Investor Presentation Q2 2017
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
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. 3
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
Titan International Overview: Portfolio COMPETITIVE ADVANTAGES TITAN/GOODYEAR MICHELIN BRIDGESTONE GKN 5
Titan International Overview: Customers 6
Titan International Overview: Global Footprint 7
AGRICULTURE: Market Summary 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 beginning in 2016) Used equipment inventory levels remain above historical averages, but declined within the past year Used equipment values have stabilized and in some cases increased over the past year Legislation passed to reinstate tax incentives including Section 179 deduction (permanent) and bonus depreciation (phased out in 2020) Despite recent increases, interest rates remain at historically low levels for financing new equipment purchases 9
AGRICULTURE: Product Innovations 10
AGRICULTURE: Product Innovations 11
AGRICULTURE: Goodyear Expansion 12
AGRICULTURE: Growth Opportunities 13
OTR: Market Summary 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 15
OTR: Recent Highlight 16
OTR: 23,000-Hour Giant Stands Out At Minexpo 17
OTR: Product Innovations 18
OTR: Product Innovations 19
OTR: ITM Innovations 20
CONSUMER: Products Innovations 22
CONSUMER: Specialty Products Division 23
Financial Overview
Financial Overview: Highlights & Challenges Q2 Highlights Net sales were $364.4 million, up 10% year-over-year which is the second consecutive quarter of significant YOY growth SG&A expenses were reduced $1.9 million, or 5% over the same period last year while our net sales increased Operating income improved by $1.4 million, or 53% year-over-year Agriculture segment net sales increased 18% year over year during the second quarter with North America up 21% and Latin America up 45% Cash, cash equivalents, and certificates of deposit ended the quarter at $153 million Finalized new five year agreements with the United Steelworkers Union (USW) representing three North American tire plants Q2 Challenges Continued trend of lower volumes in Large Ag products (higher ASP and margin) driven by lower commodities / farm income / cash receipts When raw material costs increase quickly as they did during the first half of the year, we are negatively impacted. Rising raw material costs negatively impacted gross profit approximately $11 million during the quarter and approximately $20 million year-to-date Raw material costs negatively impacted gross margins on a year-over-year basis as our OEM contracts in North America did not allow us to fully pass through these higher costs during the quarter 25
Financial Overview: Q2 2017 by Market 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 Q2 2017 Segment Revenue GP: 16.5% 11% ⬆ 18% vs. Q2 2016 Sales ⬆ 7% vs. Q2 2016 Agriculture 48% ⬇ 5% vs. Q2 2016 Earthmoving / Construction GP: 13.2% GP: 9.3% ⬇ 2.4% vs. Q2 2016 41% Consumer GP % ⬇ 1.6% vs. Q2 2016 ⬆ 3.8% vs. Q2 2016 *See Slide 25 for Q2 Challenges on Raw Material impacts. Sales: $364.4M GP: 12.0% vs.Q216: -1.3% 26
Financial Overview: Sales and Gross Margin 50 % $3 00 $257 45 % Net Sales: Up 18% Q2 ‘17 vs . Q2 ‘16 40 % $2 50 Gross margin declined 240 basis points compared to Q2 ’16 35 % $173 30 % $175 $2 00 AG 25 % Improvements in the North America aftermarket business $147 48% 20 % $1 50 15 % Volume up 11%; Price/mix up 5%; FX up 2% 16% 10 % $1 00 15% 13% 13% 5% 0% $5 0 Q2 '14 Q2 '15 Q2 '16 Q2 '17 $185 $1 90 Net Sales: Up 7% Q2 ‘17 vs. Q2 ’16 78 % $1 80 68 % Gross margin declined 163 basis points compared to Q2 ‘16 $1 70 58 % $153 $151 $1 60 EMC 48 % $141 $1 50 Positive movement within aftermarket business 41% 38 % $1 40 28 % Volume up 7%; Price/Mix up 1%; FX down (1%) $1 30 11% 10% 9% 8% 18 % $1 20 8% $1 10 - 2% $1 00 Q2 '14 Q2 '15 Q2 '16 Q2 '17 $1 00 Net Sales: Down (5%) Q2 ’17 vs. Q2 ’16 78 % $80 68 % Gross margin improved 379 basis points compared to Q2 ‘16 $7 5 58 % Consumer 48 % $48 Lower demand for Bias truck tires in Latin America $41 11% $42 $5 0 38 % 14% 28 % 17% Volume down (11%); Price/mix up 2%; FX up 4% 13% 10% $2 5 18 % 8% - 2% $0 Q2 '14 Q2 '15 Q2 '16 Q2 '17 *See Slide 25 for Q2 Challenges on Raw Material impacts. Note : Certain amounts from prior years have been reclassified to conform to the current year’s presentation. 27
Financial Overview: Summary Income & EPS (Amounts in millions) Q2 2017 Q2 2016 YTD 2017 YTD 2016 Sales $364.4 $330.2 $721.9 $652.0 Gross Margin $43.6 $43.7 $83.3 $72.0 12.0% 13.2% 11.5% 11.0% Gross Margin % Operating Income (Loss) $4.0 $2.6 ($3.1) ($8.9) Operating Income % 1.1% 0.8% (0.4%) (1.4%) Net loss applicable to common ($10.3) ($5.2) ($20.8) ($23.1) shareholders Earnings Per Share - Diluted ($0.17) ($0.10) ($0.35) ($0.43) *See Slide 25 for Q2 Challenges on Raw Material impacts. Note: Gross Margin and Operating Income net of adjustments. Net Income and EPS adjusted for Noncontrolling Interest and non GAAP items. 28
Financial Overview: EBITDA Reconciliation Q2 2017 Q2 2017 Q2 2016 YTD 2017 YTD 2016 USD Amounts in Millions Net income (loss) (6.5) (3.8) (17.1) (16.1) Adjustments Provision for income taxes 0.1 3.6 3.6 4.7 Interest expense 7.3 8.0 15.0 16.5 Depreciation & amortization 15.0 15.4 29.5 30.6 EBITDA 15.9 23.2 31.0 35.6 FX Foreign exchange gain (loss) (5.3) 2.2 (0.7) 7.0 Adjusted EBITDA 21.2 21.0 31.7 28.6 *See Slide 25 for Q2 Challenges on Raw Material impacts. 29
Financial Appendix
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