Titan International Inc. announces first quarter 2016 results.
First quarter highlights:
- Sales for the first quarter of 2016 were $321.8 million, down 20.0%, compared to $402.1 million in the first quarter of 2015.
- Gross profit for the first quarter of 2016 was $31.9 million, or 9.9% of net sales, compared to $42.8 million, or 10.6% of net sales for the first quarter of 2015.
- Loss from operations for the first quarter of 2016 was $(7.9) million, or (2.5) percent of net sales, compared to income of $0.8 million, or 0.2% of net sales, for the first quarter of 2015.
- Adjusted net loss for the first quarter of 2016 was $(9.2) million, compared to net income of $3.2 million in the first quarter of 2015.
- Adjusted basic and diluted earnings per share for the first quarter 2016 and 2015 were $(0.17) and $0.06 respectively.
Statement of Chief Executive Officer
CEO and Chairman Maurice Taylor comments, "Titan's first quarter has been a story of continued weakness within each of our end markets, which is consistent with what has been widely discussed by many in our industry. While there have been few bright spots during the quarter, we continue to improve our operating performance despite these declines. The first quarter financial results are not what we expect; however, through our business improvement framework, we were able to improve our Ag segment gross profit by nearly 100 basis points despite a 21% reduction in sales.
"Our marketing focus continues to raise the awareness of our LSW solution. Our conversations with farmers have changed from 'What is LSW?' to 'What LSW's do you have that will fit on my tractor?' This heightened awareness has translated to our Ag LSW program expanding to 18 major manufacturers with more than 200 different assembly part numbers. We expect this momentum to continue.
"The Special Committee of Titan's Board of Directors engaged Goldman, Sachs & Co. as financial advisor in connection with the possible sale of Italtractor ITM S.p.A. (ITM). The committee was impressed with the presentations from each investment bank that submitted a proposal and the choice was Goldman after a very competitive process. The committee is pleased with the level of interest received from the parties that have contacted Titan thus far.
"There are many projects happening at Titan which we expect will ultimately increase shareholder value. On March 29, 2016, we had a ribbon cutting ceremony at Titan Tire Reclamation Corporation in the oil sands of Canada. All five of Canada's major mines were represented. Paul Reitz, President of Titan International Inc., Derrick Trottier of Suncor, Chief Allan Adam of the Athabasca Chipewyan First Nation, and Tany Yao, Wildrose MLA for Fort McMurray-Wood Buffalo, officially cut the ribbon. Personnel have been hired and are going through special training with production ramping up over the next several weeks. We estimate on a daily basis this operation is capable of converting 240,000 lbs. of scrap tires which is approximately 24 giant mining tires weighing 10,000 lbs. each. Titan has signed contracts with two of the mines and believes the other mines in the region will follow in the near future. Titan has received inquiries as to when we are going to launch similar tire reclamation facilities in Chile and Australia. I believe that while this initial project has been great for Titan, we will need to focus on the longer term strategy for this business."
Financial Summary
Net Sales: Net sales for the quarter ended March 31, 2016, were $321.8 million compared to $402.1 million in 2015, a decrease of 20%. Sales declined across all reported segments. Sales volume was down 11% as both the agricultural and earthmoving/construction segments remain in a cyclical downturn. 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 6% and a reduction in price mix of 3% further eroded sales.
Gross profit: Gross profit for the first quarter of 2016 was $31.9 million, or 9.9% of net sales, compared to $42.8 million, or 10.6% of net sales for the first quarter of 2015. Gross profit margins continue to remain around 10% as there is a continued focus on improving productivity efficiency, rationalizing expenditures, finding lower cost material, improving quality, and optimizing prices.
Selling, general and administrative expenses: Selling, general and administrative (SG&A) expenses for the first quarter of 2016 were $35.1 million, or 10.9% of net sales, compared to $35.7 million, or 8.9% of net sales, for 2015.
Income (loss) from operations: Loss from operations for the first quarter of 2016 was $(7.9) million, or (2.5) percent of net sales, compared to income of $0.8 million, or 0.2% of net sales, in 2015.
Interest expense: Interest expense was $8.5 million and $8.8 million for the quarters ended March 31, 2016, and 2015, respectively.
Earnings per share: For the quarters ended March 31, 2016 and 2015, basic and diluted earnings per share were $(0.27) and $(0.05), respectively.
On an adjusted basis, basic and diluted earnings per share for the quarters ended March 31, 2016 and 2015 were $(0.17) and $0.06, respectively.
Capital expenditures: Titan's capital expenditures were $7.1 million for the first quarter of 2016 and $11.4 million for the first quarter of 2015.
Debt balance: Total long-term debt balance was $419.5 million at March 31, 2016, compared to $480.4 million at December 31, 2015. Short-term debt balance was $88.8 million at March 31, 2016, and $31.2 million at December 31, 2015. Net debt (debt less cash and cash equivalents) was $317.2 million at March 31, 2016, compared to $311.4 million at December 31, 2015.
Equity balance: The company's equity was $334.5 million at March 31, 2016, compared to $344.7 million at December 31, 2015.
