RESTATEMENT

6 Months Ended

Jun. 30, 2011

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

- 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.

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