UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549














FORM
      10-K




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





For
      the fiscal year ended December 31,
2008


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 xNon-accelerated
      filer o (Do
      not check if a smaller reporting company)
            Smaller
      reporting company 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 approximately $636  million based upon the closing
price of the common stock on the New York Stock Exchange on June 30,
2008.





As of
February 23, 2009, a total of 35,171,524 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 14,
2009.





TITAN
INTERNATIONAL, INC.


Index to
Annual Report on Form 10-K





Part
      I.
              
              PageItem 1.
              Business
              3-9Item 1A.
              Risk
      Factors
              10Item 1B.
              Unresolved
      Staff Comments
              10Item 2.
              Properties
              11Item 3.
              Legal
      Proceedings
              11Item 4.
              Submission
      of Matters to a Vote of Security Holders.
              11Part
      II.Item 5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              12Item 6.
              Selected
      Financial Data
              14Item 7.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              15-35Item 7A.
              Quantitative
      and Qualitative Disclosures about Market Risk
              36Item 8.
              Financial
      Statements and Supplementary Data
              36Item 9.
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
              36Item 9A.
              Controls
      and Procedures
              36Item 9B.
              Other
      Information
              36Part
      III.Item 10.
              Directors,
      Executive Officers and Corporate Governance
              37Item 11.
              Executive
      Compensation
              37Item 12.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              38Item 13.
              Certain
      Relationships and Related Transactions, and Director
      Independence
              38Item 14.
              Principal
      Accounting Fees and Services
              38Part
      IV.Item 15.
              Exhibits,
      Financial Statement Schedules
              39Signatures
              40Exhibit
      Index
              41


2


PART I


ITEM
1 – BUSINESS





INTRODUCTION


Titan
International, Inc. and its subsidiaries (Titan or the Company) hold the unique
position of manufacturing both wheels and tires for its target
markets.  As a leading manufacturer in the off-highway industry, Titan
produces a broad range of specialty products to meet the specifications of
original equipment manufacturers (OEMs) and aftermarket customers in the
agricultural, earthmoving/construction and consumer markets.  Titan’s
earthmoving/ construction market includes wheels and tires supplied to the U.S.
government, while the consumer market includes products for all-terrain vehicles
(ATVs) and recreational/utility trailers.





As one of
the few companies dedicated to off-highway wheel and tire products, Titan’s
engineering and manufacturing resources are focused on designing quality
products that address the real-life concerns of our end-users.  Titan’s
team of experienced and up-and-coming engineers continually work on new and
improved engineered products that evolve with today’s applications for the
off-highway wheel and tire markets.





·
            Giant
      Mining Products


In 2008,
Titan entered the giant off-the-road (OTR) earthmoving market in a big way with
the introduction of its giant mining tires and wheels, the largest in the
world.  Titan’s giant mining products include the “Big Daddy” giant
mining tire, which is approximately 13 feet tall and weighs in at approximately
12,500 pounds.  To enter the giant OTR arena, the Company invested in
a large capital expansion project at its Bryan, Ohio, location.  Titan
continues to add giant OTR capacity as the Company brings new equipment
online.





·
            Market
      Sales


In 2008,
Titan’s agricultural market sales represented 70% of net sales, the
earthmoving/construction market represented 27% and the consumer market
represented 3% 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 27 to the consolidated
financial statements of Titan, included in Item 8 herein.




COMPETITIVE
STRENGTHS


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





·
            Strong
      Market Position


Titan’s
ability to offer a broad range of specialized wheels, tires and assemblies has
resulted in the Company’s strong position in the domestic off-highway
market.  Through a diverse dealer network, the Company is able to
reach an increasing number of customers in the aftermarket and build Titan’s
image and brand recognition.  The Company’s acquisition of the
Goodyear Farm Tire brand in North America contributes to overall visibility and
customer confidence.  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, many of which are used in custom
processes.





·
            Long-Term
      Core Customer Relationships


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




3


BUSINESS
STRATEGY


Titan’s
business strategy is to continue its growth into the giant OTR market, increase
its presence in the tire aftermarket, continue to improve operating
efficiencies, maintain emphasis on new product development and explore possible
additional strategic acquisitions.





·
            Giant
      Mining Tire Product


In May
2007, Titan’s Board of Directors approved funding for the Company to increase
OTR mining tire production capacity to include giant mining
tires.  These giant tires are in short supply in the mining industry
and offer an opportunity for improved margins and greater demand.  The
“Big Daddy” giant tire is approximately 13 feet tall and weighs in at
approximately 12,500 pounds.  The Company began start-up production of
these giant mining tires in July 2008.  Titan continues to add giant
OTR tire capacity as the Company brings new equipment online.





·
            Increase
      Aftermarket Tire Business


The
Company has concentrated on increasing its presence in the tire aftermarket,
which tends to be somewhat less cyclical than the OEM market.  The
aftermarket also offers the potential for higher profit margins and is larger in
most cases.





·
            Improve
      Operating Efficiencies


The
Company continually works to improve the operating efficiency of its assets and
manufacturing facilities.  Titan integrates each facility’s strength,
which may include 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 its manufacturing
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.  These
value-added services enhance Titan’s relationships with its
customers.  The Company tests new designs and technologies and
develops methods of manufacturing to improve product quality and
performance.  Titan’s engineers recently introduced designs for giant
mining wheels and tires, which went into start-up production in second quarter
2008.  These giant tires employ an innovative steel radial
construction technology, new to the OTR tire industry, to enhance performance
and durability.  Titan’s engineers are also working on a new 15-degree
tire and wheel design for OTR and farm radial assemblies to improve tire and
wheel life.





·
            Explore
      Additional Strategic Acquisitions


The
Company’s expertise in the manufacture of off-highway wheels and tires 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 OTR ASSETS


On July
31, 2006, Titan Tire Corporation of Bryan, a subsidiary of the Company, acquired
the OTR tire assets of Continental Tire North America, Inc. (Continental) in
Bryan, Ohio.  Titan Tire Corporation of Bryan purchased the assets of
Continental’s tire facility for approximately $53 million in cash
proceeds.  The assets purchased included plant, property and equipment
located in Bryan, Ohio, inventory and other current assets.  The
acquisition included an agreement to use the General trademark on OTR
tires.




4




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 and to
the aftermarket through independent distributors, equipment dealers and Titan’s
own distribution centers.  The wheels and rims range in diameter from
9 to 54 inches with the 54-inch 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
approximately 1 foot to approximately 7 foot in outside diameter and from 5 to
44 inches in width.  The Company offers the added value of delivering
a complete wheel and tire assembly to customers.





EARTHMOVING/CONSTRUCTION
MARKET


The
Company manufactures rims, wheels and tires for various types of OTR
earthmoving, mining, military and construction equipment, including skid steers,
aerial lifts, cranes, graders and levelers, scrapers, self-propelled shovel
loaders, articulated dump trucks, load transporters, haul trucks and backhoe
loaders.  The earthmoving/construction market is often referred to as
OTR, an acronym for off-the-road.  The Company provides OEM and
aftermarket customers with a broad range of earthmoving/construction wheels
ranging in diameter from 20 to 63 inches and in weight from 125 pounds to 7,000
pounds.  The 63-inch diameter wheel is the largest manufactured in
North America for the earthmoving/construction market. Titan’s
earthmoving/construction tires range from approximately 3 feet to approximately
13 feet in outside diameter and in weight from 50 pounds to 12,500
pounds.  The Company offers the added value of wheel and tire assembly
for certain applications in the earthmoving/construction market.





CONSUMER
MARKET


Titan
builds a variety of products for ATVs, turf, golf car and trailer
applications.  Consumer wheels and rims range from 8 to 16 inches 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, which improves tread
durability.  Titan’s sales in the consumer market include sales to
Goodyear, which include an off-take/mixing agreement.  This agreement
includes mixed stock, which is a prepared rubber compound used in tire
production.  For the domestic boat, recreational and utility trailer
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 assembly for the consumer market.







MARKET
      SALESYear
      ended December 31,(Amounts
      in thousands)
                
                2008
                
                
                2007
                
                
                2006%
      of Total
                
                
                
                
                
                %
      of Total
                
                
                
                
                
                %
      of TotalNet Sales
                
                
                Net Sales
                
                
                Net Sales
                
                
                Net Sales
                
                
                Net Sales
                
                
                Net SalesAgricultural
                
                $
                729,895
                
                
                
                70
                %
                
                $
                515,642
                
                
                
                62
                %
                
                $
                421,096
                
                
                
                62
                %Earthmoving/construction
                
                
                281,008
                
                
                
                27
                %
                
                
                277,206
                
                
                
                33
                %
                
                
                183,357
                
                
                
                27
                %Consumer
                
                
                25,797
                
                
                
                3
                %
                
                
                44,173
                
                
                
                5
                %
                
                
                75,001
                
                
                
                11
                %$
                1,036,700
                
                
                
                
                
                
                $
                837,021
                
                
                
                
                
                
                $
                679,454





MARKET
CONDITIONS OUTLOOK


Titan
experienced strong demand for its agricultural and earthmoving/construction
products throughout 2008.  The continued strength of the agricultural
market, resulting from high commodity prices and a gradual increase in the use
of biofuels, contributed to the increase in sales.  Tire shortages and
strong demand in mining products such as oil, iron ore and aggregates
contributed to the rise in earthmoving/construction product
demand.  These trends are expected to continue through the first part
of 2009.  However, the housing market decline, recession, and banking
and credit crisis are affecting Titan’s customers.  The degree to
which these items will affect Titan’s customers in 2009 and the future is
difficult to estimate because of the uncertainty in the resolution of these
financial conditions.





In May
2007, Titan’s Board of Directors approved funding for the Company to increase
giant OTR mining tire production capacity to include 57-inch and 63-inch giant
(“Big Daddy”) OTR radial tires.  These tires have an outside diameter
of approximately 12 feet and 13 feet, respectively.  The Company began
start-up production of these giant mining tires in July 2008.  Titan
continues to add giant OTR tire capacity at the Bryan, Ohio, facility as the
Company brings new equipment online.


5


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 carcass.  The
uncured carcass 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
established based on each customer’s requirements and products are received by
the customer on a just-in-time basis.





·
            Quality
      Control


The
Company is ISO certified at all five main manufacturing facilities located in
Bryan, Ohio; Des Moines, Iowa; Freeport, Illinois; Quincy, Illinois; and
Saltville, Virginia.  The ISO 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
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.







6


CAPITAL
EXPENDITURES


Capital
expenditures for 2008, 2007 and 2006 were $80.0 million, $38.0 million and $8.3
million, respectively.  The 2008 capital expenditures include
approximately $60 million for the giant OTR project and the 2007 capital
expenditures include approximately $22 million for the giant OTR
project.  The remaining capital expenditures in 2008 and 2007 were
used primarily for updating manufacturing equipment, expanding manufacturing
capacity and for further automation at the Company’s
facilities.  Capital expenditures for 2009 are forecasted to be
approximately $25 million to $35 million.  Approximately $15 million
to $20 million of this amount may be spent on the giant OTR project and the
remainder is anticipated to be used to enhance the Company’s existing facilities
and manufacturing capabilities.





PATENTS,
TRADEMARKS AND ROYALTIES


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.




The
Company pays a royalty relating to a license agreement with The Goodyear Tire
& Rubber Company to manufacture and sell certain off-highway tires in North
America.  Under this agreement, royalty trademark payments would cease
immediately if Titan discontinued using the Goodyear trademark.  Titan
currently plans to continue using the Goodyear trademark until circumstances
require a change.  The current term of the agreement with Goodyear is
for the next four years.





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 geographic 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 distribution network consisting of
eight facilities in 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
historically tend to experience higher demand in the first and second
quarters.  These markets are affected by mining, building and economic
conditions.





RESEARCH,
DEVELOPMENT AND ENGINEERING


The
Company’s research, development and engineering staff tests original designs and
technologies and develops new manufacturing methods to improve product
performance.  These services enhance the Company’s relationships with
customers. Titan’s engineers recently introduced designs for giant OTR tires,
which went into start-up production in second quarter 2008.  These
giant tires employ an innovative steel radial construction technology, new to
the OTR tire industry, to enhance performance and durability.  Titan’s
engineers are also working on a new 15-degree tire and wheel design for OTR and
farm radial assemblies.  This revolutionary technology will simplify
maintenance to minimize downtime, provide better air retention, simplify
mounting and increase service life.  The Company continues to work on
sidewall improvements including the LSW (low sidewall) tire design.




7


CUSTOMERS


Titan’s
10 largest customers accounted for approximately 51% of net sales for the year
ended December 31, 2008, compared to approximately 47% for the year ended
December 31, 2007.  Net sales to Deere & Company in Titan’s
agricultural, earthmoving/construction and consumer markets combined represented
approximately 22% and 17% of the Company’s consolidated revenues for the years
ended December 31, 2008 and 2007, respectively.  Net sales to CNH
Global N.V. in Titan’s three markets represented approximately 12% and 11% of
the Company’s consolidated revenues for the years ended December 31, 2008 and
2007, respectively.  No other customer accounted for more than 10% of
the Company’s net sales in 2008 or 2007.  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 Titan’s business, the Company believes that
its diverse product mix and customer base may minimize a longer-term impact
caused by any such loss.





ORDER
BACKLOG


As of
January 31, 2009, Titan estimates $201 million in firm orders compared to $208
million at January 31, 2008, for the Company’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.




INTERNATIONAL
OPERATIONS
 In
accordance with Statement of Financial Accounting Standards (SFAS) No. 115, the
Company records the Titan Europe Plc investment as an available-for-sale
security and reports the investment at fair value, with unrealized gains and
losses excluded from earnings and reported as a separate component of
comprehensive income in stockholders’ equity.  Should the fair value
decline below the cost basis, the Company would be required to determine if this
decline is other than temporary.  If the decline in fair value were
judged to be other than temporary, an impairment charge would be
recorded.  The Company’s stock ownership interest in Titan Europe Plc
was 17.2% at December 31, 2008 and 17.3% at December 31, 2007.  The
fair value of the Company’s investment in Titan Europe Plc was $2.6 million and
$34.5 million at December 31, 2008 and 2007.  Titan Europe Plc is
publicly traded on the AIM market in London, England.




EMPLOYEES


At
December 31, 2008, the Company employed approximately 2,900 people in the United
States.  Approximately 49% of the Company’s employees in the United
States were covered by collective bargaining agreements.  In December
2005, the workers at the Des Moines, Iowa, and Freeport, Illinois, facilities
ratified new labor agreements through November 2010.  The workers at
the Bryan, Ohio, facility ratified a new labor agreement in July 2006 with the
same November 2010 expiration date.  The Company believes employee
relations are generally good.





EXPORT
SALES


The
Company had total aggregate export sales of approximately $128.8 million, $77.0
million and $57.4 million, for the years ended December 31, 2008, 2007 and 2006,
respectively.





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.




8


ENVIRONMENTAL
LAWS AND REGULATIONS


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 Carlisle Companies
Incorporated, GKN Wheels, Ltd., Topy Industries, Ltd. and certain other foreign
competitors.  Significant competitors in the off-highway tire market
include Bridgestone/Firestone, Carlisle Companies Incorporated, Michelin 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.





NEW
YORK STOCK EXCHANGE CERTIFICATION


The
Company submitted to the New York Stock Exchange during fiscal 2008 the Annual
CEO Certification required by Section 303A.12(a) of the New York Stock Exchange
Listed Company Manual.





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:




·
            Corporate
      Governance Policy




·
            Business
      Conduct Policy




·
            Audit
      Committee Charter




·
            Compensation
      Committee Charter




·
            Nominating/Corporate
      Governance Committee Charter





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


9


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 and related interest expense 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, which are
      primarily steel and rubber.




·
            The
      Company relies on a limited number of suppliers for key raw materials,
      which consist primarily of steel and
  rubber.




·
            Fluctuations
      in energy and transportation costs may affect Titan’s operating costs and
      the demand for the Company’s
products.




·
            The
      Company’s revenues are seasonal due to Titan’s dependence on agricultural,
      construction and recreational industries, which are seasonal and typically
      have lower sales in the second half of the
year.




·
            The
      Company may be adversely affected by changes in government regulations and
      policies, especially those related to farm and ethanol subsidies and those
      related to infrastructure
construction.




·
            The
      Company is subject to 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 with Titan’s ten
      largest customers historically accounting for approximately 50% of
      sales.




·
            The
      Company’s giant OTR project may experience unforeseen obstacles, which may
      delay the project, increase costs and adversely affect Titan’s financial
      results.




·
            The
      Company faces substantial competition from domestic and international
      companies, some of which operate in low wage
  markets.




·
            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.




·
            Acquisitions
      may require significant resources and/or result in significant
      unanticipated losses, costs or liabilities for the
  Company.




·
            The
      Company may be subject to product liability
  claims.




·
            The
      Company is subject to risks associated with environmental laws and
      regulations.




·
            The
      Company along with its customers and suppliers may be affected by the
      current banking and credit crisis.






ITEM
1B – UNRESOLVED STAFF COMMENTS





None.


10


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
                SegmentDes
      Moines, Iowa
                
                
                2,047,000
                
                
                
                
                Manufacturing,
      distribution
                All
      segmentsFreeport,
      Illinois
                
                
                1,202,000
                
                
                
                211,000
                
                Manufacturing,
      distribution
                All
      segmentsQuincy,
      Illinois
                
                
                1,134,000
                
                
                
                
                
                Manufacturing,
      distribution
                All
      segmentsBrownsville,
      Texas
                
                
                993,000
                
                
                
                
                
                Storage
                See
      note(a)Bryan,
      Ohio
                
                
                740,000
                
                
                
                
                
                Manufacturing,
      distribution
                Earthmoving/ConstructionWalcott,
      Iowa
                
                
                378,000
                
                
                
                
                
                Storage
                See
      note(a)Greenwood,
      S. Carolina
                
                
                110,000
                
                
                
                
                
                Storage
                See
      note(a)Dublin,
      Georgia
                
                
                20,000
                
                
                
                
                
                Distribution
                All
      segmentsSaltville,
      Virginia
                
                
                14,000
                
                
                
                245,000
                
                Manufacturing,
      distribution
                Earthmoving/ConstructionNatchez,
      Mississippi
                
                
                
                
                
                
                1,203,000
                
                Storage
                See
      note(a)Pendergrass,
      Georgia
                
                
                
                
                
                
                120,000
                
                Distribution
                All
      segmentsElko,
      Nevada
                
                
                
                
                
                
                4,000
                
                Distribution
                Earthmoving/Construction





(a)
            The
      Brownsville, Greenwood and Natchez facilities are currently being used for
      storage.  The Company’s facilities in Brownsville, Texas;
      Greenwood, South Carolina; Natchez, Mississippi, and Walcott, Iowa, are
      not in operation.  The Company has a contract for sale on the
      Walcott building.





The
Company considers each of its facilities to be in good 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 restart manufacturing
at the storage facilities described in note (a) above.








ITEM
3 – LEGAL PROCEEDINGS





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








ITEM
4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





No
matters were submitted to the vote of security holders during the fourth quarter
of 2008.


11


PART II




ITEM
      5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
      ISSUER PURCHASES OF EQUITY
SECURITIES





The
Company’s common stock is traded on the New York Stock Exchange (NYSE) under the
symbol TWI.  Titan executed a five-for-four stock split effective
August 15, 2008, for stockholders of record on July 31, 2008.  All
share and per share data, except shares authorized, have been adjusted to
reflect the effect of the stock split for all periods presented.  On
February 23, 2009, there were approximately 600 holders of record of
Titan common stock and an estimated 2,400 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.




2008
                  
                  High
                  
                  
                  Low
                  
                  
                  Dividends
                    DeclaredFirst
      quarter *
                  
                  $
                  27.86
                  
                  
                  $
                  19.36
                  
                  
                  $
                  0.004Second
      quarter *
                  
                  
                  36.31
                  
                  
                  
                  24.53
                  
                  
                  
                  0.004Third
      quarter *
                  
                  
                  37.77
                  
                  
                  
                  19.78
                  
                  
                  
                  0.005Fourth
      quarter
                  
                  
                  21.10
                  
                  
                  
                  5.40
                  
                  
                  
                  0.0052007First
      quarter *
                  
                  $
                  20.96
                  
                  
                  $
                  15.92
                  
                  
                  $
                  0.004Second
      quarter *
                  
                  
                  27.88
                  
                  
                  
                  20.26
                  
                  
                  
                  0.004Third
      quarter *
                  
                  
                  26.60
                  
                  
                  
                  18.96
                  
                  
                  
                  0.004Fourth
      quarter *
                  
                  
                  28.23
                  
                  
                  
                  19.30
                  
                  
                  
                  0.004





*
Adjusted to reflect the five-for-four stock split that took place in
2008.


12


PERFORMANCE
COMPARISON GRAPH


The
following performance graph compares cumulative total return for the Company’s
common stockholders over the past five years against the cumulative total return
of the Standard & Poor’s 600 Construction and Farm Machinery and Heavy
Trucks Index, and against the Standard & Poor’s 500 Stock
Index.  The graph depicts the value on December 31, 2008, of a $100
investment made on December 31, 2003, in Company common stock and each of the
other two indices, with all dividends reinvested.  The Company’s
common stock is currently traded on the NYSE under the symbol TWI.
















Fiscal
      Year Ended December 31,2003
                                                                                
                                                                                
                                                                                2004
                                                                                
                                                                                
                                                                                2005
                                                                                
                                                                                
                                                                                2006
                                                                                
                                                                                
                                                                                2007
                                                                                
                                                                                
                                                                                2008Titan
      International, Inc.
                                                                                
                                                                                $
                                                                                100.00
                                                                                
                                                                                
                                                                                $
                                                                                494.59
                                                                                
                                                                                
                                                                                $
                                                                                565.78
                                                                                
                                                                                
                                                                                $
                                                                                661.61
                                                                                
                                                                                
                                                                                $
                                                                                1,027.09
                                                                                
                                                                                
                                                                                $
                                                                                339.22S&P
      600 Const. & Farm Machinery Index
                                                                                
                                                                                
                                                                                100.00
                                                                                
                                                                                
                                                                                
                                                                                134.03
                                                                                
                                                                                
                                                                                
                                                                                170.38
                                                                                
                                                                                
                                                                                
                                                                                229.76
                                                                                
                                                                                
                                                                                
                                                                                289.55
                                                                                
                                                                                
                                                                                
                                                                                182.43S&P
      500 Index
                                                                                
                                                                                
                                                                                100.00
                                                                                
                                                                                
                                                                                
                                                                                110.88
                                                                                
                                                                                
                                                                                
                                                                                116.33
                                                                                
                                                                                
                                                                                
                                                                                134.70
                                                                                
                                                                                
                                                                                
                                                                                142.10
                                                                                
                                                                                
                                                                                
                                                                                89.53


13


ITEM
6 – SELECTED FINANCIAL DATA





The
selected financial data presented below, as of and for the years ended December
31, 2008, 2007, 2006, 2005, and 2004, 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 Management’s Discussion and Analysis of Financial Condition
and Results of Operations and our audited consolidated financial statements and
notes thereto.





(All
amounts in thousands, except per share data)


Year
      Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2006
                    
                    
                    2005
                    
                    
                    2004Net
      sales
                    
                    $
                    1,036,700
                    
                    
                    $
                    837,021
                    
                    
                    $
                    679,454
                    
                    
                    $
                    470,133
                    
                    
                    $
                    510,571Gross
      profit
                    
                    
                    139,714
                    
                    
                    
                    84,131
                    
                    
                    
                    72,778
                    
                    
                    
                    64,210
                    
                    
                    
                    79,500Income
      from operations
                    
                    
                    73,321
                    
                    
                    
                    24,838
                    
                    
                    
                    22,011
                    
                    
                    
                    11,999
                    
                    
                    
                    33,322Noncash
      Titan Europe Plc charge
                    
                    
                    (37,698
                    )
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Noncash
      debt conversion charge
                    
                    
                    0
                    
                    
                    
                    (13,376
                    )
                    
                    
                    0
                    
                    
                    
                    (7,225
                    )
                    
                    
                    0Income
      (loss) before income taxes
                    
                    
                    23,010
                    
                    
                    
                    (3,884
                    )
                    
                    
                    8,574
                    
                    
                    
                    (2,885
                    )
                    
                    
                    15,215Net
      income (loss)
                    
                    
                    13,337
                    
                    
                    
                    (7,247
                    )
                    
                    
                    5,144
                    
                    
                    
                    11,042
                    
                    
                    
                    11,107Net
      income (loss) per share – basic *
                    
                    
                    .39
                    
                    
                    
                    (.23
                    )
                    
                    
                    .21
                    
                    
                    
                    .49
                    
                    
                    
                    .50Net
      income (loss) per share – diluted *
                    
                    
                    .38
                    
                    
                    
                    (.23
                    )
                    
                    
                    .21
                    
                    
                    
                    .48
                    
                    
                    
                    .49Dividends
      declared per common share *
                    
                    
                    .018
                    
                    
                    
                    .016
                    
                    
                    
                    .016
                    
                    
                    
                    .016
                    
                    
                    
                    .016* Adjusted to reflect the
      five-for-four stock split that took place in 2008.


(All
      amounts in thousands)
                
                As
      of December 31,2008
                
                
                2007
                
                
                2006
                
                
                2005
                
                
                2004Working
      capital
                
                $
                232,564
                
                
                $
                239,985
                
                
                $
                247,009
                
                
                $
                157,984
                
                
                $
                114,898Current
      assets
                
                
                369,199
                
                
                
                327,765
                
                
                
                309,933
                
                
                
                206,167
                
                
                
                154,668Total
      assets
                
                
                654,782
                
                
                
                590,495
                
                
                
                585,126
                
                
                
                440,756
                
                
                
                354,166Long-term
      debt (a)
                
                
                200,000
                
                
                
                200,000
                
                
                
                291,266
                
                
                
                190,464
                
                
                
                169,688Stockholders’
      equity
                
                
                279,188
                
                
                
                272,522
                
                
                
                187,177
                
                
                
                167,813
                
                
                
                106,881(a)Excludes
      amounts due within one year and classified as a current
      liability.


14


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:




·
            Anticipated
      trends in the Company’s business




·
            Future
      expenditures for capital projects




·
            The
      Company’s ability to continue to control costs and maintain
      quality




·
            Ability
      to meet financial covenants and conditions of loan
    agreements




·
            The
      Company’s business strategies, including its intention to introduce new
      products




·
            Expectations
      concerning the performance and success of the Company’s existing and new
      products




·
            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:




·
            The
      effect of the current banking and credit crisis on the Company and its
      customers and suppliers




·
            Changes
      in the Company’s end-user markets as a result of world economic or
      regulatory influences




·
            Changes
      in the marketplace, including new products and pricing changes by the
      Company’s competitors




·
            Availability
      and price of raw materials




·
            Levels
      of operating efficiencies




·
            Actions
      of domestic and foreign governments




·
            Results
      of investments




·
            Fluctuations
      in currency translations




·
            Ability
      to secure financing at reasonable
terms





Any
changes in such factors could lead to significantly different
results.  The Company cannot provide any assurance that the
assumptions referred to in the forward-looking statements or otherwise are
accurate or will prove to transpire.  Any assumptions that are
inaccurate or do not prove to be correct could have a material adverse effect on
the Company’s ability to achieve the results as indicated in forward-looking
statements.  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.


15


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 AGCO Corporation, Caterpillar Inc., CNH Global N.V., Deere
& Company 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
following table provides highlights for the year ended December 31, 2008,
compared to 2007 (amounts
in thousands):


2008
                  
                  
                  2007
                  
                  
                  % IncreaseNet
      sales
                  
                  $
                  1,036,700
                  
                  
                  $
                  837,021
                  
                  
                  
                  24
                  %Income
      from operations
                  
                  
                  73,321
                  
                  
                  
                  24,838
                  
                  
                  
                  195
                  %Net
      income (loss)
                  
                  
                  13,337
                  
                  
                  
                  (7,247
                  )
                  
                  ─





The
Company recorded sales of $1,036.7 million for 2008, which were 24% higher than
the previous year sales of $837.0 million.  The record sales level was
attributed to exceptionally strong demand in the Company’s agricultural market,
which reported higher sales of approximately 42% for 2008 when compared to the
previous year.





Income
from operations was $73.3 million for 2008, compared to $24.8 million for
previous year.  The income from operations reflected a significant
improvement, as the Company continues its efforts to improve efficiencies and
align sale prices with production cost.  Titan’s net income was $13.3
million for 2008 as compared to a net loss of $(7.2) million in
2007.  Basic earnings per share were $.39 in 2008, compared to loss
per share of $(.23) in 2007.





RECENT
DEVELOPMENTS


Titan
Europe Plc additional share purchase


In
January 2009, the Company purchased additional shares of Titan Europe Plc,
resulting in a 22.9% ownership position.  As a result of this higher
ownership position, the Company will account for its interest in Titan Europe
Plc as an equity method investment in accordance with APB 18, “The Equity Method
of Accounting for Investments in Common Stock,” going forward.





Revolving
credit facility amendment & restatement


On
January 30, 2009, Titan International, Inc. amended and restated its revolving
credit facility (credit facility) with Bank of America, N.A.  The
amendment included a multi-year extension that extended the credit facility
termination date to January 2012 from the previous October 2009
date.  The amendment created an accordion feature within the credit
facility that set the initial loan availability at $150 million with the ability
to request increases up to a maximum availability of $250
million.  The amendment adjusted the borrowing rates within a pricing
grid that includes a minimum 11⁄2% LIBOR rate.




16




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 SalesYear
      ended December 31,2008
                  
                  
                  2007
                  
                  
                  2006Net
      sales
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Cost
      of sales
                  
                  
                  86.5
                  
                  
                  
                  89.9
                  
                  
                  
                  89.3Gross
      profit
                  
                  
                  13.5
                  
                  
                  
                  10.1
                  
                  
                  
                  10.7Selling,
      general and administrative expenses
                  
                  
                  5.5
                  
                  
                  
                  6.4
                  
                  
                  
                  6.7Royalty
      expense
                  
                  
                  0.9
                  
                  
                  
                  0.7
                  
                  
                  
                  0.7Income
      from operations
                  
                  
                  7.1
                  
                  
                  
                  3.0
                  
                  
                  
                  3.3Interest
      expense
                  
                  
                  (1.5
                  )
                  
                  
                  (2.3
                  )
                  
                  
                  (2.5
                  )Noncash
      Titan Europe Plc charge
                  
                  
                  (3.6
                  )
                  
                  
                  0.0
                  
                  
                  
                  0.0Noncash
      convertible debt conversion charge
                  
                  
                  0.0
                  
                  
                  
                  (1.6
                  )
                  
                  
                  0.0Other
      income, net
                  
                  
                  0.2
                  
                  
                  
                  0.4
                  
                  
                  
                  0.5Income
      (loss) before income taxes
                  
                  
                  2.2
                  
                  
                  
                  (0.5
                  )
                  
                  
                  1.3Provision
      for income taxes
                  
                  
                  0.9
                  
                  
                  
                  0.4
                  
                  
                  
                  0.5Net
      income (loss)
                  
                  
                  1.3
                  %
                  
                  
                  (0.9
                  )%
                  
                  
                  0.8
                  %


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):


2008
                
                
                2007
                
                
                2006Agricultural
                
                $
                729,895
                
                
                $
                515,642
                
                
                $
                421,096Earthmoving/Construction
                
                
                281,008
                
                
                
                277,206
                
                
                
                183,357Consumer
                
                
                25,797
                
                
                
                44,173
                
                
                
                75,001Total
                
                $
                1,036,700
                
                
                $
                837,021
                
                
                $
                679,454





17


STOCK
SPLIT


In June
2008, Titan’s Board of Directors approved a five-for-four stock split with a
record date of July 31, 2008, and a payable date of August 15,
2008.  The Company gave five shares for every four shares held as of
the record date.  Stockholders received one additional share for every
four shares owned as of the record date and received cash in lieu of fractional
shares.  All share and per share data, except shares authorized, have
been adjusted to reflect the effect of the stock split for all periods
presented.





GIANT
OTR PROJECT


In May
2007, Titan’s Board of Directors approved funding for the Company to increase
giant OTR mining tire production capacity to include 57-inch and 63-inch giant
radial tires (the “Giant OTR Project”).  The Company began start-up
production of these giant mining tires in July 2008.





ACQUISITION
OF OTR ASSETS


On July
31, 2006, Titan Tire Corporation of Bryan, a subsidiary of the Company, acquired
the off-the-road (OTR) tire assets of Continental Tire North America, Inc.
(Continental) in Bryan, Ohio.  Titan Tire Corporation of Bryan
purchased the assets of Continental’s tire facility for approximately $53
million in cash proceeds.  The assets purchased included plant,
property and equipment located in Bryan, Ohio, inventory and other current
assets.  The acquisition included an agreement to use the General
trademark on OTR tires.  In addition, the Company recorded intangibles
related to the acquisition as noncurrent assets and assumed warranty
liabilities.  This acquisition expanded Titan’s product offering into
larger earthmoving, construction and mining tires and added the manufacturing
capacity of the Bryan, Ohio, facility.




SENIOR
UNSECURED CONVERTIBLE NOTES CONVERSION


In
January 2007, the Company filed a registration statement relating to an offer to
the holders of its 5.25% senior unsecured convertible notes due 2009 to convert
their notes into Titan’s common stock at an increased conversion rate (the
“Offer”).  Per the Offer, each $1,000 principal amount of notes was
convertible into 81.0000 shares of common stock, which is equivalent to a
conversion price of approximately $12.35 per share. Prior to the Offer, each
$1,000 principal amount of notes was convertible into 74.0741 shares of common
stock, which was equivalent to a conversion price of approximately $13.50 per
share.





The
registration statement relating to the shares of common stock to be offered was
declared effective February 2007.  In March 2007, the Company
announced 100% acceptance of the conversion offer and the $81,200,000 of
accepted notes were converted into 6,577,200 shares of Titan common
stock.  Titan recognized a noncash charge of $13.4 million in
connection with this exchange in accordance with SFAS No. 84, “Induced
Conversions of Convertible Debt.”




18





CRITICAL
ACCOUNTING ESTIMATES


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.





Inventories


Inventories
are valued at the lower of cost or market.  Cost is determined using
the first-in, first-out (FIFO) method in 2008 for approximately 78% of
inventories and the last-in, first-out (LIFO) method for approximately 22% of
inventories.  The major rubber material inventory and related
work-in-process and their finished goods are accounted for under the FIFO
method.  The major steel material inventory and related
work-in-process and their finished goods are accounted for under the LIFO
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 experience change, adjustments to the estimated
provisions would be necessary.





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,
2008 and 2007.  Based on a discounted cash flow method, the Company’s
computation showed no impairment at December 31, 2008.  See Note 8 for
additional information.  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.




Valuation
of Investment Accounted for as Available-for-Sale Security
 The
Company has an investment in Titan Europe Plc that was valued at $2.6 million as
of December 31, 2008, representing a 17.2% ownership position, at that
time.  Titan Europe Plc is publicly traded on the AIM market in
London, England.  This investment is recorded as “Investment in Titan
Europe Plc” on the consolidated balance sheet.  In accordance with
SFAS No. 115, “Accounting for Certain Investments in Debt and Equity
Securities,” the Company records the Titan Europe Plc investment as an
available-for-sale security and reports this investment at fair value, with
unrealized gains and losses excluded from earnings and reported in a separate
component of stockholders’ equity, net of tax.  Should the fair value
decline below the cost basis, the Company would be required to determine if this
decline is other than temporary.  If the decline in fair value were
judged to be other than temporary, an impairment charge would be
recorded.  Declared dividends on this investment are recorded in
income as a component of other income.
  The
December 31, 2008, fair value of $2.6 million was below the Company’s cost basis
of $40.3 million.  The Company recorded an other than temporary
impairment charge of $37.7 million at year end 2008.  The impairment
charge was due to a substantial decline in Titan Europe Plc’s publicly quoted
price on the AIM market in London, England at year end 2008.


Recent
Development


In
January 2009, the Company purchased additional shares of Titan Europe Plc,
resulting in a 22.9% ownership position.  As a result of this higher
ownership position, the Company will account for its interest in Titan Europe
Plc as an equity method investment accordance with APB 18, “The Equity Method of
Accounting for Investments in Common Stock,” going forward.




19


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 its deferred
tax asset positions in accordance with SFAS No. 109, “Accounting for Income
Taxes.”





Asset
and Business Acquisitions


The
allocation of purchase price for asset and business acquisitions requires
management estimates and judgment as to expectations for future cash flows of
the acquired assets and business and the allocation of those cash flows to
identifiable intangible assets in determining the estimated fair value for
purchase price allocations.  If the actual results differ from the
estimates and judgments used in determining the purchase price allocations,
impairment losses could occur relating to any intangibles recorded in the
acquisition.  To aid in establishing the value of any intangible
assets at the time of acquisition, the Company typically engages a professional
appraisal firm.





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 three frozen defined benefit pension
plans and one defined benefit plan that purchased a final annuity settlement in
2002.  Titan expects to contribute approximately $1 million to these
frozen defined benefit pension plans in 2009.  For more information
concerning these costs and obligations, see the discussion of the “Pensions” and
Note 21 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, 2008
                    
                    
                    2009Increase
                    
                    
                    Increase
                    
                    
                    IncreasePercentage
                    
                    
                    (Decrease)
                    
                    
                    (Decrease)
                    
                    
                    (Decrease)Assumptions
                    
                    Change
                    
                    
                    PBO
      (a)
                    
                    
                    Equity
                    
                    
                    ExpensePensionDiscount rate
                    
                    
                    +/-.5
                    
                    
                    $
                    (4,244)/$4,617
                    
                    
                    $
                    4,244/$(4,617)
                    
                    
                    $
                    (242)/$256Expected return on
      assets
                    
                    
                    +/-.5
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    (290)/$290





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




20


FISCAL
YEAR ENDED DECEMBER 31, 2008, COMPARED TO FISCAL YEAR ENDED


DECEMBER
31, 2007





RESULTS
OF OPERATIONS


Highlights for the year
ended December 31, 2008, compared to 2007(amounts in
thousands):


2008
                      
                      
                      2007
                      
                      
                      % IncreaseNet
      sales
                      
                      $
                      1,036,700
                      
                      
                      $
                      837,021
                      
                      
                      
                      24
                      %Cost
      of sales
                      
                      
                      896,986
                      
                      
                      
                      752,890
                      
                      
                      
                      19
                      %Gross
      profit
                      
                      
                      139,714
                      
                      
                      
                      84,131
                      
                      
                      
                      66
                      %Gross
      profit percentage
                      
                      
                      13.5
                      %
                      
                      
                      10.1
                      %





Net
Sales


Net sales
for the year ended December 31, 2008, were $1,036.7 million compared to $837.0
million for the year ended December 31, 2007.  The large sales
improvement of $199.7 million, or 24%, for the year ended December 31, 2008, was
attributed to strong demand in the Company’s agricultural market, which reported
higher sales of approximately 42% for 2008 as compared to the previous
year.  Titan believes it has benefited in 2008 from a preliminary
ruling from the U.S. Department of Commerce, affirming that exporters of
Chinese-manufactured tires have been selling certain off-the-road tires in the
U.S.A. at less than normal value and received subsidies, resulting in duties
being imposed on certain imported tires.





Cost
of Sales and Gross Profit


Cost of
sales was $897.0 million for the year ended December 31, 2008, as compared to
$752.9 million in 2007.  The higher cost of sales resulted from the
record sales levels achieved in 2008.  Additional costs recorded
during the year related to expenses associated with hiring and training workers
to be utilized in giant OTR production, which were estimated to be approximately
$6 million for 2008.





Gross
profit for the year 2008 was $139.7 million, or 13.5% of net sales, compared to
$84.1 million, or 10.1% of net sales, for 2007.  The gross profit
margin for 2008 showed a significant improvement of over three percentage points
compared to the previous year, as the Company continues its efforts to improve
efficiencies and align sale prices with production cost.





Selling,
General and Administrative Expenses


Selling, general and
administrative expenses were as follows(amounts in
thousands):


2008
                    
                    
                    2007
                    
                    
                    % IncreaseSelling,
      general and administrative
                    
                    $
                    57,151
                    
                    
                    $
                    53,138
                    
                    
                    
                    8
                    %Percentage
      of net sales
                    
                    
                    5.5
                    %
                    
                    
                    6.3
                    %





Selling,
general and administrative (SG&A) expenses were $57.2 million, or 5.5% of
net sales, for the year ended December 31, 2008, as compared to $53.1 million,
or 6.3% of net sales, for 2007.  Research and development (R&D)
expenses, which are included in SG&A expenses, were $3.5 million and $1.7
million for the years ended December 31, 2008 and 2007,
respectively.  SG&A expense rose primarily as the result of higher
selling costs of approximately $3 million year over year.  SG&A
percentage of net sales improved nearly one percentage point due to the
Company’s SG&A expenses remaining relatively unchanged while sales achieved
record levels.





Royalty
Expense


Royalty expense was as
follows(amounts in
thousands):


2008
                  
                  
                  2007
                  
                  
                  % IncreaseRoyalty
      expense
                  
                  $
                  9,242
                  
                  
                  $
                  6,155
                  
                  
                  
                  50
                  %





The
Goodyear North American farm tire asset acquisition included a license agreement
with The Goodyear Tire & Rubber Company to manufacture and sell certain
off-highway tires in North America under the Goodyear name.  Royalty
expenses were $9.2 million for the year ended December 31, 2008, as compared to
$6.2 million in 2007.  The higher royalty expense was the result of
the strong sales in the agricultural segment.




21


Income
from Operations


Income from operations was
as follows(amounts in
thousands):


2008
                  
                  
                  2007
                  
                  
                  % IncreaseIncome
      from operations
                  
                  $
                  73,321
                  
                  
                  $
                  24,838
                  
                  
                  
                  195
                  %Percentage
      of net sales
                  
                  
                  7.1
                  %
                  
                  
                  3.0
                  %





Income
from operations for the year ended December 31, 2008, was $73.3 million, or 7.1%
of net sales, compared to $24.8 million, or 3.0% of net sales, in
2007.  Income from operations was affected by the items previously
discussed in the sales, cost of sales, SG&A and royalty line
items.





Interest
Expense


Interest expense was as
follows(amounts in
thousands):


2008
                  
                  
                  2007
                  
                  
                  % DecreaseInterest
      expense
                  
                  $
                  15,122
                  
                  
                  $
                  18,710
                  
                  
                  
                  (19
                  )%





Interest
expense for the year 2008 was $15.1 million compared to $18.7 million in
2007.  The reduction in interest costs was primarily the result of
capitalization of interest of $3.2 million related to the giant OTR project in
2008.  In 2007, the Company capitalized $0.4 million of interest costs
for the giant OTR project.




Noncash
Titan Europe Plc charge
 Noncash Titan Europe Plc
charge was as follows(amounts in
thousands):
 
 2008
                  
                  
                  2007
                  
                  
                  % IncreaseNoncash
      Titan Europe Plc charge
                  
                  $
                  (37,698
                  )
                  
                  $
                  0
                  
                  
                  
                  n/a
 
 The
unrealized loss on the Titan Europe Plc investment was $37.7
million.  The unrealized loss was due to a substantial decline in
Titan Europe Plc’s publicly quoted price on the AIM market in London, England at
year end 2008.  A noncash charge of $37.7 million was recorded at year
end December 31, 2008.


Noncash
Convertible Debt Conversion Charge


Noncash convertible debt
conversion charge was as follows(amounts in
thousands):


2008
                  
                  
                  2007
                  
                  
                  % DecreaseNoncash
      debt conversion charge
                  
                  $
                  0
                  
                  
                  $
                  13,376
                  
                  
                  
                  (100
                  )%





In March
2007, the Company converted $81.2 million of 5.25% senior convertible notes into
6,577,200 shares of Titan common stock.  Titan recognized a noncash
charge of $13.4 million in connection with this exchange in accordance with SFAS
No. 84, “Induced Conversions of Convertible Debt.”





Other
Income


Other income was as follows(amounts in
thousands):


2008
                  
                  
                  2007
                  
                  
                  % DecreaseOther
      income
                  
                  $
                  2,509
                  
                  
                  $
                  3,364
                  
                  
                  
                  (25
                  )%





Other
income was $2.5 million for the year ended December 31, 2008, as compared to
$3.4 million in 2007.  The major items included in other income
are:  (i) dividend income from the Titan Europe Plc investment was
$1.7 million and $1.8 million in 2008 and 2007, respectively, (ii) interest
income was $1.4 million and $2.7 million for the years ended December 31, 2008
and 2007, respectively, and (iii) other expense of $(0.6) million and $(1.1)
million in 2008 and 2007, respectively.  The reduction in interest
income was primarily the result of lower interest rates.





22




Income
Tax Expense
 Income taxes were as follows(amounts in
thousands):
 2008
                    
                    
                    2007
                    
                    
                    % IncreaseIncome
      taxes
                    
                    $
                    9,673
                    
                    
                    $
                    3,363
                    
                    
                    
                    188
                    %
 
 The
Company recorded an income tax expense of $9.7 million in 2008 and $3.4 million
in 2007.   The Company’s effective tax rate was 42.0% in 2008 and (87)% in
2007.  The Company’s 2007 income tax expense and rate differs from the
amount of income tax determined by applying the U.S. Federal income tax rate to
pre-tax income primarily as a result of the $13.4 million noncash charge taken
in connection with the Company’s convertible debt.  This noncash
charge was not deductible for income tax purposes.


Net
Income (Loss)


Net income (loss) was as
follows(amounts in
thousands):


2008
                  
                  
                  2007
                  
                  
                  % IncreaseNet
      income (loss)
                  
                  $
                  13,337
                  
                  
                  $
                  (7,247
                  )
                  
                  
                  n/a





Net
income for the year ended December 31, 2008, was $13.3 million, compared to net
loss of $(7.2) million in 2007.  Basic income per share was $.39 for
the year ended December 31, 2008, as compared to basic loss per share of $(.23)
in 2007.  Diluted income per share was $.38 for the year ended
December 31, 2008, as compared to basic loss per share of $(.23) in
2008.  The Company’s net income and earnings per share improvements
were due to the items detailed above.





Agricultural
Segment Results


Agricultural segment results
were as follows(amounts in
thousands):


2008
                  
                  
                  2007
                  
                  
                  % IncreaseNet
      sales
                  
                  $
                  729,895
                  
                  
                  $
                  515,642
                  
                  
                  
                  42
                  %Gross
      profit
                  
                  
                  89,782
                  
                  
                  
                  35,742
                  
                  
                  
                  151
                  %Income
      from operations
                  
                  
                  74,241
                  
                  
                  
                  25,324
                  
                  
                  
                  193
                  %





Net sales
in the agricultural market were $729.9 million for the year ended December 31,
2008, as compared to $515.6 million in 2007.  The robust agricultural
segment sales were the result of significantly higher demand from the Company’s
customers, an effect of record farm income and crop prices.





Gross
profit in the agricultural market was $89.8 million for the year 2008, as
compared to $35.7 million in 2007.  Income from operations in the
agricultural market was $74.2 million for the year 2008, as compared to $25.3
million in 2007.  The significant improvement in gross profit and income
from operations in the agricultural market was attributed to robust farm
equipment sales and the Company continuing to align sales prices with production
costs.





Earthmoving/Construction
Segment Results


Earthmoving/construction
segment results were as follows(amounts in
thousands):


2008
                  
                  
                  2007
                  
                  
                  %
      Increase
                    (Decrease)Net
      sales
                  
                  $
                  281,008
                  
                  
                  $
                  277,206
                  
                  
                  
                  1
                  %Gross
      profit
                  
                  
                  46,047
                  
                  
                  
                  47,848
                  
                  
                  
                  (4
                  )%Income
      from operations
                  
                  
                  38,422
                  
                  
                  
                  40,833
                  
                  
                  
                  (6
                  )%





The
Company’s earthmoving/construction market net sales were $281.0 million for the
year ended December 31, 2008, as compared to $277.2 million in
2007.  The increase of $3.8 million primarily resulted from the
continued strong earthmoving and mining sales.





Gross
profit in the earthmoving/construction market was $46.0 million for the year
2008, as compared to $47.8 million in 2007.  The Company’s
earthmoving/construction market income from operations was $38.4 million for the
year 2008, as compared to $40.8 million in 2007.  The Company’s gross
profit was negatively impacted by costs associated with hiring and training
workers to be utilized in giant OTR production, estimated to be approximately $6
million for 2008.


23


Consumer
Segment Results


Consumer segment results
were as follows(amounts in
thousands):


2008
                  
                  
                  2007
                  
                  
                  %
      (Decrease)
                    IncreaseNet
      sales
                  
                  $
                  25,797
                  
                  
                  $
                  44,173
                  
                  
                  
                  (42
                  )%Gross
      profit
                  
                  
                  3,938
                  
                  
                  
                  3,431
                  
                  
                  
                  15
                  %Income
      from operations
                  
                  
                  3,303
                  
                  
                  
                  2,546
                  
                  
                  
                  30
                  %





Consumer
market net sales were $25.8 million for the year ended December 31, 2008, as
compared to $44.2 million in 2007.  The Goodyear farm tire acquisition
agreement included an off-take/mixing agreement for certain product sales to
Goodyear.  The reduction in consumer market sales was primarily
related to lower sales to The Goodyear Tire and Rubber Company of approximately
$15 million for the twelve months ended December 31, 2008, as compared to the
previous year.





Gross
profit from the consumer market was $3.9 million in 2008 as compared to $3.4
million in 2007.  Consumer market income from operations was $3.3
million for the year 2008 as compared to $2.5 million in 2007.  The
improvement in gross profit and income from operations in the consumer segment
was the result of a shift to higher margin products.





Segment
Summary


(Amounts
in thousands)


2008
              
              Agricultural
              
              
              Earthmoving/
                Construction
              
              
              Consumer
              
              
              Corporate
                Expenses
              
              
              Consolidated
                TotalsNet sales
              
              $
              729,895
              
              
              $
              281,008
              
              
              $
              25,797
              
              
              $
              0
              
              
              $
              1,036,700Gross profit
    (loss)
              
              
              89,782
              
              
              
              46,047
              
              
              
              3,938
              
              
              
              (53
              )
              
              
              139,714Income (loss) from
      operations
              
              
              74,241
              
              
              
              38,422
              
              
              
              3,303
              
              
              
              (42,645
              )
              
              
              73,3212007Net sales
              
              $
              515,642
              
              
              $
              277,206
              
              
              $
              44,173
              
              
              $
              0
              
              
              $
              837,021Gross profit
    (loss)
              
              
              35,742
              
              
              
              47,848
              
              
              
              3,431
              
              
              
              (2,890
              )
              
              
              84,131Income (loss) from
      operations
              
              
              25,324
              
              
              
              40,833
              
              
              
              2,546
              
              
              
              (43,865
              )
              
              
              24,838





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 $42.6 million for the year ended
December 31, 2008, as compared to $43.9 million in 2007.





Corporate
expenses for the year ended December 31, 2008, were composed of selling and
marketing expenses of approximately $20 million and administrative expenses of
approximately $23 million.





Corporate
expenses for the year ended December 31, 2007, were composed of selling and
marketing expenses of approximately $17 million and administrative expenses of
approximately $27 million.





The
higher selling and marketing expenses for 2008 as compared to the previous year
resulted from the record sales levels and the associated selling
costs.  The lower administrative costs resulted primarily from a
reduction in management incentives.


24


FISCAL
YEAR ENDED DECEMBER 31, 2007, COMPARED TO FISCAL YEAR ENDED


DECEMBER
31, 2006





RESULTS
OF OPERATIONS


Highlights for the year
ended December 31, 2007, compared to 2006 (amounts in
thousands):


2007
                  
                  
                  2006
                  
                  
                  % IncreaseNet
      sales
                  
                  $
                  837,021
                  
                  
                  $
                  679,454
                  
                  
                  
                  23
                  %Cost
      of sales
                  
                  
                  752,890
                  
                  
                  
                  606,676
                  
                  
                  
                  24
                  %Gross
      profit
                  
                  
                  84,131
                  
                  
                  
                  72,778
                  
                  
                  
                  16
                  %Gross
      profit percentage
                  
                  
                  10.1
                  %
                  
                  
                  10.7
                  %





Net
Sales


Net sales
for the year ended December 31, 2007, were $837.0 million compared to $679.5
million for the year ended December 31, 2006.  The large sales
improvement of $157.6 million, or 23%, for the year ended December 31, 2007, was
attributed to the expanded agricultural product offering of Goodyear branded
farm tires and the expanded earthmoving, construction and mining product
offering of General branded OTR tires, along with added manufacturing capacity
from the Bryan, Ohio, facility, which was acquired on July 31,
2006.  In addition, the Company has experienced strong demand in the
agricultural segment.





Cost
of Sales and Gross Profit


Cost of
sales was $752.9 million for the year ended December 31, 2007, as compared to
$606.7 million in 2006.  Gross profit for the year 2007 was $84.1
million, or 10.1% of net sales, compared to $72.8 million, or 10.7% of net
sales, for 2006.  Due to capacity constraints at Titan’s Bryan, Ohio,
OTR tire facility, the Company is adding OTR tire capacity at its Freeport,
Illinois, and Des Moines, Iowa, tire facilities.  Titan is aligning
synergies, which includes retooling, retraining personnel and movement of
equipment at the Bryan, Freeport and Des Moines facilities.





These OTR
realignment costs lowered the Company’s gross profit for 2007 and for the fourth
quarter of 2006, as labor costs that are normally dedicated to making products
were instead used for retooling, retraining and movement of
equipment.  The Company estimates realignment costs to be
approximately $22 million to $24 million for 2007 and approximately $9 million
to $11 million in 2006.





Selling,
General and Administrative Expenses


Selling, general and
administrative expenses were as follows(amounts in
thousands):


2007
                  
                  
                  2006
                  
                  
                  % IncreaseSelling,
      general and administrative
                  
                  $
                  53,138
                  
                  
                  $
                  45,766
                  
                  
                  
                  16
                  %Percentage
      of net sales
                  
                  
                  6.3
                  %
                  
                  
                  6.7
                  %





SG&A
expenses were $53.1 million, or 6.3% of net sales, for the year ended December
31, 2007, as compared to $45.8 million, or 6.7% of net sales, for
2006.  R&D expenses, which are included in SG&A expenses, were
$1.7 million and $1.3 million for the years ended December 31, 2007 and 2006,
respectively.  The higher SG&A expenses for 2007 are primarily the
result of the higher selling and marketing expenses related to higher sales and
the CEO and executive incentives.  Selling and marketing expenses were
approximately $5 million higher in 2007, when compared to
2006.  Expenses recorded for CEO and executive incentives were
approximately $4 million higher in 2007, when compared to 2006.





Royalty
Expense


Royalty expense was as
follows(amounts in
thousands):


2007
                
                
                2006
                
                
                % IncreaseRoyalty
      expense
                
                $
                6,155
                
                
                $
                5,001
                
                
                
                23
                %





The
Goodyear North American farm tire asset acquisition included a license agreement
with The Goodyear Tire & Rubber Company to manufacture and sell certain
off-highway tires in North America under the Goodyear name.  Royalty
expenses were $6.2 million for the year ended December 31, 2007, as compared to
$5.0 million in 2006.  The increase in royalty expenses is directly
attributable to higher sales levels.


25


Income
from Operations


Income from operations was
as follows(amounts in
thousands):


2007
                  
                  
                  2006
                  
                  
                  % IncreaseIncome
      from operations
                  
                  $
                  24,838
                  
                  
                  $
                  22,011
                  
                  
                  
                  13
                  %Percentage
      of net sales
                  
                  
                  3.0
                  %
                  
                  
                  3.2
                  %





Income
from operations for the year ended December 31, 2007, was $24.8 million, or 3.0%
of net sales, compared to $22.0 million, or 3.2% of net sales, in
2006.  Income from operations was affected by the items previously
discussed in the cost of sales, administrative and royalty line
items.





Interest
Expense


Interest expense was as
follows(amounts in
thousands):


2007
                  
                  
                  2006
                  
                  
                  % IncreaseInterest
      expense
                  
                  $
                  18,710
                  
                  
                  $
                  17,001
                  
                  
                  
                  10
                  %





Interest
expense for the year 2007 was $18.7 million compared to $17.0 million in
2006.  The increase in interest expense in 2007 as compared to 2006
was the result of a higher average interest rate of approximately 1% in
2007.  In 2007, the Company capitalized $0.4 million of interest costs
for the giant OTR project.





Noncash
Convertible Debt Conversion Charge


Noncash convertible debt
conversion charge was as follows(amounts in
thousands):


2007
                  
                  
                  2006
                  
                  
                  % IncreaseNoncash
      debt conversion charge
                  
                  $
                  13,376
                  
                  
                  $
                  0
                  
                  
                  
                  n/a





In March
2007, the Company converted $81.2 million of 5.25% senior convertible notes into
6,577,200 shares of Titan common stock.  Titan recognized a noncash
charge of $13.4 million in connection with this exchange in accordance with SFAS
No. 84, “Induced Conversions of Convertible Debt.”





Other
Income


Other income was as follows(amounts in
thousands):


2007
                  
                  
                  2006
                  
                  
                  % DecreaseOther
      income
                  
                  $
                  3,364
                  
                  
                  $
                  3,564
                  
                  
                  
                  (6
                  %)





Other
income was $3.4 million for the year ended December 31, 2007, as compared to
$3.6 million in 2006.  Interest income included in other income was
$2.7 million and $1.7 million for the years ended December 31, 2007 and 2006,
respectively.  In addition, dividend income from the Titan Europe
investment of $1.8 million in 2007 and $1.3 million in 2006 was recorded in
other income.  The year ended December 31, 2007, also included a loss
of approximately $(1.1) million on foreign exchange and other expense
items.





Income
Tax Expense


Income taxes were as follows(amounts in
thousands):


2007
                  
                  
                  2006
                  
                  
                  % DecreaseIncome
      taxes
                  
                  $
                  3,363
                  
                  
                  $
                  3,430
                  
                  
                  
                  (2
                  %)





The
Company recorded an income tax expense of $3.4 million in 2007 and 2006.  
The Company’s effective tax rate was (87%) in 2007 and 40% in
2006.  The Company’s 2007 income tax expense and rate differs from the
amount of income tax determined by applying the U.S. Federal income tax rate to
pre-tax income primarily as a result of the $13.4 million noncash charge taken
in connection with the Company’s convertible debt.  This noncash
charge is not deductible for income tax purposes.


26


Net
(Loss) Income


Net (loss) income was as
follows(amounts in
thousands):


2007
                  
                  
                  2006
                  
                  
                  % DecreaseNet
      (loss) income
                  
                  $
                  (7,247
                  )
                  
                  $
                  5,144
                  
                  
                  
                  n/a





Net loss
for the year ended December 31, 2007, was $(7.2) million, compared to net income
of $5.1 million in 2006.  Basic and diluted loss per share was $(.23)
for the year ended December 31, 2007, as compared to basic and diluted income
per share of $.21 in 2006.  The Company’s net income and earnings per
share decreased due to the items detailed above and as a result of the $13.4
million noncash convertible debt conversion charge.





Agricultural
Segment Results


Agricultural segment results
were as follows(amounts in
thousands):


2007
                  
                  
                  2006
                  
                  
                  %
      Increase(Decrease)Net
      sales
                  
                  $
                  515,642
                  
                  
                  $
                  421,096
                  
                  
                  
                  22
                  %Gross
      profit
                  
                  
                  35,742
                  
                  
                  
                  42,511
                  
                  
                  
                  (16
                  %)Income
      from operations
                  
                  
                  25,324
                  
                  
                  
                  27,351
                  
                  
                  
                  (7
                  %)





Net sales
in the agricultural market were $515.6 million for the year ended December 31,
2007, as compared to $421.1 million in 2006.  The increase in
agricultural segment sales was the result of increased demand from the Company’s
customers, which resulted from record farm income in 2007.





Gross
profit in the agricultural market was $35.7 million for the year 2007, as
compared to $42.5 million in 2006.  Income from operations in the
agricultural market was $25.3 million for the year 2007, as compared to $27.4
million in 2006.  The decrease in gross profit and income from operations
in the agricultural market was primarily attributed to the related disruption to
production in Titan’s agricultural products resulting from the OTR realignment
initiative.





Earthmoving/Construction
Segment Results


Earthmoving/construction
segment results were as follows(amounts in
thousands):


2007
                
                
                2006
                
                
                % IncreaseNet
      sales
                
                $
                277,206
                
                
                $
                183,357
                
                
                
                51
                %Gross
      profit
                
                
                47,848
                
                
                
                28,099
                
                
                
                70
                %Income
      from operations
                
                
                40,833
                
                
                
                21,837
                
                
                
                87
                %





The
Company’s earthmoving/construction market net sales were $277.2 million for the
year ended December 31, 2007, as compared to $183.4 million in
2006.  The expanded product offering of the General brand for OTR
tires, along with added manufacturing capacity from the Bryan, Ohio, facility
and the OTR realignment initiative accounted for the higher sales levels in the
earthmoving/construction market in 2007.





Gross
profit in the earthmoving/construction market was $47.8 million, as compared to
$28.1 million in 2006.  The Company’s earthmoving/construction market
income from operations was $40.8 million for the year 2007, up from $21.8
million in 2006.  The Bryan, Ohio, facility produces OTR tires for
earthmoving, construction, and mining machinery in sizes larger than the Company
was able to produce before this facility was acquired on July 31,
2006.  The increase in gross profit and income from operations in the
earthmoving/construction segment is the result of margins realized on these
larger earthmoving, construction and mining tires and additional OTR
capacity.


27


Consumer
Segment Results


Consumer segment results
were as follows(amounts in
thousands):


2007
                  
                  
                  2006
                  
                  
                  %
      (Decrease)
                    IncreaseNet
      sales
                  
                  $
                  44,173
                  
                  
                  $
                  75,001
                  
                  
                  
                  (41
                  %)Gross
      profit
                  
                  
                  3,431
                  
                  
                  
                  2,771
                  
                  
                  
                  24
                  %Income
      from operations
                  
                  
                  2,546
                  
                  
                  
                  1,655
                  
                  
                  
                  54
                  %





Consumer
market net sales were $44.2 million for the year ended December 31, 2007, as
compared to $75.0 million in 2006.  The Goodyear farm tire acquisition
agreement included an off-take/mixing agreement for certain product sales to
Goodyear.  The decrease in consumer market sales was primarily related
to a reduction in sales to The Goodyear Tire and Rubber Company of approximately
$24 million for the twelve months ended December 31, 2007, as compared to
2006.





Gross
profit from the consumer market was $3.4 million as compared to $2.8 million in
2006.  Consumer market income from operations was $2.5 million for the
year 2007 as compared to $1.7 million in 2006.  The increase in gross
profit and income from operations in the consumer segment was the result of a
shift to higher margin products.





Segment
Summary


(Amounts
in thousands)


2007
              
              Agricultural
              
              
              Earthmoving/
                Construction
              
              
              Consumer
              
              
              Corporate
                Expenses
              
              
              Consolidated
                TotalsNet sales
              
              $
              515,642
              
              
              $
              277,206
              
              
              $
              44,173
              
              
              $
              0
              
              
              $
              837,021Gross profit
    (loss)
              
              
              35,742
              
              
              
              47,848
              
              
              
              3,431
              
              
              
              (2,890
              )
              
              
              84,131Income (loss) from
      operations
              
              
              25,324
              
              
              
              40,833
              
              
              
              2,546
              
              
              
              (43,865
              )
              
              
              24,8382006Net sales
              
              $
              421,096
              
              
              $
              183,357
              
              
              $
              75,001
              
              
              $
              0
              
              
              $
              679,454Gross profit
    (loss)
              
              
              42,511
              
              
              
              28,099
              
              
              
              2,771
              
              
              
              (603
              )
              
              
              72,778Income (loss) from
      operations
              
              
              27,351
              
              
              
              21,837
              
              
              
              1,655
              
              
              
              (28,832
              )
              
              
              22,011





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 $43.9 million for the year ended
December 31, 2007, as compared to $28.8 million in 2006.





Corporate
expenses for the year ended December 31, 2007, were composed of the
following:  (i) selling and marketing expenses of approximately $17
million; (ii) CEO and executive incentives of approximately $7 million; and
(iii) administrative expenses of approximately $20 million.





Corporate
expenses for the year ended December 31, 2006, were composed of the
following:  (i) selling and marketing expenses of approximately $12
million; (ii) CEO and executive incentives of approximately $3 million; and
(iii) administrative expenses of approximately $14 million.





The
increase of approximately $5 million in selling and marketing expenses in 2007
as compared to 2006 resulted primarily from the higher sales
levels.  The increase of approximately $4 million in the CEO and
executive incentives is primarily related to the substantial appreciation in
Titan’s stock price during 2007.  The increase of approximately $6
million in administrative costs in 2007 was primarily related to higher
professional fees.




28


LIQUIDITY
AND CAPITAL RESOURCES





Cash
Flows


As of
December 31, 2008, the Company had $61.7 million of cash balances within various
bank accounts.  This cash balance increased by $3.3 million from
December 31, 2007, due to the following cash flow discussion items.





(amounts
      in thousands)
                
                Year
      ended December 31,2008
                
                
                2007
                
                
                ChangeCash
                
                $
                61,658
                
                
                $
                58,325
                
                
                $
                3,333




Operating
Cash Flows
 Summary
of cash flows from operating activities:
 (amounts
      in thousands)
                  
                  Year
      ended December 31,2008
                  
                  
                  2007
                  
                  
                  ChangeNet
      income (loss)
                  
                  $
                  13,337
                  
                  
                  $
                  (7,247
                  )
                  
                  $
                  20,584Depreciation
      and amortization
                  
                  
                  30,368
                  
                  
                  
                  28,620
                  
                  
                  
                  1,748Deferred
      income tax provision
                  
                  
                  13,987
                  
                  
                  
                  1,995
                  
                  
                  
                  11,992Noncash
      Titan Europe Plc charge
                  
                  
                  24,504
                  
                  
                  
                  0
                  
                  
                  
                  24,504Noncash
      debt charge
                  
                  
                  0
                  
                  
                  
                  13,376
                  
                  
                  
                  (13,376
                  )Accounts
      receivable
                  
                  
                  (28,137
                  )
                  
                  
                  (24,512
                  )
                  
                  
                  (3,625
                  )Inventories
                  
                  
                  (19,258
                  )
                  
                  
                  26,556
                  
                  
                  
                  (45,814
                  )Accounts
      payable
                  
                  
                  21,555
                  
                  
                  
                  18,108
                  
                  
                  
                  3,447Other
      current liabilities
                  
                  
                  6,393
                  
                  
                  
                  16,668
                  
                  
                  
                  (10,275
                  )Other
      operating activities
                  
                  
                  (11,579
                  )
                  
                  
                  2,429
                  
                  
                  
                  (14,008
                  )Cash
      provided by operating activities
                  
                  $
                  51,170
                  
                  
                  $
                  75,993
                  
                  
                  $
                  (24,823
                  )
 
  For the
year ended December 31, 2008, operating activities provided cash of $51.2
million.  This cash was primarily provided by net income of $13.3
million and increases of $21.6 million in accounts payable.  Positive
cash flows were offset by increases in accounts receivable of $28.1 million and
inventories of $19.3 million.  Included as a reduction to net income
were noncash charges of $30.4 million for depreciation and amortization and
$24.5 million for the noncash Titan Europe Plc charge.
 
 In
comparison, for the year ended December 31, 2007, operating activities provided
cash of $76.0 million.  This cash was primarily provided by a decrease
in inventories of $26.6 million and increases of $18.1 million in accounts
payable and $16.7 million in other current liabilities.  Positive cash
flows were offset by net loss of $(7.2) million and an increase in accounts
receivable of $24.5 million.  Included as a reduction to net income
were noncash charges of $28.6 million for depreciation and amortization and
$13.4 million for a debt conversion charge.
 
 Operating
cash flows decreased $24.8 million from the year ended December 31, 2007, to
December 31, 2008.  This reduction was largely the result of cash
flows from inventories decreasing $45.8 million and 2008 including a reduction
to net income for the noncash Titan Europe Plc charge, while 2007 included a
reduction to income for a noncash debt conversion charge of $13.4
million.  The decreases were offset by a rise in net income of $20.6
million.  The higher inventory balances in 2008 were primarily due to
raw materials.  Raw materials inventories were increased in 2008 to
support Titan’s all-time record sales levels.




For the
year ended December 31, 2006, cash of $5.3 million was used for operating
activities.  This usage was primarily the result of increases in
accounts receivable and inventories of $26.8 million and $19.5 million,
respectively, offset by an increase in other current liabilities of $13.4
million and net income of $5.1 million.  Included as a reduction to
net income were noncash charges for depreciation and amortization of $26.9
million.





Operating
cash flows increased $81.3 million from the year ended December 31, 2006, to
December 31, 2007.  This increase was largely the result of cash flows
from inventories increasing $46.1 million and cash flows from accounts payable
increasing by $16.7 million.  In 2007, the Company was successful in
lowering the finished goods inventory at the recently acquired facilities in
Freeport, Illinois, and Bryan, Ohio.  Accounts payable increased in
2007 as a result of higher purchases resulting from higher sales
levels.


29


Investing
Cash Flows


Summary
of cash flows from investing activities:


(amounts
      in thousands)
                
                Year
      ended December 31,2008
                
                
                2007
                
                
                ChangeCapital
      expenditures
                
                $
                (79,953
                )
                
                $
                (38,048
                )
                
                $
                (41,905
                )Acquisition
      of off-the-road (OTR) assets
                
                
                0
                
                
                
                (8,900
                )
                
                
                8,900Other
      investing activities
                
                
                104
                
                
                
                532
                
                
                
                (428
                )Cash
      used for investing activities
                
                $
                (79,849
                )
                
                $
                (46,416
                )
                
                $
                (33,433
                )




Net cash
used for investing activities was $79.8 million in 2008, as compared to $46.4
million in 2007 and $52.7 million in 2006.  The Company invested a
total of $80.0 million in capital expenditures in 2008, compared to $38.0
million in 2007 and $8.3 million in 2006.  The 2008 capital
expenditures include approximately $60 million for the giant OTR project and the
2007 capital expenditures include approximately $22 million for the Giant OTR
project.  The remaining capital expenditures in 2008 and 2007 were
used primarily for updating manufacturing equipment, expanding manufacturing
capacity and for further automation at the Company’s
facilities.  Titan invested $44.6 million for the Continental OTR tire
acquisition in 2006.





The
Company estimates that costs related to the Giant OTR Project at this time are
approximately $100 million, of which approximately $82 million was disbursed
from inception of the Giant OTR Project through December 31, 2008.  Capital
expenditures for 2009 are forecasted to be approximately $25 million to $35
million.  Approximately $15 million to $20 million of this amount may
be spent on the giant OTR project and the remainder is anticipated to be used to
enhance the Company’s existing facilities and manufacturing
capabilities.





Investing
cash flows decreased $33.4 million from the year ended December 31, 2007, to
December 31, 2008.  This decrease was primarily the result of
additional cash being used for capital expenditures related to the Giant OTR
project.




Financing
Cash Flows


Summary
of cash flows from financing activities:


(amounts
      in thousands)
                
                Year
      ended December 31,2008
                
                
                2007
                
                
                ChangeProceeds
      on revolving credit facility
                
                $
                25,000
                
                
                $
                0
                
                
                $
                25,000Proceeds
      from exercise of stock options
                
                
                3,536
                
                
                
                6,631
                
                
                
                (3,095
                )Excess
      tax benefit from stock options
                
                
                4,131
                
                
                
                0
                
                
                
                4,131Payment
      on debt
                
                
                0
                
                
                
                (10,164
                )
                
                
                10,164Other
      financing activities
                
                
                (655
                )
                
                
                (1,131
                )
                
                
                476Cash
      provided by (used for) activities
                
                $
                32,012
                
                
                $
                (4,664
                )
                
                $
                36,676




Net cash
provided by financing activities was $32.0 million in 2008.  This cash
was provided primarily by revolving credit facility proceeds of $25.0
million.  Also, the exercise of stock options provided $3.5 million
and excess tax benefit from stock options exercised provided $4.1
million.  Net cash used by financing activities was $4.7 million in
2007.  This cash use was primarily used for payment of debt of $10.2
million offset by proceeds of $6.6 million from the exercise of stock
options.  Net cash provided by financing activities in 2006 was $90.8
million.  This cash was primarily provided by $88.9 million of net
debt proceeds.  In addition, the exercise of stock options provided
$5.4 million in cash and the payment of financing fees used $3.7 million of
cash.





Financing
cash flows increased $36.7 million from the year ended December 31, 2007, to the
year ended December 31, 2008.  Also, financing cash flows decreased
$95.5 million from the year ended December 31, 2006, to December 31,
2007.  The large changes from year to year are primarily the result of
changes in total debt borrowings.


30


Debt
Covenants


The
Company’s revolving credit facility contains various covenants and
restrictions.  The financial covenants in this agreement require
that:




·
            Collateral
      coverage be equal to or greater than 1.2 times the outstanding revolver
      balance.




·
            If
      the 30-day average of the outstanding revolver balance exceeds $225
      million, the fixed charge coverage ratio be equal to or greater than a 1.0
      to 1.0 ratio.





Restrictions
include:




·
            Limits
      on payments of dividends and repurchases of the Company’s
      stock.




·
            Restrictions
      on the ability of the Company to make additional borrowings, or to
      consolidate, merge or otherwise fundamentally change the ownership of the
      Company.




·
            Limitations
      on investments, dispositions of assets and guarantees of
      indebtedness.




·
            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.  The failure by
Titan to meet these covenants could result in the Company ultimately being in
default on these loan agreements.





The
Company is in compliance with these covenants and restrictions as of December
31, 2008.  The collateral coverage was calculated to be approximately
15 times the outstanding revolver balance at December 31, 2008.





The fixed
charge coverage ratio did not apply for the quarter ended December 31,
2008.  The credit facility usage was $30.0 million at December 31,
2008, consisting of cash borrowings of $25.0 million and outstanding letters of
credit of $5.0 million.





Other
Items


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.





LIQUIDITY
OUTLOOK


At
December 31, 2008, the Company had $61.7 million of cash and cash equivalents
and $220.0 million of unused availability under the terms of its revolving
credit facility (credit facility).  The availability under the
Company’s $250 million credit facility was reduced by $25.0 million for cash
borrowings and $5.0 million for outstanding letters of credit.  The
Company expects to contribute approximately $1 million to its frozen defined
benefit pension plans during 2009.





In May
2007, Titan’s Board of Directors approved funding for the Company to increase
giant OTR mining tire production capacity to include 57-inch and 63-inch giant
radial tires (the “Giant OTR Project”).  The Company estimates that
current commitments related to the Giant OTR Project at this time are
approximately $100 million, of which approximately $82 million was disbursed
from inception of the Giant OTR Project through December 31,
2008.  Additional capital expenditure commitments will be incurred
through 2009 as the Giant OTR Project moves to completion.  The final
cost of these additional OTR capital items have not been finalized at this
time.





The
Company currently anticipates that cash on hand and anticipated internal cash
flows from operations will allow the Company sufficient funds for completion of
the Giant OTR Project.  Capital expenditures for 2009 are forecasted
to be approximately $25 million to $35 million.  Approximately $15
million to $20 million of this amount may be spent on the giant OTR project and
the remainder is anticipated to be used to enhance the Company’s existing
facilities and manufacturing capabilities.





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 and capital expenditures.  If the Company were
to exhaust all currently available working capital sources or not meet the
financial covenants and conditions of its loan agreements, the Company’s ability
to secure additional funding may be negatively impacted.




31


INFLATION


The
Company is subject to the effect of price fluctuations.  During 2008,
2007 and 2006, the Company realized price increases 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.  However, these price adjustments
usually lag the inflationary pressures.





CONTRACTUAL
OBLIGATIONS


The
Company’s contractual obligations at December 31, 2008, consisted of the
following (in
thousands):


Payments
      due by periodContractual Obligations
                
                Total
                
                
                Less
      than 1 year
                
                
                1-3 years
                
                
                3-5 years
                
                
                More
      than 5 yearsDebt
                
                $
                225,000
                
                
                $
                25,000
                
                
                $
                0
                
                
                $
                200,000
                
                
                $
                0Interest
      expense (a)
                
                
                49,322
                
                
                
                16,655
                
                
                
                32,000
                
                
                
                667
                
                
                
                0Operating
      leases
                
                
                2,816
                
                
                
                1,267
                
                
                
                1,510
                
                
                
                39
                
                
                
                0Purchase
      obligations
                
                
                4,690
                
                
                
                1,860
                
                
                
                2,677
                
                
                
                153
                
                
                
                0Other
      long-term liabilities (b)
                
                
                28,700
                
                
                
                1,000
                
                
                
                12,000
                
                
                
                11,200
                
                
                
                4,500Royalty
      payment (c)
                
                
                36,000
                
                
                
                9,000
                
                
                
                18,000
                
                
                
                9,000
                
                
                
                0Total
                
                $
                346,528
                
                
                $
                54,782
                
                
                $
                66,187
                
                
                $
                221,059
                
                
                $
                4,500





(a)
            Interest
      expense is estimated based on the Company’s year-end 2008 debt balances,
      maturities and interest rates.  The estimates assume no
      additional revolver borrowings or repayments.  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.





(b)
            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.





(c)
            The
      Company pays a royalty relating to a license agreement with The Goodyear
      Tire & Rubber Company to manufacture and sell certain off-highway
      tires in North America.  Under this agreement, royalty trademark
      payments would cease immediately if Titan discontinued using the Goodyear
      trademark.  Titan currently plans to continue using the Goodyear
      trademark until circumstances require a change.  Titan’s royalty
      payment to Goodyear for the next four years, the current term of the
      agreement, using the annual 2008 royalty payment of approximately $9
      million as an estimate would total approximately $36
      million.  The actual royalty amount paid to Goodyear in the
      future will vary based on the sales of certain off-highway tires in North
      America and the continuation of the license
  agreement.








OFF-BALANCE
SHEET ARRANGEMENTS


The
Company has no material off-balance sheet arrangements.




32




MARKET
RISK SENSITIVE INSTRUMENTS  Exchange
Rate Sensitivity


The
Company is exposed to fluctuations in the British pound and Euro 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 $2.6 million at December 31, 2008, and
$34.5 million at December 31, 2007.  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, 2008,
would amount to approximately $0.3 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 $250 million credit facility that has a variable interest
rate.  If the credit facility were fully drawn, a change in the
interest rate of 100 basis points, or 1%, would change the Company’s interest
expense by approximately $2.5 million.  At December 31, 2008, the
Company had $25.0 million of cash borrowings on the credit
facility.





At
December 31, 2008, the fair value of the 8% senior unsecured notes, based on
market prices obtained through independent pricing sources, was approximately
$147 million, compared to a carrying value of $200 million.





MARKET
CONDITIONS AND OUTLOOK


Titan
experienced strong demand for its agricultural and earthmoving/construction
products throughout 2008.  The continued strength of the agricultural
market, resulting from high commodity prices and a gradual increase in the use
of biofuels, contributed to the increase in sales.  Tire shortages and
strong demand in mining products such as oil, iron ore and aggregates
contributed to the rise in earthmoving/construction product
demand.  These trends are expected to continue through the first part
of 2009.  However, the housing market decline, recession, and banking
and credit crisis are affecting Titan’s customers.  The degree to
which these items will affect Titan’s customers in 2009 and the future is
difficult to estimate because of the uncertainty in the resolution of these
financial conditions.





In May
2007, Titan’s Board of Directors approved funding for the Company to increase
giant OTR mining tire production capacity to include 57-inch and 63-inch giant
radial tires.  The Company began start-up production of these giant
mining tires in July 2008.  Titan continues to add giant OTR tire
capacity at the Bryan, Ohio, facility as the Company brings new equipment
online.





Energy,
raw material and petroleum-based product costs have been volatile and increases
in these costs may negatively impact the Company’s margins.  Many of
Titan’s overhead expenses are fixed; therefore, lower seasonal trends may cause
negative fluctuations in quarterly profit margins and affect the financial
condition of the Company.





AGRICULTURAL
MARKET OUTLOOK


Agricultural
market sales are forecasted to remain strong for 2009.  Commodity
prices have declined from recent highs, but remain at healthy
levels.  If oil prices remain lower, farmers will benefit from lower
input costs for fuel and fertilizer.  The available stock of many farm
crops is at low levels, which should sustain future production.  The
gradual increase in the use of biofuels should also sustain future
production.  In April 2008, Titan signed a three-year agreement to
supply farm tires to various John Deere affiliates.  Many variables,
including weather, grain prices, export markets and future government policies
and payments can greatly influence the overall health of the agricultural
economy.


33


EARTHMOVING/CONSTRUCTION
MARKET OUTLOOK


Sales for
the earthmoving/construction market are expected to remain stable in
2009.  Metals, oil and gas prices have retreated from recent highs as
a result of the worldwide economic downturn.  However, in the
long-term, these prices are expected to remain at levels that are attractive for
continued investment, which will maintain support for earthmoving and mining
sales.  The significant decline in the United States housing market
continues to cause a decline in equipment used for housing
construction.  The giant OTR project will add significant capacity for
giant mining tires in 2009.  The additional sales of these giant OTR
tires are expected to more than offset any softness in other areas of the
earthmoving/construction market.  The earthmoving/construction market
is affected by many variables, including commodity prices, road construction,
infrastructure, government appropriations, housing starts and the current
banking and credit crisis.





CONSUMER
MARKET OUTLOOK


The
current overall uncertainty in consumer spending resulting from the current
banking and credit crisis, housing market decline, and high energy and food
costs has affected the Company’s consumer market sales.  Titan’s sales
in the consumer market include sales to Goodyear, which includes an
off-take/mixing agreement.  This agreement includes mixed stock, which
is a prepared rubber compound used in tire production.  The Company’s
consumer market sales will fluctuate significantly related to sales volumes
under the off-take/mixing agreement with Goodyear.  The Company
expects challenging conditions for the consumer market for 2009.  Many
factors affect the consumer market including weather, competitive pricing,
energy prices and consumer attitude.





PENSIONS


The
Company has three frozen defined benefit pension plans and one defined benefit
plan that purchased a final annuity settlement in 2002.  These plans
are described in Note 21 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 by the
Company 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, 2008, the Company contributed cash funds of $0.2 million to
the frozen defined benefit pension plans.  Titan expects to contribute
approximately $1 million to these frozen defined benefit pension plans during
2009.





In
October 2007, the Titan Tire Bryan pension plan, adopted at the date of the
Continental OTR asset acquisition and frozen from its inception, received cash
transfers of approximately $25 million from Continental Tire North America’s
frozen pension plan for the Bryan, Ohio, location.  The amount
transferred into the frozen plan was actuarially approved to be a fully funded
plan.





Titan’s
projected benefit obligation at December 31, 2008, was $90.5 million as compared
to $95.4 million at December 31, 2007.  The Company’s defined benefit
pension plans were underfunded by $28.7 million at December 31, 2008. 
During 2008, the Company recorded net periodic pension income of $0.9
million.  Accumulated other comprehensive loss recorded for defined
benefit pension plans, net of tax, was $33.6 million and $15.6 million at
December 31, 2008 and 2007, respectively.  Other comprehensive income
is recorded as a direct charge to stockholders’ equity and does not affect net
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.


34


RECENTLY
ISSUED ACCOUNTING STANDARDS


Statement
of Financial Accounting Standards Number 141 (revised 2007)


In
December 2007, SFAS No. 141 (revised 2007), “Business Combinations,” was
issued.  This statement requires an acquirer to recognize assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at their fair values on the acquisition date, with goodwill being the
excess value over the net identifiable assets acquired.  This
statement is effective for business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2008.  The Company does not expect the adoption
of this statement to have a material impact on its consolidated financial
position, results of operations and cash flows.





Statement
of Financial Accounting Standards Number 160


In
December 2007, SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements,” was issued.  This statement establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary.  It clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated financial
statements.  This statement is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15,
2008.  The Company does not expect the adoption of this statement to
have a material impact on its consolidated financial position, results of
operations and cash flows.


35




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, 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 have
concluded 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.





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








ITEM
      9B – OTHER INFORMATION





None.


36


PART III





ITEM
10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





Directors


The
information required by this item regarding the Company’s directors is
incorporated by reference to the Company’s 2009 Proxy Statement under the
captions “Election of Mr. Billig and Mr. Soave as 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., 64, 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.





Kent W.
Hackamack, 50, 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, 61, 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 2009 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:  Titan International, Inc., c/o Corporate Secretary, 2701 Spruce
Street, Quincy, IL 62301.








ITEM
11 – EXECUTIVE COMPENSATION





The
information required by this item is incorporated by reference to the Company’s
2009 Proxy Statement under the caption “Compensation of Executive
Officers.”


37


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 2009 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,
2008:


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 securities reflected in column (i))Equity
      compensation plansapproved
      by security holders
                
                
                560,536
                (a)
                
                
                8.98
                
                
                
                1,217,720Equity
      compensation plans not approved by security holders
                
                
                0
                
                
                
                n/a
                
                
                
                0Total
                
                
                560,536
                
                
                
                8.98
                
                
                
                1,217,720





(a)
            Amount
      includes outstanding stock 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 22 of the Company’s Notes to Consolidated Financial
Statements.








ITEM
      13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE





The
information required by this item is incorporated by reference to the Company’s
2009 Proxy Statement under the caption “Related Party Transactions” and
“Corporate Governance” and also appears in Note 26 of the Company’s Notes to
Consolidated Financial Statements.








ITEM
14 – PRINCIPAL ACCOUNTING FEES AND SERVICES





The
information required by this item is incorporated by reference to the Company’s
2009 Proxy Statement under the caption “Audit and Other Fees.”


38


PART IV




ITEM
      15 –
                EXHIBITS,
      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-2Consolidated
      Statements of Operations for the years ended December 31, 2008, 2007 and
      2006
                F-3Consolidated
      Balance Sheets at December 31, 2008 and 2007
                F-4Consolidated
      Statements of Changes in Stockholders’ Equity for the years ended December
      31, 2006, 2007 and 2008
                F-5Consolidated
      Statements of Cash Flows for the years ended December 31, 2008, 2007 and
      2006
                F-6Notes
      to Consolidated Financial Statements
                F-7
      through F-332.
                Financial
      Statement ScheduleSchedule
      II – Valuation Reserves
                S-13.
                ExhibitsThe
      accompanying Exhibit Index is incorporated herein by
      reference.


39





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
      26, 2009
            By:
            /s/  MAURICE
      M. TAYLOR JR.Maurice
      M. Taylor Jr.Chairman
      and Chief Executive Officer





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 26, 2009.





Signatures
                          Capacity/s/  MAURICE M. TAYLOR
      JR.
                          Chairman
      and Chief Executive OfficerMaurice
      M. Taylor Jr.
                          (Principal
      Executive Officer)/s/  KENT W.
      HACKAMACK
                          Vice
      President of Finance and TreasurerKent
      W. Hackamack
                          (Principal
      Financial Officer andPrincipal
      Accounting Officer)/s/  J. MICHAEL A.
      AKERS
                          DirectorJ.
      Michael A. Akers/s/  ERWIN H.
      BILLIG
                          DirectorErwin
      H. Billig/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


40





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 Company4.1
      (c)
                  Indenture
      between the Company and U.S. Bank National Association dated December 28,
      200610.1
      (d)
                  1994
      Non-Employee Director Stock Option Plan10.2
      (d)
                  1993
      Stock Incentive Plan10.3
      (e)
                  Credit
      Agreement dated July 23, 2004, among the Company and LaSalle Bank National
      Association and General Electric Capital Corporation10.4
      (f)
                  First
      Amendment to Credit Agreement among the Company and LaSalle Bank National
      Association
      and General Electric Capital Corporation dated February 16,
      200510.5
      (g)
                  2005
      Equity Incentive Plan10.6
      (h)
                  Second
      Amendment to Credit Agreement among the Company and LaSalle Bank National
      Association dated October 21, 200510.7
      (i)
                  Third
      Amendment to Credit Agreement among the Company and LaSalle Bank National
      Association dated June 28, 200610.8
      (j)
                  Fourth
      Amendment to Credit Agreement among the Company and LaSalle Bank National
      Association dated February 8, 200710.9
      (k)
                  Fifth
      Amendment to Credit Agreement among the Company and LaSalle Bank National
      Association dated December 12, 200710.10
      (l)
                  Amended
      and Restated Credit Agreement among the Company and Bank of America, N.A.
      dated as of January 30, 200921*
                  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 same numbered exhibit contained in the Company’s Form
      S-4 (No. 333-141865).


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


(e)
            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).


(f)
            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).


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


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


(i)
            Incorporated
      by reference to the same numbered exhibit contained in the Company’s
      Current Report on Form 8-K filed on June 29,
  2006.


(j)
            Incorporated
      by reference to the same numbered exhibit contained in the Company’s
      Current Report on Form 8-K filed on February 8,
  2007.


(k)
            Incorporated
      by reference to the same numbered exhibit contained in the Company’s
      Current Report on Form 8-K filed on December 13,
  2007.


(l)
            Incorporated
      by reference to the same numbered exhibit contained in the Company’s
      Current Report on Form 8-K filed on February 2,
  2009.


41


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, 2008, 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, 2008, 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 evaluation,
management concluded the Company maintained effective internal control over
financial reporting as of December 31, 2008.





The
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2008, has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report which
is presented in this Annual Report on Form 10-K.


F-1


Report
of Independent Registered Public Accounting Firm





To the
Board of Directors


and
Stockholders of


Titan
International, Inc.:





In our
opinion, the consolidated financial statements listed in the accompanying index
under item 15(a)(1) present fairly, in all material respects, the financial
position of Titan International Inc. and its subsidiaries at December 31, 2008
and 2007, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2008 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) presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.  Also
in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2008 based on
criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).  The Company's management is responsible
for these financial statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in
Management's Report on Internal Control Over Financial Reporting appearing on
page F-1.  Our responsibility is to express opinions on these
financial statements, on the financial statement schedule, and on the Company's
internal control over financial reporting based on our integrated
audits.  We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States).  Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was
maintained in all material respects.  Our audits of the financial
statements included 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.  Our audit of internal control over
financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk.  Our audits also included
performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our
opinions.





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.




/s/
PricewaterhouseCoopers LLP


St.
Louis, MO


February
26, 2009


F-2


TITAN
INTERNATIONAL, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


(All
amounts in thousands, except per share data)




Year ended December
      31,2008
                      
                      
                      2007
                      
                      
                      2006Net
      sales
                      
                      $
                      1,036,700
                      
                      
                      $
                      837,021
                      
                      
                      $
                      679,454Cost
      of sales
                      
                      
                      896,986
                      
                      
                      
                      752,890
                      
                      
                      
                      606,676Gross
      profit
                      
                      
                      139,714
                      
                      
                      
                      84,131
                      
                      
                      
                      72,778Selling,
      general and administrative expenses
                      
                      
                      57,151
                      
                      
                      
                      53,138
                      
                      
                      
                      45,766Royalty
      expense
                      
                      
                      9,242
                      
                      
                      
                      6,155
                      
                      
                      
                      5,001Income
      from operations
                      
                      
                      73,321
                      
                      
                      
                      24,838
                      
                      
                      
                      22,011Interest
      expense
                      
                      
                      (15,122
                      )
                      
                      
                      (18,710
                      )
                      
                      
                      (17,001
                      )Noncash
      Titan Europe Plc charge
                      
                      
                      (37,698
                      )
                      
                      
                      0
                      
                      
                      
                      0Noncash
      convertible debt conversion charge
                      
                      
                      0
                      
                      
                      
                      (13,376
                      )
                      
                      
                      0Other
      income, net
                      
                      
                      2,509
                      
                      
                      
                      3,364
                      
                      
                      
                      3,564Income
      (loss) before income taxes
                      
                      
                      23,010
                      
                      
                      
                      (3,884
                      )
                      
                      
                      8,574Provision
      for income taxes
                      
                      
                      9,673
                      
                      
                      
                      3,363
                      
                      
                      
                      3,430Net
      income (loss)
                      
                      $
                      13,337
                      
                      
                      $
                      (7,247
                      )
                      
                      $
                      5,144Earnings
      (loss) per common share *:Basic
                      
                      $
                      .39
                      
                      
                      $
                      (.23
                      )
                      
                      $
                      .21Diluted
                      
                      
                      .38
                      
                      
                      
                      (.23
                      )
                      
                      
                      .21Average
      common shares and equivalents outstanding *:Basic
                      
                      
                      34,410
                      
                      
                      
                      32,081
                      
                      
                      
                      24,627Diluted
                      
                      
                      34,838
                      
                      
                      
                      32,081
                      
                      
                      
                      25,055





*
Adjusted to reflect the five-for-four stock split that took place in
2008.




See
accompanying Notes to Consolidated Financial Statements.


F-3


TITAN
INTERNATIONAL, INC.


CONSOLIDATED
BALANCE SHEETS


(All
amounts in thousands, except share data)




December
      31,Assets
                
                2008
                
                
                2007Current
      assetsCash
      and cash equivalents
                
                $
                61,658
                
                
                $
                58,325Accounts
      receivable (net of
      allowance of $6,639 and $5,258, respectively)
                
                
                126,531
                
                
                
                98,394Inventories
                
                
                147,306
                
                
                
                128,048Deferred
      income taxes
                
                
                12,042
                
                
                
                25,159Prepaid
      and other current assets
                
                
                21,662
                
                
                
                17,839Total
      current assets
                
                
                369,199
                
                
                
                327,765Property,
      plant and equipment, net
                
                
                248,442
                
                
                
                196,078Investment
      in Titan Europe Plc
                
                
                2,649
                
                
                
                34,535Goodwill
                
                
                11,702
                
                
                
                11,702Deferred
      income taxes
                
                
                7,256
                
                
                
                0Other
      assets
                
                
                15,534
                
                
                
                20,415Total
      assets
                
                $
                654,782
                
                
                $
                590,495Liabilities
      and Stockholders’ EquityCurrent
      liabilitiesShort-term
      debt
                
                $
                25,000
                
                
                $
                0Accounts
      payable
                
                
                65,547
                
                
                
                43,992Other
      current liabilities
                
                
                46,088
                
                
                
                43,788Total
      current liabilities
                
                
                136,635
                
                
                
                87,780Long-term
      debt
                
                
                200,000
                
                
                
                200,000Deferred
      income taxes
                
                
                0
                
                
                
                14,044Other
      long-term liabilities
                
                
                38,959
                
                
                
                16,149Total
      liabilities
                
                
                375,594
                
                
                
                317,973Commitments
      and contingencies: Notes
      13, 23 and 24Stockholders’
      equityCommon stock(no par, 60,000,000
      shares authorized, 37,475,288 issued)
                
                
                30
                
                
                
                30Additional
      paid-in capital
                
                
                300,024
                
                
                
                303,908Retained
      earnings
                
                
                41,726
                
                
                
                29,012Treasury
      stock (at cost, 2,443,604
      and 3,229,055 shares, respectively)
                
                
                (22,332
                )
                
                
                (29,384
                )Treasury
      stock reserved for contractual obligations
                
                
                (5,501
                )
                
                
                0Accumulated
      other comprehensive loss
                
                
                (34,759
                )
                
                
                (31,044
                )Total
      stockholders’ equity
                
                
                279,188
                
                
                
                272,522Total
      liabilities and stockholders’ equity
                
                $
                654,782
                
                
                $
                590,495






See
accompanying Notes to Consolidated Financial Statements.


F-4


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
                
                
                Treasury
      stock reserved for contractual obligations
                
                
                Accumulated
      other comprehensive income (loss)
                
                
                TotalBalance
      January 1, 2006
                
                
                #24,377,115
                
                
                $
                30
                
                
                $
                255,299
                
                
                $
                32,053
                
                
                $
                (99,817
                )
                
                $
                0
                
                
                $
                (19,752
                )
                
                $
                167,813Comprehensive
      income (loss):Net
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5,144
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5,144Unrealized
      gain on investment, net of tax
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                6,126
                
                
                
                6,126Minimum
      pension liability, net of tax
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                3,225
                
                
                
                3,225Comprehensive
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                14,495Adjustment
      to initially apply SFAS No. 158, net of tax
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,061
                )
                
                
                (1,061
                )Dividends
      paid on common stock
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (395
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (395
                )Exercise
      of stock options
                
                
                477,738
                
                
                
                
                
                
                
                2,647
                
                
                
                
                
                
                
                3,432
                
                
                
                
                
                
                
                
                
                
                
                6,079Issuance
      of treasury stock under 401(k) plan
                
                
                16,882
                
                
                
                
                
                
                
                125
                
                
                
                
                
                
                
                121
                
                
                
                
                
                
                
                
                
                
                
                246Balance
      December 31, 2006
                
                
                24,871,735
                
                
                
                30
                
                
                
                258,071
                
                
                
                36,802
                
                
                
                (96,264
                )
                
                
                0
                
                
                
                (11,462
                )
                
                
                187,177Comprehensive
      income (loss):Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (7,247
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (7,247
                )Unrealized
      loss on investment, net of tax
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (20,375
                )
                
                
                (20,375
                )Pension
      liability adjustments, net of tax
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                793
                
                
                
                793Comprehensive
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (26,829
                )Dividends
      paid on common stock
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (543
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (543
                )Note
      conversion
                
                
                8,221,500
                
                
                
                
                
                
                
                35,240
                
                
                
                
                
                
                
                59,049
                
                
                
                
                
                
                
                
                
                
                
                94,289Exercise
      of stock options
                
                
                555,663
                
                
                
                
                
                
                
                2,640
                
                
                
                
                
                
                
                3,991
                
                
                
                
                
                
                
                
                
                
                
                6,631Issuance
      of treasury stock for funding contractual obligations on employee
      contracts
                
                
                267,500
                
                
                
                
                
                
                
                4,184
                
                
                
                
                
                
                
                1,921
                
                
                
                
                
                
                
                
                
                
                
                6,105Issuance
      of treasury stock for pension plans
                
                
                250,000
                
                
                
                
                
                
                
                3,536
                
                
                
                
                
                
                
                1,796
                
                
                
                
                
                
                
                
                
                
                
                5,332Issuance
      of treasury stock under 401(k) plan
                
                
                17,086
                
                
                
                
                
                
                
                237
                
                
                
                
                
                
                
                123
                
                
                
                
                
                
                
                
                
                
                
                360Balance
      December 31, 2007
                
                
                34,183,484
                
                
                
                30
                
                
                
                303,908
                
                
                
                29,012
                
                
                
                (29,384
                )
                
                
                0
                
                
                
                (31,044
                )
                
                
                272,522Comprehensive
      income (loss):Net
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                13,337
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                13,337Noncash
      Titan Europe Plc charge
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                14,249
                
                
                
                14,249Pension
      liability adjustments, net of tax
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (17,964
                )
                
                
                (17,964
                )Comprehensive
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                9,622Dividends
      paid on common stock
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (623
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (623
                )Noncash
      Titan Europe Plc charge
                
                
                
                
                
                
                
                
                
                
                (10,471
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (10,471
                )Cash
      paid for fractional shares resulting from stock split
                
                
                
                
                
                
                
                
                
                
                (70
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (70
                )Exercise
      of stock options
                
                
                313,463
                
                
                
                
                
                
                
                5,389
                
                
                
                
                
                
                
                2,278
                
                
                
                
                
                
                
                
                
                
                
                7,667Issuance
      of treasury stock for funding contractual obligations on employee
      contracts
                
                
                512,640
                
                
                
                
                
                
                
                898
                
                
                
                
                
                
                
                4,603
                
                
                
                (5,501
                )
                
                
                
                
                
                
                0Issuance
      of treasury stock under 401(k) plan
                
                
                22,097
                
                
                
                
                
                
                
                370
                
                
                
                
                
                
                
                171
                
                
                
                
                
                
                
                
                
                
                
                541Balance
      December 31, 2008
                
                
                #35,031,684
                
                
                $
                30
                
                
                $
                300,024
                
                
                $
                41,726
                
                
                $
                (22,332
                )
                
                $
                (5,501
                )
                
                $
                (34,759
                )
                
                $
                279,188


See
accompanying Notes to Consolidated Financial Statements.


F-5


TITAN
INTERNATIONAL, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(All
amounts in thousands)




Year
      ended December 31,Cash
      flows from operating activities:
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006Net
      income (loss)
                  
                  $
                  13,337
                  
                  
                  $
                  (7,247
                  )
                  
                  $
                  5,144Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
      and amortization
                  
                  
                  30,368
                  
                  
                  
                  28,620
                  
                  
                  
                  26,850Deferred
      income tax provision
                  
                  
                  13,987
                  
                  
                  
                  1,995
                  
                  
                  
                  2,597Noncash
      Titan Europe Plc charge
                  
                  
                  24,504
                  
                  
                  
                  0
                  
                  
                  
                  0Noncash
      convertible debt conversion charge
                  
                  
                  0
                  
                  
                  
                  13,376
                  
                  
                  
                  0Excess
      tax benefit from stock options exercised
                  
                  
                  (4,131
                  )
                  
                  
                  0
                  
                  
                  
                  (646
                  )Issuance
      of treasury stock under 401(k) plan
                  
                  
                  541
                  
                  
                  
                  360
                  
                  
                  
                  246(Increase)
      decrease in assets:Accounts
      receivable
                  
                  
                  (28,137
                  )
                  
                  
                  (24,512
                  )
                  
                  
                  (26,770
                  )Inventories
                  
                  
                  (19,258
                  )
                  
                  
                  26,556
                  
                  
                  
                  (19,509
                  )Prepaid
      and other current assets
                  
                  
                  (3,823
                  )
                  
                  
                  (1,738
                  )
                  
                  
                  (3,675
                  )Other
      assets
                  
                  
                  575
                  
                  
                  
                  (1,566
                  )
                  
                  
                  (3,525
                  )Increase
      (decrease) in liabilities:Accounts
      payable
                  
                  
                  21,555
                  
                  
                  
                  18,108
                  
                  
                  
                  1,449Other
      current liabilities
                  
                  
                  6,393
                  
                  
                  
                  16,668
                  
                  
                  
                  13,443Other
      liabilities
                  
                  
                  (4,741
                  )
                  
                  
                  5,373
                  
                  
                  
                  (898
                  )Net
      cash provided by (used for) operating activities
                  
                  
                  51,170
                  
                  
                  
                  75,993
                  
                  
                  
                  (5,294
                  )Cash
      flows from investing activities:Capital
      expenditures
                  
                  
                  (79,953
                  )
                  
                  
                  (38,048
                  )
                  
                  
                  (8,282
                  )Acquisition
      of off-the-road (OTR) assets
                  
                  
                  0
                  
                  
                  
                  (8,900
                  )
                  
                  
                  (44,642
                  )Other
                  
                  
                  104
                  
                  
                  
                  532
                  
                  
                  
                  198Net
      cash used for investing activities
                  
                  
                  (79,849
                  )
                  
                  
                  (46,416
                  )
                  
                  
                  (52,726
                  )Cash
      flows from financing activities:Proceeds
      from borrowings
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  200,000Payment
      on debt
                  
                  
                  0
                  
                  
                  
                  (10,164
                  )
                  
                  
                  (11,995
                  )Proceeds
      (payment) on revolving credit facility, net
                  
                  
                  25,000
                  
                  
                  
                  0
                  
                  
                  
                  (99,100
                  )Proceeds
      from exercise of stock options
                  
                  
                  3,536
                  
                  
                  
                  6,631
                  
                  
                  
                  5,407Excess
      tax benefit from stock options exercised
                  
                  
                  4,131
                  
                  
                  
                  0
                  
                  
                  
                  646Payment
      of financing fees
                  
                  
                  (70
                  )
                  
                  
                  (625
                  )
                  
                  
                  (3,725
                  )Dividends
      paid
                  
                  
                  (585
                  )
                  
                  
                  (506
                  )
                  
                  
                  (393
                  )Net
      cash provided by (used for) financing activities
                  
                  
                  32,012
                  
                  
                  
                  (4,664
                  )
                  
                  
                  90,840Net
      increase in cash and cash equivalents
                  
                  
                  3,333
                  
                  
                  
                  24,913
                  
                  
                  
                  32,820Cash
      and cash equivalents, beginning of year
                  
                  
                  58,325
                  
                  
                  
                  33,412
                  
                  
                  
                  592Cash
      and cash equivalents, end of year
                  
                  $
                  61,658
                  
                  
                  $
                  58,325
                  
                  
                  $
                  33,412





See
accompanying Notes to Consolidated Financial Statements.


F-6
 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.





Stock
split


In June
2008, Titan’s Board of Directors approved a five-for-four stock split. Titan
executed a five-for-four stock split that became effective August 15, 2008, for
stockholders of record on July 31, 2008.  The Company gave five shares
for every four shares held as of the record date.  Stockholders
received one additional share for every four shares owned as of the record date
and received cash in lieu of fractional shares.  All share and per
share data, except shares authorized, have been adjusted to reflect the effect
of the stock split for all periods presented.





Inventories


Inventories
are valued at the lower of cost or market.  Cost is determined using
the first-in, first-out (FIFO) method in 2008 for approximately 78% of
inventories and the last-in, first-out (LIFO) method for approximately 22% of
inventories.  The major rubber material inventory and related
work-in-process and their finished goods are accounted for under the FIFO
method.  The major steel material inventory and related
work-in-process and their finished goods are accounted for under the LIFO
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:





YearsBuilding
      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.





Interest
is capitalized on fixed asset projects which are constructed over a period of
time.  The amount of interest capitalized is determined by applying a
weighted average interest rate to the average amount of accumulated expenditures
for the asset during the period.  The interest rate used is based on
the rates applicable to borrowings outstanding during the
period.


F-7
 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 and senior unsecured notes. The costs associated with the
revolving credit facility are being amortized over the remaining term of the
facility.  The costs associated with the senior unsecured notes are
amortized straight line over five years, the term of the
notes.  Amortization of deferred financing costs for the 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 senior
unsecured notes are the only significant financial instrument of the Company
with a fair value different from the recorded value.  At December 31,
2008, the fair value of the senior unsecured notes, based on market prices
obtained through independent pricing sources, was approximately $147 million,
compared to a carrying value of $200 million.





Available-for-sale
securities


The
Company has an investment in Titan Europe Plc that was valued at $2.6 million as
of December 31, 2008, representing a 17.2% ownership position, at that
time.  Titan Europe Plc is publicly traded on the AIM market in
London, England.  This investment is recorded as “Investment in Titan
Europe Plc” on the consolidated balance sheet.  In accordance with
SFAS No. 115, the Company records the Titan Europe Plc investment as an
available-for-sale security and reports this investment at fair value, with
unrealized gains and losses excluded from earnings and reported in a separate
component of stockholders’ equity.  Should the fair value decline
below the cost basis, the Company would be required to determine if this decline
is other than temporary.  If the decline in fair value were judged to
be other than temporary, an impairment charge would be
recorded.  Declared dividends on this investment are recorded in
income as a component of other income.  See Note 7 for additional
information.





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 2008, the
Company’s investment in Titan Europe Plc was classified as available-for-sale
securities and this investment is recorded as “Investment in Titan Europe Plc”
on the consolidated balance sheet.  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, 2008, 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, the Company’s
computation showed no impairment at December 31, 2008.  See Note 8 for
additional information.





F-8
 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 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 (SG&A) expense is comprised primarily of sales
commissions, marketing expense, selling and administrative wages, information
system costs, legal fees, bank charges, audit fees, research and development,
depreciation and amortization expense on non-manufacturing assets, and other
administrative items.





Research
and development expense


Research
and development (R&D) expenses are expensed as incurred and included as part
of selling, general and administrative expense.  R&D costs were
$3.5 million, $1.7 million and $1.3 million for the years of 2008, 2007 and
2006, respectively.





Advertising


Advertising
expenses are included in SG&A expense and are expensed as
incurred.  Advertising costs were approximately $2 million for each of
the years ended December 31, 2008 and 2007, and less than $1 million for the
year ended December 31, 2006.





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 is based on past warranty
experience.  See Note 11.





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 its 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.





Cash
equivalents


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 $16.6 million, $10.2 million and $15.6 million for interest in
2008, 2007 and 2006, respectively.





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


Income
taxes paid


Titan
paid $8.0 million, $2.4 million and $0.2 million for income taxes in 2008, 2007
and 2006, 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.





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, 2008, the Company has three stock-based compensation plans, which
are described in Note 22. The
Company granted no stock options in 2008, 2007 or 2006.





Reclassification


Certain
amounts from prior years have been reclassified to conform to the current year’s
presentation.





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 141 (revised 2007)


In
December 2007, SFAS No. 141 (revised 2007), “Business Combinations,” was
issued.  This statement requires an acquirer to recognize assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at their fair values on the acquisition date, with goodwill being the
excess value over the net identifiable assets acquired.  This
statement is effective for business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2008.  The Company does not expect the adoption
of this statement to have a material impact on its consolidated financial
position, results of operations and cash flows.





Statement
of Financial Accounting Standards Number 160


In
December 2007, SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements,” was issued.  This statement establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary.  It clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated financial
statements.  This statement is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15,
2008.  The Company does not expect the adoption of this statement to
have a material impact on its consolidated financial position, results of
operations and cash flows.




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


2.
            ACQUISITION
      OF OTR ASSETS




On July
31, 2006, Titan Tire Corporation of Bryan, a subsidiary of Titan International,
Inc., acquired the off-the-road (OTR) tire assets of Continental Tire North
America, Inc. (Continental) in Bryan, Ohio.  Titan Tire Corporation of
Bryan purchased the assets of Continental’s OTR tire facility for approximately
$53 million in cash proceeds, including an initial cash payment of approximately
$44 million and subsequent payment, made in the third quarter of 2007, of
approximately $9 million.  The assets purchased included Continental’s
OTR plant, property and equipment located in Bryan, Ohio, inventory and other
current assets.  In addition, the Company recorded intangibles related
to the acquisition as noncurrent assets and assumed certain warranty
liabilities.  This acquisition expanded Titan’s product offering into
larger earthmoving, construction and mining tires and added the manufacturing
capacity of the Bryan, Ohio, facility.





The
allocation of the Continental OTR asset acquisition was as follows (in thousands):


Inventory
                
                $
                11,053Prepaid
      and other current assets
                
                
                1,350Property,
      plant and equipment
                
                
                42,197Noncurrent
      assets
                
                
                742Liabilities
      assumed
                
                
                (1,800
                )$
                53,542





Pro
forma financial information


The
following unaudited pro forma financial information gives effect to the
acquisition of Continental’s OTR assets as if the acquisition had taken place on
January 1, 2006.  The pro forma information for the Bryan, Ohio,
facility was derived from a carve-out of Continental’s OTR historical accounting
records.





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


2006Net
      sales
                
                $
                761,796Income
      before income taxes
                
                
                21,786Net
      income
                
                
                13,072Diluted
      earnings per share *
                
                
                .49





*
Adjusted to reflect the five-for-four stock split that took place in
2008.





The pro
forma information is presented for illustrative purposes only and may not be
indicative of the results that would have been obtained had the acquisition
actually occurred on January 1, 2006, nor is it necessarily indicative of
Titan’s future consolidated results of operations or financial
position.  No pro forma information is presented for 2008 or 2007 as
the acquisition was included in the consolidated results for the full
year.




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


3.
            ACCOUNTS
      RECEIVABLE





Accounts
receivable at December 31, 2008 and 2007, consisted of the following (in thousands):


2008
                
                
                2007Accounts
      receivable
                
                $
                133,170
                
                
                $
                103,652Allowance
      for doubtful accounts
                
                
                (6,639
                )
                
                
                (5,258
                )Accounts
      receivable, net
                
                $
                126,531
                
                
                $
                98,394





The
Company had net accounts receivable of $126.5 million and $98.4 million at
December 31, 2008 and 2007, respectively.  These amounts are net of
allowance for doubtful accounts of $6.6 million and $5.3 million for the years
ended 2008 and 2007, respectively.





4.
            INVENTORIES





Inventories
at December 31, 2008 and 2007, consisted of the following (in thousands):


2008
                
                
                2007Raw
      material
                
                $
                73,927
                
                
                $
                50,368Work-in-process
                
                
                26,820
                
                
                
                21,533Finished
      goods
                
                
                56,488
                
                
                
                61,880157,235
                
                
                
                133,781Adjustment
      to LIFO basis
                
                
                (9,929
                )
                
                
                (5,733
                )$
                147,306
                
                
                $
                128,048




The
Company had inventories of $147.3 million and $128.0 million at December 31,
2008 and 2007, respectively.  Included in the above inventory balances
at year-end 2008 and 2007 are reserves for slow-moving and obsolete inventory of
$3.8 million and $4.7 million, respectively.





5.
            PREPAID
      AND OTHER CURRENT ASSETS





Prepaid
and other current assets at December 31, 2008 and 2007, consisted of the
following (in
thousands):


2008
                
                
                2007Prepaid
      supplies
                
                $
                12,436
                
                
                $
                10,023Other
                
                
                9,226
                
                
                
                7,816$
                21,662
                
                
                $
                17,839





Prepaid
and other current assets consist primarily of prepaid supplies, which were $12.4
million and $10.0 million at December 31, 2008 and 2007,
respectively.




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


6.
            PROPERTY,
      PLANT AND EQUIPMENT





Property,
plant and equipment at December 31, 2008 and 2007, consisted of the following
(in
thousands):


2008
                
                
                2007Land
      and improvements
                
                $
                3,343
                
                
                $
                3,098Buildings
      and improvements
                
                
                99,650
                
                
                
                78,462Machinery
      and equipment
                
                
                318,327
                
                
                
                276,326Tools,
      dies and molds
                
                
                62,856
                
                
                
                53,873Construction-in-process
                
                
                37,536
                
                
                
                31,801521,712
                
                
                
                443,560Less
      accumulated depreciation
                
                
                (273,270
                )
                
                
                (247,482
                )$
                248,442
                
                
                $
                196,078




Depreciation
on fixed assets for the years 2008, 2007 and 2006 totaled $27.5 million, $26.1
million, and $24.3 million, respectively.





7.
            INVESTMENT
      IN TITAN EUROPE





Investment
in Titan Europe Plc at December 31, 2008 and 2007, consisted of the following
(in
thousands):


2008
                
                
                2007Investment
      in Titan Europe Plc
                
                $
                2,649
                
                
                $
                34,535




The
Company owned a 17.2% ownership in Titan Europe Plc.  In accordance
with SFAS No. 115, the Company records the Titan Europe Plc investment as an
available-for-sale security and reports the investment at fair
value.
  The fair
value of the Company’s investment in Titan Europe Plc was $2.6 million and $34.5
million at December 31, 2008 and 2007, respectively.  Titan Europe is
publicly traded on the AIM market in London, England.  The December
31, 2008, fair value of $2.6 million was below the Company’s cost basis of $40.3
million.  The Company recorded an other than temporary impairment
charge of $37.7 million at year end 2008.  The impairment charge was
due to a substantial decline in Titan Europe Plc’s publicly quoted price on the
AIM market in London, England at year end 2008.
  Cash
dividends received from Titan Europe Plc were $1.7 million, $1.8 million and
$1.3 million for the years ended December 31, 2008, 2007 and 2006,
respectively.
 
 Subsequent
Event
 In
January 2009, the Company purchased additional shares of Titan Europe Plc,
resulting in a 22.9% ownership position.  As a result of this higher
ownership position, the Company will account for its interest in Titan Europe
Plc as an equity method investment in accordance with APB 18, “The Equity Method
of Accounting for Investments in Common Stock,” going forward.
  F-13
 TITAN
INTERNATIONAL, INC.
 NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS


8.
            GOODWILL





The
carrying amount of goodwill at December 31, 2008 and 2007, consisted of the
following (in
thousands):


2008
                
                
                2007Agricultural
      segment
                
                $
                6,912
                
                
                $
                6,912Earthmoving/construction
      segment
                
                
                3,552
                
                
                
                3,552Consumer
      segment
                
                
                1,238
                
                
                
                1,238$
                11,702
                
                
                $
                11,702




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, the Company’s
computation showed no impairment at December 31, 2008.  There can be
no assurance that future goodwill tests will not result in an impairment
charge.





9.
            OTHER
      ASSETS





Other
assets at December 31, 2008 and 2007, consisted of the following (in thousands):


2008
                
                
                2007Contractual
      obligations
                
                $
                4,426
                
                
                $
                6,277Deferred
      financing
                
                
                3,260
                
                
                
                4,897Other
      receivable
                
                
                2,400
                
                
                
                2,700Other
                
                
                5,448
                
                
                
                6,541$
                15,534
                
                
                $
                20,415





The
contractual obligations asset of $4.4 million and $6.3 million at December 31,
2008 and 2007, respectively, represents assets held in trusts to provide
contractual obligations to certain executive officers that are due upon
retirement or voluntary termination of employment.





10.
            OTHER
      CURRENT LIABILITIES





Other
current liabilities at December 31, 2008 and 2007, consisted of the following
(in
thousands):


2008
                
                
                2007Wages
      and commissions
                
                $
                11,765
                
                
                $
                10,850Accrued
      interest
                
                
                7,554
                
                
                
                7,487Warranty
                
                
                7,488
                
                
                
                5,854Insurance
                
                
                6,161
                
                
                
                4,250Utilities
                
                
                3,103
                
                
                
                3,599Other
                
                
                10,017
                
                
                
                11,748$
                46,088
                
                
                $
                43,788





Other
current liabilities were $46.1 million and $43.8 million at December 31, 2008
and 2007, respectively.


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


11.
            WARRANTY
      COSTS





Changes
in the warranty liability consisted of the following (in thousands):


2008
                
                
                2007Warranty
      liability, January 1
                
                $
                5,854
                
                
                $
                4,688Provision
      for warranty liabilities
                
                
                13,567
                
                
                
                8,901Warranty
      payments made
                
                
                (11,933
                )
                
                
                (7,735
                )Warranty
      liability, December 31
                
                $
                7,488
                
                
                $
                5,854





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.  The higher warranty
provision in 2008 was partially due to the record sales
levels.  Warranty accruals are included as a component of other
current liabilities on the Consolidated Balance Sheets.





12.
            OTHER
      LONG-TERM LIABILITIES





Other
long-term liabilities at December 31, 2008 and 2007, consisted of the following
(in
thousands):


2008
                
                
                2007Accrued
      pension liabilities
                
                $
                29,291
                
                
                $
                2,092Accrued
      employment liabilities
                
                
                7,218
                
                
                
                11,726Other
                
                
                2,450
                
                
                
                2,331$
                38,959
                
                
                $
                16,149





Accrued
employment liabilities includes liabilities for contractual and performance
obligations for certain executive officers of approximately $4 million and
approximately $8 million for December 31, 2008 and 2007,
respectively.





13.
            REVOLVING
      CREDIT FACILITY AND LONG-TERM DEBT





Long-term
debt at December 31, 2008 and 2007, consisted of the following (in thousands):


2008
                
                
                2007Senior
      unsecured notes
                
                $
                200,000
                
                
                $
                200,000Revolving
      credit facility
                
                
                25,000
                
                
                
                0225,000
                
                
                
                200,000Less
      amounts due within one year
                
                
                25,000
                
                
                
                0$
                200,000
                
                
                $
                200,000





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


2009
                
                $
                25,0002010
                
                
                02011
                
                
                02012
                
                
                200,000Thereafter
                
                
                0$
                225,000




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


Senior
unsecured notes


The
Company’s $200 million 8% senior unsecured notes are due January
2012.





Revolving
credit facility


The
Company’s $250 million revolving credit facility (credit facility) with agent
Bank of America has an October 2009 termination date and is collateralized by a
first priority security interest in certain assets of Titan and its domestic
subsidiaries.  At December 31, 2008, any borrowings under the credit
facility would have borne interest at a floating rate of prime rate plus 0% to
1% or LIBOR plus 1% to 2%.





Cash
borrowings under this credit facility were $25.0 million and outstanding letters
of credit on the facility were $5.0 million at December 31, 2008, leaving $220.0
million of unused availability on the credit facility.  The weighted
average interest rate on the Company’s borrowings outstanding under the credit
facility was approximately 31⁄4% as of December 31, 2008.





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, 2008.





Recent
development - Revolving credit facility amendment & restatement


On
January 30, 2009, Titan International, Inc. amended and restated its credit
facility with Bank of America, N.A.  The amendment included a
multi-year extension that extended the credit facility termination date to
January 2012 from the previous October 2009 date.  The amendment created an
accordion feature within the credit facility that set the initial loan
availability at $150 million with the ability to request increases up to a
maximum availability of $250 million.  The amendment adjusted the borrowing
rates within a pricing grid that includes a minimum 11⁄2% LIBOR rate.





14.
            ACCUMULATED
      OTHER COMPREHENSIVE INCOME (LOSS)





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


Currency
                      Translation
                      Adjustments
                    
                    
                    Unrealized
                      Gain
      (Loss) on
                      Investments
                    
                    
                    Unrecognized
                      Losses
      and
                      Prior
      Service
                      Cost
                    
                    
                    TotalBalance
      at January 1, 2007
                    
                    $
                    (1,183
                    )
                    
                    $
                    6,126
                    
                    
                    $
                    (16,405
                    )
                    
                    $
                    (11,462
                    )Unrealized
      loss on investment, net of tax of $10,971
                    
                    
                    0
                    
                    
                    
                    (20,375
                    )
                    
                    
                    0
                    
                    
                    
                    (20,375
                    )Defined
      benefit pension plan entries:Plan
      acquisition, net of tax of $481
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    785
                    
                    
                    
                    785Unrecognized
      prior service cost, net of tax of $53
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    84
                    
                    
                    
                    84Unrecognized
      net loss, net of tax of $26
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    (42
                    )
                    
                    
                    (42
                    )Unrecognized
      deferred tax liability, net of tax of $22
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    (34
                    )
                    
                    
                    (34
                    )Balance
      at December 31, 2007
                    
                    
                    (1,183
                    )
                    
                    
                    (14,249
                    )
                    
                    
                    (15,612
                    )
                    
                    
                    (31,044
                    )Noncash
      Titan Europe Plc charge
                    
                    
                    0
                    
                    
                    
                    14,249
                    
                    
                    
                    0
                    
                    
                    
                    14,249Defined
      benefit pension plan entries:Unrecognized
      prior service cost, net of tax of $52
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    85
                    
                    
                    
                    85Unrecognized
      net loss, net of tax of $11,041
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    (18,014
                    )
                    
                    
                    (18,014
                    )Unrecognized
      deferred tax liability, net of tax of $21
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    (35
                    )
                    
                    
                    (35
                    )Balance
      at December 31, 2008
                    
                    $
                    (1,183
                    )
                    
                    $
                    0
                    
                    
                    $
                    (33,576
                    )
                    
                    $
                    (34,759
                    )





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





15.
            STOCKHOLDERS’
      EQUITY





The
Company is authorized by the Board of Directors to repurchase up to 2.5 million
common shares subject to debt agreement covenants.  The Company
repurchased no Titan common shares in 2008, 2007, or 2006.  The
Company has no plans at this time to repurchase any Titan common
stock.  Titan paid cash dividends of $.018 per share of common stock
for 2008 and $.016 per share for common stock for 2007 and
2006.  Dividends paid totaled $0.6 million, $0.5 million and $0.4
million for 2008, 2007 and 2006, respectively.





In March
2007, the Company converted 100% of the 5.25% senior unsecured convertible notes
due 2009 into Titan common stock at an increased conversion
rate.   The exchange resulted in a decrease in treasury stock of
$59.0 million and an increase to additional paid-in-capital of approximately
$35.2 million.  Stockholder’s equity increased by $80.9 million in
total as a result of this exchange.  See Note 18 for additional
information.





16.
            FAIR
      VALUE MEASUREMENTS





In
September 2006, SFAS No. 157, “Fair Value Measurements,” was
issued.  This statement defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements.  This statement applies
under other accounting pronouncements that require or permit fair value
measurements.  FASB Staff Position (FSP) 157-2 amended SFAS No. 157 to
delay the effective date of SFAS No. 157 for all nonfinancial assets and
nonfinancial liabilities, except for items that are measured at fair value on a
recurring basis, to fiscal years beginning after November 15, 2008.





The
adoption of SFAS No. 157 for financial assets and financial liabilities,
effective January 1, 2008, did not have a material impact on Titan’s
consolidated financial position, results of operations or cash
flows.  The Company is evaluating the effect the adoption of SFAS No.
157 for nonfinancial assets and nonfinancial liabilities will have on its
consolidated financial position, results of operations and cash
flows.





SFAS No.
157 establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value.  These tiers include:  Level 1
– defined as quoted prices in active markets for identical instruments; Level 2
– defined as inputs other than quoted prices in active markets that are either
directly or indirectly observable; and Level 3 – defined as unobservable inputs
in which little or no market data exists, therefore requiring an entity to
develop its own assumptions.





Assets and liabilities measured at fair
value on a recurring basis consisted of the following(in thousands):


Fair Value Measurements as of December 31,
      2008Total
                
                
                Level 1
                
                
                Level 2
                
                
                Level 3Investments
      for contractual obligations
                
                $
                4,426
                
                
                $
                4,426
                
                
                $
                0
                
                
                $
                0Investment
      in Titan Europe Plc
                
                
                2,649
                
                
                
                2,649
                
                
                
                0
                
                
                
                0Total
                
                $
                7,075
                
                
                $
                7,075
                
                
                $
                0
                
                
                $
                0




17.
            ROYALTY
      EXPENSE





Royalty
expense consisted of the following (in thousands):


2008
                
                
                2007
                
                
                2006Royalty
      expense
                
                $
                9,242
                
                
                $
                6,155
                
                
                $
                5,001





The
Goodyear North American farm tire asset acquisition included a license agreement
with The Goodyear Tire & Rubber Company to manufacture and sell certain
off-highway tires in North America under the Goodyear name.  Royalty
expenses recorded for the years ended December 31, 2008, 2007 and 2006, were
$9.2 million, $6.2 million and $5.0 million, respectively.


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


18.
            NONCASH
      CONVERTIBLE DEBT CONVERSION CHARGE





Noncash
convertible debt conversion charge consisted of the following (in thousands):


2008
                
                
                2007
                
                
                2006Noncash
      convertible debt charge
                
                $
                0
                
                
                $
                13,376
                
                
                $
                0





In
January 2007, the Company filed a registration statement relating to an offer to
the holders of its 5.25% senior unsecured convertible notes due 2009 to convert
their notes into Titan’s common stock at an increased conversion rate (the
“Offer”).  Per the Offer, each $1,000 principal amount of notes was
convertible into 81.0000 shares of common stock, which is equivalent to a
conversion price of approximately $12.35 per share.





Prior to
the Offer, each $1,000 principal amount of notes was convertible into 74.0741
shares of common stock, which was equivalent to a conversion price of
approximately $13.50 per share.  The registration statement relating to the
shares of common stock to be offered was declared effective February
2007.  In March 2007, the Company announced 100% acceptance of the
conversion offer and the $81.2 million of accepted notes were converted into
6,577,200 shares of Titan common stock.





The
Company recognized a noncash charge of $13.4 million in connection with this
exchange in accordance with SFAS No. 84, “Induced Conversions of Convertible
Debt.”  This charge does not reflect $1.0 million of interest
previously accrued on the notes.  The shares issued for the conversion
were issued out of treasury shares.  The exchange resulted in a
decrease in treasury stock of $59.0 million and an increase to additional
paid-in capital of approximately $35.2 million.  Stockholder’s equity
increased by $80.9 million in total as a result of this exchange.





19.
            OTHER
      INCOME, NET





Other
income consisted of the following (in thousands):


2008
                
                
                2007
                
                
                2006Dividend
      income – Titan Europe Plc
                
                $
                1,711
                
                
                $
                1,768
                
                
                $
                1,281Interest
      income
                
                
                1,352
                
                
                
                2,717
                
                
                
                1,681Other
      (expense) income
                
                
                (554
                )
                
                
                (1,121
                )
                
                
                602$
                2,509
                
                
                $
                3,364
                
                
                $
                3,564





Other
income recorded for the years ended December 31, 2008, 2007 and 2006, was $2.5
million, $3.4 million and $3.6 million, respectively.




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


20.
            INCOME
      TAXES




Income
(loss) before income taxes, consisted of the following (in thousands):
 2008
                  
                  
                  2007
                  
                  
                  2006Domestic
                  
                  $
                  21,727
                  
                  
                  $
                  (6,306
                  )
                  
                  $
                  5,310Foreign
                  
                  
                  1,283
                  
                  
                  
                  2,422
                  
                  
                  
                  3,264$
                  23,010
                  
                  
                  $
                  (3,884
                  )
                  
                  $
                  8,574
 
 The
provision (benefit) for income taxes, was as follows (in thousands):
 2008
                  
                  
                  2007
                  
                  
                  2006CurrentFederal
                  
                  $
                  7,814
                  
                  
                  $
                  562
                  
                  
                  $
                  120State
                  
                  
                  34
                  
                  
                  
                  547
                  
                  
                  
                  475Foreign
                  
                  
                  1,031
                  
                  
                  
                  1,574
                  
                  
                  
                  1838,879
                  
                  
                  
                  2,683
                  
                  
                  
                  778DeferredFederal
                  
                  
                  811
                  
                  
                  
                  2,725
                  
                  
                  
                  2,442State
                  
                  
                  (17
                  )
                  
                  
                  408
                  
                  
                  
                  210Foreign
                  
                  
                  0
                  
                  
                  
                  (2,453
                  )
                  
                  
                  0794
                  
                  
                  
                  680
                  
                  
                  
                  2,652Provision
      for income taxes
                  
                  $
                  9,673
                  
                  
                  $
                  3,363
                  
                  
                  $
                  3,430
 
 The
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 income (loss) as
a result of the following:
 2008
                  
                  
                  2007
                  
                  
                  2006Statutory
      U.S. federal tax rate
                  
                  
                  35.0
                  %
                  
                  
                  35.0
                  %
                  
                  
                  35.0
                  %Nondeductible
      debt conversion charge
                  
                  
                  0.0
                  
                  
                  
                  (120.6
                  )
                  
                  
                  0.0Irish
      capital gains tax
                  
                  
                  0.0
                  
                  
                  
                  29.3
                  
                  
                  
                  0.0Repatriation
      of foreign earnings
                  
                  
                  1.9
                  
                  
                  
                  (29.2
                  )
                  
                  
                  11.6Foreign
      taxes, net
                  
                  
                  (1.9
                  )
                  
                  
                  18.8
                  
                  
                  
                  (12.0
                  )State
      taxes, net
                  
                  
                  4.8
                  
                  
                  
                  (16.0
                  )
                  
                  
                  6.2Other,
      net
                  
                  
                  2.2
                  
                  
                  
                  (3.9
                  )
                  
                  
                  (0.8
                  )Effective
      tax rate
                  
                  
                  42.0
                  %
                  
                  
                  (86.6
                  )%
                  
                  
                  40.0
                  %
 
 Federal
income taxes are provided on earnings of foreign subsidiaries except to the
extent that such earnings are expected to be indefinitely reinvested
abroad.
  F-19
 TITAN
INTERNATIONAL, INC.
 NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS


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, 2008 and 2007,
are as follows (in thousands):


2008
                
                
                2007Deferred
      tax assets:Unrealized
      loss on available-for-sale security
                
                $
                13,194
                
                
                $
                2,034Pension
                
                
                11,130
                
                
                
                529Employee
      benefits and related costs
                
                
                4,044
                
                
                
                4,197Warranty
                
                
                2,862
                
                
                
                2,224Allowance
      for bad debts
                
                
                2,523
                
                
                
                1,998Net
      operating loss carryforwards
                
                
                2,004
                
                
                
                7,062Inventory
                
                
                1,970
                
                
                
                1,417EPA
      reserve
                
                
                1,121
                
                
                
                1,201Other
                
                
                5,396
                
                
                
                7,043Deferred
      tax assets
                
                
                44,244
                
                
                
                27,705Deferred
      tax liabilities:Fixed
      assets
                
                
                (24,946
                )
                
                
                (16,590
                )Deferred
      tax liabilities
                
                
                (24,946
                )
                
                
                (16,590
                )Net
      deferred tax asset
                
                $
                19,298
                
                
                $
                11,115





The
Company recorded an income tax expense of $9.7 million, $3.4 million and $3.4
million for the years ended December 31, 2008, 2007 and 2006,
respectively.  The Company’s 2007 income tax expense and rate differs
from the amount of income tax determined by applying the U.S. Federal income tax
rate to pre-tax income primarily as a result of the $13.4 million noncash charge
taken in connection with the 100% conversion of the Company’s convertible
debt.  This noncash debt charge is not deductible for income tax
purposes.  The Company has various state net operating loss
carryforwards which are subject to expiration from 2019 to 2026.





The
Company has applied the provisions of FIN 48, “Accounting for Uncertainty in
Income Taxes”, for the year ended December 31, 2008.  No adjustment
was made to retained earnings in adopting FIN 48 in 2007 and at this time the
Company does not expect any significant increases or decreases to its
unrecognized tax benefits within 12 months of this reporting
date.  Titan has identified its federal tax return and its Illinois
state tax return as “major” tax jurisdictions.  The Company is subject
to (i) federal tax examinations for periods 2004 to 2008 and (ii) Illinois state
income tax examinations for years 2005 to 2008.


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


21.
            EMPLOYEE
      BENEFIT PLANS





Pension
plans


The
Company has a frozen defined benefit pension plan covering certain employees of
Titan Tire Corporation (Titan Tire) and has a frozen defined benefit pension
plan covering certain employees of Titan Tire Corporation of Bryan
(Bryan).  In October 2007, the Bryan pension plan, adopted at the date
of the Continental OTR asset acquisition and frozen from its inception, received
cash transfers of approximately $25 million from Continental Tire North
America’s frozen pension plan for the Bryan, Ohio, location.  The
amount transferred into the frozen plan was actuarially approved to be a fully
funded plan.  The Company also has a frozen contributory defined
benefit pension plan covering certain former eligible bargaining employees of
its Walcott, Iowa, facility (Walcott).  Additionally, the Company maintains
a contributory defined benefit plan that covered former eligible bargaining
employees of Dico, Inc (Dico).  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, 2008, presentation are the Titan
Tire, Bryan and Walcott plans which have a projected benefit obligation of $90.5
million, exceeding the fair value of plan assets of $61.3 million at December
31, 2008.  Included in the December 31, 2007, presentation are the
Titan Tire and Walcott plans which have a projected benefit obligation of $71.2
million, exceeding the fair value of plan assets of $69.1 million at December
31, 2007.





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, 2008, 2007 and
2006.





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, 2008 and 2007 (in thousands):


Change
      in benefit obligation:
                  
                  2008
                  
                  
                  2007Benefit
      obligation at beginning of year
                  
                  $
                  95,362
                  
                  
                  $
                  68,844Acquisition
                  
                  
                  0
                  
                  
                  
                  23,948Interest
      cost
                  
                  
                  5,295
                  
                  
                  
                  4,109Actuarial
      (gain) loss
                  
                  
                  (3,507
                  )
                  
                  
                  4,898Benefits
      paid
                  
                  
                  (6,605
                  )
                  
                  
                  (6,437
                  )Benefit
      obligation at end of year
                  
                  $
                  90,545
                  
                  
                  $
                  95,362Change
      in plan assets:Fair
      value of plan assets at beginning of year
                  
                  $
                  94,499
                  
                  
                  $
                  60,666Acquisition
                  
                  
                  0
                  
                  
                  
                  25,214Actual
      return on plan assets
                  
                  
                  (26,323
                  )
                  
                  
                  8,822Employer
      contributions
                  
                  
                  225
                  
                  
                  
                  6,234Benefits
      paid
                  
                  
                  (6,605
                  )
                  
                  
                  (6,437
                  )Fair
      value of plan assets at end of year
                  
                  $
                  61,796
                  
                  
                  $
                  94,499Unfunded
      status at end of year
                  
                  $
                  (28,749
                  )
                  
                  $
                  (863
                  )Amounts
      recognized in consolidated balance sheet:Noncurrent
      assets
                  
                  $
                  542
                  
                  
                  $
                  1,229Noncurrent
      liabilities
                  
                  
                  (29,291
                  )
                  
                  
                  (2,092
                  )Net
      amount recognized in the consolidated balance sheet
                  
                  $
                  (28,749
                  )
                  
                  $
                  (863
                  )





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




Amounts
      recognized in accumulated other comprehensive loss:2008
                
                
                2007Plan
      acquisition
                
                $
                0
                
                
                $
                1,266Unrecognized
      prior service cost
                
                
                (1,438
                )
                
                
                (1,574
                )Unrecognized
      net loss
                
                
                (52,886
                )
                
                
                (25,098
                )Deferred
      tax effect of unrecognized items
                
                
                20,748
                
                
                
                9,794Net
      amount recognized in accumulated other comprehensive loss
                
                $
                (33,576
                )
                
                $
                (15,612
                )





The
      weighted-average assumptions used in the actuarial computation that
      derived the benefit obligations at December 31 were as
      follows:
                  
                  2008
                  
                  
                  2007Discount
      rate
                  
                  
                  6.25
                  %
                  
                  
                  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, 2008, 2007 and
2006 (in
thousands):


Components
      of net periodic benefit cost and otheramounts
      recognized in other comprehensive incomeNet
      periodic benefit cost:
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006Interest
      cost
                      
                      $
                      5,295
                      
                      
                      $
                      4,109
                      
                      
                      $
                      3,934Assumed
      return on assets
                      
                      
                      (7,828
                      )
                      
                      
                      (5,561
                      )
                      
                      
                      (4,673
                      )Amortization
      of unrecognized prior service cost
                      
                      
                      137
                      
                      
                      
                      137
                      
                      
                      
                      137Amortization
      of unrecognized deferred taxes
                      
                      
                      (56
                      )
                      
                      
                      (56
                      )
                      
                      
                      (56
                      )Amortization
      of net unrecognized loss
                      
                      
                      1,588
                      
                      
                      
                      1,593
                      
                      
                      
                      1,848Net
      periodic pension (income) cost
                      
                      $
                      (864
                      )
                      
                      $
                      222
                      
                      
                      $
                      1,190





The
estimated net loss, prior service cost, and deferred taxes that will be
amortized from accumulated other comprehensive income into net periodic benefit
cost over the next fiscal year are $4.3 million, $0.1 million and $(0.1)
million, respectively.





The
weighted-average assumptions used in the actuarial computation that derived net
periodic pension cost for the years ended December 31, 2008, 2007 and
2006:


2008
                  
                  
                  2007
                  
                  
                  2006Discount
      rate
                  
                  
                  5.75
                  %
                  
                  
                  5.75
                  %
                  
                  
                  5.75
                  %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
                    AllocationAsset
      Category
                  
                  2008
                  
                  
                  2007
                  
                  
                  2009U.S.
      equities (a)
                  
                  
                  53
                  %
                  
                  
                  56
                  %
                  
                  
                  40%
      - 80
                  %Fixed
      income
                  
                  
                  34
                  %
                  
                  
                  27
                  %
                  
                  
                  20%
      - 50
                  %Cash
      and cash equivalents
                  
                  
                  8
                  %
                  
                  
                  6
                  %
                  
                  
                  0%
      - 20
                  %International
      equities (a)
                  
                  
                  5
                  %
                  
                  
                  11
                  %
                  
                  
                  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
risk.  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 Barclays Capital Aggregate Bond
Index.  The U.S. equities asset category included the Company’s common
stock in the amount of $1.5 million (approximately two percent of total plan
assets) and $5.1 million (approximately five percent of total plan assets) at
December 31, 2008 and 2007, 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 2009 minimum pension funding calculations are not finalized, the Company
estimates those funding requirements will be approximately $1
million.





Projected
benefit payments from the plans as of December 31, 2008, are estimated as
follows (in thousands):


2009
                
                $
                6,4902010
                
                
                6,5282011
                
                
                6,5972012
                
                
                6,7462013
                
                
                6,8722014-2018
                
                
                35,936





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.  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.  The Company issued 22,097
shares, 17,086 shares and 16,883 shares of treasury stock in connection with
this 401(k) plan during 2008, 2007 and 2006, respectively.  Expenses
to the Company related to this common stock matching contribution were $0.6
million, $0.4 million and $0.3 million for 2008, 2007 and 2006.





The other
three 401(k) plans are for employees covered by collective bargaining
arrangements at (i) Titan Tire Corporation; (ii) Titan Tire Corporation of
Freeport; and (iii) Titan Tire Corporation of Bryan.  These plans do
not include a Company matching contribution.  Employees are fully vested
with respect to their contributions.


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


22.
            STOCK
      OPTION PLANS





The
Company accounts for stock options using SFAS 123(R), “Share-Based
Payment.”  No stock-based compensation expense was recorded during
2008, 2007, or 2006.  The Company granted no stock options during
2008, 2007 or 2006.  All previously granted stock options were fully
vested before January 1, 2006.





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 were fully
vested in 2005 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 were fully vested in 2005 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
2008, 2007 and 2006 no stock options were granted under this plan.





Stock
options outstanding and exercisable as of December 31, 2008, were as
follows:


Options Outstanding
                  
                  
                  Options ExercisableWeighted
      Average
                  
                  Number
      of
                  
                  
                  Weighted
      Average
                  
                  
                  Number
      of
                  
                  
                  Weighted
      AveragePrice Range
                  
                  Contractual Life
                  
                  Options
                  
                  
                  Exercise Price
                  
                  
                  Options
                  
                  
                  Exercise Price$ 
      3.63 - $  5.35
                  
                  2.2
      years
                  
                  
                  112,500
                  
                  
                  $
                  4.45
                  
                  
                  
                  112,500
                  
                  
                  $
                  4.45$ 
      6.40 - $  7.60
                  
                  0.2
      years
                  
                  
                  170,000
                  
                  
                  $
                  6.72
                  
                  
                  
                  170,000
                  
                  
                  $
                  6.72$10.68
      - $13.74
                  
                  6.7
      years
                  
                  
                  278,036
                  
                  
                  $
                  12.20
                  
                  
                  
                  278,036
                  
                  
                  $
                  12.20560,536
                  
                  
                  $
                  8.98
                  
                  
                  
                  560,536
                  
                  
                  $
                  8.98





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


The
following is a summary of activity in the stock option plans for 2006, 2007 and
2008:


Shares
      Subject
                  to Option
                
                
                Weighted-
      Average
                  Exercise PriceOutstanding,
      January 1, 2006
                
                
                1,934,388
                
                
                $
                10.82Granted
                
                
                0
                
                
                
                -
                (a)Exercised
                
                
                (477,738
                )
                
                
                11.32Canceled/Expired
                
                
                (19,075
                )
                
                
                12.80Outstanding,
      December 31, 2006
                
                
                1,437,575
                
                
                
                10.63Granted
                
                
                0
                
                
                
                -
                (a)Exercised
                
                
                (555,663
                )
                
                
                11.94Canceled/Expired
                
                
                (7,913
                )
                
                
                10.50Outstanding,
      December 31, 2007
                
                
                873,999
                
                
                
                9.81Granted
                
                
                0
                
                
                
                -
                (a)Exercised
                
                
                (313,463
                )
                
                
                11.29Canceled/Expired
                
                
                0
                
                
                
                -Outstanding,
      December 31, 2008
                
                
                560,536
                
                
                $
                8.98





(a)
            The
      Company granted no stock options during 2006, 2007 or
  2008.





The total
intrinsic value of options exercised in 2008 was $5.1 million.  Cash
received from the exercise of stock options was $3.5 million for
2008.  The tax benefit realized for the tax deductions from stock
options exercised was $4.1 million for 2008.





The total
intrinsic value of stock options exercised in 2007 was $5.2
million.  Cash received from the exercise of options was $6.6 million
for 2007.  There was no tax benefit realized for the tax deductions
from stock options exercised for 2007.





The total
intrinsic value of options exercised in 2006 was $1.7 million.  Cash
received from the exercise of stock options was $5.4 million for
2006.  The tax benefit realized for the tax deductions from stock
options exercised was $0.6 million for 2006.





The
Company currently uses treasury shares to satisfy any stock option
exercises.  At December 31, 2008, the Company had 2.4 million shares
of treasury stock.





23.
            LITIGATION





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




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


24.
            LEASE
      COMMITMENTS





The
Company leases certain buildings and equipment under operating
leases.  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 $2.9 million, $3.0 million
and $3.2 million for the years ended December 31, 2008, 2007 and 2006,
respectively.





At
December 31, 2008, future minimum rental commitments under noncancellable
operating leases with initial or remaining terms in excess of one year are as
follows (in
thousands):


2009
                
                $
                1,2672010
                
                
                9302011
                
                
                5802012
                
                
                39Thereafter
                
                
                0Total
      future minimum lease payments
                
                $
                2,816





25.
            CONCENTRATION
      OF CREDIT RISK





Net sales
to Deere & Company in Titan’s agricultural, earthmoving/construction and
consumer markets represented 22% of the Company’s consolidated revenues for
the year ended December 31, 2008, and 17% of the Company’s consolidated revenues
for the years ended December 31, 2007 and 2006.  Net sales to CNH
Global N.V. in Titan’s three markets represented 12% of the Company’s
consolidated revenues for the year ended December 31, 2008, and 11% of the
Company’s consolidated revenues for the years ended December 31, 2007 and
2006.  No other customer accounted for more than 10% of Titan’s net
sales in 2008, 2007 or 2006.





26.
            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 2008,
2007 and 2006, sales of Titan product to these companies were approximately $6.2
million, $5.1 million and $6.4 million, respectively.  On other sales
referred to Titan from these manufacturing representative companies, commissions
were approximately $2.0 million, $1.8 million and $2.0 million during 2008, 2007
and 2006, 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 both December 31, 2008 and 2007, Titan had trade
receivables of approximately $0.2
million due from these companies.





27.
            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 to make certain operating decisions, allocate portions
of capital expenditures and assess segment performance.  The
accounting policies of the segments are the same as those described in Note 1,
“Description of Business and Significant Accounting
Policies.”  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, 2008, 2007 and 2006 (in thousands):


2008
                        
                        
                        2007
                        
                        
                        2006Revenues from external
      customersAgricultural
                        
                        $
                        729,895
                        
                        
                        $
                        515,642
                        
                        
                        $
                        421,096Earthmoving/construction
                        
                        
                        281,008
                        
                        
                        
                        277,206
                        
                        
                        
                        183,357Consumer
                        
                        
                        25,797
                        
                        
                        
                        44,173
                        
                        
                        
                        75,001$
                        1,036,700
                        
                        
                        $
                        837,021
                        
                        
                        $
                        679,454Gross profitAgricultural
                        
                        $
                        89,782
                        
                        
                        $
                        35,742
                        
                        
                        $
                        42,511Earthmoving/construction
                        
                        
                        46,047
                        
                        
                        
                        47,848
                        
                        
                        
                        28,099Consumer
                        
                        
                        3,938
                        
                        
                        
                        3,431
                        
                        
                        
                        2,771Unallocated
      corporate
                        
                        
                        (53
                        )
                        
                        
                        (2,890
                        )
                        
                        
                        (603
                        )$
                        139,714
                        
                        
                        $
                        84,131
                        
                        
                        $
                        72,778Income (loss) from
    operationsAgricultural
                        
                        $
                        74,241
                        
                        
                        $
                        25,324
                        
                        
                        $
                        27,351Earthmoving/construction
                        
                        
                        38,422
                        
                        
                        
                        40,833
                        
                        
                        
                        21,837Consumer
                        
                        
                        3,303
                        
                        
                        
                        2,546
                        
                        
                        
                        1,655Unallocated
      corporate
                        
                        
                        (42,645
                        )
                        
                        
                        (43,865
                        )
                        
                        
                        (28,832
                        )Consolidated
      income from operations
                        
                        
                        73,321
                        
                        
                        
                        24,838
                        
                        
                        
                        22,011Interest
      expense
                        
                        
                        (15,122
                        )
                        
                        
                        (18,710
                        )
                        
                        
                        (17,001
                        )Noncash
      Titan Europe Plc charge
                        
                        
                        (37,698
                        )
                        
                        
                        0
                        
                        
                        
                        0Noncash
      convertible debt conversion charge
                        
                        
                        0
                        
                        
                        
                        (13,376
                        )
                        
                        
                        0Other
      income, net
                        
                        
                        2,509
                        
                        
                        
                        3,364
                        
                        
                        
                        3,564Income
      (loss) before income taxes
                        
                        $
                        23,010
                        
                        
                        $
                        (3,884
                        )
                        
                        $
                        8,574Capital expendituresAgricultural
                        
                        $
                        10,946
                        
                        
                        $
                        11,267
                        
                        
                        $
                        5,184Earthmoving/construction
                        
                        
                        67,203
                        
                        
                        
                        22,950
                        
                        
                        
                        2,192Consumer
                        
                        
                        406
                        
                        
                        
                        1,654
                        
                        
                        
                        339Unallocated
      corporate
                        
                        
                        1,398
                        
                        
                        
                        2,177
                        
                        
                        
                        567$
                        79,953
                        
                        
                        $
                        38,048
                        
                        
                        $
                        8,282Depreciation &
    amortizationAgricultural
                        
                        $
                        16,004
                        
                        
                        $
                        14,255
                        
                        
                        $
                        15,324Earthmoving/construction
                        
                        
                        10,831
                        
                        
                        
                        10,330
                        
                        
                        
                        7,402Consumer
                        
                        
                        594
                        
                        
                        
                        1,320
                        
                        
                        
                        1,409Unallocated
      corporate
                        
                        
                        2,939
                        
                        
                        
                        2,715
                        
                        
                        
                        2,715$
                        30,368
                        
                        
                        $
                        28,620
                        
                        
                        $
                        26,850Total assetsAgricultural
                        
                        $
                        360,030
                        
                        
                        $
                        257,005
                        
                        
                        $
                        273,787Earthmoving/construction
                        
                        
                        188,486
                        
                        
                        
                        176,144
                        
                        
                        
                        145,964Consumer
                        
                        
                        9,401
                        
                        
                        
                        22,515
                        
                        
                        
                        22,678Unallocated
      corporate
                        
                        
                        96,865
                        
                        
                        
                        134,831
                        
                        
                        
                        142,697$
                        654,782
                        
                        
                        $
                        590,495
                        
                        
                        $
                        585,126







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


The table
below presents information by geographic area.  Revenues from external
customers were determined based on the location of the selling
subsidiary.  Geographic information as of and for the years ended
December 31, 2008, 2007 and 2006 was as follows (in thousands):


2008
                    
                    United
      States
                    
                    
                    Other
      Countries
                    
                    
                    Consolidated
                      TotalsRevenues
      from external customers
                    
                    $
                    1,036,700
                    
                    
                    $
                    0
                    
                    
                    $
                    1,036,700Long-lived
      assets
                    
                    
                    260,144
                    
                    
                    
                    0
                    
                    
                    
                    260,1442007Revenues
      from external customers
                    
                    $
                    837,021
                    
                    
                    $
                    0
                    
                    
                    $
                    837,021Long-lived
      assets
                    
                    
                    207,780
                    
                    
                    
                    0
                    
                    
                    
                    207,7802006Revenues
      from external customers
                    
                    $
                    679,454
                    
                    
                    $
                    0
                    
                    
                    $
                    679,454Long-lived
      assets
                    
                    
                    196,318
                    
                    
                    
                    0
                    
                    
                    
                    196,318






28.
            RECENT
      DEVELOPMENTS





Titan
Europe Plc additional share purchase




In
January 2009, the Company purchased additional shares of Titan Europe Plc,
resulting in a 22.9% ownership position.  As a result of this higher
ownership position, the Company will account for its interest in Titan Europe
Plc as an equity method investment in accordance with APB 18, “The Equity Method
of Accounting for Investments in Common Stock,” going forward.





Revolving
credit facility amendment & restatement




On
January 30, 2009, Titan International, Inc. amended and restated its credit
facility with Bank of America, N.A.  The amendment included a
multi-year extension that extended the credit facility termination date to
January 2012 from the previous October 2009 date.  The amendment
created an accordion feature within the credit facility that set the initial
loan availability at $150 million with the ability to request increases up to a
maximum availability of $250 million.  The amendment adjusted the
borrowing rates within a pricing grid that includes a minimum 11⁄2% LIBOR
rate.




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


29.
            EARNINGS
      PER SHARE





Earnings
per share for 2008, 2007 and 2006, are (amounts in thousands, except share and
per share data):


2008
                          
                          Net
      income (loss)
                          
                          
                          Weighted-
                            average shares
                          
                          
                          Per
      share
                            amountBasic
      earnings per share
                          
                          $
                          13,337
                          
                          
                          
                          34,409,754
                          
                          
                          $
                          .39Effect
      of stock options/trusts
                          
                          
                          0
                          
                          
                          
                          428,474Diluted
      earnings per share
                          
                          $
                          13,337
                          
                          
                          
                          34,838,228
                          
                          
                          $
                          .382007Basic
      and diluted loss per share (a)
                          
                          $
                          (7,247
                          )
                          
                          
                          32,081,268
                          
                          
                          $
                          (.23
                          )2006Basic
      earnings per share
                          
                          $
                          5,144
                          
                          
                          
                          24,627,017
                          
                          
                          $
                          .21Effect
      of stock options
                          
                          
                          0
                          
                          
                          
                          428,357Diluted
      earnings per share (b)
                          
                          $
                          5,144
                          
                          
                          
                          25,055,374
                          
                          
                          $
                          .21





(a)
            The
      effect of stock options has been excluded as they were
      anti-dilutive.  The weighted-average share amount excluded for
      stock options totaled 555,162 shares.  The effect of convertible
      notes has not been included as they were anti-dilutive.  The
      weighted-average share amount excluded for convertible notes totaled
      1,627,296 shares.





(b)
            The
      effect of convertible notes has not been included as they were
      anti-dilutive.  The weighted-average share amount excluded for
      convertible notes totaled 7,518,519
shares.








30.
            SUPPLEMENTARY
      DATA – QUARTERLY FINANCIAL INFORMATION
  (UNAUDITED)




Quarter ended
                    
                    March 31
                    
                    
                    June 30
                    
                    
                    September 30
                    
                    
                    December 31
                    
                    
                    Year
      ended
                      December 312008Net
      sales
                    
                    $
                    253,525
                    
                    
                    $
                    269,114
                    
                    
                    $
                    255,463
                    
                    
                    $
                    258,598
                    
                    
                    $
                    1,036,700Gross
      profit
                    
                    
                    32,344
                    
                    
                    
                    41,946
                    
                    
                    
                    37,423
                    
                    
                    
                    28,001
                    
                    
                    
                    139,714Net
      income (loss)
                    
                    
                    8,134
                    
                    
                    
                    13,306
                    
                    
                    
                    10,303
                    
                    
                    
                    (18,406
                    )
      (c)
                    
                    
                    13,337Per
      share amounts: (a)Basic
                    
                    
                    .24
                    
                    
                    
                    .39
                    
                    
                    
                    .30
                    
                    
                    
                    (.53
                    ) (c)
                    
                    
                    .39Diluted
                    
                    
                    .23
                    
                    
                    
                    .38
                    
                    
                    
                    .30
                    
                    
                    
                    (.53
                    ) (c)
                    
                    
                    .382007Net
      sales
                    
                    $
                    226,278
                    
                    
                    $
                    210,333
                    
                    
                    $
                    195,472
                    
                    
                    $
                    204,938
                    
                    
                    $
                    837,021Gross
      profit
                    
                    
                    27,191
                    
                    
                    
                    27,311
                    
                    
                    
                    18,294
                    
                    
                    
                    11,335
                    
                    
                    
                    84,131Net
      (loss) income
                    
                    
                    (2,483
                    )
      (b)
                    
                    
                    4,962
                    
                    
                    
                    (878
                    )
                    
                    
                    (8,848
                    )
                    
                    
                    (7,247
                    )Per
      share amounts: (a)Basic
                    
                    
                    (.10
                    )
      (b)
                    
                    
                    .15
                    
                    
                    
                    (.03
                    )
                    
                    
                    (.26
                    )
                    
                    
                    (.23
                    )Diluted
                    
                    
                    (.10
                    )
      (b)
                    
                    
                    .14
                    
                    
                    
                    (.03
                    )
                    
                    
                    (.26
                    )
                    
                    
                    (.23
                    )


(a)
              As
      a result of changes in outstanding share balances, year-end per share
      amounts do not agree to the sum of the
quarters.
 Adjusted
to reflect the five-for-four stock split that took place in 2008.
 
 (b)
              Noncash
      convertible debt conversion charge of $13.4 million was included in the
      quarter ended March 31, 2007.
 
 (c)
              Noncash
      Titan Europe Plc charge of $24.5 million, net of tax, was included in the
      quarter ended December 31,
2008.


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


31.
            SUBSIDIARY
      GUARANTOR FINANCIAL INFORMATION





The
Company’s $200 million 8% senior unsecured notes are guaranteed by each of
Titan’s current and future wholly owned domestic subsidiaries other than its
immaterial subsidiaries (subsidiaries with total assets less than $250,000 and
total revenues less than $250,000). The note guarantees are full and
unconditional, joint and several obligations of the guarantors. Non-guarantors
consist primarily of foreign subsidiaries of the Company, which are organized
outside the United States of America. The following condensed consolidating
financial statements are presented using the equity method of
accounting.




Consolidating
      Condensed Statements of Operations(Amounts
      in thousands)Year Ended December 31,
2008Titan
                  
                  
                  
                  
                  
                  Non-Intl.,
      Inc.
                  
                  
                  Guarantor
                  
                  
                  Guarantor(Parent)
                  
                  
                  Subsidiaries
                  
                  
                  Subsidiaries
                  
                  
                  Eliminations
                  
                  
                  ConsolidatedNet
      sales
                  
                  $
                  0
                  
                  
                  $
                  1,036,700
                  
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  1,036,700Cost
      of sales
                  
                  
                  (922
                  )
                  
                  
                  897,908
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  896,986Gross
      profit
                  
                  
                  922
                  
                  
                  
                  138,792
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  139,714Selling,
      general and administrative expenses
                  
                  
                  20,349
                  
                  
                  
                  36,724
                  
                  
                  
                  78
                  
                  
                  
                  0
                  
                  
                  
                  57,151Royalty
      expense
                  
                  
                  0
                  
                  
                  
                  9,242
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  9,242(Loss)
      income from operations
                  
                  
                  (19,427
                  )
                  
                  
                  92,826
                  
                  
                  
                  (78
                  )
                  
                  
                  0
                  
                  
                  
                  73,321Interest
      expense
                  
                  
                  (15,122
                  )
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (15,122
                  )Noncash
      Titan Europe Plc charge
                  
                  
                  (37,698
                  )
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (37,698
                  )Other
      income (expense)
                  
                  
                  832
                  
                  
                  
                  (33
                  )
                  
                  
                  1,710
                  
                  
                  
                  0
                  
                  
                  
                  2,509(Loss)
      income before income taxes
                  
                  
                  (71,415
                  )
                  
                  
                  92,793
                  
                  
                  
                  1,632
                  
                  
                  
                  0
                  
                  
                  
                  23,010(Benefit)
      provision for income taxes
                  
                  
                  (30,024
                  )
                  
                  
                  39,011
                  
                  
                  
                  686
                  
                  
                  
                  0
                  
                  
                  
                  9,673Equity
      in earnings of subsidiaries
                  
                  
                  54,728
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (54,728
                  )
                  
                  
                  0Net
      income
                  
                  $
                  13,337
                  
                  
                  $
                  53,782
                  
                  
                  $
                  946
                  
                  
                  $
                  (54,728
                  )
                  
                  $
                  13,337


Year Ended December 31,
2007Titan
                
                
                
                
                
                Non-Intl.,
      Inc.
                
                
                Guarantor
                
                
                Guarantor(Parent)
                
                
                Subsidiaries
                
                
                Subsidiaries
                
                
                Eliminations
                
                
                ConsolidatedNet
      sales
                
                $
                0
                
                
                $
                837,021
                
                
                $
                0
                
                
                $
                0
                
                
                $
                837,021Cost
      of sales
                
                
                1,905
                
                
                
                750,985
                
                
                
                0
                
                
                
                0
                
                
                
                752,890Gross
      (loss) profit
                
                
                (1,905
                )
                
                
                86,036
                
                
                
                0
                
                
                
                0
                
                
                
                84,131Selling,
      general and administrative expenses
                
                
                19,572
                
                
                
                33,364
                
                
                
                202
                
                
                
                0
                
                
                
                53,138Royalty
      expense
                
                
                0
                
                
                
                6,155
                
                
                
                0
                
                
                
                0
                
                
                
                6,155(Loss)
      income from operations
                
                
                (21,477
                )
                
                
                46,517
                
                
                
                (202
                )
                
                
                0
                
                
                
                24,838Interest
      expense
                
                
                (18,707
                )
                
                
                (3
                )
                
                
                0
                
                
                
                0
                
                
                
                (18,710
                )Intercompany
      interest income (expense)
                
                
                11,472
                
                
                
                (12,324
                )
                
                
                852
                
                
                
                0
                
                
                
                0Noncash
      convertible debt conversion charge
                
                
                (13,376
                )
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                (13,376
                )Other
      income (expense)
                
                
                1,925
                
                
                
                (333
                )
                
                
                1,772
                
                
                
                0
                
                
                
                3,364(Loss)
      income before income taxes
                
                
                (40,163
                )
                
                
                33,857
                
                
                
                2,422
                
                
                
                0
                
                
                
                (3,884
                )(Benefit)
      provision for income taxes
                
                
                (10,423
                )
                
                
                12,866
                
                
                
                920
                
                
                
                0
                
                
                
                3,363Equity
      in earnings of subsidiaries
                
                
                22,493
                
                
                
                0
                
                
                
                0
                
                
                
                (22,493
                )
                
                
                0Net
      (loss) income
                
                $
                (7,247
                )
                
                $
                20,991
                
                
                $
                1,502
                
                
                $
                (22,493
                )
                
                $
                (7,247
                )





F-30
 TITAN
INTERNATIONAL, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






Consolidating
      Condensed Statements of Operations(Amounts
      in thousands)Year Ended December 31,
2008Titan
                  
                  
                  
                  
                  
                  Non-Intl.,
      Inc.
                  
                  
                  Guarantor
                  
                  
                  Guarantor(Parent)
                  
                  
                  Subsidiaries
                  
                  
                  Subsidiaries
                  
                  
                  Eliminations
                  
                  
                  ConsolidatedNet
      sales
                  
                  $
                  0
                  
                  
                  $
                  1,036,700
                  
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  1,036,700Cost
      of sales
                  
                  
                  (922
                  )
                  
                  
                  897,908
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  896,986Gross
      profit
                  
                  
                  922
                  
                  
                  
                  138,792
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  139,714Selling,
      general and administrative expenses
                  
                  
                  20,349
                  
                  
                  
                  36,724
                  
                  
                  
                  78
                  
                  
                  
                  0
                  
                  
                  
                  57,151Royalty
      expense
                  
                  
                  0
                  
                  
                  
                  9,242
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  9,242(Loss)
      income from operations
                  
                  
                  (19,427
                  )
                  
                  
                  92,826
                  
                  
                  
                  (78
                  )
                  
                  
                  0
                  
                  
                  
                  73,321Interest
      expense
                  
                  
                  (15,122
                  )
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (15,122
                  )Noncash
      Titan Europe Plc charge
                  
                  
                  (37,698
                  )
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (37,698
                  )Other
      income (expense)
                  
                  
                  832
                  
                  
                  
                  (33
                  )
                  
                  
                  1,710
                  
                  
                  
                  0
                  
                  
                  
                  2,509(Loss)
      income before income taxes
                  
                  
                  (71,415
                  )
                  
                  
                  92,793
                  
                  
                  
                  1,632
                  
                  
                  
                  0
                  
                  
                  
                  23,010(Benefit)
      provision for income taxes
                  
                  
                  (30,024
                  )
                  
                  
                  39,011
                  
                  
                  
                  686
                  
                  
                  
                  0
                  
                  
                  
                  9,673Equity
      in earnings of subsidiaries
                  
                  
                  54,728
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (54,728
                  )
                  
                  
                  0Net
      income
                  
                  $
                  13,337
                  
                  
                  $
                  53,782
                  
                  
                  $
                  946
                  
                  
                  $
                  (54,728
                  )
                  
                  $
                  13,337








Consolidating
      Condensed Balance Sheets(Amounts
      in thousands)December 31, 2008Titan
                
                
                
                
                
                Non-Intl.,
      Inc.
                
                
                Guarantor
                
                
                Guarantor(Parent)
                
                
                Subsidiaries
                
                
                Subsidiaries
                
                
                Eliminations
                
                
                ConsolidatedAssetsCash
      and cash equivalents
                
                $
                59,011
                
                
                $
                60
                
                
                $
                2,587
                
                
                $
                0
                
                
                $
                61,658Accounts
      receivable
                
                
                (127
                )
                
                
                126,658
                
                
                
                0
                
                
                
                0
                
                
                
                126,531Inventories
                
                
                0
                
                
                
                147,306
                
                
                
                0
                
                
                
                0
                
                
                
                147,306Prepaid
      and other current assets
                
                
                17,117
                
                
                
                16,573
                
                
                
                14
                
                
                
                0
                
                
                
                33,704Total current
    assets
                
                
                76,001
                
                
                
                290,597
                
                
                
                2,601
                
                
                
                0
                
                
                
                369,199Property,
      plant and equipment, net
                
                
                6,160
                
                
                
                242,282
                
                
                
                0
                
                
                
                0
                
                
                
                248,442Investment
      in Titan Europe Plc
                
                
                (37,698
                )
                
                
                0
                
                
                
                40,347
                
                
                
                0
                
                
                
                2,649Investment
      in subsidiaries
                
                
                31,474
                
                
                
                0
                
                
                
                0
                
                
                
                (31,474
                )
                
                
                0Other
      assets
                
                
                15,842
                
                
                
                18,650
                
                
                
                0
                
                
                
                0
                
                
                
                34,492Total
      assets
                
                $
                91,779
                
                
                $
                551,529
                
                
                $
                42,948
                
                
                $
                (31,474
                )
                
                $
                654,782Liabilities
      and Stockholders’ EquityShort-term
      debt
                
                $
                25,000
                
                
                $
                0
                
                
                $
                0
                
                
                $
                0
                
                
                $
                25,000Accounts
      payable
                
                
                3,106
                
                
                
                62,441
                
                
                
                0
                
                
                
                0
                
                
                
                65,547Other
      current liabilities
                
                
                10,548
                
                
                
                34,540
                
                
                
                1,000
                
                
                
                0
                
                
                
                46,088Total current
      liabilities
                
                
                38,654
                
                
                
                96,981
                
                
                
                1,000
                
                
                
                0
                
                
                
                136,635Long-term
      debt
                
                
                200,000
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                200,000Other
      long-term liabilities
                
                
                3,943
                
                
                
                35,016
                
                
                
                0
                
                
                
                0
                
                
                
                38,959Intercompany
      accounts
                
                
                (430,006
                )
                
                
                419,738
                
                
                
                10,268
                
                
                
                0
                
                
                
                0Stockholders’
      equity
                
                
                279,188
                
                
                
                (206
                )
                
                
                31,680
                
                
                
                (31,474
                )
                
                
                279,188Total
      liabilities and stockholders’ equity
                
                $
                91,779
                
                
                $
                551,529
                
                
                $
                42,948
                
                
                $
                (31,474
                )
                
                $
                654,782





F-31
 TITAN
INTERNATIONAL, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





Consolidating
      Condensed Balance Sheets(Amounts
      in thousands)December 31, 2007Titan
                
                
                
                
                
                Non-Intl.,
      Inc.
                
                
                Guarantor
                
                
                Guarantor(Parent)
                
                
                Subsidiaries
                
                
                Subsidiaries
                
                
                Eliminations
                
                
                ConsolidatedAssetsCash
      and cash equivalents
                
                $
                57,285
                
                
                $
                63
                
                
                $
                977
                
                
                $
                0
                
                
                $
                58,325Accounts
      receivable
                
                
                (458
                )
                
                
                98,852
                
                
                
                0
                
                
                
                0
                
                
                
                98,394Inventories
                
                
                0
                
                
                
                128,048
                
                
                
                0
                
                
                
                0
                
                
                
                128,048Prepaid
      and other current assets
                
                
                26,898
                
                
                
                16,100
                
                
                
                0
                
                
                
                0
                
                
                
                42,998Total current
    assets
                
                
                83,725
                
                
                
                243,063
                
                
                
                977
                
                
                
                0
                
                
                
                327,765Property,
      plant and equipment, net
                
                
                2,291
                
                
                
                193,787
                
                
                
                0
                
                
                
                0
                
                
                
                196,078Investment
      in Titan Europe Plc
                
                
                (5,812
                )
                
                
                0
                
                
                
                40,347
                
                
                
                0
                
                
                
                34,535Investment
      in subsidiaries
                
                
                18,714
                
                
                
                0
                
                
                
                0
                
                
                
                (18,714
                )
                
                
                0Other
      assets
                
                
                12,256
                
                
                
                19,861
                
                
                
                0
                
                
                
                0
                
                
                
                32,117Total
      assets
                
                $
                111,174
                
                
                $
                456,711
                
                
                $
                41,324
                
                
                $
                (18,714
                )
                
                $
                590,495Liabilities
      and Stockholders’ EquityAccounts
      payable
                
                $
                2,059
                
                
                $
                41,933
                
                
                $
                0
                
                
                $
                0
                
                
                $
                43,992Other
      current liabilities
                
                
                10,456
                
                
                
                33,347
                
                
                
                (15
                )
                
                
                0
                
                
                
                43,788Total current
      liabilities
                
                
                12,515
                
                
                
                75,280
                
                
                
                (15
                )
                
                
                0
                
                
                
                87,780Long-term
      debt
                
                
                200,000
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                200,000Other
      long-term liabilities
                
                
                22,931
                
                
                
                7,262
                
                
                
                0
                
                
                
                0
                
                
                
                30,193Intercompany
      accounts
                
                
                (396,794
                )
                
                
                386,883
                
                
                
                9,911
                
                
                
                0
                
                
                
                0Stockholders’
      equity
                
                
                272,522
                
                
                
                (12,714
                )
                
                
                31,428
                
                
                
                (18,714
                )
                
                
                272,522Total
      liabilities and stockholders’ equity
                
                $
                111,174
                
                
                $
                456,711
                
                
                $
                41,324
                
                
                $
                (18,714
                )
                
                $
                590,495







Consolidating
      Condensed Statements of Cash Flows(Amounts
      in thousands)Year Ended December 31,
2008Titan
                
                
                
                
                
                Non-Intl.,
      Inc.
                
                
                Guarantor
                
                
                Guarantor(Parent)
                
                
                Subsidiaries
                
                
                Subsidiaries
                
                
                ConsolidatedNet
      cash (used for) provided by operating activities
                
                $
                (25,759
                )
                
                $
                75,319
                
                
                $
                1,610
                
                
                $
                51,170Cash
      flows from investing activities:Capital
    expenditures
                
                
                (4,534
                )
                
                
                (75,419
                )
                
                
                0
                
                
                
                (79,953
                )Other, net
                
                
                7
                
                
                
                97
                
                
                
                0
                
                
                
                104Net cash used for investing
      activities
                
                
                (4,527
                )
                
                
                (75,322
                )
                
                
                0
                
                
                
                (79,849
                )Cash
      flows from financing activities:Proceeds on revolving credit
      facility
                
                
                25,000
                
                
                
                0
                
                
                
                0
                
                
                
                25,000Proceeds from exercise of stock
      options
                
                
                3,536
                
                
                
                0
                
                
                
                0
                
                
                
                3,536Excess tax benefit from stock
      options exercised
                
                
                4,131
                
                
                
                0
                
                
                
                0
                
                
                
                4,131Other, net
                
                
                (655
                )
                
                
                0
                
                
                
                0
                
                
                
                (655
                )Net cash provided by financing
      activities
                
                
                32,012
                
                
                
                0
                
                
                
                0
                
                
                
                32,012Net
      increase (decrease) in cash and cash equivalents
                
                
                1,726
                
                
                
                (3
                )
                
                
                1,610
                
                
                
                3,333Cash
      and cash equivalents, beginning of year
                
                
                57,285
                
                
                
                63
                
                
                
                977
                
                
                
                58,325Cash
      and cash equivalents, end of year
                
                $
                59,011
                
                
                $
                60
                
                
                $
                2,587
                
                
                $
                61,658





F-32
 TITAN
INTERNATIONAL, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





Consolidating
      Condensed Statements of Cash Flows(Amounts
      in thousands)Year Ended December 31,
2007Titan
                
                
                
                
                
                Non-Intl.,
      Inc.
                
                
                Guarantor
                
                
                Guarantor(Parent)
                
                
                Subsidiaries
                
                
                Subsidiaries
                
                
                ConsolidatedNet
      cash provided by operating activities
                
                $
                38,364
                
                
                $
                36,775
                
                
                $
                854
                
                
                $
                75,993Cash
      flows from investing activities:Capital
    expenditures
                
                
                (1,402
                )
                
                
                (36,646
                )
                
                
                0
                
                
                
                (38,048
                )Acquisition off-the-road (OTR)
      assets
                
                
                (8,900
                )
                
                
                0
                
                
                
                0
                
                
                
                (8,900
                )Asset disposals
                
                
                3
                
                
                
                529
                
                
                
                0
                
                
                
                532Net cash used for investing
      activities
                
                
                (10,299
                )
                
                
                (36,117
                )
                
                
                0
                
                
                
                (46,416
                )Cash
      flows from financing activities:Payment of debt
                
                
                (9,500
                )
                
                
                (664
                )
                
                
                0
                
                
                
                (10,164
                )Proceeds from exercise of stock
      options
                
                
                6,631
                
                
                
                0
                
                
                
                0
                
                
                
                6,631Other, net
                
                
                (1,131
                )
                
                
                0
                
                
                
                0
                
                
                
                (1,131
                )Net cash used for financing
      activities
                
                
                (4,000
                )
                
                
                (664
                )
                
                
                0
                
                
                
                (4,664
                )Net
      increase (decrease) in cash and cash equivalents
                
                
                24,065
                
                
                
                (6
                )
                
                
                854
                
                
                
                24,913Cash
      and cash equivalents, beginning of year
                
                
                33,220
                
                
                
                69
                
                
                
                123
                
                
                
                33,412Cash
      and cash equivalents, end of year
                
                $
                57,285
                
                
                $
                63
                
                
                $
                977
                
                
                $
                58,325








Year Ended December 31,
2006Titan
                
                
                
                
                
                Non-Intl.,
      Inc.
                
                
                Guarantor
                
                
                Guarantor(Parent)
                
                
                Subsidiaries
                
                
                Subsidiaries
                
                
                ConsolidatedNet
      cash (used for) provided by operating activities
                
                $
                (69,433
                )
                
                $
                64,500
                
                
                $
                (361
                )
                
                $
                (5,294
                )Cash
      flows from investing activities:Acquisition off-the-road (OTR)
      assets
                
                
                0
                
                
                
                (44,642
                )
                
                
                0
                
                
                
                (44,642
                )Capital
    expenditures
                
                
                (390
                )
                
                
                (7,892
                )
                
                
                0
                
                
                
                (8,282
                )Other, net
                
                
                149
                
                
                
                49
                
                
                
                0
                
                
                
                198Net cash used for investing
      activities
                
                
                (241
                )
                
                
                (52,485
                )
                
                
                0
                
                
                
                (52,726
                )Cash
      flows from financing activities:Proceeds from
      borrowings
                
                
                200,000
                
                
                
                0
                
                
                
                0
                
                
                
                200,000Payment of debt
                
                
                0
                
                
                
                (11,995
                )
                
                
                0
                
                
                
                (11,995
                )Payment on revolving credit
      facility, net
                
                
                (99,100
                )
                
                
                0
                
                
                
                0
                
                
                
                (99,100
                )Proceeds from exercise of stock
      options
                
                
                5,407
                
                
                
                0
                
                
                
                0
                
                
                
                5,407Excess tax benefits from stock
      options exercised
                
                
                646
                
                
                
                0
                
                
                
                0
                
                
                
                646Payment of financing
      fees
                
                
                (3,725
                )
                
                
                0
                
                
                
                0
                
                
                
                (3,725
                )Dividends paid
                
                
                (393
                )
                
                
                0
                
                
                
                0
                
                
                
                (393
                )Net cash provided by (used for)
      financing activities
                
                
                102,835
                
                
                
                (11,995
                )
                
                
                0
                
                
                
                90,840Net
      increase (decrease) in cash and cash equivalents
                
                
                33,161
                
                
                
                20
                
                
                
                (361
                )
                
                
                32,820Cash
      and cash equivalents, beginning of year
                
                
                59
                
                
                
                49
                
                
                
                484
                
                
                
                592Cash
      and cash equivalents, end of year
                
                $
                33,220
                
                
                $
                69
                
                
                $
                123
                
                
                $
                33,412








F-33


TITAN
INTERNATIONAL, INC.





SCHEDULE
II – VALUATION RESERVES





Description
              
              Balance
      at beginning
                of year
              
              
              Additions
      to costs andexpenses
              
              
              Deductions
              
              
              Balance
                at
      end
                of yearYear
      ended December 31, 2008Reserve
      deducted in the balance sheet from the assets to which it
      appliesAllowance
      for doubtful accounts
              
              $
              5,258,000
              
              
              $
              1,489,000
              
              
              $
              (108,000
              )
              
              $
              6,639,000Year
      ended December 31, 2007Reserve
      deducted in the balance sheet from the assets to which it
      appliesAllowance
      for doubtful accounts
              
              $
              4,818,000
              
              
              $
              461,000
              
              
              $
              (21,000
              )
              
              $
              5,258,000Year
      ended December 31, 2006Reserve
      deducted in the balance sheet from the assets to which it
      appliesAllowance
      for doubtful accounts
              
              $
              5,654,000
              
              
              $
              1,596,000
              
              
              $
              (2,432,000
              )
              
              $
              4,818,000