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INCOME TAXES | 12 Months Ended
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Dec. 31, 2012
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income (loss) before income taxes, consisted of the following (amounts in thousands):
| 2012 |  | 2011 |  | 2010
Domestic | $ | 167,008 |  |  | $ | 82,282 |  |  | $ | (9,148 | )
Foreign | 13,565 |  |  | 13,613 |  |  | (42 | )
| $ | 180,573 |  |  | $ | 95,895 |  |  | $ | (9,190 | )
The income tax provision (benefit) was as follows (amounts in thousands):
| 2012 |  | 2011 |  | 2010
Current |  |  |  |  |
Federal | $ | 47,616 |  |  | $ | 32,140 |  |  | $ | (853 | )
State | 13,537 |  |  | 3,271 |  |  | (331 | )
Foreign | 8,290 |  |  | 2,797 |  |  | — |
| 69,443 |  |  | 38,208 |  |  | (1,184 | )
Deferred |  |  |  |  |  |  |  |
Federal | 14,179 |  |  | (1,904 | ) |  | (2,531 | )
State | 1,235 |  |  | (357 | ) |  | 451 |
Foreign | 1,756 |  |  | 1,812 |  |  | — |
| 17,170 |  |  | (449 | ) |  | (2,080 | )
Income tax provision (benefit) | $ | 86,613 |  |  | $ | 37,759 |  |  | $ | (3,264 | )
The income tax provision differs from the amount of income tax determined by applying the statutory U.S. federal income tax rate to pre-tax income (loss) as a result of the following:
| 2012 |  | 2011 |  | 2010
Statutory U.S. federal tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Unrecognized tax positions | 3.7 |  |  | — |  |  | — |
Tax impact of foreign income | 6.4 |  |  | (0.2 | ) |  | (0.2 | )
State taxes, net | 2.7 |  |  | 1.9 |  |  | (0.7 | )
Domestic production exemption | (3.3 | ) |  | (3.9 | ) |  | — |
Debt conversion expense | — |  |  | 6.9 |  |  | — |
Section 162m limitation | 2.6 |  |  | — |  |  | — |
Write off of Titan Europe deferred tax asset | 2.1 |  |  | — |  |  | — |
Other, net | (1.2 | ) |  | (0.3 | ) |  | 1.4 |
Effective tax rate | 48.0 | % |  | 39.4 | % |  | 35.5 | %
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2012 and 2011, are as follows (amounts in thousands):
| 2012 |  | 2011
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 37,519 |  |  | $ | 815 |
Pension | 14,684 |  |  | 15,412 |
Unrealized loss on investments | — |  |  | 5,118 |
Inventory | 3,412 |  |  | 6,621 |
Warranty | 9,723 |  |  | 6,707 |
Employee benefits and related costs | 11,319 |  |  | 4,259 |
Allowance for bad debts | 3,335 |  |  | 3,147 |
Prepaid royalties | 7,053 |  |  | 1,642 |
Reserves, other | 3,988 |  |  | — |
Fixed assets | 8,418 |  |  | — |
Other | 14,370 |  |  | 6,425 |
Deferred tax assets | 113,821 |  |  | 50,146 |
Deferred tax liabilities: |  |  |  |  |
Fixed assets | (82,400 | ) |  | (62,062 | )
Intangible Assets | (6,225 | ) |  | — |
Other | (8,006 | ) |  | — |
Deferred tax liabilities | (96,631 | ) |  | (62,062 | )
Subtotal | 17,190 |  |  | (11,916 | )
Valuation allowance | (23,691 | ) |  | — |
Net deferred tax asset | $ | (6,501 | ) |  | $ | (11,916 | )
As of December 31, 2012 and 2011 certain tax loss carryforwards of $37.5 million and $0.8 million are available with $0.5 million expiring from 2013 through 2017 and $37.0 million expiring after 2017. A valuation allowance of $23.7 million and $0.0 million at December 31, 2012 and 2011 was established to offset the net operating loss carryforwards due to uncertainty of future income in the relevant taxing jurisdictions. The valuation allowance was set up as part of acquisition accounting. Income includes a $26.7 million gain formerly recorded to other comprehensive income related to the value of the investment in Titan Europe. A related income tax expense of $10.2 million was included in total tax expense. Further, since Titan Europe is now wholly owned and consolidated, the remaining deferred tax asset of $3.7 million relating to the book versus tax basis difference in the stock is written off in 2012 and included in income tax expense. At December 31, 2012, U.S. income taxes have not been provided on approximately $2.9 million of unremitted earnings of subsidiaries operating outside the U.S. These earnings, which are considered to be invested indefinitely, would become subject to income tax if they were remitted as dividends, were lent to the Company or a U.S. affiliate, or if the Company were to sell its stock in the subsidiaries. The amount of unrecognized deferred U.S. income tax liability on these unremitted earnings is insignificant. The Company has applied the provisions of ASC 740, “Income Taxes” related to unrecognized tax benefits. No adjustment was made to retained earnings in adopting these provisions in 2007. At December 31, 2012, 2011, and 2010, the unrecognized tax benefits were $14.3 million, $0.0 million, and $0.0 million respectively. As of December 31, 2012, $11.5 million of unrecognized tax benefits would affect income tax expense if the tax benefits were recognized. The Company recorded $4.6 million of potential exposures as part of acquisition accounting and the majority of the remaining increase in unrecognized tax benefits related to potential state tax exposures. Although management cannot predict with any degree of certainty the timing of ultimate resolution of matters under review by various taxing jurisdictions, it is unlikely that the Company’s gross unrecognized tax benefits balance will change significantly within the next twelve months. Titan has identified the United States, the State of Illinois, Italy, United Kingdom, and Brazil as “major” tax jurisdictions. The Company is subject to U.S. Federal tax examinations for years 2009 to 2012. Various state and foreign income tax returns are also subject to examination. Generally, tax years 2009 and forward remain open under state statutes of limitations and tax years 2007 and forward remain open under foreign statutes of limitations. A reconciliation of the total amounts of unrecognized tax benefits at December 31 were as follows (amounts in thousands):
| 2012 |  | 2011 |  | 2010
Balance at January 1 | — |  |  | — |  |  | — |
Increases to tax positions taken during the current year | 6,050 |  |  | — |  |  | — |
Increases to tax positions taken during the prior years | 5,822 |  |  | — |  |  | — |
Balance at December 31 | 11,872 |  |  | — |  |  | — |
The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense. The amount of interest and penalties related to unrecognized tax benefits recorded in income tax expense was $2.4 million, $0.0 million and $0.0 million at December 31, 2012, 2011 and 2010. The amount of accrued interest and penalties included in the unrecognized tax benefits at December 31, 2012, 2011 and 2010 was $2.4 million, $0.0 million, and $0.0 million, respectively.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -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 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -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 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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