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ACQUISITIONS
 6 Months Ended
Jun. 30, 2011
Notes to Financial Statements [Abstract]  
Business Combination Disclosure
2. ACQUISITIONS
 
Acquisition of AII Holdings, Inc.
On April 1, 2011, Titan purchased a 70% controlling interest in AII Holding, Inc. (AII) for $1.3 million of Titan stock and payment of $2.3 million of AII’s debt.  The fair value of the identified assets acquired less liabilities assumed exceeded the fair value of the consideration transferred and noncontrolling interest.  Therefore, a bargain purchase gain of $0.9 million was recorded on the transaction.  The Company continues to evaluate the preliminary purchase price allocation, primarily the value of certain deferred taxes and the bargain purchase gain, and may revise the purchase price allocation in future periods as these estimates are finalized.
 
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, subject to post-closing conditions and adjustments.  In addition, there were approximately $1.3 million of acquisition related costs recorded as selling, general and administrative costs during the six months ended June 30, 2011.  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.  Net sales and net income from the acquisition date included in the statement of operations was $92.3 million and $4.5 million, respectively.
 
The Company funded the acquisition with cash on hand.  The purchase price was allocated to the assets acquired and liabilities assumed based on their fair values.  Inventory was valued using the comparative sales method.  Real and personal property was valued using a combination of methodologies outlined by the Brazilian Association of Technical Standards.  The excess of the purchase price over the identifiable assets acquired and liabilities assumed was reflected as goodwill.  The goodwill was allocated to the agricultural segment.  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 preliminary purchase price allocation of the Latin American farm tire business consisted of the following
 (in thousands):
 
Cash
 $1,018 
Inventories
  14,562 
Prepaid & other current assets
  4,929 
Property, plant & equipment
  108,905 
Goodwill
  21,388 
Other assets
  39,263 
Other current liabilities
  (21,127)
Deferred income taxes
  (29,477)
Other noncurrent liabilities
  (40,823)
Net assets acquired
 $98,638 

The preliminary purchase price allocation includes $42.5 million for prepaid royalty.  The prepaid royalty is for a seven year period and was calculated using a 2% royalty discounted at a 10% rate.  The prepaid royalty and discount will be amortized over the seven year period of the agreement.  The current portion of the prepaid royalty was $3.9 million and is included in prepaid & other current assets.  The noncurrent portion of the prepaid royalty was $38.6 million and is included in other assets.

The preliminary purchase price allocation includes $53.9 million for supply agreement liability which was valued using the incremental income method.  The supply agreement liability was recorded as the supply agreements are for sales at below market prices.  The liability will be amortized with an offset to cost of sales over the three year life of the agreement.  The current portion of the supply agreement was $18.0 million and is included in other current liabilities.  The noncurrent portion of the supply agreement was $35.9 million and is included in other noncurrent liabilities.

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, 2010.  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.

Pro forma financial information for the three and six months ended June 30, 2011 and 2010, is as follows :
(in thousands, except per share data)
 
Three months ended
  
Six months ended
 
   
June 30,
  
June 30,
 
   
2011
  
2010
  
2011
  
2010
 
Net sales
 $404,447  $257,656  $713,676  $482,104 
Net income
  25,277   9,490   26,371   16,490 
Net income attributable to Titan
  25,285   9,490   26,379   16,490 
Basic earnings per share
 $.60  $.27  $.64  $.47 
Diluted earnings per share
  .49   .22   .54   .38 
 
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, 2010, nor is it necessarily indicative of Titan’s future consolidated results of operations or financial position.