Investor Presentation Q3 2017

Transcription

1 Investor Presentation Q3 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 at historical lows. 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 (stabilized 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 over the past year Legislation passed to reinstate tax incentives including Section 179 deduction (permanent) and bonus depreciation (phased out in 2020) Despite recent increases, interest rates remain at historically low levels for financing new equipment purchases 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 remained slow to recover Overall mining activity remains lower with low commodity prices 15

16 OTR: Recent Highlight 16

17 OTR: 23,000-Hour Giant Stands Out At Minexpo 17

18 OTR: Product Innovations 18

19 OTR: Product Innovations 19

20 OTR: ITM Innovations 20

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22 CONSUMER: Products Innovations 22

23 CONSUMER: Specialty Products Division 23

24 Financial Overview

25 Financial Overview: Highlights & Challenges Net sales increased $64.8 million to $371 million, up 21% year-over-year; the third consecutive quarter of significant YOY growth Gross profit increased $4.7 million or 14% YOY SG&A expenses were $39.8 million (10.7% of net sales); while adjusted SG&A expenses were 9.0% of net sales, after adjusting for a contingent liability of $6.5 million accrued during the quarter Loss from operations was $5.1 million; representing income from operations of $1.4 million, after giving effect to the above adjustment. On an adjusted basis, this represents a $7.7 million increase YOY Agriculture segment net sales increased 23% YOY during the third quarter with North America up 26% and all regions experiencing double digit YOY growth. EBITDA was $13.3 million while adjusted EBITDA was $18.9 million Cash and cash equivalents ended the quarter at $155.7 million Q3 Highlights Q3 Challenges Continued trend of lower volumes in Large Ag products (higher ASP and margin) driven by lower commodities / farm income / cash receipts Gross profit as a percentage of net sales was negatively impacted on a year-over-year basis as a result of pricing initiatives to selectively grow market share. During this quarter, we accrued a contingent liability of $6.5 million associated with the Dico, Inc. and Titan Tire Corporation legal judgment, which we will appeal. 25

26 GP % Sales Financial Overview: Q 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 Q Segment Revenue GP: 14.2% 23% vs. Q % 21% vs. Q % vs. Q % vs. Q % vs. Q % 46% GP: 9.3% GP: 11.1% Agriculture Earthmoving / Construction Consumer 1.9% vs. Q Sales: $371.0M GP: 10.7% vs.q316: -0.7% 26

27 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% $100 $75 $50 $25 $0 $180 $170 $160 $150 $140 $130 $120 $10 $100 $230 $210 $190 $170 $150 $130 $10 $90 $70 $50 Financial Overview: Sales and Gross Margin $211 $171 Net Sales: Up 23% Q3 17 vs. Q3 16 $140 $139 AG 46% Gross margin declined 234 basis points compared to Q3 16 Improvements in both OEM and Aftermarket businesses 12% 9% 13% 11% Volume up 16%; Price/mix up 6%; FX up 1% Q3 '14 Q3 '15 Q3 '16 Q3 '17 $170 $156 $126 $129 7% 6% 9% 9% EMC 42% Net Sales: Up 21% Q3 17 vs. Q3 16 Gross margin improved 33 basis points compared to Q3 16 Positive movement within aftermarket business Volume up 14%; Price/Mix up 5%; FX up 2% Q3 '14 Q3 '15 Q3 '16 Q3 '17 $72 $43 $39 $44 Consumer 12% Net Sales: Up 13% Q3 17 vs. Q3 16 Gross margin improved 187 basis points compared to Q3 16 Volume up 10%; Price/mix flat; FX up 3% 12% 10% 12% 14% Q3 '14 Q3 '15 Q3 '16 Q3 '17 Note: Certain amounts from prior years have been reclassified to conform to the current year s presentation. 27

28 Financial Overview: Summary Income & EPS (Amounts in millions) Q Q YTD 2017 YTD 2016 Sales $371.0 $306.2 $1,092.9 $958.2 Gross Margin $39.7 $34.9 $123.0 $106.9 Gross Margin % 10.7% 11.4% 11.3% 11.2% Operating Income (Loss) ($5.1) ($6.3) ($8.2) ($15.3) Operating Income % (1.4%) (2.1%) (0.8%) (1.6%) Net loss applicable to common shareholders ($12.9) ($9.4) ($33.7) ($32.5) Earnings Per Share - Diluted ($0.22) ($0.17) ($0.57) ($0.60) 28

29 Financial Overview: Income Reconciliation Q USD Amounts in Millions Q Q YTD 2017 YTD 2016 Net loss applicable to common shareholders (12.9) (9.4) (33.7) (32.5) Remove redemption value adjustment (0.9) (1.4) (4.0) (8.5) Net income (loss) attributable to Titan (12.0) (8.0) (29.8) (24.0) Adjustments Contingency accrual Adjusted net income (loss) attrib. to Titan (5.5) (8.0) (23.3) (24.0) Adjusted EPS - Diluted (0.09) (0.15) (0.39) (0.45) 29

30 Financial Overview: EBITDA Reconciliation Q USD Amounts in Millions Q Q YTD 2017 YTD 2016 Net income (loss) (11.2) (9.0) (28.3) (25.1) Adjustments Provision for income taxes 2.4 (2.1) Interest expense Depreciation & amortization EBITDA Adj Contingency accrual Foreign exchange gain (loss) (0.8) (0.4) (0.0) (7.4) Adjusted EBITDA

31 Financial Appendix

32 Millions Appendix Sales N. America vs. International $500 $400 $300 $200 $100 $0-12 Quarters -8 Quarters -4 Quarters Current Quarter Q3 - Sales / Operating Income (Amounts in Millions) % % % % % 6% 4% 2% 0% -2% -4% -6% Sales - N. America Sales - International Operating Profit % FINANCIAL SUMMARY (Amounts in $ millions) Sales - Total $452.8 $308.8 $306.2 $371.0 Sales - N. America $209.9 $144.4 $120.0 $148.3 Sales - International $242.9 $164.4 $186.2 $222.7 Gross Margin $45.2 $25.1 $34.9 $39.7 Gross Margin - N. America $21.8 $11.7 $12.8 $14.1 % 10.4% 8.1% 10.6% 9.5% Gross Margin - International $23.3 $13.4 $22.2 $25.6 % 9.6% 8.1% 11.9% 11.5% Gross Margin% 10.0% 8.1% 11.4% 10.7% Operating Profit ($2.6) ($15.5) ($6.3) $1.4 Operating Profit - N. America ($1.2) ($11.7) ($10.5) ($5.7) % -0.6% -8.1% -8.8% -3.9% Operating Profit - International ($1.4) ($3.8) $4.2 $7.1 % -0.6% -2.3% 2.3% 3.2% Operating Profit % -0.6% -5.0% -2.1% 0.4% 32 Note: Gross Margin and Operating Income net of adjustments.

33 Millions $700 $600 Appendix Working Capital 23.0% Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Q3 - WORKING CAPITAL (Amounts in Millions) 28.3% 25.6% 25.8% 30% 25% $500 $400 $ % 15% $200 10% $100 $ % 0% 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) Cash Conversion Cycle Cash & CDs $191,102 $207,244 $215,515 $197,827 $181,158 $153,236 $155,675 Cash & CDs % of 12 Mo Sales 14.5% 16.3% 17.0% 15.6% 13.9% 11.5% 11.1% 33

34 Millions Appendix YTD Cash & CDs Activity September $197.8 $

35 Appendix Debt Structure CASH / DEBT Q3 '17 Q2 '17 Q1 '17 Q4 '16 Q3 '16 Cash & CDs $156 $153 $181 $198 $216 Total Debt $447 $451 $456 $506 $ % Secured Notes Due 2020 $396 $396 $396 $396 $396 Titan Europe Credit Facilities $34 $35 $36 $34 $37 Other $17 $20 $24 $76 $68 Net Leverage (Net Debt / Trailing 12 Mos EBITDA) 4.94x 5.83x 4.70x 5.52x 5.47x Interest Expense $7.5 $7.3 $7.6 $7.0 $ % Secured Notes Due 2020 $6.9 $6.9 $6.9 $6.9 $6.9 Titan Europe Credit Facilities $0.1 $0.0 $0.0 $0.1 $0.4 Other $0.5 $0.4 $0.7 $0.0 $1.4 $396 $34 $17 $ % Secured Notes Due Oct 2020 Titan Europe Credit Facilities Other $75m ABL Credit Facility Due Feb

36 Appendix Cost Structure Cost Structure Breakdown Primary Raw Materials Steel Overhead 25% Labor 20% Raw Materials 55% Natural Rubber Synthetic Rubber Carbon Black Nylon 36

37 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.