UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

twi-20220630_g1.jpg

FORM 10-Q
FORM 10-Q
þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: SeptemberJune 30, 20172022
or
o☐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)

Delaware36-3228472
(State of Incorporation)(I.R.S. Employer Identification No.)
2701 Spruce Street, Quincy,(State or other jurisdiction of incorporation or organization)

1525 Kautz Road, Suite 600, West Chicago, IL 62301
(Address of principal executive offices, including offices)

36-3228472
(I.R.S. Employer Identification No.)

60185
(Zip Code)

(217) 228-6011
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol		Name of each exchange on which registered
Common stock, $0.0001 par valueTWINew York Stock Exchange


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ☑ No o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ☑  No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☑
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer ¨
Accelerated filer þ
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth company¨
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o☐  No þ☑

Indicate the number of shares of Titan International, Inc. outstanding: 59,713,18462,804,660 shares of common stock, $0.0001 par value, as of October 24, 2017.July 25, 2022.




TITAN INTERNATIONAL, INC.

TABLE OF CONTENTS

Page
Page
Item 1.
Financial Statements (Unaudited)
1
2
3
4
56
67
2824
4337
4337
4439
4439
4540
4541




PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(All amounts in thousands, except per share data)
 
Three months ended
Nine months ended Three months endedSix months ended
September 30,
September 30,June 30,June 30,
2017
2016
2017
2016 2022202120222021
       
Net sales$370,988
 $306,195
 $1,092,888
 $958,203
Net sales$572,895 $438,639 $1,128,892 $842,157 
Cost of sales331,323
 271,275
 969,932
 851,268
Cost of sales463,242 377,169 932,510 727,422 
Gross profit39,665
 34,920
 122,956
 106,935
Gross profit109,653 61,470 196,382 114,735 
Selling, general and administrative expenses39,753
 36,348
 115,553
 107,712
Selling, general and administrative expenses34,669 32,566 70,896 66,594 
Research and development expenses2,457
 2,597
 7,908
 7,790
Research and development expenses2,238 2,528 5,158 5,081 
Royalty expense2,596
 2,285
 7,739
 6,688
Royalty expense3,045 2,657 5,919 5,110 
Loss from operations(5,141) (6,310) (8,244) (15,255)
Income from operationsIncome from operations69,701 23,719 114,409 37,950 
Interest expense(7,537) (8,714) (22,578) (25,208)Interest expense(7,707)(8,598)(15,614)(16,121)
Foreign exchange gain815
 398
 48
 7,403
Loss on senior note repurchaseLoss on senior note repurchase— (16,020)— (16,020)
Foreign exchange gain (loss)Foreign exchange gain (loss)2,234 (768)7,551 8,709 
Other income3,041
 3,578
 8,398
 10,532
Other income23,694 1,232 14,835 864 
Loss before income taxes(8,822) (11,048) (22,376) (22,528)
Provision (benefit) for income taxes2,396
 (2,074) 5,964
 2,578
Net loss(11,218) (8,974) (28,340) (25,106)
Income (loss) before income taxesIncome (loss) before income taxes87,922 (435)121,181 15,382 
Provision for income taxesProvision for income taxes19,001 1,991 27,682 4,585 
Net income (loss)Net income (loss)68,921 (2,426)93,499 10,797 
Net income (loss) attributable to noncontrolling interests800
 (966) 1,424
 (1,099)Net income (loss) attributable to noncontrolling interests1,750 347 2,406 (4)
Net loss attributable to Titan(12,018) (8,008) (29,764) (24,007)
Redemption value adjustment(882) (1,367) (3,981) (8,475)
Net loss applicable to common shareholders$(12,900) $(9,375) $(33,745) $(32,482)
Net income (loss) attributable to Titan and applicable to common shareholdersNet income (loss) attributable to Titan and applicable to common shareholders$67,171 $(2,773)$91,093 $10,801 
       
Earnings per common share: 
  
  
  
Income (loss) per common share: Income (loss) per common share:    
Basic$(0.22) $(0.17) $(0.57) $(0.60)Basic$1.07 $(0.04)$1.44 $0.18 
Diluted$(0.22) $(0.17) $(0.57) $(0.60)Diluted$1.06 $(0.04)$1.43 $0.17 
Average common shares and equivalents outstanding:   
    
Average common shares and equivalents outstanding:  
Basic59,600
 53,946
 59,247
 53,895
Basic62,671 61,717 63,262 61,592 
Diluted59,600
 53,946
 59,247
 53,895
Diluted63,221 61,717 63,773 62,480 
       
Dividends declared per common share:$0.005
 $0.005
 $0.015
 $0.015
 








See accompanying Notes to Condensed Consolidated Financial Statements.

1

TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(All amounts in thousands)

Three months ended
June 30,
 20222021
Net income (loss)$68,921 $(2,426)
Derivative gain275 225 
Currency translation adjustment, net(11,536)14,430 
Pension liability adjustments, net of tax of $(162) and $3, respectively431 692 
Comprehensive income58,091 12,921 
Net comprehensive income attributable to redeemable and noncontrolling interests8,979 490 
Comprehensive income attributable to Titan$49,112 $12,431 
 Three months ended
 September 30,
 2017 2016
Net loss$(11,218) $(8,974)
Currency translation adjustment14,015
 (386)
Pension liability adjustments, net of tax of $166 and $(126), respectively180
 465
Comprehensive income (loss)2,977
 (8,895)
Net comprehensive income (loss) attributable to redeemable and noncontrolling interests1,436
 (679)
Comprehensive income (loss) attributable to Titan$1,541
 $(8,216)



Six months ended
June 30,
 20222021
Net income$93,499 $10,797 
Derivative gain578 265 
Currency translation adjustment, net5,739 (12,748)
Pension liability adjustments, net of tax of $(344) and $(41), respectively975 1,565 
Comprehensive income (loss)100,791 (121)
Net comprehensive income (loss) attributable to redeemable and noncontrolling interests8,453 (374)
Comprehensive income attributable to Titan$92,338 $253 
 Nine months ended
 September 30,
 2017 2016
Net loss$(28,340) $(25,106)
Currency translation adjustment33,040
 21,545
Pension liability adjustments, net of tax of $55 and $(430), respectively1,902
 1,200
Comprehensive income (loss)6,602
 (2,361)
Net comprehensive income attributable to redeemable and noncontrolling interests2,657
 5,427
Comprehensive income (loss) attributable to Titan$3,945
 $(7,788)



























See accompanying Notes to Condensed Consolidated Financial Statements.

2

TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share data)

 September 30, 2017 December 31, 2016
  
 (unaudited)  
Assets   
Current assets   
Cash and cash equivalents$155,675
 $147,827
  Certificates of deposit—
 50,000
  Accounts receivable, net236,216
 179,384
Inventories331,378
 272,236
Prepaid and other current assets62,632
 79,734
Total current assets785,901
 729,181
Property, plant and equipment, net440,078
 437,201
Deferred income taxes9,259
 4,663
Other assets94,672
 94,851
Total assets$1,329,910
 $1,265,896
    
Liabilities 
  
Current liabilities 
  
Short-term debt$36,174
 $97,412
Accounts payable184,330
 148,255
Other current liabilities133,631
 120,437
Total current liabilities354,135
 366,104
Long-term debt411,230
 408,760
Deferred income taxes17,807
 13,183
Other long-term liabilities84,611
 80,161
Total liabilities867,783
 868,208
    
Redeemable noncontrolling interest111,016
 104,809
    
Equity 
  
Titan shareholders' equity

 

  Common stock ($0.0001 par value, 120,000,000 shares authorized, 60,715,356 issued, 59,700,839 outstanding)—
 —
Additional paid-in capital534,522
 479,075
Retained earnings (deficit)(13,445) 17,214
Treasury stock (at cost, 1,014,517 and 1,083,212 shares, respectively)(9,502) (10,119)
Stock reserved for deferred compensation(1,075) (1,075)
Accumulated other comprehensive loss(154,569) (188,278)
Total Titan shareholders’ equity355,931
 296,817
Noncontrolling interests(4,820) (3,938)
Total equity351,111
 292,879
Total liabilities and equity$1,329,910
 $1,265,896

 June 30, 2022December 31, 2021
(unaudited)
Assets
Current assets  
Cash and cash equivalents$116,703 $98,108 
  Accounts receivable, net299,070 255,180 
Inventories422,764 392,615 
Prepaid and other current assets90,844 67,401 
Total current assets929,381 813,304 
Property, plant and equipment, net296,832 301,109 
Operating lease assets11,845 20,945 
Deferred income taxes16,395 16,831 
Other long-term assets34,731 30,496 
Total assets$1,289,184 $1,182,685 
Liabilities  
Current liabilities  
Short-term debt$44,059 $32,500 
Accounts payable284,802 278,099 
Other current liabilities168,398 140,214 
Total current liabilities497,259 450,813 
Long-term debt441,121 452,451 
Deferred income taxes4,892 3,978 
Other long-term liabilities40,242 48,271 
Total liabilities983,514 955,513 
Equity  
Titan shareholders' equity
  Common stock ($0.0001 par value, 120,000,000 shares authorized, 66,525,269 issued at June 30, 2022 and 66,492,660 at December 31, 2021)— — 
Additional paid-in capital562,774 562,340 
Retained earnings (deficit)5,654 (85,439)
Treasury stock (at cost, 3,750,492 shares at June 30, 2022 and 80,876 shares at December 31, 2021)(23,848)(1,121)
Accumulated other comprehensive loss(245,235)(246,480)
Total Titan shareholders’ equity299,345 229,300 
Noncontrolling interests6,325 (2,128)
Total equity305,670 227,172 
Total liabilities and equity$1,289,184 $1,182,685 
See accompanying Notes to Condensed Consolidated Financial Statements.

3

TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(All amounts in thousands, except share data)


  Number of
common shares		Additional
paid-in
capital		Retained (deficit) earningsTreasury stockAccumulated other comprehensive (loss) incomeTotal Titan Equity Non-controlling interestTotal Equity
Balance January 1, 202266,411,784 $562,340 $(85,439)$(1,121)$(246,480)$229,300 $(2,128)$227,172 
Net income23,922 23,922 656 24,578 
Currency translation adjustment18,457 18,457 (1,182)17,275 
Pension liability adjustments, net of tax544 544 544 
Derivative gain303 303 303 
Stock-based compensation212,440 (851)1,339 488 488 
Issuance of common stock under 401(k) plan32,609 360 360 360 
Common stock repurchase(4,032,259)(25,000)(25,000)(25,000)
Balance March 31, 202262,624,574 $561,849 $(61,517)$(24,782)$(227,176)$248,374 $(2,654)$245,720 
Net income67,171 67,171 1,750 68,921 
Currency translation adjustment(18,765)(18,765)7,229 (11,536)
Pension liability adjustments, net of tax431 431 431
Derivative gain275 275 275
Stock-based compensation122,351 695 761 1,456 1,456 
Issuance of treasury stock under 401(k) plan27,852 230 173 403 403 
Balance June 30, 202262,774,777 $562,774 $5,654 $(23,848)$(245,235)$299,345 $6,325 $305,670 
4

 
 Number of
common shares
 
Additional
paid-in
capital
 Retained earnings (deficit) Treasury stock 
Treasury stock
 reserved for
deferred compensation
 Accumulated other comprehensive income (loss) Total Titan Equity  Noncontrolling interest Total Equity
Balance January 1, 201754,169,880
 $479,075
 $17,214
 $(10,119) $(1,075) $(188,278) $296,817
 $(3,938) $292,879
Net income (loss) *

 

 (29,764) 

 

 

 (29,764) 1,153
 (28,611)
Currency translation adjustment, net *          31,807
 31,807
 (722) 31,085
Pension liability adjustments, net of tax

 

 

 

 

 1,902
 1,902
   1,902
Dividends declared

 

 (895) 

 

 

 (895)   (895)
Note conversion5,462,264
 58,460
         58,460
   58,460
Restricted stock awards31,798
 (286)   286
     —
   —
Redemption value adjustment

 (3,981)   

     (3,981)   (3,981)
Stock-based compensation

 1,173
 

 

 

 

 1,173
   1,173
VIE distributions

 

 

 

 

 

 —
 (1,313) (1,313)
Issuance of treasury stock under 401(k) plan36,897
 81
 

 331
 

 

 412
   412
Balance September 30, 201759,700,839
 $534,522
 $(13,445) $(9,502) $(1,075) $(154,569) $355,931
 $(4,820) $351,111
  Number of
common shares		Additional
paid-in
capital		Retained (deficit) earningsTreasury stockAccumulated other comprehensive (loss) incomeTotal Titan Equity Non-controlling interestTotal Equity
Balance January 1, 202161,376,981 $532,742 $(135,025)$(1,199)$(217,254)$179,264 $(2,999)$176,265 
Net income (loss)13,574 13,574 (351)13,223 
Currency translation adjustment(26,665)(26,665)(513)(27,178)
Pension liability adjustments, net of tax873 873 873 
Derivative gain40 40 40 
Stock-based compensation146,322 487 82 569 569 
Issuance of common stock under 401(k) plan70,416 340 340 340 
Balance March 31, 202161,593,719 $533,569 $(121,451)$(1,117)$(243,006)$167,995 $(3,863)$164,132 
Net (loss) income(2,773)(2,773)347 (2,426)
Currency translation adjustment14,287 14,287 143 14,430 
Pension liability adjustments, net of tax692 692 692 
Derivative gain225 225 225 
Stock-based compensation578,516 787 (4)783 783 
Issuance of common stock under 401(k) plan35,526 341 0341 341 
Balance June 30, 202162,207,761 $534,697 $(124,224)$(1,121)$(227,802)$181,550 $(3,373)$178,177 

* Net income (loss) excludes $271 of net loss attributable to redeemable noncontrolling interest. Currency translation adjustment excludes $1,955 of currency translation related to redeemable noncontrolling interest.















See accompanying Notes to Condensed Consolidated Financial Statements.

5

TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(All amounts in thousands)
Nine months ended September 30,Six months ended June 30,
Cash flows from operating activities:2017 2016Cash flows from operating activities:20222021
Net loss$(28,340) $(25,106)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
 
  
Net incomeNet income$93,499 $10,797 
Adjustments to reconcile net income to net cash provided by (used for) operating activities:Adjustments to reconcile net income to net cash provided by (used for) operating activities:  
Depreciation and amortization44,029
 44,889
Depreciation and amortization22,245 24,918 
Deferred income tax provision(476) 172
Loss on sale of the Australian wheel businessLoss on sale of the Australian wheel business10,890 — 
Deferred income tax (benefit) provisionDeferred income tax (benefit) provision(292)198 
Income on indirect taxesIncome on indirect taxes(22,450)— 
Gain on fixed asset and investment saleGain on fixed asset and investment sale(182)(485)
Loss on senior note repurchaseLoss on senior note repurchase— 16,020 
Stock-based compensation1,173
 1,164
Stock-based compensation1,944 1,380 
Issuance of treasury stock under 401(k) plan413
 422
Foreign currency translation loss1,061
 9,822
Issuance of stock under 401(k) planIssuance of stock under 401(k) plan763 681 
Foreign currency gainForeign currency gain(4,314)(9,665)
(Increase) decrease in assets: 
  
(Increase) decrease in assets:  
Accounts receivable(46,715) 2,788
Accounts receivable(49,527)(72,765)
Inventories(46,083) 4,805
Inventories(38,884)(53,080)
Prepaid and other current assets20,046
 (12,314)Prepaid and other current assets(1,817)(10,350)
Other assets2,948
 25
Other assets(5,044)3,154 
Increase (decrease) in liabilities: 
  
Increase (decrease) in liabilities:  
Accounts payable26,372
 21,344
Accounts payable7,480 71,051 
Other current liabilities8,821
 11,315
Other current liabilities32,162 7,993 
Other liabilities1,539
 (5,342)Other liabilities2,445 (7,334)
Net cash provided by (used for) operating activities(15,212) 53,984
Net cash provided by (used for) operating activities48,918 (17,487)
Cash flows from investing activities: 
  
Cash flows from investing activities:  
Capital expenditures(23,580) (30,846)Capital expenditures(19,464)(14,637)
Certificates of deposit50,000
 —
Other1,293
 1,687
Net cash provided by (used for) investing activities27,713
 (29,159)
Proceeds from the sale of the Australian wheel businessProceeds from the sale of the Australian wheel business9,293 — 
Proceeds from sale of fixed assetsProceeds from sale of fixed assets297 749 
Net cash used for investing activitiesNet cash used for investing activities(9,874)(13,888)
Cash flows from financing activities: 
  
Cash flows from financing activities:  
Proceeds from borrowings33,540
 2,390
Proceeds from borrowings89,015 459,929 
Repurchase of senior secured notesRepurchase of senior secured notes— (413,000)
Payment on debt(41,003) (14,042)Payment on debt(86,004)(34,040)
Dividends paid(868) (810)
Net cash used for financing activities(8,331) (12,462)
Repurchase of common stockRepurchase of common stock(25,000)— 
Other financing activitiesOther financing activities(628)(2,040)
Net cash (used for) provided by financing activitiesNet cash (used for) provided by financing activities(22,617)10,849 
Effect of exchange rate changes on cash3,678
 2,958
Effect of exchange rate changes on cash2,168 (1,101)
Net increase in cash and cash equivalents7,848
 15,321
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents18,595 (21,627)
Cash and cash equivalents, beginning of period147,827
 200,188
Cash and cash equivalents, beginning of period98,108 117,431 
Cash and cash equivalents, end of period$155,675
 $215,509
Cash and cash equivalents, end of period$116,703 $95,804 
   
Supplemental information:   Supplemental information:
Interest paid$18,360
 $19,827
Interest paid$16,027 $16,422 
Income taxes paid, net of refunds received$550
 $4,316
Income taxes paid, net of refunds received$8,813 $7,101 
Noncash investing and financing information:   
Issuance of common stock for convertible debt payment$58,460
 $—









See accompanying Notes to Condensed Consolidated Financial Statements.
6


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)


1.ACCOUNTING POLICIES
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
In
Basis of presentation
The accompanying unaudited condensed consolidated interim financial statements include the opinionaccounts of Titan International, Inc. and its subsidiaries (Titan or the Company), the accompanying unaudited condensed consolidated financial statements contain all adjustments which are normal, recurring, and necessary for a fair statement of the Company's financial position as of September 30, 2017, and the results of operations and cash flows for the three and nine months ended September 30, 2017 and 2016.
Accounting policies have continued without significant change and are described in Note 1: Description of Business and Significant Accounting Policies contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2016. These interim financial statements have been prepared pursuant to the Securities and Exchange Commission's rules applicable to Form 10-Q and, therefore, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These(US GAAP) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the SEC). Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The accompanying unaudited condensed consolidated interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the Company's financial position and the results of operations and cash flows for the periods presented, and should be read in conjunction with the consolidated financial statements and the related notes thereto included in the Company'sCompany’s latest Annual Report on Form 10-K for the year ended December 31, 2016.2021, filed with the SEC on March 3, 2022 (the 2021 Form 10-K). All significant intercompany transactions have been eliminated in consolidation. These unaudited condensed consolidated interim financial statements include estimates and assumptions of management that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates.

InventoriesCOVID-19 pandemic
Inventories are valued atThe COVID-19 pandemic impact on the lowerCompany was less during the first two quarters of cost or net realizable value.2022 than in the comparable period in 2021. The Company’s inventories are valued underoperations continued with additional sanitary and other protective health measures which have increased operating costs. While the Company's operations began to return to historical levels during 2021 and continuing into the first two quarters of 2022, certain geographies (particularly China and Europe) continue to remain impacted by the COVID-19 pandemic due to new and emerging variants of COVID-19 resulting in first out (FIFO) method or average cost method. Net realizable value is estimated based on current selling prices. Estimated provisionsemployee absenteeism. Further, global supply chains are established for slow-moving and obsolete inventory.

Prior to 2017, the Company used the last in, first out (LIFO) inventory cost method at its Titan Wheel Corporation of Illinois subsidiary. Effective January 1, 2017, the Company elected to change its method of inventory accounting at this subsidiary to the FIFO method. The Company believes that the FIFO method is preferableexperiencing constraints as it results in increased uniformity across the Company’s global operations with respect to the method of inventory accounting, as no other subsidiaries were using the LIFO method. The Company also believes that the switch to FIFO at Titan Wheel Corporation of Illinois will improve financial reporting by better reflecting the current value of inventory, more closely aligning the flow of physical inventory with the accounting for the inventory, and providing better matching of revenues and expenses. The Company applied this change in method of inventory accounting by retrospectively adjusting the prior period financial statements. The cumulative effect of this accounting change resulted in a $6.6 million increase in retained earnings as of January 1, 2016.

As a result of the retrospective adjustmentongoing COVID-19 pandemic, including availability and pricing of raw materials, transportation and labor. The current constraints on the global supply chains are adding complexity to growth expectations in the near term. We expect that the pandemic will continue to have some impact on the Company's operations, though the nature and extent of the change in accounting principle, certain amounts inimpact will depend on the Company's Condensed Consolidated Statementsduration and severity of Operationsthe COVID-19 pandemic, the length of time it takes for the threemore normal economic and nine months ended September 30, 2016, were adjusted as follows:
 Three Months Ended September 30, 2016
 As originally reported Effect of change As adjusted
Cost of sales$273,219
 $(1,944) $271,275
Income (loss) from operations(8,254) 1,944
 (6,310)
Net income (loss)(10,918) 1,944
 (8,974)
      
Basic and diluted loss per share$(0.21) $0.04
 $(0.17)

 Nine Months Ended September 30, 2016
 As originally reported Effect of change As adjusted
Cost of sales$848,264
 $3,004
 $851,268
Loss from operations(12,251) (3,004) (15,255)
Net loss(22,102) (3,004) (25,106)
      
Basic and diluted loss per share$(0.55) $(0.05) $(0.60)


TITAN INTERNATIONAL, INC.
Notesoperating conditions to Condensed Consolidated Financial Statements
(Unaudited)

The Consolidated Balance Sheet at December 31, 2016, was adjusted as follows:
 December 31, 2016
 As originally reported Effect of change As adjusted
Inventories$269,291
 $2,945
 $272,236
Retained earnings14,269
 2,945
 17,214


Net sales
Sales are presented netresume, additional governmental actions that may be taken and/or extensions of allowances, discounts, and salestime for restrictions that have been imposed to date and other related taxes.uncertainties.

Fair value of financial instruments
The Company records all financial instruments, including cash and cash equivalents, certificates of deposit, accounts receivable, notes receivable, accounts payable, other accruals, and notes payable at cost, which approximates fair value due to their short term or stated rates.  Investments in marketable equity securities are recorded at fair value.  The 6.875%Our 7.00% senior secured notes due 2020 (senior2028 (the senior secured notes)notes due 2028) were carried at a cost of $396.6$395.0 million at SeptemberJune 30, 2017.2022. The fair value of the senior secured notes due 2028 at SeptemberJune 30, 2017,2022, as obtained through an independent pricing source, was approximately $410.5$373.8 million.

Cash dividendsRussia-Ukraine Military Conflict
In February 2022, in response to the military conflict between Russia and Ukraine, the United States, other North Atlantic Treaty Organization member states, as well as non-member states, have announced targeted economic sanctions on Russia, certain Russian citizens and enterprises. The continuation of the conflict has triggered additional economic and other sanctions enacted by the United States and other countries throughout the world.

The Company declared cash dividendscurrently owns 64.3% of $0.005the Voltyre-Prom, a leading producer of agricultural and $0.015 per shareindustrial tires in Volgograd, Russia, which represents approximately 9% and 7% of common stockconsolidated assets of Titan as of June 30, 2022 and December 31, 2021, respectively. The asset increase in the Russian entity was due to currency translation. The Russian operations represents approximately 6% of consolidated global sales for each of the three and ninesix months ended SeptemberJune 30, 20172022 and 2016, respectively.June 30, 2021. The third quarter 2017 cash dividendimpact of $0.005 per sharethe military conflict between Russia and Ukraine has not had a significant impact on global operations. The Company continues to monitor the potential impacts on the business and the ancillary impacts that the military conflict could have on other global operations.

Sale of common stock was paid October 13, 2017, to shareholders of record on SeptemberAustralian wheel business
On March 29, 2017.

Use of estimates
The policies utilized by2022, the Company inentered into a definitive agreement (the Agreement) for the preparationsale of the financial statements conformits Australian wheel business, to accounting principles generally accepted in the United States of AmericaOTR Tyres, a leading Australian tire, wheel and require management to make estimates, assumptions, and judgments that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities, at theservice provider. The closing date of the financial statements,transaction was March 31, 2022. The Agreement contains customary representations, warranties and covenants for transactions of this type. The sale included gross proceeds and cash repatriated of approximately $17.5 million, and the reported amountsassumption by OTR Tyres of revenues and expenses during the reporting period.  Actual amounts could differ from these estimates and assumptions.

Recently issued accounting standards
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." This update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires disclosure about the nature, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in this update were deferred by ASU No. 2015-14, "Revenue form Contracts with Customers (Topic 606) Deferral of Effective Date," and are now effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company is in the process of comparing its current revenue recognition policies to the requirements of ASU No. 2014-09. For the majority of Titan’s revenue arrangements, no significant impacts are expected as these transactions are not accounted for under industry-specific guidance that will be superseded by ASU No. 2014-09 and generally consist of a single performance obligation to transfer promised goods or services. While the Company has not identified any material differences in the amount and timing of revenue recognition related to ASU No. 2014-09, the evaluation is not complete and, accordingly, Titan has not yet reached a conclusion on the overall impacts of adopting ASU No. 2014-09. The guidance provides for adoption either retrospectively to each prior reporting period or as a cumulative-effect adjustment as of the date of adoption. The Company has determined that it will adopt the guidance using a cumulative-effect adjustment as of the date of adoption. The Company believes it is following an appropriate timeline to allow for proper recognition, presentation, and disclosure upon adoption in the year beginning on January 1, 2018.

all
7


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
liabilities, including employee and lease obligations. Refer to footnote 13 for additional information on the loss on sale of the Australian wheel business.

Adoption of new accounting standards
In April 2016,November 2021, the FASB issued ASU No. 2016-10, "Identifying Performance Obligations2021-10 Government Assistance (Topic 832), which requires annual disclosures
of transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.
These required disclosures include information on the nature of transactions and Licensing." This ASU clarifiesrelated accounting policies used to account for
transactions, detail on the following aspects of Topic 606: identifying performance obligationsline items on the balance sheet and the licensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, "Narrow-Scope Improvementsincome statement affected by these transactions including
amounts applicable to each line, and Practical Expedients." This ASU affects only narrow aspects of Topic 606 related to assessing the collectability criterion; presentation of sales tax; noncash consideration;significant terms and contract modifications and completed contracts at transition. The amendments in these updates affect the guidance in ASU No. 2014-09, as previously discussed above, and the effective dates are the same as those for ASU No. 2014-09.

In December 2016, the FASB issued ASU No. 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers." The amendments in this update affect narrow aspectsconditions of the guidance issued intransactions including commitments and
contingencies. The ASU No. 2014-09, as discussed above, and the effective dates are the same as those for ASU No. 2014-09.

In January 2016, the FASB issued ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities." This update addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." This update was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.2021. The Company is currently assessing the impact that adopting this new accounting guidance will have on the Company's consolidated financial statements.receives various forms

In August 2016, the FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments." This update addresses eight specific cash flow issuesgovernment assistance, primarily through grants associated with the objective of reducing the existing diversitycontinued infrastructure development in practice. The amendments in this update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual reporting period. The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, "Intra-Entity Transfers of Assets other than Inventory." This update requires the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those annual reporting periods.certain foreign locations. The Company adopted the impact of this guidance early,ASU effective January 1, 2017.2022 and incorporated the required disclosures within the notes to condensed consolidated financial statements. The adoption of this guidance did not have a material effectimpact on the Company'sour condensed consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." This update requires an employer to report the service cost component of defined benefit pension cost and postretirement benefit cost in the same line item
2. ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the income statement as other compensation costs arising from services rendered byfollowing (amounts in thousands):
 June 30,
2022		December 31,
2021
Accounts receivable$306,969 $259,730 
Allowance for doubtful accounts(7,899)(4,550)
Accounts receivable, net$299,070 $255,180 

3. INVENTORIES

Inventories consisted of the pertinent employees duringfollowing (amounts in thousands):
 June 30,
2022		December 31,
2021
Raw material$134,781 $135,241 
Work-in-process48,646 44,694 
Finished goods239,337 212,680 
 $422,764 $392,615 


4. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the period. The amendmentsfollowing (amounts in this update are effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.thousands):

 June 30,
2022		December 31,
2021
Land and improvements$38,976 $41,010 
Buildings and improvements237,281 236,367 
Machinery and equipment587,357 578,816 
Tools, dies and molds113,214 111,169 
Construction-in-process28,182 20,288 
 1,005,010 987,650 
Less accumulated depreciation(708,178)(686,541)
 $296,832 $301,109 
In May 2017, the FASB issued ASU No. 2017-09, "Scope of Modification Accounting." This update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in accordance with Topic 718, Compensation-Stock Compensation. The amendments in this update are effective for annual reporting periods, and interim periods within those annual reporting periods, beginning after December 15, 2017. The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.


8


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

2. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following as of the dates set forth below (amounts in thousands):
 September 30,
2017		 December 31,
2016
Accounts receivable$239,095
 $182,728
Allowance for doubtful accounts(2,879) (3,344)
Accounts receivable, net$236,216
 $179,384

Accounts receivable are reduced by an estimated allowance for doubtful accounts which is based on known risks and historical losses.


3. INVENTORIES
Inventories consisted of the following as of the dates set forth below (amounts in thousands):
 September 30,
2017		 December 31,
2016
Raw material$88,036
 $76,380
Work-in-process41,960
 32,395
Finished goods201,382
 163,461
 $331,378
 $272,236

Inventories are valued at the lower of cost or net realizable value. Net realizable value is estimated based on current selling prices. Inventory costs are calculated using the first-in, first-out (FIFO) method or average cost method. Estimated provisions are established for slow-moving and obsolete inventory.


4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net consisted of the following as of the dates set forth below (amounts in thousands):
 September 30,
2017		 December 31,
2016
Land and improvements$47,215
 $43,871
Buildings and improvements259,087
 239,036
Machinery and equipment604,617
 573,717
Tools, dies and molds112,650
 106,695
Construction-in-process16,956
 43,080
 1,040,525
 1,006,399
Less accumulated depreciation(600,447) (569,198)
 $440,078
 $437,201

Depreciation on fixed assets for the nine months ended September 30, 2017 and 2016, totaled $41.0 million and $42.1 million, respectively.



TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Capital leases included in property, plant and equipment consisted offor the following as of the dates set forth below (amounts in thousands):six months ended June 30, 2022 and 2021 totaled $21.6 million and $24.0 million, respectively.
 September 30,
2017		 December 31,
2016
Buildings and improvements$4,002
 $3,565
Less accumulated amortization(2,213) (1,923)
 $1,789
 $1,642
    
Machinery and equipment$34,230
 $31,331
Less accumulated amortization(29,091) (26,502)
 $5,139
 $4,829



5. INTANGIBLE ASSETS, NET

The components of intangible assets, net consisted of the following as of the dates set forth below (amounts in thousands):
 Weighted Average Useful Lives (in Years) September 30, 2017 September 30,
2017		 December 31,
2016
Amortizable intangible assets:     
     Customer relationships9.9 $13,956
 $13,171
     Patents, trademarks and other7.5 15,180
 14,629
          Total at cost  29,136
 27,800
     Less accumulated amortization  (13,338) (11,399)
   $15,798
 $16,401

Weighted Average Useful Lives
(in years)
June 30, 2022		June 30,
2022		December 31,
2021
Amortizable intangible assets:
     Patents, trademarks and other10.98$10,084 $10,084 
     Less accumulated amortization(8,661)(8,586)
$1,423 $1,498 
Amortization related to intangible assets for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021 totaled $2.2$0.2 million and $2.1$0.3 million, respectively. Intangible assets are included as a component of other long-term assets in the Condensed Consolidated Balance Sheet.Sheets.

The estimated aggregate amortization expense at SeptemberJune 30, 2017,2022 for each of the years (or other periods) set forth below was as follows (amounts in thousands):
July 1 - December 31, 2022$70 
2023145 
2024132 
2025123 
2026123 
Thereafter830 
 $1,423 
October 1 - December 31, 2017$604
20182,257
20192,237
20202,237
20211,563
Thereafter6,900
 $15,798





TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

6. WARRANTY

Changes in the warranty liability during the six months ended June 30, 2022 and 2021, respectively, consisted of the following (amounts in thousands):
 20222021
Warranty liability at beginning of the period$16,628 $15,040 
Provision for warranty liabilities8,317 5,747 
Warranty payments made(5,690)(4,795)
Warranty liability at end of the period$19,255 $15,992 
 2017 2016
Warranty liability, January 1$17,926
 $23,120
Provision for warranty liabilities5,377
 4,950
Warranty payments made(5,693) (8,882)
Warranty liability, September 30$17,610
 $19,188


The Company provides limited warranties on workmanship on its products in all market segments. The majority of the Company’s products are subject to a limited warranty that ranges between less than one year and ten years, with certain product warranties being prorated after the first year. The Company calculates a provision for warranty expense based on past warranty experience. Warranty accruals are included as a component of other current liabilities on the Condensed Consolidated Balance Sheet.Sheets.


7. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT
Long-term debt consisted of the following as of the dates set forth below (amounts in thousands):
 September 30, 2017
 Principal Balance Unamortized Discount Net Carrying Amount
6.875% senior secured notes due 2020$400,000
 $(3,406) $396,594
Titan Europe credit facilities33,541
 —
 33,541
Other debt16,296
 —
 16,296
Capital leases973
 —
 973
     Total debt450,810
 (3,406) 447,404
Less amounts due within one year36,174
 —
 36,174
     Total long-term debt$414,636
 $(3,406) $411,230

9
 December 31, 2016
 Principal Balance Unamortized Discount Net Carrying Amount
6.875% senior secured notes due 2020$400,000
 $(4,148) $395,852
5.625% convertible senior subordinated notes due 201760,161
 (13) 60,148
Titan Europe credit facilities33,710
 —
 33,710
Other debt15,560
 —
 15,560
Capital leases902
 —
 902
     Total debt510,333
 (4,161) 506,172
Less amounts due within one year97,425
 (13) 97,412
     Total long-term debt$412,908
 $(4,148) $408,760




TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7. DEBT

Long-term debt consisted of the following (amounts in thousands):
June 30, 2022
Principal BalanceUnamortized Debt IssuanceNet Carrying Amount
7.00% senior secured notes due 2028$400,000 $(5,046)$394,954 
Titan Europe credit facilities45,049 — 45,049 
Revolving credit facility23,000 — 23,000 
Other debt22,177 — 22,177 
     Total debt490,226 (5,046)485,180 
Less amounts due within one year44,059 — 44,059 
     Total long-term debt$446,167 $(5,046)$441,121 
December 31, 2021
Principal BalanceUnamortized Debt IssuanceNet Carrying Amount
7.00% senior secured notes due 2028$400,000 $(5,476)$394,524 
Titan Europe credit facilities44,993 — 44,993 
Revolving credit facility30,000 — 30,000 
Other debt15,434 — 15,434 
     Total debt490,427 (5,476)484,951 
Less amounts due within one year32,500 — 32,500 
     Total long-term debt$457,927 $(5,476)$452,451 

Aggregate principal maturities of long-term debt at SeptemberJune 30, 2017,2022 for each of the years (or other periods) set forth below were as follows (amounts in thousands):
October 1 - December 31, 2017$22,169
201811,704
201914,082
2020402,259
2021455
Thereafter141
 $450,810

July 1 - December 31, 2022$37,363 
202314,215 
20246,285 
20253,285 
202625,202 
Thereafter403,876 
 $490,226 
6.875%7.00% senior secured notes due 20202028
TheOn April 22, 2021, the Company issued $400.0 million aggregate principal amount of 7.00% senior secured notes are due October 2020.April 2028 (the senior secured notes due 2028), guaranteed by certain of the Company's subsidiaries. Including the impact of debt issuance costs, these notes had an effective yield of 7.27% at issuance. These notes are secured by the land and buildings of the following subsidiaries of the Company: Titan TireWheel Corporation of Illinois, Titan Tire Corporation, of Bryan, Titan Tire Corporation of Freeport, and Titan WheelTire Corporation of Illinois.Bryan.

5.625% convertible senior subordinated notes due 2017
In January 2017, the Company converted 97.1% of the principal balance of its 5.625% convertible senior subordinated notes (2017 Notes), which matured on January 15, 2017, into shares of Titan common stock. Immediately prior to maturity, $60.2 million in aggregate principal amount of the 2017 Notes was outstanding, of which holders of $58.5 million in aggregate principal amount of the 2017 Notes, or 97.1%, converted their 2017 Notes into shares of Titan common stock pursuant to the terms of the indenture governing the 2017 Notes. The $58.5 million in principal amount of converted 2017 Notes was converted into 5,462,264 shares of Titan common stock, representing approximately 10% of Titan’s common stock outstanding prior to conversion. Each $1,000 principal amount of the 2017 Notes was convertible into 93.436 shares of Titan common stock. The remaining $1.7 million principal amount of the 2017 Notes that was not converted was paid in cash at maturity.

Titan Europe credit facilities
The Titan Europe credit facilities containinclude borrowings from various institutions totaling $33.5$45.0 million in aggregate principal amount at SeptemberJune 30, 2017.2022. Maturity dates on this debt range from less than one year to nine years and interest rates range from 5% to 6.9%. The Titan Europe facilities are secured by the assets of its subsidiaries in Italy, Spain, Germany, and Brazil.five years.

Revolving credit facility
In February 2017, theThe Company entered intohas a credit and security agreement with respect to a new $75$125 million revolving credit facility (credit facility) with agent BMO Harris Bank N.A., as agent, and other financial institutions party thereto. This credit facility replaced the Company's $150 million revolving credit facility which was previously scheduled to terminate in December 2017. The credit facility is collateralized by accounts receivable and inventory of certain of the Company’s
10


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
domestic subsidiaries and includes a maturity ofis scheduled to mature in October 2026. The credit facility can be expanded by up to $50 million through an accordion provision within the earlier of five years or six months prior to the scheduled maturity of the Company’s senior secured notes.agreement. From time to time Titan's availability under this credit facility may be less than $75$125 million as a result of outstanding letters of credit and eligible accounts receivable and inventory balances at certain of its domestic subsidiaries. At SeptemberJune 30, 2017, an outstanding letter of credit2022, under the Company's $125 million credit facility totaled $12.5there were $23.0 million in borrowings and $7.2 million in outstanding letters of credit, and the amount available under the facilityfor borrowing totaled $62.5 million based upon eligible accounts receivable and inventory balances. During the first nine months of 2017 and at September 30, 2017, there were no borrowings under the credit facility.$94.8 million.

Other debt
The Company has working capital loans at Titan Pneus do Brasil Ltda and Voltyre-Prom at various interest rates, which totaled $8.9$14.6 million and $7.4 million at SeptemberJune 30, 2017,2022, respectively.




TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

8. DERIVATIVE FINANCIAL INSTRUMENTS

Maturity dates on these loans are one year or less. The Company uses financial derivativesexpects to mitigate its exposure to volatility in foreign currency exchange rates. These derivative financial instruments are recognized at fair value. The Company has not designated these financial instruments as hedging instruments. Any gain or loss on the re-measurementnegotiate an extension of the fair value is recordedmaturity dates on these loans with the respective financial institutions, as an offset to currency exchange gain/loss. For the three and nine months ended September 30, 2017, the Company recorded currency exchange loss related to these derivatives of $0.2 million and $0.5 million, respectively.needed.


9.8. REDEEMABLE NONCONTROLLING INTEREST

The Company in partnership with One Equity Partners (OEP) and the Russian Direct Investment Fund (RDIF), owns own all of the equity interests in Voltyre-Prom, a leading producer of agricultural and industrial tires in Volgograd, Russia. TheOn February 11, 2019, the Company is party to a shareholders' agreement with OEP and RDIF which was entered into in connectiona definitive agreement (the Agreement) with an affiliate of the acquisition of Voltyre-Prom. The agreement contains a settlementRDIF relating to the put option which is exercisable beginningincluded in July 2018 through December of 2018 and may require Titan to purchase the indirect equity interests in Voltyre-Prom of OEP and RDIF with cash or Titan common stock, at a value setShareholders' Agreement that was exercised by RDIF. Under the agreement. The value set by the agreement is the greater of: (i) the aggregateterms of the investment of the selling party and an amount representing an internal rate of return of 8%; or (ii) the last twelve months of EBITDA times 5.5 less net debt times the ownership percentage. The value of the redeemable noncontrolling interest held by OEP and RDIF has been recorded at the aggregate of the investment of the selling party and an amount representing an internal rate of return of 8%, which was greater than the result of the calculationAgreement, in clause (ii) above at September 30, 2017.

The redemption featuresfull satisfaction of the settlement put option are not solely within the Company’s control and the noncontrolling interest is presented as a redeemable noncontrolling interest separately from total equitythat was exercised by RDIF, Titan paid $25 million in the Condensed Consolidated Balance Sheetcash to RDIF at the redemption valueclosing of the settlement put option. If the redemption value is greater than the carrying value of the noncontrolling interest, the increase in the redemption value is adjusted directly to retained earnings of the affected entity, or additional paid-in capital if there are no available retained earnings applicabletransaction, and agreed, subject to the redeemable noncontrolling interest.completion of regulatory approval, to issue 4,032,259 shares of restricted Titan common stock to RDIF in a private placement.

In the first quarter of 2016, the Company acquired $25 million of additional shares in the consortium owning Voltyre-Prom, increasing Titan's ownership to 43% from 30%. The acquisition of shares was transacted through the conversion of an intercompany note previously held by Titan. As a result of the ownership change, the balance of the redeemable noncontrolling interest increased by $12 million at the time of such conversion of the intercompany note, which is comprised of a $3.5 million reclassification of currency translation and an $8.5 million reclassification of other equity.

The following is a reconciliation of redeemable noncontrolling interest as of September 30, 2017 and 2016 (amounts in thousands):
 2017 2016
Balance at January 1$104,809
 $77,174
   Reclassification as a result of ownership change—
 12,039
   Income attributable to redeemable noncontrolling interest271
 1,775
   Currency translation1,955
 3,330
   Redemption value adjustment3,981
 8,475
Balance at September 30$111,016
 $102,793


This obligation with respectIn November 2021, Titan received regulatory approval for the issuance of restricted Titan common stock to RDIF. On December 17, 2021, the Company issued 4,032,259 shares of restricted Titan common stock to the settlement put option approximatesRDIF equity holders subject to the cost if all remainingCompany's right to repurchase the shares in the consortium owning Voltyre-Prom were purchased byfor $25 million until February 12, 2022.

On February 1, 2022, the Company entered into a Stock Purchase Agreement with the RDIF equity holders to buy back the restricted Titan common stock for the previously agreed amount of $25 million. The transaction was completed on September 30, 2017,February 1, 2022. Following the transaction, the Company and is presented in the Condensed Consolidated Balance Sheet in redeemable noncontrolling interest, which is treated as mezzanine equity.RDIF's ownership remained at 64.3% and 35.7%, respectively, of Voltyre-Prom.


9. LEASES


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

10. LEASE COMMITMENTS

The Company leases certain buildings and equipment under both operating and finance leases.  Certain lease agreements provide for renewal options, fair value purchase options, and payment of property taxes, maintenance, and insurance by the Company. Under FASB Accounting Standards Codification Topic 842 "Leases," the Company made an accounting policy election, by class of underlying asset, not to separate non-lease components such as those previously stated from lease components and instead will treat the lease agreement as a single lease component for all asset classes. Operating right-of-use (ROU) assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent Titan's obligations to make lease payments arising from the lease. The majority of Titan's leases are operating leases. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of Titan's leases do not provide an implicit interest rate, the Company used its incremental borrowing rate (7.27%), based on the information available at the lease commencement date, in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of sales and selling, general and administrative expenses on the Condensed Consolidated Statements of Operations. Amortization expense associated with finance leases is included in cost of sales and selling, general and administrative expenses, and interest expense associated with finance leases is included in interest expense in the Condensed Consolidated Statements of Operations.
11


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Supplemental balance sheet information related to leases was as follows (amounts in thousands):
Balance Sheet ClassificationJune 30, 2022December 31, 2021
Operating lease ROU assetsOperating lease assets$11,845 $20,945 
                                
Operating lease current liabilitiesOther current liabilities$4,993 $6,180 
Operating lease long-term liabilitiesOther long-term liabilities4,503 11,352 
    Total operating lease liabilities$9,496 $17,532 
Finance lease, grossProperty, plant & equipment, net$5,825 $5,305 
Finance lease accumulated depreciationProperty, plant & equipment, net(3,005)(2,801)
   Finance lease, net$2,820 $2,504 
Finance lease current liabilitiesOther current liabilities$2,343 $2,384 
Finance lease long-term liabilitiesOther long-term liabilities3,188 3,878 
   Total finance lease liabilities$5,531 $6,262 
At SeptemberJune 30, 2017, future minimum rental commitments under noncancellable operating leases with initial terms2022, maturities of at least one yearlease liabilities were as follows (amounts in thousands):
Operating LeasesFinance Leases
July 1 - December 31, 2022$3,584 $1,546 
20234,496 2,233 
20241,737 1,457 
2025518 669 
2026254 357 
Thereafter520 3 
Total lease payments$11,109 $6,265 
Less imputed interest1,613 734 
$9,496 $5,531 
Weighted average remaining lease term (in years)3.552.79
October 1 - December 31, 2017$1,960
20185,489
20194,478
20202,599
20211,908
Thereafter1,952
Total future minimum lease payments$18,386
Supplemental cash flow information related to leases for the six months ended June 30, 2022 were as follows: operating cash flows from operating leases were $1.7 million and operating cash flows from finance leases were $0.1 million.


At September 30, 2017, the Company had assets held as capital leases with a net book value of $6.9 million included in property, plant and equipment. At September 30, 2017, total future capital lease obligations relating to these leases were as follows (amounts in thousands):
October 1 - December 31, 2017$139
2018662
2019150
202020
20212
Total future capital lease obligation payments973
Less amount representing interest(12)
Present value of future capital lease obligation payments$961



11.10. EMPLOYEE BENEFIT PLANS

The Company has three frozen defined benefit pension plans covering certain employees or former employees of three U.S. subsidiaries. The Company also has pension plans covering certain employees of several foreign subsidiaries. The Company also sponsors a number of defined contribution plans in the U.S. and at foreign subsidiaries. The Company contributed approximately $2.1$0.3 million to the pension plans during the ninesix months ended SeptemberJune 30, 2017,2022, and expects to contribute approximately $1.2$0.4 million to the pension plans during the remainder of 2017.2022.

The components of net periodic pension (benefit) cost consisted of the following for the periods set forth below (amounts in thousands):
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Service cost$129
 $74
 $482
 $386
Interest cost1,197
 1,230
 3,531
 3,700
Expected return on assets(1,372) (1,396) (4,109) (4,184)
Amortization of unrecognized prior service cost34
 35
 102
 103
Amortization of net unrecognized loss663
 762
 1,992
 2,289
      Net periodic pension cost$651
 $705
 $1,998
 $2,294
12





TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Three months endedSix months ended
June 30,June 30,
2022202120222021
Service cost$244 $181 $1,172 $338 
Interest cost717 713 1,434 1,413 
Expected return on assets(1,518)(1,508)(3,036)(3,014)
Amortization of unrecognized prior service cost(16)(32)(32)(32)
Amortization of net unrecognized loss(7)696 (13)1,393 
   Net periodic pension (benefit) cost$(580)$50 $(475)$98 
12.
Service cost is recorded as cost of sales in the Condensed Consolidated Statements of Operations while all other components are recorded in other income. The change in the net periodic pension (benefit) cost from 2021 to 2022 is due to the disposal of the Australian wheel business.


11. VARIABLE INTEREST ENTITIES

The Company holds a variable interest in threetwo joint ventures for which the CompanyTitan is the primary beneficiary. TwoOne of thethese joint ventures operate distribution facilities whichthat primarily distribute mining products. OneTitan is the 50% owner of these facilities isthe distribution facility located in CanadaCanada. Titan is also a 50% owner of a manufacturer of undercarriage components and the other is locatedcomplete track systems for earthmoving machines in Australia.India. The Company’s variable interestinterests in these joint ventures relatesrelate to sales of Titan productproducts to these entities, consigned inventory, and working capital loans. The third joint venture is the consortium which owns Voltyre-Prom. (See Note 9 for additional information.) Titan is acting as operating partner with responsibility for Voltyre-Prom’s daily operations. The Company has also provided working capital loans to Voltyre-Prom.
As the primary beneficiary of these variable interest entities (VIEs), the entities’VIEs’ assets, liabilities, and results of operations are included in the Company’s condensed consolidated financial statements. The other equity holders’ interests are reflected in “Net income (loss) attributable to noncontrolling interests” in the Condensed Consolidated Statements of Operations and “Noncontrolling interests” in the Condensed Consolidated Balance Sheets.
The following table summarizes the carrying amount of the entities’VIEs’ assets and liabilities included in the Company’s Condensed Consolidated Balance Sheets at September 30, 2017, and December 31, 2016 (amounts in thousands):
 June 30,
2022		December 31, 2021
Cash and cash equivalents$757 $714 
Inventory2,325 2,459 
Other current assets4,111 5,135 
Property, plant and equipment, net3,441 3,414 
Other non-current assets522 626 
   Total assets$11,156 $12,348 
Current liabilities$1,385 $1,687 
Other long-term liabilities583 669 
  Total liabilities$1,968 $2,356 
 September 30,
2017		 December 31, 2016
Cash and cash equivalents$12,251
 $9,396
Inventory13,862
 11,445
Other current assets22,099
 23,301
Property, plant and equipment, net34,131
 30,448
Other noncurrent assets8,431
 4,955
   Total assets$90,774
 $79,545
    
Current liabilities$23,744
 $22,068
Noncurrent liabilities9,759
 5,350
  Total liabilities$33,503
 $27,418

All assets in the above table can only be used to settle obligations of the consolidated VIE to which the respective assets relate. Liabilities are nonrecourse obligations. Amounts presented in the table above are adjusted for intercompany eliminations.

The Company holds a variable interestinterests in certain VIEs whichthat are not consolidated because Titan is not the primary beneficiary. The Company's involvement with these entities is in the form of direct equity interests and prepayments andrelated to purchases of materials. The maximum exposure to loss represents the loss of assets recognized by Titan relating to non-consolidated entities and amounts due to the non-consolidated assets. The assets and liabilities recognized in Titan's Condensed Consolidated Balance Sheets related to Titan's interest in these non-consolidated VIEs and the Company's maximum exposure to loss relating to non-consolidated VIEs as of the dates set forth below were as follows (amounts in thousands):
 September 30,
2017		 December 31, 2016
Investments$3,505
 $4,738
Other current assets1,224
 1,039
     Total VIE assets4,729
 5,777
Accounts payable1,706
 932
  Maximum exposure to loss$6,435
 $6,709
13





TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

 June 30, 2022December 31, 2021
Investments$6,736 $6,402 
     Total VIE assets6,736 6,402 
Accounts payable3,051 4,296 
  Maximum exposure to loss$9,787 $10,698 
13.

12. 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.brand. These agreements cover sales in North America, Latin America, Europe, the Middle East, Africa, Russia, and other Commonwealth of Independent States countries. The North American and Latin American farm tire royalties were prepaid through March 2018 as a partEach of the 2011 Goodyear Latin American farm tire acquisition. The Company also has a trademark license agreement with Goodyearthese agreements is scheduled to manufacture and sell certain non-farm tire productsexpire in Latin America.2025. Royalty expenses recorded were $2.6$3.0 million and $2.3$2.7 million for the three months ended SeptemberJune 30, 20172022 and 2016, respectively. Royalty expenses recorded were $7.72021, respectively, and $5.9 million and $6.7$5.1 million for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively.


14.13. OTHER INCOME

Other income consisted of the following for the periods set forth below (amounts in thousands):
Three months endedSix months ended
June 30,June 30,
 2022202120222021
Income on indirect taxes (1)
$22,450 $— $22,450 $— 
Loss on sale of Australian wheel business (2)
— — (10,890)— 
Proceeds from government grant (3)
— — 1,324 — 
Gain on legal settlement (4)
— 1,750 — 1,750 
Equity investment income322 60 570 124 
Gain (loss) on sale of assets72 (626)182 165 
Other income (expense)850 48 1,199 (1,175)
 $23,694 $1,232 $14,835 $864 
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Equity investment income$1,391
 $840
 $2,741
 $2,423
Interest income872
 929
 2,646
 2,182
Investment gain related to investments for deferred compensation480
 560
 1,827
 52
Building rental income594
 557
 1,789
 1,528
Discount amortization on prepaid royalty180
 389
 689
 1,168
Gain (loss) on sale of assets(542) (71) (734) 2,271
Other income (expense)66
 374
 (560) 908
 $3,041
 $3,578
 $8,398
 $10,532


(1) In May 2022, the Brazilian tax authorities approved indirect tax credits to be applied against future tax obligations. Refer to Footnote 14 for additional information.

(2) The loss on sale of the Australian wheel business is comprised primarily of the release of the cumulative translation adjustment of approximately $10.0 million and closing costs associated with the completion of the transaction of approximately $0.9 million. Refer to Footnote 1 for additional information.
15.
(3) In August 2014, the Company received an approximately $17.0 million capital grant from the Italian government for asset damages related to the earthquake that occurred in May 2012 at one of our Italian subsidiaries. The grant was recorded as deferred income in non-current liabilities which is being amortized over the life of the reconstructed building. The Company received proceeds of an additional $1.9 million from the grant during the six months ended June 30, 2022, of which $1.3 million was recorded as other income to match to the historical depreciation recorded on the underlying assets.

(4) The gain on legal settlement relates to proceeds received from a steel supplier for the six months ended June 30, 2021.

14


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
14. INCOME TAXES

The Company recorded income tax expense (benefit) of $2.4$19.0 million and $(2.1)$2.0 million for the quartersthree months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. For the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, the Company recorded income tax expense of $6.0$27.7 million and $2.6$4.6 million, respectively. The Company's effective income tax rate was (27)%21.6% and 16% for the quarters ended September 30, 2017 and 2016, and (27)% and (13)(457.7)% for the ninethree months ended SeptemberJune 30, 20172022 and 2016, respectively.2021, respectively, and 22.8% and 29.8% for the six months ended June 30, 2022 and 2021. For the six months ended June 30, 2022 and 2021, the income tax expense each period differed due to an overall pre-tax income increase which resulted in the significant fluctuation in the effective tax rate. The year-to-date increase in income tax expense for the six months ended June 30, 2022 is due to improved profitability in foreign jurisdictions and tax due in certain jurisdictions for entities with valuation allowances established. The tax due in certain jurisdictions by entities with valuation allowances is primarily driven by Illinois state tax for the U.S. consolidated group due to Illinois’ law change which limits the net operating losses that can be utilized beginning in 2021.

The Company’s 20172022 and 2021 income tax expense and raterates 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 U.S. and certain foreign jurisdictions that incurredhave a full valuation allowance on deferred tax assets created by current year projected losses.assets. In addition, there were non-deductible royalty expenses and statutorily required income adjustments made in certain foreign jurisdictions that negatively impacted the tax rate for the three and ninesix months ended SeptemberJune 30, 2017. During the second quarter of 2017, the IRS income tax audit for tax years 2010 through 2014 was settled, which did not result in any material change to income tax expense.2022 and 2021.

The Company’s 2016 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 U.S. and certain foreign jurisdictions that incurred a full valuation allowance on deferred tax assets created by current year projected losses. In addition, the Company adjusted its net uncertain tax positions which resulted in a tax benefit of $2.5 million.



TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The Company continues to monitor the realization of its deferred tax assets and assesses the need for a valuation allowance. The Company analyzes available positive and negative evidence to determine if a valuation allowance is needed based on the weight of the evidence. This objectively verifiable evidence primarily includes the past three years' profit and loss positions and the Company weighs this evidence to determine if a valuation allowance is needed.positions. This process requires management to make estimates, assumptions, and judgments that are uncertain in nature. The Company has established valuation allowances with respect to deferred tax assets in the U.S. and certain foreign jurisdictions and continues to monitor and assess potential valuation allowances in all its jurisdictions.


Brazilian Tax Credits
In June 2021, the Company’s Brazilian subsidiaries received a notice that they had prevailed on an existing legal claim in regards to certain non-income (indirect) taxes that had been previously charged and paid. The matter specifically relates to companies’ rights to exclude the state tax on goods circulation (a value-added-tax or VAT equivalent, known in Brazil as “ICMS”) from the calculation of certain additional indirect taxes (specifically the program of social integration (“PIS”) and contribution for financing of social security (“COFINS”)) levied by the Brazilian States on the sale of goods.
16.
During the second quarter of 2022, the Company submitted the related supporting documentation and received the approval from the Brazilian tax authorities for one of its Brazilian subsidiaries. For the three and six months ended June 30, 2022, the Company recorded $22.5 million within other income in the condensed consolidated statements of operations. The Company also recorded $7.8 million of income tax expense associated with the recognition of these indirect tax credits. The Company expects to be able to apply the tax credits received to settle the income tax liability that was incurred as a result of the credit. The Company also expects to utilize the majority of the credit against future PIS/COFINS and income tax obligations over the next twelve months.

During the third quarter of 2022, the Company plans to submit the related supporting documentation to the Brazilian tax authorities for its other Brazilian subsidiary. After review by the Brazilian tax authorities, the Company could receive approximately $10 million of additional indirect tax credits to be applied as credits against future PIS/COFINS and income tax obligations. The Company plans to recognize the full benefit of the indirect tax credits, contingent upon successful approval and verification from the Brazilian tax authorities.

15


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
15. EARNINGS PER SHARE

Earnings per share (EPS) were as follows for the periods presented below (amounts in thousands, except per share data):
Three months endedSix months ended
June 30,June 30,
2022202120222021
Net income (loss) attributable to Titan and applicable to common shareholders$67,171 $(2,773)$91,093 $10,801 
Determination of shares:
   Weighted average shares outstanding (basic)62,671 61,717 63,262 61,592 
   Effect of equity awards550 — 511 888 
   Weighted average shares outstanding (diluted)63,221 61,717 63,773 62,480 
Income (loss) per common share:
Basic$1.07 $(0.04)$1.44 $0.18 
Diluted$1.06 $(0.04)$1.43 $0.17 
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
        
Net loss attributable to Titan$(12,018) $(8,008) $(29,764) $(24,007)
   Redemption value adjustment(882) (1,367) (3,981) (8,475)
Net loss applicable to common shareholders$(12,900) $(9,375) $(33,745) $(32,482)
Determination of shares:       
   Weighted average shares outstanding (basic and diluted)59,600
 53,946
 59,247
 53,895
Earnings per share:       
   Basic and diluted(0.22) (0.17) (0.57) (0.60)

The effect of stock options, shares held by certain trusts, and convertible notes has been excluded for the nine months ended September 30, 2017 and 2016, as the effect would have been antidilutive. The weighted average share amount excluded for stock options and shares held by certain trusts was 0.2 million for each of the three and nine months ended September 30, 2017, and 0.3 million and 0.2 million for the three and nine months ended September 30, 2016, respectively. The weighted average share amount excluded for convertible notes totaled 0.3 million shares for the nine months ended September 30, 2017, and 5.6 million shares for each of the three and nine months ended and September 30, 2016.

17.16. LITIGATION

The Company is a party to routine legal proceedings arising out of the normal course of business. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss, the Company believes at this time that none of these actions, individually or in the aggregate, will have a material adverse effect on the consolidated financial condition, results of operations, or cash flows of the Company. However, dueDue to the difficult nature of predicting unresolved and future legal claims, the Company cannot anticipate or predict the material adverse effect on its consolidated financial condition, results of operations, or cash flows as a result of efforts to comply with, or liabilities pertaining to, legal judgments.

Two In the opinion of Titan’s subsidiaries aremanagement, the Company is not currently involved in litigation concerning environmental laws and regulations.

In October 2010, the United States of America, on behalf of the Environmental Protection Agency (EPA), filed a complaint against Dico, Inc. (Dico) and Titan Tire Corporation (Titan Tire)any legal proceedings which, individually or in the U.S. District Court for the Southern Districtaggregate, could have a material effect on its financial position, results of Iowa, wherein the EPA sought civil penalties, punitive damages, and response costs against Dico and Titan Tire pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA).operations, or cash flows.

In June 2015, Titan Tire and Dico, Inc. appealed the U.S. District Court’s order granting the EPA’s motion for summary judgment that found Dico and Titan Tire liable for civil penalties and response costs for violating CERCLA and Dico liable for civil penalties and punitive damages for violating an EPA Administrative Order.



TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

In December 2015, the United States Court of Appeals for the Eighth Circuit reversed the District Court’s summary judgment order with respect to “arranger” liability for Titan Tire and Dico under CERCLA and the imposition of punitive damages against Dico for violating the EPA Administrative Order, but affirmed the summary judgment order imposing civil penalties in the amount of $1.62 million against Dico for violating the EPA Administrative Order. The case was remanded to the District Court for a new trial on the remaining issues.

The trial was held in April 2017. On September 5, 2017, the District Court issued an order: (a) concluding Titan Tire and Dico arranged for the disposal of a hazardous substance in violation of 42 U.S.C. § 9607(a); (b) holding Titan Tire and Dico jointly and severally liable for $5.45 million in response costs previously incurred and reported by the United States relating to the alleged violation, including enforcement costs and attorney’s fees; and (c) awarding a declaratory judgment holding Titan Tire and Dico jointly and severally liable for all additional response costs previously incurred but not yet reported or to be incurred in the future, including enforcement costs and attorney’s fees. The District Court also held Dico liable for $5.45 million in punitive damages under 42 U.S.C. § 9607(c)(3) for violating a unilateral administrative order. The punitive damages award does not apply to Titan Tire. The Company accrued a contingent liability of $6.5 million, representing $5.45 million in costs incurred by the United States and $1.05 million of additional response costs, for this order in the quarter ended September 30, 2017. Titan Tire and Dico will appeal to the United States Court of Appeals for the Eighth Circuit.


18.17. SEGMENT INFORMATION

The Company has aggregated its operating units into reportable segments based on its three customer markets: agricultural, earthmoving/construction, and consumer. Each reportable segment includes wheels, tires, wheel/tire assemblies, and undercarriage systems and components. These segments are based on the information used by the chief executive officerChief Executive Officer to make certain operating decisions, allocate portions of capital expenditures, and assess segment performance. Segment external sales, expenses, and income from operations are determined based on the results of operations for the operating units of the Company's manufacturing facilities. Expenses and income from operations are allocated to appropriate segments based on the sales of operating units of manufacturing facilities. Segment assets are generally determined on the basis of the tangible assets located at such operating units’ manufacturing facilities and the intangible assets associated with the acquisitions of such operating units. However, certain operating units’ property, plant and equipment balances are carried at the corporate level. Titan is organized primarily on the basis of products being included in three market segments, with each reportable segment including wheels, tires, wheel/tire assemblies, and undercarriage systems and components.


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)


The table below presents information about certain operating results, separated by market segments, for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 (amounts in thousands):

Three months ended Nine months ended

September 30, September 30,
 2017 2016 2017 2016
Net sales    
 
Agricultural$170,895
 $138,568
 $524,335
 $438,108
Earthmoving/construction156,442
 128,917
 443,030
 401,649
Consumer43,651
 38,710
 125,523
 118,446
 $370,988
 $306,195
 $1,092,888
 $958,203
Gross profit 
  
    
Agricultural$18,930
 $18,592
 $63,542
 $57,684
Earthmoving/construction14,534
 11,553
 41,170
 36,354
Consumer6,201
 4,775
 18,244
 12,897
 $39,665
 $34,920
 $122,956
 $106,935
Income (loss) from operations 
  
    
Agricultural$10,056
 $9,891
 $36,721
 $32,718
Earthmoving/construction2,985
 807
 5,853
 4,060
Consumer3,060
 1,331
 8,001
 2,072
Corporate & Unallocated(21,242) (18,339) (58,819) (54,105)
      Loss from operations(5,141) (6,310) (8,244) (15,255)
        
Interest expense(7,537) (8,714) (22,578) (25,208)
Foreign exchange gain815
 398
 48
 7,403
Other income, net3,041
 3,578
 8,398
 10,532
      Loss before income taxes$(8,822) $(11,048) $(22,376) $(22,528)
16


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Three months endedSix months ended
June 30,June 30,
 2022202120222021
Net sales  
Agricultural$318,585 $231,504 $628,184 $440,263 
Earthmoving/construction210,370 176,715 411,629 341,522 
Consumer43,940 30,420 89,079 60,372 
 $572,895 $438,639 $1,128,892 $842,157 
Gross profit  
Agricultural$61,921 $35,291 $109,845 $65,080 
Earthmoving/construction36,317 22,328 67,692 42,070 
Consumer11,415 3,851 18,845 7,585 
$109,653 $61,470 $196,382 $114,735 
Income from operations  
Agricultural$44,884 $20,789 $75,001 $36,072 
Earthmoving/construction22,276 7,462 38,116 13,037 
Consumer9,238 1,881 14,120 3,548 
Corporate & Unallocated(6,697)(6,413)(12,828)(14,707)
      Income from operations69,701 23,719 114,409 37,950 
Interest expense(7,707)(8,598)(15,614)(16,121)
Loss on senior note repurchase— (16,020)— (16,020)
Foreign exchange gain (loss)2,234 (768)7,551 8,709 
Other income23,694 1,232 14,835 864 
      Income (loss) before income taxes$87,922 $(435)$121,181 $15,382 
Assets by segment were as follows as of the dates set forth below (amounts in thousands):
June 30,
2022		December 31,
2021
Total assets  
Agricultural$578,913 $517,528 
Earthmoving/construction523,883 502,373 
Consumer142,829 133,906 
Corporate & Unallocated43,559 28,878 
 $1,289,184 $1,182,685 
 September 30,
2017		 December 31,
2016
Total assets 
  
Agricultural$482,958
 $439,371
Earthmoving/construction533,112
 443,879
Consumer141,496
 140,293
Corporate & Unallocated172,344
 242,353
 $1,329,910
 $1,265,896


17

19. FAIR VALUE MEASUREMENTS
Accounting standards for fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.  These tiers are defined as:
Level 1 – Quoted prices in active markets for identical instruments.
Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3 – Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Assets and liabilities measured at fair value on a recurring basis consisted of the following as of the dates set forth below (amounts in thousands):
 September 30, 2017 December 31, 2016
 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Contractual obligation investments$11,494

$11,494

$—

$—
 $9,668
 $9,668
 $—
 $—
Derivative financial instruments asset566
 —
 566
 —
 988
 —
 988
 —
Preferred stock145
 —
 —
 145
 181
 —
 —
 181
Total$12,205
 $11,494
 $566
 $145
 $10,837
 $9,668
 $988
 $181

The following table presents the changes, during the periods presented, in Titan's Level 3 investments that are measured at fair value on a recurring basis (amounts in thousands):
 Preferred stock
Balance at December 31, 2016$181
  Total unrealized losses(36)
Balance as of September 30, 2017$145


The preferred stock was valued based on the book value of the common stock into which it can be converted.


20.18. RELATED PARTY TRANSACTIONS

The Company sells products and pays commissions to companies controlled by persons related to the Chairman of the Board of Directors of the Company, Mr. Maurice Taylor. The related party is Mr. Fred Taylor, who is Mr. Maurice Taylor’s brother. Mr. Fred Taylor passed away on December 13, 2021. The companies with which Mr. Fred Taylor is associated with that do business with Titan include the following: BlackstoneBlacksmith OTR, LLC; F.B.T. Enterprises, Inc.; Green Carbon, Inc.; Silverstone, Inc.; and OTR Wheel Engineering, Inc. Sales of Titan products to these companies were approximately $0.3$1.0 million and $2.3 million for the three and six months ended June 30, 2022, and approximately $0.8 million and $1.3 million for the three and ninesix months ended SeptemberJune 30, 2017, respectively, as compared to $0.22021. Titan had purchases from these companies of approximately $0.3 million and $0.6$0.5 million for the three and ninesix months ended SeptemberJune 30, 2016, respectively.2022, and approximately $0.4 million and $0.9 million for the three and six months ended June 30, 2021. Titan had trade receivables due from these companies of approximately $0.2$0.5 million at SeptemberJune 30, 2017,2022, and approximately $0.1$0.2 million at December 31, 2016.  Titan had product purchases from these companies of approximately $0.2 million and $0.4 million for the three and nine months ended September 30, 2017, respectively, as compared to purchases of approximately $0.1 million and $0.3 million for the three and nine months ended September 30, 2016, respectively.2021.  Sales commissions paidaccrued to the above companies were approximately $0.7$0.4 million and $1.4$0.9 million for both the three and six months ended June 30, 2022 as compared to $0.5 million and $1.0 million paid for the three and six months ended June 30, 2021.

19. ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss consisted of the following (amounts in thousands):

 Currency
Translation
Adjustments		Gain (Loss) on
Derivatives		Unrecognized
Losses and
Prior Service
Cost
 
 
Total
Balance at April 1, 2022$(217,602)$264 $(9,838)$(227,176)
Currency translation adjustments, net(18,765)— — (18,765)
Defined benefit pension plans:
Amortization of unrecognized losses and prior service cost, net of tax of $(162)— — 431 431 
Derivative gain— 275 — 275 
Balance at June 30, 2022$(236,367)$539 $(9,407)$(245,235)

 Currency
Translation
Adjustments		Gain (Loss) on
Derivatives		Unrecognized
Losses and
Prior Service
Cost
 
 
Total
Balance at January 1, 2022$(236,059)$(39)$(10,382)$(246,480)
Currency translation adjustments, net (1)(308)— — (308)
Defined benefit pension plans:
Amortization of unrecognized losses and prior service cost, net of tax of $(344)— — 975 975 
Derivative gain— 578 — 578 
Balance at June 30, 2022$(236,367)$539 $(9,407)$(245,235)

(1) The currency translation adjustments, net includes amounts reclassified into other expense within the Condensed Consolidated Statements of Operations of approximately $10 million for the three and nine months ended September 30, 2017, respectively, as comparedMarch 31, 2022 related to $0.4 million and $1.4 million for the three and nine months ended September 30, 2016, respectively.

The Company sells products to Valuepart and Track Solutions Pty Ltd., which is controlled by relatives of a member of management of a Titan subsidiary. Sales of Titan products to this company were approximately $0.1 million and $0.2 million for the three and nine months ended September 30, 2017, respectively.

In July 2013, the Company entered into a Shareholders’ Agreement between OEP and RDIF to acquire Voltyre-Prom. Mr. Richard M. Cashin Jr., a directorsale of the Company, is the President of OEP, which owns 21.4% of the joint venture.  The Shareholders’ Agreement contains a settlement put option which may require the CompanyAustralian wheel business. Refer to purchase equity interests in the joint venture from OEP and RDIF at a value set by the agreement. See Note 913 for additional information.
18

The Company has a 34.2% equity stake in Wheels India Limited, a company incorporated in India and listed on the National Stock Exchange in India. The Company had trade payables due to Wheels India Limited of approximately $0.1 million at September 30, 2017, and approximately $0.1 million at December 31, 2016.



TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

 Currency
Translation
Adjustments		Gain (Loss) on
Derivatives		Unrecognized
Losses and
Prior Service
Cost
 
 
Total
Balance at April 1, 2021$(220,816)$(373)$(21,817)$(243,006)
Currency translation adjustments, net14,287 — — 14,287 
Defined benefit pension plans:
Amortization of unrecognized losses and prior service cost, net of tax of $3— — 692 692 
Derivative gain— 225 — 225 
Balance at June 30, 2021$(206,529)$(148)$(21,125)$(227,802)
The Company has a 19.5% equity stake in Titan-Yuxiang Wheel (Liuzhou) Co., Ltd, a company incorporated in China. The Company had trade payables due to Titan-Yuxiang Wheel (Liuzhou) Co., Ltd of approximately $1.7 million at September 30, 2017, and approximately $0.9 million at December 31, 2016.
The Company has a 49.0% equity stake in Central Iowa Training and Enrichment Center, LLC, an entity that owns a commercial building located in Boone, IA.
21. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss consisted of the following (amounts in thousands):
 
Currency
Translation
Adjustments
 
Unrecognized
Losses and
Prior Service
Cost
 
 
 
Total
Balance at July 1, 2017$(144,200) $(23,928) $(168,128)
Currency translation adjustments13,379
 —
 13,379
Defined benefit pension plan entries: 
  
  
  Amortization of unrecognized losses and prior service cost,
  net of tax of $166
—
 180
 180
Balance at September 30, 2017$(130,821) $(23,748) $(154,569)
 
Currency
Translation
Adjustments
 
Unrecognized
Losses and
Prior Service
Cost
 
 
 
Total
Balance at January 1, 2017$(162,628) $(25,650) $(188,278)
Currency translation adjustments31,807
 —
 31,807
Defined benefit pension plan entries: 
  
  
  Amortization of unrecognized losses and prior service cost,
  net of tax of $55
—
 1,902
 1,902
Balance at September 30, 2017$(130,821) $(23,748) $(154,569)


 Currency
Translation
Adjustments		Gain (Loss) on
Derivatives		Unrecognized
Losses and
Prior Service
Cost
 
 
Total
Balance at January 1, 2021$(194,151)$(413)$(22,690)$(217,254)
Currency translation adjustments, net(12,378)— — (12,378)
Defined benefit pension plans:
Amortization of unrecognized losses and prior service cost, net of tax of $(41)— — 1,565 1,565 
Derivative gain— 265 — 265 
Balance at June 30, 2021$(206,529)$(148)$(21,125)$(227,802)
22. OTHER EVENTS
19

On September 21, 2017, a fire occurred at a facility of Titan Tire Reclamation Corporation (TTRC), a subsidiary of the Company, located in Fort McMurray, AB.  The TTRC facility contains six thermal vacuum recovery (TVR) units, which are large, contained capsules used
TITAN INTERNATIONAL, INC.
Notes to recycle large mining tires.  The fire started within one of the TVR units and was contained to a building housing three of the TVR units. The TTRC staff is working with affected customers to minimize the impact to their respective businesses. Three other TVR units located in another building at the TTRC facility were not affected. Titan carries both casualty and property insurance for its facilities and equipment, as well as business interruption insurance, and is reviewing the extent and scope of this coverage with its insurance carriers. The Company has insufficient information to determine if a contingent loss has occurred; therefore, no accrual was recorded.Condensed Consolidated Financial Statements

(Unaudited)

23.20. SUBSIDIARY GUARANTOR FINANCIAL INFORMATION

TheOur senior secured notes due 2028 are guaranteed by the following wholly-owned subsidiaries of the Company: Titan Tire Corporation, Titan Tire Corporation of Bryan, Titan Tire Corporation of Freeport, and Titan Wheel Corporation of Illinois. The note guarantees are the full and unconditional, joint and several obligations of the guarantors. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. See the indenture incorporated by reference to the Company's most recent Form 10-K for additional information. The following condensed consolidating financial statements are presented using the equity method of accounting. Certain sales and marketing expenses recorded by non-guarantor subsidiaries have not been allocated to the guarantor subsidiaries.


(Amounts in thousands)Condensed Consolidating Statements of Operations
For the Three Months Ended June 30, 2022
 Titan
 Intl., Inc. (Parent)		Guarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net sales$— $79,744 $572,895 $(79,744)$572,895 
Cost of sales— 31,097 511,889 (79,744)463,242 
Gross profit— 48,647 61,006 — 109,653 
Selling, general and administrative expenses2,490 13,053 19,126 — 34,669 
Research and development expenses239 829 1,170 — 2,238 
Royalty expense— 1,560 1,485 — 3,045 
(Loss) income from operations(2,729)33,205 39,225 — 69,701 
Interest expense(7,540)(3)(164)— (7,707)
Intercompany interest income (expense)371 1,080 (1,451)— — 
Foreign exchange (loss) gain— (365)2,599 — 2,234 
Other income12 533 23,149 — 23,694 
(Loss) income before income taxes(9,886)34,450 63,358 — 87,922 
Provision for income taxes1,118 162 17,721 — 19,001 
Equity in earnings (loss) of subsidiaries81,038 — 20,792 (101,830)— 
Net income (loss)70,034 34,288 66,429 (101,830)68,921 
Net income attributable to noncontrolling interests— — 1,750 — 1,750 
Net income (loss) attributable to Titan$70,034 $34,288 $64,679 $(101,830)$67,171 



20


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(Amounts in thousands) Condensed Consolidating Statements of Operations
For the Six Months Ended June 30, 2022
 Titan
 Intl., Inc. (Parent)		Guarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net sales$— $165,543 $1,128,892 $(165,543)$1,128,892 
Cost of sales— 77,913 1,020,140 (165,543)932,510 
Gross profit— 87,630 108,752 — 196,382 
Selling, general and administrative expenses4,811 25,525 40,560 — 70,896 
Research and development expenses509 1,669 2,980 — 5,158 
Royalty expense230 2,865 2,824 — 5,919 
(Loss) income from operations(5,550)57,571 62,388 — 114,409 
Interest expense(15,126)(8)(480)— (15,614)
Intercompany interest income (expense)734 1,713 (2,447)— — 
Foreign exchange gain— 290 7,261 — 7,551 
Other income12 1,040 13,783 — 14,835 
(Loss) income before income taxes(19,930)60,606 80,505 — 121,181 
Provision for income taxes2,360 296 25,026 — 27,682 
Equity in earnings (loss) of subsidiaries117,017 — 38,643 (155,660)— 
Net income (loss)94,727 60,310 94,122 (155,660)93,499 
Net income attributable to noncontrolling interests— — 2,406 — 2,406 
Net income (loss) attributable to Titan$94,727 $60,310 $91,716 $(155,660)$91,093 



(Amounts in thousands)Condensed Consolidating Statements of Comprehensive Income (Loss)
For the Three Months Ended June 30, 2022
 Titan
 Intl., Inc. (Parent)		Guarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net income (loss)$70,034 $34,288 $66,429 $(101,830)$68,921 
Derivative gain— — 275 — 275 
Currency translation adjustment— — (11,536)— (11,536)
Pension liability adjustments, net of tax— — 431 — 431 
Comprehensive income (loss)70,034 34,288 55,599 (101,830)58,091 
Net comprehensive income attributable to noncontrolling interests— — 8,979 — 8,979 
Comprehensive income (loss) attributable to Titan$70,034 $34,288 $46,620 $(101,830)$49,112 



21
(Amounts in thousands)
Condensed Consolidating Statements of Operations
For the Three Months Ended September 30, 2017
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $138,557
 $232,431
 $—
 $370,988
Cost of sales99
 122,129
 209,095
 —
 331,323
Gross profit (loss)(99) 16,428
 23,336
 —
 39,665
Selling, general and administrative expenses2,100
 12,594
 25,059
 —
 39,753
Research and development expenses—
 972
 1,485
 —
 2,457
Royalty expense217
 1,435
 944
 —
 2,596
Income (loss) from operations(2,416) 1,427
 (4,152) —
 (5,141)
Interest expense(7,231) —
 (306) —
 (7,537)
Intercompany interest income (expense)606
 983
 (1,589) —
 —
Foreign exchange gain (loss)(2) 71
 746
 —
 815
Other income (expense)968
 (33) 2,106
 —
 3,041
Income (loss) before income taxes(8,075) 2,448
 (3,195) —
 (8,822)
Provision for income taxes889
 994
 513
 —
 2,396
Equity in earnings of subsidiaries(2,252) —
 (2,306) 4,558
 —
Net income (loss)(11,216) 1,454
 (6,014) 4,558
 (11,218)
Net income noncontrolling interests—
 —
 800
 —
 800
Net income (loss) attributable to Titan$(11,216) $1,454
 $(6,814) $4,558
 $(12,018)



(Amounts in thousands)
Condensed Consolidating Statements of Operations
For the Three Months Ended September 30, 2016
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $114,743
 $191,452
 $—
 $306,195
Cost of sales87
 99,573
 171,615
 —
 271,275
Gross profit (loss)(87) 15,170
 19,837
 —
 34,920
Selling, general and administrative expenses2,556
 15,407
 18,385
 —
 36,348
Research and development expenses—
 776
 1,821
 —
 2,597
Royalty expense125
 1,296
 864
 —
 2,285
Loss from operations(2,768) (2,309) (1,233) —
 (6,310)
Interest expense(8,288) —
 (426) —
 (8,714)
Intercompany interest income (expense)470
 —
 (470) —
 —
Foreign exchange gain—
 —
 398
 


 398
Other income1,256
 62
 2,260
 —
 3,578
Income (loss) before income taxes(9,330) (2,247) 529
 —
 (11,048)
Provision (benefit) for income taxes(1,935) (1,448) 1,309
 —
 (2,074)
Equity in earnings of subsidiaries(3,523) —
 (4,037) 7,560
 —
Net income (loss)(10,918) (799) (4,817) 7,560
 (8,974)
Net loss noncontrolling interests—
 —
 (966) —
 (966)
Net income (loss) attributable to Titan$(10,918) $(799) $(3,851) $7,560
 $(8,008)


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(Amounts in thousands)Condensed Consolidating Statements of Comprehensive (Loss) Income
For the Six Months Ended June 30, 2022
 Titan
 Intl., Inc. (Parent)		Guarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net income (loss)$94,727 $60,310 $94,122 $(155,660)$93,499 
Derivative gain— — 578 — 578 
Currency translation adjustment— — 5,739 — 5,739 
Pension liability adjustments, net of tax— — 975 — 975 
Comprehensive income (loss)94,727 60,310 101,414 (155,660)100,791 
Net comprehensive income attributable to noncontrolling interests— — 8,453 — 8,453 
Comprehensive income (loss) attributable to Titan$94,727 $60,310 $92,961 $(155,660)$92,338 
(Amounts in thousands)
Condensed Consolidating Statements of Operations
For the Nine Months Ended September 30, 2017
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $429,636
 $663,252
 $—
 $1,092,888
Cost of sales256
 378,875
 590,801
 —
 969,932
Gross profit (loss)(256) 50,761
 72,451
 —
 122,956
Selling, general and administrative expenses10,038
 43,906
 61,609
 —
 115,553
Research and development expenses—
 2,825
 5,083
 —
 7,908
Royalty expense883
 4,140
 2,716
 —
 7,739
Income (loss) from operations(11,177) (110) 3,043
 —
 (8,244)
Interest expense(21,909) —
 (669) —
 (22,578)
Intercompany interest income (expense)1,775
 2,930
 (4,705) —
 —
Foreign exchange gain (loss)(2) 30
 20
 —
 48
Other income (expense)3,179
 (203) 5,422
 —
 8,398
Income (loss) before income taxes(28,134) 2,647
 3,111
 —
 (22,376)
Provision (benefit) for income taxes(620) 2,489
 4,095
 —
 5,964
Equity in earnings of subsidiaries2,120
 —
 (10,715) 8,595
 —
Net income (loss)(25,394) 158
 (11,699) 8,595
 (28,340)
Net income noncontrolling interests—
 —
 1,424
 —
 1,424
Net income (loss) attributable to Titan$(25,394) $158
 $(13,123) $8,595
 $(29,764)



(Amounts in thousands)
Condensed Consolidating Statements of Operations
For the Nine Months Ended September 30, 2016
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $384,917
 $573,286
 $—
 $958,203
Cost of sales659
 334,044
 516,565
 —
 851,268
Gross profit (loss)(659) 50,873
 56,721
 —
 106,935
Selling, general and administrative expenses7,907
 47,879
 51,926
 —
 107,712
Research and development expenses—
 2,221
 5,569
 —
 7,790
Royalty expense542
 3,573
 2,573
 —
 6,688
Loss from operations(9,108) (2,800) (3,347) —
 (15,255)
Interest expense(24,382) —
 (826) —
 (25,208)
Intercompany interest income (expense)1,122
 —
 (1,122) —
 —
Foreign exchange gain—
 202
 7,201
 


 7,403
Other income1,864
 220
 8,448
 —
 10,532
Income (loss) before income taxes(30,504) (2,378) 10,354
 —
 (22,528)
Provision (benefit) for income taxes(2,205) 417
 4,366
 —
 2,578
Equity in earnings of subsidiaries6,197
 —
 (6,243) 46
 —
Net income (loss)(22,102) (2,795) (255) 46
 (25,106)
Net loss noncontrolling interests—
 —
 (1,099) —
 (1,099)
Net income (loss) attributable to Titan$(22,102) $(2,795) $844
 $46
 $(24,007)


(Amounts in thousands)Condensed Consolidating Balance Sheets
June 30, 2022
 Titan
 Intl., Inc. (Parent)		Guarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Assets     
Cash and cash equivalents$22,539 $4 $94,160 $— $116,703 
Accounts receivable, net— 40 299,030 — 299,070 
Inventories— 74,981 347,783 — 422,764 
Prepaid and other current assets988 16,196 73,660 — 90,844 
Total current assets23,527 91,221 814,633 — 929,381 
Property, plant and equipment, net592 80,042 216,198 — 296,832 
Investment in subsidiaries826,594 — 104,455 (931,049)— 
Other assets1,148 13,910 47,913 — 62,971 
Total assets$851,861 $185,173 $1,183,199 $(931,049)$1,289,184 
Liabilities and Equity     
Short-term debt$— $— $44,059 $— $44,059 
Accounts payable1,521 53,946 229,335 — 284,802 
Other current liabilities37,121 28,899 102,378 — 168,398 
Total current liabilities38,642 82,845 375,772 — 497,259 
Long-term debt417,954 — 23,167 — 441,121 
Other long-term liabilities192 4,978 39,964 — 45,134 
Intercompany accounts54,759 (522,829)468,070 — — 
Titan shareholders' equity340,314 620,179 269,901 (931,049)299,345 
Noncontrolling interests— — 6,325 — 6,325 
Total liabilities and equity$851,861 $185,173 $1,183,199 $(931,049)$1,289,184 



22


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(Amounts in thousands)Condensed Consolidating Statements of Cash Flows
For the Six Months Ended June 30, 2022
 Titan
 Intl., Inc. (Parent)		Guarantor SubsidiariesNon-Guarantor SubsidiariesConsolidated
Net cash provided by (used for) operating activities$47,069 $6,585 $(4,736)$48,918 
Cash flows from investing activities:    
Capital expenditures— (6,578)(12,886)(19,464)
Proceeds from the sale of the Australian wheel business— — 9,293 9,293 
Proceeds from sale of fixed assets— — 297 297 
Net cash used for investing activities— (6,578)(3,296)(9,874)
Cash flows from financing activities:    
Proceeds from borrowings65,430 — 23,585 89,015 
Repurchase of common stock(25,000)— — (25,000)
Payment on debt(72,000)— (14,004)(86,004)
Other financing activities— (20)(608)(628)
Net cash (used for) provided by financing activities(31,570)(20)8,973 (22,617)
Effect of exchange rate change on cash— — 2,168 2,168 
Net increase (decrease) in cash and cash equivalents15,499 (13)3,109 18,595 
Cash and cash equivalents, beginning of period7,040 17 91,051 98,108 
Cash and cash equivalents, end of period$22,539 $4 $94,160 $116,703 
(Amounts in thousands)
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the Three Months Ended September 30, 2017
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net income (loss)$(11,216) $1,454
 $(6,014) $4,558
 $(11,218)
Currency translation adjustment14,015
 —
 14,015
 (14,015) 14,015
Pension liability adjustments, net of tax180
 625
 (445) (180) 180
Comprehensive income (loss)2,979
 2,079
 7,556
 (9,637) 2,977
Net comprehensive income attributable to redeemable and noncontrolling interests—
 —
 1,436
 —
 1,436
Comprehensive income (loss) attributable to Titan$2,979
 $2,079
 $6,120
 $(9,637) $1,541


(Amounts in thousands)
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the Three Months Ended September 30, 2016
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net income (loss)$(10,918) $(799) $(4,817) $7,560
 $(8,974)
Currency translation adjustment(386) —
 (386) 386
 (386)
Pension liability adjustments, net of tax465
 734
 (269) (465) 465
Comprehensive income (loss)(10,839) (65) (5,472) 7,481
 (8,895)
Net comprehensive loss attributable to redeemable and noncontrolling interests—
 —
 (679) —
 (679)
Comprehensive income (loss) attributable to Titan$(10,839) $(65) $(4,793) $7,481
 $(8,216)



(Amounts in thousands)
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the Nine Months Ended September 30, 2017
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net income (loss)$(25,394) $158
 $(11,699) $8,595
 $(28,340)
Currency translation adjustment33,040
 —
 33,040
 (33,040) 33,040
Pension liability adjustments, net of tax1,902
 1,875
 27
 (1,902) 1,902
Comprehensive income (loss)9,548
 2,033
 21,368
 (26,347) 6,602
Net comprehensive income attributable to redeemable and noncontrolling interests—
 —
 2,657
 —
 2,657
Comprehensive income (loss) attributable to Titan$9,548
 $2,033
 $18,711
 $(26,347) $3,945
          



TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(Amounts in thousands)
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the Nine Months Ended September 30, 2016
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net income (loss)$(22,102) $(2,795) $(255) $46
 $(25,106)
Currency translation adjustment21,545
 —
 (21,545) 21,545
 21,545
Pension liability adjustments, net of tax1,200
 2,202
 (1,002) (1,200) 1,200
Comprehensive income (loss)643
 (593) (22,802) 20,391
 (2,361)
Net comprehensive income attributable to redeemable and noncontrolling interests—
 —
 5,427
 —
 5,427
Comprehensive income (loss) attributable to Titan$643
 $(593) $(28,229) $20,391
 $(7,788)
          



21. SUBSEQUENT EVENTS
(Amounts in thousands)
Condensed Consolidating Balance Sheets
September 30, 2017
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Assets         
Cash and cash equivalents$77,903
 $10
 $77,762
 $—
 $155,675
Accounts receivable, net—
 65,141
 171,075
 —
 236,216
Inventories—
 90,857
 240,521
 —
 331,378
Prepaid and other current assets6,652
 21,131
 34,849
 —
 62,632
Total current assets84,555
 177,139
 524,207
 —
 785,901
Property, plant and equipment, net2,771
 112,878
 324,429
 —
 440,078
Investment in subsidiaries772,243
 —
 75,145
 (847,388) —
Other assets19,155
 969
 83,807
 —
 103,931
Total assets$878,724
 $290,986
 $1,007,588
 $(847,388) $1,329,910
Liabilities and Equity 
  
  
  
  
Short-term debt$—
 $—
 $36,174
 $—
 $36,174
Accounts payable(973) 21,547
 163,756
 —
 184,330
Other current liabilities33,431
 31,579
 68,621
 —
 133,631
Total current liabilities32,458
 53,126
 268,551
 —
 354,135
Long-term debt396,594
 —
 14,636
 —
 411,230
Other long-term liabilities23,524
 16,516
 62,378
 —
 102,418
Intercompany accounts61,666
 (278,187) 216,521
 —
 —
Redeemable noncontrolling interest—
 —
 111,016
 —
 111,016
Titan shareholders' equity364,482
 499,531
 339,306
 (847,388) 355,931
Noncontrolling interests—
 —
 (4,820) —
 (4,820)
Total liabilities and equity$878,724
 $290,986
 $1,007,588
 $(847,388) $1,329,910


TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(Amounts in thousands)
Condensed Consolidating Balance Sheets
December 31, 2016
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Assets         
Cash and cash equivalents$86,190
 $9
 $61,628
 $—
 $147,827
Certificates of deposit50,000
 —
 —
 —
 50,000
Accounts receivable, net—
 43,485
 135,899
 —
 179,384
Inventories—
 76,823
 195,413
 —
 272,236
Prepaid and other current assets11,965
 21,901
 45,868
 —
 79,734
Total current assets148,155
 142,218
 438,808
 —
 729,181
Property, plant and equipment, net4,898
 124,049
 308,254
 —
 437,201
Investment in subsidiaries742,679
 —
 87,385
 (830,064) —
Other assets23,627
 1,118
 74,769
 —
 99,514
Total assets$919,359
 $267,385
 $909,216
 $(830,064) $1,265,896
Liabilities and Equity 
  
  
  
  
Short-term debt$60,148
 $—
 $37,264
 $—
 $97,412
Accounts payable4,187
 14,398
 129,670
 —
 148,255
Other current liabilities34,140
 34,475
 51,822
 —
 120,437
Total current liabilities98,475
 48,873
 218,756
 —
 366,104
Long-term debt395,852
 —
 12,908
 —
 408,760
Other long-term liabilities27,636
 18,473
 47,235
 —
 93,344
Intercompany accounts94,977
 (300,823) 205,846
 —
 —
Redeemable noncontrolling interest—
 —
 104,809
 —
 104,809
Titan shareholders' equity302,419
 500,862
 323,600
 (830,064) 296,817
Noncontrolling interests—
 —
 (3,938) —
 (3,938)
Total liabilities and equity$919,359
 $267,385
 $909,216
 $(830,064) $1,265,896


The Company has evaluated subsequent events through the filing of this Form 10-Q and determined that there have been no subsequent events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.



23

TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(Amounts in thousands)
Condensed Consolidating Statements of Cash Flows
For the Nine Months Ended September 30, 2017
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidated
Net cash provided by (used for) operating activities$(53,211) $4,107
 $33,892
 $(15,212)
Cash flows from investing activities: 
  
  
  
Capital expenditures(815) (4,472) (18,293) (23,580)
Certificates of deposit50,000
 —
 —
 50,000
Other, net—
 366
 927
 1,293
Net cash provided by (used for) investing activities49,185
 (4,106) (17,366) 27,713
Cash flows from financing activities: 
  
  
  
Proceeds from borrowings—
 —
 33,540
 33,540
Payment on debt(3,393) —
 (37,610) (41,003)
Dividends paid(868) —
 —
 (868)
Net cash used for financing activities(4,261) —
 (4,070) (8,331)
Effect of exchange rate change on cash—
 —
 3,678
 3,678
Net increase (decrease) in cash and cash equivalents(8,287) 1
 16,134
 7,848
Cash and cash equivalents, beginning of period86,190
 9
 61,628
 147,827
Cash and cash equivalents, end of period$77,903
 $10
 $77,762
 $155,675

(Amounts in thousands)
Condensed Consolidating Statements of Cash Flows
For the Nine Months Ended September 30, 2016
 
Titan
 Intl., Inc. (Parent)
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidated
Net cash provided by operating activities$4,154
 $5,553
 $44,277
 $53,984
Cash flows from investing activities: 
  
  
  
Capital expenditures(657) (5,616) (24,573) (30,846)
Other, net—
 73
 1,614
 1,687
Net cash used for investing activities(657) (5,543) (22,959) (29,159)
Cash flows from financing activities: 
  
  
  
Proceeds from borrowings—
 —
 2,390
 2,390
Payment on debt—
 —
 (14,042) (14,042)
Dividends paid(810) —
 —
 (810)
Net cash used for financing activities(810)
—

(11,652)
(12,462)
Effect of exchange rate change on cash—
 —
 2,958
 2,958
Net increase in cash and cash equivalents2,687
 10
 12,624
 15,321
Cash and cash equivalents, beginning of period142,401
 4
 57,783
 200,188
Cash and cash equivalents, end of period$145,088
 $14
 $70,407
 $215,509


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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 whichthat 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 Titan's annual reportthe Company's Annual Report on Form 10-K for the year ended December 31, 2016,2021, filed with the SecuritiesSEC on March 3, 2022 (the 2021 Form 10-K).

COVID-19 Pandemic
The COVID-19 pandemic impact on the Company was less during the first two quarters of 2022 than in the comparable period in 2021. However, certain geographies (particularly China and Exchange CommissionEurope) continue to remain impacted by the COVID-19 pandemic due to new and emerging variants of COVID-19 resulting in employee absenteeism and minor disruptions to operations. Further, global supply chains are experiencing constraints partially as a result of the COVID-19 pandemic and other global impacts, including availability and pricing of raw materials, transportation and labor. The current constraints on March 15, 2017.the global supply chains add complexity to growth expectations in the near term.

Due to the above circumstances as described generally in this Form 10-Q, the Company’s results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected in the future. Management cannot predict the full impact of the COVID-19 pandemic on the economic conditions generally, on the Company’s customers and, ultimately, on the Company. The nature, extent and duration of the effects of the COVID-19 pandemic on the Company are uncertain and will depend on future developments, and such effects could exist for an extended period of time even after the pandemic might end.

Russia-Ukraine Military Conflict
In February 2022, in response to the military conflict between Russia and Ukraine, the United States, other North Atlantic Treaty Organization member states, as well as non-member states, have announced targeted economic sanctions on Russia, certain Russian citizens and enterprises. The continuation of the conflict has triggered additional economic and other sanctions enacted by the United States and other countries throughout the world. The scope of potential additional sanctions is unknown.

The Company maintains operations in Russia and any such economic sanctions may result in an adverse effect on its Russian operations. The Company currently owns 64.3% of Voltyre-Prom, a producer of agricultural and industrial tires in Volgograd, Russia, which represents approximately 9% and 7% of consolidated assets of Titan as of June 30, 2022 and December 31, 2021, respectively. The asset increase in the Russian entity was due to currency translation. The Russian operations represents approximately 6% of consolidated global sales for each of the three and six months ended June 30, 2022 and June 30, 2021, respectively. The impact of the military conflict between Russia and Ukraine has not had a significant impact on global operations.

As the military conflict in Ukraine exacerbates the global food crisis, Titan remains committed to the role it plays in the continuity of food supply and keeping essential goods moving, including its tire operation in Volgograd, Russia. Tires produced in the Voltyre-Prom facility are primarily sold into Commonwealth Independent States (CIS) countries, located in Europe and Asia. This facility is operating at lower levels in full compliance with all international sanctions on Russia. Titan has stopped any additional investments into this joint project and emphasizes that neither this operation, nor any other Titan operations, sells any products to the Russian military or other government agencies.

The potential impact of bans, sanction programs, and boycotts on our business is uncertain at the current time due to the fluid nature of the military conflict as it is unfolding. The potential impacts include supply chain and logistics disruptions, financial impacts including disruptions to the execution of banking transactions with certain Russian financial institutions, volatility in foreign exchange rates and interest rates, inflationary pressures on raw materials and energy, loss of operational control and/or assets, heightened cybersecurity threats and other restrictions. The Company continues to monitor the potential impacts on the business and the ancillary impacts that the military conflict could have on other global operations.



24


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Brazilian Tax Credits
In June 2021, the Company’s Brazilian subsidiaries received a notice that they had prevailed on an existing legal claim in regards to certain non-income (indirect) taxes that had been previously charged and paid. The matter specifically relates to companies’ rights to exclude the state tax on goods circulation (a value-added-tax or VAT equivalent, known in Brazil as “ICMS”) from the calculation of certain additional indirect taxes (specifically the program of social integration (“PIS”) and contribution for financing of social security (“COFINS”)) levied by the Brazilian States on the sale of goods.

During the second quarter of 2022, the Company submitted the related supporting documentation and received the approval from the Brazilian tax authorities for one of its Brazilian subsidiaries. For the three and six months ended June 30, 2022, the Company recorded $22.5 million within other income in the condensed consolidated statements of operations. The Company also recorded $7.8 million of income tax expense associated with the recognition of these indirect tax credits. The Company expects to be able to apply the tax credits received to settle the income tax liability that was incurred as a result of the credit. The Company also expects to utilize the majority of the credit against future PIS/COFINS and income tax obligations over the next twelve months.

During the third quarter of 2022, the Company plans to submit the related supporting documentation to the Brazilian tax authorities for its other Brazilian subsidiary. After review by the Brazilian tax authorities, the Company could receive approximately $10 million of additional indirect tax credits to be applied as credits against future PIS/COFINS and income tax obligations. The Company plans to recognize the full benefit of the indirect tax credits, contingent upon successful approval and verification from the Brazilian tax authorities.

FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements, which are covered by the "Safe Harborsafe harbor for Forward-Looking Statements""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: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;
•The Company’s ability to continue to control costs and maintain quality;
Ability•The Company's ability to meet conditions of loan agreements;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.
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, but not limited to, the factors discussed in Part I, Item 1A, Risk Factors, of the Company's most recent annual2021 Form 10-K and Part II, Item 1A, Risk Factors, of this quarterly report on Form 10-K,10-Q, certain of which are beyond the Company’s control.

Actual results could differ materially from these forward-looking statements as a result of certain factors, including:
•The effect of the COVID-19 pandemic on our operations and financial performance;
•The effect of the military conflict between Russia and Ukraine on our Russian and global operations;
•The effect of a recession on the Company and its customers and suppliers;
25


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
•Changes in the Company’s end-user markets into which the Company sells its products as a result of world economic or regulatory influences or otherwise;
•Changes in the marketplace, including new products and pricing changes by the Company’s competitors;
Ability•The Company's ability to maintain satisfactory labor relations;
•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;
•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;


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

•Unfavorable product liability and warranty claims;
•Actions of domestic and foreign governments;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:expenses;
•Results of investments;
•The effects of previously announcedpotential 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;
•Risks relating to our manufacturing facilities, including that any of our material facilities may become inoperable,inoperable; and
•Risks related to financial reporting, internal controls, tax accounting, and information systems.
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 included in this report 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. and, together with its subsidiaries, are leading manufacturersis a global manufacturer of off-highway wheels, tires, wheel and tire assemblies and undercarriage systems and components for off-highway vehicles usedproducts. As a leading manufacturer in the agricultural, earthmoving/construction, and consumer segments.off-highway industry, Titan manufactures both wheels and tires for the majority of these market applications, allowing the Company to provide the value-added service of delivering complete wheel and tire assemblies.  The Company offersproduces a broad range of products that are manufactured in relatively short production runs to meet the specifications of original equipment manufacturers (OEMs) and/orand aftermarket customers in the requirements of aftermarket customers.agricultural, earthmoving/construction, and consumer markets. Titan manufactures and sells certain tires under the Goodyear Farm Tire and Titan Tire brands and has complete research and development test facilities to validate tire and wheel designs.

Agricultural Segment: Titan'sTitan’s agricultural rims, wheels, tires, and undercarriage systems 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 ownTitan’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
26


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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. 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 rims, wheels, tires, and undercarriage systems and components for various types of off-the-road (OTR)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 inches to 63 inches and in weight from 125 pounds to 7,000 pounds. The 63-inch diameter wheel is the largest manufactured in North America for the earthmoving/construction market. Titan’s earthmoving/construction tires range from approximately three feet to approximately 13 feet in outside diameter and in weight from 50 pounds to 12,500 pounds. The Company also offers the added value of wheel and tire assembly for certain applications in the earthmoving/construction segment.

Consumer Segment: Titan manufactures bias truck tires in Latin America and light truck tires in Russia. Titan also offers select products for ATVs, turf, and golf cart applications. This segment also includes sales that do not readily fall into the Company's other segments.

The Company’s major OEMtop customers include large manufacturers of off-highwayglobal leaders in agricultural and construction equipment such asmanufacturing and include AGCO Corporation, Caterpillar Inc., CNH Global N.V., Deere & Company, Hitachi, Ltd., Kubota Corporation, Liebherr, and Volvo, in addition to many other off-highway equipment manufacturers.  The Company distributes products to OEMs, independent and OEM-affiliated dealers, and through a network of distribution facilities.

MARKET CONDITIONS AND OUTLOOK

AGRICULTURAL MARKET OUTLOOK
Agriculture-related commodity prices continued to remain at historically high levels during the first and second quarters of 2022 and favorable market conditions across the globe are expected to continue the momentum for the remainder of 2022. Improved farmer income, replacement of an aging large equipment fleet and replenishment of lower equipment inventory levels are all factors which are anticipated to support continued strong demand for our products. Many of our customers are forecasting growth, providing further optimism of sustained stability in the market over the next few years, despite current global recession concerns. Many more variables, including weather, volatility in the price of commodities, grain prices, export markets, foreign currency exchange 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 GDP by country and the need for infrastructure developments. The earthmoving/construction markets experienced signs of growth in 2021 as economies emerged from the pandemic and the momentum is expected to continue for the remainder of 2022. The continued momentum for the remainder of 2022 is due to low equipment inventory levels throughout the global construction industry and increased mining capital budgets, which continue to rise. Mineral commodity prices are at relatively high levels that also currently support growth, while global recession concerns could impact demand in various parts of the world.

CONSUMER MARKET OUTLOOK
The consumer market consists of several distinct product lines within different regions. These products include light truck tires, turf equipment, specialty products, including custom mixing of rubber stock, and train brakes. Overall, the markets stabilized during 2021 and remained stable through the first and second quarters of 2022. However, the pace of growth can vary period to period, while there are strong initiatives underway to bolster opportunities in various specialty products including mixing of rubber stock in the United States. The consumer segment is affected by many variables including inflationary impacts, consumer spending, interest rates, government policies, and other macroeconomic drivers.


27


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

RESULTS OF OPERATIONS
The table below provides highlights
Three months endedSix months ended
(amounts in thousands)June 30,June 30,
 20222021% Increase/(Decrease)20222021% Increase
Net sales$572,895 $438,639 30.6 %$1,128,892 $842,157 34.0 %
Gross profit109,653 61,470 78.4 %196,382 114,735 71.2 %
  Gross profit %19.1 %14.0 %17.4 %13.6 %
Selling, general and administrative expenses34,669 32,566 6.5 %70,896 66,594 6.5 %
Research and development expenses2,238 2,528 (11.5)%5,158 5,081 1.5 %
Royalty expense3,045 2,657 14.6 %5,919 5,110 15.8 %
Income from operations69,701 23,719 193.9 %114,409 37,950 201.5 %

Net Sales
Net sales for the three and nine months ended SeptemberJune 30, 2017,2022 were $572.9 million, compared to the same respective periods of 2016 (amounts in thousands, except earnings per share):
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 % Increase (Decrease) 2017 2016 % Increase (Decrease)
Net sales$370,988
 $306,195
 21 % $1,092,888
 $958,203
 14 %
Gross profit39,665
 34,920
 14 % 122,956
 106,935
 15 %
Loss from operations(5,141) (6,310) 19 % (8,244) (15,255) 46 %
Net loss(11,218) (8,974) (25)% (28,340) (25,106) (13)%
Basic earnings per share(0.22) (0.17) (29)% (0.57) (0.60) 5 %

The Company recorded net sales of $371.0 million for the third quarter of 2017, which were 21% higher than third quarter 2016 net sales of $306.2 million, primarily as a result of an increase in sales volume in all segments. Overall sales volume was up 14% with higher volume across all segments and all geographies. Favorable changes in price/mix increased net sales by 5% and favorable currency translations contributed another 2% increase to net sales.

The Company's gross profit was $39.7 million, or 10.7% of net sales, for the third quarter of 2017, compared to $34.9 million, or 11.4% of net sales, in the comparable period of 2016. The decrease in gross profit as a percent of sales was a result of pricing initiatives to selectively grow market share, primarily in the agricultural segment. Loss from operations was $5.1 million for the third quarter of 2017, compared to loss of $6.3 million in the comparable quarter of 2016. Net loss was $11.2 million for the third quarter of 2017, compared to loss of $9.0 million in the comparable quarter of 2016. Basic earnings per share was $(0.22) in the third quarter of 2017, compared to $(0.17) in the comparable quarter of 2016.

The Company recorded net sales of $1,092.9 million for the first nine months of 2017, which were 14% higher than the 2016 comparable period net sales of $958.2 million, primarily as a result of an increase in sales volume. Overall sales volume was up 10% driven by higher volumes in the agricultural and earthmoving/construction segments. Favorable currency translation increased net sales by 3% and a favorable change in price/mix added an additional 1% to net sales.

The Company's gross profit was $123.0 million, or 11.3% of net sales, for the first nine months of 2017, compared to $106.9 million, or 11.2% of net sales, in the comparable period of 2016. Loss from operations was $8.2 million for the first nine months of 2017, compared to loss of $15.3$438.6 million in the comparable period of 2016. 2021, an increase of 30.6%. The net sales increase was across all segments and driven by price/product mix and volume, with price having a greater impact in the most recent quarter. The increase in net sales was unfavorably impacted by foreign currency translation of 2.7% or $11.9 million, primarily due to the weakening euro currency.

Net loss was $28.3 millionsales for the first ninesix months of 2017,ended June 30, 2022 were $1,128.9 million, compared to loss of $25.1$842.2 million in 2016. Basic earnings per sharethe comparable period of 2021, an increase of 34.0%. The net sales increase was $(0.57)across all segments and driven by price/product mix and volume. The increase in net sales was unfavorably impacted by foreign currency translation of 3.5% or $29.5 million, primarily due to the weakening euro currency.

Overall net sales price/product mix and volume improved for both the three and six months ended June 30, 2022 as compared to the prior year periods due to market growth in all segments. The price increase was due to rising raw material costs and other inflationary impacts in the first ninemarkets, including freight and energy costs. The volume increase was driven by high commodity prices, improved farmer income, and replacement of an aging large equipment fleet. Global supply chains are experiencing constraints and volatility, including availability and pricing of raw materials, transportation and labor. Titan is also experiencing similar supply chain challenges and has been able to manage the situation effectively through each of the periods.

Gross Profit
Gross profit for the three months ended June 30, 2022 was $109.7 million, or 19.1% of 2017,net sales, an increase of $48.2 million compared to $(0.60) in 2016.$61.5 million, or 14.0% of net sales, for the three months ended June 30, 2021.


Gross profit for the six months ended June 30, 2022 was $196.4 million, or 17.4% of net sales, an increase of $81.7 million compared to $114.7 million, or 13.6% of net sales, for the six months ended June 30, 2021.
CRITICAL ACCOUNTING ESTIMATES
Preparation of financial statements and related disclosures in compliance with accounting principles generally accepted in the United States of America requires the application of technical accounting rules and guidance, as well as the use of estimates.  The Company’s application of such rules and guidance involves assumptions that require difficult subjective judgments regarding many factors, which, in and of themselves, could materially impact the financial statements and disclosures.  A future change in the estimates, assumptions, or judgments applied in determining the following matters, among others, could have a material impact on future financial statements and disclosures.
Asset and Business Acquisitions
The allocationsolid growth in gross profit and margin for both the three and six months ended June 30, 2022 as compared to the prior year periods was across all segments and was driven by the impact of purchase price for assetincreases in net sales, as described previously, and business acquisitions requires management estimatesbetter overhead absorption in our production facilities. In addition, cost reduction and judgment asproductivity initiatives continue to expectations for future cash flows of the acquired assets and business and the allocation of those cash flows to identifiable intangible assets in determining the estimated fair value for purchase price allocations. If the actual results differ from the estimates and judgments used in determining the purchase price allocations, impairment losses could occur. To aid in establishing the value of any intangible assets at the time of acquisition, the Company typically engages a professional appraisal firm.be executed across global production facilities.

28


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Inventories
Inventories are valued at the lower of cost or net realizable value. Net realizable value is estimated based on current selling prices. Inventory costs are calculated using the first-in, first-out (FIFO) method or average cost method. Estimated provisions are established for slow-moving and obsolete inventory.

Impairment of Long-Lived Assets
The Company reviews fixed assets to assess recoverability from future operations whenever events and circumstances indicate that the carrying values may not be recoverable. Circumstances that could result in an impairment review include, but are not limited to, a current period cash flow loss combined with a history of cash flow losses, current cash flows that may be insufficient to recover the investment in the property over the remaining useful life, or a projection that demonstrates continuing losses associated with the use of a long-lived asset, significant changes in the manner of use of the assets, or significant changes in business strategies. Impairment losses are recognized in operating results when expected undiscounted cash flows are less than the carrying value of the asset. Impairment losses are measured as the excess of the carrying value of the asset over the discounted expected future cash flows or the estimated fair value of the asset.

Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts and the respective tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates that are expected to apply in the years the temporary differences are expected to be settled or realized. A valuation allowance is recorded for the portion of the deferred tax assets for which it is more likely than not that a tax benefit will not be realized. Management’s judgment is required to determine the provision for income taxes, deferred tax assets and liabilities, and valuation allowances against deferred tax assets.

Retirement Benefit Obligations
Pension benefit obligations are based on various assumptions used by third-party actuaries in calculating these amounts. These assumptions include discount rates, expected return on plan assets, mortality rates, and other factors. Revisions in assumptions and actual results that differ from the assumptions affect future expenses, cash funding requirements, and obligations. The Company has three frozen defined benefit pension plans in the United States and pension plans in several foreign countries. During the first nine months of 2017, the Company contributed cash funds of $2.1 million to its pension plans. Titan expects to contribute approximately $1.2 million to these pension plans during the fourth quarter of 2017. For more information concerning these costs and obligations, see the discussion of “Pensions” in Item 7 and Note 23 to the Company's financial statements included in the Company's Form 10-K for the fiscal year ended December 31, 2016.
Product Warranties
The Company provides limited warranties on workmanship on its products in all market segments. The majority of the Company's products are subject to a limited warranty that ranges between less than one year and ten years, with certain product warranties being prorated after the first year. Actual warranty experience may differ from historical experience. The Company calculates an estimated warranty liability based on past warranty experience and the sales of products subject to that experience. The Company records warranty expense based on warranty payments made during the applicable period and changes to the estimated warranty liability. The Company's warranty accrual was $17.6 million at September 30, 2017, and $17.9 million at December 31, 2016.



TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

RESULTS OF OPERATIONS
Highlights for the three and nine months ended September 30, 2017, compared to 2016 (amounts in thousands):
 Three months ended Nine months ended
 September 30, September 30,
 2017
2016% Increase 2017 2016% Increase
Net sales$370,988
 $306,195
21% $1,092,888
 $958,203
14%
Cost of sales331,323
 271,275
22% 969,932
 851,268
14%
Gross profit$39,665
 $34,920
14% $122,956
 $106,935
15%
Gross profit as percentage of net sales10.7% 11.4%  11.3% 11.2% 
Net Sales
Net sales for the quarter ended September 30, 2017, were $371.0 million, compared to $306.2 million in the comparable quarter of 2016, an increase of 21%, primarily as a result of an increase in sales volume in all segments. Overall sales volume was up 14% with higher volume across all segments and all geographies. Favorable changes in price/mix increased net sales by 5% and favorable currency translations contributed another 2% increase to net sales.

Net sales for the nine months ended September 30, 2017, were $1,092.9 million, compared to $958.2 million in the comparable period of 2016, an increase of 14%, primarily as a result of an increase in sales volume. Overall sales volume was up 10% driven by higher volumes in the agriculture and earthmoving/construction segments. Favorable currency translation increased net sales by 3% and a favorable change in price/mix added an additional 1% to net sales.

Cost of Sales and Gross Profit
Cost of sales was $331.3 million for the quarter ended September 30, 2017, compared to $271.3 million for the comparable quarter in 2016. Gross profit for the third quarter of 2017 was $39.7 million, or 10.7% of net sales, compared to $34.9 million, or 11.4% of net sales, for the third quarter of 2016.

Cost of sales was $969.9 million for the nine months ended September 30, 2017, compared to $851.3 million for the comparable period in 2016. Gross profit for the first nine months of 2017 was $123.0 million, or 11.3% of net sales, compared to $106.9 million, or 11.2% of net sales, for the comparable period of 2016. The increase in gross profit was primarily related to continuous improvement from the implementation of initiatives that focus on lowering costs and increasing efficiencies.

Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the third quarter of 2017three months ended June 30, 2022 were $39.8$34.7 million, or 10.7%6.1% of net sales, compared to $36.3$32.6 million, or 11.9%7.4% of net sales, for the third quarter of 2016.  After adjusting for the accrued contingent liability of $6.5 million for a legal judgment (see Note 17 to the Company's condensed consolidated financial statements), SG&A for the third quarter of 2017 would have been 9.0% of net sales.three months ended June 30, 2021.  

SG&ASelling, general and administrative (SG&A) expenses for the first ninesix months of 2017ended June 30, 2022 were $115.6$70.9 million, or 10.6%6.3% of net sales, compared to $107.7$66.6 million, or 11.2%7.9% of net sales, for the first ninesix months of 2016.  ended June 30, 2021. 

The increase in SG&A expenses was primarily duefor both the three and six months ended June 30, 2022 as compared to the costprior year periods was driven primarily by an increase in variable costs associated with non-recurring legalimproved operating performance and professional feesgrowth in the first quarter of 2017 and the aforementioned contingent liability accrual in the third quarter of 2017.sales.

Research and Development Expenses
Research and development (R&D) expenses for the third quarter of 2017three months ended June 30, 2022 were $2.5$2.2 million, or 0.7%0.4% of net sales, compared to $2.6$2.5 million, or 0.8%0.6% of net sales, for the third quarter of 2016.

comparable period in 2021. R&D expenses for the first ninesix months of 2017ended June 30, 2022 were $7.9$5.2 million, or 0.7%0.5% of net sales, compared to $7.8$5.1 million, or 0.8%0.6% of net sales, for the first nine months of 2016.comparable period in 2021. R&D spending reflects initiatives to improve product designs and an ongoing focus on quality.



TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

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.brand. These agreements cover sales in North America, Latin America, Europe, the Middle East, Africa, Russia, and other Commonwealth of Independent States countries. Royalties attributable to sales of farm tires in North America and Latin America were prepaid through March 2018 as a part of the 2011 Goodyear Latin American farm tire acquisition. The Company also has a trademark license agreement with Goodyear to manufacture and sell certain non-farm tire products in Latin America.

Royalty expenses for the third quarter of 2017three months ended June 30, 2022 were $2.6$3.0 million, or 0.7%0.5% of net sales, compared to $2.3$2.7 million, or 0.7%0.6% of net sales, for the third quarter of 2016.

three months ended June 30, 2021. Royalty expenses for the first ninesix months of 2017ended June 30, 2022 were $7.7$5.9 million, or 0.7%0.5% of net sales, compared to $6.7$5.1 million, or 0.7%0.6% of net sales, for the first ninesix months of 2016.ended June 30, 2021. The increase was driven by higher internationalin royalty expenses are due to the increase in sales, subject to royalty.as described previously, resulting in an increase in the amount of royalty expense incurred.

LossIncome from Operations
LossIncome from operations for the thirdsecond quarter of 20172022 was $5.1$69.7 million, compared to $6.3income from operations of $23.7 million for the thirdsecond quarter of 2016.  This change was the net result of the items previously discussed.

Loss2021. Income from operations for the first ninesix months of 2017ended June 30, 2022 was $8.2$114.4 million, compared to $15.3income from operations of $38.0 million for the first ninesix months of 2016.  This changeended June 30, 2021. The increase in income from operations for both the three and six months ended June 30, 2022 as compared to the prior year periods was the net result of the items previously discussed.primarily driven by higher sales and improvements in gross profit margins.

OTHER PROFIT/LOSS ITEMS

Interest Expense
Interest expense was $7.5$7.7 million and $8.7$8.6 million for the quartersthree months ended SeptemberJune 30, 20172022 and 2016, respectively.2021, respectively, and $15.6 million and $16.1 million for the six months ended June 30, 2022 and 2021. The decrease inhigher interest expense for both the three and six months ended June 30, 2021 was primarily due to the January 2017 conversionrefinancing of the Company's 5.625% convertible senior subordinated notes.secured notes during the second quarter of 2021 resulting in an additional interest expense.

Interest expenseLoss on Senior Note Repurchase
Loss on senior note repurchase was $22.6 million and $25.2$16.0 million for the ninethree months and six months ended SeptemberJune 30, 2017 and 2016, respectively.2021. The decreaseloss was in interest expense was primarily dueconnection to the January 2017 conversionCompany completing a call and redemption of all of its outstanding $400.0 million principal amount of Titan's 6.50% senior secured notes due 2023 during the Company's 5.625% convertible senior subordinated notes.second quarter of 2021.

Foreign Exchange Gain (Loss)
Foreign exchange gain was $2.2 million for the three months ended June 30, 2022, compared to a loss of $0.8 million for the third quarter of 2017, compared to gain of $0.4 million for the third quarter of 2016.

three months ended June 30, 2021. Foreign exchange gain was $0.0$7.6 million for the first ninesix months of 2017,ended June 30, 2022, compared to a gain of $7.4$8.7 million for the first nine months of 2016.

Other Income
Other income was $3.0 million for the quarter ended September 30, 2017, as compared to $3.6 million in the comparable quarter of 2016.  For the quarter ended September 30, 2017, the Company recorded equity investment income of $1.4 million, interest income of $0.9 million, rental income of $0.6 million, a gain related to investments for deferred compensation of $0.5 million, and loss on sale of assets of $0.5 million. For the quarter ended September 30, 2016, the Company recorded interest income of $0.9 million, equity investment income of $0.8 million, rental income of $0.6 million, and a gain related to contractual obligation investments of $0.6 million.

Other income was $8.4 million for the ninesix months ended SeptemberJune 30, 2017, as compared to $10.5 million in the comparable period of 2016.  For the nine months ended September 30, 2017, the Company recorded equity investment income of $2.7 million, interest income of $2.6 million, a gain related to investments for deferred compensation of $1.8 million, and rental income of $1.8 million. For the nine months ended September 30, 2016, the Company recorded equity investment income of $2.4 million, a gain on sale of assets of $2.3 million, interest income of $2.2 million and rental income of $1.5 million.2021.


29


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The foreign exchange gain experienced during the three months and six months ended June 30, 2022 is primarily the result of a favorable impact of the movement of exchange rates in certain geographies in which we conduct business as well as the result 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.

The foreign exchange loss experienced during the three months ended June 30, 2021 is the result of the unfavorable movements
in foreign currency exchange rates in many of the geographies in which we conduct business. The foreign exchange gain experienced during the six months ended June 30, 2021 was related to realized foreign currency gains associated with an ongoing initiative to rationalize Titan's legal entity structure and ongoing management of the intercompany capital structure.

Other Income
Other income was $23.7 million for the three months ended June 30, 2022, as compared to other income of $1.2 million in the comparable period of 2021.  The increase in other income for the three months ended June 30, 2022, as compared to the same period in 2021, was primarily attributable to $22.5 million income on indirect tax credits related to Brazilian operations as mentioned previously.

Other income was $14.8 million for the six months ended June 30, 2022, as compared to other income of $0.9 million in the comparable period of 2021.  The increase in other income for the six months ended June 30, 2022, as compared to the same period in 2021, was primarily attributable to $22.5 million income on indirect tax credits, and a gain of $1.3 million from a government grant associated with an earthquake that affected one of our Italian subsidiaries in May 2012. The increase in other income was partially offset by $10.9 million loss on sale of the Australian wheel business which was comprised primarily of the release of the cumulative translation adjustment of approximately $10.0 million and closing costs associated with the completion of the transaction of approximately $0.9 million.

Provision for Income Taxes
The Company recorded income tax expense (benefit) of $2.4$19.0 million and $(2.1)$2.0 million for the quartersthree months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. For the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, the Company recorded income tax expense of $6.0$27.7 million and $2.6$4.6 million, respectively. The Company's effective income tax rate was (27)%21.6% and 16% for the quarters ended September 30, 2017 and 2016, and (27)% and (13)(457.7)% for the ninethree months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and 22.8% and 29.8% for the six months ended June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022 and 2021, the income tax expense each period differed due to an overall pre-tax income increase which resulted in the significant fluctuation in the effective tax rate. The year-to-date increase in income tax expense for the six months ended June 30, 2022 is due to improved profitability in foreign jurisdictions and tax due in certain jurisdictions for entities with valuation allowances established. The tax due in certain jurisdictions by entities with valuation allowances is primarily driven by Illinois state tax for the U.S. consolidated group due to Illinois’ law change which limits the net operating losses that can be utilized beginning in 2021.

The Company’s 2017 effective income tax rate is different from the U.S. Federal income tax rate mainly due to losses in the U.S.2022 and certain foreign jurisdictions where the Company could not record a tax benefit due to a valuation allowance. The increased negative effective tax rate is also due to non-deductible expenses and income adjustments in taxable jurisdictions that had the effect of increasing the tax rate for the three and nine months ended September 30, 2017. During the second quarter of 2017, the IRS income tax audit for tax years 2010 through 2014 was settled, which did not result in any material change to income tax expense.
The Company’s 20162021 income tax expense and raterates 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 U.S. and certain foreign jurisdictions that incurred a full valuation allowance on deferred tax assets created by current year projected losses.assets. In addition, the Company adjusted its net uncertain tax positions which resultedthere were non-deductible royalty expenses and statutorily required income adjustments made in a tax benefit of $2.5 million.

The Company continues to monitor the realization of its deferred tax assets and assess the need for a valuation allowance. This process requires management to make estimates, assumptions, and judgments that are uncertain in nature. The Company has established valuation allowances on U.S. and certain foreign jurisdictions that negatively impacted the tax rate for the six months ended June 30, 2022 and continues to monitor and assess potential valuation allowances in all its jurisdictions.2021.

Net LossIncome (Loss) and Income (Loss) per Share
Net lossincome for the thirdsecond quarter of 20172022 was $11.2$68.9 million, compared to $9.0net loss of $2.4 million in the comparable quarter of 2016.2021, an improvement of $71.3 million. For the quartersquarter ended SeptemberJune 30, 20172022 and 2016,2021, basic and diluted earningsincome per share were $(.22)$1.07 and $(.17)$(0.04), respectively, and diluted income per share were $1.06 and $(0.04), respectively. The Company's higher net lossincome and lower earningsincome per share increases were due to the items previously discussed.

Net lossincome for the first ninesix months of 2017ended June 30, 2022 was $28.3$93.5 million, compared to $25.1net income of $10.8 million in the comparable period of 2016.2021, an improvement of $82.7 million. For the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, basic and diluted earningsincome per share were $(.57)$1.44 and $(.60),$0.18, respectively, and diluted income per share were $1.43 and $0.17, respectively. The Company's higher net lossincome and higher earningsincome per share increases were due to the items previously discussed.



30


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations



SEGMENT INFORMATION

Segment Summary (amounts in thousands):
Three months ended June 30, 2022AgriculturalEarthmoving/
Construction		ConsumerCorporate/ Unallocated
 Expenses		Consolidated
 Totals
Net sales$318,585 $210,370 $43,940 $— $572,895 
Gross profit61,921 36,317 11,415 — 109,653 
Profit margin19.4 %17.3 %26.0 %— 19.1 %
Income (loss) from operations44,884 22,276 9,238 (6,697)69,701 
Three months ended June 30, 2021     
Net sales$231,504 $176,715 $30,420 $— $438,639 
Gross profit35,291 22,328 3,851 — 61,470 
Profit margin15.2 %12.6 %12.7 %— 14.0 %
Income (loss) from operations20,789 7,462 1,881 (6,413)23,719 

Six months ended June 30, 2022AgriculturalEarthmoving/
Construction		ConsumerCorporate/ Unallocated
 Expenses		Consolidated
 Totals
Net sales$628,184 $411,629 $89,079 $— $1,128,892 
Gross profit109,845 67,692 18,845 — 196,382 
Profit margin17.5 %16.4 %21.2 %— 17.4 %
Income (loss) from operations75,001 38,116 14,120 (12,828)114,409 
Six months ended June 30, 2021     
Net sales$440,263 $341,522 $60,372 $— $842,157 
Gross profit65,080 42,070 7,585 — 114,735 
Profit margin14.8 %12.3 %12.6 %— 13.6 %
Income (loss) from operations36,072 13,037 3,548 (14,707)37,950 

Agricultural Segment Results
Agricultural segment results for the periods presented below were as follows (amounts in thousands):follows:

 Three months ended��Nine months ended
 September 30, September 30,
 2017 2016% Increase 2017 2016% Increase
Net sales$170,895
 $138,568
23% $524,335
 $438,108
20%
Gross profit18,930
 18,592
2% 63,542
 57,684
10%
Income from operations10,056
 9,891
2% 36,721
 32,718
12%

Net sales in the agricultural market were $170.9 million for the quarter ended September 30, 2017, as compared to $138.6 million in 2016, an increase of 23%. Higher agricultural sales volumes contributed 16% of the increase in net sales with favorable price/mix increasing net sales by 6% and favorable currency translation contributing an additional 1%.

Gross profit in the agricultural market was $18.9 million for the quarter ended September 30, 2017, as compared to $18.6 million in the comparable quarter of 2016.  The decrease in gross profit as a percent of sales was a result of pricing initiatives to selectively grow market share. Income from operations in the agricultural market was $10.1 million for the quarter ended September 30, 2017, as compared to $9.9 million in 2016.

Net sales in the agricultural market were $524.3 million for the nine months ended September 30, 2017, as compared to $438.1 million in 2016, an increase of 20%. Higher agriculture sales volumes contributed 14% of the increase in net sales, while favorable currency translation and price/mix each contributed an additional 3% of the increase.
(Amounts in thousands)Three months endedSix months ended
June 30,June 30,
 20222021% Increase20222021% Increase
Net sales$318,585 $231,504 37.6 %$628,184 $440,263 42.7 %
Gross profit61,921 35,291 75.5 %109,845 65,080 68.8 %
Profit margin19.4 %15.2 %27.6 %17.5 %14.8 %18.2 %
Income from operations44,884 20,789 115.9 %75,001 36,072 107.9 %
    
Gross profit in the agricultural market was $63.5 million for the nine months ended September 30, 2017, as compared to $57.7 million in the comparable period of 2016.  Income from operations in the agricultural market was $36.7 million for the nine months ended September 30, 2017, as compared to $32.7 million in 2016. The Company's gross profit in the agricultural segment was negatively affected by increased raw material prices in the first and second quarters of 2017.
31


Earthmoving/Construction Segment Results
Earthmoving/construction segment results for the periods presented below were as follows (amounts in thousands):
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016% Increase 2017 2016% Increase
Net sales$156,442
 $128,917
21% $443,030
 $401,649
10%
Gross profit14,534
 11,553
26% 41,170
 36,354
13%
Income from operations2,985
 807
270% 5,853
 4,060
44%

The Company's earthmoving/construction market net sales were $156.4 million for the quarter ended September 30, 2017, as compared to $128.9 million in 2016, an increase of 21%. The increase in earthmoving/construction sales was driven by increased volume which increased net sales by 14% and favorable price/mix which increased sales an additional 5%. Favorable currency translation contributed an additional 2% to net sales.
Gross profit in the earthmoving/construction market was $14.5 million for the quarter ended September 30, 2017, as compared to $11.6 million in 2016. The Company's earthmoving/construction market income from operations was $3.0 million for the quarter ended September 30, 2017, as compared to $0.8 million in for the comparable quarter in 2016.

The Company's earthmoving/construction market net sales were $443.0 million for the nine months ended September 30, 2017, as compared to $401.6 million in 2016, an increase of 10%. The increased earthmoving/construction sales were primarily driven by an increase in volume with price/mix and currency remaining flat.

Gross profit in the earthmoving/construction market was $41.2 million for the nine months ended September 30, 2017, as compared to $36.4 million in 2016. The Company's earthmoving/construction market income from operations was $5.9 million for the nine months ended September 30, 2017, as compared to $4.1 million in 2016.


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Net sales in the agricultural segment were $318.6 million for the three months ended June 30, 2022, as compared to $231.5 million for the comparable period in 2021, an increase of 37.6%. Net sales was driven by price/product mix and volume, with price having a greater impact. Pricing is primarily reflective of increases in raw material and other inflationary cost increases in the markets, including freight and energy costs. The volume increase was due to increased demand in the global agricultural market, reflective of high farm commodity prices and increased farmer income, the need for replacement of an aging large equipment fleet and the need to replenish equipment inventory levels within the equipment dealer channels. The overall increase in net sales was partially offset by unfavorable currency translation, primarily in Europe, of 1.7%.
Consumer
Gross profit in the agricultural segment was $61.9 million for the three months ended June 30, 2022, as compared to $35.3 million in the comparable quarter of 2021.  The increase in gross profit and margin is primarily attributable to the impact of increases in net sales as described previously and cost reduction and productivity initiatives executed across global production facilities. The Company balanced the increases of related raw materials and other inflationary cost impacts with corresponding price increases to protect profitability.

Income from operations in Titan's agricultural segment was $44.9 million for the three months ended June 30, 2022, as compared to income of $20.8 million for the three months ended June 30, 2021. The overall increase in income from operations is attributable to higher gross profit, described previously.

Net sales in the agricultural segment were $628.2 million for the six months ended June 30, 2022, as compared to $440.3 million for the comparable period in 2021, an increase of 42.7%. Net sales was driven by price/product mix and volume, with price having a greater impact. Pricing is primarily reflective of increases in raw material and other inflationary cost increases in the markets, including freight and energy costs. The overall increase in net sales was partially offset by unfavorable currency translation, primarily in Europe, of 3.6%.

Gross profit in the agricultural segment was $109.8 million for the six months ended June 30, 2022, as compared to $65.1 million in the comparable period in 2021.  The increase in gross profit and margin is primarily attributable to the impact of increases in net sales as described previously and cost reduction and productivity initiatives executed across global production facilities.

Income from operations in Titan's agricultural segment was $75.0 million for the six months ended June 30, 2022, as compared to income of $36.1 million for the six months ended June 30, 2021. The overall increase in income from operations is attributable to higher gross profit.


Earthmoving/Construction Segment Results
ConsumerEarthmoving/construction segment results for the periods presented below were as follows (amounts in thousands):follows:
(Amounts in thousands)Three months endedSix months ended
June 30,June 30,
 20222021% Increase20222021% Increase
Net sales$210,370 $176,715 19.0 %$411,629 $341,522 20.5 %
Gross profit36,317 22,328 62.7 %67,692 42,070 60.9 %
Profit margin17.3 %12.6 %37.3 %16.4 %12.3 %33.3 %
Income from operations22,276 7,462 198.5 %38,116 13,037 192.4 %
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016% Increase 2017 2016% Increase
Net sales$43,651
 $38,710
13%
$125,523
 $118,446
6%
Gross profit6,201
 4,775
30%
18,244
 12,897
41%
Income from operations3,060
 1,331
130%
8,001
 2,072
286%


Consumer marketThe Company's earthmoving/construction segment net sales were $43.7$210.4 million for the quarterthree months ended SeptemberJune 30, 2017,2022, as compared to $38.7$176.7 million in the comparable quarter of 2016,2021, an increase of approximately 13%19.0%.

Gross profit from the consumer market was $6.2 million for the quarter ended September 30, 2017, as compared to $4.8 million for the comparable quarter of 2016. Consumer market income from operations was $3.1 million for the quarter ended September 30, 2017, as compared to $1.3 million The increase in 2016.

Consumer marketearthmoving/construction net sales was driven by increased price/product mix and volume, with price having a greater impact. Pricing increases were $125.5 million for the nine months ended September 30, 2017, as compared to $118.4 millionimplemented because of inflationary input costs, described previously. Net sales were unfavorably impacted by foreign currency translation in the comparable period of 2016, an increase of approximately 6%Europe, which decreased net sales by 4.8%.

Gross profit from the consumer market was $18.2 million for the nine months ended September 30, 2017, as compared to $12.9 million for the comparable period of 2016. Consumer market income from operations was $8.0 million for the nine months ended September 30, 2017, as compared to $2.1 million in 2016.

Consumer segment sales for the quarter and nine months ended September 30, 2017, were up primarily due to higher sales of other products as well as higher prices passed through to end customers as a result of higher raw material costs. Margins improved overall due to both geographic and product mix.

32


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Segment Summary (amountsGross profit in thousands)
Three months ended
September 30, 2017
 Agricultural 
Earthmoving/
Construction
 Consumer 
Corporate/ Unallocated
 Expenses
 
Consolidated
 Totals
Net sales $170,895
 $156,442
 $43,651
 $—
 $370,988
Gross profit 18,930
 14,534
 6,201
 —
 39,665
Income (loss) from operations 10,056
 2,985
 3,060
 (21,242) (5,141)
Three months ended
September 30, 2016
  
  
  
  
  
Net sales $138,568
 $128,917
 $38,710
 $—
 $306,195
Gross profit 18,592
 11,553
 4,775
 —
 34,920
Income (loss) from operations 9,891
 807
 1,331
 (18,339) (6,310)

Nine months ended
September 30, 2017
 Agricultural 
Earthmoving/
Construction
 Consumer 
Corporate/ Unallocated
 Expenses
 
Consolidated
 Totals
Net sales $524,335
 $443,030
 $125,523
 $—
 $1,092,888
Gross profit 63,542
 41,170
 18,244
 —
 122,956
Income (loss) from operations 36,721
 5,853
 8,001
 (58,819) (8,244)
Nine months ended
September 30, 2016
  
  
  
  
  
Net sales $438,108
 $401,649
 $118,446
 $—
 $958,203
Gross profit 57,684
 36,354
 12,897
 —
 106,935
Income (loss) from operations 32,718
 4,060
 2,072
 (54,105) (15,255)
           

Corporate & Unallocated Expenses
Income from operations on athe earthmoving/construction segment basis does not include corporate expenses totaling $21.2was $36.3 million for the quarterthree months ended SeptemberJune 30, 2017,2022, as compared to $18.3$22.3 million for the comparable quarter of 2016. Corporate expenses were composed of sellingthree months ended June 30, 2021. The increase in gross profit and marketing expenses of approximately $6 millionmargin was primarily driven by better price realization and $7continued improved production efficiencies stemming from the strong management actions taken to improve profitability for the long-term. The Company balanced the increases related to raw materials and other inflationary cost impacts with corresponding price increases to maintain profitability.

The Company's earthmoving/construction segment income from operations was $22.3 million for the quartersthree months ended SeptemberJune 30, 2017 and 2016, respectively; and administrative expenses2022, as compared to income of approximately $15 million and $11$7.5 million for the quartersthree months ended SeptemberJune 30, 20172021. This improvement was due to increases in sales price, volume, and 2016, respectively. Administrative expenses in the third quartercontinued execution of 2017 included a non-cash accrual of $6.5 million relatingcost containment measures taken to a court order. See Note 17 to themanage profitability.

The Company's condensed consolidated financial statements.

Income from operations on aearthmoving/construction segment basis does not include corporate expenses totaling $58.8net sales were $411.6 million for the ninesix months ended SeptemberJune 30, 2017,2022, as compared to $54.1$341.5 million in the comparable period in 2021, an increase of 21%. The increase in earthmoving/construction net sales was driven by increased price/product mix and volume, with price having a greater impact. Pricing increases were implemented because of inflationary input costs. Net sales was unfavorably impacted by foreign currency translation in Europe, which decreased net sales by 3.9%.

Gross profit in the earthmoving/construction segment was $67.7 million for the comparable period of 2016. Corporate expenses were composed of selling and marketing expenses of approximately $21 million and $22six months ended June 30, 2022, as compared to $42.1 million for the ninesix months ended SeptemberJune 30, 20172021. The increase in gross profit and 2016, respectively;margin was primarily driven by the impact of net sales as described previously and administrative expenses of approximately $38 millionthe continued improved production efficiencies stemming from the strong management actions taken to improve profitability for the long-term. The Company balanced the increases related to raw materials and $32other inflationary cost impacts with corresponding price increases to protect profitability.

The Company's earthmoving/construction segment income from operations was $38.1 million for the ninesix months ended SeptemberJune 30, 20172022, as compared to income of $13.0 million for the six months ended June 30, 2021. This improvement was due to increases in sales price, volume, and 2016, respectively.continued execution of cost containment measures taken to manage profitability.

Consumer Segment Results
Consumer segment results for the periods presented below were as follows:
(Amounts in thousands)Three months endedSix months ended
June 30,June 30,
 20222021% Increase20222021% Increase
Net sales$43,940 $30,420 44.4 %$89,079 $60,372 47.6 %
Gross profit11,415 3,851 196.4 %18,845 7,585 148.5 %
Profit margin26.0 %12.7 %104.7 %21.2 %12.6 %68.3 %
Income from operations9,238 1,881 391.1 %14,120 3,548 298.0 %

Consumer segment net sales were $43.9 million for the three months ended June 30, 2022, as compared to $30.4 million for the three months ended June 30, 2021, an increase of approximately 44.4%. The increase iswas driven by favorable price/product mix and volume impact to net sales. The increase in demand primarily related to specialty products in the United States, primarily custom mixing of rubber stock to third parties. Net sales were also favorably impacted by foreign currency translation, primarily in Latin America, which increased net sales by 1.9%.

Gross profit from the consumer segment was $11.4 million for the three months ended June 30, 2022, as compared to $3.9 million for the three months ended June 30, 2021 due primarily to sales growth, increased price/product mix and the positive impact of sales volume increase on overhead absorption. Margins related to the growth initiatives in specialty products in the United States are stronger than the average margins for other products in the segment.

Consumer segment income from operations was $9.2 million for the three months ended June 30, 2022, as compared to an income of $1.9 million for the three months ended June 30, 2021 due to non-recurring legal and professional feesincrease in the first quarter of 2017 and a contingent liability accrual in the third quarter of 2017.gross profit as mentioned previously.


33


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

MARKET RISK SENSITIVE INSTRUMENTS
Consumer segment net sales were $89.1 million for the six months ended June 30, 2022, as compared to $60.4 million for the six months ended June 30, 2021, an increase of approximately 47.6%. The Company's risksincrease was driven by favorable price/product mix and volume impact to net sales. The increase in demand primarily related to foreign currencies, commodity prices, and interest rates at September 30, 2017, were consistent with those for 2016. For more information, see the “Market Risk Sensitive Instruments” discussionspecialty products in the Company's Form 10-KUnited States, primarily custom mixing of rubber stock to third parties.

Gross profit from the consumer segment was $18.8 million for the fiscal yearsix months ended December 31, 2016.

PENSIONS
The Company has three frozen defined benefit pension plans covering certain employees or former employees of three U.S. subsidiaries. The Company also has pension plans covering certain employees of several foreign subsidiaries. These plans are described in Note 23 of the Company's NotesJune 30, 2022, as compared to Consolidated Financial Statements in the Annual Report on Form 10-K$7.6 million for the yearsix months ended December 31, 2016.June 30, 2021 due primarily to sales growth, increased price/product mix and the positive impact of sales volume increase on overhead absorption.

The Company's recorded liabilityConsumer segment income from operations was $14.1 million for pensions is basedthe six months ended June 30, 2022, as compared to an income of $3.5 million for the six months ended June 30, 2021 due to increase in gross profit as mentioned previously.

Corporate & Unallocated Expenses
Income from operations on a numbersegment basis did not include unallocated costs of assumptions, including discount rates, rates$6.7 million for the three months ended June 30, 2022, and $12.8 million for the six months ended June 30, 2022, as compared to $6.4 million for the three months ended June 30, 2021, and $14.7 million for the six months ended June 30, 2021. Unallocated expenses are primarily comprised of return oncorporate selling, general and administrative expenses. The year over year change is related to reductions in certain SG&A expenses primarily associated with investments mortality rates,to improve our supply chain and other factors. Certain of these assumptions are determined by the Company with the assistance of outside actuaries. Assumptions are based on past experience and anticipated future trends. These assumptions are reviewed on a regular basis and revised when appropriate. Revisionslogistics processes in assumptions and actual results that differ from the assumptions affect future expenses, cash funding requirements, and the carrying value of the related obligations. Titan expects to contribute approximately $1.2 million to these pension plans during the fourth quarter of 2017.2021 which did not occur in 2022.


LIQUIDITY AND CAPITAL RESOURCES

Cash Flows
As of September 30, 2017, the Company had $155.7 million of cash.
34
(Amounts in thousands)September 30, December 31,  
 2017 2016 Change
Cash$155,675
 $147,827
 $7,848


The cash balance increased by $7.8 million from December 31, 2016, due to the following items:

Operating Cash Flows
Summary of cash flows from operating activities:
(Amounts in thousands)Nine months ended September 30,  
 2017 2016 Change
Net loss$(28,340) $(25,106) $(3,234)
Depreciation and amortization44,029
 44,889
 (860)
Deferred income tax provision(476) 172
 (648)
Foreign currency translation loss1,061
 9,822
 (8,761)
Accounts receivable(46,715) 2,788
 (49,503)
Inventories(46,083) 4,805
 (50,888)
Prepaid and other current assets20,046
 (12,314) 32,360
Accounts payable26,372
 21,344
 5,028
Other current liabilities8,821
 11,315
 (2,494)
Other liabilities1,539
 (5,342) 6,881
Other operating activities4,534
 1,611
 2,923
Cash provided by (used for) operating activities$(15,212) $53,984
 $(69,196)



TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES

Cash Flows
As of June 30, 2022, the Company had $116.7 million of cash, which increased as compared to the December 31, 2021 ending balance of $98.1 million, due to the following items:

Operating Cash Flows
Summary of cash flows from operating activities:
(Amounts in thousands)Six months ended June 30, 
 20222021Change
Net income$93,499 $10,797 $82,702 
Depreciation and amortization22,245 24,918 (2,673)
Deferred income tax provision(292)198 (490)
Income on indirect taxes(22,450)— (22,450)
Loss on sale of the Australian wheel business10,890 — 10,890 
Foreign currency translation gain(4,314)(9,665)5,351 
Accounts receivable(49,527)(72,765)23,238 
Inventories(38,884)(53,080)14,196 
Prepaid and other current assets(1,817)(10,350)8,533 
Accounts payable7,480 71,051 (63,571)
Other current liabilities32,162 7,993 24,169 
Other liabilities2,445 (7,334)9,779 
Other operating activities(2,519)20,750 (23,269)
Cash provided by (used for) operating activities$48,918 $(17,487)$66,405 

In the first ninesix months of 2017,2022, cash flows provided by operating activities used $15.2was $48.9 million, driven primarily by increases in other current liabilities of cash, including decreases from$32.2 million which includes $19.2 million income tax payable increase in foreign jurisdictions. Cash flows provided by operating activities was offset partially by increases in accounts receivable of $46.7$49.5 million and inventoriesincreases in inventory of $46.1 million, offset by increases from accounts payable of $26.4 million and prepaid and other current assets of $20.0$38.9 million. Growth in these liquid working capital balances relates to the significant increase in sales activity during the period. Included in the net lossincome of $28.3$93.5 million were noncash chargeswas a non-cash charge for depreciation and amortization expense of $44.0$22.2 million, income on indirect taxes of $22.5 million, and foreign currency translation loss on sale of $1.1the Australian wheel business of $10.9 million.

Operating cash flows decreased $69.2increased by $66.4 million when comparing the first ninesix months of 20172022 to the first nine months of 2016. The net losscomparable period in the first nine months of 2017 increased $3.2 million from the loss in the first nine months of 2016. When comparing the first nine months of 20172021, which is due to the first nine monthsimpact of 2016, cash flows from operating activities decreasedhigher profitability in inventories2022 and accounts receivable by $50.9 million and $49.5 million, respectively, offset by an increases of $32.4 millionthe managed investments in prepaid and other current assets.working capital to support the business growth.

Summary of the components of cash conversion cycle:
June 30,December 31,June 30,
 202220212021
Days sales outstanding48 48 55 
Days inventory outstanding85 86 86 
Days payable outstanding(57)(61)(59)
Cash conversion cycle76 73 82 
 September 30, December 31, September 30,
 2017 2016 2016
Days sales outstanding58
 53
 55
Days inventory outstanding95
 95
 100
Days payable outstanding(53) (52) (54)
Cash conversion cycle100
 96
 101


Investing Cash Flows
Summary ofconversion cycle decreased by 6 days when comparing the quarter ended June 30, 2022 to June 30, 2021. It is due to strategic improvement in working capital management, specifically continued focus on customer cash flows from investing activities:collections and inventory management.
35
(Amounts in thousands)Nine months ended September 30,  
 2017 2016 Change
Capital expenditures$(23,580) $(30,846) $7,266
Certificates of deposit50,000
 —
 50,000
Other investing activities1,293
 1,687
 (394)
Cash provided by (used for) investing activities$27,713
 $(29,159) $56,872

Net cash provided by investing activities was $27.7 million in the first nine months of 2017, as compared to net cash used for investing activities of $29.2 million in the first nine months of 2016. The Company had cash provided by investing activities of $50.0 million from certificates of deposit that matured and were not reinvested in the first nine months of 2017. The Company invested a total of $23.6 million in capital expenditures in the first nine months of 2017, compared to $30.8 million in 2016. The 2017 and 2016 expenditures represent various equipment purchases and improvements to enhance production capabilities of Titan's existing business and maintain existing equipment.
Financing Cash Flows
Summary of cash flows from financing activities:
(Amounts in thousands)Nine months ended September 30,  
 2017 2016 Change
Proceeds from borrowings$33,540
 $2,390
 $31,150
Payment on debt(41,003) (14,042) (26,961)
Dividends paid(868) (810) (58)
Cash used for financing activities$(8,331) $(12,462) $4,131
In the first nine months of 2017, $8.3 million of cash was used for financing activities. This cash was primarily used for debt financing activities, with debt payments of $41.0 million offset in part by borrowings of $33.5 million.



TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Investing Cash Flows
Summary of cash flows from investing activities:
(Amounts in thousands)Six months ended June 30, 
 20222021Change
Capital expenditures$(19,464)$(14,637)$(4,827)
Proceeds from the sale of the Australian wheel business9,293 — 9,293 
Proceeds from sale of fixed assets297 749 (452)
Cash used for investing activities$(9,874)(13,888)$4,014 
Net cash used for investing activities was $9.9 million in the first six months of 2022, as compared to net cash used for investing activities of $13.9 million in the first six months of 2021. The Company invested a total of $19.5 million in capital expenditures in the first six months of 2022, compared to $14.6 million in the comparable period of 2021. Capital expenditures during the first six months of 2022 and 2021 represent equipment replacement and improvements, along with new tools, dies and molds related to new product development, as the Company seeks to enhance the Company’s manufacturing capabilities and drive productivity gains.Cash provided by investing activities for the first six months of 2022 includes $9.3 million from proceeds for the sale of the Australian wheel business.

Financing Cash Flows
Summary of cash flows from financing activities:
(Amounts in thousands)Six months ended June 30, 
 20222021Change
Proceeds from borrowings$89,015 $459,929 $(370,914)
Repurchase of senior secured notes— (413,000)413,000 
Payment on debt(86,004)(34,040)(51,964)
Repurchase of common stock(25,000)— (25,000)
Other financing activities(628)(2,040)1,412 
Cash (used for) provided by financing activities$(22,617)$10,849 $(33,466)
During the first six months of 2022, $22.6 million of cash was used for financing activities. Proceeds from borrowings provided $89.0 million, which was offset by payment on debt of $86.0 million and repurchase of common stock of $25.0 million. The Company borrowed on the domestic revolving credit facility during the first quarter of 2022 primarily to facilitate the repurchasing of the Company's common stock from RDIF, and subsequently repaid during the second quarter of 2022 as cash flow improved. The Company reduced its domestic credit facility outstanding balance during the second quarter of 2022 with cash provided from operations resulting in an outstanding balance of $23.0 million at June 30, 2022 as compared to $29.0 million at June 30, 2021.

Debt Restrictions
The Company’s $125 million revolving credit facility (credit facility) containsand 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 10% of the total commitment under the credit facility ($7.512.5 million as of SeptemberJune 30, 2017)2022), the Company is required to maintain a minimum fixed charge coverage ratio of not less than 1.0 to 1.0 (calculated quarterly on a trailing four quarter basis);
•Limits on dividends and repurchases of the Company’s stock;
•Restrictions on the ability of the Company to make additional borrowings, or to consolidate, merge, or otherwise fundamentally change the ownership of the Company;
•Limitations on investments, dispositions of assets, and guarantees of indebtedness; and
•Other customary affirmative and negative covenants.
These restrictions could limit the Company’s ability to respond to market conditions, provide for unanticipated capital investments, raise additional debt or equity capital, pay dividends, or take advantage of business opportunities, including future acquisitions. The Company is in compliance with these debt covenants at June 30, 2022.
36


TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Liquidity Outlook
At SeptemberJune 30, 2017,2022, the Company had $155.7$116.7 million of cash and cash equivalents. At SeptemberJune 30, 2017,2022, under the Company's $125 million credit facility, there were no$23.0 million in borrowings, $7.2 million in outstanding borrowings onletters of credit, and the Company's $75 million credit facility.amount available totaled $94.8 million. Titan's availability under this credit facility may be less than $75$125 million as a result of outstanding letters of credit and eligible accounts receivable and inventory balances at certain domestic subsidiaries. At September 30, 2017, an outstanding letter of credit under this credit facility totaled $12.5 million and the amount available under the facility totaled $62.5 million, based upon eligible accounts receivable and inventory balances. The cash and cash equivalents balance of $155.7$116.7 million included $73.8$86.9 million held in foreign countries.

The Company does not believe that its current plans demonstrate a need to repatriate the foreign amounts to fund U.S. operations; however, if foreign funds were needed for U.S. operations, the Company would be required to accrue and pay taxes to repatriate the funds. The Company does have U.S. net operating losses that may be available to offset a portion of the potential cash tax outlay from the repatriation of such foreign funds.

Capitalis expecting full year capital expenditures for the fourth quarter of 2017 are estimated to be approximately $10around $45 million to $12$50 million. Cash payments for interest are currently forecasted to be approximately $15$16 million for the fourth quarterremainder of 20172022 based on SeptemberJune 30, 2017,2022 debt balances. The forecasted interest payments are comprised primarily of the semi-annual payment of $13.8payments totaling $28 million (paid in April and October) for the 6.875%7.00% senior secured notes.

The Company's redeemable noncontrolling interest in Voltyre-Prom includes a settlement put option which is exercisable July through December of 2018. If exercised in July 2018, the redeemable noncontrolling interest may be purchased, with cash or Titan common stock, at an amount set by the Shareholder's Agreement, which is estimated to be approximately $117 million. See Note 9 to the Company's condensed consolidated financial statements regarding the Company's redeemable noncontrolling interest and the settlement put option.

In the future, Titan may seek to grow by making acquisitions, which will depend in large part on its ability to identify suitable acquisition candidates, negotiate acceptable terms for their acquisition, finance those acquisitions, and successfully integrate the acquired assets or business.

Subject to the terms of the agreements governing Titan's outstanding indebtedness, the Company may finance future acquisitions with cash on hand, cash from operations, additional indebtedness, issuing additional equity securities, and divestitures.

Cash and cash equivalents totaling $155.7 million at September 30, 2017, along with anticipated internal cash flows from operations and utilization of remaining available borrowings,availability on global credit facilities, are expected to provide sufficient liquidity for working capital needs, debt maturities, and capital expenditures, and potential acquisitions.expenditures. Potential divestitures and unencumbered assets are also a means to provide for future liquidity needs.


During June 2022, Moody’s Investors Service upgraded its credit rating for the Company, including its senior secured notes. The rating upgrade reflected Moody's expectation that favorable demand growth in Titan's end markets, primarily agricultural equipment, will support continued strength in the Company's credit metrics into 2023.


CRITICAL ACCOUNTING ESTIMATES
TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

OTHER EVENTS
On September 21, 2017, a fire occurred at a facility of Titan Tire Reclamation Corporation (TTRC), a subsidiaryThere were no material changes in the Company’s Critical Accounting Estimates since the filing of the Company, located2021 Form 10-K. As discussed in Fort McMurray, AB.  The TTRC facility contains six thermal vacuum recovery (TVR) units, which are large, contained capsules used to recycle large mining tires.  The fire started within onethe 2021 Form 10-K, the preparation of the TVR unitscondensed consolidated financial statements in conformity with US GAAP requires management to make estimates, assumptions, and was contained to a building housing threejudgments that affect the reported amount of the TVR units. The TTRC staff is working with affected customers to minimize the impact to their respective businesses. Three other TVR units located in another buildingassets and liabilities and disclosure of contingent assets and liabilities at the TTRC facility were not affected. Titan carries both casualty and property insurance for its facilities and equipment, as well as business interruption insurance, and is reviewing the extent and scope of this coverage with its insurance carriers. The Company has insufficient information to determine if a contingent loss has occurred; therefore, no accrual was recorded.


RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." This update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires disclosure about the nature, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in this update were deferred by ASU No. 2015-14, "Revenue form Contracts with Customers (Topic 606) Deferral of Effective Date," and are now effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company is in the process of comparing its current revenue recognition policies to the requirements of ASU No. 2014-09. For the majority of Titan’s revenue arrangements, no significant impacts are expected, as these transactions are not accounted for under industry-specific guidance that will be superseded by ASU No. 2014-09 and generally consist of a single performance obligation to transfer promised goods or services. While the Company has not identified any material differences in the amount and timing of revenue recognition related to ASU No. 2014-09, the evaluation is not complete and, accordingly, Titan has not yet reached a conclusion on the overall impacts of adopting ASU No. 2014-09, if any. The guidance provides for adoption either retrospectively to each prior reporting period or as a cumulative-effect adjustment as of the date of adoption. The Company has determined that it will adopt the guidance usingcondensed 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 cumulative-effect adjustment asdiscussion of the date of adoption. The Company believes it is following an appropriate timeline to allow for proper recognition, presentation, and disclosure upon adoption in the year beginning on January 1, 2018.Company’s updated accounting policies.

In April 2016, the FASB issued ASU No. 2016-10, "Identifying Performance Obligations and Licensing." This ASU clarifies the following aspects of Topic 606: identifying performance obligations and the licensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, "Narrow-Scope Improvements and Practical Expedients." This ASU affects only narrow aspects of Topic 606 related to assessing the collectability criterion; presentation of sales tax; noncash consideration; and contract modifications and completed contracts at transition. The amendments in these updates affect the guidance in ASU No. 2014-09, as previously discussed above, and the effective dates are the same as those for ASU No. 2014-09.

In December 2016, the FASB issued ASU No. 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers." The amendments in this update affect narrow aspects of the guidance issued in ASU No. 2014-09, as discussed above, and the effective dates are the same as those for ASU No. 2014-09.

In January 2016, the FASB issued ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities." This update addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." This update was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently assessing the impact that adopting this new accounting guidance will have on the Company's consolidated financial statements.



TITAN INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

In August 2016, the FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments." This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual reporting period. The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, "Intra-Entity Transfers of Assets other than Inventory." This update requires the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company adopted this guidance early, effective January 1, 2017. The adoption of this guidance did not have a material effect on the Company's consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." This update requires an employer to report the service cost component of defined benefit pension cost and postretirement benefit cost in the same line item of the income statement as other compensation costs arising from services rendered by the pertinent employees during the period. The amendments in this update are effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, "Scope of Modification Accounting." This update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in accordance with Topic 718, Compensation-Stock Compensation. The amendments in this update are effective for annual reporting periods, and interim periods within those annual reporting periods, beginning after December 15, 2017. The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

MARKET CONDITIONS AND OUTLOOK
The market for new equipment, which has been in a cyclical downturn, is beginning to show signs of recovery. In the first nine months of 2017, Titan experienced higher sales when compared to the same period of 2016.  The higher sales levels were primarily the result of increased demand for replacement equipment used in the agricultural market. In addition, currency translation positively impacted sales.

Energy, natural raw material, and petroleum-based product costs were volatile and negatively affected the Company’s margins in the first and second quarters of 2017.  Many of Titan’s overhead expenses are fixed; therefore, lower seasonal trends may cause negative fluctuations in quarterly profit margins and affect the financial condition of the Company.

AGRICULTURAL MARKET OUTLOOK
Reduced income levels have lowered demand for large farm equipment over the last business cycle. More specifically, large equipment sales have deteriorated significantly since 2013 after a robust cycle in prior years. The shift to lower horsepower tractors has had a negative impact on revenue and margin performance. Most major OEMs are forecasting 2017 agricultural equipment sales to begin increasing on a year-over-year basis within most regions. North American used equipment levels remain relatively high with some decreases recently from peak levels. Excess used equipment inventory and values can also negatively impact the new equipment market; however, with the extended equipment replacement cycle, opportunity exists for higher aftermarket replacement sales. Many variables, including weather, grain prices, export markets, currency, and government policies and subsidies can greatly influence the overall health of the agricultural economy.

EARTHMOVING/CONSTRUCTION MARKET OUTLOOK
Demand for larger products used in the mining industry is expected to improve slightly in 2017, with demand for our products in this market expected to improve nominally as compared to 2016. Demand for small and medium sized earthmoving/construction equipment used in the housing and commercial construction sectors is expected to be up slightly in 2017 relative to 2016. The earthmoving/construction segment is affected by many variables, including commodity prices, road construction, infrastructure, government appropriations, housing starts, and other macroeconomic drivers.

CONSUMER MARKET OUTLOOK
The consumer market is expected to remain highly competitive for 2017. The consumer segment is affected by many variables including consumer spending, interest rates, government policies, and other macroeconomic drivers.


TITAN INTERNATIONAL, INC.



Item 3. Quantitative and Qualitative Disclosures About Market Risk

SeeTitan 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, 2021. For quantitative and qualitative disclosures about market risk, see Item 7A - Quantitative and Qualitative Disclosures About Market Risk included in the Company's Annual Report on2021 Form 10-K for the year ended December 31, 2016. There has been no material change in this information.10-K.


Item 4. Controls and Procedures

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 as amended)(the Exchange Act)) as of the end of the period covered by this Form 10-Q.June 30, 2022. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Form 10-Q,June 30, 2022, 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.

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Changes in Internal Controls
There were no changes in internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) under the Exchange Act) that occurred during the thirdsecond quarter of fiscal 2017year 2022 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, the Company's disclosure controls and procedures or internal control over financial reporting may not prevent or detect all misstatements or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in a cost-effective control system, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur due to simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. 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.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is a partysubject, from time to routinetime, to certain legal proceedings and claims arising out of the normal course of business. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or theits business, which cover a wide range of possible loss, the Company believes atmatters, including environmental issues, product liability, contracts, and labor and employment matters. See Note 16- Litigation in Part I, Item 1, Notes to Condensed Consolidated Financial Statements of this time that none of these actions, individually or in the aggregate, will have a material adverse effect on the consolidated financial condition, results of operations, or cash flows of the Company. However, due to the difficult nature of predicting unresolved and future legal claims, the Company cannot anticipate or predict the material adverse effect on its consolidated financial condition, results of operations, or cash flows as a result of efforts to comply with, or liabilities pertaining to, legal judgments.Form 10-Q for further discussion, which is incorporated herein by reference.

Two of Titan’s subsidiaries are currently involved in litigation concerning environmental laws and regulations.

In October 2010, the United States of America, on behalf of the Environmental Protection Agency (EPA), filed a complaint against Dico, Inc. (Dico) and Titan Tire Corporation (Titan Tire) in the U.S. District Court for the Southern District of Iowa, wherein the EPA sought civil penalties, punitive damages, and response costs against Dico and Titan Tire pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA).

In June 2015, Titan Tire and Dico, Inc. appealed the U.S. District Court’s order granting the EPA’s motion for summary judgment that found Dico and Titan Tire liable for civil penalties and response costs for violating CERCLA and Dico liable for civil penalties and punitive damages for violating an EPA Administrative Order.

In December 2015, the United States Court of Appeals for the Eighth Circuit reversed the District Court’s summary judgment order with respect to “arranger” liability for Titan Tire and Dico under CERCLA and the imposition of punitive damages against Dico for violating the EPA Administrative Order, but affirmed the summary judgment order imposing civil penalties in the amount of $1.62 million against Dico for violating the EPA Administrative Order. The case was remanded to the District Court for a new trial on the remaining issues.

The trial was held in April 2017. On September 5, 2017, the District Court issued an order: (a) concluding Titan Tire and Dico arranged for the disposal of a hazardous substance in violation of 42 U.S.C. § 9607(a); (b) holding Titan Tire and Dico jointly and severally liable for $5.45 million in response costs previously incurred and reported by the United States relating to the alleged violation, including enforcement costs and attorney’s fees; and (c) awarding a declaratory judgment holding Titan Tire and Dico jointly and severally liable for all additional response costs previously incurred but not yet reported or to be incurred in the future, including enforcement costs and attorney’s fees. The District Court also held Dico liable for $5.45 million in punitive damages under 42 U.S.C. § 9607(c)(3) for violating a unilateral administrative order. The punitive damages award does not apply to Titan Tire. The Company accrued a contingent liability of $6.5 million, representing $5.45 million in costs incurred by the United States and $1.05 million of additional response costs, for this order in the quarter ended September 30, 2017. Titan Tire and Dico will appeal to the United States Court of Appeals for the Eighth Circuit.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Item 1A. Risk Factors to the Company's Annual Report on2021 Form 10-K for the year ended December 31, 2016, filed on March 15, 2017.10-K.



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Item 6. Exhibits

31.1
31.2
32
101.INS101.SCHXBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104The cover page from this Current Report on Form 10-Q formatted as inline XBRL



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TITAN INTERNATIONAL, INC.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TITAN INTERNATIONAL, INC.
(Registrant)

Date:NovemberTITAN INTERNATIONAL, INC.
(Registrant)

Date:August 1, 20172022
By:
/s/  PAUL G. REITZ
Paul G. Reitz
President and Chief Executive Officer
(Principal Executive Officer)

(Principal Executive Officer)

By:
/s/ JAMES M. FROISLANDDAVID A. MARTIN
James M. FroislandDavid A. Martin
SVP and Chief Financial Officer
(Principal Financial Officer)



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