XNYS:TWI Titan International, Inc. Quarterly Report 10-Q Filing - 6/30/2012
Effective Date 6/30/2012
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 
For Quarterly Period Ended: June 30, 2012 or
Commission file number 1-12936 TITAN INTERNATIONAL, INC. (Exact name of registrant as specified in its charter)
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.
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.
TITAN INTERNATIONAL, INC. TABLE OF CONTENTS
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)
See accompanying Notes to Consolidated Financial Statements. 1 TITAN INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (All amounts in thousands)
See accompanying Notes to Consolidated Financial Statements. 2 TITAN INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (All amounts in thousands, except share data)
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)
See accompanying Notes to Consolidated Financial Statements. 4 TITAN INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (All amounts in thousands)
See accompanying Notes to Consolidated Financial Statements. 5 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited)
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 June 30, 2012, and the results of operations and cash flows for the three and six months ended June 30, 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 June 30, 2012, respectively. The fair value of these notes at June 30, 2012, as obtained through independent pricing sources, was approximately $208.0 million for the senior secured notes and approximately $295.4 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 and $.010 per share of common stock for each of the three and six months ended June 30, 2012, and 2011. The second quarter 2012 cash dividend of $.005 per share of common stock was paid July 16, 2012, to stockholders of record on June 29, 2012. Interest paid Titan paid $0.3 million and $0.4 million for interest for the quarters ended June 30, 2012 and 2011, respectively, and $11.9 million and $13.4 million for interest for the six months ended June 30, 2012 and 2011, respectively. Income taxes paid Titan paid $37.0 million and $10.5 million for income taxes for the quarters ended June 30, 2012 and 2011, respectively, and $46.9 million and $10.6 million for income taxes for the six months ended June 30, 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):
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 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. In the second quarter of 2012, Titan became aware of additional information related to this acquisition. As a result of this information, which was available at the time of acquisition, Titan concluded that there were errors in the original accounting for the acquisition. Titan has concluded that the impact of these errors is immaterial to the consolidated financial statements for the year ended December 31, 2011 and for the three and six months ended June 30, 2012, and therefore the correction of these errors were recorded as of January 1, 2012. The correction of these errors impacted the following areas: an increase in current deferred income tax asset of $2.9 million, a decrease in goodwill of $8.4 million, and a decrease in noncurrent deferred income tax liability of $5.5 million. As a result of currency exchange rate differences, the January 1, 2012 recorded decrease in goodwill was $7.3 million, with a $1.1 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):
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. 3. ACCOUNTS RECEIVABLE Accounts receivable consisted of the following (amounts in thousands):
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):
At June 30, 2012, approximately 27% 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):
Depreciation on fixed assets for the six months ended June 30, 2012 and 2011, totaled $22.6 million and $20.2 million, respectively. 6. INVESTMENT IN TITAN EUROPE Investment in Titan Europe Plc consisted of the following (amounts in thousands):
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 $15.8 million, which is net of tax of $8.7 million. 9 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited) 7. GOODWILL Changes in goodwill consisted of the following (amounts in thousands):
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):
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):
10 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited) Aggregate maturities of long-term debt at June 30, 2012, were as follows (amounts in thousands):
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 June 30, 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 June 30, 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 six months of 2012 and at June 30, 2012, 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 June 30, 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 June 30, 2012, the Company had $5.0 million outstanding on this loan and the interest rate including the effect of the swap agreement was approximately 11%. 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. Titan Brazil could borrow up to 16.0 million Brazilian Reais, which equates to approximately $7.9 million dollars as of June 30, 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 June 30, 2012 there were no borrowings outstanding on this line of credit. Brazil Other Debt Titan Brazil has working capital loans for the Sao Paulo, Brazil manufacturing facility totaling $2.6 million at June 30, 2012. 11 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited) 10. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses financial derivatives to mitigate its exposure to volatility in the interest rate and foreign currency exchange rate in Brazil. The Company uses these derivate instruments 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 transactions with Bank of America Merrill Lynch Banco Multiplo S.A. that are designed to convert the outstanding $5.0 million US Dollar based LIBOR loan to a Brazilian Real based CDI loan and convert $2.5 million of US Dollar based LIBOR working capital loans to Brazilian Real based CDI loans. The Company has not designated these agreements as hedging instruments. 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 June 30, 2012, the Company recorded $0.0 million of other income and $0.2 million of interest expense related to these derivatives. For the six months ended June 30, 2012, the Company recorded $0.1 million of other income and $0.2 million of interest expense related to these derivatives. 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 June 30, 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):
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 $1.1 million and $1.7 million to the frozen defined pension plans during the three and six months ended June 30, 2012, respectively, and expects to contribute approximately $4.9 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):
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 tires in North America and Latin America under the Goodyear name. The North American and Latin American farm tire royalties were prepaid for seven years as a part of the 2011 Goodyear Latin American farm tire acquisition. Royalty expenses recorded were $2.7 million and $2.4 million for the quarters ended June 30, 2012 and 2011, respectively. Royalty expenses were $5.0 million and $5.3 million for the six months ended June 30, 2012 and 2011, respectively. 14. SUPPLY AGREEMENT TERMINATION INCOME Supply agreement termination income consisted of the following (amounts in thousands):
The Company's April 2011 acquisition of Goodyear's farm tire business included a three year supply agreement with Goodyear for certain non-farm tire products. A liability was recorded as the supply agreement was for sales at below market prices. In May 2012, the Company and Goodyear terminated this supply agreement and entered into an agreement under which Titan will sell these products directly to third party customers and pay a royalty to Goodyear. The remaining balance of the supply agreement liability was recorded as income as the Company is no longer obligated to sell the products at below market prices. 15. OTHER INCOME, NET Other income consisted of the following (amounts in thousands):
13 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited) 16. INCOME TAXES The Company recorded income tax expense of $31.0 million and $51.1 million for the three and six months ended June 30, 2012, respectively, as compared to $15.0 million and $22.7 million for the three and six months ended June 30, 2011. The Company's effective income tax rate was 39% and 50% for the six months ended June 30, 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. The Company's 2012 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 supply agreement termination income and related income tax effects and the liability for unrecognized tax benefits recorded during the three months ended June 30, 2012. ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination. The Company's unrecognized tax benefits were $3.1 million and $0.0 million as of June 30, 2012 and December 31, 2011, respectively. As of June 30, 2012, $2.0 million would affect income tax expense if recognized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest and penalties included in the unrecognized tax benefits at June 30, 2012 and December 31, 2011 were $0.3 million and $0.0 million, respectively. During the three months ended June 30, 2012, the increase in unrecognized tax benefits relates to potential nexus exposure in various jurisdictions where the Company has activities. 17. EARNINGS PER SHARE Earnings per share (EPS) were as follows (amounts in thousands, except per share data):
There were no stock options/trusts or convertible notes that were antidilutive for the periods presented. 14 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited) 18. 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 six months ended June 30, 2012 and 2011 (amounts in thousands):
Assets by segment were as follows (amounts in thousands):
15 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited) 19. 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):
(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. 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):
20. 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. 16 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited) 21. 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. 22. 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 $0.7 million and $1.1 million for the three and six months ended June 30, 2012, respectively, as compared to $1.1 million and $1.9 million for the three and six months ended June 30, 2011. Titan had trade receivables due from these companies of approximately $0.4 million at June 30, 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 $1.4 million for the three and six month ended June 30, 2012, respectively, as compared to $0.6 million and $1.2 million for the three and six months ended June 30, 2011. 23. SUBSEQUENT EVENTS Acquisition of Australian OTR Tire & Wheel Manufacturer: Planet Group In July, 2012, Titan announced that it has signed an agreement to purchase a majority ownership interest in Planet Corporation Group of Companies ("Planet") in an all-cash transaction. Planet includes National Tyres, Acme Wheel, Resource Tyre and Choice Tyres Wholesalers and is based in Perth, Australia. Planet is an OTR tire and wheel specialist that manufactures, distributes and services products to customers in the mining, agriculture, construction and earthmoving industries. Titan expects this acquisition to close in the third quarter of 2012. 17 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited) 24. 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.
18 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited)
19 TITAN INTERNATIONAL, INC. Notes to Consolidated Condensed Financial Statements (Unaudited)
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