Titan International, Inc. Reports 34% Increase in First Quarter Sales
QUINCY, Ill.--April 27, 2006--Titan International, Inc. :First quarter highlights:
-- Titan achieved a 34 percent increase in net sales. First quarter 2006 net sales were $182.6 million, compared to $136.1 million in first quarter 2005.
-- Titan's gross profit increased by 29 percent, or $7.0 million. First quarter 2006 gross profit was $31.1 million, compared to $24.1 million in first quarter 2005.
-- Titan was able to achieve a 22 percent increase in income from operations for the first quarter 2006 to reach $17.2 million, compared to $14.1 million in first quarter 2005.
-- First quarter income before taxes was $14.3 million for 2006 and $12.4 million for 2005. As a result of a higher effective tax rate of 40 percent ($5.7 million tax provision) in 2006, versus 10 percent ($1.2 million tax provision) in 2005, the company's first quarter net income for 2006 was $8.6 million, compared to $11.2 million for 2005.
-- Titan reduced total debt by $5.5 million in the quarter including short-term debt reduction of $3.3 million and long-term debt reduction of $2.2 million.
-- Titan's stockholders' equity increased $13.5 million in the first quarter of 2006 achieving an equity balance of $181.3 million at March 31, 2006, up from $167.8 million at December 31, 2005.
Statement of Chief Executive Officer:
"Titan achieved another first quarter of remarkable sales and profits. Our employees have worked hard, and it is paying off," stated Titan Chairman and CEO Maurice Taylor Jr. "As previously announced, Titan and One Equity Partners have terminated discussions regarding a potential cash merger of Titan. Throughout the period of discussions, Titan never took its foot off the gas pedal as the company closed on the acquisition and began the integration of Goodyear's North American farm tire assets."
"Titan is growing and expanding. During the early stages, the company's acquisition of Goodyear's North American farm tire assets is proving to be an extremely positive addition to the Titan organization. As always, we stand willing and ready to evaluate acquisition opportunities in off-highway wheels and tires that would further strengthen Titan's business and performance."
"As we embark on another chapter of the Titan story, I want to personally thank our employees, investors, customers and vendors for their ongoing support of this great American company."
Financial overview:
Titan International, Inc. reported net sales of $182.6 million for the first quarter of 2006, which were 34 percent higher than the first quarter 2005 sales of $136.1 million. The significantly higher sales level was attributed to an increase in market share related to the manufacturing capacity from the Freeport, Illinois, facility, which was acquired in December 2005.
Gross profit for the first quarter 2006 was $31.1 million, as compared to $24.1 million in the first quarter of 2005. The $7.0 million, or 29 percent, increase in gross profit was attributed to the significantly higher sales levels achieved during the quarter.
The Goodyear North American farm tire asset acquisition included a license agreement with The Goodyear Tire & Rubber Company to manufacture and sell certain off-highway tires in North America. Royalty expenses recorded in the first quarter of 2006 were $1.6 million. No royalty expense was recorded in the first quarter of 2005, as this license agreement was not yet in place.
Income from operations for the first quarter 2006 was $17.2 million, as compared to $14.1 million in the first quarter of 2005. Even with the $1.6 million of royalty expense, Titan achieved $3.1 million increase in income from operations for the first quarter of 2006.
The company recorded income tax expense of $5.7 million and $1.2 million for the quarters ended March 31, 2006 and 2005, respectively. The $4.5 million increase in tax expense quarter-over-quarter was the result of a higher effective tax rate of 40 percent in 2006 as compared to a 10 percent tax rate in 2005.
Net income for the first quarter of 2006 was $8.6 million compared to $11.2 million in 2005. Diluted earnings per share were $.36 for the first quarter of 2006 compared to $.51 in 2005. The company's lower net income and diluted earnings per share resulted from the higher effective tax rate of 40 percent in 2006 versus 10 percent in 2005.
The company's total debt reduction of $5.5 million during the first quarter of 2006 consisted of a short-term and long-term debt reductions. Titan reduced short-term debt by $3.3 million to a balance of $8.7 million at March 31, 2006, from $12.0 million at December 31, 2005. In addition, Titan lowered long-term debt by $2.2 million to a balance of $188.2 million from $190.4 million at December 31, 2005.
The company's stockholders' equity increased $13.5 million, or 8 percent, in the first quarter of 2006. Titan's equity balance reached $181.3 million at March 31, 2006, a significant increase from the $167.8 million at December 31, 2005.
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 April 27, 2006.
Termination of cash merger discussions:
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. On April 12, 2006, Titan and One Equity announced the termination of discussions regarding the proposed cash merger. On April 17, 2006, the Company's Board of Directors met and thanked the Special Committee, which had been formed to pursue discussions regarding One Equity's proposed cash merger, for all their efforts expended and agreed that their Special Committee responsibilities have now been completed.
Negotiations with CTNA to purchase Bryan, Ohio, assets:
Titan Tire Corporation, a subsidiary of Titan International, Inc., announced on April 24 that it is in negotiations with Continental Tire North America (CTNA) to acquire the assets of its off-the-road (OTR) tire manufacturing facility in Bryan, Ohio. It is the goal of the parties to reach a definitive agreement for the asset purchase transaction within the next 30 days.
The asset purchase is subject to the approval of the Board of Directors of Titan and CTNA, CTNA's shareholders and government regulations. In addition, the asset purchase is contingent upon the negotiation of an agreement between Titan and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW) and its Local Union No. 890L. Sales at CTNA's Bryan facility are approximately $125 million per year.
Titan International, Inc.
Consolidated Condensed Statements of Operations (Unaudited)
For the three months ended March 31, 2006 and 2005
Amounts in thousands except earnings Three Months Ended
per share data. March 31,
2006 2005
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Net sales $182,577 $136,129
Cost of sales 151,463 112,048
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Gross profit 31,114 24,081
Selling, general & administrative expenses 11,365 8,610
Royalty expense 1,625 0
Idled assets marketed for sale depreciation 916 1,346
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Income from operations 17,208 14,125
Interest expense (3,723) (2,589)
Other income 836 910
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Income before income taxes 14,321 12,446
Provision for income taxes 5,728 1,245
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Net income $8,593 $11,201
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Earnings per common share:
Basic $.44 $.68
Diluted .36 .51
Average common shares outstanding:
Basic 19,584 16,352
Diluted 25,925 25,071
Segment Information
Revenues from external customers (Unaudited)
Amounts in thousands Three Months Ended
March 31,
2006 2005
----------- -----------
Agricultural $124,427 $89,459
Earthmoving/Construction 31,801 39,141
Consumer 26,349 7,529
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Total $182,577 $136,129
Titan International, Inc.
Consolidated Condensed Balance Sheets (Unaudited)
Amounts in thousands
March 31, December 31,
Assets 2006 2005
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Current assets:
Cash and cash equivalents $571 $592
Accounts receivable 96,326 47,112
Inventories 139,678 122,692
Deferred income taxes 14,521 20,141
Prepaid and other current assets 17,235 15,630
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Total current assets 268,331 206,167
Property, plant and equipment, net 137,167 140,382
Idled assets marketed for sale 17,224 18,267
Investment in Titan Europe Plc 53,403 48,467
Goodwill 11,702 11,702
Other assets 15,440 15,771
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Total assets $503,267 $440,756
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Liabilities & Stockholders' Equity
Current liabilities:
Short-term debt (including current portion of
long-term debt) $8,741 $11,995
Accounts payable 61,389 24,435
Other current liabilities 28,150 11,753
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Total current liabilities 98,280 48,183
Long-term debt 188,239 190,464
Deferred income taxes 15,309 13,581
Other long-term liabilities 20,171 20,715
Stockholders' equity 181,268 167,813
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Total liabilities & stockholders' equity $503,267 $440,756
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