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

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

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Investor Presentation November 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

November 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.

  • Russian Ag has been challenged with both higher

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 showing signs of weakening 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: Highlights & Challenges

 Net sales were $345.9 million, a $38.8 million decrease YoY, net sales would have decreased nearly $33.1 million on a constant currency basis  SGARD expenses were $37.3 million (10.8% of net sales)  Loss from operations was $12.6 million  Net loss applicable to common shareholders was $19.6 million and EPS was $(0.33), with adjusted EPS of $(0.28)  Adjusted EBITDA was $8.5 million  Operating cash flow of $41 million and free cash flow of $31 million Q3 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  Conditions in North America Ag have not improved from the difficult planting season and uncertainty abounds from a global economic

  • perspective. These factors have added to weakening demand beyond North American Ag and into the global construction market, which led to

OEMs producing below retail demand levels during the quarter, which had a significant effect on our performance.  Gross profit and margin declined as a result of overall lower sales and continued underperformance in our N.A. Wheel operation from inventory at higher than current prevailing prices of steel, which compressed gross profit ($7 million). In Australia, we experienced lower margins as we continue to liquidate our OTR tire inventories as we shift away from this business. The decline in gross profit from the third quarter of 2018 to this year was over $3 million. Q3 Financial Highlights

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45% 45% 10%

GP: 11.1% GP: 8.3%

GP: 6.7%

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

Q3 2019 Segment Revenue Sales: $345.9M GP: 7.8% vs. Q3’18: -3.6%

⬇ 4.1% vs. Q3 2018 ⬇ 13.7% vs. Q3 2018 ⬇ 18.0% vs. Q3 2018 ⬇ 5.5% vs. Q3 2018 ⬇ 1.6% vs. Q3 2018 ⬇ 1.3% vs. Q3 2018 Sales GP %

Financial Overview: Quarterly Comparison by Market

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$139 $171 $163 $157 13% 11% 12% 7%

$5 $7 $9 $1 10 $1 30 $1 50 $1 70 $1 90 0% 5% 10 % 15 % 20 % 25 % 30 % 35 % 40 % 45 % 50 %

Q3 '16 Q3 '17 Q3 '18 Q3 '19

 Net Sales: Declined 4.1% Q3‘19 vs. Q3‘18  Gross margin declined ~554 bps YoY  Volume down (0.6%); Price/mix down (2.4%); FX down (1.1%)

AG 45%

 Net Sales: Declined 18.0% Q3‘19 vs. Q3‘18  Gross margin declined ~343 bps YoY  Volume down (21.3%); Price/mix up 4.3%; FX down (1.0%)

Consumer 10% EMC 45%

 Net Sales: Declined 13.7% Q3‘19 vs. Q3‘18  Gross margin declined ~157 bps YoY  Volume down (9.3%); Price/mix down (2.3%); FX down (2.1%)

$129 $156 $180 $156 9% 9% 10% 8%

$1 00 $1 10 $1 20 $1 30 $1 40 $1 50 $1 60 $1 70 $1 80 $1 90
  • 2%
8% 18 % 28 % 38 % 48 % 58 % 68 % 78 %

Q3 '16 Q3 '17 Q3 '18 Q3 '19 $39 $44 $41 $34 12% 14% 15% 11%

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

Q3 '16 Q3 '17 Q3 '18 Q3 '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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24 (Amounts in millions) Q3 2019 Q3 2018 Q3 2017 Q3 2016 Sales $345.9 $384.7 $371.0 $306.2 Gross Margin $27.1 $43.7 $39.7 $34.9 Gross Margin % 7.83% 11.36% 10.7% 11.4% Operating Income (Loss) ($12.6) $4.8 ($5.1) ($6.3) Operating Income % (3.6%) 1.3% (1.4%) (2.1%) Net income (loss) attrib. to Titan ($19.1) $2.3 ($12.0) ($8.0) Earnings per share - Diluted ($0.33) ($0.03) ($0.22) ($0.17)

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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Financial Overview: EBITDA Reconciliation

EBITDA Reconciliation (Non-GAAP)

USD Amounts in Millions

Q3 2019 Q3 2018 YTD 2019 YTD 2018 Net income (20.0) 2.7 (25.7) 27.1

Provision for income taxes 2.1 2.8 0.8 3.7 Interest expense 8.4 7.6 24.6 22.8 Depreciation and amortization 13.5 13.2 41.3 43.4

EBITDA

3.9 26.3 41.0 97.0

Foreign exchange loss 2.3 (0.9) (2.2) 7.2 ITM IPO costs 2.3

  • 2.3
  • Adjusted EBITDA

8.5 25.5 41.1 104.2

Adjustments Adj

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Appendix

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27 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Days Sales Outstanding (DSO) 63 60 62 61 66 63 58 Days A/P in Inventory (DPI) 96 96 106 115 107 105 108 Days Payable Outstanding (DPO) (59) (58) (58) (62) (65) (57) (56) Cash Conversion Cycle 100 98 110 114 108 111 110 Cash $112,429 $106,491 $96,799 $81,685 $68,315 $66,366 $78,603 Cash % of 12 Mo Sales 7.3% 6.7% 6.0% 5.1% 4.3% 4.3% 5.2% 2018 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 Quarter 4 197 220 282 221 274 323 373 352 146 187 228 182

24.6% 24.4% 24.9% 28.2%

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

Q3 - WORKING CAPITAL (Amounts in Millions)

AR Inventory AP Working Capital as % of Sales

Appendix

Working Capital / CCC

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SEPTEMBER 2019

81.7 78.6 (25.7) 41.3 (0.7) (2.3) 16.1 36.9 (4.2) (24.3) (5.9) (26.3) (70.4) 64.9 (0.9) (1.6) 55.0 65.0 75.0 85.0 95.0 105.0 115.0 125.0 135.0 145.0 155.0 Millions

Appendix

YTD Cash & Activity

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Q3 '19 Q2 '19 Q1 '19 Q4 '18 Q3 '18 Cash $79 $66 $68 $82 $97 Total Debt $529 $517 $499 $461 $461

6.50% Secured Notes Due 2023 $396 $396 $395 $395 $395 Titan Europe Credit Facilities $41 $44 $37 $35 $36 Revolving Credit Facility $59 $41 $25 $0 $0 Other $33 $36 $42 $31 $30

Net Leverage (Net Debt / Trailing 12 Mos AEBITDA) 8.35x 6.18x 4.47x 3.19x 2.88x Interest Expense $8.4 $8.3 $7.9 $6.8 $7.6

CASH / DEBT

$396 $41 $33 $59 6.50% Secured Notes Due 2023 Titan Europe Credit Facilities Other $125m 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