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, 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.
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
COMPETITIVE ADVANTAGES TITAN/GOODYEAR MICHELIN BRIDGESTONE GKN
Titan International Overview Customers
AGRICULTURE: Products/Brands /
AGRICULTURE: Major 2015 Highlight
AGRICULTURE: Product Innovations First line of text Bullet one goes here Bullet two goes here • Sub-bullet goes here • Sub-bullet goes here
AGRICULTURE: Product Innovations
AGRICULTURE: Product Innovations
AGRICULTURE: Product Innovations
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
OTR: Products/Brands
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.
OTR: Product Innovations
OTR: Product Innovations
OTR: Product Innovations
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
CONSUMER: Products/Brands
CONSUMER: Products Innovations
Financial Performance
Market Summary Overview by Market Segment Q3 2016 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 Q3 2016 Segment Revenue GP Margin: 12.2% 13% 1% decrease vs. Q3 2015 Agriculture 45% 3% increase vs. Q3 2015 Earthmoving / Construction GP Margin: 12.2% 9% decrease vs. Q3 2015 GP Margin: 8.7% Consumer 42% Total: $306.2 million
Financial Performance Sales and Gross Margin by Market 60 % $4 00 Net Sales: Down (1%) Q3 ‘16 vs . Q3 ‘15 $3 50 50 % $273 $3 00 Gross margin improved 235 basis points with every region showing 40 % $228 $2 50 improvement from the same quarter to last year AG 30 % 45% $2 00 $139 Continued reduction in OEM demand for products $140 20 % $1 50 18% 10 % Price/mix up 4%; volume down (6%); FX 1% $1 00 13% 12% 10% 0% $5 0 Q3 '13 Q3 '14 Q3 '15 Q3 '16 $3 50 Net Sales: Up 3% Q3 ‘16 vs. Q3 ’15 78 % 68 % $3 00 Gross margin improved 239 basis points with all regions showing 58 % $2 50 gains compared to Q3 ‘15 EMC 48 % $169 $2 00 $154 42% $129 38 % $126 $1 50 Positive movement within the Aftermarket segment 28 % 9% $1 00 7% 7% 6% 18 % Price/mix down (7%); volume up 10%; FX flat $5 0 8% - 2% $0 Q3 '13 Q3 '14 Q3 '15 Q3 '16 $1 25 Net Sales: Down (10%) Q3 ’16 vs. Q3 ’15 78 % 68 % $1 00 Gross margin improved 230 basis points on lower sales 58 % $68 Consumer 48 % $7 5 Decline in low-margin supply agreements in Brazil; Lower sales of 13% $55 38 % $43 $39 High Speed Train brakes $5 0 28 % 7% 12% 10% 6% 18 % $2 5 Price/mix up 14%; volume down (27%); FX 3% 8% - 2% $0 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 imp lemented 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.
Financial Performance Q3 Accomplishments & Challenges Accomplishments 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 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
Financial Performance Financial Summary (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 10.8% 8.5% 11.5% 11.0% Gross Margin % 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) Note: Gross Margin and Operating Income net of adjustments. Net Income and EPS adjusted for Noncontrolling Interest and non GAAP items.
Financial Performance Adjusted Income Q3 2016 Q3 2016 Q3 2015 YTD 2016 YTD 2015 USD Amounts in Millions 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) Adjustments 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) Note: Adjustments for non GAAP items are net of taxes.
Financial Performance Adjusted EBITDA Q3 2016 Q3 2016 Q3 2015 YTD 2016 YTD 2015 USD Amounts in Millions Operating income (loss) (8.3) (14.5) (12.3) (6.1) Adjustments 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
Financial Appendix
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