10-Q 1 twi-20240331.htm 10-Q twi-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

titancolora33.jpg

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-12936

TITAN INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

1525 Kautz Road, Suite 600, West Chicago, IL
(Address of principal executive offices)

36-3228472
(I.R.S. Employer Identification No.)

60185
(Zip Code)
(630) 377-0486
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol
Name of each exchange on which registered
Common stock, $0.0001 par valueTWINew York Stock Exchange


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
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.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No

Indicate the number of shares of Titan International, Inc. outstanding: 72,870,714 shares of common stock, $0.0001 par value, as of April 24, 2024.




TITAN INTERNATIONAL, INC.

TABLE OF CONTENTS

Page


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(All amounts in thousands, except per share data)
 
 Three months ended
March 31,
 20242023
Net sales$482,209 $548,644 
Cost of sales404,839 453,087 
Gross profit77,370 95,557 
Selling, general and administrative expenses39,420 34,472 
Acquisition related expenses6,196  
Research and development expenses3,654 3,014 
Royalty expense3,028 2,935 
Income from operations25,072 55,136 
Interest expense, net(5,492)(6,492)
Foreign exchange loss(275)(1,760)
Other income 405 762 
Income before income taxes19,710 47,646 
Provision for income taxes9,736 14,216 
Net income9,974 33,430 
Net income attributable to noncontrolling interests773 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: 
Basic64,928 62,905 
Diluted65,704 63,621 
 

See accompanying Notes to Condensed Consolidated Financial Statements.
1

TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(All amounts in thousands)

Three months ended
March 31,
 20242023
Net income$9,974 $33,430 
Derivative gain (loss)2 (111)
Currency translation adjustment, net(14,368)6,944 
Pension liability adjustments, net of tax of $(12) and $11, respectively
148 (30)
Comprehensive (loss) income(4,244)40,233 
Net comprehensive income attributable to noncontrolling interests437 497 
Comprehensive (loss) income attributable to Titan$(4,681)$39,736 


See accompanying Notes to Condensed Consolidated Financial Statements.
2

TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share data)
 March 31, 2024December 31, 2023
Assets(unaudited)
Current assets  
Cash and cash equivalents$203,628 $220,251 
Accounts receivable, net355,559 219,145 
Inventories504,945 365,156 
Prepaid and other current assets91,004 72,229 
Total current assets1,155,136 876,781 
Property, plant and equipment, net450,446 321,694 
Operating lease assets108,777 11,955 
Goodwill12,867  
Intangible assets, net17,046 1,431 
Deferred income taxes26,283 38,033 
Other long-term assets43,040 39,351 
Total assets$1,813,595 $1,289,245 
Liabilities  
Current liabilities  
Short-term debt$18,693 $16,913 
Accounts payable287,933 201,201 
Operating leases12,289 5,021 
Other current liabilities176,148 149,240 
Total current liabilities495,063 372,375 
Long-term debt554,440 409,178 
Deferred income taxes4,708 2,234 
Operating leases95,467 6,153 
Other long-term liabilities32,982 31,890 
Total liabilities1,182,660 821,830 
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 paid-in capital735,544 569,065 
Retained earnings178,824 169,623 
Treasury stock (at cost, 5,613,074 shares at March 31, 2024 and 5,809,414 shares at December 31, 2023)
(51,300)(52,585)
Accumulated other comprehensive loss(232,925)(219,043)
Total Titan shareholders’ equity630,143 467,060 
Noncontrolling interests792 355 
Total equity630,935 467,415 
Total liabilities and equity$1,813,595 $1,289,245 
See accompanying Notes to Condensed Consolidated Financial Statements.
3

TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(All amounts in thousands, except share data)

  Number of
common shares
Additional
paid-in
capital
Retained earningsTreasury stockAccumulated other comprehensive (loss) incomeTotal Titan Equity Non-controlling interestTotal Equity
Balance January 1, 202460,715,855 $569,065 $169,623 $(52,585)$(219,043)$467,060 $355 $467,415 
Net income 9,201 9,201 773 9,974 
Currency translation adjustment, net(14,032)(14,032)(336)(14,368)
Pension liability adjustments, net of tax148 148 148 
Derivative gain2 2 2 
Stock-based compensation266,817 (2,388)2,420 32 32 
Issuance of treasury stock under 401(k) plan29,523 174 267 441 441 
Common stock repurchase(100,000)(1,402)(1,402)(1,402)
Common stock issuance11,921,766 168,693 168,693 168,693 
Balance March 31, 202472,833,961 $735,544 $178,824 $(51,300)$(232,925)$630,143 $792 $630,935 


  Number of
common shares
Additional
paid-in
capital
Retained earningsTreasury stockAccumulated other comprehensive (loss) incomeTotal Titan Equity Non-controlling interestTotal Equity
Balance January 1, 202362,843,961 $565,546 $90,863 $(23,418)$(251,755)$381,236 $1,902 $383,138 
Net income31,838 31,838 1,592 33,430 
Currency translation adjustment, net8,039 8,039 (1,095)6,944 
Pension liability adjustments, net of tax(30)(30)(30)
Derivative loss(111)(111)(111)
Stock-based compensation322,157 (1,303)2,003 700 700 
Issuance of treasury stock under 401(k) plan28,733 250 179 429 429 
Common stock repurchase (109,789)(1,293)(1,293)(1,293)
Balance March 31, 202363,085,062 $564,493 $122,701 $(22,529)$(243,857)$420,808 $2,399 $423,207 


See accompanying Notes to Condensed Consolidated Financial Statements.
4

TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(All amounts in thousands)
Three months ended March 31,
Cash flows from operating activities:20242023
Net income$9,974 $33,430 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization12,001 10,830 
Deferred income tax provision3,491 4,089 
Loss (gain) on fixed asset and investment sale25 (10)
Stock-based compensation32 700 
Issuance of stock under 401(k) plan441 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 payable25,196 10,237 
Other current liabilities3,695 15,947 
Other liabilities1,401 110 
Net cash provided by operating activities2,005 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 assets52 258 
Net cash used for investing activities(158,762)(11,440)
Cash flows from financing activities:  
Proceeds from borrowings154,771 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 activities145,706 (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 period220,251 159,577 
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 $ 

See accompanying Notes to Condensed Consolidated Financial Statements.
5


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation
The accompanying unaudited condensed consolidated interim financial statements include the accounts of Titan International, Inc. and its subsidiaries (Titan or the Company) and have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the SEC). Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The accompanying unaudited condensed consolidated interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the Company's financial position and the results of operations and cash flows for the periods presented, and should be read in conjunction with the consolidated financial statements and the related notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024 (the 2023 Form 10-K). All intercompany transactions have been eliminated in consolidation. These unaudited condensed consolidated interim financial statements include estimates and assumptions of management that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates.

Reclassifications
The Company has reclassified certain prior period amounts in the consolidated balance sheet, primarily lease liabilities, to confirm with the current period presentation.

Business Combinations
We account for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires an allocation of the consideration we paid to the identifiable assets, intangible assets and liabilities based on the estimated fair values as of the closing date of the acquisition. The excess of the fair value of the purchase price over the fair values of these identifiable assets, intangible assets and liabilities is recorded as goodwill.

Purchased intangibles other than goodwill are initially recognized at fair value and amortized over their useful lives unless those lives are determined to be indefinite. The valuation of acquired assets will impact future operating results. The fair value of identifiable intangible assets is determined using an income approach on an individual asset basis. Specifically, we use the multi-period excess earnings method to determine the fair value of customer relationships and the relief-from-royalty approach to determine the fair value of the tradename and proprietary technology. Determining the fair value of acquired intangibles involves significant estimates and assumptions, including forecasted revenue growth rates, EBIT margins, percentage of revenue attributable to the tradename, contributory asset charges, customer attrition rate, market-participant discount rates, the assumed royalty rates and income tax rates.

The determination of the useful life of an intangible asset other than goodwill is based on factors including historical tradename performance with respect to consumer name recognition, geographic market presence, market share, plans for ongoing tradename support and promotion, customer attrition rate, and other relevant factors.

Fair value of financial instruments
The Company records all financial instruments, including cash and cash equivalents, accounts receivable, notes receivable, accounts payable, other accruals, revolving credit facility, and notes payable at cost, which approximates fair value due to their short term or stated rates.  Investments in marketable equity securities are recorded at fair value.  Our 7.00% senior secured notes due 2028 were carried at a cost of $396.5 million at March 31, 2024. The fair value of the senior secured notes due 2028 at March 31, 2024, as determined with the assistance of an independent pricing source, was approximately $392.0 million, which was determined to be a level 2 fair value measurement.

Hyperinflation in Argentina and Turkey
In July 2018 and March 2022, the three-year cumulative rate of inflation for consumer prices and wholesale prices reached a level in excess of 100% for Argentina and Turkey, respectively. As a result, in accordance with ASC 830 Foreign Currency Matters, Argentina and Turkey were considered hyperinflationary economies and the Company applied the standard for the year ended December 31, 2023.

6


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
For the three months ended March 31, 2024, the Company recognized a net monetary loss of $1.2 million recorded in foreign exchange loss in the consolidated statements of operations associated with the application of ASC 830.

Russia-Ukraine military conflict
In February 2022, in response to the military conflict between Russia and Ukraine, the United States, other North Atlantic Treaty Organization member states, as well as non-member states, announced targeted economic sanctions on Russia, certain Russian citizens and enterprises. The continuation of the conflict triggered additional economic and other sanctions enacted by the United States and other countries throughout the world. The scope of potential additional sanctions is unknown.

The Company currently owns 64.3% of the Voltyre-Prom, a leading producer of agricultural and industrial tires in Volgograd, Russia, which represents approximately 5% and 7% of consolidated assets of Titan as of March 31, 2024 and December 31, 2023, respectively. The Russian operations represent 5% and 6% of consolidated global sales for the three months ended March 31, 2024 and 2023. The impact of the military conflict between Russia and Ukraine has not had a significant impact on global operations. The Company continues to monitor the potential impacts on the business including the increased cost of energy in Europe and the ancillary impacts that the military conflict could have on other global operations.

Share Repurchase Program
On December 16, 2022, the Board of Directors authorized a share repurchase program allowing for the expenditure of up to $50.0 million (the “Share Repurchase Program”) for the repurchase of the Company's common stock. This authorization took effect immediately and will remain in place for up to three years. Under the Share Repurchase Program Titan repurchased 100,000 shares of its common stock totaling $1.4 million during the three months ended March 31, 2024 and 2,653,786 shares of its common stock totaling $32.6 million during 2023. As of March 31, 2024, $16.0 million remains available for future share repurchases under this program. The Company records treasury stock using the cost method.

Supplier financing program
A subsidiary of Titan participates in supplier financing programs pursuant to credit agreements between certain suppliers and financial institutions. The program enables those suppliers to receive payment from participating financial institutions prior to the payment date specified in the terms between Titan and the supplier. Titan does not incur annual service fees associated with its enrollment in the supplier financing program. The transactions are at the sole discretion of both the suppliers and the financial institution, and Titan is not a party to the agreement and has no economic interest in the supplier's decision to receive payment prior to the payment date. The terms between Titan and a supplier, including the amount due and scheduled payment dates, are not impacted by a supplier's participation in the program. Amounts due to suppliers who participate in the program are included in the accounts payable line item in Titan's Consolidated Balance Sheets and Titan’s payments made under the program are reflected in cash flows from operating activities in Titan's Consolidated Statements of Cash Flows. For suppliers who participate in a supplier financing program, Titan will pay the financial institution directly rather than the supplier. The confirmed obligations under the supplier financing programs included in the accounts payable line item in Titan's Consolidated Balance Sheet were $6.7 million at March 31, 2024, and $7.4 million at December 31, 2023.

New accounting pronouncements to be adopted in future periods
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU require, among other things, disclosure of significant segment expenses that are regularly provided to an entity's chief operating decision maker (“CODM”) and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Annual disclosures are required for fiscal years beginning after December 15, 2023 and interim disclosures are required for periods within fiscal years beginning after December 15, 2024. Retrospective application is required, and early adoption is permitted. These requirements are not expected to have an impact on our financial statements, but will result in significantly expanded reportable segment disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024,
7


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
may be applied prospectively or retrospectively, and allows for early adoption. These requirements will impact our income tax disclosures.

2. BUSINESS COMBINATION

Acquisition of The Carlstar Group

On February 29, 2024, the Company acquired 100% of the equity interests of The Carlstar Group, LLC ("Carlstar") for the following purchase consideration and subject to a working capital adjustment based on an agreed upon working capital target (amounts in thousands):

Purchase Consideration
Titan International, Inc. common stock$168,693 
Base cash consideration, net of cash acquired of $10,288127,500 
296,193 
Additional cash consideration for excess net working capital acquired18,372 
Other debt-like items(3,665)
Total purchase consideration, net of cash acquired$310,900 

Carlstar is a global manufacturer and distributor of wheels and tires for a variety of end-market verticals including outdoor power equipment, power sports, trailers, and small to midsize agricultural and construction equipment. Carlstar has 17 manufacturing and distribution facilities located in four countries and provides solutions to customers in North America, Europe and China.

The following table summarizes the major classes of assets and liabilities to which we have preliminarily allocated the purchase price consideration (amounts in thousands). The final allocation is subject to review and agreement with the prior equityholders of Carlstar.
Fair Values as of
February 29, 2024
Accounts receivable$98,439 
Inventories145,988 
Prepaid and other current assets13,339 
Property, plant, and equipment128,162 
Other long-term assets96,203 
Goodwill12,867 
Intangible assets15,770 
Fair value of assets acquired$510,768 
Accounts payable66,055 
Other current liabilities26,377 
Operating leases95,476 
Deferred tax liabilities10,451 
Other long-term liabilities1,509 
Fair value of liabilities assumed199,868 
Purchase Price$310,900 

Goodwill represents value the Company expects to be created by combining the operations of the acquired business with the Company's operations, including the expansion of customer relationships, access to new customers, and potential cost savings and synergies. Goodwill related to the acquisition is expected to be deductible for tax purposes. The assignment of the acquired goodwill to the Company's reporting units has not been completed.
8


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The purchase consideration was allocated on a provisional basis to the estimated fair value of assets acquired and liabilities assumed for Carlstar as of February 29, 2024. These fair value estimates are preliminary and subject to change as management completes further analyses and studies.

The following table summarizes the carrying amounts and weighted average lives of the acquired intangible assets (amounts in thousands):
 Carrying ValueWeighted Average Amortization (in Years)
Customer lists/relationships$10,347 10.00
Trade names3,508 15.00
Other intangibles1,915 6.25
Total$15,770 10.66

Through March 31, 2024, the actual revenue and net income of Carlstar since the acquisition date of February 29, 2024 included in the consolidated statement of operations is as shown below (amounts in thousands). The net income includes the effect of fair value adjustments for the amortization of inventory, intangible assets, and depreciation of property, plant and equipment.
 From Acquisition Date to
March 31, 2024
Carlstar revenue$51,788 
Carlstar net income1,254 

The following is the unaudited pro forma financial information for the three months ended March 31, 2024 and 2023 that reflects our results of our operations as if the acquisition of Carlstar had been completed on January 1, 2023. This unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what the actual results of operations would have been had the transactions taken place on January 1, 2023, nor is it indicative of the future consolidated results of operations or financial position of the combined companies (amounts in thousands).

 March 31,
2024
March 31,
2023
Proforma revenues$584,027 $725,775 
Proforma net income25,445 23,056 
Net income per common share, basic$0.35 $0.31 
Net income per common share, diluted$0.35 $0.31 

These pro forma amounts have been calculated after applying Titan's accounting policies and making certain adjustments, which primarily relate to: (i) severance-related costs, (ii) adjustments relating to the fair value step-ups to inventory, and (iii) transaction-related costs of both Titan and Carlstar. These pro forma amounts were adjusted to be excluded from the unaudited pro forma information for the three months ended March 31, 2024 and were adjusted to include these amounts for the three months ended March 31, 2023.

Total acquisition-related costs for the three months ended March 31, 2024 were approximately $6.2 million.

9


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
3. ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following (amounts in thousands):
 March 31,
2024
December 31,
2023
Accounts receivable$363,801 $225,727 
Allowance for credit losses(8,242)(6,582)
Accounts receivable, net$355,559 $219,145 

Accounts receivable are reduced by an estimated allowance for credit losses which is based on known risks and historical losses.

4. INVENTORIES

Inventories consisted of the following (amounts in thousands):
 March 31,
2024
December 31,
2023
Raw material$126,534 $108,504 
Work-in-process49,632 39,921 
Finished goods328,779 216,731 
 $504,945 $365,156 

Inventories are reduced by estimated provisions for slow-moving and obsolete inventory.

5. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following (amounts in thousands):
 March 31,
2024
December 31,
2023
Land and improvements$48,448 $42,140 
Buildings and improvements272,401 243,241 
Machinery and equipment840,332 628,975 
Tools, dies and molds127,023 116,328 
Construction-in-process49,736 29,744 
 1,337,940 1,060,428 
Less accumulated depreciation(887,494)(738,734)
 $450,446 $321,694 
 
Depreciation on property, plant and equipment for the three months ended March 31, 2024 and 2023 totaled $11.5 million and $10.4 million, respectively.

10


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
6. INTANGIBLE ASSETS, NET

The components of intangible assets, net consisted of the following (amounts in thousands):
Weighted- Average Useful Lives (in Years)March 31, 2024December 31, 2023
Amortizable intangible assets:
Customer lists/relationships10.00$10,347 $ 
Trade names15.003,508  
Other intangibles14.025,299 3,384 
          Total at cost19,154 3,384 
     Less accumulated amortization(2,108)(1,953)
$17,046 $1,431 

Amortization related to intangible assets for the three months ended March 31, 2024 and 2023 totaled $0.2 million and $0.2 million, respectively.

The estimated aggregate amortization expense at March 31, 2024, for each of the years (or other periods) set forth below was as follows (amounts in thousands):
April 1 - December 31, 2024$1,383 
20251,844 
20261,705 
20271,669 
20281,669 
Thereafter8,776 
 $17,046 

11


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7. OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following (amounts in thousands):
 March 31,
2024
December 31,
2023
Compensation and benefits$54,802 $47,543 
Warranty23,500 21,710 
Accrued insurance benefits20,398 19,162 
Customer rebates and deposits13,954 15,490 
Accrued other taxes15,411 13,762 
Accrued interest12,816 4,955 
Foreign government grant (1)
3,882 4,509 
Other31,385 22,109 
 $176,148 $149,240 
(1) The Company received government subsidies in 2023 associated with capital expenditure investments in technological and digital innovation in Europe. The amount of the government subsidy is used to offset existing payables to government in the future. In addition, during August 2014, the Company received an approximately $17.0 million capital grant from the Italian government for asset damages related to the earthquake that occurred in May 2012 at one of our Italian subsidiaries. The grant was recorded as deferred income in non-current liabilities which is being amortized over the life of the reconstructed building. There are no specific stipulations associated with the government grant.

8. WARRANTY

Changes in the warranty liability during the three months ended March 31, 2024 and 2023, respectively, consisted of the following (amounts in thousands):
 20242023
Warranty liability at beginning of the period$21,710 $19,914 
Provision for warranty liabilities4,043 4,439 
Warranty payments made(4,037)(2,727)
   Other adjustments, including acquisition of Carlstar1,784  
Warranty liability at end of the period$23,500 $21,626 

The Company provides limited warranties on workmanship on its products in all market segments.  The majority of the Company’s products are subject to a limited warranty that ranges between less than one year and ten years, with certain product warranties being prorated after the first year.  The Company calculates a provision for warranty expense based on past warranty experience.  Warranty accruals are included as a component of other current liabilities on the Condensed Consolidated Balance Sheets.

12


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
9. DEBT

Long-term debt consisted of the following (amounts in thousands):
March 31, 2024
Principal BalanceUnamortized Debt IssuanceNet Carrying Amount
7.00% senior secured notes due 2028$400,000 $(3,504)$396,496 
Revolving credit facility147,000  147,000 
Titan Europe credit facilities22,590  22,590 
Other debt7,047  7,047 
     Total debt576,637 (3,504)573,133 
Less amounts due within one year18,693  18,693 
     Total long-term debt$557,944 $(3,504)$554,440 
December 31, 2023
Principal BalanceUnamortized Debt IssuanceNet Carrying Amount
7.00% senior secured notes due 2028$400,000 $(3,723)$396,277 
Titan Europe credit facilities22,568  22,568 
Other debt7,246  7,246 
     Total debt429,814 (3,723)426,091 
Less amounts due within one year16,913  16,913 
     Total long-term debt$412,901 $(3,723)$409,178 

The weighted-average interest rates on short-term borrowings within one year at March 31, 2024 and December 31, 2023, were approximately 3.2% and 3.1%, respectively.

Aggregate principal maturities of long-term debt at March 31, 2024 for each of the years (or other periods) set forth below were as follows (amounts in thousands):
April 1 - December 31, 2024$13,968 
20254,013 
20266,680 
20271,021 
2028400,466 
Thereafter150,489 
 $576,637 
7.00% senior secured notes due 2028
On April 22, 2021, the Company issued $400 million aggregate principal amount of 7.00% senior secured notes due April 2028 (the senior secured notes due 2028), guaranteed by certain of the Company's subsidiaries. Including the impact of debt issuance costs, these notes had an effective yield of 7.27% at issuance. These notes are secured by the land and buildings of the following subsidiaries of the Company: Titan Wheel Corporation of Illinois, Titan Tire Corporation, Titan Tire Corporation of Freeport, and Titan Tire Corporation of Bryan. The Company is subject to certain covenants associated with the senior secured notes due 2028 and remained in compliance with these debt covenants at March 31, 2024.

13


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Titan Europe credit facilities
The Titan Europe credit facilities include borrowings from various institutions totaling $22.6 million in aggregate principal amount at March 31, 2024. Maturity dates on this debt range from less than one year to five years. The interest rates range from 0.5% to 6.5%.

Revolving credit facility
In connection with the acquisition of Carlstar, Titan entered into a new domestic credit facility which was effective on February 29, 2024. The new credit facility, with Bank of America as agent, consists of a $225.0 million revolving line of credit (the previous credit facility was $125.0 million) and is collateralized by accounts receivable and inventory of certain of the Company's domestic and Canadian subsidiaries. In addition, swingline loans and letters of credit are available under the facility up to an aggregate outstanding amount of $20.0 million for swingline loans and $50.0 million for letters of credit. The credit facility has a five-year term and can be expanded by up to $50.0 million through an uncommitted accordion provision within the agreement. It is scheduled to mature on February 28, 2029 or 91 days prior to the maturity of the Company's 7.00% secured notes due in 2028. The new facility has terms similar to those contained in the previous credit facility as well as other enhancements to further improve the availability within the borrowing base. The interest rate of the credit facility is based on the prevailing SOFR rate subject to certain debt levels within each month. As of March 31, 2024, the interest rate was 7.05%.

Prior to February 29, 2024, the Company had a $125.0 million revolving credit facility with BMO Harris Bank N.A., as agent, and other financial institutions party thereto, until the completion of the new credit facility noted above. The $125.0 million credit facility was collateralized by accounts receivable and inventory of certain of the Company’s domestic subsidiaries and was scheduled to mature in October 2026. The credit facility could have been expanded by up to $50.0 million through an accordion provision within the agreement. From time to time Titan's availability under this credit facility could have been less than $125.0 million as a result of outstanding letters of credit and eligible accounts receivable and inventory balances at certain of its domestic subsidiaries.

The Company's amount available for borrowing under the new credit facility at March 31, 2024 totaled $225.0 million, based on eligible accounts receivable and inventory balances. With outstanding letters of credit totaling $10.6 million and $147.0 million in borrowings under the revolving credit facility, the net amount available for borrowing under the new credit facility totaled $67.4 million at March 31, 2024. The Company is subject to certain affirmative and negative covenants under the credit facility, including limits on dividends and repurchases of the Company’s stock, that are described in the credit and security agreement. The Company is in compliance with the debt covenants at March 31, 2024.

Other debt
The Company has a working capital loan at Titan Pneus do Brasil Ltda at varying interest rates from approximately 7% to 7.6%, which totaled $7.0 million at March 31, 2024. The maturity dates on this loan range from one year to two years. The Company expects to negotiate an extension of the maturity date on this loan with the respective financial institution or repay, as needed.

10. LEASES

The Company leases certain buildings and equipment under both operating and finance leases.  Certain lease agreements provide for renewal options, fair value purchase options, and payment of property taxes, maintenance, and insurance by the Company. Under FASB Accounting Standards Codification Topic 842 "Leases," the Company made an accounting policy election, by class of underlying asset, not to separate non-lease components such as those previously stated from lease components and instead will treat the lease agreement as a single lease component for all asset classes. Operating right-of-use (ROU) assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent Titan's obligations to make lease payments arising from the lease. The majority of Titan's leases are operating leases. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of Titan's leases do not provide an implicit interest rate, the Company used its incremental borrowing rate (7.27%), based on the information available at the lease commencement date, in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of sales and selling, general and administrative expenses on the Condensed Consolidated Statements of Operations. Amortization expense associated with finance leases is included in cost of sales and selling, general and administrative expenses, and interest expense associated with finance leases is included in interest expense in the Condensed Consolidated Statements of Operations.

14


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Supplemental balance sheet information related to leases was as follows (amounts in thousands):
Balance Sheet ClassificationMarch 31, 2024December 31, 2023
Operating lease ROU assetsOperating lease assets$108,777 $11,955 
                                
Operating lease current liabilitiesOperating leases current liabilities$12,289 $5,021 
Operating lease long-term liabilitiesOperating leases long-term liabilities95,467 6,153 
    Total operating lease liabilities$107,756 $11,174 
Finance lease, grossProperty, plant & equipment, net$4,914 $5,175 
Finance lease accumulated depreciationProperty, plant & equipment, net(2,986)(3,489)
   Finance lease, net$1,928 $1,686 
Finance lease current liabilitiesOther current liabilities$1,334 $1,093 
Finance lease long-term liabilitiesOther long-term liabilities1,276 1,321 
   Total finance lease liabilities$2,610 $2,414 

At March 31, 2024, maturities of lease liabilities were as follows (amounts in thousands):
Operating LeasesFinance Leases
April 1 - December 31, 2024$21,508 $1,537 
202517,060 873 
202615,841 562 
202713,323 133 
202812,116 66 
Thereafter126,754 17 
Total lease payments$206,602 $3,188 
Less imputed interest98,846 578 
$107,756 $2,610 
Weighted average remaining lease term (in years)12.992.36
Supplemental cash flow information related to leases for the three months ended March 31, 2024 were as follows: operating cash flows from operating leases were $3.9 million.

15


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
11. EMPLOYEE BENEFIT PLANS

The Company has three frozen defined benefit pension plans covering certain employees or former employees of three U.S. subsidiaries. The Company also has pension plans covering certain employees of several foreign subsidiaries. The Company also sponsors a number of defined contribution plans in the U.S. and at foreign subsidiaries. The Company contributed approximately $0.1 million to the pension plans during the three months ended March 31, 2024 and $0.8 million are expected to be contributed to the pension plans during the remainder of 2024.

The components of net periodic pension cost consisted of the following for the periods set forth below (amounts in thousands):
Three months ended
March 31,
20242023
Service cost$162 $106 
Interest cost952 1,027 
Expected return on assets(1,301)(1,167)
Amortization of unrecognized prior service cost(16)(15)
Amortization of net unrecognized loss 68 240 
   Net periodic pension (benefit) cost$(135)$191 
Service cost is recorded as cost of sales in the Condensed Consolidated Statements of Operations while all other components are recorded in other income.

12. VARIABLE INTEREST ENTITIES

The Company holds a variable interest in one joint venture for which Titan is the primary beneficiary. Titan is a 50% owner of a manufacturer of undercarriage components and complete track systems for earthmoving machines in India. As the primary beneficiary of this variable interest entity (VIE), the VIE's assets, liabilities, and results of operations are included in the Company’s condensed consolidated financial statements. The other equity holder's interests are reflected in “Net income attributable to noncontrolling interests” in the Condensed Consolidated Statements of Operations and “Noncontrolling interests” in the Condensed Consolidated Balance Sheets.
The following table summarizes the carrying amount of the VIE's assets and liabilities included in the Company’s Condensed Consolidated Balance Sheets (amounts in thousands):
 March 31,
2024
December 31, 2023
Cash and cash equivalents$718 $355 
Inventory1,552 1,431 
Other current assets2,125 2,364 
Property, plant and equipment, net2,351 2,477 
Other non-current assets154 222 
   Total assets$6,900 $6,849 
Current liabilities$1,147 $1,117 
Other long-term liabilities868 869 
  Total liabilities$2,015 $1,986 

All assets in the above table can only be used to settle obligations of the consolidated VIE to which the respective assets relate. Liabilities are non-recourse obligations. Amounts presented in the table above are adjusted for intercompany eliminations.

The Company holds variable interests in certain VIEs that are not consolidated because Titan is not the primary beneficiary. The Company's involvement with these entities is in the form of direct equity interests and prepayments related to purchases of
16


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
materials. The maximum exposure to loss represents the loss of assets recognized by Titan relating to non-consolidated entities and amounts due to the non-consolidated assets. The assets and liabilities recognized in Titan's Condensed Consolidated Balance Sheets related to Titan's interest in these non-consolidated VIEs and the Company's maximum exposure to loss relating to non-consolidated VIEs as of the dates set forth below were as follows (amounts in thousands):
 March 31, 2024December 31, 2023
Investments$7,290 $7,127 
     Total VIE assets7,290 7,127 
Accounts payable to the non-consolidated VIEs5,711 3,578 
  Maximum exposure to loss$13,001 $10,705 

13. ROYALTY EXPENSE

The Company has trademark license agreements with The Goodyear Tire & Rubber Company to manufacture and sell certain farm tires under the Goodyear brand. These agreements cover sales in North America, Latin America, Europe, the Middle East, Africa, Russia, and other Commonwealth of Independent States countries. Each of these agreements is scheduled to expire in 2025. The Company also has a trademark license agreement with Carlisle Companies, Inc. to manufacture and sell certain tires under the Carlisle brand. Royalty expenses were $3.0 million and $2.9 million for the three months ended March 31, 2024 and 2023, respectively.
14. OTHER INCOME

Other income consisted of the following (amounts in thousands):
Three months ended
March 31,
 20242023
Equity investment income$327 $455 
(Loss) gain on sale of assets(25)10 
Other income103 297 
 $405 $762 

15. INCOME TAXES

The Company recorded income tax expense of $9.7 million and $14.2 million for the three months ended March 31, 2024 and 2023, respectively. The Company's effective income tax rate was 49.4% and 29.8% for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024 and 2023, the income tax expense differed in each period due to an overall decrease in pre-tax income. For the three months ended March 31, 2024, the rate was negatively impacted by non-deductible interest expense and one-time impacts associated with transaction costs, which were also not fully deductible for income tax purposes.

The Company’s 2024 and 2023 income tax expense and rates differed from the amount of income tax determined by applying the U.S. Federal income tax rate to pre-tax income primarily as a result of foreign income tax rate differential on the mix of earnings, non-deductible royalty expenses in certain foreign jurisdictions, the valuation allowance on the interest expense carryforward, and certain foreign inclusion items on the domestic provision. The 2024 rate further differed from the statutory rate due to non-deductible transaction costs.

The Company continues to monitor the realization of its deferred tax assets and assesses the need for a valuation allowance. The Company analyzes available positive and negative evidence to determine if a valuation allowance is needed based on the weight of the evidence. This objectively verifiable evidence primarily includes the past three years' profit and loss positions. This process requires management to make estimates, assumptions, and judgments that are uncertain in nature. The Company has established valuation allowances with respect to certain deferred tax assets in the U.S. and certain foreign jurisdictions and continues to monitor and assess the need for valuation allowances in all its jurisdictions.
17


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Organization Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%. Numerous countries, including European Union member states, have enacted or are expected to enact legislation to be effective as early as January 1, 2024, with general implementation of a global minimum tax by January 1, 2025. Titan will continue to evaluate the potential impact on the consolidated financial statements and related disclosures but does not anticipate a material impact. Titan did not record any tax associated with Pillar 2 in the March 31, 2024 financial statements.

16. EARNINGS PER SHARE

Earnings per share (EPS) were as follows (amounts in thousands, except per share data):
Three months ended
March 31,
20242023
Net income attributable to Titan and applicable to common shareholders$9,201 $31,838 
Determination of shares:
   Weighted average shares outstanding (basic)64,928 62,905 
   Effect of restricted stock and stock options776 716 
   Weighted average shares outstanding (diluted)$65,704 $63,621 
Earnings per common share:
Basic$0.14 $0.51 
Diluted$0.14 $0.50 

17. LITIGATION

The Company is a party to routine legal proceedings arising out of the normal course of business. Due to the difficult nature of predicting unresolved and future legal claims, the Company cannot anticipate or predict the material adverse effect on its consolidated financial condition, results of operations, or cash flows as a result of efforts to comply with, or liabilities pertaining to, legal judgments. In the opinion of management, the Company is not currently involved in any legal proceedings which, individually or in the aggregate, could have a material effect on its financial position, results of operations, or cash flows.

18. SEGMENT INFORMATION

The Company has aggregated its operating units into reportable segments based on its three customer markets: agricultural, earthmoving/construction, and consumer. These segments are based on the information used by the chief executive officer to make certain operating decisions, allocate portions of capital expenditures and assess segment performance. The accounting policies of the segments are the same as those described in Note 1, “Description of Business and Significant Accounting Policies.” Segment external revenues, expenses, and income from operations are determined on the basis of the results of operations of operating units of manufacturing facilities. Segment assets are generally determined on the basis of an allocation of the tangible assets located at such operating units’ manufacturing facilities and the intangible assets associated with the acquisitions of such operating units. However, certain operating units’ property, plant, and equipment balances are carried at the corporate level.

Titan is organized primarily on the basis of products being included in three marketing segments, with each reportable segment including wheels, tires, wheel/tire assemblies, and undercarriage systems and components. Given the integrated manufacturing operations and common administrative and marketing support, a substantial number of allocations primarily based on segment sales data must be made to determine operating segment data.

18


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The table below presents information about certain operating results, separated by market segments, for the three months ended March 31, 2024 and 2023 (amounts in thousands):
Three months ended
March 31,
 20242023
Net sales
Agricultural$239,673 $305,858 
Earthmoving/construction165,208 198,924 
Consumer77,328 43,862 
 $482,209 $548,644 
Gross profit
Agricultural$40,619 $49,250 
Earthmoving/construction22,977 37,224 
Consumer13,774 9,083 
$77,370 $95,557 
Income from operations
Agricultural$24,010 $32,569 
Earthmoving/construction8,834 23,538 
Consumer5,113 6,792 
Corporate & Unallocated(12,885)(7,763)
      Income from operations$25,072 $55,136 
Interest expense, net(5,492)(6,492)
Foreign exchange loss(275)(1,760)
Other income, net405 762 
      Income before income taxes$19,710 $47,646 
Assets by segment were as follows as of the dates set forth below (amounts in thousands):
March 31,
2024
December 31,
2023
Total assets  
Agricultural$665,237 $559,607 
Earthmoving/construction515,017 497,508 
Consumer555,340 155,602 
Corporate & Unallocated78,001 76,528 
 $1,813,595 $1,289,245 

19


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The table below presents net sales by products and reportable segments for the three months ended March 31, 2024 and 2023 (amounts in thousands):
Agricultural SegmentEarthmoving/Construction SegmentConsumer SegmentTotal
Three months ended March 31, 2024
Wheels and Tires [including assemblies]$229,034 $66,245 $71,354 $366,633 
Undercarriage systems and components10,639 98,963 5,974 115,576 
Total$239,673 $165,208 $77,328 $482,209 

Agricultural SegmentEarthmoving/Construction SegmentConsumer SegmentTotal
Three months ended March 31, 2023
Wheels and Tires [including assemblies]$293,704 $81,379 $37,230 $412,313 
Undercarriage systems and components12,154 117,545 6,632 136,331 
Total$305,858 $198,924 $43,862 $548,644 

19. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Accumulated other comprehensive loss consisted of the following (amounts in thousands):
 
 Currency
Translation
Adjustments
Gain (Loss) on
Derivatives
Unrecognized
Losses and
Prior Service
Cost
 
 
Total
Balance at January 1, 2024$(217,455)$740 $(2,328)$(219,043)
Currency translation adjustments, net(14,032)— — (14,032)
Defined benefit pension plans:
Amortization of unrecognized losses and prior service cost, net of tax of $(12)
— — 148 148 
Derivative gain— 2 — 2 
Balance at March 31, 2024$(231,487)$742 $(2,180)$(232,925)
 
 Currency
Translation
Adjustments
Gain (Loss) on
Derivatives
Unrecognized
Losses and
Prior Service
Cost
 
 
Total
Balance at January 1, 2023$(243,712)$1,224 $(9,267)$(251,755)
Currency translation adjustments, net8,039 — — 8,039 
Defined benefit pension plans:
Amortization of unrecognized losses and prior service cost, net of tax of $11
— — (30)(30)
Derivative loss— (111)— (111)
Balance at March 31, 2023$(235,673)$1,113 $(9,297)$(243,857)

20


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's discussion and analysis of financial condition and results of operations (MD&A) is designed to provide a reader of the financial statements included in this quarterly report with a narrative from the perspective of the management of Titan International, Inc. (Titan or the Company) on Titan's financial condition, results of operations, liquidity, and other factors that may affect the Company's future results. The MD&A in this quarterly report should be read in conjunction with the condensed consolidated financial statements and other financial information included elsewhere in this quarterly report and the MD&A and audited consolidated financial statements and related notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024 (the 2023 Form 10-K).

Acquisition of Carlstar
On February 29, 2024, the Company acquired 100% of the equity interests of Carlstar. The agreements associated with the purchase of the equity interests of Carlstar are included in the Exhibits within this Form 10-Q and the Current Report on Form 8-K filed on February 29, 2024. The results of Carlstar's operations are included in our consolidated financial statements since February 29, 2024. Total acquisition-related costs for the three months ended March 31, 2024 were approximately $6.2 million.

The purchase consideration was allocated on a provisional basis to the estimated fair value of assets acquired and liabilities assumed for Carlstar as of February 29, 2024. These fair value estimates are preliminary and subject to change as management completes further analyses and studies. For further information, refer to Note 2 to the consolidated financial statements.

FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements, which are covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. Readers can identify these statements by the fact that they do not relate strictly to historical or current facts. The Company tried to identify forward-looking statements in this quarterly report by using words such as “anticipates,” “estimates,” “expects,” “intends,” “plans,” and “believes,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could.” These forward-looking statements include, among other items, information concerning:
the Company's financial performance;
anticipated trends in the Company’s business;
expectations with respect to the end-user markets into which the Company sells its products (including agricultural equipment, earthmoving/construction equipment, and consumer products);
future expenditures for capital projects and future stock repurchases
the Company’s ability to continue to control costs and maintain quality;
the Company's ability to meet conditions of loan agreements, indentures and other financing documents;
the Company’s business strategies, including its intention to introduce new products;
expectations concerning the performance and success of the Company’s existing and new products; and
the Company’s intention to consider and pursue acquisition and divestiture opportunities. The results could differ materially if the acquisition of Carlstar does not deliver on the expected results.
Readers of this Form 10-Q should understand that these forward-looking statements are based on the Company’s current expectations and assumptions about future events and are subject to a number of risks, uncertainties, and changes in circumstances that are difficult to predict, including those in Part I, Item 1A, Risk Factors, of the 2023 Form 10-K and Part II, Item 1A, Risk Factors, of this quarterly report on Form 10-Q, certain of which are beyond the Company’s control.

Actual results could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various factors, including:
the effect of the geopolitical instability resulting from the military conflicts between Russia and Ukraine on our Russian and global operations, and between Israel and Hamas on our global operations;
the effect of a recession on the Company and its customers and suppliers;
21


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
the effect of the market demand cycles on the company's sales, which may have significant fluctuations;
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;
the Company's ability to operate in accordance with its business plan and strategies
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;
availability and price of supply chain logistics and freight;
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 and approval of tax credits or other incentives;
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, and the realization of projected synergies;
the effects of potential processes to explore various strategic transactions, including potential dispositions;
fluctuations in currency translations;
climate change and related laws and regulations;
risks associated with environmental laws and regulations and increased attention to ESG matters;
risks relating to our manufacturing facilities, including that any of our material facilities may become inoperable; and
risks related to financial reporting, internal controls, tax accounting, and information systems, including cybersecurity threats.
Any changes in such factors could lead to significantly different results.  Any assumptions that are inaccurate or do not prove to be correct could have a material adverse effect on the Company’s ability to achieve the results as indicated in the forward-looking statements.  Forward-looking statements speak only as of the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.  In light of these risks and uncertainties, there can be no assurance that the forward-looking information and assumptions contained in this report will in fact transpire. The reader should not place undue reliance on the forward-looking statements included in this report or that may be made elsewhere from time to time by the Company, or on its behalf. All forward-looking statements attributable to Titan are expressly qualified by these cautionary statements.





22


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
OVERVIEW
Titan International, Inc., together with its subsidiaries, is a global wheel, tire, and undercarriage industrial manufacturer and supplier that services customers across the globe. As a leading manufacturer in the off-highway industry, Titan 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. Titan manufactures and sells certain tires under the Goodyear Farm Tire, Titan Tire, Carlstar and Voltyre-Prom Tire brands and has complete research and development facilities to validate tire and wheel designs. Carlstar sells tire products under the Carlisle® brand under a long-term license agreement and also sells tires under other recognized brand names, including ITP®, Trail Wolf®, Links®, USA Trail® and Carlisle Radial Trail HD™ highway trailer tires.

Agricultural Segment: Titan’s agricultural wheels, tires, and components are manufactured for use on various agricultural equipment, including tractors, combines, skidders, plows, planters, and irrigation equipment, and are sold directly to OEMs and to the aftermarket through independent distributors, equipment dealers, and Titan’s distribution centers. The wheels range in diameter from nine inches to 54 inches, with the 54-inch diameter being the largest agricultural wheel manufactured in North America. Basic configurations are combined with distinct variations (such as different centers and a wide range of material thickness) allowing the Company to offer a broad line of products to meet customer specifications. Titan’s agricultural tires range from approximately one foot to approximately seven feet in outside diameter and from five inches to 55 inches in width. Agricultural tires are offered under the Goodyear Farm Tire, Titan Tire, Carlstar and Voltyre-Prom brands with a full portfolio of sizes, load carrying capabilities, and tread patterns necessary for the markets served. The Company offers the added value of delivering a complete wheel and tire assembly to OEM and aftermarket customers.

Earthmoving/Construction Segment: The Company manufactures wheels, tires, and undercarriage systems and components for various types of OTR earthmoving, mining, military, construction, and forestry equipment, including skid steers, aerial lifts, cranes, graders and levelers, scrapers, self-propelled shovel loaders, articulated dump trucks, load transporters, haul trucks, backhoe loaders, crawler tractors, lattice cranes, shovels, and hydraulic excavators. The Company provides OEM and aftermarket customers with a broad range of earthmoving/construction wheels ranging in diameter from 15 to 63 inches and in weight from 125 pounds to 7,000 pounds. The 63-inch diameter wheel is the largest manufactured for the global earthmoving/construction market. Titan’s earthmoving/construction tires are offered in the Titan brand and range from approximately three feet to approximately 13 feet in outside diameter and in weight from 50 pounds to 12,500 pounds. Earthmoving/construction tires offered by Titan serve virtually every off-road application in the industry with some of the highest load requirements in the most severe applications. The Company also offers the added value of wheel and tire assembly for certain applications in the earthmoving/construction segment.

Consumer Segment: In February 2024, Titan acquired Carlstar, which is a global manufacturer and distributor of wheels and tires for a variety of end-market verticals including outdoor power equipment, power sports, and high speed trailers. Carlstar is primarily concentrated in the consumer segment, but also manufactures and sells small to midsize agricultural tires.

Titan manufactures bias truck tires in Latin America and light truck tires in Russia.  Titan also offers select products for ATVs, side-by-sides, rock climbers, turf, and have recently expanded our offering into the lawn and garden segment with a major OE customer. This segment also includes sales that do not readily fall into the Company's other segments, such as custom rubber stock mixing sales to a variety of OEMs in tangential industries.

The Company’s top customers, including global leaders in agricultural and construction equipment manufacturing, have been purchasing products from Titan or its predecessors for numerous years. Customers including AGCO Corporation, Caterpillar Inc., CNH Global N.V., Deere & Company, Hitachi, Ltd., Kubota Corporation, Liebherr, and Volvo have helped sustain Titan’s market leading position in wheel, tire, assembly, and undercarriage products.

MARKET CONDITIONS AND OUTLOOK

AGRICULTURAL MARKET OUTLOOK
Agriculture-related commodity prices have come off the recent highs reached over the last couple years, however, population growth, farmer income levels and the replacement of an aging large equipment fleet are market conditions which are anticipated to support continued demand for our products in the mid to long term time horizon. The agricultural market is currently experiencing a slowdown in customer demand in the near term, however, the underlying market conditions mentioned previously provide support for the mid to long term demand for our products. Many more variables, including weather, volatility in the price of commodities, grain prices, export markets, foreign currency exchange rates, interest rates, government
23


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
policies, subsidies, and the demand for used equipment can greatly affect the Company's performance in the agricultural market in a given period.

EARTHMOVING/CONSTRUCTION MARKET OUTLOOK
The earthmoving/construction segment is affected by many variables, including commodity prices, road construction, infrastructure, government appropriations, housing starts, and other macroeconomic drivers. The construction market is primarily driven by country specific GDP and the need for infrastructure developments. The earthmoving/construction markets are currently experiencing a slowdown in OEM demand however, we expect the market to stabilize over the mid to long term given the level of mining capital budgets and forecasted GDP growth. Mineral commodity prices are at relatively high levels, which also supports the forecasted mid to long term growth.

CONSUMER MARKET OUTLOOK
The consumer market consists of several distinct product lines within different regions. These products include specialty tires and products under the Carlstar brands within powersports, outdoor power equipment and high speed trailers. The consumer market also includes light truck tires and other specialty products, including custom mixing of rubber stock, and train brakes. Some aspects of the markets are experiencing slowdown, particularly in the Americas. There are strong initiatives underway to bolster opportunities in various specialty products including mixing of rubber stock in the United States. The consumer segment pace of growth can vary from period to period and is affected by many variables including inflationary impacts, consumer spending, interest rates, government policies, and other macroeconomic drivers.

RESULTS OF OPERATIONS

Three months ended
(Amounts in thousands, except percentages)March 31,
 20242023% Increase/(Decrease)
Net sales$482,209 $548,644 (12.1)%
Cost of sales 404,839 453,087 (10.6)%
Gross profit77,370 95,557 (19.0)%
  Gross profit %16.0 %17.4 %(8.0)%
Selling, general and administrative expenses39,420 34,472 14.4 %
Acquisition related expenses6,196 — 100.0 %
Research and development expenses3,654 3,014 21.2 %
Royalty expense3,028 2,935 3.2 %
Income from operations$25,072 $55,136 (54.5)%

Net Sales
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 and construction equipment globally, with particular economic softness in Brazil. The volume change was positively impacted by the net sales from the Carlstar acquisition in March 2024, subsequent to the acquisition which was consummated on February 29, 2024. It was also negatively impacted by price due to lower raw material and other input costs, most notably steel in Europe, and unfavorable foreign currency translation of 2.3%.

Gross Profit
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 and lower fixed cost leverage.


24


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Selling, General and Administrative Expenses
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 due to recurring SG&A incurred on the Carlstar operations that includes management of distribution centers, and general inflationary cost impacts, including personnel related costs.

Acquisition related Expenses
Acquisition related expenses for the three months ended March 31, 2024 were $6.2 million, associated with the one-time transaction costs for Carlstar.

Research and Development Expenses
Research and development (R&D) expenses for the three months ended March 31, 2024 were $3.7 million, or 0.8% of net sales, compared to $3.0 million, or 0.5% of net sales, for the comparable period in 2023. R&D spending reflects initiatives to improve product designs and an ongoing focus on innovation and quality.

Royalty Expense
The Company has trademark license agreements with The Goodyear Tire & Rubber Company to manufacture and sell certain farm tires under the Goodyear name. These agreements cover sales in North America, Latin America, Europe, the Middle East, Africa, Russia, and other Commonwealth of Independent States countries. The Company also has a trademark license agreement with Carlisle Companies, Inc. to manufacture and sell certain tires under the Carlisle brand. Royalty expenses for the three months ended March 31, 2024 were $3.0 million, or 0.6% of net sales, compared to $2.9 million, or 0.5% of net sales, for the three months ended March 31, 2023.

Income from Operations
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.

OTHER PROFIT/LOSS ITEMS

Interest Expense, net
Interest expense was $5.5 million and $6.5 million for the three months ended March 31, 2024 and 2023. The change in interest expense for the three months ended March 31, 2024 was attributed to the increase in interest income from financial investments in Latin America and the United States.

Foreign Exchange Loss
Foreign exchange loss was $0.3 million for the three months ended March 31, 2024, compared to a loss of $1.8 million for the three months ended March 31, 2023.

The foreign exchange loss experienced during the three months ended March 31, 2024 was primarily the result of an unfavorable impact of the movement of exchange rates in certain geographies in which we conduct business, particularly in Argentina and Turkey (refer to Note 1 to the consolidated financial statements). Foreign exchange loss experienced during the three months ended March 31, 2023 was primarily the result of an unfavorable impact of the movement of exchange rates in certain geographies in which we conduct business, primarily due to fluctuations in the Euro.

Other Income
Other income was $0.4 million for the three months ended March 31, 2024, as compared to other income of $0.8 million in the comparable period of 2023.  The change was primarily attributable to the decrease in equity income and other miscellaneous income.

Provision for Income Taxes
The Company recorded income tax expense of $9.7 million and $14.2 million for the three months ended March 31, 2024 and 2023, respectively. The Company's effective income tax rate was 49.4% and 29.8% for the three months ended March 31, 2024
25


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
and 2023, respectively. For the three months ended March 31, 2024 and 2023, the income tax expense differed in each period due to an overall decrease in pre-tax income. For the three months ended March 31, 2024, the rate was negatively impacted by non-deductible interest expense and one-time impacts associated with transaction costs, which were also not fully deductible for income tax purposes.

The Company’s 2024 and 2023 income tax expense and rates differed from the amount of income tax determined by applying the U.S. Federal income tax rate to pre-tax income primarily as a result of foreign income tax rate differential on the mix of earnings, non-deductible royalty expenses in certain jurisdictions, the valuation allowance on the interest expense carryforward, and certain foreign inclusion items on the domestic provision. The 2024 rate further differed from the statutory rate due to non-deductible transaction costs.

Net Income and Income per Share
Net income for the three months ended March 31, 2024 was $10.0 million, compared to net income of $33.4 million in the comparable period of 2023. For the three months ended March 31, 2024 and 2023, basic income per share were $0.14 and $0.51, respectively, and diluted income per share were $0.14 and $0.50, respectively. The Company's net income and income per share changes were due to the items previously discussed.

SEGMENT INFORMATION

Segment Summary (amounts in thousands, except percentages)
Three months ended March 31, 2024AgriculturalEarthmoving/
Construction
ConsumerCorporate/ Unallocated
 Expenses
Consolidated
 Totals
Net sales$239,673 $165,208 $77,328 $— $482,209 
Gross profit40,619 22,977 13,774 — 77,370 
Profit margin16.9 %13.9 %17.8 %— 16.0 %
Income (loss) from operations24,010 8,834 5,113 (12,885)25,072 
Three months ended March 31, 2023     
Net sales$305,858 $198,924 $43,862 $— $548,644 
Gross profit49,250 37,224 9,083 — 95,557 
Profit margin16.1 %18.7 %20.7 %— 17.4 %
Income (loss) from operations32,569 23,538 6,792 (7,763)55,136 

Agricultural Segment Results
Agricultural segment results for the periods presented below were as follows (amounts in thousands, except percentages):

Three months ended
March 31,
 20242023% Increase (Decrease)
Net sales$239,673 $305,858 (21.6)%
Gross profit40,619 49,250 (17.5)%
Profit margin16.9 %16.1 %5.0 %
Income from operations 24,010 32,569 (26.3)%
    
26


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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.

Income from operations in the company's agricultural segment was $24.0 million for the three months ended March 31, 2024, as compared to income of $32.6 million for the three months ended March 31, 2023. The overall change in income from operations was attributable to lower gross profit from a decrease in net sales.

Earthmoving/Construction Segment Results
Earthmoving/construction segment results for the periods presented below were as follows (amounts in thousands, except percentages):

Three months ended
March 31,
 20242023% Decrease
Net sales$165,208 $198,924 (16.9)%
Gross profit22,977 37,224 (38.3)%
Profit margin13.9 %18.7 %(25.7)%
Income from operations8,834 23,538 (62.5)%

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 givebacks due to lower steel prices particularly in Europe.

The Company's earthmoving/construction segment income from operations was $8.8 million for the three months ended March 31, 2024 , as compared to $23.5 million for the three months ended March 31, 2023. The change was due to the decrease in sales volume and the impact on gross margins.

27


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Consumer Segment Results
Consumer segment results for the periods presented below were as follows (amounts in thousands, except percentages):

Three months ended
March 31,
 20242023% Increase (Decrease)
Net sales$77,328 $43,862 76.3 %
Gross profit13,774 9,083 51.6 %
Profit margin17.8 %20.7 %(14.0)%
Income from operations5,113 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 in March 2024, subsequent to consummation of the acquisition on February 29, 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 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.

Consumer segment income from operations was $5.1 million for the three months ended March 31, 2024, as compared to income of $6.8 million for the three months ended March 31, 2023. The change was due to lower profitability as mentioned previously.

Corporate & Unallocated Expenses
Income from operations on a segment basis did not include unallocated costs of $12.9 million for the three months ended March 31, 2024, as compared to $7.8 million for the three months ended March 31, 2023. Unallocated expenses are primarily comprised of corporate selling, general and administrative expenses. The increase in corporate and unallocated expenses for the three months ended March 31, 2024 as compared to the prior year period was attributed to the transaction costs associated with the Carlstar acquisition in the first quarter of 2024, of $6.2 million.
28


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES

Cash Flows
As of March 31, 2024, the Company had $203.6 million of cash, which decreased as compared to the December 31, 2023 ending balance of $220.3 million, due to the following items:

Operating Cash Flows
Summary of cash flows from operating activities:
(Amounts in thousands)Three months ended March 31, 
 20242023Change
Net income$9,974 $33,430 $(23,456)
Depreciation and amortization12,001 10,830 1,171 
Deferred income tax provision3,491 4,089 (598)
Foreign currency gain(390)(230)(160)
Accounts receivable(43,140)(58,541)15,401 
Inventories(136)11,486 (11,622)
Prepaid and other current assets(6,548)(3,932)(2,616)
Accounts payable25,196 10,237 14,959 
Other current liabilities3,695 15,947 (12,252)
Other liabilities1,401 110 1,291 
Other operating activities(3,539)660 (4,199)
Cash provided by operating activities$2,005 $24,086 $(22,081)

During the first three months of 2024, cash flows provided by operating activities was $2.0 million. This was primarily driven by net income of $10.0 million, offset by increases in working capital components. The net income of $10.0 million included a non-cash charge for depreciation and amortization expense of $12.0 million. The Company also incurred $6.2 million in transaction costs related to the Carlstar in the first quarter of 2024.

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 by $15.4 million, which helped offset the inventory effect of $11.6 million.

Summary of the components of cash conversion cycle:
March 31,December 31,March 31,