Titan International Inc. posted net income of $44.3 million on net sales of nearly $460 million for its second quarter ended June 30, 2012. That compares to income of $25.5 million on sales of $404.4 million for the same period last year.
Second-quarter sales and operating income were records for Titan. Operating income was up 82%, from $44.4 million in 2Q 2011 to $81 in 2Q 2012. The company's income-to-sales ratio for the quarter was 9.6%.
The company says the higher sales levels were the result of increased demand in the company’s agricultural and earthmoving/construction segments combined with price/mix improvements.
(Goodyear Latin American Truck Supply agreement termination income of $26.1 million was recorded in the second quarter due to the cancellation of the supply agreement for non-farm tire products between the parties. In May 2012, the company and Goodyear entered into a new agreement under which Titan sells these products directly to third-party customers and pays a royalty to Goodyear. Titan says it is "no longer obligated to sell the products at below market prices.")
“The second quarter was a record for Titan, but it could have been even bigger,” says Chairman and CEO Maurice Taylor. “The order books are very strong."
'Hidden value'
"The tire group was affected by the record heat wave and it impacted our efficiency," says Taylor. "The Bryan (Ohio) plant was also affected by the equipment being added to the plant for the capacity expansion. The work has been in process since the beginning of the year and will continue through the remaining of 2012. This capacity expansion should increase our output each quarter through the first quarter of 2013.
"Our balance sheet is in good shape, with working capital equal to approximately $480 million and cash debt of $208 million, considering the $112 million convertible notes have a conversion price of $10.75. This is the hidden value of the company to our shareholders in addition to today’s value of the plants and equipment.”
Taylor says he has been visiting farms in North Dakota, Minnesota, Illinois, Michigan and Ohio, and believes the net income to farmers will be equal or greater than the record last year.
"If you ask a farmer the status of their corn crop, they will tell you it is hurting. They were expecting 185 to 200 bushels per acre, but they will not get that this year. They may get 145 to 150 if this heat continues with no rain.
"If you put the numbers to this at $5 a bushel for corn, that is $1,000 per acre on yields of 200, but at $8 a bushel at 150, that’s $1,200 per acre. It is the same with soy beans. Those farmers with irrigation systems will be at record levels. Yes, there will be farmers who will lose their total crop, but they most likely have crop insurance."
For the first six months of the year, the company's net income was up 254% to $79.4 million, while its net sales were up 34.6%, to $922.3 million.
Operating income for the first six months was $139.6 million, compared to $71.3 million in 2011.
