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

titancolora33.jpg

FORM 10-Q
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: September 30, 2024
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-12936

TITAN INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

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

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

60185
(Zip Code)
(630) 377-0486
(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  ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes ☑  No ☐
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,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑Accelerated filer ☐
Non-accelerated filer ☐Smaller reporting company ☐
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. ☐ 

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

Indicate the number of shares of Titan International, Inc. outstanding: 63,139,435 shares of common stock, $0.0001 par value, as of October 22, 2024.



TITAN INTERNATIONAL, INC.

TABLE OF CONTENTS

Page

Table of Contents
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 endedNine months ended
September 30,September 30,
 2024202320242023
Net sales$447,985 $401,781 $1,462,364 $1,431,601 
Cost of sales389,180 335,708 1,245,747 1,184,076 
Gross profit58,805 66,073 216,617 247,525 
Selling, general and administrative expenses49,533 33,587 140,536 102,917 
Acquisition related expenses— — 6,196 — 
Research and development expenses4,199 3,167 12,071 9,399 
Royalty expense2,266 2,344 7,613 7,200 
Income from operations2,807 26,975 50,201 128,009 
Interest expense(9,005)(7,229)(27,103)(22,446)
Interest income3,064 3,298 8,483 6,261 
Foreign exchange (loss) gain(2,525)876 (2,338)(882)
Other income 375 461 4,057 2,409 
(Loss) income before income taxes(5,284)24,381 33,300 113,351 
Provision for income taxes12,915 4,718 38,103 28,363 
Net (loss) income(18,199)19,663 (4,803)84,988 
Net income attributable to noncontrolling interests50 383 2,096 3,663 
Net (loss) income attributable to Titan and applicable to common shareholders$(18,249)$19,280 $(6,899)$81,325 
(Loss) earnings per common share:    
Basic$(0.25)$0.31 $(0.10)$1.29 
Diluted$(0.25)$0.31 $(0.10)$1.29 
Average common shares and equivalents outstanding:  
Basic72,013 62,598 69,900 62,810 
Diluted72,013 63,095 69,900 63,271 
 

See accompanying Notes to Condensed Consolidated Financial Statements.
1
Table of Contents
TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(All amounts in thousands)


Three months ended
September 30,
 20242023
Net (loss) income$(18,199)$19,663 
Derivative loss(139)(82)
Currency translation adjustment, net11,064 (26,694)
Pension liability adjustments, net of tax of $(15) and $(21), respectively
29 80 
Comprehensive loss(7,245)(7,033)
Net comprehensive loss attributable to noncontrolling interests(1,779)(891)
Comprehensive loss attributable to Titan$(5,466)$(6,142)


Nine months ended
September 30,
 20242023
Net (loss) income$(4,803)$84,988 
Derivative loss(211)(232)
Currency translation adjustment, net(19,667)(20,395)
Pension liability adjustments, net of tax of $26 and $(51), respectively
16 173 
Comprehensive (loss) income(24,665)64,534 
Net comprehensive income (loss) attributable to noncontrolling interests2,144 (1,563)
Comprehensive (loss) income attributable to Titan$(26,809)$66,097 


See accompanying Notes to Condensed Consolidated Financial Statements.
2
Table of Contents
TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share data)
 September 30,
2024		December 31,
2023
Assets(unaudited)
Current assets  
Cash and cash equivalents$227,293 $220,251 
Accounts receivable, net of allowance of $4,117 and $5,340
272,837 219,145 
Inventories453,632 365,156 
Prepaid and other current assets71,977 72,229 
Total current assets1,025,739 876,781 
Property, plant and equipment, net440,298 321,694 
Operating lease assets120,330 11,955 
Goodwill35,810 — 
Intangible assets, net13,036 1,431 
Deferred income taxes8,106 38,033 
Other long-term assets43,405 39,351 
Total assets$1,686,724 $1,289,245 
Liabilities  
Current liabilities  
Short-term debt$15,025 $16,913 
Accounts payable234,302 201,201 
Operating leases13,077 5,021 
Other current liabilities168,897 139,378 
Total current liabilities431,301 362,513 
Long-term debt503,429 409,178 
Deferred income taxes2,524 2,234 
Operating leases109,187 6,153 
Other long-term liabilities42,229 41,752 
Total liabilities1,088,670 821,830 
Commitments and Contingencies
Equity  
Titan shareholders' equity
Common stock ($0.0001 par value, 120,000,000 shares authorized, 78,447,035 issued and 71,184,028 outstanding at September 30, 2024; 66,525,269 issued and 60,715,855 outstanding at December 31, 2023)
— — 
Additional paid-in capital738,420 569,065 
Retained earnings162,724 169,623 
Treasury stock (at cost, 7,263,007 shares at September 30, 2024 and 5,809,414 shares at December 31, 2023)
(64,424)(52,585)
Accumulated other comprehensive loss(238,953)(219,043)
Total Titan shareholders’ equity597,767 467,060 
Noncontrolling interests287 355 
Total equity598,054 467,415 
Total liabilities and equity$1,686,724 $1,289,245 
See accompanying Notes to Condensed Consolidated Financial Statements.
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TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(All amounts in thousands, except share data)
  Number of
common shares		Additional
paid-in
capital		Retained earningsTreasury stockAccumulated other comprehensive (loss) incomeTotal Titan Equity Non-controlling interestTotal Equity
Balance January 1, 202460,715,855 $569,065 $169,623 $(52,585)$(219,043)$467,060 $355 $467,415 
Net income 9,201 9,201 773 9,974 
Currency translation adjustment, net(14,032)(14,032)(336)(14,368)
Pension liability adjustments, net of tax148 148 148 
Derivative gain2 2 2 
Stock-based compensation266,817 (2,388)2,420 32 32 
Issuance of treasury stock under 401(k) plan29,523 174 267 441 441 
Common stock repurchase(100,000)(1,402)(1,402)(1,402)
Common stock issuance11,921,766 168,693 168,693 168,693 
Balance March 31, 202472,833,961 $735,544 $178,824 $(51,300)$(232,925)$630,143 $792 $630,935 
Net income2,149 2,149 1,273 3,422 
Currency translation adjustment, net(18,576)(18,576)2,213 (16,363)
Pension liability adjustments, net of tax(161)(161)(161)
Derivative loss(74)(74)(74)
Stock-based compensation78,530 1,058 711 1,769 1,769 
Issuance of treasury stock under 401(k) plan36,753 118 333 451 451 
Common stock repurchase(775,000)(6,360)(6,360)(6,360)
Balance June 30, 202472,174,244 $736,720 $180,973 $(56,616)$(251,736)$609,341 $4,278 $613,619 
Net (loss) income(18,249)(18,249)50 (18,199)
Currency translation adjustment, net12,893 12,893 (1,829)11,064 
Pension liability adjustments, net of tax29 29 29 
Derivative loss(139)(139)(139)
Stock-based compensation— 1,800 — 1,800 1,800 
Issuance of treasury stock under 401(k) plan59,784 (100)536 436 436 
Common stock repurchase(1,050,000)(8,344)(8,344)(8,344)
Sale of investment— (2,212)(2,212)
Balance September 30, 202471,184,028 $738,420 $162,724 $(64,424)$(238,953)$597,767 $287 $598,054 

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  Number of
common shares		Additional
paid-in
capital		Retained earningsTreasury stockAccumulated other comprehensive (loss) incomeTotal Titan Equity Non-controlling interestTotal Equity
Balance January 1, 202362,843,961 $565,546 $90,863 $(23,418)$(251,755)$381,236 $1,902 $383,138 
Net income31,838 31,838 1,592 33,430 
Currency translation adjustment, net8,039 8,039 (1,095)6,944 
Pension liability adjustments, net of tax(30)(30)(30)
Derivative loss(111)(111)(111)
Stock-based compensation322,157 (1,303)2,003 700 700 
Issuance of treasury stock under 401(k) plan28,733 250 179 429 429 
Common stock repurchase (109,789)(1,293)(1,293)(1,293)
Balance March 31, 202363,085,062 $564,493 $122,701 $(22,529)$(243,857)$420,808 $2,399 $423,207 
Net income30,207 30,207 1,688 31,895 
Currency translation adjustment, net2,212 2,212 (2,857)(645)
Pension liability adjustments, net of tax123 123 123
Derivative loss(39)(39)(39)
Stock-based compensation54,084 1,143 372 1,515 1,515 
Issuance of treasury stock under 401(k) plan42,353 178 271 449 449 
Common stock repurchase(493,279)(5,097)(5,097)(5,097)
Acquisition of additional non-controlling interest(80)(80)(368)(448)
Balance June 30, 202362,688,220 $565,734 $152,908 $(26,983)$(241,561)$450,098 $862 $450,960 
Net income19,280 19,280 383 19,663 
Currency translation adjustment, net(25,420)(25,420)(1,274)(26,694)
Pension liability adjustments, net of tax80 80 80 
Derivative loss(82)(82)(82)
Stock-based compensation1,485 1,485 1,485 
Issuance of treasury stock under 401(k) plan38,813 183 268 451 451 
Common stock repurchase(1,026,795)(12,674)(12,674)(12,674)
Balance September 30, 202361,700,238 $567,402 $172,188 $(39,389)$(266,983)$433,218 $(29)$433,189 


See accompanying Notes to Condensed Consolidated Financial Statements.
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TITAN INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(All amounts in thousands)
Nine months ended September 30,
Cash flows from operating activities:20242023
Net (loss) income$(4,803)$84,988 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization40,059 31,598 
Deferred income tax provision21,646 5,868 
Income on indirect taxes— (3,096)
Loss (gain) on fixed asset and investment sale625 (409)
Stock-based compensation3,601 3,700 
Issuance of stock under 401(k) plan1,328 1,329 
Proceeds from property insurance settlement(3,537)— 
Foreign currency loss (gain)1,375 (2,348)
(Increase) decrease in assets, net of acquisitions:  
Accounts receivable28,886 17,503 
Inventories53,914 32,197 
Prepaid and other current assets10,856 18,386 
Other assets(2,431)(410)
Increase (decrease) in liabilities, net of acquisitions:  
Accounts payable(28,502)(62,751)
Other current liabilities8,317 12,241 
Other liabilities1,417 1,310 
Net cash provided by operating activities132,751 140,106 
Cash flows from investing activities:  
Capital expenditures(52,318)(41,480)
Business acquisition, net of cash acquired(143,643)— 
Proceeds from sale of investment1,791 — 
Proceeds from property insurance settlement3,537 — 
Proceeds from sale of fixed assets1,603 1,795 
Net cash used for investing activities(189,030)(39,685)
Cash flows from financing activities:  
Proceeds from borrowings159,614 6,628 
Repayments of debt(66,601)(25,017)
Payment of debt issuance costs(3,115)— 
Repurchase of common stock(16,106)(19,064)
Other financing activities(738)(2,540)
Net cash provided by (used for) financing activities73,054 (39,993)
Effect of exchange rate changes on cash(9,733)(8,103)
Net increase in cash and cash equivalents7,042 52,325 
Cash and cash equivalents, beginning of period220,251 159,577 
Cash and cash equivalents, end of period$227,293 $211,902 
Supplemental information:
Interest paid$20,500 $15,971 
Income taxes paid, net of refunds received 16,422 17,581 
Non cash financing activity:
Issuance of common stock in connection with business acquisition$168,693 $— 
See accompanying Notes to Condensed Consolidated Financial Statements.
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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The accompanying unaudited condensed consolidated interim financial statements include the accounts of Titan International, Inc. and its subsidiaries (Titan or the Company) and have been prepared in accordance with accounting principles generally accepted in the United States of America (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’s latest Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024 (the 2023 Form 10-K). All 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.

Reclassifications
The Company has reclassified certain prior period amounts in the consolidated balance sheet, primarily lease liabilities, warranty liabilities and interest expense and interest income, to conform with the current period presentation.

Business Combinations
We account for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, Business Combinations, which requires an allocation of the consideration we paid to the identifiable assets, intangible assets and liabilities based on the estimated fair values as of the closing date of the acquisition. The excess of the fair value of the purchase price over the fair values of these identifiable assets, intangible assets and liabilities is recorded as goodwill.

Purchased intangibles other than goodwill are initially recognized at fair value and amortized over their useful lives unless those lives are determined to be indefinite. The valuation of acquired assets will impact future operating results. The fair value of identifiable intangible assets is determined using an income approach on an individual asset basis. Specifically, we use the multi-period excess earnings method to determine the fair value of customer relationships and the relief-from-royalty approach to determine the fair value of the tradename and proprietary technology. Determining the fair value of acquired intangibles involves significant estimates and assumptions, including forecasted revenue growth rates, EBIT margins, percentage of revenue attributable to the tradename, contributory asset charges, customer attrition rate, market-participant discount rates, the assumed royalty rates and income tax rates.

The determination of the useful life of an intangible asset other than goodwill is based on factors including historical tradename performance with respect to consumer name recognition, geographic market presence, market share, plans for ongoing tradename support and promotion, customer attrition rate, and other relevant factors.

Goodwill and Other Intangible Assets
Goodwill represents the excess of purchase price over the fair value of net assets acquired. Goodwill is not amortized. For goodwill, impairment tests are required at least annually, or more frequently if events or circumstances indicate that it may be impaired, when some portion but not all of a reporting unit is disposed of or classified as assets held for sale, or when a change in the composition of reporting units occurs for other reasons, such as a change in segments. Based on its current organizational structure, the Company identified reporting units for which cash flows are determinable and to which goodwill was allocated.

The Company will perform its goodwill impairment test annually in the fourth quarter. A quantitative test is used to determine existence of goodwill impairment and the amount of the impairment loss at the reporting unit level. The quantitative test compares the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses an income-based valuation method, determining the present value of estimated future cash flows, to estimate the fair value of a reporting unit. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Factors used in the impairment analysis require
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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
significant judgment, and actual results may differ from assumed and estimated amounts. The Company uses its own market assumptions including internal projections of future cash flows, discount rates and other assumptions considered reasonable in the analysis and reflective of market participant assumptions. These forecasts are based on historical performance and future estimated results. The discount rates utilized are based on a capital asset pricing model and published relevant industry rates, which take into consideration the risks and uncertainties inherent to the reporting units and in the internally developed forecasts.

Other intangible assets with determinable lives primarily consist of customer lists/relationships and trademarks. Refer to Note 2 to the condensed consolidated financial statements for further information.

Long-lived assets (including definite-lived intangible assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, such as a significant sustained change in the business climate. If an indicator of impairment exists for any grouping of assets, an estimate of undiscounted future cash flows is prepared and compared to its carrying value. If an asset group is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset group over its fair value, as determined by an estimate of discounted future cash flows.

Fair Value of Financial Instruments
The Company’s financial assets measured at fair value on a recurring basis include investments in marketable equity securities of $12.6 million as of September 30, 2024, which are Level 1 fair value measurements as the Company uses quoted market prices. Cash and cash equivalents are carried at cost, which approximates fair value because of the short-term maturities of these instruments. The Company’s revolving credit facility and notes payable are carried at cost, which approximates fair value due to their short terms or stated rates, which are considered Level 2 fair value measurements.  Our 7.00% senior secured notes due 2028 were carried at a cost of $396.9 million at September 30, 2024. The fair value of the senior secured notes due 2028 at September 30, 2024, as determined by an independent pricing platform using real-time trade data, was approximately $395.8 million, which was determined to be a level 2 fair value measurement.

Hyperinflation in Argentina and Turkey
In July 2018 and March 2022, the three-year cumulative rate of inflation for consumer prices and wholesale prices reached a level in excess of 100% for Argentina and Turkey, respectively. As a result, in accordance with ASC 830, Foreign Currency Matters, Argentina and Turkey were considered hyperinflationary economies and the Company applied the standard for the year ended December 31, 2023.

For the three and nine months ended September 30, 2024, the Company recognized a net monetary loss of $0.8 million and $2.5 million recorded in foreign exchange loss in the consolidated statements of operations associated with the application of ASC 830.

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, announced targeted economic sanctions on Russia, certain Russian citizens and enterprises. The continuation of the conflict 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 currently owns 64.3% of the Voltyre-Prom, a leading producer of agricultural and industrial tires in Volgograd, Russia, which represents approximately 5% and 7% of consolidated assets of Titan as of September 30, 2024 and December 31, 2023, respectively. The Russian operations represent 4% and 5% of consolidated global sales for the three months ended September 30, 2024 and 2023, respectively, while representing 4% and 6% of consolidated global sales for the nine months ended September 30, 2024 and 2023, respectively. The impact of the 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 including the increased cost of energy in Europe and the ancillary impacts that the military conflict could have on other global operations.

Share Repurchase Program
On December 16, 2022, the Board of Directors authorized a share repurchase program allowing for the expenditure of up to $50.0 million (the Share Repurchase Program) for the repurchase of the Company's common stock. This authorization took effect immediately and will remain in place for up to three years. Under the Share Repurchase Program, Titan repurchased 1,050,000 shares of its common stock totaling $8.3 million during the three months ended September 30, 2024, and 1,925,000
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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
shares of its common stock totaling $16.1 million during the nine months ended September 30, 2024 and 2,653,786 shares of its common stock totaling $32.6 million during 2023. As of September 30, 2024, $1.3 million remains available for future share repurchases under this program. The Company records treasury stock using the cost method.

Supplier Financing Program
A subsidiary of Titan participates in supplier financing programs pursuant to credit agreements between certain suppliers and financial institutions. The program enables those suppliers to receive payment from participating financial institutions prior to the payment date specified in the terms between Titan and the supplier. Titan does not incur annual service fees associated with its enrollment in the supplier financing program. The transactions are at the sole discretion of both the suppliers and the financial institution, and Titan is not a party to the agreement and has no economic interest in the supplier's decision to receive payment prior to the payment date. The terms between Titan and a supplier, including the amount due and scheduled payment dates, are not impacted by a supplier's participation in the program. Amounts due to suppliers who participate in the program are included in the accounts payable line item in Titan's Consolidated Balance Sheets, and Titan’s payments made under the program are reflected in cash flows from operating activities in Titan's Consolidated Statements of Cash Flows. For suppliers who participate in a supplier financing program, Titan will pay the financial institution directly rather than the supplier. The confirmed obligations under the supplier financing programs included in the accounts payable line item in Titan's Consolidated Balance Sheet were $8.5 million at September 30, 2024, and $7.4 million at December 31, 2023.

New Accounting Pronouncements to be Adopted in Future Periods
In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07, Improvements to Reportable Segment Disclosures, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU require, among other things, disclosure of significant segment expenses that are regularly provided to an entity's chief operating decision maker (CODM) and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Annual disclosures are required for fiscal years beginning after December 15, 2023 and interim disclosures are required for periods within fiscal years beginning after December 15, 2024. Retrospective application is required, and early adoption is permitted. These requirements are not expected to have an impact on our financial statements, but will result in significantly expanded reportable segment disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, may be applied prospectively or retrospectively, and allows for early adoption. These requirements will impact our income tax disclosures.

2. BUSINESS COMBINATION

Acquisition of The Carlstar Group

On February 29, 2024, the Company acquired 100% of the equity interests of The Carlstar Group, LLC ("Carlstar") for the following purchase consideration and subject to a working capital adjustment based on an agreed upon working capital target (amounts in thousands):
Purchase Consideration
Titan International, Inc. common stock$168,693 
Base cash consideration, net of cash acquired of $10,288
127,500 
$296,193 
Additional cash consideration for excess net working capital acquired19,759 
Other debt-like items(3,616)
Total purchase consideration, net of cash acquired$312,336 

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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Carlstar is a global manufacturer and distributor of wheels and tires for a variety of end-market verticals including outdoor power equipment, power sports, trailers, and small to midsize agricultural and construction equipment. Carlstar has 17 manufacturing and distribution facilities located in four countries and provides solutions to customers in North America, Europe and China.

Since the initial measurement of the identified assets acquired and liabilities assumed, the Company has made significant progress in completing certain of our additional valuation and analyses. As such, we have updated our initial allocation of the purchase consideration during the third quarter of 2024. The principle changes include (i) increase in the value of inventory to include inventory in-transit to a customer locations for which transfer of title has not occurred, (ii) decrease in the value of Property, Plant, and Equipment primarily to reflect updated assumptions surrounding disposed and idle assets, and (iii) decrease in the fair market value adjustment associated with a certain right-of-use asset based on updated underlying valuation assumptions.

The following table summarizes the measurement period changes since the first quarter of 2024, as well as the updated and initial preliminary allocation of purchase price consideration to the major classes of assets and liabilities (amounts in thousands) as of February 29, 2024:
Updated Purchase Price AllocationMeasurement Period ChangesInitial Purchase Price Allocation
Accounts receivable$92,043 $(6,396)$98,439 
Inventories150,900 4,912 145,988 
Prepaid and other current assets13,339 — 13,339 
Property, plant, and equipment111,580 (16,582)128,162 
Other long-term assets94,304 (1,899)96,203 
Goodwill35,810 22,943 12,867 
Intangible assets12,000 (3,770)15,770 
Fair value of assets acquired$509,976 $(792)$510,768 
Accounts payable$66,055 $— $66,055 
Other current liabilities26,377 — 26,377 
Operating leases95,476 — 95,476 
Deferred tax liabilities8,459 (1,992)10,451 
Other long-term liabilities1,273 (236)1,509 
Fair value of liabilities assumed$197,640 $(2,228)$199,868 
Purchase Price$312,336 $1,436 $310,900 

Goodwill represents value the Company expects to be created by combining the operations of the acquired business with the Company's operations, including the expansion of customer relationships, access to new customers, and potential cost savings and synergies. Goodwill related to the acquisition is expected to be deductible for tax purposes. The preliminary carrying value of goodwill by operating segment as of September 30, 2024 is as follows:
 Carrying Value as of September 30, 2024
Agricultural$5,478 
Earthmoving/construction— 
Consumer30,332 
Total$35,810 

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

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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table summarizes the carrying amounts and weighted average lives of the acquired intangible assets as of February 29, 2024 (amounts in thousands):
 Carrying ValueWeighted Average Amortization
(in Years)
Customer lists/relationships$6,500 10.00
Trade names5,500 13.50
Total$12,000 11.90

Through September 30, 2024, the actual revenue and income before taxes of Carlstar since the acquisition date of February 29, 2024 included in the Consolidated Statement of Operations is as shown below (amounts in thousands). The net income includes the effect of fair value adjustments for the amortization of inventory, intangible assets, and depreciation of property, plant and equipment.
 
From Acquisition Date to
September 30, 2024
Carlstar revenue$316,496 
Carlstar income before taxes22,069 

The following is the unaudited pro forma financial information for the three and nine months ended September 30, 2024 and 2023 that reflects our results of our operations as if the acquisition of Carlstar had been completed on January 1, 2023. This unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what the actual results of operations would have been had the transactions taken place on January 1, 2023, nor is it indicative of the future consolidated results of operations or financial position of the combined companies (amounts in thousands, except per share data).

Three months endedNine months ended
September 30,September 30,
 2024202320242023
Pro forma revenues$447,985 $547,410 $1,564,182 $1,916,526 
Pro forma net (loss) income(17,399)24,731 18,798 89,786 
Net (loss) income per common share, basic$(0.24)$0.33 $0.26 $1.20 
Net (loss) income per common share, diluted(0.24)0.33 0.26 1.19 

These pro forma amounts have been calculated after applying Titan's accounting policies and making certain adjustments, which primarily relate to: (i) severance-related costs, (ii) adjustments relating to the fair value step-ups to inventory, and (iii) transaction-related costs of both Titan and Carlstar. These pro forma amounts were adjusted to be excluded from the unaudited pro forma information for the three and nine months ended September 30, 2024 and were adjusted to include these amounts for the three and nine months ended September 30, 2023.

Total acquisition-related costs for the three and nine months ended September 30, 2024 were $0.0 million and $6.2 million, respectively.

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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
3. ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following (amounts in thousands):
 September 30,
2024		December 31,
2023
Accounts receivable$276,954 $224,485 
Allowance for credit losses(4,117)(5,340)
Accounts receivable, net$272,837 $219,145 

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

Changes in the allowance for credit losses during the nine months ended September 30, 2024 and 2023, respectively, consisted of the following (amounts in thousands):
 20242023
Balance at January 1,$5,340 $6,170 
Provision charged to expense141 — 
Write-offs of accounts receivable(1,364)(517)
Balance at September 30,$4,117 $5,653 

4. INVENTORIES

Inventories consisted of the following (amounts in thousands):
 September 30,
2024		December 31,
2023
Raw material$109,236 $108,504 
Work-in-process48,808 39,921 
Finished goods295,588 216,731 
 $453,632 $365,156 

Inventories are reduced by estimated provisions for slow-moving and obsolete inventory. These provisions reduce the cost basis of the asset.

5. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following (amounts in thousands):
 September 30,
2024		December 31,
2023
Land and improvements$45,570 $42,140 
Buildings and improvements267,847 243,241 
Machinery and equipment706,982 628,975 
Tools, dies and molds127,158 116,328 
Construction-in-process54,511 29,744 
 1,202,068 1,060,428 
Less accumulated depreciation(761,770)(738,734)
 $440,298 $321,694 
 
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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Depreciation on property, plant and equipment were $12.7 million and $9.6 million for the three months ended September 30, 2024 and 2023, respectively, and $38.6 million and $30.4 million for the nine months ended September 30, 2024 and 2023, respectively.

6. INTANGIBLE ASSETS, NET

The components of intangible assets, net consisted of the following (amounts in thousands):
Weighted- Average Useful Lives (in Years)September 30,
2024		December 31,
2023
Amortizable intangible assets:
Customer lists/relationships13.50$6,500 $— 
Trade names10.005,500 — 
Other intangibles15.873,384 3,384 
          Total at cost15,384 3,384 
     Less accumulated amortization(2,348)(1,953)
$13,036 $1,431 

Amortization related to intangible assets were $(0.3) million and $0.2 million for the three months ended September 30, 2024 and 2023, respectively, and $0.8 million and $0.5 million for the nine months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024, the Company recorded a favorable adjustment to amortization expense related to the reduction of amortizable intangible assets associated with a measurement period adjustment associated with the Carlstar purchase price allocation.

The estimated aggregate amortization expense at September 30, 2024, for each of the years (or other periods) set forth below was as follows (amounts in thousands):
October 1 - December 31, 2024$691 
20251,249 
20261,190 
20271,154 
20281,154 
Thereafter7,598 
 $13,036 

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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7. OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following (amounts in thousands):
 September 30,
2024		December 31,
2023
Compensation and benefits$59,551 $47,543 
Warranty13,240 11,848 
Accrued insurance benefits20,898 19,162 
Customer rebates and deposits16,225 15,490 
Accrued other taxes14,200 13,762 
Accrued interest13,245 4,955 
Foreign government grant (1)
3,867 4,509 
Other27,671 22,109 
 $168,897 $139,378 
(1) The Company received government subsidies in 2023 associated with capital expenditure investments in technological and digital innovation in Europe. The amount of the government subsidies is used to offset existing payables to governmental entities in the future. In addition, during 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 its Italian subsidiaries. The grant was recorded as deferred income in non-current liabilities which is being amortized over the life of the reconstructed building. There are no specific stipulations associated with the government grant.

8. WARRANTY

Changes in the warranty liability during the nine months ended September 30, 2024 and 2023, respectively, consisted of the following (amounts in thousands):
 20242023
Warranty liability at beginning of the period$21,710 $19,914 
Provision for warranty liabilities11,689 10,334 
Warranty payments made(11,854)(9,578)
   Other adjustments, including acquisition of Carlstar1,784 — 
Warranty liability at end of the period$23,329 $20,670 

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 and other long-term liabilities on the Condensed Consolidated Balance Sheets.

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

Long-term debt consisted of the following (amounts in thousands):
September 30, 2024
Principal BalanceUnamortized Debt IssuanceNet Carrying Amount
7.00% senior secured notes due 2028
$400,000 $(3,067)$396,933 
Revolving credit facility97,000 — 97,000 
Titan Europe credit facilities17,528 — 17,528 
Other debt6,993 — 6,993 
     Total debt521,521 (3,067)518,454 
Less amounts due within one year15,025 — 15,025 
     Total long-term debt$506,496 $(3,067)$503,429 
December 31, 2023
Principal BalanceUnamortized Debt IssuanceNet Carrying Amount
7.00% senior secured notes due 2028
$400,000 $(3,723)$396,277 
Titan Europe credit facilities22,568 — 22,568 
Other debt7,246 — 7,246 
     Total debt429,814 (3,723)426,091 
Less amounts due within one year16,913 — 16,913 
     Total long-term debt$412,901 $(3,723)$409,178 

The weighted-average interest rates on short-term borrowings within one year at September 30, 2024 and December 31, 2023, were approximately 4.0% and 3.1%, respectively.

Aggregate principal maturities of long-term debt at September 30, 2024 for each of the years (or other periods) set forth below were as follows (amounts in thousands):
October 1 - December 31, 2024$9,028 
20258,603 
20264,683 
2027485 
2028496,389 
Thereafter2,333 
 $521,521 
7.00% senior secured notes due 2028
On April 22, 2021, the Company issued $400 million aggregate principal amount of 7.00% senior secured notes due 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 Wheel Corporation of Illinois, Titan Tire Corporation, Titan Tire Corporation of Freeport, and Titan Tire Corporation of Bryan. The Company is subject to certain covenants associated with the senior secured notes due 2028 and remained in compliance with these debt covenants at September 30, 2024.

Titan Europe Credit Facilities
The Titan Europe credit facilities include borrowings from various institutions totaling $17.5 million in aggregate principal amount at September 30, 2024. Maturity dates on this debt range from less than one year to five years. The interest rates range from 0.5% to 6.5%.
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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Revolving Credit Facility
In connection with the acquisition of Carlstar, Titan entered into a new domestic credit facility which was effective on February 29, 2024. The new credit facility, with Bank of America as agent, consists of a $225.0 million revolving line of credit (the previous credit facility was $125.0 million) and is collateralized by accounts receivable and inventory of certain of the Company's domestic and Canadian subsidiaries. In addition, swingline loans and letters of credit are available under the facility up to an aggregate outstanding amount of $20.0 million for swingline loans and $50.0 million for letters of credit. The credit facility has a five-year term and can be expanded by up to $50.0 million through an uncommitted accordion provision within the agreement. It is scheduled to mature on February 28, 2029 or 91 days prior to the maturity of the Company's 7.00% secured notes due in 2028. The new credit facility has terms similar to those contained in the previous credit facility as well as other enhancements to further improve the availability within the borrowing base. The interest rate of the credit facility is based on the prevailing SOFR rate subject to certain debt levels within each month. As of September 30, 2024, the interest rate was 6.93%.

The Company's amount available for borrowing under the new credit facility at September 30, 2024 totaled $191.0 million, based on eligible accounts receivable and inventory balances. With outstanding letters of credit totaling $9.9 million and $97.0 million in borrowings under the revolving credit facility, the net amount available for borrowing under the new credit facility totaled $84.1 million at September 30, 2024. The Company is subject to certain affirmative and negative covenants under the credit facility, including limits on dividends and repurchases of the Company’s stock, that are described in the credit and security agreement. The Company is in compliance with the debt covenants at September 30, 2024.

Prior to February 29, 2024, the Company had a $125.0 million revolving credit facility with BMO Harris Bank N.A., as agent, and other financial institutions party thereto, until the completion of the new credit facility noted above. The $125.0 million credit facility was collateralized by accounts receivable and inventory of certain of the Company’s domestic subsidiaries and was scheduled to mature in October 2026. The credit facility could have been expanded by up to $50.0 million through an accordion provision within the agreement. From time to time, Titan's availability under this credit facility could have been less than $125.0 million as a result of outstanding letters of credit and eligible accounts receivable and inventory balances at certain of its domestic subsidiaries. This credit facility was terminated in connection with the effectiveness of the new credit facility.

Other Debt
The Company has a working capital loan at Titan Pneus do Brasil Ltda at varying interest rates between approximately 6.9% and 7.6%, which totaled $7.0 million at September 30, 2024. The maturity dates on this loan range from one year to two years. The Company expects to negotiate an extension of the maturity dates on this loan with the applicable financial institution or to repay the loan, as needed.

10. LEASES

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 ASC 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.

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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 ClassificationSeptember 30,
2024		December 31,
2023
Operating lease ROU assetsOperating lease assets$120,330 $11,955 
                                
Operating lease current liabilitiesOperating leases current liabilities$13,077 $5,021 
Operating lease long-term liabilitiesOperating leases long-term liabilities109,187 6,153 
    Total operating lease liabilities$122,264 $11,174 
Finance lease, grossProperty, plant & equipment, net$6,809 $5,175 
Finance lease accumulated depreciationProperty, plant & equipment, net(4,797)(3,489)
   Finance lease, net$2,012 $1,686 
Finance lease current liabilitiesOther current liabilities$1,180 $1,093 
Finance lease long-term liabilitiesOther long-term liabilities1,428 1,321 
   Total finance lease liabilities$2,608 $2,414 
At September 30, 2024, maturities of lease liabilities were as follows (amounts in thousands):
Operating
Leases		Finance
Leases
October 1 - December 31, 2024$5,606 $403 
202519,111 1,057 
202617,942 805 
202715,215 389 
202813,452 195 
Thereafter129,007 16 
Total lease payments$200,333 $2,865 
Less imputed interest78,069 257 
$122,264 $2,608 
Weighted average remaining lease term (in years)13.532.66
Supplemental cash flow information related to leases for the nine months ended September 30, 2024 were as follows: operating cash flows from operating leases were $5.5 million.

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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
11. 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 $0.7 million to the pension plans during the nine months ended September 30, 2024 and $0.1 million are expected to be contributed to the pension plans during the remainder of 2024.

The components of net periodic pension cost consisted of the following for the periods set forth below (amounts in thousands):
Three months endedNine months ended
September 30,September 30,
2024202320242023
Service cost$89 $112 $455 $331 
Interest cost917 1,022 2,820 3,097 
Expected return on assets(1,299)(1,167)(3,901)(3,501)
Amortization of unrecognized prior service cost(14)(16)(44)(49)
Amortization of net unrecognized loss 68 241 204 719 
   Net periodic pension (benefit) cost$(239)$192 $(466)$597 
Service cost is recorded as cost of sales in the Condensed Consolidated Statements of Operations while all other components are recorded in other income.

12. VARIABLE INTEREST ENTITIES

The Company held a variable interest in one joint venture for which Titan is the primary beneficiary. Titan sold the 50% ownership interest in a manufacturer of undercarriage components and complete track systems for earthmoving machines in India on September 30, 2024. Prior to September 30, 2024, as the primary beneficiary of this variable interest entity (VIE), the VIE's assets, liabilities, and results of operations are included in the Company’s Condensed Consolidated Financial Statements. The other equity holder's interests are reflected in “Net income 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 VIE's assets and liabilities included in the Company’s Condensed Consolidated Balance Sheets (amounts in thousands):
 September 30,
2024		December 31,
2023
Cash and cash equivalents$— $355 
Inventory— 1,431 
Other current assets— 2,364 
Property, plant and equipment, net— 2,477 
Other non-current assets— 222 
   Total assets$— $6,849 
Current liabilities$— $1,117 
Other long-term liabilities— 869 
  Total liabilities$— $1,986 

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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 non-recourse obligations. Amounts presented in the table above are adjusted for intercompany eliminations.

The Company holds variable interests in certain VIEs that 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 related 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,
2024		December 31,
2023
Investments$8,030 $7,127 
     Total VIE assets8,030 7,127 
Accounts payable to the non-consolidated VIEs3,540 3,578 
  Maximum exposure to loss$11,570 $10,705 

13. ROYALTY EXPENSE

The Company has trademark license agreements with The Goodyear Tire & Rubber Company to manufacture and sell certain farm tires under the Goodyear brand. These agreements cover sales in North America, Latin America, Europe, the Middle East, Africa, Russia, and other Commonwealth of Independent States countries. Each of these agreements is scheduled to expire in 2025. The Company also has a trademark license agreement with Carlisle Companies, Inc. to manufacture and sell certain tires under the Carlisle brand. This trademark license agreement is scheduled to expire in 2033. Royalty expenses were $2.3 million and $2.3 million for the three months ended September 30, 2024 and 2023, respectively, and $7.6 million and $7.2 million for the nine months ended September 30, 2024 and 2023, respectively.

14. OTHER INCOME

Other income consisted of the following (amounts in thousands):
Three months endedNine months ended
September 30,September 30,
 2024202320242023
Income on indirect taxes (1)
$— $— $— $475 
Gain on property insurance settlement (2)
520 — 2,433 — 
Loss on sale of investment (3)
(1,032)— (1,032)— 
Equity investment income165 222 733 954 
Gain on sale of assets19 87 407 158 
Other income703 152 1,516 822 
 $375 $461 $4,057 $2,409 
(1) In May 2022, the Brazilian tax authorities approved indirect tax credits to be applied against future tax obligations. For the nine months ended September 30, 2023, the Company recorded indirect tax credits of $0.5 million within other income.
(2) The gain on property insurance settlement relates to the receipt of insurance proceeds of $3.5 million offset by costs to repair one of the Company's operating facilities in Italy related to a 2023 hail storm weather event. During the three months ended September 30, 2024, the Company also received insurance proceeds of $0.5 million associated with certain equipment at our North American wheel facility.
(3) In September 2024, the Company sold its remaining ownership interest in an Indian undercarriage business and incurred a loss of $1.0 million as a result of the sale. The sale agreement includes a commitment to purchase approximately $1.7 million of products from the Indian undercarriage business over a two year period.
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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
15. INCOME TAXES

The Company recorded income tax expense of $12.9 million and $4.7 million for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded income tax expense of $38.1 million and $28.4 million, respectively. The Company's effective income tax rate was (244.4)% and 19.4% for the three months ended September 30, 2024 and 2023, respectively, and 114.4% and 25.0% for the nine months ended September 30, 2024 and 2023, respectively.

For the nine months ended September 30, 2024, the rate was negatively impacted by non-deductible interest expense in the United States, foreign branch income related to the Carlstar acquisition, and one-time impacts associated with transaction costs, which were also not fully deductible for income tax purposes. Additionally the rate was impacted by the results of foreign income tax rate differential on the mix of earnings, non-deductible royalty expenses in certain jurisdictions, and certain foreign inclusion items on the domestic provision.

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

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. This process requires management to make estimates, assumptions, and judgments that are uncertain in nature. The Company has established valuation allowances with respect to certain deferred tax assets in the U.S. and certain foreign jurisdictions and continues to monitor and assess the need for valuation allowances in all its jurisdictions.

The Organization Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%. Numerous countries, including European Union member states, have enacted or are expected to enact legislation to be effective as early as January 1, 2024, with general implementation of a global minimum tax by January 1, 2025. Titan will continue to evaluate the potential impact on its Condensed Consolidated Financial Statements and related disclosures but does not anticipate a material impact. Titan did not record any tax associated with Pillar 2 for the three and nine-month periods ended September 30, 2024.

16. (LOSS) EARNINGS PER SHARE

(Loss) earnings per share (EPS) were as follows (amounts in thousands, except per share data):
Three months endedNine months ended
September 30,September 30,
2024202320242023
Net (loss) income attributable to Titan and applicable to common shareholders$(18,249)$19,280 $(6,899)$81,325 
Determination of shares:
   Weighted average shares outstanding (basic)72,013 62,598 69,900 62,810 
   Effect of restricted stock and stock options— 497 — 461 
   Weighted average shares outstanding (diluted)72,013 63,095 69,900 63,271 
(Loss) earnings per common share:
Basic$(0.25)$0.31 $(0.10)$1.29 
Diluted$(0.25)$0.31 $(0.10)$1.29 

The effect of restricted stock and stock options has been excluded for the three and nine months ended September 30, 2024, as the effect would have been antidilutive. The weighted average value excluded for equity awards for the three and nine months ended September 30, 2024 was 0.4 million and 0.5 million, respectively.
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TITAN INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

17. LITIGATION

The Company is a party to routine legal proceedings arising out of the normal course of business. 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. In the opinion of management, the Company is not currently involved in any legal proceedings which, individually or in the aggregate, could have a material effect on its financial position, results of operations, or cash flows.

18. SEGMENT INFORMATION

The Company has aggregated its operating units into reportable segments based on its three customer markets: agricultural, earthmoving/construction, and consumer. These segments are based on the information used by the chief executive officer to make certain operating decisions, allocate portions of capital expenditures and assess segment performance. The accounting policies of the segments are the same as those described in Note 1, “Basis of Presentation and Significant Accounting Policies” to these Notes to the Condensed Consolidated Financial Statements. Segment external revenues, expenses, and income from operations are determined on the basis of the results of operations of operating units of manufacturing facilities. Segment assets are generally determined on the basis of an allocation 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 marketing segments, with each reportable segment including wheels, tires, wheel/tire assemblies, and undercarriage systems and components. Given the integrated manufacturing operations and common administrative and marketing support, a substantial number of allocations primarily based on segment sales data must be made to determine operating segment data.

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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 nine months ended September 30, 2024 and 2023 (amounts in thousands):
Three months endedNine months ended
September 30,September 30,
 2024202320242023
Net sales  
Agricultural$175,439 $212,967 $631,442 $787,973 
Earthmoving/construction136,313 155,045 467,085 528,652 
Consumer136,233 33,769 363,837 114,976 
 $447,985 $401,781 $1,462,364 $1,431,601 
Gross profit  
Agricultural$16,720 $37,026 $89,642 $135,012 
Earthmoving/construction11,653 22,257 55,929 88,583 
Consumer