TITAN INTERNATIONAL INC (TWI)

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS

Management’s discussion and analysis of financial condition and results of operations is designed to provide a reader of the financial statements included in this annual report with a narrative from the perspective of the management of Titan on Titan’s financial condition, results of operations, liquidity, and other factors which may affect the Company’s future results. You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes in "Item 8. Financial Statements and Supplementary Data." The following discussion includes forward-looking statements about our business, financial condition, and results of operations, including discussions about management’s expectations for our business. These statements represent projections, beliefs, and expectations based on current circumstances and conditions and in light of recent events and trends, and you should not construe these statements either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. See “Forward-Looking Statements” and "Item 1A. Risk Factors" in Part I of this Form 10-K.

Acquisition of Carlstar

On February 29, 2024, the Company acquired 100% of the equity interests of Carlstar. The results of Carlstar's operations have been included in our consolidated financial statements since February 29, 2024. Total acquisition-related costs related to the Carlstar acquisition for the year ended December 31, 2024 were $6.2 million.

The purchase consideration for the Carlstar acquisition was allocated to the estimated fair value of assets acquired and liabilities assumed for Carlstar as of February 29, 2024. For further information, refer to Note 2 to our consolidated financial statements.

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BUSINESS

For a description of the Company’s business and segments see "Item 1" in Part I of this Form 10-K.

MARKET CONDITIONS AND OUTLOOK

AGRICULTURAL MARKET OUTLOOK

During recent months, agriculture-related commodity prices and farmer income have been on the rise, however, prices remain lower than historical highs. The conclusion of the United States national political elections appears to have boosted farmer sentiments regarding the agriculture industry outlook. Population growth, a shift in consumer preference toward higher protein diets, and the pressures to replace an aging large equipment fleet in favor of newer and higher productivity technology, have provided encouragement that market conditions may improve to support renewed and continued demand for the Company's products in the mid- to long-term time horizon. The agricultural market has recently experienced a significant slowdown in customer demand, but the Company is hopeful that the underlying market conditions mentioned previously will provide future support for the mid- to long-term demand for the Company's products. Many more variables, including weather, volatility in the price of commodities, grain prices, export markets, foreign currency exchange rates, interest rates, government policies, subsidies, tariffs (including those currently being discussed by the Trump administration and the governments of China, Mexico, and Canada), and the demand for used equipment, can greatly affect the Company's performance in the agricultural market in a given period.

EARTHMOVING/CONSTRUCTION MARKET OUTLOOK

The earthmoving/construction segment is affected by many variables, including commodity prices, road construction, infrastructure, government appropriations, housing starts, and other macroeconomic drivers. The construction market is primarily driven by country-specific GDP and the need for infrastructure developments. The earthmoving/construction markets are currently experiencing a slowdown in OEM demand, but we expect the market to stabilize over the mid to long term given the level of mining capital budgets and forecasted GDP growth. The mining industry has experienced growth given the increased demand for natural resources. Mineral commodity prices are at relatively high levels, which also supports the forecasted mid- to long-term growth.

CONSUMER MARKET OUTLOOK

The consumer market consists of several distinct product lines within different regions. These products include specialty tires and products under several leading brands, inclusive of Carlstar, ITP and Marastar brands within powersports, outdoor power equipment and high-speed trailers. The consumer market also includes light truck tires and other specialty products, including custom mixing of rubber stock, and train brakes. Some aspects of the consumer market are experiencing a significant slowdown, particularly in the Americas. The consumer segment pace of growth can vary from period to period and is affected by many variables including inflationary impacts, consumer spending, interest rates, government policies, tariffs, and other macroeconomic drivers.

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SUMMARY OF RESULTS OF OPERATIONS

The following table sets forth the Company’s statement of operations expressed as a percentage of net sales for the periods indicated.  This table and subsequent discussions should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included elsewhere in this annual report.

In addition, the following table sets forth components of the Company’s net sales classified by segment:

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FISCAL YEAR ENDED DECEMBER 31, 2024, COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2023

RESULTS OF OPERATIONS

Highlights for the year ended December 31, 2024, compared to 2023 (amounts in thousands):

Net Sales

Net sales for the year ended December 31, 2024 were $1.85 billion, compared to $1.82 billion for the year ended December 31, 2023. Net sales growth was primarily driven by increased volumes in the consumer segment, bolstered by the net sales from the Carlstar acquisition, which was $418.9 million. This growth was partially offset by declines in the agricultural and earthmoving/construction segments, attributable to weakened global end customer demand. Additionally, negative price effects primarily from lower steel prices and a 3.3% unfavorable currency translation impact, mainly due to the depreciation of the Argentine peso, Brazilian real and Turkish lira, also contributed to the offset.

Cost of Sales and Gross Profit

Cost of sales was $1.59 billion for the year ended December 31, 2024, compared to $1.52 billion for 2023. The increase in cost of sales was driven by the impact of the Carlstar acquisition. Gross profit for 2024 was $257.8 million, or 14.0% of net sales, compared to $305.8 million, or 16.8% of net sales, for 2023. The change in gross profit and gross margin were primarily due to reduced fixed cost leverage across many of the Company's global production facilities due to significantly lower volume, inflationary costs impacts, negative price/mix and inventory revaluation step-up of $11.5 million related to the Carlstar purchase price allocation. Excluding the inventory revaluation step-up, the gross margin for the year ended December 31, 2024 would have been 14.6% of net sales.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for the year ended December 31, 2024, were $191.8 million, or 10.5% of net sales, up 42.1%, compared to $134.9 million, or 7.4% of net sales, for 2023.  The increase in SG&A was due to the continuing SG&A incurred on the Carlstar operations, which includes the management of distribution centers and heightened depreciation and amortization expenses associated with the acquisition. Without the impact of the acquisition of Carlstar, SG&A would have decreased by approximately 1% or $1.3 million, as the Company controlled expenses in light of more challenging market conditions.

Acquisition-Related Expenses

Acquisition-related expenses for the year ended December 31, 2024 were $6.2 million, reflecting one-time transaction costs for Carlstar.

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Research and Development Expenses

Research and development (R&D) expenses for the year ended December 31, 2024, were $16.5 million, or 0.9% of net sales, compared to $12.5 million, or 0.7% of net sales, for 2023. R&D spending reflects initiatives to improve product designs and an ongoing focus on innovation and quality.

Royalty Expense

The Company has trademark license agreements with Goodyear to manufacture and sell certain farm tires under the Goodyear name. These agreements cover sales in North America, Latin America, Europe, the Middle East, Africa, Russia, and other Commonwealth of Independent States countries. The Company also has a trademark license agreement with Carlisle to manufacture and sell certain tires under the Carlisle® brand. Royalty expenses for the year ended December 31, 2024 were $10.1 million compared to $9.6 million for 2023.

Income from Operations

Income from operations for the year ended December 31, 2024 was $33.2 million, or 1.8% of net sales, compared to income of $148.7 million, or 8.2% of net sales, for 2023.  The change in income was primarily due to lower net sales and the cumulative impact of the previously discussed items.

OTHER PROFIT/LOSS ITEMS

Interest Expense

Interest expense for 2024 and 2023 was $36.4 million and $29.2 million, respectively. The increase in interest expense was primarily attributable to higher borrowing associated with a new credit facility, which was used for the Carlstar acquisition in February 2024 and the MHR Repurchase in October 2024.

Interest Income

Interest income was $11.0 million and $10.4 million for the year ended December 31, 2024 and 2023, respectively. The increase in interest income was mainly driven by short-term financial investments in Brazil.

Foreign Exchange Loss

Foreign currency loss was $6.1 million for the year ended December 31, 2024, compared to a loss of $22.8 million for the year ended December 31, 2023. The change in foreign exchange loss was primarily attributable to reduced fluctuations in exchange rates in certain geographies in which we conduct business, particularly in Argentina, Turkey (refer to Note 1 to the consolidated financial statements), and Brazil.

Other Income

Other income was $6.6 million for the year ended December 31, 2024, compared to other income of $2.6 million for 2023, an increase of $4.0 million. This growth was primarily attributable to a $1.9 million gain from a property insurance settlement related to repairs at one of our operating facilities in Italy, a $0.5 million gain from a property insurance settlement concerning equipment at our North American wheel production facility, and an increase of $1.5 million in pension plan income as a result of favorable market performance on pension plan assets.

Provision for Income Taxes

The Company recorded income tax expense of $11.9 million and $26.0 million for the years ended December 31, 2024 and 2023, respectively. The Company's effective tax rate was 143.4% in 2024 and 23.7% in 2023. The change in the Company's effective tax rate is primarily due to the loss incurred domestically in 2024 and the impact from foreign income taxed at a higher rate as compared to the United States.

The Company’s 2024 and 2023 income tax expense and rates 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. In 2024 the rate was unfavorably impacted by certain non-deductible transaction costs related to the Company’s acquisition of The Carlstar Group, LLC.

The Organization for Economic Co-operation and Development (the “OECD”) has issued various proposals that would change long-standing global tax principles. These proposals include a two-pillar approach to global taxation (BEPS 2.0/ Pillar Two), focusing on global profit allocation and a global minimum tax rate. On December 12, 2022, the European Union member states agreed to implement the OECD’s global corporate minimum tax rate of 15%, which became effective January 2024. The company is assessing the impact of this proposal as countries are actively considering changes to their tax laws to adopt certain parts of the OECD's proposal. As of now, the company is monitoring the effects of Pillar II and the impact is not material to the Company’s results of operations or financial condition.

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Net (Loss) Income and (Loss) Earnings per Share

Net loss for the year ended December 31, 2024, was $3.6 million, compared to net income of $83.7 million for 2023. Basic loss per share was $0.08 for the year ended December 31, 2024, compared to basic earnings per share of $1.26 for 2023. Diluted loss per share was $0.08 for the year ended December 31, 2024, compared to diluted earnings per share of $1.25 for 2023. Changes in the Company’s net income and income per share were primarily influenced by the factors previously discussed.

SEGMENT INFORMATION

Segment Summary (Amounts in thousands)

Agricultural Segment Results

Agricultural segment results were as follows:

Net sales in the agricultural segment were $788.6 million for the year ended December 31, 2024, compared to $980.5 million for 2023. The change in net sales was primarily driven by a significant decline in global demand for agricultural equipment, particularly in North America and Europe which stemmed from lower farm income, higher financing costs, and actions taken by OEM customers to reduce elevated inventory at their retail channels, among other economic impacts. Additionally, an adverse foreign currency translation effect on sales of 5.1%, primarily due to the depreciation of the Argentine peso, Turkish lira, and Brazilian real, further impacted net sales.

Gross profit in the agricultural segment was $104.0 million, or 13.2% of net sales, for 2024, compared to $163.0 million, or 16.6% of net sales, for 2023. The change in gross profit was attributable to significantly lower sales volume across all major geographies, reduced fixed cost leverage, negative price/mix effects, and an inventory revaluation step-up related to the Carlstar purchase price allocation.

Income from operations in the agricultural segment was $39.8 million for the year ended December 31, 2024, compared to $100.6 million for 2023. The overall change in income from operations was primarily a result of decreased gross profit stemming from reduced net sales.

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Earthmoving/Construction Segment Results

Earthmoving/construction segment results were as follows:

The Company's earthmoving/construction segment net sales were $583.4 million for the year ended December 31, 2024, compared to $687.8 million for the year ended December 31, 2023. The change in net sales was primarily attributable to reduced sales volume due to much softer demand in North America and Europe. Additionally, adverse price/mix effects from steel cost reductions in the market and a 1.0% unfavorable impact on sales from foreign currency translation contributed to the overall change.

Gross profit in the earthmoving/construction segment was $62.8 million, or 10.8% of net sales, for the year ended December 31, 2024, compared to $110.7 million, or 16.1% of net sales, for the year ended December 31, 2023. Gross profit and margin changes were mainly due to lower sales volume, negative price/mix effects, and the effect on fixed cost leverage.

The Company's earthmoving/construction segment income from operations was $7.0 million for the year ended December 31, 2024, as compared to income of $55.1 million for 2023. The change was due to decreased sales volume and the effect on gross profit.

Consumer Segment Results

Consumer segment results were as follows:

Consumer segment's net sales were $474.0 million for the year ended December 31, 2024, compared to $153.5 million for 2023. This growth was primarily driven by increased sales volumes following the Carlstar acquisition, which contributed $346.2 million for the year ended December 31, 2024. This was partially offset by reduced sales in the Americas due to challenging market conditions, particularly with OEM's from the more challenging economic conditions, along with a 2.7% negative impact on sales from foreign currency translation, primarily related to the weakening Brazilian real.

Gross profit from the consumer segment was $91.0 million for 2024, or 19.2% of net sales, compared to $32.1 million, or 20.9% of net sales, for 2023. The increase in gross profit was influenced by the Carlstar acquisition, which was partially offset by the impact of reduced sales in other businesses. The change in profit margin was primarily due to a $9.4 million inventory revaluation step-up associated with the acquisition. Excluding the inventory revaluation step-up, the adjusted gross margin for the year ended December 31, 2024 would have been 21.2% of net sales.

Consumer segment's income from operations was $20.5 million for the year ended December 31, 2024, compared to $22.4 million for 2023. The change was due to the increase in selling, general, and administrative (SG&A) costs associated with the Carlstar acquisition of $48.1 million associated with the consumer segment, which primarily relate to warehousing and distribution costs.

Corporate & Unallocated Expenses

Income from operations on a segment basis does not include corporate expenses of approximately $34.1 million and $29.4 million for the year ended December 31, 2024 and 2023, respectively. Unallocated expenses are primarily comprised of corporate selling, general and administrative expenses. The increase in corporate and unallocated expenses for the the year ended December 31, 2024 as compared to the prior year was primarily due to transaction costs of $6.2 million related to the Carlstar acquisition incurred in the first quarter of 2024.

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FISCAL YEAR ENDED DECEMBER 31, 2023, COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2022

The comparison of the 2023 results to 2022 has been omitted from this Form 10-K and can be found in the Company's Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 29, 2024 under Item 7 thereof.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

As of December 31, 2024, the Company had $196.0 million of cash and cash equivalents, a decrease of $24.3 million from December 31, 2023, due to the following items:

Operating Cash Flows

Summary of cash flows from operating activities:

In 2024, cash flows provided by operating activities was $141.5 million, primarily driven by a reduction in working capital, and non-cash adjustments for depreciation and amortization expenses totaling $60.7 million.

When comparing the year ended December 31, 2024, to 2023, operating cash flows decreased by $37.9 million, primarily due to lower net income, though this was partially offset by effective working capital management. The positive impact of working capital management included a $31.0 million improvement from accounts receivable via effective collections efforts, and a $19.8 million reduction in inventory. These improvements helped offset the impact of additional working capital provided from the Carlstar acquisition that also contributed to a $33.6 million increase in accounts payable.

Summary of the components of cash conversion cycle:

The cash conversion cycle increased by 14 days in 2024. The increase was largely attributable to the Carlstar acquisition, which led to additional inventory at the end of December 31, 2024, as a result of its mix toward aftermarket customers through the use of controlled distribution centers to have products on demand. Inventory management is critical for the business in preparation for the future periods to supply customers efficiently, which was the primary driver of increased days inventory outstanding at the end of December 31, 2024.

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Investing Cash Flows

Summary of cash flows from investing activities:

Net cash used for investing activities was $201.6 million in 2024, compared to $56.9 million in 2023. This rise was primarily attributable to the acquisition of Carlstar for a cash consideration of $143.6 million, which included an additional payment of $19.8 million for excess working capital to the sellers, which has now been recovered through active working capital management. The Company also invested $65.6 million in capital expenditures in 2024, up from $60.8 million in 2023. These capital expenditures were directed toward the replacement and enhancement of plant equipment, as well as the procurement of new tools, dies, and molds to support new product development initiatives. The increased capital outlay in 2024 includes the impact of Carlstar capital expenditures which were $17.2 million for the year ended December 31, 2024, and also reflects Titan's strategic efforts to improve its existing facilities, enhance manufacturing capabilities, and drive operational efficiency and labor productivity gains. Additionally, a $3.5 million property insurance settlement related to the repair of one of our operating facilities in Italy associated with a 2023 hail storm weather event was recognized in the second quarter of 2024.

Financing Cash Flows

Summary of cash flows from financing activities:

In 2024, net cash provided by financing activities was $64.6 million, primarily driven by borrowings totaling $213.2 million, which included $147.0 million borrowed to finance the acquisition of Carlstar in February 2024, and $45.0 million borrowed to fund the $57.6 million repurchase of the Company's common stock from the MHR Funds, a related party, in October 2024. This cash inflow was partially offset by debt repayments of $70.3 million and open market common stock repurchases of $16.4 million, along with the $57.6 million related to the MHR Repurchase. In 2023, cash used for financing activities was $56.0 million, comprising debt payments of $27.6 million and open market common stock repurchases of $32.6 million, partially offset by $6.7 million in borrowings.

Additionally, Titan issued common stock valued at $168.7 million in connection with the Carlstar acquisition. This was reflected in “Non cash financing activity” in our consolidated statements of cash flows.

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Debt Restrictions

The Company’s $225 million revolving credit facility (credit facility) and indenture relating to the 7.00% senior secured notes due 2028 contain various restrictions, including:

•When remaining availability under the credit facility is less than the greater of (i) $17 million and (ii) 10% of the credit facility’s line cap (the line cap being the lesser of our borrowing base or the lenders’ commitments under the credit facility), the Company will be required to maintain a minimum fixed charge coverage ratio of not less than 1.0 to 1.0 (calculated quarterly on a trailing four quarter basis);

•Limits on dividends and repurchases of the Company’s stock;

•Restrictions on the ability of the Company to make additional borrowings, or to consolidate, merge, or otherwise fundamentally change the ownership of the Company;

•Limits on investments, dispositions of assets, and guarantees of indebtedness; and

•Other customary affirmative and negative covenants.

These covenants are subject to a number of exceptions and qualifications that are described in the credit and security agreement and the indenture relating to the 7.00% senior secured notes due 2028. These restrictions could limit the Company’s ability to respond to market conditions, provide for unanticipated capital investments, raise additional debt or equity capital, pay dividends, repurchase stock or take advantage of business opportunities, including future acquisitions. The Company was in compliance with these debt covenants at December 31, 2024.

Guarantor Financial Information

The Company's 7.00% senior secured notes due 2028 are guaranteed by the following 100% owned subsidiaries of the Company: Titan Tire Corporation, Titan Tire Corporation of Bryan, Titan Tire Corporation of Freeport, and Titan Wheel Corporation of Illinois. The note guarantees are full and unconditional, joint and several obligations of the guarantors. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the satisfaction of certain customary conditions.

The following summarized financial information of both the Company and the Guarantor Subsidiaries ("the Guarantors") is presented on a combined basis after elimination of (i) intercompany transactions and balances between the parent and the Guarantors and (ii) equity in earnings from investments in any subsidiary that is a non-Guarantor. The information is presented in accordance with the requirements of Rule 13-01 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had the Guarantor operated as an independent entity.

Summarized Balance Sheets:

Summarized Statement of Operations:

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LIQUIDITY OUTLOOK

The Company does not anticipate significant liquidity constraints during the foreseeable future. At December 31, 2024, the Company had $196.0 million of cash and cash equivalents. This amount included $185.3 million held in foreign countries.

As of December 31, 2024, there were $146.0 million of borrowings outstanding under the Company's $225.0 million credit facility. Titan's availability under this credit facility may be less than $225 million as of any particular date, as a result of outstanding letters of credit and eligible accounts receivable and inventory balances at certain domestic and Canadian subsidiaries. Based on eligible accounts receivable and inventory balances, the Company's total amount available for borrowing under the credit facility at December 31, 2024 totaled $177.1 million. With outstanding letters of credit totaling $9.9 million and $146.0 million in borrowings under the revolving credit facility, the net amount available for borrowing under the credit facility at December 31, 2024 totaled $21.2 million.

Capital expenditures for 2025 are forecasted to be between approximately $55 million and $65 million. These capital expenditures are anticipated to be used primarily to continue to enhance the Company’s existing facilities and manufacturing capabilities and drive productivity gains, along with the purchase of new tools, dies and molds related to new product development.

Cash payments for interest are currently forecasted to be approximately $36 million to $40 million in 2025, based on the Company's year-end 2024 debt balances and debt maturities. The forecasted interest payments are comprised primarily of the semi-annual interest payments totaling approximately $28 million (paid in April and October) for the 7.00% senior secured notes, and between $8 million and $12 million of payments on the credit facility, which are variable dependent upon on the prevailing SOFR rate and outstanding debt levels within each month.

Cash and cash equivalents along with anticipated internal cash flows from operations and utilization of availability on global credit facilities, are expected to provide sufficient liquidity for working capital needs, debt maturities, and capital expenditures. Potential divestitures and unencumbered assets are also a means to provide for future liquidity needs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are described in Note 1. Description of Business and Significant Accounting Policies to our consolidated financial statements. 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.

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. Management’s judgment is required to determine the provision for income taxes, deferred tax assets and liabilities, and valuation allowances against deferred tax assets.

Management records a reduction to the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing future profitability by year, including the impact of tax planning strategies, relative to the expiration dates, if any, of the assets.

Management considers both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable evidence. Management gives operating results during the most recent three-year period a significant weight in our analysis. Management considers whether positive cumulative operating results exist in the most recent three-year period. Management performs scheduling exercises as needed to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. Management also considers prudent tax planning strategies (including an assessment of their feasibility) to accelerate taxable income if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized. See Note 19 to the consolidated financial statements for additional information on the composition of valuation allowances.

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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.  For more information concerning these obligations, see Note 20 to our consolidated financial statements for additional information.

The effect of hypothetical changes to selected assumptions on the Company’s frozen pension benefit obligations would be as follows (amounts in thousands):

(a)Projected benefit obligation (PBO) for pension plans.

MARKET RISK

Foreign Currency Risk

The Company is exposed to the impact of foreign currency fluctuations in certain countries in which it operates. The exposure to foreign currency movements is limited in many countries because the operating revenues and expenses of the Company's various subsidiaries and business units are substantially in the local currency of the country in which they operate. To the extent that borrowings, sales, purchases, revenues, expenses or other transactions are not in the local currency of the subsidiary, the Company is exposed to currency risk and may enter into foreign exchange derivative contracts to mitigate the currency risk. The Company is exposed to fluctuations in the Brazilian real, British pound, European Union Euro, Russian ruble, Argentinian pesos, Turkish Lira and other global currencies. A hypothetical adverse change of 10% in foreign currency exchange rates would have reduced foreign currency-denominated net assets and stockholders' equity by approximately $22.0 million at December 31, 2024.

Commodity Price Risk

The Company does not generally enter into long-term commodity pricing contracts to hedge its exposures to commodity market price fluctuations.  Periodically, the Company has entered into derivative commodity instruments to hedge the exposure to fluctuations in steel prices in North America. The Company is exposed to price fluctuations of its key commodities, which consist primarily of steel, natural rubber, synthetic rubber, and carbon black. The Company attempts to pass on certain material price increases and decreases to its customers, depending on market conditions. Certain customers have mechanisms in long-term contracts which provide for periodic pricing adjustments based on relative commodity and other market indices, which protect the Company from cost volatility.

Interest Rate Risk

The Company is exposed to interest rate risk on its variable debt. The Company has a $225 million credit facility that has a variable interest rate.  As of December 31, 2024, the net amount available under the credit facility was $21.2 million.  If the credit facility were fully drawn to available funds, a change in the interest rate of 100 basis points, or 1%, would have changed the Company’s interest expense by approximately $2.3 million.

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 annual report with a narrative from the perspective of the management of Titan International, Inc. (together with its subsidiaries, Titan, or the Company) on Titan’s financial condition, results of operations, liquidity, and other factors which may affect the Company’s future results. You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes in "Item 8. Financial Statements and Supplementary Data." The following discussion includes forward-looking statements about our business, financial condition, and results of operations, including discussions about management’s expectations for our business. These statements represent projections, beliefs, and expectations based on current circumstances and conditions and in light of recent events and trends, and you should not construe these statements either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. See “Forward-Looking Statements” and "Item 1A. Risk Factors" in Part 1 of this Form 10-K.

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 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 the Voltyre-Prom, a leading producer of agricultural and industrial tires in Volgograd, Russia, which represents approximately 7% of consolidated assets of Titan as of both December 31, 2023 and December 31, 2022. The Russian operations represent approximately 6% of consolidated global sales for both the years ended December 31, 2023 and December 31, 2022.

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 of Independent States (CIS) countries, located in Europe

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and Asia. This facility is 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, sell 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 military conflict between Russia and Ukraine has not had a significant impact on global operations and the Company continues to monitor the potential impacts on the business.

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 2023, one of the Company’s Brazilian subsidiaries received a notice that they had prevailed on an additional legal claim in regards to the non-income (indirect) taxes credits that had been granted in a prior year ruling. The most recent ruling exempted from taxes, the interest benefit on the indirect tax credits granted in prior year. For the year ended December 31, 2023, the Company recorded indirect tax credits of $0.5 million within other income in the consolidated statements of operations. The Company also recorded a $2.6 million benefit within the provision for income taxes in the consolidated statements of operations for the year ended December 31, 2023.

During the second and third quarter of 2022, the Company submitted the related supporting documentation and received the approval from the Brazilian tax authorities for two of its Brazilian subsidiaries. For the year ended December 31, 2022, the Company recorded $32.0 million, within other income in the consolidated statements of operations. The Company also recorded $16.1 million of income tax expense associated with the recognition of these indirect tax credits for the year ended December 31, 2022. Of the $16.1 million income tax expense recorded, $9.4 million was recorded locally in Brazil, while the remaining $6.7 million was recorded to the US in accordance with the global intangible low-taxed income (GILTI) income tax requirements (refer to Note 17 to the consolidated financial statements). The Company fully utilized the credits against future PIS/COFINS and income tax obligations by the end of 2023.

BUSINESS

For a description of the Company’s business and segments see Part 1, Item 1 of this Form 10-K.

MARKET CONDITIONS AND OUTLOOK

AGRICULTURAL MARKET OUTLOOK

Agriculture-related commodity prices continued to remain at historically high levels during 2023. Population growth, farmer income levels and the replacement of an aging large equipment fleet are market conditions which are anticipated to support continued demand for our products in the mid to long term time horizon. The agricultural market is experiencing a slowdown in customer demand in the near term, however, the underlying market conditions mentioned previously provide support for the mid to long term demand for our products. Many more variables, including weather, volatility in the price of commodities, grain prices, export markets, foreign currency exchange rates, interest rates, government policies, subsidies, and the demand for used equipment can greatly affect the Company's performance in the agricultural market in a given period.

EARTHMOVING/CONSTRUCTION MARKET OUTLOOK

The earthmoving/construction segment is affected by many variables, including commodity prices, road construction, infrastructure, government appropriations, housing starts, and other macroeconomic drivers. The construction market is primarily driven by country specific GDP and the need for infrastructure developments. The earthmoving/construction markets are experiencing some slowdown in OEM demand however, we expect the markets to stabilize over the mid to long term given the levels of mining capital budgets and forecasted GDP growth. Mineral commodity prices are at relatively high levels, which also supports the forecasted mid to long term growth.

CONSUMER MARKET OUTLOOK

The consumer market consists of several distinct product lines within different regions. These products include light truck tires, turf equipment, specialty products, including custom mixing of rubber stock, and train brakes. Some aspects of the markets are experiencing slowdown, most notably in Latin America, due to softness in the Brazilian economy. There are strong initiatives

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underway to bolster opportunities in various specialty products including mixing of rubber stock in the United States. The consumer segment pace of growth can vary from period to period and is affected by many variables including inflationary impacts, consumer spending, interest rates, government policies, and other macroeconomic drivers.

SUMMARY OF RESULTS OF OPERATIONS

The following table sets forth the Company’s statement of operations expressed as a percentage of net sales for the periods indicated.  This table and subsequent discussions should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included elsewhere in this annual report.

In addition, the following table sets forth components of the Company’s net sales classified by segment:

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FISCAL YEAR ENDED DECEMBER 31, 2023, COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2022

RESULTS OF OPERATIONS

Highlights for the year ended December 31, 2023, compared to 2022 (amounts in thousands):

Net Sales

Net sales for the year ended December 31, 2023 were $1.82 billion, compared to $2.17 billion for the year ended December 31, 2022. Net sales change was across all segments and primarily driven by sales volume decrease caused by elevated inventory levels at our customers in the Americas, particularly OEM customers, lower levels of end customer demand in small agricultural equipment, and economic softness in Brazil. It was also impacted by negative price/mix which was primarily due to lower raw material and other input costs, most notably steel, and unfavorable foreign currency translation of 1.7% or $37.8 million. Additionally, the Company sold its Australian wheel business in the first quarter of 2022 which resulted in a reduction of net sales by 0.5% or $10.0 million for the year ended December 31, 2023, compared to the year ended December 31, 2022.

Cost of Sales and Gross Profit

Cost of sales was $1.52 billion for the year ended December 31, 2023, compared to $1.81 billion for 2022. The decrease in cost of sales was driven by the impact of decreases in sales volume. Gross profit for 2023 was $305.8 million, or 16.8% of net sales, compared to $360.7 million, or 16.6% of net sales, for 2022. The change in gross profit was driven by the impact of decreases in net sales, as described previously. The increase in gross margin was due to lower production input costs and productivity initiatives continuing to be executed across global production facilities.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for the year ended December 31, 2023, were $134.9 million, or 7.4% of net sales, up 1.6%, compared to $132.8 million, or 6.1% of net sales, for 2022.  The increase in SG&A was primarily due to general inflationary cost impacts, including personnel related costs.

Research and Development Expenses

Research and development (R&D) expenses for the year ended December 31, 2023, were $12.5 million, or 0.7% of net sales, compared to $10.4 million, or 0.5% of net sales, for 2022. R&D spending reflects continued initiatives to improve product designs and an ongoing focus on quality.

Royalty Expense

The Company has trademark license agreements with The Goodyear Tire & Rubber Company to manufacture and sell certain farm tires under the Goodyear name. These agreements cover sales in North America, Latin America, Europe, the Middle East, Africa, Russia, and other Commonwealth of Independent States countries. Royalty expenses for the year ended December 31, 2023 were $9.6 million compared to $11.7 million for 2022. The change in royalty expenses was due to the decrease in sales resulting in a decrease in the amount of royalty expense incurred.

Income from Operations

Income from operations for the year ended December 31, 2023 was $148.7 million, or 8.2% of net sales, compared to income of $205.8 million, or 9.5% of net sales, for 2022.  The change in income was primarily due to lower net sales and the net result of the items previously discussed.

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OTHER PROFIT/LOSS ITEMS

Interest Expense

Interest expense for 2023 and 2022 was $18.8 million and $29.8 million, respectively. Interest expense decreased due to the reduced borrowing under the Company's global credit facilities, and increased interest income associated with short-term financial investments in Latin America and the United States.

Foreign Exchange Loss (Gain)

Foreign currency loss was $22.8 million for the year ended December 31, 2023, compared to a gain of $0.9 million for the year ended December 31, 2022. The foreign exchange loss experienced for the year ended December 31, 2023 is primarily the result of an unfavorable impact of the movement of exchange rates in certain geographies in which we conduct business, particularly in Argentina and Turkey (refer to Note 1 to the consolidated financial statements).

The foreign exchange gain experienced for the year ended December 31, 2022 is primarily the result of a favorable impact of the movement of exchange rates in certain geographies in which we conduct business. The gain was partially offset by the loss from translation of intercompany loans at certain foreign subsidiaries, which are denominated in local currencies rather than the reporting currency, which is the United States dollar. Since such loans are expected to be settled at some point in the future, these loans are adjusted each reporting period to reflect the current exchange rates.

Other Income

Other income was $2.6 million for the year ended December 31, 2023, compared to other income of $25.4 million for 2022, a decrease of $22.8 million. The change was primarily attributable to other income in 2022 that did not occur in

2023 related to $32.0 million in indirect tax credits in Brazil and a loss of $10.9 million on sale of the Australian wheel business.

Provision for Income Taxes

The Company recorded tax expense for income taxes of $26.0 million and $23.2 million for the years ended December 31, 2023 and 2022, respectively. The Company's effective tax rate was 23.7% in 2023 and 11.4% in 2022. The change in the Company's effective tax rate is due to the impact from the federal and state valuation allowance release in 2022.

The Company’s 2023 and 2022 income tax expense and rates 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 foreign jurisdictions, and certain permanent foreign inclusion items on the domestic provision. For 2022, income tax rate was favorably impacted by benefits from a valuation allowance release, which resulted in a tax benefit of $47.4 million.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 that includes, among other provisions, changes to the U.S. corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income," which is effective for tax years beginning after December 31, 2022, and a one percent excise tax on net repurchases of stock after December 31, 2022. Titan does not anticipate being materially impacted by the Corporate Alternative Minimum Tax and has not recorded a liability in its financial statements for it.

Net Income and Income per Share

Net income for the year ended December 31, 2023, was $83.7 million, compared to net income of $179.2 million for 2022. Basic earnings per share was $1.26 for the year ended December 31, 2023, compared to $2.80 for 2022. Diluted earnings per share was $1.25 for the year ended December 31, 2023, compared to $2.77 for 2022. The Company's net income and income per share changes were due to the items previously discussed.

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SEGMENT INFORMATION

Segment Summary (Amounts in thousands)

Agricultural Segment Results

Agricultural segment results were as follows:

Net sales in the agricultural market were $980.5 million for the year ended December 31, 2023, compared to $1,192.2 million for 2022. The net sales change was primarily due to lower sales volume in North and South America which was caused by actions taken by customers to reduce elevated inventory levels, most notably OEM customers, overall softness in demand for small agricultural equipment, and decline in Brazilian economic activity. The change in net sales was also impacted by negative price/product mix associated with lower steel prices, an unfavorable impact of foreign currency translation of 3.2%, and the effects of the disposed Australian business of 0.3%.

Gross profit in the agricultural market was $163.0 million, or 16.6% of net sales, for 2023, compared to $193.6 million, or 16.2% of net sales, for 2022. The change in gross profit was due to lower sales volume. The increase in profit margin was due to the measures taken to improve financial performance, along with lower raw material and other input costs, which have helped offset the impact of lower fixed cost leverage.

Income from operations in the agricultural market was $100.6 million for the year ended December 31, 2023, compared to $130.5 million for 2022. The overall change in income from operations was attributable to lower gross profit from a decrease in net sales.

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Earthmoving/Construction Segment Results

Earthmoving/construction segment results were as follows:

The Company's earthmoving/construction market net sales were $687.8 million for the year ended December 31, 2023, compared to $807.4 million for the year ended December 31, 2022. The change in earthmoving/construction sales was primarily due to decreased volume in the Americas and the undercarriage business which was caused by elevated customer inventory levels and a slowdown at construction OEM customers. In addition, the net sales change was impacted by negative price/mix from lower raw material and other input costs, and the effects of the disposed Australian business of 0.8%. The change in net sales was partially offset by favorable impact of foreign currency translation of 0.3%,

Gross profit in the earthmoving/construction market was $110.7 million, or 16.1% of net sales, for the year ended December 31, 2023, compared to $135.8 million, or 16.8% of net sales, for the year ended December 31, 2022. The changes in gross profit and margin were primarily due to the lower sales volume, which also resulted in lower fixed cost leverage primarily in the Americas.

The Company's earthmoving/construction segment income from operations was $55.1 million for the year ended December 31, 2023, as compared to income of $79.8 million for 2022. The change was due to the decrease in sales volume and lower profitability.

Consumer Segment Results

Consumer segment results were as follows:

Consumer market net sales were $153.5 million for the year ended December 31, 2023, compared to $169.8 million for 2022. The change was due to lower sales volumes, mainly in Latin America for light utility truck tires, where demand was lower from the softer economic conditions in the region, and elevated customer inventory levels. In addition, net sales were unfavorably impacted by negative price/product mix from lower raw material and other input costs, and foreign currency translation of 0.8%.

Gross profit from the consumer market was $32.1 million for 2023, or 20.9% of net sales, compared to $31.3 million, or 18.5% of net sales, for 2022. The increases in gross profit and margin were primarily due to positive product mix impact and lower raw material and other input costs, mainly in the undercarriage and the North American wheel operations.

Consumer segment income from operations was $22.4 million for the year ended December 31, 2023, compared to $22.8 million for 2022. The change was due to an increase in SG&A cost allocations to the consumer segment within the North American tire operations as compared to the prior year.

Corporate & Unallocated Expenses

Income from operations on a segment basis does not include corporate expenses of approximately $29.4 million and $27.3 million for the year ended December 31, 2023 and 2022, respectively. Unallocated expenses are primarily comprised of corporate selling, general and administrative expenses. The year-over-year change was related to the increase in certain SG&A expenses primarily associated with legal costs.

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FISCAL YEAR ENDED DECEMBER 31, 2022, COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2021

The comparison of the 2022 results to 2021 has been omitted from this Form 10-K and can be found in the Company's Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 27, 2023.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

As of December 31, 2023, the Company had $220.3 million of cash, an increase of $60.7 million from December 31, 2022, due to the following items:

Operating Cash Flows

Summary of cash flows from operating activities:

For the year ended December 31, 2023, operating activities provided cash of $179.4 million, driven by the net income of $83.7 million, and decreases in working capital components of $30.2 million. Included in net income of $83.7 million were non-cash items for depreciation and amortization of $42.4 million.

Cash provided by operating activities increased by $18.7 million when comparing the year ended December 31, 2023 to 2022. This increase was primarily due to focused working capital management centered on collections of accounts receivable and inventory management, resulting in improvements of $70.1 million and $51.2 million, respectively. The increase was partially offset by the changes in accounts payable and other current liabilities by $55.0 million and $18.0 million, respectively.

Summary of the components of cash conversion cycle:

Cash conversion cycle increased by 21 days during 2023 from 2022, which was primarily due to the decreases in net sales in a short period of time, and cost of sales for the three months ended December 31, 2023, as compared to the three months ended December 31, 2022. Inventory management is critical for the business in preparation for the future periods to supply customers efficiently, which was the driver of increased days in inventory at the end of December 31, 2023.

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Investing Cash Flows

Summary of cash flows from investing activities:

Net cash used for investing activities was $56.9 million in 2023, compared to cash used for investing activities of $36.8 million in 2022. The Company invested a total of $60.8 million in capital expenditures in 2023, compared to $47.0 million in 2022. Capital expenditures represent plant equipment replacement and improvements, along with new tools, dies and molds related to new product development. The overall capital outlay for 2023 increased as the Company seeks to enhance the Company's existing facilities and manufacturing capabilities and drive plant efficiency and labor productivity gains. Cash provided by investing activities includes $2.1 million in proceeds from the sale of investments in 2023, and $9.3 million from the proceeds of the sale of the Australian wheel business in 2022.

Financing Cash Flows

Summary of cash flows from financing activities:

Net cash used for financing activities was $56.0 million in 2023. Payment on debt of $27.6 million and repurchase of common stock of $32.6 million were offset partially by proceeds from borrowings of $6.7 million. In 2022, the Company borrowed on the domestic revolving credit facility during the first quarter to facilitate the repurchasing of the Company's common stock from RDIF, and subsequently repaid the borrowing during the second quarter as cash flow improved.

Debt Restrictions

The Company’s revolving credit facility (credit facility) and indenture relating to the 7.00% senior secured notes due 2028 contain various restrictions which include:

•When remaining availability under the credit facility is less than 10% of the total commitment under the credit facility ($12.5 million as of December 31, 2023), 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 December 31, 2023.

Guarantor Financial Information

The Company's 7.00% senior secured notes due 2028 are guaranteed by the following 100% owned subsidiaries of the Company: Titan Tire Corporation, Titan Tire Corporation of Bryan, Titan Tire Corporation of Freeport, and Titan Wheel Corporation of Illinois. The note guarantees are full and unconditional, joint and several obligations of the guarantors. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

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The following summarized financial information of both the Company and the Guarantor Subsidiaries ("Guarantors") is presented on a combined basis. Intercompany balances and transactions between the Company and the Guarantors have been eliminated and the summarized financial information does not reflect investments of the Company or the Guarantors in the Non-Guarantor Subsidiaries. The information is presented in accordance with the requirements of Rule 13-01 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor subsidiary operated as an independent entity.

Summarized Balance Sheets:

Summarized Statement of Operations:

LIQUIDITY OUTLOOK

The Company does not anticipate significant liquidity constraints during the foreseeable future. At December 31, 2023, the Company had $220.3 million of cash and cash equivalents. Titan's availability under this credit facility may be less than

$125 million as a result of outstanding letters of credit and eligible accounts receivable and inventory balances at certain

domestic subsidiaries. Based on eligible accounts receivable and inventory balances, the Company's amount available for

borrowing totaled $96.2 million at December 31, 2023. With outstanding letters of credit totaling $6.2 million the net

amount available for borrowing under the credit facility totaled $90.0 million at December 31, 2023. The cash and cash equivalents balance of $220.3 million includes $186.1 million held in foreign countries.

Capital expenditures for 2024 are forecasted to be approximately $55 million to $60 million. These capital expenditures are anticipated to be used primarily to continue to enhance the Company’s existing facilities and manufacturing capabilities and drive productivity gains, along with the purchase of new tools, dies and molds related to new product development.

Cash payments for interest are currently forecasted to be approximately $30 million in 2024, based on the Company's year-end 2023 debt balances and debt maturities. The forecasted interest payments are comprised primarily of the semi-annual interest payments totaling approximately $28 million (paid in April and October) for the 7.00% senior secured notes.

Cash and cash equivalents along with anticipated internal cash flows from operations and utilization of availability on global credit facilities, are expected to provide sufficient liquidity for working capital needs, debt maturities, and capital expenditures. Potential divestitures and unencumbered assets are also a means to provide for future liquidity needs.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are described in Note 1. Description of Business and Significant Accounting Policies to the consolidated financial statements. 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.

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. Management’s judgment is required to determine the provision for income taxes, deferred tax assets and liabilities, and valuation allowances against deferred tax assets.

Management records a reduction to the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing future profitability by year, including the impact of tax planning strategies, relative to the expiration dates, if any, of the assets.

Management considers both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable evidence. Management gives operating results during the most recent three-year period a significant weight in our analysis. Management considers whether positive cumulative operating results exist in the most recent three-year period. Management performs scheduling exercises as needed to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. Management also considers prudent tax planning strategies (including an assessment of their feasibility) to accelerate taxable income if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized. See Note 17 to the consolidated financial statements for additional information on the composition of valuation allowances.

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.  For more information concerning these obligations, see Note 18 of the Notes to Consolidated Financial Statements for additional information.

The effect of hypothetical changes to selected assumptions on the Company’s frozen pension benefit obligations would be as follows (amounts in thousands):

(a)Projected benefit obligation (PBO) for pension plans.

MARKET RISK

Foreign Currency Risk

The Company is exposed to the impact of foreign currency fluctuations in certain countries in which it operates. The exposure to foreign currency movements is limited in many countries because the operating revenues and expenses of the Company's

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various subsidiaries and business units are substantially in the local currency of the country in which they operate. To the extent that borrowings, sales, purchases, revenues, expenses or other transactions are not in the local currency of the subsidiary, the Company is exposed to currency risk and may enter into foreign exchange derivative contracts to mitigate the currency risk. The Company is exposed to fluctuations in the Brazilian real, British pound, Euro, Russian ruble, Argentinian pesos, Turkish Lira and other global currencies. A hypothetical adverse change of 10% in foreign currency exchange rates would have reduced foreign currency-denominated net assets and stockholders' equity by approximately $17.0 million at December 31, 2023.

Commodity Price Risk

The Company does not generally enter into long-term commodity pricing contracts to hedge its exposures to commodity market price fluctuations.  Periodically, the Company does enter into derivative commodity instruments to hedge the exposure to fluctuations in steel prices in North America. The Company is exposed to price fluctuations of its key commodities, which consist primarily of steel, natural rubber, synthetic rubber, and carbon black. The Company attempts to pass on certain material price increases and decreases to its customers, depending on market conditions.

Interest Rate Risk

The Company is exposed to interest rate risk on its variable debt. The Company has a $125 million credit facility that has a variable interest rate.  As of December 31, 2023, the amount available under the credit facility was $90.0 million.  If the credit facility were fully drawn to available funds, a change in the interest rate of 100 basis points, or 1%, would have changed the Company’s interest expense by approximately $0.9 million.  At December 31, 2023, there were no borrowings under the credit facility.

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 annual report with a narrative from the perspective of the management of Titan International, Inc. (together with its subsidiaries, Titan, or the Company) on Titan’s financial condition, results of operations, liquidity, and other factors which may affect the Company’s future results. You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes in "Item 8. Financial Statements and Supplementary Data." The following discussion includes forward-looking statements about our business, financial condition, and results of operations, including discussions about management’s expectations for our business. These statements represent projections, beliefs, and expectations based on current circumstances and conditions and in light of recent events and trends, and you should not construe these statements either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. See “Forward-Looking Statements” and "Item 1A. Risk Factors" in Part 1 of this Form 10-K.

COVID-19 Pandemic

In December 2019, a novel strain of coronavirus ("COVID-19") was reported in Wuhan, China. During March 2020, the World

Health Organization declared the outbreak of COVID-19 as a global pandemic. The COVID-19 pandemic's adverse impact on the Company was less during 2022 than in 2021. The Company’s operations continued with additional sanitary and other protective health measures, which have increased operating costs. We expect these additional measures to continue into the foreseeable future as we seek to ensure the safety and welfare of Titan’s employees.

While the Company's operations began to return to historical levels during 2021 and continuing into 2022, certain geographies (particularly China) continue to remain impacted resulting in employee absenteeism. Further, global supply chains are experiencing constraints following the COVID-19 pandemic, including availability and pricing of raw materials, transportation and labor.

Due to the above circumstances and as described generally in this Form 10-K, the Company’s results of operations for the year ended December 31, 2022 are not necessarily indicative of the results to be expected in the future. Management cannot predict the future 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 remain 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, 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 the Voltyre-Prom, a leading producer of agricultural and industrial tires in Volgograd, Russia, which represents approximately 7% of consolidated assets of Titan as of both December 31, 2022 and 2021. The Russian operations represent approximately 6% of consolidated global sales for both of the years ended December 31, 2022 and 2021. 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.

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 of Independent States (CIS) countries, located in Europe and Asia. This facility is in full compliance with all international sanctions on Russia. Titan has stopped any additional

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investments into this joint project and emphasizes that neither this operation, nor any other Titan operations, sell 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 including the increased cost of energy in Europe and the ancillary impacts that the military conflict could have on other global 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 and third quarter of 2022, the Company submitted the related supporting documentation and received the approval from the Brazilian tax authorities for two of its Brazilian subsidiaries. For the year ended December 31, 2022, the Company recorded $32.0 million within other income in the consolidated statements of operations. The Company also recorded $16.1 million of income tax expense associated with the recognition of these indirect tax credits for the year ended December 31, 2022. Of the $16.1 million income tax expense recorded, $9.4 million was recorded locally in Brazil, while the remaining $6.7 million was recorded to the US in accordance with the global intangible low-taxed income (GILTI) income tax requirements (refer to Note 21).

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. For the year ended December 31, 2022, the Company has utilized approximately $15.0 million of the tax credits in the settlement of income tax obligations. After the utilization of $15.0 million of tax credits, the Company paid in cash approximately $24.1 million of income taxes for the year ended December 31, 2022 which is on the supplemental information of the consolidated statement of cash flows.

BUSINESS

For a description of the Company’s business and segments see Part 1, Item 1 of this Form 10-K.

MARKET CONDITIONS AND OUTLOOK

AGRICULTURAL MARKET OUTLOOK

Agriculture-related commodity prices continued to remain at historically high levels during 2022, although off from recent peaks in the first half of the year. The market conditions across the globe remain favorable with many of our customers forecasting modest growth during 2023. Strong farmer income, replacement of an aging large equipment fleet and replenishment of lower equipment inventory levels are all factors which are anticipated to support improved demand for our products and provide sustained stability in the market over the next few years. Many more variables, including weather, volatility in the price of commodities, grain prices, export markets, foreign currency exchange rates, interest rates, government policies, subsidies, economic cycles, 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 strong signs of growth in 2022 as economies emerged from the pandemic and modest growth is expected to continue into 2023, curtailed by softer housing starts due to rising interest rates. There are historically low equipment inventory levels throughout the global construction industry and mining capital budgets continued to rise during 2022, and we expect them to remain at healthy levels in 2023. Improvements in mineral commodity prices also currently support growth.

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 remained

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stable during 2022. However, the pace of growth can vary period to period. 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.

SUMMARY OF RESULTS OF OPERATIONS

The following table sets forth the Company’s statement of operations expressed as a percentage of net sales for the periods indicated.  This table and subsequent discussions should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included elsewhere in this annual report.

In addition, the following table sets forth components of the Company’s net sales classified by segment:

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FISCAL YEAR ENDED DECEMBER 31, 2022, COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2021

RESULTS OF OPERATIONS

Highlights for the year ended December 31, 2022, compared to 2021 (amounts in thousands):

Net Sales

Net sales for the year ended December 31, 2022 were $2.17 billion, compared to $1.78 billion for the year ended December 31, 2021, an increase of 22%. The net sales increase was primarily driven by increases in product pricing in response to inflationary impacts on raw material costs and other input costs including freight and energy costs. The net sales increase was also impacted by product mix and volume to a lesser extent across all segments. The overall volume increase was primarily in North America and Europe, and was driven by increased customer demand which is reflective of improved farmer income, and replacement of an aging large equipment fleet in the global agricultural markets. Construction and mining markets were also improved in 2022 as economies emerged from the pandemic and mining commodity prices increased. The increase in net sales was unfavorably impacted by foreign currency translation of 3.6% or $64.1 million, primarily due to the weakening Euro. The Company sold its Australian wheel business in the first quarter of 2022 which decreased the net sales by 1.8% or $32.9 million, compared to the year ended December 31, 2021.

Cost of Sales and Gross Profit

Cost of sales was $1.81 billion for the year ended December 31, 2022, compared to $1.54 billion for 2021. The increase in cost of sales was driven by the impact of increases in sales volume, raw material cost increases, and other inflationary cost impacts. Gross profit for 2022 was $360.7 million, or 17% of net sales, compared to $237.5 million, or 13% of net sales, for 2021. The increase in gross profit and margin was driven by the impact of increases in net sales, as described previously, and improved operating leverage in our production facilities. In addition, cost reduction and productivity initiatives continue to be executed across global production facilities. 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.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for the year ended December 31, 2022, were $132.8 million, or 6.1% of net sales, up only 1%, compared to $131.8 million, or 7% of net sales, for 2021.  The slight increase in SG&A was primarily due to an increase in certain variable costs associated with improved operating performance and growth in sales.

Research and Development Expenses

Research and development (R&D) expenses for the year ended December 31, 2022, were $10.4 million, or 1% of net sales, compared to $10.1 million, or 1% of net sales, for 2021. R&D spending reflects continued initiatives to improve product designs and an ongoing focus on quality.

Royalty Expense

The Company has trademark license agreements with The Goodyear Tire & Rubber Company to manufacture and sell certain farm tires under the Goodyear name. These agreements cover sales in North America, Latin America, Europe, the Middle East, Africa, Russia, and other Commonwealth of Independent States countries. Royalty expenses for the year ended December 31, 2022 were $11.7 million compared to $10.5 million for 2021. The increase in royalty expenses was due to the increase in sales, as described previously, resulting in an increase in the amount of royalty expense incurred.

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Income from Operations

Income from operations for the year ended December 31, 2022 was $205.8 million, or 10% of net sales, compared to income of $85.2 million, or 5% of net sales, for 2021.  The increase in income was primarily due to the higher sales and improvements in gross profit margins.

OTHER PROFIT/LOSS ITEMS

Interest Expense

Interest expense for 2022 and 2021 was $29.8 million and $32.2 million, respectively. Interest expense decreased due to the reduced borrowing under the Company's global credit facilities, and the refinancing of the senior secured notes during the second quarter of 2021 resulting in an additional interest expense in 2021 which did not occur in 2022.

Loss on Senior Note Repurchase

Loss on senior note repurchase was $16.0 million for 2021. The loss was in connection to the Company 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 second quarter of 2021.

Foreign Exchange Gain

Foreign currency gain was $0.9 million for the year ended December 31, 2022, compared to a gain of $12.0 million for the year ended December 31, 2021. The foreign exchange gain experienced for the year ended December 31, 2022 is primarily the result of a favorable impact of the movement of exchange rates in certain geographies in which we conduct business. The gain was partially offset by the loss from 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.

Foreign exchange gain of $12.0 million for the year ended December 31, 2021 was primarily the result of the closeout of certain legal entities as part of the ongoing initiative to rationalize Titan's legal entity structure and ongoing management of the intercompany capital structure as well as a favorable impact of the movement of exchange rates.

Other Income

Other income was $25.4 million for the year ended December 31, 2022, compared to other income of $2.1 million for 2021, an increase of $23.3 million. The increase in other income was primarily attributable to $32.0 million income on indirect tax credits in Brazil, and a gain of $1.3 million from a government grant associated with an earthquake that affected one of our Italian subsidiaries from May 2012. The increase was partially offset by $10.9 million loss on sale of the Australian wheel business which was comprised 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 tax expense for income taxes of $23.2 million and $1.1 million for the years ended December 31, 2022 and 2021, respectively. The Company's effective tax rate was 11.4% in 2022 and 2.3% in 2021.

The Company’s 2022 and 2021 income tax expense and rates 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 have a full valuation allowance on deferred tax assets. For 2022, income tax expense was favorably impacted by benefits from a valuation allowance release, which resulted in a tax benefit of $47.4 million.

In jurisdictions where the Company operates, management continues to monitor the realizability of the deferred tax assets arising from losses in its cyclical business, taking into account multiple factors. In completing this assessment, Titan considered both objective and subjective factors. These factors included, but were not limited to, a history of income or losses in prior years, future projections of income or loss, future reversal of existing temporary differences, and tax planning strategies. After evaluating all available evidence, including the fact that the US is in a three year cumulative income position, the Company decided to release most of its U.S. valuation allowance and only retain the portion related to credits that were not more likely than not to be utilized, some state net operating losses, and interest expense carryforward. The Company continues to record a valuation allowance in several major jurisdictions, including various U.S. states, Italy, and Luxembourg where it remains more likely than not that the deferred tax assets would not be utilized.

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Net Income and Income per Share

Net income for the year ended December 31, 2022, was $179.2 million, compared to net income of $49.9 million for 2021. Basic earnings per share was $2.80 for the year ended December 31, 2022, compared to $0.80 for 2021. Diluted earnings per share was $2.77 for the year ended December 31, 2022, compared to $0.79 for 2021. The Company's higher net income and earnings per share were due to the items previously discussed.

SEGMENT INFORMATION

Segment Summary (Amounts in thousands)

Agricultural Segment Results

Agricultural segment results were as follows:

Net sales in the agricultural market were $1,192.2 million for the year ended December 31, 2022, compared to $949.4 million for 2021, an increase of 26%. Net sales increase was driven by price/product mix and volume. Price had a greater impact, primarily reflective of increases in product pricing in response to inflationary impacts on raw materials 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 of 2.8%, primarily due to the weakening Euro, and the effects of the disposed Australian business of 1.5%.

Gross profit in the agricultural market was $193.6 million, or 16% of net sales, for 2022, compared to $135.8 million, or 14% of net sales, for 2021. The increase in gross profit and margin was 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 the agricultural market was $130.5 million for the year ended December 31, 2022, compared to $77.7 million for 2021. The overall increase in income from operations is attributable to higher gross profit, described previously.

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Earthmoving/Construction Segment Results

Earthmoving/construction segment results were as follows:

The Company's earthmoving/construction market net sales were $807.4 million for the year ended December 31, 2022, compared to $693.4 million for the year ended December 31, 2021, an increase of 16%. The increase in earthmoving/construction net sales was primarily driven by increases in product pricing in response to inflationary impacts on energy and freight costs, along with fluctuations in the price of steel. The net sales increase was also impacted by volume across all regions, particularly Europe with the undercarriage business. The volume increase was primarily due to improvements in global economic conditions, recovery in construction markets, and stronger mining commodity prices. Net sales were unfavorably impacted by foreign currency translation of 5.4%, primarily due to the weakening Euro, and the effects of the disposed Australia business of 2.5%.

Gross profit in the earthmoving/construction market was $135.8 million, or 17% of net sales, for the year ended December 31, 2022, compared to $83.7 million, or 12% of net sales, for the year ended December 31, 2021. The increase in gross profit and margin was primarily driven by the impact of net sales as described previously and the 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 other inflationary cost impacts with corresponding price increases to protect profitability.

The Company's earthmoving/construction segment income from operations was $79.8 million for the year ended December 31, 2022, as compared to income of $27.8 million for 2021. This improvement was due to increases in sales price, volume, and continued execution of cost containment measures taken to manage profitability.

Consumer Segment Results

Consumer segment results were as follows:

Consumer market net sales were $169.8 million for the year ended December 31, 2022, compared to $137.5 million for 2021, an increase of 24%.  The increase was driven by increased price/product mix and volume, with price having a greater impact. Pricing increases were implemented because of inflationary input costs, such as fluctuations in the price of steel and rubber, and increased energy and freight costs. The increase in demand is primarily related to specialty products in the United States, primarily custom mixing of rubber stock to third parties. Net sales were favorably impacted by foreign currency translation, primarily in Latin America and Russia, which increased net sales by 0.2%, although the disposal of the Australian business had a negative effect on sales of 0.8%.

Gross profit from the consumer market was $31.3 million for 2022, or 18% of net sales, compared to $18.0 million, or 13% of net sales, for 2021. The increase was primarily caused by increased price/product mix and the positive impact of sales volume increase on operating leverage.

Consumer segment income from operations was $22.8 million for the year ended December 31, 2022, compared to $9.6 million for 2021. The increase was due to increase in gross profit as mentioned previously.

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Corporate & Unallocated Expenses

Income from operations on a segment basis does not include corporate expenses of approximately $27.3 million and $29.9 million for the year ended December 31, 2022 and 2021, respectively. Unallocated expenses are primarily comprised of corporate selling, general and administrative expenses. The year-over-year change was due to reductions in certain SG&A expenses primarily associated with investments to improve our supply chain and logistics processes in 2021 which did not occur in 2022.

FISCAL YEAR ENDED DECEMBER 31, 2021, COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2020

The comparison of the 2021 results to 2020 has been omitted from this Form 10-K and can be found in the Company's Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 3, 2022.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

As of December 31, 2022, the Company had $159.6 million of cash, an increase of $61.5 million from December 31, 2021, due to the following items:

Operating Cash Flows

Summary of cash flows from operating activities:

For the year ended December 31, 2022, operating activities provided cash of $160.7 million, driven by the net income of $179.2 million, increases in other current liabilities of $18.9 million, and deceases in prepaid and other current assets of $11.4 million, which was partially offset by increases in accounts receivable of $27.2 million generated by the increased sales activity during the year, increases in inventories of $19.6 million, and decreases in accounts payable of $7.8 million. Included in net income of $179.2 million were non-cash items for depreciation and amortization of $42.7 million, the income on indirect taxes of $32.0 million, deferred income tax benefit of $23.4 million, and loss on sale of the Australian wheel business of $10.9 million.

Cash provided by operating activities increased by $150.0 million when comparing 2022 to 2021. This increase was primarily due to an increase of $129.3 million in net income year over year.

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Summary of the components of cash conversion cycle:

Cash conversion cycle increased by 4 days during 2022 from 2021 due to decreases in accounts payable of $7.8 million at year ended December 31, 2022, as compared to 2021.

Investing Cash Flows

Summary of cash flows from investing activities:

Net cash used for investing activities was $36.8 million in 2022, compared to cash used for investing activities of $37.6 million in 2021. The Company invested a total of $47.0 million in capital expenditures in 2022, compared to $38.8 million in 2021. Capital expenditures represent plant equipment replacement and improvements, along with new tools, dies and molds related to new product development. The overall capital outlay for 2022 increased as the Company seeks to enhance the Company's existing facilities and manufacturing capabilities and drive plant efficiency and labor productivity gains. Cash provided by investing activities in 2022 includes $9.3 million from proceeds for the sale of the Australian wheel business.

Cash used for investing activities for 2021 included $38.8 million capital expenditures used to enhance the Company's existing facilities and manufacturing capabilities and drive productivity gains.

Financing Cash Flows

Summary of cash flows from financing activities:

Net cash used for financing activities was $61.3 million in 2022. Payment on debt of $124.7 million and repurchase of common stock of $25.0 million were offset partially by proceeds from borrowings of $88.9 million. The Company borrowed on the domestic revolving credit facility during the first quarter of 2022 to facilitate the repurchasing of the Company's common stock from RDIF, and subsequently repaid the borrowing during the second quarter of 2022 as cash flow improved. The Company reduced its domestic credit facility outstanding balance to zero during 2022 with cash provided from operations as compared to domestic credit facility outstanding balance of $30.0 million at December 31, 2021.

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Debt Restrictions

The Company’s revolving credit facility (credit facility) and indenture relating to the 7.00% senior secured notes due 2028 contain various restrictions which include:

•When remaining availability under the credit facility is less than 10% of the total commitment under the credit facility ($12.5 million as of December 31, 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.

Guarantor Financial Information

The Company's 7.00% senior secured notes due 2028 are guaranteed by the following 100% owned subsidiaries of the Company: Titan Tire Corporation, Titan Tire Corporation of Bryan, Titan Tire Corporation of Freeport, and Titan Wheel Corporation of Illinois. The note guarantees are full and unconditional, joint and several obligations of the guarantors. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

The following summarized financial information of both the Company and the Guarantor Subsidiaries ("Guarantors") is presented on a combined basis. Intercompany balances and transactions between the Company and the Guarantors have been eliminated and the summarized financial information does not reflect investments of the Company or the Guarantors in the Non-Guarantor Subsidiaries. The information is presented in accordance with the requirements of Rule 13-01 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor subsidiary operated as an independent entity.

Summarized Balance Sheets:

Summarized Statement of Operations:

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LIQUIDITY OUTLOOK

The Company does not anticipate significant liquidity constraints during the foreseeable future. At December 31, 2022, the Company had $159.6 million of cash and cash equivalents. At December 31, 2022, under the Company's $125 million credit facility, there were no outstanding borrowings, $7.2 million in outstanding letters of credit, and the amount available to borrow totaled $117.8 million. Titan’s availability under this domestic facility may be less than $125 million, from time to time, as a result of any outstanding letters of credit and eligible accounts receivable and inventory balances at certain of its domestic subsidiaries. The cash and cash equivalents balance of $159.6 million includes $132.8 million held in foreign countries.

Capital expenditures for 2023 are forecasted to be approximately $55 million to $60 million. These capital expenditures are anticipated to be used primarily to continue to enhance the Company’s existing facilities and manufacturing capabilities and drive productivity gains, along with the purchase of new tools, dies and molds related to new product development.

Cash payments for interest are currently forecasted to be approximately $30 million in 2023, based on the Company's year-end 2022 debt balances and debt maturities. The forecasted interest payments are comprised primarily of the semi-annual interest payments totaling approximately $28 million (paid in April and October) for the 7.00% senior secured notes.

Cash and cash equivalents along with anticipated internal cash flows from operations and utilization of availability on global credit facilities, are expected to provide sufficient liquidity for working capital needs, debt maturities, and capital expenditures. Potential divestitures and unencumbered assets are also a means to provide for future liquidity needs.

In 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.

In December 2022, S&P Global Ratings upgraded its credit rating for the Company due to its belief that the Company will continue to benefit from solid demand in its agricultural and mining end markets in 2023.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are described in Note 1. Description of Business and Significant Accounting Policies to the consolidated financial statements. 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.

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. Management’s judgment is required to determine the provision for income taxes, deferred tax assets and liabilities, and valuation allowances against deferred tax assets.

Management records a reduction to the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing future profitability by year, including the impact of tax planning strategies, relative to the expiration dates, if any, of the assets.

Management considers both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable evidence. Management gives operating results during the most recent three-year period a significant weight in our analysis. Management considers positive cumulative operating results exist in the most recent three-year period. Management performs scheduling exercises as needed to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. Management also considers prudent tax planning strategies (including an assessment of their feasibility) to accelerate taxable income if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized. See Note 21 to the consolidated financial statements for additional information on the composition of valuation allowances.

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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.  For more information concerning these obligations, see Note 22 of the Notes to Consolidated Financial Statements for additional information.

The effect of hypothetical changes to selected assumptions on the Company’s frozen pension benefit obligations would be as follows (amounts in thousands):

(a)Projected benefit obligation (PBO) for pension plans.

MARKET RISK

Foreign Currency Risk

The Company is exposed to the impact of foreign currency fluctuations in certain countries in which it operates. The exposure to foreign currency movements is limited in many countries because the operating revenues and expenses of the Company's various subsidiaries and business units are substantially in the local currency of the country in which they operate. To the extent that borrowings, sales, purchases, revenues, expenses or other transactions are not in the local currency of the subsidiary, the Company is exposed to currency risk and may enter into foreign exchange derivative contracts to mitigate the currency risk. The Company is exposed to fluctuations in the Brazilian real, British pound, Euro, Russian ruble and other global currencies.   The Company’s net investment in foreign entities translated into U.S. dollars was $249.0 million at December 31, 2022, and $255.6 million at December 31, 2021.  The hypothetical potential loss in value of the Company’s net investment in foreign entities resulting from a 10% adverse change in foreign currency exchange rates at December 31, 2022, would have been approximately $25.0 million.

Commodity Price Risk

The Company does not generally enter into long-term commodity pricing contracts and does not use derivative commodity instruments to hedge its exposures to commodity market price fluctuations.  Therefore, the Company is exposed to price fluctuations of its key commodities, which consist primarily of steel, natural rubber, synthetic rubber, and carbon black. The Company attempts to pass on certain material price increases and decreases to its customers, depending on market conditions.

Interest Rate Risk

The Company is exposed to interest rate risk on its variable debt. The Company has a $125 million credit facility that has a variable interest rate.  As of December 31, 2022, the amount available under the credit facility was $117.8 million.  If the credit facility were fully drawn to available funds, a change in the interest rate of 100 basis points, or 1%, would have changed the Company’s interest expense by approximately $1.2 million.  At December 31, 2022, there were no borrowings under the credit facility.

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 annual report with a narrative from the perspective of the management of Titan

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International, Inc. (together with its subsidiaries, Titan, or the Company) on Titan’s financial condition, results of operations, liquidity, and other factors which may affect the Company’s future results. You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes in "Item 8. Financial Statements and Supplementary Data." The following discussion includes forward-looking statements about our business, financial condition, and results of operations, including discussions about management’s expectations for our business. These statements represent projections, beliefs, and expectations based on current circumstances and conditions and in light of recent events and trends, and you should not construe these statements either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. See “Forward-Looking Statements” and "Item 1A. Risk Factors" in Part 1 of this Form 10-K.

COVID-19 Pandemic

In December 2019, a novel strain of coronavirus ("COVID-19") was reported in Wuhan, China. During March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic. The emergence of COVID-19 and its global spread presents significant risks to the Company, some of which the Company is unable to fully evaluate or even foresee. The COVID-19 pandemic adversely affected the Company’s financial results and business operations for the years ended December 31, 2020 and December 31, 2021 and economic and health conditions in the United States and across most of the globe have continued to change since then. In some of the countries where the Company has operations and where COVID-19 has been widespread (such as the Company’s European and Latin America locations), the Company’s operations were curtailed during portions of 2020. The Company’s operations resumed with additional sanitary and other protective health measures, which have increased operating costs. We expect these additional measures to continue into the foreseeable future as we seek to ensure the safety and welfare of Titan’s employees.

While the Company's operations began to return to historical levels beginning in the second half of 2020 and continued throughout 2021, certain geographies (particularly Australia, Europe and Latin America) continue to remain impacted by the COVID-19 pandemic due to new and emerging variants of COVID-19 resulting in higher employee absenteeism. Further, global supply chains are experiencing constraints as a result of the ongoing COVID-19 pandemic, including availability and pricing of raw materials, transportation and labor. The current constraints on the global supply chains have added complexity to growth expectations in the near term.

Due to the above circumstances and as described generally in this Form 10-K, the Company’s results of operations for the year ended December 31, 2021 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 highly uncertain and will depend on future developments, and such effects could exist for an extended period of time even after the pandemic might end.

BUSINESS

For a description of the Company’s business and segments see Part 1, Item 1 of this Form 10-K.

MARKET CONDITIONS AND OUTLOOK

AGRICULTURAL MARKET OUTLOOK

Agriculture-related commodity prices continued to remain at historically high levels during 2021 and favorable market conditions across the globe are expected to continue the momentum into 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 improved 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. 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 declines in 2020 due in large part to global economic uncertainty and the impacts of the COVID-19 pandemic. The market experienced strong signs of growth in 2021 as economies emerged from the pandemic and the momentum is expected to continue into 2022. There are historically low equipment inventory levels throughout the global construction industry and

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mining capital budgets continued to rise during 2021, and we expect that trend to continue into 2022. Improvements in mineral commodity prices also currently support growth.

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, and train brakes. Overall, the markets stabilized during 2021 due to pent up demand from historically lower sales volume during 2020. This pace of growth is anticipated to be slower during 2022 than what is currently being experienced in the Agriculture and Earthmoving/Construction segments. The consumer segment is affected by many variables including consumer spending, interest rates, government policies, and other macroeconomic drivers.

SUMMARY OF RESULTS OF OPERATIONS

The following table sets forth the Company’s statement of operations expressed as a percentage of net sales for the periods indicated.  This table and subsequent discussions should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included elsewhere in this annual report.

In addition, the following table sets forth components of the Company’s net sales classified by segment:

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FISCAL YEAR ENDED DECEMBER 31, 2021, COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2020

RESULTS OF OPERATIONS

Highlights for the year ended December 31, 2021, compared to 2020 (amounts in thousands):

Net Sales

Net sales for the year ended December 31, 2021 were $1.78 billion, compared to $1.26 billion for the year ended December 31, 2020, an increase of 41.4%, driven by sales increases in all segments. Overall, net sales volume and price/mix was up 23.4% and 18.0%, respectively, from 2020. Net sales volume and product price/mix improved due to market growth in all segments. Pricing increases have been implemented because of rising raw material costs and other inflationary impacts in the markets, including freight. The contributing factors to the increase in demand in 2021 were increased agriculture commodity prices, lower equipment inventory levels and pent up demand following the economic impacts of the COVID-19 pandemic during 2020. Lower sales volumes during 2020 were primarily caused by continued weakness in the commodity markets and the effect of the COVID-19 pandemic which caused significant uncertainty for customers in most geographies, most notably OEM customers.

Global supply chains are experiencing constraints, including availability and pricing of raw materials, transportation and labor. The current constraints on global supply chains are adding complexity to the market environment and growth expectations in the near term. Titan is experiencing similar supply chain challenges, and has been able to manage the situation effectively to date.

Cost of Sales and Gross Profit

Cost of sales was $1.54 billion for the year ended December 31, 2021, compared to $1.13 billion for 2020. The increase in cost of sales was driven by the impact of increases in sales volume. Gross profit for 2021 was $237.5 million, or 13.3% of net sales, compared to $114.3 million, or 9.1% of net sales, for 2020. The increase in gross profit and margin was driven by the impact of increases in sales volume, as described previously, favorably impacting overhead absorption. In addition, cost reduction initiatives were executed across global production facilities before and throughout the COVID-19 pandemic.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for the year ended December 31, 2021, were $131.8 million, or 7.4% of net sales, up only 0.6%, compared to $130.9 million, or 10.4% of net sales, for 2020.  The increase in SG&A was primarily due to investments to improve our supply chain and logistics processes and an increase in variable costs associated with improved operating performance and growth in sales. SG&A expenses for the year ended December 31, 2020 included a $5.0 million legal accrual related to the settlement of the Dico case and an impairment charge of $6.0 million related to certain customer relationships in Australia as a result of attrition of several customers since the business was initially acquired in 2012.

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Research and Development Expenses

Research and development (R&D) expenses for the year ended December 31, 2021, were $10.1 million, or 0.6% of net sales, compared to $9.0 million, or 0.7% of net sales, for 2020. R&D spending reflects initiatives to improve product designs and an ongoing focus on quality.

Royalty Expense

The Company has trademark license agreements with The Goodyear Tire & Rubber Company to manufacture and sell certain farm tires under the Goodyear name. These agreements cover sales in North America, Latin America, Europe, the Middle East, Africa, Russia, and other Commonwealth of Independent States countries. Each of these agreements is scheduled to expire in 2025. Royalty expenses for the year ended December 31, 2021 were $10.5 million compared to $9.7 million for 2020. The increase in royalty expenses are due to the increase in sales, as described previously, resulting in an increase in the amount of royalty expense incurred.

Income (Loss) from Operations

Income from operations for the year ended December 31, 2021 was $85.2 million, or 4.7% of net sales, compared to loss of $35.4 million, or 2.8% of net sales, for 2020.  The increase in income was primarily due to the higher sales and improvements in gross profit margins.

OTHER PROFIT/LOSS ITEMS

Interest Expense

Interest expense for 2021 and 2020 was $32.2 million and $30.6 million, respectively. Interest expense increased due to the refinancing of the senior secured notes during the second quarter of 2021 resulting in an increase in the interest rate from 6.50% to 7.00%.

Loss on Senior Note Repurchase

Loss on senior note repurchase was $16.0 million for 2021. The loss was in connection to the Company 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 second quarter of 2021.

Foreign Exchange Gain (Loss)

Foreign currency gain was $12.0 million for the year ended December 31, 2021, compared to a loss of $11.0 million for the year ended December 31, 2020. The foreign exchange gain in 2021 is primarily the result of the closeout of certain legal entities as part of the ongoing initiative to rationalize Titan's legal entity structure and ongoing management of the intercompany capital structure as well as a favorable impact of the movement of exchange rates. The foreign currency exchange loss in 2020 is the result of the significant movements in foreign currency exchange rates in many of the geographies in which we conduct business and translation of intercompany loans at certain foreign subsidiaries, which are denominated in local currencies rather than the reporting currency, which is the United States dollar. Since such loans are expected to be settled at some point in the future, these loans are adjusted each reporting period to reflect the current exchange rates.

Other Income

Other income was $2.1 million for the year ended December 31, 2021, compared to other income of $18.8 million for 2020, a decrease of $16.7 million. The decrease in other income was primarily attributable to the proceeds of $8.6 million related to a property insurance settlement at Titan Tire Reclamation Corporation, a $4.9 million gain on the sale of our Brownsville, Texas facility (Texas Facility), and $2.3 million of building rental income from the Texas facility, all in 2020. The sale of the Texas facility occurred in November 2020, and no further rental income was realized in 2021.

Provision for Income Taxes

The Company recorded tax expense for income taxes of $1.1 million and $6.9 million for the years ended December 31, 2021 and 2020, respectively. The Company's effective tax rate was 2.3% in 2021 and (11.9)% in 2020.

The Company’s 2021 and 2020 income tax expense and rates 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 and a reduction of the liability for unrecognized tax positions. 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 years ended December 31, 2021 and 2020. In 2021, the Company released the valuation allowance on its deferred tax assets related to its subsidiary, Titan Luxembourg, resulting in the increase in the effective tax rate as compared to 2020. The Company expects to generate positive

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taxable income in Titan Luxembourg in future periods as a result of the legal entity and loan rationalization completed during 2021, allowing for the realization of future tax benefits from the carryforward of past net operating losses.

Net Income (Loss)

Net Income for the year ended December 31, 2021, was $49.9 million, compared to net loss of $65.1 million for 2020. Basic earnings per share was $0.80 for the year ended December 31, 2021, compared to a loss of $0.99 for 2020. Diluted earnings per share was $0.79 for the year ended December 31, 2021, compared to a loss of $0.99 for 2020. The Company's higher net income and earnings per share were due to the items previously discussed.

SEGMENT INFORMATION

Segment Summary (Amounts in thousands)

Agricultural Segment Results

Agricultural segment results were as follows:

Net sales in the agricultural market were $949.4 million for the year ended December 31, 2021, compared to $634.7 million for 2020, an increase of 49.6%. Net sales volume and product price/mix was up 28.0% and 23.4%, respectively, from 2020. The sales volume increase was driven by demand in the global agricultural markets, reflective of improved 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. Pricing is primarily reflective of increases in raw material and other inflationary cost increases in the markets, including freight. The overall increase in net sales was partially offset by unfavorable currency translation, primarily in Latin America and Europe of 1.8%.

Gross profit in the agricultural market was $135.8 million, or 14.3% of net sales, for 2021, compared to $65.4 million, or 10.3% of net sales, for 2020.   The increase in gross profit and margin is primarily attributable to the impact of increases in sales volume as described previously and cost reduction initiatives executed across global production facilities before and throughout the COVID-19 pandemic. The Company balanced the increases of related raw materials and other inflationary cost impacts throughout 2021 with corresponding price increases to protect profitability.

Income from operations in the agricultural market was $77.7 million for the year 2021, compared to $9.8 million for 2020. The overall increase in income from operations is attributable to higher gross profit from significant demand improvements, and the overall cost reduction initiatives.

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Earthmoving/Construction Segment Results

Earthmoving/construction segment results were as follows:

The Company's earthmoving/construction market net sales were $693.4 million for the year ended December 31, 2021, compared to $510.2 million for the year ended December 31, 2020, an increase of 35.9%. The increase in earthmoving/construction net sales was driven by increased volume and product price/mix of 21.5% and 11.9%, respectively, which was primarily due to improvements in global economic conditions and recovery in construction markets, including the return to normalized supply and demand levels after the initial effects of the COVID-19 pandemic in 2020. Net sales was also favorably impacted by foreign currency translation in Europe and Australia, which increased net sales by 2.5%.

Gross profit in the earthmoving/construction market was $83.7 million, or 12.1% of net sales, for the year ended December 31, 2021, compared to $37.9 million, or 7.4% of net sales, for the year ended December 31, 2020. The increase in gross profit and margin was primarily driven by the increased sales volume and continued improved production efficiencies stemming from the strong management actions taken to improve profitability for the long-term. Again, the Company balanced the increases related to raw materials and other inflationary cost impacts throughout 2021 with corresponding price increases to protect profitability.

The Company's earthmoving/construction segment income from operations was $27.8 million for the year ended December 31, 2021, as compared to a loss of $21.6 million for 2020. This improvement was due to increases in sales volume and the sustained benefit of cost containment measures taken to manage profitability in response to the prior market declines and the impact of the COVID-19 pandemic.

Consumer Segment Results

Consumer segment results were as follows:

Consumer market net sales were $137.5 million for the year ended December 31, 2021, compared to $114.5 million for 2020, an increase of 20.0%.  The increase in consumer net sales was primarily due to increased volume and product price/mix of 7.1% and 14.5%, respectively. The increase in net sales was partially offset by unfavorable foreign currency translation, primarily in Latin America and Russia, which negatively impacted net sales by 1.6%.

Gross profit from the consumer market was $18.0 million for 2021, or 13.1% of net sales, compared to $11.0 million, or 9.6% of net sales, for 2020. The increase was primarily caused by increased product price/mix and the impact of sales volume increase.

Consumer segment income from operations was $9.6 million for 2021, compared to $1.1 million for 2020. The increase was due to increase in gross profit as mentioned previously.

Corporate & Unallocated Expenses

Income from operations on a segment basis does not include corporate expenses of approximately $29.9 million and $24.7 million for the year ended December 31, 2021 and 2020, respectively. Unallocated expenses are primarily comprised of corporate selling, general and administrative expenses. The year-over-year change was due to an increase in certain unallocated SG&A expenses at the corporate level including an increase in costs associated with investments to improve our supply chain and logistics processes, increase in R&D expenses as previously mentioned and other variable operating costs associated with improved operating performance and growth in sales.

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FISCAL YEAR ENDED DECEMBER 31, 2020, COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2019

The comparison of the 2020 results to 2019 has been omitted from this Form 10-K and can be found in the Company's Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 4, 2021.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

As of December 31, 2021, the Company had $98.1 million of cash, a decrease of $19.3 million from December 31, 2020, due to the following items:

Operating Cash Flows

Summary of cash flows from operating activities:

For the year ended December 31, 2021, operating activities provided cash of $10.7 million, driven by the increase in accounts payable of $121.2 million, the net income of $49.9 million, and partially offset by increases in inventories of $112.9 million and increases in accounts receivable of $74.7 million, which was driven by the increase in sales activity during the year. Included in net income of $49.9 million was a non-cash charge for depreciation and amortization of $48.0 million. Cash flows provided by operating activities also includes $16.0 million loss on senior note repurchase.

Cash provided by operating activities decreased by $46.5 million when comparing 2021 to 2020. This decrease was due to managed investments in working capital to support significant business growth, along with the $9.2 million legal settlement paid in February 2021 in a previously settled litigation matter (see Note 25 of the Notes to Consolidated Financial Statements for additional information), and partially offset by the impact of higher profitability in 2021, which resulted in an increase of $115.0 million in net income year over year.

Summary of the components of cash conversion cycle:

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Cash conversion cycle decreased by 24 days during 2021 from 2020 due to strategic improvement in working capital management, including more accurate demand forecasting and strategic sourcing of raw materials. Further, the decrease is also due to continued focus on customer cash collections and favorable management of supplier payment cycles and terms.

Investing Cash Flows

Summary of cash flows from investing activities: