
Part I Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022, and 2021, encompassing statements of operations, comprehensive income, balance sheets, changes in equity, and cash flows, along with detailed explanatory notes Condensed Consolidated Statements of Operations The company reported significant growth in net income for both the three and nine months ended September 30, 2022, with net sales increasing by 18% for the quarter and 28% for the nine-month period, driving substantial rises in gross profit and net income attributable to Titan shareholders Consolidated Statements of Operations Highlights (Unaudited, in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $530,722 | $450,382 | $1,659,614 | $1,292,539 | | Gross profit | $87,633 | $60,292 | $284,015 | $175,027 | | Income from operations | $50,491 | $22,900 | $164,900 | $60,850 | | Net income attributable to Titan | $43,169 | $11,187 | $134,262 | $21,988 | | Diluted EPS | $0.68 | $0.18 | $2.11 | $0.35 | Condensed Consolidated Balance Sheets As of September 30, 2022, total assets increased to $1.25 billion from $1.18 billion at year-end 2021, driven by higher current assets, while total liabilities decreased slightly, leading to a substantial increase in total equity to $321.0 million from $227.2 million Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 (unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | Total current assets | $900,647 | $813,304 | | Total assets | $1,247,479 | $1,182,685 | | Total current liabilities | $470,952 | $450,813 | | Long-term debt | $414,566 | $452,451 | | Total liabilities | $926,492 | $955,513 | | Total Titan shareholders' equity | $315,763 | $229,300 | | Total equity | $320,987 | $227,172 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2022, net cash provided by operating activities significantly improved to $102.2 million, a turnaround from the prior year's usage, while investing activities remained stable and financing activities primarily focused on debt repayment and stock repurchase, resulting in an $18.5 million increase in cash and cash equivalents Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $102,240 | $(2,290) | | Net cash used for investing activities | $(22,782) | $(23,111) | | Net cash (used for) provided by financing activities | $(57,541) | $7,275 | | Net increase (decrease) in cash and cash equivalents | $18,473 | $(22,791) | | Cash and cash equivalents, end of period | $116,581 | $94,640 | Notes to Condensed Consolidated Financial Statements The notes detail significant events and accounting policies, including the impact of the Russia-Ukraine conflict, the $10.9 million loss from the sale of its Australian wheel business, the recognition of $32.0 million in Brazilian indirect tax credits, and increased sales and operating income across all business segments - The company's Russian subsidiary, Voltyre-Prom, represents approximately 8% of consolidated assets25101102 - The impact of the Russia-Ukraine military conflict has not been significant on global operations, but the company has stopped additional investments into the project25101102 - On March 31, 2022, the company sold its Australian wheel business, resulting in a loss on sale of $10.9 million, primarily from the release of a cumulative translation adjustment2661 - The company recognized $32.0 million in other income for the nine months ended Sep 30, 2022, from Brazilian indirect tax credits (PIS/COFINS) after prevailing on a legal claim6970 Segment Net Sales (in thousands) | Segment | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Agricultural | $917,443 | $684,636 | | Earthmoving/construction | $611,550 | $509,930 | | Consumer | $130,621 | $97,973 | | Total | $1,659,614 | $1,292,539 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strong financial performance, highlighting an 18% quarterly and 28% year-to-date sales increase driven by favorable pricing, product mix, and volume across all segments, alongside improved gross profit margins, positive market outlooks, limited impact from the Russia-Ukraine conflict, a significant income boost from Brazilian tax credits, and strong liquidity from operations Market Conditions and Outlook The outlook for the agricultural market remains strong, supported by high commodity prices and improved farmer income, while the earthmoving/construction market shows continued growth momentum, and the consumer market remains stable but subject to macroeconomic variables - Agricultural Outlook: Strong demand is anticipated to continue, supported by high commodity prices, improved farmer income, and replacement of aging equipment121 - Earthmoving/Construction Outlook: Growth momentum is expected to continue, driven by low equipment inventory levels and increased mining capital budgets122 - Consumer Outlook: Markets have stabilized, but growth can vary123 - Initiatives are underway to bolster opportunities in specialty products like custom rubber mixing123 Results of Operations For the third quarter of 2022, net sales grew 18% to $530.7 million and gross profit rose 45% to $87.6 million with margins expanding, while nine-month sales increased 28% to $1.66 billion and operating income surged 171% to $164.9 million, driven by price increases and strong demand, with other income boosted by $32.0 million in Brazilian tax credits partially offset by a $10.9 million loss on the Australian business sale Key Operating Results (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $530,722 | $450,382 | $1,659,614 | $1,292,539 | | Gross profit | $87,633 | $60,292 | $284,015 | $175,027 | | Gross profit % | 17% | 13% | 17% | 14% | | Income from operations | $50,491 | $22,900 | $164,900 | $60,850 | - Net sales increase for both three and nine-month periods was driven by price/product mix and volume126127128 - Price increases were implemented to offset rising raw material, freight, and energy costs126127128 - Other income for the nine months ended Sep 30, 2022, was $24.5 million, primarily due to $32.0 million from Brazilian tax credits, partially offset by a $10.9 million loss on the sale of the Australian wheel business144 Segment Information (MD&A) All segments demonstrated strong performance, with Agricultural sales rising 18% in Q3 and 34% YTD, Earthmoving/Construction sales increasing 19% in Q3 and 20% YTD, and the Consumer segment growing 10% in Q3 and 33% YTD, all driven by pricing, volume, and market demand, leading to significant improvements in gross profit and operating income across the board Agricultural Segment Results (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net sales | $289,259 (+18% YoY) | $917,443 (+34% YoY) | | Gross profit | $45,949 (+38% YoY) | $155,794 (+58% YoY) | | Income from operations | $31,125 (+71% YoY) | $106,126 (+96% YoY) | Earthmoving/Construction Segment Results (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net sales | $199,921 (+19% YoY) | $611,550 (+20% YoY) | | Gross profit | $34,959 (+64% YoY) | $102,651 (+62% YoY) | | Income from operations | $21,836 (+176% YoY) | $59,952 (+186% YoY) | Consumer Segment Results (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net sales | $41,542 (+10% YoY) | $130,621 (+33% YoY) | | Gross profit | $6,725 (+16% YoY) | $25,570 (+91% YoY) | | Income from operations | $4,856 (+38% YoY) | $18,976 (+169% YoY) | Liquidity and Capital Resources The company's liquidity significantly improved, with cash from operations reaching $102.2 million in the first nine months of 2022, a substantial turnaround from the prior year, maintaining a stable cash conversion cycle and ending the period with $116.6 million in cash and $117.8 million available under its credit facility, with projected full-year capital expenditures between $45 million and $50 million - Cash provided by operating activities was $102.2 million for the first nine months of 2022, a $104.5 million improvement from the same period in 2021, driven by higher net income and managed working capital181182 - Financing activities used $57.5 million, which included a $25.0 million repurchase of common stock from RDIF and net debt payments186 - As of September 30, 2022, the company had $116.6 million in cash and cash equivalents and $117.8 million available for borrowing under its $125 million credit facility190 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that its exposure to market risks, which include changes in foreign currency exchange rates, interest rates, and commodity price fluctuations, has not undergone any material changes since the end of the previous fiscal year (December 31, 2021) - Exposure to market risk, including foreign currency, interest rates, and commodity prices, has not materially changed since December 31, 2021195 Item 4. Controls and Procedures Based on an evaluation as of September 30, 2022, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the third quarter - The CEO and CFO concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective197 - No material changes to internal control over financial reporting occurred during the third quarter of fiscal year 2022198 Part II. Other Information Item 1. Legal Proceedings The company is involved in routine legal proceedings arising from its normal business operations, which management believes are not expected to have a material effect on its financial condition, results of operations, or cash flows - The company is party to routine legal proceedings from the normal course of business, which are not expected to have a material effect on its financial position75203 Item 1A. Risk Factors The company reports that there have been no material changes to the risk factors that were disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes from the risk factors disclosed in the 2021 Form 10-K204 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q report, including certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002, and the Inline XBRL financial data files List of Exhibits | Exhibit No. | Description | | :--- | :--- | | 31.1 | Certification of the Principal Executive Officer (Section 302) | | 31.2 | Certification of the Principal Financial Officer (Section 302) | | 32 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act | | 101 | Inline XBRL Taxonomy Documents |