Titan Reports 33% Higher Second Quarter Net Income
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Second quarter highlights:
-- Titan's net income result was 33 percent higher in the second quarter, up to $5.6 million, compared to $4.2 million of net income in the second quarter of 2005.
-- Basic earnings per share achieved a 12 percent increase to $.28 in the second quarter, as compared to $.25 in the second quarter of 2005.
-- Diluted earnings per share also improved to $.24 for the second quarter, as compared to $.23 in the second quarter of 2005.
-- Titan's stockholders' equity increased $6.4 million in the second quarter to $187.7 million at June 30, 2006, from $181.3 million equity balance at the end of first quarter 2006.
-- Titan announced on April 24, 2006, 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.
Recent developments:
It is anticipated that the United Steelworkers (USW) Local 890L of Bryan, Ohio, will vote on a new collective bargaining agreement with Titan Tire Corporation of Bryan on Saturday, July 29, 2006. As of July 27, 2006, CTNA, current owner of the OTR manufacturing facility, has agreed on substantially all of the terms of the Asset Purchase Agreement and related agreements with Titan, but under CTNA's existing labor agreement with USW Local 890L, an agreement must be reached between Titan and the union to close the transaction. The transaction is also subject to the consent of all shareholders of CTNA. If USW Local 890L ratifies the contract on Saturday, July 29, and CTNA obtains shareholder consent by July 31, Titan and CTNA will tentatively close the transaction on Monday, July 31, 2006.
Statement of Chief Executive Officer:
"Titan achieved another positive quarter," stated Titan Chairman and CEO Maurice Taylor Jr., "even with facing the strong head wind of an estimated five percent decrease in U.S. agricultural equipment demand and ever-higher raw material costs, especially in petroleum-based products. Titan continues to evaluate pricing in relation to these rising raw materials costs.
"In addition, our efforts with Continental Tire North America continue regarding the purchase of the off-the-road tire assets of the Bryan, Ohio, facility. Our goal is to finalize this transaction as soon as possible."
Financial overview:
Titan International, Inc.'s net sales of $175.2 million for the second quarter of 2006 were higher than the second quarter 2005 sales of $134.7 million. Net sales for the first half of 2006 were $357.8 million, up from the $270.8 million recorded in the first half of 2005. 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 second quarter of 2006 was $22.4 million, as compared to $22.5 million in the second quarter of 2005. Year-to-date gross profit was $53.6 million for 2006, as compared to $46.6 million for 2005.
Income before taxes for the second quarter of 2006 was $9.3 million, as compared to $3.8 million in 2005. Year-to-date income totaled $23.7 million in 2006, as compared to $16.2 million in 2005.
The company recorded income tax expense of $3.7 million and $9.5 million for the three and six months ended June 30, 2006, as compared to an income tax benefit of $0.4 million and income tax expense of $0.8 million for the three and six months ended June 30, 2005.
Net income was $5.6 million for the second quarter of 2006, compared to $4.2 million in second quarter 2005. Year-to-date, net income was $14.2 million in 2006 and $15.4 million year-to-date in 2005.
For second quarter 2006, basic earnings per share were $.28, compared to $.25 at June 30, 2005. Year-to-date basic earnings per share were $.72, compared to $.93 year-to-date 2005.
Diluted earnings per share were $.24 for the second quarter of 2006 compared to $.23 in 2005. Year-to-date diluted earnings per share were $.60 for 2006 and $.74 for 2005. The company's lower year-to-date diluted earnings per share resulted from the higher effective tax rate of 40 percent in 2006 versus 5 percent in 2005.
The company's stockholders' equity increased $19.9 million, or 12 percent, in the first half of 2006. Titan's equity balance reached $187.7 million at June 30, 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 July 28, 2006.
Negotiations with CTNA to purchase Bryan, Ohio, assets:
Titan Tire Corporation, a subsidiary of Titan International, Inc., announced on April 24, 2006, 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.
The asset purchase, if completed, will be 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.
It is anticipated that the United Steelworkers (USW) Local 890L of Bryan, Ohio, will vote on a new collective bargaining agreement with Titan Tire Corporation of Bryan on Saturday, July 29, 2006. As of July 27, 2006, CTNA, current owner of the OTR manufacturing facility, has agreed on substantially all of the terms of the Asset Purchase Agreement and related agreements with Titan, but under CTNA's existing labor agreement with USW Local 890L, an agreement must be reached between Titan and the union to close the transaction. The transaction is also subject to the consent of all shareholders of CTNA. If USW Local 890L ratifies the contract on Saturday, July 29, and CTNA obtains shareholder consent by July 31, Titan and CTNA will tentatively close the transaction on Monday, July 31, 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.
Titan International, Inc.
Consolidated Condensed Statements of Operations (Unaudited)
For the three and six months ended June 30, 2006 and 2005
Amounts in thousands except earnings per share data.
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $175,194 $134,709 $357,771 $270,838
Cost of sales 152,752 112,207 304,215 224,255
--------- --------- --------- ---------
Gross profit 22,442 22,502 53,556 46,583
Selling, general &
administrative expenses 8,589 8,228 19,954 16,838
Royalty expense 1,214 0 2,839 0
Idled assets marketed for sale
depreciation 904 1,334 1,820 2,680
--------- --------- --------- ---------
Income from operations 11,735 12,940 28,943 27,065
Interest expense (3,709) (2,353) (7,432) (4,942)
Noncash convertible debt
conversion charge 0 (7,225) 0 (7,225)
Other income 1,313 404 2,149 1,314
--------- --------- --------- ---------
Income before income taxes 9,339 3,766 23,660 16,212
Provision (benefit) for income
taxes 3,736 (434) 9,464 811
--------- --------- --------- ---------
Net income $5,603 $4,200 $14,196 $15,401
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Earnings per common share:
Basic $.28 $.25 $.72 $.93
Diluted .24 .23 .60 .74
Average common shares
outstanding:
Basic 19,695 16,900 19,639 16,628
Diluted 26,081 25,186 26,003 25,128
Segment Information
Revenues from external customers (Unaudited)
Amounts in thousands
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
--------- --------- --------- ---------
Agricultural $116,267 $90,819 $240,694 $180,278
Earthmoving/Construction 29,005 35,721 60,806 74,862
Consumer 29,922 8,169 56,271 15,698
--------- --------- --------- ---------
Total $175,194 $134,709 $357,771 $270,838
Titan International, Inc.
Consolidated Condensed Balance Sheets (Unaudited)
Amounts in thousands
June 30, December 31,
Assets 2006 2005
------------ ------------
Current assets:
Cash and cash equivalents $239 $592
Accounts receivable 98,231 47,112
Inventories 147,895 122,692
Deferred income taxes 11,604 20,141
Prepaid and other current assets 16,848 15,630
------------ ------------
Total current assets 274,817 206,167
Property, plant and equipment, net 133,989 140,382
Idled assets marketed for sale 16,121 18,267
Investment in Titan Europe Plc 52,177 48,467
Goodwill 11,702 11,702
Other assets 15,247 15,771
------------ ------------
Total assets $504,053 $440,756
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Liabilities & stockholders' equity
Current liabilities:
Short-term debt (including current portion
of long-term debt) $5,501 $11,995
Accounts payable 62,680 24,435
Other current liabilities 24,200 11,753
------------ ------------
Total current liabilities 92,381 48,183
Long-term debt 189,615 190,464
Deferred income taxes 14,880 13,581
Other long-term liabilities 19,468 20,715
Stockholders' equity 187,709 167,813
------------ ------------
Total liabilities & stockholders' equity $504,053 $440,756
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