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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
FOR QUARTERLY PERIOD ENDED: MARCH 31, 1996
Commission File Number: 1-12936
TITAN WHEEL INTERNATIONAL, INC.
(Exact name of Registrant as specified in its Charter)
ILLINOIS 36-3228472
(State of Incorporation) (I.R.S. Employer Identification No.)
2701 SPRUCE STREET, QUINCY, IL 62301
(Address of principal executive offices, including Zip Code)
(217) 228-6011
(Telephone Number)
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, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
<TABLE>
<CAPTION>
SHARES OUTSTANDING AT
CLASS APRIL 30, 1996
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<S> <C>
COMMON STOCK, NO PAR VALUE PER SHARE 22,543,336
</TABLE>
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TITAN WHEEL INTERNATIONAL, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets -
March 31, 1996 and December 31, 1995 1
Consolidated Condensed Statements of Operations
for the Three Months Ended March 31, 1996 and 1995 2
Consolidated Condensed Statements of
Cash Flows for the Three Months Ended
March 31, 1996 and 1995 3
Notes to Consolidated Condensed Financial Statements 4-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
Part II. Other Information and Signature 9-10
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Amounts In Thousands, Except Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 9,161 $ 14,211
Marketable securities 39 32
Accounts receivable (net of allowance of
$5,059 and $4,970, respectively) 127,848 107,137
Inventories 135,061 124,928
Prepaid and other current assets 17,704 18,592
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Total current assets 289,813 264,900
Property, plant and equipment, net 178,280 178,286
Other assets 17,919 17,701
Goodwill 50,719 51,248
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Total assets $ 536,731 $ 512,135
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 25,423 $ 26,419
Accounts payable 65,824 58,592
Other current liabilities 37,031 28,631
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Total current liabilities 128,278 113,642
Deferred income taxes 15,219 15,704
Other long-term liabilities 25,993 24,612
Long-term debt 139,950 142,305
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Total liabilities 309,440 296,263
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Stockholders' equity
Common stock, no par, 60,000,000 shares
authorized, 22,543,176 and 22,477,086
issued and outstanding, respectively 23 23
Additional paid-in capital 153,238 152,283
Retained earnings 74,810 64,142
Cumulative translation adjustments 55 8
Treasury stock at cost: 49,165 and 78,817 shares, respectively (835) (584)
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Total stockholders' equity 227,291 215,872
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Total liabilities and stockholders' equity $ 536,731 $ 512,135
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</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
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TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For The Three Months Ended March 31, 1996 And 1995
(Amounts In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
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<S> <C> <C>
Net sales $177,257 $157,732
Cost of sales 144,134 128,969
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Gross profit 33,123 28,763
Selling, general and administrative
expenses 11,657 9,533
Research and development expenses 769 511
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Income from operations 20,697 18,719
Interest expense 2,706 3,326
Minority interest 734 -0-
Other (income) (494) (104)
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Income before income taxes 17,751 15,497
Provision for income taxes 6,745 6,199
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Net income $ 11,006 $ 9,298
========= ==========
Earnings per common share:
Primary $ .49 $ .56
Fully diluted .40 .40
Average common shares and equivalents
outstanding:
Primary 22,674 16,614
Fully diluted (See Note 1) 29,543 25,175
</TABLE>
(1) The March 31, 1996 and 1995 computations of fully diluted earnings per
share assumes the conversion of the 4 3/4% subordinated convertible notes,
issued November 19, 1993, due December 1, 2000.
The accompanying notes are an integral part of the
consolidated condensed financial statements.
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TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,006 $ 9,298
Depreciation and amortization 7,088 5,868
(Increase) in receivables (20,711) (28,484)
(Increase)/decrease in inventories (9,274) 9,758
(Increase)/decrease in other assets 2,888 (2,897)
Increase in accounts payable 7,232 4,741
Increase in other accrued liabilities 7,165 4,662
Other, net 129 (56)
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Net cash provided by
operating activities 5,523 2,890
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (6,058) (6,615)
Acquisitions, net of cash acquired (941) (14,900)
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Net cash (used for)
investing activities (6,999) (21,515)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt (6,351) (9,726)
Proceeds from long-term borrowings 3,000 25,320
Dividends paid (338) (182)
Other, net 115 (46)
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Net cash provided by/(used for)
financing activities (3,574) 15,366
Net decrease in cash and cash equivalents (5,050) (3,259)
Cash and cash equivalents at beginning of period 14,211 7,241
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Cash and cash equivalents at end of period $ 9,161 $ 3,982
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</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
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TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. ACCOUNTING POLICIES
In the opinion of Titan Wheel International, Inc. (the "Company"), the
accompanying unaudited consolidated condensed financial statements
contain all adjustments, which are normal and recurring in nature
necessary to present fairly its financial position as of March 31, 1996,
the results of operations for the three month period ended March 31, 1996
and 1995, and cash flows for the three months ended March 31, 1996 and
1995.
Accounting policies have continued without change and are described in
the Summary of Significant Accounting Policies contained in the Company's
1995 Annual Report and Form 10-K. For additional information regarding
the Company's financial condition, refer to the footnotes accompanying
the December 31, 1995 financial statements filed in conjunction with the
Company's Annual Report on Form 10-K. Details in those notes have not
changed significantly except as a result of normal interim transactions
and certain matters discussed below.
B. INVENTORIES
Inventories by component are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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<S> <C> <C>
Raw materials $ 36,663 $ 37,273
Work in process 21,506 19,904
Finished goods 77,165 68,947
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135,334 126,124
LIFO reserve (273) (1,196)
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$135,061 $124,928
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</TABLE>
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TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
C. FIXED ASSETS
Property, plant and equipment, net reflects accumulated depreciation of
$60.5 million and $54 million at March 31, 1996, and December 31, 1995,
respectively.
D. LONG-TERM DEBT (IN THOUSANDS):
Long-term debt comprised the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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<S> <C> <C>
Bank borrowings
Revolving credit - Sirmac $ 26,247 $ 28,677
Term loan - Titan Tire 11,786 12,322
Term loan - Steel Wheels 6,951 7,299
Industrial revenue bond - Greenwood 9,500 9,500
Note payable to PATC 19,743 19,743
Subordinated convertible notes 85,921 85,936
Other 5,225 5,247
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165,373 168,724
Less - amounts due within one year 25,423 26,419
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$139,950 $142,305
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</TABLE>
Aggregate maturities of long-term debt at March 31, 1996, are as follows
(in thousands):
<TABLE>
<S> <C>
April 1 - December 31, 1996 $ 24,602
1997 8,815
1998 4,290
1999 7,625
2000 and thereafter 120,041
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$165,373
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</TABLE>
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TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
E. MINORITY INTEREST
Minority interest in the net income of the Sirmac Group of $.7 million
and $-0- at March 31, 1996 and December 31, 1995, respectively, is
included in other long-term liabilities.
F. ENVIRONMENTAL MATTER
The Company's subsidiary, Dico, Inc. is involved in an ongoing
environmental matter associated with its Des Moines, Iowa site. At March
31, 1996 the Company has an accrual of $6.1 million for remaining costs
associated with the matter.
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TITAN WHEEL INTERNATIONAL, INC.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the quarter ending March 31, 1996, increased 12% to $177.3
million from $157.7 million for the first quarter of 1995. The change from the
equity method of accounting to the consolidation method for the Sirmac Group
beginning July 1, 1995 accounted for the majority of the increase in sales for
the quarter.
Sales in the Agricultural market were $86.2 million for the first quarter as
compared to $71.6 million in 1995. The 20% increase was due primarily to the
addition of the Sirmac Group in the consolidated financial statements. Titan's
Construction market sales were $40.4 million for the first quarter as compared
to $30.5 million in 1995, with the 32% increase primarily due to the addition
of the Sirmac Group and the acquisition of Steel Wheels. Consumer product
sales were $42.4 million for the first quarter, as compared to $48.8 million in
1995. The decrease is primarily due to an $8.4 million reduction in sales of
light truck tires to Pirelli Armstrong Tire Corporation (PATC), which resulted
from the expiration of an agreement to produce such tires.
Selling, general and administrative ("SG&A") and research and development
("R&D") expenses for the first quarter of 1996 were $12.4 million or 7% of net
sales compared to $10 million and 6.4% of sales for 1995. Income from
operations for the quarter increased 11% to $20.7 million or 11.7% of sales
compared to $18.7 million, or 11.9% in 1995. Income from operations, as a
percentage of sales, decreased due to both the additional SG&A expenses
contributed by the consolidation of the Sirmac Group and the acquisition of
Steel Wheels, and production shutdowns at several facilities due to inclement
weather.
Interest expense decreased $.6 million for the quarter as compared to the prior
year. The decrease was due to lower revolving debt and subordinated
convertible note balances, partially offset by interest expense related to the
Sirmac Group.
Net income for the first quarter was $11 million in 1996, compared to $9.3
million in 1995, an 18% increase. Earnings per common share (on a fully
diluted basis) for the first quarter of 1996 was $.40, consistent with first
quarter 1995 earnings per share. However, the average number of fully diluted
common shares outstanding has increased 17% between the first quarters of 1995
and 1996 due to the June 1995 stock offering.
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TITAN WHEEL INTERNATIONAL, INC.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations of $5.5 million were attributed to net income before
depreciation and amortization and increases in accounts payable and other
current liabilities. These amounts were substantially offset by increases in
receivables and inventory. Increases in accounts receivable, inventory,
accounts payable and other current liabilities were primarily due to increases
in sales and production for the first quarter of 1996 as compared to the fourth
quarter of 1995.
The Company has invested $6.1 million in capital expenditures in 1996,
including the purchase of surplus bias tire equipment from Continental General
Tire, Inc. The balance represents various equipment purchases and building
improvements to enhance production capabilities. In January 1996, the Company
completed its purchase of the manufacturing segment of Titan GmbH for $.9
million.
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TITAN WHEEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL MATTERS
Reference is made to the environmental matter footnote.
ITEMS 2 THROUGH 4 ARE NOT APPLICABLE.
ITEM 5. OTHER MATTERS
Mr. Maurice M. Taylor, Jr., President and Chief Executive Officer of
the Company, has concluded his pursuit of the Republican nomination
for president.
ITEM 6 IS NOT APPLICABLE.
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SIGNATURE
Pursuant to the requirements 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 WHEEL INTERNATIONAL, INC.
-------------------------------
(REGISTRANT)
DATE: MAY 10, 1996 BY: /s/ Kent W. Hackamack
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Kent W. Hackamack
Vice President of Finance
(Chief accounting officer
and authorized signatory)
10
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Exhibit Index
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<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,161
<SECURITIES> 39
<RECEIVABLES> 132,907
<ALLOWANCES> 5,059
<INVENTORY> 135,061
<CURRENT-ASSETS> 289,813
<PP&E> 238,819
<DEPRECIATION> 60,539
<TOTAL-ASSETS> 536,731
<CURRENT-LIABILITIES> 128,278
<BONDS> 139,950
0
0
<COMMON> 23
<OTHER-SE> 227,268
<TOTAL-LIABILITY-AND-EQUITY> 536,731
<SALES> 177,257
<TOTAL-REVENUES> 177,257
<CGS> 144,134
<TOTAL-COSTS> 144,134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,706
<INCOME-PRETAX> 17,751
<INCOME-TAX> 6,745
<INCOME-CONTINUING> 11,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,006
<EPS-PRIMARY> .49
<EPS-DILUTED> .40
</TABLE>
