QUINCY, Ill., March 15, 2017 /PRNewswire/ -- Titan
International, Inc. (NYSE: TWI) announces 2016 fourth quarter and
year-end results.
Fourth quarter summary:
- Net sales for the fourth quarter of 2016 were $307.3 million compared to $307.8 million for the fourth quarter of
2015.
- Gross profit for the fourth quarter of 2016 was $32.5 million, or 10.6 percent of net sales,
compared to $17.8 million for the
fourth quarter of 2015, or 5.8 percent of net sales.
- 2016 fourth quarter loss from operations was $(9.1) million compared to $(18.2) million for the fourth quarter of
2015.
- Basic and fully-diluted earnings per share for the fourth
quarter of 2016 were $(0.26),
compared to basic and fully-diluted earnings per share of
$(1.07) for the fourth quarter of
2015. Basic and fully-diluted earnings per share on an adjusted
basis (see Appendix attached) for the fourth quarter of 2016 were
$(0.24), compared to adjusted basic
and fully-diluted earnings per share of $(0.38) for the fourth quarter of 2015.
Full year summary:
- Net sales for the full year ended December 31, 2016, were $1,265.5 million, down 9.3 percent compared to
$1,394.8 million in 2015.
- Gross profit was $142.5 million,
or 11.3 percent of net sales, for the year ended December 31, 2016, compared to $137.8 million, or 9.9 percent of net sales, for
the year ended December 31,
2015.
- Loss from operations was $(21.3)
million, or (1.7) percent of net sales, for full year 2016
compared to $(24.3) million, or (1.8)
percent of net sales, for 2015.
- Basic and fully-diluted earnings per share for the full year
2016 were $(0.81), compared to basic
and fully-diluted earnings per share of $(1.74) for 2015. Adjusted basic and
fully-diluted earnings per share for the full year 2016 were
$(0.63), compared to adjusted basic
and fully-diluted earnings per share of $(0.13) for 2015.
Statements of Titan Chairman and Titan President and Chief
Executive Officer:
Maurice Taylor, Titan Chairman,
commented, "Titan has a new management team, headed by President
and CEO, Paul Reitz, which
understands what needs to be done to continue our improvements and
we are moving ahead to make this happen. At the beginning of 2016,
our management team discussed with the Board of Directors certain
assets that Titan could consider for potential sale. These assets
included our facility in Brownsville,
Texas, our recently established business involving Titan
Tire Reclamation Corporation (TTRC) in the oil sands, and our
Italtractor ITM S.p.A. (ITM) undercarriage business, initially
considered in connection with an unsolicited inquiry from a
potential purchaser. At that time, Titan's management believed we
could receive more than an aggregate of $250
million for these assets.
"The appraisal for the Brownsville facility came in at the value
expected and the 750,000 square feet of the facility under lease to
third parties is generating approximately $2
million annually in rental revenue. TTRC is progressing in
the oil sands and we expect that TTRC's operations will add to both
our sales and bottom line.
"As previously announced, a special committee of Titan's Board
of Directors (Special Committee), formed for the purpose of
evaluating a potential sale of ITM, engaged Goldman Sachs to serve
as a financial advisor in connection with a potential sale of our
ITM business. Goldman Sachs contacted potential buyers and Titan
received seven formal bids from these potential buyers. The formal
bids were within the range previously guided of more than
100 million euro. Meanwhile, as the
sales process continued during 2016, ITM grew its revenue and
EBITDA, as compared to 2015, while facing a down market and
pressure on the euro. These improving fundamentals within ITM's
business, as well as the Board of Directors' confidence in the
ongoing business model, has resulted in our decision to end the
formal sales process for ITM. The Special Committee, with the
recommendation of Goldman Sachs, determined that selling ITM was
not in the best interest of Titan and its shareholders at this
time. However, Titan will continue to evaluate other possible
strategic alternatives relating to ITM that would be beneficial to
Titan's shareholders.
"Also, as previously announced, in January 2017, holders of a substantial majority
of Titan's 5.625 percent convertible senior subordinated notes
converted their notes into Titan stock, with more than $58 million moving from debt to equity on our
balance sheet.
"In connection with our 2016 third quarter earnings release, I
stated that I thought we had reached the bottom on revenue. I
continue to believe this is correct and that 2017 will demonstrate
this. We believe that there are many opportunities ahead and our
team is excited about what Titan has in front of us this next
year. I'm personally excited about the next few years,
because we have gone through very tough times over the last four
years and we believe we are stronger as a result. As you
know, I enjoy visiting our customers and am encouraged by what I am
hearing from them concerning our products, especially the LSW®
line.
"Titan has stated previously that the LSW tire and wheel volume
is growing. During the farm shows this winter, our entire sales
team has experienced the overwhelming interest from farmers coming
into the Titan booth and asking where they can buy LSW assemblies
for their equipment. I believe in 2017, Titan will accelerate the
positive growth for LSW tires and wheels now that farmers are more
aware of the increase in their yield per acre as a result of less
soil compaction from LSW tires. I believe this will not only be
meaningful in the United States,
but in South America as well.
Titan's facility in São Paulo, Brazil is scheduled to begin production of
both LSW tires and wheels during the third quarter of 2017. Titan
will invest resources in both South
America and Russia
promoting Titan's LSW products within these growing markets. I
anticipate that Brazil's ag
economy could be up 15-20 percent during 2017, which should be
great for LSW tires and wheels. In addition, Titan is focused on
the expansion of our LSW products within the
earthmoving/construction segment which will have a positive impact
for Titan. With all these positives around LSW, I feel very
confident that Titan will grow better than ever."
Paul Reitz, Titan President and
CEO, commented further, "Although sales have continued to decline
from our peak of $2.2 billion in 2013
to the current level of approximately $1.3
billion, we continue to be encouraged by the operating
progress we have made. Fourth quarter 2016 sales of $307.3 million were actually higher than third
quarter sales and relatively flat as compared to the $307.8 million in fourth quarter 2015. Despite
similar sales levels in the fourth quarter relative to the fourth
quarter of 2015, we increased gross profit by nearly $15 million and improved our gross margin
percentage by almost 83 percent to 10.6 percent.
"The collective bargaining agreements with three separate United
Steel Workers ("USW") locals have expired. Union employees at the
impacted facilities have been working without an agreement while
Titan and the USW continue negotiations toward a new contract.
"We understand that, at the beginning of 2016, there were
concerns regarding Titan's liquidity. With our 2016 operating
performance, as well as the recent convertible debt conversion and
maturity, we believe that much of that concern has been addressed.
Notwithstanding the improvement in our numbers, we realize we have
more to do."
Financial summary:
Net sales: Titan recorded net sales of $307.3 million for the fourth quarter of 2016,
compared to fourth quarter 2015 net sales of $307.8 million. For the year, net sales for
2016 were $1,265.5 million, compared
to $1,394.8 million in 2015, a
decrease of 9 percent. Net sales for 2016 declined across all
reported segments relative to 2015. Sales volume was down 5
percent as both the agriculture and earthmoving/construction
segments remained in cyclical downturns. The consumer segment
was affected by the Company's exit from various low-margin supply
agreements and declines in high-speed brake sales to China.
Unfavorable currency translation affected sales by 2 percent and
sales decreased an additional 2 percent due to a reduction in
price/mix.
Gross profit: Gross profit for the fourth quarter
of 2016 was $32.5 million, or 10.6
percent of net sales, compared to $17.8
million, or 5.8 percent of net sales, for the fourth quarter
of 2015. Gross profit for the year 2016 was $142.5 million, or 11.3 percent of net sales,
compared to $137.8 million, or 9.9
percent of net sales, for 2015. Even as sales continued to decline
in 2016, gross margin improved as a result of the Company's
continued implementation of the Business Improvement Framework,
which began in 2014. Gross margin in 2016 improved to 11.3 percent
compared to 9.9 percent in 2015 as initiatives established under
the Business Improvement Framework helped to drive increased
productivity, reduce expenditures, lower material costs, improve
quality, lower warranty costs, and optimize price.
Selling, general and administrative expenses:
Selling, general and administrative (SG&A) expenses for the
fourth quarter of 2016 were $37.3
million, or 12.1 percent of net sales, compared to
$31.4 million, or 10.2 percent of net
sales, for the comparable quarter of 2015. SG&A expenses
for the year ended December 31, 2016,
were $145.0 million, or 11.5 percent
of net sales, compared to $140.4
million, or 10.1 percent of net sales, for 2015. The
increase in SG&A expenses was primarily driven by continued
legal fees in support of anti-dumping and circumvention of duties
litigation, focused marketing expenditures to support LSW
development, and higher incentive compensation as a result of
improving profitability.
Research and development expenses: Research and
development (R&D) expenses for the fourth quarter of 2016 were
$2.2 million, or 0.7 percent of net
sales, compared to $2.3 million, or
0.8 percent of net sales, for the comparable quarter of 2015.
R&D expenses for the year ended December 31, 2016, were
$10.0 million, or 0.8 percent of net
sales, compared to $11.2 million, or
0.8 percent of net sales, for 2015.
Royalty expense: Royalty expenses for the fourth
quarter of 2016 were $2.2 million, or
0.7 percent of net sales, compared to $2.3
million, or 0.7 percent of net sales, for the comparable
quarter of 2015. Royalty expenses for the year ended
December 31, 2016, were $8.9
million, or 0.7 percent of net sales, compared to
$10.5 million, or 0.8 percent of net
sales, for 2015.
Loss from operations: Loss from
operations for the fourth quarter of 2016 was $(9.1) million, or (3.0) percent of net sales,
compared to $(18.2) million, or (5.9)
percent of net sales, in the comparable quarter of
2015. Loss from operations for the year ended
December 31, 2016, was $(21.3) million, or (1.7) percent of net sales,
compared to $(24.3) million, or (1.8)
percent of net sales, in 2015.
Interest expense: Interest expense was
$7.3 million and $8.3 million for the quarters ended December 31, 2016 and 2015, respectively.
Interest expense for the year 2016 was $32.5
million, compared to $34.0
million in 2015.
Foreign exchange gain (loss): Foreign
currency gain was $1.1 million for
the quarter ended December 31, 2016,
compared to a gain of $1.0 million
for the quarter ended December 31,
2015. Foreign currency gain was $8.6
million for the year ended December
31, 2016, compared to a loss of $(4.8) million for the year ended December 31, 2015. The strength of the U.S.
dollar was mixed in 2016 across currencies for jurisdictions in
which Titan operates, while it was predominately strong relative to
such other currencies in 2015.
Provision (benefit) for income taxes: The Company
recorded tax expense for income taxes of $3.3 million in 2016, as compared to income tax
expense of $38.3 million in 2015.
The Company's effective tax rate was (10) percent in 2016 and
(74) percent in 2015. The Company's 2016 income tax expense
and rate differ from the amount of income tax determined by
applying the U.S. Federal income tax rate to pre-tax income
primarily as a result of an increase in the valuation allowance
against deferred tax assets partially offset by tax rates in
foreign jurisdictions where the statutory rate is less than 35%.
The Company's 2015 income tax expense and rate differ from the
amount of income tax determined by applying the U.S. Federal income
tax rate to pre-tax income primarily as a result of a foreign
exchange loss upon the outbound transfer of Brazil assets for U.S. tax purposes (check the
box election) offset by an increase in the valuation allowance
against deferred tax assets.
Earnings per share: For the quarters ended
December 31, 2016 and 2015, basic and diluted earnings per
share were $(0.26) and $(1.07), respectively. For the years ended
December 31, 2016 and 2015, basic and diluted earnings per
share were $(0.81) and $(1.74), respectively.
On an adjusted basis (see Appendix attached), basic and diluted
earnings per share for the quarters ended December 31, 2016
and 2015, were $(0.24) and
$(0.38), respectively. For the years
ended December 31, 2016 and 2015, adjusted basic and diluted
earnings per share were $(0.63) and
$(0.13), respectively.
Warranty expense: The provision for warranty
liability was $7.5 million at
December 31, 2016, or 0.6 percent of
net sales, compared to $9.7 million
at December 31, 2015, or 0.7 percent
of net sales.
Capital expenditures: Titan's capital expenditures were
$11.1 million for the fourth quarter
of 2016 and $13.2 million for the
fourth quarter of 2015. Capital expenditures were
$41.9 million for the full year ended
December 31, 2016, compared to
$48.4 million for 2015.
Debt balance: Total long-term debt balance was
$408.8 million at December 31, 2016, compared to $475.4 million at December
31, 2015. Short-term debt balance was $97.4 million at December
31, 2016, and $31.2 million at
December 31, 2015. Net
debt (total debt less cash and cash equivalents less short-term
certificates of deposit) was $308.3
million at December 31, 2016,
compared to $306.5 million at
December 31, 2015.
Equity balance: The Company's equity was
$289.9 million at December 31, 2016, compared to $344.7 million at December
31, 2015.
Fourth quarter conference call:
Titan will be hosting a conference call and webcast for the
fourth quarter earnings announcement at 9
a.m. Eastern Time on Wednesday, March
15, 2017. To participate in the conference call, dial
(888) 347-5307 five minutes prior to the scheduled
time. International callers dial (412) 902-4283; Canada (855) 669-9657. The call
will be webcast live and can be accessed at
www.titan-intl.com within the "Investor Relations" page
under the "Webcasts & Events" section.
For those unable to participate on the call in real-time, a
replay of the conference call will be available within the
"Investor Relations" page under the "Webcast & Events" section
on our website soon after the conference call ends.
Safe harbor statement:
This press release contains forward-looking statements, which
statements are covered by the "Safe Harbor for Forward-Looking
Statements" provided by the Private Securities Litigation Reform
Act of 1995. The words "believe," "expect," "anticipate,"
"plan," "would," "could," "outlook," "potential," "may," "will,"
and other similar expressions are intended to identify
forward-looking statements, which are generally not historical in
nature. These forward-looking statements are based on our
current expectations and beliefs concerning future developments and
their potential effect on us. Although we believe the
assumptions upon which these forward-looking statements are based
are reasonable, these assumptions are subject to significant risks
and uncertainties, and are subject to change based on various
factors, some of which are beyond Titan International, Inc.'s
control. As a result, any of these assumptions could prove to be
inaccurate and the forward-looking statements based on these
assumptions could be incorrect. The matters discussed in
these forward-looking statements are subject to risks,
uncertainties, and other factors that could cause actual results
and trends to differ materially from those made, projected, or
implied in or by the forward-looking statements depending on a
variety of uncertainties or other factors including, but not
limited to, risks detailed in Titan International, Inc.'s periodic
reports filed with the Securities and Exchange Commission,
including the disclosures under "Risk Factors" in those
reports. These forward-looking statements are made only as of
the date hereof. The company cautions that any forward-looking
statements included in this press release are subject to a number
of risks and uncertainties, and the company undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, changed
circumstances or future events, or for any other reason.
Company description:
Titan International Inc. (NYSE: TWI), a holding Company, owns
subsidiaries that supply wheels, tires, assemblies, and
undercarriage products for off-highway equipment used in
agricultural, earthmoving/construction, and consumer (including
all-terrain vehicles) applications.
Titan
International, Inc.
Consolidated
Condensed Statements of Operations (Unaudited)
Amounts in
thousands, except per share data
|
|
|
|
|
|
Three months
ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2016
|
2015
|
|
2016
|
2015
|
Net sales
|
$
|
307,294
|
|
$
|
307,809
|
|
|
$
|
1,265,497
|
|
$
|
1,394,771
|
|
Cost of
sales
|
274,751
|
|
290,000
|
|
|
1,123,015
|
|
1,256,962
|
|
Gross
profit
|
32,543
|
|
17,809
|
|
|
142,482
|
|
137,809
|
|
Selling, general and
administrative expenses
|
37,276
|
|
31,359
|
|
|
144,988
|
|
140,393
|
|
Research and
development expenses
|
2,181
|
|
2,315
|
|
|
9,971
|
|
11,162
|
|
Royalty
expense
|
2,168
|
|
2,292
|
|
|
8,856
|
|
10,533
|
|
Loss from
operations
|
(9,082)
|
|
(18,157)
|
|
|
(21,333)
|
|
(24,279)
|
|
Interest
expense
|
(7,331)
|
|
(8,345)
|
|
|
(32,539)
|
|
(34,032)
|
|
Foreign exchange gain
(loss)
|
1,147
|
|
962
|
|
|
8,550
|
|
(4,758)
|
|
Other
income
|
1,934
|
|
4,732
|
|
|
12,466
|
|
11,063
|
|
Loss before income
taxes
|
(13,332)
|
|
(20,808)
|
|
|
(32,856)
|
|
(52,006)
|
|
Provision for income
taxes
|
703
|
|
35,087
|
|
|
3,281
|
|
38,281
|
|
Net loss
|
(14,035)
|
|
(55,895)
|
|
|
(36,137)
|
|
(90,287)
|
|
Net loss attributable
to noncontrolling interests
|
(1,051)
|
|
(4,735)
|
|
|
(2,150)
|
|
(14,654)
|
|
Net loss attributable
to Titan
|
(12,984)
|
|
(51,160)
|
|
|
(33,987)
|
|
(75,633)
|
|
Redemption value
adjustment
|
(1,081)
|
|
(6,267)
|
|
|
(9,556)
|
|
(17,668)
|
|
Net loss applicable
to common shareholders
|
$
|
(14,065)
|
|
$
|
(57,427)
|
|
|
$
|
(43,543)
|
|
$
|
(93,301)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
|
|
Basic
|
$(0.26)
|
|
$(1.07)
|
|
|
$(0.81)
|
|
$(1.74)
|
|
Diluted
|
(0.26)
|
|
(1.07)
|
|
|
(0.81)
|
|
(1.74)
|
|
Average common shares
and equivalents outstanding:
|
|
|
|
|
|
Basic
|
53,978
|
|
53,729
|
|
|
53,916
|
|
53,696
|
|
Diluted
|
53,978
|
|
53,729
|
|
|
53,916
|
|
53,696
|
|
|
|
|
|
|
|
Dividends declared
per common share:
|
$.005
|
|
$.005
|
|
|
$.02
|
|
$.02
|
|
|
|
|
|
|
|
Segment
Information (Unaudited)
|
|
|
|
|
|
|
|
Three months
ended
|
|
Twelve months
ended
|
|
December
31,
|
|
December
31,
|
Revenues from
external customers
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Agricultural
|
|
$
|
145,216
|
|
|
$
|
142,607
|
|
|
|
$
|
583,324
|
|
|
$
|
651,804
|
|
|
Earthmoving/Construction
|
|
122,640
|
|
|
129,431
|
|
|
|
524,289
|
|
|
566,988
|
|
|
Consumer
|
|
39,438
|
|
|
35,771
|
|
|
|
157,884
|
|
|
175,979
|
|
|
|
|
$
|
307,294
|
|
|
$
|
307,809
|
|
|
|
$
|
1,265,497
|
|
|
$
|
1,394,771
|
|
|
|
Titan
International, Inc.
Consolidated
Condensed Balance Sheets (Unaudited)
Amounts in
thousands
|
|
|
December
31,
|
December
31,
|
|
2016
|
2015
|
Assets
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$
|
147,827
|
|
$
|
200,188
|
|
Certificates of
deposit
|
50,000
|
|
—
|
|
Accounts
receivable
|
179,384
|
|
177,389
|
|
Inventories
|
269,291
|
|
269,791
|
|
Prepaid and other
current assets
|
79,734
|
|
62,633
|
|
Total current
assets
|
726,236
|
|
710,001
|
|
Property, plant and
equipment, net
|
437,201
|
|
450,020
|
|
Deferred income
taxes
|
4,663
|
|
5,967
|
|
Other long-term
assets
|
94,851
|
|
104,242
|
|
Total
assets
|
$
|
1,262,951
|
|
$
|
1,270,230
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
Current
liabilities
|
|
|
Short-term
debt
|
$
|
97,412
|
|
$
|
31,222
|
|
Accounts
payable
|
148,255
|
|
123,154
|
|
Other current
liabilities
|
120,437
|
|
115,721
|
|
Total current
liabilities
|
366,104
|
|
270,097
|
|
Long-term
debt
|
408,760
|
|
475,443
|
|
Deferred income
taxes
|
13,183
|
|
14,509
|
|
Other long-term
liabilities
|
80,161
|
|
88,324
|
|
Total
liabilities
|
868,208
|
|
848,373
|
|
Redeemable
noncontrolling interest
|
104,809
|
|
77,174
|
|
Total
equity
|
289,934
|
|
344,683
|
|
Total liabilities and
equity
|
$
|
1,262,951
|
|
$
|
1,270,230
|
|
Titan International,
Inc.
Supplemental Consolidated Statements of Operations
Information
Reconciliation of GAAP to Non-GAAP Financial
Measures (Unaudited)
Amounts in thousands, except
earnings per share data
The Company reports its financial results in accordance with
generally accepted accounting principles in the United States (GAAP). This
supplemental schedule provides adjusted non-GAAP financial
information and a quantitative reconciliation between adjusted net
income, a non-GAAP financial measure, and net loss applicable to
common shareholders, the most directly comparable financial measure
calculated and reported in accordance with GAAP.
We present adjusted net income as we believe that it assists
investors with analyzing our business results, as well as with
predicting future performance. In addition, management
reviews adjusted net income in order to evaluate the financial
performance of each of our segments, as well as the Company's
performance as a whole. We believe that the presentation of
this non‑GAAP financial measure will permit investors to assess the
performance of the Company on the same basis as management.
Adjusted net income should be considered supplemental to, not a
substitute for, the financial measures calculated in accordance
with GAAP. One should not consider this measure in isolation
or as a substitute for our results reported under GAAP. It
has limitations in that it does not reflect all of the costs
associated with the operations of our businesses as determined in
accordance with GAAP. In addition, adjusted net income may be
calculated differently than non-GAAP financial measures reported by
other companies, limiting its usefulness as a comparative
measure. We attempt to compensate for these limitations by
analyzing results on a GAAP basis as well as a non-GAAP basis,
prominently disclosing GAAP results and providing reconciliations
from GAAP results to non-GAAP results.
The table below provides a reconciliation of adjusted net income
to net loss applicable to common shareholders, the most directly
comparable GAAP financial measure, for each of the three and twelve
month periods ended December 31, 2016
and 2015.
|
Three Months
Ended
|
Twelve Months
Ended
|
|
December
31,
|
December
31,
|
|
2016
|
2015
|
2016
|
2015
|
Net loss applicable
to common shareholders
|
$
|
(14,065)
|
|
$
|
(57,427)
|
|
$
|
(43,543)
|
|
$
|
(93,301)
|
|
Remove redemption
value adjustment
|
1,081
|
|
6,267
|
|
9,556
|
|
17,668
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Tax valuation
allowance
|
—
|
|
30,549
|
|
—
|
|
71,106
|
|
Inventory valuation
adjustments
|
—
|
|
—
|
|
—
|
|
—
|
|
Italy
restructuring
|
—
|
|
—
|
|
—
|
|
499
|
|
Subsidiary currency
correction
|
—
|
|
—
|
|
—
|
|
(3,058)
|
|
|
|
|
|
|
Adjusted Net
Income
|
$
|
(12,984)
|
|
$
|
(20,611)
|
|
$
|
(33,987)
|
|
$
|
(7,086)
|
|
|
|
|
|
|
Adjusted earnings per
common share:
|
|
|
|
|
Basic
|
$
|
(0.24)
|
|
$
|
(0.38)
|
|
$
|
(0.63)
|
|
$
|
(0.13)
|
|
Diluted
|
(0.24)
|
|
(0.38)
|
|
(0.63)
|
|
(0.13)
|
|
|
|
|
|
|
Average common shares
outstanding:
|
|
|
|
|
Basic
|
53,978
|
|
53,729
|
|
53,916
|
|
53,696
|
|
Diluted
|
53,978
|
|
53,729
|
|
53,916
|
|
53,696
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/titan-international-announces-2016-fourth-quarter-and-year-end-results-300423545.html
SOURCE Titan International, Inc.