# Titan International Inc: Form 10-Q for the period ended Mar 31, 2024

- Company: [Titan International Inc](/companies/twi.md) (CIK 899751)
- Form: 10-Q
- Filed: 2024-05-01
- Accepted by EDGAR: May 1, 2024, 20:30 ET
- Period: 2024-03-31
- Accession: 0000899751-24-000056
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/899751/000089975124000056/twi-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/899751/000089975124000056/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $482.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $404.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $77.4m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $3.7m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $39.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $25.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $5.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $9.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $9.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.14 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.14 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 65,704,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $2.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $16.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $1.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | at 2024-03-31 | $1.16bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $1.81bn | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $495.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $1.18bn | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $630.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 39,596 characters.

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

### Acquisition of Carlstar

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

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

### FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements, which are covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. Readers can identify these statements by the fact that they do not relate strictly to historical or current facts. The Company tried to identify forward-looking statements in this quarterly report by using words such as “anticipates,” “estimates,” “expects,” “intends,” “plans,” and “believes,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could.” These forward-looking statements include, among other items, information concerning:

- the Company's financial performance;
- anticipated trends in the Company’s business;
- expectations with respect to the end-user markets into which the Company sells its products (including agricultural equipment, earthmoving/construction equipment, and consumer products);
- future expenditures for capital projects and future stock repurchases
- the Company’s ability to continue to control costs and maintain quality;
- the Company's ability to meet conditions of loan agreements, indentures and other financing documents;
- the Company’s business strategies, including its intention to introduce new products;
- expectations concerning the performance and success of the Company’s existing and new products; and
- the Company’s intention to consider and pursue acquisition and divestiture opportunities. The results could differ materially if the acquisition of Carlstar does not deliver on the expected results.

Readers of this Form 10-Q should understand that these forward-looking statements are based on the Company’s current expectations and assumptions about future events and are subject to a number of risks, uncertainties, and changes in circumstances that are difficult to predict, including those in Part I, Item 1A, Risk Factors, of the 2023 Form 10-K and Part II, Item 1A, Risk Factors, of this quarterly report on Form 10-Q, certain of which are beyond the Company’s control.

Actual results could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various factors, including:

- the effect of the geopolitical instability resulting from the military conflicts between Russia and Ukraine on our Russian and global operations, and between Israel and Hamas on our global operations;
- the effect of a recession on the Company and its customers and suppliers;
- the effect of the market demand cycles on the company's sales, which may have significant fluctuations;
- changes in the Company’s end-user markets into which the Company sells its products as a result of domestic and world economic or regulatory influences or otherwise;
- changes in the marketplace, including new products and pricing changes by the Company’s competitors;
- the Company's ability to maintain satisfactory labor relations;
- the Company's ability to operate in accordance with its business plan and strategies
- unfavorable outcomes of legal proceedings;
- the Company's ability to comply with current or future regulations applicable to the Company's business and the industry in which it competes or any actions taken or orders issued by regulatory authorities;
- availability and price of raw materials;
- availability and price of supply chain logistics and freight;
- levels of operating efficiencies;
- the effects of the Company's indebtedness and its compliance with the terms thereof;
- changes in the interest rate environment and their effects on the Company's outstanding indebtedness;
- unfavorable product liability and warranty claims;
- actions of domestic and foreign governments, including the imposition of additional tariffs and approval of tax credits or other incentives;
- geopolitical and economic uncertainties relating to the countries in which the Company operates or does business;
- risks associated with acquisitions, including difficulty in integrating operations and personnel, disruption of ongoing business, and increased expenses;
- results of investments, and the realization of projected synergies;
- the effects of potential processes to explore various strategic transactions, including potential dispositions;
- fluctuations in currency translations;
- climate change and related laws and regulations;
- risks associated with environmental laws and regulations and increased attention to ESG matters;
- risks relating to our manufacturing facilities, including that any of our material facilities may become inoperable; and
- risks related to financial reporting, internal controls, tax accounting, and information systems, including cybersecurity threats.

Any changes in such factors could lead to significantly different results. Any assumptions that are inaccurate or do not prove to be correct could have a material adverse effect on the Company’s ability to achieve the results as indicated in the forward-looking statements. Forward-looking statements speak only as of the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In light of these risks and uncertainties, there can be no assurance that the forward-looking information and assumptions contained in this report will in fact transpire. The reader should not place undue reliance on the forward-looking statements included in this report or that may be made elsewhere from time to time by the Company, or on its behalf. All forward-looking statements attributable to Titan are expressly qualified by these cautionary statements.

### OVERVIEW

Titan International, Inc., together with its subsidiaries, is a global wheel, tire, and undercarriage industrial manufacturer and supplier that services customers across the globe. As a leading manufacturer in the off-highway industry, Titan produces a broad range of products to meet the specifications of original equipment manufacturers (OEMs) and aftermarket customers in the agricultural, earthmoving/construction, and consumer markets. Titan manufactures and sells certain tires under the Goodyear Farm Tire, Titan Tire, Carlstar and Voltyre-Prom Tire brands and has complete research and development facilities to validate tire and wheel designs. Carlstar sells tire products under the Carlisle® brand under a long-term license agreement and also sells tires under other recognized brand names, including ITP®, Trail Wolf®, Links®, USA Trail® and Carlisle Radial Trail HD™ highway trailer tires.

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

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

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

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

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

### MARKET CONDITIONS AND OUTLOOK

### AGRICULTURAL MARKET OUTLOOK

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

### EARTHMOVING/CONSTRUCTION MARKET OUTLOOK

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

### CONSUMER MARKET OUTLOOK

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

### RESULTS OF OPERATIONS

*(Amounts in thousands, except percentages)*

|  | Three months ended March 31, 2024 | 2023 | % Increase/(Decrease) |
| --- | ---: | ---: | ---: |
| Net sales | $482,209 | $548,644 | (12.1)% |
| Cost of sales | 404,839 | 453,087 | (10.6)% |
| Gross profit | 77,370 | 95,557 | (19.0)% |
| Gross profit % | 16.0% | 17.4% | (8.0)% |
| Selling, general and administrative expenses | 39,420 | 34,472 | 14.4% |
| Acquisition related expenses | 6,196 | — | 100.0% |
| Research and development expenses | 3,654 | 3,014 | 21.2% |
| Royalty expense | 3,028 | 2,935 | 3.2% |
| Income from operations | $25,072 | $55,136 | (54.5)% |

### Net Sales

Net sales for the three months ended March 31, 2024 were $482.2 million, compared to $548.6 million in the comparable period of 2023. Net sales changes were primarily attributed to the agricultural and earthmoving/construction segments. This was due to a decrease in sales volume caused by lower levels of end customer demand in agricultural and construction equipment globally, with particular economic softness in Brazil. The volume change was positively impacted by the net sales from the Carlstar acquisition in March 2024, subsequent to the acquisition which was consummated on February 29, 2024. It was also negatively impacted by price due to lower raw material and other input costs, most notably steel in Europe, and unfavorable foreign currency translation of 2.3%.

### Gross Profit

Gross profit for the three months ended March 31, 2024 was $77.4 million, or 16.0% of net sales, compared to $95.6 million, or 17.4% of net sales, for the three months ended March 31, 2023. The changes in gross profit and gross margin for three months ended March 31, 2024 as compared to the prior year period were due to the lower sales and lower fixed cost leverage.

### Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2024 were $39.4 million, or 8.2% of net sales, compared to $34.5 million, or 6.3% of net sales, for the three months ended March 31, 2023. The change in SG&A for the three months ended March 31, 2024 as compared to the prior year period was due to recurring SG&A incurred on the Carlstar operations that includes management of distribution centers, and general inflationary cost impacts, including personnel related costs.

### Acquisition related Expenses

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

### Research and Development Expenses

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

### Royalty Expense

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

### Income from Operations

Income from operations for the three months ended March 31, 2024 was $25.1 million, compared to income from operations of $55.1 million for the three months ended March 31, 2023. The change in income from operations for the three months ended March 31, 2024 as compared to the prior year periods was primarily due to lower net sales and the net result of the items previously discussed.

### OTHER PROFIT/LOSS ITEMS

### Interest Expense, net

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

### Foreign Exchange Loss

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

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

### Other Income

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

### Provision for Income Taxes

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

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

### Net Income and Income per Share

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

### SEGMENT INFORMATION

**Segment Summary** (amounts in thousands, except percentages)

| Three months ended March 31, 2024 | Agricultural | Earthmoving/ Construction | Consumer | Corporate/ Unallocated Expenses | Consolidated Totals |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net sales | $239,673 | $165,208 | $77,328 | $— | $482,209 |
| Gross profit | 40,619 | 22,977 | 13,774 | — | 77,370 |
| Profit margin | 16.9% | 13.9% | 17.8% | — | 16.0% |
| Income (loss) from operations | 24,010 | 8,834 | 5,113 | (12,885) | 25,072 |
| **Three months ended March 31, 2023** |  |  |  |  |  |
| Net sales | $305,858 | $198,924 | $43,862 | $— | $548,644 |
| Gross profit | 49,250 | 37,224 | 9,083 | — | 95,557 |
| Profit margin | 16.1% | 18.7% | 20.7% | — | 17.4% |
| Income (loss) from operations | 32,569 | 23,538 | 6,792 | (7,763) | 55,136 |

### Agricultural Segment Results

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

|  | Three months ended March 31, 2024 | 2023 | % Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Net sales | $239,673 | $305,858 | (21.6)% |
| Gross profit | 40,619 | 49,250 | (17.5)% |
| Profit margin | 16.9% | 16.1% | 5.0% |
| Income from operations | 24,010 | 32,569 | (26.3)% |

26

Net sales in the agricultural segment were $239.7 million for the three months ended March 31, 2024, as compared to $305.9 million for the comparable period in 2023. The net sales change was primarily attributed to lower sales volume in North and South America, resulting from overall softness in demand for agricultural equipment, and a decline in Brazilian economic activity. The change in net sales was also influenced by the unfavorable impact of foreign currency translation of 4.3%.

Gross profit in the agricultural segment was $40.6 million for the three months ended March 31, 2024, as compared to $49.3 million in the comparable period in 2023. The change in gross profit was attributed to lower sales volume. The increase in profit margin was due to the measures taken to improve financial performance, along with lower raw material and other input costs, which have helped offset the impact of lower fixed cost leverage.

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

### Earthmoving/Construction Segment Results

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

|  | Three months ended March 31, 2024 | 2023 | % Decrease |
| --- | ---: | ---: | ---: |
| Net sales | $165,208 | $198,924 | (16.9)% |
| Gross profit | 22,977 | 37,224 | (38.3)% |
| Profit margin | 13.9% | 18.7% | (25.7)% |
| Income from operations | 8,834 | 23,538 | (62.5)% |

The Company's earthmoving/construction segment net sales were $165.2 million for the three months ended March 31, 2024, as compared to $198.9 million in the comparable period in 2023. The change in earthmoving/construction sales was primarily due to lower sales volume in the Americas and the undercarriage business which was caused by a slowdown at construction OEM customers. In addition, the net sales change was impacted by negative price due to lower raw material and other input costs.

Gross profit in the earthmoving/construction segment was $23.0 million for the three months ended March 31, 2024, as compared to $37.2 million for the three months ended March 31, 2023. The changes in gross profit and margin were primarily attributed to the lower sales volume, which also resulted in lower fixed cost leverage and contractual price givebacks due to lower steel prices particularly in Europe.

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

### Consumer Segment Results

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

|  | Three months ended March 31, 2024 | 2023 | % Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Net sales | $77,328 | $43,862 | 76.3% |
| Gross profit | 13,774 | 9,083 | 51.6% |
| Profit margin | 17.8% | 20.7% | (14.0)% |
| Income from operations | 5,113 | 6,792 | (24.7)% |

Consumer segment net sales were $77.3 million for the three months ended March 31, 2024, as compared to $43.9 million for the three months ended March 31, 2023. The increase in sales was driven by the positive effects of Carlstar acquisition in March 2024, subsequent to consummation of the acquisition on February 29, 2024. The increase was partially offset by lower sales volumes, primarily in Americas, where demand was lower from the softer market conditions.

Gross profit from the consumer segment was $13.8 million for the three months ended March 31, 2024, as compared to $9.1 million for the three months ended March 31, 2023. The increase in gross profit was driven by the positive effects of Carlstar acquisition. The change in profit margin was primarily due to the effect of the inventory revaluation step-up associated with the Carlstar purchase price allocation.

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

### Corporate & Unallocated Expenses

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

### LIQUIDITY AND CAPITAL RESOURCES

### Cash Flows

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

### Operating Cash Flows

Summary of cash flows from operating activities:

*(Amounts in thousands)*

|  | Three months ended March 31, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Net income | $9,974 | $33,430 | $(23,456) |
| Depreciation and amortization | 12,001 | 10,830 | 1,171 |
| Deferred income tax provision | 3,491 | 4,089 | (598) |
| Foreign currency gain | (390) | (230) | (160) |
| Accounts receivable | (43,140) | (58,541) | 15,401 |
| Inventories | (136) | 11,486 | (11,622) |
| Prepaid and other current assets | (6,548) | (3,932) | (2,616) |
| Accounts payable | 25,196 | 10,237 | 14,959 |
| Other current liabilities | 3,695 | 15,947 | (12,252) |
| Other liabilities | 1,401 | 110 | 1,291 |
| Other operating activities | (3,539) | 660 | (4,199) |
| Cash provided by operating activities | $2,005 | $24,086 | $(22,081) |

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

Operating cash flows decreased by $22.1 million when comparing the first three months of 2024 to the comparable period in 2023. This decrease was primarily due to lower net income, partially offset by the positive effect of focused working capital management, especially the change in accounts payable of $15.0 million and solid collections efforts on accounts receivable by $15.4 million, which helped offset the inventory effect of $11.6 million.

Summary of the components of cash conversion cycle:

|  | March 31, 2024 | December 31, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: |
| Days sales outstanding | 56 | 51 | 54 |
| Days inventory outstanding | 98 | 104 | 81 |
| Days payable outstanding | (57) | (57) | (57) |
| Cash conversion cycle | 97 | 98 | 78 |

Cash conversion cycle increased by 19 days when comparing March 31, 2024 to March 31, 2023. This increase was primarily due to the effect of the Carlstar acquisition, which carried additional accounts receivable at the end of the first quarter of 2024, resulting from deferred payment schedules related to sales promotion campaigns.

### Investing Cash Flows

Summary of cash flows from investing activities:

*(Amounts in thousands)*

|  | Three months ended March 31, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Capital expenditures | $(16,607) | $(11,698) | $(4,909) |
| Business acquisition, net of cash acquired | (142,207) | — | (142,207) |
| Proceeds from sale of fixed assets | 52 | 258 | (206) |
| Cash used for investing activities | $(158,762) | $(11,440) | $(147,322) |

Net cash used for investing activities was $158.8 million in the first three months of 2024, as compared to net cash used for investing activities of $11.4 million in the first three months of 2023. The increase was primarily due to the acquisition of Carlstar for a cash consideration of $142.2 million, which included a $18.4 million excess working capital payment to the sellers. The Company also invested a total of $16.6 million in capital expenditures in the first three months of 2024, compared to $11.7 million in the first three months of 2023. Capital expenditures represent plant equipment replacement and improvements, along with new tools, dies and molds related to new product development. The overall capital outlay for 2024 increased as the Company seeks to enhance the Company's existing facilities and manufacturing capabilities and drive plant efficiency and labor productivity gains.

### Financing Cash Flows

Summary of cash flows from financing activities:

*(Amounts in thousands)*

|  | Three months ended March 31, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Proceeds from borrowings | $154,771 | $2,360 | $152,411 |
| Payment on debt | (7,021) | (11,382) | 4,361 |
| Repurchase of common stock | (1,402) | (1,293) | (109) |
| Other financing activities | (642) | (130) | (512) |
| Cash provided by (used for) financing activities | $145,706 | $(10,445) | $156,151 |

During the first three months of 2024, $145.7 million cash was provided by financing activities. On February 29, 2024, the Company acquired Carlstar. To facilitate the purchase, Titan borrowed $147.0 million from the new domestic credit facility.

During the first three months of 2023, the company made debt payments of $11.4 million and repurchase common stock of $1.3 million, partially offset by proceeds from borrowings of $2.4 million.

Additionally, Titan issued common stock worth $168.7 million in connection with the business acquisition of Carlstar. This was reflected in “Non cash financing activity” of the Condensed Consolidated Statements of Cash Flow.

### Debt Restrictions

The Company’s $225 million revolving credit facility (credit facility) and indenture relating to the 7.00% senior secured notes due 2028 contain various restrictions, including:

- When remaining availability under the credit facility is less than the greater of (i) $17 million and (ii) 10% of the credit facility’s line cap (the line cap being the lesser of our borrowing base or the lenders’ commitments under the credit facility), the Company will be required to maintain a minimum fixed charge coverage ratio of not less than 1.0 to 1.0 (calculated quarterly on a trailing four quarter basis).
- Limits on dividends and repurchases of the Company’s stock;
- Restrictions on the ability of the Company to make additional borrowings, or to consolidate, merge, or otherwise fundamentally change the ownership of the Company;
- Limitations on investments, dispositions of assets, and guarantees of indebtedness; and
- Other customary affirmative and negative covenants.

These covenants are subject to a number of exceptions and qualifications that are described in the credit and security agreement. These restrictions could limit the Company’s ability to respond to market conditions, provide for unanticipated capital investments, raise additional debt or equity capital, pay dividends, or take advantage of business opportunities, including future acquisitions. The Company is in compliance with these debt covenants at March 31, 2024.

### Guarantor Financial Information

The Company's 7.00% senior secured notes due 2028 are guaranteed by the following 100% owned subsidiaries of the Company: Titan Tire Corporation, Titan Tire Corporation of Bryan, Titan Tire Corporation of Freeport, and Titan Wheel Corporation of Illinois (together, the "Guarantors"). The note guarantees are full and unconditional, joint and several obligations of the guarantors. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

The following summarized financial information of both the Company and the Guarantors is presented on a combined basis. Intercompany balances and transactions between the Company and the Guarantors have been eliminated and the summarized financial information does not reflect investments of the Company or the Guarantors in the Non-Guarantor Subsidiaries. The information is presented in accordance with the requirements of Rule 13-01 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor subsidiary operated as an independent entity.

Summarized Balance Sheets:

*(Amounts in thousands)*

| Assets | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Current assets | $100,247 | $93,339 |
| Property, plant, and equipment, net | 89,090 | 88,739 |
| Intercompany accounts, non-guarantor subsidiaries | 486,095 | 486,860 |
| Other long-term assets | 72,934 | 72,678 |
| **Liabilities** |  |  |
| Current liabilities | 104,208 | 83,198 |
| Long-term debt | 543,496 | 396,277 |
| Other long-term liabilities | 4,771 | 4,626 |

31

Summarized Statement of Operations:

*(Amounts in thousands)*

|  | Three months ended March 31, 2024 |
| --- | ---: |
| Net sales | $169,079 |
| Gross profit | 26,691 |
| Income from operations | 3,106 |
| Net loss | (6,541) |

### Liquidity Outlook

At March 31, 2024, the Company had $203.6 million of cash and cash equivalents. At March 31, 2024, there were $147.0 million of borrowings under the Company's $225 million credit facility. Titan's availability under this credit facility may be less than $225 million as a result of outstanding letters of credit and eligible accounts receivable and inventory balances at certain domestic and Canadian subsidiaries. Based on eligible accounts receivable and inventory balances, the Company's amount available for borrowing totaled $225.0 million at March 31, 2024. With outstanding letters of credit totaling $10.6 million, the net amount available for borrowing under the credit facility totaled $67.4 million at March 31, 2024. The cash and cash equivalents balance of $203.6 million included $169.2 million held in foreign countries.

The Company is expecting full year capital expenditures to be approximately $70 million to $75 million. These capital expenditures are anticipated to be used primarily to continue to enhance the Company’s existing facilities and manufacturing capabilities and drive productivity gains, along with the purchase of new tools, dies and molds related to new product development.

Cash payments for interest are currently forecasted to between $36 million and $38 million for the remainder of 2024 based on March 31, 2024 debt balances. The forecasted interest payment is comprised primarily of the semi-annual payment of $14 million to be paid in April and October for the 7.00% senior secured notes, and between $6 million and $8 million of payments on the credit facility, which will be variable dependent upon on the prevailing SOFR rate and debt levels within each month.

Cash and cash equivalents along with anticipated internal cash flows from operations and utilization of availability on global credit facilities, are expected to provide sufficient liquidity for working capital needs, debt maturities, and capital expenditures. Potential divestitures and unencumbered assets are also a means to provide for future liquidity needs.

### CRITICAL ACCOUNTING ESTIMATES

There were no material changes in the Company’s Critical Accounting Estimates since the filing of the 2023 Form 10-K. As discussed in the 2023 Form 10-K, the preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates, assumptions, and judgments that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates and assumptions. Refer to Note 1. Basis of Presentation and Significant Accounting Policies in Part I, Item 1, Notes to Condensed Consolidated Financial Statements of this Form 10-Q for a discussion of the Company’s updated accounting policies.

## Market risk

As filed, 389 characters.

Titan is exposed to market risks, including changes in foreign currency exchange rates and interest rates, and commodity price fluctuations. Our exposure to market risk has not changed materially since December 31, 2023. For quantitative and qualitative disclosures about market risk, see Item 7A - Quantitative and Qualitative Disclosures About Market Risk included in the 2023 Form 10-K.

## Controls and procedures

As filed, 3,277 characters.

### Evaluation of Disclosure Controls and Procedures

Titan management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the Exchange Act)) as of March 31, 2024. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2024, Titan's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by Titan in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported accurately and within the time frames specified in the SEC's rules and forms and accumulated and communicated to Titan management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As disclosed in Note 2. Business Combination in Part I, Item 1, Notes to Condensed Consolidated Financial Statements of this Form 10-Q, Titan acquired Carlstar on February 29, 2024. The total revenues of Carlstar represented approximately 10.7% of the total net sales as shown on our consolidated financial statements for the three months ended March 31, 2024 and Carlstar’s total assets constituted approximately 10.9% of total assets as shown on our consolidated financial statements for the same period. Titan is currently integrating Carlstar into our overall internal control over financial reporting process and, consistent with interpretive guidance issued by the Staff of the Securities and Exchange Commission, is excluding the business from our assessment of internal control over financial reporting as of March 31, 2024. In accordance with such guidance, an assessment of recent business combinations may be omitted from management’s assessment of internal control over financial reporting for one year following the acquisition.

### Changes in Internal Controls

As noted above, we acquired Carlstar on February 29, 2024. We are integrating Carlstar into our overall internal control over

financial reporting process. At this time, we anticipate that the scope of our assessment of our internal control over financial

reporting for our fiscal year ending December 31, 2024 will exclude Carlstar’s internal control over financial reporting.

Other than as set forth above, there were no changes in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the first quarter of fiscal year 2024 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

### Inherent Limitations on the Effectiveness of Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Filed May 1, 2024.
Source: SEC EDGAR, the filing index for accession 0000899751-24-000056. Last ingested by Listed: Oct 24, 2026, 15:00 ET. No prices; not investment advice.