TITAN INTERNATIONAL INC - FORM 10-Q

Attached files

file	filename
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-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 - TITAN INTERNATIONAL INC	ex31_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: March 31, 2011

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		April 21, 2011

Common stock, no par value per share		42,072,631

TITAN INTERNATIONAL, INC.

TABLE OF CONTENTS

		Page
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Condensed Statements of Operations for the Three Months Ended March 31, 2011 and 2010	1

	Consolidated Condensed Balance Sheets as of March 31, 2011, and December 31, 2010	2

	Consolidated Condensed Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2011	3

	Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010	4

	Notes to Consolidated Condensed Financial Statements	5-19

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20-31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

Part II.	Other Information

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 6.	Exhibits	33

	Signatures	33

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
	March 31,
	2011			2010
Net sales	$	280,829		$	196,448
Cost of sales		224,557			170,361
Gross profit		56,272			26,087
Selling, general and administrative expenses		25,293			11,809
Research and development expenses		1,183			2,027
Royalty expense		2,917			2,121
Income from operations		26,879			10,130
Interest expense		(6,280	)		(7,056	)
Noncash convertible debt conversion charge		(16,135	)		0
Other income		193			333
Income before income taxes		4,657			3,407
Provision for income taxes		7,693			1,329
Net income (loss)	$	(3,036	)	$	2,078
Earnings (loss) per common share:
Basic	$	(.07	)	$	.06
Diluted		(.07	)		.06
Average common shares outstanding:
Basic		40,511			34,772
Diluted		40,511			35,329

Dividends declared per common share:	$	.005		$	.005

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except share data)

	March 31,			December 31,
Assets	2011			2010
Current assets
Cash and cash equivalents	$	230,048		$	239,500
Accounts receivable		139,025			89,004
Inventories		133,679			127,982
Deferred income taxes		12,791			12,791
Prepaid and other current assets		18,031			18,663
Total current assets		533,574			487,940

Property, plant and equipment, net		242,064			248,054
Other assets		49,332			51,476

Total assets	$	824,970		$	787,470

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	45,186		$	35,281
Other current liabilities		65,547			57,072
Total current liabilities		110,733			92,353

Long-term debt		312,881			373,564
Deferred income taxes		9,385			1,970
Other long-term liabilities		41,114			41,268
Total liabilities		474,113			509,155

Stockholders’ equity
Common stock(no par, 120,000,000 shares authorized, 44,092,997 and 37,475,288 issued, respectively)		37			30
Additional paid-in capital		375,746			300,540
Retained earnings		12,782			16,028
Treasury stock (at cost, 2,076,040 and 2,108,561 shares, respectively)		(19,033	)		(19,324	)
Treasury stock reserved for deferred compensation		(1,233	)		(1,917	)
Accumulated other comprehensive loss		(17,442	)		(17,042	)
Total stockholders’ equity		350,857			278,315

Total liabilities and stockholders’ equity	$	824,970		$	787,470

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

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

(Amounts in thousands, except share data)

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

Balance January 1, 2011		#35,366,727	$	30	$	300,540		$	16,028		$	(19,324	)	$	(1,917	)	$	(17,042	)	$	278,315

Comprehensive income (loss):
Net loss									(3,036	)											(3,036	)
Pension liability adjustments, net of tax																		593			593
Unrealized loss on investment, net of tax																		(993	)		(993	)
Comprehensive loss																					(3,436	)
Dividends on common stock									(210	)											(210	)
Note conversion		6,617,709		7		73,902															73,909
Exercise of stock options		26,125				(4	)					234									230
Stock-based compensation						393															393
Deferred compensation transactions						846									684						1,530
Issuance of treasury stock under 401(k) plan		6,396				69						57									126

Balance March 31, 2011		#42,016,957	$	37	$	375,746		$	12,782		$	(19,033	)	$	(1,233	)	$	(17,442	)	$	350,857

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)

	Three months ended
	March 31,
	2011			2010
Cash flows from operating activities:
Net income (loss)	$	(3,036	)	$	2,078
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		9,299			9,281
Deferred income tax provision		7,415			1,275
Noncash convertible debt conversion charge		16,135			0
Stock-based compensation		393			0
Issuance of treasury stock under 401(k) plan		126			123
(Increase) decrease in assets:
Accounts receivable		(50,021	)		(34,789	)
Inventories		(5,697	)		(19,462	)
Prepaid and other current assets		632			3,099
Other assets		10			46
Increase in liabilities:
Accounts payable		9,905			22,432
Other current liabilities		8,442			4,413
Other liabilities		802			1,365
Net cash used for operating activities		(5,595	)		(10,139	)

Cash flows from investing activities:
Capital expenditures		(3,469	)		(3,508	)
Other		623			42
Net cash used for investing activities		(2,846	)		(3,466	)

Cash flows from financing activities:
Repurchase of senior unsecured notes		(1,064	)		0
Proceeds from exercise of stock options		230			0
Payment of financing fees		0			(186	)
Dividends paid		(177	)		(176	)
Net cash used for financing activities		(1,011	)		(362	)

Net decrease in cash and cash equivalents		(9,452	)		(13,967	)

Cash and cash equivalents at beginning of period		239,500			229,182

Cash and cash equivalents at end of period	$	230,048		$	215,215

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 and necessary for a fair statement of the Company’s financial position as of March 31, 2011, and the results of operations and cash flows for the three months ended March 31, 2011 and 2010.

Accounting policies have continued without significant change and are described in the Description of Business and Significant Accounting Policies contained in the Company’s 2010 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 2010 Annual Report on Form 10-K.

Fair value of financial instruments

The Company records all financial instruments, including cash and cash equivalents, accounts receivable, notes receivable, accounts payable, other accruals and notes payable at cost, which approximates fair value. Investments in marketable equity securities are recorded at fair value. The senior secured 7.875% notes due 2017 (senior secured notes) and convertible senior subordinated 5.625% notes due 2017 (convertible notes) are carried at cost of $200.0 million and $112.9 million at March 31, 2011, respectively. The fair value of these notes at March 31, 2011, as obtained through independent pricing sources, was approximately $214.0 million for the senior secured notes and approximately $317.8 million for the convertible notes. The increase in the fair value of the convertible notes is due primarily to the increased value of the underlying common stock.

Cash dividends

The Company declared cash dividends of $.005 per share of common stock for each of the three months ended March 31, 2011 and 2010.

2. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following (in thousands):

	March 31,			December 31,
	2011			2010
Accounts receivable	$	143,258		$	92,893
Allowance for doubtful accounts		(4,233	)		(3,889	)
Accounts receivable, net	$	139,025		$	89,004

TITAN INTERNATIONAL, INC

Notes to Consolidated Condensed Financial Statements

(Unaudited)

3. INVENTORIES

Inventories consisted of the following (in thousands):

	March 31,			December 31,
	2011			2010
Raw materials	$	54,169		$	56,414
Work-in-process		18,103			16,860
Finished goods		64,010			59,680
		136,282			132,954
Adjustment to LIFO basis		(2,603	)		(4,972	)
	$	133,679		$	127,982

At March 31, 2011, cost is determined using the first-in, first-out (FIFO) method for approximately 66% of inventories and the last-in, first-out (LIFO) method for approximately 34% of the inventories. At December 31, 2010, the FIFO method was used for approximately 64% of inventories and LIFO was used for approximately 36% of the inventories. Included in the inventory balances were provisions for slow-moving and obsolete inventory of $7.6 million at March 31, 2011, and $7.4 million at December 31, 2010.

4. PROPERTY, PLANT AND EQUIPMENT, NET

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

	March 31,			December 31,
	2011			2010
Land and improvements	$	3,061		$	3,061
Buildings and improvements		98,234			98,233
Machinery and equipment		385,153			383,231
Tools, dies and molds		84,901			84,134
Construction-in-process		8,040			8,741
		579,389			577,400
Less accumulated depreciation		(337,325	)		(329,346	)
	$	242,064		$	248,054

Depreciation on fixed assets for the three months ended March 31, 2011 and 2010, totaled $8.8 million and $8.6 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):

	March 31,		December 31,
	2011		2010
Investment in Titan Europe Plc	$	21,165	$	22,693

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 Accounting Standards Codification (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 accumulated other comprehensive income includes a gain on the Titan Europe Plc investment of $10.5 million, which is net of tax of $5.6 million. The decreased value in the Titan Europe Plc investment at March 31, 2011, was due primarily to a lower publicly quoted Titan Europe Plc market price.

6. WARRANTY

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

	2011			2010
Warranty liability, January 1	$	12,471		$	9,169
Provision for warranty liabilities		5,256			3,629
Warranty payments made		(3,743	)		(3,377	)
Warranty liability, March 31	$	13,984		$	9,421

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):

	March 31,		December 31,
	2011		2010
7.875% senior notes due 2017	$	200,000	$	200,000
5.625% convertible senior notes due 2017		112,881		172,500
8% senior unsecured notes due January 2012		0		1,064
		312,881		373,564
Less: Amounts due within one year		0		0
	$	312,881	$	373,564

TITAN INTERNATIONAL, INC

Notes to Consolidated Condensed Financial Statements

(Unaudited)

Aggregate maturities of long-term debt at March 31, 2011, were as follows (in thousands):

April 1 – December 31, 2011	$	0
2012		0
2013		0
2014		0
2015		0
Thereafter		312,881
	$	312,881

7.875% senior secured notes due 2017

The Company’s 7.875% senior secured notes (senior secured notes) are due October 2017. These notes are secured by the land and buildings of the following subsidiaries of the Company: Titan Tire Corporation, Titan Wheel Corporation of Illinois, Titan Tire Corporation of Freeport, and Titan Tire Corporation of Bryan. The Company’s senior secured notes outstanding balance was $200.0 million at March 31, 2011.

5.625% convertible senior subordinated notes due 2017

The Company’s 5.625% convertible senior subordinated 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 $112.9 million at March 31, 2011.

In the first quarter of 2011, the Company closed an Exchange Agreement with a note holder of the convertible notes, pursuant to which such holder converted approximately $59.6 million in aggregate principal amount of the Convertible Notes into approximately 6.6 million shares of the Company’s common stock, plus a payment for the accrued and unpaid interest. In connection with the exchange, the Company recognized a noncash charge of $16.1 million in accordance with ASC 470-20 Debt – Debt with Conversion and Other Options.

8% senior unsecured notes due 2012

In the first quarter of 2011, Titan satisfied and discharged the indenture relating to the 8% senior unsecured notes due January 2012 by depositing with the trustee $1.1 million cash representing the outstanding principal of such notes and interest payments due on July 15, 2011, and at maturity on January 15, 2012. Titan irrevocably instructed the trustee to apply the deposited money toward the interest and principal of the notes.

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 quarter of 2011 and at March 31, 2011, 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 March 31, 2011.

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 March 31, 2011, future minimum commitments under noncancellable operating leases with initial or remaining terms of at least one year were as follows (in thousands):

April 1 – December 31, 2011	$	370
2012		79
2013		18
2014		1
Thereafter		0
Total future minimum lease payments	$	468

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 $2 million to the pension plans during the remainder of 2011.

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

	Three months ended March 31,
	2011			2010
Interest cost	$	1,272		$	1,300
Expected return on assets		(1,315	)		(1,227	)
Amortization of unrecognized prior service cost		34			34
Amortization of unrecognized deferred taxes		(14	)		(14	)
Amortization of net unrecognized loss		936			907
Net periodic pension cost	$	913		$	1,000

10. ROYALTY EXPENSE

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 $2.9 million and $2.1 million for the first quarter of 2011 and 2010, 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 March 31,
	2011			2010
Investment gain on marketable securities	$	93		$	196
Interest income		145			94
Other income (expense)		(45	)		43
	$	193		$	333

12. INCOME TAXES

The Company recorded income tax expense of $7.7 million and $1.3 million for the quarters ended March 31, 2011 and 2010, respectively. The Company’s effective income tax rate was 165% and 39% for the three months ended March 31, 2011 and 2010, respectively. The Company’s 2011 income tax expense and rate differs 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 the $16.1 million noncash charge taken in connection with the Company’s convertible debt. This noncash charge is not deductible for income tax purposes.

13. COMPREHENSIVE INCOME (LOSS)

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

	Three months ended March 31,
	2011			2010
Net income (loss)	$	(3,036	)	$	2,078
Unrealized loss on investment, net of tax		(993	)		(918	)
Pension liability adjustments, net of tax		593			575
	$	(3,436	)	$	1,735

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 months ended March 31, 2011 and 2010 (in thousands):

	Three months ended March 31,
	2011			2010
Revenues from external customers
Agricultural	$	209,997		$	151,112
Earthmoving/construction		66,511			41,815
Consumer		4,321			3,521
	$	280,829		$	196,448

Gross profit
Agricultural	$	47,700		$	23,890
Earthmoving/construction		8,195			3,150
Consumer		1,002			668
Unallocated corporate		(625	)		(1,621	)
	$	56,272		$	26,087

Income from operations
Agricultural	$	42,868		$	19,955
Earthmoving/construction		6,288			690
Consumer		916			581
Unallocated corporate		(23,193	)		(11,096	)
Consolidated income from operations		26,879			10,130
Interest expense		(6,280	)		(7,056	)
Noncash convertible debt conversion charge		(16,135	)		0
Other income, net		193			333
Income before income taxes	$	4,657		$	3,407

Assets by segment were as follows (in thousands):

	March 31,		December 31,
Total Assets	2011		2010
Agricultural	$	347,432	$	304,048
Earthmoving/construction		193,276		181,249
Consumer		9,239		5,863
Unallocated corporate		275,023		296,310
Consolidated totals	$	824,970	$	787,470

TITAN INTERNATIONAL, INC

Notes to Consolidated Condensed Financial Statements

(Unaudited)

15. EARNINGS PER SHARE

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

	Three months ended
	March 31, 2011								March 31, 2010
	Net Loss			Weighted average shares		Per share amount			Net Income		Weighted average shares		Per share amount
Basic EPS	$	(3,036	)		40,511	$	(.07	)	$	2,078		34,772	$	.06
Effect of stock options/trusts		0			0					0		557
Diluted EPS	$	(3,036	)		40,511	$	(.07	)	$	2,078		35,329	$	.06

The effect of convertible notes has been excluded for both of the three months ended March 31, 2011 and 2010, as the effect would have been antidilutive. The weighted average share amount excluded for convertible notes totaled 12.3 million shares and 16.0 million shares for the three months ended March 31, 2011 and 2010, respectively.

The effect of stock options/trusts has been excluded for the three months ended March 31, 2011, as the effect would have been antidilutive. The weighted average share amount excluded was 0.3 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):

	March 31, 2011						December 31, 2010
	Total		Level 1		Levels 2&3		Total		Level 1		Levels 2&3
Investment in Titan Europe Plc	$	21,165	$	21,165	$	0	$	22,693	$	22,693	$	0
Investment in marketable securities		12,791		12,791		0		11,168		11,168		0
Total	$	33,956	$	33,956	$	0	$	33,861	$	33,861	$	0

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 effect 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.

TITAN INTERNATIONAL, INC

Notes to Consolidated Condensed Financial Statements

(Unaudited)

18. RECENTLY ISSUED ACCOUNTING STANDARDS

There have been no developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on the Company’s consolidated financial statements, from those disclosed in the Company’s 2010 Annual Report on Form 10-K.

19. SUBSEQUENT EVENTS

Purchase of Goodyear’s Latin American Farm Tire Business

On April 1, 2011, Titan closed on the acquisition of The Goodyear Tire & Rubber Company’s Latin American farm tire business for approximately $98.6 million U.S. dollars, subject to post-closing conditions and adjustments. The transaction includes Goodyear’s Sao Paulo, Brazil manufacturing plant, property, equipment and inventories and a licensing agreement that allows Titan to sell Goodyear-brand farm tires in Latin America for seven years and extends the North American licensing agreement for seven years.

TITAN INTERNATIONAL, INC

Notes to Consolidated Condensed Financial Statements

(Unaudited)

20. SUBSIDIARY GUARANTOR FINANCIAL INFORMATION

The Company’s 5.625% convertible senior subordinated notes are guaranteed by the following subsidiaries of the Company: Titan Tire Corporation, Titan Tire Corporation of Bryan, Titan Tire Corporation of Freeport, Titan Tire Corporation of Texas, Titan Wheel Corporation of Illinois, and Titan Wheel Corporation of Virginia. The note guarantees are full and unconditional, joint and several obligations of the guarantors. The following condensed consolidating financial statements are presented using the equity method of accounting. Certain sales & marketing expenses recorded by non-guarantor subsidiaries have not been allocated to the guarantor subsidiaries.

	Consolidating Condensed Statements of Operations
(Amounts in thousands)
	For the Three Months Ended March 31, 2011
	Titan						Non-
	Intl., Inc.			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	0		$	280,829		$	0		$	0		$	280,829
Cost of sales		361			223,754			442			0			224,557
Gross profit (loss)		(361	)		57,075			(442	)		0			56,272
Selling, general and administrative expenses		15,405			2,725			7,163			0			25,293
Research and development expenses		0			1,183			0			0			1,183
Royalty expense		0			2,917			0			0			2,917
Income (loss) from operations		(15,766	)		50,250			(7,605	)		0			26,879
Interest expense		(6,280	)		0			0			0			(6,280	)
Noncash convertible debt conversion charge		(16,135	)		0			0			0			(16,135	)
Other income (expense)		317			(202	)		78			0			193
Income (loss) before income taxes		(37,864	)		50,048			(7,527	)		0			4,657
Provision (benefit) for income taxes		(8,039	)		18,518			(2,786	)		0			7,693
Equity in earnings of subsidiaries		26,789			(60	)		60			(26,789	)		0
Net income (loss)	$	(3,036	)	$	31,470		$	(4,681	)	$	(26,789	)	$	(3,036	)

	Consolidating Condensed Statements of Operations
(Amounts in thousands)
	For the Three Months Ended March 31, 2010
	Titan						Non-
	Intl., Inc.			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	0		$	196,448		$	0		$	0		$	196,448
Cost of sales		1,324			168,550			487			0			170,361
Gross profit (loss)		(1,324	)		27,898			(487	)		0			26,087
Selling, general and administrative expenses		4,864			2,334			4,611			0			11,809
Research and development expenses		0			2,027			0			0			2,027
Royalty expense		0			2,121			0			0			2,121
Income (loss) from operations		(6,188	)		21,416			(5,098	)		0			10,130
Interest expense		(7,056	)		0			0			0			(7,056	)
Other income (expense)		290			(2	)		45			0			333
Income (loss) before income taxes		(12,954	)		21,414			(5,053	)		0			3,407
Provision (benefit) for income taxes		(5,052	)		8,352			(1,971	)		0			1,329
Equity in earnings of subsidiaries		9,980			(88	)		88			(9,980	)		0
Net income (loss)	$	2,078		$	12,974		$	(2,994	)	$	(9,980	)	$	2,078

TITAN INTERNATIONAL, INC

Notes to Consolidated Condensed Financial Statements

(Unaudited)

	Consolidating Condensed Balance Sheets
(Amounts in thousands)
	March 31, 2011
	Titan					Non-
	Intl., Inc.			Guarantor		Guarantor
	(Parent)			Subsidiaries		Subsidiaries			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	229,924		$	7	$	117		$	0		$	230,048
Accounts receivable		0			139,025		0			0			139,025
Inventories		0			133,679		0			0			133,679
Prepaid and other current assets		14,063			16,389		370			0			30,822
Total current assets		243,987			289,100		487			0			533,574
Property, plant and equipment, net		7,667			229,385		5,012			0			242,064
Investment in subsidiaries		61,855			9,057		20			(70,932	)		0
Other assets		21,573			1,060		26,699			0			49,332
Total assets	$	335,082		$	528,602	$	32,218		$	(70,932	)	$	824,970

Liabilities and Stockholders’ Equity
Accounts payable	$	790		$	44,006	$	390		$	0		$	45,186
Other current liabilities		20,332			42,860		2,355			0			65,547
Total current liabilities		21,122			86,866		2,745			0			110,733
Long-term debt		312,881			0		0			0			312,881
Other long-term liabilities		16,980			27,671		5,848			0			50,499
Intercompany accounts		(366,758	)		189,850		176,908			0			0
Stockholders’ equity		350,857			224,215		(153,283	)		(70,932	)		350,857
Total liabilities and stockholders’ equity	$	335,082		$	528,602	$	32,218		$	(70,932	)	$	824,970

	Consolidating Condensed Balance Sheets
(Amounts in thousands)
	December 31, 2010
	Titan					Non-
	Intl., Inc.			Guarantor		Guarantor
	(Parent)			Subsidiaries		Subsidiaries			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	239,362		$	6	$	132		$	0		$	239,500
Accounts receivable		0			89,004		0			0			89,004
Inventories		0			127,982		0			0			127,982
Prepaid and other current assets		14,732			16,240		482			0			31,454
Total current assets		254,094			233,232		614			0			487,940
Property, plant and equipment, net		7,678			235,143		5,233			0			248,054
Investment in subsidiaries		39,465			9,057		20			(48,542	)		0
Other assets		22,183			869		28,424			0			51,476
Total assets	$	323,420		$	478,301	$	34,291		$	(48,542	)	$	787,470

Liabilities and Stockholders’ Equity
Accounts payable	$	1,406		$	33,473	$	402		$	0		$	35,281
Other current liabilities		16,066			39,186		1,820			0			57,072
Total current liabilities		17,472			72,659		2,222			0			92,353
Long-term debt		373,564			0		0			0			373,564
Other long-term liabilities		9,161			28,083		5,994			0			43,238
Intercompany accounts		(355,092	)		178,164		176,928			0			0
Stockholders’ equity		278,315			199,395		(150,853	)		(48,542	)		278,315
Total liabilities and stockholders’ equity	$	323,420		$	478,301	$	34,291		$	(48,542	)	$	787,470

TITAN INTERNATIONAL, INC

Notes to Consolidated Condensed Financial Statements

(Unaudited)

	Consolidating Condensed Statements of Cash Flows
(Amounts in thousands)
	For the Three Months Ended March 31, 2011
	Titan						Non-
	Intl., Inc.			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Consolidated
Net cash provided by (used for) operating activities	$	(8,115	)	$	2,487		$	33		$	(5,595	)

Cash flows from investing activities:
Capital expenditures		(312	)		(3,100	)		(57	)		(3,469	)
Other, net		0			614			9			623
Net cash used for investing activities		(312	)		(2,486	)		(48	)		(2,846	)

Cash flows from financing activities:
Repurchase of senior unsecured notes		(1,064	)		0			0			(1,064	)
Proceeds from exercise of stock options		230			0			0			230
Dividends paid		(177	)		0			0			(177	)
Net cash used for financing activities		(1,011	)		0			0			(1,011	)

Net increase (decrease) in cash and cash equivalents		(9,438	)		1			(15	)		(9,452	)
Cash and cash equivalents, beginning of period		239,362			6			132			239,500
Cash and cash equivalents, end of period	$	229,924		$	7		$	117		$	230,048

	Consolidating Condensed Statements of Cash Flows
(Amounts in thousands)
	For the Three Months Ended March 31, 2010
	Titan						Non-
	Intl., Inc.			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Consolidated
Net cash provided by (used for) operating activities	$	(13,596	)	$	3,427		$	30		$	(10,139	)

Cash flows from investing activities:
Capital expenditures		0			(3,460	)		(48	)		(3,508	)
Other, net		0			37			5			42
Net cash used for investing activities		0			(3,423	)		(43	)		(3,466	)

Cash flows from financing activities:
Payment of financing fees		(186	)		0			0			(186	)
Dividends paid		(176	)		0			0			(176	)
Net cash used for financing activities		(362	)		0			0			(362	)

Net increase (decrease) in cash and cash equivalents		(13,958	)		4			(13	)		(13,967	)
Cash and cash equivalents, beginning of period		229,004			11			167			229,182
Cash and cash equivalents, end of period	$	215,046		$	15		$	154		$	215,215

TITAN INTERNATIONAL, INC

Notes to Consolidated Condensed Financial Statements

(Unaudited)

21. SUBSIDIARY GUARANTOR FINANCIAL INFORMATION

The Company’s 7.875% senior secured notes are guaranteed by the following 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 following condensed consolidating financial statements are presented using the equity method of accounting. Certain sales & marketing expenses recorded by non-guarantor subsidiaries have not been allocated to the guarantor subsidiaries.

	Consolidating Condensed Statements of Operations
(Amounts in thousands)
	For the Three Months Ended March 31, 2011
	Titan					Non-
	Intl., Inc.			Guarantor		Guarantor
	(Parent)			Subsidiaries		Subsidiaries			Eliminations		Consolidated
Net sales	$	0		$	274,961	$	5,868		$	0	$	280,829
Cost of sales		361			217,995		6,201			0		224,557
Gross profit (loss)		(361	)		56,966		(333	)		0		56,272
Selling, general and administrative expenses		15,405			2,649		7,239			0		25,293
Research and development expenses

TITAN INTERNATIONAL INC - FORM 10-Q - April 27, 2011

Attached files