TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)

		December 31, 2011				December 31, 2010
ASSETS
Cash and cash equivalents		$	134,984			$	150,345
Accounts receivable, net of allowance of $3,612 and $1,674			327,992				297,086
Inventories (Note 3)			85,100				73,189
Deferred tax assets – current			12,966				12,406
Assets held for sale (Note 5)			4,027				8,178
Prepaid tooling and other			56,189				57,754
Total current assets			621,258				598,958
Property, plant and equipment, net (Note 3)			667,686				627,497
Goodwill (Note 3)			63,983				66,309
Deferred tax assets – non-current			14,450				17,377
Other assets, net			30,001				30,035
Total assets		$	1,397,378			$	1,340,176
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt and current maturities of capital lease obligations (Note 6)		$	109,447			$	109,848
Accounts payable			395,287				366,761
Accrued liabilities			126,416				132,614
Total current liabilities			631,150				609,223
Long-term debt, net of current maturities (Note 6)			461,838				432,726
Obligations under capital leases, net of current maturities (Note 6)			12,213				15,604
Deferred tax liabilities – non-current			11,229				12,710
Pension liability (Note 10)			96,223				76,403
Other non-current liabilities			87,265				81,884
Total non-current liabilities			668,768				619,327
Total liabilities			1,299,918				1,228,550
Commitments and contingencies (Note 18)
Stockholders’ equity:
Tower International, Inc.’s stockholders’ equity
Common stock, $0.01 par value, 350,000,000 authorized, 19,983,403 issued and 19,683,032 outstanding at December 31, 2011 and 19,101,588 issued and outstanding at December 31, 2010 (Note 13)			200				191
Additional paid in capital			311,427				296,262
Treasury stock, at cost, 300,371 shares as of December 31, 2011			(5,130	)			—
Accumulated deficit			(184,492	)			(192,556	)
Accumulated other comprehensive loss (Note 3)			(82,002	)			(36,530	)
Total Tower International, Inc.’s stockholders’ equity			40,003				67,367
Noncontrolling interests in subsidiaries			57,457				44,259
Total stockholders’ equity			97,460				111,626
Total liabilities and stockholders’ equity		$	1,397,378			$	1,340,176

 
 
The accompanying notes are an integral part of these Consolidated Financial Statements.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)

		Year Ended December 31, 2011				Year Ended December 31, 2010				Year Ended December 31, 2009
Revenues		$	2,406,089			$	1,997,058			$	1,634,405
Cost of sales			2,149,977				1,786,476				1,536,752
Gross profit			256,112				210,582				97,653
Selling, general and administrative expenses (Note 8)			158,392				143,975				118,331
Amortization expense			4,589				3,265				2,784
Restructuring and related asset impairment charges, net (Note 4)			2,660				14,288				13,436
Operating income/(loss)			90,471				49,054				(36,898	)
Interest expense, net			62,133				66,872				57,881
Interest income			978				962				982
Other expense/(income), net (Note 6)			1,331				1,300				(33,661	)
Income/(loss) before provision for income taxes			27,985				(18,156	)			(60,136	)
Provision/(benefit) for income taxes (Note 9)			14,812				10,297				(1,104	)
Net income / (loss)			13,173				(28,453	)			(59,032	)
Less: Net income attributable to the noncontrolling interests			5,109				8,441				8,904
Net income/(loss) attributable to Tower International, Inc.		$	8,064			$	(36,894	)		$	(67,936	)
Less: Preferred unit dividends		$	—			$	(10,707	)		$	(16,087	)
Income/(loss) available to common shareholders		$	8,064			$	(47,601	)		$	(84,023	)
Weighted average common shares outstanding
Basic			19,364,433				13,865,509				12,467,866
Diluted			20,069,532				13,865,509				12,467,866
Net income/(loss) per share attributable to Tower International, Inc. (Note 13):
Basic		$	0.42			$	(3.43	)		$	(6.74	)
Diluted			0.40				(3.43	)			(6.74	)

 
 
The accompanying notes are an integral part of these Consolidated Financial Statements.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

		Year Ended December 31, 2011				Year Ended December 31, 2010				Year Ended December 31, 2009
OPERATING ACTIVITIES:
Net income/(loss)		$	13,173			$	(28,453	)		$	(59,032	)
Adjustments required to reconcile net income/(loss) to net cash provided by operating activities:
Non-cash restructuring and asset impairment charges			—				9,999				1,787
Deferred income tax provision			(725	)			(13,851	)			(13,053	)
Depreciation and amortization			114,578				114,668				147,705
Gain from debt repurchase/letter of credit reduction			—				—				(33,661	)
Non-cash share-based compensation			15,174				3,047				—
Pension expense, net of contributions			(12,992	)			(5,619	)			(2,102	)
Change in working capital and other operating items			(28,750	)			40,568				7,231
Net cash provided by operating activities		$	100,458			$	120,359			$	48,875
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant and equipment, net		$	(120,409	)		$	(100,495	)		$	(85,995	)
Net assets acquired, net of cash acquired			(22,300	)			(16,687	)			—
Net cash used in investing activities		$	(142,709	)		$	(117,182	)		$	(85,995	)
FINANCING ACTIVITIES:
Proceeds from letter of credit reduction		$	—			$	—			$	13,250
Repayments of term debt			—				(3,484	)			(16,381	)
Repayment of first lien term loan			—				(414,172	)			—
Issuance of senior secured notes			—				417,203				—
Retirement of senior secured notes			(42,008	)			(26,000	)			—
Noncontrolling interest dividends			—				(5,257	)			(4,866	)
Preferred units dividends			—				(95	)			(388	)
Proceeds from borrowings			682,204				418,237				436,172
Repayments of borrowings			(608,767	)			(452,286	)			(375,501	)
Purchase of treasury stock			(5,130	)			—				—
Financing costs			—				(8,356	)			(1,488	)
Net proceeds from initial public offering			—				74,021				—
Net cash provided by/(used in) financing activities		$	26,299			$	(189	)		$	50,798
Effect of exchange rate changes on cash and cash equivalents		$	591			$	(2,445	)		$	9,304
NET CHANGE IN CASH AND CASH EQUIVALENTS		$	(15,361	)		$	543			$	22,982
CASH AND CASH EQUIVALENTS:
Beginning of period		$	150,345			$	149,802			$	126,820
End of period		$	134,984			$	150,345			$	149,802
Supplemental Cash Flow Information:
Interest paid, net of amounts capitalized		$	64,868			$	43,437			$	52,429
Income taxes paid			15,278				14,384				14,950
Non-cash Investing and Financing Activities:
Capital expenditures in liabilities for purchases of property, plant and equipment		$	36,415			$	26,709			$	24,396
Contribution of Joint Venture			5,946				—				—
Cumulative preferred stock units accrued			—				10,612				15,699
Contribution of indebtedness			—				25,000				—
Conversion of preferred units to common shares			—				181,527				—

 
 
The accompanying notes are an integral part of these Consolidated Financial Statements.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF EQUITY/(DEFICIT),*
OTHER COMPREHENSIVE INCOME/(LOSS), AND REDEEMABLE PREFERRED UNITS
(Amounts in thousands, except per share data)

		Common Stock Units/ Shares				Amount				Additional Paid-in Capital				Treasury Stock				Retained Earnings (Accumulated Deficit)				Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity/(Deficit)* Attributable to Tower International, Inc.				Noncontrolling Interest Amount				Total Equity (Deficit)*				Redeemable Preferred Units
																																						Units				Amount
Balance at January 1, 2009			8,500			$	12,289			$	—			$	—			$	(60,932	)		$	(75,427	)		$	(124,070	)		$	35,545			$	(88,525	)			10,000			$	155,216
Net loss			—				—				—				—				(67,936	)			—				(67,936	)			8,904				(59,032	)			—				—
Other comprehensive income/(loss):
Foreign currency translation adjustment (net of tax of $0)			—				—				—				—				—				12,470				12,470				(19	)			12,451				—				—
Defined benefit plans, net (net of tax of $2.9 million)			—				—				—				—				—				4,565				4,565				—				4,565				—				—
Unrealized gain on qualifying cash flow hedge (net of tax of $2 million)			—				—				—				—				—				4,029				4,029				—				4,029				—				—
Total comprehensive income/ (loss)			—				—				—				—				—				—				(46,872	)			8,885				(37,987	)			—				—
Preferred unit dividends paid			—				—				—				—				(388	)			—				(388	)			—				(388	)			—				—
Cumulative preferred stock units accrued			—				—				—				—				(15,699	)			—				(15,699	)			—				(15,699	)			—				15,699
Noncontrolling interest dividends			—				—				—				—				—				—				—				(4,866	)			(4,866	)			—				—
Unit-based compensation expense			—				306				—				—				—				—				306				—				306				—				—
Balance at December 31, 2009			8,500			$	12,595			$	—			$	—			$	(144,955	)		$	(54,363	)		$	(186,723	)		$	39,564			$	(147,159	)			10,000			$	170,915
Net loss			—				—				—				—				(36,894	)			—				(36,894	)			8,441				(28,453	)			—				—
Other comprehensive income/(loss):
Foreign currency translation adjustment (net of tax of $0)			—				—				—				—				—				8,597				8,597				1,511				10,108				—				—
Defined benefit plans, net (net of tax of $0 million)			—				—				—				—				—				(3,060	)			(3,060	)			—				(3,060	)			—				—
Settlement of interest rate swap (net of tax of $2 million)																							12,551				12,551				—				12,551
Unrealized loss on qualifying cash flow hedge (net of tax of $0.1 million)			—				—				—				—				—				(255	)			(255	)			—				(255	)			—				—
Total comprehensive income/ (loss)			—				—				—				—				—				—				(19,061	)			9,952				(9,109	)			—				—
Preferred unit dividends paid			—				—				—				—				(95	)			—				(95	)			—				(95	)			—				—
Cumulative preferred stock units accrued			—				—				—				—				(10,612	)			—				(10,612	)			—				(10,612	)			—				10,612

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF EQUITY/(DEFICIT),*
OTHER COMPREHENSIVE INCOME / (LOSS), AND REDEEMABLE PREFERRED UNITS – (Continued)
(Amounts in thousands, except per share data)

		Common Stock Units/ Shares				Amount				Additional Paid-in Capital				Treasury Stock				Retained Earnings (Accumulated Deficit)				Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity/(Deficit)* Attributable to Tower International, Inc.				Noncontrolling Interest Amount				Total Equity (Deficit)*				Redeemable Preferred Units
																																						Units				Amount
Unit conversion – transfer of common and preferred units to capital units			(8,500	)			(12,858	)			12,858				—				—				—				—				—				—				—				—
Unit conversion – transfer of common and preferred units to capital units			10,000				—				181,527				—				—				—				181,527				—				181,527				(10,000	)			(181,527	)
Contribution of indebtedness			—				—				25,000				—				—				—				25,000				—				25,000				—				—
Corporate conversion – capital units to common shares			(10,000	)			—				—				—				—				—				—				—				—				—				—
Corporate conversion – capital units to common shares			12,467,866				125				(125	)			—				—				—				—				—				—				—				—
Initial public offering			6,633,722				66				73,955				—				—				—				74,021				—				74,021				—				—
Share-based compensation expense			—				—				3,047				—				—				—				3,047				—				3,047				—				—
Noncontrolling interest dividends			—				—				—				—				—				—				—				(5,257	)			(5,257	)			—				—
Unit-based compensation expense			—				263				—				—				—				—				263				—				263				—				—
Balance at December 31, 2010			19,101,588			$	191			$	296,262			$	—			$	(192,556	)		$	(36,530	)		$	67,367			$	44,259			$	111,626				—			$	—
Net income/(loss)			—				—				—				—				8,064				—				8,064				5,109				13,173				—				—
Other comprehensive income/(loss):
Foreign currency translation adjustment (net of tax of $0)			—				—				—				—				—				(12,095	)			(12,095	)			2,143				(9,952	)			—				—
Defined benefit plans, net (net of tax of $0 million)			—				—				—				—				—				(33,644	)			(33,644	)			—				(33,644	)			—				—
Unrealized gain on qualifying cash flow hedge (net of tax of $0 million)			—				—				—				—				—				267				267				—				267				—				—
Total comprehensive income/(loss)			—				—				—				—				—				—				(37,408	)			7,252				(30,156	)			—				—
Vesting of RSUs			881,815				9				(9	)			—				—				—				—				—				—				—				—
Treasury stock			(300,371	)			—				—				(5,130	)			—				—				(5,130	)			—				(5,130	)			—				—
Share-based compensation expense			—				—				15,174				—				—				—				15,174				—				15,174				—				—
Formation of Xiangtan			—				—				—				—				—				—				—				5,946				5,946				—				—
Balance at December 31, 2011			19,683,032			$	200			$	311,427			$	(5,130	)		$	(184,492	)		$	(82,002	)		$	40,003			$	57,457			$	97,460				—			$	—

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Business

Tower International, Inc. and its subsidiaries (collectively referred to as the “Company” or “Tower International”) is a leading integrated global manufacturer of engineered structural metal components and assemblies primarily serving automotive original equipment manufacturers, or OEMs, including Ford, Volkswagen Group, Hyundai/Kia, Fiat, Chrysler, Volvo, Nissan, Daimler, BMW, Toyota, PSA, Chery, and Honda. Products include body-structure stampings, frame and other chassis structures, as well as complex welded assemblies, for small and large cars, crossovers, pickups sport utility vehicles, or SUVs. Including both wholly owned subsidiaries and majority owned subsidiaries, the Company has strategically located production facilities in the United States, Belgium, Germany, Italy, Slovakia, Poland, Brazil, South Korea, and China, supported by engineering and sales locations in the United States, Germany, Italy, Brazil, South Korea, Japan, China, and India.

Note 2. Basis of Presentation and Organizational History

On October 14, 2010, in connection with its initial public offering (the “IPO”), Tower Automotive, LLC was converted to a Delaware corporation named Tower International, Inc. (the “Corporate Conversion”). Upon the Corporate Conversion, all of the equity interests in Tower Automotive, LLC were converted into common stock of Tower International, Inc. (see note 11 for further discussion). The Company is a “controlled company” within the meaning of the New York Stock Exchange corporate governance standards because Cerberus Capital Management, L.P. (“Cerberus”), through the Company’s controlling stockholder, controls a majority of the Company’s outstanding common stock.

On October 15, 2010, the Company’s common stock began trading on the New York Stock Exchange pursuant to the Company’s IPO. On October 20, 2010, the Company received $75.6 million of proceeds, after underwriting discounts and commissions, in connection with the sale of 6,250,000 shares of common stock in the IPO. On November 8, 2010, the Company sold an additional 383,722 shares of common stock resulting in additional proceeds of $4.6 million, after underwriting discounts and commissions, pursuant to a partial exercise of the underwriters’ over-allotment option.

All references to the Company in this Annual Report for periods prior to the effective time of our Corporate Conversion are to Tower Automotive, LLC and its subsidiaries. All references to our company in this Annual Report for periods subsequent to the effective time of our Corporate Conversion are to Tower International, Inc. and its subsidiaries.

Recent Accounting Pronouncements

Goodwill Impairment

On September 15, 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-08, which amends the guidance in Accounting Standards Codification (“ASC”) No. 350, Intangibles — Goodwill and Other, on testing goodwill for impairment. The ASU permits entities testing goodwill for impairment to have the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step 1 of the goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The ASU does not change how goodwill is calculated or assigned to reporting units, nor does it revise the requirement to test goodwill annually for impairment. In addition, the ASU does not amend the requirement to test goodwill for impairment between annual tests if events or circumstances warrant; however, it does revise the examples of events and circumstances that an entity should consider. The ASU is effective for interim and annual periods beginning after December 15, 2011 with early adoption permitted. The Company adopted this ASU on September 30, 2011, but did not perform a qualitative assessment before performing step 1; therefore, the adoption did not have a material impact on the Company’s financial statements.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Basis of Presentation and Organizational History  – (continued)

FASB ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements”

In January 2010, the FASB issued ASU 2010-06 which amended ASC No. 820-10, Fair Value Measurement and Disclosures-Overall. ASU 2010-06 requires new disclosures regarding transfers in and out of assets and liabilities measured at fair value classified within the valuation hierarchy as either Level 1 or Level 2 and information about sales, issuances and settlements on a gross basis for assets and liabilities classified as Level 3. ASU 2010-06 clarifies existing disclosures on the level of disaggregation required and inputs and valuation techniques. The provisions of ASU 2010-06 became effective for the Company on January 1, 2010, except for disclosure of information about sales, issuances and settlements on a gross basis for assets and liabilities classified as Level 3, which was effective for the Company on January 1, 2011. The provisions of ASU 2010-06 impact disclosures only and the Company has disclosed information in accordance with the revised provisions of ASU 2010-06 within this report.

Note 3. Significant Accounting Policies

Financial Statement Presentation

a. Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all subsidiaries over which the Company exercises control. The Company’s share of earnings or losses of nonconsolidated affiliates are included in the consolidated operating results using the equity method of accounting when the Company is able to exercise significant influence over the operating and financial decisions of the affiliates. The Company did not have any nonconsolidated affiliates during the periods presented in this report. All intercompany transactions and balances have been eliminated upon consolidation.

b. Cash and Cash Equivalents

All highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value. Substantially all of the Company’s cash is concentrated in a few financial institutions.

c. Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful receivables for estimated losses resulting from the inability of its trade customers to make required payments. The Company provides an allowance for specific customer accounts where collection is doubtful and also provides an allowance for customer deductions based on historical collection and write-off experience. Additional allowances could be required if the financial condition of the Company’s customers deteriorated. Bad debt expense is not material for any period presented.

d. Inventories

Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (“FIFO”) method. In addition, the Company uses a valuation account for inventory obsolescence, which has not been material for any period presented. Maintenance, repair and non-productive inventory, which are considered consumables, are expensed when acquired in cost of sales. Inventories consist of the following (in thousands):

		December 31, 2011				December 31, 2010
Raw materials		$	37,401			$	29,762
Work in process			23,372				19,335
Finished goods			24,327				24,092
Total inventory		$	85,100			$	73,189

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Significant Accounting Policies  – (continued)

e. Tooling

Tooling represents costs incurred by the Company in the development of new tooling used in the manufacture of the Company’s products. 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, are expensed as incurred unless the supply agreement provides the Company with the non-cancelable right to use the tools or the reimbursement of such costs is contractually guaranteed by the customer. Generally, the customer agrees to reimburse the Company for certain of its tooling costs at the time the customer awards a contract to the Company.

When the part for which tooling has been developed reaches a production-ready status, the Company is reimbursed by its customer for the cost of the tooling at which time the tooling becomes the property of the customer. The Company has certain other tooling costs, which are capitalized and amortized over the life of the related product program, related to tools which the Company has the contractual right to use during the life of the supply arrangement. Customer-owned tooling is included in prepaid tooling and other and company-owned tooling is included in other assets in the Consolidated Balance Sheet.

The components of capitalized tooling costs are as follows (in thousands):

		December 31, 2011				December 31, 2010
Customer-owned tooling, net		$	20,212			$	38,683
Company-owned tooling			1,595				3,828
Total tooling, net		$	21,807			$	42,511

Any gain recognized, which is defined as the excess of reimbursement over cost, is amortized over the life of the program. If estimated costs are expected to be in excess of reimbursement, a loss is recorded in the period when the loss is estimated.

f. Property, Plant and Equipment

Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation expense was $110 million, $111.4 million, and $144.9 million for the years ended December 31, 2011, 2010, and 2009. Depreciation is computed using the straight-line method over the following estimated useful lives of assets as follows:

Buildings and improvements			32 to 40 years
Machinery and equipment			3 to 20 years

Leasehold improvements are amortized over the shorter of 10 years or the remaining lease term at the date of acquisition of the leasehold improvement.

Interest is capitalized during the preparation of facilities for product programs and is amortized over the estimated lives of the programs. Interest of $1.6 million, $1.9 million and $0.9 million was capitalized in 2011, 2010, and 2009, respectively.

Costs of maintenance and repairs are charged to expense as incurred in cost of sales. Spare parts are considered capital in nature when purchased during the initial investment of a fixed asset. Amounts relating to significant improvements, which extend the useful life or utility of the related asset, are capitalized and depreciated over the remaining life of the asset. Upon disposal 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 Consolidated Statements of Operations.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Significant Accounting Policies  – (continued)

Property, plant and equipment consist of the following (in thousands):

		December 31, 2011				December 31, 2010
Cost:
Land		$	62,579			$	61,885
Buildings and improvements			221,174				209,696
Machinery and equipment			826,752				765,670
Construction in progress			122,426				91,705
Property, plant, and equipment, gross			1,232,931				1,128,956
Less: accumulated depreciation			(565,245	)			(501,459	)
Property, plant, and equipment, net		$	667,686			$	627,497

g. Asset Retirement Obligations

FASB ASC No. 410, Asset Retirement and Environmental Obligations, requires the recognition of a liability for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated. An asset retirement obligation is a legal obligation to perform certain activities in connection with retirement, disposal or abandonment of assets. The fair value of a conditional asset retirement obligation should be recognized when incurred, generally upon acquisition, construction or development and through the normal operation of the asset. Uncertainty about the timing or method of settlement of a conditional asset retirement should be factored into the measurement of the liability. The liability is measured at discounted fair value and is adjusted to its present value in subsequent periods. The Company’s asset retirement obligations are primarily associated with renovating, upgrading, and returning leased property to the lessor in accordance with the requirements of the lease.

Asset retirement obligations are included in other non-current liabilities in the Consolidated Balance Sheet. The following table reconciles our asset retirement obligations as of December 31, 2011 and 2010 (in thousands):

		December 31, 2011				December 31, 2010
Asset retirement obligation as of January 1		$	11,865			$	12,906
Accretion expense			1,018				1,104
Liabilities settled			(126	)			(2,145	)
Change in estimate			(489	)			—
Asset retirement obligation as of December 31		$	12,268			$	11,865

h. Impairment of Long-Lived Assets

The Company monitors its long-lived assets for impairment indicators on an ongoing basis in accordance with FASB ASC No. 360, Property, Plant, and Equipment. If impairment indicators exist, the Company performs the required analysis and records impairment charges. In conducting its analysis, the Company compares the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the undiscounted cash flows exceed the net book value, the long-lived assets are considered not to be impaired. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value is estimated based upon discounted cash flow analyses. Cash flows are estimated using internal budgets based on recent sales data and independent automotive production volume estimates and customer commitments. Changes in economic or operating conditions impacting these estimates and assumptions could result in the impairment of long-lived assets. Refer to note 4 for discussion of impairment charges for the periods presented.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Significant Accounting Policies  – (continued)

Long-lived assets held for sale are recorded at the lower of their carrying amount or estimated fair value less cost to sell.

i. Goodwill and Other Intangible Assets

Goodwill represents the excess of the cost of an acquisition over the fair value of net assets acquired. Goodwill is not amortized but is tested for impairment on at least an annual basis. In accordance with FASB ASC No. 350, Intangibles — Goodwill and Other, goodwill is reviewed for impairment utilizing a two-step process. The first step of the impairment test requires the identification of the reporting units, and comparison of the fair value of each of these reporting units to the respective carrying value. The Company defines its reporting units as Europe, Asia, North America, and South America. The recoverability of goodwill is evaluated at the following reporting units for which goodwill exists: Europe and South America. These reporting units exist at a lower level than our reportable segments. If the carrying value is less than the fair value, no impairment exists and the second step is not performed. In the second step, the impairment is computed by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. FASB ASC No. 350 requires goodwill to be tested for impairment annually at the same time every year, and when an event occurs or circumstances change such that it is reasonably possible that impairment may exist. The annual impairment test is performed at year end.

The Company utilizes an income approach to estimate the fair value of each of its reporting units. The income approach is based on projected debt free cash flow which is discounted to the present value using discount factors that consider the timing and risk of cash flows. The Company believes that this approach is appropriate because it provides a fair value estimate based upon the reporting units’ expected long-term operating cash flow performance. This approach also mitigates the impact of cyclical trends that occur in the industry. Fair value is estimated using recent automotive industry and specific platform production volume projections, which are based on internally-developed forecasts, as well as commercial, wage and benefit, inflation and discount rate assumptions. Other significant assumptions include terminal value growth rates, terminal value margin rates, future capital expenditures, known restructuring actions, and changes in future working capital requirements. While there are inherent uncertainties related to the assumptions used and to management’s application of these assumptions to this analysis, the Company believes that the income approach provides a reasonable estimate of the fair value of its reporting units. However, the Company’s assumptions and estimates may differ significantly from actual results. The Company also uses a second approach, which is the market multiple approach, to test the reasonableness of the income approach.

The Company’s 2011 and 2010 annual goodwill impairment analysis, completed as of each year end, indicated that the carrying value of the Europe and South America reporting units was less than the respective fair values; thus, no impairment existed at either date. The Company also performed an interim goodwill impairment analysis during 2010 as the Company deemed its IPO to be a triggering event.

The change in the carrying amount of goodwill is set forth below on a segment and consolidated basis (in thousands):

		International				Americas				Consolidated
Balance at December 31, 2009		$	67,079			$	3,486			$	70,565
Currency translation adjustment			(4,433	)			177				(4,256	)
Balance at December 31, 2010			62,646				3,663				66,309
Currency translation adjustment			(1,921	)			(405	)			(2,326	)
Balance at December 31, 2011		$	60,725			$	3,258			$	63,983

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Significant Accounting Policies  – (continued)

The Company has certain intangible assets that are related to customer relationships in Europe and Brazil. During the second quarter of 2011, the Company recorded a new intangible asset in North America for a covenant not to compete agreement related to the acquisition of substantially all of the assets of W Industries (see note 17). These intangible assets have definite lives and are amortized on a straight-line basis, which approximates the recognition of related revenue, over the estimated lives of the related assets. The intangible assets are recorded in other assets. The Company anticipates amortization expense of $4.7 million, $2.8 million, and $1.5 million for the years ended December 31, 2012, 2013, and 2014, respectively, at which time no further amortization expense will be incurred. The Company has incurred amortization expense of $4.6 million, $3.3 million, and $2.8 million, respectively, for the years ended December 31, 2011, 2010 and 2009. The following table presents information about the intangible assets of the Company at December 31, 2011 and 2010, respectively (in thousands):

						As of December 31, 2011								As of December 31, 2010
		Weighted Average Life				Gross Carrying Amount				Accumulated Amortization				Gross Carrying Amount				Accumulated Amortization
Amortized intangible:
Europe			6 years			$	15,939			$	10,236			$	16,011			$	7,504
Brazil			7 years				5,677				3,634				5,935				2,749
North America			2 years				2,271				973				—				—
Total						$	23,887			$	14,843			$	21,946			$	10,253

j. Fair Value of Financial Instruments

Fair value is generally determined based on quoted market prices in active markets for identical assets or liabilities. If quoted market prices are not available, the Company uses valuation techniques that place greater reliance on observable inputs and less reliance on unobservable inputs. In measuring fair value, the Company may make adjustments for risks and uncertainties, if a market participant would include such an adjustment in its pricing.

FASB ASC No. 820, Fair Value Measurements, establishes a fair value hierarchy that distinguishes between assumptions based on market data, referred to as observable inputs, and the Company’s assumptions, referred to as unobservable inputs. Determining where an asset or liability falls within that hierarchy depends on the lowest level input that is significant to the fair value measurement as a whole. An adjustment to the pricing method used within either Level 1 or Level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy. The hierarchy consists of three broad levels as follows:

At December 31, 2011, the carrying value and estimated fair value of the Company’s total debt was $568.4 million and $582.9 million, respectively. At December 31, 2010, the carrying value and estimated fair value of the Company’s total debt was $539.6 million and $578.5 million, respectively. The majority of the Company’s debt at December 31, 2011 and December 31, 2010 is traded in the market and is classified as a Level 2 measurement based on the pricing methodology and the limited trading of the securities. The fair value was determined based on the quoted market values. The remainder of the Company’s debt, primarily consisting of foreign subsidiaries’ debt, is asset-backed and is classified as Level 3. As this debt carries variable rates and minimal credit risk, the book value approximates the fair value for this debt.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Significant Accounting Policies  – (continued)

The Company is party to certain derivative financial instruments, which are all classified as Level 2 measurements determined using significant other observable inputs. The Company also has certain assets that have been classified as held for sale. The fair value of the long-lived assets held for sale was determined using third-party appraisals. The third-party appraisals use current market conditions adjusted for asset specific characteristics to determine the fair market value; therefore, are classified as Level 3.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accruals approximate fair value because of the short maturity of these instruments.

The Company did not have any assets or liabilities that were measured at fair value on a nonrecurring basis during the year ended December 31, 2011.

The following table provides each major category of assets and liabilities measured at fair value on a nonrecurring basis during the year ended December 31, 2010 (in millions):

		Quoted prices in active markets for identical assets				Significant other observable inputs				Significant unobservable inputs				Total Gains/ (losses)
		Level 1				Level 2				Level 3
Long-lived assets held for sale			Not applicable				Not applicable			$	4.0			$	(2.7	)
Asset impairments			Not applicable				Not applicable			$	0.7			$	(7.3	)

In accordance with FASB ASC No. 360, Property, Plant, & Equipment, long-lived assets held for sale with a carrying amount of $6.7 million were written down to their fair value of $4.3 million, less cost to sell of $0.3 million (or $4 million), resulting in a loss of $2.7 million, which was included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2010.

In accordance with FASB ASC No. 360, equipment specifically purchased for a contract with a solar customer that failed to materialize with a carrying amount of $8 million was written down to the fair value of $0.7 million, resulting in a loss of $7.3 million, which was included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2010.

k. Derivative Financial Instruments

Periodically, the Company uses derivative financial instruments 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. The Company is not a party to leveraged derivatives and does not enter into derivative financial instruments for trading or speculative purposes. Under FASB ASC No. 815, Derivatives and Hedging, all derivatives are recorded at fair value and the changes in fair value are immediately included in earnings if the derivatives do not qualify as effective cash flow hedges. If a derivative is a fair value hedge, then changes in the fair value of the derivative are offset against the changes in the fair value of the underlying hedged item. If a derivative is a cash flow hedge, then changes in the fair value of the derivative are recognized as a component of accumulated other comprehensive income until the underlying hedged item is recognized in earnings.

The Company formally documents hedge relationships, including the identification of the hedging instruments and the hedged items, as well as the risk management objectives and strategies for undertaking the hedge transaction. Effective hedges are recorded at fair value in other long-term liabilities or other long-term assets with a corresponding offset to accumulated other comprehensive income in the Consolidated Balance Sheet. This process includes linking derivatives that are designated as hedges of specific assets, liabilities, firm commitments or forecasted transactions. The Company also formally assesses, both at inception and at least quarterly thereafter, whether a derivative used in a hedging transaction is highly effective in offsetting changes in either the fair value or cash flows of the hedged item. The Company will discontinue hedge accounting when it is determined that a derivative ceases to be an effective hedge. As of December 31, 2009, an accumulated loss of $12.6 million was recorded in accumulated other comprehensive income relating to the

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Significant Accounting Policies  – (continued)

Company’s two cash flow hedges which were considered effective. The hedges were terminated in August 2010 in connection with the retirement of the first lien term loan. By termination, the amounts that had been recorded in accumulated other comprehensive were expensed through interest expense and income tax expense as appropriate. Refer to note 7 for further discussion.

l. Revenue Recognition

The Company recognizes revenue once the criteria in FASB ASC No. 605, Revenue Recognition, have been met. These criteria are that persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the Company’s price to the buyer is fixed or determinable, and collectability is reasonably assured.

The Company recognizes revenue as its products are shipped to its customers at which time title and risk of loss pass to the customer. 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. The Company takes delivery and title to such steel and bears the risk of loss and obsolescence. The Company invoices its customers based upon annually negotiated selling prices, which inherently include a component for steel under such repurchase programs. Under guidance provided in FASB ASC No. 605-45, Principal Agent Considerations, the Company has substantial risks and rewards of ownership and is acting as a principal. Therefore, for sales where the Company participates in a customer’s steel resale program, revenue is recognized on a gross basis for the entire amount of the sales, including the component for purchases under that customer’s steel resale program.

The Company enters into agreements to produce products for its customers at the beginning of a given vehicle program life. 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 period of the vehicle programs, which range from three to ten years, and generally the Company has no provisions to terminate such contracts. Additionally, the Company tracks the aging of uncollected billings and adjusts its accounts receivable allowance on a quarterly basis as necessary based on its evaluation of the probability of collection. The adjustments the Company has made due to the write-off of uncollectible amounts have been negligible.

m. Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company records net deferred tax assets to the extent it believes that these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Valuation allowances have been recorded where it has been determined that it is more likely than not the Company will not be able to realize the net deferred tax assets. Previously established valuation allowances are reversed into income when there is compelling evidence, typically three or more consecutive years of cumulative profit or other positive evidence, that the future tax profitability will be sufficient to utilize the deferred tax asset. Due to the significant judgment involved in determining whether deferred tax assets will be realized, the ultimate resolution of these items may be materially different from the previously estimated outcome.

Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on the Company’s results of operations, cash flows or financial position.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Significant Accounting Policies  – (continued)

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across the Company’s global operations.

FASB ASC No. 740, provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. FASB ASC No. 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The Company recognizes tax liabilities in accordance with FASB ASC No. 740 and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.

n. Segment Reporting

The Company determines its reportable segments based on the guidance in FASB ASC No. 280, Segment Reporting. The Company defines its operating segments as components of its business where separate financial information is available and is routinely evaluated by management. Management reviews financial information based on four operating segments: Europe, Asia, North America, and South America. The Company aggregates the four operating segments into two reportable segments consistent with the aggregation criteria in FASB ASC No. 280 as the Company’s operations have similar economic characteristics, and share fundamental characteristics including the nature of the products, production processes, customers, margins, and distribution channels. The Company’s two reportable segments are the Americas, consisting of North and South America, and International, consisting of Europe and Asia. See note 16 for further discussion.

o. Foreign Currency Translation

The functional currency of the Company’s foreign operations is the local currency in which they operate. Assets and liabilities of the Company’s foreign operations are translated into U.S. dollars using the applicable period end rates of exchange. Results of operations are translated at applicable average rates prevailing throughout the period. Translation gains or losses are reported as a separate component of accumulated other comprehensive income in the accompanying Consolidated Statements of Equity/(Deficit), Other Comprehensive Income/(Loss), and Redeemable Preferred Units. Gains and losses resulting from foreign currency transactions, the amounts of which are not material in all periods presented, are included in net income/(loss).

p. Exit or Disposal Activities

Costs to idle, consolidate, or close facilities and provide postemployment benefits to employees on an other than temporary basis are accrued based on management’s best estimate of the wage and benefit costs that will be incurred. Costs related to idlings of employees that are expected to be temporary are expensed as incurred. Costs to terminate a contract without economic benefit to the Company are expensed at the time the contract is terminated. One-time termination benefits that are not subject to contractual arrangements provided to employees who are involuntarily terminated are recorded when management commits to a detailed plan of termination, that plan is communicated to employees, and actions required to complete the plan indicate that significant changes are not likely. If employees are required to render service until they are terminated in order to earn termination benefits, the benefits are recognized ratably over the future service period.

q. Share-based Compensation

The Company measures compensation cost arising from the grant of share-based awards to employees at fair value. The Company recognizes such costs in income over the period during which the requisite service is provided, usually the vesting period. See note 14 for further discussion.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Significant Accounting Policies  – (continued)

r. Accumulated Other Comprehensive Income/(Loss) (AOCI)

The components of accumulated other comprehensive loss, net of tax, in stockholders’ equity is as follows (in thousands):

		December 31, 2011				December 31, 2010
Foreign currency translation		$	17,713			$	29,808
Defined benefit plans, net			(99,727	)			(66,083	)
Unrealized loss on qualifying cash flow hedge, net			12				(255	)
Accumulated other comprehensive loss		$	(82,002	)		$	(36,530	)

During the year ended December 31, 2011, $1.9 million was transferred out of accumulated other comprehensive (AOCI) through net periodic benefit cost related to the amortization of the loss on the Company’s defined benefit plan. During the year ended December 31, 2010, $1.5 million was transferred out of AOCI through net periodic benefit cost related to the amortization of the loss on the Company’s defined benefit plan and $10.6 million and $2 million that had been recorded in AOCI related to the Company’s cash flow hedges were transferred out of AOCI through interest expense and income tax expense, respectively.

s. Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Generally, matters subject to estimation and judgment include amounts related to accounts receivable realization, inventory obsolescence, fair value measurements, pension and other postretirement benefit plan assumptions, restructuring reserves, self-insurance accruals, asset valuation reserves and accruals related to environmental remediation costs, asset retirement obligations and income taxes. Actual results may differ from those estimates and assumptions, and changes in such estimates and assumptions may affect amounts reported in future periods.

t. Accounting Standards Not Yet Adopted

Fair Value

On May 12, 2011, the FASB issued ASU 2011-04 which amended ASC No. 820, Fair Value Measurements and Disclosures. The ASU is the result of joint efforts by the FASB and the International Accounting Standards Board (“IASB”) to develop a single, converged fair value framework that provides guidance on how to measure fair value and on what disclosures to provide about fair value measurements. The ASU expands ASC No. 820’s existing disclosure requirements for fair value measurements and makes other amendments. Many of these amendments eliminate unnecessary wording differences between U.S. GAAP and International Financial Reporting Standards (“IFRS”). The ASU is effective for interim and annual periods beginning after December 15, 2011 for public entities. The Company is continuing to evaluate the effects, if any, that this ASU may have on its financial condition and results of operations.

Other Comprehensive Income

On June 16, 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,” which improves the comparability, consistency and transparency of financial reporting and increases the prominence of items reported in other comprehensive income. This ASU is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011, although early adoption is permitted. In December 2011, the FASB issued ASU 2011-12 “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” which defers certain aspects of ASU 2011-05 related to the presentation of reclassification adjustments. The

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Significant Accounting Policies  – (continued)

adoption of the revised guidance on January 1, 2012 is not expected to have a material impact on the Company’s consolidated financial statements. The new presentation will be included in the Company’s Quarterly Reporting on Form 10-Q for the quarter ended March 31, 2012.

Note 4. Restructuring and Asset Impairment Charges

The Company has executed various restructuring plans and may execute additional plans in the future to realign manufacturing capacity to prevailing global automotive production and to improve the utilization of remaining facilities. Estimates of restructuring charges are based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially recorded. Accordingly, the Company may record revisions of previous estimates by adjusting previously established reserves.

Restructuring Charges

Restructuring charges and asset impairments for each of our segments include the following (in thousands):

		Year Ended December 31,
		2011				2010				2009
International		$	(179	)		$	3,302			$	12,619
Americas			2,839				10,986				817
Consolidated		$	2,660			$	14,288			$	13,436

The following table sets forth net restructuring expense by type for the periods presented (in thousands):

		Year Ended December 31,
		2011				2010				2009
Employee termination costs		$	1,414			$	573			$	12,860
Other exit costs			1,246				3,716				5,699
Asset impairments			—				9,999				1,787
Restructuring income			—				—				(6,910	)
Total restructuring expense		$	2,660			$	14,288			$	13,436

The Company incurred restructuring expense of $2.7 million and $14.3 million during the years ended December 31, 2011 and 2010. The Company incurred restructuring expense of $20.3 million during the year ended December 31, 2009 which was offset by $6.9 million of restructuring income.

The restructuring income was related to the cancellation of an old customer program relating to the Company’s closed facility in Milwaukee, Wisconsin. This income was recorded in the Americas segment. As of December 31, 2009, all recoveries had been received.

The charges incurred during 2011, 2010, and 2009 primarily related to the following actions:

2011 Actions

During the year ended December 31, 2011, the charges incurred in the Americas segment related to the ongoing maintenance expense of facilities closed as a result of prior actions, in addition to severance costs in Brazil to improve manufacturing efficiencies. These charges were offset partially by a favorable liability adjustment pertaining to closed facilities.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Restructuring and Asset Impairment Charges  – (continued)

2010 Actions

During the fourth quarter of 2010, the Company recorded an impairment charge of $7.3 million related to its non-automotive business. The charge taken relates to the equipment specifically purchased for a contract with a solar customer that failed to materialize, less any anticipated salvage value. The Company also recorded an expense of $2.3 million related to the sale of a closed facility in Granite City, Illinois. During the first quarter of 2010, the Company classified its Bergisch Gladbach facility as held for sale (see note 5), which resulted in an impairment charge of $2.7 million to align the book value with the estimated fair value, less costs to sell. The additional charges incurred in 2010 in both the International and Americas segments related to other severance costs and ongoing maintenance of facilities closed as a result of prior actions.

2009 Actions

In July 2009 in the International segment, the Company announced the closure of its press shop in Bergisch Gladbach, Germany. This closure impacted 57 employees, who ceased employment with the Company in October 2009. Total estimated costs of the closure of this facility are $10.2 million which is comprised of $9.1 million of severance costs and $1.1 million of other exit costs. The Company recorded the entire charge of $10.2 million during 2009 related to the closure of the Bergisch press shop. The additional charges incurred in 2009 in both the International and Americas segments relate to other severance costs, ongoing maintenance of facilities closed as a result of prior actions, and an additional impairment charge on an asset held for sale.

Restructuring Reserve

The table below summarizes the activity in the accrual by segment, reflected in accrued liabilities in the Consolidated Balance Sheet, for the above-mentioned actions through December 31, 2011 (in thousands):

		International				Americas				Consolidated
Balance at December 31, 2009		$	8,187			$	1,561			$	9,748
Payments			(7,713	)			(3,419	)			(11,132	)
Increase in liability			580				3,731				4,311
Adjustment to liability			(233	)			(986	)			(1,219	)
Balance at December 31, 2010			821				887				1,708
Payments			(501	)			(1,496	)			(1,997	)
Increase in liability			—				937				937
Adjustment to liability			(179	)			(62	)			(241	)
Balance at December 31, 2011		$	141			$	266			$	407

Except as disclosed in the table above, the Company does not anticipate incurring additional material cash charges associated with the actions described above. The change in the liability above does not agree with the restructuring charges in the table above as certain items are expensed as incurred related to the actions described. The liability primarily relates to severance.

The liability decreased during the year ended December 31, 2011 primarily due to payments made relating to prior accruals. The majority of the $0.4 million restructuring reserve accrued as of December 31, 2011 is expected to be paid in 2012.

The liability decreased during 2010 primarily due to severance payments made relating to the closure of the Company’s facility in Bergisch Gladbach, Germany. In the Americas segment, the liability increased during the year primarily related to the sale of a closed facility; however, the majority of the payments relating to the sale were made as of December 31, 2010.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Restructuring and Asset Impairment Charges  – (continued)

During the year ended December 31, 2011, the Company incurred payments related to prior accruals in Europe of $0.5 million and in North America of $1.5 million. During the year ended December 31, 2010, the Company incurred payments related to prior accruals in Europe of $7.7 million and in North America of $3.4 million.

Note 5. Assets Held for Sale

The Company had three locations that were considered held for sale in accordance with FASB ASC No. 360, Property, Plant, and Equipment. The three locations were Gunpo, South Korea; Bergisch Gladbach, Germany; and Milwaukee, Wisconsin. The Gunpo facility was classified as held for sale in 2009 and the Bergisch and Milwaukee facilities were classified as held for sale in the first quarter of 2010. During the fourth quarter of 2011, the Company’s management has determined that it does not expect to sell the Bergisch or Milwaukee locations within one year. Accordingly, the Company has classified these locations as held and used. The following table summarizes assets held for sale by category (in thousands):

		December 31, 2011				December 31, 2010
Land		$	2,335			$	6,426
Building			1,692				1,752
Total		$	4,027			$	8,178

Note 6. Debt

Long-Term Debt

Long-term debt consists of the following (in thousands):

		December 31, 2011				December 31, 2010
Senior secured notes, due September 1, 2017 (net of discount of $8,685 and $11,410)		$	353,307			$	392,590
Revolving credit facility			54,000				—
Detroit investment fund indebtedness			798				—
Other foreign subsidiary indebtedness			160,266				147,034
Total long-term debt			568,371				539,624
Less current maturities			(106,533	)			(106,898	)
Long-term debt, net of current portion		$	461,838			$	432,726

The current maturities do not include capital lease obligations of $2.9 million and $3 million as of December 31, 2011 and 2010, respectively.

Future maturities of long-term debt as of December 31, 2011 are as follows (in thousands):

2012		$	106,533
2013			40,707
2014			9,474
2015			652
2016			54,652
Thereafter			356,353
Total		$	568,371

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6. Debt  – (continued)

Senior Secured Notes

On August 24, 2010, the Company’s subsidiaries, Tower Automotive Holdings USA, LLC and TA Holdings Finance, Inc. (collectively, the “Issuers”), issued $430 million in senior secured notes (the “notes offering”). The senior secured notes (the “notes”) were issued at an original issue discount of $12.8 million and bear an annual interest rate of 10.625%. The original issue discount is being amortized on a straight-line basis, which approximates the effective interest method, through interest expense over the term of the notes which increases the effective annual interest rate to 11.25%. The notes mature on September 1, 2017. The notes are jointly and severally and unconditionally guaranteed by the Company on a senior unsecured basis and by the existing domestic subsidiaries of the Company, other than the Issuers, that are guarantors under Tower Automotive Holdings USA, LLC’s existing revolving credit facility (the “Amended ABL revolver”) and existing letter of credit facility (the “Letter of Credit Facility”) (such domestic subsidiaries, the “Subsidiary Guarantors”) on a senior secured basis. The notes are senior secured obligations of the Issuers that, subject to certain permitted liens and exceptions, and subject to certain limitations with respect to enforcement, rank equally in right of payment to any existing and future senior indebtedness of the Issuers and are effectively junior to the extent of the collateral securing the Issuers’ and the Subsidiary Guarantors’ obligations on a first priority basis under the Amended ABL revolver. The notes and the subsidiary guarantees are effectively junior to any existing and future indebtedness of the Company’s subsidiaries that are not guaranteeing the notes. The notes also restrict the Company from paying cash dividends on its common stock.

The notes are secured, on a pari passu basis with the obligations under the Letter of Credit Facility, by (i) a first priority security interest in the assets of the Issuers and the Subsidiary Guarantors which have been pledged on a first priority basis to the agent for the benefit of the lenders under the Letter of Credit Facility and (ii) on a second priority basis to all other assets of the Issuers and the Subsidiary Guarantors which have been pledged on a first priority basis to the agent for the benefit of the lenders under the Amended ABL revolver.

Upon the occurrence of certain specified changes of control, the holders of the notes will have the right to require the Issuers to purchase all or a part of their notes at a repurchase price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest.

At any time prior to September 1, 2014, the Issuers may redeem some or all of the notes at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus a “make-whole” premium and accrued and unpaid interest. Additionally, prior to September 1, 2014, during any 12-month period, the Issuers may redeem up to 10% of the principal amount of the notes at a redemption price equal to 105% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. Further, the Issuers may redeem some or all of the notes at any time on or after September 1, 2014 at a redemption price equal to 105.313% of the principal amount of the notes to be redeemed through September 1, 2015, at any time on or after September 1, 2015 at a redemption price equal to 102.656% of the principal amount of the notes to be redeemed through September 1, 2016, and at 100% of the principal amount thereafter, plus accrued and unpaid interest. In addition, prior to September 1, 2013, the Issuers may redeem up to 35% of the original principal amount of the notes from the proceeds of certain equity offerings at a price of 110.625% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. The Company has concluded that bifurcation is not required for the embedded derivative related to the redemption provisions of the notes as it is clearly and closely related to the debt instrument or is not material.

On December 16, 2010, the Issuers redeemed $26 million of the notes at 105% which resulted in a premium paid of $1.3 million that was recognized as other expense. In connection with the redemption, the Issuers accelerated the amortization of the original issue discount and associated debt issue costs by $1.2 million in the fourth quarter of 2010.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6. Debt  – (continued)

On March 30, 2011, the Issuers redeemed $17 million of the notes at 105% which resulted in a premium paid of $0.9 million that was recognized as other expense. In connection with the redemption, the Issuers accelerated the amortization of the original issue discount and associated debt issue costs by $0.8 million in the first quarter of 2011.

On September 30, 2011, the Company reduced its outstanding debt by purchasing $17.5 million of the notes in the open market at 102%, which resulted in a premium paid of $0.4 million that was recognized as other expense. The notes purchased were immediately retired by the Company. In connection with the retirement, the Company accelerated the amortization of the original issue discount and associated debt issue costs by $0.7 million in the third quarter of 2011.

On October 6, 2011, the Company reduced its outstanding debt by purchasing $7.5 million of the notes in the open market at 101.75%, which resulted in a premium paid of $0.1 million that was recognized as other expense. The notes purchased were immediately retired by the Company. In connection with the retirement, the Company accelerated the amortization of the original issue discount and associated debt issue costs by $0.3 million in the third quarter of 2011.

As of December 31, 2011, the outstanding principal balance on the notes was $353.3 million (net of a remaining $8.7 million original issue discount).

Amended Revolving Credit Facility

On June 13, 2011, the Company entered into an Amended and Restated Revolving Credit and Guaranty Agreement (the “Amended Revolving Credit Facility Agreement”) by and among Tower Automotive Holdings USA, LLC (the “Borrower”), the Company, Tower Automotive Holdings I, LLC (“Holdco”), Tower Automotive Holdings II(a), LLC, Tower Automotive Holdings II(b), LLC, the subsidiary guarantors named therein, JPMorgan Chase Bank, N.A., Wells Fargo Capital Finance, LLC and each of the other financial institutions from time to time party thereto, as Lenders and JPMorgan Chase Bank, N.A., as Issuing Lender, as Swing Line Lender and as Administrative Agent (in such capacity, the “Agent”) for the Lenders.

The Amended Revolving Credit Facility Agreement amends and restates in its entirety the Revolving Credit and Guaranty Agreement dated as of July 31, 2007, by and among the Borrower, its domestic affiliate and domestic subsidiary guarantors named therein and the lenders party thereto and the Agent. The Amended Revolving Credit Facility Agreement provides for an asset-based revolving credit facility (the “Amended ABL Revolver”) in the aggregate amount of up to $150 million, subject to a borrowing base limitation. The maturity date for the Amended ABL Revolver is June 13, 2016.

The Revolving Credit and Guaranty Agreement dated as of July 31, 2007 provided for a revolving credit facility in the aggregate amount of $150 million, subject to a borrowing base limitation. Advances under the ABL revolver bore interest at a base rate or LIBOR, plus a margin, which were 0.75% for base rate borrowings and 1.75% for LIBOR-based borrowings prior to the amendment. The applicable margins were determined by the average availability under the ABL revolver during the preceding three months. The ABL revolver was scheduled to mature on July 31, 2012 prior to the Amended Revolving Credit Facility Agreement.

Advances under the Amended ABL Revolver will bear interest at an alternate base rate (which is the highest of the Prime Rate, the Federal Funds Rate plus ½% and the Adjusted LIBOR (as each such term is defined in the Amended Revolving Credit Facility Agreement) for a one month interest period plus 1%) plus a base rate margin or LIBOR plus a Eurodollar margin. The applicable margins are determined by the average availability under the Amended ABL Revolver over the preceding three consecutive full calendar months and as of the date of the Amended Revolving Credit Facility Agreement were 2.25% per annum and 3.25% per annum for base rate and LIBOR based borrowings, respectively.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6. Debt  – (continued)

The Amended Revolving Credit Facility is guaranteed by the Company, on an unsecured basis, and certain of the Company’s direct and indirect domestic subsidiaries, on a secured basis (the “Subsidiary Guarantors”). The Amended Revolving Credit Facility is secured by the same assets of the Borrower and the Subsidiary Guarantors that secured the obligations under the ABL revolver.

The Amended Revolving Credit Facility Agreement includes customary events of default and amounts due thereunder may be accelerated upon the occurrence of an event of default.

As of December 31, 2011, there was $137.6 million of borrowing availability under the Amended ABL Revolver, of which $54 million of borrowings were outstanding. As of December 31, 2011, the applicable margins were 2.25% per annum and 3.25% per annum for base rate and LIBOR based borrowings, respectively, resulting in a weighted average interest rate of 4.06% per annum.

Detroit Investment Fund

The Company assumed an unsecured debt instrument of $1 million owed to the Detroit Investment Fund, L.P. (“DIF”) upon the acquisition of substantially all of the assets of W Industries (see note 17). The debt instrument requires monthly principal and interest payments with an annual interest rate of 8.5%. The instrument is scheduled to mature in April 2014. As of December 31, 2011, the outstanding principal balance was $0.8 million.

Letter of Credit Facility

On June 13, 2011, the Company entered into a Letter of Credit Facility Agreement dated as of June 13, 2011 (the “Letter of Credit Facility Agreement”) by and among Tower Automotive Holdings USA, LLC (the “L/C Borrower”), the Company, JPMorgan Chase Bank, N.A., in its capacity as participant in respect of letters of credit issued thereunder, and JPMorgan Chase Bank, N.A., as Administrative Agent and Issuing Lender.

The Letter of Credit Facility Agreement provides for a letter of credit facility (the “Letter of Credit Facility”) for the issuance of up to $38 million of letters of credit with a sublimit for Euro dominated letters of credit (with an option to increase the Letter of Credit Facility to $44.5 million in the future). Upon a third party drawing on letters of credit issued under the Letter of Credit Facility, the L/C Borrower will become obligated to pay to the lenders the amounts so drawn. The expiration date of the Letter of Credit Facility is June 13, 2014.

On August 5, 2011, the Company amended the Letter of Credit Facility Agreement to reduce the Letter of Credit Facility from $38 million to $30 million (with an option to increase the Letter of Credit Facility to $44.5 million in the future). The remaining terms of the Letter of Credit Facility Agreement remained the same.

As of December 31, 2011, the outstanding letters of credit under the Letter of Credit Facility were $26.1 million. As of December 31, 2011, an 8.5% per annum fee is due on the total amount of the facility. This fee is subject to change in the future based upon then current market conditions.

The Letter of Credit Facility is guaranteed by the Company and certain of the Company’s direct and indirect domestic subsidiaries on an unsecured basis pursuant to a Guaranty entered into and made as of June 13, 2011.

The Letter of Credit Facility is unsecured. The Letter of Credit Facility Agreement contains customary covenants applicable to certain of the Company’s subsidiaries. The Letter of Credit Facility Agreement includes customary events of default and amounts due thereunder may be accelerated upon the occurrence of an event of default.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6. Debt  – (continued)

First Lien Term Loan

The first lien term loan was borrowed in two tranches, with $250 million advanced to a U.S. borrower (the “U.S. Borrower”) and the Euro currency equivalent of $260 million (€190.8 million) advanced to a European borrower (the “European Borrower”). The first lien term loan required principal payments of 1%, paid quarterly at the end of each January, April, July and October. Immediately prior to the repayment described below, funds and accounts managed by Cerberus Capital Management, L.P. (collectively with Cerberus Capital Management, L.P., “Cerberus” or “Members”) owned approximately 90% of the first lien term loan. The first lien term loan was scheduled to mature on July 31, 2013.

On August 13, 2010, in connection with the offering of the senior secured notes described above, Cerberus agreed to convert $25 million aggregate principal amount of indebtedness under the first lien term loan and, in exchange, received equity in the Company; however, no new units were issued.

On August 24, 2010, the outstanding principal balance on the U.S. Dollar and Euro tranches was repaid in full in connection with the issuance of the senior secured notes described above.

On June 13, 2011, the Company terminated its first lien term loan agreement with the repayment of the $27.5 million Letter of Credit Facility.

$27.5 million Letter of Credit Facility

The $27.5 million letter of credit facility (the “$27.5 million Letter of Credit Facility”) was fully cash collateralized by third party deposit lenders for purposes of replacing or backstopping letters of credit outstanding. The $27.5 million Letter of Credit Facility was part of the First Lien Term Loan and Guaranty Agreement (the “First Lien Agreement”), dated as of July 31, 2007, by and among Tower Automotive Holdings USA, LLC, Tower Automotive Holding Europe B.V., the guarantors named therein, the lenders, named therein and JPMorgan Chase Bank, N.A., as agent, but remained outstanding as it was not terminated when the first lien term loan was paid off in August 2010. The cash collateral was deposited by such third party deposit lenders in a deposit account, and the Company had no right, title or interest in the deposit account.

On June 13, 2011, the Company terminated the First Lien Agreement. At termination, Cerberus owned all of the $27.5 million Letter of Credit Facility. In connection with the termination of the First Lien Agreement, a $27.5 million deposit was returned to Cerberus in its capacity as a deposit lender.

Debt Issue Costs

The Company incurred interest expense related to the amortization of debt issue costs of $2.3 million, $7.8 million, and $3.5 million, respectively, during the years ended December 31, 2011, 2010, and 2009.

Other Foreign Subsidiary Indebtedness

As of December 31, 2011, other foreign subsidiary indebtedness of $160.3 million consists primarily of borrowings in South Korea of $98.6 million, borrowings in Brazil of $30.5 million, receivables factoring in Europe of $19.7 million, and a line of credit in Europe of $11.5 million.

Generally, borrowings of foreign subsidiaries are made under credit agreements with commercial lenders and are used to fund working capital and other operating requirements.

South Korea

As of December 31, 2011, the Company’s South Korean subsidiary had borrowings of $98.6 million (KRW 114.4 billion), consisting of secured indebtedness of $42.8 million (KRW 49.6 billion), secured bonds of $21.5 million (KRW 25 billion), unsecured corporate bonds of $17.2 million (KRW 20 billion) issued in connection with a government sponsored collateralized bond program, unsecured indebtedness of $12.8 million (KRW 14.8 billion), and unsecured bonds of $4.3 million (KRW 5 billion) which have annual

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6. Debt  – (continued)

interest rates ranging from 5.34% to 9.96% and maturity dates ranging from February 2012 to August 2014. As of December 31, 2011, the weighted average interest rate on the borrowings in South Korea was 7.05% per annum. The majority of these borrowings are subject to annual renewal. Substantially all of the assets of the Company’s South Korean subsidiary serve as collateral for the secured indebtedness and secured bonds.

During the fourth quarter of 2011, the Company renewed $7.1 million (KRW 8.2 billion) of maturing secured indebtedness and $4.3 million (KRW 5 billion) of a maturing unsecured bond for an additional year. The terms of the new loans are substantially the same as the other portfolio loans.

Brazil

As of December 31, 2011, the Company’s Brazilian subsidiary had borrowings of $30.5 million (R$56.8 million) which have annual interest rates ranging from 5.5% to 15.39% and maturity dates ranging from February 2012 to September 2021. As of December 31, 2011, the weighted average interest rate on the borrowings in Brazil was 13.16% per annum. This credit is provided through bilateral agreements with four local banks. Periodic interest and principal payments are required. The loans are secured by certain fixed and current assets.

During the fourth quarter of 2011, two of the local banks provided the Company with $11.5 million (R$21.5 million) in new term loans. One of the loans is a one-year term loan and the other loan has an extended maturity date through April 2013. The terms of the new loans are substantially the same as the other portfolio loans.

Europe

As of December 31, 2011, the receivables factoring facilities available to the Company were $25.8 million (€19.9 million), of which $19.7 million (€15.2 million) was drawn. These are uncommitted, demand facilities which are subject to termination at the discretion of the banks, and bear interest rates based on the average three month EURIBOR plus a spread ranging from 1.45% to 2.25%. The effective annual interest rates as of December 31, 2011 ranged from 2.88% to 3.68%, with a weighted average interest rate of 2.98% per annum. Any receivables factoring under these facilities is with recourse, and is secured by the accounts receivable factored. These receivables factoring transactions are recorded in the Company’s Consolidated Balance Sheet in short-term debt and current maturities of capital lease obligations.

During the fourth quarter of 2011, the Company obtained a secured line of credit of $11.5 million (€8.9 million). The facility bears an interest rate based on the one month EURIBOR plus 4%. The effective annual interest rate as of December 31, 2011 was 5.1% per annum. The installment loan is secured by mortgages over the land, certain buildings and other assets and is subject to negotiated prepayments upon the receipt of funds from completed tooling projects.

Covenants

As of December 31, 2011, the Company was in compliance with the financial covenants that govern its credit agreements.

Capital Leases

The Company had capital lease obligations of $15.1 million and $18.6 million as of December 31, 2011 and December 31, 2010, respectively, which expire between March 2013 and March 2018. Property under capital leases was $32.7 million and $33.5 million with $12 million and $7.8 million of accumulated depreciation as of December 31, 2011 and December 31, 2010, respectively.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Derivative Financial Instruments

The Company was required by its credit agreements to enter into two interest rate swap agreements during the third quarter of 2007. These derivative agreements effectively fixed interest rates on a portion of the Company’s European and U.S. first lien term loan tranches at 5.06% and 4.62%, respectively, and qualified for cash flow hedge accounting treatment under FASB ASC No. 815, Derivatives and Hedging. The swaps were designated as hedging instruments to offset the changes in cash flows resulting from changes in interest rates on this variable rate debt through August 31, 2010. In August 2010, the first lien term loan was repaid in full and the interest rate swaps expired. Under FASB ASC No. 815, each swap was recorded as a cash flow hedge in which the fair value was recorded as an asset or liability and the changes in the fair value were recorded as a component of other comprehensive income. Periodic measurement of hedge effectiveness was performed quarterly. Any changes in the effective portion of these derivatives were recorded as a component of accumulated other comprehensive income/(loss), a component of stockholders’ equity, while any ineffective portion was recorded in earnings and reflected in the consolidated Statement of Operations as part of interest expense. The following table presents the notional amount of interest rate swaps by class (in thousands):

Financial Instruments

Hedge Type

Notional Amount

Start Date

Maturity Date

Floating to fixed

Cash Flow

$

182,500

8/31/2007

8/31/2010

Floating to fixed

Cash Flow

€

100,000

8/31/2007

8/31/2010

During 2009, a pre-tax gain of $6 million was recorded in other comprehensive income relating to the two cash flow hedges. As of December 31, 2009, no ineffective portion existed and the fair values of these derivatives were recorded as a liability of $10.6 million in the Company’s Consolidated Balance Sheet in accrued liabilities. The fair value of our interest rate swaps was determined based on third-party valuation models. During the year ended December 31, 2010, $10.6 million and $2 million was expensed through interest expense and income tax expense, respectively, that had been recorded in accumulated other comprehensive income. During the year ended December 31, 2009, $6 million was expensed through interest expense that had been recorded in accumulated other comprehensive income.

Note 8. Selling, General, and Administrative Expenses

The Company’s selling, general and administrative (“SG&A”) expenses include costs associated with the Company’s sales efforts; engineering; centralized finance, human resources, purchasing, and information technology services; and other administrative functions. The Company has implemented one-time compensation programs that will result in compensation charges against earnings in 2010 and subsequent periods. See notes 14 and 18 for further description of each program. SG&A expenses include the following (in thousands):

		Year Ended December 31,
		2011				2010				2009
SG&A (excluding items below)		$	138,941			$	132,221			$	118,331
Special incentive program			—				6,700				—
Supplemental value creation program			4,419				1,509				—
Restricted stock units granted in connection with the IPO			13,932				2,866				—
Acquisition costs			1,100				679				—
Total		$	158,392			$	143,975			$	118,331

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Income Taxes

Tax Summary

The summary of income/(loss) before provision for income taxes and noncontrolling interests consisted of the following (in thousands):

		Year Ended December 31,
		2011				2010				2009
Domestic		$	2,721			$	(45,566	)		$	(38,811	)
Foreign			25,264				27,410				(21,325	)
Total		$	27,985			$	(18,156	)		$	(60,136	)

The provision/(benefit) for income taxes consisted of the following (in thousands):

		Year Ended December 31,
		2011				2010				2009
Current:
Domestic – Federal		$	178			$	—			$	—
Domestic – State			250				(114	)			192
Foreign			15,109				22,284				16,658
Total			15,537				22,170				16,850
Tax/(benefit) expense with offset in OCI:
Domestic – Federal			—				1,786				(4,398	)
Domestic – State			—				192				(503	)
Total			—				1,978				(4,901	)
Deferred
Domestic – Federal			—				—				—
Domestic – State			(370	)			—				238
Foreign			(355	)			(13,851	)			(13,291	)
Total			(725	)			(13,851	)			(13,053	)
Total provision/(benefit) for income taxes		$	14,812			$	10,297			$	(1,104	)

A reconciliation of income tax expense/(benefit) from continuing operations and the US federal statutory income tax expense/(benefit) were as follows (in thousands):

		Year Ended December 31,
		2011				2010				2009
Taxes at U.S. federal statutory rate		$	9,795			$	(6,355	)		$	(21,057	)
State tax expense/(benefit)			(120	)			372				1,626
Valuation allowance			3,136				3,607				19,496
Disallowed interest expense			1,103				1,171				1,506
Regional production tax – Italy			776				838				720
Foreign withholding taxes			688				2,476				(679	)
Tax/(benefit) expense in OCI			—				1,978				(4,901	)
Cancellation of debt income			—				4,529				—
Foreign tax rate differential			(348	)			(2,017	)			(1,706	)
Increase/(decrease) in uncertain tax positions			(689	)			1,869				2,824
Inflation adjustment – Mexico			(748	)			(913	)			(1,277	)
Other permanent differences			1,220				2,742				2,344
Total income tax expense/(benefit)		$	14,812			$	10,297			$	(1,104	)

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Income Taxes  – (continued)

Deferred income taxes are primarily provided for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The tax effects of each type of temporary difference and carryforward that give rise to a significant portion of deferred tax assets/(liabilities) are summarized as follows (in thousands):

		December 31, 2011				December 31, 2010
Deferred tax assets are attributable to:
Net operating loss carryforwards and tax credits		$	140,908			$	140,991
Accrued compensation and postretirement benefit obligations			46,130				33,505
Non-deductible reserves and other accruals			16,506				22,827
Leases			11,531				8,739
MRO inventory reserve			8,451				8,259
Total gross deferred assets			223,526				214,321
Less: valuation allowance			(188,336	)			(180,395	)
Net deferred income tax assets			35,190				33,926
Deferred tax liabilities are attributable to:
Deferred cancellation of indebtedness income			(16,310	)			(16,310	)
Long lived assets			(2,882	)			(810	)
Total gross deferred liabilities			(19,192	)			(17,120	)
Net deferred tax asset/(liability)		$	15,998			$	16,806

As of December 31, 2011, the amount of valuation allowance that existed was $188.3 million. The valuation allowance increased $7.9 million during 2011 primarily as a result of not recognizing tax benefits from the increases in U.S. post retirement benefit obligations. The Company continually monitors all available evidence to determine if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Based on this assessment, the Company continues to record a full valuation allowance against its deferred tax assets in the U.S. and certain international jurisdictions, primarily Mexico and the Netherlands. The amount of valuation allowance is approximately 81% domestic and 19% international. As of December 31, 2011, there is not any amount of the valuation allowance for which subsequently recognized benefits will be allocated to reduce goodwill or other intangible assets.

As of December 31, 2010, the amount of valuation allowance that existed was $180.4 million. The valuation allowance increased $8 million during 2010 primarily as a result of not recognizing tax benefits from operating losses in the U.S. where the Company has incurred cumulative losses. The $8 million worldwide increase was partially mitigated by a $9.1 benefit for the reversal of valuation allowances previously recorded on certain South Korean deferred tax assets. In 2011 the Company was able to significantly reduce most of these Korean temporary differences that had valuation allowances recorded against them in 2010.

The Company has U.S. net operating loss (“NOLs”) carryforwards of $194.2 million that expire during the years 2027 through 2031 and state NOL carryforwards of $46.3 million and state credit carryforwards of $22.5 million that expire during the years 2012 through 2031. The state NOL was reduced by $25.5 million from 2010 due to the enactment of a new Michigan Corporate Income Tax (CIT) in 2011. The new Michigan CIT law did not provide for the carryover of NOL’s generated under the old Michigan Business Tax. The Company has recorded deferred tax assets of $68 million and $25.6 million related to federal NOL carryforwards and state NOL and credit carryforwards, respectively.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Income Taxes  – (continued)

The Company’s international subsidiaries have NOL carryforwards of $172 million, other local income tax NOL carryforwards of $28.1 million and credit carryforwards of $2.7 million at December 31, 2011 of which some expire in 2014 and others are carried forward indefinitely. The Company has recorded deferred tax assets of $47.3 million related to the foreign NOL and credit carryforwards.

As of December 31, 2011, the Company has not provided for U.S. deferred income taxes and foreign withholding tax on the unremitted earnings of the Company’s international subsidiaries because such earnings are considered permanently reinvested and it is not practical to estimate the amount of income taxes that may be payable upon distribution. The Company has recorded a deferred income tax liability of $0.4 million for the expected future taxes relating to distributions within Europe and Asia.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of unrecognized tax benefits are as follows (in thousands):

		Year Ended December 31,
		2011				2010				2009
Unrecognized tax benefit – January 1		$	10,096			$	8,227			$	5,647
Increase in prior year tax positions			11,107				972				882
Decrease in prior year tax positions			(2,300	)			(262	)			—
Increase in current year tax positions			2,634				1,827				1,718
Audit settlements			(12	)			(152	)			(303	)
Lapse in statute of limitations			(679	)			(100	)			(75	)
Foreign currency translation			(343	)			(416	)			358
Total		$	20,503			$	10,096			$	8,227

The increase in prior year tax positions for 2011 includes increases that did not affect income tax expense in 2011. These unrecognized tax benefits were recorded in other balance sheet accounts or offset by NOLs in prior years.

Included in the balance of unrecognized tax benefits at December 31, 2011, 2010, and 2009 are $19.5 million, $9.1 million, and $7.4 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. These amounts are primarily associated with international tax issues such as the deductibility of interest expenses and the qualification of a China joint venture for a lower tax rate than the statutory tax rate. Also included in the balance of unrecognized tax benefits at December 31, 2011, 2010 and 2009 are $1 million, $1 million, and $0.8 million, respectively, of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.

The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. As of December 31, 2011 and 2010, the Company accrued for the payment of income tax related interest and penalties $3.7 million and $3.5 million, respectively. The amount of interest and penalty expense was $0.2 million, $1.1 million and $0.5 million for the years ended December 31, 2011, 2010, and 2009, respectively.

The Company is not currently under IRS or U.S. state income tax examination for any tax year. The Company is under examination in some international jurisdictions for the 2004 – 2010 tax years and has appealed a German audit assessment for tax year 2004. The Company believes appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Employee Benefit Plans

The Company sponsors various pension and other postretirement benefit plans for its employees.

In accordance with FASB ASC No. 805, Business Combinations, on August 1, 2007, the Company recorded a liability for the total projected benefit obligation in excess of plan assets for the pension plans and a liability for the total accumulated postretirement benefit obligation in excess of the fair value of plan assets for other postretirement benefit plans and for postretirement benefit settlement agreements, which were approved by the Bankruptcy Court and assumed by the Company.

Defined Benefit Retirement Plans

The Tower Automotive Consolidated Pension Plan (the “Pension Plan”) provides benefits for certain current and former U.S. employees. Benefits under the Pension Plan are based on years of service, compensation, and other factors. Effective October 1, 2006, the plan was frozen and ceased accruing any additional benefits. Contributions by the Company are intended to fund benefits that accrued through October 1, 2006.

The Company’s funding policy is to annually contribute amounts to the Pension Plan’s related trust sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Internal Revenue Code of 1986, as amended (the “Code”). The Company expects minimum contribution requirements to the Pension Plan of $20.4 million during 2012. Benefit payments under the Pension Plan are estimated to be $19.7 million, $18.9 million, $19 million, $18.2 million, and $17.7 million for the years ending December 31, 2012, 2013, 2014, 2015, and 2016, respectively, for a total of $93.5 million during that five-year period. Aggregate benefit payments under the Pension Plan for the years 2017 through 2021 are estimated to be $86.2 million.

The following table provides a reconciliation of the changes in the benefit obligations and fair value of assets for the Pension Plan (in thousands):

		Year Ended December 31, 2011				Year Ended December 31, 2010
Reconciliation of fair value of plan assets:
Fair value of plan assets at the beginning of the period		$	172,186			$	165,858
Actual return on plan assets			5,918				20,210
Employer contributions			16,289				9,741
Plan expenses paid			(1,438	)			(1,180	)
Benefits paid			(19,716	)			(22,443	)
Fair value of plan assets at the end of the period		$	173,239			$	172,186
Change in Benefit Obligations:
Benefit obligations at the beginning of the period		$	248,589			$	244,588
Service cost			30				29
Interest cost			12,601				13,211
Actuarial loss			27,958				13,204
Benefits paid			(19,716	)			(22,443	)
Benefit obligations at the end of the period		$	269,462			$	248,589
Funded status of the pension plan		$	(96,223	)		$	(76,403	)

At December 31, 2011 and 2010, the funded status is recorded as pension liability in the Consolidated Balance Sheet.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Employee Benefit Plans  – (continued)

At the December 31, 2011 measurement date, the accumulated benefit obligation of the Pension Plan was approximately $269 million. At December 31, 2010, the accumulated benefit obligation of the Pension Plan was approximately $248.4 million.

The following table provides the components of net periodic pension benefit cost for the Pension Plan (in thousands):

		Year Ended December 31,
		2011				2010				2009
Service cost		$	30			$	29			$	28
Interest cost			12,601				13,211				14,305
Expected return on plan assets			(11,259	)			(10,611	)			(10,063	)
Amortization of net losses			1,895				1,495				1,835
Net periodic benefit cost		$	3,267			$	4,124			$	6,105

Amounts recognized in other comprehensive income/(loss), pre-tax, at December 31, 2011 and 2010 consist of the following (in thousands):

		Year Ended December 31,
		2011				2010
Net actuarial loss		$	34,737			$	4,786
Amortization of net losses			(1,895	)			(1,495	)
Amount recognized		$	32,842			$	3,291

The net periodic benefit cost for the year ending December 31, 2012 will contain an estimated $3.1 million to be amortized from accumulated other comprehensive income.

The assumptions used in the measurement of the Company’s benefit obligation, based upon a December 31, 2011 and December 31, 2010 measurement date, are as follows:

		Year Ended December 31,
		2011				2010
Discount rate			4.50	%			5.25	%
Rate of compensation increase			4.50	%			4.50	%

The assumptions used in determining net periodic benefit cost are shown below:

		Year Ended December 31,
		2011				2010				2009
Discount rate			5.25	%			5.75	%			6.25	%
Expected return on plan assets			7.40	%			7.25	%			7.25	%
Rate of compensation increase			4.50	%			4.50	%			4.50	%

The present value of the Company’s pension benefit obligation is calculated through the use of a discount rate. The discount rate used is established annually at the measurement date and reflects the construction of a yield curve analysis from a third party, which calculates the yield to maturity that mirrors the timing and amounts of future benefit payments.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Employee Benefit Plans  – (continued)

The Company invests the assets of the Pension Plan in a diversified portfolio consisting of an array of asset classes that attempts to maximize returns while minimizing volatility. The Company’s allocations of Pension Plan assets on the December 31, 2011 and 2010 measurement dates, as well as the 2011 target allocation, are as follows:

		Year Ended December 31,
		2011				2010				2011 Target
Fixed income investments			43%				40%				45%
Equity securities			32%				35%				30%
Non-equity investments			25%				25%				25%
Real estate			—				—				—
Cash equivalents			—				—				—
Total			100%				100%				100%

The expected long-term rates of return on the plans’ assets assumptions are based on modeling studies completed with the assistance of the Company’s actuaries and investment consultants. The models take into account inflation, asset class returns, and bond yields for both domestic and foreign markets. These studies, along with the history of returns for the plans, indicate that expected future returns, weighted by asset allocation, supported an expected long-term asset return assumption of 7.4% for 2011 and 2010.

The Company’s investment goals are to achieve returns in excess of the plans’ actuarial assumptions, commensurate with the plans’ risk tolerance; to invest in a prudent manner in accordance with fiduciary requirements of ERISA; and to ensure that plan assets will meet the obligations of the plans as they come due.

Investment management of the plans is delegated to a professional investment management firm that must adhere to policy guidelines and objectives. An independent investment consultant is used to measure and report on investment performance; perform asset/liability modeling studies and recommend changes to objectives, guidelines, managers, or asset class structure; and keep the Company informed of current investment trends and issues.

The investment policy, as established by the Company’s Benefit Plans 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. Plan assets do not include equity securities of the Company.

Based on consideration of the plans’ projected benefit obligation, the plans’ ability to tolerate risk is in the moderate range. Asset allocation is consistent with this level of risk, with assets being a mix of equities and fixed income. Equity investments are diversified across U.S. and non-U.S. stocks. Minimum and maximum ranges are established for each asset class to control risk and maximize the effectiveness of the plans’ asset allocation strategy. Asset allocation is reviewed quarterly and rebalanced if necessary. Specific investment guidelines, restrictions, and investment return objectives exist for each asset class and corresponding investment manager.

Pension Plan assets are recorded at fair value. Fixed income and equity securities may each be combined into commingled fund investments. Commingled funds are valued to reflect the Company’s interest in the fund based on the reported year-end net asset value. The estimated fair values of debt securities held are based on

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Employee Benefit Plans  – (continued)

quoted market prices and/or market data for the same or comparable instruments. Due to the nature of pricing fixed income securities and the use of commingled fixed income funds, some of these instruments are classified as Level 2 or Level 3 investments within the fair value hierarchy described in this note. Fair value estimates for publicly-traded equity securities are based on quoted market prices and/or other market data for the same or comparable instruments. Collective trusts that hold securities directly are stated at fair value of the underlying securities, as determined by the administrator, based on readily determinable market values and as such are classified as Level 2 or Level 3 investments within the fair value hierarchy described in this note. Non-equity investments, which represent approximately 25% of Pension Plan assets, include investments in hedge funds, and are valued based on year-end reported net asset value. The balance sheet includes the funded status of the benefit plans, which represents the difference between the benefit obligations and fair value of Pension Plan assets.

The following table summarizes the Company’s Pension Plan assets measured at fair value as of December 31, 2011 and 2010 (in millions). See note 3 for definitions of Levels 1, 2, and 3 fair value hierarchy and the methods and assumptions to estimate fair value of marketable securities.

		Fair Value Measurements at December 31, 2011
Asset Classes		Total				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Cash		$	2			$	2			$	—			$	—
Equity securities			14				14				—				—
Mutual funds(a)			71				60				11				—
U.S. Treasuries			5				—				5				—
Corporate bonds			34				—				34				—
Equity long/short hedge funds(b)			47				—				—				47
Total		$	173			$	76			$	50			$	47

		Fair Value Measurements at December 31, 2010
Asset Classes		Total				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Cash		$	2			$	2			$	—			$	—
Equity securities			21				21				—				—
Mutual funds(a)			51				39				12				—
U.S. Treasuries			14				—				14				—
Corporate bonds			36				—				36				—
Equity long/short hedge funds(b)			48				—				—				48
Total		$	172			$	62			$	62			$	48

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Employee Benefit Plans  – (continued)

For Pension Plan assets with a fair value measurement using significant unobservable inputs (Level 3), the reconciliation of the beginning and ending balances are as follows (in millions):

Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)

		Equity Long/Short Hedge Funds
Beginning balance at December 31, 2009		$	20
Actual return on plan assets:
Relating to assets still held at the reporting date			2
Purchases			26
Balance at December 31, 2010			48
Actual return on plan assets:
Relating to assets still held at the reporting date			(1	)
Purchases			—
Ending balance at December 31, 2011		$	47

Defined Contribution Retirement Plans

The Company sponsors various qualified defined contribution retirement plans. Each plan serves a defined group of employees and has varying levels of Company contributions. The Company’s contributions may be required by collective bargaining agreements for certain plans. During 2011, 2010, and 2009, the Company contributed $3.8 million, $3.3 million and $3 million, respectively.

Retirement Plans of Non-U.S. Operations

The Company has no defined benefit pension plans associated with its non-U.S. operations. The Company primarily provides severance benefits to employees that have terminated their employment due to retirement or otherwise. The amount associated with such benefits depends upon the length of service of the employee and also upon whether the termination was voluntary or at the request of the Company. During 2011, 2010, and 2009, the Company recorded expenses associated with these non-U.S. plans of $3.4 million, $3.2 million, and $3.1 million, respectively.

Other Postretirement Plans

Defined-Dollar Capped Medical Plans

For the retirees of the Company’s Milwaukee, Wisconsin facility, a Voluntary Employee Beneficiary Association (“VEBA”) Trust was established and began administering medical insurance benefits for retirees and their dependents beginning July 1, 2006. A separate VEBA Trust was established and began administering benefits for retirees from the Company’s Greenville facilities and their dependents beginning September 1, 2006.

As of July 31, 2007, the Company assumed the liabilities associated with the VEBA Trusts described above and future benefit payments were capped at specified amounts to be paid through 2011. As a result, the Company determined that these arrangements represent defined benefit postretirement plans and defined-dollar capped plans in accordance with FASB ASC No. 715, Compensation — Retirement Benefits. The Company has accreted the interest cost through cost of sales until settlement in accordance with FASB ASC No. 715. Benefit payments during the years ended December 31, 2011, 2010, and 2009 were $0.6 million, $1.2 million, and $2 million, respectively. Interest accretion during the years ended December 31, 2011, 2010, and 2009 was less than $0.1 million, $0.1 million, and $0.2 million, respectively. At December 31, 2011 no further payments remain.

TOWER INTERNATIONAL, INC. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Employee Benefit Plans  – (continued)

Life Insurance Plans

As of July 31, 2007, the Company assumed life insurance benefits for certain U.S. retirees and the benefit plans pursuant to which such life insurance benefits are provided. Expected future life insurance benefit payments amount to $0.8 million for 2012 and $0.9 million for each year 2013 through 2016 for a total of $4.4 million during the five-year period. Aggregate expected benefit payments for the years 2017 through 2021 are $4.4 million.

The following table provides a reconciliation of the changes in the benefit obligations and funded status of the Company’s other post employment benefit plans (in thousands):

		Year Ended December 31, 2011(1)				Year Ended December 31, 2010(1)
Reconciliation of fair value of plan assets:
Fair value of plan assets at the beginning of the period		$	—			$	—
Employer contributions			420				431
Benefits paid			(420	)			(431	)
Fair value of plan assets at the end of the period		$	—			$	—
Change in Benefit Obligations:
Benefit obligations at the beginning of the period		$	13,922			$	13,831
Service cost			—				—
Interest cost			716				753
Actuarial loss (gain)			802				(231	)
Benefits paid			(420	)			(431	)
Benefit obligations at the end of the period		$	15,020			$	13,922
Funded status of life insurance plan		$	(15,020	)		$	(13,922	)