Titan International, Inc.1525 Kautz Road, Suite 600
West Chicago, IL 60185
INVESTOR CONTACT:
Todd Shoot
SVP, Investor Relations & Treasurer
217-221-4416
FOR IMMEDIATE RELEASE
Thursday, July 29, 2021
Titan International, Inc. Reports Second Quarter 2021 Net Sales Up 53 Percent YoY
Highlights
•Net sales were $438.6 million, a $152.5 million (53.3%) YoY increase, the highest quarterly sales since 2014
•Gross margin was 14.0%, up from 10.4% in Q2 of the prior year
•Income from operations was $23.7 million, a $26.8 million YoY improvement, the strongest performance in more than eight years
•Adjusted EBITDA was $37.4 million as compared to $13.3 million in Q2 of the prior year, a $24 million YoY improvement
•First half net sales increased by $215 million YoY, or 35%, demonstrating capability to adjust quickly to meet market demands
QUINCY, ILLINOIS, July 29, 2021 - Titan International, Inc. (NYSE: TWI), a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products, today reported financial results for the second quarter ended June 30, 2021, highlighted by the strongest quarterly operating performance since 2013.
Paul Reitz, President and Chief Executive Officer commented “I am proud of how we continue to grow stronger as a Company and this is highlighted by our tremendous financial performance in the second quarter. Our sales increased by over 53 percent from last year and more importantly increased 9 percent from the first quarter this year as our adjusted EBITDA improved by more than $11 million sequentially to over $37 million this quarter. Despite the continuing supply chain and labor challenges, the Titan team persevered through the noise, and delivered impressive results in the second quarter. These results come after both strategic actions and significant efforts to reposition and transform Titan to achieve greater long-term success. Our end-markets currently are very buoyant, with strong fundamentals present for a sustained runway for elevated activity through this year and beyond.
“During the second quarter, both our Agriculture and Earthmoving/Construction segments experienced strong sales volume growth even beyond the first quarter higher levels. In Ag, dealer inventories remain tight, used and new equipment pricing continues to increase, and the overall large equipment fleet is aged. From our viewpoint, Ag growth continues to build momentum across the globe, with our customers starting to provide us with indications of continued strength into 2022. We see momentum in large Ag products where orders have increased throughout the quarter and should keep moving in a further positive direction as the large Ag equipment market is still roughly 25 percent below long-term averages. Farm commodity prices remain at historically elevated levels, which should also support sustained market activity for Titan for the foreseeable future. Our earthmoving and construction end-markets continue to look promising as our undercarriage business continues on a strong pace and early 2022 indications are healthy with increased infrastructure and ramping construction activities being the primary driving forces.
“We completed the refinancing of our $400 million bonds during the second quarter, extending the maturity to 2028. This move, along with the actions we had taken previously, position us well for the future by providing stability to manage the business. With our strong second quarter and first half results, Titan is set to deliver adjusted EBITDA north of $120 million this year, with opportunities for further growth next year. We have worked tirelessly to position ourselves well with our customers to support their increasing needs, and we believe we are in a unique situation at this time to capitalize on our reinvigorated strength to drive growth and increased financial results that our investors expect and deserve.”
Results of Operations
Net sales for the second quarter ended June 30, 2021, were $438.6 million, compared to $286.1 million in the comparable quarter of 2020, an increase of 53.3 percent driven by sales increases in the agricultural and earthmoving/construction segments. Overall net sales volume and product price and mix was up 33.2 percent and 17.2 percent, respectively, from the comparable prior year quarter. The increase in net sales was also favorably impacted by foreign currency translation, which positively impacted net sales by 2.9 percent or $8.2 million. On a constant currency basis, net sales for the second quarter 2021 would have been $430.5 million.
Net sales for the six months ended June 30, 2021 were $842.2 million, compared to $627.6 million in the comparable period of 2020, an increase of 34.2 percent driven by sales increases in the agricultural and earthmoving/construction segments. Overall net sales volume and product price and mix was up 23.3 percent and 10.5 percent, respectively, from the comparable period of 2020. On a constant currency basis, net sales for the first six months of 2021 would have been $839.7 million.
Overall net sales volume and product price and mix improved for both the three and six months ended June 30, 2021 as compared to the prior year periods due to market growth in the agricultural and earthmoving/construction segments. Pricing increases have been implemented because of rising raw material costs and other inflationary impacts in the markets, including freight. The contributing factors to the increase in demand were increased commodity prices, lower equipment inventory levels and pent up demand following the economic impacts of the COVID-19 pandemic during 2020. Lower sales volumes during the first half of 2020 were primarily caused by continued weakness in the commodity markets and the effect of the COVID-19 pandemic which caused significant uncertainty for customers in most geographies, most notably OEM customers.
Gross profit for the second quarter ended June 30, 2021 was $61.5 million, compared to $29.9 million in the comparable prior year period. Gross margin was 14.0 percent of net sales for the quarter, compared to 10.4 percent of net sales in the comparable prior year period. The increase in gross profit and margin was driven by the impact of increases in sales volume, as described previously, favorably impacting overhead absorption. In addition, cost reduction initiatives have been executed across global production facilities, in the last year, somewhat reflecting COVID-19 pandemic responses.
Gross profit for the six months ended June 30, 2021 was $114.7 million, or 13.6% of net sales, an increase of $57.6 million compared to $57.1 million, or 9.1% of net sales, for the six months ended June 30, 2020. The increase in gross profit and margin was driven by the impact of increases in sales volume and cost reduction initiatives executed across the business. Gross profit was negatively impacted by $2.8 million, as a result of abnormal natural gas price increases for our North American operations due to unprecedented unfavorable weather conditions experienced during a few weeks in February 2021 in large portions of the Southwest and Midwest regions of the United States.
Selling, general, administrative, research and development (SGARD) expenses for the second quarter of 2021 were $35.1 million, compared to $30.6 million for the comparable prior year period. As a percentage of net sales, SGARD was 8.0 percent, compared to 10.7 percent for the comparable prior year period. The increase in SGARD
was driven primarily by an increase in other employee-related costs on improved operating performance and growth in sales and unfavorable foreign currency impacts primarily in Europe and the United Kingdom.
SGARD for the six months ended June 30, 2021 were $71.7 million, or 8.5 percent of net sales, compared to $64.9 million, or 10.3 percent of net sales, for the six months ended June 30, 2020. The increase in SGARD was driven primarily by investments to improve our supply chain and logistics processes, an increase in other employee-related costs on improved operating performance and growth in sales and unfavorable foreign currency impacts primarily in Europe and the United Kingdom.
Income from operations for the second quarter of 2021 was $23.7 million, or 5.4 percent of net sales, compared to a loss of $3.1 million, or 1.1 percent of net sales, for the second quarter of 2020. Income from operations for the six months ended June 30, 2021 was $38.0 million, compared to loss from operations of $12.7 million for the six months ended June 30, 2020. The increase in income was primarily due to the higher sales and improvements in gross profit margins.
The Company refinanced it senior secured notes during the second quarter for 2021, and completed a call and redemption of all of its outstanding $400 million principal amount of Titan's 6.50 percent senior secured notes due 2023. As a result, the call premium plus a write-off of previously unamortized costs related to the senior secured notes of $16.0 million was recorded in the income statement for the three and six months ended June 30, 2021.
Foreign exchange loss was $0.8 million for the three months ended June 30, 2021, compared to income of $8.8 million for the three months ended June 30, 2020. Foreign exchange gain was $8.7 million for the six months ended June 30, 2021, compared to a loss of $8.4 million for the six months ended June 30, 2020. The foreign exchange loss experienced during the three months ended June 30, 2021 is the result of the unfavorable movements in foreign currency exchange rates in many of the geographies in which we conduct business as compared to the same period in 2020. The foreign exchange gain experienced during the six months ended June 30, 2021 was related to realized foreign currency gains associated with an ongoing initiative to rationalize Titan's legal entity structure and ongoing management of the intercompany capital structure as well as a favorable impact of the movement of foreign exchange rates. The foreign exchange loss experienced for the six months ended June 30, 2020 were the result of the translation of intercompany loans at certain foreign subsidiaries, which are denominated in local currencies rather than the reporting currency, which is the United States dollar. Since such loans are expected to be settled at some point in the future, these loans are adjusted each reporting period to reflect the current exchange rates. During the first quarter of 2020, we had settled a number of intercompany loans as part of a loan restructuring initiative with a resulting foreign exchange loss, which is reflected in the total foreign exchange loss recognized for the first quarter of 2020.
The second quarter of 2021 net loss applicable to common shareholders was a loss of $2.8 million, equal to a loss of $0.04 per basic and diluted share, compared to loss of $5.0 million, equal to a loss of $0.08 per basic and diluted share, in the comparable prior year period. Net income applicable to common shareholders for the six months ended June 30, 2021, was $10.8 million, equal to income per basic share of $0.18 and income per diluted share of $0.17, compared to a loss of $30.5 million, equal to a loss of $0.50 per basic and diluted share, in the comparable prior year period.
Non-GAAP Financial Measures
Adjusted net income applicable to common shareholders for the second quarter of 2021 was income of $14.0 million, equal to income per basic share of $0.23 and income per diluted share of $0.22, compared to a loss of $10.5 million, equal to a loss of $0.17 per basic and diluted share, in the second quarter of 2020. Adjusted net income applicable to common shareholders for the first six months of 2021 was $18.1 million, equal to income of $0.29 per basic and diluted share, compared to loss of $21.1 million, equal to a loss of $0.35 per basic and diluted share, for the first six months of 2020. The Company utilizes adjusted net income applicable to shareholders, which is a non-GAAP financial measure, as a means to measure its operating performance. A reconciliation of net income (loss)
applicable to common shareholders and adjusted net income (loss) applicable to common shareholders can be found at the end of this release.
Adjusted EBITDA was $37.4 million for the second quarter of 2021, compared to $13.3 million in the comparable prior year period. The Company utilizes EBITDA and adjusted EBITDA, which are 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.
Segment Information
Agricultural Segment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Amounts in thousands) | Three months ended | | Six months ended |
| June 30, | | June 30, |
| | 2021 | | 2020 | | % Increase/(Decrease) | | 2021 | | 2020 | | % Increase/(Decrease) |
| Net sales | $ | 231,504 | | | $ | 147,267 | | | 57.2 | % | | $ | 440,263 | | | $ | 320,206 | | | 37.5 | % |
| Gross profit | 35,291 | | | 15,613 | | | 126.0 | % | | 65,080 | | | 29,640 | | | 119.6 | % |
| Profit margin | 15.2 | % | | 10.6 | % | | 43.4 | % | | 14.8 | % | | 9.3 | % | | 59.1 | % |
| Income from operations | 20,789 | | | 6,992 | | | 197.3 | % | | 36,072 | | | 8,867 | | | 306.8 | % |
During the quarter ended June 30, 2021, net sales volume and product price and mix was up 35.8 percent and 21.8 percent, respectively, from the comparable prior year quarter due to demand in the market, reflective of improved farmer income, an aging large equipment fleet and lower equipment inventory levels within the equipment dealer channels. Pricing is primarily reflective of increases in raw material and other inflationary cost increases in the markets, including freight. The increase in gross profit and margin is primarily attributable to the impact of increases in sales volume as described previously and cost reduction initiatives executed across global production facilities following the COVID-19 pandemic.
During the six months ended June 30, 2021, net sales volume and product price and mix was up 24.5 percent and 15.5 percent, respectively, from the comparable prior year period due to increased demand in the market, reflective of the same impacts described for the second quarter of 2021 and 2020. Pricing is primarily reflective of rising raw material costs and other inflationary cost increases in the markets, including freight. The overall increase in net sales was partially offset by unfavorable currency translation, primarily in Latin America and Russia of 2.6 percent. The increase in gross profit and margin is primarily attributable to the favorable impact of increases in sales volume as described previously and cost reduction initiatives executed across global production facilities following the COVID-19 pandemic.
Earthmoving/Construction Segment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Amounts in thousands) | Three months ended | | Six months ended |
| June 30, | | June 30, |
| | 2021 | | 2020 | | % Increase/(Decrease) | | 2021 | | 2020 | | % Increase/(Decrease) |
| Net sales | $ | 176,715 | | | $ | 112,457 | | | 57.1 | % | | $ | 341,522 | | | $ | 249,379 | | | 36.9 | % |
| Gross profit | 22,328 | | | 11,614 | | | 92.3 | % | | 42,070 | | | 22,368 | | | 88.1 | % |
| Profit margin | 12.6 | % | | 10.3 | % | | 22.3 | % | | 12.3 | % | | 9.0 | % | | 36.7 | % |
| Income (loss) from operations | 7,462 | | | (1,902) | | | 492.3 | % | | 13,037 | | | (5,817) | | | 324.1 | % |
During the quarter ended June 30, 2021, the increase in earthmoving/construction net sales was driven by increased volume and product price and mix of 38.3 percent and 11.4% percent respectively, which was primarily due to improvements of global economic conditions and recovery in construction markets, including the return to normalized supply and demand levels in light of the COVID-19 pandemic. For the three months ended June 30, 2020, the direct impact of COVID-19 accounted for approximately $26 million of the sales decrease due to plant shutdowns and market disruptions in Europe, Asia and Latin America, which did not repeat during the second quarter of 2021. Net sales was also favorably impacted by foreign currency translation in Europe, which increased net sales by 7.5 percent. The increase in gross profit and margin was primarily driven by the increased sales volume and continued improved production efficiencies.
During the six months ended June 30, 2021, the increase in earthmoving/construction sales was driven by increased volume and product price and mix of 27.8 percent and 4.1 percent, respectively, which was primarily due to continued market recovery, as previously discussed. For the six months ended June 30, 2020, the direct impact of COVID-19 accounted for approximately $40 million of the sales decrease due to plant shutdowns and market disruptions in Europe, Asia and Latin America, which did not repeat during the first half of 2021. Net sales was also favorably impacted by foreign currency translation in Europe, which increased net sales by 5.1 percent. The increase in gross profit and margin was primarily driven by the increased sales volume and continued improved production efficiencies.
Consumer Segment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Amounts in thousands) | Three months ended | | Six months ended |
| June 30, | | June 30, |
| | 2021 | | 2020 | | % Increase/(Decrease) | | 2021 | | 2020 | | % Increase/(Decrease) |
| Net sales | $ | 30,420 | | | $ | 26,409 | | | 15.2 | % | | $ | 60,372 | | | $ | 58,048 | | | 4.0 | % |
| Gross profit | 3,851 | | | 2,640 | | | 45.9 | % | | 7,585 | | | 5,103 | | | 48.6 | % |
| Profit margin | 12.7 | % | | 10.0 | % | | 27.0 | % | | 12.6 | % | | 8.8 | % | | 43.2 | % |
| Income (loss) from operations | 1,881 | | | 1,425 | | | 32.0 | % | | 3,548 | | | 1,000 | | | 254.8 | % |
During the quarter ended June 30, 2021, the increase in net sales was driven by favorable product price and mix impact to net sales of 17.1 percent. The increase was partially offset by unfavorable volume impacts to net sales of 3.1 percent reflecting lower sales volume mainly in Europe, as production has been allocated toward the agriculture and construction markets, due to significant increases in demand. The increase in gross profit and margin was due primarily to increased product price and mix.
During the six months ended June 30, 2021, the increase in net sales was driven by favorable product price and mix impact to net sales of 10.0 percent. The increase was partially offset by unfavorable foreign currency and volume impacts to net sales of 3.7 percent and 2.3 percent, respectively. The unfavorable foreign currency impact was primarily due to devaluation of Latin American currencies against the US Dollar. The increase in gross profit and margin was due primarily to increased product price and mix.
Financial Condition
The Company ended the second quarter of 2021 with total cash and cash equivalents of $95.8 million, compared to $117.4 million at December 31, 2020. Long-term debt at June 30, 2021, was $452.7 million, compared to $433.6 million at December 31, 2020. Short-term debt was $34.3 million at June 30, 2021, compared to $31.1 million at December 31, 2020. Net debt (total debt less cash and cash equivalents) was $391.2 million at June 30, 2021, compared to $347.3 million at December 31, 2020. The increase in net debt during the first six months of 2021 was primarily due to managed investments in working capital to support the business growth as well as approximately $19 million paid in connection with the refinancing of the senior notes during the second quarter and a $9.2 million legal settlement paid in February.
Net cash used by operating activities for the first six months of 2021 was $17.5 million, compared to net cash provided by operations of $5.5 million for the comparable prior year period. Capital expenditures were $14.6 million for the first six months of 2021, compared to $8.4 million for the comparable prior year period. Capital expenditures during the first six months of 2021 and 2020 represent equipment replacement and improvements, along with new tools, dies and molds related to new product development. The overall capital outlay for 2021 is expected to increase as the Company seeks to enhance the Company's existing facilities and manufacturing capabilities and drive productivity gains following suppression of capital outlay in 2020 as a result of the COVID-19 pandemic and reduction of business activity.
About Titan
Titan International, Inc. (NYSE: TWI) is a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products. Headquartered in 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.
Teleconference and Webcast
Titan will be hosting a teleconference and webcast to discuss the second quarter financial results on Thursday, July 29, 2021, 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, the effect of the COVID-19 pandemic on our operations and financial performance; 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 domestic and world economic or regulatory influences or otherwise; changes in the marketplace, including new products and pricing changes by the Company’s competitors; the Company's ability to maintain satisfactory labor relations; unfavorable outcomes of legal proceedings; the Company's ability to comply with current or future regulations applicable to the Company's business and the industry in which it competes or any actions taken or orders issued by regulatory authorities; availability and price of raw materials; levels of operating efficiencies; the effects of the Company's indebtedness and its compliance with the terms thereof; changes in the interest rate environment and their effects on the Company's outstanding indebtedness; unfavorable product liability and warranty claims; 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; results of investments; the effects of potential processes to explore various strategic transactions, including potential dispositions; fluctuations in currency translations; risks associated with environmental laws and regulations; risks relating to our manufacturing facilities, including that any of our material facilities may become inoperable; 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, except as required by law.
Titan International, Inc.
Consolidated Statements of Operations
Amounts in thousands, except per share data
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| June 30, | | June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
| (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
| | | | | | | |
| Net sales | $ | 438,639 | | | $ | 286,133 | | | $ | 842,157 | | | $ | 627,633 | |
| Cost of sales | 377,169 | | | 255,259 | | | 727,422 | | | 566,936 | |
| Asset impairment | — | | | 1,007 | | | — | | | 3,586 | |
| Gross profit | 61,470 | | | 29,867 | | | 114,735 | | | 57,111 | |
| Selling, general and administrative expenses | 32,566 | | | 28,441 | | | 66,594 | | | 60,398 | |
| Research and development expenses | 2,528 | | | 2,132 | | | 5,081 | | | 4,542 | |
| Royalty expense | 2,657 | | | 2,395 | | | 5,110 | | | 4,875 | |
| | | | | | | |
| Income (loss) from operations | 23,719 | | | (3,101) | | | 37,950 | | | (12,704) | |
| Interest expense | (8,598) | | | (7,906) | | | (16,121) | | | (15,826) | |
| Loss on senior note repurchase | (16,020) | | | — | | | (16,020) | | | — | |
| Foreign exchange (loss) gain | (768) | | | 8,836 | | | 8,709 | | | (8,406) | |
| Other income (expense) | 1,232 | | | (492) | | | 864 | | | 6,829 | |
| (Loss) income before income taxes | (435) | | | (2,663) | | | 15,382 | | | (30,107) | |
| Provision for income taxes | 1,991 | | | 1,980 | | | 4,585 | | | 2,035 | |
| Net (loss) income | (2,426) | | | (4,643) | | | 10,797 | | | (32,142) | |
| Net income (loss) attributable to noncontrolling interests | 347 | | | 402 | | | (4) | | | (1,611) | |
| Net (loss) income attributable to Titan and applicable to common shareholders | (2,773) | | | (5,045) | | | 10,801 | | | (30,531) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| (Loss) income per common share: | | | | | | | |
| Basic | $ | (.04) | | | $ | (.08) | | | $ | .18 | | | $ | (.50) | |
| Diluted | $ | (.04) | | | $ | (.08) | | | $ | .17 | | | $ | (.50) | |
| Average common shares and equivalents outstanding: | | | | | | | |
| Basic | 61,717 | | | 60,602 | | | 61,592 | | | 60,481 | |
| Diluted | 61,717 | | | 60,602 | | | 62,480 | | | 60,481 | |
| | | | | | | |
| Dividends declared per common share: | $ | — | | | $ | — | | | $ | — | | | $ | .005 | |
Titan International, Inc.
Consolidated Balance Sheets
Amounts in thousands, except share data
| | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 |
| |
| Assets | | | |
| Current assets | | | |
| Cash and cash equivalents | $ | 95,804 | | | $ | 117,431 | |
| | | |
| Accounts receivable, net | 265,729 | | | 193,014 | |
| Inventories | 345,339 | | | 293,679 | |
| | | |
| Prepaid and other current assets | 65,368 | | | 54,475 | |
| Total current assets | 772,240 | | | 658,599 | |
| Property, plant and equipment, net | 310,210 | | | 319,854 | |
| Operating lease assets | 19,393 | | | 24,356 | |
| Deferred income taxes | 2,780 | | | 2,591 | |
| Other assets | 22,815 | | | 26,484 | |
| Total assets | $ | 1,127,438 | | | $ | 1,031,884 | |
| | | |
| Liabilities | | | |
| Current liabilities | | | |
| Short-term debt | $ | 34,296 | | | $ | 31,119 | |
| Accounts payable | 239,001 | | | 167,210 | |
| | | |
| Other current liabilities | 140,316 | | | 131,382 | |
| Total current liabilities | 413,613 | | | 329,711 | |
| Long-term debt | 452,730 | | | 433,584 | |
| Deferred income taxes | 4,278 | | | 3,895 | |
| Other long-term liabilities | 53,640 | | | 63,429 | |
| Total liabilities | 924,261 | | | 830,619 | |
| | | |
| Redeemable noncontrolling interest | 25,000 | | | 25,000 | |
| | | |
| Equity | | | |
| Titan shareholders' equity | | | |
| Common stock ($0.0001 par value, 120,000,000 shares authorized, 62,288,637 issued at June 30, 2021 and 61,466,593 at December 31, 2020) | — | | | — | |
| Additional paid-in capital | 534,697 | | | 532,742 | |
| Retained deficit | (124,224) | | | (135,025) | |
| Treasury stock (at cost, 80,876 shares at June 30, 2021 and 89,612 shares at December 31, 2020) | (1,121) | | | (1,199) | |
| | | |
| Accumulated other comprehensive loss | (227,802) | | | (217,254) | |
| Total Titan shareholders’ equity | 181,550 | | | 179,264 | |
| Noncontrolling interests | (3,373) | | | (2,999) | |
| Total equity | 178,177 | | | 176,265 | |
| Total liabilities and equity | $ | 1,127,438 | | | $ | 1,031,884 | |
Titan International, Inc.
Consolidated Statements of Cash Flows
All amounts in thousands
| | | | | | | | | | | |
| Six months ended June 30, |
| Cash flows from operating activities: | 2021 | | 2020 |
| Net income (loss) | $ | 10,797 | | | $ | (32,142) | |
| Adjustments to reconcile net income (loss) to net cash (used for) provided by operating activities: | | | |
| Depreciation and amortization | 24,918 | | | 27,119 | |
| Asset impairment | — | | | 3,586 | |
| Deferred income tax provision | 198 | | | (2,111) | |
| (Gain) loss on fixed asset and investment sale | (485) | | | 703 | |
| Gain on property insurance settlement | — | | | (4,936) | |
| Loss on senior note repurchase | 16,020 | | | — | |
| Stock-based compensation | 1,380 | | | 1,071 | |
| Issuance of stock under 401(k) plan | 681 | | | 615 | |
| Foreign currency translation (gain) loss | (9,665) | | | 8,122 | |
| (Increase) decrease in assets: | | | |
| Accounts receivable | (72,765) | | | (22,383) | |
| Inventories | (53,080) | | | 23,051 | |
| Prepaid and other current assets | (10,350) | | | (2,491) | |
| Other assets | 3,154 | | | 844 | |
| Increase (decrease) in liabilities: | | | |
| Accounts payable | 71,051 | | | (11,568) | |
| Other current liabilities | 7,993 | | | 19,180 | |
| Other liabilities | (7,334) | | | (3,159) | |
| Net cash (used for) provided by operating activities | (17,487) | | | 5,501 | |
| Cash flows from investing activities: | | | |
| Capital expenditures | (14,637) | | | (8,402) | |
| | | |
| | | |
| Sale of Wheels India Limited shares | — | | | 15,722 | |
| Proceeds from property insurance settlement | — | | | 4,936 | |
| Proceeds from sale of fixed assets | 749 | | | 200 | |
| Other | — | | | (558) | |
| Net cash (used for) provided by investing activities | (13,888) | | | 11,898 | |
| Cash flows from financing activities: | | | |
| Proceeds from borrowings | 459,929 | | | 76,798 | |
| Repurchase of senior secured notes | (413,000) | | | — | |
| Payment on debt | (34,040) | | | (74,011) | |
| Dividends paid | — | | | (603) | |
| Other financing activities | (2,040) | | | 608 | |
| Net cash provided by financing activities | 10,849 | | | 2,792 | |
| Effect of exchange rate changes on cash | (1,101) | | | (6,830) | |
| Net (decrease) increase in cash and cash equivalents | (21,627) | | | 13,361 | |
| Cash and cash equivalents, beginning of period | 117,431 | | | 66,799 | |
| Cash and cash equivalents, end of period | $ | 95,804 | | | $ | 80,160 | |
| | | |
| Supplemental information: | | | |
| Interest paid | $ | 16,422 | | | $ | 15,188 | |
| Income taxes paid, net of refunds received | $ | 7,101 | | | $ | 4,732 | |
| | | |
| | | |
| | | |
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, adjusted EBITDA, net sales on a constant currency basis, and net debt, 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, adjusted earnings per common share, EBITDA, adjusted EBITDA, net sales on a constant currency basis, and net debt, 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, adjusted earnings per common share, EBITDA, adjusted EBITDA, net sales on a constant currency basis, and net debt 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 income (loss) applicable to common shareholders, the most directly comparable GAAP financial measure, for each of the three and six month periods ended June 30, 2021 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Six months ended |
| June 30, | | June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | |
| Net (loss) income applicable to common shareholders | $ | (2,773) | | | $ | (5,045) | | | $ | 10,801 | | | $ | (30,531) | |
| Adjustments: | | | | | | | |
| | | | | | | |
| | | | | | | |
| Insurance reimbursement | — | | | — | | | — | | | (4,936) | |
| Foreign exchange loss (gain) | 768 | | | (8,836) | | | (8,709) | | | 8,406 | |
| Loss on senior note repurchase | 16,020 | | | — | | | 16,020 | | | — | |
| Asset impairment | — | | | 1,007 | | | — | | | 3,586 | |
| Loss on sale of Wheels India Limited shares | — | | | 2,005 | | | — | | | 2,005 | |
| Restructuring charge | — | | | 399 | | | — | | | 399 | |
| | | | | | | |
| Adjusted net income (loss) attributable to Titan | $ | 14,015 | | | $ | (10,470) | | | $ | 18,112 | | | $ | (21,071) | |
| | | | | | | |
| Adjusted earnings per common share: | | | | | | | |
| Basic | $ | 0.23 | | | $ | (0.17) | | | $ | 0.29 | | | $ | (0.35) | |
| Diluted | 0.22 | | | (0.17) | | | 0.29 | | | (0.35) | |
| | | | | | | |
| Average common shares and equivalents outstanding: | | | | | | | |
| Basic | 61,717 | | | 60,602 | | | 61,592 | | | 60,481 | |
| Diluted | 62,568 | | | 60,602 | | | 62,480 | | | 60,481 | |
The table below provides a reconciliation of net income (loss) to EBITDA and adjusted EBITDA, which are non-GAAP financial measures, for the three and six month periods ended June 30, 2021 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Six months ended |
| June 30, | | June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | |
| Net (loss) income | $ | (2,426) | | | $ | (4,643) | | | $ | 10,797 | | | $ | (32,142) | |
| Adjustments: | | | | | | | |
| Provision for income taxes | 1,991 | | | 1,980 | | | 4,585 | | | 2,035 | |
| Interest expense, excluding interest income | 8,701 | | | 8,008 | | | 16,110 | | | 16,043 | |
| Depreciation and amortization | 12,358 | | | 13,334 | | | 24,918 | | | 27,119 | |
| EBITDA | $ | 20,624 | | | $ | 18,679 | | | $ | 56,410 | | | $ | 13,055 | |
| Adjustments: | | | | | | | |
| | | | | | | |
| Insurance reimbursement | — | | | — | | | — | | | (4,936) | |
| Foreign exchange loss (gain) | 768 | | | (8,836) | | | (8,709) | | | 8,406 | |
| Loss on senior note repurchase | 16,020 | | | — | | | 16,020 | | | — | |
| Asset impairment | — | | | 1,007 | | | — | | | 3,586 | |
| Loss on sale of Wheels India Limited shares | — | | | 2,005 | | | — | | | 2,005 | |
| Restructuring charge | — | | | 399 | | | — | | | 399 | |
| Adjusted EBITDA | $ | 37,412 | | | $ | 13,254 | | | $ | 63,721 | | | $ | 22,515 | |
The table below sets forth, for the three and six month period ended June 30, 2021, the impact to net sales of currency translation (constant currency) by geography (in thousands, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Change due to currency translation | | Three Months Ended June 30, 2021 |
| 2021 | | 2020 | | % Change from 2020 | | $ | | % | | Constant Currency |
| United States | $ | 199,205 | | | $ | 140,662 | | | 41.6% | | — | | | — | % | | $ | 199,205 | |
| Europe / CIS | 121,346 | | | 80,271 | | | 51.2% | | 7,562 | | | 9.4 | % | | 113,784 | |
| Latin America | 78,928 | | | 41,498 | | | 90.2% | | (1,331) | | | (3.2) | % | | 80,259 | |
| Other International | 39,160 | | | 23,702 | | | 65.2% | | 1,945 | | | 8.2 | % | | 37,215 | |
| 438,639 | | | 286,133 | | | 53.3% | | 8,176 | | | 2.9 | % | | 430,463 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | Change due to currency translation | | Six Months Ended June 30, 2021 |
| 2021 | | 2020 | | % Change from 2020 | | $ | | % | | Constant Currency |
| United States | $ | 385,610 | | | $ | 317,759 | | | 21.4% | | — | | | — | % | | $ | 385,610 | |
| Europe / CIS | 233,508 | | | 164,691 | | | 41.8% | | 13,012 | | | 7.9 | % | | 220,496 | |
| Latin America | 145,071 | | | 96,239 | | | 50.7% | | (15,239) | | | (15.8) | % | | 160,310 | |
| Other International | 77,968 | | | 48,944 | | | 59.3% | | 4,666 | | | 9.5 | % | | 73,302 | |
| 842,157 | | | 627,633 | | | 34.2% | | 2,439 | | | 0.4 | % | | 839,718 | |
The table below provides a reconciliation of net debt, which is a non-GAAP financial measure:
| | | | | | | | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 | | June 30, 2020 |
| | |
| | | | | |
| Long-term debt | $ | 452,730 | | | $ | 433,584 | | | $ | 462,240 | |
| Short-term debt | 34,296 | | | 31,119 | | | 40,784 | |
| Total debt | $ | 487,026 | | | $ | 464,703 | | | $ | 503,024 | |
| Cash and cash equivalents | 95,804 | | | 117,431 | | | 80,160 | |
| Net debt | $ | 391,222 | | | $ | 347,272 | | | $ | 422,864 | |
