Titan International (NYSE: TWI) reported Q3 EPS of ($0.28), $0.22 worse than the analyst estimate of ($0.06). Revenue for the quarter came in at $345.9 million versus the consensus estimate of $370.66 million.

"Our third quarter results reflect the continued softening in our business across all regions and segments with net sales declining approximately ten percent," commented Paul Reitz, President and Chief Executive Officer. "Conditions in North America Ag have not improved from the difficult planting season and uncertainty abounds from a global economic perspective. These factors have added to weakening demand beyond North American Ag and into the global construction market, which led to OEMs producing below retail demand levels during the quarter, which had a significant effect on our performance. Despite ongoing actions to react to these continually evolving conditions, our demand visibility remains extremely limited. In addition, we continued to experience underperformance in our North American Wheel operation from reductions of inventory at higher than current prevailing prices of steel, which compressed gross profit by approximately $7 million during the quarter. Over 10 years ago, we experienced similar issues in the North America Wheel steel procurement process that cost the Company millions of dollars in excess costs. Corrective actions were put in place with the belief that the situation was rectified, but a similar problem arose again in 2019. We are taking strong actions to drive necessary changes in the North America wheel procurement and operations management personnel and the related processes to ensure these types of anomalies are completely eliminated going forward.

"Cost reductions to align our production and workforce to current demand levels have been ongoing and will continue based upon our expectations of market conditions in the near term. We have already reduced our headcount by more than five percent this year and have developed plans to reduce headcount further by another three to five percent in coming months. These actions have reduced our operational cost structure by approximately $10 million on an annualized basis. Also, we've significantly reduced working hours in many locations by taking additional days or even weeks out of our production schedules. Titan has been through many business cycles and our management team is experienced at taking quick actions in difficult situations to adjust to these declining market trends. In addition to these actions, we are realigning our business in Australia and have reduced inventory by $12 million since March and closed three locations. The 80/20 initiatives within North American tire have refocused our operations on \'A\' products resulting in reduced inventory of $16 million this year and are expected to reduce operational costs by $3 million to $5 million next year. We are expanding our tire export opportunities into Europe and elsewhere and we expect to drive $12 million to $15 million of incremental revenue next year. All of these actions should produce improved profitability moving forward.

"As part of the plan we have outlined in previous quarters, we were able to make meaningful improvements in reducing our working capital and increasing our cash balance. This reflects the efforts taken across each of our business units and is expected to continue moving forward. These reductions are expected to continue into the future as a result of our ongoing efforts and are not simply from the reduced business level. Subsequent to the end of the quarter, we closed on a $19 million asset sale relating to a portion of our investment in Wheels India and the proceeds were used fully to reduce debt. Our goal is to repay all borrowings under the U.S. credit facility by early 2020. We believe this is achievable with planned reductions in our working capital and additional non-core asset sales, which we have previously discussed as being within the range of $30 million to $50 million.

"Reflecting near-term demand levels, we now anticipate fourth quarter sales to be at a similar level to third quarter at $335 million to $350 million. Our margins should improve somewhat with recent cost reduction actions and right-sized inventory levels. We anticipate adjusted EBITDA for the fourth quarter to be in the $15 million to $20 million range, which would bring full year adjusted EBITDA to $56 million to $61 million. We are in the midst of our planning time frame for 2020 and we will address our expectations for next year in the coming months."

For earnings history and earnings-related data on Titan International (TWI) click here.