TITAN INTERNATIONAL INC

Question-and-Answer Session

Operator:[Operator Instructions] Our first question comes from Mike Shlisky from D.A. Davidson.

Mike Shlisky: David, can you maybe clarify the last few comments there, I might have misinterpreted here. So in the third quarter you're saying sales could be roughly similar to what you just saw in 2Q, but the EBITDA could be down 10% to 15%. That's what the numbers are saying. So can you maybe break down a little bit what's behind that assumption? Is there any kind of mix or other issue that's just 3Q specific here?

David Martin: Yes. There's nothing to really call out, but we normally have our seasonal shutdowns of plant and equipment for the summer maintenance schedules as well as the holiday schedules in Europe. Overall, the product mix we don't think it's going to be quite the same as what we saw in Q2. So moderately off, but nothing significant. So again, we have the opportunity on the high end to achieve what we achieved in Q2, but a little bit of moderation in some areas.

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Mike Shlisky: Okay. I don't want to look too far ahead, but looking at the fourth quarter. If you recall last year, I think folks were thrown a bit of a curve. You had kind of EBITDA that was not seen since pre-pandemic when you were a very different company. I don't know if you would actually give us guidance yet, but are you getting any indicators that these OEMs are going to have a large shutdown again this fourth quarter or is that just kind of in the past at this point?

David Martin: Yes. We're seeing very similar schedules. I don't think it's really changing a lot. But certainly, I would be encouraged by them picking up production. But right now we're not seeing any indication of that. It's just kind of fairly flat at this point.

Mike Shlisky: Okay. I also wanted to ask about maybe the broader AG sector in general. It sounds to me as if you're seeing some inflection, but it's just still happening only in Brazil. Are you getting any sense that you'll start seeing an improvement in the United States or are the OEMs still just saying we're just not going to build anything more until we start seeing actual farmer orders get better?

Paul Reitz: Yes. I think there's an overall tone that's just pretty quiet and I would say that's different than prior years, that quietness. I don't think that indicates negativity, but I think it just means right now there's definitely a pause to wait and see obviously what's going on currently with some of the tariff deadlines and then any Fed action later in the year. Where we see some positives though in our industry, you mentioned Brazil. I think Brazil continues on a good path. But where we're seeing some net positive in our industry is that wheel and tire inventory just has been dragged down too low or equipment inventory has been dragged down too low and that's where we get these drop-in orders that can be fairly largeable in size. As I've mentioned, we saw them in Q1, Q2. Seeing some good trends starting off Q3 so far in July related to our consumer segment as David has mentioned as well. So each quarter we're seeing some very positive trends with good size orders coming in from different customers serving kind of some different markets with products, but that's where Titan's ability and what we have been instructing our team all along is that when our customers need us, we have to be there. And so it's easy to say it on a call today. It's much more difficult and it shows the strength of Titan to do it in reality. And so we are positioned to take these large orders as they come and service our customers and we are starting to see them.

And so I think, Mike, what we believe as we get into next year and it's very early to give you a fine-tuned comment. But I think because of inventory and some general positive trends kind of leaving tariffs and interest rates to the side, we do expect an uptick for next year. And quantifying that further is going to depend on again tariffs and interest rates and some of these elements that are causing the pause. But I think the underlying drivers that are there for us to see some uptick for next year.

Mike Shlisky: All right. Maybe one last one. I've only gone partially through the 10-Q. Do you have -- given what happened with the taxes this quarter, are there any large U.S. NOLs that are on the books that we should be putting into our valuation going forward?

David Martin: Yes. So there are some NOLs that could potentially hit valuation allowances needed if we don't see market conditions improve. But again, I think it's important to focus on cash taxes and how we're paying it. It's been relatively stable in that area. So that's really what we look at. There can be some movement in the NOL valuation allowance from time to time, but we'll call it out separately.