Titan International, Inc.2701 Spruce Street
Quincy, IL 62301
INVESTOR CONTACT:
Todd Shoot
Treasurer & VP, Investor Relations
217-221-4416
FOR IMMEDIATE RELEASE
Thursday, March 7, 2019
Titan International, Inc. Reports 2018 Results
Full-Year 2018 Highlights
| • | Net sales increased $133.5 million, or 9.1% YOY, and net sales increased 11.3% |
on a constant currency basis
| • | Gross profit increased $38.0 million, a 23.7% YOY improvement |
| • | SG&A expenses were $134.8 million (8.4% of net sales), a $15.9 million YOY decrease |
| • | Operating income was $42.2 million, a $53.4 million YOY improvement |
| • | EPS was $0.06, with adjusted EPS of $0.27, a $1.18 YOY improvement on an EPS basis and a $0.76 YOY improvement on an adjusted EPS basis |
| • | Adjusted EBITDA was $119.1 million, a 64% YOY improvement |
Quarter Highlights
| • | Net sales decreased 3.4% YOY, while net sales increased 2.1% on a constant currency basis |
| • | Gross profit increased $0.7 million, a 2.0% YOY improvement |
| • | SG&A expenses were $32.5 million (8.9% of net sales), a $2.6 million YOY decrease |
| • | Operating loss was $0.9 million, a $3.4 million YOY improvement |
| • | Adjusted EBITDA was $14.8 million |
QUINCY, ILLINOIS, March 7, 2019 - Titan International, Inc. (NYSE: TWI), a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products, today reported results for the fourth quarter and year ended December 31, 2018.
Net sales for the full year of 2018 were $1.60 billion, representing an increase of 9.1 percent when compared to net sales of $1.47 billion in 2017. Net sales increased 11.3 percent on a constant currency basis. Net income applicable to common shareholders for the full year 2018 was $3.9 million, equal to $0.06 per basic and diluted share, compared to a loss of $66.4 million, equal to $(1.12) per basic and diluted share, for 2017. The full year 2018 adjusted net income attributable to Titan was $16.1 million, equal to $0.27 per basic and diluted share, compared to a loss of $28.9 million, equal to $(0.49) per basic and diluted share, in the
comparable prior year period. A reconciliation of adjusted net income (loss) attributable to Titan to net income (loss) applicable to common shareholders can be found at the end of this release.
“When we take a step back and review the progress that Titan has made over the past couple years, we believe it’s a really good story that we’re proud of working hard to have accomplished,” stated Paul Reitz, President and Chief Executive Officer. “This is evidenced in our 2018 net sales that came in above $1.6 billion with adjusted EBITDA of more than $119 million. In 2016, we ended the year under $1.3 billion in net sales and just over $47 million in adjusted EBITDA. Those figures represent top-line, organic growth of more than 26 percent along with an adjusted EBITDA increase of over two-and-one-half times over this two-year period. We have said it before, but it’s worth repeating, the operational improvements and strategic investments in our existing business during this period and prior, are reflected in these improved financial results.
“For Titan and many other companies, there were many factors in 2018 impacting our business and creating an often volatile operating environment. These factors include the much discussed tariffs standoff, steel prices that reached the highest level in more than a decade and sluggish commodity prices continuing to impact farmers. Despite those challenges, in 2018 we were able to achieve double-digit revenue growth on a constant currency basis and we successfully leveraged that growth to drive a return to positive bottom-line earnings for the first time since 2013. Throughout the year our earthmoving/construction segment, particularly the ITM undercarriage business, led the way with full-year segment growth of 22 percent while also showing strong growth in margins and EBITDA.
“We did a good job in managing our business in 2018 and performed well compared to the financial outlook we previously provided. Net sales grew 9 percent during the year and would have been up over 11 percent excluding negative currency impacts, well within our expectations of 9 to 12 percent growth. Our SGARD expenses came in better than the outlook at slightly more than 9 percent of net sales, beating the low end of the target of 10 percent by more than $14 million. EBITDA was $107.9 million, reflecting a 98 percent improvement over 2017, and was within our outlook of an 80 to 100 percent increase over the previous year. Adjusted EBITDA was $119.1 million, which reflected a 64 percent increase when compared to the previous year. Gross profit improved 24 percent when compared to 2017, which was slightly under the lower end of the expected improvement range missing by just over $2 million, but still represented more than 28 percent incremental gross margin in a volatile operating environment."
“It was disappointing that we didn’t achieve positive cash flow in 2018, despite the strong earnings growth, and that was directly attributable to increases in working capital, specifically growth in inventory," stated David Martin, Senior Vice President and Chief Financial Officer. “Earnings must be translated into cash flow in the business to continue to invest for profitable growth, and what we experienced in 2018 in working capital increases will not be the expectation moving forward. Our management team is focused on the strategies to manage working capital in a much stronger way. Specifically, we expect to strategically target increased inventory turnover in a number of areas of the business which should drive improved cash flow in 2019.”
Business Outlook & Strategic Evaluation
Paul Reitz commented further, “As we look to 2019, we believe that Titan is positioned for continued overall net sales growth in the range of 6 percent to 7.5 percent. Specifically, within our segments we anticipate net sales growing as follows: agricultural (4 - 6 percent), earthmoving/construction (8 - 9.5 percent) and consumer (2.5 - 4.5 percent). With the continued growth in revenue, we believe that gross margin will improve and finish the year within the range of 12.8 percent to 13.2 percent of net sales. We currently expect SGARD
expenses of approximately $150 million. These targets are expected to yield EBITDA ranging from $124 million to $134 million excluding currency impacts. We currently foresee continued investments in capital expenditures of between $40 million to $50 million in 2019.
“We recently announced that we are evaluating strategic alternatives with respect to ITM, our undercarriage business. Titan’s Board of Directors has engaged advisors to assist us in carrying out this evaluation with the goal of maximizing value for our stakeholders. These alternatives, among others, includes a public listing within Europe. ITM’s financial performance has improved significantly since we last formally considered selling the business in 2016, and, as a result, we believe ITM's overall value has increased.”
Summary of Operations
Net sales for the fourth quarter ended December 31, 2018, were $363.4 million, a decrease of 3.4 percent from $376.0 million in the comparable prior year period, driven by decreased net sales in the agricultural and consumer segments, offset by increases in the earthmoving/construction segment. Overall net sales volume was essentially flat compared to the same quarter a year ago, while favorable changes in price/mix positively impacted net sales by 2.2 percent. Unfavorable currency translation negatively impacted net sales by 5.4 percent, particularly in Latin America.
Net sales for the year ended December 31, 2018, were $1.60 billion, compared to $1.47 billion in the comparable prior year period, an increase of 9.1 percent, primarily resulting from an increase in net sales volume in all segments. The increase reflects general market improvements in the agricultural and construction sectors, coupled with market share increases, particularly in the undercarriage mining sector during 2018. Overall net sales volume increased 7.7 percent. Favorable changes in price/mix contributed a 3.6 percent increase in net sales, partially offset by unfavorable currency translation which decreased net sales by 2.2 percent.
Gross profit for the fourth quarter ended December 31, 2018, was $36.7 million, compared to $36.0 million in the comparable prior year period. Gross margin was 10.1 percent of net sales for the latest quarter, compared to 9.6 percent of net sales in the comparable prior year period. During the fourth quarter of 2017, the Company recorded an asset impairment of $9.9 million related to a fire at one of its subsidiaries. Excluding the asset impairment, gross profit for the fourth quarter of 2017 would have been $45.9 million, or 12.2 percent of net sales. The lower gross profit margin in the fourth quarter of 2018, relative to the comparable quarter in 2017 excluding the asset impairment, related primarily to lower aftermarket sales in North America which carry stronger gross margins.
Gross profit for the year ended December 31, 2018, was $198.3 million compared to $160.3 million in the comparable prior year period. Gross margin was 12.4 percent of net sales for the year ended 2018, compared to 10.9 percent of net sales in the comparable prior year period. Excluding the asset impairment, gross profit for 2017 would have been $170.2 million, or 11.6% of net sales. The increase in gross profit was driven by increased sales volume and production efficiencies, partially offset by higher material costs.
Selling, general and administrative (SG&A) expenses for the fourth quarter of 2018 were $32.5 million, compared to $35.1 million for the comparable prior year period. As a percentage of net sales, SG&A was 8.9 percent, compared to 9.3 percent for the comparable prior year period.
SG&A expenses for the year ended December 31, 2018, were $134.8 million, compared to $150.7 million for the comparable prior year period. As a percentage of net sales, SG&A was 8.4 percent, compared to 10.3
percent for the comparable prior year period. The decrease in SG&A expenses was driven by $7.3 million in lower legal fees in 2018 and $6.5 million related to a 2017 non-recurring legal contingent liability.
For the fourth quarter of 2018, research and development (R&D) expenses were $2.9 million, or 0.8 percent of net sales, compared to $2.4 million, or 0.6 percent of net sales, for the comparable prior year period. For the year ended December 31, 2018, R&D expenses were $11.1 million, or 0.7 percent of net sales, compared to $10.3 million, or 0.7 percent of net sales, for the comparable prior year period. The increase in R&D expenses were primarily attributable to higher amortization expense for product and technology investments made in 2018.
Royalty expenses for the fourth quarter of 2018 were $2.2 million, or 0.6 percent of net sales, compared to $2.7 million, or 0.7 percent of net sales, for the fourth quarter of 2017. Royalty expenses for the year ended December 31, 2018, were $10.1 million, or 0.6 percent of net sales, compared to $10.5 million, or 0.7 percent of net sales, for the comparable prior year period.
Loss from operations for the fourth quarter of 2018 was $0.9 million, or (0.3) percent of net sales, compared to a loss of $4.3 million, or (1.1) percent of net sales, for the fourth quarter of 2017. Income from operations for the year ended December 31, 2018, was $42.2 million, or 2.6 percent of net sales, compared to a loss from operations of $11.2 million, or (0.8) percent of net sales, for the year ended 2017.
For the fourth quarter of 2018, interest expense was $7.7 million, compared to $7.7 million in the comparable prior year period. For the year ended December 31, 2018, interest expense was $30.5 million, compared to $30.2 million in the comparable prior year period.
Foreign exchange loss was $4.0 million in the fourth quarter of 2018, compared to a loss of $2.0 million for the fourth quarter of 2017. Foreign exchange loss was $11.2 million for the year ended of December 31, 2018, compared to a loss of $2.0 million in the comparable period in 2017. Latin American, Australian, Canadian and Russian currencies all experienced significant fluctuations in 2018 which drove the increase in foreign currency loss.
Other income was $1.5 million in the fourth quarter of 2018, compared to $2.1 million in the same quarter of 2017. Other income was $19.2 million for the year ended December 31, 2018, compared to $9.1 million in 2017. The increase in 2018 was primarily attributable to non-recurring legal settlements of $9.9 million.
Income tax expense of $3.0 million was recorded for the fourth quarter of 2018, compared to a $5.2 million expense in the comparable prior year period. Income tax expense of $6.8 million was recorded for the year ended December 31, 2018, compared to a $11.2 million expense in the prior year.
The fourth quarter 2018 net loss applicable to common shareholders was $13.4 million, equal to $(0.22) per basic and diluted share, compared to a loss of $32.7 million, equal to $(0.55) per basic and diluted share, in the comparable prior year period. Net income applicable to common shareholders for the year ended 2018 was $3.9 million, equal to $0.06 per basic and diluted share, compared to a loss of $66.4 million, equal to $(1.12) per basic and diluted share, in the prior year.
The fourth quarter 2018 adjusted net income attributable to Titan was $12.3 million, equal to $(0.21) per basic and diluted share, compared to a loss of $5.7 million, equal to $(0.10) per basic and diluted share, in the comparable prior year period. Adjusted net income for the year ended December 31, 2018, attributable to Titan was $16.1 million, equal to $0.27 per basic and diluted share, compared to a loss of $28.9 million, equal to $(0.49) per basic and diluted share, in the comparable prior year period. The Company utilizes
adjusted net income (loss) attributable to Titan, a non-GAAP financial measure, as a means to measure its operating performance. A reconciliation of adjusted net income (loss) attributable to Titan to net income (loss) applicable to common shareholders can be found at the end of this release.
EBITDA was $10.8 million for the fourth quarter of 2018, compared to $10.2 million in the comparable prior year period. EBITDA was $107.9 million for the year ended December 31, 2018, compared to $54.4 million in the comparable prior year period, which was primarily attributable to the business growth discussed above coupled with the absence of adjustments incurred in 2017.
Adjusted EBITDA was $14.8 million for the fourth quarter of 2018, compared to $22.1 million in the prior year. Adjusted EBITDA was $119.1 million for the year ended December 31, 2018, compared to $72.8 million in the prior year. The Company utilizes EBITDA and adjusted EBITDA, non-GAAP financial measures, as a means to measure its operating performance. A reconciliation of net income (loss) to EBITDA and adjusted EBITDA can be found at the end of this release.
Financial Condition
Net cash used for operations for the year ended December 31, 2018, was $36.2 million, compared to $1.3 million for prior year. While net income has improved in the current year, net sales growth required significant additional working capital to meet ongoing demand for the Company's products. Capital expenditures were $39.0 million for the year ended December 31, 2018, compared to $32.6 million for the prior year.
The Company ended the year ended December 31, 2018 with total cash and cash equivalents of $81.7 million. Long-term debt at December 31, 2018, was $409.6 million, compared to $407.2 million at December 31, 2017. Short-term debt was $51.9 million at December 31, 2018, compared to $43.7 million at December 31, 2017. Net debt (total debt less cash and cash equivalents) was $379.8 million at December 31, 2018, compared to $307.3 million at December 31, 2017, as cash decreased during 2018 due to the previously mentioned growth requiring additional working capital.
Teleconference and Webcast
Titan will be hosting a teleconference and webcast to discuss the fourth quarter and 2018 full-year financial results on Thursday, March 7, 2019, at 9 a.m. Eastern Time.
The real-time, listen-only webcast can be accessed on our website at www.titan-intl.com within the “Investor Relations” page under the “News & Events” menu (https://ir.titan-intl.com/news-and-events/events/default.aspx). Listeners should access the website at least 15 minutes prior to the live event to download and install any necessary audio software.
A webcast replay of the teleconference will be available on our website (https://ir.titan-intl.com/news-and-events/events/default.aspx) soon after the live event.
In order to participate in the real-time teleconference with live audio Q&A, participants in the U.S. should dial (888) 347-5307, participants in Canada should dial (855) 669-9657, and other international callers should dial (412) 902-4283.
Safe Harbor Statement
This press release contains forward-looking statements. These forward-looking statements are covered by the "Safe Harbor for Forward-Looking Statements" provided by the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “plan,” “would,” “could,” “potential,” “may,” “will,” and other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, these assumptions are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond Titan International, Inc.'s control. As a result, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors including, but not limited to, whether the Company’s process in evaluating its strategic alternatives with respect to Italtractor ITM S.p.A. ("ITM"), one of the Company's subsidiaries that designs and produces steel track and undercarriages for the construction, mining and agricultural markets, will result in any transaction or other action with respect to ITM or that any transaction or other action will be consummated; risks relating to the exercise by OEP 11 COÖPERATIEF U.A., an affiliate of One Equity Partners, one of the three shareholders of Voltyre-Prom, of the settlement put option with respect to its holdings in Voltyre-Prom, pursuant to the Voltyre-Prom Shareholders' Agreement; the effect of a recession on the Company and its customers and suppliers; changes in the Company’s end-user markets into which the Company sells its products as a result of world economic or regulatory influences or otherwise; changes in the marketplace, including new products and pricing changes by the Company’s competitors; unfavorable outcomes of legal proceedings; availability and price of raw materials; levels of operating efficiencies; the effects of the Company's indebtedness and its compliance with the terms thereof; the impact of any exercise of the settlement put option relating to the Company's redeemable non-controlling interest in Voltyre-Prom; actions of domestic and foreign governments, including the imposition of additional tariffs; geopolitical and economic uncertainties relating to the countries in which the Company operates or does business; risks associated with acquisitions, including difficulty in integrating operations and personnel, disruption of ongoing business, and increased expenses; fluctuations in currency translations; risks associated with environmental laws and regulations; risks relating to financial reporting, internal controls, tax accounting, and information systems; and the other risks and factors detailed in the Company’s periodic reports filed with the Securities and Exchange Commission, including the disclosures under "Risk Factors" in those reports. These forward-looking statements are made only as of the date hereof. 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, whether as a result of new information, changed circumstances or future events, or for any other reason.
About Titan
Titan International, Inc. (NYSE: TWI) is a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products. Headquartered in Quincy, Illinois, the Company globally produces a broad range of products to meet the specifications of original equipment manufacturers (OEMs) and aftermarket customers in the agricultural, earthmoving/construction, and consumer markets. For more information, visit www.titan-intl.com.
Titan International, Inc.
Consolidated Statements of Operations
Amounts in thousands, except per share data
| Three months ended | Twelve months ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||
| Net sales | $ | 363,403 | $ | 376,034 | $ | 1,602,408 | $ | 1,468,922 | |||||||
| Cost of sales | 326,714 | 330,164 | 1,404,142 | 1,298,694 | |||||||||||
| Asset impairment | — | 9,917 | — | 9,917 | |||||||||||
| Gross profit | 36,689 | 35,953 | 198,266 | 160,311 | |||||||||||
| Selling, general and administrative expenses | 32,481 | 35,123 | 134,789 | 150,676 | |||||||||||
| Research and development expenses | 2,924 | 2,394 | 11,146 | 10,302 | |||||||||||
| Royalty expense | 2,209 | 2,745 | 10,087 | 10,484 | |||||||||||
| (Loss) income from operations | (925 | ) | (4,309 | ) | 42,244 | (11,151 | ) | ||||||||
| Interest expense | (7,670 | ) | (7,651 | ) | (30,456 | ) | (30,229 | ) | |||||||
| Loss on senior note repurchase | — | (18,646 | ) | — | (18,646 | ) | |||||||||
| Foreign exchange (loss) gain | (3,992 | ) | (2,006 | ) | (11,179 | ) | (1,958 | ) | |||||||
| Other income | 1,534 | 2,112 | 19,198 | 9,108 | |||||||||||
| (Loss) income before income taxes | (11,053 | ) | (30,500 | ) | 19,807 | (52,876 | ) | ||||||||
| Provision for income taxes | 3,024 | 5,239 | 6,762 | 11,203 | |||||||||||
| Net (loss) income | (14,077 | ) | (35,739 | ) | 13,045 | (64,079 | ) | ||||||||
| Net loss attributable to noncontrolling interests | (1,786 | ) | (5,461 | ) | (3,042 | ) | (4,037 | ) | |||||||
| Net (loss) income attributable to Titan | (12,291 | ) | (30,278 | ) | 16,087 | (60,042 | ) | ||||||||
| Redemption value adjustment | (1,141 | ) | (2,412 | ) | (12,207 | ) | (6,393 | ) | |||||||
| Net (loss) income applicable to common shareholders | $ | (13,432 | ) | $ | (32,690 | ) | $ | 3,880 | $ | (66,435 | ) | ||||
| Earnings per common share: | |||||||||||||||
| Basic | $ | (.22 | ) | $ | (.55 | ) | $ | .06 | $ | (1.12 | ) | ||||
| Diluted | $ | (.22 | ) | $ | (.55 | ) | $ | .06 | $ | (1.12 | ) | ||||
| Average common shares and equivalents outstanding: | |||||||||||||||
| Basic | 59,917 | 59,618 | 59,820 | 59,340 | |||||||||||
| Diluted | 59,917 | 59,618 | 59,909 | 59,340 | |||||||||||
| Dividends declared per common share: | $ | .005 | $ | .005 | $ | .02 | $ | .02 | |||||||
Segment Information
| Amounts in thousands | Three months ended | Twelve months ended | |||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||
| Net sales | |||||||||||||||
| Agricultural | $ | 149,864 | $ | 165,903 | $ | 694,268 | $ | 690,238 | |||||||
| Earthmoving/construction | 173,676 | 165,864 | 741,733 | 608,894 | |||||||||||
| Consumer | 39,863 | 44,267 | 166,407 | 169,790 | |||||||||||
| $ | 363,403 | $ | 376,034 | $ | 1,602,408 | $ | 1,468,922 | ||||||||
Titan International, Inc.
Consolidated Balance Sheets
Amounts in thousands, except share data
| December 31, 2018 | December 31, 2017 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 81,685 | $ | 143,570 | |||
| Accounts receivable (net of allowance of $3,404 and $2,974, respectively) | 241,832 | 226,703 | |||||
| Inventories | 395,735 | 339,836 | |||||
| Prepaid and other current assets | 60,229 | 73,084 | |||||
| Total current assets | 779,481 | 783,193 | |||||
| Property, plant and equipment, net | 384,872 | 421,248 | |||||
| Deferred income taxes | 2,874 | 3,779 | |||||
| Other long-term assets | 84,029 | 81,892 | |||||
| Total assets | $ | 1,251,256 | $ | 1,290,112 | |||
| Liabilities | |||||||
| Current liabilities | |||||||
| Short-term debt | $ | 51,885 | $ | 43,651 | |||
| Accounts payable | 212,129 | 195,497 | |||||
| Other current liabilities | 111,054 | 133,774 | |||||
| Total current liabilities | 375,068 | 372,922 | |||||
| Long-term debt | 409,572 | 407,171 | |||||
| Deferred income taxes | 9,416 | 13,545 | |||||
| Other long-term liabilities | 67,290 | 73,197 | |||||
| Total liabilities | 861,346 | 866,835 | |||||
| Redeemable noncontrolling interest | 119,813 | 113,193 | |||||
| Equity | |||||||
| Titan stockholders' equity | |||||||
| Common stock ($0.0001 par, 120,000,000 shares authorized, 60,715,356 issued at December 2018 and December 2017) | — | — | |||||
| Additional paid-in capital | 519,498 | 531,708 | |||||
| Retained deficit | (29,048 | ) | (44,022 | ) | |||
| Treasury stock (at cost, 798,383 shares at December 2018 and 914,797 shares at December 2017) | (7,831 | ) | (8,606 | ) | |||
| Stock reserved for deferred compensation | — | (1,075 | ) | ||||
| Accumulated other comprehensive loss | (203,571 | ) | (157,076 | ) | |||
| Total Titan stockholders’ equity | 279,048 | 320,929 | |||||
| Noncontrolling interests | (8,951 | ) | (10,845 | ) | |||
| Total equity | 270,097 | 310,084 | |||||
| Total liabilities and equity | $ | 1,251,256 | $ | 1,290,112 | |||
Titan International, Inc.
Consolidated Statements of Cash Flows
All amounts in thousands
| Twelve months ended | |||||||
| December 31, | |||||||
| Cash flows from operating activities: | 2018 | 2017 | |||||
| Net income (loss) | $ | 13,045 | $ | (64,079 | ) | ||
| Adjustments to reconcile net income (loss) to net cash used for operating activities: | |||||||
| Depreciation and amortization | 57,618 | 58,444 | |||||
| Asset impairment | — | 9,917 | |||||
| Deferred income tax provision | (2,291 | ) | 785 | ||||
| Loss on note repurchase | — | 18,646 | |||||
| Stock-based compensation | 1,130 | 1,539 | |||||
| Issuance of treasury stock under 401(k) plan | 561 | 540 | |||||
| Foreign currency translation loss | 3,149 | 5,258 | |||||
| (Increase) decrease in assets: | |||||||
| Accounts receivable | (36,092 | ) | (38,478 | ) | |||
| Inventories | (77,919 | ) | (55,562 | ) | |||
| Prepaid and other current assets | (5,377 | ) | 9,277 | ||||
| Other long-term assets | (13,054 | ) | 15,134 | ||||
| Increase (decrease) in liabilities: | |||||||
| Accounts payable | 29,364 | 37,584 | |||||
| Other current liabilities | (2,866 | ) | 9,522 | ||||
| Other liabilities | (3,444 | ) | (9,816 | ) | |||
| Net cash used for operating activities | (36,176 | ) | (1,289 | ) | |||
| Cash flows from investing activities: | |||||||
| Capital expenditures | (39,000 | ) | (32,626 | ) | |||
| Certificates of deposit | — | 50,000 | |||||
| Other | 2,069 | 993 | |||||
| Net cash (used for) provided by investing activities | (36,931 | ) | 18,367 | ||||
| Cash flows from financing activities: | |||||||
| Proceeds from borrowings | 57,294 | 447,639 | |||||
| Repurchase of senior secured notes | — | (415,395 | ) | ||||
| Payment on debt | (38,557 | ) | (55,160 | ) | |||
| Dividends paid | (1,201 | ) | (1,167 | ) | |||
| Net cash provided by (used for) financing activities | 17,536 | (24,083 | ) | ||||
| Effect of exchange rate changes on cash | (6,314 | ) | 2,748 | ||||
| Net decrease in cash and cash equivalents | (61,885 | ) | (4,257 | ) | |||
| Cash and cash equivalents, beginning of year | 143,570 | 147,827 | |||||
| Cash and cash equivalents, end of year | $ | 81,685 | $ | 143,570 | |||
| Supplemental information: | |||||||
| Interest paid | $ | 30,800 | $ | 38,164 | |||
| Income taxes paid, net of refunds received | $ | 12,435 | $ | 4,594 | |||
| Non-cash information: | |||||||
| Deferred compensation obligation paid through the transfer of trust assets | $ | 14,268 | $ | — | |||
| Issuance of common stock for convertible debt payment | $ | — | $ | 58,460 | |||
Titan International, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)
Amounts in thousands, except earnings per share data
The Company reports its financial results in accordance with generally accepted accounting principles in the United States (GAAP). These supplemental schedules provide a quantitative reconciliation between each of adjusted net income (loss) attributable to Titan, EBITDA, and adjusted EBITDA, each of which is a non-GAAP financial measure and the most directly comparable financial measures calculated and reported in accordance with GAAP.
We present adjusted net income (loss) attributable to Titan, EBITDA, and adjusted EBITDA as we believe that they assist investors with analyzing our business results. In addition, management reviews each of these non-GAAP financial measures in order to evaluate the financial performance of each of our segments, as well as the Company’s performance as a whole. We believe that the presentation of these non‑GAAP financial measures will permit investors to assess the performance of the Company on the same basis as management.
Adjusted net income (loss) attributable to Titan, EBITDA, and adjusted EBITDA should be considered supplemental to, not a substitute for, the financial measures calculated in accordance with GAAP. One should not consider these measures in isolation or as a substitute for our results reported under GAAP. These measures have limitations in that they do not reflect all of the costs associated with the operations of our businesses as determined in accordance with GAAP. In addition, these measures may be calculated differently than non-GAAP financial measures reported by other companies, limiting their usefulness as comparative measures. We attempt to compensate for these limitations by analyzing results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to non-GAAP results.
The table below provides a reconciliation of adjusted net income (loss) attributable to Titan to net (loss) income applicable to common shareholders, the most directly comparable GAAP financial measure, for each of the three and twelve month periods ended December 31, 2018 and 2017.
| Three months ended | Twelve months ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net (loss) income applicable to common shareholders | $ | (13,432 | ) | $ | (32,690 | ) | $ | 3,880 | $ | (66,435 | ) | ||||
| Remove redemption value adjustment | (1,141 | ) | (2,412 | ) | (12,207 | ) | (6,393 | ) | |||||||
| Adjustments: | |||||||||||||||
| Contingency accrual | — | — | — | 6,500 | |||||||||||
| Debt termination expense | — | 18,646 | — | 18,646 | |||||||||||
| Asset impairment, net of noncontrolling interests portion | — | 5,950 | — | 5,950 | |||||||||||
| Adjusted net (loss) income attributable to Titan | $ | (12,291 | ) | $ | (5,682 | ) | $ | 16,087 | $ | (28,946 | ) | ||||
| Adjusted earnings per common share: | |||||||||||||||
| Basic | $ | (0.21 | ) | $ | (0.10 | ) | $ | 0.27 | $ | (0.49 | ) | ||||
| Diluted | $ | (0.21 | ) | $ | (0.10 | ) | $ | 0.27 | $ | (0.49 | ) | ||||
| Average common shares and equivalents outstanding: | |||||||||||||||
| Basic | 59,917 | 59,618 | 59,820 | 59,340 | |||||||||||
| Diluted | 59,917 | 59,618 | 59,909 | 59,340 | |||||||||||
The table below provides a reconciliation of net income (loss) to EBITDA and adjusted EBITDA, non-GAAP financial measures, for the three and twelve-month periods ended December 31, 2018 and 2017.
| Three months ended | Twelve months ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net (loss) income | $ | (14,077 | ) | $ | (35,739 | ) | $ | 13,045 | $ | (64,079 | ) | ||||
| Adjustments: | |||||||||||||||
| Provision for income taxes | 3,024 | 5,239 | 6,762 | 11,203 | |||||||||||
| Interest expense | 7,670 | 7,651 | 30,456 | 30,229 | |||||||||||
| Debt termination expense | — | 18,646 | — | 18,646 | |||||||||||
| Depreciation and amortization | 14,223 | 14,415 | 57,618 | 58,444 | |||||||||||
| EBITDA | $ | 10,840 | $ | 10,212 | $ | 107,881 | $ | 54,443 | |||||||
| Adjustments: | |||||||||||||||
| Contingency accrual | — | — | — | 6,500 | |||||||||||
| Foreign exchange loss | 3,992 | 2,006 | 11,179 | 1,958 | |||||||||||
| Asset impairment | — | 9,917 | — | 9,917 | |||||||||||
| Adjusted EBITDA | $ | 14,832 | $ | 22,135 | $ | 119,060 | $ | 72,818 | |||||||