0000899751
False
0000899751
2024-05-01
2024-05-01
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
May 1, 2024
TITAN INTERNATIONAL, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 1-12936 36-3228472
(State of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
1525 Kautz Road, Suite 600
,
West Chicago
,
IL
60185
(Address of principal executive offices) (Zip Code)
(
630)
377-0486
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under any of
the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 ((s)230.405 of this chapter)
or Rule 12b-2 of the Securities Exchange Act of 1934 ((s)240.12b-2 of this
chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Name of each exchange on which registered
Symbol
Common stock, $0.0001 par value TWI New York Stock Exchange
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Item 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On May 1, 2024, Titan International, Inc. issued a press release reporting its
first quarter 2024 financial results. A copy of the press release is furnished
herewith as Exhibit 99.
Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d)
Exhibits
99
Press release dated May 1, 2024, reporting first quarter 2024 financial
results for Titan International, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TITAN INTERNATIONAL, INC.
(Registrant)
Date: May 1, 2024 By /s/ DAVID A. MARTIN
:
David A. Martin
SVP and Chief Financial Officer
(Principal Financial Officer)
FOR IMMEDIATE RELEASE
Wednesday, May 1, 2024
Titan International, Inc. Reports First Quarter Financial Performance
Delivers Solid Profitability with Adjusted EBITDA of $50 Million and Adjusted
EPS of $0.29
Integration of Carlstar Driving `One Stop Shop' Positioning in Ag and Consumer
Segments for Long-Term growth
WEST CHICAGO, ILLINOIS, May 1, 2024 - Titan International, Inc. (NYSE: TWI)
("Titan" or the "Company"), a leading global manufacturer of off-highway
wheels, tires, assemblies, and undercarriage products, today reported
financial results for the first quarter ended March 31, 2024. Results for the
first quarter of 2024 include approximately one month of results from the
February 29, 2024 acquisition of Carlstar Group LLC ("Carlstar").
Paul Reitz, President and Chief Executive Officer, stated, "The last two
months have been very exciting for us as we have been running full speed
integrating Carlstar into our existing operations. I have been particularly
impressed by the enthusiasm I see from everyone at Titan and our new team
members that joined us with the acquisition. One of the key strategic
rationales for the acquisition was our expected ability to be a `one stop
shop' for customers by delivering best in class products with a deep portfolio
for both aftermarket and OEM channels. From top to bottom, our employees
understand this vision and are working hard every day to make it happen. We
have made a lot of progress integrating Carlstar's operations and are very
pleased by the initial feedback we've received from the market on the `new
Titan' and how that benefits our customers."
Mr. Reitz continued, "As we look towards the future, we believe Titan is
positioned to deliver more consistent, stronger results throughout various
market cycles due to the structural changes we have made in recent years and
with the opportunities created by the Carlstar acquisition. We design and
manufacture market leading products meeting the needs of customers that serve
crucial mega-trend sectors of the global economy that, when combined with our
long history of driving innovative products in the marketplace, provide us
with long-term growth opportunities. Using that as a basis along with recent
financial performance of Titan and Carlstar, along with expected synergies, we
believe the combined companies in a typical year would have earnings power of
$250 million to $300 million of adjusted EBITDA with free cash flow of at
least $125 million. Our team is focused on implementing the short and
long-term actions needed to deliver this and more, and while fiscal year 2024
results will be impacted by soft market conditions, it is good for our
investors to have a perspective on the future opportunities and our steadfast
focus on building shareholder value."
Mr. Reitz continued, "Turning to our first quarter, we were able to deliver
solid results in the midst of challenging market conditions. Overall, all
three of our sectors continue to be impacted by macro uncertainty, which is
affecting many industries. Returning to our theme of `controlling what we can
control', during the first quarter we focused on our operating efficiency and
other levers at our disposal to maximize our profitability. Gross margin was
16.7% on an adjusted basis, with Ag segment adjusted margins expanding to
17.2% from 16.1% a year ago. Consumer segment adjusted gross margin was 21.3%,
up from 20.7% last year. Earthmoving/Construction adjusted gross margins
lagged our other two segments at 14.0%, compared with 18.7%, as OEM volume
declines in Europe and Latin America weighed on margins."
Mr. Reitz concluded, "The Titan team is experienced in handling market cycles
and skilled at making timely decisions to adapt to evolving market conditions.
We are seeing reduced OEM demand in all geographies and segments but remain
confident that our end-markets are well supported by farmer incomes and
balance sheets along
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with the global need for long-term infrastructure investments, so we don't
expect a slowdown to be deep or protracted. We have seen tire and wheel
inventory levels normalizing in the dealer channels, but overall sales levels
are still running below our exceptional performance in 2022 and 2023. We
expect sales activity within the Ag sector to be directly correlated with
overall market activity in the first half of the year. Our Earthmoving/Construct
ion segment continues to have a favorable long-term outlook despite the
near-term volatility. With Carlstar contributing in full beginning with the
second quarter of 2024, compared with only one month of contribution in Q1
2024, our Consumer segment sales now represent a more meaningful proportion of
our total sales. While the consumer sector is facing some of the same macro
headwinds as our other two segments, in the form of interest rate uncertainty,
geopolitical instability and a looming Presidential election, we are
encouraged by our new opportunities and the overall margin profile of the
segment. Key to that is our aftermarket business, as that is less correlated
to new equipment sales, along with sales synergies we expect to realize as a
result of our one stop shop strategy. Titan remains in a strong position to
succeed in capturing value due to the strength that we have created over the
last several years."
Second Quarter 2024 Outlook
The Company is introducing financial guidance for Q2 2024 as follows:
.
Revenues are expected to range between $525 million to $575 million
.
SG&A plus royalty and R&D expense at approximately 11.0% of sales
.
Adjusted EBITDA of $45 million to $55 million
.
Free cash flow to range between $30 to $40 million
.
Capital expenditures to range between $15 to $20 million
David Martin, Chief Financial Officer, added, "As Paul noted, macro
uncertainty is acute right now, impacting our end markets as well as many
others. With that in mind, we're providing guidance for the second quarter
while the lack of adequate visibility leads us to refrain from giving full
year guidance at this time. We are also including SG&A guidance as Carlstar's
operating expense profile is different than Titan's, due to their distribution
center model."
Mr. Martin concluded, "At quarter end our net debt was $370 million. That's in
line with our modeling as we closed the Carlstar acquisition, and we expect to
prioritize debt paydown as we move through the year. Based on our current
integration progress, we expect to achieve bottom line synergies of $5 million
to $6 million this year and $25 million to $30 million over the longer term.
We will be opportunistic in allocating cash as we have approximately $15
remaining under the Board authorized $50 million share repurchase program. Our
balance sheet strength and cash flow prospects set us up to create value over
the long-term."
Results of Operations
Net sales for the three months ended March 31, 2024 were $482.2 million,
compared to $548.6 million in the comparable period of 2023. Net sales changes
were primarily attributed to the agricultural and earthmoving/construction
segments. This was due to a decrease in sales volume caused by lower levels of
end customer demand in agricultural equipment, and economic softness in
Brazil. The volume change was positively impacted by the inclusion of net
sales from the Carlstar acquisition for one month. It was also impacted by
negative price due to lower raw material and other input costs, most notably
steel, and unfavorable foreign currency translation of 2.3%.
Gross profit for the three months ended March 31, 2024 was $77.4 million, or
16.0% of net sales, compared to $95.6 million, or 17.4% of net sales, for the
three months ended March 31, 2023. The changes in gross profit and gross
margin for three months ended March 31, 2024 as compared to the prior year
period were due to the lower sales, which resulted in lower fixed cost
leverage. Excluding the impact of the inventory revaluation step-up associated
with the Carlstar purchase price allocation of $3.4 million, gross profit was
$80.7 million, or 16.7% of net sales.
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Selling, general and administrative expenses for the three months ended March
31, 2024 were $39.4 million, or 8.2% of net sales, compared to $34.5 million,
or 6.3% of net sales, for the three months ended March 31, 2023. The change in
SG&A for the three months ended March 31, 2024 as compared to the prior year
period was primarily due to recurring SG&A incurred on the Carlstar operations
that includes management of distribution centers.
Acquisition related expenses for the three months ended March 31, 2024 were
$6.2 million, associated with the transaction-related expenses for Carlstar.
Income from operations for the three months ended March 31, 2024 was $25.1
million, compared to income from operations of $55.1 million for the three
months ended March 31, 2023. The change in income from operations for the
three months ended March 31, 2024 as compared to the prior year periods was
primarily due to lower net sales and the net result of the items previously
discussed.
Segment Information
Agricultural Segment
(Amounts in thousands, except percentages) Three months ended
March 31,
2024 2023 % Increase / (Decrease)
Net sales $ 239,673 $ 305,858 (21.6) %
Gross profit 40,619 49,250 (17.5) %
Profit margin 16.9 % 16.1 % 5.0 %
Income from operations 24,010 32,569 (26.3) %
Net sales in the agricultural segment were $239.7 million for the three months
ended March 31, 2024, as compared to $305.9 million for the comparable period
in 2023. The net sales change was primarily attributed to lower sales volume
in North and South America, resulting from overall softness in demand for
agricultural equipment, and a decline in Brazilian economic activity. The
change in net sales was also influenced by the unfavorable impact of foreign
currency translation of 4.3%.
Gross profit in the agricultural segment was $40.6 million for the three
months ended March 31, 2024, as compared to $49.3 million in the comparable
period in 2023. The change in gross profit was attributed to lower sales
volume. The increase in profit margin was due to the measures taken to improve
financial performance, along with lower raw material and other input costs,
which have helped offset the impact of lower fixed cost leverage.
Earthmoving/Construction Segment
(Amounts in thousands, except percentages) Three months ended
March 31,
2024 2023 % Decrease
Net sales $ 165,208 $ 198,924 (16.9) %
Gross profit 22,977 37,224 (38.3) %
Profit margin 13.9 % 18.7 % (25.7) %
Income from operations 8,834 23,538 (62.5) %
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The Company's earthmoving/construction segment net sales were $165.2 million
for the three months ended March 31, 2024, as compared to $198.9 million in
the comparable period in 2023. The change in earthmoving/construction sales
was primarily due to lower sales volume in the Americas and the undercarriage
business which was caused by a slowdown at construction OEM customers. In
addition, the net sales change was impacted by negative price due to lower raw
material and other input costs.
Gross profit in the earthmoving/construction segment was $23.0 million for the
three months ended March 31, 2024, as compared to $37.2 million for the three
months ended March 31, 2023. The changes in gross profit and margin were
primarily attributed to the lower sales volume, which also resulted in lower
fixed cost leverage and contractual price give backs due to lower steel
prices, respectively.
Consumer Segment
(Amounts in thousands, except percentages) Three months ended
March 31,
2024 2023 % Increase / (Decrease)
Net sales $ 77,328 $ 43,862 76.3 %
Gross profit 13,774 9,083 51.6 %
Profit margin 17.8 % 20.7 % (14.0) %
Income from operations 5,113 6,792 (24.7) %
Consumer segment net sales were $77.3 million for the three months ended March
31, 2024, as compared to $43.9 million for the three months ended March 31,
2023. The increase in sales was driven by the positive effects of Carlstar
acquisition, which contributed one month of results in the first quarter of
2024. The increase was partially offset by lower sales volumes, primarily in
Americas, where demand was lower from the softer market conditions.
Gross profit from the consumer segment was $13.8 million for the three months
ended March 31, 2024, as compared to $9.1 million for the three months ended
March 31, 2023. The increase in gross profit was driven by the positive
effects of the Carlstar acquisition. The change in profit margin was primarily
due to the effect of the inventory revaluation step-up associated with the
Carlstar purchase price allocation.
Non-GAAP Financial Measures
Adjusted EBITDA was $49.7 million for the first quarter of 2024, compared to
$67.6 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 to EBITDA
and adjusted EBITDA can be found at the end of this release.
Adjusted net income applicable to common shareholders for the first quarter of
2024 was income of $19.0 million, equal to income of $0.29 per basic and
diluted share, compared to adjusted net income of $33.6 million, equal to
income of $0.53 per basic and diluted share, in the first quarter of 2023. The
Company utilizes adjusted net income applicable to common shareholders, which
is a non-GAAP financial measure, as a means to measure its operating
performance. A reconciliation of net income applicable to common shareholders
and adjusted net income applicable to common shareholders can be found at the
end of this release.
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Financial Condition
The Company ended the first quarter of 2024 with total cash and cash
equivalents of $203.6 million, compared to $220.3 million at December 31,
2023. Long-term debt at March 31, 2024, was $554.4 million, compared to $409.2
million at December 31, 2023. Short-term debt was $18.7 million at March 31,
2024, compared to $16.9 million at December 31, 2023. Net debt (total debt
less cash and cash equivalents) was $369.5 million at March 31, 2024, compared
to $205.8 million at December 31, 2023.
Net cash provided by operating activities for the first three months of 2024
was $2.0 million, compared to net cash provided by operating activities of
$24.1 million for the comparable prior year period. Operating cash flows
decreased by $22.1 million when comparing the first three months of 2024 to
the comparable period in 2023. This decrease was primarily due to lower net
income, partially offset by the positive effect of focused working capital
management, especially the change in accounts payable of $15.0 million and
solid collections efforts on accounts receivable improving by $15.4 million,
which helped offset the inventory effect of $11.6 million. Capital
expenditures were $16.6 million for the first three months of 2024, compared
to $11.7 million for the comparable prior year period. Capital expenditures
during the first three months of 2024 and 2023 represent scheduled equipment
replacement and improvements, along with new tools, dies and molds related to
new product development, as the Company seeks to enhance the Company's
manufacturing capabilities and drive productivity gains.
Teleconference and Webcast
Titan will be hosting a teleconference and webcast to discuss the first
quarter financial results on Thursday, May 2, 2024, at 9:00 a.m. Eastern Time.
The real-time, listen-only webcast can be accessed using the following link
https://events.q4inc.com/attendee/722246104
or 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 10 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 should use one of the following dial in numbers:
United States Toll Free: 1 833 470 1428
All other locations:
https://www.netroadshow.com/conferencing/global-numbers?confId=56511
Participants Access Code: 314632
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About Titan
Titan International, Inc. (NYSE: TWI) is a leading global manufacturer of
off-highway wheels, tires, assemblies, and undercarriage products.
Headquartered in West Chicago, 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.
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.
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Titan International, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Amounts in thousands, except per share data
Three months ended
March 31,
2024 2023
Net sales $ 482,209 $ 548,644
Cost of sales 404,839 453,087
Gross profit 77,370 95,557
Selling, general and administrative expenses 39,420 34,472
Acquisition related expenses 6,196 -
Research and development expenses 3,654 3,014
Royalty expense 3,028 2,935
Income from operations 25,072 55,136
Interest expense, net (5,492) (6,492)
Foreign exchange loss (275) (1,760)
Other income 405 762
Income before income taxes 19,710 47,646
Provision for income taxes 9,736 14,216
Net income 9,974 33,430
Net income attributable to noncontrolling interests 773 1,592
Net income attributable to Titan and applicable to common shareholders $ 9,201 $ 31,838
Earnings per common share:
Basic $ 0.14 $ 0.51
Diluted $ 0.14 $ 0.50
Average common shares and equivalents outstanding:
Basic 64,928 62,905
Diluted 65,704 63,621
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Titan International, Inc.
Condensed Consolidated Balance Sheets
Amounts in thousands, except share data
March 31, 2024 December 31, 2023
(unaudited)
Assets
Current assets
Cash and cash $ 203,628 $ 220,251
equivalents
Accounts 355,559 219,145
receivable, net
Inventories 504,945 365,156
Prepaid and other 91,004 72,229
current assets
Total current assets 1,155,136 876,781
Property, plant and 450,446 321,694
equipment, net
Operating lease assets 108,777 11,955
Goodwill 12,867 -
Intangible assets, net 17,046 1,431
Deferred income taxes 26,283 38,033
Other long-term assets 43,040 39,351
Total assets $ 1,813,595 $ 1,289,245
Liabilities
Current liabilities
Short-term debt $ 18,693 $ 16,913
Accounts payable 287,933 201,201
Operating leases 12,289 5,021
Other current 176,148 149,240
liabilities
Total current 495,063 372,375
liabilities
Long-term debt 554,440 409,178
Deferred income taxes 4,708 2,234
Operating leases 95,467 6,153
Other long-term 32,982 31,890
liabilities
Total liabilities 1,182,660 821,830
Equity
Titan shareholders' equity
Common stock ($0.0001 par value, 120,000,000 shares authorized, - -
78,447,035 issued at March 31, 2024 and 66,525,269 at December 31, 2023)
Additional 735,544 569,065
paid-in capital
Retained earnings 178,824 169,623
Treasury stock (at cost, 5,613,074 shares at March (51,300) (52,585)
31, 2024 and 5,809,414 shares at December 31, 2023)
Accumulated other (232,925) (219,043)
comprehensive loss
Total Titan 630,143 467,060
shareholders' equity
Noncontrolling 792 355
interests
Total equity 630,935 467,415
Total liabilities $ 1,813,595 $ 1,289,245
and equity
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Titan International, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
All amounts in thousands
Three months ended March 31,
Cash flows from operating activities: 2024 2023
Net income $ 9,974 $ 33,430
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 12,001 10,830
Deferred income tax provision 3,491 4,089
Loss (gain) on fixed asset and investment sale 25 (10)
Stock-based compensation 32 700
Issuance of stock under 401(k) plan 441 429
Foreign currency gain (390) (230)
(Increase) decrease in assets, net of acquisitions:
Accounts receivable (43,140) (58,541)
Inventories (136) 11,486
Prepaid and other current assets (6,548) (3,932)
Other assets (4,037) (459)
Increase in liabilities, net of acquisitions:
Accounts payable 25,196 10,237
Other current liabilities 3,695 15,947
Other liabilities 1,401 110
Net cash provided by operating activities 2,005 24,086
Cash flows from investing activities:
Capital expenditures (16,607) (11,698)
Business acquisition, net of cash acquired (142,207) -
Proceeds from sale of fixed assets 52 258
Net cash used for investing activities (158,762) (11,440)
Cash flows from financing activities:
Proceeds from borrowings 154,771 2,360
Repayments of debt (7,021) (11,382)
Repurchase of common stock (1,402) (1,293)
Other financing activities (642) (130)
Net cash provided by (used for) financing activities 145,706 (10,445)
Effect of exchange rate changes on cash (5,572) 2,338
Net (decrease) increase in cash and cash equivalents (16,623) 4,539
Cash and cash equivalents, beginning of period 220,251 159,577
Cash and cash equivalents, end of period $ 203,628 $ 164,116
Supplemental information:
Interest paid $ 843 $ 863
Income taxes paid, net of refunds received $ 5,549 $ 3,767
Non cash financing activity:
Issuance of common stock in connection with business acquisition $ 168,693 $ -
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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 gross
profit, adjusted net income attributable to Titan, EBITDA, adjusted EBITDA,
net sales on a constant currency basis, net debt, and net cash provided by
operating activities to free cash flow, 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 gross profit, adjusted net income attributable to Titan,
adjusted earnings per common share, EBITDA, adjusted EBITDA, net sales on a
constant currency basis, net debt and net cash provided by operating
activities to free cash flow, as we believe that they assist investors with
analyzing our business results. In addition, management reviews 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 nonGAAP financial measures will permit investors to
assess the performance of the Company on the same basis as management.
Adjusted gross profit, adjusted net income attributable to Titan, adjusted
earnings per common share, EBITDA, adjusted EBITDA, net sales on a constant
currency basis, net debt, and free cash flow 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 gross profit to gross
profit, the most directly comparable GAAP financial measure, for the
three-month periods ended March 31, 2024 and 2023 (in thousands, except
percentages).
Three months ended Three months ended
March 31, 2024 March 31, 2023
Agricultural Earthmoving/Construction Consumer Total Total
Gross profit, $ 40,619 $ 22,977 $ 13,774 $ 77,370 $ 95,557
as reported
Gross 16.9 % 13.9 % 17.8 % 16.0 % 17.4 %
Margin
Adjustments:
Carlstar inventory 614 94 2,668 3,376 -
fair value step-up
Gross profit, $ 41,233 $ 23,071 $ 16,442 $ 80,746 $ 95,557
as adjusted
Adjusted 17.2 % 14.0 % 21.3 % 16.7 % 17.4 %
Gross Margin
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The table below provides a reconciliation of adjusted net income attributable
to Titan to net income applicable to common shareholders, the most directly
comparable GAAP financial measure, for the three-month periods ended March 31,
2024 and 2023 (in thousands, except earnings per share).
Three months ended
March 31,
2024 2023
Net income attributable to Titan and applicable to common shareholders $ 9,201 $ 31,838
Adjustments:
Foreign exchange loss 275 1,760
Carlstar transaction costs 6,196 -
Carlstar inventory fair value step-up 3,376 -
Adjusted net income attributable to Titan and applicable to common shareholders $ 19,048 $ 33,598
Adjusted earnings per common share:
Basic $ 0.29 $ 0.53
Diluted $ 0.29 $ 0.53
Average common shares and equivalents outstanding:
Basic 64,928 62,905
Diluted 65,704 63,621
The table below provides a reconciliation of net income to EBITDA and adjusted
EBITDA, which are non-GAAP financial measures, for the three-month periods
ended March 31, 2024 and 2023 (in thousands).
Three months ended
March 31,
2024 2023
Net income $ 9,974 $ 33,430
Adjustments:
Provision for income taxes 9,736 14,216
Interest expense, excluding interest income 8,147 7,391
Depreciation and amortization 12,001 10,830
EBITDA $ 39,858 $ 65,867
Adjustments:
Foreign exchange loss 275 1,760
Carlstar transaction costs 6,196 -
Carlstar inventory fair value step-up 3,376 -
Adjusted EBITDA $ 49,705 $ 67,627
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The table below sets forth, for the three months ended March 31, 2024, the
impact to net sales of currency translation (constant currency) by geography
(in thousands, except percentages):
Three months Change due to Three months
ended March 31, currency translation ended March 31,
2024 2023 % Change $ % Constant
from 2023 Currency
United $ 258,363 $ 268,032 (3.6) % $ - - % $ 258,363
States
Europe 126,790 153,495 (17.4) % (3,678) (2.4) % 130,468
/ CIS
Latin 72,481 102,521 (29.3) % (2,468) (2.4) % 74,949
America
Other 24,575 24,596 (0.1) % (6,592) (26.8) % 31,167
International
$ 482,209 $ 548,644 (12.1) % $ (12,738) (2.3) % $ 494,947
The table below provides a reconciliation of net debt, which is a non-GAAP
financial measure (in thousands):
March 31, 2024 December 31, 2023 March 31, 2023
Long-term debt $ 554,440 $ 409,178 $ 413,371
Short-term debt 18,693 16,913 23,836
Total debt $ 573,133 $ 426,091 $ 437,207
Cash and cash equivalents 203,628 220,251 164,116
Net debt $ 369,505 $ 205,840 $ 273,091
The table below provides a reconciliation of net cash provided by operating
activities to free cash flow, which is a non-GAAP financial measure (in
thousands):
Three months ended
March 31,
2024 2023
Net cash provided by operating activities $ 2,005 $ 24,086
Capital expenditures (16,607) (11,698)
Free cash flow $ (14,602) $ 12,388
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