<PAGE> 1
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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: JUNE 30, 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
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
SHARES OUTSTANDING AT
CLASS JULY 31, 1996
----- ---------------------
COMMON STOCK, NO PAR VALUE PER SHARE 22,270,649
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TITAN WHEEL INTERNATIONAL, INC.
TABLE OF CONTENTS
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
<TABLE>
<S> <C> <C>
Consolidated Condensed Balance Sheets -
June 30, 1996 and December 31, 1995 1
Consolidated Condensed Statements of Operations
for the Three and Six Months Ended
June 30, 1996 and 1995 2
Consolidated Condensed Statements of
Cash Flows for the Six Months Ended
June 30, 1996 and 1995 3
Notes to Consolidated Condensed Financial Statements 4-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
Part II. Other Information and Signature 10-12
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Amounts in thousands, except share data)
<TABLE>
JUNE 30, DECEMBER 31,
ASSETS 1996 1995
-------- ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 20,344 $ 14,211
Marketable securities 39 32
Accounts receivable (net of allowance of
$4,833 and $4,970, respectively) 109,185 107,137
Inventories 137,390 124,928
Prepaid and other current assets 15,253 18,592
-------- --------
Total current assets 282,211 264,900
Property, plant and equipment, net $178,522 $178,286
Other assets 22,338 17,701
Goodwill 50,410 51,248
-------- --------
Total assets $533,481 $512,135
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 22,792 $ 26,419
Accounts payable 57,387 58,592
Other current liabilities 35,533 28,631
-------- --------
Total current liabilities 115,712 113,642
Deferred income taxes 15,219 15,704
Other long-term liabilities 26,703 24,612
Long-term debt 138,468 142,305
-------- --------
Total liabilities 296,102 296,263
-------- --------
Stockholders' equity
Common stock, no par, 60,000,000 shares authorized,
22,520,649 and 22,477,086 issued and outstanding,
respectively 23 23
Additional paid-in capital 153,713 152,283
Retained earnings 84,947 64,142
Cumulative translation adjustments 317 8
Treasury stock at cost: 99,165 and 78,817
shares, respectively (1,621) (584)
-------- --------
Total stockholders' equity 237,379 215,872
-------- --------
Total liabilities and stockholders' equity $533,481 $512,135
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
1
<PAGE> 4
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $167,030 $157,640 $344,287 $315,372
Cost of sales 136,621 129,483 280,755 258,452
-------- -------- -------- --------
Gross profit 30,409 28,157 63,532 56,920
Selling, general and administrative
expenses 10,519 9,188 22,176 18,721
Research and development expenses 716 534 1,485 1,045
-------- -------- -------- --------
Income from operations 19,174 18,435 39,871 37,154
Interest expense 2,545 3,087 5,251 6,413
Minority interest 1,348 -0- 2,082 -0-
Other (income) (1,617) (1,369) (2,111) (1,473)
-------- -------- -------- --------
Income before income taxes 16,898 16,717 34,649 32,214
Provision for income taxes 6,422 6,684 13,167 12,883
-------- -------- -------- --------
Net income $ 10,476 $ 10,033 $ 21,482 $ 19,331
======== ======== ======== ========
Earnings per common share:
- --------------------------
Primary $ .46 $ .55 $ .95 $ 1.11
Fully diluted $ .38 $ .42 $ .78 $ .82
Average common shares outstanding:
- ----------------------------------
Primary 22,717 18,170 22,696 17,397
Fully diluted (See Note 1) 29,584 25,905 29,564 25,544
</TABLE>
(1) The computations of fully diluted earnings per share for the three and
six months ending June 30, 1996 and 1995, assume the conversion of the
4 3/4% convertible notes, issued November 19, 1993, due December 1, 2000.
The accompanying notes are an integral part of the
consolidated condensed financial statements.
2
<PAGE> 5
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,482 $ 19,331
Depreciation and amortization 14,353 11,757
Gain on sale of assets (998) -0-
(Increase) in receivables (3,104) (24,233)
(Increase)/decrease in inventories (14,695) 12,095
(Increase)/decrease in other assets 3,483 (5,246)
Increase/(decrease) in accounts payable (557) 1,658
Increase/(decrease) in other accrued liabilities 6,699 (2,095)
Other, net 67 (1,158)
-------- --------
Net cash provided by operating activities 26,730 12,109
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (14,096) (13,963)
Proceeds from sale of assets 2,077 -0-
Acquisitions, net of cash acquired (941) (14,900)
-------- --------
Net cash (used for) investing activities (12,960) (28,863)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock offering -0- 64,860
Payment of debt (10,099) (80,871)
Proceeds from long-term borrowings 3,000 52,422
Repurchase of preferred stock & stock warrants -0- (17,500)
Dividends paid (675) (388)
Other, net 137 (38)
-------- --------
Net cash provided by/(used for) financing
activities (7,637) 18,485
Net increase in cash and cash equivalents 6,133 1,731
Cash and cash equivalents at beginning of period 14,211 7,241
-------- --------
Cash and cash equivalents at end of period $ 20,344 $ 8,972
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
<PAGE> 6
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 June 30, 1996,
the results of operations for the three and six month periods ended June
30, 1996 and 1995, and cash flows for the six months ended June 30, 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 on Form 10-K. For additional information regarding
the Company's financial condition, refer to the footnotes accompanying
the financial statements as of and for the year ended December 31, 1995
filed in conjunction with the Company's 1995 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>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Raw materials $ 38,347 $ 37,273
Work in process 21,882 19,904
Finished goods 77,995 68,947
-------- --------
138,224 126,124
LIFO reserve (834) (1,196)
-------- --------
$137,390 $124,928
======== ========
</TABLE>
4
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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
$66.9 million and $54.0 million at June 30, 1996, and December 31, 1995,
respectively.
D. Long-term debt (in thousands):
<TABLE>
<CAPTION>
Long-term debt comprised the following: June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Bank borrowings
Revolving credit - Sirmac $ 23,689 $ 28,677
Term loan - Titan Tire 11,250 12,322
Term loan - Steel Wheels 6,829 7,299
Industrial revenue bond - Greenwood 9,500 9,500
Note payable to PATC 19,743 19,743
Subordinated convertible notes 85,866 85,936
Other 4,383 5,247
-------- --------
161,260 168,724
Less - amounts due within one year 22,792 26,419
-------- --------
$138,468 $142,305
======== ========
</TABLE>
Aggregate maturities of long-term debt at June 30, 1996, are as follows
(in thousands):
<TABLE>
<S> <C>
July 1 - December 31, 1996 $ 20,792
1997 8,591
1998 4,197
1999 7,641
2000 and thereafter 120,039
--------
$161,260
========
</TABLE>
5
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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 $2.1 million
at June 30, 1996, is included in other long-term liabilities.
F. Environmental matter
The Company's Dico, Inc. subsidiary is involved in an ongoing
environmental matter associated with its Des Moines, Iowa site. At June
30, 1996, the Company has an accrual of $5.7 million for remaining costs
associated with the matter.
G. Stock repurchase program
On May 23, 1996, the Board of Directors of the Company authorized the
repurchase of up to five million shares (approximately 22 percent of the
outstanding shares) of Titan Wheel International, Inc. common stock. The
Company may make these common stock purchases periodically in the open
market. As of June 30, 1996, the Company had purchased 50,000 shares
under the aforementioned program. During July, 1996, the Company
purchased an additional 250,000 shares under the program.
H. Sale of assets
On June 1, 1996, the Company sold the assets of Automation International,
Inc. (AII) to Automation International Holdings, Inc., comprised of former
AII management. AII specializes in manufacturing and rebuilding welding
and automation equipment. The Company's net sales, net income and
earnings per share for the three and six months ended June 30, 1996, and
1995, would not have been significantly different had the disposition
occurred on January 1, 1995.
6
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TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
I. SUBSEQUENT EVENT
Effective July 23, 1996, the Company acquired the remaining 50% of the
Sirmac Group located in Italy. The Sirmac Group is a manufacturer of
specialty wheels and other products for the agricultural and construction
markets. On November 21, 1994, the Company acquired 50% of the common
stock of the Sirmac Group which was initially accounted for under the
equity method. Effective July 1, 1995, Titan was able to exert control
over the Sirmac Group by making day to day operational decisions;
therefore, the Company began consolidating the Sirmac Group in its
financial statements.
Had the acquisition of 100% of the Sirmac Group occurred on January 1,
1995, net sales for the three and six month periods ended June 30, 1995,
would have been $182.0 and $359.0 million, respectively. Net sales for
1996 would not have been different, as the Sirmac Group was consolidated
with the Company beginning July 1, 1995. Net income and fully diluted
earnings per share would have been $11.5 million and $.41 for the three
month period ended June 30, 1996, and $23.0 million and $.82 for the six
month period ended June 30, 1996.
7
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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 ended June 30, 1996, were $167.0 million, an increase
of 6% over 1995 second quarter sales of $157.6 million. Sales on a year to
date basis were $344.3 million, an increase of 9% over 1995 sales of $315.4
million. 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 and the year to date period.
Sales in the Agricultural market were $78.3 and $164.5 million for the second
quarter and year to date respectively, as compared to $66.8 and $138.4 million
in 1995. The increase was due primarily to the addition of the Sirmac Group.
The Company's Construction market sales were $36.3 and $76.7 million for the
second quarter and year to date respectively, as compared to $33.3 and $63.8
million in 1995, with the increase primarily due to the addition of the Sirmac
Group. Consumer product sales were $43.0 and $85.4 million for the second
quarter and year to date respectively, as compared to $47.9 and $96.7 million in
1995. The decrease, for the quarter and year to date period, was primarily
due to a $12.5 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.
Primarily due to the addition of the Sirmac Group in the consolidated financial
statements, cost of sales increased $7.1 and $22.3 million for the second
quarter and year to date respectively. Gross profit for the second quarter was
$30.4 million, or 18.2% of net sales, compared to $28.2 million, or 17.9% of
net sales for the second quarter of 1995. Gross profit on a year to date
basis was $63.5 million, or 18.5% of net sales, compared to $56.9, or 18.0% of
net sales for 1995. Gross profit was positively affected by strong
margins from the Company's European divisions.
Selling, general and administrative ("SG&A") and research and development
("R&D") expenses for the second quarter of 1996 were $11.2 million or 6.7% of
net sales compared to $9.7 million and 6.2% of sales for 1995. Year to date
SG&A and R&D expenses were $23.7 million and 6.9% of sales as compared to $19.8
million and 6.3% of sales for 1995. Income from operations for the quarter
increased 4.0% to $19.2 million or 11.5% of sales compared to $18.4 million,
or 11.7% in 1995. Income from operations for the quarter, as a percentage of
sales, decreased primarily due to a higher level of SG&A expenses contributed
by the addition of the Sirmac Group in the consolidated financial statements.
The Company's lower revolving debt and subordinated convertible note balances
contributed to reduced interest expense, partially offset by the consolidation
of the interest cost of the Sirmac Group. Interest expense decreased $.5 and
$1.2 million for the quarter and year to date respectively, as compared to the
prior year.
8
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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 (CONTINUED)
Net income for the second quarter and year to date respectively, were $10.5 and
$21.5 million in 1996, compared to $10.0 and $19.3 million in 1995. Earnings
per common share (on a fully diluted basis) were $.38 and $.78 for the second
quarter and year to date respectively, as compared to $.42 and $.82 in 1995. The
average number of 1996 fully diluted common shares outstanding has increased 14%
and 16% for the quarter and year to date respectively, due to a June 1995 common
stock offering.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations of $26.7 million were attributed to net income and
increases in other accrued liabilities. These amounts were partially offset by
increases in inventory and receivables. Increases in receivables, inventory,
and other accrued liabilities were primarily due to higher sales and production
for the second quarter of 1996 as compared to the fourth quarter of 1995.
The Company has invested $14.1 million in capital expenditures in 1996,
including $2.3 million for the purchase, rebuilding and installation of surplus
bias tire equipment from Continental General Tire, Inc. The balance represents
various equipment purchases and building improvements to enhance production
capabilities.
At June 30, 1996, the Company had cash and cash equivalents of $20.3 million.
Cash on hand, anticipated internal cash flows and utilization of available
borrowing under the Company's credit facilities are expected to provide
sufficient liquidity for working capital needs, capital expenditures and
acquisitions for the foreseeable future.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Except for the historical information contained herein, the matters discussed
in this quarterly report are forward-looking statements which involve risks
and uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, services, products, prices, and other factors discussed in the
Company's prior filings with the Securities and Exchange Commission.
9
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TITAN WHEEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 1. Legal Matters
Reference is made to the environmental matter in footnote F.
ITEMS 2 AND 3 ARE NOT APPLICABLE.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on May 23, 1996,
for the purpose of electing two directors to serve for three year terms
and approving the appointment of independent auditors. All of
management's nominees for directors as listed in the proxy statement
were elected with the following vote:
<TABLE>
<CAPTION>
Shares Shares Shares
Election of Directors Voted For Against Withheld
--------------------- ---------- ------- --------
<S> <C> <C> <C>
Richard M. Cashin Jr. 20,688,824 -0- 23,172
Albert J. Febbo 20,591,862 -0- 120,134
</TABLE>
The appointment of Price Waterhouse LLP as independent auditors was
approved by the following vote:
<TABLE>
<CAPTION>
Shares Shares Shares
Selection of Auditors Voted For Against Withheld
--------------------- ---------- ------- --------
<S> <C> <C> <C>
Price Waterhouse LLP 20,690,334 15,487 6,175
</TABLE>
10
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TITAN WHEEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 5. OTHER MATTERS
Effective July 23, 1996, the Company acquired the remaining 50% of the
Sirmac Group located in Italy. The Sirmac Group is a manufacturer of
specialty wheels and other products for the agricultural and
construction markets. On November 21, 1994, the Company acquired 50%
of the common stock of the Sirmac Group which was initially accounted
for under the equity method. Effective July 1, 1995, Titan was able to
exert control over the Sirmac Group by making day to day operational
decisions; therefore, the Company began consolidating the Sirmac Group
in its financial statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
In a report dated June 28, 1996, the Company reported the authorization
by the Board of Directors to repurchase up to five million shares of
Titan Wheel International, Inc. common stock. No financial statements
were filed as part of the report.
11
<PAGE> 14
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: AUGUST 7, 1996 BY: /s/Kent W. Hackamack
---------------- ---------------------------------
Kent W. Hackamack
Controller and Treasurer
(Duly Authorized Officer,
Principal Financial Officer and
Principal Accounting Officer)
12
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EXHIBIT INDEX
Exhibit
No. Description Page
- ------- ----------- ----
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 20,344
<SECURITIES> 39
<RECEIVABLES> 114,018
<ALLOWANCES> 4,833
<INVENTORY> 137,390
<CURRENT-ASSETS> 282,211
<PP&E> 245,471
<DEPRECIATION> 66,949
<TOTAL-ASSETS> 533,481
<CURRENT-LIABILITIES> 115,712
<BONDS> 138,468
0
0
<COMMON> 23
<OTHER-SE> 237,356
<TOTAL-LIABILITY-AND-EQUITY> 533,481
<SALES> 344,287
<TOTAL-REVENUES> 344,287
<CGS> 280,755
<TOTAL-COSTS> 280,755
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,251
<INCOME-PRETAX> 34,649
<INCOME-TAX> 13,167
<INCOME-CONTINUING> 21,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,482
<EPS-PRIMARY> .95
<EPS-DILUTED> .78
</TABLE>
