# Titan International Inc: Form 10-Q for the period ended Jun 30, 2024

- Company: [Titan International Inc](/companies/twi.md) (CIK 899751)
- Form: 10-Q
- Filed: 2024-07-31
- Accepted by EDGAR: Jul 31, 2024, 20:27 ET
- Period: 2024-06-30
- Accession: 0000899751-24-000082
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/899751/000089975124000082/twi-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/899751/000089975124000082/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $532.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $1.01bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $451.7m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $856.6m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $80.4m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $157.8m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $4.2m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2024-01-01 to 2024-06-30 | $7.9m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $51.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $91.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $22.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $47.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $7.2m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $12.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $15.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $25.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $2.1m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $11.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.03 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.16 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.03 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.16 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 73,078,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 69,361,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $72.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $34.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $7.8m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $224.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $1.09bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $1.73bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $454.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $1.12bn | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $553.8m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-06-30 | $609.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 50,885 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 to our Form 10-Q for the quarter ended March 31, 2024 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 six months ended June 30, 2024 were $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;
- Uncertainties from political or electoral changes in the United States, Europe and elsewhere;
- the effect of a recession or depression 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 related to the Company's previously announced intention to negotiate a possible increase in the amount of the Company's common stock that American Industrial Partners and its affiliates may acquire under the Stockholders Agreement dated February 29, 2024 among the Company, Carlstar Intermediate Holdings I LLC, AIPCF V Feeder CTP Tire, LLC and AIPCF V Feeder C (Cayman), LP;
- 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, a shift in consumer preference towards higher protein diets, and the replacement of an aging large equipment fleet in favor of newer and higher productivity technology, 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 significant slowdown in customer demand, 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. 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 June 30, 2024 | 2023 | % Increase/(Decrease) | Six months ended June 30, 2024 | 2023 | % Increase/(Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $532,170 | $481,176 | 10.6% | $1,014,379 | $1,029,820 | (1.5)% |
| Cost of sales | 451,728 | 395,281 | 14.3% | 856,567 | 848,368 | 1.0% |
| Gross profit | 80,442 | 85,895 | (6.3)% | 157,812 | 181,452 | (13.0)% |
| Gross profit % | 15.1% | 17.9% | (15.6)% | 15.6% | 17.6% | (11.4)% |
| Selling, general and administrative expenses | 51,583 | 34,858 | 48.0% | 91,003 | 69,330 | 31.3% |
| Acquisition related expenses | — | — | 0.0% | 6,196 | — | 100.0% |
| Research and development expenses | 4,218 | 3,218 | 31.1% | 7,872 | 6,232 | 26.3% |
| Royalty expense | 2,319 | 1,921 | 20.7% | 5,347 | 4,856 | 10.1% |
| Income from operations | $22,322 | $45,898 | (51.4)% | $47,394 | $101,034 | (53.1)% |

### Net Sales

Net sales for the three months ended June 30, 2024 were $532.2 million, compared to $481.2 million in the comparable period of 2023. This growth was primarily driven by higher volumes in the consumer segment, bolstered by the net sales contribution from the Carlstar acquisition completed on February 29, 2024. The sales increase was partially offset by reduced sales in the agricultural and earthmoving/construction segments, stemming from weakened global agriculture end customer demand and lower steel prices in Europe. Furthermore, the net sales increase was impacted by negative price effects and an unfavorable currency translation impact of 3.7%.

Net sales for the six months ended June 30, 2024 were $1,014.4 million, compared to $1,029.8 million in the comparable period of 2023. Net sales change was primarily attributable to lower demand for agriculture and construction equipment, the adverse impact of price, particularly lower steel prices in Europe, as well as a 3.0% unfavorable foreign currency translation effect. The decrease was partially offset by increased sales volumes, resulting from the positive contribution from the Carlstar acquisition.

### Gross Profit

Gross profit for the three months ended June 30, 2024 was $80.4 million, or 15.1% of net sales, compared to $85.9 million, or 17.9% of net sales, for the three months ended June 30, 2023. The changes in gross profit and margin were attributed to negative price/mix, reduced fixed cost leverage, higher material costs and inventory revaluation step-up of $7.3 million associated with the Carlstar purchase price allocation. Excluding the inventory revaluation step-up, adjusted gross margin for the three months ended June 30, 2024 would have been 16.5% of net sales.

Gross profit for the six months ended June 30, 2024 was $157.8 million, or 15.6% of net sales, compared to $181.5 million, or 17.6% of net sales, for the six months ended June 30, 2023. The changes in gross profit and gross margin for six months ended June 30, 2024 as compared to the prior year period were primarily due to lower sales volume, negative price/mix resulting in reduced fixed cost leverage and inventory revaluation step-up of $10.7 million associated with the Carlstar purchase price allocation. Excluding the inventory revaluation step-up, adjusted gross margin for the six months ended June 30, 2024 would have been 16.6% of net sales.

### Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) for the three months ended June 30, 2024 were $51.6 million, or 9.7% of net sales, compared to $34.9 million, or 7.2% of net sales, three months ended June 30, 2023. The change in SG&A for the three months ended June 30, 2024 as compared to the prior year period was attributable to the ongoing SG&A associated with the Carlstar operations, specifically related to the management of distribution centers.

Selling, general and administrative expenses for the six months ended June 30, 2024 were $91.0 million, or 9.0% of net sales, compared to $69.3 million, or 6.7% of net sales, for the six months ended June 30, 2023. The change in SG&A for the six months ended June 30, 2024 as compared to the prior year period was primarily driven by the continuing SG&A incurred on the Carlstar operations, which includes the management of distribution centers. Additionally, general inflationary cost impacts, such as rising personnel-related expenses, also contributed to the overall increase in SG&A during this period.

### Acquisition Related Expenses

Acquisition related expenses for the six months ended June 30, 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 June 30, 2024 were $4.2 million, or 0.8% of net sales, compared to $3.2 million, or 0.7% of net sales, for the comparable period in 2023. R&D expenses for the six months ended June 30, 2024 were $7.9 million, or 0.8% of net sales, compared to $6.2 million, or 0.6% 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 June 30, 2024 were $2.3 million, or 0.4% of net sales, compared to $1.9 million, or 0.4% of net sales, for the three months ended June 30, 2023. Royalty expenses for the six months ended June 30, 2024 were $5.3 million, or 0.5% of net sales, compared to $4.9 million, or 0.5% of net sales, for the six months ended June 30, 2023.

### Income from Operations

Income from operations for the three months ended June 30, 2024 was $22.3 million, compared to income from operations of $45.9 million for the three months ended June 30, 2023. Income from operations for the six months ended June 30, 2024 was $47.4 million, compared to income from operations of $101.0 million for the six months ended June 30, 2023. The change in income from operations for the three and six months ended June 30, 2024 as compared to the prior year periods were primarily due to lower gross profit and the net result of the items previously discussed.

### OTHER PROFIT/LOSS ITEMS

### Interest Expense, net

Interest expense was $7.2 million and $5.8 million for the three months ended June 30, 2024 and 2023, respectively, and $12.7 million and $12.3 million for the six months ended June 30, 2024 and 2023.

The increase in interest expense for the three months ended June 30, 2024 was attributable to a new domestic credit facility, which became effective on February 29, 2024, in connection with the acquisition of Carlstar. This resulted in additional interest expenses being recorded during this period. The higher interest expense for the six months ended June 30, 2024 was also primarily driven by the new domestic credit facility. However, this increase was partially offset by a rise in interest income generated from financial investments in Latin America. These changes in interest expenses reflected the Company's strategic financial decisions and its ongoing efforts to optimize its capital structure and financing activities.

### Foreign Exchange Gain (Loss)

Foreign exchange gain was $0.5 million for the three months ended June 30, 2024, compared to a nominal gain for the three months ended June 30, 2023. Foreign exchange gain was $0.2 million for the six months ended June 30, 2024, compared to a loss of $1.8 million for the six months ended June 30, 2023. The increases in foreign exchange gains during the three and six months ended on June 30, 2024, as compared to the prior year periods, were attributable to the favorable impact of the translation of intercompany loans at certain foreign subsidiaries, which are denominated in local currencies rather than the reporting currency, which is the United States dollar. Since such loans are expected to be settled at some point in the future, these loans are adjusted each reporting period to reflect the current exchange rates.

### Other Income

Other income was $3.3 million for the three months ended June 30, 2024, as compared to other income of $1.2 million in the comparable period of 2023. This change was primarily driven by a gain of $1.9 million from a property insurance settlement, which consisted of insurance proceeds received net of costs incurred to repair one of our operating facilities in Italy.

Other income was $3.7 million for the six months ended June 30, 2024, as compared to other income of $1.9 million in the comparable period of 2023. The increase was primarily due to a gain of $1.9 million from a property insurance settlement as discussed above.

### Provision for Income Taxes

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 and 2023, the income tax expense differed in each period due to an overall decrease in pre-tax income. 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. Without these impacts, the income tax rate would have been about 36% of pre-tax income, a slightly elevated rate due to the majority of pre-tax income being derived from foreign jurisdictions.

The Company’s 2023 income tax expense and rate 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.

### Net Income and Earnings per Share

Net income for the three months ended June 30, 2024 was $3.4 million, compared to net income of $31.9 million in the comparable period of 2023. For the three months ended June 30, 2024 and 2023, basic earnings per share were $0.03 and $0.48, respectively, and diluted earnings per share were $0.03 and $0.48, respectively. The Company's net income and earnings per share changes were due to the items previously discussed.

Net income for the six months ended June 30, 2024 was $13.4 million, compared to net income of $65.3 million in the comparable period of 2023. For the six months ended June 30, 2024 and 2023, basic earnings per share were $0.16 and $0.99, respectively, and diluted earnings per share were $0.16 and $0.98, respectively. The Company's net income and earnings per share changes were due to the items previously discussed.

### SEGMENT INFORMATION

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

| Three months ended June 30, 2024 | Agricultural | Earthmoving/ Construction | Consumer | Corporate/ Unallocated Expenses | Consolidated Totals |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net sales | $216,330 | $165,564 | $150,276 | $— | $532,170 |
| Gross profit | 32,303 | 21,299 | 26,840 | — | 80,442 |
| Profit margin | 14.9% | 12.9% | 17.9% | — | 15.1% |
| Income (loss) from operations | 15,772 | 7,047 | 6,449 | (6,946) | 22,322 |
| **Three months ended June 30, 2023** |  |  |  |  |  |
| Net sales | $269,148 | $174,683 | $37,345 | $— | $481,176 |
| Gross profit | 48,736 | 29,102 | 8,057 | — | 85,895 |
| Profit margin | 18.1% | 16.7% | 21.6% | — | 17.9% |
| Income (loss) from operations | 32,119 | 14,522 | 5,865 | (6,608) | 45,898 |

| Six months ended June 30, 2024 | Agricultural | Earthmoving/ Construction | Consumer | Corporate/ Unallocated Expenses | Consolidated Totals |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net sales | $456,003 | $330,772 | $227,604 | $— | $1,014,379 |
| Gross profit | 72,922 | 44,276 | 40,614 | — | 157,812 |
| Profit margin | 16.0% | 13.4% | 17.8% | — | 15.6% |
| Income (loss) from operations | 39,782 | 15,881 | 11,562 | (19,831) | 47,394 |
| **Six months ended June 30, 2023** |  |  |  |  |  |
| Net sales | $575,006 | $373,607 | $81,207 | $— | $1,029,820 |
| Gross profit | 97,986 | 66,326 | 17,140 | — | 181,452 |
| Profit margin | 17.0% | 17.8% | 21.1% | — | 17.6% |
| Income (loss) from operations | 64,688 | 38,060 | 12,657 | (14,371) | 101,034 |

### Agricultural Segment Results

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

|  | Three months ended June 30, 2024 | 2023 | % Decrease | Six months ended June 30, 2024 | 2023 | % Decrease |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $216,330 | $269,148 | (19.6)% | $456,003 | $575,006 | (20.7)% |
| Gross profit | 32,303 | 48,736 | (33.7)% | 72,922 | 97,986 | (25.6)% |
| Profit margin | 14.9% | 18.1% | (17.7)% | 16.0% | 17.0% | (5.9)% |
| Income from operations | 15,772 | 32,119 | (50.9)% | 39,782 | 64,688 | (38.5)% |

Net sales in the agricultural segment were $216.3 million for the three months ended June 30, 2024, as compared to $269.1 million for the comparable period in 2023. The net sales change was primarily attributed to significantly reduced global demand for agricultural equipment, most notably in North America and Brazil. Additionally, an unfavorable impact of foreign currency translation by 5.3% contributed to the change in net sales.

Gross profit in the agricultural segment was $32.3 million for the three months ended June 30, 2024, as compared to $48.7 million in the comparable period in 2023. The change in gross profit was attributed to the lower sales volume, reduced fixed cost leverage, negative price/mix and higher material costs and inventory revaluation step-up associated with the Carlstar purchase price allocation.

Income from operations in the Company's agricultural segment was $15.8 million for the three months ended June 30, 2024, as compared to income of $32.1 million for the three months ended June 30, 2023. The change in income from operations was mainly due to the lower gross profit resulting from the decline in net sales.

Net sales in the agricultural segment were $456.0 million for the six months ended June 30, 2024, as compared to $575.0 million for the comparable period in 2023. The net sales change was primarily attributed to lower sales volume in North and South America, reflecting the soft demand for agricultural equipment and a decline in Brazilian economic activity. The unfavorable effect of foreign currency translation by 4.8% also contributed to the change in net sales.

Gross profit in the agricultural segment was $72.9 million for the six months ended June 30, 2024, as compared to $98.0 million in the comparable period in 2023. The change in gross profit was attributed to the lower sales volume, reduced fixed cost leverage and higher material costs.

Income from operations in the Company's agricultural segment was $39.8 million for the six months ended June 30, 2024, as compared to income of $64.7 million for the six months ended June 30, 2023. The overall change in income from operations was primarily due to the lower gross profit resulting from the 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 June 30, 2024 | 2023 | % Decrease | Six months ended June 30, 2024 | 2023 | % Decrease |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $165,564 | $174,683 | (5.2)% | $330,772 | $373,607 | (11.5)% |
| Gross profit | 21,299 | 29,102 | (26.8)% | 44,276 | 66,326 | (33.2)% |
| Profit margin | 12.9% | 16.7% | (22.8)% | 13.4% | 17.8% | (24.7)% |
| Income from operations | 7,047 | 14,522 | (51.5)% | 15,881 | 38,060 | (58.3)% |

The Company's earthmoving/construction segment net sales were $165.6 million for the three months ended June 30, 2024, as compared to $174.7 million in the comparable period in 2023. Sales volume was higher during the period driven by increased sales in the undercarriage business and the positive contribution from the Carlstar acquisition. However, this increase was more than offset by the impact of contractual price givebacks resulting from lower raw material costs, particularly lower steel prices in Europe, as well as an unfavorable impact of foreign currency translation by 1.5%.

Gross profit in the earthmoving/construction segment was $21.3 million for the three months ended June 30, 2024, as compared to $29.1 million for the three months ended June 30, 2023. The change in gross profit was primarily attributed to lower sales volume in North America, and reduced fixed cost leverage.

The Company's earthmoving/construction segment income from operations was $7.0 million for the three months ended June 30, 2024 , as compared to $14.5 million for the three months ended June 30, 2023. The change was primarily due to lower sales volume, resulting in lower fixed cost leverage, and its impact on gross margins.

The Company's earthmoving/construction segment net sales were $330.8 million for the six months ended June 30, 2024, as compared to $373.6 million in the comparable period in 2023. The change in earthmoving/construction sales was mainly due to the impact of contractual price givebacks resulting from lower raw material costs, lower sales volume in the Americas and the European business due to a slowdown in construction OEM customers, and a 0.5% negative impact from foreign currency translation.

Gross profit in the earthmoving/construction segment was $44.3 million for the six months ended June 30, 2024, as compared to $66.3 million for the six months ended June 30, 2023. Similar to the three-month period, the change in gross profit was attributed to lower sales volume, negative/price mix, and reduced fixed cost leverage.

The Company's earthmoving/construction segment income from operations was $15.9 million for the six months ended June 30, 2024, as compared to $38.1 million for the six months ended June 30, 2023. The change was attributed to lower sales volume and its 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 June 30, 2024 | 2023 | % Increase (Decrease) | Six months ended June 30, 2024 | 2023 | % Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $150,276 | $37,345 | 302.4% | $227,604 | $81,207 | 180.3% |
| Gross profit | 26,840 | 8,057 | 233.1% | 40,614 | 17,140 | 137.0% |
| Profit margin | 17.9% | 21.6% | (17.1)% | 17.8% | 21.1% | (15.6)% |
| Income from operations | 6,449 | 5,865 | 10.0% | 11,562 | 12,657 | (8.7)% |

Consumer segment net sales were $150.3 million for the three months ended June 30, 2024, as compared to $37.3 million for the three months ended June 30, 2023. This growth was primarily driven by increased sales volumes resulting from the positive impact of the Carlstar acquisition. The increase was partially offset by negative price/product mix and reduced sales volumes in the Americas region due to weaker market conditions.

Gross profit from the consumer segment was $26.8 million for the three months ended June 30, 2024, as compared to $8.1 million for the three months ended June 30, 2023. The increase in gross profit was primarily driven by the benefits of the Carlstar acquisition. The shift in profit margin was influenced by the inventory revaluation step-up of $6.0 million associated with the Carlstar purchase price allocation and reduced fixed cost leverage resulting from lower sales volumes in the Americas.

Consumer segment income from operations was $6.4 million for the three months ended June 30, 2024, as compared to income of $5.9 million for the three months ended June 30, 2023. The increase was primarily due to increased sales volumes as mentioned above.

Consumer segment net sales were $227.6 million for the six months ended June 30, 2024, as compared to $81.2 million for the six months ended June 30, 2023. The increase in sales was driven by the positive effects of the Carlstar acquisition. However, lower sales volumes in the Americas stemming from challenging market conditions, and unfavorable foreign currency impact of 1.6% offsetting some of this increase.

Gross profit from the consumer segment was $40.6 million for the six months ended June 30, 2024, as compared to $17.1 million for the six months ended June 30, 2023. The increase in gross profit was influenced by the Carlstar acquisition. The change in profit margin from 21.1% for the six months ended June 30, 2023 to 17.8% for the six months ended June 30, 2024, was primarily due to the effect of the inventory revaluation step-up of $8.6 million associated with the Carlstar acquisition. The impact of lower sales volume in the Americas on fixed cost leverage was also a driver in the change in profit margin.

Consumer segment income from operations was $11.6 million for the six months ended June 30, 2024, as compared to income of $12.7 million for the six months ended June 30, 2023. The change was due to lower profitability stemming from the aforementioned factors.

### Corporate & Unallocated Expenses

Income from operations on a segment basis did not include unallocated costs of $6.9 million for the three months ended June 30, 2024, and $19.8 million for the six months ended June 30, 2024, as compared to $6.6 million for the three months ended June 30, 2023, and $14.4 million for the six months ended June 30, 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 June 30, 2024 as compared to the prior year period was related to the increase in certain SG&A expenses primarily associated with legal costs. The increase in corporate and unallocated expenses for the six months ended June 30, 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 June 30, 2024, the Company had $224.1 million of cash, which increased 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)*

|  | Six months ended June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Net income | $13,396 | $65,325 | $(51,929) |
| Depreciation and amortization | 27,423 | 21,565 | 5,858 |
| Deferred income tax provision | 12,978 | 12,349 | 629 |
| Income on indirect taxes | — | (3,096) | 3,096 |
| Proceeds from property insurance settlement | (3,537) | — | (3,537) |
| Foreign currency gain | (1,063) | (2,130) | 1,067 |
| Accounts receivable | (8,437) | (16,322) | 7,885 |
| Inventories | 34,764 | 24,096 | 10,668 |
| Prepaid and other current assets | (3,789) | 12,512 | (16,301) |
| Accounts payable | (2,930) | (32,005) | 29,075 |
| Other current liabilities | 1,773 | 781 | 992 |
| Other liabilities | 1,431 | 1,508 | (77) |
| Other operating activities | 837 | 4,307 | (3,470) |
| Cash provided by operating activities | $72,846 | $88,890 | $(16,044) |

During the first half of 2024, cash flows provided by operating activities was $72.8 million. This was mainly driven by working capital reduction and reduction in net income to $13.4 million. The net income of $13.4 million included a non-cash charge for depreciation and amortization expense of $27.4 million. Additionally, the Company incurred $6.2 million in transaction costs associated with the Carlstar acquisition in the first quarter of 2024.

Operating cash flows decreased by $16.0 million when comparing the first half of 2024 to the comparable period in 2023. This decline was primarily attributed to lower net income, partially offset by the positive impact of focused working capital management. Key factors contributing to this management included a $29.1 million increase in accounts payable, a $7.9 million improvement due to collections efforts on accounts receivable, and a $10.7 million improvement in inventory management.

Summary of the components of cash conversion cycle:

|  | June 30, 2024 | December 31, 2023 | June 30, 2023 |
| --- | ---: | ---: | ---: |
| Days sales outstanding | 54 | 51 | 53 |
| Days inventory outstanding | 97 | 104 | 90 |
| Days payable outstanding | (53) | (57) | (55) |
| Cash conversion cycle | 98 | 98 | 88 |

Cash conversion cycle increased by 10 days when comparing June 30, 2024 to June 30, 2023. This increase was primarily due to the Carlstar acquisition, which led to additional accounts receivable and inventory at the end of the second quarter of 2024, as a result of its customer mix and use of distribution centers to have product on demand for customers. Inventory management is critical for the business in preparation for the future periods to supply customers efficiently, which was the driver of increased days in inventory at the end of June 30, 2024.

### Investing Cash Flows

Summary of cash flows from investing activities:

*(Amounts in thousands)*

|  | Six months ended June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Capital expenditures | $(34,199) | $(27,567) | $(6,632) |
| Business acquisition, net of cash acquired | (142,207) | — | (142,207) |
| Proceeds from property insurance settlement | 3,537 | — | 3,537 |
| Proceeds from sale of fixed assets | 1,597 | 289 | 1,308 |
| Cash used for investing activities | $(171,272) | $(27,278) | $(143,994) |

During the first half of 2024, Titan reported a net cash outflow of $171.3 million from investing activities, as compared to the $27.3 million outflow recorded in the same period of 2023. This rise was primarily attributed to the acquisition of Carlstar for a cash consideration of $142.2 million, which included an additional payment of $18.4 million for excess working capital to the sellers, which has now been recovered through active working capital management during the quarter. The Company also invested a total of $34.2 million in capital expenditures in the first half of 2024, compared to $27.6 million in the corresponding period of 2023. These capital expenditures were directed toward the replacement and enhancement of plant equipment, as well as the procurement of new tools, dies, and molds to support new product development initiatives. The increased capital outlay in 2024 reflects Titan's strategic efforts to improve its existing facilities, enhance manufacturing capabilities, and drive operational efficiency and labor productivity gains. The proceeds from property insurance settlement of $3.5 million in the first half of 2024 was relate to the repair of one of our operating facilities in Italy associated with a 2023 hail storm weather event.

### Financing Cash Flows

Summary of cash flows from financing activities:

*(Amounts in thousands)*

|  | Six months ended June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Proceeds from borrowings | $159,539 | $4,373 | $155,166 |
| Payment on debt | (34,095) | (21,030) | (13,065) |
| Payment of debt issuance costs | (3,115) | — | (3,115) |
| Repurchase of common stock | (7,762) | (6,390) | (1,372) |
| Other financing activities | (692) | (2,748) | 2,056 |
| Cash provided by (used for) financing activities | $113,875 | $(25,795) | $139,670 |

During the first half of 2024, $113.9 million cash was provided by financing activities. This was primarily driven by the acquisition of Carlstar on February 29, 2024, for which Titan borrowed $147.0 million under a new domestic credit facility.

During the first half of 2023, the Company made debt payments of $21.0 million and repurchased common stock of $6.4 million, partially offset by proceeds from borrowings of $4.4 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” in the Condensed Consolidated Statements of Cash Flows.

### 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;
- Limits 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, repurchase stock or take advantage of business opportunities, including future acquisitions. The Company is in compliance with these debt covenants at June 30, 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 satisfaction 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 | June 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Current assets | $86,547 | $93,339 |
| Property, plant, and equipment, net | 90,740 | 88,739 |
| Intercompany accounts, non-guarantor subsidiaries | 447,096 | 486,860 |
| Other long-term assets | 62,947 | 72,678 |
| **Liabilities** |  |  |
| Current liabilities | 86,163 | 83,198 |
| Long-term debt | 523,706 | 396,277 |
| Other long-term liabilities | 4,198 | 4,626 |

35

Summarized Statement of Operations:

*(Amounts in thousands)*

|  | Six months ended June 30, 2024 |
| --- | ---: |
| Net sales | $312,604 |
| Gross profit | 43,959 |
| Income from operations | 2,968 |
| Net loss | (25,030) |

### Liquidity Outlook

At June 30, 2024, the Company had $224.1 million of cash and cash equivalents. At June 30, 2024, there were $127.0 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 $204.2 million at June 30, 2024. With outstanding letters of credit totaling $9.9 million, the net amount available for borrowing under the credit facility totaled $67.3 million at June 30, 2024. The cash and cash equivalents balance of $224.1 million included $188.0 million held in foreign countries.

The Company is expecting full year capital expenditures to be approximately $55 million to $65 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 $22 million and $24 million for the remainder of 2024 based on June 30, 2024 debt balances. The forecasted interest payment is comprised primarily of the semi-annual payment of $14 million to be paid in October 2024 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 may also be 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, 3,318 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 June 30, 2024. Based on that evaluation, the

Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 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 25.3% and 18.5% of the total net sales as shown on our Consolidated Financial Statements for the three months and six months ended June 30, 2024, respectively, and Carlstar’s total assets constituted approximately 11.2% of total assets as shown on our Consolidated Balance Sheet as of June 30, 2024. 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 June 30, 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 up to 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 second quarter of fiscal year 2024 and 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 Jul 31, 2024.
Source: SEC EDGAR, the filing index for accession 0000899751-24-000082. Last ingested by Listed: Oct 24, 2026, 15:00 ET. No prices; not investment advice.