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Titan International Products
Titan Strategy
Wheels
Undercarriage components (ITM)
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
Tires, and Assemblies Undercarriage components (ITM)
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Titan/
Goodyear
40%
Others
<5% ea
27%
* Source: Modern Tire Dealer, December 2013
Market LeaderNorth American Ag
TIRES:
OEM 48%; REPLACEMENT 29%*
WHEELS:
OEM & REPLACEMENT > 75%
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Overview by Market Segment- Q2 2014
Agriculture
Consumer
Earthmoving / Construction
Q2 Segment Revenue
Agricultural: 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
Total: $523.7 million
12% decrease vs. Q2 2013
21% decrease vs. Q2 2013
22% decrease vs. Q2 2013 55%31%
14%GP Margin: 6%
GP Margin: (14%)GP Margin: 15%
1,824
1,586
1,406
1,018
932
732
705
96
61
13
6
5
3
1
Canada
USA
France
Germany
UK
Japan
Australia
Russia
Brazil
Pakistan
India
Africa
China
Indonesia
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Agricultural DriversAg Drivers 2014
Mix Shift- Large Ag equipment (4WD and Combines) are experiencing downward cycle after 3 good
years of massive growth. Smaller hp tractors sales are increasing but are lower priced and less
profitable
Reinstatement of the Section 179 tax deduction to $500,000 for ‘14 and ‘15 passed House and
Senate; awaiting President Obama’s approval. This will have a positive effect on equipment purchases.
Grain prices are lower but the condition of this years crop is rated good to excellent
Interest rates are low for equipment purchases
Drought in Brazil could increase exports from North America
Inventory levels are still considered high
Input costs for seed, chemicals and fuel are rising lowering cash receipts
Source: World Development Indicators, World Bank; Ag Equipment Intelligence January 2014; Starks 7/7/14
Mechanization- Tractor units per 1,000 farmers North American Farm Machinery Sales Outlook
175,515187,280 191,870
8,545 8,480 8,54512,760 13,715 12,530
2012 2013 2014F
<100 hp tractors 4WD tractors combines
181161
144158
202
233224
191
148
7790
126
150 145160
180200
2000 2002 2004 2006 2008 2010 2012 2014F 2016F
Small construction equipment sales in North America are forecasted to grow ~10-12% YoY through 2016 primarily due to residential and commercial improvements
Larger construction equipment purchases used for highways and infrastructure are slow to recover
Mining is weak: Commodity prices are low; Cap Ex and Op Ex reduced at mine locations, Tire inventory is being destocked to minimum levels
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Earthmoving / Construction Drivers
Earthmover/Construction Drivers in 2013/2014
Source: Wall Street Research
Global Construction Equipment forecast (in thousands)
Titan’s
projections
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Our Global Footprint and Market Share
* MTD Jan 2014; all other market share figures are approximate/estimated
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The Titan Advantage
* MTD Jan 2014; all other market share figures are approximate/estimated
TIRES WHEELSUNDER-
CARRIAGESERVICE CENTERS
RECLAMATION
TITAN INTERNATIONAL PROVIDES THE TOTAL SYSTEM.
LSW (Low Sidewall) tire/wheel systems feature a larger rim diameter and smaller tire sidewall
Today’s equipment is getting larger and more powerful. This design offers: smoother ride,
improved stability, speed/fuel efficiencies, increase in operator safety.
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TTRC-Recycling venture
10 year agreement with Suncor to recycle used tires
Oil, Carbon black and steel reclaimed
First location, Fort McMurray, Canada to be in operation in 2015
Each site will process 100 million pounds of rubber annually
Significant margins projected
Simplified design
Ease of wheel offset changes
Superior durability and long-term reliability
Reduced wheel wobble and hop
Innovation
technology
Waffle Wheel
Visit: lswadvantage.com
“ONE TITAN”
• Maximize collaboration between wheel and tire business units to accelerate market penetration
• Exercise one common strategy across company divisions
WHEEL/TIRE
SYSTEM
ADVANTAGE
•Exploit our competitive advantage as the only wheel/tire assembly solution provider in North America
•Accelerating adoption of our unique “system” solution “One stop” supplier
PROFIT
OPTIMIZATION
•Measure, Evaluate and drive Net Economic Profit
•Align investments with “One Titan” strategy
•Drive decision making through detailed understanding of “Cost to Serve”
2014 Objectives
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= INCREASE SHAREHOLDER VALUE
Significant headcount reduction
Established a profit optimization framework whereby executive team identified key initiatives for immediate focus in 2H 2014
Introduction of EVA (Economic Value Added) performance management framework
Traction on LSW receptiveness
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Q2 Highlights
Accomplishments
Challenges
Large Ag products (higher ASP and margin) are in a downward cycle after 3 robust years
Weak mining market conditions which Impacts-North American, ITM and Australia business units
Impairment recorded of $23.2 on mining equipment and inventory writedowns of $11.6
Inventory destocking and pricing pressures for EMC product continues
Russia contributed $25M in sales with no profit flow through
Raw material prices continue to fall thus price concessions will be passed through
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Q2 Financial Summary (M$)
(Amounts in millions) Q2 2011 Q2 2012 Q2 2013 Q2 2014
Sales $404.4 $459.2 $593.2 $523.7
Gross Margin $64.3 $82.1 $86.7 $22.6
Gross Margin % 15.9% 17.9% 14.6% 4.3%
Adjusted Net Income $23.7 $28.8 $13.7 $1.7
Adjusted Earnings Per Share-Diluted $0.44 $0.56 $0.24 $0.03
Note: Net income and EPS adjusted for non GAAP items.
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$404 $459
$593$524
11.0% 17.6%6.2%
-5.6%-10%
0%
10%
20%
$200
$400
$600
Q2 2011 Q2 2012 Q2 2013 Q2 2014
Sales Operating Income
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Sales and Gross Margin by Market ($M)
Note: Consumer sales shown post the Latin American farm/;consumer plant acquisiton (April 2011)
Net Sales: Down 12% Q2 ‘14 vs. ‘13; Down 5% YTD ‘14 vs. ‘13
Volume on Large Ag in a cyclical downturn
Pricing reduced due to lower raw material prices
Russia Ag revenue contribution = $17M Q2; $41M YTD
AG
59%
Net Sales: Up 22% % Q2 ‘14 vs. ‘13; Up 20% YTD ‘14 vs. ‘13
New sales in Russia and Titan Europe increased brake sales
Margins challenged due to Russia inventory destocking at dealers
and Brazil with competitive pressure
Volume increase of 34% offset by currency devaluation of 16%
Consumer
13%
EMC
28%
Net Sales: Down 21% % Q2 ‘14 vs. ‘13; Down 24% YTD ‘14 vs. ‘13
Super Giant Mining tires down $28M QoQ; Down $72M YoY
Mining equipment impairment and inventory writedown of $34.8M
$257
$289
$324$285
18% 21% 17% 15%$100
$150
$200
$250
$300
$350
$400
- 4%
6%
16%
26%
36%
46%
56%
66%
Q2 '11 Q2 '12 Q2 '13 Q2 '14
$77 $111
$208
$164
15%
18%13% -14%
$0
$50
$100
$150
$200
$250
$300
- 15%
- 5%
5%
15%
25%
35%
45%
55%
65%
75%
Q2 '11 Q2 '12 Q2 '13 Q2 '14
$70$60 $61
$75
10% 6%7% 6%
$0
$25
$50
$75
$100
- 2%
8%
18%
28%
38%
48%
58%
68%
78%
Q2 '11 Q2 '12 Q2 '13 Q2 '14
Titan performance: 2010-2013
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$89
$184$244
$192
$0
$100
$200
$300
2010 2011 2012 2013
Adjusted EBITDAIn millions
50% domestic;
50% International
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(Amounts in $ millions) 2011 2012 2013 2014 2014*
Sales - Total $404.4 $459.2 $593.3 $523.7 $523.7
Sales - N. America $312.2 $374.3 $329.4 $250.9 $250.9
Sales - International $92.3 $84.9 $263.9 $272.9 $272.9
Gross Margin $64.3 $82.1 $86.7 $22.6 $57.4
Gross Margin - N. America $55.6 $73.1 $57.0 ($0.5) $32.6
% 17.8% 19.5% 17.3% -0.2% 13.0%
Gross Margin - International $8.7 $9.0 $29.7 $23.1 $24.8
% 9.4% 10.5% 11.3% 8.5% 9.1%
Gross Margin% 15.9% 17.9% 14.6% 4.3% 11.0%
Operating Profit $44.4 $81.0 $36.9 ($29.5) $5.3
Operating Profit - N. America $38.0 $49.5 $30.3 ($24.4) $8.7
% 12.2% 13.2% 9.2% -9.7% 3.5%
Operating Profit - International $6.4 $31.5 $6.6 ($5.1) ($3.4)
% 6.9% 37.1% 2.5% -1.9% -1.2%
Operating Profit % 11.0% 17.6% 6.2% -5.6% 1.0%
* 2014 adjusted for Mining Impairment and Inventory Write-down
Q2 FINANCIAL SUMMARY
Q2 SALES / OPERATING INCOME
$312.2 $374.3
$329.4 $250.9 $250.9
$92.3
$84.9 $263.9
$272.9 $272.9
11.0%
17.6%
6.2%
-5.6%
1.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
$-
$100
$200
$300
$400
$500
$600
2011 2012 2013 2014 2014*
Sales - N. America Sales - International Operating Profit %
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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Days of Sales O/S 51 51 53 48 55 52
Days of Inventory 83 75 73 74 76 75
Cash 508,447$ 424,387$ 447,456$ 189,360$ 200,094$ 162,961$
Cash % of 12 Month Sales 26.3% 21.0% 20.7% 8.8% 9.4% 7.9%
2013 2014
243 237336 303
174 215
369387
115 110212 201
26.6%
19.9%
23.8% 23.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
-
100.000
200.000
300.000
400.000
500.000
600.000
700.000
2011 2012 2013 2014
Q2 - WORKING CAPITAL (In Millions)
AR Inventory AP Working Capital as % of Sales
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201 4 YTD Cas h Activity
Jun 30 Mar 31 Dec 31
2014 2014 2013
Cash & Investments $163.0 $200.1 $189.4
(Amounts in Millions)
$189.4$163.0
$46.8
$32.0
$23.2$14.3
$11.6$7.2 $6.2 $5.3 $5.0
$30.0
$53.4
$30.9
$29.0
$18.3$13.4
$3.0
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
$400.0
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Capital Structure
Q2'14 Q1'14 Q4'13 Q3 '13 Q2 '13
Cash $163 $200 $189 $447 $424
Total Debt $528 $577 $572 $742 $744
Titan International $478 $482 $474 $615 $615
Titan Europe $50 $95 $98 $127 $129
Net Leverage (Net Debt / Trailing 12 Mos Adjusted EBITDA) 2.91x 2.57x 1.99x 1.44x 1.46x
Interest Expense $8.9 $9.2 $11.2 $12.4 $13.1
7.875% Secured Notes Due 2017 $0.0 $0.0 $1.4 $9.0 $9.0
5.625% Convertible Notes Due 2017 $0.8 $0.8 $0.8 $0.9 $0.9
6.875% Secured Notes Due 2020 $6.9 $6.9 $6.4 $0.0 $0.0
European Credit Facilities $0.5 $0.7 $1.8 $1.7 $2.4
Latin America Working Capital Facilities $0.0 $0.2 $0.2 $0.2 $0.2
Voltyre Prom Line of Credit $0.1 $0.0 $0.0 $0.0 $0.0
Revolver/ABL Fees $0.1 $0.1 $0.1 $0.1 $0.1
Financing Fees Amortization $0.4 $0.4 $0.5 $0.5 $0.5
May 2014: Paid off Titan Europe's bank overdraft facility with Lloyds - $38.5M
CASH / DEBT
CURRENT DEBT STRUCTURE
$60$400
$16 $50$0
5.625% Convertible Notes -Due Jan 2017
6.875% Secured Notes - Due Oct 2020
Brazil Working Capital Debt European Bank Credit Facilities
$150m ABL Credit Facility -Due Dec 2017
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Cost Structure
Primary Raw MaterialsCost Structure Breakdown
Steel
Natural Rubber
Synthetic Rubber
Carbon Black
Nylon
Company Website:
www.titan-intl.comInvestor [email protected]
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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 or revise anyforward-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.