UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, 2006

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

For the transition period from                      to                     

TOWER AUTOMOTIVE, INC.

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		41-1746238 (I.R.S. Employer Identification No.)
27175 Haggerty Road Novi, Michigan (Address of principal executive offices)		48377 (Zip Code)

(248) 675-6000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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

Yes þ No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12(b)-2 of the Securities and Exchange Act.

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

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

Yes o No þ

The number of shares outstanding of the Registrant’s Common Stock, par value $.01 per share, at August 1, 2006, was 58,548,801 shares.

 

 

Tower Automotive, Inc.
Form 10-Q

Table of Contents

				Page
PART I. Financial Information
Item 1.		Financial Statements (unaudited):
		Condensed Consolidated Balance Sheets at March 31, 2006 and December 31, 2005			1
		Condensed Consolidated Statements of Operations for Three Months Ended March 31, 2006 and 2005			2
		Condensed Consolidated Statements of Cash Flows for Three Months Ended March 31, 2006 and 2005 (as restated)			3
		Notes to Condensed Consolidated Financial Statements			4
Item 1A.		Risk Factors			25
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3.		Quantitative and Qualitative Disclosure About Market Risk			30
Item 4.		Controls and Procedures			30
PART II. Other Information
Item 1.		Legal Proceedings			31
Item 6.		Exhibits			31
Signatures
Certification of Chief Executive Officer Pursuant to Rules 13a-15(e) and 15d-15(e)
Certification of Chief Financial Officer Pursuant to Rules 13a-15(e) and 15d-15(e)
Certification Pursuant to Section 906

PART 1 — FINANCIAL INFORMATION

ITEM 1. Financial Statements.

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

		March 31, 2006				December 31, 2005
ASSETS
Current Assets:
Cash and cash equivalents		$	124,211			$	65,791
Accounts receivable			425,637				363,040
Inventories			137,745				123,433
Prepaid tooling and other			156,803				185,646
Total current assets			844,396				737,910
Property, plant and equipment, net			999,238				1,038,794
Investments in joint ventures			235,318				228,634
Goodwill			156,483				153,037
Other assets, net			135,503				132,851
Total assets		$	2,370,938			$	2,291,226
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities Not Subject to Compromise:
Current maturities of long-term debt and capital lease obligations		$	129,956			$	151,755
Current portion of debtor-in-possession borrowings			612,000				—
Accounts payable			405,206				378,816
Accrued liabilities			168,332				169,248
Total current liabilities			1,315,494				699,819
Liabilities subject to compromise			1,290,969				1,284,217
Non-Current Liabilities Not Subject to Compromise:
Long-term debt, net of current maturities			107,208				107,823
Debtor-in-possession borrowings			—				531,000
Capital lease obligations, net of current maturities			30,034				30,308
Other non-current liabilities			110,663				125,682
Total non-current liabilities			247,905				794,813
Stockholders’ deficit:
Preferred stock			—				—
Common stock			666				666
Additional paid-in-capital			681,502				681,102
Accumulated deficit			(1,117,177	)			(1,106,840	)
Deferred compensation plans			—				(6,798	)
Accumulated other comprehensive income (loss)			903				(6,429	)
Treasury stock			(49,324	)			(49,324	)
Total stockholders’ deficit			(483,430	)			(487,623	)
Total liabilities and stockholders’ deficit		$	2,370,938			$	2,291,226

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

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

		Three Months Ended March 31,
		2006				2005
Revenues		$	769,720			$	915,880
Cost of sales			719,932				851,089
Gross profit			49,788				64,791
Selling, general and administrative expenses			34,037				43,206
Restructuring and asset impairment charges, net			2,522				31,895
Other operating income			(520	)			—
Operating income (loss)			13,749				(10,310	)
Interest expense (contractual interest of $38,881 in 2006 and $55,967 in 2005)			20,806				44,109
Interest income			(456	)			(439	)
Chapter 11 and related reorganization items			11,609				41,622
Loss before provision for income taxes, equity in earnings of joint ventures, and minority interest			(18,210	)			(95,602	)
Provision (benefit) for income taxes			(2,155	)			6,125
Loss before equity in earnings of joint ventures, and minority interest			(16,055	)			(101,727	)
Equity in earnings of joint ventures, net of tax			6,684				4,263
Minority interest, net of tax			(966	)			(1,334	)
Net loss		$	(10,337	)		$	(98,798	)
Basic and diluted loss per share		$	(0.18	)		$	(1.68	)
Weighted average basic and diluted shares outstanding			58,654				58,648

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

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

		Three Months Ended March 31,
		2006				2005
						(as restated
						see Note 1)
OPERATING ACTIVITIES:
Net loss		$	(10,337	)		$	(98,798	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Chapter 11 and related reorganization items, net			6,016				38,188
Non-cash restructuring and impairment, net			679				32,095
Depreciation			41,387				43,591
Deferred income tax provision (benefit)			(7,685	)			2,343
Equity in earnings of joint ventures, net			(6,684	)			(4,263	)
Change in working capital and other operating items			(20,069	)			(163,840	)
Net cash provided by (used in) operating activities			3,307				(150,684	)
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant and equipment			(28,860	)			(58,148	)
Cash proceeds from asset disposal			32,664				—
Net cash provided by (used in) investing activities			3,804				(58,148	)
FINANCING ACTIVITIES:
Proceeds from borrowings			11,139				16,151
Repayments of borrowings			(40,830	)			(433,435	)
Proceeds from DIP credit facility			216,000				623,738
Repayments of DIP credit facility			(135,000	)			(111,125	)
Net cash provided by financing activities			51,309				95,329
NET CHANGE IN CASH AND CASH EQUIVALENTS			58,420				(113,503	)
Cash and cash equivalents, beginning of period			65,791				149,101
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	124,211			$	35,598
Supplemental Cash Flow Information:
Interest paid, net of amounts capitalized		$	18,602			$	13,074
Income taxes paid (refunded)		$	1,043			$	(295	)
Non-cash investing activities:
Net decrease in liabilities for purchases of property, plant and equipment		$	(4,122	)		$	(26,171	)

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

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

Note 1. Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by Tower Automotive, Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished in the condensed consolidated financial statements includes primarily normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the SEC. Although the Company believes that the disclosures are adequate to make the information presented not misleading, these condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. The interim results for the periods presented are not indicative of the Company’s actual annual results.

As indicated in Note 2, Tower Automotive, Inc. and 25 of its U.S. Subsidiaries (collectively, the “Debtors”) are operating pursuant to Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) and continuation of the Company as a going concern is contingent upon, among other things, the Debtors’ ability: (i) to comply with the terms and conditions of the Debtor-in-Possession financing agreement described in Note 9; (ii) to obtain confirmation of a plan of reorganization under the Bankruptcy Code; (iii) to undertake certain restructuring actions relative to the Company’s operations in North America; (iv) to reduce unsustainable debt and other liabilities and simplify the Company’s complex and restrictive capital structure through the bankruptcy process; (v) to return to profitability; (vi) to generate sufficient cash flow from operations; and (vii) to obtain financing sources to meet the Debtors’ future obligations. The accompanying condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of liabilities that might result from the outcome of these uncertainties. In addition, a confirmed plan of reorganization will materially change amounts reported in the Company’s consolidated financial statements, which do not give effect to any adjustments of the carrying value of assets and liabilities that are necessary as a consequence of reorganization under Chapter 11.

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

Change in Accounting Principle

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

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

Restatement

Subsequent to the issuance of the Company’s Condensed Consolidated Financial Statements for the period ended March 31, 2005 the Company concluded that the Company must correct the presentation of its Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2005. Previously, the Company was reporting capital expenditures in its Condensed Consolidated Statement of Cash Flows on an accrual basis rather than on a cash basis. Accordingly, the Company reported capital expenditures in the Condensed Consolidated Statement of Cash Flows in the period in which the Company acquired legal title to the related property, plant or equipment rather than when the Company actually paid the vendor for such property, plant or equipment. The impact of

restating this presentation in the Condensed Consolidated Statement of Cash Flows from an accrual basis to a cash basis decreases or increases cash provided by operations with corresponding decreases or increases in cash utilized in investing activities.

As a result, the accompanying Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2005, including the Consolidating Financial Statements in Note 17, have been restated to correct this error. A summary of the impact of this restatement is as follows (in thousands):

		Three Months Ended
		March 31, 2005
		As previously				As
Consolidated Financial Statement Caption		reported				restated
Consolidated Statement of Cash Flows
Change in working capital and other operating items			(190,011	)			(163,840	)
Net cash used in operating activities			(176,855	)			(150,684	)
Cash disbursed for purchases of property, plant and equipment*			(31,977	)			(58,148	)
Net cash used in investing activities			(31,977	)			(58,148	)
Net decrease in liabilities for purchases of property, plant and equipment			—				(26,171	)

Note 2. Chapter 11 Reorganization Proceedings

On February 2, 2005 (the “Petition Date”), the Debtors filed a voluntary petition for relief under the Bankruptcy Code in the United States Bankruptcy Court Southern District of New York (“Bankruptcy Court”). The cases were consolidated for administrative purposes. The filing was made necessary by: customer pricing pressures, North American automotive production cuts, significantly higher material costs (primarily steel) and the termination of accelerated payment programs of certain customers adversely affecting the Debtor’s liquidity and financial condition, all of which raise substantial doubt as to the Company’s ability to continue as a going concern. The Debtors are operating their businesses as debtors-in-possession (“DIP”) pursuant to the Bankruptcy Code. An official committee of unsecured creditors has been appointed.

Pursuant to the provisions of the Bankruptcy Code, all actions to collect upon any of the Debtors’ liabilities as of the petition date or to enforce pre-petition date contractual obligations are automatically stayed. As a general rule, absent approval from the Bankruptcy Court, the Debtors are prohibited from paying pre-petition obligations. In addition, as a consequence of the Chapter 11 filing, pending litigation against the Debtors is generally stayed, and no party may take any action to collect pre-petition claims except pursuant to an order of the Bankruptcy Court. However, the Debtors have requested that the Bankruptcy Court approve certain pre-petition liabilities, such as employee wages and benefits and certain other pre-petition obligations. Since the filing, all orders sufficient to enable the Debtors to conduct normal business activities, including the approval of the Debtors’ DIP financing, have been entered by the Bankruptcy Court. See Note 9 for a description of the DIP financing. While the Debtors are in bankruptcy, transactions of the Debtors outside the ordinary course of business will require the prior approval of the Bankruptcy Court.

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

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

Financial Statement Classification

The majority of the Debtors’ pre-petition debt is in default and is classified as “Liabilities Subject to Compromise” in the accompanying Condensed Consolidated Balance Sheets at March 31, 2006 and December 31, 2005 (see Note 9).

In addition to the Debtors’ pre-petition debt which is in default, liabilities subject to compromise reflects the Debtors’ other liabilities incurred prior to the commencement of the bankruptcy proceedings. These amounts represent the Company’s estimate of known or

potential pre-petition claims to be resolved in connection with the bankruptcy proceedings. Such claims remain subject to future adjustments. Future adjustments may result from: (i) negotiations; (ii) actions of the Bankruptcy Court; (iii) further developments with respect to disputed claims; (iv) rejection of executory contracts and leases; (v) the determination of value of any collateral securing claims; (vi) proofs of claims; or (vii) other events. Payment terms for these claims will be established in connection with a plan of reorganization.

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

		March 31,				December 31,
		2006				2005
Debt:
5.75% Convertible senior debentures		$	124,999			$	124,999
6.75% Subordinated debentures			258,750				258,750
9.25% Senior Euro notes			181,755				177,600
12% Senior notes			258,000				258,000
Total debt			823,504				819,349
Pension and other post-retirement benefits			159,933				162,886
Pre-petition accounts payable and accruals			200,777				195,294
Accrued interest on debt subject to compromise			21,343				21,343
Executory contracts			85,412				85,345
Total liabilities subject to compromise		$	1,290,969			$	1,284,217

The Debtors have incurred certain professional and other expenses directly associated with the bankruptcy proceedings. The Company disbursed cash of approximately $5.6 million and $3.4 million relating to these expenses during the three months ended March 31, 2006 and 2005, respectively. In addition, the Debtors have made certain provisions to adjust the carrying value of certain pre-petition liabilities to reflect the Debtors’ estimate of allowed claims. Such costs are classified as Chapter 11 and related reorganization items in the accompanying Statements of Operations for the three months ended March 31, 2006 and 2005 and consist of the following (in thousands):

		Three Months Ended
		March 31,
		2006				2005
Professional fees directly related to the filing		$	8,580			$	12,194
Key employee retention costs			2,961				36
Write off of deferred financing costs			—				29,135
Estimated executory contract rejection damages			68				208
Other expenses directly attributable to the Company’s reorganization			—				49
Total		$	11,609			$	41,622

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

Debtors’ Financial Statements

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

Debtors’ Condensed Combined Balance Sheet
Debtors- in-Possession		March 31,				December 31,
(Amounts in thousands)		2006				2005
ASSETS
Current Assets:
Cash and cash equivalents		$	52,067			$	858
Accounts receivable			218,587				173,206
Inventories			68,281				60,068
Prepaid tooling and other			33,425				65,882
Total current assets			372,360				300,014
Property, plant and equipment, net			528,266				538,598
Investments in and advances to non-debtor subsidiaries			848,853				796,662
Other assets, net			56,340				60,959
Total assets		$	1,805,819			$	1,696,233
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities Not Subject to Compromise:
Current maturities of long-term debt and capital lease obligations		$	14,257			$	14,257
Current portion of debtor-in-possession borrowings			612,000				—
Accounts payable			145,838				134,069
Accrued liabilities			102,937				87,098
Total current liabilities			875,032				235,424
Liabilities subject to compromise			1,307,332				1,300,580
Non-Current Liabilities Not Subject to Compromise:
Long-term debt, net of current maturities			84,752				84,754
Long-term portion of debtor-in-possession borrowings			—				531,000
Other noncurrent liabilities			22,133				32,098
Total noncurrent liabilities			106,885				647,852
Total stockholders’ deficit			(483,430	)			(487,623	)
Total liabilities and stockholders’ deficit		$	1,805,819			$	1,696,233

Debtors’ Condensed Combined Statements of Operations Debtors- in-Possession		Three Months Ended March 31,
(Amounts in thousands)		2006				2005
Revenues		$	431,650			$	577,617
Cost of sales			416,258				545,144
Gross profit			15,392				32,473
Selling, general and administrative expenses			21,258				28,782
Restructuring and asset impairment charges, net			2,411				31,895
Other operating income			(1,305	)			—
Operating loss			(6,972	)			(28,204	)
Interest expense			18,020				40,685
Interest income			(321	)			(125	)
Inter-company interest income			(6,094	)			(5,890	)
Chapter 11 and related reorganization items			11,609				41,622
Loss before provision for income taxes, equity in earnings of joint ventures and equity in earnings from non-Debtor subsidiaries			(30,186	)			(104,496	)
Provision for income taxes			938				3,251
Loss before equity in earnings of joint ventures and equity in earnings of non-Debtor subsidiaries			(31,124	)			(107,747	)
Equity in earnings of joint ventures, net of tax			68				(89	)
Equity in earnings of non-Debtor subsidiaries			20,719				9,038
Net loss		$	(10,337	)		$	(98,798	)

Debtors’ Condensed Combined Statements of Cash Flows Debtors- in-Possession		Three Months Ended March 31,
(Amounts in thousands)		2006				2005
						(as restated)
OPERATING ACTIVITIES:		$	(10,337	)		$	(98,798	)
Net loss
Adjustments required to reconcile net loss to net cash provided by (used in) operating activities:
Chapter 11 and related reorganization items, net			6,016				38,188
Non-cash restructuring and impairment, net			679				32,095
Depreciation			24,202				27,040
Equity in earnings of joint ventures and subsidiaries, net			(20,787	)			(8,949	)
Change in working capital and other operating items			(13,804	)			(151,904	)
Net cash used for operating activities			(14,031	)			(162,328	)
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant and equipment			(15,757	)			(28,720	)
Net cash used for investing activities			(15,757	)			(28,720	)
FINANCING ACTIVITIES:
Repayments of borrowings			(3	)			(425,941	)
Proceeds from DIP credit facility			216,000				623,738
Repayments of DIP credit facility			(135,000	)			(111,125	)
Net cash provided by financing activities			80,997				86,672
NET CHANGE IN CASH AND CASH EQUIVALENTS			51,209				(104,376	)
Cash and cash equivalents, beginning of period			858				107,081
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	52,067			$	2,705

Note 3. New Accounting Pronouncements.

SFAS No. 151, “Inventory Costs, an Amendment of ARB No. 43, Chapter 4” (“SFAS No. 151”) — In November 2004, the FASB issued SFAS No. 151. The statement amends Accounting Research Bulletin 43, Chapter 4, to clarify that the abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) be recognized as current period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The adoption of this standard as of January 1, 2006 had no impact on the Company’s Condensed Consolidated Financial Statements.

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

Note 4. Accounts Receivable Securitization Facility

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

contributed receivables or cash. The Facility allowed the Company to earn fees for performing collection and administrative functions associated with the Facility. The Facility had an expiration date of the earlier of 36 months subsequent to December 30, 2004 or the occurrence of a termination event as defined in the agreement. The accounts receivable sold were removed from the consolidated balance sheet of the Company as these receivables and the QSPE met the applicable criteria of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” The Facility became unavailable on February 2, 2005, the date on which the Debtors filed a voluntary petition for relief pursuant to the Bankruptcy Code.

Note 5. Inventories

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

		March 31,				December 31,
		2006				2005
Raw materials		$	60,992			$	56,309
Work in process			37,499				30,710
Finished goods			39,254				36,414
		$	137,745			$	123,433

Note 6. Goodwill

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

Balance at December 31, 2005		$	153,037
Currency translation adjustment			3,446
Balance at March 31, 2006		$	156,483

Note 7. Investments in Joint Ventures

On February 10, 2004, the Company announced that a decision had been finalized by DaimlerChrysler to move the current production of the frame assembly for the Dodge Ram light truck from the Company’s Milwaukee, Wisconsin facility to the Company’s joint venture partner, Metalsa S. de R.L. (“Metalsa”) headquartered in Monterrey, Mexico. The Dodge Ram frame program produced in the Milwaukee facility was expected to run through 2009. Production at the Milwaukee facility related to this program ceased in June 2005. The Company recognized revenue associated with the Dodge Ram frame program in the amount of $46.5 million for the three months ended March 31, 2005. The Company is a 40% partner in Metalsa with Promotora de Empresas Zano, S.A. de C.V. (“Proeza”). Metalsa is the largest supplier of vehicle frames and structures in Mexico. In addition, the Company and Metalsa have a technology sharing arrangement. Metalsa has manufacturing facilities in Monterrey and San Luis Potosi, Mexico and Roanoke, Virginia.

Note 8. Restructuring and Asset Impairment Charges

The Company has executed various restructuring plans and may execute additional plans in the future to respond to its bankruptcy proceedings, customer sourcing decisions, realignment of manufacturing capacity to prevailing global automotive production and 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.

In February 2006, the Company announced that it would begin discussions with the union at its Greenville, Michigan manufacturing facility regarding closing the facility. During the first quarter of 2006 the Company finalized its decision to close the facility. Such closure is expected to be completed by December 2006. The Company expects to incur approximately $7.5 million of employee

termination costs, including potential costs to withdraw from a multi-employer retirement plan. In addition, the Company expects to incur approximately $2.9 million of other cash costs related to the relocation of equipment and other closure costs.

The table below summarizes the accrual for the Company’s various restructuring actions for the three months ended March 31, 2006 (in thousands):

		Severance				Other Costs				Total
Balance at December 31, 2005		$	523			$	—			$	523
Provision			—				4,067				4,067
Cash usage			(523	)			—				(523	)
Non-cash usage and revisions of estimates			—				(4,067	)			(4,067	)
Balance at March 31, 2006		$	—			$	—			$	—

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

Note 9. Debt

Chapter 11 Impact

Under the terms of the Company’s pre-petition credit agreement, the Chapter 11 filing created an event of default. Outstanding obligations under the pre-petition credit agreement were $425 million, which was refinanced through the DIP financing described below.

In addition, the Chapter 11 filing caused a default on the Convertible Debentures, Senior Notes, Senior Euro Notes and Subordinated Debentures (see Note 2).

Pursuant to SOP 90-7, the Company ceased recognizing interest expense on the Convertible Debentures, Senior Notes, Senior Euro Notes and Subordinated Debentures effective February 2, 2005. Contractual interest not accrued during the period from January 1, 2006 through March 31, 2006 is $18.1 million.

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

DIP Financing

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

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

Advances under the DIP Agreement bear interest at a fixed rate per annum equal to (x) the greatest (as of the date the advance is made) of the prime rate, the Base CD Rate (as defined in the DIP Agreement) plus 1%, or the Federal Funds Effective Rate (as defined in the DIP Agreement) plus 0.5%, plus (y) 1.75%, in the case of a loan under the revolving facility, or 2.25% in the case of the term loan. Alternatively, the Debtors may request that advances be made at a variable rate equal to (x) the Adjusted LIBO Rate (as defined in the DIP Agreement), for a one-month, three-month, six-month, or nine-month period, at the election of the Debtors, plus (y) 2.75%, in the case of a loan under the revolving facility, or 3.25% in the case of the term loan. In addition, the DIP Agreement obligates the Debtors to pay certain fees to the Lenders as described in the DIP Agreement. At March 31, 2006, $95.9 million was available for borrowing under the revolving credit and letter of credit facility. For the period of January 1, 2006 through March 31, 2006, the

weighted average interest rate associated with borrowings pertaining to the DIP Agreement was 7.67%. DIP commitment fees totaled $0.1 million during the period of January 1, 2006 through March 31, 2006. The DIP Agreement matures on February 2, 2007; however, the Debtors are obligated to repay all borrowings made pursuant to the DIP Agreement upon substantial consummation of a plan of reorganization of the Debtors that is confirmed pursuant to an order of the Bankruptcy Court.

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

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

Back-Stop Agreement

The Debtors have entered into a Back-Stop Agreement with a finance company (“Finance Company”). Under the Back-Stop Agreement, in the event any second lien lender under the pre-petition credit agreement wished to assign its deposits, rights and obligations after the Chapter 11 filing, the Finance Company agreed to take by assignment any such second lien holder’s deposits, rights and obligations in an aggregate amount not to exceed $155 million.

Draws were made against the second lien letters of credit of $41 million as of March 31, 2006.

Debt Classified as Not Subject to Compromise

The Company’s industrial development revenue bonds and the debt associated with the Company’s variable interest entity of $43.8 million and $14.3 million, respectively, are classified as liabilities not subject to compromise on the Company’s Condensed Consolidated Balance Sheet at March 31, 2006. The Company’s foreign subsidiary indebtedness of $168.2 million at March 31, 2006, is also not subject to compromise as the Company’s operating foreign subsidiaries are not included in the bankruptcy proceedings.

Interest Rate Swap Contracts

In February 2005, the Company’s interest rate swap contracts were terminated. The Company had previously de-designated one of the contracts as a cash flow hedge. Amounts previously deferred in other comprehensive income were deferred over the initial term of the contract, as the Company expected that the cash flows originally hedged would continue to occur. As of March 31, 2006, no amounts remain deferred in other comprehensive income (loss) as the remaining term of the contract expired during the quarter ended September 30, 2005.

Note 10. Comprehensive Loss

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

		For the three months ended March 31,
		2006				2005
Net loss		$	(10,337	)		$	(98,798	)
Change in cumulative translation adjustment			7,332				(7,951	)
Unrealized gain (loss) on qualifying cash flow hedges, net of tax $- and $-, respectively			—				1,727
Comprehensive loss		$	(3,005	)		$	(105,022	)

Note 11. Income Taxes

During the three months ended March 31, 2006, the Company recognized an income tax benefit of $2.2 million related to a pre-tax loss of $18.2 million. The Company recorded income tax expense that resulted from foreign income taxes related to the Company’s international operations and U.S. state taxes. Full valuation allowances were provided for U.S. Federal income tax benefits generated

during the 2006 period. These collective income tax provisions were offset by an $8.1 million tax benefit related to the reversal of a valuation allowance for certain tax loss carry-overs. The reversal of the valuation allowance resulted from the reorganization, completed in the 2006 period, at certain of the Company’s international operations. Such reorganization resulted in the ability to utilize tax loss carry-overs in future periods over a sufficiently long carry-forward period to cause the probability of their realization to be considered more likely than not.

During the three months ended March 31, 2005, the Company recognized income tax expense of $6.1 million in relation to a net loss of $95.6 million. This income tax provision resulted primarily from the recognition of foreign income taxes and state taxes. Full valuation allowances were provided for U.S. Federal income tax benefits generated during the 2005 period.

Note 12. Stockholders’ Deficit

Loss Per Share

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. The effects of common stock equivalents have not been included in diluted loss per share for all periods presented, as the effect would be anti-dilutive. Common stock equivalents totaled 96.5 million shares and 96.6 million shares for the three months ended March 31, 2006 and the three months ended March 31, 2005, respectively.

Stock-Based Compensation

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

For the three months ended March 31, 2005, the Company accounted for stock options using the intrinsic value approach in accordance with APB Opinion No. 25, under which no compensation expense is recognized when the stock options are granted to colleagues and directors with an exercise price equal to or greater than fair market value of the stock as of the grant date. The grant date represents the measurement date of the stock options. The Company may also grant stock options to outside consultants. The fair value of options granted to outside consultants is expensed over the period services are rendered based on the Black-Scholes valuation model.

The Company has three stock option plans and three stock purchase plans: the 1994 Key Employee Stock Option Plan; the Long Term Incentive Plan; and the Independent Director Stock Option Plan; and, the Employee Stock Purchase Plan; the Key Leadership Deferred Income Stock Purchase Plan; and the Director Deferred Income Stock Purchase Plan, respectively. Had compensation

expense for these plans been determined using a fair value approach the Company’s pro forma net loss and pro forma net loss per share would have been as follows (in thousands, except per share data):

		Three months ended
		March 31, 2005
Net loss
As Reported		$	(98,798	)
Add: Stock —based employee compensation expense included in reported net loss, net of tax related effects			274
Deduct: Total stock-based employee compensation (expense) income determined under fair value based method for all awards, net of related tax effects			112
Pro forma net loss		$	(98,636	)
Basic loss per share as reported		$	(1.68	)
Pro forma			(1.68	)
Diluted loss per share as reported		$	(1.68	)
Pro forma			(1.68	)

As of September 20, 2005, the Company fully vested all outstanding stock options. No expense was recognized related to these options.

The fair value of each option grant is estimated on the date of the grant using the Black Scholes option pricing model with the following assumptions for the 2005 period: risk free interest rate of 3.89%; expected life of seven years; expected volatility of 61.2%; and no expected dividends. No options were granted or exercised during the 2006 period.

Stock Option Plans

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

The Stock Option Plan provides for the issuance of options to purchase up to 3,000,000 shares of common stock at exercise prices equal to the market price of the common stock on the date of grant, subject to certain adjustments reflecting changes in the Company’s capitalization. As of March 31, 2006, 1,169,660 shares of common stock were available for issuance under the Stock Option Plan.

The only option activity under the Stock Option Plan during the three months ended March 31, 2006 was forfeitures of 5,500 shares with a weighted-average exercise price of $7.56. The aggregate intrinsic value is zero as the fair value of all options was less than the exercise price.

A summarization of stock options outstanding related to the Stock Option Plan at March 31, 2006 follows:

		Number		Options Outstanding				Options Exercisable
Range of		Outstanding		Weighted-Average		Weighted-		Number		Weighted-
Exercisable		At		Remaining		Average		Exercisable		Average
Options		3/31/06		Contractual Life		Exercise Price		3/31/06		Exercise Price
17.13 — 22.97		94,500		2.39		$18.26		94,500		$18.26

Incentive Plan

The Tower Automotive Inc. Long Term Incentive Plan (“Incentive Plan”), which was approved by stockholders and adopted in 1999, is designed to promote the long-term success of the Company through stock based compensation by aligning the interests of participants with those of its stockholders. Eligible participants under the Incentive Plan include key company colleagues, directors, and outside consultants. Awards under the Incentive Plan may include stock options, stock appreciation rights, performance shares and other stock based awards. The option exercise price must be at least equal to the fair value of the Common Stock at the time the option is granted. The Company’s Board of Directors determines vesting at the date of grant and in no event can be less than six months from the date of grant. The Incentive Plan provides for the issuance of up to 3,000,000 shares of common stock. As of March 31, 2006, 1,703,833 shares of common stock were available for issuance under the Incentive Plan. A committee of the Board of Directors is responsible for administration, participant selection and determination of terms and conditions of the Incentive Plan.

The only option activity under the Incentive Plan during the three months ended March 31, 2006 was forfeitures of 57,450 shares with a weighted-average exercise price of $11.32. The aggregate intrinsic value is zero as the fair value all options was less than the exercise price.

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

		Number		Options Outstanding				Options Exercisable
Range of		Outstanding		Weighted-Average				Number
Exercisable		At		Remaining		Weighted-Average		Exercisable		Weighted-Average
Options		3/31/06		Contractual Life		Exercise Price		3/31/06		Exercise Price
$1.99 - $7.08		729,925		7.87		$3.40		729,925		$3.40
11.33 — 15.56		1,018,650		4.86		12.93		1,018,650		12.93
26.81		121,490		3.06		26.81		121,490		26.81

Director Option Plan

In February 1996, the Company’s Board of Directors approved the Tower Automotive, Inc. Independent Director Stock Option Plan (the “Director Option Plan”) that provides for the grant of options to independent directors, as defined in the plan, to acquire up to 200,000 shares of the Company’s Common Stock, subject to certain adjustments reflecting changes in the Company’s capitalization. As of March 31, 2006, 84,800 shares of common stock were available for issuance under the Director Option Plan. The option exercise price must be at least equal to the fair value of the Common Stock at the time the option is granted. The Company’s Board of Directors determines vesting at the date of grant and in no event can be less than six months from the date of grant.

The only option activity under the Director Option Plan during the three months ended March 31, 2006 was forfeitures of 15,000 shares with a weighted-average exercise price of $7.56. The aggregate intrinsic value is zero as the fair value all options was less than the exercise price.

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

				Options Outstanding				Options Exercisable
Range of		Number		Weighted-Average				Number
Exercisable		Outstanding		Remaining		Weighted-Average		Exercisable		Weighted-Average
Options		At 3/31/06		Contractual Life		Exercise Price		3/31/06		Exercise Price
$18.94-$22.97		85,200		1.83		$19.63		85,200		$19.63

The Company provides certain medical benefits for retired employees and has reached agreements with certain retirees and active U.S. employees to modify the benefits payable under the various plans (see Note 16). The Company’s benefit obligations under these post-retirement benefit plans may be subject to compromise under the Company’s bankruptcy proceedings.

Note 14. Segment Information

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

		North America				International				Total
Three months ended March 31, 2006:
Revenues		$	441,387			$	328,333			$	769,720
Operating income (loss)			(8,856	)			22,605				13,749
Restructuring and asset impairment charges			2,411				111				2,522
Total assets		$	1,228,272			$	1,142,666			$	2,370,938
Three months ended March 31, 2005:
Revenues		$	589,608			$	326,272			$	915,880
Operating income (loss)			(29,851	)			19,541				(10,310	)
Restructuring and asset impairment charges			31,895				—				31,895
Total assets		$	1,419,893			$	1,130,072			$	2,549,965

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

Note 15. Commitments and Contingencies

Key Employee Retention Plan Agreements

On March 30, 2005, the Bankruptcy Court entered an order approving the execution and implementation of a Key Employee Retention program by the Company and the assumption of certain executive contracts. Under the order, three separate retention funds were made available, including specific retention incentives for approximately 100 Key Employees (“the Core KERP Agreements”). Under the Core KERP Agreements, the Company agreed to pay the applicable employee a retention incentive. The total amount of the retention incentive (which varies by employee from 40% to 110% of base salary) is payable in four installments of 25% each, conditioned upon the employee’s continued employment by the Company through each of the scheduled payment dates. The four scheduled payment dates are (1) May 2, 2005; (2) November 2, 2005; (3) the confirmation of a plan of reorganization in the Company’s Chapter 11 proceedings; and (4) six months after the confirmation of a plan of reorganization in the Company’s Chapter 11 proceedings. In addition, a transition incentive pool was established for Key Employees whose roles will be phased out, but whose employment during such phase out remains critical and a discretionary fund was made available to address unanticipated retention needs. The cost of the Key Employee Retention program and the assumption of certain executive contracts is approximately $13.2 million. During the three months ended March 31, 2006, the Company recognized expense of $3.0 million in relation to this plan.

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

Environmental Matters

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

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. The established liability for environmental matters is based upon management’s best estimates of expected investigation/remediation costs related to environmental contamination. It is possible that actual costs associated with these matters will exceed the environmental reserves established by the Company. Inherent uncertainties exist in the estimates, primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability and evolving technologies for handling site remediation and restoration. As of March 31, 2006 and December 31, 2005, the Company had accrued approximately $11.8 million and $11.4 million, respectively, for environmental remediation.

Litigation

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

On February 2, 2005, the Debtors filed a voluntary petition for relief under the Bankruptcy Code. The cases of each of the Debtors were consolidated for the purpose of joint administration (see Note 2). As a result of the commencement of the Chapter 11 proceedings by the Debtors, an automatic stay has been imposed against the commencement or continuation of legal proceedings, pertaining to claims existing as of February 2, 2005, against the Debtors outside of the Bankruptcy Court. Claimants against the Debtors may assert their claims in the Chapter 11 proceedings by filing a proof of claim, to which the Debtors may object and seek a determination from the Bankruptcy Court as to the allowability of the claim. Claimants who desire to liquidate their claims in legal proceedings outside of the Bankruptcy Court will be required to obtain relief from the automatic stay by order of the Bankruptcy Court. If such relief is granted, the automatic stay will remain in effect with respect to the collection of liquidated claim amounts. Generally, all claims against the Debtors that seek a recovery from assets of the Debtors’ estates will be addressed in the Chapter 11 proceedings and paid only pursuant to the terms of a confirmed plan of reorganization. The Company requested an extension of the required due date for the filing of its plan of reorganization. The Bankruptcy Court approved an extension of the due date to August 26, 2006.

Following the above-referenced filing, certain claims were filed against certain current and former officers and directors of Tower Automotive, Inc., alleging various (1) violations of the federal securities laws (the “Securities Litigation”), and (2) breaches of fiduciary duties to participants in and beneficiaries of the Company’s various 401(k) retirement plans in connection with the availability of the common stock of Tower Automotive, Inc. as an investment option under the plans (the “ERISA Litigation”). Defendants have moved to dismiss the claims in each of the cases. The motions are pending in federal court in the Southern District of New York.

On November 29, 2005, the Company’s joint venture partner in Metalsa, Grupo, S.A. de C.V. (“Proeza”) filed a lawsuit in Mexico against Tower Mexico, Metalsa, and certain of Tower Mexico’s directors. Proeza’s lawsuit alleges certain breaches of Tower Mexico’s obligations under the governing documents of the joint venture and asserts certain rights in connection with the alleged change in control of Tower Mexico. As a result of these allegations, Proeza seeks either the rescission of the joint venture relationship or the redemption of Tower Mexico’s investment in Metalsa. The Company believes that Proeza’s claims and assertions are without merit and have vigorously defended this matter, including the venue of the litigation.

In addition, the Company has initiated an adversary proceeding against Proeza in the Chapter 11 proceedings. In the adversary proceeding, the Company alleges that Proeza filed the Mexico lawsuit in violation of the governing documents of the joint venture and seeks an order staying the Mexico lawsuit and compelling Proeza to arbitrate the claims raised therein under the auspices of the International Chamber of Commerce (ICC) in Paris, France. The Company has also filed with the ICC a request for arbitration of the disputes raised in the Mexico lawsuits.

Note 16. Subsequent Events

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

In May 2006, the Bankruptcy Court approved the agreements. As a result, salaried retirees will continue to receive current benefits through June 30, 2006. The salaried retirees will establish a Voluntary Employee Benefit Association (VEBA) trust to administer benefits after June 30, 2006. The Company contributed cash of $0.6 million to the VEBA on June 30, 2006. The Company will also provide certain cash and equity consideration to the VEBA upon emergence from bankruptcy. Such consideration will total approximately $5 million. The Company will provide certain supplemental cash payments to the VEBA, until such time as the Company emerges from bankruptcy.

The agreement with current employees and retirees represented by unions at the Company’s Milwaukee, WI facility was also submitted for Bankruptcy Court approval. Under the agreement, the Company will continue current benefit payments through June 30, 2006. A separate VEBA was established and will administer benefits for retirees and their dependents beginning July 1, 2006. The Company contributed cash of approximately $2.5 million on June 30, 2006. The Company will contribute approximately $30 million in equity of the reorganized Company upon emergence from bankruptcy. In addition, the Company may make additional cash contributions to the VEBA if the reorganized Company meets certain financial targets. The Company will make certain supplemental cash payments to the VEBA, until such time as the Company emerges from bankruptcy. In addition, the Company will make payments totaling approximately $3.5 million in settlement of all other outstanding matters with the impacted employees.

In May, 2006, the Company announced its intention to enter into decision bargaining to downsize its Bluffton, OH facility and move work to other facilities in the U.S.

On June 26, 2006, the Company announced that it will phase out of production at its Toronto, Ontario aluminum foundry and mini-mill by August 31, 2006, as part of its ongoing restructuring plan. This action is part of the Company’s ongoing strategy to improve operational efficiency and cost competitiveness while focusing on its core business of automotive structural stampings and assemblies. Total estimated costs associated with this action amount to approximately $19.9 million, which is comprised of employee related costs of $4.3 million, asset impairment charges of $14.5 million, other non cash charges of $0.7 million and other costs of $0.4 million. Future cash expenditures for these actions are estimated at $4.7 million.

On July 19, 2006, the Company issued a press release announcing tentative contract agreements with the United Auto Workers union and the United Steelworkers union covering approximately 2,100 Company employees. The agreements are subject to ratification by both unions’ affected memberships, and they also must be approved by the U.S. Bankruptcy Court overseeing the Company’s Chapter 11 case.

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

Note 17. Consolidating Guarantor and Non-Guarantor Financial Information

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

TOWER AUTOMOTIVE INC.
Consolidating Balance Sheet at March 31, 2006
(Amounts in thousands)

														Non-Guarantor				Non-Guarantor
		R.J. Tower				Parent								Restricted				Unrestricted
		Corporation				Guarantor				Guarantor Companies				Companies				Companies				Eliminations				Consolidated
Assets
Current assets:
Cash and cash equivalents		$	52,008			$	—			$	59			$	72,009			$	135			$	—			$	124,211
Accounts receivable			3,403				4,152				211,032				184,144				22,906				—				425,637
Inventories			—				—				68,281				52,902				16,562				—				137,745
Prepaid tooling and other			4,556				—				28,869				91,022				32,356				—				156,803
Total current assets			59,967				4,152				308,241				400,077				71,959				—				844,396
Property, plant and equipment, net			519				—				527,747				305,934				165,038				—				999,238
Investments in and advances to (from) affiliates			645,863				(95,994	)			(777,524	)			36,254				(3,569	)			430,288				235,318
Goodwill			—				—				—				156,483				—				—				156,483
Other assets, net			25,236				—				31,104				61,764				17,399				—				135,503
		$	731,585			$	(91,842	)		$	89,568			$	960,512			$	250,827			$	430,288			$	2,370,938
Liabilities and Stockholders’ Investment (Deficit)
Current liabilities not subject to compromise:
Current maturities of long-term debt and capital lease obligations		$	—			$	—			$	14,257			$	19,332			$	96,367			$	—			$	129,956
Current portion debtor-in-possession borrowings			612,000				—				—				—				—				—				612,000
Accounts payable			7,535				—				138,303				193,876				65,492				—				405,206
Accrued liabilities			42,391				—				60,546				52,817				12,578				—				168,332
Total current liabilities			661,926				—				213,106				266,025				174,437				—				1,315,494
Liabilities subject to compromise			625,046				391,588				290,698				—				—				(16,363	)			1,290,969
Non-current liabilities not subject to compromise:
Long-term debt, net of current maturities			40,986				—				43,766				5,943				16,513				—				107,208
Obligations under capital leases, net of current maturities			—				—				—				30,034				—				—				30,034
Other noncurrent liabilities			2,776				—				19,357				74,642				13,888				—				110,663
Total noncurrent liabilities			43,762				—				63,123				110,619				30,401				—				247,905
Stockholders’ investment (deficit)			(599,149	)			(483,430	)			(477,359	)			583,868				45,989				446,651				(483,430	)
		$	731,585			$	(91,842	)		$	89,568			$	960,512			$	250,827			$	430,288			$	2,370,938

TOWER AUTOMOTIVE INC.
Consolidating Statement of Operations for the Three Months Ended March 31, 2006
(Amounts in thousands)

														Non-Guarantor				Non-Guarantor
		R.J. Tower				Parent								Restricted				Unrestricted
		Corporation				Guarantor				Guarantor Companies				Companies				Companies				Eliminations				Consolidated
Revenues		$	—			$	—			$	431,650			$	246,014			$	92,056			$	—			$	769,720
Cost of sales			(2,099	)			—				418,357				215,524				88,150				—				719,932
Gross profit			2,099				—				13,293				30,490				3,906				—				49,788
Selling, general and administrative expenses			(9,876	)			—				31,134				10,216				2,563				—				34,037
Restructuring and asset impairment charges, net			5				(4,142	)			6,548				303				(192	)			—				2,522
Other operating expense/(income)			(7,948	)			—				6,643				785				—				—				(520	)
Operating income (loss)			19,918				4,142				(31,032	)			19,186				1,535				—				13,749
Interest expense			17,165				—				855				743				2,043				—				20,806
Interest income			(318	)			—				(3	)			47				(182	)			—				(456	)
Intercompany interest expense/(income)			(6,094	)			—				—				6,427				(333	)			—				—
Chapter 11 and related reorganization items			11,541				68				—				—				—				—				11,609
Income (loss) before provision for income taxes, equity in earnings of joint ventures, and minority interest			(2,376	)			4,074				(31,884	)			11,969				7				—				(18,210	)
Provision (benefit) for income taxes			746				62				130				(3,096	)			3				—				(2,155	)
Income (loss) before equity in earnings of joint ventures, and minority interest			(3,122	)			4,012				(32,014	)			15,065				4				—				(16,055	)
Equity in earnings of joint ventures, net of tax			(11,227	)			(14,349	)			—				6,616				—				25,644				6,684
Minority interest, net of tax			—				—				—				(966	)			—				—				(966	)
Net income (loss)		$	(14,349	)		$	(10,337	)		$	(32,014	)		$	20,715			$	4			$	25,644			$	(10,337	)

TOWER AUTOMOTIVE, INC.
Consolidating Statement of Cash Flows for the Three Months Ended March 31, 2006
(Amounts in thousands)

														Non-Guarantor				Non-Guarantor
		R. J. Tower				Parent								Restricted				Unrestricted
		Corporation				Guarantor				Guarantor Companies				Companies				Companies				Eliminations				Consolidated
OPERATING ACTIVITIES:
Net income (loss)		$	(14,349	)		$	(10,337	)		$	(32,014	)		$	20,715			$	4			$	25,644			$	(10,337	)
Adjustments required to reconcile net income (loss) to net cash provided by (used in) operating activities:
Chapter 11 and related reorganization items, net			5,948				68				—				—				—				—				6,016
Non-cash restructuring and impairment, net			—				—				679				—				—				—				679
Depreciation			83				—				24,119				11,035				6,150				—				41,387
Deferred income tax provision (benefit)			—				—				—				(11,861	)			4,176				—				(7,685	)
Equity in earnings of joint ventures, net			11,227				14,349				—				(6,616	)			—				(25,644	)			(6,684	)
Change in working capital and other operating items			(32,603	)			(4,080	)			22,879				(2,920	)			(3,345	)			—				(20,069	)
Net cash provided by (used in) operating activities			(29,694	)			—				15,663				10,353				6,985				—				3,307
INVESTING ACTIVITIES:
Cash disbursed for purchases of property, plant and equipment			—				—				(15,757	)			(9,031	)			(4,072	)			—				(28,860	)
Cash proceeds from asset disposal			—				—				—				—				32,664				—				32,664
Net cash provided by (used in) investing activities			—				—				(15,757	)			(9,031	)			28,592				—				3,804
FINANCING ACTIVITIES:
Proceeds from borrowings			—				—				—				9,886				1,253				—				11,139
Repayments of borrowings			—				—				(3	)			(3,989	)			(36,838	)			—				(40,830	)
Proceeds from DIP credit facility			216,000				—				—				—				—				—				216,000
Repayments of DIP credit facility			(135,000	)			—				—				—				—				—				(135,000	)
Net cash provided by (used for) financing activities			81,000				—				(3	)			5,897				(35,585	)			—				51,309
NET CHANGE IN CASH AND CASH EQUIVALENTS			51,306				—				(97	)			7,219				(8	)			—				58,420
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			702				—				156				64,790				143				—				65,791
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	52,008			$	—			$	59			$	72,009			$	135			$	—			$	124,211