Investor Presentation August 2019 Titan International Overview - - PowerPoint PPT Presentation

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Investor Presentation August 2019 Titan International Overview - - PowerPoint PPT Presentation

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Investor Presentation August 2019 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

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Investor Presentation

August 2019

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  • 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.

Titan International Overview

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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

Titan International Overview: Strategy

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Titan International Overview: Customers

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Source: Titan filings 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

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

Australia 

Emerald, QLD

Kalgoorie, WA

Karratha, WA

Mildura, VIC

Muswellbrook, NSW

Perth, WA

Port Hedland, WA

Yatala, QLD

Asia / Africa 

Aydin, Turkey

Nuffield Springs, South Africa

Tianjin, China

 Tires  Wheels  Undercarriage  Mining Services  Distribution

Titan International Overview: Global Footprint

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  • Large hp equipment (4WD tractors and Combines)

remain well below historical averages.

  • News involving bad weather, local flooding, prevented

planting, poor crop conditions, negative farm sentiment, and ongoing trade concerns have slowed the U.S. Ag equipment market.

  • Ag-related commodity prices have declined in the

midst of tariffs and trade concerns but have rebounded somewhat due to recent weather-related concerns

  • ver a reduced harvest.
  • Russian Ag remains challenged by high dealer

inventory levels and local economic conditions while European Ag demand has stabilized at lower levels.

  • Tax Cuts & Jobs Act makes 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. This is good for farmers purchasing equipment.

AGRICULTURE: Market Summary

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AGRICULTURE: Low Sidewall Technology

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AGRICULTURE: Low Sidewall Technology

TIRES vs TRACKS

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AGRICULTURE: Low Sidewall Technology

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  • Demand for larger construction equipment used

for highways and infrastructure remains steady after several years of strong growth.

  • Construction driven by GDP by country and the

need for infrastructure developments.

  • Overall mining equipment demand is driven by

both demand and pricing of commodities.

  • Potential for a U.S. infrastructure bill, but not

anticipated to have an impact in the near-term

OTR: Market Summary

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OTR: ITM Products & Customers

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OTR: ITM Product Applications

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OTR: Europe Wheel

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OTR: Product Highlights

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OTR: Product Innovations

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CONSUMER: Growing Opportunity

The consumer market continues to present opportunities for Titan with products that have strong margins. The specialty products group had its first full year of operations in 2017, and saw significant sales increases for mud flaps and cattle mats for the dairy market. We continued this expansion into the swine and equestrian market during 2018.

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Financial Overview

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Financial Overview: 2019 Outlook

(Amounts in millions)

2018 Actual 2019 Outlook Net Sales $1,602 $1,554 – $1,602 Down 3% to Flat Gross Margin $198 $174 - $186 Between 11.2% – 11.6% SGA & RD $146 ~ $150 EBITDA (excludes FX) $119 $75 - $90 CAPEX $39 ~ $40

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Financial Overview: Highlights & Challenges

 Net sales were $390.6 million, a $38.3 million decrease YoY, net sales would have increased nearly $16.5 million on a constant currency basis  SGARD expenses were $38.3 million (9.8% of net sales)  Income from operations was a loss of $2.4 million  Net loss applicable to common shareholders was $7.1 million and EPS was -$0.12  Adjusted EBITDA was $12.8 million Q2 Financial Challenges  Continued trend of volumes below longer-term, historical averages in Large Ag products (higher ASP and margin) driven by overall lower commodities / farm income / cash receipts  U.S. Ag perspective was dominated by news involving bad weather, local flooding, prevented planting, poor crop conditions, negative farmer sentiment and the ongoing trade battle  Gross profit and margin declined as a result of overall lower sales and 1) N.A. wheel inventory challenges associated with higher priced steel due to inventory build-up for ERP implementation combined with an expectation of growing demand and then as prices decreased we weren’t able to fully realize those lower costs as we worked to reduce elevated inventory levels ($8 million); 2) challenges in Russia and Europe in the Ag markets, which caused margin decline due to production inefficiencies created with lower volume ($4 million); and 3) footprint reduction in Australia tire distribution resulting in sales at lower levels to reduce inventory ($2.5 million). Q2 Financial Highlights

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42% 47% 11%

GP: 10.5% GP: 10.7%

GP: 8.7%

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) Agriculture Consumer Earthmoving / Construction

Q2 2019 Segment Revenue Sales: $390.6M GP: 9.8% vs. Q2’18: -3.8%

⬇ 12.1% vs. Q2 2018 ⬇ 7.1% vs. Q2 2018 ⬇ 3.6% vs. Q2 2018 ⬇ 5.9% vs. Q2 2018 ⬇ 1.5% vs. Q2 2018 ⬇ 5.2% vs. Q2 2018 Sales GP %

Financial Overview: FY 2018 by Market

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$147 $173 $187 $164 16% 13% 15% 9%

$50 $70 $90 $110 $130 $150 $170 $190 $210 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Q2 '16 Q2 '17 Q2 '18 Q2 '19

 Net Sales: Declined 12.1% Q2‘19 vs. Q2‘18  On a constant currency basis, net sales would have increased 3.6%  Gross margin declined ~590 bps YoY  Volume down (6.5%); Price/mix down (2.0%); FX down (3.6%)

AG 42%

 Net Sales: Declined 3.6% Q2‘19 vs. Q2‘18  Gross margin declined ~520 bps YoY  Volume down (1.0%); Price/mix up 1.6%; FX down (4.2%)

Consumer 11% EMC 47%

 Net Sales: Declined 7.1% Q2‘19 vs. Q2‘18  Gross margin declined ~150 bps YoY  Volume down (3.0%); Price/mix down (0.1%); FX down (4.0%)

$141 $151 $199 $185 11% 9% 12% 11%

$100 $120 $140 $160 $180 $200 $220
  • 2
% 8% 18% 28% 38% 48% 58% 68% 78%

Q2 '16 Q2 '17 Q2 '18 Q2 '19 $42 $41 $43 $42 13% 17% 16% 10%

$0 $25 $50
  • 2
% 8% 18% 28% 38% 48% 58% 68% 78%

Q2 '16 Q2 '17 Q2 '18 Q2 '19

Note: Certain amounts from prior years have been reclassified to conform to the current year’s presentation.

Financial Overview: Sales and Gross Margin

* GP% net of adjustments.

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25 (Amounts in millions) Q2 2019 Q2 2018 Q2 2017 Q2 2016 Sales $390.6 $428.9 $364.4 $330.2 Gross Margin $38.3 $58.3 $44.0 $43.7 Gross Margin % 9.8% 13.6% 12.1% 13.2% Operating Income (Loss) ($2.4) $16.2 $4.4 $2.6 Operating Income % (0.6%) 3.8% 1.2% 0.8% Net income (loss) attrib. to Titan ($6.4) $8.4 ($6.3) ($3.3) Earnings per share - Diluted ($0.12) $0.06 ($0.17) ($0.10)

Financial Overview: Summary Income & EPS

Note: Certain amounts from prior years have been reclassified to conform to the current year’s presentation.

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(Non-GAAP)

USD Amounts in Millions

Q2 2019 Q2 2018 YTD 2019 YTD 2018 Net income (6.7) 8.5 (5.7) 24.4

Provision for income taxes (3.2) 1.7 (1.3) 0.9 Interest expense 8.3 7.7 16.2 15.2 Depreciation and amortization 13.1 14.8 27.8 30.2

EBITDA

11.5 32.7 37.0 70.7

Foreign exchange loss 1.2 3.6 (4.5) 8.0

Adjusted EBITDA

12.7 36.3 32.5 78.7

Adjustments Adj

Financial Overview: EBITDA Reconciliation

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Appendix

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Appendix

Working Capital / CCC

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 Quarter 4 197 220 282 272 274 323 373 385 146 187 228 209

24.6% 24.4% 24.9% 28.7%

22% 23% 24% 25% 26% 27% 28% 29% $0 $100 $200 $300 $400 $500 $600 $700 2016 2017 2018 2019 Millions

Q2 - WORKING CAPITAL (Amounts in Millions)

AR Inventory AP Working Capital as % of Sales

2019 Q1 Q2 Q3 Q4 Q1 Q2 Days Sales Outstanding (DSO) 63 60 62 61 66 63 Days A/P in Inventory (DPI) 96 96 106 115 107 105 Days Payable Outstanding (DPO) (59) (58) (58) (62) (65) (57) Cash Conversion Cycle 100 98 110 114 108 111 Cash $112,429 $106,491 $96,799 $81,685 $68,315 $66,366 Cash % of 12 Mo Sales 7.3% 6.7% 6.0% 5.1% 4.3% 4.3% 2018

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JUNE 2019

81.7 66.4 (5.7) 27.8 0.2 (1.8) (27.2) 14.3 (0.5) (15.0) (2.1) (16.7) (39.8) 50.6 (0.6) 1.1

  • 20.0

40.0 60.0 80.0 100.0 Millions

Appendix

YTD Cash & Activity

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Q2 '19 Q1 '19 Q4 '18 Q3 '18 Q2 '18 Cash $66 $68 $82 $97 $106 Total Debt $517 $499 $461 $461 $462

6.50% Secured Notes Due 2023 $396 $395 $395 $395 $395 Titan Europe Credit Facilities $44 $37 $35 $36 $34 Revolving Credit Facility $41 $25 $0 $0 $0 Other $36 $42 $31 $30 $33

Net Leverage (Net Debt / Trailing 12 Mos AEBITDA) 6.18x 4.47x 3.19x 2.88x 2.97x Interest Expense $8.3 $7.9 $6.8 $7.6 $7.7

CASH / DEBT

$396 $44 $36 $41 6.50% Secured Notes Due 2023 Titan Europe Credit Facilities Other $75m ABL Credit Facility Due Feb 2022

Appendix

Debt Structure

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Appendix

Cost Structure

Raw Materials ~50-55% Overhead ~30-35% Labor ~10-15%

Primary Raw Materials GP Cost Structure Breakdown Steel Natural Rubber Synthetic Rubber Carbon Black Nylon

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Appendix

Financial Summary 2014 - 2018

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Appendix

Financial Summary 2018

 Net sales increased $133.5 million, or 9.1% YoY, and net sales increased 11.3% on a constant currency basis  Gross profit increased $38.0 million, a 23.7% YoY improvement  SG&A expenses were $134.8 million (8.4% of net sales), a $15.9 YoY decrease  Operating income was $42.2 million, a $53.4 million YoY improvement  EPS was $0.06, with adjusted EPS of $0.27, a $1.18 YoY improvement on an EPS basis and a $0.76 YoY improvement on adjusted EPS  Adjusted EBITDA was $119.1 million, a 64% YoY improvement

2018 Financial Highlights

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Appendix

Financial Summary 2018

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Appendix

Financial Summary 2018

AGRICULTURE OTR CONSUMER

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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

  • r 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.

Titan Website: www.titan-intl.com

Investor Relations todd.shoot@titan-intl.com