XNYS:TWI Titan International Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

XNYS:TWI Fair Value Estimate
Premium
XNYS:TWI Consider Buying
Premium
XNYS:TWI Consider Selling
Premium
XNYS:TWI Fair Value Uncertainty
Premium
XNYS:TWI Economic Moat
Premium
XNYS:TWI Stewardship
Premium
 
TWI 03.31.2012 10-Q


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, 2012
or
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 þ  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 þ
Accelerated filer ¨
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 23, 2012
 
 
 
Common stock, no par value per share
 
42,242,524




TITAN INTERNATIONAL, INC.

TABLE OF CONTENTS

 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(All amounts in thousands, except per share data)
 
 
Three months ended
 
March 31,
 
2012
 
2011
Net sales
$
463,088

 
$
280,829

Cost of sales
369,725

 
224,557

Gross profit
93,363

 
56,272

Selling, general and administrative expenses
30,835

 
25,293

Research and development expenses
1,508

 
1,183

Royalty expense
2,349

 
2,917

Income from operations
58,671

 
26,879

Interest expense
(6,295
)
 
(6,280
)
Noncash convertible debt conversion charge

 
(16,135
)
Other income
3,111

 
193

Income before income taxes
55,487

 
4,657

Provision for income taxes
20,093

 
7,693

Net income (loss)
35,394

 
(3,036
)
Net loss attributable to noncontrolling interests
(25
)
 

Net income (loss) attributable to Titan
$
35,419

 
$
(3,036
)
 
 
 
 
Earnings (loss) per common share:
 

 
 

Basic
$
.84

 
$
(.07
)
Diluted
$
.68

 
$
(.07
)
Average common shares and equivalents outstanding:
 
 
 

Basic
42,105

 
40,511

Diluted
53,450

 
40,511

 
 
 
 
Dividends declared per common share:
$
.005

 
$
.005

 











See accompanying Notes to Consolidated Financial Statements.

1



TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(All amounts in thousands)

 
Three months ended
 
March 31,
 
2012
 
2011
Net income (loss)
$
35,394

 
$
(3,036
)
Unrealized gain (loss) on investments, net of tax of $3,475 and $535, respectively
5,917

 
(993
)
Currency translation adjustment
3,567

 

Pension liability adjustments, net of tax of $491and $363, respectively
836

 
593

Comprehensive income (loss)
45,714

 
(3,436
)
Net comprehensive loss attributable to noncontrolling interests
(25
)
 

Comprehensive income (loss) attributable to Titan
$
45,739

 
$
(3,436
)




































See accompanying Notes to Consolidated Financial Statements.


2



TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(All amounts in thousands, except share data)

 
March 31,
 
December 31,
Assets
2012
 
2011
Current assets
 
 
 
Cash and cash equivalents
$
129,308

 
$
129,170

  Accounts receivable, net
245,948

 
189,527

Inventories
214,154

 
190,872

Deferred income taxes
34,098

 
26,775

Prepaid and other current assets
31,528

 
28,249

Total current assets
655,036

 
564,593

Property, plant and equipment, net
333,918

 
334,742

Other assets
110,245

 
110,951

Total assets
$
1,099,199

 
$
1,010,286

Liabilities and Equity
 

 
 

Current liabilities
 

 
 

Short-term debt
$

 
$
11,723

Accounts payable
112,666

 
76,574

Other current liabilities
99,481

 
87,469

Total current liabilities
212,147

 
175,766

Long-term debt
317,881


317,881

Deferred income taxes
38,414

 
38,691

Other long-term liabilities
87,069

 
81,069

Total liabilities
655,511

 
613,407

Equity:
 

 
 

Titan stockholder's equity
 
 
 
  Common stock (no par, 120,000,000 shares authorized, 44,092,997 issued)
37

 
37

Additional paid-in capital
381,328

 
380,295

Retained earnings
102,261

 
67,053

  Treasury stock (at cost, 1,856,828 and 1,887,316 shares, respectively)
(17,065
)
 
(17,338
)
Treasury stock reserved for deferred compensation
(1,233
)
 
(1,233
)
Accumulated other comprehensive loss
(23,255
)
 
(33,575
)
Total Titan stockholders’ equity
442,073

 
395,239

Noncontrolling interests
1,615

 
1,640

Total equity
443,688

 
396,879

Total liabilities and equity
$
1,099,199

 
$
1,010,286

 








See accompanying Notes to Consolidated Financial Statements.

3



TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN 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 Titan Equity
 
Noncontrolling interest
 
Total Equity
Balance January 1, 2012
42,205,681

 
$
37

 
$
380,295

 
$
67,053

 
$
(17,338
)
 
$
(1,233
)
 
$
(33,575
)
 
$
395,239

 
$
1,640

 
$
396,879

Net income


 


 


 
35,419

 


 


 


 
35,419

 
(25
)
 
35,394

Currency translation adjustment
 
 
 
 
 
 
 
 
 
 
 
 
3,567

 
3,567

 
 
 
3,567

Pension liability adjustments, net of tax


 

 


 


 


 


 
836

 
836

 
 
 
836

Unrealized gain on investment, net of tax


 

 


 


 


 


 
5,917

 
5,917

 
 
 
5,917

Dividends on common stock


 


 


 
(211
)
 


 


 


 
(211
)
 
 
 
(211
)
Exercise of stock options
23,490

 

 
160

 


 
210

 


 


 
370

 
 
 
370

Stock-based compensation


 

 
791

 


 


 


 


 
791

 
 
 
791

Tax benefit related to stock-based compensation


 

 
6

 


 


 


 


 
6

 
 
 
6

Issuance of treasury stock under 401(k) plan
6,998

 

 
76

 


 
63

 


 


 
139

 
 
 
139

Balance March 31, 2012
42,236,169

 
$
37

 
$
381,328

 
$
102,261

 
$
(17,065
)
 
$
(1,233
)
 
$
(23,255
)
 
$
442,073

 
$
1,615

 
$
443,688

 














See accompanying Notes to Consolidated Financial Statements.

4



TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(All amounts in thousands)
 
Three months ended March 31,
Cash flows from operating activities:
2012
 
2011
Net income (loss)
$
35,394

 
$
(3,036
)
Adjustments to reconcile net income to net cash
 

 
 

provided by (used for) operating activities:
 

 
 

Depreciation and amortization
11,843

 
9,299

Deferred income tax provision
(8,091
)
 
7,415

Noncash convertible debt conversion charge

 
16,135

Stock-based compensation
791

 
393

Excess tax benefit from stock options exercised
(6
)
 

Issuance of treasury stock under 401(k) plan
139

 
126

(Increase) decrease in assets:
 

 
 

Accounts receivable
(54,988
)
 
(50,021
)
Inventories
(22,449
)
 
(5,697
)
Prepaid and other current assets
(3,033
)
 
632

Other assets
(3,089
)
 
10

Increase in liabilities:
 

 
 

Accounts payable
35,334

 
9,905

Other current liabilities
11,580

 
8,442

Other liabilities
17,223

 
802

Net cash provided by (used for) operating activities
20,648

 
(5,595
)
Cash flows from investing activities:
 

 
 

Capital expenditures
(8,155
)
 
(3,469
)
Other
108

 
623

Net cash used for investing activities
(8,047
)
 
(2,846
)
Cash flows from financing activities:
 

 
 

Repurchase of senior unsecured notes

 
(1,064
)
Payment on debt
(12,444
)
 

Proceeds from exercise of stock options
370

 
230

Excess tax benefit from stock options exercised
6

 

Dividends paid
(211
)
 
(177
)
Net cash used for financing activities
(12,279
)
 
(1,011
)
Effect of exchange rate changes on cash
(184
)
 

Net increase (decrease) in cash and cash equivalents
138

 
(9,452
)
Cash and cash equivalents, beginning of period
129,170

 
239,500

Cash and cash equivalents, end of period
$
129,308

 
$
230,048


 








See accompanying Notes to Consolidated Financial Statements.

5



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, 2012, and the results of operations and cash flows for the three months ended March 31, 2012 and 2011.

Accounting policies have continued without significant change and are described in the Description of Business and Significant Accounting Policies contained in the Company's 2011 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 2011 Annual Report on Form 10-K.

Sales
Sales and revenues are presented net of sales taxes and other related taxes.

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 7.875% senior secured notes due 2017 ("senior secured notes") and 5.625% convertible senior subordinated notes due 2017 ("convertible notes") are carried at cost of $200.0 million and $112.9 million at March 31, 2012, respectively. The fair value of these notes at March 31, 2012, as obtained through independent pricing sources, was approximately $213.0 million for the senior secured notes and approximately $277.6 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, 2012, and 2011.

Interest paid
Titan paid $11.5 million and $13.0 million for interest for the three months ended March 31, 2012 and 2011, respectively.
 
Income taxes paid
Titan paid $10.7 million and $0.1 million for income taxes for the three months ended March 31, 2012 and 2011, respectively.
 
Use of estimates
The policies utilized by the Company in the preparation of the financial statements conform to accounting principles generally accepted in the United States of America and require management to make estimates, assumptions and judgments that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual amounts could differ from these estimates and assumptions.

Reclassification
Certain amounts from prior years have been reclassified to conform to the current year's presentation.

Subsequent Events
The Company has evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through the date of issuance of the financial statements.




6



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)


2. ACQUISITIONS

Acquisition of Goodyear's Latin American Farm Tire Business
On April 1, 2011, Titan closed on the acquisition of The Goodyear Tire & Rubber Company's ("Goodyear") Latin American farm tire business for approximately $98.6 million U.S. dollars. The transaction includes Goodyear's Sao Paulo, Brazil manufacturing plant, property, equipment; inventories; 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.

The purchase price was allocated to the assets acquired and the liabilities assumed based on their fair values. Inventory was valued using the comparative sales method. Real and personal property was valued at fair value. The excess of the purchase price of the identifiable assets acquired and liabilities assumed was reflected as goodwill. The goodwill was allocated to the agricultural segment.

The purchase price allocation of the Latin American farm tire business consisted of the following (in thousands):
Cash
$
1,018

Inventories
14,562

Deferred income taxes - current asset
2,948

Prepaid & other current assets
4,929

Property, plant & equipment
108,905

Goodwill
11,536

Other assets
39,263

Other current liabilities
(21,127
)
Deferred income taxes - noncurrent liability
(22,573
)
Other noncurrent liabilities
(40,823
)
Net assets acquired
$
98,638


The purchase price allocation has changed from that reported in the Form 10-K for the year ended December 31, 2011. In the first quarter of 2012, after filing of the Form 10-K for the year ended December 31, 2011, Titan became aware of information related to the classification of the Latin American business for US tax purposes. As a result of this information, which was available at the time of acquisition, Titan concluded that there was an error in the original accounting for the acquisition. Titan has concluded that the impact of this error is immaterial to the consolidated financial statements for the year ended December 31, 2011 and for the quarter ended March 31, 2012, and therefore the correction of this error was recorded as of January 1, 2012. The correction of this error impacted the following areas: an increase in current deferred income tax asset of $2.9 million, a decrease in goodwill of $11.4 million, and a decrease in noncurrent deferred income tax liability of $8.4 million. As a result of currency exchange rate differences, the January 1, 2012 recorded decrease in goodwill was $10.1 million, with a $1.2 million offset in currency translation adjustment.

Pro forma financial information
The following unaudited pro forma financial information gives effect to the acquisition of Goodyear's Latin American farm tire business as if the acquisition had taken place on January 1, 2011. The pro forma financial information for the Sao Paulo, Brazil manufacturing facility was derived from The Goodyear Tire & Rubber Company's historical accounting records. These amounts have been calculated by adjusting the historical results of the Sao Paulo, Brazil facility to reflect the additional depreciation and the amortization of the prepaid royalty discount and supply agreement liability assuming the fair value adjustments had taken place.

7



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)


Pro forma financial information is as follows (in thousands, except per share data):
 
Three months ended March 31,
 
2012 (Actual)
2011 (Pro forma)
Net sales
$
463,088

$
309,229

Net income
35,394

1,094

Net income attributable to Titan
35,419

1,094

Basic earnings per share
$
.84

$
.03

Diluted earnings per share
.68

.04


The pro forma information is presented for illustrative purposes only and may not be indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2011, nor is it necessarily indicative of Titan's future consolidated results of operations or financial position. The net sales for the three months ended March 31, 2012 include $57.5 million of supply agreement sales, which are not included in the 2011 pro forma financial information.


3. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following (amounts in thousands):
 
March 31,
2012
 
December 31,
2011
Accounts receivable
$
250,740

 
$
193,731

Allowance for doubtful accounts
(4,792
)
 
(4,204
)
Accounts receivable, net
$
245,948

 
$
189,527

 
Accounts receivable are reduced by an allowance for doubtful accounts which is based on historical losses.


4. INVENTORIES

Inventories consisted of the following (amounts in thousands):
 
March 31,
2012
 
December 31,
2011
Raw material
$
101,312

 
$
97,257

Work-in-process
31,751

 
31,141

Finished goods
89,169

 
75,137

 
222,232

 
203,535

Adjustment to LIFO basis
(8,078
)
 
(12,663
)
 
$
214,154

 
$
190,872

 
At March 31, 2012, approximately 31% of the Company's inventories were valued under the last-in, first-out (LIFO) method. At December 31, 2011, approximately 30% of the Company's inventories were valued under the LIFO method. The remaining inventories were valued under the first-in, first-out (FIFO) method or average cost method. All inventories are valued at lower of cost or market. The LIFO reserve decreased primarily as a result of the composition of inventory. An overall increase in raw material relative to total inventory resulted in a greater decrease in the FIFO cost versus the LIFO cost.




8



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)


5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net consisted of the following (amounts in thousands):
 
March 31, 2012
 
December 31, 2011
Land and improvements
$
20,834

 
$
20,330

Buildings and improvements
124,036

 
121,847

Machinery and equipment
456,170

 
456,236

Tools, dies and molds
89,711

 
88,676

Construction-in-process
14,366

 
14,606

 
705,117

 
701,695

Less accumulated depreciation
(371,199
)
 
(366,953
)
 
$
333,918

 
$
334,742

 
Depreciation on fixed assets for the three months ended March 31, 2012 and 2011, totaled $11.4 million and $8.8 million, respectively.


6. INVESTMENT IN TITAN EUROPE

Investment in Titan Europe Plc consisted of the following (amounts in thousands):
 
March 31, 2012
 
December 31, 2011
Investment in Titan Europe Plc
$
38,389

 
$
28,998


Titan Europe Plc is publicly traded on the AIM market in London, England.  The Company’s investment in Titan Europe represents a 21.8% 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 $21.4 million, which is net of tax of $11.9 million.  The increased value in the Titan Europe Plc investment at March 31, 2012, was due primarily to a higher publicly quoted Titan Europe Plc market price.




9



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)


7. GOODWILL

Changes in goodwill consisted of the following (amounts in thousands):
 
 
2012
 
2011
Agricultural segment
 
 
 
 
           Goodwill balance, January 1
 
$
19,841

 
$

              Acquisition adjustment
 
(10,134
)
 

              Foreign currency translation
 
585

 

           Goodwill balance, March 31
 
$
10,292

 
$

 
The Company's goodwill balance is related to the acquisition of Goodyear's Latin American farm tire business which included the Sao Paulo, Brazil manufacturing facility. Goodwill is included as a component of other assets in the Consolidated Condensed Balance Sheets. The Company reviews goodwill for impairment during the fourth quarter of each annual reporting period, and whenever events and circumstances indicate that the carrying values may not be recoverable. See Note 2 for additional information.


8. WARRANTY

Changes in the warranty liability consisted of the following (amounts in thousands):
 
2012
 
2011
Warranty liability, January 1
$
17,659

 
$
12,471

Provision for warranty liabilities
7,773

 
5,256

Warranty payments made
(5,899
)
 
(3,743
)
Warranty liability, March 31
$
19,533

 
$
13,984


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.


9. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT

Long-term debt consisted of the following (amounts in thousands):
 
March 31,
2012
 
December 31, 2011
7.875% senior secured notes due 2017
$
200,000

 
$
200,000

5.625% convertible senior subordinated notes due 2017
112,881

 
112,881

Other debt
5,000

 
16,723

 
317,881

 
329,604

Less amounts due within one year

 
11,723

 
$
317,881

 
$
317,881

 

10



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)

Aggregate maturities of long-term debt at March 31, 2012, were as follows (amounts in thousands):
April 1 - December 31, 2012
$

2013
5,000

2014

2015

2016

Thereafter
312,881

 
$
317,881


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 Tire Corporation of Bryan, Titan Tire Corporation of Freeport and Titan Wheel Corporation of Illinois.  The Company’s senior secured notes outstanding balance was $200.0 million at March 31, 2012.

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, 2012.

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 three months of 2012 and at March 31, 2012, there were no borrowings under the credit facility.  Outstanding letters of credit were $12.0 million at March 31, 2012, leaving $88.0 million of unused availability on 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, 2012.

Other debt
Brazil Term Loan
In May 2011, the Company entered into a two-year, unsecured $10.0 million Term Loan with Bank of America, N.A. (BoA Term Loan) to provide working capital for the Sao Paulo, Brazil manufacturing facility. Borrowings under the BoA Term Loan bear interest at a rate equal to LIBOR plus 200 basis points. The BoA Term Loan shall be a minimum of $5.0 million with the option for an additional $5.0 million loan for a maximum of $10.0 million. The BoA Term Loan is due May 2013. The Company entered into an interest rate swap agreement and cross currency swap transaction with Bank of America Merrill Lynch Banco Multiplo S.A. that is designed to convert the outstanding $5.0 million US Dollar based LIBOR loan to a Brazilian Real based CDI loan. See Note 10 for additional information. As of March 31, 2012, the Company had $5.0 million outstanding on this loan and the interest rate including the effect of the swap agreement was approximately 12%.

Brazil Revolving Line of Credit
The Company's wholly-owned Brazilian subsidiary, Titan Pneus Do Brasil Ltda ("Titan Brazil"), has a revolving line of credit (Brazil line of credit) established with Bank of America Merrill Lynch Banco Multiplo S.A. in May 2011 that is secured by a $12.0 million line of credit between the Company and Bank of America N.A. under the Company's $100.0 million credit facility. Titan Brazil could borrow up to 16.0 million Brazilian Reais, which equates to approximately $8.8 million dollars as of March 31, 2012, for working capital purposes. Under the terms of the Brazil line of credit, borrowings, if any, bear interest at a rate of LIBOR plus 247 basis points. At March 31, 2012 there were no borrowings outstanding on this line of credit.




11



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)

10. DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses a financial derivative to mitigate its exposure to volatility in the interest rate and foreign currency exchange rate in Brazil. The Company uses this derivate instrument to hedge exposure in the ordinary course of business and does not invest in derivative instruments for speculative purposes. In order to reduce interest rate and foreign currency risk on the BoA Term Loan, the Company entered into an interest rate swap agreement and cross currency swap transaction with Bank of America Merrill Lynch Banco Multiplo S.A. that is designed to convert the outstanding $5.0 million US Dollar based LIBOR loan to a Brazilian Real based CDI loan. The Company has not designated this agreement as a hedging instrument. Changes in the fair value of the cross currency swap are recorded in other income (expense) and changes in the fair value of the interest rate swap agreement are recorded as interest expense (or gain as an offset to interest expense). For the three months ended March 31, 2012, the Company recorded $0.1 million of other income related to this derivative.


11. 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, 2012, future minimum rental commitments under noncancellable operating leases with initial or remaining terms of at least one year were as follows (amounts in thousands):
April 1 - December 31, 2012
$
450

2013
475

2014
389

Thereafter
66

Total future minimum lease payments
$
1,380



12. 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 contributed approximately $0.6 million to the frozen defined pension plans during the three months ended March 31, 2012 and expects to contribute approximately $6.0 million to the frozen pension plans during the remainder of 2012.

The components of net periodic pension cost consisted of the following (amounts in thousands):
 
Three months ended
 
March 31,
 
2012
 
2011
Interest cost
$
1,133

 
$
1,272

Expected return on assets
(1,252
)
 
(1,315
)
Amortization of unrecognized prior service cost
34

 
34

Amortization of unrecognized deferred taxes

 
(14
)
Amortization of net unrecognized loss
1,293

 
936

      Net periodic pension cost
$
1,208

 
$
913





12



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)


13. ROYALTY EXPENSE

The Company has a trademark license agreement with Goodyear to manufacture and sell certain off-highway tires in North America and Latin America under the Goodyear name.  The North American and Latin American royalties were prepaid for seven years as a part of the 2011 Goodyear Latin American farm tire acquisition. Royalty expenses recorded were $2.3 million and $2.9 million for the first quarter of 2012 and 2011, respectively.


14. OTHER INCOME, NET

Other income consisted of the following (amounts in thousands):
 
Three months ended
 
March 31,
 
2012
 
2011
Gain related to contractual obligation investments
$
1,268

 
$
93

Discount amortization on prepaid royalty
1,039

 

Interest income
205

 
145

Building rental income
175

 

Other income (expense)
424

 
(45
)
 
$
3,111

 
$
193



15. INCOME TAXES

The Company recorded income tax expense of $20.1 million and $7.7 million for the quarters ended March 31, 2012 and 2011, respectively. The Company's effective income tax rate was 36% and 165% for the three months ended March 31, 2012 and 2011, 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 fully deductible for income tax purposes.




13



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)


16. 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, 2012 and 2011 (amounts in thousands):
 
Three months ended
 
March 31,
 
2012
 
2011
Revenues from external customers
 
 
 
Agricultural
$
295,805

 
$
209,997

Earthmoving/construction
104,568

 
66,511

Consumer
62,715

 
4,321

 
$
463,088

 
$
280,829

Gross profit
 

 
 

Agricultural
$
66,092

 
$
47,700

Earthmoving/construction
22,347

 
8,195

Consumer
5,699

 
1,002

Unallocated corporate
(775
)
 
(625
)
 
$
93,363

 
$
56,272

Income from operations
 

 
 

Agricultural
$
60,663

 
$
42,868

Earthmoving/construction
20,401

 
6,288

Consumer
3,102

 
916

Unallocated corporate
(25,495
)
 
(23,193
)
      Income from operations
58,671

 
26,879

 
 
 
 
Interest expense
(6,295
)
 
(6,280
)
Noncash convertible debt conversion charge

 
(16,135
)
Other income, net
3,111

 
193

      Income before income taxes
$
55,487

 
$
4,657


Assets by segment were as follows (amounts in thousands):
 
March 31, 2012
 
December 31, 2011
Total assets
 

 
 

Agricultural
$
519,223

 
$
444,611

Earthmoving/construction
212,687

 
193,566

Consumer
147,371

 
139,161

Unallocated corporate
219,918

 
232,948

 
$
1,099,199

 
$
1,010,286

 



14



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)


17. EARNINGS PER SHARE

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

 
Three months ended
 
March 31, 2012
 
March 31, 2011
 
Titan Net income (loss)
 
Weighted-
average shares
 
Per share
 amount
 
Titan Net income (loss)
 
Weighted-
average shares
 
Per share
 amount
Basic earnings per share
$
35,419

 
42,105

 
$
0.84

 
$
(3,036
)
 
40,511

 
$
(0.07
)
   Effect of stock options/trusts

 
274

 
 

 

 

 
 

   Effect of convertible notes
1,143

 
11,071

 
 
 

 

 
 
Diluted earnings per share
$
36,562

 
53,450

 
$
0.68

 
$
(3,036
)
 
40,511

 
$
(0.07
)

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.

The effect of convertible notes 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 12.3 million shares.


18. 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 (amounts in thousands):
 
March 31, 2012
 
December 31, 2011
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Investment in Titan Europe Plc (a)
$
38,389

 
$
38,389

 
$

 
$

 
$
28,998

 
$
28,998

 
$

 
$

Contractual obligation investments
13,662

 
13,662

 


 


 
12,395

 
12,395

 


 


Preferred stock
1,000

 

 

 
1,000

 
1,000

 

 

 
1,000

Interest rate swap
545

 

 
545

 

 
634

 

 
634

 

Total
$
53,596

 
$
52,051

 
$
545

 
$
1,000

 
$
43,027

 
$
41,393

 
$
634

 
$
1,000


(a) The fair value for all periods presented has been decreased by cumulative translation adjustment of $1.2 million, which relates to the Company's Titan Europe Plc ownership in 2005 and before.

15



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)


The following table presents the changes during the periods presented in Titan's Level 3 investments that are measured at fair value on a recurring basis (amounts in thousands):
 
Preferred stock
Balance at December 31, 2011
$
1,000

  Total realized and unrealized gains and losses

Balance as of March 31, 2012
$
1,000



19. 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.


20. RECENTLY ISSUED ACCOUNTING STANDARDS

Comprehensive Income
In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220) - Presentation of Comprehensive Income.” The objective of this update is to improve the comparability, consistency, and transparency of financial reporting to increase the prominence of items reported in other comprehensive income. This update requires that all nonowner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. In December of 2011, the FASB issued ASU No. 2011-12, "Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05." Titan adopted the required comprehensive income presentation updates in the first quarter of 2012. The Company has elected to present items of income and other comprehensive income in two separate, but consecutive, statements of net income and other comprehensive income. This change in presentation did not have a material effect on the Company's financial position, results of operations or cash flows.


21. RELATED PARTY TRANSACTIONS

The Company sells products and pays commissions to companies controlled by persons related to the chief executive officer of the Company.  The related party is Mr. Fred Taylor and is Mr. Maurice Taylor’s brother.  The companies which Mr. Fred Taylor is associated with that do business with Titan include the following:  Blackstone OTR, LLC; FBT Enterprises; and OTR Wheel Engineering.  Sales of Titan products to these companies were approximately $0.4 million and $0.9 million for the first quarter of 2012 and 2011, respectively.  Titan had trade receivables due from these companies of approximately $0.2 million at March 31, 2012, and approximately $0.0 million at December 31, 2011.  On other sales referred to Titan from these manufacturing representative companies, commissions were approximately $0.7 million and $0.6 million during the first quarter of 2012 and 2011, respectively.




16



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)


22. SUBSIDIARY GUARANTOR FINANCIAL INFORMATION - 5.625% CONVERTIBLE NOTES

The Company's 5.625% convertible senior subordinated notes ("convertible notes") are guaranteed by the following 100% owned 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 guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. 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.
(Amounts in thousands)
Consolidating Condensed Statements of Operations
For the Three Months Ended March 31, 2012
 
Titan
 Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
371,129

 
$
91,959

 
$

 
$
463,088

Cost of sales
302

 
285,024

 
84,399

 

 
369,725

Gross profit (loss)
(302
)
 
86,105

 
7,560

 

 
93,363

Selling, general and administrative expenses
10,587

 
15,675

 
4,573

 

 
30,835

Research and development expenses
124

 
1,298

 
86

 

 
1,508

Royalty expense

 
1,693

 
656

 

 
2,349

Income (loss) from operations
(11,013
)
 
67,439

 
2,245

 

 
58,671

Interest expense
(6,062
)
 

 
(233
)
 

 
(6,295
)
Other income
2,174

 
497

 
440

 

 
3,111

Income (loss) before income taxes
(14,901
)
 
67,936

 
2,452

 

 
55,487

Provision (benefit) for income taxes
(6,952
)
 
25,041

 
2,004

 

 
20,093

Equity in earnings of subsidiaries
43,343

 

 

 
(43,343
)
 

Net income (loss)
35,394

 
42,895

 
448

 
(43,343
)
 
35,394

Net loss noncontrolling interests

 

 

 
(25
)
 
(25
)
Net income (loss) attributable to Titan
$
35,394

 
$
42,895

 
$
448

 
$
(43,318
)
 
$
35,419




17



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)

(Amounts in thousands)
Consolidating Condensed Statements of Operations
For the Three Months Ended March 31, 2011
 
Titan
 Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
280,829

 
$

 
$

 
$
280,829

Cost of sales
361

 
223,754

 
442

 

 
224,557

Gross profit (loss)
(361
)
 
57,075

 
(442
)
 

 
56,272

Selling, general and administrative expenses
15,405

 
2,725

 
7,163

 

 
25,293

Research and development expenses

 
1,183

 

 

 
1,183

Royalty expense

 
2,917

 

 

 
2,917

Income (loss) from operations
(15,766
)
 
50,250

 
(7,605
)
 

 
26,879

Interest expense
(6,280
)
 

 

 

 
(6,280
)
Noncash convertible debt conversion charge
(16,135
)
 

 

 

 
(16,135
)
Other income (expense)
317

 
(202
)
 
78

 

 
193

Income (loss) before income taxes
(37,864
)
 
50,048

 
(7,527
)
 

 
4,657

Provision (benefit) for income taxes
(8,039
)
 
18,518

 
(2,786
)
 

 
7,693

Equity in earnings of subsidiaries
26,789

 

 

 
(26,789
)
 

Net income (loss)
$
(3,036
)
 
$
31,530

 
$
(4,741
)
 
$
(26,789
)
 
$
(3,036
)



(Amounts in thousands)
Consolidating Condensed Statements of Comprehensive Income
For the Three Months Ended March 31, 2012
 
Titan
 Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net income (loss)
$
35,394

 
$
42,895

 
$
448

 
$
(43,343
)
 
$
35,394

Unrealized gain (loss) on investments, net of tax
5,917

 

 
5,917

 
(5,917
)
 
5,917

Currency translation adjustment
3,567

 

 
3,567

 
(3,567
)
 
3,567

Pension liability adjustments, net of tax
836

 
790

 
46

 
(836
)
 
836

Comprehensive income (loss)
45,714

 
43,685

 
9,978

 
(53,663
)
 
45,714

Net comprehensive loss attributable to noncontrolling interests

 

 

 
(25
)
 
(25
)
Comprehensive income (loss) attributable to Titan
$
45,714

 
$
43,685

 
$
9,978

 
$
(53,638
)
 
$
45,739




18



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)

(Amounts in thousands)
Consolidating Condensed Statements of Comprehensive Income
For the Three Months Ended March 31, 2011
 
Titan
 Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net income (loss)
$
(3,036
)
 
$
31,530

 
$
(4,741
)
 
$
(26,789
)
 
$
(3,036
)
Unrealized gain (loss) on investments, net of tax
(993
)
 

 
(993
)
 
993

 
(993
)
Currency translation adjustment

 

 

 

 

Pension liability adjustments, net of tax
593

 
553

 
40

 
(593
)
 
593

Comprehensive income (loss)
(3,436
)
 
32,083

 
(5,694
)
 
(26,389
)
 
(3,436
)
Net comprehensive loss attributable to noncontrolling interests

 

 

 

 

Comprehensive income (loss) attributable to Titan
$
(3,436
)
 
$
32,083

 
$
(5,694
)
 
$
(26,389
)
 
$
(3,436
)


(Amounts in thousands)
Consolidating Condensed Balance Sheets
March 31, 2012
 
Titan
 Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
116,518

 
$
6

 
$
12,784

 
$

 
$
129,308

Accounts receivable

 
192,351

 
53,597

 

 
245,948

Inventories

 
184,114

 
30,040

 

 
214,154

Prepaid and other current assets
33,400

 
17,325

 
14,901

 

 
65,626

Total current assets
149,918

 
393,796

 
111,322

 

 
655,036

Property, plant and equipment, net
8,805

 
217,232

 
107,881

 

 
333,918

Investment in subsidiaries
220,693

 

 

 
(220,693
)
 

Other assets
44,910

 
1,403

 
63,932

 

 
110,245

Total assets
$
424,326

 
$
612,431

 
$
283,135

 
$
(220,693
)
 
$
1,099,199

Liabilities and Stockholders’ Equity
 

 
 

 
 

 
 

 
 

Accounts payable
$
1,084

 
$
52,185

 
$
59,397

 
$

 
$
112,666

Other current liabilities
1,893

 
69,570

 
28,018

 

 
99,481

Total current liabilities
2,977

 
121,755

 
87,415

 

 
212,147

Long-term debt
312,881

 

 
5,000

 

 
317,881

Other long-term liabilities
37,072

 
37,522

 
50,889

 

 
125,483

Intercompany accounts
(370,677
)
 
141,897

 
228,780

 

 

Titan stockholders' equity
442,073

 
311,257

 
(88,949
)
 
(222,308
)
 
442,073

Noncontrolling interests

 

 

 
1,615

 
1,615

Total liabilities and stockholders’ equity
$
424,326

 
$
612,431

 
$
283,135

 
$
(220,693
)
 
$
1,099,199


 

19



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)

(Amounts in thousands)
Consolidating Condensed Balance Sheets
December 31, 2011
 
Titan
Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
125,266

 
$
6

 
$
3,898

 
$

 
$
129,170

Accounts receivable

 
137,226

 
52,301

 

 
189,527

Inventories

 
162,134

 
28,738

 

 
190,872

Prepaid and other current assets
27,251

 
15,490

 
12,283

 

 
55,024

Total current assets
152,517

 
314,856

 
97,220

 

 
564,593

Property, plant and equipment, net
9,562

 
219,734

 
105,446

 

 
334,742

Investment in subsidiaries
184,317

 

 

 
(184,317
)
 

Other assets
44,918

 
1,454

 
64,579

 

 
110,951

Total assets
$
391,314

 
$
536,044

 
$
267,245

 
$
(184,317
)
 
$
1,010,286

Liabilities and Stockholders’ Equity
 

 
 

 
 

 
 

 
 

Short-term debt
$

 
$

 
$
11,723

 
$

 
$
11,723

Accounts payable
930

 
33,563

 
42,081

 

 
76,574

Other current liabilities
22,687

 
39,457

 
25,325

 

 
87,469

Total current liabilities
23,617

 
73,020

 
79,129

 

 
175,766

Long-term debt
312,881

 

 
5,000

 

 
317,881

Other long-term liabilities
29,267

 
38,187

 
52,306

 

 
119,760

Intercompany accounts
(369,690
)
 
157,264

 
212,426

 

 

Titan stockholders' equity
395,239

 
267,573

 
(81,616
)
 
(185,957
)
 
395,239

Noncontrolling interests

 

 

 
1,640

 
1,640

Total liabilities and stockholders’ equity
$
391,314

 
$
536,044

 
$
267,245

 
$
(184,317
)
 
$
1,010,286

 
(Amounts in thousands)
Consolidating Condensed Statements of Cash Flows
For the Three Months Ended March 31, 2012
 
Titan
 Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Consolidated
Net cash provided by (used for) operating activities
$
(7,535
)
 
$
6,204

 
$
21,979

 
$
20,648

Cash flows from investing activities:
 

 
 

 
 

 
 

Capital expenditures
(1,378
)
 
(6,225
)
 
(552
)
 
(8,155
)
Other, net

 
21

 
87

 
108

Net cash used for investing activities
(1,378
)
 
(6,204
)
 
(465
)
 
(8,047
)
Cash flows from financing activities:
 

 
 

 
 

 
 

Payment on debt

 

 
(12,444
)
 
(12,444
)
Proceeds from exercise of stock options
370

 

 

 
370

Excess tax benefit from stock options exercised
6

 

 

 
6

Dividends paid
(211
)
 

 

 
(211
)
Net cash provided by (used for) financing activities
165

 

 
(12,444
)
 
(12,279
)
Effect of exchange rate change on cash

 

 
(184
)
 
(184
)
Net increase (decrease) in cash and cash equivalents
(8,748
)
 

 
8,886

 
138

Cash and cash equivalents, beginning of period
125,266

 
6

 
3,898

 
129,170

Cash and cash equivalents, end of period
$
116,518

 
$
6

 
$
12,784

 
$
129,308



20



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)


(Amounts in thousands)
Consolidating Condensed Statements of Cash Flows
For the Three Months Ended March 31, 2011
 
Titan
 Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor 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

 
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
)
 

 

 
(1,064
)
Proceeds from exercise of stock options
230

 

 

 
230

Dividends paid
(177
)
 

 

 
(177
)
Net cash used for financing activities
(1,011
)
 

 

 
(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

 


21



TITAN INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
(Unaudited)

23. SUBSIDIARY GUARANTOR FINANCIAL INFORMATION- 7.875% SENIOR SECURED NOTES

The Company's 7.875% senior secured notes are guaranteed by the following 100% owned subsidiaries of the Company: Titan Tire Corporation, Titan Tire Corporation of Bryan, Titan Tire Corporation of Freeport, and Titan Wheel Corporation of Illinois. The note guarantees are full and unconditional, joint and several obligations of the guarantors. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. The following 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.