**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549













**FORM
                10-K**





(Mark
      One)


x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      fiscal year ended December 31, 2005


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
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)





**2701
      Spruce Street, Quincy, IL 62301**


(Address
      of principal executive offices)





**(217)
      228-6011**


(Registrant’s
      telephone number, including area code)





**Securities
      registered pursuant to Section 12(b) of the Act:**





Title
                of each class
            Name
                of each exchange on which registeredCommon
                stock, no par value
            New
                York Stock Exchange (Symbol: TWI)





**Securities
      registered pursuant to Section 12(g) of the Act:** None





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      by
      Rule 405 of the Securities Act. Yes o No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes o No x





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 x No o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K.  x





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.


Large
      accelerated filer o    Accelerated
      filer x     Non-accelerated
      filer o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act). Yes o No x





The
      aggregate market value of the shares of common stock of the registrant held
      by
      non-affiliates was $217,653,292 based upon the closing price of the common
      stock
      on the New York Stock Exchange on June 30, 2005.





As
      of
      January 31, 2006, 19,614,464 shares of common stock of the registrant were
      outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





Part
      III
      incorporates information by reference from the registrant's definitive proxy
      statement for its annual meeting of stockholders to be held May 18,
      2006.











**TITAN
      INTERNATIONAL, INC.**


Index
      to
      Annual Report on Form 10-K





Part
                I.
            
            PageItem
                1.
            Business
            3-9Item
                1A.
            Risk
                Factors
            9Item
                1B.
            Unresolved
                Staff Comments
            9Item
                2.
            Properties
            10Item
                3.
            Legal
                Proceedings
            10Item
                4.
            Submission
                of Matters to a Vote of Security Holders.
            10Part
                II.Item
                5.
            Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            11Item
                6.
            Selected
                Financial Data
            12Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            13-30Item
                7A.
            Quantitative
                and Qualitative Disclosures about Market Risk
            30Item
                8.
            Financial
                Statements and Supplementary Data
            30Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            30Item
                9A.
            Controls
                and Procedures
            30Item
                9B.
            Other
                Information
            30Part
                III.Item
                10.
            Directors
                and Executive Officers of the Registrant
            31Item
                11.
            Executive
                Compensation
            31Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            32Item
                13.
            Certain
                Relationships and Related Transactions
            32Item
                14.
            Principal
                Accountant Fees and Services
            32Part
                IV.Item
                15.
            Exhibits
                and Financials Statement Schedules
            33Signatures
            34





2





**PART
      I**


**ITEM
      1 - BUSINESS**





**INTRODUCTION**


Titan
      International, Inc. and its subsidiaries (Titan or the Company) are leading
      manufacturers of wheels, tires and assemblies for off-highway vehicles used
      in
      the agricultural, earthmoving/construction and consumer markets. Titan’s
      earthmoving/construction market also includes products supplied to the U.S.
      government, while the consumer market includes products for all-terrain vehicles
      (ATVs) and recreational/utility trailer applications. Titan manufactures both
      wheels and tires for the majority of these market applications, allowing the
      Company to provide the value-added service of delivering complete wheel and
      tire
      assemblies. The Company offers a broad range of products that are manufactured
      in relatively short production runs to meet the specifications of original
      equipment manufacturers (OEMs) and/or the requirements of aftermarket
      customers.





As
      one of
      the few companies dedicated to the off-highway wheel and tire market, Titan’s
      engineering and manufacturing resources are focused on addressing the real-life
      concerns of the end-users of our products. Titan’s commitment to product
      innovation is demonstrated by the development of the LSW series of wheel and
      tire assemblies, which considerably enhances the performance of off-highway
      vehicles by pairing a larger diameter wheel with a shorter sidewall
      tire.





In
      2005,
      Titan’s agricultural market sales represented 66% of net sales, the
      earthmoving/construction market represented 28% and the consumer market
      represented 6% of net sales. For information concerning the revenues, certain
      expenses, income from operations and assets attributable to each of the segments
      in which the Company operates, see Note 29 to the consolidated financial
      statements of Titan, included in Item 8 herein.





**COMPETITIVE
      STRENGTHS**


Titan’s
      competitive strengths include the Company’s strong market position in the
      off-highway wheel and tire market and the Company’s long-term core customer
      relationships. These competitive strengths along with Titan’s dedication to the
      off-highway tire and wheel market continue to drive the Company
      forward.





**STRONG
      MARKET POSITION**


The
      Company has achieved a strong position in the domestic market for off-highway
      wheels, tires and assembly products. Titan’s ability to offer a broad range of
      different products has increased the Company’s visibility and has enhanced its
      ability to cross-sell products and consolidate market positions. Innovative
      marketing programs have strengthened Titan’s image in the marketplace, and the
      Company is reaching increasing numbers of customers in the aftermarket. Years
      of
      product design and engineering experience have enabled Titan to improve existing
      products and develop new ones that have been well received in the marketplace.
      In addition, Titan believes it has benefited from significant barriers to entry,
      such as the substantial investment necessary to replicate the Company’s
      manufacturing equipment and numerous tools, dies and molds.





**LONG-TERM
      CORE CUSTOMER RELATIONSHIPS**


The
      Company’s top customers, including global leaders in agricultural and
      construction equipment manufacturers, have been purchasing wheels from Titan
      or
      its predecessors for more than 50 years on average. Customers including Deere
      & Company, CNH Global N.V., Caterpillar Inc., AGCO Corporation, Kubota
      Corporation and the U.S. Government have helped sustain Titan’s leadership in
      wheel, tire and assembly innovation for new products.





**BUSINESS
      STRATEGY**


Titan’s
      business strategy is to increase its penetration of the aftermarket for tires
      and the private branding business, to continue to improve operating
      efficiencies, to maintain emphasis on new product development and to explore
      possible additional strategic acquisitions.





**INCREASE
      AFTERMARKET TIRE BUSINESS AND PRIVATE BRANDING BUSINESS**


The
      Company has concentrated on increasing its penetration of the tire aftermarket.
      The aftermarket offers higher profit margins and the tire aftermarket is larger
      and somewhat less cyclical than the OEM market. Additionally, Titan has
      developed a unique and efficient method of private branding the sidewall of
      its
      tires for sale through OEM retail distribution networks.





3





**IMPROVE
      OPERATING EFFICIENCIES**


The
      Company continually works to improve the operating efficiency of its assets
      and
      manufacturing facilities. Titan integrates each facility’s strength, often
      transferring equipment and business to the facilities that are best equipped
      to
      handle the work. This provides capacity to increase utilization and spread
      operating costs over a greater volume of products. Titan is also continuing
      a
      comprehensive program to refurbish, modernize and enhance the computer
      technology of their equipment. The Company has centralized and streamlined
      inventory controls. These efforts have led to improved management of order
      backlogs and have substantially improved Titan’s ability to respond to customer
      orders on a timely basis.





**IMPROVE
      DESIGN CAPACITY AND INCREASE NEW PRODUCT DEVELOPMENT**


Equipment
      manufacturers constantly face changing industry dynamics. Titan directs its
      business and marketing strategy to understand and address the needs of its
      customers and demonstrate the advantages of its products. In particular, the
      Company often collaborates with customers in the design of new and upgraded
      products. Titan will occasionally recommend modified products to its customers
      based on its own market information. The Company tests new designs and
      technologies and develops methods of manufacturing to improve product quality
      and performance. These value-added services enhance Titan’s relationships with
      its customers.





**EXPLORE
      ADDITIONAL STRATEGIC ACQUISITIONS**


The
      Company’s expertise in the manufacture of steel wheels has permitted it to take
      advantage of opportunities to acquire businesses in the United States that
      complement this product line, including companies engaged in the tire market
      and
      companies that have wheel and tire assembly capabilities. In the future, Titan
      may make additional strategic acquisitions of businesses that have an
      off-highway focus.





**ACQUISITION
      OF GOODYEAR’S NORTH AMERICAN FARM TIRE ASSETS**


On
      December 28, 2005, Titan Tire Corporation, a subsidiary of Titan International,
      Inc. acquired The Goodyear Tire & Rubber Company’s North American farm tire
      assets. Titan Tire purchased the assets of Goodyear’s North American farm tire
      business for approximately $100 million in cash proceeds. The assets purchased
      include Goodyear’s North American plant, property and equipment located in
      Freeport, Illinois, and Goodyear’s North American farm tire inventory. The
      Company funded the acquisition through an increase in its revolving credit
      facility.





**AGRICULTURAL
      MARKET**


Titan’s
      agricultural rims, wheels and tires are manufactured for use on various
      agricultural and forestry equipment, including tractors, combines, skidders,
      plows, planters and irrigation equipment, and are sold directly to OEMs,
      independent distributors, equipment dealers and through Titan’s own distribution
      centers. The wheels and rims range in diameter from 9” to 54” with the 54”
diameter being the largest agricultural wheel manufactured in North America.
      Basic configurations are combined with distinct variations (such as different
      centers and a wide range of material thickness) allowing the Company to offer
      a
      broad line of product models to meet customer specifications. Titan’s
      agricultural tires range from 8” to 85” in diameter and from 4.8” to 44” in
      width. The Company offers the added value of delivering a complete wheel and
      tire assembly to customers. Aftermarket tires are marketed through a network
      of
      independent distributors, equipment dealers and Titan’s own distribution
      centers.





**EARTHMOVING/CONSTRUCTION
      MARKET**


The
      Company manufactures rims and wheels for various types of earthmoving, mining,
      military and construction equipment, including skid steers, aerial lifts,
      cranes, graders and levelers, scrapers, self-propelled shovel loaders, load
      transporters, haul trucks and backhoe loaders. Titan produces various wheels,
      tires and components for the United States government, primarily for military
      vehicles such as trucks, trailers, tanks and personnel carriers. The Company
      provides customers with a broad range of earthmoving/construction wheels ranging
      in diameter from 20” to 63”, in width from 8” to 60” and in weight from 125
      pounds to 7,000 pounds. The 63” diameter wheel is the largest manufactured in
      North America for the earthmoving/construction market. The majority of the
      earthmoving/construction wheels produced by Titan are sold directly to OEMs.
      In
      addition, Titan produces a range of tires for the earthmoving/construction
      market. The Company offers the added value of wheel and tire assembly for
      certain applications in the earthmoving/construction market.





4





**CONSUMER
      MARKET**


Titan
      builds a variety of products for all-terrain vehicles (ATV), turf, golf and
      trailer applications. Consumer wheels and rims range from 8” to 16” in diameter.
      Likewise, Titan produces a variety of tires for the consumer market. ATV tires
      using the new stripwinding manufacturing process have been introduced to the
      marketplace. For the domestic boat, recreational and utility trailers markets,
      the Company provides wheels and tires, and assembles brakes, actuators and
      components. The Company also offers the value-added service of a wheel and
      tire
      system for the consumer market.





**MARKET
      CONDITIONS OUTLOOK**


The
      Company’s sales were stable in 2005 when compared to the 2004 sales excluding
      Titan Europe, which was divested in April 2004. Titan’s agricultural sales in
      2006 are expected to be significantly higher with the December 2005 acquisition
      of Goodyear’s North American farm tire assets. However, the overall agricultural
      market is expected to decline 5% to 10% in 2006 as a result of higher fuel
      and
      fertilizer costs. The earthmoving/construction market is anticipated to maintain
      current sales levels in 2006 as a result of strong energy and mining markets
      and
      continued high levels of construction spending. The performance of the consumer
      market, Titan’s smallest market, is largely tied to recreational spending habits
      and sales in this market are expected to remain steady in 2006.





**OPERATIONS**


Titan’s
      operations include manufacturing wheels, manufacturing tires, and combining
      these wheels and tires into assemblies for use in the agricultural,
      earthmoving/construction and consumer markets. These operations entail many
      manufacturing processes in order to complete the finished products.





**WHEEL
      MANUFACTURING PROCESS**


Most
      agricultural wheels are produced using a rim and a center disc. A rim is
      produced by first cutting large steel sheets to required width and length
      specifications. These steel sections are rolled and welded to form a circular
      rim, which is flared and formed in the rollform operation. The majority of
      discs
      are manufactured using presses that both blank and form the center to
      specifications in multiple stage operations. The Company e-coats wheels using
      a
      multi-step process prior to the final paint top coating.





Large
      earthmoving/construction steel wheels are manufactured from hot and cold-rolled
      steel sections. Hot-rolled sections are generally used to increase cross section
      thickness in high stress areas of large diameter wheels. A special cold forming
      process for certain wheels is used to increase cross section thickness while
      reducing the number of wheel components. Rims are built from a series of hoops
      that are welded together to form a rim base. The complete rim base is made
      from
      either three or five separate parts that lock together after the rubber tire
      has
      been fitted to the wheel and inflated.





For
      most
      consumer market wheels, the Company manufactures rims and center discs from
      steel sheets. Rims are rolled and welded, and discs are stamped and formed
      from
      the sheets. The manufacturing process then entails welding the rims to the
      centers and painting the assembled product.





**TIRE
      MANUFACTURING PROCESS**


The
      first
      stage in tire production is the mixing of rubber, carbon black and chemicals
      to
      form various rubber compounds. These rubber compounds are then extruded and
      processed with textile or steel materials to make specific components. These
      components - beads (wire bundles that anchor the tire with the wheel), plies
      (layers of fabric that give the tire strength), belts (fabric or steel fabric
      wrapped under the tread in some tires), tread and sidewall - are then assembled
      into an uncured tire. The uncured tire is placed into a press that molds and
      vulcanizes the carcass under set time, temperature and pressure into a finished
      tire.





**WHEEL
      AND TIRE ASSEMBLIES**


The
      Company’s position as a manufacturer of both wheels and tires allows Titan to
      mount and deliver one of the largest selections of off-highway assemblies in
      North America. Titan offers this value-added service of one-stop shopping for
      wheel and tire assemblies for the agricultural, earthmoving/construction and
      consumer markets. Customer orders are entered into the Company’s system either
      through electronic data interchange or manually. The appropriate wheel-tire
      assembly delivery schedule is formulated based on each customer’s requirements
      and products are received by the customer on a just-in-time basis.





5





**QUALITY
      CONTROL**


The
      Company is ISO 9001 certified at all four main manufacturing facilities located
      in Des Moines, IA; Freeport, IL; Quincy, IL; and Saltville, VA. The ISO 9001
      series is a set of related and internationally recognized standards of
      management and quality assurance. The standards specify guidelines for
      establishing, documenting and maintaining a system to ensure quality. The ISO
      9001 certifications are a testament to Titan’s dedication to providing quality
      products for its customers.





**RAW
      MATERIALS**


Steel
      and
      rubber are the primary raw materials used by the Company in all segments. To
      ensure a consistent steel supply, Titan purchases raw steel from key steel
      mills
      and maintains relationships with steel processors for steel preparation. The
      Company is not dependent on any single producer for its steel supply. Rubber
      and
      other raw materials for tire manufacture represent some of the Company’s largest
      commodity expenses. Titan buys rubber in markets where there are several sources
      of supply. In addition to the development of key domestic suppliers, the
      Company’s strategic procurement plan includes international steel and rubber
      suppliers to assure competitive price and quality in the global marketplace.
      As
      is customary in the industry, the Company does not have long-term contracts
      for
      the purchase of steel or rubber and, therefore, purchases are subject to price
      fluctuations.





**CAPITAL
      EXPENDITURES**


Capital
      expenditures for 2005, 2004 and 2003 were $6.8 million, $4.3 million and $14.6
      million, respectively. Capital expenditures in 2005 were used primarily for
      updating manufacturing equipment, expanding manufacturing capacity and for
      further automation at the Company’s facilities. Capital expenditures for 2006
      are forecasted to be approximately $16 million to $18 million and will be used
      to enhance the Company’s existing facilities and manufacturing
      capabilities.





**PATENTS
      AND TRADEMARKS**


The
      Company owns various patents and trademarks and continues to apply for patent
      protection for new products. While patents are considered significant to the
      operations of the business, at this time Titan does not consider any one of
      them
      to be of such importance that the patent’s expiration or invalidity could
      materially affect the Company’s business. However, due to the difficult nature
      of predicting the interpretation of patent laws, the Company cannot anticipate
      or predict the material adverse effect on its operations, cash flows or
      financial condition as a result of associated liabilities created under such
      patent interpretations.





**MARKETING
      AND DISTRIBUTION**


The
      Company employs an internal sales force and utilizes several manufacturing
      representative firms for sales in North America. Sales representatives are
      primarily organized within geographical regions.





Titan
      distributes wheels and tires directly to OEMs. The distribution of aftermarket
      tires occurs primarily through a network of independent and OEM affiliated
      dealers. The Company distributes wheel and tire assemblies directly to OEMs
      and
      aftermarket customers through its own distribution network consisting of seven
      facilities throughout the United States.





**SEASONALITY**


Agricultural
      equipment sales are seasonal by nature. Farmers generally order equipment to
      be
      delivered before the growing season. Shipments to OEMs usually peak during
      the
      Company’s first and second quarters for the spring planting period.
      Earthmoving/construction and consumer markets also tend to experience higher
      demand in the first and second quarters historically. However, these markets
      are
      affected not by a planting season but by mining, building and economic
      conditions.





**RESEARCH,
      DEVELOPMENT AND ENGINEERING**


The
      Company’s research, development and engineering staffs test original designs and
      technologies and develop new manufacturing methods to improve product
      performance. These services enhance the Company’s relationships with customers.
      The Company has spent $0.8 million, $1.9 million and $2.7 million on research
      and development for the years ended December 31, 2005, 2004 and 2003,
      respectively. These costs were primarily incurred in developing the LSW series
      of wheels and tires, which considerably enhances the performance of off-highway
      vehicles. The ongoing cost of research and development for the LSW has declined,
      although Titan continues to introduce new LSW wheel and tire assemblies for
      the
      agricultural, earthmoving/construction and consumer markets.





6





LSW
      wheel
      and tire assemblies reduce bounce, power hop, road lope and heat build-up,
      and
      provide more stability and safety for operators, which in turn may lead to
      greater productivity. The key to the success of the LSW is an increase in wheel
      diameter while maintaining the original outside tire diameter. This is
      accomplished by lowering the sidewall (LSW is an acronym for low sidewall)
      and
      increasing its strength. Maintaining the original outside diameter of the tire
      allows the LSW to improve the performance of agricultural,
      earthmoving/construction and consumer equipment without further
      modification.





**CUSTOMERS**


The
      Company’s 10 largest customers accounted for approximately 55% of net sales for
      the year ended December 31, 2005, compared to 57% for the year ended December
      31, 2004. Net sales to Deere & Company in Titan’s agricultural,
      earthmoving/construction and consumer markets combined represented 20% of the
      Company’s consolidated revenues for the year ended December 31, 2005, and 22%
      for the year ended 2004. Net sales to CNH Global N.V. in Titan’s three markets
      represented 11% of the Company’s consolidated revenues for both of the years
      ended December 31, 2005 and 2004. No other customer accounted for more than
      10%
      of the Company’s net sales in 2005 or 2004. Management believes the Company is
      not totally dependent on any single customer, however, certain products are
      dependent on a few customers. While the loss of any substantial customer could
      impact the Company’s business, the Company believes that its diverse product mix
      and customer base minimizes a longer-term impact caused by any such
      loss.





**ORDER
      BACKLOG**


As
      of
      January 31, 2006, Titan estimates $122 million in firm orders compared to $118
      million at January 31, 2005, for the Company’s U.S. operations. Orders are
      considered firm if the customer would be obligated to accept the product if
      manufactured and delivered pursuant to the terms of such orders. The Company
      believes that the majority of the current order backlog will be filled during
      the present year.





**EMPLOYEES**


At
      December 31, 2005, the Company employed approximately 1,800 people in the United
      States. Approximately 27% of the Company’s employees in the United States were
      covered by a collective bargaining agreement. In December 2005, the workers
      at
      the Des Moines facility ratified a labor extension through November 2010. The
      Natchez facility is covered by a second collective bargaining agreement to
      expire in December of 2006; however, this facility was idled in 2001 and
      currently has no employees. In January of 2006, the Company gained approximately
      800 employees at the Freeport facility, which was a part of the Goodyear North
      American farm tire acquisition. The workers at the Freeport facility ratified
      a
      new labor agreement with a November 2010 expiration date. The Company believes
      employee relations are generally good.





**INTERNATIONAL
      OPERATIONS**


On
      April
      7, 2004, Titan Luxembourg Sarl, a wholly-owned European subsidiary of the
      Company, sold 70% of the common stock of Titan Europe to the public on the
      AIM
      market in London. Titan Luxembourg was the largest single stockholder in Titan
      Europe Plc, retaining a 30% interest on the transaction date. On December 30,
      2005, Titan Europe Plc issued additional shares of stock for an acquisition.
      As
      a result of these additional shares, the Company’s interest in Titan Europe Plc
      was diluted and decreased from 29.3% at December 31, 2004, to a 15.4% ownership
      position at December 30, 2005. With the decreased ownership percentage,
      effective December 30, 2005, the Company will no longer use the equity method
      to
      account for its interest in Titan Europe Plc.





In
      accordance with Statement of Financial Accounting Standards (SFAS) No. 115,
      the
      Company will record the Titan Europe Plc investment as an available-for-sale
      security and report the investment at fair value, with unrealized gains and
      losses excluded from earnings and reported in a separate component of
      shareholders’ equity. The fair value of the Company’s investment in Titan Europe
      Plc was $48.5 million at December 31, 2005. The carrying value of Titan Europe
      Plc was $30.0 million at December 31, 2004.





For
      the
      year ended December 31, 2004, the Company generated $49.4 million, or
      approximately 10% percent, of its net sales from foreign operations. All of
      these sales were recorded in the first quarter, prior to the Titan Europe sale
      transaction. For financial information regarding international operations,
      see
      Note 29 to the consolidated financial statements of Titan International, Inc.,
      included in Item 8 herein.





7





**EXPORT
      SALES**


The
      Company had total aggregate export sales of approximately $39.0 million, $56.2
      million and $94.5 million, for the years ended December 31, 2005, 2004 and
      2003,
      respectively. The significant reduction in 2005 and 2004 export sales primarily
      resulted from the sale of a majority interest in Titan Europe.





Exports
      to foreign markets are subject to a number of special risks, including but
      not
      limited to risks with respect to currency exchange rates, economic and political
      destabilization, other disruption of markets and restrictive actions by foreign
      governments (such as restrictions on transfer of funds, export duties and quotas
      and foreign customs). Other risks include changes in foreign laws regarding
      trade and investment, difficulties in obtaining distribution and support,
      nationalization, reforms of laws and policies of the United States affecting
      trade, foreign investment and loans and foreign tax laws. There can be no
      assurance that one, or a combination, of these factors will not have a material
      adverse effect on the Company’s ability to increase or maintain its export
      sales.





The
      Company purchases a portion of its raw materials from foreign suppliers. The
      production costs, profit margins and competitive position of the Company are
      affected by the strength of the currencies in countries where Titan purchases
      goods, relative to the strength of the currencies in countries where the
      products are sold. The Company’s results of operations, cash flows and financial
      position may be affected by fluctuations in foreign currencies.





**ENVIRONMENTAL
      COMPLIANCE**


In
      the
      ordinary course of business, like other industrial companies, Titan is subject
      to extensive and evolving federal, state and local environmental laws and
      regulations, and has made provisions for the estimated financial impact of
      environmental cleanup. The Company’s policy is to accrue environmental
      cleanup-related costs of a non-capital nature when those costs are believed
      to
      be probable and can be reasonably estimated. Expenditures that extend the life
      of the related property, or mitigate or prevent future environmental
      contamination, are capitalized. The Company does not currently anticipate any
      material capital expenditures for environmental control facilities. The
      quantification of environmental exposures requires an assessment of many
      factors, including changing laws and regulations, advances in environmental
      technologies, the quality of information available related to specific sites,
      the assessment stage of the site investigation, preliminary findings and the
      length of time involved in remediation or settlement. Due to the difficult
      nature of predicting future environmental costs, the Company cannot anticipate
      or predict the material adverse effect on its operations, cash flows or
      financial condition as a result of efforts to comply with, or its liabilities
      under, environmental laws.





**COMPETITION**


The
      Company competes with several domestic and international companies, some of
      which are larger and have greater financial and marketing resources than Titan.
      The Company believes it is a primary source of steel wheels and rims to the
      majority of its North American customers. Major competitors in the off-highway
      wheel market include GKN Wheels, Ltd., Topy Industries, Ltd., Carlisle Companies
      Incorporated and certain other foreign competitors. Significant competitors
      in
      the off-highway tire market include Bridgestone/Firestone, Michelin, Carlisle
      Companies Incorporated and certain other foreign competitors.





The
      Company competes primarily on the basis of price, quality, customer service,
      design capability and delivery time. The Company’s ability to compete with
      international competitors may be adversely affected by currency fluctuations.
      In
      addition, certain of the Company’s OEM customers could, under individual
      circumstances, elect to manufacture the Company’s products to meet their
      requirements or to otherwise compete with the Company. There can be no assurance
      that the Company will not be adversely affected by increased competition in
      the
      markets in which it operates, or that competitors will not develop products
      that
      are more effective, less expensive or otherwise render certain of Titan’s
      products less competitive. From time to time, certain of the Company’s
      competitors have reduced their prices in particular product categories, which
      has prompted Titan to reduce prices as well. There can be no assurance that
      competitors of the Company will not further reduce prices in the future or
      that
      any such reductions would not have a material adverse effect on the
      Company.





8





**AVAILABLE
      INFORMATION**


The
      Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current
      reports on Form 8-K, and any amendments to those reports are made available,
      without charge, through the Company’s website located at www.titan-intl.com as soon
      as reasonably practicable after they are filed with the Securities and Exchange
      Commission (SEC). The SEC maintains an Internet site that contains reports,
      proxy and information statements, and other information regarding issuers that
      file electronically with the SEC at www.sec.gov website.
      The following documents are also posted on the Company’s website:





Audit
      Committee Charter


Compensation
      Committee Charter


Nominating/Corporate
      Governance Committee Charter


Business
      Conduct Policy





Printed
      copies of these documents are available, without charge, by writing to:
      Secretary of Titan International, Inc., 2701 Spruce Street, Quincy, IL
      62301.





**NEW
      YORK STOCK EXCHANGE CERTIFICATION**


The
      Company submitted to the New York Stock Exchange during fiscal 2005 the Annual
      CEO Certification required by Section 303A.12(a) of the New York Stock Exchange
      Listed Company Manual.





**ITEM
      1A - RISK FACTORS**





The
      Company is subject to various risks and uncertainties relating to or arising
      out
      of the nature of its business and general business, economic, financing, legal
      and other factors or conditions that may affect the Company. Realization of
      any
      of the following risks could have a material adverse effect on Titan’s business,
      financial condition, cash flows and results of operations.





·
            The
                Company operates in cyclical industries and, accordingly, its business
                is
                subject to the numerous and continuing changes in the
                economy.





·
            The
                Company’s debt may limit Titan’s financial and operating
                flexibility.





·
            The
                Company has incurred, and may incur in the future, net
                losses.





·
            The
                Company is exposed to price fluctuations of key
                commodities.





·
            The
                Company relies on a limited number of
                suppliers.





·
            The
                Company’s revenues are seasonal due to Titan’s dependence on agricultural,
                construction and recreational industries, which are
                seasonal.





·
            The
                Company may be adversely affected by changes in government regulations
                and
                policies.





·
            The
                Company is subject to new corporate governance requirements, and
                costs
                related to compliance with, or failure to comply with, existing and
                future
                requirements could adversely affect Titan’s
                business.





·
            The
                Company’s customer base is relatively
                concentrated.





·
            The
                Company faces substantial competition from international and domestic
                companies.





·
            The
                Company’s business could be negatively impacted if Titan fails to maintain
                satisfactory labor relations,





·
            Unfavorable
                outcomes of legal proceedings could adversely affect the Company’s
                financial condition and results of
                operations.





**ITEM
      1B - UNRESOLVED STAFF COMMENTS**





None.





9





**ITEM
      2 - PROPERTIES**





The
      Company’s properties are detailed by the location, size and focus of each
      facility as provided in the table below:





Approximate
                square footageLocation
            
            Owned
            
            Leased
            
            Use
            
            SegmentBrownsville,
                TX
            
            
            993,000
            
            
            
            
            
            Manufacturing
            
            
            Idled
            (a)Cartersville,
                GA
            
            
            
            
            
            169,000
            
            
            Distribution
            
            
            All
                segmentsDes
                Moines, IA
            
            
            2,207,000
            
            
            
            
            
            Manufacturing,
                distribution
            
            
            All
                segmentsDublin,
                GA
            
            
            20,000
            
            
            
            
            
            Distribution
            
            
            All
                segmentsElko,
                NV
            
            
            
            
            
            4,000
            
            
            Distribution
            
            
            Earthmoving/ConstructionFreeport,
                IL
            
            
            1,202,000
            
            
            211,000
            
            
            Manufacturing,
                distribution
            
            
            All
                segmentsGreenwood,
                SC
            
            
            110,000
            
            
            
            
            
            Manufacturing
            
            
            Idled
            (a)Natchez,
                MS
            
            
            
            
            
            1,203,000
            
            
            Manufacturing
            
            
            Idled
            (a)Quincy,
                IL
            
            
            1,134,000
            
            
            
            
            
            Manufacturing,
                distribution
            
            
            All
                segmentsSaltville,
                VA
            
            
            14,000
            
            
            245,000
            
            
            Manufacturing,
                distribution
            
            
            Earthmoving/ConstructionWalcott,
                IA
            
            
            378,000
            
            
            
            
            
            Manufacturing
            
            
            Idled
            (a)





(a)
            The
                Company’s facilities in Brownsville, Texas, and Natchez, Mississippi, are
                currently not in operation. The Company has listed the majority of
                the
                machinery and equipment located at the Brownsville and Natchez facilities
                as available for sale. The Company’s facilities in Greenwood, South
                Carolina and Walcott, Iowa, are not in operation. The Company has
                listed
                the land and buildings at the Greenwood site as available for sale
                and has
                a contract for sale on the Walcott building. The Brownsville, Greenwood
                and Natchez facilities are currently being used for
                storage.





The
      Company considers each of its facilities to be in good operating condition
      and
      adequate for present use. Management believes that the Company has sufficient
      capacity to meet current market demand with the active facilities. The Company
      has no current plans to reopen the idled facilities.








**ITEM
      3 - LEGAL PROCEEDINGS**





The
      State
      Court of California allowed the disbursement of the $24.5 million of restricted
      cash funds held in the Vehicular Technologies case in the fourth quarter of
      2005. Titan recognized an expense accrual for the judgment of approximately
      $15.2 million. The Company received $4.3 million of the cash funds and is still
      awaiting the calculation of interest earned on the funds along with the
      associated receipt of interest to determine the amounts to be
      recorded.





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 affect on the financial condition or
      results of operations of the Company. However, due to the difficult nature
      of
      predicting future legal claims, the Company cannot anticipate or predict the
      material adverse effect on its operations, cash flows or financial condition
      as
      a result of efforts to comply with or its liabilities pertaining to legal
      judgments.








**ITEM
      4 - SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS**





No
      matters were submitted to the vote of security holders during the fourth quarter
      of 2005.





10





**PART
      II**





**ITEM
      5 - MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
      ISSUER PURCHASE OF EQUITY SECURITIES**





The
      Company’s common stock is traded on the New York Stock Exchange (NYSE) under the
      symbol TWI. On January 31, 2006, there were approximately 900 holders of record
      of Titan common stock and an estimated 2,600 beneficial stockholders. The
      following table sets forth the high and low sales prices per share of common
      stock as reported on the NYSE, as well as information concerning per share
      dividends declared for the periods indicated.





**High**
            
            **Low**
            
            **Dividends**
              **Declared****2005**First
                quarter
            
            $
            15.45
            
            $
            12.30
            
            $
            0.005Second
                quarter
            
            
            15.85
            
            
            13.12
            
            
            0.005Third
                quarter
            
            
            14.58
            
            
            12.64
            
            
            0.005Fourth
                quarter
            
            
            18.17
            
            
            13.15
            
            
            0.005**2004**First
                quarter
            
            $
            6.38
            
            $
            3.04
            
            $
            0.005Second
                quarter
            
            
            10.80
            
            
            5.23
            
            
            0.005Third
                quarter
            
            
            12.30
            
            
            9.15
            
            
            0.005Fourth
                quarter
            
            
            15.70
            
            
            9.20
            
            
            0.005











11





**ITEM
      6 - SELECTED FINANCIAL DATA**





The
      selected financial data presented below, as of and for the years ended December
      31, 2005, 2004, 2003, 2002, and 2001, are derived from the Company’s
      consolidated financial statements, as audited by PricewaterhouseCoopers LLP,
      an
      independent registered public accounting firm, and should be read in conjunction
      with the Company’s audited consolidated financial statements and notes
      thereto.






(All
        amounts in thousands, except per share data)
 **Year
                  Ended December 31,****2005**
              
              
              **2004**
              
              
              **2003**
              
              
              **2002**
              
              
              **2001**Net
                  sales
              
              $
              470,133
              
              $
              510,571
              
              $
              491,672
              
              $
              462,820
              
              $
              457,475Gross
                  profit
              
              
              64,210
              
              
              79,500
              
              
              29,703
              
              
              29,741
              
              
              18,664Income
                  (loss) from operations
              
              
              11,999
              
              
              33,322
              
              
              (16,220
              )
              
              (14,086
              )
              
              (33,465
              )(Loss)
                  income before income taxes
              
              
              (2,885
              )
              
              15,215
              
              
              (33,668
              )
              
              (44,293
              )
              
              (46,386
              )Net
                  income (loss)
              
              
              11,042
              
              
              11,107
              
              
              (36,657
              )
              
              (35,877
              )
              
              (34,789
              )Net
                  income (loss) per share - basic
              
              
              .61
              
              
              .62
              
              
              (1.75
              )
              
              (1.73
              )
              
              (1.68
              )Net
                  income (loss) per share - diluted
              
              
              .60
              
              
              .61
              
              
              (1.75
              )
              
              (1.73
              )
              
              (1.68
              )Dividends
                  declared per common share
              
              
              .02
              
              
              .02
              
              
              .02
              
              
              .02
              
              
              .03
 
 **As
                  of December 31,**(All
                  amounts in thousands)**2005**
              
              
              **2004**
              
              
              **2003**
              
              
              **2002**
              
              
              **2001**Working
                  capital
              
              $
              157,984
              
              $
              114,898(a
              )
              $
              183,971
              
              $
              170,263
              
              $
              180,684Current
                  assets
              
              
              206,167
              
              
              154,668(a
              )
              
              286,946
              
              
              254,569
              
              
              262,723Total
                  assets
              
              
              440,756
              
              
              354,166(a
              )
              
              523,084
              
              
              531,999
              
              
              568,954Long-term
                  debt(b)
              
              
              190,464
              
              
              169,688(a
              )
              
              248,397
              
              
              249,119
              
              
              256,622Stockholders’
                  equity
              
              
              167,813
              
              
              106,881(a
              )
              
              111,956
              
              
              144,027
              
              
              185,907(a)Amounts
                  were affected by the April 2004 sale of a majority interest in
                  Titan
                  Europe, which is no longer consolidated. See Note 4 to the consolidated
                  financial statements.
                
                (b)Excludes
                  amounts due within one year and classified as a current
                  liability.







12





**ITEM
      7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


Management’s
      discussion and analysis of financial condition and results of operations
      (MD&A) is designed to provide readers of these financial statements with a
      narrative from the perspective of the management of Titan International, Inc.
      (Titan or the Company) on Titan’s financial condition, results of operations,
      liquidity and other factors which may affect the Company’s future
      results.





**FORWARD-LOOKING
      STATEMENTS**


This
      Form
      10-K contains forward-looking statements, including statements regarding, among
      other items, (i) anticipated trends in the Company’s business, (ii) future
      expenditures for capital projects, (iii) the Company’s ability to continue to
      control costs and maintain quality, (iv) ability to meet financial covenants
      and
      conditions of loan agreements, (v) the Company’s business strategies, including
      its intention to introduce new products, (vi) expectations concerning the
      performance and commercial success of the Company’s existing and new products
      and (vii) the Company’s intention to consider and pursue acquisitions and
      divestitures. Readers of this Form 10-K should understand that these
      forward-looking statements are based on the Company’s expectations and are
      subject to a number of risks and uncertainties, certain of which are beyond
      the
      Company’s control.





Actual
      results could differ materially from these forward-looking statements as a
      result of certain factors, including, (i) changes in the Company’s end-user
      markets as a result of world economic or regulatory influences, (ii)
      fluctuations in currency translations, (iii) changes in the competitive
      marketplace, including new products and pricing changes by the Company’s
      competitors, (iv) availability and price of raw materials, (v) levels of
      operating efficiencies, (vi) actions of domestic and foreign governments, (vii)
      results of investments, and (viii) ability to secure financing at reasonable
      terms. Any changes in such factors could lead to significantly different
      results. The Company undertakes no obligation to publicly update or revise
      any
      forward-looking statements, whether as a result of new information, future
      events or otherwise. In light of these risks and uncertainties, there can be
      no
      assurance that the forward-looking information contained in this document will
      in fact transpire.





**OVERVIEW**


Titan
      International, Inc. and its subsidiaries are leading manufacturers of wheels,
      tires and assemblies for off-highway vehicles used in the agricultural,
      earthmoving/construction and consumer markets. Titan’s earthmoving/construction
      market also includes products supplied to the U.S. government, while the
      consumer market includes products for all-terrain vehicles (ATVs) and
      recreational/utility trailer applications. Titan manufactures both wheels and
      tires for the majority of these market applications, allowing the Company to
      provide the value-added service of delivering complete wheel and tire
      assemblies. The Company offers a broad range of products that are manufactured
      in relatively short production runs to meet the specifications of original
      equipment manufacturers (OEMs) and/or the requirements of aftermarket
      customers.





The
      Company’s major OEM customers include large manufacturers of off-highway
      equipment such as Deere & Company, CNH Global N.V., Caterpillar Inc., AGCO
      Corporation, and Kubota Corporation, in addition to many other off-highway
      equipment manufacturers. The Company distributes products to OEMs, independent
      and OEM- affiliated dealers, and through a network of distribution
      facilities.





The
      Company recorded sales of $470.1 million in 2005, down 7.9% from the $510.6
      million recorded in 2004. Pro forma sales excluding those of Titan Europe,
      which
      was sold in April 2004, were $470.1 million in 2005, up 2.0% from the $461.1
      million of pro forma sales in 2004. The Company’s sales were relatively stable
      when compared to 2004 excluding Titan Europe’s sales.





Titan’s
      net income was $11.0 million for 2005, compared to $11.1 million in 2004.
      Diluted income per share was $.60 for 2005, compared to $.61 in
      2004.





13





**RESULTS
      OF OPERATIONS**


The
      following table sets forth the Company’s statement of operations expressed as a
      percentage of net sales for the periods indicated. This table and subsequent
      discussions should be read in conjunction with the Company’s audited
      consolidated financial statements and notes thereto.





**As
                a Percentage of Net Sales****Year
                ended December 31,****2005**
            
            **2004**
            
            **2003**Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of sales
            
            
            86.3
            
            
            84.4
            
            
            94.0Gross
                profit
            
            
            13.7
            
            
            15.6
            
            
            6.0Selling,
                general and administrative expenses
            
            
            6.7
            
            
            7.1
            
            
            8.8Research
                and development expenses
            
            
            0.2
            
            
            0.4
            
            
            0.5Dyneer
                legal charge
            
            
            3.2
            
            
            0.0
            
            
            0.0Idled
                assets depreciation
            
            
            1.0
            
            
            1.0
            
            
            0.0Goodwill
                impairment on Titan Europe
            
            
            0.0
            
            
            0.6
            
            
            0.0Income
                (loss) from operations
            
            
            2.6
            
            
            6.5
            
            
            (3.3
            )Interest
                expense
            
            
            (1.8
            )
            
            (3.2
            )
            
            (4.1
            )Noncash
                convertible debt conversion charge
            
            
            (1.6
            )
            
            0.0
            
            
            0.0Debt
                termination expense
            
            
            0.0
            
            
            (0.7
            )
            
            0.0Other
                income
            
            
            0.2
            
            
            0.4
            
            
            0.5(Loss)
                income before income taxes
            
            
            (0.6
            )
            
            3.0
            
            
            (6.9
            )(Benefit)
                provision for income taxes
            
            
            (2.9
            )
            
            0.8
            
            
            0.6Net
                income (loss)
            
            
            2.3
            %
            
            2.2
            %
            
            (7.5
            )%








In
      addition, the following table sets forth components of the Company’s net sales
      classified by segment for the years ended December 31, (in
      thousands):


**2005**
            
            **2004**
            
            **2003**Agricultural
            
            $
            310,361
            
            $
            316,235
            
            $
            288,545Earthmoving/Construction
            
            
            131,982
            
            
            160,297
            
            
            169,087Consumer
            
            
            27,790
            
            
            34,039
            
            
            34,040Total
            
            $
            470,133
            
            $
            510,571
            
            $
            491,672





The
      following is a summary of the Titan Europe results included in the historical
      results of the Company for the years ended December 31, (in
      thousands):


**2005****(a)**
            
            **2004****(a)**
            
            **2003**Agricultural
            
            $
            0
            
            $
            24,264
            
            $
            79,237Earthmoving/Construction
            
            
            0
            
            
            23,460
            
            
            60,631Consumer
            
            
            0
            
            
            1,722
            
            
            3,856Total
            
            $
            0
            
            $
            49,446
            
            $
            143,724





**(a)**
            70%
                interest in Titan Europe sold in April
                2004.





14





**ACQUISITION
      OF GOODYEAR’S NORTH AMERICAN FARM TIRE ASSETS**


On
      December 28, 2005, Titan Tire Corporation, a subsidiary of Titan International,
      Inc., acquired The Goodyear Tire & Rubber Company’s North American farm tire
      assets. Titan Tire purchased the assets of Goodyear’s North American farm tire
      business for approximately $100 million in cash proceeds. The assets purchased
      include Goodyear’s North American plant, property and equipment located in
      Freeport, Illinois, and Goodyear’s North American farm tire inventory. The
      Company funded the acquisition through an increase in its revolving credit
      facility.





**CASH
      MERGER OFFER**


On
      October 11, 2005, the Company received an offer from One Equity Partners LLC
      (One Equity), a private equity affiliate of JPMorgan Chase & Co., indicating
      One Equity’s interest in acquiring Titan International, Inc., in a cash merger
      for $18.00 per share of Titan common stock. A Special Committee of the Board
      of
      Directors of Titan was formed to pursue discussions with One Equity. The offer
      is subject to reaching a definitive agreement with the customary conditions,
      due
      diligence, financing, both One Equity and Titan board approvals and Titan’s
      stockholders’ approval. There can be no assurance that any agreement will be
      completed. Mr. Richard M. Cashin, Jr., one of Titan’s directors, is also the
      Managing Partner of One Equity. Mr. Maurice M. Taylor, Jr., Chief Executive
      Officer and Chairman of the Board of Directors of Titan, is expected to
      participate with One Equity Partners. Additionally, Mr. Mitchell I. Quain and
      Mr. Anthony L. Soave, also directors of Titan, may participate.





The
      Special Committee consists of Mr. Erwin H. Billig, Mr. Edward J. Campbell and
      Mr. Albert J. Febbo. No member of the Special Committee is participating with
      One Equity in the cash merger offer. The Special Committee hired counsel and
      a
      financial advisor. The financial advisor is Jefferies & Company, Inc. Anyone
      who is interested in submitting a competing offer to Titan’s Special Committee
      may do so by contacting Jefferies & Company, Inc. at the address of 520
      Madison Avenue, New York, New York 10019. The telephone number is 212-284-2300
      and the fax number is 212-284-2114.





**CONVERTIBLE
      NOTE CONVERSION**


In
      June
      of 2005, Titan finalized a private transaction in which the Company issued
      3,022,275 shares of common stock in exchange for the cancellation of $33.8
      million principal amount of the Company’s outstanding 5.25% senior convertible
      notes due 2009, as proposed to the Company by certain note holders. Titan
      recognized a noncash charge of $7.2 million in connection with this exchange
      in
      accordance with SFAS No. 84, “Induced Conversions of Convertible
      Debt.”





**STOCK
      REPURCHASE**


On
      April
      20, 2004, the Company purchased the shares of Titan common stock held by
      Citicorp Venture Capital, Ltd. (CVC) (approximately 4.9 million shares) for
      a
      cash payment of $15.0 million. In connection with this purchase of Titan’s
      common stock, the Company recorded an accrued contingent liability of $5.0
      million for contingent obligations under the stock purchase agreement.
      Accordingly, these treasury shares were valued at $20.0 million. As of December
      31, 2005, the contingent liability was offset to the Dyneer legal charge to
      which it related. CVC was formerly Titan’s largest single stockholder, owning
      approximately 23% of the total outstanding shares.





**SALE
      OF A MAJORITY INTEREST IN TITAN EUROPE**


On
      April
      7, 2004, Titan Luxembourg Sarl, a wholly-owned European subsidiary of the
      Company, sold 70% of the common stock of Titan Europe, to the public on the
      AIM
      market in London. Titan Luxembourg was the largest single stockholder in Titan
      Europe Plc, retaining a 30% interest on the date of the transaction. Titan
      Luxembourg’s proceeds from the sale of Titan Europe shares were approximately
      $62 million, before fees and expenses of approximately $2.8 million. The Company
      recorded cash receipts of $50 million and a five-year note receivable of $9.2
      million from the newly created public company, Titan Europe Plc.





In
      the
      first quarter of 2004, the Company recognized a $3.0 million goodwill impairment
      charge on the pending sale of a majority interest in Titan Europe in accordance
      with the Company’s goodwill impairment policy. Net proceeds from the sale of
      Titan Europe were used to reduce the Company’s debt balances and $15.0 million
      of the proceeds were used to purchase the shares of Titan common stock
      (approximately 4.9 million shares) held by Citicorp Venture Capital, Ltd.





15





Prior
      to
      the April 2004 transaction, Titan Europe was consolidated in the Company’s
      financial statements. Subsequent to the April 2004 transaction, the Company
      accounted for its interest in Titan Europe Plc as an equity investment. The
      Company recognized equity income on its investment in Titan Europe Plc of $2.9
      million in 2005 and $1.3 million in 2004. On December 30, 2005, Titan Europe
      Plc
      issued additional shares of stock for an acquisition. As a result of these
      additional shares, the Company’s interest in Titan Europe Plc was diluted and
      decreased from 29.3% at December 31, 2004, to a 15.4% ownership position at
      December 30, 2005. With the decreased ownership percentage, effective December
      30, 2005, the Company will no longer use the equity method to account for its
      interest in Titan Europe Plc.





In
      accordance with SFAS No. 115, the Company will record the Titan Europe Plc
      investment as an available-for-sale security and report the investment at fair
      value, with unrealized gains and losses excluded from earnings and reported
      in a
      separate component of shareholders’ equity. The fair value of the Company’s
      investment in Titan Europe Plc was $48.5 million at December 31, 2005. The
      carrying value of Titan Europe Plc was $30.0 million at December 31,
      2004.




The
      following is a summary of the Titan Europe results included in the historical
      results of the Company for the years ended December 31 (in
      millions):


**2005**
            
            **2004**
            
            **2003**Net
                sales
            
            $
            0.0
            
            $
            49.4
            
            $
            143.7Gross
                profit
            
            
            0.0
            
            
            8.3
            
            
            20.3Income
                from operations
            
            
            0.0
            
            
            0.4
            
            
            5.4





**CRITICAL
      ACCOUNTING POLICIES**


Preparation
      of the financial statements and related disclosures in compliance with
      accounting principles generally accepted in the United States of America
      requires the application of appropriate technical accounting rules and guidance,
      as well as the use of estimates. The Company’s application of these policies
      involves assumptions that require difficult subjective judgments regarding
      many
      factors, which, in and of themselves, could materially impact the financial
      statements and disclosures. A future change in the estimates, assumptions or
      judgments applied in determining the following matters, among others, could
      have
      a material impact on future financial statements and disclosures.





**REVENUE
      RECOGNITION**


The
      Company records sales revenue when products are shipped to customers and both
      title and the risks and rewards of ownership are transferred. Provisions are
      established for sales returns and uncollectible accounts based on historical
      experience. Should these trends change, adjustments to the estimated provisions
      would be necessary.





**INVENTORIES**


Inventories
      are valued at the lower of cost or market. Cost is determined using the last-in,
      first-out (LIFO) method for approximately 29% of inventories and the first-in,
      first-out (FIFO) method for the remainder of inventories. The major steel
      material inventory and related work-in-process and their finished goods are
      accounted for under the LIFO method. The major rubber material inventory and
      related work-in-process and their finished goods are accounted for under the
      FIFO method. Market value is estimated based on current selling prices.
      Estimated provisions are established for excess and obsolete inventory, as
      well
      as inventory carried above market price based on historical experience. Should
      this experience change, adjustments to the estimated provisions would be
      necessary.





**IMPAIRMENT
      OF FIXED ASSETS**


The
      Company reviews fixed assets to assess recoverability from future operations
      whenever events and circumstances indicate that the carrying values may not
      be
      recoverable. Impairment losses are recognized in operating results when expected
      undiscounted future cash flows are less than the carrying value of the asset.
      Impairment losses are measured as the excess of the carrying value of the asset
      over the discounted expected future cash flows, or the fair value of the asset.
      The Company had idled assets marketed for sale of $18.3 million and $31.2
      million at December 31, 2005 and 2004, respectively. With the sales process
      extending more than 12 months, the remaining idled assets were depreciated
      during the fourth quarter of 2004 in accordance with SFAS No. 144 and
      reclassified to noncurrent. Appraisals from third-party valuation firms indicate
      that the fair market values of the machinery and equipment at these facilities
      exceed their respective carrying values. Significant assumptions relating to
      future operations must be made when estimating future cash flows. Should
      unforeseen events occur or operating trends change significantly, impairment
      losses could occur.





16





**IMPAIRMENT
      OF GOODWILL**


The
      Company reviews goodwill to assess recoverability from future operations during
      the fourth quarter of each annual reporting period, and whenever events and
      circumstances indicate that the carrying values may not be recoverable. The
      Company’s goodwill was $11.7 million at December 31, 2005 and 2004. Significant
      assumptions relating to future operations must be made when estimating future
      cash flows in analyzing goodwill for impairment. Should unforeseen events occur
      or operating trends change significantly, impairment losses could
      occur.





**RETIREMENT
      BENEFIT OBLIGATIONS**


Pension
      benefit obligations are based on various assumptions used by third-party
      actuaries in calculating these amounts. These assumptions include discount
      rates, expected return on plan assets, mortality rates and other factors.
      Revisions in assumptions and actual results that differ from the assumptions
      affect future expenses, cash funding requirements and obligations. The Company
      has two frozen defined benefit pension plans and one defined benefit plan that
      purchased a final annuity settlement in 2002. The Company expects to contribute
      approximately $3.3 million to these frozen defined benefit pension plans in
      2006. For more information concerning these costs and obligations, see the
      discussion of the “Pensions” and Note 23 to the Company’s financial
      statements.





The
      effect of hypothetical changes to selected assumptions on the Company’s frozen
      pension benefit obligations would be as follows (in thousands):


December
                31, 2005
            
            2006Increase
            Increase
            
            IncreasePercentage
            (Decrease)
            (Decrease)
            
            (Decrease)Assumptions
            Change
            PBO(a)
            Equity(b)
            
            ExpensePensionDiscount
                rate(c)
            +/-.5
            $(3,057)/$3,314
            $3,057/$(3,314)
            
            $(77)/$79Expected
                return on assets
            +/-.5
            
            
            
            $(275)/$275





(a)
            Projected
                benefit obligation (PBO) for pension
                plans.




(b)
            Pretax
                minimum pension liability
                adjustment.





(c)
            Pretax
                impact on service cost, interest cost and amortization of gains or
                losses.





**VALUATION
      OF INVESTMENT ACCOUNTED FOR AS AVAILABLE- FOR-SALE
      SECURITY**


The
      Company had an investment in Titan Europe Plc of $48.5 million as of December
      31, 2005, representing a 15.4% ownership position. This investment is recorded
      as “Investment in Titan Europe Plc” on the consolidated balance sheet. The
      Company reports this investment at fair value, with unrealized gains and losses
      excluded from earnings and reported in a separate component of stockholders’
equity. If the fair value declines below the amortized cost basis, the Company
      determines if this decline is other than temporary. If the decline in fair
      value
      is judged to be other than temporary, an impairment charge is recorded. Should
      unforeseen events occur or investment trends change significantly, impairment
      losses could occur.





17





**INVESTMENT
      EXPOSURES**


The
      Company accounted for its interest in Titan Europe Plc as an equity investment
      subsequent to the sale of a majority interest in April 2004. The Company
      recognized equity income on its investment in Titan Europe Plc of $2.9 million
      in 2005 and $1.3 million in 2004. On December 30, 2005, Titan Europe Plc issued
      additional shares of stock for an acquisition. As a result of these additional
      shares, the Company’s interest in Titan Europe Plc was diluted and decreased
      from 29.3% at December 31, 2004, to a 15.4% ownership position at December
      30,
      2005. With the decreased ownership percentage, effective December 30, 2005,
      the
      Company will no longer use the equity method to account for its interest in
      Titan Europe Plc.





In
      accordance with SFAS No. 115, the Company will record the Titan Europe Plc
      investment as an available-for-sale security and report the investment at fair
      value, with unrealized gains and losses excluded from earnings and reported
      in a
      separate component of shareholders’ equity. The fair value of the Company’s
      investment in Titan Europe Plc was $48.5 million at December 31, 2005. The
      carrying value of Titan Europe Plc was $30.0 million at December 31,
      2004.





Dividends
      received in 2005 and 2004 from this investment were $0.9 million and $0.3
      million, respectively. Titan Europe Plc is publicly traded on the AIM market
      in
      London. Prior to the sale of a majority interest in April 2004, Titan Europe
      was
      consolidated in the Company’s financial statements.





**IDLED
      ASSETS MARKETED FOR SALE**


In
      December 2003, the Company’s management and Board of Directors approved the sale
      of certain operating assets with a carrying value of $37.8 million at December
      31, 2003. With the sales process extending more than 12 months, the remaining
      idled assets were depreciated during the fourth quarter of 2004 in accordance
      with SFAS No. 144 and reclassified to noncurrent. The idled assets marketed
      for
      sale balance was $18.3 million at December 31, 2005, and $31.2 million at
      December 31, 2004. Included in the December 31, 2005, balance was land and
      buildings at the Company’s idled facility in Greenwood, South Carolina, of $1.9
      million. Machinery and equipment located at the Company’s idled facilities in
      Brownsville, Texas, and Natchez, Mississippi, totaling $16.4 million are also
      included in idled assets marketed for sale at December 31, 2005.





Depreciation
      on these idled assets was $4.7 million, $5.3 million, and $5.2 million for
      the
      years ended December 31, 2005, 2004 and 2003, respectively. During 2005 and
      2004, approximately $5.8 million and $1.3 million of idled assets were sold
      or
      placed back into service. Also in 2005, the Company received a contract for
      sale
      for the land and building at the Walcott, Iowa facility, which had a book value
      of $2.4 million. Appraisals from third-party valuation firms indicate that
      the
      fair market values of the remaining machinery and equipment at these facilities
      exceed their respective carrying values. The Company has had inquiries regarding
      these assets and will continue the sales process in 2006. Also, as a result
      of
      the Goodyear North American farm asset acquisition, the Company is considering
      placing some of the idled machinery and equipment back into service at the
      Des
      Moines, Iowa, or Freeport, Illinois, facilities.





18





**FISCAL
      YEAR ENDED DECEMBER 31, 2005, COMPARED TO FISCAL YEAR ENDED**


**DECEMBER
      31, 2004**





**RESULTS
      OF OPERATIONS**


The
      following table provides highlights for the year ended December 31, 2005,
      compared to 2004


(amounts
      in thousands, except per share data):


**2005**
            
            **2004**Net
                sales
            
            $
            470,133
            
            $
            510,571Gross
                profit
            
            
            64,210
            
            
            79,500Gross
                margin
            
            
            13.7
            %
            
            15.6
            %Income
                from operations
            
            
            11,999
            
            
            33,322Net
                income
            
            
            11,042
            
            
            11,107Diluted
                earnings per share
            
            
            .60
            
            
            .61





The
      following is a summary of the Titan Europe results included in the historical
      results of the Company for the year ended December 31, 2005, compared to 2004
      (amounts in thousands, except per share data):





**2005****(a)**
            
            **2004****(a)**Net
                sales
            
            $
            0
            
            $
            49,446Gross
                profit
            
            
            0
            
            
            8,272Gross
                margin
            
            
            0.0
            %
            
            16.7
            %Income
                from operations
            
            
            0
            
            
            420





**(a)**
            70
                % interest in Titan Europe sold in April
                2004.





**Net
      Sales**


Net
      sales
      for the year ended December 31, 2005, were $470.1 million compared to $510.6
      million for the year ended December 31, 2004. Had the sale of the majority
      interest in Titan Europe occurred on January 1, 2004, pro forma net sales would
      have been $470.1 million and $461.1 million for the years ended December 31,
      2005 and 2004, respectively. Sales on a comparative basis were higher by $9.0
      million, a 2% increase.





**Cost
      of Sales and Gross Profit**


Cost
      of
      sales was $405.9 million for the year ended December 31, 2005, as compared
      to
      $431.1 million in 2004. Gross profit for the year 2005 was $64.2 million or
      13.7% of net sales, compared to $79.5 million, or 15.6% of net sales for 2004.
      Had the sale of the majority interest in Titan Europe occurred on January 1,
      2004, pro forma gross profit would have been $71.2 million, or 15.4% of net
      sales for 2004. Gross profit was negatively impacted by higher raw material
      and
      energy costs. Raw material and energy costs increased by approximately $7
      million in 2005 over 2004, accounting for a gross profit decrease of 1.7% of
      net
      sales.





**Administrative
      Expenses**


Selling,
      general and administrative (SG&A) and research and development (R&D)
      expenses were $32.3 million or 6.9% of net sales for the year ended December
      31,
      2005, as compared to $37.9 million or 7.4% of net sales for 2004. Administrative
      expenses as a percentage of net sales were positively impacted by the sale
      of a
      majority interest in Titan Europe, which had administrative expenses that
      averaged 10% to 11% on a historical basis. Titan Europe administrative expenses
      of $7.9 million were included in 2004.





**Idled
      Assets Marketed for Sale**


The
      Company’s profit margins have been negatively affected by the depreciation
      associated with the idled assets marketed for sale. The idled assets balance
      at
      December 31, 2005, was $18.3 million. Included in the December 31, 2005, balance
      is land and a building at the Company’s idled facility in Greenwood, South
      Carolina, of $1.9 million. Machinery and equipment located at the Company’s
      idled facilities in Brownsville, Texas, and Natchez, Mississippi, totaling
      $16.4
      million are also included in idled assets at December 31, 2005. With the sales
      process extending more than 12 months, the idled assets were depreciated during
      the fourth quarter of 2004 in accordance with SFAS No. 144, and the Company
      incurred $4.7 million and $5.3 million in depreciation related to the idled
      assets for the years ended December 31, 2005 and 2004,
      respectively.





19





**Dyneer
      Legal Charge**


The
      State
      Court of California allowed the disbursement of the $24.5 million of restricted
      cash funds held in the Vehicular Technologies case in the fourth quarter of
      2005. Titan recognized the Dyneer legal charge for the judgment of approximately
      $15.2 million for this case. The Company received $4.3 million of the cash
      funds
      and is still awaiting the calculation of interest earned on the funds along
      with
      the associated receipt of interest to determine the amounts to be
      recorded.





**Income
      from Operations**


Income
      from operations for the year ended December 31, 2005, was $12.0 million or
      2.6%
      of net sales, compared to $33.3 million or 6.5% in 2004. Excluding the Dyneer
      legal charge, income from operations for the year ended December 31, 2005,
      were
      $27.2 million or 5.8% of net sales. The Company recognized a $3.0 million
      goodwill impairment charge in the first quarter of 2004 on the pending sale
      of a
      majority interest in Titan Europe in accordance with the Company’s goodwill
      impairment process. The decreased income from operations in 2005 as compared
      to
      2004 resulted primarily from the decreased gross profit of $15.3 million and
      the
      Dyneer legal charge of $15.2 million offset by the administrative expense
      decrease of $5.6 million and the $3.0 million goodwill impairment charge in
      2004.





**Interest
      Expense**


Net
      interest expense for the year 2005 was $8.6 million compared to $16.2 million
      in
      2004. The Company’s average debt balances were approximately $83 million lower
      when compared to 2004 resulting in a reduction of interest expense of $6.1
      million. The Company’s average interest rates were 6.2%, approximately one
      percentage point lower in 2005 than the average 2004 interest rate resulting
      in
      an interest savings of $1.5 million.





**Noncash
      Convertible Debt Conversion Charge**


In
      June
      2005, Titan finalized a private transaction in which the Company issued
      3,022,275 shares of common stock in exchange for the cancellation of $33.8
      million principal amount of the Company’s outstanding 5.25% senior convertible
      notes due 2009, as proposed to the Company by certain note holders. The Company
      recognized a noncash charge of $7.2 million in connection with this exchange
      in
      accordance with SFAS No. 84, “Induced Conversions of Convertible
      Debt.”





**Debt
      Termination Expense**


In
      connection with the termination of the Company’s prior revolving loan agreement
      and term loan and the redemption of the 8.75% senior subordinated notes, Titan
      recorded expenses of $3.7 million in the third quarter of 2004. These expenses
      were related to the (i) redemption premium on the subordinated notes of $2.0
      million, (ii) unamortized deferred financing fees of $1.5 million, and (iii)
      prepayment penalty of $0.2 million.





**Other
      Income**


Other
      income was $1.0 million in 2005 as compared to $1.7 million in 2004. Included
      in
      other income is equity income on the Titan Europe Plc investment of $2.9 million
      in 2005 as compared to $1.3 million in 2004. Currency exchange, which is also
      included in other income, was a loss of $1.3 million in 2005 as compared to
      gain
      of $0.5 million in 2004.





**Income
      Tax Expense**


The
      Company recorded an income tax benefit of $13.9 million and an income tax
      expense of $4.1 million and $3.0 million for the years ended December 31, 2005,
      2004, and 2003, respectively.   As a result of several years of previous
      losses, the Company recorded a valuation allowance against its net deferred
      tax
      asset, consistent with the Company’s accounting policies. As a result of
      anticipated utilization of net operating loss carryforward in connection with
      its future Federal income tax filings, the Company recorded a tax benefit of
      $13.9 million as a result of the reversal of the Company’s valuation allowance.
      The Company’s net operating loss carryforward of approximately $37 million
      expires in 2023.




**Net
      Income**


Net
      income for the year ended December 31, 2005, was $11.0 million, compared to
      $11.1 million in 2004. Basic earnings per share was $.61 for the year ended
      December 31, 2005, as compared to $.62 in 2004. Diluted earnings per share
      was
      $.60 for the year ended December 31, 2005, as compared to $.61 in
      2004.





20





**Agricultural
      Segment Results**


Net
      sales
      in the agricultural market were $310.4 million for the year ended December
      31,
      2005, as compared to $316.2 million in 2004. Had the sale of the majority
      interest in Titan Europe occurred on January 1, 2004, net sales in the
      agricultural market for the year ended December 31, 2005, would have been $310.4
      million, as compared to $292.0 million in 2004. Income from operations in the
      agricultural market was $31.8 million for the year 2005 as compared to $38.6
      million in 2004. Income from operations in the agricultural market was
      negatively affected by higher raw material and energy costs of approximately
      $5
      million.





**Earthmoving/Construction
      Segment Results**


The
      Company’s earthmoving/construction market net sales were $132.0 million for the
      year ended December 31, 2005, as compared to $160.3 million in 2004. Had the
      sale of the majority interest in Titan Europe occurred on January 1, 2004,
      net
      sales in the earthmoving/construction market for years ended December 31, 2005
      and 2004, would have been $132.0 million and $136.8 million, respectively.
      The
      Company’s earthmoving/construction market income from operations was $17.7
      million for the year 2005, up from $16.6 million in 2004 due to higher margins
      related to product mix that offset the higher raw material and energy costs
      of
      approximately $2 million.





**Consumer
      Segment Results**


Consumer
      market net sales were $27.8 million for the year ended December 31, 2005, as
      compared to $34.0 million in 2004. Had the sale of the majority interest in
      Titan Europe occurred on January 1, 2004, net sales in the consumer market
      for
      the years ended December 31, 2005 and 2004, would have been $27.8 million and
      $32.3 million, respectively. Consumer market income from operations remained
      relatively stable at $1.8 million for the year 2005 as compared to $1.9 million
      in 2004.




**Foreign
      Subsidiaries Sales**


Net
      sales
      at foreign subsidiaries were $0.0 million for the year ended December 31, 2005,
      as compared to $49.4 million in 2004. The sales decrease at foreign subsidiaries
      was due to the April 2004 sale of a majority interest in Titan Europe, which
      comprised all of the Company’s foreign subsidiary sales. Titan retains a 15.4%
      ownership in Titan Europe Plc at December 31, 2005. Titan Europe’s sales were no
      longer consolidated with Titan beginning in the second quarter of 2004 as a
      result of the ownership decrease to approximately 30% upon the April 2004
      transaction.





**Corporate
      Expenses**


Income
      from operations on a segment basis does not include corporate expenses carried
      at the corporate level totaling $24.0 million for the year ended December 31,
      2005, as compared to $23.8 million in 2004. The Dyneer legal charge of $15.2
      million is also not included in income from operations on a segment
      basis.





21





**FISCAL
      YEAR ENDED DECEMBER 31, 2004, COMPARED TO FISCAL YEAR ENDED**


**DECEMBER
      31, 2003**





**RESULTS
      OF OPERATIONS**


The
      following table provides highlights for year ended December 31, 2004 compared
      to
      2003


(amounts
      in thousands, except per share data):


**2004**
            
            **2003**Net
                sales
            
            $
            510,571
            
            $
            491,672Gross
                profit
            
            
            79,500
            
            
            29,703Gross
                margin
            
            
            15.6
            %
            
            6.0
            %Income
                (loss) from operations
            
            
            33,322
            
            
            (16,220
            )Net
                income (loss)
            
            
            11,107
            
            
            (36,657
            )Diluted
                earnings (loss) per share
            
            
            .61
            
            
            (1.75
            )





The
      following is a summary of the Titan Europe results included in the historical
      results of the Company for the year ended December 31, 2004 compared to 2003
      (amounts in thousands, except per share data):





**2004****(a)**
            
            **2003**Net
                sales
            
            $
            49,446
            
            $
            143,724Gross
                profit
            
            
            8,272
            
            
            20,281Gross
                margin
            
            
            16.7
            %
            
            14.1
            %Income
                from operations
            
            
            420
            
            
            5,415





**(a)**
            70
                % interest in Titan Europe sold in April
                2004.





**Net
      Sales**


Net
      sales
      for the year ended December 31, 2004, were $510.6 million compared to $491.7
      million for the year ended December 31, 2003. Net sales increased despite the
      sale of a majority interest in Titan Europe on April 7, 2004. Had the Titan
      Europe transaction occurred on January 1, 2003, pro forma net sales would have
      been $461.1 million and $347.9 million for the years ended December 31, 2004
      and
      2003, respectively. The increase in net sales on a comparative basis was $113.2
      million. Of this amount, approximately 26% was due to price increases related
      to
      higher raw material costs being passed on to customers. The remaining amount
      was
      primarily attributed to higher demand from the Company’s agricultural
      segment.





**Cost
      of Sales and Gross Profit**


Cost
      of
      sales was $431.1 million for the year ended December 31, 2004, as compared
      to
      $462.0 million in 2003. Gross profit for the year 2004 was $79.5 million or
      15.6% of net sales, compared to $29.7 million, or 6.0% of net sales for 2003.
      Gross profit was positively impacted by higher domestic sales levels of
      approximately 30%, along with facility consolidations, which allowed the Company
      to operate more efficiently. Also, the Company has been able to institute
      certain price increases required due to higher raw material costs.





**Administrative
      Expenses**


Selling,
      general and administrative (SG&A) and research and development (R&D)
      expenses were $37.9 million or 7.4% of net sales for the year ended December
      31,
      2004, as compared to $45.9 million or 9.3% of net sales for 2003. Despite the
      increase in sales, the Company was able to maintain administrative expenses
      below the previous year’s level. Administrative expenses as a percentage of net
      sales were positively impacted by the sale of a majority interest in Titan
      Europe, which had administrative expenses that averaged 10% to 11% on a
      historical basis.





The
      Company’s profit margins have been affected by the costs associated with the
      idled assets marketed for sale. The idled assets balance at December 31, 2004,
      was $31.2 million. Included in the December 31, 2004, balance are land and
      buildings at the Company’s idled facilities in Walcott, Iowa, and Greenwood,
      South Carolina, totaling $4.6 million. Machinery and equipment located at the
      Company’s idled facilities in Brownsville, Texas, and Natchez, Mississippi,
      totaling $26.6 million are also included in idled assets at December 31, 2004.
      With the sales process extending more than 12 months, the remaining idled assets
      were depreciated during the fourth quarter of 2004 in accordance with SFAS
      No.
      144, and the Company incurred $5.3 million in depreciation related to the idled
      assets for the year ended December 31, 2004. In the first quarter of 2004,
      the
      Company recognized a $3.0 million goodwill impairment charge on the pending
      sale
      of a majority interest in Titan Europe in accordance with the Company’s goodwill
      impairment policy.





22





**Income
      (Loss) from Operations**


Income
      from operations for the year ended December 31, 2004, was $33.3 million or
      6.5%
      of net sales, compared to a loss from operations of $(16.2) million or (3.3)%
      in
      2003. Operating results were primarily impacted by efficiency related to higher
      sales volume, facility consolidations and certain price increases. This
      efficiency was partially offset by the $3.0 million goodwill impairment charge
      on Titan Europe.





**Interest
      Expense**


Net
      interest expense for the year 2004 was $16.2 million compared to $20.2 million
      in 2003. The reduced interest expense was due to lower average interest rates
      and debt balances. The primary transactions that reduced interest expense in
      2004 were the April sale of the majority interest in Titan Europe and in July,
      the Company sold 5.25% senior unsecured convertible notes of $115 million to
      help fund the redemption of all of the Company’s 8.75% senior subordinated notes
      of approximately $137 million.





**Debt
      Termination Expense**


In
      connection with the termination of the Company’s prior revolving loan agreement
      and term loan and the redemption of the 8.75% senior subordinated notes, Titan
      recorded expenses of $3.7 million in the third quarter of 2004. These expenses
      were related to the (i) redemption premium on the subordinated notes of $2.0
      million, (ii) unamortized deferred financing fees of $1.5 million, and (iii)
      prepayment penalty of $0.2 million.





**Equity
      Investment Income and Other Income**


The
      Company recognized equity income on its investment in Titan Europe Plc of $1.3
      million in 2004. Other income was $0.4 million for the year 2004, as compared
      to
      $5.5 million in 2003. Other income was significantly higher in 2003 due to
      Titan
      Europe having $3.0 million of other income, which is no longer consolidated
      after the sale of a majority interest in Titan Europe.





**Income
      Tax Expense**


The
      Company recorded income tax expense of $4.1 million and $3.0 million for the
      years ended December 31, 2004 and 2003, respectively.   As a result of
      several years of previous losses, the Company had recorded a valuation allowance
      against its net deferred tax asset position, consistent with the Company’s
      accounting policies. As a result of anticipated utilization of a net operating
      loss carryforward in connection with its 2004 Federal income tax filing, the
      Company reduced the valuation allowance related to its net deferred tax asset
      position by $7.1 million. The Company’s net operating loss carryforward of
      approximately $37 million expires in 2023.





**Net
      Income (Loss)**


Net
      income for the year ended December 31, 2004, was $11.1 million, compared to
      a
      net loss of $(36.7) million in 2003. Basic earnings per share was $.62 for
      the
      year ended December 31, 2004, as compared to loss per share of $(1.75) in 2003.
      Diluted earnings per share was $.61 for the year ended December 31, 2004, as
      compared to loss per share of $(1.75) in 2003. Net income and earnings per
      share
      increased due to higher sales levels, facility consolidations and price
      increases required due to raw material costs.





**Agricultural
      Segment Results**


Net
      sales
      in the agricultural market were $316.2 million for the year ended December
      31,
      2004, as compared to $288.5 million in 2003. Had the sale of the majority
      interest in Titan Europe occurred on January 1, 2003, net sales in the
      agricultural market for the year ended December 31, 2004, would have been $292.0
      million, as compared to $209.3 million in 2003. Agricultural market net sales
      increased as a result of stronger demand coupled with higher raw material costs
      that were passed on to customers. Income from operations in the agricultural
      market was $38.6 million for the year 2004 as compared to $4.9 million in 2003.
      Income from operations in the agricultural market was positively affected by
      efficiencies gained from higher production levels, facility consolidations
      and
      certain price increases.





23





**Earthmoving/Construction
      Segment Results**


The
      Company’s earthmoving/construction market net sales were $160.3 million for the
      year ended December 31, 2004, as compared to $169.1 million in 2003. Had the
      sale of the majority interest in Titan Europe occurred on January 1, 2003,
      net
      sales in the earthmoving/construction market for years ended December 31, 2004
      and 2003, would have been $136.8 million and $108.5 million, respectively.
      Earthmoving/construction sales were higher as a result of steady growth in
      the
      market along with material cost increases that were passed on to customers.
      The
      Company’s earthmoving/construction market income from operations was $16.6
      million for the year 2004, up from $4.0 million in 2003. Income from operations
      in the earthmoving/construction market was positively affected by efficiencies
      gained from higher production levels, facility consolidations and certain price
      increases.





**Consumer
      Segment Results**


Consumer
      market net sales were $34.0 million for each of the years ended December 31,
      2004 and 2003. Had the sale of the majority interest in Titan Europe occurred
      on
      January 1, 2003, net sales in the consumer market for the years ended December
      31, 2004 and 2003, would have been $32.3 million and $30.2 million,
      respectively. Consumer market income from operations was $1.9 million for the
      year 2004 as compared to loss from operations of $(0.3) million in 2003. The
      increase in income from operations in the consumer market was primarily
      attributed to a change in sales mix to higher margin products and facility
      consolidations.





**Foreign
      Subsidiaries Sales**


Net
      sales
      at foreign subsidiaries were $49.4 million for the year ended December 31,
      2004,
      as compared to $143.7 million in 2003. The sales decrease at foreign
      subsidiaries was due to the April 2004 sale of a majority interest in Titan
      Europe, which comprised all of the Company’s foreign subsidiary sales. Titan
      held a 29.3% ownership in Titan Europe at December 31, 2004. Titan Europe was
      accounted for as an equity investment, and, therefore, their sales were no
      longer consolidated with Titan beginning in the second quarter of
      2004.





**Corporate
      Expenses**


Income
      from operations on a segment basis does not include corporate expenses or
      depreciation and amortization expense related to property, plant and equipment
      carried at the corporate level totaling $19.5 million and $4.3 million for
      the
      year ended December 31, 2004, as compared to $20.1 million and $4.8 million
      in
      2003.





**TITAN
      EUROPE SEGMENT RESULTS**





The
      following is a summary of the Titan Europe results included in the historical
      results of the Company for the years ended December 31 (in
      millions):





**2005**
            
            **Agricultural**
            
            **Earthmoving/**
              **Construction**
            
            **Consumer**
            
            **Reconciling**
              ******Items**
            
            **Consolidated**
              ******Totals**Revenues
                from externalcustomers
            
            $
            0.0
            
            $
            0.0
            
            $
            0.0
            
            $
            0.0
            
            $
            0.0Income
                (loss) from operations
            
            
            0.0
            
            
            0.0
            
            
            0.0
            
            
            0.0(a
            )
            
            0.0**2004**Revenues
                from externalcustomers
            
            $
            24.3
            
            $
            23.4
            
            $
            1.7
            
            $
            0.0
            
            $
            49.4Income
                (loss) from operations
            
            
            0.8
            
            
            0.5
            
            
            (0.1
            )
            
            (0.8(a
            ))
            
            0.4**2003**Revenues
                from externalcustomers
            
            $
            79.2
            
            $
            60.6
            
            $
            3.9
            
            $
            0.0
            
            $
            143.7Income
                (loss) from operations
            
            
            5.1
            
            
            2.9
            
            
            0.2
            
            
            (2.8(a
            ))
            
            5.4





(a)
            Represents
                corporate expenses.





24





**LIQUIDITY
      AND CAPITAL RESOURCES**





**Cash
      Flows**


As
      of
      December 31, 2005, the Company had $0.6 million of unrestricted cash balances
      within various bank accounts. This unrestricted cash balance decreased by $0.5
      million from December 31, 2004, due to the cash flows discussed in the following
      paragraphs.





**Operating
      cash flows**


For
      the
      year ended December 31, 2005, positive cash flows from operating activities
      of
      $22.9 million resulted primarily from net income of $11.0 million, noncash
      charges of $20.7 million for depreciation and amortization and a $7.2 million
      noncash convertible debt conversion charge offset by a noncash deferred income
      tax provision of $14.5 million. In comparison, for the year ended December
      31,
      2004, positive cash flows from operation activities of $18.1 million resulted
      primarily from income of $11.1 million and depreciation and amortization of
      $24.9 million offset by an increase in accounts receivable of $10.8 million
      and
      an inventory increase of $8.8 million.





**Investing
      cash flows**


Net
      cash
      used for investing activities was $76.7 million in 2005, as compared to $62.4
      million provided by investing activities in 2004. Titan invested $100.0 million
      for the Goodyear North American farm tire acquisition in 2005. The Company
      invested a total of $6.8 million in capital expenditures in 2005. In comparison
      the 2004 capital expenditures were $4.3 million. The Company estimates that
      capital expenditures for 2006 could range between $16 million and $18 million.
      A
      decrease in restricted cash provided $24.5 million and asset sales provided
      $5.5
      million in 2005. In 2004, restricted cash decreased $24.6 million. In April
      2004, the Company received net proceeds of $50.0 million on the sale of a
      majority interest in Titan Europe and recorded a $9.2 million note receivable
      from the newly created public company, Titan Europe Plc.





**Financing
      cash flows**


Net
      cash
      provided by financing activities in 2005 was $53.3 million. This cash was
      primarily provided by $53.4 million of net debt borrowings over repayments
      on
      debt. In 2004, net debt repayments were $65.8 million and $15 million of common
      stock was repurchased.





**Debt
      Covenants**


The
      Company’s revolving credit facility contains various covenants and restrictions.
      The financial covenants in this agreement require that the (i) Company’s minimum
      book value of eligible accounts receivable and eligible inventory be equal
      to or
      greater than $75 million (or equal to or greater than $100 million when the
      30-day average of the outstanding revolver balance exceeds $100 million), (ii)
      collateral coverage be equal to or greater than 1.25 times the outstanding
      revolver balance, and (iii) if the 30-day average of the outstanding revolver
      balance exceeds $175 million, the fixed charge coverage ratio be equal to or
      greater than a 1.0 to 1.0 ratio. Restrictions include (i) limits on payments
      of
      dividends and repurchases of the Company’s stock, (ii) restrictions on the
      ability of the Company to make additional borrowings, or to consolidate, merge
      or otherwise fundamentally change the ownership of the Company, (iii)
      limitations on investments, dispositions of assets and guarantees of
      indebtedness, and (iv) other customary affirmative and negative covenants.
      These
      covenants and restrictions could limit the Company’s ability to respond to
      market conditions, to provide for unanticipated capital investments, to raise
      additional debt or equity capital, to pay dividends or to take advantage of
      business opportunities, including future acquisitions. If the Company were
      unable to meet these covenants, the Company would be in default on these loan
      agreements.





The
      Company is in compliance with these covenants and restrictions as of December
      31, 2005. The Company’s minimum book value of eligible accounts receivable and
      eligible inventory is required to be equal to or greater than $75 million and
      the Company computed it to be $160.2 million at December 31, 2005. The
      collateral coverage is required to be equal to or greater than 1.25 times the
      outstanding revolver balance and was calculated to be 2.4 times this balance
      at
      December 31, 2005. The fixed charge coverage ratio must be equal to or greater
      than a 1.0 to 1.0 ratio if the 30-day average of the outstanding revolver
      balance exceeds $175 million. This covenant did not apply for the quarter ended
      December 31, 2005. The outstanding revolver balance was $114.8 million at
      December 31, 2005, including cash borrowings of $99.1 million and letters of
      credit of $15.7 million.





25





**Other
      Issues**


The
      Company’s business is subject to seasonal variations in sales that affect
      inventory levels and accounts receivable balances. Historically, Titan tends
      to
      experience higher sales demand in the first and second quarters.





A
      building in Brownsville, Texas, which had previously been leased, was purchased
      in November 2005 for $13.0 million. The building was purchased with a debt
      payment schedule of approximately $1.1 million monthly for 12
      months.





The
      Company had restricted cash of $0.0 million and $24.5 million at December 31,
      2005 and 2004, respectively. The restricted cash of $24.5 million was on deposit
      for the Dyneer court appeal. The State Court of California allowed the
      disbursement of the $24.5 million of restricted cash funds held in the Vehicular
      Technologies case in the fourth quarter of 2005. Titan recognized the Dyneer
      legal charge for the judgment of approximately $15.2 million for this case.





On
      April
      20, 2004, the Company purchased the shares of Titan common stock held by
      Citicorp Venture Capital, Ltd. (CVC) (approximately 4.9 million shares) for
      a
      cash payment of $15.0 million. In connection with this purchase of Titan’s
      common stock, the Company recorded an accrued contingent liability of $5.0
      million for contingent obligations under the stock purchase agreement.
      Accordingly, these treasury shares were valued at $20.0 million. CVC was
      formerly Titan’s largest single stockholder owning approximately 23% of the
      total outstanding shares.





The
      Company’s Board of Directors authorized Titan to repurchase up to 10.0 million
      shares of its common stock in addition to the 4.9 million CVC shares. The
      Company repurchased 4.9 million and 0.2 million shares of its common stock
      at a
      cost of $20.0 million, $0.2 million in 2004 and 2003, respectively. No stock
      was
      repurchased in 2005. The Company repurchased 7.2 million shares in years prior
      to 2003 leaving Titan with authorization to repurchase an additional 2.5 million
      common shares subject to debt agreement covenants.





**LIQUIDITY
      OUTLOOK**


At
      December 31, 2005, the Company had unrestricted cash and cash equivalents of
      $0.6 million and $85.2 million of unused availability under the terms of its
      revolving credit facility. The availability under the Company’s $200 million
      revolving credit facility was reduced by $99.1 million of cash borrowings and
      $15.7 million for outstanding letters of credit. At December 31, 2005, the
      Company had $18.3 million of idled assets marketed for sale. The Company
      estimates that capital expenditures for 2006 could range between $16 million
      and
      $18 million. The Company has scheduled debt principal payments amounting to
      $12.0 million due during 2006. The Company expects to contribute approximately
      $3.3 million to its frozen defined benefit pension plans during 2006. The
      Company has a net operating loss carryforward of approximately $37 million,
      expiring in 2023, which is expected to reduce the Company’s income tax payments
      in the future.





Cash
      on
      hand, anticipated internal cash flows from operations and utilization of
      remaining available borrowings are expected to provide sufficient liquidity
      for
      working capital needs, capital expenditures, and payments required on short-term
      debt. However, if the Company were to exhaust all currently available working
      capital sources or were not to meet the financial covenants and conditions
      of
      its loan agreements, the Company might find it difficult to secure additional
      funding in order to meet working capital requirements.





**American
      Jobs Creation Act of 2004**


On
      October 22, 2004, the American Jobs Creation Act of 2004 was signed into law
      by
      the President of the United States of America. This legislation resulted in
      sweeping revisions to the U.S. Internal Revenue Code and related regulations.
      The Act provides for a number of changes, including providing taxpayers with
      an
      opportunity to repatriate foreign-source income in the U.S. if such repatriated
      income is invested in the U.S. under a properly approved domestic reinvestment
      plan. The repatriation provisions of this Act benefited the Company by
      preserving net operating loss carryforwards.







**INFLATION**


The
      Company is subject to the effect of price fluctuations. During 2005 and 2004,
      the Company realized dramatic, unprecedented increases in pricing for purchases
      of steel and rubber used in the manufacture of its products. While the cost
      outlook for commodities used in the Company’s production is not certain,
      management believes it can manage these inflationary pressures by introducing
      appropriate sales price adjustments.





26





**CONTRACTUAL
      OBLIGATIONS**


The
      Company’s contractual obligations at December 31, 2005, consisted of the
      following (in thousands):





**Payments
                due by period****Contractual
                Obligations**
            
            **Total**
            
            **Less
                than****1
                year**
            
            **1-3**
              **years**
            
            **3-5**
              **years**
            
            **More
                than****5
                years**Long-term
                debt(a)
                (b)
            
            $
            202,459
            
            $
            11,995
            
            $
            99,764
            
            $
            90,700
            
            $
            0Long-term
                debt - Estimated interest(c)
            
            
            39,631
            
            
            13,022
            
            
            23,747
            
            
            2,862
            
            
            0Operating
                leases
            
            
            4,011
            
            
            1,660
            
            
            1,981
            
            
            370
            
            
            0Purchase
                obligations
            
            
            3,136
            
            
            1,223
            
            
            1,580
            
            
            333
            
            
            0Other
                long-term liabilities(d)
            
            
            15,000
            
            
            3,300
            
            
            6,600
            
            
            5,100
            
            
            0Total
            
            $
            264,237
            
            $
            31,200
            
            $
            133,672
            
            $
            99,365
            
            $
            0





(a)
            Long-term
                debt includes current maturities.





(b)
            Long-term
                debt includes debt of $11.9 million on a building in Brownsville,
                Texas,
                that had previously been leased and was purchased in November 2005.





(c)
            Estimated
                interest payments are based on the Company’s year-end 2005 debt balances
                and maturities including interest rates that are anticipated to remain
                at
                the current rates. The Company’s actual debt balances and interest rates
                may fluctuate in the future. Therefore, actual interest payments
                may vary
                from those payments detailed in the above
                table.





(d)
            Other
                long-term liabilities represent the Company’s estimated funding
                requirements for the frozen defined benefit pension plans. The Company’s
                liability for pensions is based on a number of assumptions, including
                discount rates, rates of return on investments, mortality rates and
                other
                factors. Certain of these assumptions are determined with the assistance
                of outside actuaries. Assumptions are based on past experience and
                anticipated future trends and are subject to a number of risks and
                uncertainties and may lead to significantly different pension liability
                funding requirements.





**OFF-BALANCE
      SHEET ARRANGEMENTS**


The
      Company has no material off-balance sheet arrangements.





27





**MARKET
      RISK SENSITIVE INSTRUMENTS**





**Exchange
      Rate Sensitivity**


The
      Company is exposed to fluctuations in the British pound, Euro and other world
      currencies. Titan does not hedge foreign currency transaction or translation
      exposures. The Company’s net investment in foreign entities translated into U.S.
      dollars was $56.9 million at December 31, 2005, and $42.5 million at December
      31, 2004. The hypothetical potential loss in value of the Company’s net
      investment in foreign entities resulting from a 10% adverse change in foreign
      currency exchange rates at December 31, 2005, would amount to $5.7
      million.





**Commodity
      Price Sensitivity**


The
      Company does not generally enter into long-term commodity contracts and does
      not
      use derivative commodity instruments to hedge its exposures to commodity market
      price fluctuations. Therefore, the Company is exposed to price fluctuations
      of
      its key commodities, which consist primarily of steel and rubber. The Company
      attempts to pass on certain material price increases and decreases to its
      customers, depending on market conditions.




**Interest
      Rate Sensitivity**


The
      Company has a revolving credit facility and an industrial revenue bond that
      have
      variable interest rates. If the revolving credit facility were fully drawn,
      a 1%
      change in the interest rate would change the Company’s interest expense by $2.1
      million.





At
      December 31, 2005, the fair value of the Company’s senior unsecured convertible
      notes, based upon quoted market prices obtained through independent pricing
      sources, was $118.5 million, compared to the carrying value of $81.2 million.
      The Company believes the carrying value of its other debt reasonably
      approximates fair value at December 31, 2005.





**Other
      Risks**


The
      Company is subject to various risks and uncertainties relating to or arising
      out
      of the nature of its business and general business, economic, financing, legal
      and other factors or conditions that may affect the Company. Realization of
      any
      of the following risks could have a material adverse effect on Titan’s business,
      financial condition, cash flows, and results of operations.





The
      Company(’s): (i) operates in cyclical industries and, accordingly, its business
      is subject to changes in the economy, (ii) debt may limit Titan’s financial and
      operating flexibility, (iii) has incurred, and may in the future incur, net
      losses, (iv) is exposed to price fluctuations of key commodities, (v) relies
      on
      a limited number of suppliers, (vi) revenues are seasonal due to Titan’s
      dependence on agricultural, construction and recreational industries, which
      are
      seasonal, (vii) may be adversely affected by changes in government regulations
      and policies, (viii) is subject to new corporate governance requirements, and
      costs related to compliance with, or failure to comply with, existing and future
      requirements could adversely affect Titan’s business, (ix) customer base is
      relatively concentrated, (x) faces substantial competition from international
      and domestic companies, (xi) business could be negatively impacted if Titan
      fails to maintain satisfactory labor relations, (xii) unfavorable outcomes
      of
      legal proceedings could adversely affect Titan’s financial condition and results
      of operations.





**MARKET
      CONDITIONS AND OUTLOOK**


In
      2004
      and the first half of 2005, the Company benefited from increased demand for
      Titan products as many OEM manufacturers benefited from higher equipment demand.
      This demand was driven by the increase in production of new agricultural and
      earthmoving/construction vehicles that use the Company’s products. In the second
      half of 2005, this demand softened. The higher domestic sales levels along
      with
      facility consolidations have allowed Titan to manufacture its products in a
      more
      efficient operating environment. However, if the demand continues to decrease,
      the Company’s operating results may deteriorate. Higher energy and
      petroleum-based product costs may continue to negatively impact the Company’s
      margins and sales volumes. Many of Titan’s overhead expenses are fixed;
      therefore seasonal trends may cause fluctuations in quarterly profit margins
      and
      affect the financial condition of the Company. The Goodyear North American
      farm
      tire acquisition will provide a significant increase in sales for Titan in
      2006
      with the additional production from these farm tire assets.





28





**AGRICULTURAL
      MARKET OUTLOOK**


Agricultural
      market sales for the industry are expected to be slightly lower in 2006. The
      farm economy is forecasted to remain healthy. However, the high cost of fuel
      and
      fertilizer is affecting the farm economy. Increasing use of grain-based ethanol
      and soybean-based biodiesel fuel should continue to support commodity prices
      and
      farm income levels in the long-term. Titan’s market share in the agricultural
      market should increase significantly as a result of the Goodyear North American
      farm tire asset acquisition. Many variables, including weather, export markets,
      and future government policies and payments can greatly influence the overall
      health of the agricultural economy.





**EARTHMOVING/CONSTRUCTION
      MARKET OUTLOOK**


Sales
      for
      the earthmoving/construction market are expected to remain strong in 2006.
      Mining sales are expected to remain at a high level as the result of higher
      commodity prices. Products supplied to the U.S. government, included in this
      segment, are also expected to remain stable for the near term. The
      earthmoving/construction segment is affected by many variables including road
      construction, infrastructure and housing starts. Many of these items are very
      sensitive to interest rate fluctuations.





**CONSUMER
      MARKET OUTLOOK**


The
      consumer market is expected to be stable in 2006 as compared to 2005. The
      all-terrain vehicle (ATV) wheel and tire market is expected to offer future
      long-term growth opportunities for Titan. Looking forward, Titan is exploring
      the option of re-entering the high-end lawn and garden and golf markets. Many
      factors affect the consumer market including weather, competitive pricing,
      energy prices and consumer attitude.




**PENSIONS**


The
      Company has two frozen defined benefit pension plans and one defined benefit
      plan that purchased a final annuity settlement in October 2002. These plans
      are
      described in Note 23 of the Company’s Notes to Consolidated Financial
      Statements. The Company’s recorded liability for pensions is based on a number
      of assumptions, including discount rates, rates of return on investments,
      mortality rates and other factors. Certain of these assumptions are determined
      with the assistance of outside actuaries. Assumptions are based on past
      experience and anticipated future trends. These assumptions are reviewed on
      a
      regular basis and revised when appropriate. Revisions in assumptions and actual
      results that differ from the assumptions affect future expenses, cash funding
      requirements and the carrying value of the related obligations. During the
      twelve months ended December 31, 2005, the Company contributed $3.8 million
      to
      its pension plans. The Company expects to contribute approximately $3.3 million
      to these frozen defined benefit pension plans during 2006.





Titan’s
      projected benefit obligation at December 31, 2005, was $71.8 million as compared
      to $75.7 million at December 31, 2004. During 2005, the Company recorded net
      periodic pension cost of $1.2 million. The minimum pension liability of the
      Company was $18.6 million at both December 31, 2005 and 2004. The minimum
      liability is recorded as a direct charge to stockholders’ equity and does not
      affect net income, but is included in other comprehensive income. Titan will
      be
      required to record net periodic pension cost in the future; these costs may
      fluctuate based upon revised assumptions and could negatively affect the
      Company’s financial position, cash flows and results of operations.





**RECENTLY
      ISSUED ACCOUNTING STANDARDS**





**Statement
      of Financial Accounting Standards Number 151**


In
      November 2004, SFAS No. 151, “Inventory Costs,” was issued. This statement
      amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4,
      “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle
      facility expense, freight, handling costs, and wasted material (spoilage).
      In
      addition, this statement requires that allocation of fixed production overheads
      to the costs of conversion be based on the normal capacity of the production
      facilities. This statement is effective for inventory costs incurred during
      fiscal years beginning after June 15, 2005. The Company is evaluating the effect
      the adoption of this interpretation will have on its financial position, cash
      flows and results of operations.





29





**Statement
      of Financial Accounting Standards Number 123(R)**


In
      December 2004, SFAS No. 123, “Share-Based Payment,” was revised. This revised
      statement will require that the compensation cost relating to share-based
      payment transactions be recognized in financial statements. Statement 123
      (revised 2004) covers a wide range of share-based compensation arrangements
      including share options, restricted share plans, performance-based awards,
      share
      appreciation rights and employee share purchase plans. This statement is
      effective for annual periods beginning after June 15, 2005. The Company is
      evaluating the effect the adoption of this interpretation will have on its
      financial position, cash flows and results of operations.





**Statement
      of Financial Accounting Standards Number 154**


In
      May
      2005, SFAS No. 154, “Accounting Changes and Error Corrections,” was issued. This
      statement applies to all voluntary changes in accounting principle and requires
      retrospective application to prior periods’ financial statements of changes in
      accounting principle, unless this would be impracticable. This statement also
      makes a distinction between “retrospective application” of an accounting
      principle and the “restatement” of financial statements to reflect the
      correction of an error. This statement is effective for accounting changes
      and
      corrections of errors made in fiscal years beginning after December 15, 2005.
      The Company does not expect the adoption of this interpretation to have a
      material impact on its financial position, cash flows and results of
      operations.








**ITEM
      7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





Reference
      is made to Item 7, Part II of this report.








**ITEM
      8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**





Reference
      is made to Item 15, Part IV of this report, “Exhibits and Financial Statement
      Schedules.”








**ITEM
      9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





None.








**ITEM
      9A - CONTROLS AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**


The
      Company’s principal executive officer and principal financial officer believe
      the Company’s disclosure controls and procedures (as defined in Exchange Act
      Rules 13a-15(e) and 15d-15(e)) are effective as of the end of the period covered
      by this Form 10-K based on an evaluation of the effectiveness of disclosure
      controls and procedures.





**Changes
      in Internal Controls**


There
      were no material changes in internal control over financial reporting (as
      defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during
      the
      fourth quarter that have materially affected, or are reasonably likely to
      materially affect, the Company’s internal control over financial
      reporting.








**ITEM
      9B - OTHER INFORMATION**





None.





30





**PART
      III**





**ITEM
      10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**





**Directors**


The
      information required by this item regarding the Company’s directors is
      incorporated by reference to the Company’s 2006 Proxy Statement under the
      captions “Election of Directors”, “Directors Continuing in Office”, “Committees
      and Meetings of the Board of Directors”, and “Corporate
      Governance.”





**Executive
      Officers**


The
      names, ages and positions of all executive officers of the Company are listed
      below, followed by a brief account of their business experience during the
      past
      five years. Officers are normally appointed annually by the Board of Directors
      at a meeting immediately following the Annual Meeting of Stockholders. The
      Chief
      Executive Officer and Secretary are brother and sister. There is no arrangement
      or understanding between any officer and any other person pursuant to which
      an
      officer was selected.





Maurice
      M. Taylor Jr., 61, has been Chief Executive Officer and a Director of the
      Company since 1990, when Titan was acquired in a management-led buyout by
      investors, including Mr. Taylor. Mr. Taylor served as President of the Company
      from 1990 to 2005 and was appointed Chairman in 2005.





Ernest
      J.
      Rodia, 62, joined the Company in 2005 as Executive Vice President and Chief
      Operating Officer. Prior to Titan, Mr. Rodia was employed for nearly 40 years
      by
      Goodyear Tire and Rubber Company, holding various engineering and manufacturing
      positions.





Kent
      W.
      Hackamack, 47, served as Corporate Controller of the Company from 1994 to 1996.
      Mr. Hackamack was appointed Vice President of Finance and Treasurer in
      1996.





Cheri
      T.
      Holley, 58, joined the Company in 1994 as General Counsel and Secretary. Ms.
      Holley was appointed Vice President in 1996.





**Section
      16(a) beneficial ownership reporting compliance**


The
      information required by this item regarding beneficial ownership reporting
      compliance is incorporated by reference to the Company’s 2006 Proxy Statement
      under the caption “Section 16(a) Beneficial Ownership Reporting
      Compliance.”





**Business
      conduct policy**


The
      Company adopted a business conduct policy, which is applicable to directors,
      officers and employees. The Company has also adopted corporate governance
      guidelines. The business conduct policy and corporate governance guidelines
      are
      available under the investor information category of the Company’s website, www.titan-intl.com .
      The
      Company intends to satisfy disclosure requirements regarding amendments to
      or
      waivers from its business conduct policy by posting such information on its
      website. A printed copy of the business conduct policy and corporate governance
      guidelines are available, without charge, by writing to: Secretary of Titan
      International, Inc., 2701 Spruce Street, Quincy, IL 62301.








**ITEM
      11 - EXECUTIVE COMPENSATION**





The
      information required by this item is incorporated by reference to the Company’s
      2006 Proxy Statement under the caption “Compensation of Executive
      Officers.”





31





**ITEM
      12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**





Except
      for the information concerning equity compensation plans, the information
      required by this item is incorporated by reference to the Company’s 2006 Proxy
      Statement under the caption “Security Ownership of Certain Beneficial Owners and
      Management.”





The
      following table provides information about shares of Titan common stock that
      may
      be issued under Titan’s equity compensation plans, as of December 31,
      2005:


Plan
                Category
            
            (i)
              Number
                of securities to
              be
                issued upon exercise
              of
                outstanding options,
              warrants
                and rights
            
            (ii)
              Weighted-average
              exercise
                price of outstanding options,warrants
                and rights
            
            (iii)
              Number
                of securities
              remaining
                available for
              future
                issuance under equity compensation plans (excluding securitiesreflected
                in column (i))Equity
                compensation plansapproved
                by security holders
            
            
            1,547,510
            (a)
            
            13.53
            
            
            1,213,720Equity
                compensation plans not approved by security holders
            
            
            0
            
            
            n/a
            
            
            0Total
            
            
            1,547,510
            
            
            13.53
            
            
            1,213,720





(a)
            Amount
                includes outstanding options under the Company’s 1993 Stock Incentive
                Plan, 1994 Non-Employee Director Stock Option Plan and 2005 Equity
                Incentive Plan.




For
      additional information regarding the Company’s stock option plans, please see
      Note 24 of the Company’s Notes to Consolidated Financial
      Statements.








**ITEM
      13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





The
      information required by this item is incorporated by reference to the Company’s
      2006 Proxy Statement under the caption “Related Party Transactions” and also
      appears in Note 28 of the Company’s Notes to Consolidated Financial
      Statements.








**ITEM
      14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
      information required by this item is incorporated by reference to the Company’s
      2006 Proxy Statement under the caption “Audit and Other Fees.”





32





**PART
      IV**














**ITEM
                15 -**
            **EXHIBITS
                AND FINANCIAL STATEMENT SCHEDULES**(a)1.
            Financial
                StatementsManagement’s
                Responsibility for Financial Statements and Report on Internal Control
                Over Financial Reporting
            F-1Report
                of Independent Registered Public Accounting Firm
            F-2
                through F-3Consolidated
                Statements of Operations for the years ended December 31, 2005, 2004
                and
                2003
            F-4Consolidated
                Balance Sheets at December 31, 2005 and 2004
            F-5Consolidated
                Statements of Changes in Stockholders’ Equity for the years ended December
                31, 2005, 2004 and 2003
            F-6Consolidated
                Statements of Cash Flows for the years ended December 31, 2005, 2004
                and
                2003
            F-7Notes
                to Consolidated Financial Statements
            F-8
                through F-302.
            Financial
                Statement ScheduleSchedule
                II - Valuation Reserves
            S-13.
            ExhibitsThe
                accompanying Exhibit Index is incorporated herein by
                reference.





33








**SIGNATURES**





Pursuant
      to the requirements of Sections 13 or 15(d) of the Securities Exchange Act
      of
      1934, the registrant has duly caused this Report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





**TITAN
                INTERNATIONAL, INC.****(Registrant)**








**Date:**
            February
                24, 2006
            **By**:
            /s/
                MAURICE M. TAYLOR JR.Maurice
                M. Taylor Jr.Chief
                Executive Officer and Chairman





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this Report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities indicated on February 24, 2006.





Signatures
            Capacity/S/
                MAURICE M. TAYLOR JR.
            Chief
                Executive OfficerMaurice
                M. Taylor Jr.
            and
                Chairman(Principal
                Executive Officer)/S/
                KENT W. HACKAMACK
            Vice
                President of Finance and TreasurerKent
                W. Hackamack
            (Principal
                Financial Officer andPrincipal
                Accounting Officer)/S/
                ERWIN H. BILLIG
            DirectorErwin
                H. Billig/S/
                EDWARD J. CAMPBELL
            DirectorEdward
                J. Campbell/S/
                RICHARD M. CASHIN JR.
            DirectorRichard
                M. Cashin Jr./S/
                ALBERT J. FEBBO
            DirectorAlbert
                J. Febbo/S/
                MITCHELL I. QUAIN
            DirectorMitchell
                I. Quain/S/
                ANTHONY L. SOAVE
            DirectorAnthony
                L. Soave





34








**TITAN
      INTERNATIONAL, INC.**





**Exhibit
      Index**


**Annual
      Report on Form 10-K**





ExhibitNo.
            DESCRIPTION3.1
                (a)
            Amended
                Restated Articles of Incorporation of the Company3.2
                (b)
            Bylaws
                of the Company10.1
                (c)
            1994
                Non-Employee Director Stock Option Plan10.2
                (c)
            1993
                Stock Incentive Plan10.3
                (d)
            Credit
                Agreement dated July 23, 2004, among the Company and LaSalle Bank
                National
                Association and General Electric Capital Corporation10.4
                (d)
            Indenture
                between the Company and U.S. Bank National Association dated July
                26,
                200410.5
                (e)
            First
                Amendment to Credit Agreement among the Company and LaSalle Bank
                National
                Association
                and General Electric Capital Corporation dated February 16,
                200510.6
                (f)
            2005
                Equity Incentive Plan10.7
                (g)
            Second
                Amendment to Credit Agreement among the Company and LaSalle Bank
                National
                Association dated October 21, 200510.8*
            Employment
              Agreement for Mr. Rodia dated November 1,
              200521*
            Subsidiaries
                of the Registrant23*
            Consent
                of Independent Registered Public Accounting Firm31.1*
            Certification
                of the Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200231.2*
            Certification
                of the Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200232*
            Certification
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002








*Filed
      herewith





(a)
            Incorporated
                by reference to the same numbered exhibit contained in the Company’s Form
                10-Q for the quarterly period ended September 30, 1998 (No.
                001-12936).


(b)
            Incorporated
                by reference to the same numbered exhibit contained in the Company’s
                Registration Statement on Form S-4 (No.
                33-69228).


(c)
            Incorporated
                by reference to the Company’s Registration Statement on Form S-3 (No.
                333-61743).


(d)
            Incorporated
                by reference to the same numbered exhibit contained in the Company’s Form
                10-Q for the quarterly period ended June 30, 2004 (No.
                001-12936).


(e)
            Incorporated
                by reference to the same numbered exhibit contained in the Company’s
                Annual Report on Form 10-K for the year ended December 31, 2005 (No.
                001-12936).


(f)
            Incorporated
                by reference to Appendix A of the Company’s Definitive Proxy Statement
                filed on March 30, 2005.


(g)
            Incorporated
                by reference to the same numbered exhibit contained in the Company’s
                Current Report on Form
                8-K filed on October 24, 2005.











35





**Management’s
      Responsibility for Financial Statements**





Management
      is responsible for the preparation of the Company’s consolidated financial
      statements included in this annual report on Form 10-K. Management believes
      that
      the consolidated financial statements fairly reflect the transactions and the
      financial statements reasonably present the Company’s financial position and
      results of operations in conformity with accounting principles generally
      accepted in the United States of America.





The
      Board
      of Directors of the Company has an Audit Committee comprised entirely of outside
      directors who are independent of management. The Committee meets periodically
      with management, the internal auditors and the independent registered public
      accounting firm to review accounting control, auditing and financial reporting
      matters. The Audit Committee is responsible for the appointment of the
      independent registered public accounting firm and approval of their fees.





The
      independent registered public accounting firm audits the Company’s consolidated
      financial statements in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). The consolidated financial
      statements as of December 31, 2005, have been audited by PricewaterhouseCoopers
      LLP, an independent registered public accounting firm, as stated in their
      report, which is included herein.








**Management’s
      Report on Internal Control Over Financial Reporting**





Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting. Because of its inherent limitations, internal control
      over
      financial reporting may not prevent or detect misstatements. Also, projections
      of any evaluation of effectiveness to future periods are subject to the risk
      that controls may become inadequate because of changes in conditions, or that
      the degree of compliance with the policies or procedures may deteriorate.
      Management has performed an evaluation of the effectiveness of the Company’s
      internal control over financial reporting as of December 31, 2005, based on
      criteria for effective internal control over financial reporting described
      in
“Internal Control-Integrated Framework” issued by the Committee of Sponsoring
      Organizations of the Treadway Commission. Based on this assessment, management
      concluded the Company maintained effective internal control over financial
      reporting as of December 31, 2005. Management’s assessment of the effectiveness
      of the Company’s internal controls over financial reporting as of December 31,
      2005 has been audited by PricewaterhouseCoopers LLP, an independent registered
      public accounting firm, as stated in their report which is included herein.








F-1





**Report
      of Independent Registered Public Accounting Firm**





To
      the
      Board of Directors


and
      Stockholders of


Titan
      International, Inc.:








We
      have
      completed integrated audits of Titan International, Inc.’s 2005 and 2004
      consolidated financial statements and of its internal control over financial
      reporting as of December 31, 2005 and 2004, and an audit of its 2003
      consolidated financial statements in accordance with the standards of the Public
      Company Accounting Oversight Board
      (United States). Our opinions, based
      on
      our audits, are presented below.





Consolidated
      financial statements and financial statement schedule





In
      our
      opinion, the consolidated financial statements listed in the index appearing
      under Item 15(a)(1) present fairly, in all material respects, the financial
      position of Titan International, Inc. and its subsidiaries at December 31,
      2005
      and 2004, and the results of their operations and their cash flows for each
      of
      the three years in the period ended December 31, 2005 in conformity with
      accounting principles generally accepted in the United States of America. In
      addition, in our opinion, the financial statement schedule listed in the index
      appearing under Item 15(a) (2) present fairly, in all material respects, the
      information set forth therein when read in conjunction with the related
      consolidated financial statements. These financial statements and financial
      statement schedule are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements and
      financial statement schedule based on our audits. We conducted our audits of
      these statements in accordance with the standards of the Public Company
      Accounting Oversight Board (United States).
      Those standards require that we plan and perform the audit to obtain reasonable
      assurance about whether the financial statements are free of material
      misstatement. An audit of financial statements includes examining, on a test
      basis, evidence supporting the amounts and disclosures in the financial
      statements, assessing the accounting principles used and significant estimates
      made by management, and evaluating the overall financial statement presentation.
      We believe that our audits provide a reasonable basis for our
      opinion.





Internal
      control over financial reporting





Also,
      in
      our opinion, management’s assessment, included in Management’s Report on
      Internal Control Over Financial Reporting appearing on page F-1, that the
      Company maintained effective internal control over financial reporting as of
      December 31, 2005 based on criteria established in *Internal
      Control - Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
      is fairly stated, in all material respects, based on those criteria.
      Furthermore, in our opinion, the Company maintained, in all material respects,
      effective internal control over financial reporting as of December 31, 2005,
      based on criteria established in *Internal
      Control - Integrated Framework* issued
      by the COSO. The Company’s management is responsible for maintaining effective
      internal control over financial reporting and for its assessment of the
      effectiveness of internal control over financial reporting. Our responsibility
      is to express opinions on management’s assessment and on the effectiveness
      of the Company’s internal control over financial reporting based on our audit.
      We conducted our audit of internal control over financial reporting in
      accordance with the standards of the Public Company Accounting Oversight Board
      (United States). Those standards require that we plan and perform the audit
      to
      obtain reasonable assurance about whether effective internal control over
      financial reporting was maintained in all material respects. An audit of
      internal control over financial reporting includes obtaining an understanding
      of
      internal control over financial reporting, evaluating management’s assessment,
      testing and evaluating the design and operating effectiveness of internal
      control, and performing such other procedures as we consider necessary in the
      circumstances. We believe that our audit provides a reasonable basis for our
      opinions.





F-2





A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (i) pertain
      to the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company;
      (ii) provide reasonable assurance that transactions are recorded as
      necessary to permit preparation of financial statements in accordance with
      generally accepted accounting principles, and that receipts and expenditures
      of
      the company are being made only in accordance with authorizations of management
      and directors of the company; and (iii) provide reasonable assurance
      regarding prevention or timely detection of unauthorized acquisition, use,
      or
      disposition of the company’s assets that could have a material effect on the
      financial statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.











PricewaterhouseCoopers
      LLP


St.
      Louis, Missouri


February
      23, 2006





F-3





**TITAN
      INTERNATIONAL, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(All
      amounts in thousands, except per share data)**








**Year
                ended December 31,****2005**
            
            **2004**
            
            **2003**Net
                sales
            
            $
            470,133
            
            $
            510,571
            
            $
            491,672Cost
                of sales
            
            
            405,923
            
            
            431,071
            
            
            461,969Gross
                profit
            
            
            64,210
            
            
            79,500
            
            
            29,703Selling,
                general and administrative expenses
            
            
            31,433
            
            
            36,040
            
            
            43,174Research
                and development expenses
            
            
            837
            
            
            1,875
            
            
            2,749Dyneer
                legal charge
            
            
            15,205
            
            
            0
            
            
            0Idled
                assets marketed for sale depreciation
            
            
            4,736
            
            
            5,275
            
            
            0Goodwill
                impairment on Titan Europe
            
            
            0
            
            
            2,988
            
            
            0Income
                (loss) from operations
            
            
            11,999
            
            
            33,322
            
            
            (16,220
            )Interest
                expense
            
            
            (8,617
            )
            
            (16,159
            )
            
            (20,231
            )Noncash
                convertible debt conversion charge
            
            
            (7,225
            )
            
            0
            
            
            0Debt
                termination expense
            
            
            0
            
            
            (3,654
            )
            
            0Other
                income, net
            
            
            958
            
            
            1,706
            
            
            2,783(Loss)
                income before income taxes
            
            
            (2,885
            )
            
            15,215
            
            
            (33,668
            )(Benefit)
                provision for income taxes
            
            
            (13,927
            )
            
            4,108
            
            
            2,989Net
                income (loss)
            
            $
            11,042
            
            $
            11,107
            
            $
            (36,657
            )Income
                (loss) per common share:Basic
            
            $
            .61
            
            $
            .62
            
            $
            (1.75
            )Diluted
            
            
            .60
            
            
            .61
            
            
            (1.75
            )Average
                common shares and equivalents outstanding:Basic
            
            
            18,053
            
            
            17,798
            
            
            20,984Diluted
            
            
            18,284
            
            
            21,574
            
            
            20,984







See
      accompanying Notes to Consolidated Financial Statements.













F-4






**TITAN
          INTERNATIONAL, INC.**
 **CONSOLIDATED
          BALANCE SHEETS**
 **(All
          amounts in thousands, except share data)**
 
 
 **December
                    31****Assets**
                
                **2005**
                
                **2004**Current
                    assetsCash
                    and cash equivalents
                
                $
                592
                
                $
                1,130Accounts
                    receivable(net
                    of allowance of $5,654 and $4,259, respectively)
                
                
                47,112
                
                
                52,781Inventories
                
                
                122,692
                
                
                84,658Deferred
                    income taxes
                
                
                20,141
                
                
                6,711Prepaid
                    and other current assets
                
                
                15,630
                
                
                9,388Total
                    current assets
                
                
                206,167
                
                
                154,668Property,
                    plant and equipment, net
                
                
                140,382
                
                
                80,644Idled
                    assets marketed for sale
                
                
                18,267
                
                
                31,245Investment
                    in Titan Europe Plc
                
                
                48,467
                
                
                30,040Restricted
                    cash deposits
                
                
                0
                
                
                24,500Goodwill
                
                
                11,702
                
                
                11,702Other
                    assets
                
                
                15,771
                
                
                21,367Total
                    assets
                
                $
                440,756
                
                $
                354,166**Liabilities
                    and Stockholders’ Equity**Current
                    liabilitiesShort-term
                    debt(including
                    current portion of long-term debt)
                
                $
                11,995
                
                $
                217Accounts
                    payable
                
                
                24,435
                
                
                26,733Other
                    current liabilities
                
                
                11,753
                
                
                12,820Total
                    current liabilities
                
                
                48,183
                
                
                39,770Long-term
                    debt
                
                
                190,464
                
                
                169,688Deferred
                    income taxes
                
                
                13,581
                
                
                9,164Other
                    long-term liabilities
                
                
                20,715
                
                
                28,663Total
                    liabilities
                
                
                272,943
                
                
                247,285Commitments
                    and contingencies:Notes
                    17, 25 and 26Stockholders’
                    equityCommon
                    stock(no
                    par, 60,000,000 shares authorized,30,577,356
                    and 27,555,081 issued, respectively)
                
                
                30
                
                
                27Additional
                    paid-in capital
                
                
                255,299
                
                
                203,239Retained
                    earnings
                
                
                32,053
                
                
                21,385Treasury
                    stock(at
                    cost, 11,074,150 and 11,228,655 shares, respectively)
                
                
                (99,817
                )
                
                (101,204
                )Accumulated
                    other comprehensive loss
                
                
                (19,752
                )
                
                (16,566
                )Total
                    stockholders’ equity
                
                
                167,813
                
                
                106,881Total
                    liabilities and stockholders’ equity
                
                $
                440,756
                
                $
                354,166
 
 
 See
          accompanying Notes to Consolidated Financial Statements.


F-5





**TITAN
      INTERNATIONAL, INC.**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**


**(All
      amounts in thousands, except share data)**











**Number
                of common shares**
            
            **Common
                Stock**
            
            **Additional**
              **paid-in**
              **capital**
            
            **Retained
                earnings**
            
            **Treasury**
              **stock**
            
            **Accumulated
                other comprehensive income (loss)**
            
            **Total****Balance
                January 1, 2003**
            
            
            20,790,882
            
            $
            27
            
            $
            210,231
            
            $
            47,705
            
            $
            (88,963
            )
            $
            (24,973
            )
            $
            144,027Comprehensive
                income (loss):Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            (36,657
            )
            
            
            
            
            
            
            
            (36,657
            )Currency
                translation adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            8,460
            
            
            8,460Minimum
                pension liability,net
                of tax
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,033
            )
            
            (4,033
            )Comprehensive
                (loss) income
            
            
            
            
            
            
            
            
            
            
            
            (36,657
            )
            
            
            
            
            4,427
            
            
            (32,230
            )Dividends
                paid on common stock
            
            
            
            
            
            
            
            
            
            
            
            (419
            )
            
            
            
            
            
            
            
            (419
            )Issuance
                of treasury stock under 401(k) plan
            
            
            623,938
            
            
            
            
            
            (7,181
            )
            
            
            
            
            8,003
            
            
            
            
            
            822Treasury
                stock purchases
            
            
            (217,500
            )
            
            
            
            
            
            
            
            
            
            
            (244
            )
            
            
            
            
            (244
            )**Balance
                December 31, 2003**
            
            
            21,197,320
            
            
            27
            
            
            203,050
            
            
            10,629
            
            
            (81,204
            )
            
            (20,546
            )
            
            111,956Comprehensive
                income (loss):Net
                income
            
            
            
            
            
            
            
            
            
            
            
            11,107
            
            
            
            
            
            
            
            
            11,107Currency
                translation adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (584
            )
            
            (584
            )Minimum
                pension liability,net
                of tax
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,564
            
            
            4,564Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            11,107
            
            
            
            
            
            3,980
            
            
            15,087Dividends
                paid on common stock
            
            
            
            
            
            
            
            
            
            
            
            (351
            )
            
            
            
            
            
            
            
            (351
            )Exercise
                of stock options
            
            
            23,570
            
            
            
            
            
            189
            
            
            
            
            
            
            
            
            
            
            
            189Treasury
                stock purchases
            
            
            (4,894,464
            )
            
            
            
            
            
            
            
            
            
            
            (20,000
            )
            
            
            
            
            (20,000
            )**Balance
                December 31, 2004**
            
            
            16,326,426
            
            
            27
            
            
            203,239
            
            
            21,385
            
            
            (101,204
            )
            
            (16,566
            )
            
            106,881Comprehensive
                income (loss):Net
                income
            
            
            
            
            
            
            
            
            
            
            
            11,042
            
            
            
            
            
            
            
            
            11,042Currency
                translation adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (3,168
            )
            
            (3,168
            )Minimum
                pension liability,net
                of tax
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (18
            )
            
            (18
            )Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            11,042
            
            
            
            
            
            (3,186
            )
            
            7,856Dividends
                paid on common stock
            
            
            
            
            
            
            
            
            
            
            
            (374
            )
            
            
            
            
            
            
            
            (374
            )Gain
                on investee transaction,net
                of tax
            
            
            
            
            
            
            
            
            10,471
            
            
            
            
            
            
            
            
            
            
            
            10,471Bond
                conversion
            
            
            3,022,275
            
            
            3
            
            
            40,928
            
            
            
            
            
            
            
            
            
            
            
            40,931Exercise
                of stock options
            
            
            135,860
            
            
            
            
            
            568
            
            
            
            
            
            1,220
            
            
            
            
            
            1,788Issuance
                of treasury stock under 401(k) plan
            
            
            18,645
            
            
            
            
            
            93
            
            
            
            
            
            167
            
            
            
            
            
            260**Balance
                December 31, 2005**
            
            
            19,503,206
            
            $
            30
            
            $
            255,299
            
            $
            32,053
            
            $
            (99,817
            )
            $
            (19,752
            )
            $
            167,813








See
      accompanying Notes to Consolidated Financial Statements.





F-6





**TITAN
      INTERNATIONAL, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(All
      amounts in thousands)**





**Year
                ended December 31,****Cash
                flows from operating activities:**
            
            **2005**
            
            **2004**
            
            **2003**Net
                income (loss)
            
            $
            11,042
            
            $
            11,107
            
            $
            (36,657
            )Adjustments
                to reconcile net (loss) income to net cashprovided
                by operating activities:Depreciation
                and amortization
            
            
            20,746
            
            
            24,907
            
            
            32,277Noncash
                convertible debt conversion charge
            
            
            7,225
            
            
            0
            
            
            0Goodwill
                impairment
            
            
            0
            
            
            2,988
            
            
            0Noncash
                debt termination expense
            
            
            0
            
            
            1,486
            
            
            0Noncash
                portion of loss on investment
            
            
            0
            
            
            0
            
            
            2,707Undistributed
                earnings of unconsolidated affiliate
            
            
            (2,024
            )
            
            (1,022
            )
            
            0Deferred
                income tax (benefit) provision
            
            
            (14,476
            )
            
            0
            
            
            2,453(Increase)
                decrease in current assets:Accounts
                receivable
            
            
            5,669
            
            
            (10,822
            )
            
            4,749Inventories
            
            
            2,212
            
            
            (8,804
            )
            
            1,023Income
                tax refunds received
            
            
            0
            
            
            0
            
            
            7,687Prepaid
                and other current assets
            
            
            1,938
            
            
            (944
            )
            
            (390
            )Increase
                (decrease) in current liabilities:Accounts
                payable
            
            
            (2,298
            )
            
            4,689
            
            
            (1,343
            )Other
                current liabilities
            
            
            (260
            )
            
            140
            
            
            3,382Other,
                net
            
            
            (6,875
            )
            
            (5,576
            )
            
            (5,506
            )**Net
                cash provided by operating activities**
            
            
            22,899
            
            
            18,149
            
            
            10,382**Cash
                flows from investing activities:**Goodyear
                North American farm tire acquisition
            
            
            (100,000
            )
            
            0
            
            
            0Capital
                expenditures
            
            
            (6,752
            )
            
            (4,328
            )
            
            (14,564
            )Decrease
                (increase) in restricted cash deposits
            
            
            24,500
            
            
            24,609
            
            
            (24,236
            )Proceeds
                from Titan Europe Plc sale
            
            
            0
            
            
            49,984
            
            
            0Loan
                to Titan Europe Plc
            
            
            0
            
            
            (9,227
            )
            
            0Proceeds
                from sale of investments
            
            
            0
            
            
            0
            
            
            4,636Asset
                disposals
            
            
            5,509
            
            
            1,354
            
            
            410**Net
                cash (used for) provided by investing activities**
            
            
            (76,743
            )
            
            62,392
            
            
            (33,754
            )**Cash
                flows from financing activities:**Proceeds
                from borrowings
            
            
            0
            
            
            115,348
            
            
            30,297Payment
                of debt
            
            
            (1,296
            )
            
            (225,525
            )
            
            (23,037
            )Proceeds
                on revolving credit facility, net
            
            
            54,700
            
            
            44,400
            
            
            0Proceeds
                from exercise of stock options
            
            
            1,500
            
            
            0
            
            
            0Repurchase
                of common stock
            
            
            0
            
            
            (15,000
            )
            
            (244
            )Payment
                of financing fees
            
            
            (1,500
            )
            
            (4,788
            )
            
            (200
            )Dividends
                paid
            
            
            (358
            )
            
            (375
            )
            
            (419
            )Other,
                net
            
            
            260
            
            
            189
            
            
            822**Net
                cash provided by (used for) financing activities**
            
            
            53,306
            
            
            (85,751
            )
            
            7,219Effect
                of exchange rate changes on cash
            
            
            0
            
            
            (216
            )
            
            660Net
                decrease in cash and cash equivalents
            
            
            (538
            )
            
            (5,426
            )
            
            (15,493
            )Cash
                and cash equivalents, beginning of year
            
            
            1,130
            
            
            6,556
            
            
            22,049Cash
                and cash equivalents, end of year
            
            $
            592
            
            $
            1,130
            
            $
            6,556**Significant
                noncash investing and financing activities**Building
                purchased with debt payments
            
            $
            12,950
            
            $
            0
            
            $
            0








See
      accompanying Notes to Consolidated Financial Statements.








F-7
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





**1.**
            **DESCRIPTION
                OF BUSINESS AND SIGNIFICANT ACCOUNTING
                POLICIES**





**Business**


Titan
      International, Inc. and its subsidiaries (Titan or the Company) are leading
      manufacturers of wheels, tires and assemblies for off-highway vehicles used
      in
      the agricultural, earthmoving/construction and consumer markets. Titan’s
      earthmoving/construction market also includes products supplied to the U.S.
      military and other government entities, while the consumer market includes
      all-terrain vehicles (ATVs) and recreational/utility trailer applications.
      Titan
      manufactures both wheels and tires for the majority of these market
      applications, allowing the Company to provide the value-added service of
      delivering complete wheel and tire assemblies. The Company offers a broad range
      of products that are manufactured in relatively short production runs to meet
      the specifications of original equipment manufacturers (OEMs) and/or the
      requirements of aftermarket customers.





**Principles
      of consolidation**


The
      consolidated financial statements include the accounts of the Company and its
      wholly and majority-owned subsidiaries. Titan records its investment in each
      unconsolidated affiliated company (20% to 49% ownership) at its related equity
      in the net assets of such affiliate, as adjusted for equity earnings and losses.
      Investments of less than 20% of non-publicly traded entities are carried at
      cost. Investments of less than 20% of publicly traded entities are carried
      at
      fair value in accordance with Statement of Financial Accounting Standards (SFAS)
      No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” The
      Company records change of interest gains  and losses directly to
      equity.  All significant intercompany accounts and transactions have been
      eliminated.





**Inventories**


Inventories
      are valued at the lower of cost or market. Cost is determined using the last-in,
      first-out (LIFO) method in 2005 for approximately 29% of inventories and the
      first-in, first-out (FIFO) method for the remainder of inventories. The major
      steel material inventory and related work-in-process and their finished goods
      are accounted for under the LIFO method. The major rubber material inventory
      and
      related work-in-process and their finished goods are accounted for under the
      FIFO method. Market value is estimated based on current selling prices.
      Estimated provisions are established for excess and obsolete inventory, as
      well
      as inventory carried above market price based on historical
      experience.





**Fixed
      assets**


Property,
      plant and equipment have been recorded at cost. Depreciation is provided using
      the straight-line method over the following estimated useful lives of the
      related assets:





**Years**Building
                and improvements
            
            
            25Machinery
                and equipment
            
            
            10Tools,
                dies and molds
            
            
            5





Maintenance
      and repairs are expensed as incurred. When property, plant and equipment are
      retired or otherwise disposed of, the related cost and accumulated depreciation
      are eliminated and any gain or loss on disposition is included in the
      accompanying consolidated statements of operations.





**Idled
      assets marketed for sale**


Idled
      assets marketed for sale reflect the Company’s December 2003 decision to sell
      certain assets at the Company’s idled facilities in Brownsville, Texas;
      Greenwood, South Carolina; Natchez, Mississippi and Walcott, Iowa. With the
      sales process extending more than 12 months, the remaining idled assets were
      depreciated during the fourth quarter of 2004 in accordance with SFAS No. 144
      and reclassified to noncurrent. Titan had idled assets marketed for sale of
      $18.3 million at December 31, 2005. Appraisals from third-party valuation firms
      indicate the fair market values of the machinery and equipment at these
      facilities exceed their respective carrying values.





F-8
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





**Deferred
      financing costs**


Deferred
      financing costs are costs incurred in connection with the Company’s revolving
      credit facility, senior unsecured convertible notes and industrial revenue
      bonds. The costs associated with the revolving credit facility are being
      amortized over three years, the term of the facility. The costs associated
      with
      the senior unsecured convertible notes are amortized straight line over five
      years, the term of the notes. The costs associated with the industrial revenue
      bonds are being amortized over the life of the bonds on a straight-line basis.
      Amortization of deferred financing costs for the various debt facilities
      approximates the effective interest rate method.





**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. Investments in marketable
      equity securities are recorded at fair value. The convertible notes due 2009
      are
      the only significant financial instrument of the Company with a fair value
      different than the recorded value. At December 31, 2005, the fair value of
      the
      convertible notes, based on quoted market prices obtained through independent
      pricing sources, was approximately $118.5 million, compared to a carrying value
      of $81.2 million.





**Available-for-sale
      securities**


The
      Company has an investment in Titan Europe Plc of $48.5 million as of December
      31, 2005, representing a 15.4% ownership position. Due to the dilution in the
      Company’s ownership interest from 29.3% at December 31, 2004, the Company began
      accounting for its investment in Titan Europe Plc as an available-for-sale
      security during 2005. Accordingly, this investment is recorded as “Investment in
      Titan Europe Plc” on the consolidated balance sheet. The Company reports this
      investment at fair value, with unrealized gains and losses excluded from
      earnings and reported in a separate component of stockholders’ equity. If the
      fair value declines below the amortized cost basis, the Company determines
      if
      this decline is other than temporary. If the decline in fair value is judged
      to
      be other than temporary, an impairment charge is recorded.





**Impairment
      of fixed assets**


The
      Company reviews fixed assets to assess recoverability from future operations
      whenever events and circumstances indicate that the carrying values may not
      be
      recoverable. Impairment losses are recognized in operating results when expected
      undiscounted future cash flows are less than the carrying value of the asset.
      Impairment losses are measured as the excess of the carrying value of the asset
      over the discounted expected future cash flows or the estimated fair value
      of
      the asset.





**Foreign
      currency translation**


The
      financial statements of the Company’s foreign subsidiaries are translated to
      United States currency in accordance with SFAS No. 52, “Foreign Currency
      Translation.” Assets and liabilities are translated to United States dollars at
      period-end exchange rates. Income and expense items are translated at average
      rates of exchange prevailing during the period. Translation adjustments are
      included in “Accumulated other comprehensive loss” in stockholders’ equity. As
      of December 2005, the Company’s investment in Titan Europe Plc was reclassified
      to available-for-sale securities and this investment is recorded as “Investment
      in Titan Europe Plc” on the consolidated balance sheet. The Company no longer
      has subsidiaries with foreign denominated balance sheets, therefore no currency
      translation adjustments are included in comprehensive loss at December 31,
      2005.
      Gains and losses that result from foreign currency transactions are included
      in
      the accompanying consolidated statements of operations.





**Impairment
      of goodwill**


The
      Company reviews goodwill to assess recoverability from future operations during
      the fourth quarter of each annual reporting period, and whenever events and
      circumstances indicate that the carrying values may not be recoverable as
      required by the adoption of SFAS No. 142, Goodwill and Other Intangible Assets.
      The carrying amount of $11.7 million of goodwill by segment at December 31,
      2005
      was (i) agricultural of $6.9 million, (ii) earthmoving/ construction of $3.6
      million, and (iii) consumer of $1.2 million. Based on a discounted cash flow
      method at December 31, 2005, the Company’s computation showed no impairment. See
      Notes 12 and 20 for additional information.





F-9
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





**Revenue
      recognition**


The
      Company records sales revenue when products are shipped to customers and both
      title and the risks and rewards of ownership are transferred. Provisions are
      established for sales returns and uncollectible accounts based on historical
      experience. Should these trends change, adjustments would be necessary to the
      estimated provisions.





**Cost
      of sales**


Cost
      of
      sales is comprised primarily of direct materials and supplies consumed in the
      manufacturing of the Company’s products, as well as manufacturing labor,
      depreciation expense and overhead expense necessary to acquire and convert
      the
      purchased materials and supplies into a finished product. Cost of sales also
      includes all purchasing, receiving, inspection, internal transfers, and related
      distribution costs.





**Selling,
      general and administrative expense**


Selling,
      general and administrative expense is comprised primarily of sales commissions,
      marketing expense, selling and administrative wages, management information
      system costs, legal fees, bank charges, audit fees, depreciation and
      amortization expense on non-manufacturing assets, and other administrative
      items.





**Warranty
      costs**


The
      Company provides limited warranties on workmanship on its products in all market
      segments. The provision for estimated warranty costs is made in the period
      when
      such costs become probable and based on past warranty experience. Warranty
      costs
      were $2.6 million, $2.4 million, and $2.3 million for the years of 2005, 2004,
      and 2003, respectively.





**Income
      taxes**


Deferred
      income tax provisions are determined using the liability method whereby deferred
      tax assets and liabilities are recognized based upon temporary differences
      between the financial statement and income tax basis of assets and liabilities.
      The Company assesses the realizability of deferred tax asset positions to
      determine if a valuation allowance is necessary.





**Earnings
      per share**


Basic
      earnings per share (EPS) is computed by dividing consolidated net earnings
      by
      the weighted average number of common shares outstanding. Diluted EPS is
      computed by dividing adjusted consolidated net earnings by the sum of the
      weighted average number of common shares outstanding and the weighted average
      number of potential common shares outstanding. Potential common shares consist
      of outstanding options under the Company’s stock option plans and the conversion
      of the Company’s senior unsecured convertible notes.





**Statement
      of cash flows**


For
      purposes of the Consolidated Statements of Cash Flows, the Company considers
      short-term debt securities with an original maturity of three months or less
      to
      be cash equivalents.





**Interest
      paid**


The
      Company paid $7.5 million, $17.9 million, and $19.1 million for interest in
      2005, 2004 and 2003, respectively.





**Income
      taxes paid**


Titan
      paid $1.9 million, $0.7 million, and $4.0 million for income taxes in 2005,
      2004
      and 2003, respectively.





**Global
      market risk**


The
      Company manufactures and sells products and purchases goods in the United States
      and foreign countries. The Company is potentially subject to foreign currency
      exchange risk relating to receipts from customers and payments to suppliers
      in
      foreign currencies. As a result, the Company’s financial results could be
      affected by factors such as changes in foreign currency exchange rates or weak
      economic conditions in the foreign markets in which the Company conducts
      business. Gains and losses arising from the settlement of foreign currency
      transactions are charged to the Consolidated Statement of Operations for the
      related period. Translation adjustments arising from the translation of foreign
      subsidiary financial statements are recorded in accumulated other comprehensive
      income in stockholders’ equity in the accompanying consolidated balance
      sheets.





F-10
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





**Environmental
      liabilities**


Environmental
      expenditures that relate to current operations are expensed or capitalized
      as
      appropriate. Expenditures that relate to an existing condition caused by past
      operations and that do not contribute to current or future revenue are expensed.
      Liabilities are recorded when environmental assessments and/or remedial efforts
      are probable and can be reasonably estimated.





**Stock-based
      compensation**


At
      December 31, 2005, the Company has two stock-based compensation plans, which
      are
      described in Note 24. The Company applies the recognition and measurement
      principles of Accounting Principles Board (APB) Opinion No. 25, “Accounting for
      Stock Issued to Employees,” and related Interpretations in accounting for those
      plans. The weighted-average fair value of options granted during 2005 was $9.56.
      No stock-based compensation expense has been recorded in the consolidated
      financial statements as any options granted had an exercise price equal to
      the
      market value of the underlying common stock on the date of the grant. The
      Company granted no stock options in 2004 or 2003. The following table
      illustrates the effect on net income (loss) and income (loss) per share if
      the
      Company had applied the fair value recognition provisions of SFAS No. 123,
      “Accounting for Stock-Based Compensation,” to stock-based compensation (in
      thousands, except share data):





**2005**
            
            **2004**
            
            **2003**Net
                income (loss) - as reported
            
            $
            11,042
            
            $
            11,107
            
            $
            (36,657
            )Deduct:
                Total stock-based compensation expensedetermined
                under fair value method for all awards,net
                of related tax effects
            
            
            (5,255
            )
            
            0
            
            
            (9
            )Pro
                forma net income (loss)
            
            $
            5,787
            
            $
            11,107
            
            $
            (36,666
            )Income
                (loss) per share:Basic
                - as reported
            
            $
            .61
            
            $
            .62
            
            $
            (1.75
            )Basic
                - pro forma
            
            
            .32
            
            
            .62
            
            
            (1.75
            )Diluted
                - as reported
            
            $
            .60
            
            $
            .61
            
            $
            (1.75
            )Diluted
                - pro forma
            
            
            .32
            
            
            .61
            
            
            (1.75
            )





**Reclassification**


Certain
      amounts from prior years have been reclassified to conform to the current year’s
      presentation. The 2003 and 2004 Statement of Cash Flows have been revised to
      reflect the classification of the cash flows related to restricted cash as
      investing activities.





**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.





**Recently
      issued accounting standards**





**Statement
      of Financial Accounting Standards Number 151**


In
      November 2004, SFAS No. 151, “Inventory Costs,” was issued. This statement
      amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4,
      “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle
      facility expense, freight, handling costs, and wasted material (spoilage).
      In
      addition, this statement requires that allocation of fixed production overheads
      to the costs of conversion be based on the normal capacity of the production
      facilities. This statement is effective for inventory costs incurred during
      fiscal years beginning after June 15, 2005. The Company is evaluating the effect
      the adoption of this interpretation will have on its financial position, cash
      flows and results of operations.





F-11
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





**Statement
      of Financial Accounting Standards Number 123(R)**


In
      December 2004, SFAS No. 123, “Share-Based Payment,” was revised. This revised
      statement will require that the compensation cost relating to share-based
      payment transactions be recognized in financial statements. Statement 123
      (revised 2004) covers a wide range of share-based compensation arrangements
      including share options, restricted share plans, performance-based awards,
      share
      appreciation rights and employee share purchase plans. This statement is
      effective for annual periods beginning after June 15, 2005. The Company is
      evaluating the effect the adoption of this interpretation will have on its
      financial position, cash flows and results of operations.





**Statement
      of Financial Accounting Standards Number 154**


In
      May
      2005, SFAS No. 154, “Accounting Changes and Error Corrections,” was issued. This
      statement applies to all voluntary changes in accounting principle and requires
      retrospective application to prior periods’ financial statements of changes in
      accounting principle, unless this would be impracticable. This statement also
      makes a distinction between “retrospective application” of an accounting
      principle and the “restatement” of financial statements to reflect the
      correction of an error. This statement is effective for accounting changes
      and
      corrections of errors made in fiscal years beginning after December 15, 2005.
      The Company does not expect the adoption of this interpretation to have a
      material impact on its financial position, cash flows and results of
      operations.





**2.**
            **GOODYEAR
                NORTH AMERICAN FARM TIRE
                ACQUISITION**





On
      December 28, 2005, Titan Tire Corporation, a subsidiary of Titan International,
      Inc. acquired The Goodyear Tire & Rubber Company’s North American farm tire
      assets. Titan Tire purchased the assets of Goodyear’s North American farm tire
      business for approximately $100 million in cash proceeds. The assets purchased
      include Goodyear’s North American plant, property and equipment located in
      Freeport, Illinois, and Goodyear’s North American farm tire inventory. The
      Company funded the acquisition through an increase in its revolving credit
      facility.





The
      initial allocation of the Goodyear North American farm tire acquisition was
      as
      follows:


Inventory
            
            $
            40,246Prepaid
                and other current assets
            
            
            4,680Property,
                plant and equipment
            
            
            55,074$
            100,000





As
      a
      result of the December 28, 2005, transaction date and awaiting final information
      from the seller, the above allocation has not yet been finalized. Any changes
      to
      the allocation will be made by year-end 2006.





The
      following unaudited pro forma financial information gives effect to the
      acquisition of the Goodyear North American farm tire acquisition as if the
      acquisition had taken place on January 1, 2004. The pro forma information for
      the Freeport, Illinois, facility was derived from a carve-out of The Goodyear
      Tire & Rubber Company’s historical accounting records. 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
      of
      assets actually occurred on January 1, 2004, nor is it necessarily indicative
      of
      Titan’s future consolidated results of operations or financial
      position.





Pro
      forma
      information for the year (in thousands, except per share data):


**2005**
            
            **2004**Net
                sales
            
            $
            714,293
            
            $
            761,312Net
                income (loss)
            
            
            10,968
            
            
            (5,520
            )Diluted
                earnings (loss) per share
            
            
            .60
            
            
            (.31
            )







F-12
 
 **TITAN
            INTERNATIONAL, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**




**3.**
            **CASH
                MERGER OFFER**





On
      October 11, 2005, the Company received an offer from One Equity Partners LLC
      (One Equity), a private equity affiliate of JPMorgan Chase & Co., indicating
      One Equity’s interest in acquiring Titan International, Inc., in a cash merger
      for $18.00 per share of Titan common stock. A Special Committee of the Board
      of
      Directors of Titan was formed to pursue discussions with One Equity. The offer
      is subject to reaching a definitive agreement with the customary conditions,
      due
      diligence, financing, both One Equity and Titan board approvals and Titan’s
      stockholders’ approval. There can be no assurance that any agreement will be
      completed. Mr. Richard M. Cashin, Jr., one of Titan’s directors, is also the
      Managing Partner of One Equity. Mr. Maurice M. Taylor, Jr., Chief Executive
      Officer and Chairman of the Board of Directors of Titan, is expected to
      participate with One Equity Partners. Additionally, Mr. Mitchell I. Quain and
      Mr. Anthony L. Soave, also directors of Titan, may participate.





The
      Special Committee consists of Mr. Erwin H. Billig, Mr. Edward J. Campbell and
      Mr. Albert J. Febbo. No member of the Special Committee is participating with
      One Equity in the cash merger offer. The Special Committee hired counsel and
      a
      financial advisor. The financial advisor is Jefferies & Company, Inc.





**4.**
            **SALE
                OF A MAJORITY INTEREST IN TITAN
                EUROPE**





On
      April
      7, 2004, Titan Luxembourg Sarl, a wholly-owned European subsidiary of the
      Company, sold 70% of the common stock of Titan Europe to the public on the
      AIM
      market in London. Titan Luxembourg was the largest single stockholder in Titan
      Europe Plc, retaining a 30% interest on the date of the transaction. Titan
      Luxembourg’s proceeds from the sale of Titan Europe shares were approximately
      $62 million, before fees and expenses of approximately $2.8 million. The Company
      recorded cash receipts of $50 million and a five-year note receivable of $9.2
      million from the newly created public company, Titan Europe Plc.





In
      the
      first quarter of 2004, The Company recognized a $3.0 million goodwill impairment
      charge on the pending sale of a majority interest in Titan Europe in accordance
      with the Company’s goodwill impairment policy. Net proceeds from the sale of
      Titan Europe were used to reduce the Company’s debt balances and $15.0 million
      of the proceeds were used to purchase the shares of Titan International stock
      (approximately 4.9 million shares) held by Citicorp Venture Capital, Ltd.





Prior
      to
      the April 2004 transaction, Titan Europe was consolidated in the Company’s
      financial statements. Subsequent to the April 2004 transaction, the Company
      accounted for its interest in Titan Europe Plc as an equity investment. The
      Company recognized equity income on its investment in Titan Europe Plc of $2.9
      million in 2005 and $1.3 million in 2004. On December 30, 2005, Titan Europe
      Plc
      issued additional shares of stock for an acquisition. As a result of these
      additional shares, the Company’s interest in Titan Europe was diluted and
      decreased from 29.3% at December 31, 2004, to a 15.4% ownership position at
      December 31, 2005. With the decreased ownership percentage, effective December
      30, 2005, the Company will no longer use the equity method to account for its
      interest in Titan Europe.





In
      accordance with SFAS No. 115, the Company will record the Titan Europe Plc
      investment as an available-for-sale security and report the investment at fair
      value, with unrealized gains and losses excluded from earnings and reported
      in a
      separate component of shareholders’ equity. The fair value of the Company’s
      investment in Titan Europe Plc was $48.5 million at December 31, 2005. The
      carrying value of Titan Europe Plc was $30.0 million at December 31,
      2004.





The
      following is a summary of the Titan Europe results included in the historical
      results of the Company for the years ended December 31 (in
      thousands):


**2005**
            
            **2004**
            
            **2003**Net
                sales
            
            $
            0
            
            $
            49,446
            
            $
            143,724Gross
                profit
            
            
            0
            
            
            8,272
            
            
            20,281Income
                from operations
            
            
            0
            
            
            420
            
            
            5,415






**5.**
            **ACCOUNTS
                RECEIVABLE**





The
      Company had net accounts receivable of $47.1 million and $52.8 million at
      December 31, 2005 and 2004, respectively. These amounts are net of allowance
      for
      doubtful accounts of $5.7 million and $4.3 million for the years ended 2005
      and
      2004, respectively.






F-13
 
 **TITAN
            INTERNATIONAL, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**




**6.**
            **INVENTORIES**





Inventories
      at December 31, 2005 and 2004, consisted of the following (in
      thousands):


**2005**
            
            **2004**Raw
                material
            
            $
            42,511
            
            $
            27,984Work-in-process
            
            
            10,939
            
            
            13,439Finished
                goods
            
            
            74,793
            
            
            51,054128,243
            
            
            92,477Adjustment
                to LIFO basis
            
            
            (5,551
            )
            
            (7,819
            )$
            122,692
            
            $
            84,658







The
      significant inventory increase resulted from the December 2005 purchase of
      Goodyear’s North American farm tire assets. The inventory included in this
      purchase totaled $40.2 million. See Note 2 for additional information. Included
      in the above inventory balances at December 31, 2005, and December 31, 2004,
      are
      reserves for slow-moving and obsolete inventory of $2.7 million and $2.8 million
      respectively.





**7.**
            **PREPAID
                AND OTHER CURRENT ASSETS**





Prepaid
      and other current assets at December 31, 2005 and 2004, consisted of the
      following (in thousands):





**2005**
            
            **2004**Prepaid
                supplies
            
            $
            8,051
            
            $
            4,364Other
            
            
            7,579
            
            
            5,024$
            15,630
            
            $
            9,388





The
      significant prepaid supplies increase resulted from the December 2005 purchase
      of Goodyear’s North American farm tire assets. The prepaid supplies included in
      this purchase totaled $3.7 million. See Note 2 for additional information.





**8.**
            **PROPERTY,
                PLANT AND EQUIPMENT**





Property,
      plant and equipment at December 31, 2005 and 2004, consisted of the following
      (in thousands):





**2005**
            
            **2004**Land
                and improvements
            
            $
            2,521
            
            $
            2,003Buildings
                and improvements
            
            
            63,572
            
            
            34,426Machinery
                and equipment
            
            
            202,598
            
            
            161,859Tools,
                dies and molds
            
            
            51,859
            
            
            48,714Construction-in-process
            
            
            2,284
            
            
            508322,834
            
            
            247,510Less
                accumulated depreciation
            
            
            (182,452
            )
            
            (166,866
            )$
            140,382
            
            $
            80,644







The
      significant increase in property, plant and equipment resulted from the December
      2005 purchase of Goodyear’s North American farm tire assets. The property, plant
      and equipment included in this purchase totaled $55.1 million. See Note 2 for
      additional information. The balances above do not include idled assets marketed
      for sale of $18.3 million at December 31, 2005 and $31.2 million at December
      31,
      2004. Depreciation on fixed assets for the years 2005, 2004 and 2003 totaled
      $14.3 million, $17.4 million, and $30.0 million, respectively. In addition,
      $4.7
      million and $5.3 million of depreciation was recorded on idled assets marketed
      for sale in 2005 and 2004, respectively.




F-14
 
 **TITAN
            INTERNATIONAL, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**




**9.**
            **IDLED
                ASSETS MARKETED FOR SALE**





In
      December 2003, the Company’s management and Board of Directors approved the sale
      of certain operating assets with a carrying value of $37.8 million at December
      31, 2003. With the sales process extending more than 12 months, the remaining
      idled assets were depreciated during the fourth quarter of 2004 in accordance
      with SFAS No. 144 and reclassified to noncurrent. The idled assets marketed
      for
      sale balance was $18.3 million at December 31, 2005, and $31.2 million at
      December 31, 2004. Included in the December 31, 2005, balance are land and
      buildings at the Company’s idled facility in Greenwood, South Carolina, of $1.9
      million. Machinery and equipment located at the Company’s idled facilities in
      Brownsville, Texas, and Natchez, Mississippi, totaling $16.4 million are also
      included in idled assets marketed for sale at December 31, 2005.





Depreciation
      on these idled assets was $4.7 million, $5.3 million, and $5.2 million for
      the
      years ended December 31, 2005, 2004 and 2003, respectively. During 2005 and
      2004, approximately $5.8 million and $1.3 million of idled assets were sold
      or
      placed back into service. Also in 2005, the Company received a contract for
      sale
      for the land and buildings at the Walcott, Iowa facility, which had a book
      value
      of $2.4 million. Appraisals from third-party valuation firms indicate that
      the
      fair market values of the remaining machinery and equipment at these facilities
      exceed their respective carrying values. The Company has had inquiries regarding
      these assets and will continue the sales process in 2006. Also, as a result
      of
      the Goodyear North American farm asset acquisition, the Company is considering
      placing some of the idled machinery and equipment back into service at the
      Des
      Moines, Iowa, or Freeport, Illinois, facilities.





**10.**
            **INVESTMENT
                IN TITAN EUROPE**





The
      Company accounted for its interest in Titan Europe Plc as an equity investment
      subsequent to the sale of a majority interest in April 2004. The Company
      recognized equity income on its investment in Titan Europe Plc of $2.9 million
      in 2005 and $1.3 million in 2004. On December 30, 2005, Titan Europe Plc issued
      additional shares of stock for an acquisition. As a result of these additional
      shares, the Company’s interest in Titan Europe Plc was diluted and decreased
      from 29.3% at December 31, 2004, to a 15.4% ownership position at December
      30,
      2005. The Company recorded the change of interest gain to equity in accordance
      with SAB 51. With the decreased ownership percentage, effective December 30,
      2005, the Company will no longer use the equity method to account for its
      interest in Titan Europe Plc.





In
      accordance with SFAS No. 115, the Company will record the Titan Europe Plc
      investment as an available-for-sale security and report the investment at fair
      value, with unrealized gains and losses excluded from earnings and reported
      in a
      separate component of shareholders’ equity. The fair value of the Company’s
      investment in Titan Europe Plc was $48.5 million at December 31, 2005. The
      carrying value of Titan Europe Plc was $30.0 million at December 31, 2004.
      Cash
      dividends received from Titan Europe Plc were $0.9 million in 2005 and $0.3
      million in 2004. Titan Europe Plc is publicly traded on the AIM market in
      London. Prior to the sale in April 2004, Titan Europe was consolidated in the
      Company’s financial statements.




Summarized
        financial information of Titan Europe Plc for 2004 consisted of the following
        (in thousands):
 **December
                  31, 2004**Current
                  assets
              
              $
              122,333Noncurrent
                  assets
              
              
              92,005$
              214,338Current
                  liabilities
              
              $
              72,145Noncurrent
                  liabilities
              
              
              38,987Equity
              
              
              103,206$
              214,338**Year
                  ended****December
                  31, 2004**Net
                  sales
              
              $
              196,377Gross
                  profit
              
              
              35,157Income
                  before provision for income taxes
              
              
              13,111Net
                  income
              
              
              6,210








F-15
 
 **TITAN
            INTERNATIONAL, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**




**11.**
            **RESTRICTED
                CASH DEPOSITS**





The
      Company had restricted cash of $0.0 million and $24.5 million at December 31,
      2005 and 2004, respectively. The restricted cash of $24.5 million was on deposit
      for the Dyneer court appeal. The State Court of California allowed the
      disbursement of the $24.5 million of restricted cash funds held for the Dyneer
      court appeal in the Vehicular Technologies case during the fourth quarter of
      2005. See Note 26 for additional information.





**12.**
            **GOODWILL**





The
      carrying amount of goodwill by segment at December 31, 2005 and 2004, was (i)
      agricultural of $6.9 million, (ii) earthmoving/construction of $3.6 million,
      and
      (iii) consumer of $1.2 million.





The
      Company reviews goodwill to assess recoverability from future operations during
      the fourth quarter of each annual reporting period, and whenever events and
      circumstances indicate that the carrying values may not be recoverable as
      required by the adoption of SFAS No. 142, Goodwill and Other Intangible Assets.
      Based on a discounted cash flow method at December 31, 2005, the Company’s
      computation showed no impairment. There can be no assurance that future goodwill
      tests will not result in an impairment charge.





**13.**
            **OTHER
                ASSETS**





Other
      assets at December 31, 2005 and 2004, consisted of the following (in
      thousands):





**2005**
            
            **2004**Note
                receivable from Titan Europe Plc
            
            $
            5,191
            
            $
            9,633Deferred
                financing
            
            
            4,014
            
            
            4,494Other
            
            
            6,566
            
            
            7,240$
            15,771
            
            $
            21,367





The
      decrease in the note receivable is the result of Titan Europe Plc issuing
      additional shares to the Company from its December 2005 share offering in
      partial satisfaction of the note. The note receivable has a variable interest
      rate of 2% to 4% and an April 2009 redemption date.





**14.**
            **OTHER
                CURRENT LIABILITIES**





Other
      current liabilities at December 31, 2005 and 2004, consisted of the following
      accruals (in thousands):





**2005**
            
            
            **2004**Wages
                and commissions
            
            $
            3,381
            
            $
            3,064Insurance
            
            
            2,430
            
            
            2,017Warranty
            
            
            1,838
            
            
            1,762Taxes
            
            
            432
            
            
            2,977Other
            
            
            3,672
            
            
            3,000$
            11,753
            
            $
            12,820





**15.**
            **WARRANTY
                COSTS**





The
      Company provides limited warranties on workmanship on 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 Balance Sheets. Changes in the warranty
      liability consisted of the following (in thousands):





**2005**
            
            **2004**Warranty
                liability, January 1
            
            $
            1,762
            
            $
            1,508Provision
                for warranty liabilities
            
            
            2,622
            
            
            2,390Warranty
                payments made
            
            
            (2,546
            )
            
            (2,136
            )Warranty
                liability, December 31
            
            $
            1,838
            
            $
            1,762






F-16
 
 **TITAN
            INTERNATIONAL, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**






**16.**
            **OTHER
                LONG-TERM LIABILITIES**





Other
      long-term liabilities at December 31, 2005 and 2004, consisted of the following
      (in thousands):





**2005**
            
            **2004**Accrued
                pension liabilities
            
            $
            15,476
            
            $
            18,232Accrued
                employment liabilities
            
            
            2,775
            
            
            2,896Accrued
                stock purchase liability
            
            
            0
            
            
            5,000Other
            
            
            2,464
            
            
            2,535$
            20,715
            
            $
            28,663





The
      accrued stock purchase liability was settled through the Dyneer legal charge
      to
      which it related. See Note 26 for additional information.





**17.**
            **REVOLVING
                CREDIT FACILITY AND LONG-TERM
                DEBT**





Long-term
      debt at December 31, 2005 and 2004, consisted of the following (in
      thousands):





**2005**
            
            **2004**Revolving
                credit facility
            
            $
            99,100
            
            $
            44,400Senior
                unsecured convertible notes
            
            
            81,200
            
            
            115,000Industrial
                revenue bonds and other
            
            
            22,159
            
            
            10,505202,459
            
            
            169,905Less
                amounts due within one year
            
            
            11,995
            
            
            217$
            190,464
            
            $
            169,688





Aggregate
      maturities of long-term debt are as follows (in thousands):





2006
            
            $
            11,9952007
            
            
            982008
            
            
            99,6662009
            
            
            81,2002010
            
            
            9,500Thereafter
            
            
            0$
            202,459





**Revolving
      credit facility**





The
      Company’s $200 million revolving credit facility with agent LaSalle Bank
      National Association has a 2008 termination date and is collateralized by a
      first priority security interest in certain assets of Titan and its domestic
      subsidiaries. The borrowings under the facility bear interest at a floating
      rate
      of either prime rate plus 1.5% or LIBOR plus 3.0%. Interest rates at December
      31, 2005, ranged from 7.4% to 8.8%. The facility contains certain financial
      covenants, restrictions and other customary affirmative and negative covenants.
      The Company is in compliance with these covenants and restrictions as of
      December 31, 2005. In October 2005, this facility was amended. The amendment
      increased the revolving loan availability to $200 million from $100 million,
      extended the termination date to October 2008 from the previous termination
      date
      of July 2007 and removed General Electric Capital Corporation as a
      participant.





**Senior
      unsecured convertible notes**





The
      $81.2
      million of 5.25% senior unsecured convertible notes are due 2009. These notes
      are convertible into shares of the Company’s stock at any time on or before
      maturity at a conversion rate of 74.0741 shares per $1,000 principal amount
      of
      notes ($13.50 per common share), subject to adjustment. This conversion rate
      would convert all of the notes into approximately 6.0 million shares of the
      Company’s common stock. In June of 2005, Titan finalized a private transaction
      to exchange $33.8 million of the Company’s outstanding 5.25% senior unsecured
      convertible notes due 2009 for 3,022,275 shares of common stock as proposed
      to
      the Company by certain note holders. The Company recognized a noncash charge
      of
      $7.2 million in connection with this exchange in accordance with SFAS No. 84,
      “Induced Conversions of Convertible Debt,” during the second quarter of 2005.





F-17
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





**Industrial
      revenue bonds and other**





Other
      debt primarily consists of industrial revenue bonds, loans from local and state
      entities, and other long-term notes. Maturity dates range from one to four
      years
      and interest rates vary from a 2% to 8% rate. The increase in the other debt
      relates to the $11.9 million balance due on the building purchase in
      Brownsville, Texas. The entire $11.9 million is classified as short-term
      debt.





**Redemption
      of 8.75% senior subordinated notes**





On
      July
      26, 2004, the Company notified the trustee to redeem all of Titan’s outstanding
      8.75% senior subordinated notes. On August 26, 2004, the Company redeemed all
      of
      the outstanding principal amount ($136.8 million) of these notes at a redemption
      price of 101.458% per note (expressed as a percentage of the principal
      amount).





**Debt
      termination expenses**





In
      connection with the termination of the Company’s prior revolving loan agreement
      and term loan and the redemption of the 8.75% senior subordinated notes, Titan
      recorded expenses of $3.7 million in the third quarter of 2004. These expenses
      were related to the (i) redemption premium on the subordinated notes of $2.0
      million, (ii) unamortized deferred financing fees of $1.5 million, and (iii)
      prepayment penalty of $0.2 million.





**18.**
            **ACCUMULATED
                OTHER COMPREHENSIVE INCOME
                (LOSS)**





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





**Currency**
              **Translation**
              **Adjustments**
            
            **Minimum**
              **Pension**
              **Liability**
              **Adjustments**
            
            **Total****Balance
                at January 1, 2004**
            
            $
            2,569
            
            $
            (23,115
            )
            $
            (20,546
            )Currency
                translation adjustment attributableto
                Titan Europe Plc transaction
            
            
            (1,672
            )
            
            0
            
            
            (1,672
            )Currency
                translation adjustments
            
            
            1,088
            
            
            0
            
            
            1,088Minimum
                pension liability adjustment,net
                of tax of $5,060
            
            
            0
            
            
            4,564
            
            
            4,564**Balance
                at December 31, 2004**
            
            
            1,985
            
            
            (18,551
            )
            
            (16,566
            )Currency
                translation adjustments
            
            
            (3,168
            )
            
            
            
            
            (3,168
            )Minimum
                pension liability adjustment,net
                of tax of $10
            
            
            0
            
            
            (18
            )
            
            (18
            )**Balance
                at December 31, 2005**
            
            $
            (1,183
            )
            $
            (18,569
            )
            $
            (19,752
            )





**19.**
            **STOCKHOLDERS’
                EQUITY**





In
      June
      of 2005, Titan finalized a private transaction to exchange $33.8 million of
      the
      Company’s outstanding 5.25% senior unsecured convertible notes due 2009 for
      3,022,275 shares of common stock as proposed to the Company by certain note
      holders. The Company recognized a noncash charge of $7.2 million in connection
      with this exchange in accordance with SFAS No. 84, “Induced Conversions of
      Convertible Debt,” during the second quarter of 2005.





On
      April
      20, 2004, the Company purchased the shares of Titan International stock held
      by
      Citicorp Venture Capital, Ltd. (CVC) (approximately 4.9 million shares) for
      a
      cash payment of $15.0 million. In connection with this purchase of Titan’s
      common stock, the Company recorded an accrued contingent liability of $5.0
      million for contingent obligations under the stock purchase agreement.
      Accordingly, these treasury shares were valued at $20.0 million. As of December
      31, 2005, the contingent liability was offset to the Dyneer legal charge to
      which it related. CVC was formerly Titan’s largest single stockholder owning
      approximately 23% of the total outstanding shares.





In
      addition, during 2003 the Company repurchased 0.2 million shares of its common
      stock at a cost of $0.2 million. The Company is authorized by the Board of
      Directors to repurchase an additional 2.5 million common shares subject to
      debt
      agreement covenants. The Company paid cash dividends of $.02 per share of common
      stock per year for 2005, 2004 and 2003.






F-18
 
 **TITAN
            INTERNATIONAL, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**




**20.**
            **GOODWILL
                IMPAIRMENT ON TITAN EUROPE**





On
      April
      7, 2004, Titan Luxembourg Sarl, a wholly-owned European subsidiary of the
      Company, sold 70% of the common stock of Titan Europe to the public on the
      AIM
      market in London. In the first quarter of 2004, the Comapny recognized a $3.0
      million goodwill impairment charge on the pending sale of a majority interest
      in
      Titan Europe based on the valuation of Titan Europe inherent in the April 2004
      public offering in accordance with the Company’s goodwill impairment policy. The
      April 2004 consideration for the entire Titan Europe offering was $89.5 million
      as compared to a book value of $92.5 million, resulting in a goodwill impairment
      charge of $3.0 million. See Note 4 for additional information.





**21.**
            **OTHER
                INCOME, NET**





Other
      income consisted of the following (in thousands):





**2005**
            
            **2004**
            
            **2003**Equity
                income - Titan Europe Plc
            
            $
            2,938
            
            $
            1,278
            
            $
            0Interest
                income
            
            
            367
            
            
            669
            
            
            1,138Foreign
                exchange (loss) gain
            
            
            (1,338
            )
            
            537
            
            
            681Wheels
                India Ltd. income
            
            
            0
            
            
            0
            
            
            2,398Loss
                on investments
            
            
            0
            
            
            0
            
            
            (2,707
            )Other
                (expense) income
            
            
            (1,009
            )
            
            (778
            )
            
            1,273$
            958
            
            $
            1,706
            
            $
            2,783





On
      December 30, 2005, Titan Europe Plc issued additional shares of stock for an
      acquisition. As a result of these additional shares, the Company’s interest in
      Titan Europe Plc was diluted and decreased from 29.3% at December 31, 2004,
      to a
      15.4% ownership position at December 30, 2005. With the decreased ownership
      percentage, effective December 30, 2005, Titan will no longer use the equity
      method to account for its interest in Titan Europe Plc.





In
      2003,
      the $2.4 million Wheels India Ltd. income was attributed to this Indian entity,
      which is owned by Titan Europe Plc and was included in the April 2004 sale
      of a
      majority interest in Titan Europe.





In
      July
      2003, the Company sold its interest in Polymer Enterprises, Inc. for $4.6
      million, with cash proceeds being applied to the Company’s term loan. This
      investment had been accounted for using the cost method. This sale resulted
      in a
      $2.7 million loss on the sale of the investment. Polymer, a privately held
      company in Greensburg, Pennsylvania, manufactures specialty tires and various
      rubber-related products for industrial applications.





**22.**
            **INCOME
                TAXES**





(Loss)
      income before income taxes, consisted of the following (in
      thousands):





**2005**
            
            **2004**
            
            **2003**Domestic
            
            $
            (5,048
            )
            $
            12,533
            
            $
            (41,216
            )Foreign
            
            
            2,163
            
            
            2,682
            
            
            7,548$
            (2,885
            )
            $
            15,215
            
            $
            (33,668
            )





The
      (benefit) provision for income taxes, was as follows (in
      thousands):





**2005**
            
            **2004**
            
            **2003**CurrentFederal
            
            $
            549
            
            $
            2,571
            
            $
            0State
            
            
            0
            
            
            0
            
            
            0Foreign
            
            
            87
            
            
            1,537
            
            
            2,288636
            
            
            4,108
            
            
            2,288DeferredFederal
            
            
            (13,413
            )
            
            0
            
            
            0State
            
            
            (1,150
            )
            
            0
            
            
            0Foreign
            
            
            0
            
            
            0
            
            
            701(14,563
            )
            
            0
            
            
            701(Benefit)
                provision for income taxes
            
            $
            (13,927
            )
            $
            4,108
            
            $
            2,989





F-19
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





The
      (benefit) provision for income taxes differs from the amount of income tax
      determined by applying the statutory U.S. federal income tax rate to pre-tax
      (loss) income as a result of the following:





**2005**
            
            **2004**
            
            **2003**Statutory
                U.S. federal tax rate
            
            
            (35.0
            )%
            
            35.0
            %
            
            (35.0
            )%Valuation
                allowance
            
            
            (488.7
            )
            
            (47.3
            )
            
            32.8Nondeductible
                convertible debt conversion charge
            
            
            87.7
            
            
            0.0
            
            
            0.0Dyneer
                legal charge
            
            
            (60.7
            )
            
            0.0
            
            
            0.0State
                tax rate change
            
            
            21.2
            
            
            0.0
            
            
            0.0Repatriation
                of foreign earnings, net ofAmerican
                Jobs Creation Act benefit
            
            
            19.0
            
            
            29.3
            
            
            0.0Nondeductible
                goodwill write-off
            
            
            0.0
            
            
            6.9
            
            
            0.0Foreign
                taxes, net
            
            
            (18.1
            )
            
            0.0
            
            
            1.0State
                taxes, net
            
            
            (2.9
            )
            
            0.0
            
            
            0.0Other,
                net
            
            
            (5.2
            )
            
            3.1
            
            
            10.1Effective
                tax rate
            
            
            (482.7
            )%
            
            27.0
            %
            
            8.9
            %





Federal
      income taxes are provided on earnings of foreign subsidiaries except to the
      extent that such earnings are expected to be indefinitely reinvested
      abroad.





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, 2005 and 2004, are
      as follows (in thousands):


**2005**
            
            **2004**Deferred
                tax assets:Net
                operating loss carryforward
            
            $
            14,120
            
            $
            15,107Pension
            
            
            5,619
            
            
            6,850Allowance
                for bad debts
            
            
            2,148
            
            
            1,684Employee
                benefits and related costs
            
            
            2,050
            
            
            2,018EPA
                reserve
            
            
            1,236
            
            
            1,320Warranty
            
            
            699
            
            
            697Inventory
            
            
            459
            
            
            0Other
            
            
            3,025
            
            
            3,024Gross
                deferred tax assets
            
            
            29,356
            
            
            30,700Less
                valuation allowance
            
            
            0
            
            
            (12,381
            )Deferred
                tax assets
            
            
            29,356
            
            
            18,319Deferred
                tax liabilities:Fixed
                assets
            
            
            (14,705
            )
            
            (17,587
            )Unrealized
                gain on available-for-sale security
            
            
            (5,638
            )
            
            0Foreign
                deferred gain
            
            
            (2,453
            )
            
            (2,453
            )Inventory
            
            
            0
            
            
            (732
            )Deferred
                tax liabilities
            
            
            (22,796
            )
            
            (20,772
            )Net
                deferred tax asset (liability)
            
            $
            6,560
            
            $
            (2,453
            )





The
      Company recorded an income tax benefit of $13.9 million and an income tax
      expense of $4.1 million and $3.0 million for the years ended December 31, 2005,
      2004, and 2003, respectively.   As a result of several years of previous
      losses, the Company recorded a valuation allowance against its net deferred
      tax
      asset, consistent with the Company’s accounting policies. As a result of
      anticipated utilization of net operating loss carryforward in connection with
      its future Federal income tax filings, the Company recorded a tax benefit of
      $13.9 million as a result of the reversal of the Company’s valuation allowance.
      The Company’s net operating loss carryforward of approximately $37 million
      expires in 2023.





F-20
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





**American
      Jobs Creation Act of 2004**


On
      October 22, 2004, the American Jobs Creation Act of 2004 was signed into law
      by
      the President of the United States of America. This legislation resulted in
      sweeping revisions to the U.S. Internal Revenue Code and related regulations.
      The Act provides for a number of changes, including providing taxpayers with
      an
      opportunity to repatriate foreign-source income in the U.S. if such repatriated
      income is invested in the U.S. under a properly approved domestic reinvestment
      plan. The repatriation provisions of this Act benefited the Company by
      preserving net operating loss carryforwards.





During
      2004, prior to the passage of the Act, the Company had estimated a $15 million
      reduction to the valuation allowance related to its net deferred tax asset
      position. The reduction in this estimate at December 31, 2004, by $7.1 million
      was due to the repatriation, under the provisions of the Act, of foreign
      earnings associated with the sale of a majority interest in Titan Europe. This
      repatriation under the Act allowed the Company to pay a current tax rate of
      5.25% on the repatriated foreign earnings rather than utilizing net operating
      loss carryforwards.





**23.**
            **EMPLOYEE
                BENEFIT PLANS**





**Pension
      plans**


The
      Company has a frozen defined benefit pension plan covering certain employees
      of
      Titan Tire Corporation. The Company also has a frozen contributory defined
      benefit pension plan covering certain former eligible bargaining employees
      of
      its Walcott, Iowa, facility. Additionally, the Company maintains a contributory
      defined benefit plan that covered former eligible bargaining employees of Dico,
      Inc. This Dico plan purchased a final annuity settlement contract in October
      2002. The Company’s policy is to fund pension costs as required by law, which is
      consistent with the funding requirements of federal laws and
      regulations.





The
      Company’s defined benefit plans have been aggregated in the following table.
      Included in the December 31, 2005, presentation are the Titan Tire and Walcott
      plans, which have a projected benefit obligation and accumulated benefit
      obligation of $71.8 million, exceeding the fair value of plan assets of $56.3
      million at December 31, 2005. At December 31, 2004, these plans had a projected
      benefit obligation and accumulated benefit obligation of $75.7 million,
      exceeding the fair value of plan assets of $57.5 million. The projected benefit
      obligation and the accumulated benefit obligation are the same amount since
      the
      Plans are frozen and there are no future compensation levels to factor into
      the
      obligations. The Company absolved itself from the liabilities associated with
      the Dico plan with the purchase of a final annuity settlement contract in
      October 2002. Therefore, the plan no longer maintains a projected or accumulated
      benefit obligation. The fair value of the Dico plan assets was $0.5 million
      at
      December 31, 2005, 2004 and 2003.





The
      following table provides the change in benefit obligation, change in plan
      assets, funded status and amounts recognized in the consolidated balance sheet
      of the defined benefit pension plans as of December 31, 2005 and 2004 (in
      thousands):





**Change
                in benefit obligation:**
            
            **2005**
            
            **2004**Benefit
                obligation at beginning of year
            
            $
            75,748
            
            $
            74,814Interest
                cost
            
            
            4,158
            
            
            4,465Actuarial
                (gain) loss
            
            
            (1,342
            )
            
            3,340Benefits
                paid
            
            
            (6,768
            )
            
            (6,871
            )Benefit
                obligation at end of year
            
            $
            71,796
            
            $
            75,748**Change
                in plan assets:**Fair
                value of plan assets at beginning of year
            
            $
            57,985
            
            $
            50,938Actual
                return on plan assets
            
            
            1,753
            
            
            5,690Employer
                contributions
            
            
            3,832
            
            
            8,228Benefits
                paid
            
            
            (6,768
            )
            
            (6,871
            )Fair
                value of plan assets at end of year
            
            $
            56,802
            
            $
            57,985








F-21
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**








**Reconciliation
                of funded status:**
            
            **2005**
            
            **2004**Benefit
                obligation more than plan assets
            
            $
            (14,994
            )
            $
            (17,763
            )Unrecognized
                prior service cost
            
            
            1,848
            
            
            1,985Unrecognized
                net loss
            
            
            28,906
            
            
            28,933Unrecognized
                deferred tax liability
            
            
            (337
            )
            
            (393
            )Net
                amount recognized within the consolidated balance sheet
            
            $
            15,423
            
            $
            12,762**Amounts
                recognized in consolidated balance sheet:**Prepaid
                benefit cost
            
            $
            483
            
            $
            470Intangible
                asset
            
            
            1,848
            
            
            1,985Accrued
                benefit costs
            
            
            (15,476
            )
            
            (18,232
            )Accumulated
                other comprehensive loss
            
            
            28,568
            
            
            28,539Net
                amount recognized within the consolidated balance sheet
            
            $
            15,423
            
            $
            12,762




Included
      in the consolidated balance sheets at December 31, 2005 and 2004, are the after
      tax minimum pension liabilities for the unfunded pension plans of $18.6 million
      at both dates.





The
                weighted-average assumptions used in the actuarial computation that
                derived the benefit obligations at December 31 were as
                follows:
            
            
            **2005**
            
            
            **2004**Discount
                rate
            
            
            5.75
            %
            
            5.75
            %Expected
                long-term return on plan assets
            
            
            8.50
            %
            
            8.50
            %








The
      following table provides the components of net periodic pension cost for the
      plans, settlement cost and the assumptions used in the measurement of the
      Company’s benefit obligation for the years ended December 31, 2005, 2004 and
      2003 (in thousands):





**Components
                of net periodic pension cost:**
            
            
            **2005**
            
            
            **2004**
            
            
            **2003**Interest
                cost
            
            $
            4,158
            
            $
            4,465
            
            $
            4,617Assumed
                return on assets
            
            
            (4,809
            )
            
            (4,394
            )
            
            (3,481
            )Amortization
                of unrecognized prior service cost
            
            
            137
            
            
            136
            
            
            144Amortization
                of unrecognized deferred taxes
            
            
            (56
            )
            
            (56
            )
            
            (59
            )Amortization
                of net unrecognized loss
            
            
            1,754
            
            
            1,609
            
            
            1,590Net
                periodic pension cost
            
            $
            1,184
            
            $
            1,760
            
            $
            2,811Recognition
                of prior service cost
            
            $
            0
            
            $
            0
            
            $
            112The
                weighted-average assumptions used in the actuarial computation that
                derived net periodic pension cost for the year ended December 31,
                were as
                follows:
            
            
            **2005**
            
            
            **2004**
            
            
            **2003**Discount
                rate
            
            
            5.75
            %
            
            6.25
            %
            
            6.75
            %Expected
                long-term return on plan assets
            
            
            8.50
            %
            
            8.50
            %
            
            8.50
            %








F-22
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





The
      allocation of the fair value of plan assets was as follows:


**Percentage
                of Plan Assets**
              **at
                December 31,**
            
            **Target**
              **Allocation****Asset
                Category**
            
            **2005**
            
            **2004**
            
            **2006**U.S.
                equities(a)
            
            
            64
            %
            
            64
            %
            
            44%
                - 80
            %Fixed
                income
            
            
            20
            %
            
            26
            %
            
            20%
                - 40
            %Cash
                and cash equivalents
            
            
            8
            %
            
            8
            %
            
            0%
                - 20
            %International
                equities(a)
            
            
            8
            %
            
            2
            %
            
            0%
                - 16
            %100
            %
            
            100
            %





(a)
            Total
                equities may not exceed 80% of total plan
                assets.





The
      Company invests in a diversified portfolio consisting of an array of asset
      classes in an attempt to maximize returns while minimizing volatility. These
      asset classes include U.S. equities, fixed income, cash and cash equivalents,
      and international equities. The investment objectives are to provide for the
      growth and preservation of plan assets on a long-term basis through investments
      in: (i) investment grade securities that provide investment returns that meet
      or
      exceed the Standard & Poor’s 500 Index and (ii) investment grade fixed
      income securities that provide investment returns that meet or exceed the Lehman
      Government / Corporate Index. The U.S. equities asset category included the
      Company’s common stock in the amount of $2.7 million (five percent of total plan
      assets) and $4.2 million (seven percent of total plan assets) at December 31,
      2005 and 2004, respectively.





The
      long-term rate of return for plan assets is determined using a weighted-average
      of long-term historical returns on cash and cash equivalents, fixed income
      securities, and equity securities considering the anticipated investment
      allocation within the plans. The expected return on plan assets is anticipated
      to be 8.5% over the long-term. This rate assumes historical returns of 10%
      for
      equities and 7% for fixed income securities using the plans’ target allocation
      percentages. Professional investment firms, none of which are Titan employees,
      manage the plan assets.





Although
      the 2006 minimum pension funding calculations are not finalized, the Company
      estimates those funding requirements will be approximately $3.3
      million.





Projected
      benefit payments from the plans as of December 31, 2005, are estimated as
      follows (in thousands):





2006
            
            $
            6,3562007
            
            
            6,1962008
            
            
            6,0792009
            
            
            6,0212010
            
            
            5,8412011-2015
            
            
            27,590





**401(k)**


The
      Company sponsors four 401(k) retirement savings plans. One plan is for the
      benefit of substantially all employees who are not covered by a collective
      bargaining arrangement. Formerly, Titan provided a 50% matching contribution
      in
      the form of the Company’s common stock on the first 6% of the employee’s
      contribution in this plan. This contribution was discontinued in November 2003.
      Beginning in July of 2004, Titan provides a 25% matching contribution in the
      form of the Company’s common stock on the first 6% of the employee’s
      contribution in this plan. A second plan is for employees covered by a
      collective bargaining arrangement at Titan Tire Corporation and does not include
      a Company matching contribution. Employees are fully vested with respect to
      their contributions. The Company issued 18,645 shares and 623,938 shares of
      treasury stock in connection with these 401(k) plans during 2005 and 2003,
      respectively. Expenses to the Company related to these 401(k) plans were $0.3
      million and $0.6 million in 2005 and 2003, respectively. There was no treasury
      stock issued or expense recorded for the 401(k) plan in 2004 as the Company
      used
      forfeited shares within the plan to satisfy matching contributions.





Previously,
      the Company adopted 401(k) plans for the employees of Titan Tire Corporation
      of
      Texas and the employees of Titan Tire Corporation of Natchez. These plans relate
      to the idled facilities in Brownsville, Texas, and Natchez, Mississippi. The
      matching contributions on these 401(k) plans were discontinued in November
      2003.
      Expenses for the Company’s matching contribution were $0.1 million for
      2003.






F-23
 
 **TITAN
            INTERNATIONAL, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**




**24.**
            **STOCK
                OPTION PLANS**





**Stock
      Incentive Plan** **


The
      Company adopted the 1993 Stock Incentive Plan (the Plan) to provide grants
      of
      stock options as a means of attracting and retaining qualified employees for
      the
      Company. There will be no additional issuance of stock options under this plan
      as it has expired. Options previously granted are now fully vested and expire
      10
      years from the grant date of the option.





**Non-Employee
      Director Stock Option Plan** **


The
      Company adopted the 1994 Non-Employee Director Stock Option Plan (the Director
      Plan) to provide for grants of stock options as a means of attracting and
      retaining qualified independent directors for the Company. There will be no
      additional issuance of stock options under this plan as it has expired. Options
      previously granted are now fully vested and expire 10 years from the grant
      date
      of the option.





**2005
      Equity Incentive Plan**


The
      Company adopted the 2005 Equity Incentive Plan to provide stock options as
      a
      means of attracting and retaining qualified independent directors and employees
      for the Company. A total of 2.1 million shares are reserved for the plan. The
      exercise price of stock options may not be less than the fair market value
      of
      the common stock on the date of the grant. The vesting and term of each option
      is set by the Board of Directors. In 2005, a total of 890,380 options were
      issued under this plan. Options granted are now fully vested and expire 10
      years
      from the grant date of the option.





The
      following is a summary of activity in the stock option plans for 2003, 2004
      and
      2005:





**Shares
                Subject**
              **to
                Option**
            
            **Weighted-
                Average**
              **Exercise
                Price****Outstanding,
                January 1, 2003**
            
            
            1,024,600
            
            $
            11.37Granted
            
            
            0
            
            
            -
            (a)Canceled/Expired
            
            
            (75,950
            )
            
            12.40**Outstanding,
                December 31, 2003**
            
            
            948,650
            
            
            11.29Granted
            
            
            0
            
            
            -
            (a)Exercised
            
            
            (23,570
            )
            
            8.00Canceled/Expired
            
            
            (122,690
            )
            
            12.16**Outstanding,
                December 31, 2004**
            
            
            802,390
            
            
            11.25Granted
            
            
            890,380
            
            
            15.20Exercised
            
            
            (135,860
            )
            
            11.04Canceled/Expired
            
            
            (9,400
            )
            
            13.47**Outstanding,
                December 31, 2005**
            
            
            1,547,510
            
            $
            13.53





(a)
            The
                Company granted no options during 2004 or
                2003.





F-24
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





Stock
      options outstanding and exercisable as of December 31, 2005, were as
      follows:





**Options
                Outstanding**
            
            **Options
                Exercisable****Weighted
                Average**
            
            **Number
                of**
            
            **Weighted
                Average**
            
            **Number
                of**
            
            **Weighted
                Average****Price
                Range**
            
            **Contractual
                Life**
            
            **Options**
            
            **Exercise
                Price**
            
            **Options**
            
            **Exercise
                Price**$
                4.54-$ 6.69
            
            
            5.3
                years
            
            
            144,000
            
            $
            5.55
            
            
            144,000
            
            $
            5.55$
                8.00-$ 9.50
            
            
            3.2
                years
            
            
            193,610
            
            $
            8.42
            
            
            193,610
            
            $
            8.42$12.75-$14.45
            
            
            7.8
                years
            
            
            585,245
            
            $
            13.33
            
            
            585,245
            
            $
            13.33$16.00-$18.00
            
            
            7.0
                years
            
            
            624,655
            
            $
            17.14
            
            
            624,655
            
            $
            17.141,547,510
            
            $
            13.53
            
            
            1,547,510
            
            $
            13.53





The
      Company applies the recognition and measurement principles of APB Opinion No.
      25, “Accounting for Stock Issued to Employees,” and related Interpretations in
      accounting for those plans. No stock-based compensation expense was recorded
      during 2005, 2004, or 2003. The Company granted no options during 2004 or 2003.





The
      fair
      value of each option used for disclosure requirements of SFAS No. 123 is
      calculated at the time of issue using the Black-Scholes option-pricing model
      with the following assumptions used for grants in 2005:





**2005**
            
            **2004**(a)
            
            **2003******(a)Stock
                price volatility
            
            
            66
            %
            
            n/a
            
            
            n/aRisk-free
                interest rate
            
            
            3.7%
                - 4.4
            %
            
            n/a
            
            
            n/aExpected
                life of options
            
            
            6
                years
            
            
            n/a
            
            
            n/aDividend
                yield
            
            
            .43%
                - .62
            %
            
            n/a
            
            
            n/a





(a)
            The
                Company granted no options during 2004 or 2003.





**25.**
            **LEASE
                COMMITMENTS**





The
      Company leases certain buildings and equipment under operating leases. A
      building in Brownsville, Texas, which had previously been leased, was purchased
      in November 2005 for $13.0 million. The purchase price of the building of $13.0
      million is payable in twelve monthly installments of approximately $1.1 million.
      Certain lease agreements provide for renewal options, fair value purchase
      options, and payment of property taxes, maintenance and insurance by the
      Company. Total rental expense was $3.2 million, $2.9 million, and $5.0 million
      for the years ended December 31, 2005, 2004 and 2003, respectively.





At
      December 31, 2005, future minimum rental commitments under noncancellable
      operating leases with initial or remaining terms in excess of one year are
      as
      follows (in thousands):





2006
            
            $
            1,6602007
            
            
            1,2582008
            
            
            7232009
            
            
            3242010
            
            
            46Thereafter
            
            
            0Total
                future minimum lease payments
            
            $
            4,011









F-25
 
 **TITAN
            INTERNATIONAL, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**


**26.**
            **LITIGATION**





The
      State
      Court of California allowed the disbursement of the $24.5 million of restricted
      cash funds held for the Dyneer court appeal in the Vehicular Technologies case
      during the fourth quarter of 2005. Titan recognized the Dyneer legal charge
      for
      the judgment of approximately $15.2 million for this case. The Company received
      $4.3 million of the cash funds and is still awaiting the calculation of interest
      earned on the funds along with the associated receipt of interest to determine
      the amount of interest income to be recorded, which cannot be reasonably
      estimated at this time. See Note 16 for additional information.





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 affect on the financial condition or
      results of operations of the Company. However, due to the difficult nature
      of
      predicting future legal claims, the Company cannot anticipate or predict the
      material adverse effect on its operations, cash flows or financial condition
      as
      a result of efforts to comply with or its liabilities pertaining to legal
      judgments.





**27.**
            **CONCENTRATION
                OF CREDIT RISK**





Net
      sales
      to Deere & Company in Titan’s agricultural, earthmoving/construction, and
      consumer markets represented 20%, 22%, and 14% of the Company’s consolidated
      revenues for the years ended December 31, 2005, 2004, and 2003, respectively.
      Net sales to CNH Global N.V. in Titan’s three markets represented 11%, 11%, and
      12% of the Company’s consolidated revenues for the years ended December 31,
      2005, 2004, and 2003, respectively. No other customer accounted for more than
      10% of Titan’s net sales in 2005, 2004 or 2003.





**28.**
            **RELATED
                PARTY TRANSACTIONS**





The
      Company sells products and pays commissions to companies controlled by persons
      related to the Chief Executive Officer of the Company. During 2005, 2004 and
      2003, sales of Titan product to these companies were approximately $6.5 million,
      $4.6 million and, $6.5 million, respectively. On other sales referred to Titan
      from these manufacturing representative companies, commissions were
      approximately $1.6 million, $1.5 million, and $1.2 million during 2005, 2004
      and
      2003, respectively. These sales and commissions were made in the ordinary course
      of business and were made on terms no less favorable to Titan than comparable
      sales and commissions to unaffiliated third parties. At December 31, 2005 and
      2004, Titan had trade receivables of approximately $0.9 million and $1.4 million
      due from these companies, respectively.





**29.**
            **SEGMENT
                AND GEOGRAPHICAL
                INFORMATION**





The
      Company has aggregated its operating units into reportable segments based on
      its
      three customer markets: agricultural, earthmoving/construction and consumer.
      These segments are based on the information
      used by the chief executive
      officer and chief operating
      officer to make operating decisions, allocate capital, and assess
      performance. management
      approach, which is the internal organization used by management in making
      operating decisions and assessing performance. The
      accounting policies of the segments are the same as those described in Note
      1,
“Descripiton of Business and Significant Accounting Policies.” Sales between
      segments are priced at certain margins over the cost to manufacture and all
      intersegment revenues are eliminated in consolidation. Segment external
      revenues, expenses and income from operations are determined on the basis of
      the
      results of operations of operating units of manufacturing facilities. Segment
      assets are generally determined on the basis of the tangible assets located
      at
      such operating units’ manufacturing facilities and the intangible assets
      associated with the acquisitions of such operating units. However, certain
      operating units’ goodwill and property, plant and equipment balances are carried
      at the corporate level.





Titan
      is
      organized primarily on the basis of products being included in three marketing
      segments, with each reportable segment including wheels, tires and wheel/tire
      assemblies.





F-26
 
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**





The
      table
      below presents information about certain revenues and expenses, income (loss)
      from operations and segment assets used by the chief operating decision maker
      of
      the Company as of and for the years ended December 31, 2005, 2004, and 2003
      (in
      thousands):





**2005**
              
              **Agricultural**
              
              **Earthmoving/**
                **Construction**
              
              **Consumer**
              
              **Reconciling**
                ******Items**
              
              **Consolidated**
                ******Totals**Revenues
                  from external customers
              
              $
              310,361
              
              $
              131,982
              
              $
              27,790
              
              $
              0
              
              $
              470,133Intersegment
                  revenues
              
              
              47,059
              
              
              24,005
              
              
              2,507
              
              
              0
              
              
              73,571Depreciation
                  & amortization
              
              
              11,738
              
              
              5,183
              
              
              1,447
              
              
              2,378
              (a)
              
              20,746Income
                  (loss) from operations
              
              
              31,750
              
              
              17,664
              
              
              1,825
              
              
              (39,240
              )
                  (b)
              
              11,999Total
                  assets
              
              
              239,581
              
              
              89,241
              
              
              22,963
              
              
              88,971
              (c)
              
              440,756Capital
                  expenditures
              
              
              3,365
              
              
              1,615
              
              
              230
              
              
              1,542
              (d)
              
              6,752**2004**Revenues
                  from external customers
              
              $
              316,235
              
              $
              160,297
              
              $
              34,039
              
              $
              0
              
              $
              510,571Intersegment
                  revenues
              
              
              49,905
              
              
              25,454
              
              
              2,722
              
              
              0
              
              
              78,081Depreciation
                  & amortization
              
              
              12,084
              
              
              6,980
              
              
              1,585
              
              
              4,258
              (a)
              
              24,907Income
                  (loss) from operations
              
              
              38,585
              
              
              16,627
              
              
              1,891
              
              
              (23,781
              )
                  (b)
              
              33,322Total
                  assets
              
              
              173,335
              
              
              78,116
              
              
              17,211
              
              
              85,504
              (c)
              
              354,166Capital
                  expenditures
              
              
              2,493
              
              
              1,417
              
              
              185
              
              
              233
              (d)
              
              4,328**2003**Revenues
                  from external customers
              
              $
              288,545
              
              $
              169,087
              
              $
              34,040
              
              $
              0
              
              $
              491,672Intersegment
                  revenues
              
              
              66,216
              
              
              34,158
              
              
              6,106
              
              
              0
              
              
              106,480Depreciation
                  & amortization
              
              
              15,680
              
              
              9,850
              
              
              1,917
              
              
              4,830
              (a)
              
              32,277Income
                  (loss) from operations
              
              
              4,908
              
              
              4,030
              
              
              (297
              )
              
              (24,861
              )
                  (b)
              
              (16,220
              )Total
                  assets
              
              
              246,138
              
              
              144,580
              
              
              27,130
              
              
              105,236
              (c)
              
              523,084Capital
                  expenditures
              
              
              8,701
              
              
              5,195
              
              
              421
              
              
              247
              (d)
              
              14,564


(a)
            Represents
                depreciation expense related to property, plant and equipment carried
                at
                the corporate level.





(b)
            Represents
                corporate expenses including those referred to in (a). Includes Dyneer
                legal charge of $15.2 million in
                2005.





(c)
            Represents
                property, plant and equipment and goodwill related to certain acquisitions
                and other corporate assets.





(d)
            Represents
                corporate capital expenditures.








F-27
 **TITAN
              INTERNATIONAL, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**





The
      table
      below presents information by geographic area as of and for the years ended
      December 31, 2005, 2004, and 2003 (in thousands):


**2005**
            
            **United****States**
            
            **Italy**
            
            **Other****Countries**
            
            **Consolidated**
              **Totals**Revenues
                from external customers
            
            $
            470,133
            
            $
            0
            
            $
            0
            
            $
            470,133Intersegment
                revenues
            
            
            73,571
            
            
            0
            
            
            0
            
            
            73,571Long-lived
                assets(a)
            
            
            152,084
            
            
            0
            
            
            0
            
            
            152,084**2004**Revenues
                from external customers
            
            $
            461,125
            
            $
            29,584
            
            $
            19,862
            
            $
            510,571Intersegment
                revenues
            
            
            74,030
            
            
            1,930
            
            
            2,121
            
            
            78,081Long-lived
                assets(b)
            
            
            92,346
            
            
            0
            
            
            0
            
            
            92,346**2003**Revenues
                from external customers
            
            $
            347,948
            
            $
            88,613
            
            $
            55,111
            
            $
            491,672Intersegment
                revenues
            
            
            98,192
            
            
            2,005
            
            
            6,283
            
            
            106,480Long-lived
                assets(c)
            
            
            97,163
            
            
            34,967
            
            
            25,175
            
            
            157,305








(a)
            Idled
                assets marketed for sale in the amount of $18.3 million are not included
                in the 2005 long-lived assets.





(b)
            Idled
                assets marketed for sale in the amount of $31.2 million are not included
                in the 2004 long-lived assets.





(c)
            Assets
                held for sale in the amount of $37.8 million are not included in
                the 2003
                long-lived assts.







F-28
 
 **TITAN
            INTERNATIONAL, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**


**30.**
            **EARNINGS
                PER SHARE**





Earnings
      (loss) per share for 2005, 2004 and 2003, are (amounts in thousands, except
      share and per share data):





**2005**
            
            **Net
                income (loss)**
            
            **Weighted-**
              **average
                shares**
            
            **Per share**
              **amount**Basic
                earnings per share
            
            $
            11,042
            
            
            18,052,946
            
            $
            .61Effect
                of stock options
            
            
            0
            
            
            230,663Diluted
                earnings per share(a)
            
            $
            11,042
            
            
            18,283,609
            
            $
            .60**2004**Basic
                earnings per share
            
            $
            11,107
            
            
            17,798,483
            
            $
            .62Effect
                of stock options
            
            
            0
            
            
            75,247Effect
                of convertible notes
            
            
            2,137
            
            
            3,700,669Diluted
                earnings per share
            
            $
            13,244
            
            
            21,574,399
            
            $
            .61**2003**Basic
                and diluted loss per share
            
            $
            (36,657
            )
            
            20,983,814(b
            )
            $
            (1.75
            )








(a)
            The
                effect of convertible notes has not been included as they were
                anti-dilutive. The weighted-average share amount excluded for convertible
                notes totaled 7,146,627 shares.





(b)
            The
                option price exceeded the average market price during the year; therefore,
                there was no stock option effect.











F-29
 
 **TITAN
            INTERNATIONAL, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**





**31.**
            **SUPPLEMENTARY
                DATA - QUARTERLY FINANCIAL INFORMATION
                (UNAUDITED)**





(All
      amounts in thousands, except per share data)


**Quarter
                ended**
            
            **March
                31**
            
            **June
                30**
            
            **September
                30**
            
            **December
                31**
            
            **Year
                ended**
              **December
                31****2005**Net
                sales
            
            $
            136,129
            
            $
            134,709
            
            $
            102,712
            
            $
            96,583
            
            $
            470,133Gross
                profit
            
            
            24,081
            
            
            22,502
            
            
            10,973
            
            
            6,654
            
            
            64,210Net
                income (loss)
            
            
            11,201
            
            
            4,200
            (a)
            
            1,182
            
            
            (5,541
            )
                (b)
            
            11,042Per
                share amounts:(c)Basic
            
            
            .68
            
            
            .25
            (a)
            
            .06
            
            
            (.28
            )
                (b)
            
            .61Diluted
            
            
            .51
            
            
            .23
            (a)
            
            .06
            
            
            (.28
            )
                (b)
            
            .60**2004**Net
                sales
            
            $
            166,976
            
            $
            121,188
            
            $
            116,487
            
            $
            105,920
            
            $
            510,571Gross
                profit
            
            
            27,293
            
            
            21,316
            
            
            17,801
            
            
            13,090
            
            
            79,500Net
                income (loss)
            
            
            5,276
            (d)
            
            5,643
            
            
            1,481
            (e)
            
            (1,293
            )
                (f)
            
            11,107Per
                share amounts:(c)Basic
            
            
            .25
            (d)
            
            .32
            
            
            .09
            (e)
            
            (.08
            )
                (f)
            
            .62Diluted
            
            
            .25
            (d)
            
            .32
            
            
            .09
            (e)
            
            (.08
            )
                (f)
            
            .61








(a)
            Noncash
                convertible debt conversion charge of $7.2 million was included in
                the
                quarter ended June 30, 2005.





(b)
            Dyneer
                legal charge of $15.2 million and income tax benefit of $13.9 million
                were
                included in the quarter ended December 31,
                2005.





(c)
            As
                a result of the variances in the outstanding share balances, the
                year-end
                per share amounts do not agree to the sum of the
                quarters.





(d)
            Goodwill
                impairment charge on Titan Europe of $3.0 million was included in
                the
                quarter ended March 31, 2004.





(e)
            Debt
                termination expense of $3.7 million was included in the quarter ended
                September 30, 2004.





(f)
            Depreciation
                expense on idled assets marketed for sale of $5.3 million was included
                in
                the quarter ended December 31, 2004. No depreciation expense was
                recorded
                on idled assets in the first three quarters of 2004 in accordance
                with
                SFAS No. 144.











F-30
   **TITAN
        INTERNATIONAL, INC.**
 
 **SCHEDULE
        II - VALUATION RESERVES**
 
 
 **Description**
              
              **Balance
                  at beginning**
                **of
                  year**
              
              **Additions
                  to costs and****expenses**
              
              **Deductions**
              
              **Balance**
                **at
                  end**
                **of
                  year****Year
                  ended December 31, 2005**Reserve
                  deducted in the balance sheet from the assets to which it
                  appliesAllowance
                  for doubtful accounts
              
              $
              4,259,000
              
              $
              1,455,000
              
              $
              (60,000
              )
              $
              5,654,000**Year
                  ended December 31, 2004**Reserve
                  deducted in the balance sheet from the assets to which it
                  appliesAllowance
                  for doubtful accounts
              
              $
              5,331,000
              
              $
              1,698,000
              
              $
              (2,770,000
              )
                  (a)
              $
              4,259,000**Year
                  ended December 31, 2003**Reserve
                  deducted in the balance sheet from the assets to which it
                  appliesAllowance
                  for doubtful accounts
              
              $
              3,172,000
              
              $
              3,327,000
              
              $
              (1,168,000
              )
              $
              5,331,000
 
 
 (a)
            Deduction
                of $2.8 million in 2004 includes a $1.0 million effect from the April
                2004
                sale of a majority interest in Titan
                Europe.   S-1