Titan International(TWI) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and related notes for the company Item 1. Financial Statements (Unaudited) Presents Titan International's unaudited condensed consolidated financial statements and detailed notes for Q1 2020 and 2019 Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (Three months ended March 31) | Metric (in thousands) | 2020 | 2019 | Change (2020 vs 2019) | | :-------------------- | :--- | :--- | :-------------------- | | Net sales | $341,500 | $410,374 | $(68,874) | | Cost of sales | $311,677 | $365,110 | $(53,433) | | Asset impairment | $2,579 | — | $2,579 | | Gross profit | $27,244 | $45,264 | $(18,020) | | (Loss) income from operations | $(9,603) | $4,136 | $(13,739) | | Foreign exchange (loss) gain | $(17,242) | $5,723 | $(22,965) | | Net (loss) income attributable to Titan | $(25,486) | $1,977 | $(27,463) | | Basic EPS | $(0.42) | $0.02 | $(0.44) | | Diluted EPS | $(0.42) | $0.02 | $(0.44) | - Net sales decreased by $68.9 million (16.8%) from $410.4 million in Q1 2019 to $341.5 million in Q1 2020[8] - The company reported a net loss attributable to Titan of $25.5 million in Q1 2020, a significant decline from a net income of $2.0 million in Q1 2019[8] Condensed Consolidated Statements of Comprehensive Income (Loss) Condensed Consolidated Statements of Comprehensive Income (Loss) (Three months ended March 31) | Metric (in thousands) | 2020 | 2019 | Change (2020 vs 2019) | | :-------------------- | :--- | :--- | :-------------------- | | Net (loss) income | $(27,499) | $1,007 | $(28,506) | | Currency translation adjustment | $(33,786) | $(4,379) | $(29,407) | | Pension liability adjustments, net of tax | $1,308 | $466 | $842 | | Comprehensive loss | $(59,977) | $(2,906) | $(57,071) | | Comprehensive loss attributable to Titan | $(56,181) | $(2,838) | $(53,343) | - Comprehensive loss attributable to Titan significantly increased to $56.2 million in Q1 2020 from $2.8 million in Q1 2019, primarily due to a substantial negative currency translation adjustment[10] Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (as of) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Cash and cash equivalents | $60,378 | $66,799 | $(6,421) | | Accounts receivable, net | $211,982 | $185,238 | $26,744 | | Inventories | $306,071 | $333,356 | $(27,285) | | Total current assets | $638,892 | $644,262 | $(5,370) | | Total assets | $1,060,254 | $1,114,307 | $(54,053) | | Short-term debt | $46,275 | $61,253 | $(14,978) | | Accounts payable | $179,933 | $158,647 | $21,286 | | Total current liabilities | $341,952 | $327,153 | $14,799 | | Long-term debt | $444,550 | $443,349 | $1,201 | | Total liabilities | $856,332 | $850,319 | $6,013 | | Total equity | $178,922 | $238,988 | $(60,066) | - Total assets decreased by $54.1 million, while total liabilities increased by $6.0 million, leading to a $60.1 million decrease in total equity from December 31, 2019, to March 31, 2020[13] Condensed Consolidated Statements of Changes in Equity Key Changes in Equity (Three months ended March 31, 2020, in thousands) | Item | Amount | | :-------------------------------- | :------- | | Balance January 1, 2020 | $238,988 | | Net income (loss) | $(27,499) | | Currency translation adjustment, net | $(33,786) | | Pension liability adjustments, net of tax | $1,308 | | Dividends declared | $(302) | | Stock-based compensation | $490 | | VIE deconsolidation | $(559) | | Issuance of stock under 401(k) plan | $282 | | Balance March 31, 2020 | $178,922 | - Total equity decreased from $238.9 million at January 1, 2020, to $178.9 million at March 31, 2020, primarily driven by a net loss of $27.5 million and a significant negative currency translation adjustment of $33.8 million[15] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Three months ended March 31, in thousands) | Cash Flow Activity | 2020 | 2019 | Change (2020 vs 2019) | | :----------------- | :--- | :--- | :-------------------- | | Operating activities | $3,972 | $(15,619) | $19,591 | | Investing activities | $5,067 | $(34,259) | $39,326 | | Financing activities | $(8,293) | $36,740 | $(45,033) | | Effect of exchange rate changes on cash | $(7,167) | $(232) | $(6,935) | | Net decrease in cash and cash equivalents | $(6,421) | $(13,370) | $6,949 | | Cash and cash equivalents, end of period | $60,378 | $68,315 | $(7,937) | - Operating activities generated $4.0 million in cash in Q1 2020, a significant improvement from a $15.6 million cash usage in Q1 2019[16] - Investing activities provided $5.1 million in Q1 2020, a substantial shift from $34.3 million cash usage in Q1 2019, partly due to proceeds from property insurance settlement and sale of Wheels India Limited shares[16] - Financing activities used $8.3 million in Q1 2020, compared to providing $36.7 million in Q1 2019, reflecting higher debt payments relative to borrowings[16] Notes to Condensed Consolidated Financial Statements 1. Basis of Presentation and Significant Accounting Policies Details the basis of financial statement preparation, significant accounting policies, and the impact of new accounting standards - The Company declared cash dividends of $0.005 per share for both Q1 2020 and Q1 2019[20] - The fair value of 6.50% senior secured notes due 2023 was approximately $174.0 million at March 31, 2020, significantly lower than their cost of $396.2 million[19] - New accounting standards, ASU No. 2016-13 (Credit Losses) and ASU No. 2018-13 (Fair Value Measurement), adopted on January 1, 2020, did not have a material effect on the financial statements[21][22] 2. Accounts Receivable Provides a breakdown of net accounts receivable, including the allowance for doubtful accounts Accounts Receivable (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :---------------------- | :------------- | :---------------- | | Accounts receivable | $215,633 | $188,952 | | Allowance for doubtful accounts | $(3,651) | $(3,714) | | Accounts receivable, net | $211,982 | $185,238 | - Net accounts receivable increased by $26.7 million from December 31, 2019, to March 31, 2020[26] 3. Inventories Details inventory composition, valuation methods, and provisions for slow-moving or obsolete items Inventories (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :------------- | :------------- | :---------------- | | Raw material | $72,597 | $83,569 | | Work-in-process | $49,414 | $48,369 | | Finished goods | $184,060 | $201,418 | | Total | $306,071 | $333,356 | - Total inventories decreased by $27.3 million from December 31, 2019, to March 31, 2020, primarily due to a reduction in raw materials and finished goods[27] 4. Property, Plant and Equipment, Net Presents a breakdown of net property, plant, and equipment, including asset impairment charges Property, Plant and Equipment, Net (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | Land and improvements | $41,266 | $44,386 | | Buildings and improvements | $253,949 | $265,281 | | Machinery and equipment | $585,230 | $605,743 | | Tools, dies and molds | $110,692 | $113,603 | | Construction-in-process | $14,725 | $16,237 | | Total at cost | $1,005,862 | $1,045,250 | | Less accumulated depreciation | $(661,784) | $(670,452) | | Net | $344,078 | $374,798 | - The Company recorded a $2.6 million asset impairment charge in Q1 2020 related to machinery and equipment at Titan Tire Reclamation Corporation (TTRC) due to market declines[30] - Depreciation for the three months ended March 31, 2020, was $12.9 million, down from $13.8 million in the prior year[28] 5. Intangible Assets, Net Details amortizable intangible assets, their useful lives, and estimated future amortization expense Intangible Assets, Net (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | Customer relationships | $11,047 | $12,629 | | Patents, trademarks and other | $9,897 | $11,598 | | Total at cost | $20,944 | $24,227 | | Less accumulated amortization | $(12,662) | $(14,461) | | Net | $8,282 | $9,766 | - Amortization expense for intangible assets was $0.6 million in Q1 2020, compared to $0.5 million in Q1 2019[31] 6. Warranty Reconciles warranty liability, calculated based on historical experience for products with limited warranties Changes in Warranty Liability (in thousands) | Metric | 2020 | 2019 | | :------------------------ | :--- | :--- | | Warranty liability, January 1 | $14,334 | $16,327 | | Provision for warranty liabilities | $1,962 | $1,714 | | Warranty payments made | $(2,028) | $(1,795) | | Warranty liability, March 31 | $14,268 | $16,246 | - The warranty liability remained relatively stable at $14.3 million at March 31, 2020, with provisions for new liabilities largely offset by payments made[33] 7. Debt Details the Company's long-term debt, including senior secured notes, credit facilities, and maturity schedules Long-term Debt (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | 6.50% senior secured notes due 2023 | $396,184 | $395,960 | | Titan Europe credit facilities | $40,009 | $43,591 | | Revolving credit facility | $30,000 | $36,000 | | Other debt | $19,830 | $24,171 | | Capital leases | $4,802 | $4,880 | | Total debt | $490,825 | $504,602 | | Less amounts due within one year | $46,275 | $61,253 | | Total long-term debt | $444,550 | $443,349 | - Total debt decreased from $504.6 million at December 31, 2019, to $490.8 million at March 31, 2020[35] - The Company had $62.3 million available under its $125 million revolving credit facility at March 31, 2020, with $30.0 million in borrowings and an $11.5 million letter of credit[39] 8. Redeemable Noncontrolling Interest Describes redeemable noncontrolling interest in Voltyre-Prom, detailing put option settlements and remaining obligations - As of March 31, 2020, the redeemable noncontrolling interest held by RDIF was recorded at $25 million, representing the value of restricted stock to be issued[44][46] - In Q1 2019, Titan paid RDIF $25 million in cash and agreed to issue 4,032,259 shares of restricted common stock to satisfy a put option[42] - In Q2 2019, Titan paid OEP $46.7 million in cash to fully satisfy its put option, resulting in Titan and RDIF owning 64.3% and 35.7% of Voltyre-Prom, respectively[43] 9. Leases Provides supplemental balance sheet and cash flow information for operating and finance leases under ASC 842 Lease Information (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | Operating lease ROU assets | $20,117 | $23,914 | | Total operating lease liabilities | $20,595 | $24,089 | | Finance lease, net | $4,104 | $4,490 | | Total finance lease liabilities | $4,802 | $4,880 | | Weighted average remaining operating lease term (years) | 4.6 | N/A | | Weighted average remaining finance lease term (years) | 3.9 | N/A | - Operating lease ROU assets and liabilities decreased from December 31, 2019, to March 31, 2020[50] - Operating cash flows from operating leases were $2.1 million for the three months ended March 31, 2020[50] 10. Employee Benefit Plans Details defined benefit pension plans and defined contribution plans, including net periodic pension cost components Net Periodic Pension Cost (Three months ended March 31, in thousands) | Metric | 2020 | 2019 | | :------------------------------------ | :--- | :--- | | Service cost | $286 | $225 | | Interest cost | $862 | $1,123 | | Expected return on assets | $(1,360) | $(1,189) | | Amortization of net unrecognized loss | $696 | $765 | | Net periodic pension cost | $484 | $980 | - Net periodic pension cost decreased to $0.5 million in Q1 2020 from $1.0 million in Q1 2019[54] - The Company contributed approximately $0.4 million to pension plans in Q1 2020 and expects to contribute $1.4 million for the remainder of 2020[53] 11. Variable Interest Entities Discusses the Company's involvement with Variable Interest Entities (VIEs), including consolidated and non-consolidated entities Consolidated VIEs' Assets and Liabilities (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | Total assets | $5,035 | $5,614 | | Total liabilities | $1,409 | $1,689 | Non-Consolidated VIEs' Assets and Maximum Exposure to Loss (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | Total VIE assets | $4,694 | $4,973 | | Accounts payable | $1,548 | $2,006 | | Maximum exposure to loss | $6,242 | $6,979 | - In March 2020, the Company terminated supply agreements with two manufacturing-related VIEs at its Tennessee facility and no longer holds a variable interest in them[56] 12. Royalty Expense Details royalty expenses incurred under trademark license agreements with The Goodyear Tire & Rubber Company Royalty Expense (Three months ended March 31, in thousands) | Metric | 2020 | 2019 | | :------------- | :--- | :--- | | Royalty expense | $2,480 | $2,606 | - Royalty expenses slightly decreased to $2.5 million in Q1 2020 from $2.6 million in Q1 2019[60] 13. Other Income Provides a breakdown of other income, including gains from insurance settlements and asset sales Other Income (Three months ended March 31, in thousands) | Metric | 2020 | 2019 | | :------------------------------ | :--- | :--- | | Gain on property insurance settlement | $4,936 | — | | Gain on Wheels India Limited share sale | $1,302 | — | | Equity investment income | $605 | $875 | | Total other income | $7,436 | $996 | - Other income significantly increased to $7.4 million in Q1 2020 from $1.0 million in Q1 2019, primarily due to a $4.9 million gain from a property insurance settlement and a $1.3 million gain on the sale of Wheels India Limited shares[62] 14. Income Taxes Details income tax expense, effective tax rates, and factors influencing tax rate differences, including the CARES Act Income Tax Expense and Effective Rate (Three months ended March 31) | Metric | 2020 | 2019 | | :-------------------- | :--- | :--- | | Income tax expense | $0.1 million | $1.9 million | | Effective income tax rate | (0.2)% | 66% | - The effective income tax rate for Q1 2020 was (0.2)%, a significant change from 66% in Q1 2019, primarily due to valuation allowances on deferred tax assets from projected losses and a reduction in unrecognized tax positions[63][64] - The CARES Act is not expected to materially affect the Company's financial position or results, except for the deferral of Social Security payroll taxes, which will benefit operating cash flows through 2020[67] 15. Earnings Per Share Presents basic and diluted earnings per share calculations and weighted average shares outstanding Earnings Per Share (Three months ended March 31, in thousands, except per share data) | Metric | 2020 | 2019 | | :------------------------------------ | :--- | :--- | | Net (loss) income attributable to Titan | $(25,486) | $1,977 | | Net (loss) income applicable to common shareholders | $(25,486) | $1,201 | | Weighted average shares outstanding (basic) | 60,360 | 59,946 | | Weighted average shares outstanding (diluted) | 60,360 | 59,946 | | Basic and diluted EPS | $(0.42) | $0.02 | - Basic and diluted EPS shifted to a loss of $(0.42) in Q1 2020 from a gain of $0.02 in Q1 2019, reflecting the net loss attributable to common shareholders[69] 16. Litigation Describes ongoing environmental litigation involving Titan Tire Corporation and Dico, Inc., detailing liabilities and appeals - Titan Tire and Dico, Inc. were found jointly and severally liable for $5.45 million in response costs and $5.45 million in punitive damages (Dico only) in environmental litigation[76] - As of March 31, 2020, a contingent liability of $6.5 million remains outstanding for this order, and a judgment lien exists over Titan Tire's real property in Iowa[76][77] - The U.S. Court of Appeals for the Eighth Circuit affirmed the District Court's order in April 2019, and settlement discussions are ongoing[77] 17. Segment Information Provides segmented financial information for agricultural, earthmoving/construction, and consumer markets Segment Operating Results (Three months ended March 31, in thousands) | Segment | Net Sales 2020 | Net Sales 2019 | Gross Profit 2020 | Gross Profit 2019 | (Loss) Income from Operations 2020 | (Loss) Income from Operations 2019 | | :-------------------- | :------------- | :------------- | :---------------- | :---------------- | :--------------------------------- | :--------------------------------- | | Agricultural | $172,938 | $191,730 | $14,027 | $22,125 | $(4,694) | $13,928 | | Earthmoving/construction | $136,922 | $176,745 | $10,754 | $18,170 | $(6,994) | $5,528 | | Consumer | $31,640 | $41,899 | $2,463 | $4,969 | $(295) | $2,121 | | Corporate & Unallocated | — | — | — | — | $2,380 | $(17,441) | | Total | $341,500 | $410,374 | $27,244 | $45,264 | $(9,603) | $4,136 | - All three segments (Agricultural, Earthmoving/Construction, Consumer) experienced decreases in net sales, gross profit, and a shift from operating income to loss in Q1 2020 compared to Q1 2019[81] - Corporate & Unallocated expenses shifted to an income of $2.4 million in Q1 2020 from an expense of $17.4 million in Q1 2019 due to a refinement in the allocation process[81] 18. Related Party Transactions Discloses transactions with related parties, including sales of products and sales commissions paid Related Party Transactions (Three months ended March 31, in thousands) | Metric | 2020 | 2019 | | :-------------------- | :--- | :--- | | Sales of Titan products | $0.1 million | $0.3 million | | Sales commissions paid | $0.2 million | $0.4 million | - Sales to related parties and sales commissions paid to related parties both decreased in Q1 2020 compared to Q1 2019[84] 19. Accumulated Other Comprehensive Loss Reconciles accumulated other comprehensive loss, detailing currency translation and pension plan impacts Accumulated Other Comprehensive Loss (in thousands) | Metric | January 1, 2020 | March 31, 2020 | | :------------------------------------ | :-------------- | :------------- | | Currency Translation Adjustments | $(192,507) | $(224,511) | | Unrecognized Losses and Prior Service Cost | $(26,144) | $(24,836) | | Total | $(218,651) | $(249,347) | - Accumulated other comprehensive loss increased by $30.7 million from January 1, 2020, to March 31, 2020, primarily due to a $32.0 million negative currency translation adjustment[85] 20. Subsidiary Guarantor Financial Information Provides condensed consolidating financial statements for the Parent, Guarantor, and Non-Guarantor Subsidiaries - The senior secured notes are fully and unconditionally guaranteed, jointly and severally, by certain wholly-owned subsidiaries: Titan Tire Corporation, Titan Tire Corporation of Bryan, Titan Tire Corporation of Freeport, and Titan Wheel Corporation of Illinois[86] Consolidated Net Sales (Three months ended March 31, 2020, in thousands) | Entity | Net Sales | | :-------------------- | :-------- | | Guarantor Subsidiaries | $159,969 | | Non Guarantor Subsidiaries | $341,685 | | Consolidated | $341,500 | Consolidated Total Assets (March 31, 2020, in thousands) | Entity | Total Assets | | :-------------------- | :----------- | | Guarantor Subsidiaries | $149,490 | | Non Guarantor Subsidiaries | $959,818 | | Consolidated | $1,060,254 | 21. Subsequent Events Discusses post-March 31, 2020 events, including COVID-19 impacts and the planned closure of Saltville operations - COVID-19 continued to significantly impact Titan's workforce and operations, leading to curtailments in European and Latin American locations during March 2020 and potentially beyond[99] - The Company is taking steps to finalize the closure of its wheel operations in Saltville, Virginia, by July 2020, expecting to incur disposal costs for assets totaling approximately $5 million[100] - The duration and severity of the COVID-19 pandemic's impact on economic conditions, customer demand, and the Company's financial results remain uncertain[99] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion of financial condition, operations, liquidity, and future outlook, highlighting COVID-19 impacts COVID-19 Pandemic - The COVID-19 pandemic adversely affected the Company's financial results and business operations in Q1 2020, with significant curtailment of operations in Europe and Latin America[102] - The duration and severity of the pandemic's impact on operations, customer demand, and the overall economy are highly uncertain and may continue indefinitely[103][106] FORWARD-LOOKING STATEMENTS - This section contains forward-looking statements regarding financial performance, market trends, capital expenditures, cost control, business strategies, product performance, and potential acquisitions/divestitures[107] - Actual results could differ materially due to risks including the COVID-19 pandemic, economic recession, changes in end-user markets, competition, labor relations, legal proceedings, raw material availability, and geopolitical uncertainties[109] OVERVIEW - Titan International, Inc. is a global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products for agricultural, earthmoving/construction, and consumer markets[112] - The Company's top customers include global leaders in agricultural and construction equipment manufacturing such as AGCO Corporation, Caterpillar Inc., CNH Global N.V., and Deere & Company[116] MARKET CONDITIONS AND OUTLOOK - The COVID-19 pandemic led to curtailed and suspended operations in certain geographies (China, Europe, South America) and is expected to impact the future outlook for the remainder of 2020[119] - Agricultural market outlook is volatile due to low commodity prices, tariffs, trade concerns, and OEM production pullbacks, though aftermarket demand remained relatively stable in Q1 2020[120] - Earthmoving/construction market is experiencing declines due to global economic uncertainty and COVID-19, with the largest impact expected in Q2 2020; mining demand is anticipated to be generally flat[121] - The consumer market is expected to see flat growth in 2020, affected by consumer spending and macroeconomic drivers[122] RESULTS OF OPERATIONS Key Financial Performance (Three months ended March 31, in thousands) | Metric | 2020 | 2019 | % Change | | :------------------------------------ | :--- | :--- | :------- | | Net sales | $341,500 | $410,374 | (16.8)% | | Gross profit | $27,244 | $45,264 | (39.8)% | | Gross profit % | 8.0% | 11.0% | (3.0) pp | | Selling, general and administrative expenses | $31,957 | $35,905 | (11.0)% | | Research and development expenses | $2,410 | $2,617 | (7.9)% | | Royalty expense | $2,480 | $2,606 | (4.8)% | | (Loss) income from operations | $(9,603) | $4,136 | (332.2)% | | Interest expense | $8,035 | $7,933 | 1.3% | | Foreign exchange (loss) gain | $(17,242) | $5,723 | (401.3)% | | Other income | $7,436 | $996 | 646.6% | | Provision for income taxes | $55 | $1,915 | (97.1)% | | Net (loss) income | $(27,499) | $1,007 | (2830.4)% | | Basic and diluted EPS | $(0.42) | $0.02 | (2200.0)% | - Net sales decreased by 16.8% due to lower volume, especially in earthmoving/construction, and the direct impact of COVID-19 plant closures in Europe and China[126] - Gross profit declined by 39.8% to 8.0% of net sales, impacted by lower sales volume, production inefficiencies, unfavorable foreign currency, and a $2.6 million asset impairment[127] - The Company shifted from an operating income of $4.1 million in Q1 2019 to an operating loss of $9.6 million in Q1 2020[133] - A significant foreign exchange loss of $17.2 million was recorded in Q1 2020, compared to a gain of $5.7 million in Q1 2019, due to negative movements in foreign currency exchange rates and intercompany loan settlements[135] SEGMENT INFORMATION Segment Performance (Three months ended March 31, in thousands) | Segment | Net Sales 2020 | Net Sales 2019 | % Change Net Sales | Gross Profit 2020 | Gross Profit 2019 | % Change Gross Profit | (Loss) Income from Operations 2020 | (Loss) Income from Operations 2019 | % Change (Loss) Income from Operations | | :-------------------- | :------------- | :------------- | :----------------- | :---------------- | :---------------- | :-------------------- | :--------------------------------- | :--------------------------------- | :------------------------------------- | | Agricultural | $172,938 | $191,730 | (9.8)% | $14,027 | $22,125 | (36.6)% | $(4,694) | $13,928 | (133.7)% | | Earthmoving/construction | $136,922 | $176,745 | (22.5)% | $10,754 | $18,170 | (40.8)% | $(6,994) | $5,528 | (226.5)% | | Consumer | $31,640 | $41,899 | (24.5)% | $2,463 | $4,969 | (50.4)% | $(295) | $2,121 | (113.9)% | - Agricultural segment net sales decreased by 9.8% due to lower sales volume in North America, Europe, and Australia, unfavorable currency translation, and price/mix, leading to an operating loss[143][144] - Earthmoving/construction segment net sales decreased by 22.5% primarily due to decreased volume in the construction market and $11.9 million direct impact from COVID-19 plant shutdowns[147] - Consumer segment net sales decreased by 24.5% due to lower sales volume in North America, Latin America, and Australia, and unfavorable currency translation and price mix[149] - Corporate & Unallocated expenses showed an income of $2.4 million in Q1 2020, a significant improvement from a $17.4 million expense in Q1 2019, attributed to a refinement of the allocation process[151] LIQUIDITY AND CAPITAL RESOURCES Cash Flow Summary (Three months ended March 31, in thousands) | Activity | 2020 | 2019 | Change | | :-------------------- | :--- | :--- | :------- | | Operating activities | $3,972 | $(15,619) | $19,591 | | Investing activities | $5,067 | $(34,259) | $39,326 | | Financing activities | $(8,293) | $36,740 | $(45,033) | | Net decrease in cash and cash equivalents | $(6,421) | $(13,370) | $6,949 | | Cash and cash equivalents, end of period | $60,378 | $68,315 | $(7,937) | Cash Conversion Cycle (Days) | Metric | March 31, 2020 | December 31, 2019 | March 31, 2019 | | :-------------------- | :------------- | :---------------- | :------------- | | Days sales outstanding | 57 | 56 | 66 | | Days inventory outstanding | 93 | 111 | 107 | | Days payable outstanding | (55) | (53) | (65) | | Cash conversion cycle | 95 | 114 | 108 | - Operating cash flows improved significantly, providing $4.0 million in Q1 2020 compared to using $15.6 million in Q1 2019, despite a net loss[154][155] - Investing activities provided $5.1 million in Q1 2020, a substantial increase from using $34.3 million in Q1 2019, driven by proceeds from asset sales and insurance settlements[158] - The Company had $60.4 million in cash and cash equivalents at March 31, 2020, with $62.3 million available under its $125 million revolving credit facility[162] - Total capital expenditures for 2020 are expected to be significantly lower than originally forecasted, and the Company is taking actions to obtain additional financial flexibility and reduce discretionary spending[163][165] CRITICAL ACCOUNTING ESTIMATES - There were no material changes in the Company's Critical Accounting Estimates since the filing of the 2019 Form 10-K[166] Item 3. Quantitative and Qualitative Disclosures About Market Risk Refers to 2019 Form 10-K disclosures on market risk, noting no material changes - No material changes to quantitative and qualitative disclosures about market risk have occurred since the 2019 Form 10-K filing[169] Item 4. Controls and Procedures Details the evaluation of disclosure controls and procedures, confirming effectiveness and no material changes in Q1 2020 - Management concluded that Titan's disclosure controls and procedures were effective as of March 31, 2020, providing reasonable assurance for accurate and timely reporting[170] - No material changes in internal control over financial reporting occurred during Q1 2020[171] - The Company acknowledges the inherent limitations of control systems, which can only provide reasonable, not absolute, assurance against misstatements or fraud[172] PART II. OTHER INFORMATION Contains disclosures on legal proceedings, risk factors, exhibits, and official signatures Item 1. Legal Proceedings Refers to Note 16 for detailed legal proceedings, including routine matters in the normal course of business - The Company is subject to routine legal proceedings, including environmental issues, product liability, contracts, and labor matters[176] Item 1A. Risk Factors Highlights the adverse impact of the COVID-19 pandemic as a significant additional risk factor - The COVID-19 pandemic has adversely impacted, and will likely continue to affect, the Company's business, operating results, and financial condition, leading to significant disruptions in workforce and operations[178] - The pandemic has caused unpredictable disruption in product demand, and its duration, ultimate impact, and timing of recovery remain uncertain, potentially leading to material adverse impacts and asset impairment charges[178][179] - The COVID-19 pandemic may heighten many of the other risks previously disclosed in the 2019 Form 10-K[180] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including certifications and XBRL taxonomy documents - Exhibits include certifications by the Principal Executive Officer and Principal Financial Officer (Sections 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL Taxonomy Extension documents[183] Signatures Contains signatures of authorized officers, certifying the report - The report is signed by Paul G. Reitz, President and Chief Executive Officer, and David A. Martin, SVP and Chief Financial Officer, on May 6, 2020[187]