
Part I. Financial Information This section presents the unaudited financial statements, management's analysis of financial condition and operations, market risk disclosures, and internal controls Item 1. Financial Statements (Unaudited) Unaudited financial statements for Q3 2020 show decreased net sales, increased net loss, reduced assets and equity, improved operating cash flow, and a dividend suspension Condensed Consolidated Statements of Operations This section details the company's net sales, gross profit, operating loss, and net loss for the three and nine months ended September 30, 2020 and 2019 Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $304,772 | $345,905 | $932,405 | $1,146,876 | | Gross profit | $31,317 | $27,100 | $88,428 | $110,672 | | Loss from operations | $(6,808) | $(12,616) | $(19,512) | $(10,910) | | Net loss attributable to Titan | $(12,643) | $(19,144) | $(43,174) | $(23,590) | | Loss per common share (Basic & Diluted) | $(0.21) | $(0.33) | $(0.71) | $(0.43) | - The company suspended its quarterly common stock dividend in June 2020, after paying $0.005 per share in Q1 202024 Condensed Consolidated Balance Sheets This section presents the company's financial position, including assets, liabilities, and equity, as of September 30, 2020, and December 31, 2019 Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 (unaudited) | Dec 31, 2019 | | :--- | :--- | :--- | | Total current assets | $638,415 | $651,465 | | Total assets | $1,016,347 | $1,114,307 | | Total current liabilities | $315,254 | $327,153 | | Total liabilities | $822,137 | $850,319 | | Total equity | $169,210 | $238,988 | - Cash and cash equivalents increased to $98.8 million as of September 30, 2020, from $66.8 million at December 31, 201914 - Inventories decreased to $284.2 million from $333.4 million, with long-term debt remaining stable at $431.8 million14 Condensed Consolidated Statements of Cash Flows This section outlines the cash flows from operating, investing, and financing activities for the nine months ended September 30, 2020 and 2019 Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $47,431 | $31,212 | | Net cash provided by (used for) investing activities | $25,364 | $(96,622) | | Net cash (used for) provided by financing activities | $(33,936) | $63,956 | | Net increase (decrease) in cash | $31,973 | $(3,082) | - Investing cash flow significantly improved due to the sale of Wheels India Limited shares for $32.9 million in 2020, contrasting with a $71.7 million payment in 201918 - Capital expenditures were reduced to $13.4 million in the first nine months of 2020 from $26.3 million in the prior year period18 Notes to Condensed Consolidated Financial Statements This section provides additional details on the financial statements, including impacts of COVID-19, asset impairments, debt changes, and legal proceedings - The COVID-19 pandemic significantly impacted operations from March through May 2020, particularly in Europe and Latin America, leading to curtailed production and increased operating costs21 - The company recorded a $2.6 million asset impairment charge for TTRC equipment and a $1.0 million inventory impairment for its Saltville, Virginia operations closure3671 - Total debt decreased from $499.7 million to $464.4 million, with the $36.0 million revolving credit facility fully paid down44188 - A tentative settlement in the Dico environmental litigation case involves a proposed $11.5 million payment, with an incremental $5.0 million accrual in Q3 20208991 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2020 net sales decline due to COVID-19 and market slowdowns, improved gross profit from cost reductions, and sufficient liquidity despite an uncertain outlook Market Conditions and Outlook This section discusses the uncertain market outlook due to COVID-19, recent improvements in agricultural demand, and continued declines in the earthmoving/construction sector - The outlook for the remainder of 2020 remains uncertain due to the ongoing COVID-19 pandemic, despite operations resuming after significant curtailment from March to May116131 - Agricultural market demand has somewhat increased with improved commodity prices, though major OEMs reduced production, and small equipment sales are rebounding faster133 - The earthmoving/construction market continues to decline due to global economic uncertainty and COVID-19, with demand for mining and large construction equipment softening since 2019134 Results of Operations This section analyzes the company's net sales, gross profit, and operating expenses for the three months ended September 30, 2020, compared to the prior year Key Operating Results (in thousands) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $304,772 | $345,905 | (11.9)% | | Gross profit | $31,317 | $27,100 | 15.6% | | Loss from operations | $(6,808) | $(12,616) | (46.0)% | - Q3 2020 net sales decreased 11.9% YoY, driven by a 9.7% volume decline and 5.8% negative currency impact, with COVID-19 reducing sales by approximately $8 million139 - Q3 gross profit margin improved to 10.3% from 7.8% YoY, despite lower sales, due to cost reduction initiatives and lower raw material prices141 - Q3 SG&A expenses decreased to $33.5 million from $35.0 million, impacted by a $5.0 million contingent legal accrual for the Dico case144 Segment Information This section provides a breakdown of net sales and operating income by Agricultural, Earthmoving/Construction, and Consumer segments for Q3 2020 and 2019 Net Sales by Segment - Q3 2020 vs Q3 2019 (in thousands) | Segment | Q3 2020 Net Sales | Q3 2019 Net Sales | % Change | | :--- | :--- | :--- | :--- | | Agricultural | $153,067 | $156,625 | (2.3)% | | Earthmoving/construction | $123,227 | $155,659 | (20.8)% | | Consumer | $28,478 | $33,621 | (15.3)% | Income (Loss) from Operations by Segment - Q3 2020 vs Q3 2019 (in thousands) | Segment | Q3 2020 Income (Loss) | Q3 2019 Income (Loss) | | :--- | :--- | :--- | | Agricultural | $3,091 | $(1,230) | | Earthmoving/construction | $656 | $(2,938) | | Consumer | $(88) | $(229) | - The Agricultural segment's Q3 operating income significantly improved due to higher gross profit from production efficiencies and lower material costs, despite a slight sales decline165166 - The Earthmoving/Construction segment experienced a 20.8% drop in Q3 sales but improved operating income to a $0.7 million profit from a $2.9 million loss YoY due to cost containment171172 Liquidity and Capital Resources This section details the company's liquidity position, including cash balances, operating cash flow, available credit, and planned capital expenditures - As of September 30, 2020, the company held $98.8 million in cash and cash equivalents, an increase of $32.0 million from year-end 2019183192 - Cash from operations for the first nine months of 2020 was $47.4 million, an improvement from $31.2 million YoY, primarily due to a $36.7 million reduction in inventories183 - The company had $61.4 million available under its $125 million revolving credit facility as of September 30, 2020, with no outstanding borrowings192 - Management expects full-year 2020 capital expenditures to be approximately $20 million, a reduction aimed at preserving cash due to COVID-19 impacts193 Quantitative and Qualitative Disclosures About Market Risk The company states there have been no material changes in its market risk disclosures since its 2019 Form 10-K report - No material changes have occurred in quantitative and qualitative market risk disclosures since the 2019 Annual Report on Form 10-K198 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2020. No material changes to internal control over financial reporting occurred during the third quarter of 2020 - Management concluded the company's disclosure controls and procedures were effective as of September 30, 2020199 - No material changes to internal control over financial reporting occurred during Q3 2020200 Part II. Other Information This section addresses legal proceedings, updated risk factors, and a list of exhibits filed with the report Legal Proceedings The company is involved in routine legal proceedings. Specific details regarding ongoing litigation, particularly environmental matters, are referenced in Note 17 of the financial statements - The company is subject to various legal proceedings, including environmental and product liability issues, with details referenced in Note 17 of the financial statements205 Risk Factors The company highlights the ongoing adverse impact of the COVID-19 pandemic as a significant risk factor. This includes disruptions to operations, unpredictable product demand, and potential negative effects on economic growth and financial markets, which could heighten other existing business risks - A new risk factor details the adverse impacts of the COVID-19 pandemic on the company's business, operating results, and financial condition206207 - The pandemic has caused and may continue to cause unpredictable disruptions in product demand, operational activities, and customer collections, with uncertain duration and impact207208 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002 and Inline XBRL data files - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002212 - The filing also includes various Inline XBRL taxonomy documents for financial data reporting212