Tower International, Inc.

During the fourth quarter of 2018, our subsidiaries Tower Automotive Holdings III Cooperatie U.A. and Tower Automotive Holdings USA, LLC entered into a Memorandum of Understanding and Stock Purchase Agreement with Financière SNOP Dunois S.A. (the “Purchaser”). Pursuant to these agreements, the Purchaser will acquire all of the stock of TA Holdings Europe B.V., our indirect wholly owned subsidiary, and an intercompany loan, for a purchase price of  €255 million on a cash free, debt free basis, subject to working capital and other customary adjustments and a reduction to the extent that capital expenditures for our European operations for calendar year 2018 were less than €45 million. Approval of the transaction is subject to (i) the approval of the European Commission and (ii) the absence of a material breach in any of the seller parties’ fundamental representations (e.g., title, authority and absence of insolvency). On February 13, 2019, we obtained the required approvals from the European Commission. During the first quarter of 2019, we expect to consummate the transaction and receive net sale proceeds of approximately $250 million after payment of transaction costs and the repayment of our cross currency swap.

insolvency, financial statements and other financial matters, compliance with law, employment matters, real property, litigation, taxes, material contracts and environmental matters. The agreement provides for indemnification by the Company and its subsidiaries with respect to its representations, subject, in general, to customary minimum and maximum thresholds. However, with respect to the environmental representations, the agreement provides for a layering of responsibilities over the applicable minimum threshold: (i) the Purchaser and Tower Automotive Holdings III Cooperatie U.A. will share in the first €5 million of damages, (ii) for damages between €5 million and €10 million, Tower Automotive Holdings III Cooperatie U.A. will have exclusive responsibility and (iii) for damages in excess of  €10 million, the Purchaser will have exclusive responsibility.

Goodwill represents the excess of the cost of an acquisition over the fair value of net assets acquired. Goodwill is not amortized, but it is tested for impairment on, at a minimum, an annual basis. In accordance with FASB ASC No. 350, Intangibles — Goodwill and Other, we qualitatively assess the goodwill assigned to each of our reporting units annually at year-end. This qualitative assessment evaluates various factors, such as macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, and other relevant events, that may impact a reporting unit’s fair value. Using this qualitative assessment, we determine whether it is more-likely-than-not that the reporting unit’s fair value exceeds its carrying value. If it is determined that it is not more-likely-than-not that the reporting unit’s fair value exceeds the carrying value, we perform a quantitative goodwill impairment analysis by comparing the carrying amount of the reporting unit to its fair value. We will also test goodwill for impairment when an event occurs or circumstances change such that it is reasonably possible that impairment may exist.

During the fourth quarter of 2018, the Company’s subsidiaries Tower Automotive Holdings III Cooperatie U.A. and Tower Automotive Holdings USA, LLC entered into a Memorandum of Understanding and Stock Purchase Agreement with Financière SNOP Dunois S.A. (the “Purchaser”). Pursuant to the agreement, the Purchaser will acquire all of the stock of TA Holdings Europe B.V., an indirect wholly owned subsidiary of the Company, and an intercompany loan, for a purchase price of  €255 million on a cash free, debt free basis, subject to working capital and other customary adjustments and a reduction to the extent that capital expenditures for the Company’s European operations for calendar year 2018 were less than €45 million. Approval of the transaction is subject to (i) the approval of the European Commission and (ii) the absence of a material breach in any of the seller parties’ fundamental representations (e.g., title, authority and absence of insolvency). On February 13, 2019, the Company obtained the required approvals from the European Commission. During the first quarter of 2019, the Company expects to consummate the transaction and receive the net sale proceeds of approximately $250 million after payment of transaction costs and the repayment of the Company’s cross currency swap. The anticipated purchase price less expected transaction related costs is less than the carrying value as of December 31, 2018; therefore, the Company recorded a fair value adjustment of  $44 million during the fourth quarter of 2018. Included in the fair value adjustment is the required recognition of the cumulative translation adjustment that will be reclassified to earnings.

In 2018, the Company received a favorable court ruling regarding the unconstitutionality of calculating Brazilian gross receipt taxes that has the potential to generate significant tax credits for the Company. The Brazilian tax authorities have issued official guidance that significantly limits the potential credits. The Company disagrees with the government’s current guidance and plans to file a claim with the Brazilian government during the first quarter of 2019. Utilization of these tax credits are subject to government approval. Given the significant uncertainty regarding the potential value of these tax credits, the Company has not recorded any benefit during the year ended December 31, 2018 in accordance with FASB ASC 450, Contingencies.