TWI 06.30.2014 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: June 30, 2014
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
 
July 21, 2014
 
 
 
Common stock, no par value per share
 
53,597,995




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
 
Six months ended
 
June 30,
 
June 30,
 
2014
 
2013
 
2014
 
2013
Net sales
$
523,731

 
$
593,291

 
$
1,062,671

 
$
1,171,678

Cost of sales
466,374

 
506,636

 
950,764

 
988,272

Mining asset impairment and inventory writedown
34,797

 

 
34,797

 

Gross profit
22,560

 
86,655

 
77,110

 
183,406

Selling, general and administrative expenses
45,008

 
43,653

 
91,843

 
86,096

Research and development expenses
3,189

 
2,801

 
6,899

 
5,503

Royalty expense
3,830

 
3,295

 
7,571

 
7,018

Income (loss) from operations
(29,467
)
 
36,906

 
(29,203
)
 
84,789

Interest expense
(8,926
)
 
(13,069
)
 
(18,185
)
 
(23,510
)
Convertible debt conversion charge

 

 

 
(7,273
)
Gain on earthquake insurance recovery

 
22,451

 

 
22,451

Other income (expense)
6,335

 
(2,429
)
 
6,851

 
(1,010
)
Income (loss) before income taxes
(32,058
)
 
43,859

 
(40,537
)
 
75,447

Provision (benefit) for income taxes
(7,167
)
 
21,003

 
(10,518
)
 
33,202

Net income (loss)
(24,891
)
 
22,856

 
(30,019
)
 
42,245

Net loss attributable to noncontrolling interests
(4,380
)
 
(361
)
 
(11,671
)
 
(447
)
Net income (loss) attributable to Titan
$
(20,511
)
 
$
23,217

 
$
(18,348
)
 
$
42,692

 
 
 
 
 
 
 
 
Earnings (loss) per common share:
 

 
 

 
 

 
 

Basic
$
(.38
)
 
$
.43

 
$
(.34
)
 
$
.81

Diluted
$
(.38
)
 
$
.40

 
$
(.34
)
 
$
.74

Average common shares and equivalents outstanding:
 
 
 

 
 
 
 

Basic
53,486

 
53,426

 
53,478

 
52,625

Diluted
53,486

 
59,504

 
53,478

 
59,527

 
 
 
 
 
 
 
 
Dividends declared per common share:
$
.005

 
$
.005

 
$
.010

 
$
.010

 

 







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
 
June 30,
 
2014
 
2013
Net income (loss)
$
(24,891
)
 
$
22,856

Currency translation adjustment, net
7,826

 
(25,171
)
Pension liability adjustments, net of tax of $123 and $586, respectively
28

 
1,070

Comprehensive loss
(17,037
)
 
(1,245
)
Net comprehensive loss attributable to noncontrolling interests
(1,062
)
 
(3,167
)
Comprehensive income (loss) attributable to Titan
$
(15,975
)
 
$
1,922



 
 
 
 
 
Six months ended
 
June 30,
 
2014
 
2013
Net income (loss)
$
(30,019
)
 
$
42,245

Unrealized loss on investments, net of tax of $0 and $0, respectively

 
(3
)
Currency translation adjustment, net
8,214

 
(25,367
)
Pension liability adjustments, net of tax of $506 and $1,113, respectively
745

 
2,021

Comprehensive income (loss)
(21,060
)
 
18,896

Net comprehensive loss attributable to noncontrolling interests
(13,245
)
 
(3,158
)
Comprehensive income (loss) attributable to Titan
$
(7,815
)
 
$
22,054























See accompanying Notes to Consolidated Financial Statements.

2



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

 
June 30,
 
December 31,
Assets
2014
 
2013
Current assets
 
 
 
Cash and cash equivalents
$
162,954

 
$
189,360

  Restricted cash

 
14,268

  Accounts receivable, net
302,504

 
263,053

Inventories
386,700

 
384,920

Deferred income taxes
41,707

 
41,931

Prepaid and other current assets
80,552

 
114,346

Total current assets
974,417

 
1,007,878

Property, plant and equipment, net
604,017

 
638,807

Goodwill
42,899

 
42,075

Deferred income taxes
6,837

 
2,772

Other assets
134,340

 
129,699

Total assets
$
1,762,510

 
$
1,821,231

Liabilities and Equity
 

 
 

Current liabilities
 

 
 

Short-term debt
$
26,498

 
$
75,061

Accounts payable
200,548

 
176,719

Deferred income taxes
4,084

 
3,525

Other current liabilities
139,463

 
131,266

Total current liabilities
370,593

 
386,571

Long-term debt
501,468

 
497,694

Deferred income taxes
48,706

 
60,985

Other long-term liabilities
76,127

 
77,945

Total liabilities
996,894

 
1,023,195

Equity
 

 
 

Titan stockholders' equity


 


  Common stock (no par, 120,000,000 shares authorized, 55,253,092 issued)

 

Additional paid-in capital
560,916

 
558,637

Retained earnings
188,657

 
207,541

Treasury stock (at cost, 1,665,188 and 1,692,220 shares, respectively)
(15,343
)
 
(15,586
)
Treasury stock reserved for deferred compensation
(1,075
)
 
(1,075
)
Accumulated other comprehensive loss
(52,414
)
 
(61,794
)
Total Titan stockholders’ equity
680,741

 
687,723

Noncontrolling interests
84,875

 
110,313

Total equity
765,616

 
798,036

Total liabilities and equity
$
1,762,510

 
$
1,821,231

 





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
 
Additional
paid-in
capital
 
Retained earnings
 
Treasury stock
 
Treasury stock
 reserved for
deferred compensation
 
Accumulated other comprehensive income (loss)
 
Total Titan Equity
 
Noncontrolling interest
 
Total Equity
Balance January 1, 2014
53,560,872

 
$
558,637

 
$
207,541

 
$
(15,586
)
 
$
(1,075
)
 
$
(61,794
)
 
$
687,723

 
$
110,313

 
$
798,036

Net loss


 


 
(18,348
)
 


 


 


 
(18,348
)
 
(11,671
)
 
(30,019
)
Currency translation adjustment
 
 
 
 
 
 
 
 
 
 
9,788

 
9,788

 
(1,574
)
 
8,214

Pension liability adjustments, net of tax


 


 


 


 


 
745

 
745

 
 
 
745

Dividends on common stock


 


 
(536
)
 


 


 


 
(536
)
 
 
 
(536
)
Exercise of stock options
8,971

 
60

 


 
81

 


 


 
141

 
 
 
141

Acquisition of additional interest


 
(49
)
 


 


 


 
(1,153
)
 
(1,202
)
 
(12,193
)
 
(13,395
)
Stock-based compensation


 
2,143

 


 


 


 


 
2,143

 
 
 
2,143

Tax benefit related to stock-based compensation


 
(45
)
 


 


 


 


 
(45
)
 
 
 
(45
)
Issuance of treasury stock under 401(k) plan
18,061

 
170

 


 
162

 


 


 
332

 
 
 
332

Balance June 30, 2014
53,587,904

 
$
560,916

 
$
188,657

 
$
(15,343
)
 
$
(1,075
)
 
$
(52,414
)
 
$
680,741

 
$
84,875

 
$
765,616

 
















See accompanying Notes to Consolidated Financial Statements.

4



TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(All amounts in thousands)
 
Six months ended
June 30,
Cash flows from operating activities:
2014
 
2013
Net income (loss)
$
(30,019
)
 
$
42,245

Adjustments to reconcile net income to net cash
 

 
 

provided by operating activities:
 

 
 

Depreciation and amortization
46,815

 
40,031

Amortization of debt premium

 
(1,202
)
Mining asset impairment
23,242

 

Mining inventory writedown
11,555

 

Deferred income tax provision
(18,269
)
 
9,213

Convertible debt conversion charge

 
7,273

Gain on earthquake insurance recovery

 
(22,451
)
Stock-based compensation
2,143

 
2,800

Excess tax benefit from stock options exercised
45

 
42

Insurance proceeds

 
35,808

Issuance of treasury stock under 401(k) plan
332

 
326

(Increase) decrease in assets:
 

 
 

Accounts receivable
(28,989
)
 
(48,349
)
Inventories
(3,046
)
 
(14,599
)
Prepaid and other current assets
36,061

 
(15,634
)
Other assets
(4,050
)
 
4,818

Increase (decrease) in liabilities:
 

 
 

Accounts payable
15,017

 
42,014

Other current liabilities
4,937

 
(402
)
Other liabilities
(12,719
)
 
4,677

Net cash provided by operating activities
43,055

 
86,610

Cash flows from investing activities:
 

 
 

Capital expenditures
(30,883
)
 
(36,068
)
Acquisition of additional interest
(13,395
)
 
(1,671
)
Additional equity investment in Wheels India

 
(8,017
)
Decrease in restricted cash deposits
14,268

 

Insurance proceeds

 
2,879

Other
3,241

 
179

Net cash used for investing activities
(26,769
)
 
(42,698
)
Cash flows from financing activities:
 

 
 

Proceeds from borrowings

 
345,313

Payment on debt
(53,393
)
 
(155,082
)
Term loan borrowing
6,217

 
25,157

Convertible note conversion

 
(14,090
)
Proceeds from exercise of stock options
141

 
841

Excess tax benefit from stock options exercised
(45
)
 
(42
)
Payment of financing fees
(33
)
 
(5,452
)
Dividends paid
(536
)
 
(511
)
Net cash provided by (used for) financing activities
(47,649
)
 
196,134

Effect of exchange rate changes on cash
4,957

 
(4,773
)
Net increase (decrease) in cash and cash equivalents
(26,406
)
 
235,273

Cash and cash equivalents, beginning of period
189,360

 
189,114

Cash and cash equivalents, end of period
$
162,954

 
$
424,387

 
 
 
 
Supplemental information:
 
 
 
Interest paid
$
20,695

 
$
16,375

Income taxes paid
$
6,454

 
$
37,207

Noncash investing and financing information:
 
 
 
Issuance of common stock for convertible debt payment
$

 
$
45,903

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 June 30, 2014, and the results of operations and cash flows for the three and six months ended June 30, 2014 and 2013.

Accounting policies have continued without significant change and are described in the Description of Business and Significant Accounting Policies contained in the Company's 2013 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 2013 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 due to their short term or stated rates.  Investments in marketable equity securities are recorded at fair value.  The 6.875% senior secured notes due 2020 (senior secured notes due 2020) and 5.625% convertible senior subordinated notes due 2017 (convertible notes) are carried at cost of $400.0 million and $60.2 million at June 30, 2014, respectively. The fair value of the senior secured notes due 2020 at June 30, 2014, as obtained through an independent pricing source, was approximately $408.0 million.

Cash dividends
The Company declared cash dividends of $.005 and $0.010 per share of common stock for each of the three and six months ended June 30, 2014, and 2013. The second quarter 2014 cash dividend of $.005 per share of common stock was paid July 15, 2014, to stockholders of record on June 30, 2014.

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. MINING ASSET IMPAIRMENT AND INVENTORY WRITEDOWN

In the second quarter of 2014, the Company recorded an asset impairment and inventory writedown of $23.2 million and $11.6 million, respectively. The impairment was recorded on machinery, equipment and molds used to produce giant mining tires. Mining products are included in the Company's earthmoving/construction segment. In the second quarter of 2014, several large mining equipment manufacturers significantly decreased their sales forecast for mining equipment. The Company's sales of mining product were deteriorating at an accelerated pace. Therefore, the company tested mining related assets for impairment in the second quarter of 2014. The fair value of the mining equipment was determined using a cost and market approach. The inventory writedown was to adjust the value of mining product inventory to estimated market value.


3. ACQUISITIONS

Acquisition of Voltyre-Prom
On October 4, 2013, Titan in partnership with One Equity Partners (OEP) and the Russian Direct Investment Fund (RDIF) closed the acquisition of an 85% interest in Voltyre-Prom, a leading producer of agricultural and industrial tires in Volgograd, Russia, for approximately $94.1 million, which includes the assumption of debt. Titan is acting as operating partner with responsibility for Voltyre-Prom's daily operations on behalf of the consortium of which Titan holds a 30% interest. This acquisition expanded Titan's footprint into the Commonwealth of Independent States (CIS) region. The fair value of the consideration transferred and noncontrolling interests exceeded the fair value of the identified assets acquired less liabilities assumed. Therefore, goodwill of $21.0 million was recorded on the transaction, which is not expected to be deductible for tax purposes. An initial noncontrolling interest of $14.5 million, representing the 15% not owned by the partnership, was recorded at the acquisition date. In the first half of 2014, the partnership of Titan, OEP, and RDIF purchased an additional 15% to bring the total Voltyre-Prom ownership to 100%. The Company continues to evaluate the preliminary purchase price allocation, primarily the value of certain deferred taxes and goodwill, and may revise the purchase price allocation in future periods as these estimates are finalized.

The purchase price allocation of the Voltyre-Prom acquisition consisted of the following (amounts in thousands):
 
Acquisition
 
Additional
 
 
 
Date
 
Purchases
 
Total
Cash
$
80

 
$

 
$
80

Accounts receivable
5,596

 

 
5,596

Inventories
3,807

 

 
3,807

Deferred income taxes - current asset
253

 

 
253

Prepaid & other current assets
1,881

 

 
1,881

Goodwill
21,002

 

 
21,002

Property, plant & equipment
79,255

 

 
79,255

Other assets
17,615

 

 
17,615

Accounts payable
(715
)
 

 
(715
)
Other current liabilities
(4,152
)
 

 
(4,152
)
Deferred income taxes - noncurrent liability
(15,989
)
 

 
(15,989
)
Noncontrolling interests
(14,542
)
 
13,395

 
(1,147
)
Net assets acquired
$
94,091

 
$
13,395

 
$
107,486




7



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

4. RESTRICTED CASH

Restricted cash consisted of the following (amounts in thousands):
 
June 30,
2014
 
December 31, 2013
Restricted cash
$

 
$
14,268


At December 31, 2013, the Company had restricted cash of $14.3 million. This restricted cash was on deposit for the purchase of the remaining 15% of Voltyre-Prom. In the first half of 2014, the partnership of Titan, OEP, and RDIF purchased an additional 15% to bring the total Voltyre-Prom ownership to 100%. See note 3 for additional information.


5. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following (amounts in thousands):
 
June 30,
2014
 
December 31,
2013
Accounts receivable
$
308,608

 
$
268,340

Allowance for doubtful accounts
(6,104
)
 
(5,287
)
Accounts receivable, net
$
302,504

 
$
263,053

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


6. INVENTORIES

Inventories consisted of the following (amounts in thousands):
 
June 30,
2014
 
December 31,
2013
Raw material
$
130,617

 
$
130,403

Work-in-process
53,962

 
54,190

Finished goods
211,137

 
208,821

 
395,716

 
393,414

Adjustment to LIFO basis
(9,016
)
 
(8,494
)
 
$
386,700

 
$
384,920

 
At June 30, 2014, approximately 11% of the Company's inventories were valued under the last-in, first-out (LIFO) method. At December 31, 2013, approximately 12% 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. See note 2 for additional information on the mining inventory writedown of $11.6 million recorded in the second quarter of 2014.



8



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

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net consisted of the following (amounts in thousands):
 
June 30,
2014
 
December 31, 2013
Land and improvements
$
68,806

 
$
67,243

Buildings and improvements
243,602

 
242,261

Machinery and equipment
589,188

 
617,709

Tools, dies and molds
106,816

 
112,997

Construction-in-process
51,128

 
42,539

 
1,059,540

 
1,082,749

Less accumulated depreciation
(455,523
)
 
(443,942
)
 
$
604,017

 
$
638,807

 
Depreciation on fixed assets for the six months ended June 30, 2014 and 2013, totaled $43.8 million and $37.8 million, respectively.

Included in the total building and improvements are capital leases of $5.8 million and $4.6 million at June 30, 2014, and December 31, 2013, respectively. Included in the total of machinery and equipment are capital leases of $49.8 million and $40.6 million at June 30, 2014, and December 31, 2013, respectively. Included in total tools, dies and molds are capital leases of $0.2 million at June 30, 2014. See note 2 for additional information on the mining asset impairment of $23.2 million recorded in the second quarter of 2014.


8. GOODWILL AND INTANGIBLE ASSETS

Changes in goodwill consisted of the following (amounts in thousands):
 
2014
 
2013
 
 
 
Earthmoving/
 
 
 
 
 
 
 
Earthmoving/
 
 
 
 
 
Agricultural
 
Construction
 
Consumer
 
 
 
Agricultural
 
Construction
 
Consumer
 
 
 
Segment
 
Segment
 
Segment
 
Total
 
Segment
 
Segment
 
Segment
 
Total
Goodwill, January 1
$
24,540

 
$
14,898

 
$
2,637

 
$
42,075

 
$
11,522

 
$
13,419

 
$

 
$
24,941

Foreign currency translation
252

 
642

 
(70
)
 
824

 
(993
)
 
(1,605
)
 

 
(2,598
)
Goodwill, June 30
$
24,792

 
$
15,540

 
$
2,567

 
$
42,899

 
$
10,529

 
$
11,814

 
$

 
$
22,343

 
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. In the second quarter of 2014, several large mining equipment manufacturers significantly decreased their sales forecast for mining equipment. The Company's sales of mining product were deteriorating at an accelerated pace. Therefore, related to the earthmoving/construction segment, the Company reviewed $12.2 million of Australia goodwill for impairment in the second quarter of 2014. The recoverability of the goodwill was evaluated by estimating future discounted cash flows. In determining the estimated future cash flows, the Company considered current and projected future levels of income as well as business trends and economic conditions. Impairment was not identified. However, the calculated excess value was less than 10% and there may be potential risk of future impairment if cash flows or other estimates would change.


9



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

The components of intangible assets consisted of the following (amounts in thousands):
 
Weighted- Average Useful Lives (in Years)
 
June 30,
2014
 
December 31, 2013
Amortizable intangible assets:
 
 
 
 
 
     Customer relationships
13.1
 
17,248

 
16,659

     Patents, trademarks and other
6.3
 
20,148

 
20,561

          Total at cost
 
 
37,396

 
37,220

     Less accumulated amortization
 
 
(6,544
)
 
(4,607
)
 
 
 
30,852

 
32,613

 
Amortization related to intangible assets for the six months ended June 30, 2014 and 2013, totaled $2.2 million and $1.2 million, respectively. Intangible assets are included as a component of other assets in the consolidated condensed balance sheet.

The estimated aggregate amortization expense at June 30, 2014, is as follows (amounts in thousands):
July 1 - December 31, 2014
$
2,306

2015
4,219

2016
3,371

2017
3,196

2018
3,196

Thereafter
14,564

 
$
30,852



9. WARRANTY

Changes in the warranty liability consisted of the following (amounts in thousands):
 
2014
 
2013
Warranty liability, January 1
$
33,134

 
$
27,482

Provision for warranty liabilities
9,422

 
24,078

Warranty payments made
(9,975
)
 
(17,079
)
Warranty liability, June 30
$
32,581

 
$
34,481


The Company provides limited warranties on workmanship of 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.



10



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

10. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT
 
Long-term debt consisted of the following (amounts in thousands):
 
June 30,
2014
 
December 31,
2013
6.875% senior secured notes due 2020
$
400,000

 
$
400,000

5.625% convertible senior subordinated notes due 2017
60,161

 
60,161

Titan Europe credit facilities
38,503

 
41,687

Other debt
26,279

 
67,541

Capital leases
3,023

 
3,366

 
527,966

 
572,755

Less amounts due within one year
26,498

 
75,061

 
$
501,468

 
$
497,694

 
Aggregate maturities of long-term debt at June 30, 2014, were as follows (amounts in thousands):
July 1 - December 31, 2014
$
26,012

2015
17,123

2016
20,906

2017
61,025

2018
656

Thereafter
402,244

 
$
527,966

 
6.875% senior secured notes due 2020
The Company’s 6.875% senior secured notes (senior secured notes due 2020) are due October 2020. 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 due 2020 outstanding balance was $400.0 million at June 30, 2014.

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 $60.2 million at June 30, 2014.

Titan Europe credit facilities
The Titan Europe credit facilities contain borrowings from various institutions totaling $38.5 million at June 30, 2014. Maturity dates on this debt range from less than one year to ten years and interest rates range from 5% to 6.9%. The European facilities are secured by the assets of select European subsidiaries.

Revolving credit facility
The Company’s $150 million revolving credit facility (credit facility) with agent Bank of America, N.A. has a December 2017 termination date and is collateralized by the accounts receivable and inventory of certain Titan domestic subsidiaries.  During the first six months of 2014 and at June 30, 2014, there were no borrowings under the credit facility.

Other debt
Brazil Other Debt
Titan Brazil has working capital loans for the Sao Paulo, Brazil manufacturing facility totaling $15.7 million at June 30, 2014.

11



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


Australia Capital Leases
Titan National Australia Holdings has capital leases totaling $1.2 million at June 30, 2014.

Titan Europe Other Debt
Titan Europe has overdraft facilities totaling $9.7 million at June 30, 2014.

Titan Europe Capital Leases
Titan Europe has capital lease obligations totaling $1.9 million at June 30, 2014.

Russia Other Debt
Voltyre-Prom has working capital loans for the Volgograd, Russia manufacturing facility totaling $0.9 million at June 30, 2014.


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, 2014, future minimum rental commitments under noncancellable operating leases with initial terms of at least one year were as follows (amounts in thousands):
July 1 - December 31, 2014
$
4,786

2015
5,734

2016
5,567

2017
3,621

2018
2,355

Thereafter
2,893

Total future minimum lease payments
$
24,956


At June 30, 2014, the Company had assets held as capital leases with a net book value of $10.7 million included in property, plant and equipment. Total future capital lease obligations relating to these leases are as follows (amounts in thousands):
July 1 - December 31, 2014
$
797

2015
1,129

2016
693

2017
247

2018
82

Thereafter
75

Total future capital lease obligation payments
3,023

Less amount representing interest
(101
)
Present value of future capital lease obligation payments
$
2,922




12



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

12. EMPLOYEE BENEFIT PLANS

The Company has three frozen defined benefit pension plans covering certain employees or former employees of three U.S. subsidiaries. The Company also has pension plans covering certain employees of several foreign subsidiaries. The Company also sponsors four 401(k) retirement savings plans in the U.S. and a number of defined contribution plans at foreign subsidiaries. The Company contributed approximately $2.3 million to the pension plans during the six months ended June 30, 2014 and expects to contribute approximately $3.6 million to the pension plans during the remainder of 2014.

The components of net periodic pension cost consisted of the following (amounts in thousands):
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2014
 
2013
 
2014
 
2013
Service cost
$
193

 
$
214

 
$
402

 
$
386

Interest cost
1,426

 
1,350

 
2,847

 
2,704

Expected return on assets
(1,501
)
 
(1,396
)
 
(3,003
)
 
(2,792
)
Amortization of unrecognized prior service cost
34

 
34

 
68

 
68

Amortization of net unrecognized loss
758

 
1,317

 
1,516

 
2,635

      Net periodic pension cost
$
910

 
$
1,519

 
$
1,830

 
$
3,001



13. VARIABLE INTEREST ENTITIES

The Company holds a variable interest in three joint ventures for which the Company is the primary beneficiary. Two of the joint ventures operate distribution facilities which primarily distribute mining products. One of these facilities is located in Canada and the other is located in Australia. The Company’s variable interest in these joint ventures relates to sales of Titan product to these entities, consigned inventory and working capital loans. The third joint venture is the consortium which owns Voltyre-Prom, a leading producer of agricultural and industrial tires in Volgograd, Russia. Titan is acting as operating partner with responsibility for Voltyre-Prom’s daily operations. The Company has also provided working capital loans to Voltyre-Prom.

As the primary beneficiary of these variable interest entities (VIEs), the entities’ assets, liabilities and results of operations are included in the Company’s consolidated financial statements. The other equity holders’ interests are reflected in “Net loss attributable to noncontrolling interests” in the consolidated condensed statements of operations and “Noncontrolling interests” in the consolidated condensed balance sheets.


13



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

The following table summarizes the carrying amount of the entities’ assets and liabilities included in the Company’s consolidated condensed balance sheets at June 30, 2014 and December 31, 2013 (amounts in thousands):
 
June 30,
2014
 
December 31, 2013
Cash and cash equivalents
$
11,784

 
$
17,106

Inventory
21,958

 
33,406

Other current assets
18,950

 
17,000

Goodwill
20,020

 
20,601

Property, plant and equipment, net
66,492

 
76,060

Other noncurrent assets
15,052

 
16,673

   Total assets
154,256

 
180,846

 
 
 
 
Current liabilities
15,663

 
23,816

Noncurrent liabilities
13,576

 
15,818

  Total liabilities
29,239

 
39,634


All assets in the above table can only be used to settle obligations of the consolidated VIE. Liabilities are nonrecourse obligations. Amounts presented in the table above are adjusted for intercompany eliminations.


14. 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 part of the 2011 Goodyear Latin American farm tire acquisition. In May 2012, the Company and Goodyear entered into an agreement under which Titan will sell certain non-farm tire products directly to third party customers and pay a royalty to Goodyear. Royalty expenses recorded were $3.8 million and $3.3 million for the quarters ended June 30, 2014 and 2013, respectively. Royalty expenses were $7.6 million and $7.0 million for the six months ended June 30, 2014 and 2013, respectively.


15. OTHER INCOME (EXPENSE)

Other income (expense) consisted of the following (amounts in thousands):
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2014
 
2013
 
2014
 
2013
Currency exchange gain (loss)
$
3,747

 
$
(6,111
)
 
$
2,050

 
$
(6,654
)
Other income
787

 
681

 
1,250

 
1,331

Discount amortization on prepaid royalty
756

 
787

 
1,530

 
1,703

Wheels India Limited equity income
532

 
460

 
950

 
275

Interest income
288

 
1,530

 
640

 
1,931

Building rental income
225

 
224

 
431

 
404

 
$
6,335

 
$
(2,429
)
 
$
6,851

 
$
(1,010
)

The Company's investment in Wheels India Limited decreased from 41.7% to 34.2% during the first quarter of 2014 due to an equity offering by Wheels India Limited.


14



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


16. GAIN ON EARTHQUAKE INSURANCE RECOVERY

Gain on earthquake insurance recovery consisted of the following (amounts in thousands):
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2014
 
2013
 
2014
 
2013
Gain on earthquake insurance recovery
$

 
$
22,451

 
$

 
$
22,451


Titan Europe's wheel manufacturing facility in Finale Emilia, Italy experienced damage from an earthquake in May 2012, prior to Titan's acquisition of Titan Europe.  The plant was closed for production during initial remedial work. This resulted in a limited transfer of production to other facilities within Titan Europe as well as sourcing product from facilities in the U.S. owned by Titan and competitors.  In the second quarter of 2013, Titan received a final insurance settlement payment of $38.7 million, which offset the earthquake insurance receivable and resulted in a gain of $22.5 million.


17. INCOME TAXES

The Company recorded income tax benefit of $(7.2) million and $(10.5) million for the three and six months ended June 30, 2014, respectively, as compared to income tax expense of $21.0 million and $33.2 million for the three and six months ended June 30, 2013. The Company's effective income tax rate was 26% and 44% for the six months ended June 30, 2014 and 2013, respectively.

The Company's 2014 income tax benefit 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 state income tax expense, unrecognized tax benefits, foreign earnings, and domestic production activities deduction.

The Company's 2013 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 state income tax expense, expense for unrecognized tax benefits, foreign earnings, domestic production activities deduction, and tax deductible expenses related to the convertible bond repurchase.



15



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

18. EARNINGS PER SHARE

Earnings per share (EPS) were as follows (amounts in thousands, except per share data):
 
Three months ended
 
June 30, 2014
 
June 30, 2013
 
Titan Net loss
 
Weighted-
average shares
 
Per share
 amount
 
Titan Net income
 
Weighted-
average shares
 
Per share
 amount
Basic earnings per share
$
(20,511
)
 
53,486

 
$
(0.38
)
 
$
23,217

 
53,426

 
$
0.43

   Effect of stock options/trusts

 

 
 

 

 
280

 
 

   Effect of convertible notes

 

 
 
 
609

 
5,798

 
 
Diluted earnings per share
$
(20,511
)
 
53,486

 
$
(0.38
)
 
$
23,826

 
59,504

 
$
0.40


 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended
 
June 30, 2014
 
June 30, 2013
 
Titan Net income
 
Weighted-
average shares
 
Per share
 amount
 
Titan Net income
 
Weighted-
average shares
 
Per share
 amount
Basic earnings per share
$
(18,348
)
 
53,478

 
$
(0.34
)
 
$
42,692

 
52,625

 
$
0.81

   Effect of stock options/trusts

 

 
 

 

 
290

 
 

   Effect of convertible notes

 

 
 
 
1,381

 
6,612

 
 
Diluted earnings per share
$
(18,348
)
 
53,478

 
$
(0.34
)
 
$
44,073

 
59,527

 
$
0.74


The effect of stock options/trusts has been excluded for the three and six months ended June 30, 2014, 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 and six months ended June 30, 2014, as the effect would have been antidilutive. The weighted average share amount excluded was 5.8 million shares.


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.



16



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

20. SEGMENT INFORMATION

The table below presents information about certain operating results of segments as reviewed by the chief executive officer of the Company for the three and six months ended June 30, 2014 and 2013 (amounts in thousands):

Three months ended
 
Six months ended

June 30,
 
June 30,
 
2014
 
2013
 
2014
 
2013
Revenues from external customers
 
 
 
 

 

Agricultural
$
285,274

 
$
323,943

 
$
602,440

 
$
634,496

Earthmoving/construction
163,961

 
208,226

 
316,901

 
417,842

Consumer
74,496

 
61,122

 
143,330

 
119,340

 
$
523,731

 
$
593,291

 
$
1,062,671

 
$
1,171,678

Gross profit
 

 
 

 
 
 
 
Agricultural
$
42,517

 
$
56,150

 
$
89,782

 
$
110,220

Earthmoving/construction
(23,255
)
 
26,820

 
(19,457
)
 
64,315

Consumer
4,114

 
4,331

 
8,196

 
10,478

Unallocated corporate
(816
)
 
(646
)
 
(1,411
)
 
(1,607
)
 
$
22,560

 
$
86,655

 
$
77,110

 
$
183,406

Income (loss) from operations
 

 
 

 
 
 
 
Agricultural
$
28,078

 
$
45,686

 
$
58,619

 
$
87,301

Earthmoving/construction
(38,235
)
 
8,519

 
(49,329
)
 
29,198

Consumer
(1,814
)
 
1,027

 
(3,374
)
 
4,169

Unallocated corporate
(17,496
)
 
(18,326
)
 
(35,119
)
 
(35,879
)
      Income (loss) from operations
(29,467
)
 
36,906

 
(29,203
)
 
84,789

 
 
 
 
 
 
 
 
Interest expense
(8,926
)
 
(13,069
)
 
(18,185
)
 
(23,510
)
Convertible debt conversion charge

 

 

 
(7,273
)
Gain on earthquake insurance recovery

 
22,451

 

 
22,451

Other income (expense), net
6,335

 
(2,429
)
 
6,851

 
(1,010
)
      Income (loss) before income taxes
$
(32,058
)
 
$
43,859

 
$
(40,537
)
 
$
75,447


Assets by segment were as follows (amounts in thousands):
 
June 30,
2014
 
December 31,
2013
Total assets
 

 
 

Agricultural
$
698,041

 
$
725,032

Earthmoving/construction
676,543

 
749,564

Consumer
225,227

 
172,320

Unallocated corporate
162,699

 
174,315

 
$
1,762,510

 
$
1,821,231

 


17



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


21. FAIR VALUE MEASUREMENTS

Accounting standards for fair value measurements establish 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):
 
June 30, 2014
 
December 31, 2013
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Contractual obligation investments
$
9,332


$
9,332


$


$

 
$
8,723

 
$
8,723

 
$

 
$

Preferred stock
250

 

 

 
250

 
250

 

 

 
250

Derivative financial instruments liability
(75
)
 

 
(75
)
 

 
(126
)
 

 
(126
)
 

Total
$
9,507

 
$
9,332

 
$
(75
)
 
$
250

 
$
8,847

 
$
8,723

 
$
(126
)
 
$
250



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, 2013
$
250

  Total realized and unrealized gains and losses

Balance as of June 30, 2014
$
250



Fair value, nonrecurring, Level 2 measurements from impairments consisted of the following (amounts in thousands):
 
Fair Value
 
Impairment Charges
 
June 30,
 
December 31,
 
Six months ended
 
2014
 
2013
 
2014
 
2013
Property, plant and equipment
$
45,189

 
$

 
$
23,242

 
$


The fair value measurements and impairment charges shown above pertain to assets used to produce giant mining tires for the mining industry. See note 2 for additional information.



18



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

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; Green Carbon, INC; and OTR Wheel Engineering.  Sales of Titan products to these companies were approximately $0.8 million and $1.4 million for the three and six months ended June 30, 2014, respectively, as compared to $0.8 million and $1.4 million for the three and six months ended June 30, 2013. Titan had trade receivables due from these companies of approximately $0.2 million at June 30, 2014, and December 31, 2013, respectively.  On other sales referred to Titan from the above manufacturing representative companies, commissions were approximately $0.6 million and $1.3 million for the three and six months ended June 30, 2014, respectively, as compared to $0.6 million and $1.3 million for the three and six months ended June 30, 2013. Titan had purchases from these companies of approximately $4.1 million and $4.8 million for the three and six months ended June 30, 2014, respectively.

The Company has a 34.2% equity stake in Wheels India Limited, a company incorporated in India and listed on the National Stock Exchange in India. The Company had trade payables due to Wheels India of approximately $0.0 million and $0.3 million at June 30, 2014, and December 31, 2013, respectively.


23. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) consisted of the following (amounts in thousands):

 
Currency
Translation
Adjustments
 
Unrecognized
Losses and
Prior Service
Cost
 
 
 
Total
Balance at April 1, 2014
$
(36,678
)
 
$
(20,213
)
 
$
(56,891
)
Other comprehensive income (loss) before
 
 
 
 
 
reclassifications
4,449

 

 
4,449

Reclassification adjustments:
 

 
 

 
 

Amortization of unrecognized losses and prior
 
 
 
 
 
  service cost, net of tax of $(123)

 
28

 
28

Balance at June 30, 2014
$
(32,229
)
 
$
(20,185
)
 
$
(52,414
)
 
 
 
 
 
 
 
Currency
Translation
Adjustments
 
Unrecognized
Losses and
Prior Service
Cost
 
 
 
Total
Balance at January 1, 2014
$
(40,864
)
 
$
(20,930
)
 
$
(61,794
)
Other comprehensive income (loss) before
 
 
 
 
 
reclassifications
8,635

 

 
8,635

Reclassification adjustments:
 

 
 

 
 

Amortization of unrecognized losses and prior
 
 
 
 
 
  service cost, net of tax of $(506)

 
745

 
745

Balance at June 30, 2014
$
(32,229
)
 
$
(20,185
)
 
$
(52,414
)


19



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

24. SUBSIDIARY GUARANTOR FINANCIAL INFORMATION

The Company's 6.875% senior secured notes due 2020 and 5.625% convertible senior subordinated 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.

(Amounts in thousands)
Consolidating Condensed Statements of Operations
For the Three Months Ended June 30, 2014
 
Titan
 Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
244,664

 
$
279,067

 
$

 
$
523,731

Cost of sales
303

 
241,915

 
258,953

 

 
501,171

Gross profit (loss)
(303
)
 
2,749

 
20,114

 

 
22,560

Selling, general and administrative expenses
2,388

 
17,611

 
25,009

 

 
45,008

Research and development expenses
72

 
1,214

 
1,903

 

 
3,189

Royalty expense

 
1,926

 
1,904

 

 
3,830

Loss from operations
(2,763
)
 
(18,002
)
 
(8,702
)
 

 
(29,467
)
Interest expense
(8,255
)
 

 
(671
)
 

 
(8,926
)
Intercompany interest income (expense)
1,618

 

 
(1,618
)
 

 

Other income
1,192

 
103

 
5,040

 

 
6,335

Loss before income taxes
(8,208
)
 
(17,899
)
 
(5,951
)
 

 
(32,058
)
Benefit for income taxes
69

 
(6,437
)
 
(799
)
 

 
(7,167
)
Equity in earnings of subsidiaries
(16,614
)
 

 
(18,004
)
 
34,618

 

Net income (loss)
(24,891
)
 
(11,462
)
 
(23,156
)
 
34,618

 
(24,891
)
Net loss noncontrolling interests

 

 
(4,380
)
 

 
(4,380
)
Net income (loss) attributable to Titan
$
(24,891
)
 
$
(11,462
)
 
$
(18,776
)
 
$
34,618

 
$
(20,511
)
 


20



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

(Amounts in thousands)
Consolidating Condensed Statements of Operations
For the Three Months Ended June 30, 2013
 
Titan
 Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
323,482

 
$
269,809

 
$

 
$
593,291

Cost of sales
277

 
261,789

 
244,570

 

 
506,636

Gross profit (loss)
(277
)
 
61,693

 
25,239

 

 
86,655

Selling, general and administrative expenses
2,130

 
20,300

 
21,223

 

 
43,653

Research and development expenses
(28
)
 
1,400

 
1,429

 

 
2,801

Royalty expense

 
1,850

 
1,445

 

 
3,295

Income (loss) from operations
(2,379
)
 
38,143

 
1,142

 

 
36,906

Interest expense
(10,833
)
 

 
(2,236
)
 

 
(13,069
)
Gain on earthquake insurance recovery

 

 
22,451

 

 
22,451

Intercompany interest income (expense)
2,192

 

 
(2,192
)
 

 

Other income (expense)
904

 
2

 
(3,335
)
 

 
(2,429
)
Income (loss) before income taxes
(10,116
)
 
38,145

 
15,830

 

 
43,859

Provision for income taxes
6,491

 
13,637

 
875

 

 
21,003

Equity in earnings of subsidiaries
39,463

 

 
14,892

 
(54,355
)
 

Net income (loss)
22,856

 
24,508

 
29,847

 
(54,355
)
 
22,856

Net loss noncontrolling interests

 

 
(361
)
 

 
(361
)
Net income (loss) attributable to Titan
$
22,856

 
$
24,508

 
$
30,208

 
$
(54,355
)
 
$
23,217


(Amounts in thousands)
Consolidating Condensed Statements of Operations
For the Six Months Ended June 30, 2014
 
Titan
 Intl., Inc. (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
508,622

 
$
554,049

 
$

 
$
1,062,671

Cost of sales
513

 
470,154

 
514,894

 

 
985,561

Gross profit (loss)
(513
)
 
38,468

 
39,155

 

 
77,110

Selling, general and administrative expenses
4,032

 
36,601

 
51,210

 

 
91,843

Research and development expenses
72

 
3,367

 
3,460

 

 
6,899

Royalty expense

 
3,774

 
3,797

 

 
7,571

Loss from operations
(4,617
)
 
(5,274
)