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Washington, D.C.  20549

For the Quarterly Period Ended: June 30, 2023

or

Commission file number 1-12936

(Exact name of registrant as specified in its charter)

(State or other jurisdiction of incorporation or organization)

(Address of principal executive offices)

(I.R.S. Employer Identification No.)

(Zip Code)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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.

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: 62,727,033 shares of common stock, $0.0001 par value, as of July 24, 2023.

 

			Three months ended												Six months ended
			June 30,												June 30,
			2023						2022						2023						2022
Net sales			$	481,176					$	572,895					$	1,029,820					$	1,128,892
Cost of sales			395,281						463,242						848,368						932,510
Gross profit			85,895						109,653						181,452						196,382
Selling, general and administrative expenses			34,858						34,669						69,330						70,896
Research and development expenses			3,218						2,238						6,232						5,158
Royalty expense			1,921						3,045						4,856						5,919
Income from operations			45,898						69,701						101,034						114,409
Interest expense, net			(5,762)						(7,707)						(12,254)						(15,614)
Foreign exchange gain (loss)			2						2,234						(1,758)						7,551
Other income			1,186						23,694						1,948						14,835
Income before income taxes			41,324						87,922						88,970						121,181
Provision for income taxes			9,429						19,001						23,645						27,682
Net income			31,895						68,921						65,325						93,499
Net income attributable to noncontrolling interests			1,688						1,750						3,280						2,406
Net income attributable to Titan and applicable to common shareholders			$	30,207					$	67,171					$	62,045					$	91,093
Earnings per common share:
Basic			$	0.48					$	1.07					$	0.99					$	1.44
Diluted			$	0.48					$	1.06					$	0.98					$	1.43
Average common shares and equivalents outstanding:
Basic			62,931						62,671						62,918						63,262
Diluted			63,234						63,221						63,404						63,773

 

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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, 2022, filed with the SEC on February 27, 2023 (the 2022 Form 10-K). All significant 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.

The Company records all financial instruments, including cash and cash equivalents, accounts receivable, notes receivable, accounts payable, other accruals, 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 $395.8 million at June 30, 2023. The fair value of the senior secured notes due 2028 at June 30, 2023, as obtained through an independent pricing source, was approximately $373.0 million.

The Company currently owns 64.3% of the Voltyre-Prom, a leading producer of agricultural and industrial tires in Volgograd, Russia, which represents approximately 6% and 7% of consolidated assets of Titan as of June 30, 2023 and December 31, 2022, respectively. The Russian operations represent approximately 7% and 6% of consolidated global sales for the three months ended June 30, 2023 and 2022, respectively, while representing 6% of consolidated global sales for both the six months ended June 30, 2023 and 2022, respectively. 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.

On March 29, 2022, the Company entered into a definitive agreement (the Agreement) for the sale of its Australian wheel business, to OTR Tyres, a leading Australian tire, wheel and service provider. The closing date of the transaction was March 31, 2022. The Agreement contains customary representations, warranties and covenants for transactions of this type. The sale included gross proceeds and cash repatriated of approximately $17.5 million, and the assumption by OTR Tyres of all liabilities, including employee and lease obligations. Refer to Note 12 for additional information on the loss on sale of the Australian wheel business.

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 493,279 shares of its common stock totaling $5.1 million during the three months ended June 30, 2023, and 603,068 shares of its common stock totaling $6.4 million during the six months ended June 30, 2023. As of June 30, 2023, $43.6 million remains available for future share repurchases under this program.

A subsidiary of Titan participates in supplier financing programs pursuant to credit agreements between certain suppliers and financial institution. 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 June 30, 2023, and $11.8 million at December 31, 2022.

In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50) Disclosure of Supplier Finance Program Obligations ("ASU No. 2022-04"). The ASU requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, and potential magnitude. The amendments in this ASU will be applied retrospectively to each period in which a balance sheet is presented, with the exception of a new requirement to disclose a rollforward of program activity, which will be applied prospectively. The amendments in the ASU are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted the impact of this ASU effective March 31, 2023 and incorporated the required disclosures within Note 1 to condensed consolidated financial statements.

On May 3, 2023, the SEC amended disclosure rules to modernize the disclosure requirements relating to repurchase of an issuer's equity securities. Under the amended rules, issuers will be required to provide daily repurchase activity on a quarterly or semi-annual basis, depending upon the type of issuer. Issuers will also have to explain the purpose of such repurchases and how they determined buyback amounts. The Company will adopt the impact of this standard on October 1, 2023 and will include the related enhanced disclosures in the Company's Form 10-K for the year ended December 31, 2023 and in the Company's quarterly reports thereafter.

Accounts receivable consisted of the following (amounts in thousands):

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

Inventories consisted of the following (amounts in thousands):

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

Property, plant and equipment, net consisted of the following (amounts in thousands):

 

Depreciation on property, plant and equipment for the six months ended June 30, 2023 and 2022 totaled $20.8 million and $21.6 million, respectively.

Other current liabilities consisted of the following (amounts in thousands):

(1) In 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.

(2) The amount relates to a legal settlement between Titan Tire Corporation and Dico, Inc. executed on February 1, 2021 in the amount of $11.5 million, of which the final remaining amount of $1.3 million was paid on January 31, 2023. The Company paid $9.2 million and $1.6 million, including accrued interest, to the federal government on February 25, 2021 and February 1, 2022, respectively.

Changes in the warranty liability during the six months ended June 30, 2023 and 2022, respectively, consisted of the following (amounts in thousands):

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.

Long-term debt consisted of the following (amounts in thousands):

Aggregate principal maturities of long-term debt at June 30, 2023 for each of the years (or other periods) set forth below were as follows (amounts in thousands):

On April 22, 2021, the Company issued $400.0 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 June 30, 2023.

The Titan Europe credit facilities include borrowings from various institutions totaling $27.3 million in aggregate principal amount at June 30, 2023. Maturity dates on this debt range from less than one year to five years. The interest rates range from 0.5% to 6.5%.

The Company has a $125.0 million revolving credit facility with BMO Harris Bank N.A., as agent, and other financial institutions party thereto. The credit facility is collateralized by accounts receivable and inventory of certain of the Company’s domestic subsidiaries and is scheduled to mature in October 2026.

The credit facility can be expanded by up to $50 million through an accordion provision within the agreement. From time to time Titan's availability under this credit facility may be 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. Based on eligible accounts receivable and inventory balances, the Company's amount available for borrowing totaled $117.9 million at June 30, 2023. With outstanding letters of credit totaling $6.2 million, the net amount available for borrowing under the credit facility totaled $111.7 million at June 30, 2023. There were no borrowings under the revolving credit facility at June 30, 2023.

The Company has a working capital loan at Titan Pneus do Brasil Ltda at varying interest rates from approximately 5% to 6.5%, which totaled $7.1 million at June 30, 2023. The maturity date on this loan is one year or less. The Company expects to negotiate an extension of the maturity date on this loan with the respective financial institution or repay, as needed.

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.

Supplemental balance sheet information related to leases was as follows (amounts in thousands):

At June 30, 2023, maturities of lease liabilities were as follows (amounts in thousands):

Supplemental cash flow information related to leases for the six months ended June 30, 2023 were as follows: operating cash flows from operating leases were $1.5 million.

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 six months ended June 30, 2023 and no amounts are expected to be contributed to the pension plans during the remainder of 2023.

The components of net periodic pension cost consisted of the following for the periods set forth below (amounts in thousands):

Service cost is recorded as cost of sales in the Condensed Consolidated Statements of Operations while all other components are recorded in other income.

The Company holds a variable interest in two joint ventures for which the Titan is the primary beneficiary. One of these joint ventures operate distribution facilities that primarily distribute mining products. Titan is the 50% owner of the distribution facility located in Canada. Titan is also a 50% owner of a manufacturer of undercarriage components and complete track systems for earthmoving machines in India. The Company’s variable interests in these joint ventures relate to sales of Titan products to these entities, consigned inventory, and working capital loans. As the primary beneficiary of these variable interest entities (VIEs), the VIEs’ assets, liabilities, and results of operations are included in the Company’s condensed consolidated financial statements. The other equity holders’ 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 VIEs’ assets and liabilities included in the Company’s Condensed Consolidated Balance Sheets (amounts in thousands):

			June 30, 2023						December 31, 2022
Cash and cash equivalents			$	1,224					$	1,729
Inventory			3,460						2,581
Other current assets			3,387						4,179
Property, plant and equipment, net			4,540						4,657
Other non-current assets			396						465
Total assets			$	13,007					$	13,611
Current liabilities			$	2,090					$	2,077
Other long-term liabilities			933						1,062
Total liabilities			$	3,023					$	3,139

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 nonrecourse 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 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):

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. Royalty expenses were $1.9 million and $3.0 million for the three months ended June 30, 2023 and 2022, respectively, and $4.9 million and $5.9 million for the six months ended June 30, 2023 and 2022, respectively.

Other income consisted of the following (amounts in thousands):

(1) In May 2022, the Brazilian tax authorities approved indirect tax credits to be applied against future tax obligations. Refer to Footnote 13 for additional information.

(2) The loss on sale of the Australian wheel business is comprised primarily of the release of the cumulative translation adjustment of approximately $10.0 million and closing costs associated with the completion of the transaction of approximately $0.9 million. Refer to Note 1 for additional information.

(3) In August 2014, the Company received 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. The Company received proceeds of an additional $1.9 million from the grant during the six months ended June 30, 2022, of which $1.3 million was recorded as other income to match to the historical depreciation recorded on the underlying asset.

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.

During the second quarter of 2023, one of the Company’s Brazilian subsidiaries received a notice that they had prevailed on an additional legal claim in regards to the non-income (indirect) taxes credits that had been granted in a prior year ruling. The most recent ruling exempted from taxes, the interest benefit on the indirect tax credits granted in prior year. For the three and six months ended June 30, 2023, the Company recorded indirect tax credits of $0.5 million within other income and $2.6 million within provision for income taxes in the condensed consolidated statements of operations.

The Company expects to be able to apply the tax credits received to settle the income tax liability that was incurred as a result of the credit. The Company also expects to utilize the majority of the credit against future PIS/COFINS and income tax obligations over the next twelve months.

Earnings per share (EPS) were as follows (amounts in thousands, except per share data):

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.

The Company has aggregated its operating units into reportable segments based on its three customer markets: agricultural, earthmoving/construction, and consumer. Each reportable segment includes wheels, tires, wheel/tire assemblies, and undercarriage systems and components. 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. Segment external sales, expenses, and income from operations are determined based on the results of operations for the operating units of the Company's manufacturing facilities. Segment assets are generally determined on the basis 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.

The table below presents information about certain operating results, separated by market segments, for the three and six months ended June 30, 2023 and 2022 (amounts in thousands):

Assets by segment were as follows as of the dates set forth below (amounts in thousands):

The Company sells products and pays commissions to companies controlled by persons related to the Chairman of the Board of Directors of the Company, Mr. Maurice Taylor. The related party is Mr. Fred Taylor, who was Mr. Maurice Taylor’s brother. Mr. Fred Taylor passed away on December 13, 2021. The companies with which Mr. Fred Taylor was associated that do business with Titan include the following: Blacksmith OTR, LLC; F.B.T. Enterprises, Inc.; Green Carbon, Inc.; Silverstone, Inc.; and OTR Wheel Engineering, Inc. Sales of Titan products to these companies were approximately $1.0 million and $2.4 million for the three and six months ended June 30, 2023, and approximately $1.0 million and $2.3 million for the three and six months ended June 30, 2022. Titan had trade receivables due from these companies of approximately $0.5 million at June 30, 2023, and approximately $0.2 million at December 31, 2022.  Titan had purchases from these companies of approximately $0.0 million and $0.2 million for the three and six months ended June 30, 2023, and approximately $0.3 million and $0.5 million for the three and six months ended June 30, 2022. Sales commissions accrued to the above companies were approximately $0.1 million and $0.3 million for the three and six months ended June 30, 2023 as compared to $0.4 million and $0.9 million accrued for the three and six months ended June 30, 2022.

Accumulated other comprehensive loss consisted of the following (amounts in thousands):

(1) The currency translation adjustments, net includes currency translation on amounts reclassified into other expense within the Condensed Consolidated Statements of Operations of approximately $10.0 million for the six months ended June 30, 2022 related to the sale of the Australian wheel business. Refer to Note 1 and 12 for additional information.

The Company has evaluated subsequent events through the filing of this Form 10-Q and determined that there have been no subsequent events that have occurred that would require adjustments or disclosures in the condensed consolidated financial statements.

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, 2022, filed with the SEC on February 27, 2023 (the 2022 Form 10-K).

The Company currently owns 64.3% of the Voltyre-Prom, a leading producer of agricultural and industrial tires in Volgograd, Russia, which represents approximately 6% and 7% of consolidated assets of Titan both as of June 30, 2023 and December 31, 2022, respectively. The Russian operations represent approximately 7% and 6% of consolidated global sales for the three months ended June 30, 2023 and 2022, respectively, while representing 6% of consolidated global sales for both the six months ended June 30, 2023 and 2022, respectively. 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.

As the military conflict in Ukraine exacerbates the global food crisis, Titan remains committed to the role it plays in the continuity of food supply and keeping essential goods moving, including its tire operation in Volgograd, Russia. Tires produced in the Voltyre-Prom facility are primarily sold into Commonwealth of Independent States (CIS) countries, located in Europe and Asia. This facility is in full compliance with all international sanctions on Russia. Titan has stopped any additional investments into this joint project and emphasizes that neither this operation, nor any other Titan operations, sell any products to the Russian military or other government agencies.

The potential impact of bans, sanction programs, and boycotts on our business is uncertain at the current time due to the fluid nature of the military conflict. The potential impacts include supply chain and logistics disruptions, financial impacts including disruptions to the execution of banking transactions with certain Russian financial institutions, volatility in foreign exchange rates and interest rates, inflationary pressures on raw materials and energy, loss of operational control and/or assets, heightened cybersecurity threats and other restrictions.

During the second quarter of 2023, one of the Company’s Brazilian subsidiaries received a notice that they had prevailed on an additional legal claim in regards to the non-income (indirect) taxes credits that had been granted in a prior year ruling. The most recent ruling exempted from taxes, the interests benefit on the indirect tax credits granted in prior year. For the three and six months ended June 30, 2023, the Company recorded indirect tax credits of $0.5 million within other income and $2.6 million within provision for income taxes in the condensed consolidated statements of operations.

The Company expects to be able to apply the tax credits received to settle the income tax liability that was incurred as a result of the credit. The Company also expects to utilize the majority of the credit against future PIS/COFINS and income tax

obligations over the next twelve months.

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;

•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.

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 2022 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 military conflict between Russia and Ukraine on our Russian and global operations;

•the effect of a recession on the Company and its customers and suppliers;

•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;

•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;

•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;

•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.

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.

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 and Voltyre-Prom Tire brands and has complete research and development facilities to validate tire and wheel designs.

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 in Titan, Goodyear, and Votyre 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: 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 OEM's 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.

Agriculture-related commodity prices continued to remain at historically high levels during the first two quarters of 2023. High farmer income and replacement of an aging large equipment fleet are both market conditions which are anticipated to support continued healthy demand for our products in the mid to long term time horizon. There are recent concerns over a slowdown in OEM customer demand due to their elevated inventory levels, particularly, in the Americas, resulting in uncertain demand in the near term. However, the underlying market conditions mentioned previously provide support for the mid to long term healthy demand for our products. Many more variables, including weather, volatility in the price of commodities, grain prices, export markets, foreign currency exchange rates, government policies, subsidies, and the demand for used equipment can greatly affect the Company's performance in the agricultural market in a given period.

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 GDP by country and the need for infrastructure developments. The earthmoving/construction markets experienced some slow down in OEM demand during the second quarter of 2023, particularly in the Americas, that we believe is not unrelated to the concerns over elevated inventory levels for small equipment. We expect a recovery and continued market stability 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 that also currently support growth, while global recession concerns could impact demand in various parts of the world.

The consumer market consists of several distinct product lines within different regions. These products include light truck tires, turf equipment, specialty products, including custom mixing of rubber stock, and train brakes. The markets remained stable through the first quarter of 2023, but experienced some slow down during the second quarter of 2023 due to elevated inventory levels in Latin America. 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.

Net sales for the three months ended June 30, 2023 were $481.2 million, compared to $572.9 million in the comparable period of 2022, a decrease of 16.0% , due to sales decreases in all segments. Overall net sales decrease was primarily due to sales volume decrease caused by elevated inventory levels at our customers in the Americas, particularly OEM customers. The net sales decrease was also impacted by negative price/mix which was primarily due to lower steel prices, and unfavorable currency translation of 2.3%.

Net sales for the six months ended June 30, 2023 were $1,029.8 million, compared to $1,128.9 million in the comparable period of 2022, a decrease of 8.8%, due to sales decreases in all segments. Overall net sales decrease was primarily due to the reduced demand caused by aforementioned high inventory levels with customers. It was also impacted by negative price/mix which was due to lower steel prices, and unfavorable currency translation of 1.9%. Additionally, the Company sold its Australian wheel business in the first quarter of 2022 which resulted in a reduction of net sales of 0.9%, or $10.0 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.

Gross profit for the three months ended June 30, 2023 was $85.9 million, or 17.9% of net sales, a decrease of $23.8 million compared to $109.7 million, or 19.1% of net sales, for the three months ended June 30, 2022. The decrease in gross profit and margin was primarily due to the lower sales volume, which resulted in lower overhead absorption, and the timing lag in higher material costs relative to contractual customer price reductions in the North America wheel business.

Gross profit for the six months ended June 30, 2023 was $181.5 million, or 17.6% of net sales, a decrease of $14.9 million compared to $196.4 million, or 17.4% of net sales, for the six months ended June 30, 2022. The decrease in gross profit for six months ended June 30, 2023 as compared to the prior year period was due to the impact of lower sales volume in North America and the aforementioned factors experienced in the second quarter.

Selling, general and administrative expenses for the three months ended June 30, 2023 were $34.9 million, or 7.2% of net sales, compared to $34.7 million, or 6.1% of net sales, for the three months ended June 30, 2022. The slight increase in SG&A for the three months ended June 30, 2023 as compared to the prior year period was due to personnel related inflationary cost impacts.

Selling, general and administrative expenses for the six months ended June 30, 2023 were $69.3 million, or 6.7% of net sales, compared to $70.9 million, or 6.3% of net sales, for the six months ended June 30, 2022. The decrease in SG&A for the three and six months ended June 30, 2023 as compared to the prior year period was due to the disposition of the Australian wheel business during the first quarter of 2022.

Research and development (R&D) expenses for the three months ended June 30, 2023 were $3.2 million, or 0.7% of net sales, compared to $2.2 million, or 0.4% of net sales, for the comparable period in 2022. R&D expenses for the six months ended June 30, 2023 were $6.2 million, or 0.6% of net sales, compared to $5.2 million, or 0.5% of net sales, for the comparable period in 2022.

R&D spending reflects initiatives to improve product designs and an ongoing focus on quality and innovation.

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.

Royalty expenses for the three months ended June 30, 2023 were $1.9 million, or 0.4% of net sales, compared to $3.0 million, or 0.5% of net sales, for the three months ended June 30, 2022. Royalty expenses for the six months ended June 30, 2023 were $4.9 million, or 0.5% of net sales, compared to $5.9 million, or 0.5% of net sales, for the six months ended June 30, 2022. The decreases in royalty expenses for the three months and six months ended June 30, 2023 as compared to the prior year periods were due to the decreases in net sales, as described previously.

Income from operations for the three months ended June 30, 2023 was $45.9 million, compared to income from operations of $69.7 million for the three months ended June 30, 2022. Income from operations for the six months ended June 30, 2023 was $101.0 million, compared to income from operations of $114.4 million for the six months ended June 30, 2022. The decreases in income from operations for the three months and six months ended June 30, 2023 as compared to the prior year periods were primarily due to lower net sales and the net result of the items previously discussed.

Interest expense was $5.8 million and $7.7 million for the three months ended June 30, 2023 and 2022, respectively, and $12.3 million and $15.6 million for the six months ended June 30, 2023 and 2022. The decreases in interest expense for the three months and six months ended June 30, 2023 were due to the reduced borrowing under the Company's global credit facilities, as compared to the prior year periods, and increased interest income associated with financial investments in Latin America and the United States.

Foreign exchange gain was insignificant for the three months ended June 30, 2023, compared to a gain of $2.2 million for the three months ended June 30, 2022. Foreign exchange loss was $1.8 million for the six months ended June 30, 2023, compared to a gain of $7.6 million for the six months ended June 30, 2022.

Foreign exchange gain experienced during the three months ended June 30, 2023 was primarily the result of a favorable impact of the movement of exchange rates in certain geographies in which we conduct business, offset by an unfavorable impact of the translation of intercompany loans at certain foreign subsidiaries, which are denominated in local currencies rather than the reporting currency, which is the United States dollar. Since such loans are expected to be settled at some point in the future, these loans are adjusted each reporting period to reflect the current exchange rates. The foreign exchange loss experienced during the six months ended June 30, 2023 was the result of an unfavorable impact of the translation of intercompany loans at certain foreign subsidiaries, which are denominated in local currencies rather than the reporting currency, which is the United States dollar.

Foreign exchange gains experienced during the three months and six months ended June 30, 2022 were primarily the result of a favorable impact of the movement of exchange rates in certain geographies in which we conduct business as well as the result of the translation of intercompany loans at certain foreign subsidiaries, which are denominated in local currencies rather than the reporting currency, which is the United States dollar. Since such loans are expected to be settled at some point in the future, these loans are adjusted each reporting period to reflect the current exchange rates.

Other income was $1.2 million for the three months ended June 30, 2023, as compared to other income of $23.7 million in the comparable period of 2022.  The decrease in other income for the three months ended June 30, 2023, as compared to the same period in 2022, was primarily attributable to $22.5 million income on indirect tax credits in Brazil in the second quarter of 2022.

Other income was $1.9 million for the six months ended June 30, 2023, as compared to other income of $14.8 million in the comparable period of 2022.  The decrease in other income for the six months ended June 30, 2023, as compared to the same period in 2022, was primarily attributable to miscellaneous income in 2022 that did not occur in 2023 which included $22.5 million indirect tax credits in Brazil, a gain of $1.3 million from a government grant associated with an earthquake that affected one of our Italian subsidiaries, and a loss of $10.9 million on sale of the Australian wheel business.

On August 16, 2022, the “Inflation Reduction Act” (H.R. 5376) was signed into law in the United States. As part of the Inflation Reduction Act, the U.S. Congress enacted the corporate alternative minimum tax (CAMT). Titan does not currently expect the Inflation Reduction Act or CAMT to have a material impact on our financial results, including on our annual estimated effective tax rate.

Net income for the three months ended June 30, 2023 was $31.9 million, compared to net income of $68.9 million in the comparable period of 2022, a decrease of $37.0 million. For the three months ended June 30, 2023 and 2022, basic income per share were $0.48 and $1.07, respectively, and diluted income per share were $0.48 and $1.06, respectively. The Company's net income and income per share decreases were due to the items previously discussed.

Net income for the six months ended June 30, 2023 was $65.3 million, compared to net income of $93.5 million in the comparable period of 2022, a decrease of $28.2 million. For the six months ended June 30, 2023 and 2022, basic income per share were $0.99 and $1.44, respectively, and diluted income per share were $0.98 and $1.43, respectively. The Company's net income and income per share decreases were due to the items previously discussed.

Segment Summary (amounts in thousands, except percentages):