Titan International, Inc. (NYSE:TWI) Q3 2022 Results Conference Call November 8, 2022 9:00 AM ET Company Participants Todd Shoot - Senior Vice President, Investor Relations and Treasurer Paul Reitz - President and CEO David Martin - Senior Vice President and CFO Conference Call Participants Steve Ferazani - Sidoti Kirk Ludtke - Imperial Capital Operator Good morning, ladies and gentlemen. And welcome to the Titan International Incorporated Third Quarter 2022 Earnings Conference Call. At this time, all parti ...

Titan International, Inc. (NYSE:TWI) Q2 2022 Earnings Conference Call August 2, 2022 9:30 AM ET Company Participants Todd Shoot - Senior Vice President, Investor Relations and Treasurer Paul Reitz - President and CEO David Martin - Senior Vice President and CFO Conference Call Participants Steve Ferazani - Sidoti Kirk Ludtke - Imperial Capital Operator Good morning, ladies and gentlemen. And welcome to Titan International, Inc. Second Quarter 2022 Earnings Conference Call. At this time, all participants hav ...

Part I. Financial Information [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The company achieved significant year-over-year growth in Q2 and H1 2022, with net sales reaching **$1.13 billion** and net income surging to **$93.5 million**, driven by strong demand and favorable pricing Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $572,895 | $438,639 | $1,128,892 | $842,157 | | **Gross profit** | $109,653 | $61,470 | $196,382 | $114,735 | | **Income from operations** | $69,701 | $23,719 | $114,409 | $37,950 | | **Net income attributable to Titan** | $67,171 | $(2,773) | $91,093 | $10,801 | | **Diluted EPS** | $1.06 | $(0.04) | $1.43 | $0.17 | Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $929,381 | $813,304 | | **Total assets** | $1,289,184 | $1,182,685 | | **Total current liabilities** | $497,259 | $450,813 | | **Total liabilities** | $983,514 | $955,513 | | **Total equity** | $305,670 | $227,172 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Net cash provided by (used for) operating activities** | $48,918 | $(17,487) | | **Net cash used for investing activities** | $(9,874) | $(13,888) | | **Net cash (used for) provided by financing activities** | $(22,617) | $10,849 | | **Net increase (decrease) in cash** | $18,595 | $(21,627) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key accounting policies and significant events are detailed, including the impact of the Russia-Ukraine conflict, the sale of the Australian wheel business, and **$22.5 million** in Brazilian tax credit recognition - The company's Russian operations (Voltyre-Prom) represent approximately **9% of consolidated assets** and **6% of global sales**, with the Russia-Ukraine military conflict not significantly impacting global operations to date[24](index=24&type=chunk) - On March 31, 2022, the company sold its Australian wheel business for approximately **$17.5 million** in proceeds, recognizing a loss of **$10.9 million**, primarily from the release of a cumulative translation adjustment[25](index=25&type=chunk)[61](index=61&type=chunk) - In Q2 2022, the company recognized **$22.5 million** in other income after receiving approval from Brazilian tax authorities for indirect tax credits, with an additional **$10 million** potentially recognized upon future approval for another subsidiary[67](index=67&type=chunk)[68](index=68&type=chunk) Segment Net Sales (in thousands) | Segment | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Agricultural** | $318,585 | $231,504 | $628,184 | $440,263 | | **Earthmoving/construction** | $210,370 | $176,715 | $411,629 | $341,522 | | **Consumer** | $43,940 | $30,420 | $89,079 | $60,372 | Segment Income from Operations (in thousands) | Segment | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Agricultural** | $44,884 | $20,789 | $75,001 | $36,072 | | **Earthmoving/construction** | $22,276 | $7,462 | $38,116 | $13,037 | | **Consumer** | $9,238 | $1,881 | $14,120 | $3,548 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong H1 2022 performance to robust demand and effective cost management, leading to significant gross margin expansion and improved liquidity [Overview and Market Outlook](index=31&type=section&id=Overview%20and%20Market%20Outlook) Titan International, a global off-highway products manufacturer, anticipates continued strong demand in agricultural and earthmoving/construction markets, despite global recession concerns - Agricultural Market Outlook: Favorable conditions are expected to continue for the remainder of 2022, supported by high commodity prices, improved farmer income, and the need to replace an aging large equipment fleet[118](index=118&type=chunk) - Earthmoving/Construction Market Outlook: Momentum is expected to continue due to low equipment inventory levels and increased mining capital budgets, although global recession concerns could impact demand[119](index=119&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Q2 2022 saw substantial growth, with net sales up **30.6%** to **$572.9 million** and gross profit rising **78.4%** to **$109.7 million**, driven by strong price/product mix and volume Q2 2022 vs Q2 2021 Performance Summary (in thousands) | Metric | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | **Net sales** | $572,895 | $438,639 | 30.6% | | **Gross profit** | $109,653 | $61,470 | 78.4% | | **Gross profit %** | 19.1% | 14.0% | - | | **Income from operations** | $69,701 | $23,719 | 193.9% | - The increase in net sales was driven by price/product mix and volume across all segments, with pricing actions implemented to counter rising raw material, freight, and energy costs[123](index=123&type=chunk)[125](index=125&type=chunk) - Other income for Q2 2022 was **$23.7 million**, primarily driven by a **$22.5 million** gain from indirect tax credits related to Brazilian operations[141](index=141&type=chunk) [Segment Information](index=37&type=section&id=Segment%20Information) All segments performed strongly in Q2 2022, with Agricultural net sales growing **37.6%** to **$318.6 million** and Earthmoving/Construction net sales up **19.0%** to **$210.4 million** Q2 2022 Segment Performance vs Q2 2021 (in thousands) | Segment | Net Sales | % Change | Income from Operations | % Change | | :--- | :--- | :--- | :--- | :--- | | **Agricultural** | $318,585 | 37.6% | $44,884 | 115.9% | | **Earthmoving/Construction** | $210,370 | 19.0% | $22,276 | 198.5% | | **Consumer** | $43,940 | 44.4% | $9,238 | 391.1% | [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity strengthened in H1 2022, with cash increasing to **$116.7 million** and operating cash flow turning positive at **$48.9 million**, supported by **$94.8 million** available credit - Cash and cash equivalents increased to **$116.7 million** at June 30, 2022, from **$98.1 million** at December 31, 2021[174](index=174&type=chunk) - Net cash from operating activities was **$48.9 million** for the first six months of 2022, a **$66.4 million** improvement over the same period in 2021, primarily due to higher net income[174](index=174&type=chunk)[175](index=175&type=chunk) - During the first six months of 2022, the company repurchased **$25.0 million** of its common stock[179](index=179&type=chunk) - As of June 30, 2022, the company had **$94.8 million** available for borrowing under its **$125 million** revolving credit facility[182](index=182&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's exposure to market risks, including foreign currency, interest rates, and commodity prices, has not materially changed since year-end 2021 - The company's exposure to market risk, including foreign currency, interest rates, and commodity prices, has not changed materially since December 31, 2021[187](index=187&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[188](index=188&type=chunk) - No changes in internal control over financial reporting occurred during the second quarter of 2022 that have materially affected, or are reasonably likely to materially affect, the company's internal controls[190](index=190&type=chunk) Part II. Other Information [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings, which management does not expect to have a material effect on its financial condition or operations - The company is involved in routine legal proceedings but does not believe they will have a material effect on its financial position, results of operations, or cash flows[71](index=71&type=chunk)[195](index=195&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K have occurred - There have been no material changes from the risk factors disclosed in the company's 2021 Form 10-K[196](index=196&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Act and Inline XBRL financial data files - The exhibits filed with the report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, along with XBRL data files[199](index=199&type=chunk) [Signatures](index=47&type=section&id=Signatures) The Form 10-Q report was signed and authorized on August 1, 2022, by the Principal Executive Officer and Principal Financial Officer - The report was signed on August 1, 2022, by the company's Principal Executive Officer and Principal Financial Officer[203](index=203&type=chunk)

Financial Data and Key Metrics Changes - Q1 2022 revenue reached $556 million, the highest quarterly revenue since early 2013, with a gross margin improvement to 15.6% [9][33] - Adjusted EBITDA for Q1 was $57 million, up over $30 million from the previous year, and adjusted EPS was $0.44 compared to $0.07 last year [10][33] - Net debt leverage decreased to 2.6 times adjusted EBITDA from 2.9 times at year-end [34][53] Business Line Data and Key Metrics Changes - Agricultural segment net sales accounted for 56% of total sales, totaling $310 million, an increase of $101 million year-over-year and $45 million sequentially [35][36] - Earthmoving and Construction (EMC) segment net sales grew by $36.5 million or 22% year-over-year, with a gross profit of $31.4 million, representing a 59% increase from the previous year [38][41] - Consumer segment net sales increased by 51% year-over-year, with gross profit rising to $7.4 million, reflecting strong margins [43][44] Market Data and Key Metrics Changes - Strong commodity prices and supportive government programs are positively impacting the agricultural sector, creating a robust demand environment [12][13] - The OEM market is expected to see continued demand, with low dealer inventories projected to persist into 2023 [17][19] - The EMC segment is benefiting from anticipated infrastructure investments, supporting strong demand levels [18] Company Strategy and Development Direction - The company has increased its 2022 expectations, forecasting full-year net sales above $2.1 billion and adjusted EBITDA around $200 million [25][54] - A focus on improving operational efficiencies and restructuring underperforming businesses has positioned the company for growth [27][29] - The company is committed to sustainability, having published its first comprehensive sustainability report [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the agricultural sector's demand dynamics, stating that inflation will not significantly impact supply-demand relationships [86][92] - The company is optimistic about maintaining strong production levels and managing labor effectively despite potential challenges in the market [90][91] - Management highlighted the importance of long-term agreements with customers to ensure consistent volume and mitigate risks [95][106] Other Important Information - The company reported stable cash balances of $98 million, with operating cash flow impacted by increased working capital due to sales growth [33][47] - Capital expenditures for the year are expected to be in the range of $40 million to $50 million, with ongoing investments in production efficiency [48][49] Q&A Session Summary Question: Can you delineate between price and volume in the outlook? - Management indicated a good mix of price and volume growth, with increased production levels and improved labor productivity [61][62] Question: How does the strike at one of your customers affect guidance? - Management expressed confidence in the customer's leadership and stated that Titan can adjust deliveries without significant impact on operations [63][64] Question: What drove the substantial sequential growth in revenue? - Management attributed growth to evolving pricing strategies and a clean production period in Q1 compared to Q4, which had maintenance and holiday shutdowns [68][71] Question: Can you provide insights into the consumer business growth? - Management noted growth from utility truck tires in Latin America and strategic moves in third-party custom mixing rubber, contributing to strong margins [78][80] Question: How does inflation impact demand in the agricultural sector? - Management believes strong supply-demand dynamics will prevail despite inflation, emphasizing the importance of food production [86][92] Question: What are the plans for capital allocation? - Management stated that improved cash flow provides flexibility for growth initiatives and investments while maintaining a conservative leverage posture [114][115] Question: Are there any other non-core businesses considered for divestiture? - Management mentioned the tire recycling business as a potential area for partnership or divestiture, focusing on environmental-friendly processes [99][100]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-12936 TITAN INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 1525 Kautz Road ...

Titan International, Inc. (NYSE:TWI) Q4 2021 Earnings Conference Call March 3, 2022 9:00 AM ET Company Participants Todd Shoot - Senior Vice President, Investor Relations and Treasurer Paul Reitz - President and CEO David Martin - Senior Vice President and CFO Conference Call Participants Steve Ferazani - Sidoti & Company Komal Patel - Goldman Sachs Kirk Ludtke - Imperial Capital DeForest Hitman - Walthausen & Co. Alex Blanton - Clear Harbor Asset Management Jack Voigt - Balyasny Asset Management Operator G ...

Company Overview - Titan is a top global manufacturer of off-highway wheels, tires, and undercarriage products[5] - Titan operates in three business segments: Agricultural, Earthmoving/Construction (EMC), and Consumer[6] - Titan has a diverse global footprint with manufacturing facilities in North America, Latin/South America, Europe/Russia, Asia/Africa, and Australia[9] Financial Performance (Q4 2021) - Net sales were $488 million, a $161 million increase year-over-year, representing 51% organic revenue growth[62] - Adjusted EBITDA was $36.1 million, a $19 million increase year-over-year[62] - Gross margin was 12.8%, up 106 bps from 11.8% in Q4 of the prior year[63] - Adjusted net income attributable to Titan was $24.7 million, with diluted EPS of $0.39, compared to an adjusted net loss of ($5.9M) and diluted EPS of ($0.10) in Q4 2020[63] Financial Performance (FY 2021) - Sales reached $1.8 billion, compared to $1.3 billion in FY 2020[91] - Adjusted EBITDA was $135.0 million, compared to $54.0 million in FY 2020[91] - Net income attributable to Titan was $53.6 million, compared to a net loss of ($33.2M) in FY 2020[91] - Earnings per share - Diluted was $0.85, compared to ($0.55) in FY 2020[91] Segment Performance (YTD'21 vs YTD'20) - Agricultural net sales increased 49.6%[81] - EMC net sales increased 35.9%[84] - Consumer net sales increased 20.0%[86]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-12936 TITAN INTERNATIONAL, INC. 1525 Kautz Road, Suite 600, West Chicago, IL 60185 (Address of principal executive offices) (217) 228-6011 (Registrant's telephone number, including ...

Financial Data and Key Metrics Changes - Titan International reported a strong third quarter with revenue of $450 million, a 48% increase year-over-year, and adjusted EBITDA of $35.1 million, marking the strongest third quarter since 2013 [11][29] - The company expects full-year adjusted EBITDA to exceed $130 million, the highest annual total since 2013 [12][56] - Gross profit increased by 93% to $60 million, with a gross margin improvement to 13.4% compared to 10.3% last year [29][32] Business Segment Data and Key Metrics Changes - The agriculture segment led growth with net sales of $244 million, a 60% increase from the previous year, and gross profit of $33 million, up 105% [34][36] - The earthmoving and construction (EMC) segment saw net sales grow by 37% to $166 million, with gross profit increasing by 71% to $21 million [37][39] - The consumer segment's net sales rose by 32% to $37 million, with gross profit margins improving to 15% from 9.5% last year [40][41] Market Data and Key Metrics Changes - Demand in the agriculture sector remains strong, supported by high commodity prices, with corn above $5 and soybeans above $12 [14][15] - The EMC segment is benefiting from infrastructure investments globally, with significant growth in Latin America and Europe [17][38] - Inventory levels at dealers are low, indicating pent-up demand that is expected to carry into 2022 [67] Company Strategy and Development Direction - The company is focused on increasing production capabilities and expanding its workforce to meet growing demand [23][28] - Titan has strategically invested in capital expenditures to enhance production efficiency and product innovation [21][50] - The company aims to maintain a disciplined approach to cost control while capitalizing on market opportunities [20][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate supply chain challenges and adjust production as needed [73][74] - Despite fluctuations in commodity prices, management believes demand will remain strong due to robust farmer incomes and ongoing construction projects [83][84] - The company anticipates a strong fourth quarter and a positive outlook for 2022, driven by solid order books and inventory replenishment needs [56][94] Other Important Information - The company refinanced $400 million in bonds and improved liquidity through an ABL credit line extension [24][52] - Net debt leverage improved to 3.3 times trailing twelve-month adjusted EBITDA, indicating a stronger balance sheet [55][56] Q&A Session Summary Question: Outlook on adjusted EBITDA considering the strike situation with a major customer - Management acknowledged the importance of the customer and indicated that production adjustments could be made based on the situation [62] Question: Ability to shift production capacity between OE and aftermarket products - Management confirmed that while adjustments can be made, it requires planning and alignment with operational teams [64] Question: Supply chain issues and potential customer slowdowns - Management stated they have effectively managed supply chain challenges and have a diverse customer base to mitigate risks [73][76] Question: Labor force hiring and retention status - Management reported a 12% increase in the labor force year-to-date and emphasized ongoing efforts in onboarding and retention [78] Question: Stabilization of material costs and its impact - Management noted some stabilization in raw material costs and expressed confidence in maintaining margins [80] Question: Visibility on order books for 2022 - Management indicated strong order books and confidence in robust demand for 2022, driven by inventory replenishment needs [91][93] Question: Capital allocation and cash requirements for next year - Management expects capital expenditures to increase slightly next year while maintaining a healthy cash flow [94][95] Question: Impact of steel price fluctuations on results - Management stated they can manage costs effectively and would handle any significant drop in steel prices similarly to how they managed increases [97][98]

Part I. Financial Information [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents unaudited condensed consolidated financial statements, showing significant improvements in net sales and a shift to net income [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported substantial increases in net sales and gross profit, turning prior-year operating and net losses into positive income | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net sales | $450,382 | $304,772 | $1,292,539 | $932,405 | | Gross profit | $60,292 | $31,317 | $175,027 | $88,428 | | Income (loss) from operations | $22,900 | $(6,808) | $60,850 | $(19,512) | | Net income (loss) | $10,804 | $(13,454) | $21,601 | $(45,596) | | Net income (loss) attributable to Titan | $11,187 | $(12,643) | $21,988 | $(43,174) | | Basic EPS | $0.18 | $(0.21) | $0.36 | $(0.71) | | Diluted EPS | $0.18 | $(0.21) | $0.35 | $(0.71) | [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The company reported an improved comprehensive loss, primarily influenced by currency translation adjustments | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income (loss) | $10,804 | $(13,454) | $21,601 | $(45,596) | | Currency translation adjustment, net | $(16,243) | $4,275 | $(28,991) | $(28,498) | | Comprehensive loss attributable to Titan | $(4,639) | $(6,709) | $(4,386) | $(67,572) | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased due to higher current assets, while total liabilities rose, leading to a slight decrease in total equity | Metric | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Cash and cash equivalents | $94,640 | $117,431 | | Accounts receivable, net | $261,447 | $193,014 | | Inventories | $373,012 | $293,679 | | Total current assets | $796,243 | $658,599 | | Property, plant and equipment, net | $302,590 | $319,854 | | Total assets | $1,144,259 | $1,031,884 | | Total current liabilities | $436,912 | $329,711 | | Long-term debt | $450,999 | $433,584 | | Total liabilities | $944,665 | $830,619 | | Total equity | $174,594 | $176,265 | [Condensed Consolidated Statements of Changes in Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Equity statements detail changes from net income, currency adjustments, and stock compensation, resulting in a slight decrease in total equity | Metric | Balance January 1, 2021 (in thousands) | Balance September 30, 2021 (in thousands) | | :--------------------------------------- | :------------------------------------- | :-------------------------------------- | | Total Titan shareholders' equity | $179,264 | $177,916 | | Total equity | $176,265 | $174,594 | - Net income contributed **$13.6 million** and **$11.2 million** to retained earnings for the periods ended March 31, 2021, and September 30, 2021, respectively[16](index=16&type=chunk) - Currency translation adjustments resulted in a net decrease of **$26.7 million** and **$16.7 million** for the periods ended March 31, 2021, and September 30, 2021, respectively[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash and cash equivalents decreased due to cash used in operating and investing activities, partially offset by financing activities | Cash Flow Activity | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash (used for) provided by operating activities | $(2,290) | $47,431 | | Net cash (used for) provided by investing activities | $(23,111) | $25,364 | | Net cash provided by (used for) financing activities | $7,275 | $(33,936) | | Net (decrease) increase in cash and cash equivalents | $(22,791) | $31,973 | | Cash and cash equivalents, end of period | $94,640 | $98,772 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, financial instrument fair values, and specific balance sheet and income statement items, including COVID-19 impacts and debt refinancing [1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis of interim financial statements, US GAAP adherence, COVID-19 impacts, and new accounting standard adoption - The COVID-19 pandemic continued to impact the Company in Q3 2021, leading to increased operating costs due to sanitary measures and significant global supply chain constraints (raw materials, transportation, labor), particularly affecting Australia, Europe, and Latin America[21](index=21&type=chunk) - The fair value of the 7.00% senior secured notes due 2028 was approximately **$421.5 million** at September 30, 2021, compared to a cost of **$394.3 million**[22](index=22&type=chunk) - The Company adopted ASU 2019-12, Simplifying the Accounting for Income Taxes, on January 1, 2021, which did not have a material impact on the condensed consolidated financial statements[24](index=24&type=chunk) [2. ACCOUNTS RECEIVABLE, NET](index=12&type=section&id=2.%20ACCOUNTS%20RECEIVABLE,%20NET) Net accounts receivable increased significantly due to higher sales, while the allowance for doubtful accounts slightly decreased | Metric | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Accounts receivable | $265,015 | $196,796 | | Allowance for doubtful accounts | $(3,568) | $(3,782) | | Accounts receivable, net | $261,447 | $193,014 | [3. INVENTORIES](index=12&type=section&id=3.%20INVENTORIES) Total inventories increased substantially across all categories, indicating higher production or anticipated future demand | Metric | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :---------------- | :-------------------------------- | :------------------------------- | | Raw material | $116,572 | $78,733 | | Work-in-process | $46,297 | $36,485 | | Finished goods | $210,143 | $178,461 | | Total Inventories | $373,012 | $293,679 | [4. PROPERTY, PLANT AND EQUIPMENT, NET](index=12&type=section&id=4.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT,%20NET) Net property, plant, and equipment decreased slightly due to depreciation, despite increased construction-in-process, with a prior-year asset impairment charge | Metric | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------- | :-------------------------------- | :------------------------------- | | Land and improvements | $41,680 | $43,943 | | Buildings and improvements | $240,276 | $245,619 | | Machinery and equipment | $582,457 | $583,847 | | Tools, dies and molds | $112,015 | $111,189 | | Construction-in-process | $16,444 | $11,282 | | Less accumulated depreciation | $(690,282) | $(676,026) | | Property, plant and equipment, net | $302,590 | $319,854 | - Depreciation on property, plant and equipment for the nine months ended September 30, 2021, was **$35.1 million**, down from **$37.7 million** in the comparable 2020 period[28](index=28&type=chunk) - A **$2.6 million** asset impairment charge was recorded during the nine months ended September 30, 2020, related to machinery and equipment at Titan Tire Reclamation Corporation (TTRC) due to market declines[29](index=29&type=chunk) [5. INTANGIBLE ASSETS, NET](index=13&type=section&id=5.%20INTANGIBLE%20ASSETS,%20NET) Net amortizable intangible assets decreased, with amortization expense totaling $0.6 million for the nine months ended September 30, 2021 | Metric | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Patents, trademarks and other | $10,062 | $10,181 | | Less accumulated amortization | $(8,527) | $(8,206) | | Intangible assets, net | $1,535 | $1,975 | - Amortization related to intangible assets for the nine months ended September 30, 2021, totaled **$0.6 million**, a decrease from **$1.6 million** in the comparable 2020 period[31](index=31&type=chunk) | Period | Estimated Amortization Expense (in thousands) | | :-------------------------- | :-------------------------------------------- | | October 1 - December 31, 2021 | $37 | | 2022 | $145 | | 2023 | $145 | | 2024 | $134 | | 2025 | $123 | | Thereafter | $951 | | Total | $1,535 | [6. WARRANTY](index=13&type=section&id=6.%20WARRANTY) Warranty liability increased due to higher provisions compared to payments made during the period | Metric | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Warranty liability, January 1 | $15,040 | $14,334 | | Provision for warranty liabilities | $7,397 | $4,060 | | Warranty payments made | $(6,039) | $(4,346) | | Warranty liability, September 30 | $16,398 | $14,048 | [7. DEBT](index=14&type=section&id=7.%20DEBT) Debt refinancing led to a $16.0 million loss on repurchase, increased long-term debt, and $30.0 million outstanding on the revolving credit facility | Debt Type | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------- | :-------------------------------- | :------------------------------- | | 7.00% senior secured notes due 2028 | $394,305 | — | | 6.50% senior secured notes due 2023 | — | $396,876 | | Titan Europe credit facilities | $40,690 | $49,583 | | Revolving credit facility | $30,000 | — | | Other debt | $16,871 | $18,244 | | Total long-term debt | $450,999 | $433,584 | - On April 22, 2021, the Company issued **$400.0 million** aggregate principal amount of 7.00% senior secured notes due April 2028, with an effective yield of **7.27%** at issuance[36](index=36&type=chunk) - In connection with the new notes, the Company repurchased its **$400.0 million** principal amount of 6.50% senior secured notes due 2023, incurring a **$16.0 million** loss on senior note repurchase[39](index=39&type=chunk) - At September 30, 2021, the Company had **$30.0 million** in borrowings and **$10.7 million** in outstanding letters of credit under its **$100 million** revolving credit facility, with **$59.3 million** available for borrowing[41](index=41&type=chunk) [8. REDEEMABLE NONCONTROLLING INTEREST](index=15&type=section&id=8.%20REDEEMABLE%20NONCONTROLLING%20INTEREST) Redeemable noncontrolling interest of $25 million relates to an RDIF put option, with potential $25 million cash settlement if shares are not issued - The redeemable noncontrolling interest held by RDIF was recorded at **$25 million** as of September 30, 2021, representing the value of restricted common stock to be issued[47](index=47&type=chunk) - The issuance of **4,032,259** shares of restricted Titan common stock to RDIF is pending regulatory approval, and if not released by December 31, 2021, alternative settlement terms, including a **$25 million** cash payment, may be sought[44](index=44&type=chunk) [9. LEASES](index=16&type=section&id=9.%20LEASES) The company leases buildings and equipment, with operating lease assets and liabilities decreasing, and finance lease assets and liabilities increasing | Metric | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------- | :-------------------------------- | :------------------------------- | | Operating lease ROU assets | $20,709 | $24,356 | | Total operating lease liabilities | $19,840 | $24,670 | | Finance lease, net | $3,597 | $3,506 | | Total finance lease liabilities | $4,995 | $2,680 | - The weighted average remaining lease term for operating leases is **4.16 years**, and for finance leases, it is **2.68 years**[50](index=50&type=chunk) - Operating cash flows from operating leases were **$2.4 million** and from finance leases were **$0.2 million** for the nine months ended September 30, 2021[50](index=50&type=chunk) [10. EMPLOYEE BENEFIT PLANS](index=17&type=section&id=10.%20EMPLOYEE%20BENEFIT%20PLANS) Net periodic pension cost significantly decreased, with the company contributing $0.8 million to pension plans during the period | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net periodic pension cost | $48 | $393 | $146 | $1,333 | - The Company contributed approximately **$0.8 million** to pension plans during the nine months ended September 30, 2021, and expects to contribute approximately **$0.4 million** for the remainder of 2021[51](index=51&type=chunk) [11. VARIABLE INTEREST ENTITIES](index=18&type=section&id=11.%20VARIABLE%20INTEREST%20ENTITIES) Consolidated VIE assets and liabilities remained stable, while maximum exposure to loss from non-consolidated VIEs slightly increased | Metric | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Consolidated VIE Total assets | $12,211 | $11,939 | | Consolidated VIE Total liabilities | $2,336 | $3,743 | | Non-consolidated VIE Investments | $6,002 | $5,623 | | Maximum exposure to loss (non-consolidated VIEs) | $9,235 | $9,000 | [12. ASSET IMPAIRMENT](index=19&type=section&id=12.%20ASSET%20IMPAIRMENT) No asset impairment charges were recorded in 2021, contrasting with a $3.6 million charge in the prior year - No asset impairment charge was recorded for the three and nine months ended September 30, 2021[60](index=60&type=chunk) - For the nine months ended September 30, 2020, the Company recorded a **$3.6 million** asset impairment charge, including **$1.0 million** for inventory at Saltville, Virginia, and **$2.6 million** for TTRC machinery and equipment[60](index=60&type=chunk) [13. ROYALTY EXPENSE](index=19&type=section&id=13.%20ROYALTY%20EXPENSE) Royalty expenses increased, reflecting higher sales under trademark license agreements | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :---------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Royalty expenses | $2,805 | $2,434 | $7,915 | $7,309 | [14. OTHER INCOME](index=20&type=section&id=14.%20OTHER%20INCOME) Other income significantly decreased due to the absence of prior-year government subsidies, insurance settlements, and rental income | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Other income | $648 | $2,283 | $1,512 | $9,111 | - The decrease in other income for the three months ended September 30, 2021, was primarily due to the absence of **$0.9 million** in government subsidies and **$0.5 million** in building rental income from the Brownsville, Texas facility (sold in November 2020) present in the comparable 2020 period[63](index=63&type=chunk) - The decrease for the nine months ended September 30, 2021, was mainly due to the absence of **$4.9 million** from a property insurance settlement, **$1.4 million** in government subsidies, and **$1.2 million** in building rental income from the Brownsville, Texas facility in the comparable 2020 period[63](index=63&type=chunk) [15. INCOME TAXES](index=20&type=section&id=15.%20INCOME%20TAXES) Income tax expense and effective tax rate significantly increased due to improved foreign profitability and valuation allowances on deferred tax assets | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Provision for income taxes | $5,342 (in thousands) | $342 (in thousands) | $9,927 (in thousands) | $2,377 (in thousands) | | Effective income tax rate | 33.1% | (2.6)% | 31.5% | (5.5)% | - The year-to-date increase in income tax expense for the nine months ended September 30, 2021, is attributed to improved profitability in foreign jurisdictions[64](index=64&type=chunk) - The effective tax rates differed from the U.S. Federal income tax rate primarily due to full valuation allowances on deferred tax assets in the U.S. and certain foreign jurisdictions, partially offset by a reduction of unrecognized tax positions[65](index=65&type=chunk) [16. EARNINGS PER SHARE](index=21&type=section&id=16.%20EARNINGS%20PER%20SHARE) Basic and diluted EPS significantly improved, reflecting the company's return to profitability from prior-year losses | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) attributable to Titan | $11,187 (in thousands) | $(12,643) (in thousands) | $21,988 (in thousands) | $(43,174) (in thousands) | | Basic EPS | $0.18 | $(0.21) | $0.36 | $(0.71) | | Diluted EPS | $0.18 | $(0.21) | $0.35 | $(0.71) | | Weighted average shares outstanding (basic) | 62,340 (in thousands) | 60,926 (in thousands) | 61,844 (in thousands) | 60,630 (in thousands) | | Weighted average shares outstanding (diluted) | 62,601 (in thousands) | 60,926 (in thousands) | 62,523 (in thousands) | 60,630 (in thousands) | [17. LITIGATION](index=21&type=section&id=17.%20LITIGATION) The company settled a CERCLA legal proceeding for $11.5 million, with $9.0 million paid and the remainder accounted for as liabilities - In September 2020, an agreement was reached to settle the CERCLA legal proceeding, formalized in a Consent Decree on February 1, 2021[79](index=79&type=chunk) - The settlement prescribed total cash payments of **$11.5 million** to the federal government, with **$9.0 million** paid on February 25, 2021[79](index=79&type=chunk) - Remaining amounts of **$1.6 million** and **$1.2 million** (including accrued interest) are accounted for within other accrued liabilities and other long-term liabilities, respectively, as of September 30, 2021[79](index=79&type=chunk) [18. SEGMENT INFORMATION](index=23&type=section&id=18.%20SEGMENT%20INFORMATION) All three segments showed significant increases in net sales, gross profit, and income from operations, reflecting broad market recovery | Segment | 3 Months Ended Sep 30, 2021 (Net Sales in thousands) | 3 Months Ended Sep 30, 2020 (Net Sales in thousands) | 9 Months Ended Sep 30, 2021 (Net Sales in thousands) | 9 Months Ended Sep 30, 2020 (Net Sales in thousands) | | :------------------------ | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Agricultural | $244,373 | $153,067 | $684,636 | $473,272 | | Earthmoving/construction | $168,408 | $123,227 | $509,930 | $372,606 | | Consumer | $37,601 | $28,478 | $97,973 | $86,527 | | **Total Net Sales** | **$450,382** | **$304,772** | **$1,292,539** | **$932,405** | | | 3 Months Ended Sep 30, 2021 (Gross Profit in thousands) | 3 Months Ended Sep 30, 2020 (Gross Profit in thousands) | 9 Months Ended Sep 30, 2021 (Gross Profit in thousands) | 9 Months Ended Sep 30, 2020 (Gross Profit in thousands) | | Agricultural | $33,214 | $16,191 | $98,294 | $45,830 | | Earthmoving/construction | $21,263 | $12,409 | $63,333 | $34,777 | | Consumer | $5,815 | $2,717 | $13,400 | $7,821 | | **Total Gross Profit** | **$60,292** | **$31,317** | **$175,027** | **$88,428** | | | 3 Months Ended Sep 30, 2021 (Income (Loss) from Operations in thousands) | 3 Months Ended Sep 30, 2020 (Income (Loss) from Operations in thousands) | 9 Months Ended Sep 30, 2021 (Income (Loss) from Operations in thousands) | 9 Months Ended Sep 30, 2020 (Income (Loss) from Operations in thousands) | | Agricultural | $18,156 | $3,091 | $54,228 | $11,958 | | Earthmoving/construction | $7,913 | $656 | $20,950 | $(5,161) | | Consumer | $3,519 | $(88) | $7,067 | $912 | | Corporate & Unallocated | $(6,688) | $(10,467) | $(21,395) | $(27,221) | | **Total Income (Loss) from Operations** | **$22,900** | **$(6,808)** | **$60,850** | **$(19,512)** | | Segment | September 30, 2021 (Total Assets in thousands) | December 31, 2020 (Total Assets in thousands) | | :------------------------ | :-------------------------------- | :------------------------------- | | Agricultural | $494,117 | $420,993 | | Earthmoving/construction | $489,076 | $473,873 | | Consumer | $142,093 | $114,993 | | Corporate & Unallocated | $18,973 | $22,025 | | **Total Assets** | **$1,144,259** | **$1,031,884** | [19. RELATED PARTY TRANSACTIONS](index=24&type=section&id=19.%20RELATED%20PARTY%20TRANSACTIONS) Related party transactions significantly increased in sales, purchases, and commissions paid compared to the prior year | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Sales to related parties | $700 | $100 | $2,000 | $600 | | Purchases from related parties | $100 | $0 | $1,000 | $0 | | Sales commissions paid | $500 | $300 | $1,500 | $1,000 | - Trade receivables due from related parties were approximately **$0.3 million** at September 30, 2021, compared to **$0.1 million** at December 31, 2020[85](index=85&type=chunk) [20. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=24&type=section&id=20.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Accumulated other comprehensive loss increased due to negative currency translation adjustments, partially offset by pension and derivative gains | Metric | Balance January 1, 2021 (in thousands) | Balance September 30, 2021 (in thousands) | | :--------------------------------------- | :------------------------------------- | :-------------------------------------- | | Currency Translation Adjustments | $(194,151) | $(223,206) | | Gain (Loss) on Derivatives | $(413) | $(94) | | Unrecognized Losses and Prior Service Cost | $(22,690) | $(20,328) | | Total Accumulated Other Comprehensive Loss | $(217,254) | $(243,628) | - The increase in currency translation adjustments for the nine months ended September 30, 2021, was due to foreign currency rate fluctuations, legal entity rationalization, and intercompany capital structure management[88](index=88&type=chunk) [21. SUBSIDIARY GUARANTOR FINANCIAL INFORMATION](index=26&type=section&id=21.%20SUBSIDIARY%20GUARANTOR%20FINANCIAL%20INFORMATION) This note provides condensed consolidating financial statements for entities guaranteeing the 7.00% senior secured notes due 2028 - The 7.00% senior secured notes due 2028 are fully and unconditionally guaranteed, jointly and severally, by Titan Tire Corporation, Titan Tire Corporation of Bryan, Titan Tire Corporation of Freeport, and Titan Wheel Corporation of Illinois[91](index=91&type=chunk) [22. SUBSEQUENT EVENTS](index=29&type=section&id=22.%20SUBSEQUENT%20EVENTS) The company amended and extended its revolving credit facility, increasing it to $125 million and extending its maturity to October 2026 - On October 28, 2021, the **$100 million** revolving credit facility was amended and extended, increasing to **$125 million** and maturing on October 28, 2026[100](index=100&type=chunk) - The amended credit facility includes an accordion provision allowing for expansion by up to an additional **$50 million**[100](index=100&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operations, and liquidity, highlighting significant improvements in sales and profitability across segments, while addressing COVID-19 impacts [COVID-19 Pandemic](index=30&type=section&id=COVID-19%20Pandemic) The COVID-19 pandemic continued to impact operations, increasing costs and causing significant global supply chain constraints, creating ongoing uncertainty - The COVID-19 pandemic continued to have an impact on the Company in the third quarter of 2021, with increased operating costs due to additional sanitary and protective health measures[21](index=21&type=chunk)[103](index=103&type=chunk) - Global supply chains are experiencing significant constraints, including availability and pricing of raw materials, transportation, and labor, adding complexity to recovery and growth expectations[21](index=21&type=chunk)[125](index=125&type=chunk) - Certain geographies (Australia, Europe, Latin America) remain significantly impacted by the pandemic, and the full impact on economic conditions, customers, and the Company remains highly uncertain[21](index=21&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) [FORWARD-LOOKING STATEMENTS](index=30&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section provides a cautionary statement on forward-looking statements, outlining risks from the COVID-19 pandemic, economic conditions, and operational factors - Forward-looking statements are based on current expectations and assumptions but are subject to risks and uncertainties, including the effect of the COVID-19 pandemic, a recession, changes in end-user markets, competitor actions, labor relations, regulatory compliance, raw material availability and price, and geopolitical uncertainties[106](index=106&type=chunk)[109](index=109&type=chunk) - Key areas of forward-looking statements include financial performance, anticipated business trends, end-user market expectations, capital expenditures, cost control, loan agreement compliance, business strategies, new product introductions, and acquisition/divestiture opportunities[106](index=106&type=chunk) [OVERVIEW](index=33&type=section&id=OVERVIEW) Titan International, Inc. is a global manufacturer of off-highway wheels, tires, and undercarriage products for agricultural, earthmoving, and consumer markets - Titan is a global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products[111](index=111&type=chunk) - The company serves agricultural, earthmoving/construction, and consumer markets, offering products under brands like Goodyear Farm Tire and Titan Tire[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - Top customers include global leaders such as AGCO Corporation, Caterpillar Inc., CNH Global N.V., Deere & Company, Hitachi, Ltd., Kubota Corporation, Liebherr, and Volvo[115](index=115&type=chunk) [MARKET CONDITIONS AND OUTLOOK](index=33&type=section&id=MARKET%20CONDITIONS%20AND%20OUTLOOK) Market conditions show positive trends across all segments, with strong growth in agricultural and earthmoving/construction, and a stabilized consumer market [AGRICULTURAL MARKET OUTLOOK](index=33&type=section&id=AGRICULTURAL%20MARKET%20OUTLOOK) The agricultural market outlook is positive, driven by improved commodity prices, higher farmer income, and the need to replace aging equipment and replenish inventory - Agriculture-related commodity prices improved in 2020 and continued to rise in the first three quarters of 2021, remaining at historically high levels[116](index=116&type=chunk) - Improved farmer income, replacement of aging large equipment, and replenishment of lower equipment inventory levels are expected to support increased demand for products[116](index=116&type=chunk) - Many customers are forecasting growth, indicating sustained market stability over the next few years[116](index=116&type=chunk) [EARTHMOVING/CONSTRUCTION MARKET OUTLOOK](index=33&type=section&id=EARTHMOVING/CONSTRUCTION%20MARKET%20OUTLOOK) The earthmoving/construction market shows strong growth, recovering from 2020 declines, driven by global economic emergence and low equipment inventory - The market is experiencing strong signs of continued growth as economies emerge from the pandemic[117](index=117&type=chunk) - Historically low equipment inventory levels throughout the global construction industry and rising mining capital budgets are supporting recovery and growth in 2021[117](index=117&type=chunk)[119](index=119&type=chunk) - Improvements in mineral commodity prices also currently support recovery and growth[119](index=119&type=chunk) [CONSUMER MARKET OUTLOOK](index=35&type=section&id=CONSUMER%20MARKET%20OUTLOOK) The consumer market stabilized in 2021 due to pent-up demand, with a slower recovery pace anticipated compared to other segments - The consumer market has stabilized through 2021 due to pent-up demand from historically lower sales volume achieved during 2020[120](index=120&type=chunk) - The pace of recovery in the consumer segment is anticipated to be slower than in the Agriculture and Earthmoving/Construction segments[120](index=120&type=chunk) [RESULTS OF OPERATIONS](index=35&type=section&id=RESULTS%20OF%20OPERATIONS) The company achieved substantial improvements in net sales, gross profit, and operating income, driven by increased volume, favorable price/mix, and cost reduction initiatives [Net Sales](index=35&type=section&id=Net%20Sales) Net sales significantly increased due to higher volume, favorable price/mix, positive foreign currency translation, and pricing increases to offset rising raw material costs | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Increase | | :---------------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $450.4 million | $304.8 million | 47.8% | | Volume increase | 25.3% | N/A | N/A | | Price/mix increase | 21.3% | N/A | N/A | | FX impact | 1.2% ($3.7 million) | N/A | N/A | | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Increase | | :---------------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $1,292.5 million | $932.4 million | 38.6% | | Volume increase | 23.9% | N/A | N/A | | Price/mix increase | 14.0% | N/A | N/A | | FX impact | 0.7% ($6.2 million) | N/A | N/A | - The increase in net sales was driven by market growth in the agricultural and earthmoving/construction segments, pricing increases due to rising raw material and freight costs, and pent-up demand following the COVID-19 pandemic[124](index=124&type=chunk) [Gross Profit](index=37&type=section&id=Gross%20Profit) Gross profit and margin substantially increased due to higher sales volume impacting overhead absorption and successful cost reduction initiatives | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Increase | | :---------------- | :-------------------------- | :-------------------------- | :--------- | | Gross profit | $60.3 million | $31.3 million | 92.5% | | Gross profit % | 13.4% | 10.3% | 3.1 pp | | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Increase | | :---------------- | :-------------------------- | :-------------------------- | :--------- | | Gross profit | $175.0 million | $88.4 million | 97.9% | | Gross profit % | 13.5% | 9.5% | 4.0 pp | - The increase in gross profit and margin was driven by the impact of increases in sales volume, favorably impacting overhead absorption, and cost reduction initiatives executed across global production facilities[128](index=128&type=chunk)[129](index=129&type=chunk) [Selling, General and Administrative Expenses](index=37&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) SG&A expenses decreased for three months due to a legal accrual, but increased for nine months due to supply chain investments and variable costs | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | | :---------------- | :-------------------------- | :-------------------------- | :------- | | SG&A expenses | $32.2 million | $33.5 million | (3.7)% | | SG&A % of net sales | 7.2% | 11.0% | (3.8) pp | | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | | :---------------- | :-------------------------- | :-------------------------- | :------- | | SG&A expenses | $98.8 million | $93.8 million | 5.3% | | SG&A % of net sales | 7.6% | 10.1% | (2.5) pp | - The decrease in SG&A for the three months was primarily due to a **$5.0 million** contingent legal accrual recorded in the comparable prior-year period for the Dico case[130](index=130&type=chunk) - The increase in SG&A for the nine months was driven by investments to improve supply chain and logistics processes and an increase in variable costs associated with improved operating performance and sales growth[131](index=131&type=chunk) [Research and Development Expenses](index=37&type=section&id=Research%20and%20Development%20Expenses) R&D expenses slightly increased, reflecting product design improvements and quality focus, following prior-year pandemic-related reductions | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | | :---------------- | :-------------------------- | :-------------------------- | :------- | | R&D expenses | $2.4 million | $2.2 million | 5.8% | | R&D % of net sales | 0.5% | 0.7% | (0.2) pp | | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | | :---------------- | :-------------------------- | :-------------------------- | :------- | | R&D expenses | $7.5 million | $6.8 million | 9.9% | | R&D % of net sales | 0.6% | 0.7% | (0.1) pp | - R&D spending reflects initiatives to improve product designs and an ongoing focus on quality, following reductions during the onset of the COVID-19 pandemic in the comparable periods of 2020[132](index=132&type=chunk) [Royalty Expense](index=37&type=section&id=Royalty%20Expense) Royalty expenses increased, directly correlating with higher sales under trademark license agreements | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | | :---------------- | :-------------------------- | :-------------------------- | :------- | | Royalty expenses | $2.8 million | $2.4 million | 15.2% | | Royalty % of net sales | 0.6% | 0.8% | (0.2) pp | | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | | :---------------- | :-------------------------- | :-------------------------- | :------- | | Royalty expenses | $7.9 million | $7.3 million | 8.3% | | Royalty % of net sales | 0.6% | 0.8% | (0.2) pp | - The increase in royalty expenses is due to the increase in sales, resulting in an incremental increase in the amount of royalty expense incurred[134](index=134&type=chunk) [Income (Loss) from Operations](index=37&type=section&id=Income%20(Loss)%20from%20Operations) The company achieved a significant turnaround from prior-year operating losses to substantial operating income, driven by higher sales and improved gross profit | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | % Change | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Income (loss) from operations | $22.9 | $(6.8) | 436.4% | | Metric | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | % Change | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Income (loss) from operations | $60.9 | $(19.5) | 411.9% | - The increase in income from operations was primarily due to higher sales and improvements in gross profit margins[135](index=135&type=chunk) [OTHER PROFIT/LOSS ITEMS](index=37&type=section&id=OTHER%20PROFIT/LOSS%20ITEMS) This section details changes in non-operating items, including increased interest expense, a loss on senior note repurchase, foreign exchange gain, and decreased other income [Interest Expense](index=37&type=section&id=Interest%20Expense) Interest expense slightly increased due to refinancing senior secured notes at a higher interest rate | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :---------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Interest expense | $7,818 | $7,251 | $23,939 | $23,076 | - Interest expense increased due to the refinancing of the senior secured notes during the second quarter of 2021, resulting in an increase in the interest rate from **6.50%** to **7.00%**[136](index=136&type=chunk) [Loss on Senior Note Repurchase](index=38&type=section&id=Loss%20on%20Senior%20Note%20Repurchase) A **$16.0 million** loss on senior note repurchase was recorded from the redemption of **$400.0 million** principal of 6.50% senior secured notes - A loss on senior note repurchase of **$16.0 million** was recorded for the nine months ended September 30, 2021[138](index=138&type=chunk) - This loss was incurred in connection with the Company's call and redemption of its outstanding **$400.0 million** principal amount of 6.50% senior secured notes due 2023 during the second quarter of 2021[138](index=138&type=chunk) [Foreign Exchange Gain (Loss)](index=38&type=section&id=Foreign%20Exchange%20Gain%20(Loss)) The company experienced a foreign exchange gain, a significant improvement from prior-year losses, driven by legal entity rationalization and favorable exchange rates | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Foreign exchange gain (loss) | $416 | $(1,336) | $9,125 | $(9,742) | - The foreign exchange gain in 2021 was primarily the result of the closeout of certain legal entities as part of an ongoing initiative to rationalize Titan's legal entity structure, ongoing management of the intercompany capital structure, and favorable exchange rate movements[140](index=140&type=chunk) [Other Income](index=38&type=section&id=Other%20Income) Other income decreased due to the absence of prior-year government subsidies, insurance settlement proceeds, and rental income | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :---------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Other income | $648 | $2,283 | $1,512 | $9,111 | - The decrease in other income for the three months ended September 30, 2021, was primarily attributable to **$0.9 million** of government subsidies and **$0.5 million** of building rental income in the comparable 2020 period[142](index=142&type=chunk) - The decrease for the nine months ended September 30, 2021, was primarily due to **$4.9 million** from a property insurance settlement, **$1.4 million** of government subsidies, and **$1.2 million** of building rental income in the comparable 2020 period[143](index=143&type=chunk) [Provision for Income Taxes](index=38&type=section&id=Provision%20for%20Income%20Taxes) Income tax expense and effective tax rate significantly increased due to improved foreign profitability and valuation allowances on deferred tax assets | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Income tax expense | $5,342 (in thousands) | $342 (in thousands) | $9,927 (in thousands) | $2,377 (in thousands) | | Effective income tax rate | 33.1% | (2.6)% | 31.5% | (5.5)% | - The year-to-date increase in income tax expense for the nine months ended September 30, 2021, is due to improved profitability in foreign jurisdictions[144](index=144&type=chunk) - The effective tax rates differed from the U.S. Federal income tax rate primarily due to full valuation allowances on deferred tax assets in the U.S. and certain foreign jurisdictions, and non-deductible royalty expenses[145](index=145&type=chunk) [Net Income (Loss) and Income (Loss) per Share](index=40&type=section&id=Net%20Income%20(Loss)%20and%20Income%20(Loss)%20per%20Share) The company achieved a significant turnaround from prior-year net losses to net income, resulting in positive basic and diluted earnings per share | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income (loss) | $10,804 (in thousands) | $(13,454) (in thousands) | $21,601 (in thousands) | $(45,596) (in thousands) | | Basic income (loss) per share | $0.18 | $(0.21) | $0.36 | $(0.71) | | Diluted income (loss) per share | $0.18 | $(0.21) | $0.35 | $(0.71) | [Segment Summary](index=40&type=section&id=Segment%20Summary) This table provides a consolidated view of net sales, gross profit, and operating income across all segments, demonstrating overall improved performance | Segment | 3 Months Ended Sep 30, 2021 (Net Sales in thousands) | 3 Months Ended Sep 30, 2020 (Net Sales in thousands) | 9 Months Ended Sep 30, 2021 (Net Sales in thousands) | 9 Months Ended Sep 30, 2020 (Net Sales in thousands) | | :------------------------ | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Agricultural | $244,373 | $153,067 | $684,636 | $473,272 | | Earthmoving/construction | $168,408 | $123,227 | $509,930 | $372,606 | | Consumer | $37,601 | $28,478 | $97,973 | $86,527 | | **Total Net Sales** | **$450,382** | **$304,772** | **$1,292,539** | **$932,405** | | | 3 Months Ended Sep 30, 2021 (Income (Loss) from Operations in thousands) | 3 Months Ended Sep 30, 2020 (Income (Loss) from Operations in thousands) | 9 Months Ended Sep 30, 2021 (Income (Loss) from Operations in thousands) | 9 Months Ended Sep 30, 2020 (Income (Loss) from Operations in thousands) | | Agricultural | $18,156 | $3,091 | $54,228 | $11,958 | | Earthmoving/construction | $7,913 | $656 | $20,950 | $(5,161) | | Consumer | $3,519 | $(88) | $7,067 | $912 | | Corporate & Unallocated | $(6,688) | $(10,467) | $(21,395) | $(27,221) | | **Total Income (Loss) from Operations** | **$22,900** | **$(6,808)** | **$60,850** | **$(19,512)** | [Agricultural Segment Results](index=42&type=section&id=Agricultural%20Segment%20Results) The Agricultural segment experienced robust growth in net sales, gross profit, and operating income, driven by strong market demand, increased volume, and favorable price/mix | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Increase | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $244.4 million | $153.1 million | 59.7% | | Gross profit | $33.2 million | $16.2 million | 105.1% | | Profit margin | 13.6% | 10.6% | 28.3% | | Income from operations | $18.2 million | $3.1 million | 487.4% | | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Increase | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $684.6 million | $473.3 million | 44.7% | | Gross profit | $98.3 million | $45.8 million | 114.5% | | Profit margin | 14.4% | 9.7% | 48.5% | | Income from operations | $54.2 million | $12.0 million | 353.5% | - Net sales volume and product price/mix were up **36.4%** and **23.0%** respectively for the three months, and **28.4%** and **17.9%** respectively for the nine months, driven by improved farmer income, equipment replacement, and lower equipment inventory levels[152](index=152&type=chunk)[155](index=155&type=chunk) - Pricing increases reflect rising raw material and other inflationary costs, including freight[152](index=152&type=chunk)[155](index=155&type=chunk) [Earthmoving/Construction Segment Results](index=43&type=section&id=Earthmoving/Construction%20Segment%20Results) The Earthmoving/Construction segment showed strong recovery with significant increases in net sales, gross profit, and operating income, driven by improved economic conditions and efficiencies | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Increase | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $168.4 million | $123.2 million | 36.7% | | Gross profit | $21.3 million | $12.4 million | 71.4% | | Profit margin | 12.6% | 10.1% | 24.8% | | Income (loss) from operations | $7.9 million | $0.7 million | 1106.3% | | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Increase | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $509.9 million | $372.6 million | 36.9% | | Gross profit | $63.3 million | $34.8 million | 82.1% | | Profit margin | 12.4% | 9.3% | 33.3% | | Income (loss) from operations | $21.0 million | $(5.2) million | 505.9% | - Sales increases were driven by increased volume and product price/mix (**15.8%** and **18.8%** for three months; **23.8%** and **8.9%** for nine months), reflecting improvements in global economic conditions and construction markets[160](index=160&type=chunk)[163](index=163&type=chunk) - The segment also benefited from improved production efficiencies and cost containment measures[161](index=161&type=chunk)[162](index=162&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [Consumer Segment Results](index=45&type=section&id=Consumer%20Segment%20Results) The Consumer segment reported increased net sales, gross profit, and operating income, primarily due to favorable product price/mix and volume | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Increase | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $37.6 million | $28.5 million | 32.0% | | Gross profit | $5.8 million | $2.7 million | 114.0% | | Profit margin | 15.5% | 9.5% | 63.2% | | Income (loss) from operations | $3.5 million | $(0.1) million | (4098.9)% | | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Increase | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $98.0 million | $86.5 million | 13.2% | | Gross profit | $13.4 million | $7.8 million | 71.3% | | Profit margin | 13.7% | 9.0% | 52.2% | | Income (loss) from operations | $7.1 million | $0.9 million | 674.9% | - The increase in net sales was driven by favorable product price/mix (**22.5%** for three months; **13.1%** for nine months) and volume impact (**6.8%** for three months; **0.7%** for nine months)[169](index=169&type=chunk)[171](index=171&type=chunk) - The nine-month net sales increase was partially offset by unfavorable foreign currency impacts of **1.6%**, primarily due to the devaluation of Latin American currencies against the US Dollar[171](index=171&type=chunk) [Corporate & Unallocated Expenses](index=45&type=section&id=Corporate%20%26%20Unallocated%20Expenses) Corporate & Unallocated expenses decreased due to changes in certain corporate SG&A expenses | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Corporate & Unallocated loss | $(6,688) | $(10,467) | $(21,395) | $(27,221) | - The year-over-year change is related to the increase in certain corporate SG&A expenses, which were not allocated[173](index=173&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=46&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Liquidity decreased due to cash used in operating and investing activities, offset by financing, but management anticipates sufficient liquidity from cash and credit facilities [Cash Flows](index=46&type=section&id=Cash%20Flows) Cash and cash equivalents decreased by **$22.8 million**, reflecting the net impact of operating, investing, and finan