TITAN INTERNATIONAL INC - FORM 10-Q

Attached files

file	filename
EX-3 - TITAN INTERNATIONAL, INC. ARTICLES OF INCORPORATION - TITAN INTERNATIONAL INC	ex3.htm
EX-32 - CERTIFICATION PURSUANT TO SECTION 906 - TITAN INTERNATIONAL INC	ex32.htm
EX-31.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 - TITAN INTERNATIONAL INC	ex31_1.htm
EX-10.1 - TRADEMARK LICENSE AGREEMENT WITH THE GOODYEAR TIRE & RUBBER COMPANY - TITAN INTERNATIONAL INC	ex10_1.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 - TITAN INTERNATIONAL INC	ex31_2.htm
EX-10.3 - SUPPLY AGREEMENT WITH DEERE & COMPANY - APRIL 2008 - TITAN INTERNATIONAL INC	ex10_3.htm
EX-10.2 - SUPPLY AGREEMENT WITH DEERE & COMPANY - AUGUST 2006 - TITAN INTERNATIONAL INC	ex10_2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended: September 30, 2010

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-12936

TITAN INTERNATIONAL, INC.

(Exact name of Registrant as specified in its Charter)

Illinois		36-3228472
(State of Incorporation)		(I.R.S. Employer Identification No.)

2701 Spruce Street, Quincy, IL 62301

(Address of principal executive offices, including Zip Code)

(217) 228-6011

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer þ
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

		Shares Outstanding at
Class		October 25, 2010

Common stock, no par value per share		35,355,477

TITAN INTERNATIONAL, INC.

TABLE OF CONTENTS

		Page
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009	1

	Consolidated Condensed Balance Sheets as of September 30, 2010, and December 31, 2009	2

	Consolidated Condensed Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2010	3

	Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009	4

	Notes to Consolidated Condensed Financial Statements	5-17

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

Part II.	Other Information

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 6.	Exhibits	34

	Signatures	34

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TITAN INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in thousands, except earnings per share data)

	Three months ended						Nine months ended
	September 30,						September 30,
	2010			2009			2010			2009
Net sales	$	222,818		$	141,496		$	648,922		$	581,083
Cost of sales		194,872			144,526			560,986			524,304
Gross profit (loss)		27,946			(3,030	)		87,936			56,779
Selling, general & administrative expenses		12,037			10,114			36,008			34,409
Research and development expenses		1,112			1,158			5,039			5,016
Royalty expense		2,275			1,464			6,809			6,123
Income (loss) from operations		12,522			(15,766	)		40,080			11,231
Interest expense		(5,867	)		(3,997	)		(19,713	)		(11,819	)
Gain (loss) on note repurchase		(473	)		0			(3,195	)		1,398
Other income		401			644			307			1,302
Income (loss) before income taxes		6,583			(19,119	)		17,479			2,112
Income tax provision (benefit)		2,568			(8,006	)		6,817			274
Net income (loss)	$	4,015		$	(11,113	)	$	10,662		$	1,838
Earnings (loss) per common share:
Basic	$	.12		$	(.32	)	$	.31		$	.05
Diluted		.11			(.32	)		.30			.05
Average common shares outstanding:
Basic		34,868			34,746			34,819			34,692
Diluted		51,773			34,746			51,740			35,251

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except share data)

	September 30,			December 31,
Assets	2010			2009
Current assets
Cash and cash equivalents	$	159,315		$	229,182
Accounts receivable		114,140			67,513
Inventories		135,976			110,136
Deferred income taxes		3,065			11,108
Prepaid and other current assets		20,826			27,277
Total current assets		433,322			445,216

Property, plant and equipment, net		248,689			254,461
Deferred income taxes		1,671			7,253
Other assets		44,012			29,533

Total assets	$	727,694		$	736,463

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	47,135		$	24,246
Other current liabilities		43,886			45,826
Total current liabilities		91,021			70,072

Long-term debt		312,448			366,300
Other long-term liabilities		38,431			38,138
Total liabilities		441,900			474,510

Stockholders’ equity
Common stock (no par, 120,000,000 shares authorized, 37,475,288 issued)		30			30
Additional paid-in capital		299,862			299,519
Retained earnings		26,509			16,377
Treasury stock (at cost, 2,127,428 and 2,214,347 shares, respectively)		(19,494	)		(20,274	)
Treasury stock reserved for contractual obligations		(2,936	)		(5,393	)
Accumulated other comprehensive loss		(18,177	)		(28,306	)
Total stockholders’ equity		285,794			261,953

Total liabilities and stockholders’ equity	$	727,694		$	736,463

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(All amounts in thousands, except share data)

	Number of common shares		Common Stock		Additional paid-in capital			Retained earnings			Treasury stock			Treasury stock reserved for contractual obligations			Accumulated other comprehensive income (loss)			Total

Balance January 1, 2010		#35,260,941	$	30	$	299,519		$	16,377		$	(20,274	)	$	(5,393	)	$	(28,306	)	$	261,953

Comprehensive income:
Net income									10,662												10,662
Pension liability adjustments, net of tax																		1,724			1,724
Unrealized gain on investment, net of tax																		8,405			8,405
Comprehensive income																					20,791
Dividends on common stock									(530	)											(530	)
Exercise of stock options		45,000				(163	)					404									241
Contractual obligation transactions						501									2,457						2,958
Issuance of treasury stock under 401(k) plan		41,919				5						376									381

Balance September 30, 2010		#35,347,860	$	30	$	299,862		$	26,509		$	(19,494	)	$	(2,936	)	$	(18,177	)	$	285,794

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)

	Nine months ended
	September 30,
	2010			2009
Cash flows from operating activities:
Net income	$	10,662		$	1,838
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		27,617			24,759
Deferred income tax provision		8,043			550
(Gain) loss on note repurchase		3,195			(1,398	)
Excess tax benefit from stock options exercised		0			(86	)
Issuance of treasury stock under 401(k) plan		382			398
(Increase) decrease in assets:
Accounts receivable		(46,627	)		46,326
Inventories		(25,840	)		22,473
Prepaid and other current assets		6,451			(2,236	)
Other assets		(458	)		(1,753	)
Increase (decrease) in liabilities:
Accounts payable		22,889			(40,483	)
Other current liabilities		(1,740	)		(5,070	)
Other liabilities		3,074			6,330
Net cash provided by operating activities		7,648			51,648

Cash flows from investing activities:
Capital expenditures		(20,056	)		(36,482	)
Acquisition of shares of Titan Europe Plc		0			(2,399	)
Other		91			1,030
Net cash used for investing activities		(19,965	)		(37,851	)

Cash flows from financing activities:
Repurchase of senior notes		(56,674	)		(4,726	)
Payment on debt		0			(25,000	)
Proceeds from exercise of stock options		240			1,142
Excess tax benefit from stock options exercised		0			86
Payment of financing fees		(586	)		(1,070	)
Dividends paid		(530	)		(527	)
Net cash used for financing activities		(57,550	)		(30,095	)

Net decrease in cash and cash equivalents		(69,867	)		(16,298	)

Cash and cash equivalents at beginning of period		229,182			61,658

Cash and cash equivalents at end of period	$	159,315		$	45,360

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

1. ACCOUNTING POLICIES

In the opinion of Titan International, Inc. (Titan or the Company), the accompanying unaudited consolidated condensed financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the Company’s financial position as of September 30, 2010, the results of operations for the three and nine months ended September 30, 2010 and 2009, and cash flows for the nine months ended September 30, 2010 and 2009.

Accounting policies have continued without significant change and are described in the Description of Business and Significant Accounting Policies contained in the Company’s 2009 Annual Report on Form 10-K. These interim financial statements have been prepared pursuant to the Securities and Exchange Commission’s rules for Form 10-Q’s and, therefore, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2009 Annual Report on Form 10-K. Certain amounts from prior periods have been reclassified to conform to the current period financial presentation.

Fair value of financial instruments

The Company records financial instruments, including cash and cash equivalents, accounts receivable, notes receivable, accounts payable and other accruals at cost, which approximates fair value. Investments in marketable equity securities are recorded at fair value. The senior unsecured 8% notes due January 2012 (senior unsecured notes) and convertible senior subordinated 5.625% notes due 2017 (convertible notes) are carried at cost of $139.9 million and $172.5 million at September 30, 2010, respectively. The fair value of these notes at September 30, 2010, as obtained through independent pricing sources, was approximately $148.3 million for the senior unsecured notes and approximately $263.7 million for the convertible notes.

Cash dividends

The Company declared cash dividends of $.005 and $.015 per share of common stock for each of the three and nine months ended September 30, 2010 and 2009. The third quarter 2010 cash dividend of $.005 per share of common stock was paid October 15, 2010, to stockholders of record on September 30, 2010.

2. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following (in thousands):

	September 30,			December 31,
	2010			2009
Accounts receivable	$	118,275		$	71,471
Allowance for doubtful accounts		(4,135	)		(3,958	)
Accounts receivable, net	$	114,140		$	67,513

The Company had net accounts receivable balance of $114.1 million at September 30, 2010, and $67.5 million at December 31, 2009. These amounts are net of allowance for doubtful accounts of $4.1 million at September 30, 2010, and $4.0 million at December 31, 2009.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

3. INVENTORIES

Inventories consisted of the following (in thousands):

	September 30,			December 31,
	2010			2009
Raw materials	$	56,557		$	44,336
Work-in-process		23,064			21,378
Finished goods		60,476			46,067
		140,097			111,781
Adjustment to LIFO basis		(4,121	)		(1,645	)
	$	135,976		$	110,136

Inventories were $136.0 million at September 30, 2010, and $110.1 million at December 31, 2009. At September 30, 2010, cost is determined using the first-in, first-out (FIFO) method for approximately 69% of inventories and the last-in, first-out (LIFO) method for approximately 31% of the inventories. At December 31, 2009, the FIFO method was used for approximately 74% of inventories and LIFO was used for approximately 26% of the inventories. Included in the inventory balances were reserves for slow-moving and obsolete inventory of $2.1 million at September 30, 2010, and $2.3 million at December 31, 2009.

4. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following (in thousands):

	September 30,			December 31,
	2010			2009
Land and improvements	$	3,040		$	2,993
Buildings and improvements		97,391			97,238
Machinery and equipment		370,090			359,244
Tools, dies and molds		83,550			77,926
Construction-in-process		17,041			16,383
		571,112			553,784
Less accumulated depreciation		(322,423	)		(299,323	)
	$	248,689		$	254,461

The Company had property, plant and equipment of $248.7 million and $254.5 million at September 30, 2010, and December 31, 2009, respectively. Depreciation on fixed assets for the three months ended September 30, 2010 and 2009, totaled $8.4 million and $7.8 million, respectively. Depreciation on fixed assets for the nine months ended September 30, 2010 and 2009, totaled $25.7 million and $22.8 million, respectively.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

5. INVESTMENT IN TITAN EUROPE PLC

Investment in Titan Europe Plc consisted of the following (in thousands):

	September 30,		December 31,
	2010		2009
Investment in Titan Europe Plc	$	19,386	$	6,456

Titan Europe Plc is publicly traded on the AIM market in London, England. The Company’s investment in Titan Europe represents a 22.9% ownership percentage. The Company has considered the applicable guidance in ASC 323 Investments – Equity Method and Joint Ventures and has concluded that the Company’s investment in Titan Europe Plc should be accounted for as an available-for-sale security and recorded at fair value in accordance with ASC 320 Investments – Debt and Equity Securities as the Company does not have significant influence over Titan Europe Plc. The investment in Titan Europe Plc is included as a component of other assets on the Consolidated Condensed Balance Sheets. Titan’s cost basis in Titan Europe is $5.0 million. Titan’s other comprehensive income includes a gain on the Titan Europe Plc investment of $9.3 million, which is net of tax of $5.0 million. The increased value in the Titan Europe Plc investment at September 30, 2010, was due primarily to a higher publicly quoted Titan Europe Plc market price.

6. WARRANTY

Changes in the warranty liability consisted of the following (in thousands):

	2010			2009
Warranty liability, January 1	$	9,169		$	7,488
Provision for warranty liabilities		12,469			12,735
Warranty payments made		(11,181	)		(11,398	)
Warranty liability, September 30	$	10,457		$	8,825

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

7. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

	September 30,		December 31,
	2010		2009
Senior unsecured 8% notes due January 2012	$	139,948	$	193,800
Convertible senior subordinated 5.625% notes due 2017		172,500		172,500
Revolving credit facility		0		0
		312,448		366,300
Less: Amounts due within one year		0		0
	$	312,448	$	366,300

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

Aggregate maturities of long-term debt at September 30, 2010, were as follows (in thousands):

October 1 – December 31, 2010	$	0
2011		0
2012		139,948
2013		0
2014		0
Thereafter		172,500
	$	312,448

Senior unsecured 8% notes due January 2012

The Company’s senior unsecured 8% notes (senior unsecured notes) are due January 2012. In the nine months ended September 30, 2010, the Company repurchased $53.9 million of principal value of senior unsecured notes resulting in a loss on note repurchase of $3.2 million. In the first quarter of 2009, the Company repurchased $6.2 million of principal value of senior unsecured notes for approximately $4.8 million resulting in a $1.4 million gain on the note repurchases. The Company’s senior unsecured notes outstanding balance was $139.9 million at September 30, 2010.

Tender offer and loss on senior unsecured note repurchase

In May 2010, the Company commenced a tender offer to purchase its outstanding senior unsecured 8% notes due January 2012. As of the expiration of the tender offer in June 2010, there were $47.4 million of the notes tendered and accepted for payment which represented 24.4% of the principal amount of notes outstanding. In July 2010, the Company repurchased an additional $6.5 million of senior unsecured notes outstanding. In connection with the tender offer and additional note repurchase, Titan recorded expenses of $3.2 million in the nine months ended September 30, 2010. These expenses were related to: (i) early tender premium of $2.6 million, (ii) unamortized deferred financing fees of $0.4 million and (iii) other fees of $0.2 million.

Convertible senior subordinated 5.625% notes due 2017

The Company’s convertible senior subordinated 5.625% notes (convertible notes) are due January 2017. The initial base conversion rate for the convertible notes is 93.0016 shares of Titan common stock per $1,000 principal amount of convertible notes, equivalent to an initial base conversion price of approximately $10.75 per share of Titan common stock. If the price of Titan common stock at the time of determination exceeds the base conversion price, the base conversion rate will be increased by an additional number of shares (up to 9.3002 shares of Titan common stock per $1,000 principal amount of convertible notes) as determined pursuant to a formula described in the indenture. The base conversion rate will be subject to adjustment in certain events. The Company’s convertible notes balance was $172.5 million at September 30, 2010.

Revolving credit facility

The Company’s $100 million revolving credit facility (credit facility) with agent Bank of America, N.A. has a January 2014 termination date and is collateralized by the accounts receivable and inventory of Titan and certain of its domestic subsidiaries. During the first nine months of 2010 and at September 30, 2010, there were no borrowings under the credit facility. The credit facility contains certain financial covenants, restrictions and other customary affirmative and negative covenants. Titan is in compliance with these covenants and restrictions as of September 30, 2010.

In September 2010, Titan amended its credit facility with Bank of America, N.A. The amendment extended the credit facility termination date to January 2014 from the previous January 2012 date. The amendment also reduced the revolving commitment to $100 million from $150 million and released the lender’s lien on property, plant and equipment.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

8. LEASE COMMITMENTS

The Company leases certain buildings and equipment under operating leases. Certain lease agreements provide for renewal options, fair value purchase options, and payment of property taxes, maintenance and insurance by the Company.

At September 30, 2010, future minimum commitments under noncancellable operating leases with initial or remaining terms of at least one year were as follows (in thousands):

October 1 – December 31, 2010	$	303
2011		392
2012		64
2013		14
Thereafter		1
Total future minimum lease payments	$	774

9. EMPLOYEE BENEFIT PLANS

The Company has three frozen defined benefit pension plans and one defined benefit plan that previously purchased a final annuity settlement. The Company also sponsors four 401(k) retirement savings plans. The Company expects to contribute approximately $0.4 million to the pension plans during the remainder of 2010.

The components of net periodic pension cost consisted of the following (in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2010			2009			2010			2009
Interest cost	$	1,300		$	1,364		$	3,900		$	4,092
Expected return on assets		(1,227	)		(1,235	)		(3,681	)		(3,703	)
Amortization of unrecognized prior service cost		34			34			102			102
Amortization of unrecognized deferred taxes		(14	)		(14	)		(42	)		(42	)
Amortization of net unrecognized loss		907			1,076			2,721			3,228
Net periodic pension cost (income)	$	1,000		$	1,225		$	3,000		$	3,677

10. ROYALTY EXPENSE

Royalty expense consisted of the following (in thousands):

	Three months ended				Nine months ended
	September 30,				September 30,
	2010		2009		2010		2009
Royalty expense	$	2,275	$	1,464	$	6,809	$	6,123

The Company has a trademark license agreement with The Goodyear Tire & Rubber Company to manufacture and sell certain off-highway tires in North America under the Goodyear name. Royalty expenses recorded were $2.3 million and $1.5 million for the quarters ended September 30, 2010 and 2009, respectively. Royalty expenses were $6.8 million and $6.1 million for the nine months ended September 30, 2010 and 2009, respectively.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

11. OTHER INCOME

Other income consisted of the following (in thousands):

	Three months ended					Nine months ended
	September 30,					September 30,
	2010			2009		2010			2009
Investment gain on contractual obligations	$	638		$	583	$	285		$	1,028
Interest income		92			35		266			147
Other income (expense)		(329	)		26		(244	)		127
	$	401		$	644	$	307		$	1,302

In September 2010, Titan recorded other expense of $0.4 million related to deferred financing fees when the Company’s credit facility was amended.

12. INCOME TAXES

Income tax provision (benefit) consisted of the following (in thousands):

	Three months ended					Nine months ended
	September 30,					September 30,
	2010		2009			2010		2009
Income tax provision (benefit)	$	2,568	$	(8,006	)	$	6,817	$	274

The Company recorded income tax provision of $2.6 million and $6.8 million for the three and nine months ended September 30, 2010, respectively, as compared to income tax benefit of $(8.0) million and income tax provision of $0.3 million for the three and nine months ended September 30, 2009. The Company’s effective income tax rate was 39% and 13% for the nine months ended September 30, 2010 and 2009, respectively. The 2009 effective income tax rate was impacted by a reduction to the Company’s income tax provision of $0.5 million that related to one of the Company’s foreign subsidiaries.

13. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consisted of the following (in thousands):

	Three months ended					Nine months ended
	September 30,					September 30,
	2010		2009			2010		2009
Net income (loss)	$	4,015	$	(11,113	)	$	10,662	$	1,838
Unrealized gain on investment, net of tax		5,137		1,686			8,405		2,633
Pension liability adjustments, net of tax		575		680			1,724		2,039
	$	9,727	$	(8,747	)	$	20,791	$	6,510

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

14. SEGMENT INFORMATION

The table below presents information about certain revenues and income from operations used by the chief operating decision maker of the Company for the three and nine months ended September 30, 2010 and 2009 (in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2010			2009			2010			2009
Revenues from external customers
Agricultural	$	170,675		$	105,426		$	497,503		$	453,098
Earthmoving/construction		47,848			30,732			139,161			113,085
Consumer		4,295			5,338			12,258			14,900
	$	222,818		$	141,496		$	648,922		$	581,083

Gross profit (loss)
Agricultural	$	25,283		$	(522	)	$	78,201		$	48,400
Earthmoving/construction		2,495			(1,815	)		10,294			8,727
Consumer		827			(142	)		2,302			1,254
Corporate expenses		(659	)		(551	)		(2,861	)		(1,602	)
	$	27,946		$	(3,030	)	$	87,936		$	56,779

Income (loss) from operations
Agricultural	$	21,440		$	(3,775	)	$	66,222		$	35,530
Earthmoving/construction		1,077			(2,951	)		4,080			3,711
Consumer		734			(282	)		2,030			842
Corporate expenses		(10,729	)		(8,758	)		(32,252	)		(28,852	)
Income (loss) from operations		12,522			(15,766	)		40,080			11,231
Interest expense		(5,867	)		(3,997	)		(19,713	)		(11,819	)
Other income (expense)		(72	)		644			(2,888	)		2,700
Income (loss) before income taxes	$	6,583		$	(19,119	)	$	17,479		$	2,112

Assets by segment were as follows (in thousands):

	September 30,		December 31,
Total Assets	2010		2009
Agricultural segment	$	328,603	$	257,523
Earthmoving/construction segment		191,881		188,169
Consumer segment		11,761		8,305
Other assets		195,449		282,466
	$	727,694	$	736,463

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

15. EARNINGS PER SHARE

Earnings per share (EPS) are as follows (amounts in thousands, except per share data):

	Three months ended,
	September 30, 2010						September 30, 2009
	Net Income		Weighted average shares		Per share amount		Net Loss			Weighted average shares		Per share amount
Basic EPS	$	4,015		34,868	$	.12	$	(11,113	)		34,746	$	(.32	)
Effect of stock options/trusts		0		529				0			0
Effect of convertible notes		1,598		16,376				0			0
Diluted EPS	$	5,613		51,773	$	.11	$	(11,113	)		34,746	$	(.32	)

	Nine months ended,
	September 30, 2010						September 30, 2009
	Net Income		Weighted average shares		Per share amount		Net Income		Weighted average shares		Per share amount
Basic EPS	$	10,662		34,819	$	.31	$	1,838		34,692	$	.05
Effect of stock options/trusts		0		545				0		559
Effect of convertible notes		4,827		16,376				0		0
Diluted EPS	$	15,489		51,740	$	.30	$	1,838		35,251	$	.05

The effect of stock options/trusts has been excluded for the three months ended September 30, 2009, as the effect would have been antidilutive. The weighted average share amount excluded was 0.6 million shares.

16. FAIR VALUE MEASUREMENTS

ASC 820 Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as:

Level 1 – Quoted prices in active markets for identical instruments;

Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable.

Level 3 – Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Assets and liabilities measured at fair value on a recurring basis consisted of the following (in thousands):

	September 30, 2010						December 31, 2009
	Total		Level 1		Levels 2&3		Total		Level 1		Levels 2&3
Investment in Titan Europe Plc	$	19,386	$	19,386	$	0	$	6,456	$	6,456	$	0
Investments for contractual obligations		9,112		9,112		0		5,869		5,869		0
Total	$	28,498	$	28,498	$	0	$	12,325	$	12,325	$	0

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

17. LITIGATION

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

18. RECENTLY ISSUED ACCOUNTING STANDARDS

Fair Value Measurements and Disclosures

In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements.” This guidance requires new disclosures for transfers in and out of Level 1 and Level 2 fair value measurements. This guidance requires separate presentation about purchases, sales, issuances, and settlements for activity in Level 3 fair value measurements. ASU 2010-06 also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The guidance for new disclosures and clarifications of existing disclosures was effective for reporting periods beginning after December 15, 2009. The adoption of this part of the guidance had no material effect on the Company’s financial position, results of operations or cash flows. The guidance related to presentation of Level 3 fair value measurements is effective for fiscal years beginning after December 15, 2010. The adoption of this part of the guidance is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

Receivables

In July 2010, FASB issued ASU No. 2010-20, “Receivables (Topic 310) – Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” This guidance amends Topic 310 to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. The disclosures as of the end of a reporting period are effective for reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for reporting periods beginning on or after December 15, 2010. The adoption of this ASU is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

19. SUBSEQUENT EVENTS

Senior Secured 7.875% Notes due 2017

On October 1, 2010, the Company closed on an offering of $200 million senior secured 7.875% notes due 2017. Titan used a portion of the net proceeds from the offering to finance the repurchase of $138.9 million of its 8% senior unsecured notes due January 2012 and to pay all consent payments, accrued interest and costs and expenses associated therewith. The Company intends to use the remaining net proceeds from this offering of approximately $44 million for general corporate purposes, which may include potential future acquisitions.

Senior Unsecured 8% Note due January 2012 Repurchase

On October 1, 2010, the Company closed on a tender transaction to purchase $138.9 million, or 99.2%, of its outstanding senior unsecured 8% notes due January 2012. In connection with this transaction, Titan will record expenses of approximately $12 million in the fourth quarter of 2010. These expenses relate primarily to a tender and consent premium of $75 per $1,000 principal amount of the notes. After this transaction, Titan’s senior unsecured 8% note due January 2012 outstanding balance was $1.1 million as of October 1, 2010, compared to a balance of $139.9 million at September 30, 2010.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

20. SUBSIDIARY GUARANTOR FINANCIAL INFORMATION

The Company’s 8% senior unsecured notes and 5.625% convertible senior subordinated notes are guaranteed by each of Titan’s current and future wholly owned domestic subsidiaries other than its immaterial subsidiaries (subsidiaries with total assets less than $250,000 and total revenues less than $250,000.) The note guarantees are full and unconditional, joint and several obligations of the guarantors. Non-guarantors consist primarily of foreign subsidiaries of the Company, which are organized outside the United States of America. The following condensed consolidating financial statements are presented using the equity method of accounting.

	Consolidating Condensed Statements of Operations
(Amounts in thousands)
	For the Three Months Ended September 30, 2010
	Titan					Non-
	Intl., Inc.			Guarantor		Guarantor
	(Parent)			Subsidiaries		Subsidiaries			Eliminations			Consolidated
Net sales	$	0		$	222,818	$	0		$	0		$	222,818
Cost of sales		387			194,485		0			0			194,872
Gross income (loss)		(387	)		28,333		0			0			27,946
Selling, general and administrative expenses		4,843			7,185		9			0			12,037
Research and development expenses		0			1,112		0			0			1,112
Royalty expense		0			2,275		0			0			2,275
Income (loss) from operations		(5,230	)		17,761		(9	)		0			12,522
Interest expense		(5,867	)		0		0			0			(5,867	)
Loss on note repurchase		(473	)		0		0			0			(473	)
Other income		377			24		0			0			401
Income (loss) before income taxes		(11,193	)		17,785		(9	)		0			6,583
Income tax provision (benefit)		(4,366	)		6,937		(3	)		0			2,568
Equity in income of subsidiaries		10,842			0		0			(10,842	)		0
Net income (loss)	$	4,015		$	10,848	$	(6	)	$	(10,842	)	$	4,015

	Consolidating Condensed Statements of Operations
(Amounts in thousands)
	For the Three Months Ended September 30, 2009
	Titan						Non-
	Intl., Inc.			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net sales	$	0		$	141,496		$	0		$	0	$	141,496
Cost of sales		273			144,253			0			0		144,526
Gross loss		(273	)		(2,757	)		0			0		(3,030	)
Selling, general and administrative expenses		3,512			6,580			22			0		10,114
Research and development expenses		2			1,156			0			0		1,158
Royalty expense		0			1,464			0			0		1,464
Loss from operations		(3,787	)		(11,957	)		(22	)		0		(15,766	)
Interest expense		(3,997	)		0			0			0		(3,997	)
Other income		618			26			0			0		644
Loss before income taxes		(7,166	)		(11,931	)		(22	)		0		(19,119	)
Income tax provision (benefit)		3,070			(11,085	)		9			0		(8,006	)
Equity in loss of subsidiaries		(877	)		0			0			877		0
Net loss	$	(11,113	)	$	(846	)	$	(31	)	$	877	$	(11,113	)

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

	Consolidating Condensed Statements of Operations
(Amounts in thousands)
	For the Nine Months Ended September 30, 2010
	Titan					Non-
	Intl., Inc.			Guarantor		Guarantor
	(Parent)			Subsidiaries		Subsidiaries			Eliminations			Consolidated
Net sales	$	0		$	648,922	$	0		$	0		$	648,922
Cost of sales		1,996			558,990		0			0			560,986
Gross profit (loss)		(1,996	)		89,932		0			0			87,936
Selling, general and administrative expenses		14,624			21,334		50			0			36,008
Research and development expenses		0			5,039		0			0			5,039
Royalty expense		0			6,809		0			0			6,809
Income (loss) from operations		(16,620	)		56,750		(50	)		0			40,080
Interest expense		(19,713	)		0		0			0			(19,713	)
Loss on note repurchase		(3,195	)		0		0			0			(3,195	)
Other income		203			104		0			0			307
Income (loss) before income taxes		(39,325	)		56,854		(50	)		0			17,479
Income tax provision (benefit)		(15,337	)		22,173		(19	)		0			6,817
Equity in earnings of subsidiaries		34,650			0		0			(34,650	)		0
Net income (loss)	$	10,662		$	34,681	$	(31	)	$	(34,650	)	$	10,662

	Consolidating Condensed Statements of Operations
(Amounts in thousands)
	For the Nine Months Ended September 30, 2009
	Titan					Non-
	Intl., Inc.			Guarantor		Guarantor
	(Parent)			Subsidiaries		Subsidiaries			Eliminations			Consolidated
Net sales	$	0		$	581,083	$	0		$	0		$	581,083
Cost of sales		707			523,597		0			0			524,304
Gross profit (loss)		(707	)		57,486		0			0			56,779
Selling, general and administrative expenses		12,437			21,907		65			0			34,409
Research and development expenses		38			4,978		0			0			5,016
Royalty expense		0			6,123		0			0			6,123
Income (loss) from operations		(13,182	)		24,478		(65	)		0			11,231
Interest expense		(11,819	)		0		0			0			(11,819	)
Gain on note repurchase		1,398			0		0			0			1,398
Other income		1,072			230		0			0			1,302
Income (loss) before income taxes		(22,531	)		24,708		(65	)		0			2,112
Income tax provision (benefit)		(2,922	)		3,204		(8	)		0			274
Equity in earnings of subsidiaries		21,447			0		0			(21,447	)		0
Net income (loss)	$	1,838		$	21,504	$	(57	)	$	(21,447	)	$	1,838

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

	Consolidating Condensed Balance Sheets
(Amounts in thousands)
	September 30, 2010
	Titan				Non-
	Intl., Inc.		Guarantor		Guarantor
	(Parent)		Subsidiaries		Subsidiaries		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	159,158	$	24	$	133	$	0		$	159,315
Accounts receivable		0		114,140		0		0			114,140
Inventories		0		135,976		0		0			135,976
Prepaid and other current assets		7,004		16,887		0		0			23,891
Total current assets		166,162		267,027		133		0			433,322
Property, plant and equipment, net		3,483		245,206		0		0			248,689
Investment in subsidiaries		36,234		0		0		(36,234	)		0
Other assets		19,427		6,870		19,386		0			45,683
Total assets	$	225,306	$	519,103	$	19,519	$	(36,234	)	$	727,694

Liabilities and Stockholders’ Equity
Accounts payable	$	1,554	$	45,581	$	0	$	0		$	47,135
Other current liabilities		487		43,399		0		0			43,886
Total current liabilities		2,041		88,980		0		0			91,021
Long-term debt		312,448		0		0		0

TITAN INTERNATIONAL INC - FORM 10-Q - October 27, 2010

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