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RESTATEMENT | 6 Months Ended
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Jun. 30, 2011
RESTATEMENT |
RESTATEMENT | 2. RESTATEMENT In the third quarter of 2008, the Company began manufacturing the first generation (Gen 1) of its super giant tires. In the fourth quarter of 2009, the Company ceased manufacturing Gen 1 tires due to the creation of the second generation (Gen 2) of super giant tires which began production in the first quarter of 2010. During the fourth quarter of 2010, the Company recorded a $5.1 million charge to reduce the remaining Gen 1 tire inventory to an estimated market value of $10.6 million. In October of 2011, the Company determined that the analysis performed in the fourth quarter of 2010 that created the $5.1 million adjustment was not reflective of all the facts and circumstances that existed at December 31, 2010. After reconsidering the facts and circumstances that existed at December 31, 2010, the Company determined that the estimated market value of the Gen 1 tires that remained as of December 31, 2010 was $0.7 million. Accordingly, the Company is restating its consolidated financial statements as of and for the year ended December 31, 2010 to reflect an additional charge of $9.8 million for its Gen 1 inventory. In addition, this Form 10-Q/A reflects the reversal of a related inventory decrease of $0.4 million which was previously recorded in the quarter ended June 30, 2011. The following table represents the impact of the restatement adjustments on the Company’s Consolidated Condensed Statement of Operations for the three and six months ended June 30, 2011 (amounts in thousands, except share and per share data):
|  | CONSOLIDATED CONDENSED STATEMENTS OF OPERATION (UNAUDITED) |
|  | Three months ended June 30, 2011 |  |  | Six months ended June 30, 2011 |
|  | Previously Reported |  |  | Restatement Adjustment |  |  | Restated |  |  | Previously Reported |  |  | Restatement Adjustment |  |  | Restated |
Net sales |  | $ | 404,447 |  |  | $ | 0 |  |  | $ | 404,447 |  |  | $ | 685,276 |  |  | $ | 0 |  |  | $ | 685,276 |
Cost of sales |  |  | 340,556 |  |  |  | (443 | ) |  |  | 340,113 |  |  |  | 565,113 |  |  |  | (443 | ) |  |  | 564,670 |
Gross profit |  |  | 63,891 |  |  |  | 443 |  |  |  | 64,334 |  |  |  | 120,163 |  |  |  | 443 |  |  |  | 120,606 |
Selling, general and administrative expenses |  |  | 16,573 |  |  |  | 0 |  |  |  | 16,573 |  |  |  | 41,866 |  |  |  | 0 |  |  |  | 41,866 |
Research and development expenses |  |  | 1,014 |  |  |  | 0 |  |  |  | 1,014 |  |  |  | 2,197 |  |  |  | 0 |  |  |  | 2,197 |
Royalty expense |  |  | 2,350 |  |  |  | 0 |  |  |  | 2,350 |  |  |  | 5,267 |  |  |  | 0 |  |  |  | 5,267 |
Income from operations |  |  | 43,954 |  |  |  | 443 |  |  |  | 44,397 |  |  |  | 70,833 |  |  |  | 443 |  |  |  | 71,276 |
Interest expense |  |  | (6,149 | ) |  |  | 0 |  |  |  | (6,149 | ) |  |  | (12,429 | ) |  |  | 0 |  |  |  | (12,429 | )
Noncash convertible debt conversion charge |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | (16,135 | ) |  |  | 0 |  |  |  | (16,135 | )
Other income |  |  | 2,270 |  |  |  | 0 |  |  |  | 2,270 |  |  |  | 2,463 |  |  |  | 0 |  |  |  | 2,463 |
Income before income taxes |  |  | 40,075 |  |  |  | 443 |  |  |  | 40,518 |  |  |  | 44,732 |  |  |  | 443 |  |  |  | 45,175 |
Income tax provision |  |  | 14,798 |  |  |  | 164 |  |  |  | 14,962 |  |  |  | 22,491 |  |  |  | 164 |  |  |  | 22,655 |
Net income |  |  | 25,277 |  |  |  | 279 |  |  |  | 25,556 |  |  |  | 22,241 |  |  |  | 279 |  |  |  | 22,520 |
Net (loss) attributable to noncontrolling interests |  |  | (8 | ) |  |  | 0 |  |  |  | (8 | ) |  |  | (8 | ) |  |  | 0 |  |  |  | (8 | )
Net income attributable to Titan |  | $ | 25,285 |  |  | $ | 279 |  |  | $ | 25,564 |  |  | $ | 22,249 |  |  | $ | 279 |  |  | $ | 22,528 |
Earnings per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | .60 |  |  | $ | .01 |  |  | $ | .61 |  |  | $ | .54 |  |  | $ | .01 |  |  | $ | .55 |
Diluted |  |  | .49 |  |  |  | .01 |  |  |  | .50 |  |  |  | .46 |  |  |  | .01 |  |  |  | .47 |
Average common shares and equivalents outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 41,981 |  |  |  | 41,981 |  |  |  | 41,981 |  |  |  | 41,250 |  |  |  | 41,250 |  |  |  | 41,250 |
Diluted |  |  | 53,394 |  |  |  | 53,394 |  |  |  | 53,394 |  |  |  | 53,229 |  |  |  | 53,229 |  |  |  | 53,229 |
Dividends declared per common share |  | $ | .005 |  |  |  |  |  |  | $ | .005 |  |  | $ | .010 |  |  |  |  |  |  | $ | .010 |
The following table represents the impact of the restatement adjustments on the Company’s Consolidated Condensed Balance Sheets (Unaudited) as of June 30, 2011 and December 31, 2010 (amounts in thousands):
|  | CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) |
|  | June 30, 2011 |  |  | December 31, 2010 |
Assets |  | Previously Reported |  |  | Restatement Adjustment |  |  | Restated |  |  | Previously Reported |  |  | Restatement Adjustment |  |  | Restated |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 114,162 |  |  | $ | 0 |  |  | $ | 114,162 |  |  | $ | 239,500 |  |  | $ | 0 |  |  | $ | 239,500 |
Accounts receivable |  |  | 243,478 |  |  |  | 0 |  |  |  | 243,478 |  |  |  | 89,004 |  |  |  | 0 |  |  |  | 89,004 |
Inventories |  |  | 183,763 |  |  |  | (9,396 | ) |  |  | 174,367 |  |  |  | 127,982 |  |  |  | (9,839 | ) |  |  | 118,143 |
Deferred income taxes |  |  | 13,102 |  |  |  | 3,085 |  |  |  | 16,187 |  |  |  | 12,791 |  |  |  | 3,249 |  |  |  | 16,040 |
Prepaid and other current assets |  |  | 29,671 |  |  |  | 0 |  |  |  | 29,671 |  |  |  | 18,663 |  |  |  | 0 |  |  |  | 18,663 |
Total current assets |  |  | 584,176 |  |  |  | (6,311 | ) |  |  | 577,865 |  |  |  | 487,940 |  |  |  | (6,590 | ) |  |  | 481,350 |
Property, plant and equipment, net |  |  | 353,546 |  |  |  | 0 |  |  |  | 353,546 |  |  |  | 248,054 |  |  |  | 0 |  |  |  | 248,054 |
Other assets |  |  | 133,970 |  |  |  | 0 |  |  |  | 133,970 |  |  |  | 51,476 |  |  |  | 0 |  |  |  | 51,476 |
Total assets |  | $ | 1,071,692 |  |  | $ | (6,311 | ) |  | $ | 1,065,381 |  |  | $ | 787,470 |  |  | $ | (6,590 | ) |  | $ | 780,880 |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term debt |  | $ | 10,330 |  |  | $ | 0 |  |  | $ | 10,330 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Accounts payable |  |  | 114,837 |  |  |  | 0 |  |  |  | 114,837 |  |  |  | 35,281 |  |  |  | 0 |  |  |  | 35,281 |
Other current liabilities |  |  | 102,352 |  |  |  | 0 |  |  |  | 102,352 |  |  |  | 57,072 |  |  |  | 0 |  |  |  | 57,072 |
Total current liabilities |  |  | 227,519 |  |  |  | 0 |  |  |  | 227,519 |  |  |  | 92,353 |  |  |  | 0 |  |  |  | 92,353 |
Long-term debt |  |  | 317,881 |  |  |  | 0 |  |  |  | 317,881 |  |  |  | 373,564 |  |  |  | 0 |  |  |  | 373,564 |
Deferred income taxes |  |  | 48,227 |  |  |  | (306 | ) |  |  | 47,921 |  |  |  | 1,970 |  |  |  | (306 | ) |  |  | 1,664 |
Other long-term liabilities |  |  | 79,364 |  |  |  | 0 |  |  |  | 79,364 |  |  |  | 41,268 |  |  |  | 0 |  |  |  | 41,268 |
Total liabilities |  |  | 672,991 |  |  |  | (306 | ) |  |  | 672,685 |  |  |  | 509,155 |  |  |  | (306 | ) |  |  | 508,849 |
Stockholders’ equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock |  |  | 37 |  |  |  | 0 |  |  |  | 37 |  |  |  | 30 |  |  |  | 0 |  |  |  | 30 |
Additional paid-in capital |  |  | 377,565 |  |  |  | 0 |  |  |  | 377,565 |  |  |  | 300,540 |  |  |  | 0 |  |  |  | 300,540 |
Retained earnings |  |  | 37,856 |  |  |  | (6,005 | ) |  |  | 31,851 |  |  |  | 16,028 |  |  |  | (6,284 | ) |  |  | 9,744 |
Treasury stock |  |  | (18,172 | ) |  |  | 0 |  |  |  | (18,172 | ) |  |  | (19,324 | ) |  |  | 0 |  |  |  | (19,324 | )
Treasury stock reserved for contractual obligations |  |  | (1,233 | ) |  |  | 0 |  |  |  | (1,233 | ) |  |  | (1,917 | ) |  |  | 0 |  |  |  | (1,917 | )
Accumulated other comprehensive income (loss) |  |  | 727 |  |  |  | 0 |  |  |  | 727 |  |  |  | (17,042 | ) |  |  | 0 |  |  |  | (17,042 | )
Total Titan stockholders equity |  |  | 396,780 |  |  |  | (6,005 | ) |  |  | 390,775 |  |  |  | 278,315 |  |  |  | (6,284 | ) |  |  | 272,031 |
Noncontrolling interests |  |  | 1,921 |  |  |  | 0 |  |  |  | 1,921 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total stockholders’ equity |  |  | 398,701 |  |  |  | (6,005 | ) |  |  | 392,696 |  |  |  | 278,315 |  |  |  | (6,284 | ) |  |  | 272,031 |
Total liabilities and stockholders’ equity |  | $ | 1,071,692 |  |  | $ | (6,311 | ) |  | $ | 1,065,381 |  |  | $ | 787,470 |  |  | $ | (6,590 | ) |  | $ | 780,880 |
The following table represents the impact of the restatement adjustments on the Company’s cash flows from operating activities for the six months ended June 30, 2011 (amounts in thousands):
|  | Six Months Ended June 30, 2011 |
|  | Previously Reported |  |  | Restatement Adjustment |  |  | Restated |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |
Net income |  | $ | 22,241 |  |  | $ | 279 |  |  | $ | 22,520 |
Adjustments to reconcile net income to net cash |  |  |  |  |  |  |  |  |  |  |  |
provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 21,146 |  |  |  | 0 |  |  |  | 21,146 |
Deferred income tax provision |  |  | 8,282 |  |  |  | 164 |  |  |  | 8,446 |
Noncash convertible debt conversion charge |  |  | 16,135 |  |  |  | 0 |  |  |  | 16,135 |
Stock-based compensation |  |  | 1,384 |  |  |  | 0 |  |  |  | 1,384 |
Issuance of treasury stock under 401(k) plan |  |  | 268 |  |  |  | 0 |  |  |  | 268 |
Gain on acquisition |  |  | (919 | ) |  |  | 0 |  |  |  | (919 | )
(Increase) decrease in assets: |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  |  | (152,495 | ) |  |  | 0 |  |  |  | (152,495 | )
Inventories |  |  | (34,525 | ) |  |  | (443 | ) |  |  | (34,968 | )
Prepaid and other current assets |  |  | (6,088 | ) |  |  | 0 |  |  |  | (6,088 | )
Other assets |  |  | (222 | ) |  |  | 0 |  |  |  | (222 | )
Increase (decrease) in liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  | 77,736 |  |  |  | 0 |  |  |  | 77,736 |
Other current liabilities |  |  | 19,269 |  |  |  | 0 |  |  |  | 19,269 |
Other liabilities |  |  | (2,844 | ) |  |  | 0 |  |  |  | (2,844 | )
Net cash used for operating activities |  | $ | (30,632 | ) |  | $ | 0 |  |  | $ | (30,632 | )
The restatement adjustments did not impact the total net cash flows from financing and investing activities in the Consolidated Statement of Cash Flows for the year ended December 31, 2010. Additionally, all amounts in notes to the Consolidated Condensed Financial Statements (Unaudited) affected by the restatements have been labeled as restated

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- Definition Tabular disclosure of prior period adjustments to previously issued financial statements including (1) the effect of the correction on each financial statement line item and any per-share amounts affected for each prior period presented (2) the cumulative effect of the change on retained earnings or other appropriate components of equity or net assets in the statement of financial position, as of the beginning of the earliest period presented, and (3) the effect of the prior period adjustments (both gross and net of applicable income tax) on the net income of each prior period presented in the entity's annual report for the year in which the adjustments are made. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -SubTopic 10 -Section 50 -Paragraph 8 -URI http://asc.fasb.org/extlink&oid=6801783&loc=d3e22658-107794 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6801783&loc=d3e22663-107794 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 9 -Paragraph 26 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 154 -Paragraph 26 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=6801783&loc=d3e22644-107794 + Details
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