Titan International, Inc. Reports Third Quarter Earnings
QUINCY, Ill.--Oct. 2, 20057, 2005--Titan International, Inc. :Third quarter highlights:
-- Net sales remained over $100 million in Titan's 2005 third quarter, despite the natural disasters and dry weather that occurred in the United States during the period, which impacted product demand. The net sales of $102.7 million this quarter compare to $116.5 million in the third quarter of last year.
-- Despite the difficult conditions in the period, adjusted income from operations, not including idled asset depreciation, remained a positive $3.6 million in the quarter. This compares to $9.9 million in third quarter 2004.
-- Interest expense for the third quarter was $1.8 million, a 54% decrease as compared to the $3.8 million recorded in the third quarter of 2004.
-- Debt declined $9.1 million in the quarter to a balance of $102.0 million, the lowest debt level since Titan's first year as a public company in 1993. This debt includes $81.2 million in convertible bonds.
Statement of Chief Executive Officer:
"Third quarter is always the toughest quarter due to Titan's various shut downs, and usually during the third quarter most OEMs adjust their inventory levels," said Titan Chairman and CEO Maurice Taylor Jr. "There's no question costs have risen further than we anticipated. In addition to working on closing various acquisitions, management, starting with myself, must keep a keen focus on our costs. We believe there will be some movement up and down in our markets over the next few months. Our business has been good, and we in management will continue our focus to drive product costs down."
Year-to-date highlights:
-- Year-to-date net sales increased $18.3 million, or 5%, to $373.6 million when compared to 2004 year-to-date net sales of $355.2 million, excluding Titan Europe. Recorded 2004 year-to-date net sales were $404.7 million, including $49.4 million of Titan Europe sales.
-- Basic earnings per share year-to-date were $.94, a 38% increase over the $.68 per share recorded for the nine months ended September 30, 2004.
-- Fully diluted earnings per share year-to-date was $.83, a 28% increase over the $.65 per share recorded for the nine months ended September 30, 2004.
Financial overview:
Titan International, Inc. reported net sales of $102.7 million for third quarter of 2005, a reduction of 12% compared to $116.5 million for the previous year's quarter. Net sales for the first three quarters of 2005 were $373.6 million, up from $355.2 million for the first three quarters of 2004 on a pro forma basis, adjusted for the sale of Titan Europe in April 2004. Reported sales for the first three quarters of 2004 were $404.7 million.
Adjusted income from operations (not including idled assets depreciation of $1.3 million in the quarter and $4.0 million year-to-date) was $3.6 million and $33.3 million for the quarter and nine months ended September 30, 2005, respectively. These results compare to last year's $9.9 million and $34.3 million, for the quarter and year-to-date. (See Idled assets marketed for sale depreciation.)
Titan reduced debt by $9.1 million, or 8%, in the quarter, to a balance of $102.0 million. The balance on the company's revolving credit facility was $10.5 million on September 30, 2005, down from $19.5 million on June 30, 2005.
The income tax benefit was $0.8 million and $0 for the three and nine months ending September 30, 2005. Based on the company's estimated year-end tax rate, the company provided for income taxes at an effective rate of 0% for the nine months ending September 30, 2005.
Net income for the third quarter was $1.2 million, as compared to $1.5 million in the third quarter of 2004. Net income for the nine months ended September 30, 2005 and 2004 was $16.6 million and $12.4 million respectively.
Basic earnings per share were $.06 for the third quarter 2005 and $.09 per share for the third quarter of 2004. Year-to-date 2005 basic earnings per share were $.94, compared to $.68 per share for the year-to-date 2004.
Fully diluted earnings per share were $.06 for the third quarter 2005 and $.09 per share for the third quarter of 2004. Year-to-date 2005 fully diluted earnings per share were $.83, compared to $.65 per share for the year-to-date 2004.
Idled assets marketed for sale depreciation:
Titan recorded depreciation for idled assets marketed for sale of $1.3 million for third quarter 2005, and $4.0 million year-to-date 2005, as compared to no expense recorded for these time periods during 2004.
Acquisition update:
Titan Tire Corporation, a subsidiary of the Company, entered into a definitive agreement to purchase the assets of The Goodyear Tire & Rubber Company's North American farm tire business on February 28, 2005. The closing is subject to certain conditions. At the closing, Titan will purchase the assets of Goodyear's farm tire business for approximately $100 million.
On July 26, 2005, Titan Tire Corporation received approval from the International leadership of the United Steelworkers of America (USWA) to begin negotiations with USWA Local 745 in Freeport, Illinois. A contract must be approved by the USWA membership in Freeport for the sale to Titan to be finalized. The termination date of the agreement has been extended to November 1, 2005.
Cash merger offer
On October 11, 2005, the Company received an offer from One Equity Partners LLC (One Equity), a private equity affiliate of JPMorgan Chase & Co., indicating One Equity's interest in acquiring Titan International, Inc., in a cash merger for $18.00 per share of Titan common stock. A Special Committee of the Board of Directors of Titan was formed to pursue discussions with One Equity. The offer is subject to reaching a definitive agreement with the customary conditions, due diligence, financing, both One Equity and Titan board approvals and Titan's stockholders' approval. There can be no assurance that any agreement will be completed. Mr. Richard M. Cashin Jr., one of Titan's directors, is also the Managing Partner of One Equity. Mr. Maurice M. Taylor Jr., Chief Executive Officer and Chairman of the Board of Directors of Titan, is expected to participate with One Equity Partners. Additionally, Mr. Mitchell I. Quain and Mr. Anthony L. Soave, also directors of Titan, may participate.
The Special Committee consists of Mr. Erwin H. Billig, Mr. Edward J. Campbell and Mr. Albert J. Febbo. No member of the Special Committee is participating with One Equity in the cash merger offer. The Special Committee hired counsel and a financial advisor. The financial advisor is Jefferies & Company, Inc. Anyone who is interested in submitting a competing offer to Titan's Special Committee may do so by contacting Jefferies & Company, Inc. at the address of 520 Madison Avenue, New York, N.Y., 10019. The telephone number is (212) 284-2300 and the fax number is (212) 284-2114.
Additional information:
For additional information and Management's Discussion and Analysis of Financial Condition and Results of Operations, see the company's Form 10-Q for quarterly period ended September 30, 2005, filed with the Securities and Exchange Commission on October 27, 2005.
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, including the annual report on Form 10-K for the year ended December 31, 2004. 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:
Quincy, IL. - Titan International, Inc. , a holding company, owns subsidiaries that supply wheels, tires and assemblies for off-highway equipment used in agricultural, earthmoving/construction, and consumer (i.e. all terrain vehicles and trailers) applications.
Titan International, Inc.
Consolidated Statements of Operations (Unaudited)
For the three and nine months ended September 30, 2005 and 2004
Amounts in thousands except
earnings per share data. Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Net sales $102,712 $116,487 $373,550 $404,651
Cost of sales 91,739 98,686 315,994 338,241
--------- --------- --------- ---------
Gross profit 10,973 17,801 57,556 66,410
Selling, general &
administrative expenses 7,213 7,613 23,658 27,585
Research & development
expenses 205 323 598 1,530
Idled assets marketed for sale
depreciation 1,312 0 3,992 0
Goodwill impairment on Titan
Europe 0 0 0 2,988
--------- --------- --------- ---------
Income from operations 2,243 9,865 29,308 34,307
Interest expense (1,781) (3,833) (6,723) (13,598)
Noncash convertible debt
conversion charge 0 0 (7,225) 0
Debt termination expense 0 (3,654) 0 (3,654)
Equity income (loss) from
unconsolidated affiliate 322 (367) 2,360 421
Other (expense) income (413) 105 (1,137) 239
--------- --------- --------- ---------
Income before income taxes 371 2,116 16,583 17,715
(Benefit) provision for
income taxes (811) 635 0 5,315
--------- --------- --------- ---------
Net income $1,182 $1,481 $16,583 $12,400
========= ========= ========= =========
Earnings per common share:
Basic $.06 $.09 $.94 $.68
Diluted .06 .09 .83 .65
Average common shares
outstanding:
Basic 19,422 16,324 17,570 18,293
Diluted 19,617 16,426 25,298 20,429
Adjustment Calculations (Unaudited)
Amounts in thousands except per
share data. Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
-------- --------- --------- ---------
Income from operations $2,243 $9,865 $29,308 $34,307
Add back: Idled assets marketed
for sale depreciation 1,312 0 3,992 0
-------- --------- --------- ---------
Adjusted income from
operations $3,555 $9,865 $33,300 $34,307
======== ========= ========= =========
Segment Information
Revenues from external customers (Unaudited)
Amounts in thousands Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Agricultural $64,595 $70,451 $244,873 $253,583
Earthmoving/Construction 31,303 37,495 106,165 124,546
Consumer 6,814 8,541 22,512 26,522
--------- --------- --------- ---------
Total $102,712 $116,487 $373,550 $404,651
--------- --------- --------- ---------
Consolidated Condensed Balance Sheets (Unaudited)
Amounts in thousands
September 30, December 31,
Assets 2005 2004
------------- ------------
Current assets:
Cash & cash equivalents $594 $1,130
Accounts receivable 56,553 52,781
Inventories 78,941 84,658
Deferred income taxes 6,711 6,711
Other current assets 13,907 9,388
------------- ------------
Total current assets 156,706 154,668
Property, plant & equipment, net 69,929 80,644
Idled assets marketed for sale 26,574 31,245
Investment in unconsolidated affiliate 28,855 30,040
Restricted cash on deposit 24,500 24,500
Goodwill 11,702 11,702
Other noncurrent assets 18,658 21,367
------------- ------------
Total assets $336,924 $354,166
============= ============
Liabilities & stockholders' equity
Current liabilities:
Short-term debt (including current portion
of long-term debt) $141 $217
Accounts payable 22,773 26,733
Other current liabilities 13,659 12,820
------------- ------------
Total current liabilities 36,573 39,770
Long-term debt 101,887 169,688
Deferred income taxes 9,164 9,164
Other long-term liabilities 26,320 28,663
Stockholders' equity 162,980 106,881
------------- ------------
Total liabilities & stockholders' equity $336,924 $354,166
============= ============