Titan International Inc. Reports Second Quarter 2011 Results: Record Revenue & Earnings

Titan International Inc. Reports Second Quarter 2011 Results: Record Revenue & Earnings

Titan International Inc. (NYSE: TWI):

Second quarter summary:

• Sales for second quarter 2011 set an all-time record at $404.4 million up 76 percent, compared to $229.7 million in the second quarter of 2010.
• Gross profit for second quarter 2011 was record-setting at $63.9 million up 88 percent, compared to $33.9 million in 2010.
• Second quarter income from operations was a record $44.0 million up 152 percent, compared to $17.4 million last year.
• Net income for the second quarter set a record at $25.3 million, compared to $4.6 million in the second quarter of last year.
• Earnings per common basic share for the second quarter were $0.60 per share up 362%, compared to $0.13 in the second quarter of last year.

Statement of Chief Executive Officer:

“I told everyone last quarter that everything was going well, but I didn’t think the Titan team would be moving this quickly,” stated Maurice M. Taylor Jr., Chairman and CEO. “The forecast I made in May is too low for sales and EBITDA.

I was sent a copy of a report that talked about advance shipments before the quarter ended. Titan is building all of its wheels and tires to order and the order deck has never been this large. If anyone would like a tour, I would be happy to show them around our factories to see how we operate.

“Farm, earthmover and construction are all going up. Natural rubber and synthetic rubber are still rising in cost. Our announced price increase will bring our margins back to first quarter for North America. Our Goodyear South American purchase is doing better than we thought it would. When you look at their numbers, remember two thirds of the revenue is at cost. The equipment we will be shipping to them will increase their sales and profit. Titan expects real growth and profit from South America in 2012.”

Taylor announced, “The Goodyear Europe acquisition has a drop dead timeline of November 3, 2011. If Goodyear and the trade unions agree, then I believe Titan has the opportunity to add approximately $400 million in revenue in 2012 out of this facility.

“Titan’s testing and improvements of our new generation III and IV tires in the super giant class continue to enhance our product performance. We expect shipment of tires in this class to increase during the second half of 2011. We have added new employees to all five of Titan’s North American factories and we expect to have a strong second half. The hard work for the last few years is paying off and I’m happy for our shareholders and all the Titan employees who are very proud of what they have accomplished.

“The numbers for the last two quarters have proven if there is strong demand, we will grow and perform. I know we surprised a few people but we have a lot going now and we have proven without a doubt that we are moving like a rocket. The goal is to stay in orbit and not come back down.”

Year-to-date summary:

• June 2011 year-to-date sales were $685.3 million, compared to $426.1 million in 2010.
• June 2011 year-to-date gross profit was $120.2 million, compared to $60.0 million in 2010.
• Income from operations for the first six months of 2011 was $70.8 million, compared to $27.6 million year-to-date 2010.
• A noncash convertible debt charge of $16.1 million was recognized in conjunction with the first quarter exchange of $59.6 million in convertible notes for 6.6 million shares of Company stock.
• Year-to-date net income was $22.2 million, compared to $6.6 million in 2010.

Financial overview:

Sales: Titan recorded sales of $404.4 million for the second quarter of 2011, compared to second quarter 2010 sales of $229.7 million. The increase of 76 percent in revenue was the result of continual strong demand in each of our market segments as well as the April acquisition of the Goodyear Latin American farm tire business including the Sao Paulo, Brazil manufacturing facility. Net sales for the first half of 2011 were $685.3 million, compared to $426.1 million in the first half of 2010.

Gross profit: For the second quarter of 2011, gross profit was 15.8 percent of net sales, compared to 14.8 percent of net sales for the second quarter of 2010. Year-to-date gross profit was $120.2 million, or 17.5 percent of sales for 2011, as compared to $60.0 million or 14.1 percent of sales for 2010. Gross profit margin benefitted from improved plant utilization resulting from the higher sales levels.

Selling, general and administrative expenses: SG&A expenses for the second quarter of 2011 were $16.6 million or 4.1 percent of net sales, compared to $12.2 million or 5.3 percent in 2010. The lower SG&A expenses as a percent of sales for the quarter were primarily the result of the decrease in the accrual for the CEO special performance award due to the drop in the Company’s stock price for the quarter and the absence of selling and marketing expenses related to the supply agreement sales. Expenses for SG&A for the six months ended June 30, 2011, were $41.9 million or 6.1% of net sales, compared to $24.0 million or 5.6% in 2010.

Income from operations: For the second quarter of 2011, income from operations was $44.0 million, or 10.9 percent of net sales, compared to $17.4 million, or 7.6 percent of net sales, in 2010. Year-to-date income from operations was $70.8 million, or 10.3 percent of net sales in 2011, compared to $27.6 million, or 6.5 percent of net sales in 2010.

Interest expense: Interest expense was $6.1 million for the second quarter of 2011, compared to $6.8 million in 2010. Year-to-date interest expense was $12.4 million and $13.8 million for the six months ended June 30, 2011 and 2010, respectively. The company’s interest expense year-to-date 2011 decreased from the previous year primarily as a result of the exchange agreement for $59.6 million of 5.625 percent convertible senior subordinated notes completed in the first quarter of 2011.

Noncash convertible debt conversion charge: The Company closed an exchange agreement converting approximately $59.6 million of the 5.625 percent convertible notes into approximately 6.6 million shares of the Company’s common stock. In connection with the exchanges, the company recognized a noncash charge of $16.1 million.

Earnings per share: For the second quarter of 2011, basic earnings per share were $.60 and diluted earnings per share were $.49, as compared to basic and fully diluted earnings per share of $.13 and $.12 in 2010 respectively. Year-to-date earnings per share for 2011, on an adjusted basis (see Appendix below), was $1.02 and $.83 basic and fully diluted, respectively. Earnings per share for 2010 were $.19 for both basic and fully diluted earnings per share.

Capital expenditures: Titan’s capital expenditures were $6.7 million for the second quarter of 2011 and $8.2 million for 2010. Year-to-date expenditures were $10.2 million for 2011 and $11.7 million for 2010.

Debt balance: Total debt was $317.9 million at June 30, 2011, compared to the balance at December 31, 2010 of $373.6 million. The reduction in debt is related to the exchange agreement in the first quarter 2011 to convert approximately $59.6 million of 5.625 percent convertible notes into approximately 6.6 million shares of the Company’s common stock.

Equity balance: The Company’s stockholders’ equity increased $120.4 million to $398.7 million at June 30, 2011 from $278.3 million at December 31, 2010.

Form 10-Q: For additional information and Management’s Discussion and Analysis of Financial Condition and Results of Operations, see the company’s Form 10-Q filed with the Securities and Exchange Commission on July 27, 2011.

Acquisition of Goodyear’s Latin America Farm Tire Business:

On April 1, 2011, Titan closed on the acquisition of The Goodyear Tire & Rubber Company’s Latin American farm tire business for approximately $98.6 million U.S. dollars, subject to post-closing conditions and adjustments. The transaction includes Goodyear’s Sao Paulo, Brazil manufacturing plant, property, equipment; inventories; a licensing agreement that allows Titan to sell Goodyear-brand farm tires in Latin America for seven years; and extends the North American licensing agreement for seven years.

Second Quarter Conference Call:

The Titan International Inc. earnings conference call for the second quarter that ended June 30, 2011, will be held at 9 a.m. Eastern Time on Thursday, July 28, 2011. To participate in the conference call, dial (866) 793-1341 five minutes prior to the scheduled time. International callers dial (703) 639-1312. A replay of the call will be available until August 4, 2011. To access the replay, dial (800) 475-6701 and enter access code 209920. International callers dial (320) 365-3844.

Safe harbor statement:

This press release includes forward-looking statements that involve risks and uncertainties, including risks as detailed in Titan International, Inc.’s periodic filings with the Securities and Exchange Commission. 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.

Company description:

Titan International Inc. (NYSE: TWI), a holding company, owns subsidiaries that supply wheels, tires and assemblies 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 earnings per share data.		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Net sales		$	404,447			$	229,656			$	685,276			$	426,104
Cost of sales			340,556				195,753				565,113				366,114
Gross profit			63,891				33,903				120,163				59,990
Selling, general & administrative expenses			16,573				12,162				41,866				23,971
Research and development expenses			1,014				1,900				2,197				3,927
Royalty expense			2,350				2,413				5,267				4,534
Income from operations			43,954				17,428				70,833				27,558
Interest expense			(6,149	)			(6,790	)			(12,429	)			(13,846	)
Noncash convertible debt conversion charge			0				0				(16,135	)			0
Loss on senior note repurchase			0				(2,722	)			0				(2,722	)
Other income (expense)			2,270				(427	)			2,463				(94	)
Income before income taxes			40,075				7,489				44,732				10,896
Provision for income taxes			14,798				2,920				22,491				4,249
Net income			25,277				4,569				22,241				6,647
Net loss attributable to noncontrolling interests			(8	)			0				(8	)			0
Net income		$	25,285			$	4,569			$	22,249			$	6,647
Earnings per common share:
Basic		$	.60			$	.13			$	.54			$	.19
Diluted			.49				.12				.46				.19
Average common shares outstanding:
Basic			41,981				34,815				41,250				34,794
Diluted			53,394				51,407				53,229				35,347

Segment Information Revenues from external customers (Unaudited)
Amounts in thousands		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2011			2010			2011			2010
Agricultural		$	257,268		$	175,716		$	467,265		$	326,828
Earthmoving/Construction			76,895			49,498			143,406			91,313
Consumer			70,284			4,442			74,605			7,963
Total		$	404,447		$	229,656		$	685,276		$	426,104

Titan International, Inc. Consolidated Condensed Balance Sheets (Unaudited)
Amounts in thousands
		June 30,			December 31,
Assets		2011			2010
Current assets:
Cash and cash equivalents		$	114,162		$	239,500
Accounts receivable			243,478			89,004
Inventories			183,763			127,982
Deferred income taxes			13,102			12,791
Prepaid and other current assets			29,671			18,663
Total current assets			584,176			487,940
Property, plant and equipment, net			353,546			248,054
Other assets			133,970			51,476
Total assets		$	1,071,692		$	787,470
Liabilities & Equity
Current liabilities:
Short-term debt		$	10,330		$	0
Accounts payable			114,837			35,281
Other current liabilities			102,352			57,072
Total current liabilities			227,519			92,353
Long-term debt			317,881			373,564
Deferred income taxes			48,227			1,970
Other long-term liabilities			79,364			41,268
Equity			398,701			278,315
Total liabilities & equity		$	1,071,692		$	787,470

Titan International, Inc.

Supplemental Consolidated Statement of Income 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 of the difference between non-GAAP financial measure and the financial measure calculated and reported in accordance with GAAP.

The SEC’s Regulation G applies to any public disclosure or release of material information that includes a non-GAAP financial measure. The non-GAAP financial measure should be considered supplemental to, not a substitute for, the financial measures calculated in accordance with 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, this measure may not be comparable to non-GAAP financial measures reported by other companies.

The non-GAAP financial measure of adjusted net income assists investors with analyzing our business results as well as with predicting future performance. In addition, this non-GAAP financial measure is reviewed by management in order to evaluate the financial performance of each segment as well as the Company 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.

As a result, one should not consider this measure in isolation or as a substitute for our results reported under GAAP. We 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 the non-GAAP financial measures with the most directly comparable GAAP financial measures for June 30, 2011.

		Three Months Ended June 30							Six Months Ended June 30
		2011				2010			2011			2010
Net income (loss)		$	25,285			$	4,569		$	22,249		$	6,647
Adjustments:
Noncash convertible debt charge			0				0			16,135			0
Loss on note repurchase, net of tax			0				1,660			0			1,660
CEO incentive compensation, net of tax			(1,851	)			0			3,717			0
Adjusted Net Income		$	23,434			$	6,229		$	42,101		$	8,307
Adjusted earnings per common share:
Basic		$	0.56			$	0.18		$	1.02		$	0.24
Diluted		$	0.46			$	0.15		$	0.83		$	0.22
Average common shares outstanding:
Basic			41,981				34,815			41,250			34,794
Diluted			53,394				51,407			53,229			51,390

Titan International Inc.
Krista Gray
IR Manager
(217) 221-4773