Titan reports Q4, fiscal year losses

QUINCY, Ill. (March 15, 2017) — Titan International Inc. reported operating and net losses for the fourth quarter and fiscal year ended Dec. 31, but management is confident the company's financial ills have bottomed out based on signs of recovery in the fourth quarter and the first few months of 2017.

Titan's fiscal 2016 loss from operations was $21.3 million, or 1.7 percent of net sales, compared with a loss of $24.3 million in fiscal 2015. The net loss was more than halved to $36.1 million.

Sales were off 9.3 percent to $1.27 billion, although the company noted fourth quarter sales of $307.3 million were essentially unchanged from the 2015 fourth quarter.

Titan President and CEO Paul Reitz said Titan management continues "to be encouraged by the operating progress we have made" despite the decline of the firm's sales to $1.27 billion last year from the peak of $2.2 billion in 2013.

Mr. Reitz noted that Titan's gross profit increased nearly $15 million in the fourth quarter, improving the gross margin by almost 83 percent to 10.6 percent.

Titan Chairman Maurice Taylor Jr. based his optimism for a recovery on Titan's belief that demand for its LSW (low-sidewall) tires and wheels is growing in the agricultural sector and will accelerate throughout 2017.

"I believe in 2017, Titan will accelerate the positive growth for LSW tires and wheels now that farmers are more aware of the increase in their yield per acre as a result of less soil compaction from LSW tires," Mr. Taylor said.

In addition, Titan is focused on expanding the acceptance of the LSW concept in the earthmoving/construction segment.

Titan is confident enough in this stance that the company is investing in adding capacity for LSW tires and wheels at its plant in Sao Paulo, Brazil, and will invest undisclosed resources in both South America and Russia in promoting the product range in those markets.

Titan also disclosed in the earnings report that it no longer is pursuing the sale of its Italtractor ITM S.p.A. undercarriage business, has begun leasing space at its unused Brownsville, Texas, facility and expects its Titan Tire Reclamation Corp. unit in the Canadian tar sands to contribute to earnings this year

Titan at one time believed divesting these assets could be worth as much as $250 million on the open market.

Now, however, Titan has determined, with the recommendation of Goldman Sachs, that selling ITM was not in the best interest of Titan and its shareholders and instead will "continue to evaluate other possible strategic alternatives relating to ITM that would be beneficial to Titan's shareholders."

Leasing space at the 750,000-sq.-ft.Brownsville facility — originally intended to be tire plant but which has sat empty for 16 years — is generating about $2 million annually, Titan said.

Titan also said it is engaged in negotiations with the United Steelworkers (USW) locals at its three U.S. plants on a new contract to replace one that expired during the fourth quarter last year.

As for 2017, Mr. Reitz acknowledged the financial community's concerns about Titan's liquidity and said, "With our 2016 operating performance, as well as the recent convertible debt conversion and maturity, we believe that much of that concern has been addressed. Notwithstanding the improvement in our numbers, we realize we have more to do."