QUINCY, Ill., Aug. 4, 2016 — Titan International Inc. (NYSE: TWI) announces second quarter 2016 results.
Second quarter highlights:
- Sales for the second quarter of 2016 were $330.2 million, down 12.2%, compared to $376.1 million in the second quarter of 2015.
- Gross profit for the second quarter of 2016 was $45.1 million, or 13.7% of net sales, compared to $51.1 million, or 13.6% of net sales, for the second quarter of 2015.
- Income from operations for the second quarter of 2016 was $4.0 million, or 1.2% of net sales, compared to income of $7.5 million, or 2.0% of net sales, for the second quarter of 2015.
- Net loss applicable to common shareholders for the second quarter of 2016 was $(3.8) million, compared to net income of $9.4 million in the second quarter of 2015. Adjusted net loss for the second quarter of 2016 was $(1.9) million, compared to net income of $1.0 million in the second quarter of 2015 (see Appendix attached).
- Basic and diluted earnings per share for the second quarter 2016 and 2015 were $(0.07) and $0.17, respectively. Adjusted basic and diluted earnings per share for the second quarter of 2016 and 2015 were $(0.04) and $0.02, respectively (see Appendix attached).
Statement of Chief Executive Officer:
CEO and chairman, Maurice Taylor, comments, "Second quarter has some good news, some not so good news, and some great reasons to be optimistic. Titan has seen an increase in our cash balance. Our sales in the under 100 HP tractors are holding up well. The market for high horsepower tractors and combines continue to decline in North America, but in talking with equipment dealers, they have been moving used equipment and look forward to an uptick this fall. Titan has seen an uptick in construction and forestry tire sales for our aftermarket customers. I believe the agriculture market is at or near the bottom and we expect to gain business from our competitors. We also must keep showing farmers and construction companies the benefits of Titan's LSW tires/wheels. Titan's next super single LSW assemblies for 400, 500, and 600 HP tractors have been developed with new double sleeve hubs to hold on to the axles. OEMs have only single sleeve hubs which are too weak for this high horsepower equipment."
"Titan Tire Reclamation Corp. (TTRC) is expected to be in full production by late August. We had planned to be running in April, but obtaining the permits and training requirements took longer than expected. Then the great forest fires of Fort McMurray occurred which shut everything down until July. TTRC will be filing a business interruption insurance claim which could offset a portion of the costs associated with the delays.
"We continue working to lower our production costs of wheels and tires. This will come from operations as well as our selling, general and administrative expenses. Additionally, Titan has leased out (with a purchase option) an additional 500,000 square feet in our Brownsville, Texas site. We now have over 800,000 square feet leased and the possibility of leasing another 200,000 square feet in the near future.
"As previously announced, Goldman, Sachs & Co. has been engaged as financial advisor to the Special Committee of Titan's Board of Directors in connection with the possible sale of Titan's subsidiary Italtractor ITM S.p.A. The Special Committee is doing their job and I believe the Board of Directors would consider a sale of ITM as we continue to focus exclusively on our core business of wheels and tires.
"So with our current cash of $207 million and the potential proceeds from the sale of noncore businesses, our total cash balances will continue to grow and help grow our core tire/wheel business. I believe we are in a great position to expand in our core business of tires, wheels and assemblies for farm, construction and mining. I believe there is no other company in the world with the capability and drive to produce the wheels and tires which will meet the demands on the agriculture, construction and mining equipment of the future. With all the positive things happening within Titan, I continue to be optimistic about our future."
Net Sales: Net sales for the quarter ended June 30, 2016, were $330.2 million compared to $376.1 million in 2015, a decrease of 12%. Sales declined across all reported segments. Sales volume was flat as the agricultural segment remains in a cyclical downturn; however, we experienced slightly higher volumes from both the earthmoving/construction segment and the consumer segment. Unfavorable currency translation affected sales by 4% and a reduction in price mix of 8% further eroded sales.
Net sales for the six months ended June 30, 2016, were $652.0 million compared to $778.1 million in 2015, a decrease of 16%. Sales volume was down 5% as both the agricultural and earthmoving/construction segments continue to see lower volume sales compared to prior year. The consumer segment was affected by the decrease in high-speed brake sales related to lower Chinese infrastructure investment and by lower sales related to economic stress in Brazil. Unfavorable currency translation affected sales by 5% and a reduction in price mix of 6% further eroded sales.
Gross profit:Gross profit for the second quarter of 2016 was $45.1 million, or 13.7% of net sales, compared to $51.1 million, or 13.6% of net sales, for the second quarter of 2015. Despite lower sales, gross profit margins remain comparative as there is a continued focus on improving productivity efficiency, rationalizing expenditures, finding lower cost material, improving quality, and optimizing prices.
Gross profit for the first six months of 2016 was $77.0 million, or 11.8% of net sales, compared to $93.8 million, or 12.1% of net sales, in 2015. Gross profit margins continue to remain around 12% as there is a continued focus on improving productivity efficiency, rationalizing expenditures, finding lower cost material, improving quality, and optimizing prices.