0000899751--12-312024Q2falsexbrli:sharesiso4217:USDiso4217:USDxbrli:sharesxbrli:puretwi:facilitytwi:countrytwi:plantwi:jointVenturetwi:segment00008997512024-01-012024-06-3000008997512024-07-2400008997512024-04-012024-06-3000008997512023-04-012023-06-3000008997512023-01-012023-06-3000008997512024-06-3000008997512023-12-310000899751us-gaap:CommonStockMember2023-12-310000899751us-gaap:AdditionalPaidInCapitalMember2023-12-310000899751us-gaap:RetainedEarningsMember2023-12-310000899751us-gaap:TreasuryStockCommonMember2023-12-310000899751us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310000899751us-gaap:ParentMember2023-12-310000899751us-gaap:NoncontrollingInterestMember2023-12-310000899751us-gaap:RetainedEarningsMember2024-01-012024-03-310000899751us-gaap:ParentMember2024-01-012024-03-310000899751us-gaap:NoncontrollingInterestMember2024-01-012024-03-3100008997512024-01-012024-03-310000899751us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310000899751us-gaap:CommonStockMember2024-01-012024-03-310000899751us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310000899751us-gaap:TreasuryStockCommonMember2024-01-012024-03-310000899751us-gaap:CommonStockMember2024-03-310000899751us-gaap:AdditionalPaidInCapitalMember2024-03-310000899751us-gaap:RetainedEarningsMember2024-03-310000899751us-gaap:TreasuryStockCommonMember2024-03-310000899751us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310000899751us-gaap:ParentMember2024-03-310000899751us-gaap:NoncontrollingInterestMember2024-03-3100008997512024-03-310000899751us-gaap:RetainedEarningsMember2024-04-012024-06-300000899751us-gaap:ParentMember2024-04-012024-06-300000899751us-gaap:NoncontrollingInterestMember2024-04-012024-06-300000899751us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-04-012024-06-300000899751us-gaap:CommonStockMember2024-04-012024-06-300000899751us-gaap:AdditionalPaidInCapitalMember2024-04-012024-06-300000899751us-gaap:TreasuryStockCommonMember2024-04-012024-06-300000899751us-gaap:CommonStockMember2024-06-300000899751us-gaap:AdditionalPaidInCapitalMember2024-06-300000899751us-gaap:RetainedEarningsMember2024-06-300000899751us-gaap:TreasuryStockCommonMember2024-06-300000899751us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-300000899751us-gaap:ParentMember2024-06-300000899751us-gaap:NoncontrollingInterestMember2024-06-300000899751us-gaap:CommonStockMember2022-12-310000899751us-gaap:AdditionalPaidInCapitalMember2022-12-310000899751us-gaap:RetainedEarningsMember2022-12-310000899751us-gaap:TreasuryStockCommonMember2022-12-310000899751us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000899751us-gaap:ParentMember2022-12-310000899751us-gaap:NoncontrollingInterestMember2022-12-3100008997512022-12-310000899751us-gaap:RetainedEarningsMember2023-01-012023-03-310000899751us-gaap:ParentMember2023-01-012023-03-310000899751us-gaap:NoncontrollingInterestMember2023-01-012023-03-3100008997512023-01-012023-03-310000899751us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310000899751us-gaap:CommonStockMember2023-01-012023-03-310000899751us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310000899751us-gaap:TreasuryStockCommonMember2023-01-012023-03-310000899751us-gaap:CommonStockMember2023-03-310000899751us-gaap:AdditionalPaidInCapitalMember2023-03-310000899751us-gaap:RetainedEarningsMember2023-03-310000899751us-gaap:TreasuryStockCommonMember2023-03-310000899751us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310000899751us-gaap:ParentMember2023-03-310000899751us-gaap:NoncontrollingInterestMember2023-03-3100008997512023-03-310000899751us-gaap:RetainedEarningsMember2023-04-012023-06-300000899751us-gaap:ParentMember2023-04-012023-06-300000899751us-gaap:NoncontrollingInterestMember2023-04-012023-06-300000899751us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300000899751us-gaap:CommonStockMember2023-04-012023-06-300000899751us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300000899751us-gaap:TreasuryStockCommonMember2023-04-012023-06-300000899751us-gaap:CommonStockMember2023-06-300000899751us-gaap:AdditionalPaidInCapitalMember2023-06-300000899751us-gaap:RetainedEarningsMember2023-06-300000899751us-gaap:TreasuryStockCommonMember2023-06-300000899751us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300000899751us-gaap:ParentMember2023-06-300000899751us-gaap:NoncontrollingInterestMember2023-06-3000008997512023-06-300000899751twi:SeniorSecuredNotes700PercentMember2024-06-300000899751country:TR2022-03-012022-03-310000899751country:AR2018-07-012018-07-310000899751twi:VoltyrePromMember2024-06-3000008997512022-12-160000899751srt:MaximumMember2022-12-162022-12-1600008997512023-01-012023-12-310000899751twi:TheCarlstarGroupLLCMember2024-02-290000899751twi:TheCarlstarGroupLLCMember2024-02-292024-02-290000899751twi:TheCarlstarGroupLLCMember2024-02-292024-02-290000899751twi:TheCarlstarGroupLLCMember2024-02-290000899751twi:TheCarlstarGroupLLCMemberus-gaap:CustomerRelationshipsMember2024-02-292024-02-290000899751twi:TheCarlstarGroupLLCMemberus-gaap:TradeNamesMember2024-02-292024-02-290000899751twi:TheCarlstarGroupLLCMemberus-gaap:OtherIntangibleAssetsMember2024-02-292024-02-290000899751twi:TheCarlstarGroupLLCMember2024-02-292024-06-300000899751twi:TheCarlstarGroupLLCMember2024-04-012024-06-300000899751twi:TheCarlstarGroupLLCMember2023-04-012023-06-300000899751twi:TheCarlstarGroupLLCMember2024-01-012024-06-300000899751twi:TheCarlstarGroupLLCMember2023-01-012023-06-300000899751us-gaap:LandAndLandImprovementsMember2024-06-300000899751us-gaap:LandAndLandImprovementsMember2023-12-310000899751us-gaap:BuildingAndBuildingImprovementsMember2024-06-300000899751us-gaap:BuildingAndBuildingImprovementsMember2023-12-310000899751us-gaap:MachineryAndEquipmentMember2024-06-300000899751us-gaap:MachineryAndEquipmentMember2023-12-310000899751us-gaap:ToolsDiesAndMoldsMember2024-06-300000899751us-gaap:ToolsDiesAndMoldsMember2023-12-310000899751us-gaap:ConstructionInProgressMember2024-06-300000899751us-gaap:ConstructionInProgressMember2023-12-310000899751us-gaap:CustomerRelationshipsMember2024-06-300000899751us-gaap:TradeNamesMember2024-06-300000899751us-gaap:OtherIntangibleAssetsMember2024-06-3000008997512014-08-012014-08-310000899751srt:MinimumMember2024-06-300000899751srt:MaximumMember2024-06-300000899751us-gaap:LineOfCreditMember2024-06-300000899751twi:TitanEuropeMember2024-06-300000899751us-gaap:OtherDebtSecuritiesMember2024-06-300000899751us-gaap:LongTermDebtMember2024-06-300000899751twi:SeniorSecuredNotes700PercentMember2023-12-310000899751twi:TitanEuropeMember2023-12-310000899751us-gaap:OtherDebtSecuritiesMember2023-12-310000899751us-gaap:LongTermDebtMember2023-12-310000899751twi:SeniorSecuredNotes700PercentMember2021-04-2200008997512021-04-220000899751twi:TitanEuropeMembersrt:MinimumMember2024-01-012024-06-300000899751twi:TitanEuropeMembersrt:MaximumMember2024-01-012024-06-300000899751twi:TitanEuropeMembersrt:MinimumMember2024-06-300000899751twi:TitanEuropeMembersrt:MaximumMember2024-06-3000008997512024-02-290000899751twi:BMOHarrisBankN.A.Member2024-02-2800008997512024-02-292024-02-290000899751twi:SeniorSecuredNotes700PercentMember2024-02-292024-02-290000899751us-gaap:OtherDebtSecuritiesMembersrt:MinimumMember2024-06-300000899751us-gaap:OtherDebtSecuritiesMembersrt:MaximumMember2024-06-300000899751twi:TitanBrazilMember2024-06-300000899751us-gaap:OtherDebtSecuritiesMembersrt:MinimumMember2024-01-012024-06-300000899751us-gaap:OtherDebtSecuritiesMembersrt:MaximumMember2024-01-012024-06-300000899751us-gaap:PensionPlansDefinedBenefitMember2024-04-012024-06-300000899751us-gaap:PensionPlansDefinedBenefitMember2023-04-012023-06-300000899751us-gaap:PensionPlansDefinedBenefitMember2024-01-012024-06-300000899751us-gaap:PensionPlansDefinedBenefitMember2023-01-012023-06-300000899751us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2024-06-300000899751us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2023-12-310000899751us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2024-06-300000899751us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2023-12-310000899751twi:AgriculturalMemberus-gaap:OperatingSegmentsMember2024-04-012024-06-300000899751twi:AgriculturalMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300000899751twi:AgriculturalMemberus-gaap:OperatingSegmentsMember2024-01-012024-06-300000899751twi:AgriculturalMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300000899751us-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2024-04-012024-06-300000899751us-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2023-04-012023-06-300000899751us-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2024-01-012024-06-300000899751us-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2023-01-012023-06-300000899751twi:ConsumerMemberus-gaap:OperatingSegmentsMember2024-04-012024-06-300000899751twi:ConsumerMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300000899751twi:ConsumerMemberus-gaap:OperatingSegmentsMember2024-01-012024-06-300000899751twi:ConsumerMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300000899751us-gaap:OperatingSegmentsMember2024-04-012024-06-300000899751us-gaap:OperatingSegmentsMember2023-04-012023-06-300000899751us-gaap:OperatingSegmentsMember2024-01-012024-06-300000899751us-gaap:OperatingSegmentsMember2023-01-012023-06-300000899751us-gaap:OperatingSegmentsMembertwi:CorporateUnallocatedMember2024-04-012024-06-300000899751us-gaap:OperatingSegmentsMembertwi:CorporateUnallocatedMember2023-04-012023-06-300000899751us-gaap:OperatingSegmentsMembertwi:CorporateUnallocatedMember2024-01-012024-06-300000899751us-gaap:OperatingSegmentsMembertwi:CorporateUnallocatedMember2023-01-012023-06-300000899751twi:AgriculturalMemberus-gaap:OperatingSegmentsMember2024-06-300000899751twi:AgriculturalMemberus-gaap:OperatingSegmentsMember2023-12-310000899751us-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2024-06-300000899751us-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2023-12-310000899751twi:ConsumerMemberus-gaap:OperatingSegmentsMember2024-06-300000899751twi:ConsumerMemberus-gaap:OperatingSegmentsMember2023-12-310000899751us-gaap:OperatingSegmentsMembertwi:CorporateUnallocatedMember2024-06-300000899751us-gaap:OperatingSegmentsMembertwi:CorporateUnallocatedMember2023-12-310000899751twi:AgriculturalMembertwi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMember2024-04-012024-06-300000899751twi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2024-04-012024-06-300000899751twi:ConsumerMembertwi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMember2024-04-012024-06-300000899751us-gaap:OperatingSegmentsMembertwi:WheelsAndTiresIncludingAssembliesMember2024-04-012024-06-300000899751twi:AgriculturalMembertwi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMember2024-04-012024-06-300000899751twi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2024-04-012024-06-300000899751twi:UndercarriageSystemsAndComponentsMembertwi:ConsumerMemberus-gaap:OperatingSegmentsMember2024-04-012024-06-300000899751twi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMember2024-04-012024-06-300000899751twi:AgriculturalMembertwi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMember2024-01-012024-06-300000899751twi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2024-01-012024-06-300000899751twi:ConsumerMembertwi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMember2024-01-012024-06-300000899751us-gaap:OperatingSegmentsMembertwi:WheelsAndTiresIncludingAssembliesMember2024-01-012024-06-300000899751twi:AgriculturalMembertwi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMember2024-01-012024-06-300000899751twi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2024-01-012024-06-300000899751twi:UndercarriageSystemsAndComponentsMembertwi:ConsumerMemberus-gaap:OperatingSegmentsMember2024-01-012024-06-300000899751twi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMember2024-01-012024-06-300000899751twi:AgriculturalMembertwi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300000899751twi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2023-04-012023-06-300000899751twi:ConsumerMembertwi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300000899751us-gaap:OperatingSegmentsMembertwi:WheelsAndTiresIncludingAssembliesMember2023-04-012023-06-300000899751twi:AgriculturalMembertwi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300000899751twi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2023-04-012023-06-300000899751twi:UndercarriageSystemsAndComponentsMembertwi:ConsumerMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300000899751twi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300000899751twi:AgriculturalMembertwi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300000899751twi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2023-01-012023-06-300000899751twi:ConsumerMembertwi:WheelsAndTiresIncludingAssembliesMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300000899751us-gaap:OperatingSegmentsMembertwi:WheelsAndTiresIncludingAssembliesMember2023-01-012023-06-300000899751twi:AgriculturalMembertwi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300000899751twi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMembertwi:EarthmovingconstructionMember2023-01-012023-06-300000899751twi:UndercarriageSystemsAndComponentsMembertwi:ConsumerMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300000899751twi:UndercarriageSystemsAndComponentsMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-30

Washington, D.C.  20549

For the Quarterly Period Ended: June 30, 2024

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: 72,159,028 shares of common stock, $0.0001 par value, as of July 24, 2024.

 

			Three months ended												Six months ended
			June 30,												June 30,
			2024						2023						2024						2023
Net sales			$	532,170					$	481,176					$	1,014,379					$	1,029,820
Cost of sales			451,728						395,281						856,567						848,368
Gross profit			80,442						85,895						157,812						181,452
Selling, general and administrative expenses			51,583						34,858						91,003						69,330
Acquisition related expenses			—						—						6,196						—
Research and development expenses			4,218						3,218						7,872						6,232
Royalty expense			2,319						1,921						5,347						4,856
Income from operations			22,322						45,898						47,394						101,034
Interest expense, net			(7,187)						(5,762)						(12,679)						(12,254)
Foreign exchange gain (loss)			462						2						187						(1,758)
Other income			3,277						1,186						3,682						1,948
Income before income taxes			18,874						41,324						38,584						88,970
Provision for income taxes			15,452						9,429						25,188						23,645
Net income			3,422						31,895						13,396						65,325
Net income attributable to noncontrolling interests			1,273						1,688						2,046						3,280
Net income attributable to Titan and applicable to common shareholders			$	2,149					$	30,207					$	11,350					$	62,045
Earnings per common share:
Basic			$	0.03					$	0.48					$	0.16					$	0.99
Diluted			$	0.03					$	0.48					$	0.16					$	0.98
Average common shares and equivalents outstanding:
Basic			72,737						62,931						68,833						62,918
Diluted			73,078						63,234						69,361						63,404

 

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, 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.

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

We account for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification 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.

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 of $12.7 million are recorded at fair value which approximates market value.  Our 7.00% senior secured notes due 2028 were carried at a cost of $396.7 million at June 30, 2024. The fair value of the senior secured notes due 2028 at June 30, 2024, as determined with the assistance of an independent pricing source, was approximately $384.4 million, which was determined to be a level 2 fair value measurement.

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.

For the three and six months ended June 30, 2024, the Company recognized a net monetary loss of $0.4 million and $1.6 million recorded in foreign exchange loss in the consolidated statements of operations associated with the application of ASC 830.

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 6% and 7% of consolidated assets of Titan as of June 30, 2024 and December 31, 2023, respectively. The Russian operations represent 4% and 7% of consolidated global sales for the three months ended June 30, 2024 and 2023, respectively, while representing 5% and 6% of consolidated global sales for the six months ended June 30, 2024 and 2023, 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 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 775,000 shares of its common stock totaling $6.4 million during the three months ended June 30, 2024, and 875,000 shares of its common stock totaling $7.8 million during the six months ended June 30, 2024 and 2,653,786 shares of its common stock totaling $32.6 million during 2023. As of June 30, 2024, $9.6 million remains available for future share repurchases under this program. The Company records treasury stock using the cost method.

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 $4.3 million at June 30, 2024, and $7.4 million at December 31, 2023.

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 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, may be applied prospectively or retrospectively, and allows for early adoption. These requirements will impact our income tax disclosures.

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):

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 equity holders of Carlstar.

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.

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 as of February 29, 2024 (amounts in thousands):

Through June 30, 2024, the actual revenue and income before taxes 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.

The following is the unaudited pro forma financial information for the three and six months ended June 30, 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, except per share data).

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 and six months ended June 30, 2024 and were adjusted to include these amounts for the three and six months ended June 30, 2023.

Total acquisition-related costs for the three and six months ended June 30, 2024 were $0.0 million and $6.2 million, respectively.

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 were $14.3 million and $10.4 million for the three months ended June 30, 2024 and 2023, respectively, and $25.9 million and $20.8 million for the six months ended June 30, 2024 and 2023, respectively.

The components of intangible assets, net consisted of the following (amounts in thousands):

Amortization related to intangible assets were $0.9 million and $0.1 million for the three months ended June 30, 2024 and 2023, respectively, and $1.1 million and $0.3 million for the six months ended June 30, 2024 and 2023, respectively.

The estimated aggregate amortization expense at June 30, 2024, for each of the years (or other periods) set forth below was as follows (amounts in thousands):

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

(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.

Changes in the warranty liability during the six months ended June 30, 2024 and 2023, 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):

The weighted-average interest rates on short-term borrowings within one year at June 30, 2024 and December 31, 2023, were approximately 2.8% and 3.1%, respectively.

Aggregate principal maturities of long-term debt at June 30, 2024 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 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, 2024.

The Titan Europe credit facilities include borrowings from various institutions totaling $19.9 million in aggregate principal amount at June 30, 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%.

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 June 30, 2024, the interest rate was 7.05%.

The Company's amount available for borrowing under the new credit facility at June 30, 2024 totaled $204.2 million, based on eligible accounts receivable and inventory balances. With outstanding letters of credit totaling $9.9 million and $127.0 million in borrowings under the revolving credit facility, the net amount available for borrowing under the new credit facility totaled $67.3 million at June 30, 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 June 30, 2024.

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 has a working capital loan at Titan Pneus do Brasil Ltda at varying interest rates from approximately 7% to 7.6%, which totaled $6.9 million at June 30, 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.

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 ASC 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, 2024, maturities of lease liabilities were as follows (amounts in thousands):

Supplemental cash flow information related to leases for the six months ended June 30, 2024 were as follows: operating cash flows from operating leases were $4.5 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 $0.3 million to the pension plans during the six months ended June 30, 2024 and $0.7 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):

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 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):

			June 30, 2024						December 31, 2023
Cash and cash equivalents			$	975					$	355
Inventory			1,587						1,431
Other current assets			2,551						2,364
Property, plant and equipment, net			1,313						2,477
Other non-current assets			154						222
Total assets			$	6,580					$	6,849
Current liabilities			$	632					$	1,117
Other long-term liabilities			868						869
Total liabilities			$	1,500					$	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 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. 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 $2.3 million and $1.9 million for the three months ended June 30, 2024 and 2023, respectively, and $5.3 million and $4.9 million for the six months ended June 30, 2024 and 2023, 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. For the three and six months ended June 30, 2023, the Company recorded indirect tax credits of $0.5 million within other income.

(2) The gain on property insurance settlement relates to the receipt of insurance proceeds of $3.5 million offset by costs to repair one of our operating facilities in Italy related to a 2023 hail storm weather event.

The Company recorded income tax expense of $15.5 million and $9.4 million for the three months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and 2023, the Company recorded income tax expense of $25.2 million and $23.6 million, respectively. The Company's effective income tax rate was 81.9% and 22.8% for the three months ended June 30, 2024 and 2023, respectively, and 65.3% and 26.6% for the six months ended June 30, 2024 and 2023, respectively.

For the six months ended June 30, 2024, the rate was negatively impacted by non-deductible interest expense in the United States, foreign branch income related to the Carlstar acquisition,and one-time impacts associated with transaction costs, which were also not fully deductible for income tax purposes. Additionally the rate was impacted by the results of foreign income tax rate differential on the mix of earnings, non-deductible royalty expenses in certain jurisdictions, and certain foreign inclusion items on the domestic provision.

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.

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 June 30, 2024 financial statements.

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. 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.

The table below presents information about certain operating results, separated by market segments, for the three and six months ended June 30, 2024 and 2023 (amounts in thousands):

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

The table below presents net sales by products and reportable segments for the three and six months ended June 30, 2024 and 2023 (amounts in thousands):