TITAN INTERNATIONAL INC (TWI) FY 2023 MD&A

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.