EX-99 2 q122earningsreleaseex99.htm EX-99 Document

titancolora28a.jpg    

Todd Shoot
SVP, Investor Relations & Treasurer
217-221-4416

FOR IMMEDIATE RELEASE
Monday, May 2, 2022
                                    
    
Titan International, Inc. Reports Strong First Quarter
During the Q4 2021 earnings call, TWI's President & CEO stated that Titan's business was riding a tidal wave. That tidal wave continues!


Quarter Highlights
•Net sales were $556.0 million, a $152.5 million (37.8%) YoY increase, the highest quarterly sales since Q2 2013
•Gross margin was 15.6%
•Adjusted EBITDA was $56.8 million as compared to $26.3 million in Q1 of the prior year



CHICAGO, ILLINOIS, May 2, 2022 - Titan International, Inc. (NYSE: TWI), a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products, today reported results for the first quarter ended March 31, 2022.

“We were able to pick up right where we left off in 2021 with another stellar quarter to begin the year,” stated Paul Reitz, President and Chief Executive Officer. “All of our business units across all geographies came together to deliver our strongest sales quarter in nearly nine years. The first quarter experienced strong top line growth, along with excellent conversion to the bottom line, as gross margins were 15.6%, adjusted EBITDA was $57 million, and adjusted EBITDA margin climbed to 10.2%, reaching their strongest levels in close to a decade. The runway for our business moving forward looks good and remains similar to what we outlined in March, with both our Agriculture and Earthmoving / Construction segments continuing to reflect strong demand driven by solid market fundamentals.

“Earlier this year, we commented on the positive market dynamics creating a tidal wave for Titan to navigate in 2022 and beyond. We continue to firmly believe this remains the case. Our first quarter results and our 2022 order books clearly support that, along with elevated commodity prices with solid supply-demand fundamentals, used inventory levels at record lows for larger equipment, and demand for new equipment that remains robust. Elaborating further, these positive market forces, combined with delays in order deliveries from the OEM’s due to production challenges, provide support and momentum for a multi-year demand cycle. Aftermarket demand remains very robust reflecting the need for replacement in the midst of shortages of new equipment. Along with the strong agriculture backdrop, order books are solid in earthmoving and construction and should continue to remain positive as infrastructure spending increases globally. Our Titan team will continue to work hard to meet our customers growing expectations and with our impressive and extensive manufacturing footprint that produces quality, innovative products, we are a strong solution to meet the needs of our global customer base.




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“Based on the strength of our first quarter performance and a similar expectation for Q2, we are now anticipating full year net sales above $2.1 billion, with adjusted EBITDA to be around $200 million. This revised outlook reflects more normalized demand and production levels in the second half that are in line with our typical seasonality trends for the business. Based on the increased profitability and strength in the business, our cash flow expectations have also improved, and believe we can deliver between $55 million and $65 million in free cash flow for the full year.


Results of Operations

Net sales for the first quarter ended March 31, 2022, were $556.0 million, compared to $403.5 million in the comparable quarter of 2021, an increase of 37.8 percent. The net sales increase was across all segments and driven by price/product mix and volume, with price having a greater impact due to rising raw material costs and other inflationary impacts in the markets, including freight. The contributing factors to the increase in demand were increased commodity prices, improved farmer income, replacement of an aging large equipment fleet, and lower equipment inventory levels. The increase in net sales was offset by unfavorable foreign currency translation of 4.4 percent or $17.7 million.

Gross profit for the first quarter ended March 31, 2022 was $86.7 million, compared to $53.3 million in the comparable prior year period. Gross margin was 15.6 percent of net sales for the quarter, compared to 13.2 percent of net sales in the comparable prior year period. The increase in gross profit and margin was driven by the impact of increases in net sales, as described previously, primarily reflective of productivity improvements across all production facilities. In addition, cost reduction and production initiatives continue to be executed across global production facilities.

Selling, general, administrative, research and development (SGARD) expenses for the first quarter of 2022 were $39.1 million, compared to $36.6 million for the comparable prior year period. As a percentage of net sales, SGARD was 7.0 percent, compared to 9.1 percent for the comparable prior year period. The increase in SG&A was driven primarily by an increase in variable costs associated with improved operating performance and growth in sales.

Income from operations for the first quarter of 2022 was $44.7 million, or 8.0 percent of net sales, compared to an income of $14.2 million, or 3.5 percent of net sales, for the first quarter of 2021.  The increase in income was primarily due to the higher sales and improvements in gross profit margins.



Sale of Australian Wheel Business

On March 29, 2022, the Company entered into a definitive agreement for the sale of its Australian wheel business, to OTR Tyres, a local leading national tire, wheel and service provider. The closing date of the transaction was March 31, 2022. The sale includes gross proceeds and cash to be repatriated of approximately $17.5 million, and the assumption of all liabilities, including employee and lease obligations. During the quarter ended March 31, 2022, the Company recorded a loss on sale of approximately $10.9 million which was comprised primarily of the release of the cumulative translation adjustment of approximately $10 million and closing costs associated with the completion of the transaction of approximately $0.9 million.






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Segment Information

Agricultural Segment

(Amounts in thousands)Three months ended
March 31,
 20222021% Increase/(Decrease)
Net sales$309,600 $208,759 48 %
Gross profit47,924 29,789 61 %
Profit margin15.5 %14.3 %8 %
Income from operations 30,117 15,283 97 %

During the quarter ended March 31, 2022, net sales increased 48 percent driven by price/product mix and volume due to significant demand increases in the global agricultural market, reflective of improved farm commodity prices and increased farmer income, the need for replacement of an aging large equipment fleet and the need to replenish equipment inventory levels within the equipment dealer channels. Pricing is primarily reflective of increases in raw material and other inflationary cost increases in the markets, including freight.

The increase in gross profit and margin is primarily attributable to the impact of increases in net sales as described previously and cost reduction and productivity initiatives executed across global production facilities. The Company balanced the increases of related raw materials and other inflationary cost impacts with corresponding price increases to protect profitability.


Earthmoving/Construction Segment

(Amounts in thousands)Three months ended
March 31,
 20222021% Increase/(Decrease)
Net sales$201,259 $164,807 22 %
Gross profit31,375 19,742 59 %
Profit margin15.6 %12.0 %30 %
Income from operations15,840 5,575 184 %

During the quarter ended March 31, 2022, the 22 percent increase in earthmoving/construction net sales was driven by increased price/product mix and volume, which were primarily due to improvements in global economic conditions and recovery in construction markets, including the return to normalized supply and demand levels after the effects of the COVID-19 pandemic in previous years. Pricing increases were implemented because of inflationary input costs.

The increase in gross profit and margin was primarily driven by continued improved production efficiencies stemming from the strong management actions taken to improve profitability for the long-term. Again, the Company balanced the increases related to raw materials and other inflationary cost impacts with corresponding price increases to protect profitability.






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Consumer Segment

(Amounts in thousands)Three months ended
March 31,
 20222021% Increase/(Decrease)
Net sales$45,138 $29,952 51 %
Gross profit7,430 3,734 99 %
Profit margin16.5 %12.5 %32 %
Income from operations4,882 1,667 193 %

During the quarter ended March 31, 2022, the 51 percent increase in net sales was driven by favorable price/product mix and volume impact to net sales. Demand increases related to utility truck tires in Latin America increased during the first quarter of 2022. The Company has also experienced growth related to specialty products in the United States, primarily custom mixing of rubber stock to third parties.

The increase in gross profit and margin was due primarily to sales growth, increased price/product mix and the positive impact of sales volume increase on overhead absorption.


Non-GAAP Financial Measures

Adjusted EBITDA was $56.8 million for the first quarter of 2022, compared to $26.3 million in the comparable prior year period. The Company utilizes EBITDA and adjusted EBITDA, which are non-GAAP financial measures, as a means to measure its operating performance. A reconciliation of net income (loss) to EBITDA and adjusted EBITDA can be found at the end of this release.

Adjusted net income applicable to common shareholders for the first quarter of 2022 was income of $28.2 million, equal to income of $0.44 per basic and diluted share, compared to income of $4.1 million, equal to income of $0.07 per basic and diluted share, in the first quarter of 2021. The Company utilizes adjusted net income applicable to common shareholders, which is a non-GAAP financial measure, as a means to measure its operating performance. A reconciliation of net income (loss) applicable to common shareholders and adjusted net income (loss) applicable to common shareholders can be found at the end of this release.


Financial Condition

The Company ended the first quarter of 2022 with total cash and cash equivalents of $98.1 million, compared to $98.1 million at December 31, 2021. Long-term debt at March 31, 2022, was $484.6 million, compared to $452.5 million at December 31, 2021. Short-term debt was $37.9 million at March 31, 2022, compared to $32.5 million at December 31, 2021. Net debt (total debt less cash and cash equivalents) was $424.3 million at March 31, 2022, compared to $386.8 million at December 31, 2021. The increase in net debt during the first three months of 2022 was primarily due to managed investments in working capital to support the business growth as well as $25 million of additional borrowings to fund the repurchase of common stock.

Net cash used by operating activities for the first three months of 2022 was $18.5 million, compared to net cash used by operations of $16.0 million for the comparable prior year period. Capital expenditures were $7.6 million for the first three months of 2022, compared to $8.9 million for the comparable prior year period. Capital expenditures during the first three months of 2022 and 2021 represent equipment replacement and improvements, along with new tools, dies and molds related to new product development, as the Company seeks to enhance the Company’s manufacturing capabilities and drive productivity gains.




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Teleconference and Webcast

Titan will be hosting a teleconference and webcast to discuss the first quarter financial results on Tuesday, May 3, 2022, at 9 a.m. Eastern Time.

The real-time, listen-only webcast can be accessed using the following link https://events.q4inc.com/attendee/321965608 or on our website at www.titan-intl.com within the “Investor Relations” page under the “News & Events” menu (https://ir.titan-intl.com/news-and-events/events/default.aspx). Listeners should access the website at least 15 minutes prior to the live event to download and install any necessary audio software.

A webcast replay of the teleconference will be available on our website (https://ir.titan-intl.com/news-and-events/events/default.aspx) soon after the live event.

In order to participate in the real-time teleconference, with live audio Q&A, participants should use one of the following dial in numbers:

United States Toll Free: 1 844 200 6205
United States: 1 646 904 5544
All other locations: +1 929 526 1599

Participants Access Code: 629933


About Titan

Titan International, Inc. (NYSE: TWI) is a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products. Headquartered in West Chicago, Illinois, the Company globally produces a broad range of products to meet the specifications of original equipment manufacturers (OEMs) and aftermarket customers in the agricultural, earthmoving/construction, and consumer markets. For more information, visit www.titan-intl.com.





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Safe Harbor Statement

This press release contains forward-looking statements. These forward-looking 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,” “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, the effect of the COVID-19 pandemic on our operations and financial performance; the effect of a recession on the Company and its customers and suppliers; changes in the Company’s end-user markets into which the Company sells its products as a result of domestic and world economic or regulatory influences or otherwise; changes in the marketplace, including new products and pricing changes by the Company’s competitors; the Company's ability to maintain satisfactory labor relations; unfavorable outcomes of legal proceedings; the Company's ability to comply with current or future regulations applicable to the Company's business and the industry in which it competes or any actions taken or orders issued by regulatory authorities; availability and price of raw materials; levels of operating efficiencies; the effects of the Company's indebtedness and its compliance with the terms thereof; changes in the interest rate environment and their effects on the Company's outstanding indebtedness; unfavorable product liability and warranty claims; actions of domestic and foreign governments, including the imposition of additional tariffs; geopolitical and economic uncertainties relating to the countries in which the Company operates or does business; risks associated with acquisitions, including difficulty in integrating operations and personnel, disruption of ongoing business, and increased expenses; results of investments; the effects of potential processes to explore various strategic transactions, including potential dispositions; fluctuations in currency translations; risks associated with environmental laws and regulations; risks relating to our manufacturing facilities, including that any of our material facilities may become inoperable; risks relating to financial reporting, internal controls, tax accounting, and information systems; and the other risks and factors detailed in the Company’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, except as required by law.



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Titan International, Inc.
Consolidated Statements of Operations
Amounts in thousands, except per share data
 Three months ended
March 31,
 20222021
(unaudited)(unaudited)
Net sales$555,997 $403,518 
Cost of sales469,268 350,253 
Gross profit86,729 53,265 
Selling, general and administrative expenses36,227 34,028 
Research and development expenses2,920 2,553 
Royalty expense2,874 2,453 
Income from operations44,708 14,231 
Interest expense(7,907)(7,523)
Foreign exchange gain5,317 9,477 
Other expense(8,859)(368)
Income before income taxes33,259 15,817 
Provision for income taxes8,681 2,594 
Net income 24,578 13,223 
Net income (loss) attributable to noncontrolling interests656 (351)
Net income attributable to Titan and applicable to common shareholders23,922 13,574 
 Income per common share: 
Basic$0.37 $0.22 
Diluted$0.37 $0.22 
Average common shares and equivalents outstanding: 
Basic63,860 61,466 
Diluted64,350 62,414 





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Titan International, Inc.
Consolidated Balance Sheets
Amounts in thousands, except share data
 March 31, 2022December 31, 2021
Assets
Current assets  
Cash and cash equivalents$98,144 $98,108 
  Accounts receivable, net309,411 255,180 
Inventories424,200 392,615 
Prepaid and other current assets79,715 67,401 
Total current assets911,470 813,304 
Property, plant and equipment, net298,285 301,109 
Operating lease assets12,526 20,945 
Deferred income taxes15,888 16,831 
Other long-term assets31,132 30,496 
Total assets$1,269,301 $1,182,685 
Liabilities  
Current liabilities  
Short-term debt$37,853 $32,500 
Accounts payable302,382 278,099 
Other current liabilities151,660 140,214 
Total current liabilities491,895 450,813 
Long-term debt484,600 452,451 
Deferred income taxes4,124 3,978 
Other long-term liabilities42,962 48,271 
Total liabilities1,023,581 955,513 
Equity  
Titan shareholders' equity
  Common stock ($0.0001 par value, 120,000,000 shares authorized, 66,525,269 issued at March 31, 2022 and 66,492,660 at December 31, 2021)— — 
Additional paid-in capital561,849 562,340 
Retained deficit(61,517)(85,439)
Treasury stock (at cost, 3,900,695 shares at March 31, 2022 and 80,876 shares at December 31, 2021)(24,782)(1,121)
Accumulated other comprehensive loss(227,176)(246,480)
Total Titan shareholders’ equity248,374 229,300 
Noncontrolling interests(2,654)(2,128)
Total equity245,720 227,172 
Total liabilities and equity$1,269,301 $1,182,685 







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Titan International, Inc.
Consolidated Statements of Cash Flows
All amounts in thousands
Three months ended March 31,
Cash flows from operating activities:20222021
Net income$24,578 $13,223 
Adjustments to reconcile net income to net cash used for operating activities:  
Depreciation and amortization11,348 12,560 
Loss on sale of Australian wheel business10,890 — 
Deferred income tax provision (benefit)995 (402)
Gain on fixed asset and investment sale(110)(485)
Stock-based compensation488 570 
Issuance of stock under 401(k) plan360 339 
Foreign currency gain(5,448)(9,571)
(Increase) decrease in assets:  
Accounts receivable(57,332)(63,803)
Inventories(34,240)(27,313)
Prepaid and other current assets(9,606)(3,297)
Other assets(330)337 
Increase (decrease) in liabilities:  
Accounts payable23,918 60,581 
Other current liabilities13,728 401 
Other liabilities2,244 898 
Net cash used for operating activities(18,517)(15,962)
Cash flows from investing activities:  
Capital expenditures(7,637)(8,861)
Proceeds from the sale of the Australian wheel business9,293 — 
Proceeds from sale of fixed assets756 545 
Net cash provided by (used for) investing activities2,412 (8,316)
Cash flows from financing activities:  
Proceeds from borrowings76,782 21,881 
Repurchase of common stock(25,000)— 
Payment on debt(39,483)(12,398)
Other financing activities(586)(2,409)
Net cash provided by financing activities11,713 7,074 
Effect of exchange rate changes on cash4,428 (4,273)
Net increase (decrease) in cash and cash equivalents36 (21,477)
Cash and cash equivalents, beginning of period98,108 117,431 
Cash and cash equivalents, end of period$98,144 $95,954 
Supplemental information:
Interest paid$869 $1,059 
Income taxes paid, net of refunds received$2,083 $3,703 









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Titan International, Inc.
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). These supplemental schedules provide a quantitative reconciliation between each of adjusted net income (loss) attributable to Titan, EBITDA, adjusted EBITDA, net sales on a constant currency basis, and net debt, each of which is a non-GAAP financial measure and the most directly comparable financial measures calculated and reported in accordance with GAAP.

We present adjusted net income attributable to Titan, adjusted earnings per common share, EBITDA, adjusted EBITDA, net sales on a constant currency basis, and net debt, as we believe that they assist investors with analyzing our business results. In addition, management reviews each of these non-GAAP financial measures 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 these non‑GAAP financial measures will permit investors to assess the performance of the Company on the same basis as management.

Adjusted net income attributable to Titan, adjusted earnings per common share, EBITDA, adjusted EBITDA, net sales on a constant currency basis, and net debt should be considered supplemental to, not a substitute for, the financial measures calculated in accordance with GAAP. One should not consider these measures in isolation or as a substitute for our results reported under GAAP. These measures have limitations in that they do not reflect all of the costs associated with the operations of our businesses as determined in accordance with GAAP. In addition, these measures may be calculated differently than non-GAAP financial measures reported by other companies, limiting their usefulness as comparative measures. 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 attributable to Titan to net income (loss) applicable to common shareholders, the most directly comparable GAAP financial measure, for the three month periods ended March 31, 2022 and 2021.

Three months ended
March 31,
20222021
Net income applicable to common shareholders$23,922 13,574 
Adjustments:
  Foreign exchange gain(5,317)(9,477)
  Loss on sale of Australian wheel business10,890 — 
Proceeds from government grant(1,324)— 
Adjusted net income attributable to Titan$28,171 $4,097 
Adjusted earnings per common share:
  Basic $0.44 $0.07 
  Diluted 0.44 0.07 
Average common shares and equivalents outstanding:
  Basic 63,860 61,466 
  Diluted64,350 62,414 




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The table below provides a reconciliation of net income (loss) to EBITDA and adjusted EBITDA, which are non-GAAP financial measures, for the three month periods ended March 31, 2022 and 2021.

Three months ended
March 31,
20222021
Net income (loss)$24,578 $13,223 
Adjustments:
Provision for income taxes8,681 2,594 
Interest expense, excluding interest income7,948 7,409 
Depreciation and amortization11,348 12,560 
EBITDA$52,555 $35,786 
Adjustments:
  Foreign exchange gain(5,317)(9,477)
  Loss on sale of Australian wheel business10,890 — 
Proceeds from government grant(1,324)— 
Adjusted EBITDA$56,804 $26,309 





The table below sets forth, for the three month period ended March 31, 2022, the impact to net sales of currency translation (constant currency) by geography (in thousands, except percentages):

 Three Months Ended March 31,Change due to currency translationThree Months Ended March 31, 2022
20222021% Change from 2021$%Constant Currency
United States $277,055 $186,405 48.6%— — %$277,055 
Europe / CIS145,169 112,163 29.4%(12,707)(11.3)%157,876 
Latin America98,998 66,143 49.7%3,135 4.7 %95,863 
Other International34,775 38,807 (10.4)%(8,079)(20.8)%42,854 
555,997 403,518 37.8%(17,651)(4.4)%573,648 
 



The table below provides a reconciliation of net debt, which is a non-GAAP financial measure:
 March 31, 2022December 31, 2021March 31, 2021
  
Long-term debt$484,600 $452,451 $440,576 
Short-term debt37,853 32,500 31,076 
   Total debt$522,453 $484,951 $471,652 
Cash and cash equivalents98,144 98,108 95,954 
     Net debt$424,309 $386,843 $375,698 




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