset
impairment charges relating to this event. These charges reflect estimated qualifying exit costs
comprising of cash charges of $6.1 million, pension and other post-retirement benefit plan
curtailment costs of $6.3 million and non-cash asset impairment charges of $12.6 million, all
within the North America segment. These charges did not cover certain aspects of the 2003 Plan,
including movement of equipment and colleague relocation and training, which are being recognized
in future periods as incurred. On December 5, 2003, the Company announced that it had decided not
to proceed with the relocation of 49




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##### Table of Contents



the Ford Ranger program based on revised economic factors from the original May 2003 decision
principally due to concessions received from the Milwaukee labor unions and a need for management
to focus on its 2004 new product launch schedule. Because the Companys measurement date for
pension and post-retirement benefits is September 30 and the decision to continue Ranger frame
production in Milwaukee was made in December 2003, the curtailment loss was reversed in the first
quarter of 2004 (see Note 17). The cash charges of $6.1 million were incurred prior to the reversal
of the original decision to move the Ford Ranger frame production. SFAS No. 144, Accounting for
Impairment or Disposal of Long-Lived Assets prohibits the restoration of the non-cash asset
impairment charges of $12.6 million. This activity is contained in the North America segment The accrual for the 2003 Plan is included in accrued liabilities in the accompanying Consolidated
Balance Sheets as of December 31, 2004 and 2003. The table below summarizes the accrual for the
2003 Plan through December 31, 2004 (in millions): Severance andAsset
    
    
    Outplacement
    
    
    Other ExitImpairments
    
    
    Costs
    
    
    Costs
    
    
    TotalProvision
    
    $
    14.2
    
    
    $
    4.9
    
    
    $
    9.6
    
    
    $
    28.7Cash usage
    
    
    
    
    
    
    (2.9
    )
    
    
    (3.3
    )
    
    
    (6.2
    )Non-cash charges
    
    
    (14.2
    )
    
    
    
    
    
    
    (6.3
    )
    
    
    (20.5
    )Balance at December 31, 2003
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Cash usage
    
    
    
    
    
    
    (1.1
    )
    
    
    3⁄4
    
    
    
    (1.1
    )Non-cash usage
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.2
    )Balance at December 31, 2004
    
    $
    
    
    
    $
    0.7
    
    
    $
    
    
    
    $
    0.7
 Milwaukee Press Operations (2002 Plan) On January 31, 2002, the Company announced that it would discontinue the remaining stamping and
ancillary processes performed at its Milwaukee Press Operations and relocate the remaining work to
other Tower locations or Tier II suppliers. The Company substantially completed the transfer
process in 2002. As a result of these efforts, the Company recorded a restructuring charge in the
first quarter of 2002 totaling $75.4 million, which reflects the estimated qualifying exit costs
to be incurred. During the fourth quarter of 2002, due to a favorable settlement of anticipated
other exit costs and an assessment of remaining costs, the Company subsequently reduced the
estimates associated with the 2002 Plan and a restructuring plan for 2001 by $14.3 million,
resulting in a net restructuring charge of $61.1 million for 2002. This activity is contained in
the North America segment. The 2002 Plan charge includes costs associated with asset impairments, severance and outplacement
costs related to colleague terminations and certain other exit costs. The asset impairments pertain to long-lived assets, including fixed assets, buildings and
manufacturing equipment from the facilities the Company intended to dispose of or discontinue.
Fixed assets that were disposed of were written down to their estimated residual values. For assets
that were immediately sold, the Company measured impairment based on estimated proceeds on the sale
of the facilities and equipment. 50




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##### Table of Contents



The accrual for the 2002 Plan is included in accrued liabilities in the accompanying Consolidated
Balance Sheets as of December 31, 2004 and 2003. The table below summarizes the accrued operational
realignment and other charges through December 31, 2004 (in millions): Severance andAsset
    
    
    Outplacement
    
    
    Other ExitImpairments
    
    
    Costs
    
    
    Costs
    
    
    TotalProvision
    
    $
    47.2
    
    
    $
    8.4
    
    
    $
    19.8
    
    
    $
    75.4Cash usage
    
    
    
    
    
    
    (4.7
    )
    
    
    (6.6
    )
    
    
    (11.3
    )Non-cash charges
    
    
    (47.2
    )
    
    
    
    
    
    
    (11.2
    )
    
    
    (58.4
    )Revision of estimate
    
    
    
    
    
    
    (0.2
    )
    
    
    (1.0
    )
    
    
    (1.2
    )Balance at December 31, 2002
    
    
    
    
    
    
    3.5
    
    
    
    1.0
    
    
    
    4.5Cash usage
    
    
    
    
    
    
    (1.8
    )
    
    
    (1.0
    )
    
    
    (2.8
    )Revision of estimate
    
    
    
    
    
    
    (0.7
    )
    
    
    
    
    
    
    (0.7
    )Balance at December 31, 2003 and 2004
    
    $
    
    
    
    $
    1.0
    
    
    $
    
    
    
    $
    1.0
 During 2002, the Company charged $11.2 million of other exit costs pertaining to expected remaining
pension curtailment costs against the pension liability accrual. The revision in estimate resulted
from minor variances in severance and other exit costs compared to the amount initially
established. Such revisions were credited to Restructuring and Asset Impairment Charges in the
consolidated financial statements. Restructuring Plans Initiated Prior to 2002 The accrual for restructuring plans initiated prior to 2002 is included in accrued liabilities in
the accompanying Consolidated Balance Sheets at December 31, 2004 and 2003. The table below
summarizes the accrued operational realignment and accrued other charges related to these plans
through December 31, 2004 (in millions): Severance andOutplacement
    
    
    Other ExitCosts
    
    
    Costs
    
    
    TotalBalance at December 31, 2001
    
    $
    23.9
    
    
    $
    31.4
    
    
    $
    55.3Cash usage
    
    
    (22.2
    )
    
    
    (3.6
    )
    
    
    (25.8
    )Non cash charges
    
    
    
    
    
    
    (7.1
    )
    
    
    (7.1
    )Revision of estimate
    
    
    (0.7
    )
    
    
    (12.4
    )
    
    
    (13.1
    )Balance at December 31, 2002
    
    
    1.0
    
    
    
    8.3
    
    
    
    9.3Cash usage
    
    
    (2.0
    )
    
    
    (3.5
    )
    
    
    (5.5
    )Revision of estimate
    
    
    1.0
    
    
    
    (0.3
    )
    
    
    0.7Balance at December 31, 2003
    
    
    
    
    
    
    4.5
    
    
    
    4.5Cash usage
    
    
    
    
    
    
    (0.9
    )
    
    
    (0.9
    )Non-cash charges
    
    
    
    
    
    
    0.8
    
    
    
    0.8Balance at December 31, 2004
    
    $
    
    
    
    $
    4.4
    
    
    $
    4.4
 This restructuring activity is contained in the North America segment. The remaining other exit costs of $4.4 million as of December 31, 2004 relate to the present value
of operating lease payments that the Company is obligated to pay though 2010. During 2002, the
Company charged $7.1 million against the pension liability accrual for expected special termination
benefits to be paid out in the future pertaining to restructuring reserves established in 2001, as
a result of a legal settlement negotiated in 2002. The impact of this legal settlement was to
substantially reduce the cost of actuarial pension benefits due to colleagues terminated in 2001.
The resulting reduction of $11.1 million was credited to restructuring and asset impairment
charges in the Consolidated Statement of Operations for the year ended December 31, 2002. The
revisions in estimate resulted from variances in restructuring execution. 51




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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 each of the three years ended December 31 (in
millions): 2004
    
    
    2003
    
    
    2002Restructuring and related asset impairments, net
    
    $
    5.6
    
    
    $
    28.7
    
    
    $
    75.4Revision of estimate
    
    
    (6.3
    )
    
    
    
    
    
    
    (14.3
    )Other asset impairments
    
    
    
    
    
    
    128.8
    
    
    
    Total
    
    $
    (0.7
    )
    
    $
    157.5
    
    
    $
    61.1
 Non-Restructuring Asset Impairments During 2003, the Company evaluated the current operating plans and current and forecasted business
for three of its frame assembly plants and other facilities. In accordance with SFAS No. 144,
Accounting for Impairment or Disposal of Long-Lived Assets,the Company determined that there were
indicators of impairment present for each of the facilities based upon the potential for new
business and evaluation of pricing. Cash flow projections were prepared which indicated that there
were not sufficient projected cash flows to support the carrying value of the long-lived assets at
these facilities, which resulted in a write down to fair value of $122.7 million based upon
associated discounted cash flows. In addition, the Company identified assets, which no longer had
sufficient cash flows to support applicable carrying amounts, resulting in a write down to fair
value of $6.1 million. The asset write-offs of $128.8 million are included in the $157.5 million
restructuring and asset impairment charge in the Consolidated Statement of Operations for the year
ended December 31, 2003. The non-restructuring asset impairment charges recorded during 2003 are
within the North America operating segment.  10.
    
    Debt LONG-TERM DEBT Long-term debt consists of the following (in thousands): December 31,
    
    
    December 31,2004
    
    
    2003Revolving credit facility
    
    $
    50,000
    
    
    $
    First lien term loan
    
    
    373,125
    
    
    
    Convertible Debentures
    
    
    121,723
    
    
    
    Senior Euro notes
    
    
    203,550
    
    
    
    188,640Term credit facilities
    
    
    
    
    
    
    239,512Industrial development revenue bonds
    
    
    43,765
    
    
    
    43,765Senior notes (net of discount of $6,567 and
$6,955, respectively)
    
    
    251,433
    
    
    
    251,005Due to Tower Automotive Capital Trust
    
    
    258,750
    
    
    
    258,750Other foreign subsidiary indebtedness
    
    
    163,953
    
    
    
    145,373Other
    
    
    19,608
    
    
    
    25,7491,485,907
    
    
    
    1,152,794Less-current maturities
    
    
    (124,622
    )
    
    
    (91,935
    )Long-term debt
    
    $
    1,361,285
    
    
    $
    1,060,859
 Future maturities of long-term debt as of December 31, 2004 are as follows (in thousands): 2005
    
    $
    124,6222006
    
    
    55,5632007
    
    
    8,2012008
    
    
    185,3072009
    
    
    231,574Thereafter
    
    
    880,640Total
    
    $
    1,485,907
 52




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On May 24 2004, the Company entered into a credit agreement (the Credit Agreement) to replace its
existing term credit facilities and issued $125.0 million of 5.75% Convertible Senior Debentures
(the Convertible Debentures). The Company utilized the proceeds of the Credit Agreement and the
Convertible Debentures to repay existing senior credit facilities in the amount of $239.5 million,
call the $200 million 5.0% convertible subordinated notes due August 1, 2004, pay related fees and
expenses and for general corporate purposes. In the second quarter of 2004, the Company wrote off
deferred financing costs in the amount of $3.3 million in relation to debt that was paid off with
proceeds from the Credit Agreement and the Convertible Debentures. During the years ended December
31, 2003 and 2002, the Company incurred charges of $0.4 million and $2.0 million, respectively, for
the write off of deferred financing costs associated with the permanent reductions of borrowing
capacity associated with the Companys previous credit facilities. The Credit Agreement The Credit Agreement provided for a revolving credit facility in the aggregate amount of $50.0
million, a first lien term loan of $375.0 million and a second lien letter of credit facility of
$155.0 million. Revolving loans could be borrowed at any time subsequent to May 24, 2004 but prior to May 24, 2009,
the revolving loan termination date. The revolving credit facility also provided for the issuance
of letters of credit of up to $25.0 million, which constituted usage under the facility and reduced
availability of revolving loans dollar for dollar. Revolver letters of credit were to expire on the
earlier of one year from the date of issuance, unless otherwise agreed to by the issuer, or one
business day prior to May 24, 2009, the revolving loan termination date. At December 31, 2004, the
Company had no amounts available for borrowing under this revolving credit facility. The first lien
term loan required quarterly payments of $937,500 for the period of September 30, 2004 through
September 30, 2008 and a payment of $179.5 million on each of November 24, 2008 and May 24, 2009. Borrowings under outstanding revolving loans and the first lien term loan bore interest at a
variable rate based upon a base rate, LIBOR or a Euro rate plus an applicable margin of between
3.25% and 4.25%. The Company was obligated to pay a commitment fee of 0.50% per annum on the unused
portion of the revolving credit facility. Beginning January 1, 2005, the applicable margin on
outstanding borrowings and the commitment fee was subject to adjustment based on the Companys
leverage ratio. No adjustments were applicable at that time. The actual interest rate on amounts
outstanding under revolving loans and the first lien term loan ranged from 5.75% to 8.00% during
the period of May 24, 2004 through December 31, 2004. The revolving credit facility and the first
lien term loan were secured by a first priority lien and security interest (subject to customary
exceptions) in the present and future property and assets, real and personal, tangible and
intangible of the Company and the proceeds and products of such property and assets. The Company
was required to utilize the net proceeds, in excess of certain provisions for reinvestment or
retention, of any equity issuances, asset dispositions, casualty losses or debt to make mandatory
prepayments under the Credit Agreement. The second lien letter of credit facility is fully cash collateralized by third parties for
purposes of replacing or backstopping letters of credit outstanding under the Companys previous
credit agreement. The cash collateral was deposited by such third parties in a trust account and
the Company has no right, title or interest in the trust account. The Company pays an annual fee on
amounts deposited with the second lien letter of credit issuers equal to, at the election of the
Company, the base rate plus a margin of 6.00% or LIBOR plus a margin of 7.00%, in each case, less
the amount of interest earned on the amount deposited as cash collateral by the second lien
participants. The second lien letters of credit expire on the earlier of one year from date of
issuance, unless otherwise agreed to by the issuer, or on January 29, 2010, the stated maturity
date of the second lien letter of credit facility. The total of issued and un-issued second lien
letters of credit shall be reduced by $387,500 per quarter beginning December 31, 2004 through
December 31, 2009, and by $146.9 million on January 29, 2010. At December 31, 2004, the Company had
second lien letters of credit issued in the amount of $151.9 million. No draws were made against
the second lien letters of credit as of December 31, 2004. The second lien letter of credit facility is secured by a second priority lien and security
interest (subject to the same exceptions as the first lien collateral) in all first lien
collateral, other than the principal manufacturing facilities located in the United States owned by
the Company or any of its subsidiaries or shares of capital stock or indebtedness of certain
subsidiaries. 53




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The Credit Agreement contains numerous covenants, which require the Company to meet certain
financial maintenance tests including a minimum interest coverage and a total leverage ratio. In
addition, the covenants limit: the creation of liens; the incurrence of indebtedness, guarantees
and contingent obligations; mergers and consolidations, acquisitions, joint ventures and other
investments; sales, transfers and other dispositions of assets; dividends and other distributions
to stockholders; repurchasing shares of common stock; prepayment, redemption or repurchase of
certain indebtedness and other matters customarily restricted in such agreements. See
DIP Financing and Back-Stop Agreement below. Weighted Average Interest Rates of Credit Facilities The weighted average interest rates associated with borrowings pertaining to the Companys credit
facilities (including the effects of the interest rate swap contracts mentioned below) were 7.9 %,
7.3% and 6.4% respectively, for the years ended December 31, 2004, 2003 and 2002. Convertible Debentures On May 24, 2004, the Company issued the Convertible Debentures in the total amount of $125.0
million. The Convertible Debentures bear interest at a rate of 5.75% per annum paid semi-annually
on May 15 and November 15 beginning November 15, 2004. The Convertible Debentures mature on May
15, 2024, unless earlier converted, redeemed or repurchased by the Company. The Convertible Debentures are general unsecured senior obligations of the Company and rank equally
with any present and future senior debt of the Company. The Convertible Debentures rank senior to
any subordinated debt of the Company and are effectively subordinated to any secured debt of the
Company, to the extent of the amount of the assets securing such debt. The Convertible Debentures
are structurally subordinated to present and future debt and other obligations of each subsidiary
of the Company. Holders may convert the Convertible Debentures into shares of the Companys common stock at a
conversion rate of 231.0002 shares per $1,000 principal amount of the Convertible Debentures (equal
to a conversion price of approximately $4.33 per share) subject to adjustment upon certain events. In January 2005, the Convertible Debentures became immediately convertible as a result of the
downgrading of the Companys debt by credit rating agencies. Upon conversion, the Company has the right to deliver, in lieu of shares of the Companys common
stock, cash or a combination of cash and shares of common stock. Prior to September 20, 2004, the
Company could not issue more than 19,705,187 shares of common stock upon the conversion or
repurchase of the Convertible Debentures unless and until the Company obtained stockholder approval
for the issuance of the Convertible Debentures and the common stock issuable upon conversion or
repurchase. In circumstances under which the Company would have been required to issue in excess
of 19,705,187 shares of common stock, the Company was required to pay cash in respect of all or a
portion of converted or repurchased Convertible Debentures in order to ensure that the shares
issued on conversion or repurchase did not exceed 19,705,187 shares (the 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. The Company recognized income of approximately
$3.9 million, for the period of May 24, 2004 through September 19, 2004, in relation to the change
in fair value of the Embedded Conversion Option, which is reflected as Unrealized Gain on
Derivative in the accompanying Consolidated Statement of Operations for 2004. The portion of the
Convertible Debentures, which was to be currently settled in cash, was reflected as a current
liability in the Companys Consolidated Balance Sheet until September 20, 2004. On September 20, 2004, the Companys stockholders approved the issuance of the Convertible
Debentures and the common stock issuable upon conversion or repurchase. As of September 20, 2004,
mark-to-market adjustments pertaining to the Embedded Conversion Option are no longer required, the
Company is no longer required to settle any portion of the Convertible Debentures in cash and the
carrying amount of the Convertible Debentures amounted to $ 121.6 million consisting of the sum of
the carrying amount of the Convertible Debentures of $112.9 million and the fair value of the
Embedded Conversion Option of $8.7 million. Prior to February 2, 2005, the date on which the
Debtors filed a voluntary petition under Chapter 11, of the Bankruptcy Code, the difference between
the carrying 54




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##### Table of Contents



value and the principal amount of the Convertible Debentures was to be accreted to the carrying
amount of the Convertible Debentures through interest expense on the effective interest method to
the earliest put date of the Convertible Debentures, May 20, 2011. The Convertible Debentures are not redeemable prior to May 20, 2011. The Company may redeem the
Convertible Debentures on or after May 20, 2011, in whole or in part, at any time, for cash at a
redemption price equal to 100% of the principal amount, plus accrued and unpaid interest. In accordance with the terms of the Convertible Debentures, the holders of the Convertible
Debentures may require the Company to repurchase all or a portion of the Convertible Debentures on
May 15, 2011, May 15, 2014 and May 15, 2019 or if the Company experiences certain fundamental
changes at a repurchase price of 100% of principal amount, plus accrued and unpaid interest. The
Company, may at its option, pay the repurchase price in cash, shares of common stock or a
combination thereof, except that the Company shall pay accrued and unpaid interest, if any, in
cash. Tower Automotive Capital Trust During the third quarter of 2003, the Company elected to adopt the current provisions of FASB
Interpretation Number (FIN) 46, Consolidation of Variable Interest Entities, an interpretation of
Accounting Research Bulletin No. 51as it relates to the Companys mandatorily redeemable
convertible trust preferred securities prior to the required effective date. Under FIN 46, the
Tower Automotive Capital Trust (the Trust), which was previously consolidated by the Company, is
no longer consolidated. As a result, the Company no longer presents the mandatorily redeemable
convertible trust preferred securities as mezzanine financing, but instead records a debt
obligation for the proceeds which are owed to the Trust by the Company. Interest is recorded at 6
3/4% on the amount owed by the Company to the Trust, which is equal to the amount that was
previously presented as minority interest (net of tax) for the dividends on the preferred stock.
Interest expense increased by $8.8 million for 2004 in comparison to 2003 as a result of this
reclassification. Pursuant to the guidance in FIN 46, the Company has elected not to reclassify
the presentation in prior periods. The Company deferred the interest payment of $4.4 million due
on December 31, 2004. The terms of the trust agreement and the underlying 6 3/4% convertible
subordinated debentures held by the Trust permits the deferral of dividends and the underlying
interest payments for up to 20 consecutive quarters. The $258.8 million trust convertible
preferred securities held by the Trust were issued in June 1998 at a dividend rate of 6 3/4% and
are redeemable, in whole or in part, after June 30, 2001 but before June 30, 2018. The preferred
securities are also convertible at the option of the holder into common stock of the Company at an
equivalent conversion price of $30.713 per share. Senior Euro Notes The Euro-denominated senior unsecured notes in the amount of 150 million euro ($203.6 million at
December 31, 2004) bear interest at a rate of 9.25%, payable semi-annually. These notes rank
equally with all of the Companys other senior unsecured and unsubordinated debt and mature on
August 1, 2010. Senior Notes In June 2003, R. J. Tower (the Issuer), a wholly owned subsidiary of the Company, completed a
senior note offering with a face amount of $258 million. The notes were discounted upon issuance
to yield 12.0% payable semi-annually. The notes rank equally with all of the Companys other
senior unsecured and unsubordinated debt and mature on June 1, 2013. 55




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Industrial Development Revenue Bonds The industrial development revenue bonds are due in lump sum payments of $21.9 million each in
June 2024 and March 2025. Interest is payable monthly at a rate adjusted weekly by a bond
remarketing agent (2.52 % and 1.26%, respectively, at December 31, 2004 and 2003). The industrial
development revenue bonds are backed by long-term letters of credit; see The Credit Agreement. Other Foreign Subsidiary Indebtedness Other foreign subsidiary indebtedness consists primarily of borrowings at Seojin, with interest
rates ranging from
4.52% to 9.4%, renewable annually. Generally, borrowings of foreign subsidiaries are made under
credit agreements with commercial lenders and are used to fund working capital and other operating
requirements. Certain foreign subsidiaries have financing arrangements that restrict their ability
to dividend or otherwise distribute cash to the parent company and its subsidiaries. Variable Interest Entity As of December 31, 2003, the Company consolidated the variable interest entity related to its
Lansing, Michigan building and equipment leasing arrangement and, therefore, recorded property,
plant and equipment of $25.7 million and related indebtedness of $25.7 million. At December 31,
2004, this indebtedness amounted to $19.6 million. Interest Rate Swap Contracts The Company has utilized an interest rate swap contract (First Interest Rate Swap Contract),
which was designated as a cash flow hedge, to manage its interest rate exposure on approximately
$160.0 million of its floating rate indebtedness under its credit agreements. The First Interest
Rate Swap Contract has the effect of converting the floating rate interest to a fixed rate of
approximately 6.88%, plus any applicable margin required under the revolving credit facilities. The
interest rate swap contract expires in September 2005. On December 6, 2004, this interest rate
swap contract was de-designated as a cash flow hedge and changes in the fair value of the interest
rate swap contract are recorded in earnings. On December 6, 2004, the Company entered into a
second interest rate swap contract (Second Interest Rate Swap). The Second Interest Rate Swap
contract has the effect of converting the fixed rate of interest of 6.88% associated with the First
Interest Rate Swap Contract to a floating rate, which approximated 2.44% at December 31, 2004, plus
any applicable margin required under the Companys revolving credit facility. The Second Interest
Rate Swap contract has not been designated as a hedge; accordingly, changes in the fair value of
this interest rate swap contract are recorded in earnings. As of December 31, 2004, $2.9 million (net of tax) is recorded in accumulated other comprehensive
loss related to the cash flow hedges. This represents the accumulated losses on the First Interest
Rate Swap Contract, prior to being de-designated as a cash flow hedge. This amount will be
amortized as additional interest expense over the remaining term of the First Interest Rate Swap
Contract, as the Company expects that the cash flows originally hedged will continue to occur.
Derivative liabilities relating to the interest rate swap agreements totaling $4.5 million have
been recorded in accrued liabilities in the Consolidated Balance Sheet as of December 31, 2004. The
fair value of the interest rate swap contracts is based upon the difference between the contractual
rates and the present value of the expected future cash flows on the hedged interest rate. Chapter 11 Impact Under the terms of the Credit Agreement, the Chapter 11 filing creates 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 Credit Agreement. Outstanding
obligations under the Credit Agreement amounted to $425.0 million, which was refinanced through the
DIP financing described below. In addition, the Chapter 11 filing creates an event of default in relation to the Convertible
Debentures, Senior Notes, Senior Euro Notes, and the Trust Preferred Securities and underlying 6
-3/4% Convertible Subordinated Debentures. 56




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The ability of the creditors of the Debtors to seek remedies to enforce their rights under the
credit facilities described above is stayed as a result of the Chapter 11 filing, and the
creditors rights of enforcement are subject to the applicable provisions of the Bankruptcy Code. The Companys foreign subsidiaries are not included in the Chapter 11 filing. Therefore, the
debt of these subsidiaries is not subject to compromise in the bankruptcy proceedings. 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 a number of 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 Debtors obligation amounting to $425 million
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 (which 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 will 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 2.75% 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 Debtors, plus (y) 2.75%, in the
case of a loan under the revolving facility, or 3.75% 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. 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. 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. 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 under the Credit Agreement in an aggregate
amount not to exceed $155 million. 57




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11. Income Taxes The provision (benefit) for income taxes consisted of the following (in thousands): Years Ended December 31,2004
    
    
    2003
    
    
    2002Current Domestic
    
    $
    
    
    
    $
    (11,213
    )
    
    $
    (4,981
    )Foreign
    
    
    9,944
    
    
    
    (3,571
    )
    
    
    10,5109,944
    
    
    
    (14,784
    )
    
    
    5,529Deferred Domestic
    
    
    122,169
    
    
    
    (48,491
    )
    
    
    4,321Foreign
    
    
    24,971
    
    
    
    12,464
    
    
    
    (2,214
    )147,140
    
    
    
    (36,027
    )
    
    
    2,107$
    157,084
    
    
    $
    (50,811
    )
    
    $
    7,636
 A reconciliation of income taxes computed at the statutory rates to the reported income tax
provision (benefit) is as follows (in thousands): Years Ended December 31,2004
    
    
    2003
    
    
    2002Taxes at federal statutory rates
    
    $
    (137,959
    )
    
    $
    (52,752
    )
    
    $
    7,636Foreign taxes and other
    
    
    7,925
    
    
    
    (14,469
    )
    
    
    (7,252
    )Goodwill impairment
    
    
    70,670
    
    
    
    
    
    
    
    Other permanent differences,
primarily interest, sale of
investment and unrealized gain on
derivative
    
    
    (1,591
    )
    
    
    (2,385
    )
    
    
    (457
    )Valuation allowance
    
    
    218,039
    
    
    
    18,795
    
    
    
    7,709Total
    
    $
    157,084
    
    
    $
    (50,811
    )
    
    $
    7,636
 The summary of income (loss) before provision (benefit) for income taxes, equity in earnings of
joint ventures, gain on sale of joint venture, minority interest and cumulative effect of change in
accounting principle consisted of the following (in thousands): Years Ended December 31,2004
    
    
    2003
    
    
    2002Domestic
    
    $
    (425,060
    )
    
    $
    (183,070
    )
    
    $
    (12,246
    )Foreign
    
    
    30,891
    
    
    
    32,351
    
    
    
    34,064$
    (394,169
    )
    
    $
    (150,719
    )
    
    $
    21,818
 A summary of deferred income tax assets (liabilities) is as follows (in thousands): December 31,2004
    
    
    2003Deferred income tax assets:Accrued compensation costs
    
    $
    38,471
    
    
    $
    36,735Postretirement benefit obligations
    
    
    26,396
    
    
    
    30,073Loss contracts
    
    
    4,453
    
    
    
    2,894Facility closure and consolidation costs
    
    
    101,663
    
    
    
    79,339Net operating loss carryforwards and tax credits
    
    
    226,848
    
    
    
    191,878Investment valuation adjustments
    
    
    
    
    
    
    25,857Other reserves and adjustments
    
    
    19,805
    
    
    
    12,669417,636
    
    
    
    379,445Less: Valuation allowance
    
    
    (306,844
    )
    
    
    (60,103
    )Total deferred income tax assets
    
    
    110,792
    
    
    
    319,342Deferred
income tax liabilities  fixed asset and goodwill lives and methods
    
    
    (122,072
    )
    
    
    (152,282
    )Net deferred income tax assets (liabilities)
    
    $
    (11,280
    )
    
    $
    167,060
 58




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##### Table of Contents



The Company has U.S. net operating loss carryforwards (NOLs) of $424.1 million that expire during
the years 2021 through 2024. The Company has a U.S. alternative minimum tax (AMT) credit
carryforward of $2.7 million. The AMT credit has an indefinite carryforward period. In the
fourth quarter of 2004, the Company concluded that it was appropriate to establish a full valuation
allowance in the amount of $148.4 million as a result of the uncertainty of realization of the
Companys U.S. operating loss carryforwards. The Company has various state tax credits and state NOL carryforwards in the amount of $16.0
million and $691.9 million, respectively, that expire through 2024. In 2002, a $7.7 million
valuation allowance was established due to the uncertainty of realization of certain state tax
credits and net operating loss carryforwards. In 2004 and 2003, additional valuation allowance
amounts of $17.9 million and $13.5 million, respectively, were established resulting in a full
valuation allowance amounting to $39.1 million in association with state deferred tax assets. As of and subsequent to December 31, 2004, the Company is maintaining a full valuation allowance
related to its U.S. federal and state deferred tax assets. The Companys foreign subsidiaries have NOL carryforwards of $150.2 million at December 31, 2004.
In 2002, the Company established a $24.2 million valuation allowance due to the uncertainty of the
realization of a tax benefit associated with the write down of goodwill under SFAS 142 related to
the Companys Brazil operations. The goodwill write down and related income tax provision were
netted and reported as a cumulative effect of a change in accounting principle in the 2002
Consolidated Statement of Operations. In 2003, the Company determined that realization of the
entire goodwill tax benefit is probable and reversed the remaining portion of the valuation
allowance. In 2003, a $13.1 million valuation allowance was established due to the uncertainty of
realization of certain foreign NOL carryforwards. In 2004, the valuation allowance was increased
by $4.2 million due to the uncertainty of realization of certain additional foreign NOL
carryforwards. The Company recognizes deferred taxes on its earnings related to equity method investments.
Deferred taxes have not been recognized in relation to consolidated foreign investments as earnings
relating to such investments have been deemed permanently reinvested by the Company. It is not
practicable for the Company to determine the amount of unrecognized deferred tax liability for
temporary differences, which are permanent in duration pertaining to investments in foreign
subsidiaries. A $21.2 million deferred tax liability for a temporary difference arising from
undistributed earnings of an investment in a joint venture accounted for in accordance with the
equity method has been recognized. In 2003, a $9.6 million valuation allowance was provided as a
result of the uncertainty pertaining to the use of the tax benefit associated with the write-down
of the Yorozu investment to less than its carrying value for tax purposes due to the capital nature
of the loss. This valuation allowance was reversed in 2004 as a result of the Companys sale of
the Yorozu investment in March 2004. At December 31, 2004, the Company has accrued contingent tax liabilities in the aggregate amount of
approximately $6.9 million, recognized in accordance with SFAS 5, Accounting for Contingencies, in
relation to certain foreign and state tax issues. The American Jobs Creation Act of 2004 (the Act), which was signed into law on October 22,
2004, provides domestic manufacturers with a special deduction of up to 9%, when fully phased in,
of the lesser of (a) qualified production activities income as defined in the Act, or (b) taxable
income after the deduction for the utilization of any net operating loss carryforwards. A special
deduction, if applicable, of 3% shall apply to 2005 and 2006, while a deduction of 6% shall apply
for the years 2007 through 2009. The full 9% deduction, if applicable, is available in 2010 and
thereafter. This tax deduction is limited to 50% of taxable wages paid. This special deduction will
not be available until the Company realizes taxable income. The Foreign Earnings Repatriation Provision within the Act provides for a special one-time tax
deduction of 85% of certain foreign earnings that are repatriated to a U.S. taxpayer as defined in
the Act. The Company will not be utilizing this provision due to its operating loss carryforward
position. 59




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##### Table of Contents



12.
    
    Stockholders Investment (Deficit) Stock-Based Compensation 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 December
31, 2004, 1,114,400 shares of common stock were available for issuance under the Stock Option Plan.
Summarized information pertaining to the Stock Option Plan follows: WeightedWeighted
    
    
    Average FairShares
    
    
    
    
    
    
    Average
    
    
    Value of
    
    
    ExercisableUnder
    
    
    
    
    
    
    Exercise
    
    
    Options
    
    
    At End ofOption
    
    
    Exercise Price
    
    
    Price
    
    
    Granted
    
    
    YearOutstanding, January 1, 2002
    
    
    502,600
    
    
    
    4.00 - 22.97
    
    
    
    17.29
    
    
    $
    8.85
    
    
    
    378,600Exercised
    
    
    (75,000
    )
    
    
    4.00 -   7.56
    
    
    
    6.11Forfeited
    
    
    (201,250
    )
    
    
    17.13 - 22.97
    
    
    
    19.93Outstanding, December 31, 2002
    
    
    226,350
    
    
    
    4.00 - 22.97
    
    
    
    18.65
    
    
    
    9.36
    
    
    
    205,913Forfeited
    
    
    (58,650
    )
    
    
    4.00 - 22.97
    
    
    
    20.03Outstanding, December 31, 2003
    
    
    167,700
    
    
    
    4.00 - 22.97
    
    
    
    18.16
    
    
    
    9.07
    
    
    
    167,700Forfeited
    
    
    (10,500
    )
    
    
    7.5625 - 19.25
    
    
    
    16.47Outstanding, December 31, 2004
    
    
    157,200
    
    
    
    4.00 - 22.97
    
    
    
    18.28
    
    
    
    9.47
    
    
    
    157,200
 A summarization of stock options outstanding related to the Stock Option Plan at December 31, 2004
follows: Options Outstanding
    
    
    Options ExercisableNumberRange of
    
    Outstanding
    
    
    Weighted-Average
    
    
    Weighted-
    
    
    Number
    
    
    Weighted-Exercisable
    
    At
    
    
    Remaining
    
    
    Average
    
    
    Exercisable
    
    
    AverageOptions
    
    12/31/04
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    12/31/04
    
    
    Exercise Price$4.00
    
    
    1,950
    
    
    
    0.2
    
    
    $
    4.00
    
    
    
    1,950
    
    
    $
    4.007.56
    
    
    5,500
    
    
    
    1.3
    
    
    
    7.56
    
    
    
    5,500
    
    
    
    7.5617.13 - 25.75
    
    
    149,750
    
    
    
    3.8
    
    
    
    18.86
    
    
    
    149,750
    
    
    
    18.86
 The weighted average exercise price of options exercisable was $18.28, $18.16 and $18.59,
respectively, at December 31, 2004, 2003 and 2002. The weighted average remaining contractual life
of outstanding options was 3.7 years at December 31, 2004. All options granted under the Stock Option Plan have a contractual life of 10 years from the date
of grant and vest ratably generally over a four-year period from the date of grant. 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 Incentive Plan
provides for the issuance of up to 3,000,000 shares of common stock. As of December 31, 2004,
1,334,507 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. 60




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##### Table of Contents



A summarization of options granted pertaining to the Incentive Plan follows: WeightedWeighted
    
    
    Average FairShares
    
    
    
    
    
    
    Average
    
    
    Value of
    
    
    ExercisableUnder
    
    
    
    
    
    
    Exercise
    
    
    Options
    
    
    At End ofOption
    
    
    Exercise Price
    
    
    Price
    
    
    Granted
    
    
    YearOutstanding,
January 1, 2002
    
    
    2,380,970
    
    
    $
    9.63 - $26.81
    
    
    $
    13.36
    
    
    $
    7.48
    
    
    
    373,783Granted
    
    
    859,050
    
    
    
    13.75
    
    
    
    13.75Exercised
    
    
    (33,400
    )
    
    
    11.33 - 13.19
    
    
    
    12.87Forfeited
    
    
    (249,175
    )
    
    
    10.19 - 19.25
    
    
    
    13.62Outstanding, December 31,
2002
    
    
    2,957,445
    
    
    
    9.63 - 26.81
    
    
    
    13.46
    
    
    
    7.79
    
    
    
    925,605Granted
    
    
    562,900
    
    
    
    3.16
    
    
    
    3.16Granted
    
    
    3,000
    
    
    
    4.55
    
    
    
    4.55Forfeited
    
    
    (1,234,232
    )
    
    
    3.16 - 13.75
    
    
    
    12.35Outstanding, December 31,
2003
    
    
    2,289,113
    
    
    
    3.16 - 26.81
    
    
    
    11.51
    
    
    
    6.50
    
    
    
    1,024,239Granted
    
    
    534,800
    
    
    
    1.99 - 7.08
    
    
    
    3.71Exercised
    
    
    (23,750
    )
    
    
    3.16
    
    
    
    3.16Forfeited
    
    
    (503,322
    )
    
    
    3.16 - 13.75
    
    
    
    9.21Outstanding, December
31, 2004
    
    
    2,296,841
    
    
    
    3.16 - 13.75
    
    
    
    10.29
    
    
    
    5.95
    
    
    
    708,790
 The following table summarizes certain information pertaining to stock options outstanding
under the Incentive Plan: Number
    
    
    Options Outstanding
    
    
    Options ExercisableRange of
    
    Outstanding
    
    
    Weighted-Average
    
    
    
    
    
    
    NumberExercisable
    
    At
    
    
    Remaining
    
    
    Weighted-Average
    
    
    Exercisable
    
    
    Weighted-AverageOptions
    
    12/31/04
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    12/31/04
    
    
    Exercise Price$1.99 - $7.08
    
    
    816,913
    
    
    
    9.0
    
    
    $
    3.50
    
    
    
    
    
    
    $
    9.13
- 15.56
    
    
    1,358,438
    
    
    
    6.2
    
    
    
    12.89
    
    
    
    587,300
    
    
    
    13.2726.81
    
    
    121,490
    
    
    
    4.3
    
    
    
    26.81
    
    
    
    121,490
    
    
    
    26.81
 Options vest ratably over a four-year period from the date of grant. The weighted average
exercise price of exercisable options was $15.59, $14.49 and $14.63, respectively, at December 31,
2004, 2003 and 2002. The weighted average remaining contractual life of outstanding options was
7.1 years at December 31, 2004. Information on shares of restricted stock into which options
granted under this plan have been converted is set forth below under the caption Restricted
Stock. Independent Director Stock 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 December 31, 2004, 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. Vesting is determined by the Companys Board of Directors at the
date of grant and in no event can be less than six months from the date of grant. A summarization of information pertaining to the Director Option Plan follows: WeightedWeighted
    
    
    Average FairShares
    
    
    
    
    
    
    Average
    
    
    Value of
    
    
    ExercisableUnder
    
    
    
    
    
    
    Exercise
    
    
    Options
    
    
    At End ofOption
    
    
    Exercise Price
    
    
    Price
    
    
    Granted
    
    
    YearOutstanding, January 1,
2002
    
    
    115,200
    
    
    
    7.56 - 22.97
    
    
    
    16.49
    
    
    $
    8.75
    
    
    
    108,400Exercised
    
    
    (15,000
    )
    
    
    7.56
    
    
    
    7.56Outstanding, December 31, 2004,
2003 and 2002
    
    
    100,200
    
    
    $
    7.56 - 22.97
    
    
    $
    17.82
    
    
    $
    9.42
    
    
    
    100,200
 61




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##### Table of Contents



A summarization of certain information pertaining to stock options outstanding at December 31,
2004 in relation to the Director Option Plan follows: Options Outstanding
    
    Options ExercisableRange of
    
    Number
    
    Weighted-Average
    
    
    
    
    
    NumberExercisable
    
    Outstanding
    
    Remaining
    
    Weighted-Average
    
    Exercisable
    
    Weighted-AverageOptions
    
    At 12/31/04
    
    Contractual Life
    
    Exercise Price
    
    12/31/04
    
    Exercise Price$              7.56
    
    
    15,000
    
    
    
    1.1
    
    
    $
    7.56
    
    
    
    15,000
    
    
    $
    7.56$18.94-$22.97
    
    
    85,200
    
    
    
    3.1
    
    
    $
    19.63
    
    
    
    85200
    
    
    $
    19.63
 The weighted average exercise price of exercisable options was $17.82 at December 31, 2004,
2003 and 2002. The weighted average remaining contractual life of outstanding options was 2.8
years at December 31, 2004. Employee Stock Purchase Plan The Company sponsors an employee stock discount purchase plan, which originally provided for the
sale, to colleagues only, of up to 1,400,000 shares of the Companys Common Stock at discounted
purchase prices, subject to certain limitations. During the first quarter of 2004, the Company had
no shares available for future purchases under the plan. In May 2004, stockholders approved an
amendment to the plan to make an additional 400,000 shares available for purchase under the plan.
The cost per share under this plan is 85 percent of the market value of the Companys common stock
at the date of purchase, as defined in the plan. During the years ended December 31, 2004, 2003
and 2002, 15,912, 252,156 and 222,145 shares of Common Stock were purchased by colleagues pursuant
to this plan. The weighted average fair value of shares sold to colleagues under this plan was
$2.09, $2.59 and $6.43, respectively, in 2004, 2003 and 2002. In January 2005, the Company suspended purchases under its Employee Stock Purchase Plan effective
as of January 1, 2005. Deferred Stock Plans The Company also sponsors the Tower Automotive, Inc. Key Leadership Deferred Income Stock Purchase
Plan and the Tower Automotive, Inc. Director Deferred Stock Purchase Plan (the Deferred Stock
Plans), which allow certain colleagues to defer receipt of all or a portion of their annual cash
bonus and allows outside directors to defer all or a portion of their annual retainer. The Company
makes a matching contribution of one-third of the deferral. The Company matching contribution vests
on the 15th day of December of the second plan year following the date of the deferral. In
accordance with the terms of the plans, the deferral and the Companys matching contribution may be
placed in a Rabbi trust, which invests solely in the Companys Common Stock. This trust
arrangement offers a degree of assurance for ultimate payment of benefits without causing
constructive receipt for income tax purposes. Distributions from the trust can only be made in the
form of the Companys Common Stock. The assets in the trust remain subject to the claims of
creditors of the Company and are not the property of the colleague or outside director; therefore,
the assets in the trust are included as a separate component of stockholders investment under the
caption Deferred Compensation Plans. Under these plans, $0.6 million, $3.4 million and $1.4
million were deferred (including employer match) during the years ended December 31, 2004, 2003 and
2002, respectively. Restricted Stock In July 2001, the Company offered its existing colleagues and designated consultants the right to
exchange certain Company stock options, having an exercise price of $17.125 or more, for shares of
restricted stock. As a result of this offer, effective September 17, 2001, the Company issued
530,671 shares of its common stock under the Tower Automotive, Inc. Long Term Incentive Plan,
subject to certain restrictions and risks of forfeiture, in exchange for the surrender of options
to purchase a total of 1,503,500 shares of the Companys common stock. The cost of this exchange
was recorded in stockholders investment as deferred compensation based upon the fair value of
stock issued and is being expensed over the applicable vesting periods. During the years ended
December 31, 2004, 2003 and 2002, 342,736, 2,920 and 575 shares vested, respectively, and 26,031,
98,172 and 61,003 shares were forfeited, respectively. As of December 31, 2004, no shares remain
restricted. 62




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##### Table of Contents



During the years ended December 31, 2004 and 2003, a committee of the board of directors awarded
220,720 and 210,360 shares, respectively, of its common stock under the Tower Automotive,
Inc. Long Term Incentive Plan, subject to certain restrictions and risks of forfeiture, to certain
colleagues. During the years ended December 31, 2004 and 2003, 47,387 and 19,620 shares,
respectively, were forfeited and 62,833 vested. As of December 31, 2004, 301,240 shares remain
restricted. Supplemental Retirement Plan The Tower Automotive Supplemental Retirement Plan allows certain colleagues who are restricted
in their contributions to the Tower Automotive Retirement Plan, by certain statutory benefit
limitations, to defer receipt of all or a portion of their annual cash compensation. The Company
makes a matching contribution based on the terms of the plan. A portion of the Companys matching
contributions vests immediately and the remaining portion vests on the first day of the third plan
year following the date of the colleagues deferral. Colleague and Company contributions to this
plan are invested in the Companys Common Stock. Sale of Common Stock In May 2002, the Company completed an underwritten primary offering of 17.25 million shares of the
Companys common stock, which included the exercise of the underwriters over-allotment option to
acquire 2.25 million shares. The net proceeds from the offering were $222.6 million, based on an
offering price of $13.75 per share. The Company used the net proceeds from this offering to repay
borrowings under its then existing credit agreement. Stock Repurchase In May 2000, the Companys Board of Directors approved the repurchase of up to $100 million of the
Companys common stock in the open market at times and amounts to be determined by the Company.
During 2000, the Company purchased approximately 4.1 million shares at a total cost of $40.1
million. During 2001, no purchases were made. In August 2002, the Company announced its plan to
resume the stock repurchase program. During 2002, approximately 9.8 million shares, at a total cost
of $59.9 million were purchased to complete the total original approved amount. Repurchased shares
are designated as treasury stock until subsequently reissued for general corporate purposes. 13. Employee Benefit Plans The Company sponsors various pension and other postretirement benefit plans for its employees. Retirement Plans The Companys UAW Retirement Income Plan and the Tower Automotive Pension Plan provide for
substantially all U.S. union employees. Benefits under the plans are based on years of service.
Contributions by the Company are intended to provide not only for benefits attributed to service to
date, but also for those benefits expected to be earned in the future. The Companys funding policy
is to annually contribute the amounts sufficient to meet the higher of the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974 or the minimum
funding requirements under the Companys union contracts. The Company expects minimum pension
funding requirements of $32.4 million during 2005. Expected benefit payments amount to $14.3
million, $15.4 million, $16.5 million, $17.5 million and $18.3 million, respectively, for
the years 2005, 2006, 2007, 2008 and 2009 for a total of $82.0 million during that five-year
period. 63




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##### Table of Contents



The following table provides a reconciliation of the changes in the benefit obligations and fair
value of assets for the defined benefit pension plans (in thousands): 2004
    
    
    2003Reconciliation of fair value of plan assets:Fair value of plan assets at the beginning of the year
    
    $
    133,554
    
    
    $
    106,572Actual return on plan assets
    
    
    16,841
    
    
    
    12,710Employer contributions
    
    
    30,832
    
    
    
    25,772Plan expenses paid
    
    
    (1,010
    )
    
    
    Benefits paid
    
    
    (14,208
    )
    
    
    (11,500
    )Fair value of plan assets at the end of the year
    
    $
    166,009
    
    
    $
    133,554Change in Benefit Obligations:Benefit obligations at the beginning of the year
    
    $
    241,630
    
    
    $
    189,095Service cost
    
    
    8,560
    
    
    
    6,517Interest cost
    
    
    14,505
    
    
    
    13,949Plan Amendments
    
    
    19,603
    
    
    
    18,872Actuarial loss
    
    
    10,658
    
    
    
    24,644Benefits paid
    
    
    (14,208
    )
    
    
    (11,500
    )Curtailment loss
    
    
    
    
    
    
    53Benefit obligations at the end of the year
    
    $
    280,748
    
    
    $
    241,630Funded Status Reconciliation:Funded status
    
    $
    (108,477
    )
    
    $
    (108,076
    )Unrecognized transition asset
    
    
    
    
    
    
    (5
    )Unrecognized prior service cost
    
    
    40,737
    
    
    
    21,887Unrecognized actuarial losses
    
    
    82,004
    
    
    
    78,570Contributions made after measurement date
    
    
    6,262
    
    
    
    5,948Net amount recognized
    
    $
    20,526
    
    
    $
    (1,676
    )Amounts recognized in the balance sheet as of each
year end:Accrued benefit liability
    
    $
    (108,477
    )
    
    $
    (108,076
    )Intangible asset
    
    
    40,737
    
    
    
    21,887Accumulated other comprehensive income
    
    
    82,004
    
    
    
    78,565Contributions made after measurement date
    
    
    6,262
    
    
    
    5,948Net amount recognized
    
    $
    20,526
    
    
    $
    (1,676
    )
 In connection with the comprehensive realignment plans discussed in Note 9, benefits for certain
employees covered by the Tower Automotive Pension Plan and the UAW Retirement Income Plan are
accounted for as a curtailment and special termination benefits for the periods ended December 31,
2003 and 2002. At the September 30, 2004 measurement date, the accumulated benefit obligation of the Companys
under funded defined benefit pension plans exceeded plan assets by approximately $115 million. The following table provides the components of net periodic pension benefit cost for the plans (in
thousands): 2004
    
    
    2003
    
    
    2002Service cost
    
    $
    8,560
    
    
    $
    6,517
    
    
    $
    9,536Interest cost
    
    
    14,505
    
    
    
    13,949
    
    
    
    11,486Expected return on plan assets
    
    
    (12,179
    )
    
    
    (9,751
    )
    
    
    (9,602
    )Amortization of transition asset
    
    
    (5
    )
    
    
    (31
    )
    
    
    (31
    )Amortization of prior service cost
    
    
    4,216
    
    
    
    2,380
    
    
    
    812Amortization of net (gains) losses
    
    
    3,741
    
    
    
    4,435
    
    
    
    1,609Curtailment loss
    
    
    
    
    
    
    3,632
    
    
    
    Special termination benefits
    
    
    
    
    
    
    
    
    
    
    7,067Net periodic benefit cost
    
    $
    18,838
    
    
    $
    21,131
    
    
    $
    20,877
 The reversal of the pension curtailment loss of $6.3 million, recognized in the first quarter of
2004, associated with the Companys decision to not move the Ford Ranger frame assembly is not
reflected in the table immediately above but is reflected in the Companys Statement of Operations
for the year ended December 31, 2004 as a restructuring charge reversal. (See Notes 9 and 17). 64




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The assumptions used in the measurement of the Companys benefit obligation, based upon a September
30 measurement date, are as follows: 2004
    
    
    2003
    
    
    2002Weighted-average
assumptions at each year end:Discount rate
    
    
    5.50
    %
    
    
    5.95
    %
    
    
    6.75
    %Expected return on plan assets
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    8.50
    %Rate of compensation increase
    
    
    4.50
    %
    
    
    4.50
    %
    
    
    4.50
    %
 The Companys allocations of plan assets on the September 30, 2004 and 2003 measurement dates are
as follows: 2004
    
    
    2003Equity securities
    
    
    56
    %
    
    
    57
    %Fixed income
    
    
    34
    %
    
    
    34
    %Real estate
    
    
    5
    %
    
    
    5
    %Cash equivalents
    
    
    5
    %
    
    
    4
    %
 Plan assets do not include equity securities of the Company. The present value of the Companys pension benefit obligation is calculated through the use of the
discount rate. The discount rate used is established annually at the measurement date and reflects
the construction of a hypothetical portfolio of high quality instruments with maturities that
mirror the timing and amounts of future benefits. The expected long-term rate of return on plan assets is based on the expected return of each of the
above categories, weighted based on the median of the target allocation for each class. Equity
securities are expected to return between 8.75% to 10.75% over the long-term, while cash and fixed
income investments are expected to return between 4.1% and 10.1%. Based on historical
experience, the Company expects that the asset managers overseeing plan assets will provide a 0.5%
to 1.0% per annum premium to their respective market benchmark indices. The investment policy, as established by the Companys Defined Benefit Investment Committee (the
Committee), allows for effective supervision, monitoring, and evaluating of the investment of the
Companys retirement plan assets. This includes setting forth an investment structure for managing
assets and providing guidelines for each portfolio to control the level of overall risk and
liquidity. The cash inflows and outflows will be deployed in a manner consistent with the above
target allocations. If the Committee determines cash flows to be insufficient within the strategic
allocation target ranges, the Committee shall decide whether to effect transactions to bring the
strategic allocation within the threshold ranges. The Company contributes to a union sponsored multi-employer pension plan providing defined benefits
to certain Michigan hourly employees. Contributions to this pension plan are based on rates set
forth in the Companys union contracts. The expense related to this plan amounted to $0.7 million,
$1.0 million, and $0.8 million, respectively, for the years ended December 31, 2004, 2003 and 2002. The Company also contributes to a union sponsored multi-employer pension plan providing defined
benefits for certain hourly employees of the Companys Milwaukee facility. Expense associated with
this plan amounted to $0.2 million, $0.2 million and $0.4 million, respectively, for the years
ended December 31, 2004, 2003 and 2002. The expense amounts were determined based on contractual
rates with the union. The Company maintains a qualified profit sharing retirement plan and 401(k) employee savings plan
covering certain salaried and hourly employees. The Company matches certain employee contributions
to the 401(k) employee savings plan. Expense relating to these plans amounted to $4.0 million,
$12.8 million and $10.6 million, respectively, during 2004, 2003 and 2002. In addition, the Company sponsors a 401(k) employee savings plan covering certain union employees.
The Company matches a portion of the employee contributions made to this plan. Expense pertaining
to this plan for the year ended December 31, 2004 was $3.1 million and was immaterial in each of
the two years in the period ended December 31, 2003. 65




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Retirement Plans of Non-U.S. Operations The Company has no defined benefit pension plans in association with its foreign operations. The
Company primarily provides severance benefits to colleagues that have terminated their employment
due to retirement or otherwise. The amount associated with such benefits depends upon the length
of service of the colleague and also depends upon whether the termination was voluntary or at the
request of the Company. Expenses associated with these non-U.S. plans amounted to $2.9 million,
$4.6 million and $3.2 million, respectively, during 2004, 2003 and 2002. Postretirement Plans The Company provides certain medical insurance benefits for retired employees. Certain U.S.
employees of the Company are eligible for these benefits if they fulfill the eligibility
requirements specified by the plans. Certain retirees between the ages of 55 and 62 must contribute
all or a portion of the cost of their coverage. Benefits are continued for dependents of eligible
retiree participants subsequent to the death of the retiree. The Company estimates minimum funding
requirements related to these postretirement plans of $20.6 million during 2005. Expected benefit
payments amount to $20.6 million, $20.2 million, $19.7 million, $19.0 million and $17.9
million, respectively, for the years 2005, 2006, 2007, 2008 and 2009 for a total of $97.4 million
during that five-year period. The following table provides a reconciliation of the changes in the benefit obligations and funded
status in relation to the Companys retiree medical plans (in thousands): 2004
    
    
    2003Reconciliation of fair value of plan assets:Fair value of plan assets at the beginning of the year
    
    $
    
    
    
    $
    Employer contributions
    
    
    22,099
    
    
    
    25,100Benefits paid
    
    
    (22,099
    )
    
    
    (25,100
    )Fair value of plan assets at the end of the year
    
    $
    
    
    
    $
    Change in Benefit Obligations:Benefit obligations at the beginning of the year
    
    $
    135,209
    
    
    $
    124,355Service cost
    
    
    378
    
    
    
    667Interest cost
    
    
    7,738
    
    
    
    8,313Plan amendments
    
    
    
    
    
    
    (9,735
    )Actuarial loss (gain)
    
    
    51,659
    
    
    
    34,065Benefits paid
    
    
    (22,099
    )
    
    
    (25,100
    )Curtailment loss
    
    
    141
    
    
    
    2,644Benefit obligations at the end of the year
    
    $
    173,026
    
    
    $
    135,209Funded Status Reconciliation:Funded status
    
    $
    (173,026
    )
    
    $
    (135,209
    )Unrecognized actuarial losses
    
    
    104,184
    
    
    
    55,862Net amount recognized
    
    $
    (68,842
    )
    
    $
    (79,347
    )Amounts recognized in the balance sheet as of each
year end:Accrued benefit liability
    
    $
    (68,842
    )
    
    $
    (79,347
    )
 The following table provides the components of net periodic benefit cost for the plans (in
thousands): 2004
    
    
    2003
    
    
    2002Service cost
    
    $
    378
    
    
    $
    667
    
    
    $
    858Interest cost
    
    
    7,738
    
    
    
    8,313
    
    
    
    8,519Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    1,092Amortization of net loss
    
    
    5,981
    
    
    
    3,569
    
    
    
    3Curtailment loss
    
    
    141
    
    
    
    2,644
    
    
    
    Net periodic benefit cost
    
    $
    14,238
    
    
    $
    15,193
    
    
    $
    10,472
 The discount rate used to measure the Companys post retirement medical benefit obligation was
5.00% in 2004, 5.95% in 2003 and 6.75% in 2002. The rate used reflects the rate at which the
accrued liability can be effectively settled. The measurement date for the Companys post
retirement benefit plans is September 30. 66




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For measurement purposes, an 8.50% annual rate of increase in per capita cost of covered health
care benefits was assumed for 2004. The rate was assumed to decrease gradually to 5.50% by 2007 and
remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the post
retirement medical plans. A one percentage point change in assumed health care costs trend rates
would have the following effects (in thousands): Increase
    
    
    DecreaseOne percentage point change:Effect on total service and interest cost components
    
    $
    177
    
    
    $
    159Effect on the accumulated benefit obligation
    
    
    3,512
    
    
    
    3,227
 The Medicare Prescription Drug Improvement and Modernization Act of 2003 reduced the Companys
accumulated postretirement benefit by approximately $4.0 million, and decreased the postretirement
unrecognized actuarial losses by approximately $ 4.0 million based upon the measurement of the
Companys postretirement benefit obligation as of September 30, 2004. 14. Related Party Transactions The Company made payments to Hidden Creek Industries, an affiliate of the Company, for certain
acquisition related and other management consulting services totaling $0.8 million and $0.6
million, respectively, during 2003 and 2002. No payments were made to Hidden Creek Industries
during 2004. 15. 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 follows (in thousands): NorthAmerica
    
    
    International
    
    
    Total2004:Revenues
    
    $
    2,082,776
    
    
    $
    1,095,948
    
    
    $
    3,178,724Interest expense, net
    
    
    128,435
    
    
    
    13,543
    
    
    
    141,978Operating income (loss)
    
    
    (337,855
    )
    
    
    81,804
    
    
    
    (256,051
    )Total assets
    
    
    1,438,858
    
    
    
    1,121,916
    
    
    
    2,560,774Capital expenditures, net
    
    
    144,663
    
    
    
    66,263
    
    
    
    210,926Depreciation expense
    
    
    96,091
    
    
    
    56,065
    
    
    
    152,156Restructuring and asset impairment
charges, net
    
    
    (1,384
    )
    
    
    671
    
    
    
    (713
    )Goodwill impairment charge
    
    
    337,230
    
    
    
    
    
    
    
    337,230Income (loss) before provision
(benefit) for income taxes
    
    
    (438,759
    )
    
    
    44,590
    
    
    
    (394,169
    )Provision for income taxes
    
    
    144,815
    
    
    
    12,269
    
    
    
    157,0842003:Revenues
    
    $
    1,987,701
    
    
    $
    828,048
    
    
    $
    2,815,749Interest expense, net
    
    
    80,111
    
    
    
    12,636
    
    
    
    92,747Operating income (loss)
    
    
    (111,703
    )
    
    
    53,731
    
    
    
    (57,972
    )Total assets
    
    
    1,892,602
    
    
    
    953,807
    
    
    
    2,846,409Capital expenditures, net
    
    
    140,226
    
    
    
    89,900
    
    
    
    230,126Depreciation expense
    
    
    105,084
    
    
    
    46,114
    
    
    
    151,198Restructuring and asset impairment
charges, net
    
    
    153,884
    
    
    
    3,648
    
    
    
    157,532Income (loss) before provision
(benefit) for income taxes
    
    
    (183,070
    )
    
    
    32,351
    
    
    
    (150,719
    )Provision (benefit) for income taxes
    
    
    (59,704
    )
    
    
    8,893
    
    
    
    (50,811
    )
 67




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##### Table of Contents



NorthAmerica
    
    
    International
    
    
    Total2002:Revenues
    
    $
    2,075,222
    
    
    $
    679,242
    
    
    $
    2,754,464Interest expense, net
    
    
    57,703
    
    
    
    12,564
    
    
    
    70,267Operating income
    
    
    37,124
    
    
    
    56,013
    
    
    
    93,137Total assets
    
    
    1,747,772
    
    
    
    810,113
    
    
    
    2,557,885Capital expenditures, net
    
    
    95,922
    
    
    
    63,042
    
    
    
    158,964Depreciation expense
    
    
    100,595
    
    
    
    36,103
    
    
    
    136,698Restructuring and asset impairment
charges, net
    
    
    57,475
    
    
    
    3,650
    
    
    
    61,125Income (loss) before provision
(benefit) for income taxes

    
    
    (12,246
    )
    
    
    34,064
    
    
    
    21,818Provision (benefit) for income taxes
    
    
    (660
    )
    
    
    8,296
    
    
    
    7,636
 Inter-segment sales are not significant for any period presented. The following is a summary of revenues and long-lived assets by geographic location (in thousands): Years Ended and End of Year December 31,2004
    
    

2003
    
    

2002Long-Lived
    
    
    
    
    
    
    Long-Lived
    
    
    
    
    
    
    Long-LivedRevenues
    
    
    Assets
    
    
    Revenues
    
    
    Assets
    
    
    Revenues
    
    
    AssetsNorth America
    
    $
    2,082,776
    
    
    $
    728,603
    
    
    $
    1,987,701
    
    
    $
    679,634
    
    
    $
    2,075,222
    
    
    $
    743,552Europe
    
    
    643,244
    
    
    
    257,268
    
    
    
    426,778
    
    
    
    242,766
    
    
    
    322,773
    
    
    
    176,412Asia
    
    
    391,530
    
    
    
    236,191
    
    
    
    359,583
    
    
    
    183,995
    
    
    
    322,951
    
    
    
    180,298South America
    
    
    61,174
    
    
    
    14,218
    
    
    
    41,687
    
    
    
    12,923
    
    
    
    33,518
    
    
    
    10,481$
    3,178,724
    
    
    $
    1,236,280
    
    
    $
    2,815,749
    
    
    $
    1,119,318
    
    
    $
    2,754,464
    
    
    $
    1,110,743
 Revenues are attributed to geographic locations based on the location of specific production.
Long-lived assets consist of net property, plant and equipment and capitalized tooling. The following is a summary of the approximate composition by product category of the Companys
revenues (in thousands): Years Ended December 31,2004
    
    
    2003
    
    
    2002Body structures and assemblies
    
    $
    1,489,833
    
    
    $
    1,203,772
    
    
    $
    1,046,696Lower vehicle frames and structures
    
    
    872,873
    
    
    
    955,301
    
    
    
    1,101,786Chassis modules and systems
    
    
    513,014
    
    
    
    354,411
    
    
    
    302,991Suspension components
    
    
    243,842
    
    
    
    221,777
    
    
    
    220,357Other
    
    
    59,162
    
    
    
    80,488
    
    
    
    82,634$
    3,178,724
    
    
    $
    2,815,749
    
    
    $
    2,754,464
 The Company sells its products directly to automotive manufacturers. Following is a summary of
customers that accounted for 10 percent or more of consolidated revenues in each of the three years
ended December 31, 2004: 2004
    
    
    2003
    
    
    2002Ford
    
    
    34
    %
    
    
    35
    %
    
    
    38
    %DaimlerChrysler
    
    
    14
    %
    
    
    19
    %
    
    
    22
    %General Motors
    
    
    14
    %
    
    
    10
    %
    
    
    8
    %Hyundai/Kia
    
    
    10
    %
    
    
    9
    %
    
    
    7
    %
 Receivables from the above mentioned customers represented 31% and 33%, respectively, of total
accounts receivable at December 31, 2004 and 2003. 68




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16. Commitments and Contingencies Leases The Company leases office and manufacturing space and certain equipment under lease agreements,
which require the Company to pay maintenance, insurance, taxes and other expenses in addition to
annual rentals. The Company has entered into leasing commitments with lease terms ending between
the years 2005 and 2020. The properties covered under these leases include manufacturing equipment,
facilities and administrative offices. The operating leases provide for fair market purchase and
renewal options. Future annual rental commitments at December 31, 2004 under these leases are as
follows (in thousands): Operating
    
    
    CapitalYear
    
    Leases
    
    
    Leases2005
    
    $
    78,430
    
    
    $
    16,1992006
    
    
    72,060
    
    
    
    9,5752007
    
    
    69,065
    
    
    
    6,0992008
    
    
    59,735
    
    
    
    5,2202009
    
    
    54,576
    
    
    
    3,541Thereafter
    
    
    103,849
    
    
    
    14,850$
    437,715
    
    
    
    55,484Less-amount representing interest
    
    
    
    
    
    
    10,127Present value of minimum lease payments
    
    
    
    
    
    $
    45,357
 Certain of the Companys lease agreements may be rejected through the Companys bankruptcy
proceedings. See Note 2. Total rent expense for all operating leases totaled $90.0 million, $72.5 million and $57.0 million
in 2004, 2003 and 2002, respectively. Purchase Commitments As of December 31, 2004, the Company was obligated under executory purchase orders for
approximately $47.2 million of tooling $22.8 million of capital expenditures. 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 remediating
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 in the amounts of $16.3 million and $6.9 million, respectively, were contained in other
non-current liabilities on the Companys balance sheets at December 31, 2004 and 2003. 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. 69




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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. 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 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. 17. Quarterly Financial Data (Unaudited) The following is a condensed summary of quarterly results of operations for 2004 and 2003.
Restructuring and asset impairment charges are reflected in the quarters of 2004 and 2003 as
described in Note 9 (in thousands, except per share amounts): Basic
    
    
    DilutedOperating
    
    
    
    
    
    
    Earnings
    
    
    EarningsGross
    
    
    Income
    
    
    Net Income
    
    
    (Loss)
    
    
    (Loss)Revenues
    
    
    Profit
    
    
    (Loss)
    
    
    (Loss)
    
    
    Per Share
    
    
    Per Share2004:First
    
    $
    781,236
    
    
    $
    60,645
    
    
    $
    32,098
    
    
    $
    12,018
    
    
    $
    0.21
    
    
    $
    0.21Second
    
    
    783,213
    
    
    
    68,714
    
    
    
    33,269
    
    
    
    (2,657
    )
    
    
    (0.05
    )
    
    
    (0.05
    )Third
    
    
    722,334
    
    
    
    32,384
    
    
    
    (3,139
    )
    
    
    (20,218
    )
    
    
    (0.35
    )
    
    
    (0.35
    )Fourth
    
    
    891,941
    
    
    
    63,940
    
    
    
    (318,279
    )
    
    
    (523,048
    )
    
    
    (9.00
    )
    
    
    (9.00
    )$
    3,178,724
    
    
    $
    225,683
    
    
    $
    (256,051
    )
    
    $
    (533,905
    )
    
    $
    (9.19
    )
    
    $
    (9.19
    )2003:First
    
    $
    732,578
    
    
    $
    74,524
    
    
    $
    39,848
    
    
    $
    11,572
    
    
    $
    0.21
    
    
    $
    0.21Second
    
    
    743,179
    
    
    
    78,448
    
    
    
    23,935
    
    
    
    2,646
    
    
    
    0.05
    
    
    
    0.05Third
    
    
    623,013
    
    
    
    35,846
    
    
    
    (138,167
    )
    
    
    (105,859
    )
    
    
    (1.87
    )
    
    
    (1.87
    )Fourth
    
    
    716,979
    
    
    
    66,242
    
    
    
    16,412
    
    
    
    (33,034
    )
    
    
    (0.59
    )
    
    
    (0.59
    )$
    2,815,749
    
    
    $
    255,060
    
    
    $
    (57,972
    )
    
    $
    (124,675
    )
    
    $
    (2.20
    )
    
    $
    (2.20
    )
 During the fourth quarter of 2004, the Company recognized an impairment charge of $337.2
million for the write down of goodwill. Certain amounts in the Statements of Operations for the second and third quarters of 2003 are
different from the amounts originally reported as a result of a restatement of a $7.7 million
curtailment loss for pension and other post-retirement benefits related to the Companys 2003
restructuring plan (subsequently reduced to $6.3 million based upon updated actuary information in
the fourth quarter of 2003). SFAS No. 88, Employers Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits requires curtailment losses to be
recorded when probable and reasonably estimable. The Company determined that the curtailment loss
related to the 2003 restructuring plan was probable and reasonably estimable in the second quarter
of 2003. However, because the Company uses a September 30 measurement date for its pension and
other post-retirement benefits, the curtailment loss, which was initially recorded in the second
quarter of 2003, should have been recorded in the third quarter of 2003 (a three-month lag), as
required by SFAS No. 88. 70




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A summary of the impact of this restatement is as follows (in thousands, except per share amounts): For the three months ended
    
    
    For the three months endedJune 30, 2003
    
    
    September 30, 2003As reported
    
    
    As restated
    
    
    As reported
    
    
    As restatedOperating income (loss)
    
    $
    16,247
    
    
    $
    23,935
    
    
    $
    (130,479
    )
    
    $
    (138,167
    )Net income (loss)
    
    
    (2,423
    )
    
    
    2,646
    
    
    
    (100,790
    )
    
    
    (105,859
    )Basic earnings (loss) per share
    
    
    (0.04
    )
    
    
    0.05
    
    
    
    (1.78
    )
    
    
    (1.87
    )Diluted earnings (loss) per share
    
    
    (0.04
    )
    
    
    0.05
    
    
    
    (1.78
    )
    
    
    (1.87
    )
 This change did not impact the Companys results of operations for the year ended December 31,
2003. 18. Subsequent Events Exit or Disposal Activities On April 15, 2005, the Company committed to a plan to close its Belcamp, MD, Bowling Green, KY and
Corydon, IN facilities. In addition, as a result of the closing of the Corydon, IN facility, the
Company will reduce the number of employees at its Granite City, IL facility. These actions will
result in the elimination of approximately 800 positions. The facilities are expected to cease
production by June 30, 2005. These operational restructuring initiatives are designed to reduce
excess capacity and associated costs and improve overall efficiency. Total estimated 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 and other costs of $2.5 million. Future 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. In April 2005, the Company announced the consolidation of its Hanam, Korea facility into its
Pyeongdong, Korea facility to improve overall efficiency. The Company does not expect to incur
significant costs associated with this move. In June 2005, production ceased on the Dodge Ram light truck frame at the Companys Milwaukee,
Wisconsin facility (see Note 8). The Company leased a significant portion of the equipment
utilized to produce the Dodge Ram light truck frame and notice of rejection of these leases was
filed with the Bankruptcy Court in June 2005. In June 2005, the Company recorded its estimate of
rejection damages associated with the Lessors pre-petition claim of approximately $75 million.
Except for the costs associated with the lease rejections, the Company does not expect to incur
additional material net costs associated with the customers decision to move the Dodge Ram light
truck frame production. The Company anticipates recording approximately $37.8 million in pension and postretirement
curtailment charges in the third quarter of 2005, as measured in the second quarter of 2005, based
on certain actions the Company believes are probable of occurring which will result in the
curtailments. Key Employee Retention Plan Agreements On March 30, 2005, the Court entered an order approving the execution and implementation by the
Company of Key Employee Retention Plan Agreements (the KERP Agreements) with 106 of its key
employees. All KERP Agreements were executed by April 15, 2005. 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 71




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##### Table of Contents



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 amounts to
approximately $7.9 million. 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. 19. 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 dividend 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 credit facility and first lien term loan entered into by R.J.
Tower Corporation in 2004, on a joint and several basis. Tower Automotive, Inc. (the parent
company) has also fully and unconditionally guaranteed the notes, the credit facility and the first
lien term loan 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. Separate financial statements and other disclosures concerning
the Guarantors have not been presented because management believes that such information is not
material to investors. 72




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TOWER AUTOMOTIVE INC.
Consolidating Balance Sheets at December 31, 2004
(Amounts in thousands) Non-Guarantor
    
    
    Non-GuarantorR. J. Tower
    
    
    Parent
    
    
    Guarantor
    
    
    Restricted
    
    
    UnrestrictedCorporation
    
    
    Guarantor
    
    
    Companies
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    107,599
    
    
    $
    
    
    
    $
    (517
    )
    
    $
    41,948
    
    
    $
    71
    
    
    $
    
    
    
    $
    149,101Accounts receivable
    
    
    47,373
    
    
    
    
    
    
    
    70,636
    
    
    
    188,352
    
    
    
    39,670
    
    
    
    
    
    
    
    346,031Inventories
    
    
    (372
    )
    
    
    
    
    
    
    75,469
    
    
    
    72,050
    
    
    
    11,887
    
    
    
    
    
    
    
    159,034Deferred income taxes, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prepaid tooling and other
    
    
    4,427
    
    
    
    
    
    
    
    54,618
    
    
    
    53,947
    
    
    
    11,946
    
    
    
    
    
    
    
    124,938Total current assets
    
    
    159,027
    
    
    
    
    
    
    
    200,206
    
    
    
    356,297
    
    
    
    63,574
    
    
    
    
    
    
    
    779,104Property, plant and equipment, net
    
    
    601
    
    
    
    
    
    
    
    690,646
    
    
    
    319,785
    
    
    
    194,608
    
    
    
    
    
    
    
    1,205,640Investments in joint ventures
    
    
    227,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227,740Investments in and advances to (from)
affiliates
    
    
    526,173
    
    
    
    255,049
    
    
    
    (453,177
    )
    
    
    (216,603
    )
    
    
    4,278
    
    
    
    (115,720
    )
    
    
    Deferred income taxes, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174,563
    
    
    
    
    
    
    
    
    
    
    
    174,563Other assets, net
    
    
    37,307
    
    
    
    5,410
    
    
    
    90,194
    
    
    
    28,616
    
    
    
    12,200
    
    
    
    
    
    
    
    173,727$
    950,848
    
    
    $
    260,459
    
    
    $
    527,869
    
    
    $
    662,658
    
    
    $
    274,660
    
    
    $
    (115,720
    )
    
    $
    2,560,774Liabilities and StockholdersInvestment(Deficit)Current liabilities:Current maturities of long-term debt and
capital lease obligations
    
    $
    3,750
    
    
    $
    
    
    
    $
    6,271
    
    
    $
    24,460
    
    
    $
    98,675
    
    
    $
    
    
    
    $
    133,156Convertible subordinated notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accounts payable
    
    
    29,052
    
    
    
    
    
    
    
    366,329
    
    
    
    184,876
    
    
    
    57,861
    
    
    
    
    
    
    
    638,118Accrued liabilities
    
    
    70,421
    
    
    
    918
    
    
    
    143,643
    
    
    
    57,941
    
    
    
    13,339
    
    
    
    
    
    
    
    286,262Total current liabilities
    
    
    103,223
    
    
    
    918
    
    
    
    516,243
    
    
    
    267,277
    
    
    
    169,875
    
    
    
    
    
    
    
    1,057,536Long-term debt, net of current maturities
    
    
    874,358
    
    
    
    258,750
    
    
    
    57,126
    
    
    
    11,855
    
    
    
    37,473
    
    
    
    
    
    
    
    1,239,562Convertible Senior Debentures
    
    
    
    
    
    
    121,723
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,723Obligations under capital leases, net of
current maturities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,472
    
    
    
    351
    
    
    
    
    
    
    
    36,823Other noncurrent liabilities
    
    
    40,001
    
    
    
    
    
    
    
    149,776
    
    
    
    30,956
    
    
    
    5,329
    
    
    
    
    
    
    
    226,062Total noncurrent liabilities
    
    
    914,359
    
    
    
    380,473
    
    
    
    206,902
    
    
    
    79,283
    
    
    
    43,153
    
    
    
    
    
    
    
    1,624,170Stockholders investment (deficit)
    
    
    (66,734
    )
    
    
    (120,932
    )
    
    
    (195,276
    )
    
    
    316,098
    
    
    
    61,632
    
    
    
    (115,720
    )
    
    
    (120,932
    )$
    950,848
    
    
    $
    260,459
    
    
    $
    527,869
    
    
    $
    662,658
    
    
    $
    274,660
    
    
    $
    (115,720
    )
    
    $
    2,560,774
 73




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TOWER AUTOMOTIVE INC.
Consolidating Statements of Operations for the Year Ended December 31, 2004
(Amounts in thousands) Non-Guarantor
    
    
    Non-GuarantorR. J. Tower
    
    
    Parent
    
    
    Guarantor
    
    
    Restricted
    
    
    UnrestrictedCorporation
    
    
    Guarantor
    
    
    Companies
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    726
    
    
    $
    
    
    
    $
    2,043,455
    
    
    $
    816,524
    
    
    $
    318,019
    
    
    $
    
    
    
    $
    3,178,724Cost of sales
    
    
    (3,948
    )
    
    
    
    
    
    
    1,950,790
    
    
    
    714,245
    
    
    
    291,954
    
    
    
    
    
    
    
    2,953,041Gross profit
    
    
    4,674
    
    
    
    
    
    
    
    92,665
    
    
    
    102,279
    
    
    
    26,065
    
    
    
    
    
    
    
    225,683Selling, general and administrative expenses
    
    
    (1,596
    )
    
    
    
    
    
    
    98,883
    
    
    
    37,220
    
    
    
    10,710
    
    
    
    
    
    
    
    145,217Restructuring and asset impairment charges,
net
    
    
    1,859
    
    
    
    
    
    
    
    (3,243
    )
    
    
    
    
    
    
    671
    
    
    
    
    
    
    
    (713
    )Goodwill impairment charges
    
    
    
    
    
    
    
    
    
    
    326,309
    
    
    
    10,921
    
    
    
    
    
    
    
    
    
    
    
    337,230Operating income (loss)
    
    
    4,411
    
    
    
    
    
    
    
    (329,284
    )
    
    
    54,138
    
    
    
    14,684
    
    
    
    
    
    
    
    (256,051
    )Interest expense (income), net
    
    
    95,358
    
    
    
    30,141
    
    
    
    2,270
    
    
    
    5,543
    
    
    
    8,666
    
    
    
    
    
    
    
    141,978Unrealized gain on derivative
    
    
    
    
    
    
    (3,860
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,860
    )Income (loss) before provision for
income taxes, equity in earnings of
joint ventures and minority interest
    
    
    (90,947
    )
    
    
    (26,281
    )
    
    
    (331,554
    )
    
    
    48,595
    
    
    
    6,018
    
    
    
    
    
    
    
    (394,169
    )Provision (benefit) for income taxes
    
    
    127,317
    
    
    
    21,716
    
    
    
    (1,783
    )
    
    
    6,058
    
    
    
    3,776
    
    
    
    
    
    
    
    157,084Income (loss) before equity in
earnings of joint ventures and
minority interest
    
    
    (218,264
    )
    
    
    (47,997
    )
    
    
    (329,771
    )
    
    
    42,537
    
    
    
    2,242
    
    
    
    
    
    
    
    (551,253
    )Equity earnings in joint ventures and
subsidiaries, net of tax
    
    
    (277,376
    )
    
    
    (485,908
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    776,654
    
    
    
    13,370Gain on sale of joint venture investment, net
    
    
    9,732
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,732Minority interest, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,754
    )
    
    
    
    
    
    
    
    
    
    
    (5,754
    )Net income (loss)
    
    $
    (485,908
    )
    
    $
    (533,905
    )
    
    $
    (329,771
    )
    
    $
    36,783
    
    
    $
    2,242
    
    
    $
    776,654
    
    
    $
    (533,905
    )
 74




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##### Table of Contents



TOWER AUTOMOTIVE INC.
Consolidating Statements of Cash Flows for the Year Ended December 31, 2004
(Amounts in thousands) Non-Guarantor
    
    
    Non-GuarantorR. J. Tower
    
    
    Parent
    
    
    Guarantor
    
    
    Restricted
    
    
    UnrestrictedCorporation
    
    
    Guarantor
    
    
    Companies
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedOPERATING ACTIVITIES:Net income (loss)
    
    $
    (485,908
    )
    
    $
    (533,905
    )
    
    $
    (329,771
    )
    
    $
    36,783
    
    
    $
    2,242
    
    
    $
    776,654
    
    
    $
    (533,905
    )Adjustments required to reconcile net
income to net cash provided by (used
in) operating activitiesGoodwill Impairment charges
    
    
    
    
    
    
    
    
    
    
    326,309
    
    
    
    10,921
    
    
    
    
    
    
    
    
    
    
    
    337,230Non-cash restructuring
charges, net
    
    
    
    
    
    
    
    
    
    
    (6,276
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,276
    )Depreciation and amortization
    
    
    662
    
    
    
    
    
    
    
    94,211
    
    
    
    41,326
    
    
    
    15,957
    
    
    
    
    
    
    
    152,156Deferred income tax
provision (benefit)
    
    
    128,966
    
    
    
    21,716
    
    
    
    38,234
    
    
    
    (7,849
    )
    
    
    (13,347
    )
    
    
    
    
    
    
    167,720Gain on sale of joint venture
    
    
    (9,732
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,732
    )Equity in earnings of joint
ventures, net of tax
    
    
    (13,370
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,370
    )Changes in working capital
and other operating items
    
    
    885,334
    
    
    
    (46,593
    )
    
    
    (89,265
    )
    
    
    (15,406
    )
    
    
    23,521
    
    
    
    (776,654
    )
    
    
    (19,063
    )Net cash provided by (used
in) operating activities
    
    
    505,952
    
    
    
    (558,782
    )
    
    
    33,442
    
    
    
    65,775
    
    
    
    28,373
    
    
    
    
    
    
    
    74,760INVESTING ACTIVITIES:Capital expenditures, net
    
    
    (4
    )
    
    
    
    
    
    
    (147,101
    )
    
    
    (42,705
    )
    
    
    (21,116
    )
    
    
    
    
    
    
    (210,926
    )Net proceeds from divestitures of
subsidiary and other
    
    
    (581,963
    )
    
    
    633,663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,700Acquisitions, including joint venture
interests and earn out payments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,299
    )
    
    
    
    
    
    
    (21,299
    )Net cash provided by (used
in) investing activities
    
    
    (581,967
    )
    
    
    633,663
    
    
    
    (147,101
    )
    
    
    (42,705
    )
    
    
    (42,415
    )
    
    
    
    
    
    
    (180,525
    )FINANCING ACTIVITIES:Proceeds from borrowings
    
    
    429,009
    
    
    
    125,000
    
    
    
    1
    
    
    
    7,901
    
    
    
    51,874
    
    
    
    
    
    
    
    613,785Repayment of debt
    
    
    (245,395
    )
    
    
    (199,984
    )
    
    
    (5,211
    )
    
    
    (29,442
    )
    
    
    (39,889
    )
    
    
    
    
    
    
    (519,921
    )Net proceeds from issuance of common
stock
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103Net cash provided by (used
for) financing activities
    
    
    183,614
    
    
    
    (74,881
    )
    
    
    (5,210
    )
    
    
    (21,541
    )
    
    
    11,985
    
    
    
    
    
    
    
    93,967NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    107,599
    
    
    
    
    
    
    
    (118,869
    )
    
    
    1,529
    
    
    
    (2,057
    )
    
    
    
    
    
    
    (11,798
    )CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD
    
    
    
    
    
    
    
    
    
    
    118,352
    
    
    
    40,419
    
    
    
    2,128
    
    
    
    
    
    
    
    160,899CASH AND CASH EQUIVALENTS, END OF
PERIOD
    
    $
    107,599
    
    
    $
    
    
    
    $
    (517
    )
    
    $
    41,948
    
    
    $
    71
    
    
    $
    
    
    
    $
    149,101
 75




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##### Table of Contents



TOWER AUTOMOTIVE INC.
Consolidating Balance Sheets at December 31, 2003
(Amounts in thousands) Non-Guarantor
    
    
    Non-GuarantorR. J. Tower
    
    
    Parent
    
    
    Guarantor
    
    
    Restricted
    
    
    UnrestrictedCorporation
    
    
    Guarantor
    
    
    Companies
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    118,352
    
    
    $
    40,419
    
    
    $
    2,128
    
    
    $
    
    
    
    $
    160,899Accounts receivable
    
    
    
    
    
    
    
    
    
    
    177,177
    
    
    
    129,633
    
    
    
    18,789
    
    
    
    
    
    
    
    325,599Inventories
    
    
    
    
    
    
    
    
    
    
    73,760
    
    
    
    44,876
    
    
    
    11,368
    
    
    
    
    
    
    
    130,004Deferred income taxes, net
    
    
    
    
    
    
    
    
    
    
    14,250
    
    
    
    5,866
    
    
    
    
    
    
    
    
    
    
    
    20,116Prepaid tooling and other
    
    
    
    
    
    
    
    
    
    
    39,849
    
    
    
    41,445
    
    
    
    10,368
    
    
    
    
    
    
    
    91,662Total current assets
    
    
    
    
    
    
    
    
    
    
    423,388
    
    
    
    262,239
    
    
    
    42,653
    
    
    
    
    
    
    
    728,280Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    642,240
    
    
    
    288,430
    
    
    
    125,203
    
    
    
    
    
    
    
    1,055,873Investments in joint ventures
    
    
    247,756
    
    
    
    
    
    
    
    
    
    
    
    377
    
    
    
    
    
    
    
    
    
    
    
    248,133Investments in and advances to (from)
affiliates
    
    
    891,056
    
    
    
    847,598
    
    
    
    (758,417
    )
    
    
    (147,123
    )
    
    
    (8,337
    )
    
    
    (824,777
    )
    
    
    Deferred income taxes, net
    
    
    
    
    
    
    21,716
    
    
    
    119,857
    
    
    
    (3,406
    )
    
    
    8,777
    
    
    
    
    
    
    
    146,944Goodwill
    
    
    
    
    
    
    
    
    
    
    326,309
    
    
    
    172,354
    
    
    
    
    
    
    
    
    
    
    
    498,663Other assets, net
    
    
    14,881
    
    
    
    7,096
    
    
    
    82,162
    
    
    
    37,574
    
    
    
    26,803
    
    
    
    
    
    
    
    168,516$
    1,153,693
    
    
    $
    876,410
    
    
    $
    835,539
    
    
    $
    610,445
    
    
    $
    195,099
    
    
    $
    (824,777
    )
    
    $
    2,846,409Liabilities and Stockholders InvestmentCurrent liabilities:Current maturities of long-term debt and
capital lease obligations
    
    $
    
    
    
    $
    
    
    
    $
    3,622
    
    
    $
    32,916
    
    
    $
    63,059
    
    
    $
    
    
    
    $
    99,597Convertible subordinated notes
    
    
    
    
    
    
    199,984
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199,984Accounts payable
    
    
    
    
    
    
    
    
    
    
    399,319
    
    
    
    114,333
    
    
    
    42,384
    
    
    
    
    
    
    
    556,036Accrued liabilities
    
    
    11,124
    
    
    
    4,166
    
    
    
    161,788
    
    
    
    64,044
    
    
    
    8,862
    
    
    
    
    
    
    
    249,984Total current liabilities
    
    
    11,124
    
    
    
    204,150
    
    
    
    564,729
    
    
    
    211,293
    
    
    
    114,305
    
    
    
    
    
    
    
    1,105,601Long-term debt, net of current maturities
    
    
    679,177
    
    
    
    258,750
    
    
    
    65,871
    
    
    
    16,202
    
    
    
    40,859
    
    
    
    
    
    
    
    1,060,859Obligations under capital leases, net of
current maturities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,054
    
    
    
    2,744
    
    
    
    
    
    
    
    42,798Other noncurrent liabilities
    
    
    
    
    
    
    
    
    
    
    180,827
    
    
    
    34,431
    
    
    
    8,383
    
    
    
    
    
    
    
    223,641Total noncurrent liabilities
    
    
    679,177
    
    
    
    258,750
    
    
    
    246,698
    
    
    
    90,687
    
    
    
    51,986
    
    
    
    
    
    
    
    1,327,298Stockholders investment
    
    
    463,392
    
    
    
    413,510
    
    
    
    24,112
    
    
    
    308,465
    
    
    
    28,808
    
    
    
    (824,777
    )
    
    
    413,510$
    1,153,693
    
    
    $
    876,410
    
    
    $
    835,539
    
    
    $
    610,445
    
    
    $
    195,099
    
    
    $
    (824,777
    )
    
    $
    2,846,409
 76




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##### Table of Contents



TOWER AUTOMOTIVE INC.
Consolidating Statements of Operations for the Year Ended December 31, 2003
(Amounts in thousands ) Non-Guarantor
    
    
    Non-GuarantorR. J. Tower
    
    
    Parent
    
    
    Guarantor
    
    
    Restricted
    
    
    UnrestrictedCorporation
    
    
    Guarantor
    
    
    Companies
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    1,883,907
    
    
    $
    635,915
    
    
    $
    295,927
    
    
    $
    
    
    
    $
    2,815,749Cost of sales
    
    
    
    
    
    
    
    
    
    
    1,738,388
    
    
    
    546,362
    
    
    
    275,939
    
    
    
    
    
    
    
    2,560,689Gross profit
    
    
    
    
    
    
    
    
    
    
    145,519
    
    
    
    89,553
    
    
    
    19,988
    
    
    
    
    
    
    
    255,060Selling, general and administrative expenses
    
    
    
    
    
    
    
    
    
    
    110,362
    
    
    
    39,004
    
    
    
    6,134
    
    
    
    
    
    
    
    155,500Restructuring and asset impairment charges,
net
    
    
    
    
    
    
    
    
    
    
    152,079
    
    
    
    5,453
    
    
    
    
    
    
    
    
    
    
    
    157,532Operating income (loss)
    
    
    
    
    
    
    
    
    
    
    (116,922
    )
    
    
    45,096
    
    
    
    13,854
    
    
    
    
    
    
    
    (57,972
    )Interest expense (income), net
    
    
    61,714
    
    
    
    27,464
    
    
    
    (9,425
    )
    
    
    4,454
    
    
    
    8,540
    
    
    
    
    
    
    
    92,747Income (loss) before provision for
income taxes, equity in earnings of
joint ventures and minority interest
    
    
    (61,714
    )
    
    
    (27,464
    )
    
    
    (107,497
    )
    
    
    40,642
    
    
    
    5,314
    
    
    
    
    
    
    
    (150,719
    )Provision (benefit) for income taxes
    
    
    (20,549
    )
    
    
    (9,336
    )
    
    
    (36,552
    )
    
    
    13,819
    
    
    
    1,807
    
    
    
    
    
    
    
    (50,811
    )Income (loss) before equity in
earnings of joint ventures and
minority interest
    
    
    (41,165
    )
    
    
    (18,128
    )
    
    
    (70,945
    )
    
    
    26,823
    
    
    
    3,507
    
    
    
    
    
    
    
    (99,908
    )Write-down of joint venture investment to
market value, net of tax
    
    
    (27,436
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,436
    )Equity earnings in joint ventures and
subsidiaries, net of tax
    
    
    (32,182
    )
    
    
    (100,783
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,263
    
    
    
    13,298Minority interest, net of tax
    
    
    
    
    
    
    (5,764
    )
    
    
    
    
    
    
    (4,865
    )
    
    
    
    
    
    
    
    
    
    
    (10,629
    )Net income (loss)
    
    $
    (100,783
    )
    
    $
    (124,675
    )
    
    $
    (70,945
    )
    
    $
    21,958
    
    
    $
    3,507
    
    
    $
    146,263
    
    
    $
    (124,675
    )
 77




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##### Table of Contents



TOWER AUTOMOTIVE INC.
Consolidating Statements of Cash Flows for the Year Ended December 31, 2003
(Amounts in thousands) Non-Guarantor
    
    
    Non-GuarantorR. J. Tower
    
    
    Parent
    
    
    Guarantor
    
    
    Restricted
    
    
    UnrestrictedCorporation
    
    
    Guarantor
    
    
    Companies
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedOPERATING ACTIVITIES:Net income (loss)
    
    $
    (100,783
    )
    
    $
    (124,675
    )
    
    $
    (70,945
    )
    
    $
    21,958
    
    
    $
    3,507
    
    
    $
    146,263
    
    
    $
    (124,675
    )Adjustments required to reconcile net
income (loss) to net cash provided by
(used in) operating activitiesRestructuring and asset impairment
charges, net
    
    
    
    
    
    
    
    
    
    
    151,868
    
    
    
    3,882
    
    
    
    
    
    
    
    
    
    
    
    155,750Customer recovery related to program
cancellation
    
    
    
    
    
    
    
    
    
    
    15,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,600Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    103,919
    
    
    
    32,266
    
    
    
    15,013
    
    
    
    
    
    
    
    151,198Deferred income tax expense (benefit)
    
    
    
    
    
    
    
    
    
    
    (37,088
    )
    
    
    740
    
    
    
    321
    
    
    
    
    
    
    
    (36,027
    )Write-down of joint venture
investment to market value
    
    
    27,436
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,436Equity in earnings of joint ventures,
net of tax
    
    
    (13,298
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,298
    )Changes in working capital and other
operating items
    
    
    3,727
    
    
    
    (10,796
    )
    
    
    34,083
    
    
    
    48,751
    
    
    
    6,852
    
    
    
    (73,803
    )
    
    
    8,814Net cash provided by (used in)
operating activities
    
    
    (82,918
    )
    
    
    (135,471
    )
    
    
    197,437
    
    
    
    107,597
    
    
    
    25,693
    
    
    
    72,460
    
    
    
    184,798INVESTING ACTIVITIES:Capital expenditures, net
    
    
    
    
    
    
    
    
    
    
    (139,880
    )
    
    
    (63,185
    )
    
    
    (27,061
    )
    
    
    
    
    
    
    (230,126
    )Acquisitions and other, net
    
    
    (119,278
    )
    
    
    134,801
    
    
    
    65,440
    
    
    
    
    
    
    
    
    
    
    
    (72,460
    )
    
    
    8,503Net cash provided by (used in)
investing activities
    
    
    (119,278
    )
    
    
    134,801
    
    
    
    (74,440
    )
    
    
    (63,185
    )
    
    
    (27,061
    )
    
    
    (72,460
    )
    
    
    (221,623
    )FINANCING ACTIVITIES:Proceeds from borrowings
    
    
    1,564,234
    
    
    
    
    
    
    
    1,834
    
    
    
    55,146
    
    
    
    43,353
    
    
    
    
    
    
    
    1,664,567Repayments of debt
    
    
    (1,362,038
    )
    
    
    
    
    
    
    (6,479
    )
    
    
    (68,330
    )
    
    
    (44,365
    )
    
    
    
    
    
    
    (1,481,212
    )Net proceeds from issuance of common stock
    
    
    
    
    
    
    670
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    670Net cash provided by (used for)
financing activities
    
    
    202,196
    
    
    
    670
    
    
    
    (4,645
    )
    
    
    (13,184
    )
    
    
    (1,012
    )
    
    
    
    
    
    
    184,025NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    
    
    
    
    
    
    
    
    118,352
    
    
    
    31,228
    
    
    
    (2,380
    )
    
    
    
    
    
    
    147,200CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,191
    
    
    
    4,508
    
    
    
    
    
    
    
    13,699CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    
    
    
    $
    
    
    
    $
    118,352
    
    
    $
    40,419
    
    
    $
    2,128
    
    
    $
    
    
    
    $
    160,899
 78




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##### Table of Contents



TOWER AUTOMOTIVE INC.
Consolidating Statements of Operations for the Year Ended December 31, 2002
(Amounts in thousands) Non-Guarantor
    
    
    Non-GuarantorR. J. Tower
    
    
    Parent
    
    
    Guarantor
    
    
    Restricted
    
    
    UnrestrictedCorporation
    
    
    Guarantor
    
    
    Companies
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    1,937,140
    
    
    $
    543,235
    
    
    $
    274,089
    
    
    $
    
    
    
    $
    2,754,464Cost of sales
    
    
    
    
    
    
    
    
    
    
    1,759,587
    
    
    
    451,264
    
    
    
    245,529
    
    
    
    
    
    
    
    2,456,380Gross profit
    
    
    
    
    
    
    
    
    
    
    177,553
    
    
    
    91,971
    
    
    
    28,560
    
    
    
    
    
    
    
    298,084Selling, general and administrative expenses
    
    
    
    
    
    
    
    
    
    
    104,026
    
    
    
    31,481
    
    
    
    8,315
    
    
    
    
    
    
    
    143,822Restructuring and asset impairment charges,
net
    
    
    
    
    
    
    
    
    
    
    57,475
    
    
    
    3,650
    
    
    
    
    
    
    
    
    
    
    
    61,125Operating income (loss)
    
    
    
    
    
    
    
    
    
    
    16,052
    
    
    
    56,840
    
    
    
    20,245
    
    
    
    
    
    
    
    93,137Interest expense (income), net
    
    
    45,369
    
    
    
    11,302
    
    
    
    653
    
    
    
    14,209
    
    
    
    (1,266
    )
    
    
    
    
    
    
    70,267Other expense (income)
    
    
    1,993
    
    
    
    
    
    
    
    946
    
    
    
    (10,257
    )
    
    
    8,370
    
    
    
    
    
    
    
    1,052Income (loss) before provision for
income taxes, equity in earnings
of
joint ventures and minority
interest
    
    
    (47,362
    )
    
    
    (11,302
    )
    
    
    14,453
    
    
    
    52,888
    
    
    
    13,141
    
    
    
    
    
    
    
    21,818Provision (benefit) for income taxes
    
    
    (16,577
    )
    
    
    (3,956
    )
    
    
    5,061
    
    
    
    18,510
    
    
    
    4,598
    
    
    
    
    
    
    
    7,636Income (loss) before equity in
earnings of joint ventures and
minority interest
    
    
    (30,785
    )
    
    
    (7,346
    )
    
    
    9,392
    
    
    
    34,378
    
    
    
    8,543
    
    
    
    
    
    
    
    14,182Equity earnings in joint ventures and
subsidiaries, net of tax
    
    
    (48,121
    )
    
    
    (78,906
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143,849
    
    
    
    16,822Minority interest, net of tax
    
    
    
    
    
    
    (11,354
    )
    
    
    
    
    
    
    (4,525
    )
    
    
    55
    
    
    
    
    
    
    
    (15,824
    )Income (loss) before cumulative
effect of accounting change
    
    
    (78,906
    )
    
    
    (97,606
    )
    
    
    9,392
    
    
    
    29,853
    
    
    
    8,598
    
    
    
    143,849
    
    
    
    15,180Cumulative effect of change in accounting
principle, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,108
    )
    
    
    (29,678
    )
    
    
    
    
    
    
    (112,786
    )Net income (loss)
    
    $
    (78,906
    )
    
    $
    (97,606
    )
    
    $
    9,392
    
    
    $
    (53,255
    )
    
    $
    (21,080
    )
    
    $
    143,849
    
    
    $
    (97,606
    )
 79




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##### Table of Contents



TOWER AUTOMOTIVE INC.
Consolidating Statements of Cash Flows for the Year Ended December 31, 2002
(Amounts in thousands) Non-Guarantor
    
    
    Non-GuarantorR. J. Tower
    
    
    Parent
    
    
    Guarantor
    
    
    Restricted
    
    
    UnrestrictedCorporation
    
    
    Guarantor
    
    
    Companies
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedOPERATING ACTIVITIES:Net income (loss)
    
    $
    (78,906
    )
    
    $
    (97,606
    )
    
    $
    9,392
    
    
    $
    (53,255
    )
    
    $
    (21,080
    )
    
    $
    143,849
    
    
    $
    (97,606
    )Adjustments required to reconcile net
income (loss) to net cash provided by
(used in) operating activitiesCumulative effect of change
in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,108
    
    
    
    29,678
    
    
    
    
    
    
    
    112,786Restructuring and asset
impairment charges, net
    
    
    
    
    
    
    
    
    
    
    57,475
    
    
    
    3,650
    
    
    
    
    
    
    
    
    
    
    
    61,125Depreciation and amortization
    
    
    3,095
    
    
    
    
    
    
    
    96,402
    
    
    
    23,010
    
    
    
    14,191
    
    
    
    
    
    
    
    136,698Deferred income tax expense
(benefit)
    
    
    
    
    
    
    
    
    
    
    (3,902
    )
    
    
    15,107
    
    
    
    (9,098
    )
    
    
    
    
    
    
    2,107Gain on sale of plant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,839
    )
    
    
    
    
    
    
    (3,839
    )Equity in earnings of joint
ventures, net of tax
    
    
    (16,822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,822
    )Changes in working capital
and other operating items
    
    
    283,863
    
    
    
    (4,811
    )
    
    
    (280,951
    )
    
    
    26,857
    
    
    
    (2,174
    )
    
    
    (86,281
    )
    
    
    (63,497
    )Net cash provided by (used
in) operating activities
    
    
    191,230
    
    
    
    (102,417
    )
    
    
    (121,584
    )
    
    
    98,477
    
    
    
    7,678
    
    
    
    57,568
    
    
    
    130,952INVESTING ACTIVITIES:Capital expenditures, net
    
    
    
    
    
    
    
    
    
    
    (96,176
    )
    
    
    (44,960
    )
    
    
    (17,828
    )
    
    
    
    
    
    
    (158,964
    )Acquisitions and other, net
    
    
    (88,479
    )
    
    
    (63,424
    )
    
    
    168,702
    
    
    
    (33
    )
    
    
    4,004
    
    
    
    (57,568
    )
    
    
    (36,798
    )Proceeds from sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    50,313
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,313Net cash provided by (used
in) investing activities
    
    
    (88,479
    )
    
    
    (63,424
    )
    
    
    122,839
    
    
    
    (44,993
    )
    
    
    (13,824
    )
    
    
    (57,568
    )
    
    
    (145,449
    )FINANCING ACTIVITIES:Proceeds from borrowings
    
    
    1,994,990
    
    
    
    
    
    
    
    98
    
    
    
    30,166
    
    
    
    12,783
    
    
    
    
    
    
    
    2,038,037Repayments of debt
    
    
    (2,097,741
    )
    
    
    
    
    
    
    (3,797
    )
    
    
    (89,605
    )
    
    
    (6,306
    )
    
    
    
    
    
    
    (2,197,449
    )Net proceeds from issuance of stock
    
    
    
    
    
    
    225,701
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,701Payments for the repurchase of common
stock
    
    
    
    
    
    
    (59,860
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,860
    )Net cash provided by (used
for) financing activities
    
    
    (102,751
    )
    
    
    165,841
    
    
    
    (3,699
    )
    
    
    (59,439
    )
    
    
    6,477
    
    
    
    
    
    
    
    6,429NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    
    
    
    
    
    
    
    
    (2,444
    )
    
    
    (5,955
    )
    
    
    331
    
    
    
    
    
    
    
    (8,068
    )CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD
    
    
    
    
    
    
    
    
    
    
    2,444
    
    
    
    15,146
    
    
    
    4,177
    
    
    
    
    
    
    
    21,767CASH AND CASH EQUIVALENTS, END OF
PERIOD
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    9,191
    
    
    $
    4,508
    
    
    $
    
    
    
    $
    13,699
 80




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##### Table of Contents



Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 
 Item 9A.Controls and Procedures. Evaluation of Disclosure Controls and Procedures As of December 31, 2004, the Company carried out the evaluation required by paragraph (b) of
Exchange Act Rules 13a-15 or 15d-15, under the supervision and with the participation of the
Companys management, including the Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) or 15d-15(e).) Based on this evaluation, the Companys
Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure
controls and procedures as of December 31, 2004 were not effective. To address the control
weaknesses described below, the Company performed additional analysis and other post-closing
procedures to ensure the Companys consolidated financial statements are prepared in accordance
with generally accepted accounting principles. Accordingly, management believes that the
consolidated financial statements included in this report fairly present in all material respects
the Companys financial condition, results of operations and cash flows for the periods presented. Managements Report on Internal Control Over Financial Reporting The management of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934. The Companys internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting
principles in the United States of America. The Companys internal control over financial
reporting includes those policies and procedures that: (a) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (b) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and (c) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of the Companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate. Management assessed the
effectiveness of the Companys internal control over financial reporting as of December 31, 2004.
In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on
the Companys assessment and those criteria, management has concluded that the Company did not
maintain effective internal control over financial reporting as of December 31, 2004 as a result of
material weaknesses in (a) internal controls surrounding accounting for income taxes and (b)
internal controls to validate the appropriateness of discount rates utilized to record pension and
other postretirement benefit liabilities. A material weakness is a control deficiency, or combination of control deficiencies, that results
in more than a remote likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. Managements assessment identified the following material weaknesses in the Companys internal
control over financial reporting. Internal Controls Surrounding Accounting for Pension and Other Postretirement Benefit Plans The principal factor contributing to the material weakness in accounting for pension and other
postretirement benefit plans related to the Companys failure to appropriately support discount
rates utilized to estimate the Companys 2004 pension and postretirement benefit plan liabilities,
as required by the Companys policies. This material weakness was discovered during the year-end
2004 closing procedures in conjunction with the year-end audit of the Companys financial
statements. 81




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##### Table of Contents



This material weakness resulted in adjustments that were included in the Companys consolidated
financial statements for 2004 and were appropriately recorded in the fourth quarter of 2004,
consistent with the Companys policies regarding accounting for pension and postretirement benefit
plan liabilities. If this material weakness is not remediated, it could result in a material
misstatement of the Companys pension and other postretirement benefit plan liabilities in the
annual financial statements. Internal Controls Surrounding Accounting for Income Taxes The principal factors contributing to the material weakness in accounting for income taxes resulted
from significant turnover in the global tax department during the fourth quarter of 2004 resulting
in:  
    
    Lack of local tax law expertise or failure to engage local tax law expertise in certain
non-U.S. locations to appropriately determine deferred tax assets and liabilities in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109;
    
    Insufficient or ineffective review and approval practices with the tax and finance
organizations resulting in the errors not being prevented or detected in a timely manner;
and
    
    Insufficient staffing in the global tax organization. If not remediated, this material weaknesses could result in material misstatement of the income tax
accounts that would result in a material misstatement to annual or interim financial statements
that might not be prevented or detected. The Companys assessment of the effectiveness of its internal control over financial reporting as
of December 31, 2004 has been audited by Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report included herein. Planned Remediation Efforts to Address Material Weakness Management has designed control objectives and activities to address each of the material
weaknesses described above. Accounting for Pension and Other Postretirement Benefit Plans Remediation plans include implementation of additional monitoring and oversight controls regarding
the discount rate assumptions utilizing the demographic information of the Companys population
prior to completing the valuation of pension and other postretirement benefit plan liabilities. Accounting for Income Taxes The Company is implementing enhancements to its internal control over financial reporting to
remediate the material weakness in its accounting for income taxes. These steps include:  
    
    Additional staffing in the Companys Tax Department to provide oversight over accounting
for income taxes performed by the Companys finance department as well as other actions to
strengthen the income tax accounting function within the tax organization, including the
hiring of a new Global Tax Director.
    
    The Company, in conjunction with external advisors, has completed a review of all
significant income tax related accounts on the balance sheet including a review of income
tax accounting in non-U.S. locations.
    
    The Company is implementing definitive policies and procedures for detailed
documentation and reconciliations supporting income tax accounts in non-U.S. locations
including oversight and review by the Global Tax Director.
    
    The Company will develop comprehensive income tax accounting training programs for certain non-U.S. tax personnel.
    
    The Company will enhance internal audit procedures surrounding accounting for income taxes. 82




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##### Table of Contents



Changes in Internal Control Over Financial Reporting There have been no changes in the Companys internal control over financial reporting during the
most recently completed fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting. 
 Item 9B.Other Information. None. 
 PART III 
 Item 10. Directors and Executive Officers of the Registrant. Directors The following table sets forth certain information with respect to the Companys directors as of
June 1, 2005: Name
    
    Age
    
    PositionS.A. (Tony) Johnson
    
    
    65
    
    
    ChairmanAnthony G. Fernandes
    
    
    59
    
    
    DirectorJuergen M. Geissinger
    
    
    45
    
    
    DirectorAli Jenab
    
    
    42
    
    
    DirectorKathleen A. Ligocki
    
    
    48
    
    
    Director, President and CEOF. Joseph Loughrey
    
    
    55
    
    
    DirectorJames R. Lozelle
    
    
    59
    
    
    DirectorGeorgia R. Nelson
    
    
    55
    
    
    Director
 S. A. (Tony) Johnson has served as Chairman and as a Director since April 1993. Mr.
Johnson is the founder of Hidden Creek Industries (Hidden Creek), which was a
private industrial management company based in Minneapolis, MN. In the past Hidden Creek has
provided certain management and other services to Tower Automotive. Prior to forming Hidden Creek,
Mr. Johnson served from 1985 to 1989 as Chief Operating Officer of Pentair, Inc., a diversified
industrial company. From 1981 to 1985, Mr. Johnson was President and Chief Executive Officer of
Onan Corp., a diversified manufacturer of electrical generating equipment and engines for
commercial, defense and industrial markets. Mr. Johnson served as a director of Dura Automotive
Systems, Inc., a manufacturer of mechanical assemblies and integrated systems for the automotive
industry, from 1990 to 2004 and served as Chairman and a director of Automotive Industries Holding,
Inc., a supplier of automotive interior trim components, from May 1990 until its sale to Lear
Corporation in August 1995. Mr. Johnson currently serves as a director of Commercial Vehicle
Group, Inc., J.L. French Automotive Castings, Inc. and Cooper-Standard Automotive, Inc., each of
which is in the automotive supply industry. Anthony G. Fernandes has served as a Director since 2003. Mr. Fernandes, who is retired,
was Chairman, Chief Executive Officer and President of Philip Services Corporation, an industrial
services and integrated metals recovery company, from 1999 to 2002. Prior to joining Philip
Services, Mr. Fernandes worked at Atlantic Richfield Company for more than 30 years, including from
1994 to 1999 as Executive Vice President and director, and, from 1987 to 1990, as Corporate
Controller. In addition, from 1997 to 1998, he was chairman of ARCO Chemical, a publicly traded
company owned 80% by Atlantic Richfield. Mr. Fernandes is a director of Baker Hughes Corporation,
Cytec Industries, Inc. and Black and Veatch. Juergen M. Geissinger has served as a Director since May 2000. Dr. Geissinger has served
as President and Chief Executive Officer of INA Holding Schaeffler KG, a global manufacturer of
bearings, linear guidance systems, automotive transmissions and engine systems since November 1998.
From 1992 to October 1998, Dr. Geissinger served in various positions at ITT Automotive, most
recently as Senior Vice President, with responsibility for the Brakes and Chassis Engineering
Division worldwide. Ali Jenab has served as a Director since January 2001. Mr. Jenab is the President and
Chief Executive Officer of VA Software Corporation. From February 2001 until July 2003, he served
as its Chief Operating Officer. From August 2000 until February 2001, Mr. Jenab served as that
companys Senior Vice President and General Manager, Systems Division. From 1983 through August
2000, Mr. Jenab held various positions at Amdahl Corporation, a provider of high-end integrated
computing solutions. 83




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##### Table of Contents



Kathleen A. Ligocki has served as President and Chief Executive Officer of the Company
since August 2003. Ms. Ligocki joined the Company from Ford Motor Company, where she had most
recently served as a corporate officer and Vice President, Ford Customer Service Division. During
her five year tenure at Ford, Ms. Ligocki held various other positions, including President and
CEO, Ford of Mexico, Vice President, North American Marketing and Director of Business Strategy.
From 1994 to 1998, Ms. Ligocki worked for United Technologies Corporation, initially at Carrier
Corporation as the Director of Manufacturing and Purchasing in Paris, France, subsequently at UT
Automotive as the Vice President of Worldwide Sales and as the Vice President of the Motors
Division. Ms. Ligocki is a director of Ashland Inc., a diversified specialty chemical company
since July 2004. F. Joseph Loughrey has served as a Director since November 1994. Mr. Loughrey is the
President and Chief Operating Officer of Cummins, Inc., the worlds leader in the manufacture of
large diesel engines. Mr. Loughrey joined Cummins in 1974. Mr. Loughrey served as Executive Vice
President and Group President  Industrial and Chief Technical Officer from 1996 to 1999. and as
President Engine Business from 1999 to 2005. Mr. Loughrey serves as a director of Sauer-Danfoss,
Inc., a worldwide leader in the design, manufacture and sale of engineered hydraulic systems and
components and was recently named to the Board of Cummins, Inc. James R. Lozelle has served as a Director since May 1994. Mr. Lozelle, who is retired,
served as Executive Vice President for Tower, with responsibility for the Companys operations in
Milwaukee, Wisconsin and Roanoke, Virginia, from April 1997 to January 1999. From the acquisition
of Edgewood Tool and Manufacturing Company (Edgewood) in May 1994 until March 1997, Mr. Lozelle
served at the Tower Automotive Technical Centers, with responsibility for advanced product
development and customer service. Mr. Lozelle served as President of Edgewood from 1982 until it
was acquired by Tower Automotive. Georgia R. Nelson has served as a Director since May 2001. Ms. Nelson has served as the
President and Chief Executive Officer of PTI Resources, LLC. since June 2005. Prior to June 2005,
Ms. Nelson served as President of Midwest Generation EME, LLC, a wholesale power generator, an
Edison International company since it was established in 1999 as a subsidiary of Edison Mission
Energy. Ms. Nelson also served as General Manager of Edison Mission Energy  Americas, a global
independent power operating, development and trading company. From 1996 to 1999, Ms. Nelson was
Senior Vice President of Worldwide Operations and Division President of the Americas region of
Edison Mission Energy. From 1993 to 1996, she served as Senior Vice President of Southern
California Edison, a large U.S. electric utility. Ms. Nelson is a director of Cummins, Inc. The above mentioned individuals are elected for one year terms, or until their successors are duly
elected and have qualified, or until their earlier death, resignation or removal. Due to the
Companys Chapter 11 filing, the Company has not held the Companys 2005 annual meeting of
stockholders, and the Company has no current plans to hold such a meeting. The Companys directors
were last elected at the Companys annual meeting of stockholders held on May 20, 2004. Executive Officers The following table sets forth certain information with respect to the Companys executive officers
as of April 1, 2005: Name
    
    Age
    
    PositionKathleen A. Ligocki
    
    
    48
    
    
    President and Chief Executive Officer and DirectorJames A. Mallak
    
    
    49
    
    
    Chief Financial Officer and TreasurerBill Pumphrey
    
    
    45
    
    
    President, North AmericaGyula Meleghy
    
    
    49
    
    
    President, Europe and South AmericanVincent Pairet
    
    
    42
    
    
    President, AsiaTerry Gohl
    
    
    43
    
    
    Senior Vice President, North American OperationsJeffrey L. Kersten
    
    
    37
    
    
    Senior Vice President, Strategy and Business DevelopmentKathy J. Johnston
    
    
    47
    
    
    Senior Vice President, Purchasing and Manufacturing StrategySharon Wenzl
    
    
    46
    
    
    Senior Vice President, Human Resources and CommunicationsThomas Werle
    
    
    46
    
    
    Senior Vice President, Technology
 Kathleen A. Ligocki.See Directors above. James A. Mallak has served as Chief Financial Officer and Treasurer of the Company since
January 2004. From 2001 to 2003, Mr. Mallak served as the Executive Vice President and Chief
Financial Officer of Textron Fastening Systems, a division of Textron Inc. From 1999 to 2001, Mr.
Mallak served as Executive Vice President and CFO of Textron Automotive Company. Mr. Mallak is
also responsible for the Companys Information Technology operations. 84




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##### Table of Contents



Bill Pumphrey has served as Vice President of the Company since January 2005 with
responsibility for our North America operations. Prior to joining the Company, he served as
President of the Asia Pacific Division of Lear Corporation (Lear) from 2003 to 2004. In 2003,
he served as President, DaimlerChrysler Division of Lear. He also served Lear as President, Ford
Europe Division in 2002. From 1999, to 2001, Mr. Pumphrey was Lears President, Electronics and
Electrical Division. Gyula Meleghy has served as Vice President of the Company since August 2004 with
responsibility for the Companys European and South American Operations. In the years prior to
assuming this role, Dr. Meleghy served in the roles of Chief Operating Officer, and Vice
President, Customer Service. Prior to joining the Company in 2000, Dr. Meleghy served as Managing
Director of the German company, Dr. Meleghy & Co., a European diversified group of operations in
the tool and die, stamping and component industry. Vincent Pairet has served as Vice President of the Company since September 2002 with
responsibility for the Companys Asian strategy. From 2000 to 2002, Mr. Pairet was based in Tokyo,
Japan, as President of INERGY Automotive Systems, a joint venture between Solvay and
Plastic-Omnium. From 1998 to 2000, Mr. Pairet was President of Solvay Automotive Asia and from 1987
to 1998, Mr. Pairet held various general management, marketing and business development positions
within the Solvay Group in Belgium and the United States. Terry Gohlhas served as Vice President, North American Operations for the Company since
August 2004. Mr. Gohl was with Lear Corporation from 1994 to 2004. He was most recently
responsible for Lears North American Operations, which included oversight for 26 manufacturing
locations with revenues of $2.1 billion. Kathy J. Johnston has served as Vice President of the Company since June 2000 with current
responsibility for global purchasing and manufacturing strategy and previous responsibility for
enterprise strategy and commercial development. From 1997 to 2000, Ms. Johnston served as Vice
President Planning and Business Development at TRW Automotive in Cleveland, Ohio. From 1981 to
1997, Ms. Johnston served in finance, sales and marketing, purchasing, operations and strategic
planning roles at TRWs Vehicle Safety Systems group in Detroit, Michigan. Jeffrey L. Kerstenhas served as Vice President of the Company since December 2003 with
current responsibility for the Companys enterprise strategy and business development. Mr. Kersten
had served as the Companys European finance leader from January 2001 until November 2003. Prior to
2001, Mr. Kersten served in various finance roles after joining the Company in January 1997. Sharon Wenzlhas served as Vice President of the Company since June 2004 with
responsibility for Global Human Resources and Communications. From 1991 to 2004, Ms. Wenzl was
with Freudenberg-NOK, where she was most recently Vice President, Human Resources and
Communications. Thomas Werle has served as Vice President of the Company since December 2003, with current
responsibility for the Companys global technology strategy. Dr. Werle has served on the Companys
European leadership team since 2000. From 1995 to 2000, Dr. Werle served as Managing Director of
the German company Dr. Meleghy GmbH & Co., a European diversified group of operations in the tool
and die, stamping and component industry. The above listed individuals are appointed annually to their respective offices to hold office
until their successors are duly appointed and have qualified, or until their earlier death,
resignation or removal. Family Relationships There are no family relationships between or among any of our directors and executive
officers. Code of Business Conduct and Ethics and Code of Ethics for Senior Financial Officers The Companys Board has also adopted a Code of Business Conduct and Ethics that applies to all of
the Companys colleagues, officers and directors. In addition, the Companys Board adopted a Code
of Ethics for Senior Financial Officers, which includes the Companys principal executive officer,
principal financial officer and controller. Each of these codes are posted on the Companys
website and copies of these codes are filed as exhibits to this Form 10-K. Any changes to or
waivers of either code will be disclosed on the Companys website. 85




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##### Table of Contents



Executive Committee The Executive Committee consists of S.A. Johnson (Chairman), Kathleen Ligocki and James R.
Lozelle. The Executive Committee has the authority and responsibility to approve quotes on new
programs involving capital expenditures within certain, predetermined thresholds. This committee
also has such other duties and responsibilities that may be specifically assigned to that Committee
by the Board, subject to any specific limitations imposed by law or the Board of Directors. Nominating and Corporate Governance Committee The Nominating and Corporate Governance Committee consists of Georgia Nelson (Chairperson), F.
Joseph Loughrey, James R. Lozelle and Anthony Fernandes. This Committee is responsible for
assisting the Board in recommending qualifications and standards to serve as a director of the
Companys Company, identifying and recommending individuals qualified to become one of the
Companys directors and developing, recommending and reviewing corporate governance standards and
policies. Audit Committee and Audit Committee Financial Expert The Companys Audit Committee consists of Anthony Fernandes (Chairman), James R. Lozelle and Ali
Jenab. Each member of the Committee qualifies as an Independent Director as such term is used in
Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act. Mr. Fernandes is qualified as an audit
committee financial expert within the meaning of SEC regulations, and the Board has determined
that he has accounting and related financial management expertise within the meaning of the NYSE
listing standards. The primary function of this Committee is to assist the Board by overseeing (1)
the quality and integrity of the Companys accounting, auditing and reporting practices, (2) the
performance of the Companys internal audit function and independent auditor, and (3) the Companys
disclosure controls and system of internal controls regarding finance, accounting, legal
compliance, and ethics that management and the Board of Directors have established. The Committee
is also responsible to appoint the independent public accountants to audit the Companys financial
statements. The full responsibilities of the Committee are set forth in its Audit Committee
Charter (a copy of which is filed as an exhibit to this Form 10-K), which was amended and restated
by the Board of Directors on February 18, 2004. The Audit Committee met 17 times during 2004. Compensation Committee The Compensation Committee consists of F. Joseph Loughrey (Chairman), Juergen M. Geissinger, Ali
Jenab, and Georgia Nelson. During 2004, the Compensation Committee made recommendations to the
Board of Directors with respect to salaries, compensation and benefits of the Companys directors
and executive officers. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Companys officers,
directors, and persons who beneficially own more than 10% of a registered class of the Companys
equity securities, to file reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission (the SEC). Officers, directors, and greater than 10%
beneficial owners also are required by rules promulgated by the SEC to furnish us with copies of
all Section 16(a) forms they file. Based solely upon a review of the copies of such forms furnished to us, or written representations
that no Form 5 filings were required, the Company believe that during the period from January 1,
2004 through December 31, 2004, all Section 16(a) filing requirements applicable to the Companys
officers, directors, and greater than 10% beneficial owners were complied with, except for one late
report each by Mr. Gohl, Mr. Meleghy and Ms. Wenzl reporting their initial ownership of the
Companys common stock in connection with their respective appointments as officers of the
Company. Legal Proceedings On February 2, 2005, Tower Automotive, Inc. and its U.S. subsidiaries filed for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. Consequently, individuals who were or are executive
officers of Tower Automotive, Inc. have been associated with a corporation that filed a petition
under federal bankruptcy laws. 86




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##### Table of Contents



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 Claims), and (2) breaches of fiduciary duties to the
Companys various retirement plans and participants attributable to the plans investment in the
common stock of Tower Automotive, Inc. (the ERISA Claims). The Securities Claims and ERISA
Claims are pending in federal court in the Southern District of New York. 
 Item 11. Executive Compensation. EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth compensation packages for the years ended December 31, 2004, 2003,
and 2002 for the persons who served as the Companys chief executive officer and the four other
most highly compensated executive officers and a former Vice President who served in such position
for a portion of 2004 (the Named Executive Officers). ANNUAL COMPENSATION
    
    
    LONG-TERM COMPENSATIONOther Annual
    
    
    Restricted
    
    
    Options
    
    
    
    
    
    
    All OtherName and
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Compensation
    
    
    Stock Awards
    
    
    Granted
    
    
    LTIP
    
    
    CompensationPrincipal Position
    
    Year
    
    
    ($)(1)
    
    
    ($)(2)
    
    
    ($)
    
    
    ($)
    
    
    (#)(3)
    
    
    Payouts(4)
    
    
    ($)(5)Kathleen Ligocki
    
    
    2004
    
    
    
    700,000
    
    
    
    250,000
    (2)
    
    
    0
    
    
    
    254,800
    (7)
    
    
    0
    
    
    
    0
    
    
    
    4,135President and Chief
    
    
    2003
    
    
    
    291,667
    
    
    
    0
    
    
    
    0
    
    
    
    395,000
    (8)
    
    
    0
    
    
    
    0
    
    
    
    681Executive Officer (6)
    
    
    2002
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0James A. Mallak
    
    
    2004
    
    
    
    361,932
    
    
    
    0
    
    
    
    0
    
    
    
    461,200
    (7)
    
    
    45,000
    
    
    
    0
    
    
    
    7,649Chief Financial
    
    
    2003
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Officer and Treasurer(9)
    
    
    2002
    
    
    
    0

    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Tom G. Pitser(10)
    
    
    2004
    
    
    $
    349,500
    
    
    
    39,828
    
    
    
    0
    
    
    
    25,480
    (7)
    
    
    20,000
    
    
    
    201,265
    
    
    $
    18,8122003
    
    
    
    332,968
    
    
    
    0
    
    
    
    0
    
    
    
    22,120
    (11)
    
    
    17,500
    
    
    
    79,160
    
    
    
    21,1992002
    
    
    
    271,667
    
    
    
    205,000
    
    
    
    0
    
    
    
    0
    
    
    
    35,000
    
    
    
    56,527
    
    
    
    20,372Gyula Meleghy
    
    
    2004
    
    
    
    242,777
    
    
    
    190,968
    
    
    
    0
    
    
    
    
    
    
    
    15,000
    
    
    
    0
    
    
    
    687Vice President
    
    
    2003
    
    
    
    209,055
    
    
    
    190,278
    
    
    
    0
    
    
    
    00
    
    
    
    15,000
    
    
    
    0
    
    
    
    02002
    
    
    
    168,735
    
    
    
    158,401
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Kathy Johnston
    
    
    2004
    
    
    
    279,750
    
    
    
    107,385
    
    
    
    82,863
    (12)
    
    
    21,840
    (7)
    
    
    15,000
    
    
    
    290,093
    
    
    
    14,010Vice President
    
    
    2003
    
    
    
    255,000
    
    
    
    0
    
    
    
    14,802
    
    
    
    15,800
    (11)
    
    
    12,500
    
    
    
    25,000
    
    
    
    17,6902002
    
    
    
    244,375
    
    
    
    124,500
    
    
    
    0
    
    
    
    0
    
    
    
    20,000
    
    
    
    0
    
    
    
    18,589Thomas Werle
    
    
    2004
    
    
    
    295,507
    
    
    
    190,968
    
    
    
    0
    
    
    
    21,840
    (7)
    
    
    15,000
    
    
    
    0
    
    
    
    958Vice President
    
    
    2003
    
    
    
    209,055
    
    
    
    190,278
    
    
    
    0
    
    
    
    18,960
    (11)
    
    
    10,000
    
    
    
    0
    
    
    
    9,9802002
    
    
    
    168,735
    
    
    
    158,401
    
    
    
    0
    
    
    
    0
    
    
    
    10,000
    
    
    
    0
    
    
    
    13,372
 
 (1)
    
    Includes amounts deferred by employees under the Companys 401(k) employee savings plan,
pursuant to Section 401(k) of the Internal Revenue Code.(2)
    
    Represents amounts earned under the Companys annual bonus plan, but excludes amounts
foregone at the election of the Named Executive Officer and payable in shares of the Companys
Common Stock under the Companys Key Leadership Deferred Income
Stock Purchase Plan (DISPP). Includes, for Ms. Ligocki, bonus payable in connection with her employment with the
Company.(3)
    
    The options vest ratably over four years commencing with the first anniversary of the grant
date.(4)
    
    Represents payout for performance under the Long-Term Performance Cash Plan for the 2001-2002
period, but excludes amounts earned but deferred under the Companys DISPP, payable solely in
shares of the Companys Common Stock. Fifty percent of any bonus for the above-mentioned
period was payable in 2003, and the balance was payable in 2004. Also includes the value of
the Companys shares of Common Stock distributed under the Companys DISPP, based upon the
fair market value of the Companys Common Stock on the date of distribution. 87




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##### Table of Contents



(5)
    
    The amounts disclosed in this column include: (a) amounts contributed to the Companys
401(k) plan and supplement retirement plan, and (b) dollar value of premiums paid by us for
term life insurance on behalf of the named executive officers as follows: 2004
    
    
    2003
    
    
    2002($)
    
    
    ($)
    
    
    ($)K. Ligocki
    
    
    (a
    )
    
    
    0
    
    
    
    0
    
    
    
    0(b
    )
    
    
    4,135
    
    
    
    681
    
    
    
    0J. Mallak
    
    
    (a
    )
    
    
    5,833
    
    
    
    0
    
    
    
    0(b
    )
    
    
    1,816
    
    
    
    0
    
    
    
    0T. Pitser
    
    
    (a
    )
    
    
    15,740
    
    
    
    20,200
    
    
    
    19,467(b
    )
    
    
    3,072
    
    
    
    999
    
    
    
    905G. Meleghy
    
    
    (a
    )
    
    
    0
    
    
    
    0
    
    
    
    0(b
    )
    
    
    687
    
    
    
    0
    
    
    
    0K. Johnston
    
    
    (a
    )
    
    
    12,411
    
    
    
    16,840
    
    
    
    17,775(b
    )
    
    
    1,599
    
    
    
    850
    
    
    
    814T. Werle
    
    
    (a
    )
    
    
    0
    
    
    
    0
    
    
    
    0(b
    )
    
    
    958
    
    
    
    0
    
    
    
    0
 
 (6)
    
    Ms. Ligocki became the Companys CEO on August 18, 2003.(7)
    
    Represents the grant of 70,000, 10,000, 7,000, 7,000, 6,000 and 6,000 shares of the Companys
Common Stock to Ms. Ligocki, Mr. Mallak, Mr. Pitser, Dr. Meleghy, Ms. Johnston and Mr. Werle,
respectively, under the Companys Long-Term Incentive Plan, as of May 20, 2004 (based upon the
fair market value of the Companys stock of $3.64 on that date). Subject to certain pro rata
vesting due to termination for death, disability and retirement, the shares vest on the third
anniversary of the grant date. As of December 31, 2004, the value of these restricted shares
owned by the foregoing executives was $167,300, $23,900, $16,730, $16,730, $14,340 and
$14,340, respectively, based on the value of the Companys stock on that date ($2.39 per
share). Holders of restricted stock are entitled to vote the shares and to receive dividends
thereon prior to the date of vesting. The value for Mr. Mallak also represents the grant of
60,000 shares of the Companys Common Stock under the above-referenced plan as of January 5,
2004 (based upon the fair market value of the Companys stock of $7.08 per share on that
date). These shares vest at the rate of 33% of the shares granted on each anniversary of the
date of grant. As of December 31, 2004, the value of these shares, based upon the value of
the Companys stock on that date ($2.39) was $143,400(8)
    
    Represents the grant of 100,000 shares of the Companys Common Stock to Ms. Ligocki under
the Companys Long-Term Incentive Plan, based upon the fair market value of the Companys
stock ($3.95) on August 18, 2003, the date of grant. The shares vest at the rate of 50% of
the shares granted on the first and second anniversary of the grant date. As of December
31, 2004, the value of these shares, based upon the value of the Companys stock on that date
($2.39) was $239,000.(9)
    
    Mr. Mallak became the Companys CFO on January 5, 2004.(10)
    
    (Mr. Pitsers employment as an officer of the Company terminated as of November 12, 2004.(11)
    
    Represents the grant of 7,000, 5,000 and 6,000 shares of restricted stock to Mr. Pitser, Ms.
Johnston and Mr. Werle, respectively, under the Companys Long-Term Incentive Plan, based on
the fair market value of the Companys stock of $3.16 on the grant date. Subject to certain
pro rata vesting due to termination for death, disability and retirement, the shares vest on
the third anniversary of the grant date. As of December 31, 2004, the value of these
restricted shares owned by the foregoing executives was $16,730, $11,950 and $14,340,
respectively, based upon the value of the Companys stock on that date ($2.39 per share).
Holders of restricted stock are entitled to vote the shares and to receive dividends thereon
prior to the date of vesting.(12)
    
    Represents relocation payments made on Ms. Johnstons behalf of $64,154, vehicle allowance of
$12,000 and other taxable fringe benefits of $6,709. 88




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##### Table of Contents



Option Grant Table The following table provides information on all grants of options to acquire shares of the
Companys Common Stock to the Named Executive Officers during 2004. Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Potential RealizableSecurities
    
    
    % of Total
    
    
    
    
    
    
    
    
    
    
    Value at AssumedUnderlying
    
    
    Options
    
    
    
    
    
    
    
    
    
    
    Annual Rates ofOptions
    
    
    Granted to
    
    
    Exercise
    
    
    
    
    
    
    Stock Price AppreciationGranted
    
    
    Employees in
    
    
    Price
    
    
    Expiration
    
    
    for Option Term(2)Name
    
    (#)(1)
    
    
    Fiscal Year
    
    
    (Per Share)
    
    
    Date
    
    
    5%
    
    
    10%K. Ligocki
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AJ. Mallak
    
    
    45,000
    
    
    
    5.2
    
    
    
    
    (3)
    
    
    (3
    )
    
    
    N/A
    
    
    
    N/AT. Pitser
    
    
    20,000
    
    
    
    2.3
    
    
    $
    3.64
    
    
    
    5/20/14
    
    
    
    N/A
    
    
    
    N/AG. Meleghy
    
    
    12,500
    
    
    
    1.7
    
    
    $
    3.64
    
    
    
    5/20/14
    
    
    
    N/A
    
    
    
    N/AK. Johnston
    
    
    15,000
    
    
    
    1.7
    
    
    $
    3.64
    
    
    
    5/20/14
    
    
    
    N/A
    
    
    
    N/AT. Werle
    
    
    15,000
    
    
    
    1.7
    
    
    $
    3.64
    
    
    
    5/20/14
    
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    These options vest ratably over four years commencing one year from the date of grant.(2)
    
    Not applicable. On February 2, 2005, Tower Automotive, Inc. and its U.S. subsidiaries filed a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.(3)
    
    Represents options to purchase 20,000 shares at $7.08 per share and expiring on January 14,
2014, and options to purchase 25,000 shares at $3.64 per share and expiring on May 20, 2014 . Option Exercises and Year-End Value Table The following table provides information on the exercise of stock options during 2004 by the Named
Executive Officers and the aggregate number and value of unexercised options held by each Named
Executive Officer, as of December 31, 2004. Aggregated Option Exercises in Last Fiscal
Year and Year-End Option Values Number of
    
    
    Value ofUnexercised
    
    
    Unexercised In-the-Options at
    
    
    Money OptionsYear-End(#)
    
    Year-End($)Shares Acquired
    
    
    Value
    
    
    Exercisable/
    
    
    Exercisable/Name
    
    on Exercise
    
    
    Realized($)
    
    
    Unexercisable
    
    
    Unexercisable(2)K. Ligocki
    
    
    0
    
    
    
    N/A
    (1)
    
    
    0/0
    
    
    
    0/0J. Mallak
    
    
    0
    
    
    
    N/A
    (1)
    
    
    0/45,000
    
    
    
    0/0T. Pitser
    
    
    0
    
    
    
    N/A
    (1)
    
    
    103,375/0
    
    
    
    0/0G. Meleghy
    
    
    0
    
    
    
    N/A
    (1)
    
    
    25,000/27,500
    
    
    
    0/0K. Johnston
    
    
    0
    
    
    
    N/A
    (1)
    
    
    83,750/38,750
    
    
    
    0/0T. Werle
    
    
    0
    
    
    
    N/A
    (1)
    
    
    25,000/30,000
    
    
    
    0/0
 
 (1)
    
    Not Applicable.(2)
    
    On February 2, 2005, Tower Automotive, Inc. and its U.S. subsidiaries filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code. 89




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##### Table of Contents



Chief Executive Officer Compensation Ms. Kathleen Ligocki became the Companys Chief Executive Officer on August 18, 2003. Ms. Ligocki
has a Change in Control Agreement, comparable to those offered to the Companys other executive
officers, providing a cash payout of three times salary if she becomes entitled to a payout under
the terms of the Agreement. In addition, Ms. Ligockis agreement provides that if her employment
is terminated within three years from date of hire for any reason other than cause, she will
receive a severance equal to one year of base salary plus an annual bonus equal to her target award
under the annual incentive plan. Neither Ms. Ligocki nor any of the other executive officers have
an employment agreement with the Company. Change in Control Agreements The Company has entered into Change in Control Agreements with certain key colleagues, including
the Named Executive Officers. These agreements provide severance benefits if an individuals
employment is terminated within 36 months after change in control, or within six months before
change in control. For purposes of these agreements, a change in control is any occurrence of a
nature that is reportable as such under applicable proxy rules of the SEC, and would include,
without limitation, the acquisition of the actual ownership of 20% or more of the Companys voting
securities by any person and that person directs or controls management or causes any material
change in the composition of the Companys Board of Directors, certain changes in the composition
of the Companys Board of Directors, or a merger and consolidation in which the Company are not the
surviving entity, or the Companys sale or liquidation. A change in control does not include
the filing by Tower Automotive, Inc. and its U.S. subsidiaries of the voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code. Benefits under these agreements are not payable if the Company terminates an individuals
employment for cause, if employment terminates due to the individuals death or disability, or the
individual resigns without good reason. A colleague may resign with good reason after a change
in control and retain benefits if the Company reduces the individuals salary or bonus, assigns
duties inconsistent with the colleagues prior position, or makes other material, adverse changes
in the terms or conditions of the colleagues employment. The agreements are on self-renewing
terms of one year each, unless the Company takes action to terminate further extensions at least
six months prior to the annual expiration date. These agreements provide severance benefits of
salary for up to three years and bonus and a continuation of benefits for up to three years. These Change in Control Agreements have been approved in the United States Bankruptcy Court for the
Southern District of New York (the Bankruptcy Court). 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) with certain of
its key employees. The Company entered into KERP Agreements with a total of 106 employees,
including the executive officers. All KERP Agreements were executed by April 15, 2005. The KERP Agreements were designed to ensure the continued contributions of key employees during
the pendency of the Companys Chapter 11 bankruptcy proceedings. Under each KERP Agreement, 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.
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.
The KERP Agreements are substantially identical to each other. 90




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##### Table of Contents



Compensation of Directors For service in 2004, non-employee directors (Outside Directors) each received an annual retainer
of $75,000. Board compensation for 2005 remains unchanged. The Chairman of the Audit Committee
receives additional compensation in the amount of $10,000, and the Chairman of the Compensation
Committee and the Chairman of the Nominating and Corporate Governance Committee each receive
additional compensation in the amount of $5,000. No additional fees are paid to directors for
attendance at Board meetings. During 2004, all, none, or a portion of the retainer, but in
increments of not less than 25%, were allowed be deferred under the Companys Director Deferred
Stock Purchase Plan. Deferred amounts are payable only in shares of the Companys common stock.
The issuance of shares of the Companys common stock under the Plan was suspended as of February 2,
2005, the date Tower Automotive, Inc. and its U.S. subsidiaries filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code. In addition, the Company paid Mr.
Johnson an annual fee of $202,634 for his services as Chairman of the Board, and reimbursed him
approximately $92,911 for office and travel expenses. 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Unless otherwise noted, the following table sets forth certain information regarding ownership of
common stock as of May 31, 2005, by (i) the beneficial owners of more than 5% of the Companys
common stock, (ii) each director and named executive officer, and (iii) all of the Companys
directors and executive officers as a group. To the Companys knowledge, each of such stockholders
has sole voting and investment power as to the shares shown unless otherwise noted. Beneficial
ownership of the common stock listed in the table has been determined in accordance with the
applicable rules and regulations promulgated under the Securities Exchange Act of 1934. Beneficial Ownership ofCommon Stock(1)Number of
    
    
    Percent ofDirectors, Officers and 5% Stockholders
    
    Shares
    
    
    ClassKathleen Ligocki
    
    
    135,475
    
    
    
    *James A. Mallak
    
    
    78,250
    
    
    
    *Tom G. Pitser
    
    
    199,753
    
    
    
    *Kathy Johnston
    
    
    125,175
    
    
    
    *Thomas Werle
    
    
    42,250
    
    
    
    *Gyula Meleghy
    
    
    25,000
    
    
    
    *Anthony G. Fernandes
    
    
    58,403
    
    
    
    *Juergen M. Geissinger(2)
    
    
    32,676
    
    
    
    *Ali Jenab(2)
    
    
    22,813
    
    
    
    *S. A. Johnson(2)
    
    
    351,247
    
    
    
    *F. Joseph Loughrey(2)
    
    
    92,361
    
    
    
    *James R. Lozelle(2)
    
    
    313,429
    
    
    
    *Georgia Nelson(2)
    
    
    76,336
    
    
    
    *Barclays Global Investors NA(3)
    
    
    3,590,706
    
    
    
    6.1
    %Dimensional Funds Advisors, Inc.(4)
    
    
    4,513,487
    
    
    
    7.7
    %FMR Corp(5)
    
    
    5,809,400
    
    
    
    9.9
    %Morgan Stanley(6)
    
    
    7,265,995
    
    
    
    12.4
    %Missouri Valley Partners, Inc.(7)
    
    
    3,496,728
    
    
    
    6.0
    %New York Life Trust Company(8)
    
    
    4,551,493
    
    
    
    7.7
    %Strong Capital Management, Inc.(9)
    
    
    3,176,219
    
    
    
    5.4
    %All Directors and executive officers as a group (17 persons)
 
 *
    
    Less than one percent.(1)
    
    The number of shares includes shares that may be purchased under options that are
exercisable in 60 days. The percent of class is calculated based on the number of shares
outstanding plus such option shares.(2)
    
    Includes the following number of shares issuable as deferred compensation for the following
individuals: Mr. Pitser  4,885; Ms. Johnston  26,124; Mr. Pairet 17,653 ; Mr. Fernandes
 58,403; Dr. Geissinger  32,676; Mr. Jenab  18,777 ; Mr. Johnson  35,637 ; Mr.
Loughrey  20,153; Mr. Lozelle  1,945 and Ms. Nelson  76,336. 91




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##### Table of Contents



(3)
    
    Barclays Global Investors, NA, on behalf of itself and its affiliates reported as of February
14, 2005, sole voting power with respect to 3,286,649 and sole dispositive power with respect
to 3,590,706 shares of Common Stock. The address for Barclays Global Investors, NA is 45
Fremont Street, San Francisco, California 94105.(4)
    
    Dimensional Fund Advisors, Inc. reported as of February 9, 2005, sole voting and dispositive
power with respect to 4,513,487 shares of Common Stock. The address for Dimensional Fund
Advisors, Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.(5)
    
    FMR Corp reported as of February 14, 2005, sole dispositive power with respect to 5,809,400
shares of Common Stock. The address for FMR Corp is 82 Devonshire Street, Boston,
Massachusetts 02109.(6)
    
    Morgan Stanley on behalf of itself and its affiliates reported as of February 15, 2005, sole
voting and dispositive power with respect to 7,260,985 shares of Common Stock and shared
voting and dispositive power with respect to 5,010 shares of Common Stock. The address of
Morgan Stanley is 1585 Broadway, New York, New York 10036.(7)
    
    Missouri Valley Partners, Inc. reported as of January 12, 2005, sole voting and dispositive
power over 2,630,358 shares and 3,496,728 shares, respectively. The address of Missouri
Valley Partners, Inc. is 135 North Merramec, Suite 500, St. Louis, Missouri 63105.(8)
    
    New York Life Trust Company in its capacity as directed trustee of various Company plans,
reported as of February 15, 2005 sole voting and sole dispositive power over 4,551,493 shares.
The address of New York Life Trust Company is 51 Madison Avenue, New York, New York, 10010.(8)
    
    Strong Capital Management, Inc. reported as of February 11, 2005, sole voting and dispositive
power with respect t3,176,219 shares of Common Stock. The address of Strong Capital Management, Inc. is 100 Heritage
Reserve, Menominee Falls, Wisconsin 53051. The Company maintains certain stock option plans under which common stock is authorized for
issuance to employees and directors, including the Companys 1994 Key Employee Stock Option Plan,
1999 Long-Term Incentive Plan, and Independent Director Stock Option Plan. In addition, the
Company maintains certain stock purchase plans, which include the Employee Stock Purchase Plan,
Director Deferred Income Stock Purchase Plan, and Key Leadership Deferred Income Stock Purchase
Plan. The following table sets forth certain information regarding the above referenced equity
compensation plans as of December 31, 2004. Equity Compensation Plan Information (c)Number of securities(a)
    
    
    (b)
    
    
    remaining availableNumber of securities
    
    
    Weighted-average
    
    
    for future issuanceto be issued upon
    
    
    exercise price of
    
    
    under equityexercise of
    
    
    outstanding
    
    
    compensation plansoutstanding options,
    
    
    options,
    
    
    (excluding securitiesPlan Category
    
    warrants and rights(1)
    
    
    warrants and rights
    
    
    reflected in column (a)Equity compensation plans
approved by security holders (3)
    
    
    2,554,241
    (1)
    
    $
    11.08
    (1)
    
    
    2,533,707
    (2)Equity compensation plans
not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,554,241
    
    
    $
    11.08
    
    
    
    2,533,707
 
 (1)
    
    Consists of 157,200 shares under the 1994 Key Employee Stock Option Plan, 2,296,841 shares
under the 1999 Long-Term Incentive Plan and 100,200 under the Independent Director Stock
Option Plan.(2)
    
    Consists of 1,114,400 shares under the 1994 Key Employee Stock Option Plan, 1,334,507 shares
under the 1999 Long-Term Incentive Plan and 84,800 shares under the Independent Stock Option
Plan.(3)
    
    Excludes the Companys stock purchase plans. 
 Item 13. Certain Relationships and Related Transactions. The Company made pension payments of approximately $255,000 in 2004, $231,000 in 2003 and $192,000
in 2002 to the mother of Gyula Meleghy, an executive officer of the Company, in connection with the
acquisition by the Company of Dr. Meleghy & Co GmbH. Also, the Company purchased certain services
from a business owned by his wife totaling approximately $103,000 in 2004 and $71,000 in 2003. 92




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##### Table of Contents



Item 14. Principal Accounting Fees and Services. The Audit Committee of the Companys Board of Directors appointed Deloitte & Touche LLP as
principal independent auditors to examine the consolidated financial statements of Tower
Automotive, Inc. and its consolidated subsidiaries for 2004 and 2003. The following table displays
the aggregate fees billed to us for the years ended December 31, 2004 and 2003, by Deloitte &
Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates. 2004
    
    
    20031. Audit Fees
    
    $
    3,325,339
    
    
    $
    1,556,0062. Audit Related Fees (a)
    
    
    288,448
    
    
    
    125,4623. Tax Fees (b)
    
    
    565,193
    
    
    
    821,6454. All Other Fees
    
    
    
    
    
    
    
 
 (a)
    
    Includes fees for (1) financial accounting and reporting consultations on proposed
transactions, and (2) advisory and internal accounting control-related services related to
the implementation of Section 404 of the Sarbanes-Oxley Act.(b)
    
    Consists primarily of fees paid for tax compliance and tax planning services. This
category includes services regarding sales and use, property and other tax return
assistance, assistance with tax return filings in certain foreign jurisdictions, assistance
with tax audits and appeals, preparation of expatriate tax returns, and general U.S. and
foreign tax advice. The Companys Audit Committee adopted a policy regarding the approval of audit and permissible
non-audit services provided by the Companys independent auditor. A copy of that policy is
available on the Companys website. The policy requires specific approval by the committee of
audit, audit related and other permissible services. The policy authorizes the Committee to
delegate to one or more of its members pre-approval authority with respect to permitted services.
All of the fees listed above were approved by the Companys Audit Committee under this policy. 
 PART IV 
 Item 15. Exhibits, Financial Statement Schedules. (a) Documents Filed as Part of this Form 10-K. (1) Financial
Statements: Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets at December 31, 2004 and 2003
Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002
Consolidated Statements of Stockholders Investment for the years ended December 31, 2004, 2003 and 2002
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002 Notes to Consolidated
Financial Statements (2) Financial
Statement Schedules: Financial Statement Schedule I  Condensed Financial Information of Registrant   93




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##### Table of Contents



(b) Exhibits: Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of the
Registrant, as amended by the Certificate of Amendment to
Certificate of Incorporated, dated June 2, 1997,
incorporated by reference to the Registrants Form S-3
Registration Statement (Registration No. 333-38827),
filed under the Securities Act of 1933 (the
S-3)
    
    *3.2
    
    Amended and Restated Bylaws of the Registrant,
incorporated by reference to Exhibit 3.2 of the
Companys Form S-1 Registration Statement
(Registration No. 333-80320) (the S-1).
    
    *4.1
    
    Form of Common Stock Certificate, incorporated by
reference to Exhibit 4.1 of the S-1.
    
    *4.2
    
    Euro Indenture, dated July 25, 2000, by and among R.J.
Tower Corporation, certain of its affiliates and United
States Trust Company of New York, as trustee (including
the form of notes), incorporated by reference to Exhibit
4.1 of the Registrants Form S-4 Registration Statement
(Registration No. 333-45528), as filed with the SEC on
December 21, 2000(the S-4).
    
    *4.3
    
    Exchange and Registration Rights Agreement, dated July
25, 2000, by and among R.J. Tower Corporation, certain
of its affiliates and Chase Manhattan International
Limited, Bank of America International Limited, ABN
AMRO Incorporated, Donaldson, Lufkin & Jennrette
International, First Chicago Limited and Scotia Capital
(USA) Inc. (collectively, the Initial Purchasers),
incorporated by reference to Exhibit 4.2 of the S-4.
    
    *4.4
    
    Deposit Agreement, dated July 25, 2000, among R.J. Tower
Corporation, Deutsche Bank Luxembourg
S.A., and the Trustee, incorporated by reference to
Exhibit 4.3 of the S-4.
    
    *4.5
    
    Indenture, dated as of July 28, 1997, by and between the
Registrant and Bank of New York, as trustee (including
form of 5% Convertible Subordinated Note due 2004)
incorporated by reference to Exhibit 4.5 of the S-3.
    
    *4.6
    
    Indenture, dated June 13, 2003, among Registrant, certain
subsidiaries and BNY Midwest Trust Company, as trustee,
incorporated by reference to Exhibit 4.1 to the
Registrants Form S-4 Registration Statement
(Registration No. 333-107232), filed under the Securities
Act of 1933 (the 2003 S-4).
    
    *4.7
    
    Registration Rights Agreement, dated June 13, 2003, by
and among the Registrant, certain of its subsidiaries,
and J.P. Morgan Securities Inc., for itself and on behalf
of other Initial Purchases, incorporated by reference to
Exhibit 4.2 of the 2003 S-4.
    
    *
 94




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##### Table of Contents



Exhibit10.1**
    
    1994 Key Employee Stock Option Plan, incorporated by
reference to the S-1.
    
    *10.2**
    
    Tower Automotive, Inc. Independent Director Stock Option
Plan, incorporated by reference to Exhibit 4.3
of the Registrants Form S-8 dated December 5, 1996,
filed under the Securities Act of 1933.
    
    *10.3
    
    Joint Venture Agreement by and among Promotora de
Empresas Zano, S.A. de C.V., Metalsa, S.A. de C.V.
and R.J. Tower Corporation dated as of September 26,
1997 incorporated by reference to Exhibit 2.1 of the
Registrants Form 8-K dated October 23, 1997, filed
under the Securities Exchange Act of1934.
    
    *10.4
    
    Certificate of Trust of Tower Automotive Capital Trust,
incorporated by reference to Exhibit 4.1 of the
Registrants1998 Second Quarter 10-Q, filed under the
Securities Exchange Act of 1934.
    
    *10.5
    
    Amended and Restated Declaration of Trust of Tower
Automotive Capital Trust, dated June 9, 1998,
incorporated by reference to Exhibit 4.2 of the1998
Second Quarter 10-Q, filed under the Securities
Exchange Act of 1934.
    
    *10.6
    
    Junior Convertible Subordinated Indenture for the 6 3/4%
Convertible Subordinated Debentures, between Registrant
and the First National Bank of Chicago,
as Subordinated Debt Trustee, dated as of June 9, 1998,
incorporated by reference to Exhibit 4.3 of the 1998
Second Quarter 10Q.
    
    *10.7
    
    Form of 6 3/4% Preferred Securities, incorporated by
reference to Exhibit 4.4 of the 1998 Second Quarter
10-Q.
    
    *10.8
    
    Form of 6 3/4% Junior Convertible Subordinated
Debentures, incorporated by reference to Exhibit 4.5 of
the 1998 Second Quarter 10Q.
    
    *10.9
    
    Guarantee Agreement, dated as of June 9, 1998, between
Registrant as Guarantor, and the First National Bank of
Chicago, as Guarantee Trustee, incorporated by reference
to Exhibit 4.6 of the 1998 Second Quarter 10-Q.
    
    *10.10
    
    Amended and Restated Credit Agreement among R.J. Tower
Corporation, Tower Italia, S.r.L., Bank of
America National Trust and Savings Association, as
agent, and the other financial institutions named therein,
dated August 23, 1999, incorporated by reference to
Exhibit 10.43 of the Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 1999,
filed under the Securities Exchange Act of 1934.
    
    *10.11 a
    
    Tower Automotive, Inc. Long-Term Incentive Plan,
incorporated by reference to Appendix A to Registrants
Proxy Statement, dated April 12, 1999.
    
    *
 95




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##### Table of Contents



Exhibit10.12 a
    
    Tower Automotive, Inc. Director Deferred Stock Purchase Plan,
incorporated by reference to Appendix A
to Registrants Proxy Statement, dated April 10, 2000.
    
    *10.13 a
    
    Tower Automotive, Inc. Key Leadership Deferred Income Stock
Purchase Plan, incorporated by reference
to Appendix B to Parents Proxy Statement, dated
April 12, 1999.
    
    *10.14 a
    
    Tower Automotive, Inc. Colleague Stock Purchase Plan,
incorporated by reference to Exhibit 10.19 of the S-1.
    
    *10.15
    
    Indenture for the 5.75% Convertible Senior Debentures
dated as of May 24, 2004, Tower Automotive, Inc., as
Issuer, and BNY Midwest Trust Company, as Trustee,
incorporated by reference to Form 8-K, dated May 25,
2004.
    
    *
*10.16
    
    Form of Tower Automotive, Inc. 5.75% Convertible
Senior Debenture, incorporated by reference to Form 8-K
dated May 25, 2004.
    
    *10.17
    
    Resale Registration Rights Agreement dated as of May 24, 2004,
for the Tower Automotive, Inc. 5.75%
Convertible Senior Debentures Due 2024, incorporated
by reference to Form 8-K, dated May 25, 2004.
    
    *10.18
    
    Purchase Agreement dated May 17, 2004 for the 5.75%
Convertible Senior Debentures due May 15, 2024,
incorporated by reference to Form 8-K, dated May 25,
2004.
    
    *10.19
    
    Credit Agreement dated as of May 24, 2004, among R.J.
Tower Corporation, Tower Automotive, Inc., and the
various financial institutions from time to time parties
thereto, incorporated by reference to Form 8-K, dated
May 25, 2004.
    
    *10.20
    
    Revolving Credit, Term Loan and Guaranty Agreement,
as amended dated February 2, 2005, filed herewith.10.21
    
    Form of The Key Employee Retention Plan between
Tower Automotive, Inc. and Key Employees incorporated
by reference to Form 8-K, dated April 1, 2005.
    
    *10.22
    
    Agreement between Tower Automotive, Inc., R.J. Tower
Corporation and Silver Point Finance, LLC, dated February 3, 2005,
filed herewith.10.23
    
    Fourth Amendment to Revolving Credit, Term Loan and
Guaranty Agreement, dated April 29, 2005, filed herewith.12.1
    
    Statement and Computation of Ratio of Earnings to Fixed
Charges filed herewith.14.1
    
    Code of Business Conduct and Ethics filed herewith
 96




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##### Table of Contents



Exhibit14.2
    
    Code of Ethics for Senior Officers and Leaders filed herewith21.1
    
    List of Subsidiaries filed herewith.23.1
    
    Consent of Deloitte and Touche LLP filed herewith.23.2
    
    Consent of KPMG Cárdenas Dosal, S.C. filed herewith.31.1
    
    Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.31.2
    
    Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.32.1
    
    Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.32.2
    
    Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.99.1
    
    Audit Committee Charter filed herewith.
 
 *
    
    Incorporated by reference. a Indicates compensatory arrangement. (c) Additional Financial Statement Schedules Independent Auditors Report
Separate Financial Statements of Significant Equity Method Investee 97




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized. TOWER AUTOMOTIVE, INC.By
    
    /s/ S.A. JOHNSONS.A. Johnson, Chairman
 Date: JULY 27, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant in the capacities indicated on July 27, 2005. Each director of the Registrant, whose signature appears below, hereby appoints
Kathleen Ligocki as his or her attorney-in-fact, to sign in his or her name and on his or her
behalf, as a director of the Registrant and to file with the Commission any and all amendments to
this Report on Form 10-K. Signature
    
    Title/s/ S.A. JOHNSON
S.A. Johnson
    
    Chairman of the Board of Directors/s/ KATHLEEN LIGOCKI
Kathleen Ligocki
    
    Director and
President and Chief Executive Officer(Principal Executive Officer)/s/ ANTHONY FERNANDES
Anthony Fernandes
    
    Director/s/ JURGEN M. GEISSINGER
Jurgen M. Geissinger
    
    Director/s/ ALI JENAB
Ali Jenab
    
    Director/s/ F.J. LOUGHREY
F.J. Loughrey
    
    Director/s/ JAMES R. LOZELLE
James R. Lozelle
    
    Director/s/ GEORGIA R. NELSON
Georgia R. Nelson
    
    Director/s/ JAMES A. MALLAK
James A. Mallak
    
    Chief Financial Officer and Treasurer
(Principal Financial Officer)/s/ CHRISTOPHER T. HATTO
Christopher T. Hatto
    
    Chief Accounting Officer
(Principal Accounting Officer)
 98




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##### Table of Contents



SCHEDULE I TOWER AUTOMOTIVE, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT TOWER AUTOMOTIVE, INC. (PARENT COMPANY)
CONDENSED BALANCE SHEETS
AT DECEMBER 31, 2004 AND 2003 (Amounts in thousands, except share amounts) 2004
    
    
    2003ASSETSInvestments in and advances to (from) affiliates
    
    $
    255,049
    
    
    $
    847,598Other assets
    
    
    5,410
    
    
    
    28,812$
    260,459
    
    
    $
    876,410LIABILITIES AND STOCKHOLDERS INVESTMENT (DEFICIT)Accrued liabilities
    
    $
    918
    
    
    $
    4,166Convertible subordinated notes
    
    
    
    
    
    
    199,9846-3/4% convertible subordinated debentures payable to trust subsidiary
    
    
    258,750
    
    
    
    258,750Convertible Senior Debentures
    
    
    121,723
    
    
    
    Stockholders investment:Preferred stock, par value $1; 5,000,000 shares
authorized; no shares issued or outstanding
    
    
    
    
    
    
    Common stock, par value $.01; 200,000,000 shares
authorized; 66,578,962 shares issued and 58,480,909 shares
outstanding in 2004; 66,133,731 shares issued and 57,341,805
shares and outstanding in 2003
    
    
    666
    
    
    
    661Additional paid-in capital
    
    
    681,084
    
    
    
    680,608Retained deficit
    
    
    (715,754
    )
    
    
    (181,849
    )Deferred compensation plans
    
    
    (7,636
    )
    
    
    (9,609
    )Accumulated other comprehensive loss
    
    
    (29,968
    )
    
    
    (22,751
    )Treasury stock, at cost: 8,098,053 shares in 2004 and
8,791,926 shares in 2002
    
    
    (49,324
    )
    
    
    (53,550
    )Total stockholders investment (deficit)
    
    
    (120,932
    )
    
    
    413,510$
    260,459
    
    
    $
    876,410
 The accompanying notes are an integral part of these condensed financial statements.




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##### Table of Contents



SCHEDULE I TOWER AUTOMOTIVE, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT TOWER AUTOMOTIVE, INC. (PARENT COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (Amounts in thousands) 2004
    
    
    2003
    
    
    2002Interest expense
    
    $
    30,141
    
    
    $
    28,768
    
    
    $
    28,768Unrealized Gain on Derivative
    
    
    (3,860
    )
    
    
    
    
    
    
    Loss before income taxes and equity in earnings
of consolidated subsidiaries
    
    
    (26,281
    )
    
    
    (28,768
    )
    
    
    (28,768
    )Provision (benefit) for income taxes
    
    
    21,716
    
    
    
    (9,780
    )
    
    
    (10,068
    )Equity in earnings of consolidated subsidiaries, net of tax
    
    
    (485,908
    )
    
    
    (105,687
    )
    
    
    (78,906
    )Net loss
    
    $
    (533,905
    )
    
    $
    (124,675
    )
    
    $
    (97,606
    )
 The accompanying notes are an integral part of these condensed financial statements.




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##### Table of Contents



SCHEDULE I TOWER AUTOMOTIVE, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT TOWER AUTOMOTIVE, INC. (PARENT COMPANY)
CONDENSED STATEMENTS OF STOCKHOLDERS INVESTMENT (DEFICIT)  AccumulatedOtherAdditional
    
    
    Retained
    
    
    Deferred
    
    
    Comprehensive
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Earnings
    
    
    Compensation
    
    
    Income
    
    
    Treasury Stock
    
    
    Stockholders Shares
    
    
    Amount
    
    
    Capital
    
    
    (Deficit)
    
    
    Plans
    
    
    (Loss)
    
    
    Shares
    
    
    Amount
    
    
    Investment(Amounts in thousands, except share data)BALANCE, December 31, 2001
    
    
    48,077,142
    
    
    $
    481
    
    
    $
    456,627
    
    
    $
    40,432
    
    
    $
    (15,571
    )
    
    $
    (34,561
    )
    
    
    
    
    
    $
    
    
    
    $
    447,408Exercise of options
    
    
    329,368
    
    
    
    3
    
    
    
    1,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,656Sales of stock under Employee Stock Discount Purchase Plan
    
    
    222,145
    
    
    
    2
    
    
    
    1,423
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,425Deferred Income Stock Plan deferrals
    
    
    
    
    
    
    
    
    
    
    1,387
    
    
    
    
    
    
    
    (1,387
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Stock Plan distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,781
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,781Restricted stock grants earned and forfeited
    
    
    
    
    
    
    
    
    
    
    (465
    )
    
    
    
    
    
    
    2,431
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,966Issuance of common stock
    
    
    17,250,000
    
    
    
    173
    
    
    
    222,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222,620Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,827,800
    )
    
    
    (59,860
    )
    
    
    (59,860
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97,606
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,915
    
    
    
    
    
    
    
    
    
    
    
    Unrealized loss on qualifying cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,521
    )
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,708
    )
    
    
    
    
    
    
    
    
    
    
    Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (106,920
    )BALANCE, December 31, 2002
    
    
    65,878,655
    
    
    
    659
    
    
    
    683,072
    
    
    
    (57,174
    )
    
    
    (10,746
    )
    
    
    (43,875
    )
    
    
    (9,827,800
    )
    
    
    (59,860
    )
    
    
    512,076Sales of stock under Employee Stock Discount Purchase Plan
    
    
    252,156
    
    
    
    2
    
    
    
    650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    652Deferred Income Stock Plan deferrals
    
    
    
    
    
    
    
    
    
    
    3,395
    
    
    
    
    
    
    
    (3,395
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Stock Plan forfeitures
    
    
    
    
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Stock Plan distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,999Deferred Income Stock Plan funding
    
    
    
    
    
    
    
    
    
    
    (6,310
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,035,874
    
    
    
    6,310
    
    
    
    Restricted stock grants earned and forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,316
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,316Restricted stock grant distributions
    
    
    2,920
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124,675
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,609
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gain on qualifying cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,586
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,071
    )
    
    
    
    
    
    
    
    
    
    
    Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103,551
    )Balance, December 31, 2003
    
    
    66,133,731
    
    
    
    661
    
    
    
    680,608
    
    
    
    (181,849
    )
    
    
    (9,609
    )
    
    
    (22,751
    )
    
    
    (8,791,926
    )
    
    
    (53,550
    )
    
    
    413,510Exercise of options
    
    
    23,750
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72Sales of stock under Employee Stock Discount Purchase Plan
    
    
    15,912
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Deferred Income Stock Plan deferrals
    
    
    
    
    
    
    
    
    
    
    636
    
    
    
    
    
    
    
    (636
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Stock Plan forfeitures
    
    
    
    
    
    
    
    
    
    
    (74
    )
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Stock Plan distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,524
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,524Deferred Income Stock Plan funding
    
    
    
    
    
    
    
    
    
    
    (181
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    693,873
    
    
    
    4,226
    
    
    
    4,045Restricted stock grants earned and forfeited
    
    
    405,569
    
    
    
    5
    
    
    
    (5
    )
    
    
    
    
    
    
    1,011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,011Restricted stock grant distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (533,905
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,760
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gain on qualifying cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,777
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,754
    )
    
    
    
    
    
    
    
    
    
    
    Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (541,122
    )Balance, December 31, 2004
    
    
    66,578,962
    
    
    $
    666
    
    
    $
    681,084
    
    
    $
    (715,754
    )
    
    $
    (7,636
    )
    
    $
    (29,968
    )
    
    
    (8,098,053
    )
    
    $
    (49,324
    )
    
    $
    (120,932
    )
 The accompanying notes are an integral part of these condensed financial statements.




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##### Table of Contents



SCHEDULE I TOWER AUTOMOTIVE, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT TOWER AUTOMOTIVE, INC. (PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (Amounts in thousands) 2004
    
    
    2003
    
    
    2002Operating Activities:Net loss
    
    $
    (533,905
    )
    
    $
    (124,675
    )
    
    $
    (97,606
    )Equity in earnings of consolidated subsidiaries
    
    
    485,908
    
    
    
    105,687
    
    
    
    78,906Deferred income tax provision
    
    
    21,716
    
    
    
    
    
    
    
    Changes in working capital and other operating items
    
    
    (46,593
    )
    
    
    (10,796
    )
    
    
    (4,811
    )Net cash used in operating activities
    
    
    (72,874
    )
    
    
    (29,784
    )
    
    
    (23,511
    )Investing Activities:Dividends received from consolidated subsidiaries
    
    
    29,817
    
    
    
    27,466
    
    
    
    27,466Investments in and advances to (from) consolidated subsidiaries
    
    
    117,798
    
    
    
    1,648
    
    
    
    (169,796
    )Net cash provided by (used in) investing activities
    
    
    147,615
    
    
    
    29,114
    
    
    
    (142,330
    )Financing Activities:Proceeds from borrowings
    
    
    125,000
    
    
    
    
    
    
    
    Repayment of debt
    
    
    (199,984
    )
    
    
    
    
    
    
    Net proceeds from issuance of common stock
    
    
    243
    
    
    
    670
    
    
    
    225,701Payments for repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (59,860
    )Net cash provided by (used in) financing activities
    
    
    (74,741
    )
    
    
    670
    
    
    
    165,841Net change in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    
    
    
    $
    Supplemental Cash Flow Information:Interest paid
    
    $
    23,530
    
    
    $
    27,466
    
    
    $
    27,466Income taxes paid (refunded)
    
    $
    
    
    
    $
    
    
    
    $
    
 The accompanying notes are an integral part of these condensed financial statements.




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##### Table of Contents



SCHEDULE I TOWER AUTOMOTIVE, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT TOWER AUTOMOTIVE, INC. (PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS 1. Organization and Nature of Business Tower Automotive, Inc. (the Parent Company) and its subsidiaries, collectively the
Company, is a global designer and producer of vehicle structural components and assemblies,
which include body structures and assemblies, lower vehicle frames and structures, chassis modules
and systems and suspension components. The Parent Company is a holding company that owns all of
the outstanding capital stock of R.J. Tower Corporation (R.J. Tower) and all of the common
securities issued by the Tower Automotive Capital Trust. R.J. Tower is also a holding company
that conducts all of its operations through domestic and foreign direct and indirect subsidiaries.
R. J. Towers subsidiaries conduct operations in the United States, Canada, Mexico, Germany,
Belgium, Poland, Slovakia, Italy, France, Spain, Japan, China, Korea, Brazil and India. All of
R.J. Towers subsidiaries are 100% owned other than two joint ventures in China and a minor German
subsidiary acquired as part of the acquisition of Dr. Meleghy. R.J. Tower also owns a 40% equity
interest in Metalsa S. de R.L., one of the largest suppliers of vehicle frames and structures in
Mexico. The Notes to the Consolidated Financial Statements of Tower Automotive, Inc. and Subsidiaries
contained in this Schedule I should be read in conjunction with the financial statements of this
Schedule I. 2. Chapter 11 Reorganization Proceedings On February 2, 2005, the Parent Company and 25 of its United States subsidiaries (the Debtors)
filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (the
Bankruptcy Code) in the United States Bankruptcy Court Southern District of New York (the
Court). The cases were consolidated for the purpose of joint administration. An extensive
liquidity deficiency 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 involving primarily steel and the termination of accelerated payment programs of
certain customers adversely affected the Debtors operations and financial condition. The objectives of this 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 Court. The Parent 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, the extent to which such relief will be achieved is uncertain at this
time. See Note 10 for a description of DIP financing. 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 Parent
Companys financial statements while the Parent Company operates 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. The accompanying Parent Company condensed financial statements do not reflect the Chapter 11
filing.




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##### Table of Contents



SCHEDULE I 3. Going Concern As indicated in Note 2, the Parent Company is operating pursuant to Chapter 11 under the Bankruptcy
Code and continuation of the Parent Company as a going concern is contingent upon, among other
things, the Debtors ability (i) to comply with the terms and conditions of the DIP financing
agreement described in Note 10; (ii) to obtain confirmation of a plan of reorganization under the
Bankruptcy Code; (iii) to reduce unsustainable debt and other liabilities and simplify the
Debtors complex and restrictive capital structure through the bankruptcy process; (iv) to return
to profitability; (v) to generate sufficient cash flow from operations and; (vi) to obtain
financing sources to meet the Debtors future obligations. These matters create uncertainty
relating to the Parent Companys ability to continue as a going concern. The accompanying
condensed 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 Parent Companys
condensed 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. 4. Convertible Debentures On May 24, 2004, the Parent Company issued Convertible Senior Debentures (Convertible
Debentures) in the total amount of $125.0 million. The Convertible Debentures bear interest at a
rate of 5.75% per annum paid semi-annually on May 15 and November 15 beginning November 15, 2004.
The Convertible Debentures mature on May 15, 2024, unless earlier converted, redeemed or
repurchased by the Parent Company. The Convertible Debentures are general unsecured senior obligations of the Parent Company and rank
equally with any present and future senior debt of the Parent Company. The Convertible Debentures
rank senior to any subordinated debt of the Parent Company and are effectively subordinated to any
secured debt of the Parent Company, to the extent of the amount of the assets securing such debt.
The Convertible Debentures are structurally subordinated to present and future debt and other
obligations of each subsidiary of the Parent Company. Holders may convert the Convertible Debentures into shares of the Parent Companys common stock at
a conversion rate of 231.0002 shares per $1,000 principal amount of the Convertible Debentures
(equal to a conversion price of approximately $4.33 per share) subject to adjustment upon certain
events. In January 2005, the Convertible Debentures became immediately convertible as a result of the
downgrading of the Companys debt by credit rating agencies. Prior to September 20, 2004, the Parent Company could not issue more than 19,705,187 shares of
common stock upon the conversion or repurchase of the Convertible Debentures unless and until the
Parent Company obtained stockholder approval for the issuance of the Convertible Debentures and the
common stock issuable upon conversion or repurchase. In circumstances under which the Parent
Company would have been required to issue in excess of 19,705,187 shares of common stock, the
Parent Company was required to pay cash in respect of all or a portion of converted or repurchased
Convertible Debentures in order to ensure that the shares issued on conversion or
repurchase did not exceed 19,705,187 shares (the Embedded Conversion Option). The initial value
associated with the Embedded Conversion Option was $12.6 million and was marked to market through
the Parent Companys Statement of Operations for the period of May 24, 2004 through September 19,
2004. The Parent Company recognized income of approximately $3.9 million, for the period of May
24, 2004 through September 19, 2004, in relation to the change in fair value of the Embedded
Conversion Option, which is reflected as Unrealized Gain on Derivative in the accompanying
Condensed Statement of Operations for 2004. See Note 9. 5. Convertible Subordinated Debentures On June 9, 1998, Tower Automotive Capital Trust (the Preferred Issuer), a 100% owned statutory
business trust of the Parent Company, completed the offering of $258.8 million of its 6-3/4 % Trust
Convertible Preferred Securities (Preferred Securities), resulting in net proceeds of
approximately $249.7 million. The Preferred Securities are redeemable, in whole or in part, on or
after June 30,
2001 and all Preferred Securities must be redeemed no later than June 30, 2018. The Preferred
Securities are convertible, at




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##### Table of Contents



SCHEDULE I the option of the holder, into Common Stock of the Parent Company at a rate of 1.6280 shares of
Common Stock for each Preferred Security, which is equivalent to a conversion price of $30.713 per
share. The obligations of the Preferred Issuer under the Preferred Securities are fully and
unconditionally guaranteed by the Parent Company. Concurrently with the issuance of the Preferred
Securities, the Preferred Issuer acquired $258.8 million of the Parent Companys 6-3/4 %
Convertible Subordinated Debentures (Debentures) for net proceeds of $249.7 million. Interest is
payable quarterly and the notes mature on June 30, 2018. The net proceeds received from the
issuance of the Debentures by the Parent Company were contributed as an additional investment in
/advances to the Parent Companys subsidiaries. The Parent Company deferred the interest payment of $4.4 million due on December 31, 2004. The
terms of the trust agreement and the underlying 6 3/4% convertible subordinated debentures held by
the Trust permits the deferral of dividends and the underlying interest payments for up to 20
consecutive quarters. See Note 9. 6. Guarantees and Restrictions Guarantees of Debt of Subsidiaries On May 24, 2004, R.J. Tower entered into a credit agreement (Credit Agreement) that provided for
a revolving credit facility in the aggregate amount of $50.0 million, a first lien term loan of
$375.0 million and a second lien letter of credit facility of $155.0 million. Revolving loans could
be borrowed at any time subsequent to May 24, 2004 but prior to May 24, 2009, the revolving loan
termination date. At December 31, 2004, no amounts were available for borrowing under this
revolving credit facility. The first lien term loan required quarterly payments of $937,500 for the
period of September 30, 2004 through September 30, 2008 and a payment of $179.5 million on each of
November 24, 2008 and May 24, 2009. The Credit Agreement also provides for a second lien letter of credit facility in the amount of
$155.0 million for purposes of replacing or backstopping letters of credit outstanding under R.J.
Towers previous credit agreement. At December 31, 2004, the Company had second lien letters of
credit issued in the amount of $151.9 million. No draws were made against the second lien letters
of credit as of December 31, 2004. The weighted average interest rate associated with borrowings pertaining to R.J. Towers credit
facilities were 7.9 %, 7.3% and 6.4% respectively, for the years ended December 31, 2004, 2003 and
2002. The obligations of R.J. Tower under the Credit Agreement are guaranteed by the Parent Company and
all direct and indirect existing and future domestic restricted subsidiaries (as defined in the
credit agreement) of R.J. Tower. R.J. Towers obligations under the revolving credit facility and
the term loan are secured by a first priority lien and security interest in the capital stock of
R.J. Tower and all of its domestic subsidiaries, the present and future property and assets, real
and personal, tangible and intangible (subject to customary exceptions), of the Parent Company, R.
J. Tower and all of its domestic restricted subsidiaries, and the proceeds and products of such
property and assets. The obligations of R.J. Tower under the letter of credit facility are secured
by a second priority lien and security interest in the same collateral, other than the principal
manufacturing facilities located in the United States owned by R.J. Tower or any of its
subsidiaries or shares of capital stock or indebtedness of any restricted subsidiary. In June 2003, R. J. Tower completed a senior note offering with a face amount of $258 million. The
notes were discounted upon issuance to yield 12.0% payable semi-annually. The notes rank equally
with all of the Companys other senior unsecured and unsubordinated debt and mature on June 1,
2013. The Parent Company has guaranteed all of the obligations of R. J. Tower in relation to these
notes on a senior unsecured basis. The Euro-denominated senior unsecured notes of R. J. Tower in the amount of euro 150 million
($203.6 million at December 31, 2004) bear interest at a rate of 9.25%, payable semi-annually.
These notes rank equally with all of the Companys other senior unsecured and unsubordinated debt
and mature on August 1, 2010. The Parent Company has unconditionally guaranteed these notes on a
senior unsecured basis. For the most part, borrowings by foreign subsidiaries are made under credit agreements with
commercial lenders and are used to fund working capital and other operating requirements. At
December 31, 2004, the Parent Company had guaranteed on a senior unsecured




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##### Table of Contents



SCHEDULE I basis $74.5 million of the outstanding borrowings of Seojin Industrial Company Limited (Seojin)
with such guarantee containing a limit of approximately $115.8 million. Effective June 30, 2005,
the Parent Companys guarantee became inoperative upon the rollover of the borrowing facilities to
which the guarantee applied. See Notes 9 and 10. Restrictions on Subsidiaries to Make Distributions to the Parent Company The Parent Company is a holding company that derives substantially all of its cash flow from
R.J. Tower, which itself is a holding company with no operations or assets other than the capital
stock of its subsidiaries. Under the existing credit facility, subsidiaries are restricted in their ability to dividend, loan
or otherwise distribute assets, properties, cash, rights, obligations or securities to the Parent
Company. These restrictions are subject to a number of exceptions, including, but not limited to,
the ability of the subsidiaries to:  (i)
    
    declare and pay dividends to the Parent Company to be used to pay taxes and other
expenses (not relating to interest, bank fees or other payments on indebtedness) of the
Parent Company and the subsidiaries on a consolidated basis; and(ii)
    
    declare and pay dividends to the Parent Company to enable the Parent Company to make
regularly scheduled interest payments or the payment of principal at maturity of certain
unsecured indebtedness issued by the Parent Company (including the Convertible Debentures
and the 6 3/4% Convertible Subordinated Debentures). In association with the 12% senior notes, R.J. Tower is restricted from paying dividends or making
other distributions to the Parent Company unless certain conditions are satisfied. The applicable
conditions were not satisfied at December 31, 2004. Notwithstanding this restriction, the 12%
senior notes indenture permits R.J. Tower to make restricted payments to the Parent Company in the
aggregate amount of $25.0 million, whether or not the above mentioned conditions are satisfied.
As of December 31, 2004, R.J. Tower was allowed to make restricted payments, including dividends
and other distributions, to the Parent Company in the amount of $21.6 million. Irrespective of the above mentioned restrictions, R.J. Tower is permitted to make cash
dividends or loans to the Parent Company for the payment of franchise taxes and federal, state,
local and foreign income taxes to the extent of amounts actually received from its unrestricted
subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of
such unrestricted subsidiaries. R.J. Tower is also permitted to make payments to the Parent
Company for fees required to maintain the Parent Companys legal existence, and an amount not to
exceed $5.0 million in any fiscal year to permit the Parent Company to pay its corporate overhead
and operating expenses incurred in the ordinary course of business. In addition, R.J. Tower is permitted to pay dividends to the Parent Company for the payment
of accrued interest with respect to the Parent Companys 6 3/4% convertible subordinated debentures
due June 18, 2018, whether or not the foregoing conditions are satisfied. Certain foreign subsidiaries of R.J. Tower are also subject to restrictions on their ability to
dividend or otherwise distribute cash to R.J. Tower because they are subject to financing
arrangements that restrict those subsidiaries from paying dividends. See Note 9. 7. Extinguishments of Debt Proceeds of the Credit Agreement and the Convertible Debentures were used to repay existing senior
credit facilities of R.J. Tower in the amount of $239.5 million, call the Parent Companys $200
million of 5.0% convertible subordinated notes due August 1, 2004, pay related fees and expenses
and for general corporate purposes. 8. Sale of Common Stock In May 2002, the Parent Company completed an underwritten primary offering of 17.25 million
shares of the Parent Companys




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SCHEDULE I common stock, which included the exercise of the underwriters over-allotment option to acquire
2.25 million shares. The net proceeds from the offering were $222.6 million, based on an offering
price of $13.75 per share. The net proceeds from this offering were used to repay borrowings under
the Companys then existing credit agreement 9. Chapter 11 Impact The Chapter 11 filing creates an event of default in relation to the Credit
Agreement, Convertible Debentures, 12% Senior Notes, 9.25% Senior Euro Notes, and the Preferred Securities and underlying 6 3/4% Convertible Subordinated Debentures. The ability of the creditors of the Debtors to seek remedies to enforce their rights under the debt
facilities described above is stayed as a result of the Chapter 11 filing, and the creditors
rights of enforcement are subject to the applicable provisions of the Bankruptcy Code. 10. DIP Financing In February 2005, the Bankruptcy Court approved a Revolving Credit, Term Loan and Guaranty
Agreement (DIP Agreement) with a national banking institution as agent for the lenders
(Lenders) and each of the Lenders. R.J. Tower serves as the borrower, and the Parent Company and
the U.S. subsidiaries of R.J. Tower serve as guarantors under this agreement. 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 obligation amounting to $425
million 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 (which 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. 11. Income Taxes In the fourth quarter of 2004, the Parent Company provided a full valuation allowance in relation
to its deferred tax assets, as of the beginning of the year, in the amount of $21.7 million. 12. Recently Issued Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (FASB) adopted 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 is currently evaluating SFAS 123 ( R ) to determine its impact on the Companys
consolidated financial statements.




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##### Table of Contents



SCHEDULE II TOWER AUTOMOTIVE, INC.
VALUATION AND QUALIFYING ACCOUNTS OF REGISTRANT (DOLLARS IN MILLIONS) Reserves LOSS CONTRACTSEMPLOYEE
    
    
    FACILITY
    
    
    ESTABLISHED IN
    
    
    
    
    
    RESTRUCTURINGDESCRIPTION
    
    COST
    
    
    COST
    
    
    PURCHASE ACCOUNTING
    
    
    
    
    
    COSTSBalance, December 31, 2001
    
    
    1.1
    
    
    
    5.2
    
    
    
    17.0
    
    
    
    
    
    
    
    55.3Additional Provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28.2Utilization
    
    
    (1.1
    )
    
    
    (0.7
    )
    
    
    (3.9
    )
    
    
    
    
    
    
    (55.4
    )Revision of Estimate
    
    
    
    
    
    
    
    
    
    
    (7.0
    )
    
    
    
    
    
    
    (14.3
    )Balance, December 31, 2002
    
    
    
    
    
    
    4.5
    
    
    
    6.1
    
    
    
    
    
    
    
    13.8Additional Provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.1Utilization
    
    
    
    
    
    
    (0.4
    )
    
    
    (3.0
    )
    
    
    
    
    
    
    (14.4
    )Revision of Estimate
    
    
    
    
    
    
    (2.1
    )
    
    
    (0.2
    )
    
    
    
    
    
    
    Balance, December 31, 2003
    
    
    
    
    
    
    2.0
    
    
    
    2.9
    
    
    
    
    
    
    
    7.5Additional Provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.2Utilization
    
    
    
    
    
    
    (0.4
    )
    
    
    (2.3
    )
    
    
    
    
    
    
    (2.6
    )Revision of Estimate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2004
    
    $
    
    
    
    $
    1.6
    
    
    $
    0.6
    
    
    
    
    
    
    $
    7.1
 Valuation Allowance- Deferred Tax Assets DESCRIPTION
    
    TOTALBalance, December 31, 2001
    
    
    16.2Additions
    
    
    31.9Deductions
    
    
    Balance, December 31, 2002
    
    
    48.1Additions
    
    
    36.2Deletions
    
    
    (24.2
    )Balance, December 31, 2003
    
    
    60.1Additions
    
    
    256.3Deletions
    
    
    (9.6
    )Balance, December 31, 2004
    
    $
    306.8




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##### Table of Contents



(KPMG LOGO) KPMG Cardenas Dosal
    
    Telefono: +01 (81) 81 22 18 18Oficinas en el Parque Torre II
    
    Fax: +01 (81) 83 33 05 32Blvd. Diaz Ordaz Pte. 140
    
    www.kpmg.com.mxPisos 16 y 17 Col. Santa Maria64650 Monterrey, N.L.
 Report of Independent Registered Public Accounting Firm The Board of Managers Metalsa, S. de R.L. We have audited the accompanying consolidated balance sheets of Metalsa, S. de R.L. and
subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements
of earnings, comprehensive income, and cash flows for each of the years then ended.
These consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Metalsa, S. de R.L. and
subsidiaries as of December 31, 2004 and 2003, and the results of their operations and
their cash flows for the years then ended, in conformity with U.S. generally accepted
accounting principles. (-s- Luis A. Carrero Roman)
Luis A. Carrero Román KPMG
Cárdenas Dosal, S.C. Monterrey, N.L., Mexico March 18, 2005 Aguascalientes, Ags.Ciudad Juárez,Chih.
    
    México, D.F.Culiacán, Sin.
    
    Monterrey, N.L.Chihuahua, Chih.
    
    Puebla, Pue.Guadalajara, Jal.
    
    Querétaro, Qro.Hermosillo, Son.
    
    Reynosa, Tamps.Mérida, Yuc.
    
    Tijuana, B.C.Mexicali, B.C.
    
    Toluca, Edo. de Mex.




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##### Table of Contents



METALSA, S. DE R.L. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2004 and 2003 (Thousands of US dollars) 2004
    
    
    2003AssetsCurrent assets:Cash (includes cash equivalents for $11,260 in 2004
and $9,104 in 2003)
    
    $
    12,789
    
    
    
    12,772Accounts receivable (note 6)
    
    
    92,656
    
    
    
    40,166Inventories (note 7)
    
    
    38,094
    
    
    
    29,833Other current assets (note 8)
    
    
    1,525
    
    
    
    2,833Deferred income taxes (note 18)
    
    
    2,767
    
    
    
    1,467Deferred employees statutory profit sharing (note 18)
    
    
    24
    
    
    
    Total current assets
    
    
    147,855
    
    
    
    87,071Spare parts
    
    
    4,960
    
    
    
    2,370Goodwill, net (note 9)
    
    
    12,809
    
    
    
    12,809Property, plant and equipment, net (note 10)
    
    
    319,117
    
    
    
    314,214Deferred income taxes (note 18)
    
    
    8,767
    
    
    
    14,609Other non-current assets, net (notes 11)
    
    
    8,656
    
    
    
    7,610$
    502,164
    
    
    
    438,683Liabilities and Partners EquityCurrent liabilities:Current installments of long-term debt (note 12)
    
    $
    13,299
    
    
    
    399Current installments of obligations under capital leases (note 13)
    
    
    84
    
    
    
    Accounts payable and accrued liabilities (note 14)
    
    
    80,892
    
    
    
    52,230Deferred employees statutory profit sharing (note 18)
    
    
    
    
    
    
    1,800Total current liabilities
    
    
    94,275
    
    
    
    54,429Long-term debt, excluding current installments (note 12)
    
    
    141,894
    
    
    
    144,521Obligations under capital leases (note 13)
    
    
    260
    
    
    
    Deferred income taxes (note 18)
    
    
    12,216
    
    
    
    9,470Deferred employees statutory profit sharing (note 18)
    
    
    4,596
    
    
    
    4,650Deferred credit (note 15)
    
    
    22,819
    
    
    
    30,635Other long-term liabilities (note 16)
    
    
    2,839
    
    
    
    2,812Accrued seniority premium and severance liability
    
    
    4,069
    
    
    
    3,595Total liabilities
    
    
    282,968
    
    
    
    250,112Partners equity (note 17):Capital shares
    
    
    12,718
    
    
    
    12,718Additional paid-in capital
    
    
    63,705
    
    
    
    63,705Retained earnings
    
    
    142,773
    
    
    
    112,148Total partners equity
    
    
    219,196
    
    
    
    188,571Contingencies and commitments (note 21)$
    502,164
    
    
    
    438,683
 See accompanying notes to consolidated financial statements.




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METALSA, S. DE R.L. AND SUBSIDIARIES Consolidated Statements of Earnings Years ended December 31, 2004, 2003 and 2002 (Thousands of US dollars, except per share amounts) Unaudited2004
    
    
    2003
    
    
    2002Net sales (notes 5 and 6)
    
    $
    435,465
    
    
    
    309,529
    
    
    
    367,042Cost of sales
    
    
    341,146
    
    
    
    245,591
    
    
    
    271,225Gross profit
    
    
    94,319
    
    
    
    63,938
    
    
    
    95,817Selling, general and administrative expenses (note 5)
    
    
    47,665
    
    
    
    39,361
    
    
    
    31,930Launching cost (note 1)
    
    
    3,766
    
    
    
    1,205
    
    
    
    Operating income
    
    
    42,888
    
    
    
    23,372
    
    
    
    63,887Other income (expenses):Interest expense
    
    
    (6,163
    )
    
    
    (7,353
    )
    
    
    (6,429
    )Interest income
    
    
    857
    
    
    
    577
    
    
    
    71Translation gain
    
    
    2,665
    
    
    
    1,408
    
    
    
    1,597Other, net (note 2s)
    
    
    (912
    )
    
    
    4,344
    
    
    
    (7,755
    )Earnings before income taxes
    
    
    39,335
    
    
    
    22,348
    
    
    
    51,371Income taxes (note 18)Current
    
    
    5,698
    
    
    
    5,107
    
    
    
    6,604Deferred
    
    
    (946
    )
    
    
    1,446
    
    
    
    12,0794,752
    
    
    
    6,553
    
    
    
    18,683Net earnings
    
    $
    34,583
    
    
    
    15,795
    
    
    
    32,688Basic and diluted earnings per share
    
    $
    4.66
    
    
    
    2.13
    
    
    
    4.40
 See accompanying notes to consolidated financial statements.




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METALSA, S. DE R.L. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Years ended of December 31, 2004, 2003 and 2002 (Thousands of US dollars) Additional
    
    
    
    
    
    
    TotalCapital
    
    
    paid-in
    
    
    Retained
    
    
    partnersshares
    
    
    capital
    
    
    earnings
    
    
    equityBalances at December 31, 2001 (unaudited)
    
    $
    12,718
    
    
    
    63,519
    
    
    
    71,665
    
    
    
    147,902Net earnings
    
    
    
    
    
    
    
    
    
    
    32,688
    
    
    
    32,688Balances at December 31, 2002 (unaudited)
    
    
    12,718
    
    
    
    63,519
    
    
    
    104,353
    
    
    
    180,590Dividends paid (note 17b)
    
    
    
    
    
    
    
    
    
    
    (8,000
    )
    
    
    (8,000
    )Donated capital, net of $114 of income taxes
    
    
    
    
    
    
    186
    
    
    
    
    
    
    
    186Net earnings
    
    
    
    
    
    
    
    
    
    
    15,795
    
    
    
    15,795Balances at December 31, 2003
    
    
    12,718
    
    
    
    63,705
    
    
    
    112,148
    
    
    
    188,571Dividends paid (note 17b)
    
    
    
    
    
    
    
    
    
    
    (4,700
    )
    
    
    (4,700
    )Derivative financial Instruments, net of
income taxes (note 4)
    
    
    
    
    
    
    
    
    
    
    742
    
    
    
    742Net earnings
    
    
    
    
    
    
    
    
    
    
    34,583
    
    
    
    34,583Balances at December 31, 2004
    
    $
    12,718
    
    
    
    63,705
    
    
    
    142,773
    
    
    
    219,196
 See accompanying notes to consolidated financial statements.




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METALSA, S. DE R.L. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended of December 31, 2004, 2003 and 2002 (Thousands US dollars) (Unaudited)2004
    
    
    2003
    
    
    2002Net cash provided by (used in) operating activities (note 20)
    
    $
    33,652
    
    
    
    43,360
    
    
    
    50,132Cash flows from investing activities:Acquisition of property, plant and equipment, including interest
Capitalized
    
    
    (36,583
    )
    
    
    (47,090
    )
    
    
    (33,275
    )Change in other non-current assets, net
    
    
    (2,625
    )
    
    
    (5,483
    )
    
    
    (10,730
    )Acquisition of subsidiary
    
    
    
    
    
    
    (8,852
    )
    
    
    10,362Net cash used in investing activities
    
    
    (39,208
    )
    
    
    (61,425
    )
    
    
    (33,643
    )Cash flows from financing activities:Dividends paid
    
    
    (4,700
    )
    
    
    (8,000
    )
    
    
    Proceeds from long-term debt
    
    
    10,273
    
    
    
    
    
    
    
    Principal payments on long-term debt
    
    
    
    
    
    
    (5,080
    )
    
    
    (2,096
    )Net cash provided by (used in) financing activities
    
    
    5,573
    
    
    
    (13,080
    )
    
    
    (2,096
    )Net increase (decrease) in cash and cash equivalents
    
    
    17
    
    
    
    (31,145
    )
    
    
    14,393Cash and cash equivalents at beginning of year
    
    
    12,772
    
    
    
    43,917
    
    
    
    29,524Cash and cash equivalents at end of year
    
    $
    12,789
    
    
    
    12,772
    
    
    
    43,917Supplemental disclosure of cash flow information:Interest paid (net of amounts capitalized)
    
    $
    3,921
    
    
    
    4,002
    
    
    
    5,160Income taxes paid (net of refunds received)
    
    $
    6,009
    
    
    
    5,525
    
    
    
    8,747Noncash investing and financing activities:Capital lease obligations incurred for equipment under
capital lease
    
    
    414
    
    
    
    
    
    
    
    Machinery and equipment purchases included in accrued
expenses
    
    
    
    
    
    
    2,707
    
    
    
    Additional consideration payable allocated to goodwill
    
    
    
    
    
    
    1,903
    
    
    
    Receipt of parcel of land recorded as donated capital, net
of deferred taxes
    
    
    
    
    
    
    186
    
    
    
    
 See accompanying notes to consolidated financial statements.




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METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  (1)
    
    Company activity and salient eventsActivityThe Company is engaged in the manufacturing and sale of frames (chassises), heavy truck side
rails, fuel tanks, and steel stamped parts for the automotive industry, mainly to the North
America Free Trade Agreement (NAFTA) market. Companys partners are Promotora de Empresas
Zano, S. A. de C. V. (Proeza) 60% and Tower Automotive Mexico, S. de R. L., de C.V. (Tower)
40%. There are three facilities, Apodaca and San Luis Potosí in México and the other in
Virginia USA.(2)
    
    Summary of significant accounting policiesThe accounting policies and practices followed by the Company in the preparation of these
consolidated financial statements are described below:  a)
    
    Basis of translationThe functional currency of the Company and all its subsidiaries has been defined as the
U.S. dollar in accordance with the SFAS No. 52 Foreign Currency Translation criteria.
Therefore, monetary assets and liabilities are translated at the current exchange rate in
effect at the end of the fiscal period, non-monetary assets and partners equity are
remeasured at the historical exchange rate and revenue and expense accounts at the average
rates that prevailed during the period, as applicable. Translation adjustments, including
those related to income taxes, are recorded as translation gain or loss in the
accompanying consolidated statements of earnings.b)
    
    Basis of presentationThe accompanying consolidated financial statements were prepared in accordance with
generally accepted accounting principles in United States (US GAAP), and are expressed in
US dollars.The accounting records of the Mexican companies are kept in Mexican pesos and in
accordance with generally accepted accounting principles in Mexico (Mexican GAAP).
Mexican GAAP vary in certain significant respects from generally accepted accounting
principles in the United States of America (U.S. GAAP) and therefore, the financial
statements of the company and its subsidiaries include certain adjustments to present
them in accordance to U.S. GAAP and in U.S. dollars.c)
    
    Principles of consolidationThe consolidated financial statements includes the financial statements of Metalsa, S. de
R.L. and its subsidiaries: Metalsa-Roanoke, Inc., Tecnología Aplicada en Procesos, S. de
R.L. and Metalsa Servicios, S. de R.L., in which the Company holds a 100% interest and
has control. All significant intercompany balances and transactions have been eliminated
in consolidation.




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2 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  d)
    
    Cash and cash equivalentsCash and cash equivalents consist of deposits in bank accounts, overnight repurchase
agreements and other fixed interest instruments of immediate realization with an initial
term of less than three months. For purposes of the statements of cash flows, the
Company considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.e)
    
    InventoriesInventories are valued at the lower of standard cost, which approximates cost determined
using the first-in, first-out method, or market.Long-term spare parts inventory consist of spare and replacement parts that are critical
in the operations of plant and equipment. The spare parts are recorded at cost and are
expensed when used. The Company performs an evaluation of the physical conditions and
future plans in the determination of a reserve for slow moving inventory.f)
    
    GoodwillGoodwill represents the excess of the foreign subsidiary acquisition cost over the fair
value of assets of the business acquired. Goodwill and intangible assets acquired in a
purchase business combination and determined to have an indefinite useful life are not
amortized, but instead tested for impairment at least annually in accordance with the
provisions of FASB Statement No. 142, Goodwill and Other Intangible Assets. Intangible
assets with estimable useful lives are amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in accordance with
FASB Statement No. 144, Accounting for Impairment or Disposal of Long- Lived Assets.
After the evaluation by the Company no impairment loss in 2004, 2003 and 2002 was
determined.g)
    
    Property, plant and equipmentProperty, plant and equipment are stated at historical cost. Plant and equipment under
capital leases are stated at the present value of minimum lease payments. External
direct costs of materials and services consumed in developing or obtaining internal
computer software; payroll and payroll-related costs for employees who are directly
associated with and who devote time to an internal use computer software project, to the
extent of the time spent directly on the project are capitalized. The costs of mayor
improvements are capitalized, while costs of maintenance and repairs, which do not
improve or extend the life of the respective assets, are expensed when incurred.Interest is normally expensed as incurred, except when it is incurred in conjunction with
major capital additions, and then it is capitalized as part of the asset cost. The
amount of interest capitalized is determined by applying current interest rates to the
average amount of accumulated capital expenditures during construction period. Interest
capitalized during the year ended December 31, 2003 and 2004 was $213 and $70,
respectively.In conjunction with Metalsa Roanoke, Inc. major plant expansion during 2003, the Company
received from Boteturt County, Virginia a parcel of land contiguous to the then existing
facility with a fair value in excess of cash paid by the Company totaling $300. This
amount was recorded in land and as donated capital, net of income taxes of $114, at the
date of donation.Depreciation and amortization is calculated primarily using the straight-line method
according to the useful life of the asset determined by Companys management as indicated
in note 10.




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3 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  h)
    
    Other non-current assetOther non-current assets are recorded at cost and represent primarily intangible assets
with defined lives. Amortization expenses are calculated on the straight-line method over
the respective useful lives, except deferred financing costs which are being amortized
under the interest method. For the years ended December 31, 2004, 2003 and 2002,
interest expense included $353, $340 and $340, respectively, of amortization of deferred
financing costs. For the year ended December 31, 2003, interest expense includes $1,257
of deferred financing costs written of as a result of the refinancing of the related debt
(see note 12).i)
    
    Derivative financial instrumentsThe Company accounts for derivatives and hedging activities in accordance with FASB
Statement No. 133, Accounting for Derivative Instruments and Certain Hedging Activities,
as amended, which requires that all derivative instruments be recorded on the balance
sheet at their respective fair values.On the date that a derivative contract is entered into, the Company designates the
derivative as either a hedge of the fair value of a recognized asset or liability or of an
unrecognized firm commitment (fair value hedge), a hedge of a forecasted transaction or
the variability of cash flows to be received or paid related to a recognized asset or
liability (cash flow hedge), a foreign-currency fair-value or cash-flow hedge (foreign
currency hedge). For all hedging relationships the Company formally documents the hedging
relationship and its risk-management objective and strategy for undertaking the hedge, the
hedging instrument, the item, the nature of the risk being hedged, how the hedging
instruments effectiveness in offsetting the hedged risk will be assessed, and a
description of the method of measuring ineffectiveness. The Company also formally
assesses, both at the hedges inception and on an ongoing basis, whether the derivatives
that are used in hedging transactions are highly effective in offsetting changes in fair
values. Changes in the fair value of a derivative that is highly effective and that is
designated and qualifies as a cash-flow hedge are recorded in other comprehensive income
to the extent that the derivative is effective as a hedge, until earnings are affected by
the variability in cash flows of the designated hedged item.The Company enters into agreements to manage certain exposures to fluctuations in interest
rates and currency exchange rates. Interest-rate contracts generally involve the exchange
of floating interest rate for fixed and floating interest rate payments without the
exchange of the underlying principal. Net amounts paid or received are reflected as
adjustments to interest expense.The Company discontinues hedge accounting prospectively when it is determined that the
derivative is no longer effective in offsetting changes cash flows of the hedged item, the
derivative expires or is sold, terminated, or exercised, the derivative is dedesignated as
a hedging instrument, because it is unlikely that a forecasted transaction will occur, a
hedged firm commitment no longer meets the definition of a firm commitment, or management
determines that designation of the derivative as a hedging instrument is no longer
appropriate. When hedge accounting is discontinued because it is probable that a
forecasted transaction will not occur, the Company continues to carry the derivative on
the balance sheet at its fair value with subsequent changes in fair value included in
earnings, and
gains and losses that were accumulated in other comprehensive income are recognized
immediately in earnings. In all other situations in which hedge accounting is
discontinued, the Company continues to carry the derivative at its fair value on the
balance sheet and recognizes any subsequent changes in its fair value in earnings.




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4 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  j)
    
    Seniority Premium and other postemployment benefitsThe accumulated seniority premium benefits and postemployment benefits liability, to
which the Mexican operations workers are entitled by the Mexican Labor Law are recognized
in the results of each period, based on actuarial calculations of the present value of
this liability. The amortization of prior years service cost, which has not been
recognized, is based on the estimated personnel service life. As of December 31, 2004 and
2003, the estimated service life of employees entitled to the plan benefits is
approximately 5.5 years.k)
    
    Deferred creditDeferred credit arose from the acquisition in 2003 of future tax benefits. The Company
accounts for this transaction in accordance with EITF 98-11 Accounting for Acquired
Temporary Differences in Certain Purchase Transactionsthat are not accounted for a
Business Combinations, which requires that the difference between the amount paid and the
future tax benefit be amortized to income tax expense in proportion to the realization of
the tax benefits that give rise to the deferred credit (see note 15).l)
    
    Income tax (IT), business asset tax (BAT) and employee statutory profit sharing
(ESPS)IT and ESPS are accounted for under the asset and liability method. Deferred taxes are
recognized (assets and liabilities) for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the enactment
date. ESPS (current and deferred) is only provided for Mexican companies with employees
and is recorded as part of the selling, general & administrative expenses.Because the Company uses the US dollar as the functional currency for its Mexican
operations, no deferred IT and ESPS are provided for the difference between the foreign
currency equivalent of the US dollar cost and the indexed tax basis of the non monetary
assets and liabilities.m)
    
    Capital shares and additional paid-in capitalCapital shares and additional paid-in capital were converted at the historical exchange
rate at the date of the contributions if made in Mexican pesos or at the US dollar value
if the contribution was made in dollars.




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5 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  n)
    
    Revenue recognitionThe Company recognizes revenue when the products are shipped and the customer takes
ownership and assumes the risk of loss, collection of the relevant receivable is
probable, persuasive evidence of an arrangement exists and the sales price is fixed or
determinable. The Company records the necessary provisions to recognize sales
commissions, refunds and discounts at the time the related revenue is recognized, which
are deducted from sales or recognized as sales expense, as determined by the
circumstances.Revenue from separately priced engineering services and tooling contracts is recorded
when the project reaches the milestones contractually established and the purchase order
from the customer is obtained, which is similar to percentage of completion. If the
Company has a contractual right to bill its customers, costs incurred in connection with
the design and development of tooling are carried as component of current accounts
receivable. A loss is recognized if the Company forecasts that the amount of capitalized
tooling and engineering services exceeds the amount to be realized.Revenue and cost of sales, including amounts attributable to separately priced
engineering and tooling contracts, are presented on a gross basis in the consolidated
statement of earnings because the Company is acting as principal and is subject to
significant risks and rewards in connection with the process of bringing the product to
its final state. For the years ended December 31, 2004, 2003 and 2002, revenues from
tooling contracts amounted to $44,111, $24,308 and $36,494, respectively.o)
    
    Trade accounts receivable and concentration of credit riskThe Company made net sales to four clients that represent approximately 80%, 87% and 80%
of total net sales during 2004, 2003 and 2002, respectively. These clients accounts
receivable balances as of December 31, 2004 and 2003 represent approximately 70% and 80%
of total accounts receivable, respectively. The Company records the necessary reserves
for losses in the recovery of accounts receivable based on management analysis and
estimates.Beginning in 2004, the Company acquires a substantial portion of the steel to be used by
the Company for certain customer models directly from those customers. As a result, the
Company has minimal exposure to changes in steel prices for parts supplied to these
customers, which collectively represented 43 percent of the Companys revenues in 2004.p)
    
    Commitments and contingenciesSignificant obligations or losses related to contingencies are recorded when it is
probable that a liability has been incurred and the amount of the assessment and/or
remediation can be reasonably estimated. If these reasonable elements do not exist,
their qualitative disclosure is included in the notes to the consolidated financial
statements. Contingent income, earnings or assets are recognized when there is almost
absolute certainty of their realization.




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##### Table of Contents



6 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  q)
    
    Impairment of property, plant and equipment, goodwill and other non-current assetsIn accordance with Statement 144, long-lived assets, such as property, plant, and
equipment, and purchased intangibles subject to amortization, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by which the
carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of
would be separately presented in the balance sheet and reported at the lower of the
carrying amount or fair value less costs to sell, and are no longer depreciated. The
assets and liabilities of a disposal group classified as held for sale would be presented
separately in the appropriate asset and liability sections of the balance sheet.Goodwill is tested annually for impairment, and is tested for impairment more frequently
if events and circumstances indicate that the asset might be impaired. An impairment
loss is recognized to the extent that the carrying amount exceeds the assets fair
value. This determination is made at the reporting unit level and consists of two steps.
First, the Company determines the fair value of a reporting unit and compares it to its
carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair
value, an impairment loss is recognized for any excess of the carrying amount of the
reporting units goodwill over the implied fair value of that goodwill. The implied fair
value of goodwill is determined by allocating the fair value of the reporting unit in a
manner similar to a purchase price allocation, in accordance with FASB Statement No.
141, Business Combinations. The residual fair value after this allocation is the implied
fair value of the reporting unit goodwill.  r)
    
    Use of estimatesThe preparation of consolidated financial statements requires management of the Company
to make a number of estimates and assumptions relating to the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Significant items subject to such estimates and assumptions include
the carrying amount of property, plant and equipment; valuation allowances for
receivables, inventories and deferred income tax assets; valuation of financial
instruments; and assets and obligations related to employee benefits. Actual results
could differ from those estimates and assumptions.  s)
    
    Other, netFor the years ended December 31, 2004, 2003 and 2002 other expenses include the
following: (Unaudited)2004
    
    
    2003
    
    
    2002Loss on disposition of fixed assets
    
    $
    
    
    
    
    
    
    
    
    (3,096
    )Disallowed value added tax
    
    
    (500
    )
    
    
    
    
    
    
    Legal expenses
    
    
    (23
    )
    
    
    (759
    )
    
    
    (1,690
    )Other
    
    
    (389
    )
    
    
    5,103
    
    
    
    (2,969
    )$
    (912
    )
    
    
    4,344
    
    
    
    (7,755
    )




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7 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  t)
    
    Product warrantiesThe Company generally warrants its products against certain manufacturing and other
defects in material and workmanship. These product warranties are provided for specific
periods of time and are applicable assuming the product has not been subjected to misuse,
improper installation, and negligence or shipping damage. As of December 31, 2004 and
2003, the Company had no accrual for estimated product warranty claims and there was no
warranty claims expense for the years ended December 31, 2004, 2003 and 2002.  u)
    
    Preproduction costsThe Company follows the provisions of Emerging Issues Task Force (EITF) Issue No. 99-5,
Accounting for Pre-production Costs Related to Long-Term Supply Arrangements, that
requires all pre-production tooling costs incurred for tools that the Company will not
own be expensed as incurred, unless the supply agreement provides the supplier with the
noncancellable right to use the tools or the reimbursement costs is contractually
guaranteed by the customer. At December 31, 2004 and 2003, $7,076 and $4,941 were
included as part of accounts receivable as reimbursable costs.  v)
    
    Earnings per shareBasic and diluted earnings per share are computed by dividing net income by the
weighted-average number of capital shares outstanding for the period. Weighted-average
number of shares outstanding during the years ended December 31, 2004, 2003 and 2002
amounted to 7,423 million shares.  (3)
    
    Exchange rate and position in Mexican pesosThe amounts shown in this note are expressed in thousands of Mexican pesos. The Mexican peso
exchange rates as of December 31, 2004 and 2003, was $0.0888 and $0.0890, respectively. At
March 18, 2005, the exchange rate is approximately $0.0891.The foreign currency assets and liabilities held as of December 31, 2004 and 2003, are as
follows: 2004
    
    
    2003Current assets
    
    $
    404,924
    
    
    
    141,638Less:Current liabilities
    
    
    (324,615
    )
    
    
    (196,855
    )Long-term liabilities
    
    
    (599,121
    )
    
    
    (638,310
    )Net liabilities
    
    $
    (518,812
    )
    
    
    (693,527
    )
  (4)
    
    Derivative financial instrumentsThe Company uses both interest-rate-related derivative instruments (Interest Rate Swaps or
IRS) to manage its exposure on its debt obligations. The Company does not enter into
derivative instruments for any purpose other than cash-flow-hedging purposes. That is, the
Company does not speculate using derivative instruments.




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##### Table of Contents



8   METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  By using derivative financial instruments to hedge exposures to changes in interest rates, the
Company exposes itself to credit risk and market risk. Credit risk is the failure of the
counterparty to perform under the terms of the derivative contract. When the fair value of a
derivative contract is positive, the counterparty owes the Company, which creates credit risk
for the Company. When the fair value of a derivative contract is negative, the Company owes
the counterparty and, therefore, it does not possess credit risk. The Company minimizes the
credit risk in derivative instruments by entering into transactions with high-quality domestic
financial counterparties. Market risk is the adverse effect on the value of a financial
instrument that results from a change in interest rates.The Company uses variable-rate USD debt to finance its operations. The debt obligations expose
the Company to variability in interest payments due to changes in interest rates. Management
believes that it is prudent to limit the variability of total of its interest payments. To
meet this objective, management enters into interest rate swap agreements to manage
fluctuations in cash flows resulting from interest rate risk. These swaps change the
variable-rate cash flow exposure on the debt issuance obligations to fixed cash flows. Under
the terms of the interest rate swaps, the Company receives variable interest rate payments and
makes fixed interest rate payments, thereby creating the equivalent (synthetic) of fixed-rate
debt.As of December 31, 2004 and 2003, Metalsa had the following interest rate contracts
outstanding:  
    
    For the years ended December 31, 2004 and 2003, the Company has an
amortizing interest rate swap contract related to Metalsas long-term debt which was not
designated as a hedge. The swap converts $24.75 million dollars notional amount from
variable rate (LIBOR 3M) to fixed rate (4.3%). The Company has estimated losses of
approximately $318 and $936, for 2004 and 2003, respectively to account for its fair
market value. As a result of the fair market value for the interest rate swap a $618
benefit was recorded as a reduction of the interest expense during 2004 and as interest
expense of $900 for 2003.
    
    During 2004, the Company entered into an amortizing interest rate swap
contract related to Metalsas long-term debt. The swap converts 50 million dollars
notional from variable rate (LIBOR 3M) to fixed rate (2.6%). The Company designated the
financial instrument as a cash flow hedge and recorded approximately $1.232 million as a
result of the fair market value for the swap at the balance sheet date, as a part of the
comprehensive income within the partners equity and other non-current assets. The
deferred IT effect of this transaction amounted to approximately $370. No hedge ineffectiveness on cash flow hedges was recognized during 2004. During 2005, the
Company estimates that an additional $142 will be reclassified from Other Comprehensive Income
as a decrease in interest expense. During 2003 the Company had currency exchange forward contracts. The purpose of Metalsas
currency strategy is to reduce the exposure that the Company has to Mexican pesos exchange
rate due to the outflows in such currency. The Company enters into currency exchange forward
contracts to hedge part of its anticipated working capital expenses, such as salaries and
wages, in Mexican pesos. These contracts cover periods, generally within nine months, and
are negotiated with carefully selected banks. At December 31, 2004, there are no currency
exchange forward contracts.




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9 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars) Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable,
accrued expenses, long-term debt and deposits approximate their fair value due to the
short-term nature and maturities of these assets and liabilities.  (5)
    
    Related partiesAt December 31, 2004 and 2003, the balances and transactions with related parties are as
follows: (a) Due from 2004
    
    
    2003Proeza Grede S. de R.L. de C.V.
    
    
    734
    
    
    
    Tower, Inc.
    
    
    636
    
    
    
    Others
    
    
    341
    
    
    
    99$
    1,711
    
    
    
    99(b) Due toPromotora de Empresas Zano, S.A. de C.V.
    
    $
    5,332
    
    
    
    5,082Tower Automotive, Inc.
    
    
    2,429
    
    
    
    4,953Proeza, S.A. de C.V.
    
    
    765
    
    
    
    Others
    
    
    326
    
    
    
    548$
    8,852
    
    
    
    10,583
  (c)
    
    Related party transactionsThe transactions carried out during the years ended December 31, 2004, 2003 and 2002,
with related parties are as follows: (Unaudited)2004
    
    
    2003
    
    
    2002Sales
    
    $
    1,666
    
    
    
    2,001
    
    
    
    4,551Purchases
    
    $
    7,541
    
    
    
    9,709
    
    
    
    10,002Service and technical assistance
    
    $
    16,722
    
    
    
    12,408
    
    
    
    16,282
 The Company has a contract with its parent companies Proeza (3.6%) and Tower (1.5%),
whereby it agrees to pay for administrative services and technical assistance provided,
respectively. The amount to be paid for these services is determined, based on a
percentage of sales, amounted to $16,722, $12,408 and $16,282 for 2004, 2003 and 2002,
respectively. The Company agreed with Tower and Proeza to pay amounts due under this contract for 2001
over the following six years on a monthly basis; however this amount can be paid in full
at any time. The amount being paid on a monthly basis to Tower is approximately $58 and
to Proeza is $112. The unpaid balance as of December 2004 and 2003 to Tower amounts to
$1,702 and $2,398, respectively and to Proeza amounts to $2,553 and $3,897, respectively.




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10 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  (6)
    
    Accounts receivableAt December 31, 2004 and 2003, accounts receivable are as follows: 2004
    
    
    2003Trade
    
    $
    69,011
    
    
    
    28,134Advances for taxes and other accounts receivable
    
    
    11,002
    
    
    
    5,483Receivable from tools and dies projects
    
    
    11,138
    
    
    
    6,581Related parties (note 5)
    
    
    1,711
    
    
    
    9992,862
    
    
    
    40,297Less allowance for doubtful accounts
    
    
    206
    
    
    
    131$
    92,656
    
    
    
    40,166
 For the years ended December 31, 2004, 2003 and 2002, the net sales include $45,928, $24,422
and $35,972 of revenue from tools and dies projects, respectively. At December 31, 2004, 2003
and 2002, the unbilled portion for tools and dies projects amounts to $7,076, $4,941 and
$7,305, respectively. A summary of the changes in the allowance for doubtful accounts for the years ended December
31, 2004, 2003 and 2002 is as follows: Balancesat
    
    
    
    
    
    
    
    
    
    
    Balancesbeginning
    
    
    Charges to
    
    
    
    
    
    
    at end ofDescription
    
    of period
    
    
    expense
    
    
    Write-off
    
    
    yearYear ended:December 31, 2002 (unaudited)
    
    $
    
    
    
    
    429
    
    
    
    (52
    )
    
    $
    377December 31, 2003
    
    $
    377
    
    
    
    (246
    )
    
    
    
    
    
    $
    131December 31, 2004
    
    $
    131
    
    
    
    348
    
    
    
    (273
    )
    
    $
    206
  (7)
    
    InventoriesAt December 31, 2004 and 2003, inventories consist of: 2004
    
    
    2003Raw material
    
    $
    14,343
    
    
    
    9,895Work-in process
    
    
    9,464
    
    
    
    6,823Finished goods
    
    
    7,275
    
    
    
    5,016Spare parts and materials in-transit
    
    
    7,852
    
    
    
    8,12338,934
    
    
    
    29,857Less allowance for obsolescence and
slow moving
    
    
    840
    
    
    
    24$
    38,094
    
    
    
    29,833




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##### Table of Contents



11 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  (8)
    
    Other current assetsAt December 31, 2004 and 2003, other current assets are as follows: 2004
    
    
    2003Refundable taxes
    
    $
    657
    
    
    
    654Prepaid insurance
    
    
    544
    
    
    
    652Notes receivable
    
    
    
    
    
    
    457Other
    
    
    324
    
    
    
    1,070$
    1,525
    
    
    
    2,833
  (9)
    
    GoodwillThe changes in the carrying amount of goodwill for the years ended December 31, 2004 and 2003
are as follows: Balance as of December 31, 2002 (unaudited)
    
    $
    10,906Goodwill acquired during the year
    
    
    1,903Balance as of December 31, 2003
    
    
    12,809Changes during the year
    
    
    Balance as of December 31, 2004
    
    $
    12,809
 Through December 31, 2003, Metalsa Roanoke Inc. was contingently liable for additional cash
consideration should the Metalsa Roanoke Inc operating results, as defined, exceed certain
targeted levels. As of December 31, 2003, the outcome of this contingency arising from the
original acquisition of the business in December 2000 was determined. Accordingly, at December
31, 2003 the Company accrued additional consideration payable of $1,903 and allocated the
additional cost to goodwill. This additional consideration was paid to the seller during the
year ended at December 31, 2004.  (10)
    
    Property, plant and equipmentAt December 31, 2004 and 2003, the investment in property, plant and equipment is analyzed as
follows: Depreciation2004
    
    
    2003
    
    
    RatesLand
    
    $
    1,339
    
    
    
    1,339Building
    
    
    81,536
    
    
    
    77,719
    
    
    
    2.9
    %Plant and equipment
    
    
    364,142
    
    
    
    341,009
    
    
    
    9
    %Transportation equipment
    
    
    737
    
    
    
    474
    
    
    
    33
    %Furniture and fixtures
    
    
    6,944
    
    
    
    6,455
    
    
    
    17
    %Computer equipment
    
    
    7,150
    
    
    
    6,893
    
    
    
    50
    %Tools and dies
    
    
    1,565
    
    
    
    1,500
    
    
    
    20
    %Construction in progress
    
    
    18,839
    
    
    
    11,992
    
    
    
    482,252
    
    
    
    447,381Less accumulated depreciation
    
    
    163,135
    
    
    
    133,167$
    319,117
    
    
    
    314,214




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12 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars) Property, plant and equipment include capitalized interest of $4,101 net of accumulated
amortization, of which $70 was capitalized during 2004 and $212 was capitalized in 2003.  (11)
    
    Other non-current assetsAt December 31, 2004 and 2003, other non-current assets are integrated as follows: 2004
    
    
    2003Software
    
    $
    8,684
    
    
    
    6,641Deferred financing cost
    
    
    1,181
    
    
    
    1,184Derivative financial instruments (note 4)
    
    
    1,232
    
    
    
    Others
    
    
    528
    
    
    
    47411,625
    
    
    
    8,299Less accumulated amortization
    
    
    2,969
    
    
    
    689$
    8,656
    
    
    
    7,610
  (12)
    
    Long-term debt and bank loansAt December 31, 2004 and 2003, long-term debt is as follows: 2004
    
    
    2003a) Syndicated credit contract payable in
semiannual principal installments
    
    $
    150,000
    
    
    
    140,000b) ECA premium credit contract to EUR 5.2 in 2004
and 4.9 in 2003
    
    
    5,193
    
    
    
    4,920Less current installments of long-term debt
    
    
    13,299
    
    
    
    399Long-term debt, net
    
    $
    141,894
    
    
    
    144,521
  a)
    
    During 2003, the Company and Metalsa Roanoke refinanced its long-term debt.
Through this refinancing they obtained a $150 million Dual Tranche Syndicated Facility
(the facility). The facility has two tranches, A and B. Tranche A is a $125 million
five-year amortizing facility and Tranche B is a $25 million three-year revolving
credit facility. Tranche B has an extension option for and additional year, but such
extension requires the approval of 100% of Tranche B lenders. At December 31, 2004, the
amount outstanding was $150 million.Tranche A has a 24 month grace period, then semi-annual amortizations as follows: 10% in
months 24, 30 and 36; 15% in months 42 and 48 and 20% in months 54 and 60. Tranche B
will be paid in full at maturity (year three).




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13   METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars) The interest rate for the Tranche A is LIBOR plus 125 basis points (bps) for the first two
years, LIBOR plus 137.5 bps for year three and four and LIBOR plus 150 bps for the fifth
year. For Tranche B the interest rate will be LIBOR plus 125 bps for the first two years
and LIBOR plus 150 bps for the third year. The average interest rates during the years
ended December 31, 2004 and 2003 were 2.73% and 2.83%, respectively. The facility imposes certain covenants with which, at December 31, 2004 and 2003, the
Company was in compliance. Also, the Company irrevocably guarantees both tranches.  b)
    
    Additionally, the purchase of two pieces of equipment in 2004 was financed with a
long-term loan for the equivalent in US Dollars of EUR 5.2 million. The loan will be
paid in 14 equal installments over 7 years beginning in 2004 and is secured by the
equipment acquired. The Company and Roanoke irrevocably guarantee this loan. The maturities of long-term debt are as follows: Years ending December 31:2006
    
    $
    50,7992007
    
    
    38,2992008
    
    
    50,7992009 and thereafter
    
    
    1,997$
    141,894
 The Company has contracted several lines of credit for approximately 50 million dollars. As
of December 31, 2004 and 2003, the Company has not used these lines of credit.  (13)
    
    LeasesMetalsa Roanoke is obligated under capital leases covering machinery and equipment that
expire in 2009. These leases generally contain renewal options for periods ranging from three
to five years and require Metalsa Roanoke to pay all executory costs such as maintenance and
insurance.




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14   METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars) Future minimum capital lease payments as of December 31, 2004 are: Year ending December 31:2005
    
    $
    1102006
    
    
    1102007
    
    
    1102008
    
    
    1102009
    
    
    9Total minimum lease payments
    
    
    449Less estimated executory costs
    
    
    (75
    )Net minimum lease payments
    
    
    374Less: amount representing interest (at the rate of 4%)
    
    
    (30
    )Present value of net minimum capital lease
payments
    
    
    344Less current portion of obligations under capital leases
    
    
    (84
    )Obligations under capital leases, excluding
current portion
    
    $
    260
 Rent expense under operating leases during 2004 and 2003 approximated $1.3 million and $1.6
million, respectively.  (14)
    
    Accounts payable and accrued liabilitiesAt December 31, 2004 and 2003, liabilities and accruals are as follows: 2004
    
    
    2003Trade
    
    $
    57,243
    
    
    
    26,064Accounts payable and accrued liabilities
    
    
    14,141
    
    
    
    15,424Related parties (note 5)
    
    
    8,852
    
    
    
    10,583Interest payable
    
    
    656
    
    
    
    159$
    80,892
    
    
    
    52,230
 The Company made purchases of raw material from four suppliers that represented 58%, 53% and
48%of its total purchases made during 2004, 2003 and 2002. The balance of the accounts
payable to this supplier as of December 31, 2004 and 2003 represents 58% and 42% of total
accounts payable, respectively.




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##### Table of Contents



15 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  (15)
    
    Deferred creditAt December 31, 2004 and 2003, the deferred credit balance is as follows: 2004
    
    
    2003Deferred credit
    
    $
    33,661
    
    
    
    33,748Less:Accumulated amortization
    
    
    10,842
    
    
    
    3,113$
    22,819
    
    
    
    30,635
 In 2003, through a subsidiary, the Company paid $6,200 for an entity whose primary asset was
$42,752 of tax loss carryforwards. The difference between the purchase price and the fair
value was recorded as a deferred credit, as required by EITF 98-11 Accounting for Acquired
Temporary Differences in Certain Purchase Transactions That Are Not Accounted for as Business
Combinations. The deferred credit is in Mexican pesos and subject to transaction gain or
(loss), which for the years ended December 31, 2004 and 2003 amounted to $95 and $2,598,
respectively.  (16)
    
    Other long-term liabilitiesOther long-term liabilities represent deferred current tax from years 2000, 2001 and 2002 as
a result of the use the preference tax rate instead of enacted tax rate. This amount will be
paid to the taxing authorities when the Company pays a dividend in excess of predetermined
amount. As of December 31, 2004, $196 was included as a current portion within accrued
liabilities.  (17)
    
    Partners equityThe characteristics of partners equity are as follows:  (a)
    
    Capital shares  
    
    Capital shares represent the capital of the Company, each one representing the
value of the contribution made by the respective partner. Each partner has one
vote for each Mexican peso of contributed capital;
    
    Capital shares can be divided up to four series. Series A must be owned by
individuals or groups of partners that have an affiliates relation, parent, and
subsidiaries and of Mexican nationally whose by-laws have the direct and indirect
exclusion clause for foreign nationals that reside in Mexico as legal residents.
Series B can be subscribed to any person or legal entity;
    
    The capital shares of the Company amounts to $12,718 of Series A and B;
    
    The partners have the first right of refusal to subscribe new shares of each
series held by them whenever an increase in capital is approved.




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##### Table of Contents



16   METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  (b)
    
    Partners equity transactionsIn September 2004, the Company paid dividends of $4.7 million dollars: $2.8 and $1.9 to
Proeza and Tower, respectively.In an Ordinary Partners Meeting held on January 28, 2003, the Companys partners
approved a $10,404 dividend, payable in two installments. The first installment
amounting to $8 million dollars was paid in February 2003 and the remaining was to be
paid during the second half of 2003 if the Company met its financial projections for
2003. The remaining 2004 of the dividend was canceled.In 2004, the Company recognized the provisions of FASB 133, whose effect was $1,232.  (c)
    
    Retained earningsThe principal restrictions to retained earnings are:  1.
    
    The Company is required to maintain a legal reserve as defined in the
Mexican Business Law. At December 31, 2004, the legal reserve is $257.2.
    
    Earnings distributed as dividends in excess of accumulated tax
earnings will be subject to payment of income taxes in accordance with the Mexican
Income Tax Law. At December 31, 2004, no deferred income tax has been recognized
over this excess because it is expected that dividends will be paid free of taxes.  (18)
    
    Income tax (IT), business assets tax (BAT) and employees statutory profit sharing (ESPS)
and deferred taxesThe income tax law in Mexico provides that companies must pay either IT or BAT depending on
which amount is greater with respect to their Mexican operations. Both taxes recognize the
effects of inflation. ESPS is calculated on a similar basis as IT without recognizing the
effects of inflationBAT law establishes a 1.8% tax levy on assets, indexed for inflation in the case of inventory
and property, plant and equipment, after deducting certain liabilities. This same law allows
the use of the net assets balance of the preceding fourth period, updated with NCPI, as the
basis for the calculation of this tax, the option currently being followed by the Company.
BAT levied in excess of IT for the period may be recovered, restated for inflation, in any of
the succeeding ten years, provided that the IT incurred exceeds BAT in such period. At
December 31, 2004 and 2003, there is no BAT available to carry forward.The Company accounts for IT and ESPS under the asset and liability method. As mentioned
below, the deferred income taxes, for its Mexican operations, were calculated assuming a 30%
tax rate for current assets and current liabilities; 29% and 28%, for assets whose tax
effects will be reversed after 2005 and 2006. Also the Company has recorded deferred ESPS at
the statutory rate of 10% for the Mexican company which has employees. Because ESPS is not
considered a tax under US GAAP, the effects of the current and deferred provisions has been
recorded as part of the selling, general and administrative expenses. Deferred income taxes
arising from Metalsa Roanoke, Inc. were calculated using a tax rate of approximately 39%.
This tax rate considers US federal and state taxes.




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17   METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars) Because the Company and its subsidiaries file their income tax returns separately, the income
tax expense represents the combined tax expense of the Company and its subsidiaries. Income
tax expense for the years ended December 31, 2004, 2003 and 2002 is summarized as follows: 2004
    
    
    2003
    
    
    2002(unaudited)Current Mexican taxes
    
    $
    5,678
    
    
    
    5,107
    
    
    
    6,604Current US Federal and state taxes
    
    
    20
    
    
    
    
    
    
    
    Deferred Mexican taxes
    
    
    3,861
    
    
    
    1,362
    
    
    
    8,262Deferred US Federal and state taxes
    
    
    2,898
    
    
    
    3,347
    
    
    
    3,817Amortization of deferred credit
    
    
    (7,705
    )
    
    
    (3,263
    )
    
    
    $
    4,752
    
    
    
    6,553
    
    
    
    18,683
 Pre tax book income for the Mexican operations and its foreign subsidiary for the years ended
December 31, 2004 and 2003 were $31,377, $7,958, $13,209 and $9,139, respectively. During the month of December 2004, the Mexican Congress approved changes to the Income Tax
Law. The main changes and their impact on the Companys financial statements, through the
calculation of deferred IT and ESPS were as follows:  1.
    
    A reduction in the income tax rates from previously approved tax rate of 32% in 2005
to a new tax rate of 30%. Also, for years 2006 and 2007 the tax rates will decrease to
29% and 28%, respectively. The effect of the reduction in the deferred income tax asset
calculation was $668.2.
    
    Beginning on 2005, the purchases of raw materials will no longer be deductible for
tax purposes; instead the deduction will be the cost of sales. The ending inventory
deducted for tax purposes will be repaid through a phase-out period of six years.3.
    
    Beginning on 2006, the Company will be able to deduct for tax purposes the ESPS paid
to its employees. Based upon that change, deferred income tax effects were calculated
over the deferred ESPS balance using the expected income tax rate. The deferred income tax
effect of this change amounted to approximately $985. Income tax expense attributable to income from continuing operations before IT differed from
the amounts computed by applying the Mexican rates of 33% in 2004 and 34% in 2003 to pretax
income from continuing operations, as a result of the following: 2004
    
    
    2003Computed expected tax expense
    
    $
    12,980
    
    
    
    7,598Non-deductible expenses
    
    
    93
    
    
    
    2,332Effects of changes in the income tax law
    
    
    (317
    )
    
    
    Excess of income tax rate of foreign subsidiary
    
    
    254
    
    
    
    Excess of depreciation expense due to exchange rate for
which there is no tax benefit
    
    
    1,720
    
    
    
    1,525Amortization of deferred credit related to acquired
loss carryforwards
    
    
    (7,705
    )
    
    
    (3,263
    )Tax rate differential effects of inflation and other, net
    
    
    (2,273
    )
    
    
    (1,639
    )Actual income tax expense
    
    $
    4,752
    
    
    
    6,553




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18 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars) The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities, as of December 31, 2004 and 2003 for the
Mexican operations, are presented below: 2004
    
    
    2003Deferred tax assets:Allowance for doubtful accounts
    
    $
    27
    
    
    
    41Liability accruals
    
    
    4,049
    
    
    
    3,544Tax loss carryforwards
    
    
    29,756
    
    
    
    36,867Total deferred tax assets
    
    
    33,832
    
    
    
    40,452Deferred tax liabilities:Inventories
    
    
    (5,653
    )
    
    
    (6,563
    )Deferred revenue
    
    
    (2,128
    )
    
    
    (1,630
    )Property, plant, equipment and intangible assets
    
    
    (15,450
    )
    
    
    (17,638
    )Derivative financial instruments
    
    
    (370
    )
    
    
    Total deferred tax liabilities
    
    
    (23,601
    )
    
    
    (25,831
    )Total deferred tax asset, net
    
    $
    10,231
    
    
    
    14,621
 The rollforward for the net deferred IT asset for the years ended December 31, 2004 and 2003
for the Mexican operations is presented below: 2004
    
    
    2003Initial balance of deferred income tax
    
    $
    14,621
    
    
    
    (25,613
    )Deferred IT from acquisition
    
    
    
    
    
    
    42,752Deferred IT of derivate financial instruments
    
    
    (370
    )
    
    
    Deferred IT expense
    
    
    (3,861
    )
    
    
    (1,362
    )Transaction loss
    
    
    (159
    )
    
    
    (1,156
    )Ending balance
    
    $
    10,231
    
    
    
    14,621




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19 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars) The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities, as of December 31, 2004 and 2003 for the
foreign subsidiary operations, are presented below: 2004
    
    
    2003Deferred tax assets:Allowance for doubtful accounts
    
    $
    44
    
    
    
    Tax loss carryforwards
    
    
    2,266
    
    
    
    1,476AMT credit carryforward
    
    
    117
    
    
    
    62Other
    
    
    55
    
    
    
    10Total deferred tax assets
    
    
    2,482
    
    
    
    1,548Deferred tax liabilities:Property, plant and equipment
    
    
    (9,879
    )
    
    
    (8,785
    )Goodwill
    
    
    (3,516
    )
    
    
    (746
    )Other
    
    
    
    
    
    
    (32
    )Total deferred tax liabilities
    
    
    (13,395
    )
    
    
    (9,563
    )Total deferred income tax liabilities, net
    
    $
    (10,913
    )
    
    
    (8,015
    )
 The rollforward for the net deferred IT liability for the years ended December 31, 2004 and
2003 for the foreign subsidiary is presented below: 2004
    
    
    2003Initial balance of deferred income tax
    
    $
    (8,015
    )
    
    
    (4,554
    )Deferred IT in partners equity
    
    
    
    
    
    
    (114
    )Deferred IT expense
    
    
    (2,898
    )
    
    
    (3,347
    )Ending balance
    
    $
    (10,913
    )
    
    
    (8,015
    )
 The tax effect of temporary difference that give rise to significant portions of the deferred
ESPS liability, as of December 31, 2004 and 2003 are presented below: 2004
    
    
    2003Deferred ESPS assets:Allowance for doubtful accounts
    
    $
    9
    
    
    
    13Liability accruals
    
    
    1,095
    
    
    
    1,085Unrealized exchange loss
    
    
    1,144
    
    
    
    1,450Total deferred ESPS assets
    
    
    2,248
    
    
    
    2,548Deferred ESPS liabilities:Inventories
    
    
    215
    
    
    
    (1,983
    )Deferred revenues
    
    
    (710
    )
    
    
    (494
    )Property, plant and equipment
    
    
    (6,202
    )
    
    
    (6,521
    )Derivative financial instruments
    
    
    (123
    )
    
    
    Total deferred ESPS liabilities
    
    
    (6,820
    )
    
    
    (8,998
    )Total deferred ESPS liabilities, net
    
    $
    (4,572
    )
    
    
    (6,450
    )




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##### Table of Contents



20 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars) The rollforward for the net deferred ESPS liability for the years ended December 31, 2004 and
2003 is presented below: ESPS2004
    
    
    2003Initial balance of ESPS liability
    
    $
    (6,450
    )
    
    
    (9,378
    )Deferred ESPS benefit
    
    
    1,982
    
    
    
    2,258Deferred ESPS in partners equity
    
    
    (123
    )
    
    
    Transaction gain
    
    
    19
    
    
    
    670Ending balance
    
    $
    (4,572
    )
    
    
    (6,450
    )
 In assessing the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences become
deductible or tax carryforwards are utilizable. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income, and tax planning strategies in
making this assessment. In order to fully realize the deferred tax asset, the Company will
need to generate future taxable income of approximately $103,450 for its Mexican operation
prior to the expiration of the net operating loss carryforwards in 2011 and $6,700 for its
foreign subsidiary. Taxable income for the years ended December 31, 2004 and 2003 was
approximately $28,600 and $21,900, respectively. Based upon the level of historical taxable
income and projections for future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely than not that the Company will
realize the benefits of these deductible differences and tax carryforwards. The amount of the
deferred tax asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced. At December
31, 2004, the tax loss carryforwards for its Mexican subsidiaries are as follows: HistoricalAmount
    
    

ExpirationYear1996
    
    $
    9,524
    
    
    
    20061997
    
    
    732
    
    
    
    20071998
    
    
    6,281
    
    
    
    20082001
    
    
    86,913
    
    
    
    2011$
    103,450
 At December 31, 2004, Metalsa Roanoke had net loss carryforwards for federal income tax
purposes of approximately $6,700, which are available to offset future taxable income. The
net loss carryforwards will expire in 2023. In addition, the Company has alternative minimum
tax credit carryforwards of $117 which are available to reduce future federal regular income
taxes, if any, over an indefinite period. The Company has not recognized a deferred tax liability of approximately $5,510 for the
undistributed earnings of its foreign operations that arose in 2004 and prior years because
the Company currently does not expect those unremitted earnings to reverse and become taxable
to the Company in the foreseeable future. A deferred tax liability will be recognized when
the Company is no longer able to demonstrate that it plans to permanently reinvest
undistributed earnings. As of December 31, 2004 the undistributed earnings of these
subsidiaries were approximately $18,368.




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##### Table of Contents



21 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars) Since the Mexican peso could potentially decline in value relative to the U.S. dollar, a
translation loss could be realized for the deferred tax assets denominated in Mexican pesos.
Alternatively, translation gain could potentially be realized in future periods in the event
of an increase in the value of the Mexican peso.  (19)
    
    Employee Benefit PlanMetalsa Roanoke, Inc. has a 401(k) investment plan (the Plan) for the benefit of its
employee. Employees are eligible to participate in the Plan in the quarter following their
first 60 days of service. Under the Plan, employees may elect to have up to 16% of their
salary, subject to Internal Revenue Service limitations, withheld on a pretax basis. The
company matches 100% of employees contributions up to 3% of their compensation, then matches
50% of employees contributions up to an additional 2% of their compensation. Metalsa
Roanoke, made matching contributions of approximately $354 and $230, for the years ended
December 31, 2004 and 2003, respectively.As an additional incentive, the Metalsa Roanoke established deferred profit sharing as a part
of the Plan. Deferred profit sharing is based on the Company reaching 75% of the target
operating income as defined by the Plan. To be eligible, employees must be employed on the
last day of the plan year or employment terminated because of retirement age, death or
disability. The employee must complete at least 1,000 hours of service during the plan year.
Employees receive up to 5% of their wages excluding bonuses and are 100% vested after three
years of service. If the target operating income is below 75%, there is no profit sharing in
the plan year. For the years ended December 31, 2004 and 2003, Metalsa Roanoke made profit
sharing contributions of $586 and $340, respectively.  (20)
    
    Reconciliation of Net Earnings to Net Cash Provided by Operating ActivitiesThe reconciliation of net earnings to net cash provided by operating activities for
the years ended December 31, 2004, 2003 and 2002 follows: (Unaudited)2004
    
    
    2003
    
    
    2002Net earnings
    
    $
    34,583
    
    
    
    15,795
    
    
    
    32,688Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    32,024
    
    
    
    27,180
    
    
    
    19,417Bad debt expense
    
    
    348
    
    
    
    429
    
    
    
    Amortization and write-off of deferred financing costs
    
    
    224
    
    
    
    286
    
    
    
    81Deferred ESPS
    
    
    (1,982
    )
    
    
    (2,258
    )
    
    
    2,099Inventory reserve
    
    
    816
    
    
    
    24
    
    
    
    Amortization of deferred credit
    
    
    (7,705
    )
    
    
    (3,263
    )
    
    
    Deferred income tax
    
    
    6,759
    
    
    
    4,823
    
    
    
    12,079Accrual for seniority premiums
    
    
    474
    
    
    
    1,646
    
    
    
    (303
    )Derivative financial instruments
    
    
    (582
    )
    
    
    
    
    
    
    Translation (gain)/ loss
    
    
    (2,665
    )
    
    
    (1,408
    )
    
    
    (3,731
    )Change in operating assets and liabilities:Trade accounts receivable
    
    
    (52,838
    )
    
    
    (3,605
    )
    
    
    16,935Inventories
    
    
    (9,077
    )
    
    
    2,740
    
    
    
    (7,530
    )Other current assets
    
    
    1,308
    
    
    
    (1,978
    )
    
    
    96Trade accounts payable and accrued liabilities
    
    
    31,938
    
    
    
    2,949
    
    
    
    (21,957
    )Accrued seniority premium
    
    
    
    
    
    
    
    
    
    
    (612
    )Other long-term liabilities
    
    
    27
    
    
    
    
    
    
    
    870Net cash provided by (used in) operating activities
    
    $
    33,652
    
    
    
    43,360
    
    
    
    50,132




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##### Table of Contents



22 METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars)  (21)
    
    Contingencies and commitmentsThe Company has the following contingencies and commitments:  (a)
    
    There is an agreement with a related party to quote certain parts and accessories
required by the Company. This agreement establishes that should the Company require
Japanese origin, they should be bought to this related party, if the costs are similar.(b)
    
    In accordance with to the tax law in force, tax authorities have the right to
review up to the five tax periods prior to the last income tax return filed.(c)
    
    According to the Income Tax Law, companies carrying out operations with related
parties, residing in the country or abroad, are subject to tax limitations and
obligations, regarding the determination of agreed-upon prices, since they must be
equivalent to those that would be used with or between independent parties in comparable
operations.In case the tax authorities review the prices and reject the determined amounts, they
could demand, besides collection of corresponding tax and accessories (update and late
charges), fines over the omitted contributions, which could reach up to 100% of the
updated amount of the contributions.(d)
    
    Metalsa Roanoke, Inc. has certain non-cancelable operating leases that expire over
the next four years. Future minimum lease payments under noncancelable operating leases
as of December 31, 2004 are as follows in dollars: Years ending December 31:2005
    
    $
    492006
    
    
    202007
    
    
    .4$
    69.4
  (22)
    
    Recently Issued Accounting StandardsIn December 2004, the FASB issued FASB Statement No. 123 (revised 2004), Share-Based Payment,
which addresses the accounting for transactions in which an entity exchanges its equity
instruments for goods or services, with a primary focus on transactions in which an entity
obtains employee services in share-based payment transactions. This Statement is a revision to
Statement 123 and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and
its related implementation guidance. For nonpublic companies, this Statement will require
measurement of the cost of employee services received in exchange for stock compensation based
on the grant-date fair value of the employee stock options. Incremental compensation costs
arising from subsequent modifications of awards after the grant date must be recognized. This
Statement will be effective for the Company as of January 1, 2006.In December 2004, the FASB issued FASB Statement No. 151, Inventory Costs, which clarifies the
accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage). Under this Statement, such items will be recognized as current-period
charges. In addition, the Statement requires that allocation of fixed production overheads to
the costs of conversion be based on the normal capacity of the production facilities. This Statement will be effective for the
Company for inventory costs incurred on or after January 1, 2006.




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##### Table of Contents



23   METALSA, S. DE R.L. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002 (Thousands of US dollars) In December 2004, the FASB issued FASB Statement No. 153, Exchanges of Nonmonetary Assets,
which eliminates an exception in APB 29 for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. This Statement will be effective for the Company for nonmonetary asset
exchanges occurring on or after January 1, 2006. The Company believes that the adoption of the recently issued accounting standards will have
no material effect on the Companys consolidated financial statements.




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##### Table of Contents



EXHIBIT DESCRIPTION Exhibit No.3.1
    
    Amended and Restated Certificate of Incorporation of the
Registrant, as amended by the Certificate of Amendment to
Certificate of Incorporated, dated June 2, 1997,
incorporated by reference to the Registrants Form S-3
Registration Statement (Registration No. 333-38827),
filed under the Securities Act of 1933 (the
S-3)
    
    *3.2
    
    Amended and Restated Bylaws of the Registrant,
incorporated by reference to Exhibit 3.2 of the
Companys Form S-1 Registration Statement
(Registration No. 333-80320) (the S-1).
    
    *4.1
    
    Form of Common Stock Certificate, incorporated by
reference to Exhibit 4.1 of the S-1.
    
    *4.2
    
    Euro Indenture, dated July 25, 2000, by and among R.J.
Tower Corporation, certain of its affiliates and United
States Trust Company of New York, as trustee (including
the form of notes), incorporated by reference to Exhibit
4.1 of the Registrants Form S-4 Registration Statement
(Registration No. 333-45528), as filed with the SEC on
December 21, 2000(the S-4).
    
    *4.3
    
    Exchange and Registration Rights Agreement, dated July
25, 2000, by and among R.J. Tower Corporation, certain
of its affiliates and Chase Manhattan International
Limited, Bank of America International Limited, ABN
AMRO Incorporated, Donaldson, Lufkin & Jennrette
International, First Chicago Limited and Scotia Capital
(USA) Inc. (collectively, the Initial Purchasers),
incorporated by reference to Exhibit 4.2 of the S-4.
    
    *4.4
    
    Deposit Agreement, dated July 25, 2000, among R.J. Tower
Corporation, Deutsche Bank Luxembourg
S.A., and the Trustee, incorporated by reference to
Exhibit 4.3 of the S-4.
    
    *4.5
    
    Indenture, dated as of July 28, 1997, by and between the
Registrant and Bank of New York, as trustee (including
form of 5% Convertible Subordinated Note due 2004)
incorporated by reference to Exhibit 4.5 of the S-3.
    
    *4.6
    
    Indenture, dated June 13, 2003, among Registrant, certain
subsidiaries and BNY Midwest Trust Company, as trustee,
incorporated by reference to Exhibit 4.1 to the
Registrants Form S-4 Registration Statement
(Registration No. 333-107232), filed under the Securities
Act of 1933 (the 2003 S-4).
    
    *4.7
    
    Registration Rights Agreement, dated June 13, 2003, by
and among the Registrant, certain of its subsidiaries,
and J.P. Morgan Securities Inc., for itself and on behalf
of other Initial Purchases, incorporated by reference to
Exhibit 4.2 of the 2003 S-4.
    
    *




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##### Table of Contents



Exhibit No.10.1**
    
    1994 Key Employee Stock Option Plan, incorporated by
reference to the S-1.
    
    *10.2**
    
    Tower Automotive, Inc. Independent Director Stock Option
Plan, incorporated by reference to Exhibit 4.3
of the Registrants Form S-8 dated December 5, 1996,
filed under the Securities Act of 1933.
    
    *10.3
    
    Joint Venture Agreement by and among Promotora de
Empresas Zano, S.A. de C.V., Metalsa, S.A. de C.V.
and R.J. Tower Corporation dated as of September 26,
1997 incorporated by reference to Exhibit 2.1 of the
Registrants Form 8-K dated October 23, 1997, filed
under the Securities Exchange Act of 1934.
    
    *10.4
    
    Certificate of Trust of Tower Automotive Capital Trust,
incorporated by reference to Exhibit 4.1 of the
Registrants1998 Second Quarter 10-Q, filed under the
Securities Exchange Act of 1934.
    
    *10.5
    
    Amended and Restated Declaration of Trust of Tower
Automotive Capital Trust, dated June 9, 1998,
incorporated by reference to Exhibit 4.2 of the1998
Second Quarter 10-Q, filed under the Securities
Exchange Act of 1934.
    
    *10.6
    
    Junior Convertible Subordinated Indenture for the 6 3/4%
Convertible Subordinated Debentures, between Registrant
and the First National Bank of Chicago,
as Subordinated Debt Trustee, dated as of June 9, 1998,
incorporated by reference to Exhibit 4.3 of the 1998
Second Quarter 10Q.
    
    *10.7
    
    Form of 6 3/4% Preferred Securities, incorporated by
reference to Exhibit 4.4 of the 1998 Second Quarter
10-Q.
    
    *10.8
    
    Form of 6 3/4% Junior Convertible Subordinated
Debentures, incorporated by reference to Exhibit 4.5 of
the 1998 Second Quarter 10Q.
    
    *10.9
    
    Guarantee Agreement, dated as of June 9, 1998, between
Registrant as Guarantor, and the First National Bank of
Chicago, as Guarantee Trustee, incorporated by reference
to Exhibit 4.6 of the 1998 Second Quarter 10-Q.
    
    *10.10
    
    Amended and Restated Credit Agreement among R.J. Tower
Corporation, Tower Italia, S.r.L., Bank of
America National Trust and Savings Association, as
agent, and the other financial institutions named therein,
dated August 23, 1999, incorporated by reference to
Exhibit 10.43 of the Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 1999,
filed under the Securities Exchange Act of 1934.
    
    *10.11 a
    
    Tower Automotive, Inc. Long-Term Incentive Plan,
incorporated by reference to Appendix A to Registrants
Proxy Statement, dated April 12, 1999.
    
    *




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##### Table of Contents



Exhibit No.10.12 a
    
    Tower Automotive, Inc. Director Deferred Stock Purchase Plan,
incorporated by reference to Appendix A
to Registrants Proxy Statement, dated April 10, 2000.
    
    *10.13 a
    
    Tower Automotive, Inc. Key Leadership Deferred Income Stock
Purchase Plan, incorporated by reference
to Appendix B to Parents Proxy Statement, dated
April 12, 1999.
    
    *10.14 a
    
    Tower Automotive, Inc. Colleague Stock Purchase Plan,
incorporated by reference to Exhibit 10.19 of the S-1.
    
    *10.15
    
    Indenture for the 5.75% Convertible Senior Debentures
dated as of May 24, 2004, Tower Automotive, Inc., as
Issuer, and BNY Midwest Trust Company, as Trustee,
incorporated by reference to Form 8-K, dated May 25,
2004.
    
    *
*10.16
    
    Form of Tower Automotive, Inc. 5.75% Convertible
Senior Debenture, incorporated by reference to Form 8-K
dated May 25, 2004.
    
    *10.17
    
    Resale Registration Rights Agreement dated as of May 24, 2004,
for the Tower Automotive, Inc. 5.75%
Convertible Senior Debentures Due 2024, incorporated
by reference to Form 8-K, dated May 25, 2004.
    
    *10.18
    
    Purchase Agreement dated May 17, 2004 for the 5.75%
Convertible Senior Debentures due May 15, 2024,
incorporated by reference to Form 8-K, dated May 25,
2004.
    
    *10.19
    
    Credit Agreement dated as of May 24, 2004, among R.J.
Tower Corporation, Tower Automotive, Inc., and the
various financial institutions from time to time parties
thereto, incorporated by reference to Form 8-K, dated
May 25, 2004.
    
    *10.20
    
    Revolving Credit, Term Loan and Guaranty Agreement,
as amended dated February 2, 2005, filed herewith.10.21
    
    Form of The Key Employee Retention Plan between
Tower Automotive, Inc. and Key Employees incorporated
by reference to Form 8-K, dated April 1, 2005.
    
    *10.22
    
    Agreement between Tower Automotive, Inc., R.J. Tower
Corporation and Silver Point Finance, LLC, dated February 3, 2005,
filed herewith.10.23
    
    Fourth Amendment to Revolving Credit, Term Loan and
Guaranty Agreement, dated April 29, 2005, filed herewith.12.1
    
    Statement and Computation of Ratio of Earnings to Fixed
Charges filed herewith.14.1
    
    Code of Business Conduct and Ethics filed herewith




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##### Table of Contents



Exhibit No.14.2
    
    Code of Ethics for Senior Officers and Leaders filed herewith21.1
    
    List of Subsidiaries filed herewith.23.1
    
    Consent of Deloitte and Touche LLP filed herewith.23.2
    
    Consent of KPMG Cárdenas Dosal, S.C. filed herewith.31.1
    
    Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.31.2
    
    Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.32.1
    
    Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.32.2
    
    Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.99.1
    
    Audit Committee Charter filed herewith.
 
 *
    
    Incorporated by reference. a Indicates compensatory arrangement.