Investor Presentation

Transcription

1 Investor Presentation Second Quarter 2018

2 Safe Harbor Statement 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 off-highway wheels, tires, assemblies and undercarriage products. 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: Customers 5

6 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 6

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8 AGRICULTURE 8

9 AGRICULTURE: Market Summary Large hp equipment (4WD tractors and Combines) remain well below historical averages Ag-related commodity prices remain lower and have declined further with tariff concerns Farmer income has stabilized, although still expected to be slightly lower versus last year Used equipment inventory levels and values have both improved in 2018 North America equipment dealer sentiment has improved for 2018 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

10 AGRICULTURE: Innovation Highlights 10

11 AGRICULTURE: Low Sidewall Technology 11

12 AGRICULTURE: Low Sidewall Technology 12

13 AGRICULTURE: Low Sidewall Technology 13

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15 OTR: Earthmoving/Construction/Mining 15

16 OTR: Market Summary Demand for larger construction equipment used for highways and infrastructure has been strong Private construction spending for residential and non-residential remains strong Overall mining equipment demand has strengthened within certain regions with commodity prices improving Potential for a U.S. infrastructure bill, but not anticipated to have an impact in the near-term 16

17 OTR: Product & Innovation Highlights 17

18 OTR: Mining Rebound 18

19 OTR: Product Innovations 19

20 OTR: Product Innovations 20

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22 CONSUMER 22

23 CONSUMER: Growing Opportunity 23

24 Financial Overview

25 Financial Overview: Highlights & Challenges Net sales increased $64 million to $429 million, up 18% year-over-year; the sixth consecutive YOY quarter of double-digit growth Gross profit increased $14.3 million (+32% YOY); gross margin improved YOY to 13.6% (from 12.1%) SG&A expenses were $36.7 million (8.6% of net sales) Income from operations was $16.2 million (+$11.8 million YOY) EPS improved $0.19 YOY Q2 Financial Highlights Earthmoving / Construction segment net sales increased 32% YOY on increased volume (+26.5%) EBITDA was $30 million (+$14 million YOY); Adjusted EBITDA was $34 million (+$12 million YOY) Q2 Financial Challenges Continued trend of lower volumes in Large Ag products (higher ASP and margin) driven by lower commodities / farm income / cash receipts FX losses of $3.6 million driven primarily by currency devaluation in Latin America. The redemption value adjustment was also impacted by $2.6 million from currency devaluation in Russia. Both of these items impacted reported EPS. Tariffs have brought steel costs to their highest level in more than ten years. Natural rubber prices remain low, but other costs within our tire business have been rising including synthetic rubber, carbon black, bead wire and chemicals. 25

26 GP % Sales Financial Overview: Q by Market Agriculture: Tractors, combines, implements, irrigation Earthmoving/Construction: Mining, cranes, aerial lifts, haul trucks, scrapers Consumer: Light-truck tires, ATVs, turf equipment, specialty products (includes livestock mats and mud flaps) Q Segment Revenue 8.1% vs. Q GP: 15.7% 10% 31.8% vs. Q % vs. Q % Agriculture GP: 12.2% GP: 14.6% Earthmoving / Construction 1.3% vs. Q % vs. Q % Consumer 0.9% vs. Q Sales: $428.9M GP: 13.6% vs.q2 17: +1.5% 26

27 78% 68% 58% 48% 38% 28% 18% 8% -2% 50% 45% 40% 35% 30% 25% 20% 15% 10% 78% 5% 0% 68% 58% 48% 38% 28% 18% 8% -2% $75 $50 $25 $0 $20 $200 $180 $160 $140 $120 $100 $210 $190 $170 $150 $130 $10 $90 $70 $50 Financial Overview: Sales and Gross Margin $175 $147 $173 $187 AG 44% Net Sales: Up 8.1% Q2 18 vs. Q2 17 Gross margin improved 127 basis points compared to Q2 17 Favorable market conditions in both OEM and Aftermarket businesses 15% 16% 13% 15% Volume up 8.5%; Price/mix up 2.3%; FX down (2.7%) Q2 '15 Q2 '16 Q2 '17 Q2 '18 $199 Net Sales: Up 31.8% Q2 18 vs. Q2 17 $153 $141 $151 10% 11% 9% 12% EMC 46% Gross margin improved 275 basis points compared to Q2 17 Market improvements particularly in Europe Volume up 26.6%; Price/mix up 2.2%; FX up 3.0% Q2 '15 Q2 '16 Q2 '17 Q2 '18 Net Sales: Up 6.3% Q2 18 vs. Q2 17 $48 $42 $41 $43 14% 13% 17% 16% Consumer 10% Gross margin worsened 87 basis points compared to Q2 17 Volume up 9.9%; Price/mix up 1.0%; FX down (4.6%) Q2 '15 Q2 '16 Q2 '17 Q2 '18 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 2018 YTD 2017 Sales $428.9 $364.4 $854.3 $721.9 Gross Margin $58.3 $44.0 $117.9 $84.2 Gross Margin % 13.6% 12.1% 13.8% 11.7% Operating Income (Loss) $16.2 $4.4 $34.3 ($2.2) Operating Income % 3.8% 1.2% 4.0% (0.3%) Net Income (Loss) applicable to common shareholders $1.0 ($10.3) $15.0 ($20.8) Earnings per common share - Diluted $0.02 ($0.17) $0.25 ($0.35) 28

29 Financial Overview: EBITDA Reconciliation Q USD Amounts in Millions Q Q YTD 2018 YTD 2017 Net income (loss) 5.7 (6.5) 20.4 (17.1) Adjustments Provision for income taxes Interest expense Depreciation and amortization EBITDA Adj Foreign exchange gain (loss) Adjusted EBITDA

30 2018 Outlook (Amounts in millions) 2017 Actual 2018 Guidance 2018 Outlook Net Sales $1,469 9% 12% Growth $1,601 - $1,645 Gross Margin $158 25% 40% Growth $198 - $221 SGA & RD $161 At or below 10% of Net Sales $160 - $165 EBITDA $ % 100% Growth $98 - $109 CAPEX $32.6 $35 - $45 $35 -$45 30

31 Appendix

32 Millions Appendix Sales N. America / Rest of World $500 $400 $300 $200 $100 $0-12 Quarters -8 Quarters -4 Quarters Current Quarter Q2 - Sales / Operating Income (Amounts in Millions) % % 0.8% 1.2% Sales - N. America Sales - Rest of World Operating Profit % 8% 7% 6% 5% 4% 3% 2% 1% 0% FINANCIAL SUMMARY (Amounts in $ millions) Sales - Total $376.1 $330.2 $364.4 $428.9 Sales - N. America $178.1 $131.6 $155.8 $177.2 Sales - Rest of World $197.9 $198.6 $208.6 $251.7 Gross Margin $47.9 $43.7 $44.0 $58.3 Gross Margin - N. America $28.9 $18.8 $18.1 $27.2 % 16.2% 14.3% 11.6% 15.4% Gross Margin - Rest of World $19.1 $24.9 $25.9 $31.1 % 9.6% 12.5% 12.4% 12.4% Gross Margin% 12.7% 13.2% 12.1% 13.6% Operating Profit $4.4 $2.6 $4.4 $16.2 Operating Profit - N. America $5.6 ($3.4) ($3.2) $3.5 % 3.2% -2.6% -2.1% 2.0% Operating Profit - Rest of World ($1.2) $6.0 $7.6 $12.8 % -0.6% 3.0% 3.7% 5.1% Operating Profit % 1.2% 0.8% 1.2% 3.8% *Gross Margin and Operating Profit net of adjustments. 32

33 Millions Appendix Working Capital / CCC $700 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Q2 - WORKING CAPITAL (Amounts in Millions) 27% $ % 27% $500 $400 $300 $200 $ % 25.0% 24.7% % 26% 25% 25% 24% 24% $ % 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) (56) (56) (53) (56) (59) (58) Cash Conversion Cycle Cash & CDs $181,158 $153,236 $155,675 $143,570 $112,429 $106,491 Cash & CDs % of 12 Mo Sales 13.9% 11.5% 11.1% 9.8% 7.3% 6.7% 33

34 Millions Appendix YTD Cash & Activity June $143.6 $

35 Appendix Cash / Debt CASH / DEBT Q2 '18 Q1 '18 Q4 '17 Q3 '17 Q2 '17 Cash & CDs $106 $112 $144 $156 $153 Total Debt $462 $463 $451 $447 $ % Secured Notes Due 2023 $395 $394 $394 $0 $ % Secured Notes Due 2020 $0 $0 $0 $396 $396 Titan Europe Credit Facilities $34 $33 $34 $34 $35 Other $33 $36 $23 $17 $20 Net Leverage (Net Debt / Trailing 12 Mos EBITDA) 3.34x 3.78x 4.34x 4.95x 5.83x Interest Expense $7.7 $7.5 $7.6 $7.5 $ % Secured Notes Due 2023 $6.5 $6.5 $2.9 $0.0 $ % Secured Notes Due 2020 $0.0 $0.0 $4.0 $6.9 $6.9 Titan Europe Credit Facilities $0.1 $0.2 $0.3 $0.1 $0.0 Other $1.0 $0.8 $0.5 $0.5 $0.4 $395 $34 $33 $0 6.50% Secured Notes Due 2023 Titan Europe Credit Facilities Other $75m ABL Credit Facility Due Feb

36 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 36

37 Titan 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. 37