Titan International Announces Record Year 2012

Mon Feb 25, 2013 5:12pm EST

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Sales increased 22%, Net Income increased 64% 
QUINCY, Ill.--(Business Wire)--
Titan International Inc. (NYSE: TWI): 

Fourth quarter summary:

* Record sales for fourth quarter 2012 were $493.6 million, as compared to
$402.9 million in the fourth quarter of 2011. 
* Fourth quarter gross profit decreased to $51.5 million from $58.5 million in
2011. 
* Fourth quarter loss from operations was ($1.1) million, compared to income of
$19.5 million for last year`s fourth quarter. 
* Cash and investments at December 31, 2012, was $189.1 million, compared to a
balance of $134.9 million at September 30, 2012. 
* Inventory at December 31, 2012, was $366.4 million, compared to $247.8 million
balance at September 30, 2012.

Full year summary:

* Year-to-date sales for 2012 were the highest in company history at $1,820.7
million, as compared to $1,487.0 million in 2011, an improvement of 22.4
percent. 
* Gross profit for 2012 was $294.1 million, or 16.2 percent of net sales, as
compared to $232.1 million, or 15.6 percent of net sales in 2011. Year over year
the gross profit increased 26.7 percent. 
* Income from operations in the current year was $174.7 million, compared to
$132.2 million in 2011, an increase of 32.2 percent. 
* Net income for year-end 2012 was $95.6 million, compared to $58.2 million in
2011, an increase of 64.3 percent. 
* Cash and investments at December 31, 2012, was $189.1 million, compared to the
$129.2 million balance at December 31, 2011. 
* Inventory at December 31, 2012, was $366.4 million, compared to the $190.9
million balance at December 31, 2011.

Statement of Chief Executive Officer:

CEO and Chairman, Maurice Taylor commented, "This past year was a record year in
every way. We added to our global footprint with the purchase of Titan Europe
and Planet Group located in Perth, Australia. Both additions will expand our
business opportunities in the agriculture and construction/earthmoving markets.
The fourth quarter had two negative problems: One, the construction slow down in
Europe and its effect on the newly acquired Titan Europe Business, and the extra
costs due to the start up of the wheel facility resulting from the earthquake in
Italy. Insurance claims should cover the cost of the damage sustained and we
have seen a strengthening of the market for the steel track business. 

"One of the biggest problems in the quarter was in the performance of the three
U.S. tire plants. I believe most of this had to do with the unionized work force
due to the fact that both Freeport and Bryan have been working for the past two
years under a best and final proposed contract. The Company and the Union have
been negotiating the terms of a new CBA since September 2012. The Union is in
the process of reviewing the proposed CBA. The Union has told Titan that they
expect all three Titan Tire plants to vote on the new four year proposed
contract the week of March 4, 2013. Titan believes this proposed contract is
fair to our employees and the company. 

"The farm business for 2013 will continue to be strong as is mining. The
construction side is starting to show a little strength in the United States.
The management team at Titan is building a strong and growing company for our
employees and stockholders." 

Financial overview:

Sales: Titan International Inc. recorded net sales of $493.6 million for fourth
quarter of 2012, as compared to fourth quarter 2011 sales of $402.9 million. For
the year, net sales for 2012 were $1,820.7 million, as compared to $1,487.0
million at year-end 2011, an increase of 22.4 percent. 

Gross profit: Gross profit for fourth quarter 2012 was $51.5 million, or 10.4
percent of net sales, as compared to $58.5 million in 2011, or 14.5 percent of
net sales. Gross profit for the year of 2012 was $294.1 million, or 16.2 percent
of net sales, as compared to $232.1 million, or 15.6 percent of net sales, for
2011. The increase in gross profit margin for the year was primarily due to
productivity gains on the higher sales volumes and select price increases on
certain products that exceeded the increase in raw material costs, as well as
sales mix changes to larger products that generally carry higher margins. 

Selling, general and administrative expenses: SG&A expenses for the fourth
quarter of 2012 were $46.4 million, as compared to $35.5 million at the same
time in 2011. For the year, SG&A was $126.2 million, as compared to $85.9
million for the year ended December 31, 2011. The higher SG&A expenses were
primarily the result of an increase of selling and marketing expenses related to
the increased sales levels and increased information technology expenses, an
increase in incentive compensation, and acquisition related costs. 

Supply agreement termination income: In May 2012, Titan and Goodyear terminated
the supply agreement between the two parties and entered into a new agreement
under which Titan will sell these products directly to third party customers and
pay a royalty to Goodyear. The remaining balance of the supply agreement
liability of $26.1 million was recorded to income as the Company is no longer
obligated to sell the products at below market prices. 

Income (loss) from operations: Loss from operations was ($1.1) million in the
fourth quarter of 2012, compared to income of $19.5 million in fourth quarter
2011. Income from operations was $174.7 million for the year ended December 31,
2012, compared to $132.2 million for the year ended December 31, 2011. 

Noncash convertible debt conversion charge: In 2011, Titan closed an exchange
agreement converting approximately $59.6 million of the 5.625% convertible notes
into approximately 6.6 million shares of the Company`s common stock. In
connection with the exchange, the Company recognized a noncash charge of $16.1
million. 

Noncash Titan Europe Plc gain: In the fourth quarter of 2012, Titan acquired
Titan Europe Plc. Prior to the acquisition, Titan held a 21.8% ownership
percentage in Titan Europe, which had a fair value on the acquisition date of
$31.7 million. As a result of recording the fair value of the investment on the
acquisition date, a gain of $26.7 million was recorded on Titan's previously
held interest in Titan Europe. 

Net income (loss): Net loss was ($3.5) million for the fourth quarter of 2012,
compared to net income of $14.5 million in fourth quarter 2011. Year-to-date
2012 net income was $95.6 million, as compared to $58.2 million in 2011. 

Cash and investments balance: Cash at December 31, 2012, was $189.1 million
compared to $129.2 million balance at December 31, 2011. The increase in the
cash balance was primarily due to the addition of Titan Europe. 

Inventory: Inventory at December 31, 2012, was $366.4 million compared to $190.9
million balance at December 31, 2011. The increase in inventory was due to the
Titan Europe acquisition. 

Capital expenditures: Titan`s capital expenditures for 2012 and 2011 were $65.7
million and $35.7 million, respectively. The capital expenditures in each year
were used primarily for updating manufacturing equipment, expanding
manufacturing capacity and for further automation at our facilities. 

Depreciation and amortization: The Company`s depreciation and amortization at
December 31, 2012, was $54.1 million, compared to $44.9 million for year-ended
December 31, 2011. 

Net debt (debt less cash and investments): Net debt at December 31, 2012, was
$398.1 million, compared to $200.4 million at December 31, 2011. Increase is due
to the acquisition of Titan Europe. 

Acquisitions:

During the fourth quarter, Titan acquired 100% of the outstanding stock of Titan
Europe Plc (Titan Europe). Titan Europe is an international engineering group
which designs and manufactures wheels, undercarriage components and assemblies
for tracked and wheeled "off-road vehicles". Prior to the acquisition, Titan
held a 21.8% ownership percentage in Titan Europe. Titan Europe shareholders
received one share of new Titan common stock for every 11 Titan Europe shares
held. A total of 6,257,011 new shares of Titan common stock were issued with a
value of $121.8 million. In addition, Titan paid cash of $5.6 million for option
payouts and partial shares. Titan`s previous investment in Titan Europe had a
fair value on the acquisition date of $31.7 million. Total consideration
including the value of stock issued, cash payments, and the fair value of
previously held Titan Europe shares totaled $159.1 million. A gain of $26.7
million was recorded on Titan`s previously held interest in Titan Europe which
was recorded as Noncash Titan Europe Plc gain in the consolidated statement of
operations. 

Subsequent Events:

In January 2013, Titan was approached by a note holder of the Company's 5.625%
convertible senior subordinated notes due 2017 (convertible notes), with an
offer to exchange the note holder's convertible notes for the Company's common
stock. The two parties privately negotiated an agreement to exchange
approximately $52.7 million in aggregate principal amount of the convertible
notes for approximately 4.9 million shares of the Company's common stock plus a
cash payment totaling $14.2 million for the premium on the principal and unpaid
interest to maturity. 

Conference call:

The Titan International Inc. earnings conference call for the fourth quarter and
year ended December 31, 2012, is currently scheduled to be held at 9 a.m.
Eastern Time on Tuesday, February 26. 

To participate in the conference call, dial (800) 288-8975 five minutes prior to
the scheduled time. International callers dial (612) 332-0228. 

Visit our website at www.titan-intl.com for further details. 

10-K Filing:

The Form 10-K will be filed on Wednesday, February 27, 2013. 

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, assemblies and undercarriage for off-highway equipment
used in agricultural, earthmoving/construction and consumer (including all
terrain vehicles) applications.

                                                                                                                                                                   
 Consolidated Statements of Operations (Unaudited)                                                                                                                 
 For the three and twelve months ended December 31, 2012 and 2011                                                                                                  
                                                                                                                                                                   
 Amounts in thousands except earnings per share data.               Three Months Ended                              Twelve Months Ended                            
                                                                    December 31,                                    December 31,                                   
                                                                    2012                    2011                    2012                      2011                 
 Net sales                                                          $493,638                $402,917                $1,820,678                $1,486,998           
 Cost of sales                                                      442,109                 344,409                 1,526,539                 1,254,890            
 Gross profit                                                       51,529                  58,508                  294,139                   232,108              
                                                                                                                                                                   
 Selling, general and administrative expenses                       46,415                  35,503                  126,157                   85,917               
 Research and development expenses                                  2,692                   1,235                   7,148                     4,228                
 Royalty expense                                                    3,520                   2,260                   12,260                    9,790                
 Supply agreement termination income                                0                       0                       (26,134     )             0                    
 Income (loss) from operations                                      (1,098    )             19,510                  174,708                   132,173              
                                                                                                                                                                   
 Interest expense                                                   (8,959    )             (6,214    )             (27,658     )             (25,259     )        
 Noncash convertible debt conversion charge                         0                       0                       0                         (16,135     )        
 Noncash Titan Europe Plc gain                                      26,700                  0                       26,700                    0                    
 Other income                                                       660                     3,209                   6,823                     5,116                
 Income (loss) before income taxes                                  17,303                  16,505                  180,573                   95,895               
                                                                                                                                                                   
 Provision (benefit) for income taxes                               21,891                  2,414                   86,613                    37,759               
                                                                                                                                                                   
 Net income (loss)                                                  ($4,588   )             $14,091                 $93,960                   $58,136              
                                                                                                                                                                   
 Net (income) loss attributable to noncontrolling interests         (1,087    )             (370      )             (1,593      )             (16         )        
 Net income (loss) attributable to Titan                            ($3,501   )             $14,461                 $95,553                   $58,152              
                                                                                                                                                                   
 Earnings (loss) per common share:                                                                                                                                 
 Basic                                                              ($.07     )             $.34                    $2.20                     $1.40                
 Diluted                                                            (.07      )             .29                     1.83                      1.18                 
                                                                                                                                                                   
 Average common shares outstanding:                                                                                                                                
 Basic                                                              47,047                  42,088                  43,380                    41,657               
 Diluted                                                            47,278                  53,254                  54,662                    53,144               
                                                                                                                                                                   


                                                                                                                               
 Segment Information                                                                                                           
 Revenues from external customers (Unaudited)                                                                                  
                                                                                                                               
 Amounts in thousands                              Three Months Ended                       Twelve Months Ended                
                                                   December 31,                             December 31,                       
                                                   2012               2011                  2012                 2011          
 Agricultural                                      $249,036           $246,972              $1,080,412           $960,693      
 Earthmoving/Construction                          183,373            82,337                501,617              306,821       
 Consumer                                          61,229             73,608                238,649              219,484       
 Total                                             $493,638           $402,917              $1,820,678           $1,486,998    
                                                                                                                               


                                                                                                         
 Consolidated Condensed Balance Sheets (Unaudited)                                                       
                                                                                                         
 Amounts in thousands                                                                                    
                                                       December 31,                      December 31,    
 Assets                                                2012                              2011            
 Current assets:                                                                                         
 Cash & cash equivalents                               $189,114                          $129,170        
 Accounts receivable                                   297,798                           189,527         
 Inventories                                           366,385                           190,872         
 Deferred income taxes                                 52,331                            26,775          
 Prepaid & other current assets                        75,140                            28,249          
 Total current assets                                  980,768                           564,593         
                                                                                                         
 Property, plant & equipment, net                      568,344                           334,742         
 Other assets                                          143,602                           110,951         
 Total assets                                          $1,692,714                        $1,010,286      
                                                                                                         
 Liabilities & equity                                                                                    
 Current liabilities:                                                                                    
 Short-term debt                                       $145,801                          $11,723         
 Accounts payable                                      180,065                           76,574          
 Other current liabilities                             135,724                           87,469          
 Total current liabilities                             461,590                           175,766         
                                                                                                         
 Long-term debt                                        441,438                           317,881         
 Deferred income taxes                                 61,977                            38,691          
 Other long-term liabilities                           107,096                           81,069          
 Total equity                                          620,613                           396,879         
 Total liabilities & equity                            $1,692,714                        $1,010,286      
                                                                                                         
                                                                                                         


Appendix 
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 December 31,
2012.

                                                                                                                               
                                                   Three Months Ended                  Twelve Months Ended                     
                                                   December 31,                        December 31,                            
                                                   2012                   2011         2012                  2011              
                                                                                                                               
 Net income (loss)                                 ($3,501  )             $14,461      $95,553               $58,152           
                                                                                                                               
 Europe acquisition costs, not taxable             (133     )             0            2,703                 0                 
 Europe rationalization costs, net of tax          2,514                               2,514                                   
 Noncash Titan Europe Plc gain, net of tax         (12,320  )             0            (12,320   )           0                 
 Unrecognized tax benefit                          2,306                  0            6,654                 0                 
 Inventory write ups from recent acquisitions      15,249                 0            18,174                0                 
 Supply Agreement Term Income-net of tax           0                      0            (17,248   )           0                 
 CEO incentive compensation, net of tax            0                      2,921        5,127                 (64       )       
 Brea legal fees and interest, net of tax          0                      1,269        0                     1,269             
 Noncash convertible debt charge                   0                      0            0                     16,135            
 Adjusted net income                               $4,115                 $18,651      $101,157              $ 75,492          
                                                                                                                               
 Adjusted earnings per common share:                                                                                           
 Basic                                             $0.09                  $0.44        $2.33                 $1.81             
 Diluted                                           $0.09                  $0.37        $1.93                 $1.50             
                                                                                                                               
 Average common shares outstanding:                                                                                            
 Basic                                             47,047                 42,088       43,380                41,657            
 Diluted                                           47,278                 53,254       54,662                53,144            


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

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