Investor Presentation Q3 2016 Titan International Overview Titan - - PowerPoint PPT Presentation

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Investor Presentation Q3 2016 Titan International Overview Titan - - PowerPoint PPT Presentation

May 25, 2023 232 likes •623 views

Investor Presentation Q3 2016 Titan International Overview Titan International, Inc. 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,

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Investor Presentation Q3 2016

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Titan International Overview

Titan International, Inc.

  • 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 two distinct tire brands: Titan Tire and Goodyear Farm Tires.

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Titan International Overview

Corporate 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
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COMPETITIVE ADVANTAGES

TITAN/GOODYEAR MICHELIN BRIDGESTONE GKN

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Titan International Overview

Customers

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AGRICULTURE: Products/Brands

/

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AGRICULTURE: Major 2015 Highlight

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AGRICULTURE: Product Innovations

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AGRICULTURE: Product Innovations

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AGRICULTURE: Product Innovations

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AGRICULTURE: Product Innovations

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Market Summary

Agricultural Drivers

  • Mix Shift - Large hp equipment (4WD tractors and Combines) continue a cyclical downturn which began in
  • 2014. Smaller hp tractor demand remains good, but at lower ASP and gross margins
  • Grain prices remain low; resulting in lower farm income (although expected to stabilize somewhat in 2016)
  • Used equipment inventory levels remain above average, but have started to decline recently
  • Used equipment values began to increase during early 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 low for financing new equipment purchases
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OTR: Products/Brands

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OTR: Major Highlight

TITAN TIRE RECLAMATION CORPORATION (TTRC)

Disposal of giant mining tires is the responsibility of the end-user, and doing so responsibly has traditionally come with a significant cost, leading many in the industry to stockpile used tires until a less cost-prohibitive solution is

  • developed. Since 2007, development of that solution has been underway.

Titan Tire Reclamation Corp has now completed a pyrolysis system that can convert reclaimed tires into raw materials. The first facility officially opened in Fort McMurray, Alberta with a ribbon cutting in March 2016.

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OTR: Product Innovations

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OTR: Product Innovations

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OTR: Product Innovations

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Market Summary

Earthmoving/Construction Drivers

  • 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
  • Mining remains weak with commodity prices low
  • Strong U.S. dollar
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CONSUMER: Products/Brands

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CONSUMER: Products Innovations

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Financial Performance

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Market Summary

Overview by Market Segment Q3 2016

45% 42% 13%

GP Margin: 12.2% GP Margin: 8.7%

GP Margin: 12.2%

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, brakes and actuators Agriculture Consumer Earthmoving / Construction

Q3 2016 Segment Revenue Total: $306.2 million

1% decrease vs. Q3 2015 3% increase vs. Q3 2015 9% decrease vs. Q3 2015

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$273 $228 $140 $139 18% 13% 10% 12%

$5 $1 00 $1 50 $2 00 $2 50 $3 00 $3 50 $4 00 0% 10 % 20 % 30 % 40 % 50 % 60 %

Q3 '13 Q3 '14 Q3 '15 Q3 '16

Financial Performance

Sales and Gross Margin by Market

 Net Sales: Down (1%) Q3 ‘16 vs. Q3 ‘15  Gross margin improved 235 basis points with every region showing improvement from the same quarter to last year  Continued reduction in OEM demand for products  Price/mix up 4%; volume down (6%); FX 1%

AG 45%

 Net Sales: Down (10%) Q3 ’16 vs. Q3 ’15  Gross margin improved 230 basis points on lower sales  Decline in low-margin supply agreements in Brazil; Lower sales of High Speed Train brakes  Price/mix up 14%; volume down (27%); FX 3%

Consumer 13%

EMC 42%

 Net Sales: Up 3% Q3 ‘16 vs. Q3 ’15  Gross margin improved 239 basis points with all regions showing gains compared to Q3 ‘15  Positive movement within the Aftermarket segment  Price/mix down (7%); volume up 10%; FX flat

$169 $154 $126 $129 7% 7% 6% 9%

$0 $5 $1 00 $1 50 $2 00 $2 50 $3 00 $3 50
  • 2%
8% 18 % 28 % 38 % 48 % 58 % 68 % 78 %

Q3 '13 Q3 '14 Q3 '15 Q3 '16 $55 $68 $43 $39 6% 7% 10% 12%

$0 $2 5 $5 $7 5 $1 00 $1 25
  • 2%
8% 18 % 28 % 38 % 48 % 58 % 68 % 78 %

Q3 '13 Q3 '14 Q3 '15 Q3 '16 Note: Certain amounts from prior years have been reclassified to conform to the current year’s presentation. The company has implemented new technology resources which allow for more accurate segregation of sales and profit by segment. The previous year segment information has been updated to be consistent. Gross Margin net of adjustments.

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Financial Performance

Q3 Accomplishments & Challenges

 Improved overall gross margin rate performance (230 bps) for the quarter despite a 1% sales decline compared to prior year  Latin America, Australia, Europe, ITM and Russia teams all improved results (sales & gross profit) in tough market conditions  Cash ended the quarter at $216 million compared to $200 million at the beginning of the year and $207 million at the end of the previous quarter; At the start of the Ag downturn in 2014 this balance was $189 million, clearly demonstrating the diligent manner in which we are managing liquidity and cash flow  Released test results from a Missouri farm using Goodyear LSW Super Single tires demonstrating increased yield on the corn and soybeans tested by approximately three percent per acre (See October 21 Press Release)  Re-aligned our Grizz Squad with our sale territory managers unleashing a much larger sales group in North America  Continued investments in R&D, sales and marketing (specifically supporting LSW) adding value for the long term Accomplishments Challenges  Continued downward trend in Large Ag products (higher ASP and margin) driven by lower commodities / farm income / cash receipts  Weak mining market conditions which impacts North America, ITM and Australia business units  Strong US dollar impacting U.S. exports and reported sales  Decreased OEM production levels commensurate with lower demand driven by lower farm income and lower commodity prices

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Financial Performance

Financial Summary

Note: Gross Margin and Operating Income net of adjustments. Net Income and EPS adjusted for Noncontrolling Interest and non GAAP items.

(Amounts in millions) Q3 2016 Q3 2015 YTD 2016 YTD 2015 Sales $306.2 $308.8 $958.2 $1,087.0 Gross Margin $33.0 $26.2 $109.9 $120.0 Gross Margin % 10.8% 8.5% 11.5% 11.0% Operating Income (Loss) ($8.3) ($14.5) ($12.3) ($5.6) Operating Income % (2.7%) (4.7%) (1.3%) (0.5%) Adjusted Net Income (Loss) ($10.0) ($31.5) ($21.0) ($27.0) Adjusted Earnings Per Share-Diluted ($0.18) ($0.59) ($0.39) ($0.50)

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Financial Performance

Adjusted Income

Note: Adjustments for non GAAP items are net of taxes.

Q3 2016

USD Amounts in Millions

Q3 2016 Q3 2015 YTD 2016 YTD 2015 Net loss applicable to common shareholders (11.3) (42.5) (29.5) (35.9) Remove redemption value adjustment 1.3 11.0 8.5 11.4 Net income (loss) attributable to Titan (10.0) (31.5) (21.0) (24.5)

Subsidiary currency correction (3.1) Italy restructuring 0.5

Adjusted net income (loss) attrib. to Titan (10.0) (31.5) (21.0) (27.0) Adjusted EPS - Diluted (0.18) (0.59) (0.39) (0.50)

Adjustments

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Financial Performance

Adjusted EBITDA

Q3 2016

USD Amounts in Millions

Q3 2016 Q3 2015 YTD 2016 YTD 2015 Operating income (loss) (8.3) (14.5) (12.3) (6.1)

Other income (expense) 3.6 0.8 10.5 6.3 Depreciation & amortization 14.3 16.4 44.9 53.0 Subsidiary currency correction (3.1) Italy restructuring 0.7

Adjusted EBITDA 9.6 2.7 43.2 50.8

Adjustments

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Financial Appendix

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Appendix

Sales – N. America vs. International

(Amounts in $ millions)

2013 2014 2015 2016

Sales - Total

$497.5 $449.6 $308.8 $306.2

Sales - N. America

$282.8 $209.9 $144.4 $118.5

Sales - International

$214.7 $239.7 $164.4 $187.7

Gross Margin

$62.5 $43.6 $26.2 $33.0

Gross Margin - N. America

$38.7 $21.8 $12.7 $10.8

%

13.7% 10.4% 8.8% 9.1%

Gross Margin - International

$23.8 $21.8 $13.4 $22.2

%

11.1% 9.1% 8.2% 11.8%

Gross Margin%

12.6% 9.7% 8.5% 10.8%

Operating Profit

$17.1 ($2.5) ($14.5) ($8.3)

Operating Profit - N. America

$9.9 ($1.2) ($10.6) ($12.5)

%

3.5% (0.6%) (7.3%) (10.5%)

Operating Profit - International

$7.2 ($1.3) ($3.9) $4.2

%

3.3% (0.6%) (2.3%) 2.3%

Operating Profit %

3.4% (0.6%) (4.7%) (2.7%)

Note: Gross Margin and Operating Income net of adjustments.

Q3 FINANCIAL SUMMARY

283 210 144 119 215 240 164 188

3.4% (0.6%) (4.7%) (2.7%)

  • 6%
  • 4%
  • 2%

0% 2% 4% 6% 8% $0 $100 $200 $300 $400 $500 $600 2013 2014 2015 2016 Millions

Q3 - Sales / Operating Income (Amounts in Millions)

Sales - N. America Sales - International Operating Profit %

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Appendix

Working Capital

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Days Sales Outstanding (DSO) 54 55 54 53 61 54 55 Days A/P in Inventory (DPI) 82 91 98 90 88 92 98 Cash $190,557 $187,490 $193,817 $200,188 $191,097 $207,238 $215,509 Cash % of 12 Month Sales 10.8% 11.6% 13.2% 14.4% 14.5% 16.3% 17.0% 2015 2016 290 248 184 184 376 375 287 278 195 169 128 152

23.7% 25.3% 27.8% 25.3%

21% 22% 23% 24% 25% 26% 27% 28% 29% $0 $100 $200 $300 $400 $500 $600 $700 2013 2014 2015 2016 Millions

Q3 - WORKING CAPITAL (Amounts in Millions)

AR Inventory AP Working Capital as % of Sales

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September 2016

$200.2 $215.5 44.9 27.3 9.8 3.0 2.8 2.5 2.4 1.8 0.2 12.3 14.0 22.1 30.8

  • 50.0

100.0 150.0 200.0 250.0 300.0 350.0

Appendix

YTD Cash Activity

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Appendix

Debt Structure

Q3 '16 Q2 '16 Q1 '16 Q4 '15 Q3 '15 Cash $216 $207 $191 $200 $194 Total Debt $501 $504 $504 $507 $508

Titan International $456 $455 $456 $456 $455 Titan Europe Credit Facilities $37 $39 $40 $38 $40 Other $8 $10 $8 $13 $13

Net Leverage (Net Debt / Trailing 12 Mos EBITDA) 6.16x 7.51x 7.76x 5.67x 5.24x Interest Expense $8.7 $8.0 $8.5 $8.3 $8.3

5.625% Convertible Notes Due 2017 $0.8 $0.8 $0.8 $0.6 $0.6 6.875% Secured Notes Due 2020 $6.9 $6.9 $6.9 $6.9 $6.9 European Credit Facilities $0.4 $0.2 $0.2 $0.4 $0.3 LAT/AUS/VP Working Capital Facilities $0.0 $(0.0) $0.0 $(0.1) $(0.0) Revolver Commitment/Letter of Credit Fees $0.2 $0.2 $0.2 $0.2 $0.2 Financing Fees Amortization $0.4 $(0.1) $0.4 $0.4 $0.4

CASH / DEBT

$396 $60 $37 $8 6.875% Secured Notes Due Oct 2020 5.625% Convertible Notes Due Jan 2017 Titan Europe Credit Facilities Other $150m ABL Credit Facility Due Dec 2017

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Appendix

Cost Structure

Raw Materials 55% Overhead 25% Labor 20%

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