Investor Presentation FY 2017

Transcription

1 Investor Presentation FY 2017

2 SAFE HARBOR STATEMENT: The accompanying material includes forward-looking comments and information concerning the company s expectations and objectives for the future. Readers of this material should understand that these forward looking statements are based on the Company s expectations and subject to a number of risks and uncertainties, certain of which are beyond the Company s control. Actual results may differ materially from those projected in these forward looking statements as a result of certain factors which are contained in the Company s most recent 10K filing. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this document will in fact transpire. 2

3 Titan International Overview Titan International Inc. (TWI) is a publicly traded company on the New York Stock Exchange. Headquartered in the heartland of the U.S. in Quincy, Illinois, Titan has grown to become a top global manufacturer of specialty tires, wheels and tracks. Titan has a heritage of over 100 years in the off-highway wheel manufacturing business and is the world s largest manufacturer of off-highway wheels. Titan has complete research and development test facilities to validate wheel and rim designs. Since Titan's entrance into the tire market in 1993, we have evolved into a leading global supplier of complete wheel and tire assemblies for off-highway vehicles. Titan manufactures under the Goodyear Farm Tire and Titan Tire brands. 3

4 Titan International Overview: Strategy To become the worldwide leader in manufacturing and distribution of wheels, tires, assemblies and undercarriage products and to serve our customers needs through product innovation and quality service in our key markets: Agriculture Earthmoving/Construction Consumer 4

5 Titan International Overview: Portfolio COMPETITIVE ADVANTAGES TITAN/GOODYEAR MICHELIN BRIDGESTONE GKN 5

6 Titan International Overview: Customers 6

7 Titan International Overview: Global Footprint Europe Ceprano, Italy Kidderminster, UK Fanano, Italy Monreal del Campo, Spain Finale Emilia, Italy Potenza, Italy Flers, France St. Helens, UK Gevelsburg, Germany Valsamoggia, Italy Jesi, Italy Volgograd, Russia North America Quincy, IL (International headquarters) Bryan, OH Des Moines, IA Elkhorn, WI Freeport, IL Fort McMurray, AB, Canada Saltville, VA (closing) Saskatoon, SK Union City, TN Winston-Salem, NC Latin / South America Atibaia, Brazil Iquique, Chile Lima, Peru São Paulo, Brazil Santiago, Chile Naucalpan de Juarez, Mexico Buenos Aires, Argentina Source: Titan filings Tires Wheels Undercarriage Mining Services Distribution Asia / Africa Aydin, Turkey Jakarta, Indonesia (closing) Nuffield Springs, South Africa Tianjin, China Australia Emerald, QLD Kalgoorie, WA Karratha, WA Mildura, VIC Muswellbrook, NSW Perth, WA Port Hedland, WA Sydney, NSW Yatala, QLD 7

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9 AGRICULTURE: Market Summary Large hp equipment (4WD tractors and Combines) remain well below historical averages. Smaller hp tractor demand remains strong, but at lower ASP and gross margins than larger equipment Grain prices remain low; resulting in lower farm income (began stabilizing somewhat beginning in 2016) Used equipment inventory levels remain above historical averages, but declined within the past year Used equipment values have stabilized and in some cases increased moderately recently Tax Cuts & Jobs Act was passed making Section 179 deduction permanent and increasing limits. Bonus depreciation is allowed for both new and used equipment, and is permitted at the 100% rate through 2022, and phased down by 20% each year thereafter. 9

10 AGRICULTURE: Product Innovations 10

11 AGRICULTURE: Product Innovations 11

12 AGRICULTURE: Goodyear Expansion 12

13 AGRICULTURE: Growth Opportunities 13

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15 OTR: Market Summary Private construction spending for resi and non-resi buildings continue to carry the industry Larger construction equipment used for highways and infrastructure have recovered modestly from the lower base in recent years Potential for a U.S. infrastructure bill, but not anticipated to have an impact until after 2018 Overall mining activity remains lower with commodity prices remaining at lower levels, but has improved somewhat recently within certain regions 15

16 OTR: 23,000-Hour Giant Stands Out At Minexpo 16

17 OTR: Product Innovations 17

18 OTR: Product Innovations 18

19 OTR: ITM Innovations 19

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21 CONSUMER: Products Innovations 21

22 CONSUMER: Specialty Products Division 22

23 Financial Overview

24 Financial Overview: Highlights & Challenges Net sales increased $68.7 million to $376 million, up 22% year-over-year; the fourth consecutive quarter of significant YOY growth For the first time since becoming a public company in 1993, experienced sequential growth each quarter throughout 2018 Gross profit increased $3.4 million (+11% YOY). After adjusting for the asset impairment noted below, GP increased $13.3 million (+42% YOY) SG&A expenses were down $2.2 million (-6% YOY) to $35.1 million (9.3% of net sales); compared to prior year of $37.3 million (12.1% of net sales) Loss from operations was $(4.9) million. After adjusting for the asset impairment, income from operations was $5.0 million (+$14.7 million YOY) Earthmoving / Construction segment net sales increased 35% YOY during the quarter with all regions improving on increased volume EBITDA was $10.2 million while adjusted EBITDA was $22.1 million (+$15 million YOY) Cash and cash equivalents ended the quarter at $143.6 million Q4 Highlights Q4 Challenges & Unusual Items Continued trend of lower volumes in Large Ag products (higher ASP and margin) driven by lower commodities / farm income / cash receipts Loss on senior note repurchase of $18.6 million was recorded in connection with the completion of a tender offer settlement and redemption of all outstanding $400 million principal amount of 6.875% senior notes due in An asset impairment of $9.9 million was recorded relating to a previously announced fire at Titan Tire Reclamation Corporation. Insurance proceeds are anticipated in future periods and these proceeds will be reflected in our financial results once the cash is received. 24

25 GP % Sales Financial Overview: FY 2017 by Market Agriculture: Tractors, combines, implements, irrigation Earthmoving/Construction: Mining, cranes, aerial lifts, haul trucks, scrapers Consumer: Primarily light-truck tires, ATVs and select golf and turf equipment markets FY 2017 Segment Revenue 18% vs. FY 2016 GP: 14.7% 12% 16% vs. FY % vs. FY % vs. FY % vs. FY % 47% GP: 9.6% GP: 12.3% Agriculture Earthmoving / Construction Consumer 3.7% vs. FY 2016 * GP% net of adjustments. See details for all 2017 adjustments on page 28. Sales: $1.5B GP: 11.5% vs.fy16: +0.5% 25

26 78% 68% 58% 48% 38% 28% 18% 8% -2% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 78% 68% 58% 48% 38% 28% 18% 8% -2% $325 $300 $275 $250 $25 $200 $175 $150 $125 $100 $75 $50 $25 $0 $800 $700 $600 $500 $400 $300 $200 $100 $1, 050 $950 $850 $750 $650 $50 $450 $350 $250 $150 $50 Financial Overview: Sales and Gross Margin $924 $652 $583 $690 AG 47% Net Sales: Up 18% FY 17 vs. FY 16 Gross margin declined 64 basis points compared to FY 16 Improvements in both OEM and Aftermarket businesses 12% 11% 13% 12% Volume up 13%; Price/mix up 2%; FX up 3% FY '14 FY '15 FY '16 FY '17 $685 $609 $567 $524 6% 8% 9% 10% EMC 41% Net Sales: Up 16% FY 17 vs. FY 16 Gross margin improved 81 basis points compared to FY 16 Positive movement within aftermarket business Volume up 13%; Price/Mix up 2%; FX up 1% FY '14 FY '15 FY '16 FY '17 $287 Net Sales: Up 8% FY 17 vs. FY 16 $176 $158 $170 Consumer 12% Gross margin improved 367 basis points compared to FY 16 Volume up 1%; Price/mix up 1%; FX up 5% 10% 11% 11% 15% FY '14 FY '15 FY '16 FY '17 * GP% net of adjustments. See details for all 2017 adjustments on page 28. Note: Certain amounts from prior years have been reclassified to conform to the current year s presentation. 26

27 Financial Overview: Summary Income & EPS (Amounts in millions) Sales $1,468.9 $1,265.5 $1,394.8 $1,895.5 Adjusted Gross Margin $168.2 $138.9 $134.7 $180.6 Adjusted Gross Margin % 11.5% 11.0% 9.7% 9.5% Adjusted Operating Income (Loss) $3.2 ($25.0) ($26.7) ($16.1) Adjusted Operating Income % 0.2% (2.0%) (1.9%) (0.8%) Adjusted Net loss attributable to Titan ($28.9) ($37.6) ($77.7) ($26.3) Adjusted Earnings Per Share - Diluted ($0.49) ($0.70) ($1.45) ($0.49) * Amounts are shown net of adjustments. See details for all 2017 adjustments on page

28 Financial Overview: Income Reconciliation Q USD Amounts in Millions Q Q FY 2017 FY 2016 Net loss applicable to common shareholders (32.7) (14.7) (66.4) (47.2) Remove redemption value adjustment (2.4) (1.1) (6.4) (9.6) Net income (loss) attributable to Titan (30.3) (13.6) (60.0) (37.6) Adjustments Contingency accrual 6.5 Debt termination expense Asset impairment Adjusted net income (loss) attrib. to Titan (5.7) (13.6) (28.9) (37.6) Adjusted EPS - Diluted (0.10) (0.25) (0.49) (0.70) 28

29 Financial Overview: EBITDA Reconciliation Q USD Amounts in Millions Q Q FY 2017 FY 2016 Net income (loss) (35.7) (14.6) (64.1) (39.8) Adjustments Provision for income taxes Interest expense Debt termination expense Depreciation and amortization EBITDA Adj Contingency accrual Foreign exchange gain (loss) 2.0 (1.1) 2.0 (8.6) Asset impairment Adjusted EBITDA

30 Financial Appendix

31 Millions Appendix Sales N. America vs. International $2,000 $1,500 $1,000 $500 $0-12 Quarters -8 Quarters -4 Quarters Current Quarter Full Year - Sales / Operating Income (Amounts in Millions) % % % % % 6% 4% 2% 0% -2% -4% Sales - N. America Sales - International Operating Profit % FINANCIAL SUMMARY (Amounts in $ millions) Sales - Total $1,895.5 $1,394.8 $1,265.5 $1,468.9 Sales - N. America $910.1 $664.5 $523.2 $600.4 Sales - International $985.4 $730.3 $742.3 $868.5 Gross Margin $180.6 $134.7 $138.9 $168.2 Gross Margin - N. America $105.3 $71.1 $56.7 $65.4 % 11.6% 10.7% 10.8% 10.9% Gross Margin - International $75.3 $63.6 $82.2 $102.8 % 7.6% 8.7% 11.1% 11.8% Gross Margin% 9.5% 9.7% 11.0% 11.5% Operating Profit ($21.1) ($26.7) ($25.0) $3.2 Operating Profit - N. America $10.1 ($18.1) ($34.6) ($25.4) % 1.1% -2.7% -6.6% -4.2% Operating Profit - International ($31.2) ($8.6) $9.6 $28.6 % -3.2% -1.2% 1.3% 3.3% Operating Profit % -1.1% -1.9% -2.0% 0.2% 31 Note: Gross Margin and Operating Income net of adjustments.

32 Millions Appendix Working Capital $600 $500 $400 $300 $200 $100 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Q4 - WORKING CAPITAL (Amounts in Millions) 28% 26.9% 27% 27% % % % 24.7% 24.7% 25% 25% % $ % AR Inventory AP Working Capital as % of Sales Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Days Sales Outstanding (DSO) Days A/P in Inventory (DPI) Days Payable Outstanding (DPO) (45) (49) (54) (52) (56) (56) (53) (56) Cash Conversion Cycle Cash & CDs $191,102 $207,244 $215,515 $197,827 $181,158 $153,236 $155,675 $143,570 Cash & CDs % of 12 Mo Sales 14.5% 16.3% 17.0% 15.6% 13.9% 11.5% 11.1% 9.8% 32

33 Appendix YTD Cash & CDs Activity December 2017 Millions $197.8 $

34 Appendix Debt Structure CASH / DEBT Q4 '17 Q3 '17 Q2 '17 Q1 '17 Q4 '16 Cash & CDs $144 $156 $153 $181 $198 Total Debt $451 $447 $451 $456 $ % Secured Notes Due 2023 $394 $0 $0 $0 $ % Secured Notes Due 2020 $0 $396 $396 $396 $396 Titan Europe Credit Facilities $34 $34 $35 $36 $34 Other $23 $17 $20 $24 $76 Net Leverage (Net Debt / Trailing 12 Mos EBITDA) 4.34x 4.94x 5.83x 4.70x 5.52x Interest Expense $7.6 $7.5 $7.3 $7.6 $ % Secured Notes Due 2023 $2.9 $0.0 $0.0 $0.0 $ % Secured Notes Due 2020 $4.0 $6.9 $6.9 $6.9 $6.9 Titan Europe Credit Facilities $0.3 $0.1 $0.0 $0.0 $0.1 Other $0.5 $0.5 $0.4 $0.7 $0.0 $394 $34 $23 $0 6.50% Secured Notes Due 2023 Titan Europe Credit Facilities Other $75m ABL Credit Facility Due Feb

35 Appendix Cost Structure GP Cost Structure Breakdown Primary Raw Materials Steel Overhead ~30-35% Labor ~10-15% Raw Materials ~50-55% Natural Rubber Synthetic Rubber Carbon Black Nylon 35

36 Company Website: Investor Relations SAFE HARBOR STATEMENT: The accompanying material includes forward-looking comments and information concerning the company s expectations and objectives for the future. Readers of this material should understand that these forward looking statements are based on the Company s expectations and subject to a number of risks and uncertainties, certain of which are beyond the Company s control. Actual results may differ materially from those projected in these forward looking statements as a result of certain factors which are contained in the Company s most recent 10K filing. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this document will in fact transpire.