Investor Presentation Q1 2017 · 2017-10-13 · Titan International Overview Titan International...
Transcript of Investor Presentation Q1 2017 · 2017-10-13 · Titan International Overview Titan International...
Investor Presentation
Q1 2017
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.
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
COMPETITIVE ADVANTAGES
TITAN/GOODYEAR
MICHELIN
BRIDGESTONE
GKN
Titan International Overview: Portfolio
Titan International Overview: Customers
Titan International Overview: Global Footprint
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 during 2016)
Used equipment inventory levels remain above historical averages, but declined within the past year
Used equipment values increased during 2016; first time since 1H 2013
Legislation passed to reinstate tax incentives including Section 179 deduction (permanent) and bonus
depreciation (phased out in 2020)
Interest rates remain at historically low levels for financing new equipment purchases
AGRICULTURE: Market Summary
AGRICULTURE: Product Innovations
AGRICULTURE: Product Innovations
AGRICULTURE: Goodyear Expansion
AGRICULTURE: Growth Opportunities
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
Strong U.S. dollar
OTR: Market Summary
OTR: Recent Highlight
OTR: 23,000-Hour Giant Stands Out At Minexpo
OTR: Product Innovations
OTR: Product Innovations
OTR: ITM Innovations
CONSUMER: Products Innovations
CONSUMER: Specialty Products Division
Financial Overview
Financial Overview: Q1 2017 by Market
50%38%
12%
GP: 13.0%
GP: 9.3%
GP: 12.0%
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
Agriculture
Consumer
Earthmoving / Construction
Q1 2017 Segment Revenue
Sales: $357.5M GP: 11.1% vs.Q116: +2.3%
⬆18% vs. Q1 2016
⬆3% vs. Q1 2016
⬆11% vs. Q1 2016
⬆1.5% vs. Q1 2016
⬆2.2% vs. Q1 2016
⬆5.6% vs. Q1 2016
Sa
les
GP
%
$289
$194
$153
$181
14%12% 11% 12%
$50
$100
$150
$200
$250
$300
$350
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Q1 '14 Q1 '15 Q1 '16 Q1 '17
Financial Overview: Sales and Gross Margin
Net Sales: Up 18% Q1 ‘17 vs. Q1 ‘16
Gross margin improved 147 basis points compared to Q1 ’16
Large Ag equipment sales continue to improve
Volume up 12%; Price/mix flat; FX up 6%
AG
50%
Net Sales: Up 11% Q1 ’17 vs. Q1 ’16
Gross margin improved 565 basis points compared to Q1 ‘16
Positive movement due to recent appreciation in the Brazilian Real
Volume up 1%; Price/mix down (1%); FX up 11%
Consumer
12%
EMC
38%
Net Sales: Up 3% Q1 ‘17 vs. Q1 ’16
Gross margin improved 217 basis points compared to Q1 ‘16
Positive movement within aftermarket business
Price/mix up 6%; Volume down (3%); FX flat
$175
$159
$132$136
3%8% 7% 9%
$100
$110
$120
$130
$140
$150
$160
$170
$180
-2%
8%
18%
28%
38%
48%
58%
68%
78%
Q1 '14 Q1 '15 Q1 '16 Q1 '17
$75
$50
$37$41
11%14%
7%13%
$0
$25
$50
$75
$100
-2%
8%
18%
28%
38%
48%
58%
68%
78%
Q1 '14 Q1 '15 Q1 '16 Q1 '17
Note: Certain amounts from prior years have been reclassified to conform to the current year’s presentation.
Financial Overview: Highlights & Challenges
Net sales of $357.5 million, up 11% YOY after eighteen quarters of YOY declines
Improved overall gross profit for the quarter by $11.4 million (230 bps) YOY
Triple-digit increases in agriculture segment net sales were realized in Latin America (102%) with double-digit increases in Russia (39%) and Australia (47%)
Aftermarket gains in North America offset OEM decreases, resulting in a net overall gain for our North American tire business
Improved Ag segment gross margin by 147 bps for the quarter to 12.0%
Improved earthmoving and construction segment gross margin by 217 bps for the quarter with most regions showing YOY improvements
Cash, cash equivalents, and certificates of deposit ended the quarter at $181 million. We began the Ag downturn in 2014 with a cash balance of $189 million,
demonstrating the diligent manner in which we are managing our liquidity
Tentative agreements reached with United Steelworkers Union (USW) representing three North American tire plants
Q1 Highlights
Q1 Challenges
Continued downward trend in Large Ag products (higher ASP and margin) driven by lower commodities / farm income / cash receipts
Continued weakness in earthmoving and construction market conditions negatively impacted North America
When raw material costs increase as fast as they did recently we are negatively impacted, rising raw material costs impacted gross profit
approximately $9 million during the quarter.
SG&A expenses were up $6.3 million over the same period last year primarily due to one-time legal and professional fees
Financial Overview: Summary Income & EPS
Note: Gross Margin and Operating Income net of adjustments.
Net Income and EPS adjusted for Noncontrolling Interest and non GAAP items.
(Amounts in millions) Q1 2017 Q1 2016
Sales $357.5 $321.8
Gross Margin $39.7 $28.3
Gross Margin % 11.1% 8.8%
Operating Income (Loss) ($7.1) ($11.5)
Operating Income % (2.0%) (3.6%)
Adjusted Net Income (Loss) ($11.5) ($12.7)
Adjusted Earnings Per Share-Diluted ($0.20) ($0.24)
Financial Overview: EBITDA Reconciliation
Q1 2017USD Amounts in Millions Q1 2017 Q1 2016
Net income (loss) (10.6) (12.3)
Provision for income taxes 3.4 1.0
Interest expense 7.7 8.5
Depreciation & amortization 14.5 15.2
EBITDA 15.0 12.4
Ad
jus
tme
nts
Financial Appendix
Appendix
Sales – N. America vs. International-12 Quarters -8 Quarters -4 Quarters Current Quarter
(Amounts in $ millions) 2014 2015 2016 2017
Sales - Total $538.9 $402.1 $321.8 $357.5
Sales - N. America $269.9 $199.9 $149.4 $150.2
Sales - International $269.0 $202.1 $172.4 $207.3
Gross Margin $54.6 $43.5 $28.3 $39.7
Gross Margin - N. America $32.6 $24.9 $11.5 $15.0
% 12.1% 12.4% 7.7% 10.0%
Gross Margin - International $22.0 $18.6 $16.8 $24.7
% 8.2% 9.2% 9.8% 11.9%
Gross Margin% 10.1% 10.8% 8.8% 11.1%
Operating Profit $0.3 $2.2 ($11.5) ($7.1)
Operating Profit - N. America $6.5 $1.7 ($11.3) ($12.4)
% 2.4% 0.9% -7.6% -8.2%
Operating Profit - International ($6.2) $0.4 ($0.2) $5.3
% -2.3% 0.2% -0.1% 2.6%
Operating Profit % 0.1% 0.5% -3.6% -2.0%
Note: Gross Margin and Operating Income net of adjustments.
FINANCIAL SUMMARY
270
200 149 150
269
202
172 207 0.1%
0.5%
-3.6%
-2.0%
-6%
-4%
-2%
0%
2%
4%
6%
8%
$0
$100
$200
$300
$400
$500
$600
2014 2015 2016 2017
Mill
ions
Q1 - Sales / Operating Income (Amounts in Millions)
Sales - N. America Sales - International Operating Profit %
Appendix
Working Capital
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Days Sales Outstanding (DSO) 61 54 55 53 59
Days A/P in Inventory (DPI) 88 93 100 95 88
Days Payable Outstanding (DPO) (45) (49) (54) (52) (56)
Cash Conversion Cycle 104 98 101 96 91
2016 2017
328239 216 232
395
318
268292
213153 138
186
23.6%
25.1%
26.9%
23.7%
21%
22%
23%
24%
25%
26%
27%
28%
$0
$100
$200
$300
$400
$500
$600
$700
$800
2014 2015 2016 2017
Mill
ion
s
Q1 - WORKING CAPITAL (Amounts in Millions)
AR Inventory AP Working Capital as % of Sales
Appendix
YTD Cash & CDs ActivityMarch 2017
$197.8 $181.2
42.2
14.6
14.52.4 0.7 0.6 1.3 8.4
10.210.6
14.5
48.2
-
50.0
100.0
150.0
200.0
250.0
300.0
Appendix
Debt Structure
Q1 '17 Q4 '16 Q3 '16 Q2 '16 Q1 '16
Cash & CDs $181 $198 $216 $207 $191
Total Debt $456 $506 $501 $504 $504
Titan International $396 $456 $456 $455 $456
Titan Europe Credit Facilities $36 $34 $37 $39 $40
Other $24 $16 $8 $10 $8
Net Leverage (Net Debt / Trailing 12 Mos EBITDA) 5.28x 5.52x 5.47x 11.18x 11.56x
Interest Expense $7.7 $7.3 $8.7 $8.0 $8.5
5.625% Convertible Notes Due 2017 $0.1 $0.8 $0.8 $0.8 $0.8
6.875% Secured Notes Due 2020 $6.9 $6.9 $6.9 $6.9 $6.9
European Credit Facilities $0.1 $0.4 $0.4 $0.2 $0.2
LAT/AUS/VP Working Capital Facilities $0.3 $(0.2) $0.0 $(0.0) $0.0
Revolver Commitment/Letter of Credit Fees $0.1 $0.2 $0.2 $0.2 $0.2
Financing Fees Amortization $0.3 $0.4 $0.4 $(0.1) $0.4
Capitalized Interest $(0.2) $(1.2) $0.0 $0.0 $0.0
CASH / DEBT
$396
$36 $24 $0 $0
6.875% Secured NotesDue Oct 2020
Titan EuropeCredit Facilities
Other $150m ABL Credit FacilityDue Dec 2017
$75m ABL Credit FacilityDue Feb 2022
Appendix
Cost Structure
Raw
Materials
55%
Overhead
25%
Labor
20%
Primary Raw MaterialsCost Structure Breakdown
Steel
Natural Rubber
Synthetic Rubber
Carbon Black
Nylon