<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 1997
REGISTRATION STATEMENT NO. 333-22279
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
TITAN WHEEL INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<C> <C> <C>
ILLINOIS 3523 36-3228472
(State or other jurisdiction (Primary standard industrial (IRS Employer
of incorporation or classification code number) Identification No.)
organization)
</TABLE>
2701 SPRUCE STREET
QUINCY, ILLINOIS 62301
(217) 228-6011
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
CHERI T. HOLLEY, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
TITAN WHEEL INTERNATIONAL, INC.
2701 SPRUCE STREET
QUINCY, ILLINOIS 62301
(217) 228-6011
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies of all communications to:
<TABLE>
<C> <C>
JOHN L. GILLIS, JR., ESQ. VALERIE FORD JACOB, ESQ.
ARMSTRONG, TEASDALE, SCHLAFLY & DAVIS FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
ONE METROPOLITAN SQUARE, SUITE 2600 ONE NEW YORK PLAZA
ST. LOUIS, MISSOURI 63102 NEW YORK, NEW YORK 10004
(314) 621-5070 (212) 859-8000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]
If this Form is filed to register additional securities pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------
If delivery of the Prospectus is expected pursuant to Rule 434, please
check the following box. [X]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 17, 1997
PROSPECTUS
- ---------------------
$150,000,000
TITAN WHEEL LOGO
TITAN WHEEL INTERNATIONAL, INC.
% SENIOR SUBORDINATED NOTES DUE 2007
------------------------
Interest on the % Senior Subordinated Notes due 2007 (the "Notes") of
Titan Wheel International, Inc. ("Titan" or the "Company") will accrue from the
date of issuance thereof and will be payable semi-annually on and
of each year, commencing , 1997. The Notes will mature on
, 2007. The Notes are redeemable for cash at any time on or after
, 2002, at the option of Titan, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the
redemption date. Upon a Change of Control (as defined herein), each holder of
the Notes will have the right to require the repurchase of its Notes by the
Company in cash at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase. See
"Description of the Notes."
The Notes will be unsecured senior subordinated obligations of the Company
and, as such, will be subordinated in right of payment to all existing and
future Senior Indebtedness (as defined herein) of the Company, including
indebtedness under the Bank Credit Facility (as defined herein), and will rank
pari passu in right of payment with all other existing and future senior
subordinated indebtedness, if any, of the Company. In addition, the business
operations of the Company are conducted in part through its subsidiaries and the
Notes will also be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, including such subsidiaries'
guarantees of the Company's indebtedness under the Bank Credit Facility. As of
September 30, 1996, on a pro forma basis after giving effect to the sale of the
Notes and the application of the estimated net proceeds therefrom, the
redemption and conversion of the Company's 4 3/4% Notes (as defined herein) and
the repayment of certain other indebtedness, the Company would have had
approximately $11.6 million of Senior Indebtedness outstanding and the Company's
subsidiaries would have had approximately $129.3 million of indebtedness
outstanding (including trade payables and current, long-term and other
liabilities and excluding the guarantees by certain of the Company's
subsidiaries of the Company's obligations under the Bank Credit Facility).
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Per Note.......................................... % % %
- -----------------------------------------------------------------------------------------------------------------
Total............................................. $ $ $
=================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from , 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $275,455.
------------------------
The Notes are being offered by the Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Notes
will be made through the book-entry facilities of The Depository Trust Company
on or about , 1997.
------------------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
SCHRODER WERTHEIM & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
------------------------
The date of this Prospectus is , 1997.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
<PAGE> 3
Titan Wheel Logo
Titan serves several major
original equipment
manufacturers, including John
Deere, Case, New Holland,
Caterpillar and AGCO. Titan
serves four primary markets:
agricultural, consumer,
earthmoving/construction, and
military applications.
Photograph depicting John Deere
tractor with Titan wheels and tires.
Photograph depicting New Holland
tractor with Titan wheels and tires.
Photograph depicting Case front-end
loader with Titan wheels.
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Notes. Such
transactions may include stabilizing, the purchase of Notes to cover syndicate
short positions and the imposition of penalty bids. For a description of these
activities, see "Underwriting."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and the Consolidated Financial Statements of the Company, including
the notes thereto, included elsewhere in this Prospectus. References herein to
the Offering refer to the offer and sale of the Notes offered hereby.
THE COMPANY
Titan Wheel International, Inc. ("Titan" or the "Company") is a leading
global manufacturer of steel wheels and tires for off-highway vehicles used in
the agricultural, consumer products (including recreational trailers, all
terrain vehicles ("ATVs") and grounds care vehicles), earthmoving/construction
and military markets. The Company generally manufactures both the wheels and
tires for these vehicles and increasingly provides the value-added service of
assembling the completed system. The Company offers a broad range of over 25,000
different products that are manufactured in relatively short production runs and
must meet Original Equipment Manufacturers' ("OEM") specifications. The Company
believes, based upon current industry revenue data, that it is the largest
agricultural wheel producer and the third largest agricultural tire manufacturer
in North America. Agricultural sales in the aggregate accounted for
approximately 44% and 47% of the Company's net sales for the year ended December
31, 1995 and the latest twelve months ended September 30, 1996, respectively.
The Company's net sales for the year ended December 31, 1995 and the latest
twelve months ended September 30, 1996 were approximately $623.2 million and
$648.3 million, respectively. The Company's earnings before interest, income
taxes, depreciation and amortization ("EBITDA") for the year ended December 31,
1995 and the latest twelve months ended September 30, 1996 were $98.8 million
and $103.7 million, respectively.
Titan's major OEM customers include Deere & Company ("Deere"), Case
Corporation ("Case"), New Holland North America Inc. ("New Holland") and
Caterpillar Inc. ("CAT") in the agricultural and off-highway construction
markets and Deere, Bayliner Marine Corporation ("Bayliner") and Polaris
Industries, Inc. ("Polaris") in the consumer products market. In addition, the
Company continues to expand its sales of wheels and tires to the after-market,
where product demand tends to be less cyclical than in the OEM market. The
Company distributes its tire products in the after-market through a network of
more than 1,500 independent distributors and 12 of its own distribution centers.
This distribution network enables the Company to service markets not otherwise
accessible through its traditional OEM marketing channels.
Through a series of strategic acquisitions, the Company has broadened its
expertise in steel wheels, has become a major participant in tire manufacturing
and has expanded geographically into Europe. The Company has experienced
significant growth, both internally and through acquisitions. In the three years
ended December 31, 1995, the Company increased its net sales and EBITDA at a
compounded annual rate of 77% and 98%, respectively. The Company's history of
successful integration of acquisitions is evidenced by a growth in gross margin
over the same period at a compounded rate of 88%.
COMPANY STRENGTHS
Strong Market Position. The Company has achieved strong positions in both
the domestic and European markets for each of its major product categories.
Titan's ability to offer a broad range of different products has increased the
Company's visibility both in the United States and in Europe and has enhanced
the Company's ability to cross-sell its products and consolidate its market
positions. Innovative marketing programs have strengthened Titan's market image,
and the Company's widening distribution network is reaching increasing numbers
of customers in the after-market. Years of product design and engineering
experience have enabled the Company to improve existing products and develop new
ones that have been well received in the marketplace. In addition, Titan
believes that it has benefitted from significant barriers to entry, such as the
substantial investment necessary to replicate Titan's manufacturing equipment
and numerous tools and dies.
Cost-Effective Manufacturing Facilities. The Company believes it enjoys low
costs of production relative to the industry as a whole due to its workforce and
production facilities. Titan's employees receive continuing training to increase
their efficiency and flexibility and the Company's comprehensive maintenance
program
3
<PAGE> 5
enables it to utilize its production capabilities to maximum advantage.
Completion of Titan's new tire manufacturing facility in Brownsville, Texas will
enhance the Company's ability to shift production loads and will provide greater
flexibility in meeting output schedules to meet customer demands.
Geographic Diversity/Global Presence. The Company has established a strong
presence in North America and Europe, with manufacturing facilities in the
United States, the United Kingdom, France, Germany and Italy. International
sales for the year ended December 31, 1995 and the nine months ended September
30, 1996 accounted for 16% and 22%, respectively, of the Company's aggregate net
sales for these periods. The Company's European facilities are located in the
four countries that in the aggregate account for a significant majority of the
European market for off-highway wheels and tires. Titan believes that there will
be opportunities to expand sales of its agricultural wheel and tire products to
European OEMs and to Titan's existing North American OEM customers for export to
Europe and for their European operations.
Proven Track Record of Integrating Acquired Assets. The Company maintains a
highly disciplined approach in evaluating prospective acquisitions, focusing on
opportunities to improve and complement existing products, establishing a
broader market presence and consolidating its engineering, manufacturing and
marketing activities, while striving to acquire assets which have been
inefficiently utilized or ineffectively managed. By integrating acquired assets
with the Company's existing operations, reducing costs of operation and
achieving economies of scale, the Company has rapidly improved earnings and cash
flows of the majority of its acquired companies. Generally, the Company's
acquisitions have allowed it to: (i) expand its market and geographic reach;
(ii) enter the market for assembled wheels and tires, a market in which margins
are greater than markets for wheels and rims alone; (iii) substantially increase
its penetration of the after-market for wheels and tires (which market for tires
is larger and less cyclical than the OEM market); (iv) improve significantly the
operating efficiencies of its acquired assets and its manufacturing facilities;
and (v) improve its ability to service its customers' needs on a timely basis.
BUSINESS STRATEGY
Titan's business strategy is to increase its penetration of the
after-market for tires and wheels, increase its penetration of European and
possibly other global markets, focus on possible additional strategic
acquisitions, continue to improve its operating efficiencies and continue its
emphasis on new product development.
Increase After-Market Tire and Wheel Business. Titan has concentrated on
increasing its penetration of the tire and wheel after-markets. These
after-markets offer higher profit margins and the tire after-market is larger
and somewhat less cyclical than the OEM market. The Company estimates that sales
in the tire and wheel after-markets represented approximately 14% and 8%,
respectively, of the Company's net sales for the first nine months of 1996.
Titan intends to continue to devote its resources to future growth in the tire
and wheel after-markets.
Expand European Markets. Titan currently manufactures wheels for sale to
European OEMs in the agricultural and the earthmoving/construction off-highway
markets. The Company has established a significant presence in Europe, including
the following four markets: the United Kingdom, France, Germany and Italy. A
primary motivation for the Company's entry into European markets is its desire
to serve the worldwide needs of its major United States OEM customers, many of
which have substantial business in Europe. Additionally, the Company believes
that, due to the removal of trade barriers in the European Union and political
changes in Eastern Europe, the average size of farms in Europe is likely to
increase and, as a result, the average size of farm vehicles used in Europe will
increase. Because larger farm vehicles utilize larger and a greater number of
wheels and tires similar to those produced in the United States, Titan believes
that there will be opportunities to expand sales of its agricultural wheel and
tire products to European OEMs and to Titan's existing North American OEM
customers for export to Europe and for their European operations.
Explore Additional Strategic Acquisitions. Titan believes that its
expertise in the manufacture of steel wheels has permitted it to take advantage
of opportunities to acquire businesses in the United States and Europe that
complement this product line, including companies engaged in the tire market and
ultimately companies with wheel and tire assembly capabilities. The broadening
of Titan's business may permit it to
4
<PAGE> 6
make additional strategic acquisitions in the future. Although the Company
continuously reviews opportunities and has discussions with various parties, it
has no acquisition agreements at the present time.
Improve Operating Efficiencies. The Company continually works to improve
the operating efficiency of its acquired assets and its manufacturing
facilities. With each acquisition, Titan integrates each facility's strengths,
often transferring equipment and business to the facilities that are best
equipped to handle the work. This provides capacity to increase utilization and
spread operating costs over a greater volume of products. Titan is also
continuing a comprehensive program to refurbish, modernize and computerize its
equipment. Titan has also centralized and streamlined its inventory controls,
instituting a "just-in-time" system of providing raw materials to its
manufacturing units. These efforts have led to improved management of order
backlog and have substantially improved the Company's ability to respond to
customer orders on a timely basis. The Company is continually evaluating
opportunities to improve its operating efficiency. The Company is ISO 9000
certified at two of its wheel manufacturing facilities, evidencing its
conformance to internationally recognized standards of management and quality
assurance.
Improve Design Capacity and Increase New Product Development. Equipment
manufacturers constantly face changing industry dynamics. Titan directs its
business and marketing strategy to understanding all of its markets, addressing
the needs of its customers and demonstrating the advantages of its products. In
particular, the Company often participates with its customers in the design of
new and upgraded products. Titan will from time to time recommend modified
products to its customers based on Titan's own market information and research
and development. The Company's engineering and research and development staffs
test new designs and technologies, developing new methods of manufacturing to
improve product quality and performance. These value-added services enhance the
Company's relationship with its customers. The Company has spent in excess of $2
million annually on research and development for the fiscal years ending
December 31, 1994, 1995 and 1996, and has introduced more than 2,000 new
products in those years. The Company believes that its performance orientation
provides Titan with a competitive advantage in the global marketplace.
RECENT DEVELOPMENTS
Acquisition of Delachaux. In December 1996, the Company acquired the wheel
subsidiary of the French manufacturing company, Delachaux SA. The company has
been renamed Titan France SA ("Titan France") and will initially do business
under the name "Titan Delachaux." Titan France manufactures wheels and rims for
the French and European off-highway wheel markets. The acquisition enhances the
Company's presence in one of the four leading European wheel markets.
Redemption of 4 3/4% Notes. In December 1996, the Company redeemed $28.7
million aggregate principal amount of its 4 3/4% Notes, and the remaining $56.6
million aggregate principal amount of the 4 3/4% Notes were converted into
4,530,240 shares of common stock of the Company ("Common Stock").
Construction of Brownsville Plant. In October 1996, the Company announced
that it will construct a new off-highway tire manufacturing facility in
Brownsville, Texas. The new plant, which will be the first new agricultural tire
manufacturing facility constructed in the United States since the early 1960s,
is projected to be operational in late 1997 or early 1998. Upon completion, this
facility will significantly increase the Company's tire manufacturing capacity.
Bank Credit Facility. In September 1996, the Company entered into a $175.0
million credit facility with a syndicate of banks (the "Bank Credit Facility").
In March 1997 the Company amended the Bank Credit Facility in order to, among
other things, increase the availability under the Bank Credit Facility to $200.0
million. See "Description of Certain Indebtedness."
Offer to Purchase. On February 25, 1997, the Company commenced an offer to
purchase (the "Offer to Purchase") up to 5 million shares of its Common Stock
(the "Shares") at a price not greater than $15.00 nor less than $12.50 per
Share, for a maximum aggregate purchase price of $75 million. The Offer to
Purchase will expire on March 24, 1997 unless extended. Because holders of
Shares are not required to tender their Shares, no determination can be made of
the number of Shares, if any, that will be tendered. The repurchase is expected
to be funded by the Company partially from cash on hand and partially from
increased borrowings
5
<PAGE> 7
under the Bank Credit Facility. In May 1996, the Board of Directors authorized
the Company to repurchase up to five million Shares, and as of February 12,
1997, the Company had repurchased 1,758,100 Shares on the open market. On
February 21, 1997, the Executive Committee of the Board of Directors authorized
the Company to repurchase an additional five million Shares pursuant to the
Offer to Purchase for an aggregate total of ten million Shares.
1996 Results. Sales for the year ended December 31,1996 totaled $634.6
million, an $11.4 million increase over fiscal 1995 sales of $623.2 million.
Income from operations totaled $67.3 million for the year ended December
31,1996, compared to $73.1 million in fiscal 1995. The 1996 amounts were
impacted by the divestiture of the assets of non-core businesses in the second
and third quarters of 1996 and by pricing competition and certain other factors.
The Company believes these trends will continue into 1997.
Titan is an Illinois corporation, its executive office is located at 2701
Spruce Street, Quincy, Illinois 62301, and its telephone number is (217)
228-6011.
6
<PAGE> 8
THE OFFERING
NOTES OFFERED.............. $150,000,000 aggregate principal amount of %
Senior Subordinated Notes due 2007.
MATURITY DATE.............. , 2007.
INTEREST PAYMENT DATES..... and of each year,
commencing , 1997.
OPTIONAL REDEMPTION........ On and after , 2002, the Notes may be
redeemed, in whole or in part, at the option of the
Company at the redemption prices set forth herein,
plus accrued and unpaid interest, if any, to the
redemption date. See "Description of Notes --
Optional Redemption."
CHANGE OF CONTROL.......... Upon the occurrence of a Change of Control, each
holder of Notes will have the right to require the
Company to repurchase in whole or in part such
holder's Notes at a cash purchase price equal to
101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the redemption
date. See "Description of Notes -- Change of
Control."
RANKING.................... The Notes will be unsecured senior subordinated
obligations of the Company and, as such, will be
subordinated in right of payment to all existing
and future Senior Indebtedness of the Company,
including indebtedness under the Bank Credit
Facility (defined below). The Notes will rank pari
passu in right of payment with all other existing
and future senior subordinated indebtedness, if
any, of the Company and will rank senior to all
other subordinated indebtedness, if any, of the
Company. In addition, the business operations of
the Company are conducted in part through its
subsidiaries and the Notes will also be effectively
subordinated to all existing and future liabilities
of the Company's subsidiaries, including such
subsidiaries' guarantees of the Company's
indebtedness under the Bank Credit Facility. As of
September 30, 1996, on a pro forma basis after
giving effect to the sale of the Notes and the
application of the estimated net proceeds
therefrom, the redemption and conversion of the
4 3/4% Notes and the repayment of certain other
indebtedness, the Company would have had
approximately $11.6 million of Senior Indebtedness
outstanding and the Company's subsidiaries would
have had approximately $129.3 million of
Indebtedness outstanding (including trade payables
and current, long-term and other liabilities and
excluding the guarantees by certain of such
subsidiaries of the Company's obligations under the
Bank Credit Facility). See "Risk Factors --
Subordination of the Notes," "Risk Factors --
Holding Company Structure" and "Description of the
Notes -- Ranking."
CERTAIN COVENANTS.......... The indenture relating to the Notes (the
"Indenture") will contain certain covenants for the
benefit of the holders of the Notes, including, but
not limited to, covenants with respect to the
following matters: (i) limitation on indebtedness;
(ii) limitation on restricted payments; (iii)
limitation on transactions with affiliates, (iv)
limitation on certain liens; (v) limitation on
certain guarantees; (vi) limitation on other senior
subordinated indebtedness; (vii) limitation on the
sale or issuance of capital stock of subsidiaries;
(viii) limitation on dividend and other payment
restrictions affecting subsidiaries; (ix)
limitation on sale of assets; (x) change of
control; and (xi) limitation on mergers,
consolidations and sales of assets. However, these
limitations will be subject to a
7
<PAGE> 9
number of important qualifications and exceptions.
See "Description of the Notes -- Certain Covenants"
and "-- Mergers, Consolidations and Sales of
Assets."
USE OF PROCEEDS............ The net proceeds to the Company from the sale of
the Notes offered hereby are estimated to be
approximately $146.0 million (after deducting
estimated offering expenses and the Underwriters'
discount). The Company will use the net proceeds of
the Offering to repay outstanding long-term debt
and, if the Offer to Purchase is not consummated,
for general corporate purposes, which may include
capital expenditures and acquisitions. See "Use of
Proceeds" and "Capitalization."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Notes.
8
<PAGE> 10
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical consolidated financial
data with respect to the Company for the periods ended and as of the dates
indicated. The summary historical consolidated annual financial data is derived
from the audited Consolidated Financial Statements of the Company as of December
31, 1994 and 1995 and for the years ended December 31, 1993, 1994 and 1995
included elsewhere in this Prospectus and as of December 31, 1993 included in
the Company's 1993 Annual Report on Form 10-K. The summary historical
consolidated interim financial data is derived from the unaudited Consolidated
Condensed Financial Statements of the Company included elsewhere in this
Prospectus and as of and for the nine months ended September 30, 1995 included
in the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1995. In the opinion of the Company's management, the unaudited Consolidated
Condensed Financial Statements include all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
financial position and the results of operations for such period and as of such
dates. Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of results expected for the year ended December 31, 1996.
See "-- Recent Developments -- 1996 Results." This information should be read in
conjunction with the Consolidated Financial Statements of the Company and the
notes thereto appearing elsewhere in this Prospectus, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Selected
Financial Information." The pro forma data for the year ended December 31, 1995
and the nine months ended September 30, 1996 is unaudited and such amounts are
not necessarily indicative of future results or of the results which would have
occurred had the sale of Notes taken place on January 1, 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1993(A) 1994(A) 1995(A) 1995 1996
------- ------- ------- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................. $150,441 $407,000 $623,183 $464,900 $489,969
Income from operations.................................... 13,142 37,996 73,055 53,586 57,184(b)
Interest expense.......................................... 3,242 8,503 12,045 8,794 7,779
Net income................................................ 6,361 18,480 37,983 28,237 30,697
OTHER DATA:
EBITDA(c)................................................. $ 18,689 $ 56,038 $ 98,753 $ 73,331 $ 78,282(b)
Depreciation and amortization............................. 5,333 17,428 23,428 17,480 20,991
Capital expenditures...................................... 5,427 15,249 20,191 17,581 19,073
EBITDA Margin(d).......................................... 12.4% 13.8% 15.8% 15.8% 16.0%
Ratio of EBITDA to interest expense....................... 5.76x 6.59x 8.20x 8.34x 10.06x
Ratio of earnings to fixed charges(e)..................... 3.98x 4.39x 6.09x 6.18x 7.13x
Pro forma ratio of earnings to fixed charges(f)........... 4.84x 4.78x
Total debt as a percentage of total book
capitalization(g)....................................... 66% 63% 44% 46% 45%
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED(H)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $216,795 $251,784
Total assets.............................................. 571,210 596,897
Total debt................................................ 195,719 183,446
Stockholders' equity...................................... 242,194 280,154
OTHER DATA:
Ratio of EBITDA to interest expense....................... 10.06x 6.67x
Total debt as a percentage of total book
capitalization(g)....................................... 45% 40%
</TABLE>
- -------------------------
(a) See Note 1 of the Notes to Consolidated Financial Statements herein for a
description of significant acquisitions.
(b) See Notes F and G of the Notes to Consolidated Condensed Interim Financial
Statements herein for a description of certain sales of assets and
realignment costs, respectively.
(c) EBITDA means earnings before interest, income taxes, depreciation and
amortization. Management believes that EBITDA is used by certain investors
as one measure of the Company's historical ability to service and/or incur
debt. However, EBITDA should not be considered as an alternative to net
income as a measure of the Company's operating results or to cash flows as a
measure of liquidity. In addition, although the EBITDA measure of
performance is not recognized under generally accepted accounting
principles, it is widely used by industrial companies as a general measure
of a company's operating performance because it assists in comparing
performance on a relatively consistent basis across companies without regard
to depreciation and amortization, which can vary significantly depending on
accounting methods (particularly where acquisitions are involved) or
non-operating factors such as historical cost bases. Because EBITDA is not
calculated identically by all companies, the presentation herein may not be
comparable to other similarly titled measures of other companies.
(d) EBITDA Margin means EBITDA expressed as a percentage of net sales.
(e) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary items, cumulative effect of change in
accounting principle, interest expense, taxes on income, and a portion of
rent expense representative of the interest component by the sum of interest
expense and the portion of rent expense representative of the interest
component.
(f) Pro forma ratio of earnings to fixed charges is calculated by determining
the ratio of earnings to fixed charges (as calculated in footnote (e) above)
as adjusted to reflect the redemption and conversion of the 4 3/4% Notes,
repayment of certain other indebtedness, the repurchase of certain shares of
the Company's Common Stock as of February 12, 1997, the issuance of the
Notes offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." Assuming that, pursuant to the Offer to
Purchase, the maximum number of Shares (5 million) are tendered to the
Company at the maximum tender offer price of $15.00 per Share and not
withdrawn, and after giving effect to the redemption and conversion of the
4 3/4% Notes, repayment of certain other indebtedness, the Company's
repurchase of shares of its Common Stock as of February 12, 1997 (see
"Capitalization") and the sale of the Notes offered hereby and the
application of the estimated net proceeds therefrom (see "Use of Proceeds"),
the pro forma ratio of earnings to fixed charges for the year ended December
31, 1995 and the nine months ended September 30, 1996 would have been 4.34x
and 4.38x, respectively. See "Business Summary--Recent Developments--Offer
to Purchase."
(g) Total debt as a percentage of total book capitalization is equal to total
debt divided by the sum of total debt plus total stockholders' equity.
(h) Adjusted to reflect the redemption and conversion of the Company's 4 3/4%
Notes, repayment of certain other indebtedness, the repurchase of certain
shares of the Company's Common Stock as of February 12, 1997, the issuance
of the Notes offered hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."
9
<PAGE> 11
RISK FACTORS
Prospective purchasers of the Notes should carefully consider the factors
set forth below, as well as the other information set forth in this Prospectus,
in evaluating an investment in the Notes. This Prospectus contains certain
forward-looking statements which involve risks and uncertainties. There can be
no assurance that such forward-looking information will in fact transpire. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON CYCLICAL INDUSTRIES
Titan's sales are dependent in substantial part on three major industries,
the agricultural equipment industry, the consumer products industry (including
recreational trailers, ATVs and grounds care vehicles) and the
earthmoving/construction equipment industry, representing 44%, 27% and 22% of
Titan's net sales for the year ended December 31, 1995, respectively, and 47%,
25% and 23% of Titan's net sales for the nine-month period ended September 30,
1996, respectively.
From the late 1970's until 1993, sales of agricultural equipment in North
America declined significantly and sales of off-highway construction equipment,
recreational trailer and vehicle and turf and garden equipment in North America
were cyclical. Since the mid-1980's, the market for marine trailers also
declined substantially. Although these markets improved significantly in 1994
and remained strong through the third quarter of 1996, Titan believes that the
market for the sale by OEMs of agricultural equipment which utilize Titan's
products will continue to be below historical averages for the foreseeable
future. Because of Titan's already strong position in the North American and
European markets as a producer of wheels and rims for this equipment, Titan
believes that its opportunities for significant growth in market share in this
aspect of its business will be limited. See "Business."
LEVERAGE
Upon consummation of the Offering the Company will be leveraged. At
September 30, 1996, on a pro forma basis, after giving effect to the sale of the
Notes and the application of the estimated net proceeds therefrom, the
redemption and conversion of the 4 3/4% Notes and repayment of certain other
indebtedness, the Company would have had total indebtedness of approximately
$183.4 million. See "Capitalization." The Company may incur additional
indebtedness in the future, including Senior Indebtedness, subject to
limitations imposed by the Indenture and the Bank Credit Facility. The Company's
ability to make payments with respect to the Notes and to satisfy its other debt
obligations will depend on its future operating performance, which will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond the Company's control.
Upon the issuance of the Notes, the Company's interest expense will
increase compared to prior years. The Company believes, based on current
circumstances, that the Company's cash flow, together with available borrowings
under the Bank Credit Facility, will be sufficient to permit the Company to meet
its operating expenses and to service its debt requirements as they become due
for the foreseeable future. Significant assumptions underlie this belief,
including, among other things, that the Company will succeed in implementing its
business strategy and there will be no material adverse developments in the
business, liquidity or capital requirements of the Company. If the Company is
unable to service its indebtedness, it will be forced to adopt an alternative
strategy that may include actions such as reducing or delaying capital
expenditures, selling assets, restructuring or refinancing its indebtedness or
seeking additional equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The degree to which the Company will be leveraged following the Offering
could have important consequences to holders of the Notes, including, but not
limited to, the following: (i) a substantial portion of the Company's cash flow
from operations will be required to be dedicated to debt service and will not be
available to the Company for its operations; (ii) the Company's ability to
obtain additional financing in the future for acquisitions, capital
expenditures, working capital or general corporate purposes could be limited;
10
<PAGE> 12
(iii) certain of the Company's borrowings are at variable rates of interest,
which could result in higher interest expense in the event of increases in
interest rates; and (iv) the Company may be substantially more leveraged than
certain of its competitors, which may place the Company at a relative
competitive disadvantage and make the Company more vulnerable to changing market
conditions and regulations. See "Description of the Notes."
SUBORDINATION OF THE NOTES
The Notes will be senior subordinated obligations of the Company,
subordinated in right of payment to all present and future Senior Indebtedness
of the Company including indebtedness under the Bank Credit Facility. The Notes
will rank pari passu with all senior subordinated indebtedness, if any, of the
Company and will rank senior to all other subordinated indebtedness, if any, of
the Company. The Notes will also be effectively subordinated to all existing and
future liabilities of the Company's subsidiaries, including such subsidiaries'
guarantees of the Company's indebtedness under the Bank Credit Facility. As of
September 30, 1996, on a pro forma basis after giving effect to the sale of the
Notes and the application of the estimated net proceeds therefrom, the
redemption and conversion of the Company's 4 3/4% Notes and the repayment of
certain other indebtedness, the Company would have had approximately $11.6
million of Senior Indebtedness outstanding and the Company's Subsidiaries would
have had approximately $129.3 million of indebtedness outstanding (including
trade payables and current, long-term and other liabilities and excluding the
guarantees by certain of the Company's subsidiaries of the Company's obligations
under the Bank Credit Facility). The Company expects that it will incur
additional Senior Indebtedness, including Senior Indebtedness under the Bank
Credit Facility, in connection with the implementation of its growth strategy.
In addition, on a pro forma basis at September 30, 1996, the Company would have
had available an additional $175.0 million under the Bank Credit Facility and,
provided certain tests were met, would have been able to borrow additional
Senior Indebtedness. In March 1997 the Company amended the Bank Credit Facility
in order to, among other things, increase the availability under such agreement
to up to $200.0 million.
By reason of such subordination, in the event of the liquidation or
insolvency of the Company, creditors of the Company who are not holders of
Senior Indebtedness, including holders of the Notes, may recover less, ratably,
than holders of Senior Indebtedness. The holders of any indebtedness of the
Company's subsidiaries will be entitled to payment of their indebtedness from
the assets of such subsidiaries prior to the holders of any general unsecured
obligations of the Company, including the Notes. If the Company incurs
additional pari passu indebtedness, the holders of such debt would be entitled
to share ratably with the holders of the Notes in any proceeds distributed in
connection with any insolvency, liquidation, reorganization, dissolution or
other winding up of the Company. This will have the effect of reducing the
amount of proceeds paid to holders of the Notes. In addition, no payments may be
made with respect to the principal of or interest on the Notes if a payment
default exists with respect to Designated Senior Indebtedness (as defined
herein) and, under certain circumstances, no payments may be made with respect
to the principal of or interest on the Notes for certain periods of time if a
non-payment default exists with respect to Designated Senior Indebtedness. See
"Description of Certain Indebtedness" and "Description of the Notes--Ranking."
HOLDING COMPANY STRUCTURE
The Company conducts a portion of its business through its subsidiaries.
The Company will, in part, be dependent on the cash flow of such subsidiaries
and dividends and distributions from such subsidiaries to the Company in order
to meet its debt service obligations. The ability of the Company's subsidiaries
to pay such dividends and distributions will be subject to, among other things,
the terms of any debt instruments of the Company's subsidiaries then in effect
and applicable law. As a result of the structure of the Company, the holders of
the Notes will be structurally subordinated to all creditors of the subsidiaries
of the Company, including the guarantees by certain subsidiaries of the
Company's obligations and any borrowings by the Company's subsidiaries under the
Bank Credit Facility. The Company's rights, and the rights of its creditors, to
participate in the distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization will be subject to the prior claims
of such subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such subsidiary, in which case the claims of the
Company would still be subject to
11
<PAGE> 13
the claims of any secured creditor of such subsidiary and of any holder of
indebtedness of such subsidiary senior to that held by the Company. As of
September 30, 1996, the aggregate amount of indebtedness and other obligations
of the subsidiaries (including trade payables current, long-term and other
liabilities) plus other debt would have been approximately $129.3 million
(excluding the guarantees of the Company's obligations under the Bank Credit
Facility by certain of the Company's subsidiaries).
SENSITIVITY TO NORTH AMERICAN AND EUROPEAN ECONOMIES
Sales of a substantial portion of Titan's products in the agricultural,
consumer products and the off-highway construction markets are directly related
to the overall level of production of OEMs, which, in turn, is sensitive to the
overall strength of the North American and European economies, including farm
income and farm land values, consumer disposable income, interest rates, levels
of acreage planted and crop yields, international supply and demand conditions
for agricultural commodities and forestry products, weather conditions, and
other general agricultural, forestry, construction and mining conditions.
Significant adverse changes in the overall strength of these economies or in
these other factors would have a negative effect on the Company's business.
RISKS OF FOREIGN OPERATIONS
During 1995 and the nine months ended September 30, 1996, 16% and 22%,
respectively, of the Company's net sales was generated by sales of its foreign
subsidiaries. The percentage of sales generated by foreign subsidiaries of the
Company has been increasing. See Note 15 to the Company's Consolidated Financial
Statements. International operations and 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, restrictive actions by foreign governments (such as
restrictions on transfer of funds, export duties and quotas, foreign customs and
tariffs and unexpected changes in regulatory environments), changes in foreign
laws regarding trade and investment, difficulty in obtaining distribution and
support, nationalization, the 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 foreign
sales or on its results of operations.
In addition, the Company has significant manufacturing operations in
foreign countries and 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 it
manufactures or purchases goods relative to the strength of the currencies in
countries where its products are sold. The Company's results of operations and
financial position may be adversely affected by fluctuations in foreign
currencies and by translations of the financial statements of the Company's
foreign subsidiaries from local currencies into U.S. dollars.
POTENTIAL ADVERSE EFFECT OF REGULATION AND GOVERNMENT POLICY
Domestic and foreign political developments and government regulations and
policies directly affect the agricultural, off-highway construction and consumer
products industries in the United States and abroad and indirectly affect the
wheel and tire markets for such industries. Regulations and policies relating to
the agricultural industry include those encouraging farm acreage reduction in
the United States and restricting deforestation techniques. Regulations and
policies relating to the off-highway construction industry include those
regarding the construction of roads, bridges and other items of infrastructure.
Regulations and policies relating to over-the-highway vehicles include standards
established by the U.S. Department of Transportation for tire endurance
standards and safety. The modification of existing laws, regulations or
policies, or the adoption of new laws, regulations or policies, could have an
adverse effect on Titan's business.
12
<PAGE> 14
DEPENDENCE ON PRINCIPAL CUSTOMERS
For the year ended December 31, 1995 and the nine months ended September
30, 1996, Titan's largest customer, Deere & Company, accounted for approximately
12% and 13%, respectively, of net sales, and Titan's ten largest customers
accounted for approximately 42% of net sales during both periods. As a result,
Titan's business could be adversely affected if one of its larger customers
reduces its purchases from Titan due to work stoppages or slow-downs, financial
difficulties, as a result of termination provisions, competitive pricing or
other reasons. Although the Company has had long-term relationships with its
major customers and expects that it will be able to negotiate extensions of its
current arrangements, there can be no assurance that it will be able to do so or
that, if obtained, such arrangements will be obtained on terms favorable to the
Company. Any failure to obtain an extension of an arrangement with a leading
customer could have an adverse effect on the Company. See "Business--Customers."
DEPENDENCE ON EXISTING MANAGEMENT AND KEY PERSONNEL
Titan's continued success and viability are dependent, to a certain extent,
upon its ability to attract and retain qualified personnel in all areas of its
businesses, especially management positions. In the event the Company is unable
to attract and retain qualified personnel, its businesses may be adversely
affected. Mr. Taylor, the Company's President and Chief Executive Officer, has
been instrumental in the development and implementation of Titan's business
strategy. The Company's Bank Credit Facility provides that if Mr. Taylor ceases
to serve as an executive officer or director of the Company for more than 180
days, and if during that period Titan has not replaced Mr. Taylor with a person
reasonably acceptable to the Company's lenders, the lenders may require the
entire amount outstanding thereunder to be prepaid. The Company has not entered
into employment agreements with any of its executive officers, including Mr.
Taylor, and does not maintain key-person life insurance policies on any of its
executive officers. The loss or interruption of the continued full-time services
of any of the Company's executive officers, including Mr. Taylor, could have a
material adverse effect on Titan. See "Business--Business History."
COMPETITION
Titan competes with several international and domestic competitors, some of
which are larger and have greater financial and marketing resources than Titan.
Titan competes primarily on the basis of price, quality, customer service,
design capability and delivery time. Its ability to compete with international
competitors may be adversely affected by currency fluctuations. In addition,
certain of Titan's OEM customers could, under certain circumstances, elect to
manufacture certain of Titan's products to meet their requirements or to
otherwise compete with Titan. There can be no assurance that the businesses of
Titan will not be adversely affected by increased competition in the markets in
which it operates or that the Company's competitors will not develop products
that are more effective or less expensive than the Company's products or which
could render certain of the Company's products less competitive. From time to
time certain competitors of the Company have reduced their prices in particular
product categories, which has caused the Company to reduce its prices. There can
be no assurance that in the future competitors of the Company will not further
reduce prices or that any such reductions would not have a material adverse
effect on the Company. See "Business -- Competition."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture will contain certain covenants limiting the incurrence of
additional indebtedness, the payment of dividends, the redemption of capital
stock, the making of certain investments, the issuance of capital stock of
subsidiaries, the creation of liens, the creation of dividend and other
restrictions affecting subsidiaries, the issuance of guarantees, transactions
with affiliates, asset sales and certain mergers and consolidations. However,
these limitations will be subject to a number of important qualifications and
exceptions. In addition, the Bank Credit Facility contains restrictive covenants
and requires the Company to maintain specified financial ratios and satisfy
certain financial tests. The Company's ability to meet such financial ratios and
tests may be affected by events beyond its control, and there can be no
assurance that the Company will meet such tests. A breach of any of these
covenants could result in an event of default under the
13
<PAGE> 15
Bank Credit Facility. In an event of default under the Bank Credit Facility, the
lenders thereunder could elect to declare all amounts borrowed, together with
accrued interest, to be immediately due and payable and the lenders under the
Bank Credit Facility could terminate all commitments thereunder. If any such
indebtedness were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay in full such indebtedness and the
other indebtedness of the Company, including the Notes. In addition, a default
under the Bank Credit Facility or the instruments governing the Company's other
indebtedness could constitute a cross-default under the Indenture and any
instruments governing the Company's other indebtedness, and a default under the
Indenture could constitute a cross-default under the Bank Credit Facility and
any instruments governing the Company's other indebtedness. See "Description of
the Notes--Certain Covenants" and "Description of Certain Indebtedness."
RISKS IN ACQUISITION STRATEGY
The ability of the Company to successfully implement its acquisition
strategy depends upon a number of factors. To implement its strategy, the
Company must identify acquisition opportunities in the wheel and tire or related
industries, successfully negotiate, finance and consummate such acquisitions and
comply with applicable regulatory restrictions (including antitrust laws) in the
United States and abroad. There can be no assurance that the Company will be
able to identify suitable acquisition candidates at favorable acquisition prices
or that it will be able to finance and consummate any such acquisitions. In past
acquisitions, the Company has been successful in reducing product and
organization costs upon consummation and integration of the acquisitions.
However, there can be no assurance that the Company will be able to integrate
any new acquisitions successfully into its operations and achieve cost savings
from such integration.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES; POSSIBLE VOLATILITY
There is no established trading market for the Notes and the Company does
not intend to apply for listing of the Notes on any national securities exchange
or for quotation of the Notes on any automated dealer quotation system. The
Company has been advised by the Underwriters that they presently intend to make
a market in the Notes after the consummation of the Offering contemplated
hereby, although they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. Accordingly, no
assurance can be given as to the price of the Notes or the liquidity of the
trading market for the Notes or that an active public trading market for the
Notes will develop. If an active public trading market for the Notes does not
develop, the market price and liquidity of the Notes may be adversely affected.
If the Notes are traded, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for similar
securities, the performance of the Company and certain other factors. The
liquidity of, and trading markets for, the Notes may also be adversely affected
by general declines in the market for non-investment grade debt. Such declines
may adversely affect the liquidity of, and trading markets for, the Notes,
independent of the financial performance of or prospects for the Company.
Historically, the market for debt similar to the Notes has been subject to
disruptions that have caused substantial price volatility. There can be no
assurance that the market for the Notes will not be subject to similar
disruptions. Any such disruptions may have a material adverse effect on the
value of the Notes.
14
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes, after deducting
estimated underwriting discounts and offering expenses, are estimated to be
approximately $146.0 million. The Company intends to use approximately $100.0
million of such proceeds to repay amounts then outstanding under the Bank Credit
Facility; however, if the Offer to Purchase is consummated, the entire net
proceeds will be used to repay a portion of amounts then outstanding under the
Bank Credit Facility. See "Prospectus Summary--Recent Developments--Offer to
Purchase," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Description of Certain Indebtedness." The remaining
proceeds (if any) will be used for general corporate purposes, which may include
capital expenditures and additional acquisitions.
The Bank Credit Facility provides the Company with four interest options,
bore interest at the rate of 6 1/4% per annum on February 18, 1997 and is
scheduled to mature in March 2002. Approximately $100.0 million was outstanding
under the Bank Credit Facility at February 18, 1997. Borrowings under the Bank
Credit Facility were used primarily to discharge subsidiary term loans and the
SIRMAC Group (as defined herein) revolving credit facility and for the
redemption of the 4 3/4% Notes.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Company at September 30, 1996, (ii) the consolidated capitalization of the
Company on a pro forma basis to give effect to the redemption and conversion of
the 4 3/4% Notes (as described in note (b) below), repayment of certain other
indebtedness and the Company's repurchase of shares of its Common Stock (as
described in note (f) below) and (iii) the September 30, 1996 pro forma
capitalization as adjusted for the sale of the Notes offered hereby and the
application of the estimated net proceeds as described under "Use of Proceeds."
The following table should be read in conjunction with the Company's unaudited
Consolidated Condensed Financial Statements and the Notes thereto included in
this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(A) AS ADJUSTED(B)
-------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents............................... $ 56,146 $ 32,789 $ 78,789
======== ======== ========
Total debt:
Industrial Revenue Bonds -- Greenwood................. $ 9,500 $ 9,500 $ 9,500
Bank borrowings:
Revolving credit -- SIRMAC (c)..................... 16,994 -- --
Bank Credit Facility (d)........................... 60,000 100,000 --
Notes offered hereby.................................. -- -- 150,000
4 3/4% Convertible Subordinated Notes due 2000 (e).... 85,279 -- --
Note payable to PATC.................................. 19,743 19,743 19,743
Other................................................. 4,203 4,203 4,203
-------- -------- --------
Total debt......................................... $195,719 $133,446 $183,446
======== ======== ========
Stockholders' equity:
Common Stock--no par value, 60,000,000 shares
authorized, 22,295,541 shares outstanding at
September 30, 1996 and 25,444,892 shares
outstanding at September 30, 1996 on a pro forma
and pro forma as adjusted basis.................... $ 23 $ 27 $ 27
Additional paid-in capital (e)........................ 154,688 210,307 210,307
Retained earnings..................................... 93,823 93,823 93,823
Cumulative translation adjustments.................... (355) (355) (355)
Treasury stock at cost: 399,165 shares at September
30, 1996 and 1,807,265 shares at September 30, 1996
on a pro forma and a pro forma as adjusted basis,
respectively (f)................................... (5,985) (23,648) (23,648)
-------- -------- --------
Total stockholders' equity......................... 242,194 280,154 280,154
-------- -------- --------
Total capitalization............................. $437,913 $413,600 $463,600
======== ======== ========
</TABLE>
- -------------------------
(a) Gives pro forma effect to the redemption and conversion of the 4 3/4% Notes,
repayment of certain other indebtedness and the Company's repurchase of
shares of Common Stock as of February 12, 1997.
(b) Gives pro forma effect to the redemption and conversion of the 4 3/4% Notes,
repayment of certain other indebtedness, the Company's repurchase of shares
of Common Stock as of February 12, 1997, the sale of the Notes offered
hereby and the application of the $146.0 million of the estimated net
proceeds described under "Use of Proceeds."
(c) This loan was repaid with borrowings under the Bank Credit Facility.
(d) The Bank Credit Facility presently allows borrowings up to $200.0 million.
Approximately $100.0 million was outstanding under the Bank Credit Facility
at February 18, 1997.
(e) On December 30, 1996 the Company redeemed $28.7 million principal amount of
the 4 3/4% Notes with borrowings under the Bank Credit Facility, with the
remaining $56.6 million principal amount converted into 4,530,240 shares of
Common Stock of the Company resulting in an increase in additional paid-in
capital of $55.6 million.
(f) In May 1996 the Company's Board of Directors authorized the repurchase of up
to 5 million shares (approximately 22% of outstanding shares as of the end
of May 1996) of its Common Stock. As of February 12, 1997 the Company has
repurchased 1,758,100 shares pursuant to this program.
16
<PAGE> 18
SELECTED FINANCIAL INFORMATION
The selected financial data presented below as of December 31, 1994 and
1995 and for the years ended December 31, 1993, 1994 and 1995 are derived from
the Company's Consolidated Financial Statements, audited by Price Waterhouse
LLP, independent accountants, included elsewhere herein. The selected financial
data as of December 31, 1992 and 1993 and for the years ended December 31, 1991
and 1992 are derived from the Company's Consolidated Financial Statements
audited by Price Waterhouse LLP, not included herein, which have been filed in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993. The selected financial data as of December 31, 1991 is derived from the
Company's Consolidated Financial Statements audited by Price Waterhouse LLP. The
selected financial data as of and for the nine months ended September 30, 1996
is derived from the Company's unaudited Consolidated Condensed Financial
Statements included elsewhere herein, and the selected financial data as of and
for the nine months ended September 30, 1995 is derived from financial data
included in the Company's third quarter 1995 Quarterly Report on Form 10-Q. In
the opinion of the Company's management, the unaudited Consolidated Condensed
Financial Statements have been prepared on the same basis as the audited
Consolidated Financial Statements and include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
financial position and the results of operations for these periods and as of
such dates. Operating results for the nine months ended September 30, 1996 are
not necessarily indicative of results expected for the entire year. See
"Prospectus Summary -- Recent Developments -- 1996 Results." The selected
consolidated financial data set forth below should be read in conjunction with
the Consolidated Financial Statements and Notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial information included elsewhere in this Prospectus. The pro forma
data for the year ended December 31, 1995 and the nine months ended September
30, 1996 is unaudited and such amounts are not necessarily indicative of future
results or of the results which would have occurred had the sale of Notes taken
place on January 1, 1995.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------------------- -------------------
1991 1992 1993(A) 1994(A) 1995(A) 1995 1996
---- ---- ------- ------- ------- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................... $100,054 $113,170 $150,441 $407,000 $623,183 $464,900 $489,969
Gross profit........................ 11,501 17,437 25,269 68,432 115,726 84,673 76,989(c)
Income (loss) from operations....... (911)(b) 8,798 13,142 37,996 73,055 53,586 57,184(c)
Other (income) expenses:
Interest expense.................. 3,399 2,817 3,242 8,503 12,045 8,794 7,779
Other............................. (782) (487) (214) (614) (3,480) (2,688) (2,189)
Income (loss) before income taxes,
extraordinary loss and cumulative
effect of change in accounting
principle......................... (3,528) 6,468 10,114 30,107 63,280 47,057 49,512
Extraordinary loss related to early
retirement of debt(d)............. -- (258) -- -- -- -- --
Cumulative effect of change in
accounting principle(e)........... -- (275) -- -- -- -- --
Net income (loss)................... (3,616) 3,539 6,361 18,480 37,983 28,237 30,697
BALANCE SHEET DATA (AT END OF PERIOD):
Current assets...................... $ 41,978 $ 40,663 $141,682 $192,358 $264,900 $287,001 $323,308
Total assets........................ 66,994 69,313 261,266 400,460 512,135 534,923 571,210
Current liabilities................. 21,125 22,459 50,944 72,396 113,642 134,174 106,513
Current portion of long-term debt... 2,443 2,317 7,115 3,195 26,419 31,736 14,009
Long-term debt...................... 36,950 35,785 123,646 178,341 142,305 142,180 181,710
Total liabilities................... 59,900 62,673 194,538 292,724 296,263 329,017 329,016
Stockholders' equity................ 7,094 6,640 66,728 107,736 215,872 205,906 242,194
OTHER FINANCIAL DATA:
EBITDA(f)........................... $ 2,812 $ 12,725 $ 18,689 $ 56,038 $ 98,753 $ 73,331 $ 78,282(c)
Depreciation and amortization....... 2,941 3,440 5,333 17,428 23,428 17,480 20,991
Capital expenditures................ 3,704 3,035 5,427 15,249 20,191 17,581 19,073
EBITDA Margin(g).................... 2.8% 11.2% 12.4% 13.8% 15.8% 15.8% 16.0%
Ratio of EBITDA to interest
expense........................... .83x 4.52x 5.76x 6.59x 8.20x 8.34x 10.06x
Ratio of earnings to fixed
charges(h)........................ (--)(i) 3.14x 3.98x 4.39x 6.09x 6.18x 7.13x
Pro forma ratio of earnings to fixed
charges(j)........................ -- -- -- -- 4.84x -- 4.78x
Total debt as a percentage of total
book capitalization(k)............ 85% 85% 66% 63% 44% 46% 45%
</TABLE>
(footnotes on following page)
17
<PAGE> 19
- -------------------------
(a) See Note 1 of the Notes to the Consolidated Financial Statements herein for
a description of significant acquisitions.
(b) In December 1991, Titan recorded a provision of $4.2 million for the
estimated costs associated with the closure of the Company's Toronto,
Ontario facility, including costs related to employee severance, inventory
obsolescence, rent and property taxes, asset disposal and other
miscellaneous costs. This facility was closed in October 1992.
(c) See Notes F and G of the Notes to Consolidated Condensed Interim Financial
Statements herein for a description of sale of assets and realignment costs,
respectively.
(d) On July 31, 1992, Titan entered into a credit agreement and, in connection
therewith, recorded an extraordinary loss of $258,000 (net of tax benefit of
$167,000), consisting primarily of deferred financing costs associated with
its previous credit facility.
(e) The Company adopted SFAS 109 effective January 1, 1992. The cumulative
effect of adopting SFAS 109 was a $275,000 charge to the statement of
operations for the year ended December 31, 1992.
(f) EBITDA means earnings before interest, income taxes, depreciation and
amortization. Management believes that EBITDA is used by certain investors
as one measure of the Company's historical ability to service and/or incur
its debt. However, EBITDA should not be considered as an alternative to net
income as a measure of the Company's operating results or to cash flows as a
measure of liquidity. In addition, although the EBITDA measure of
performance is not recognized under generally accepted accounting
principles, it is widely used by industrial companies as a general measure
of a company's operating performance because it assists in comparing
performance on a relatively consistent basis across companies without regard
to depreciation and amortization, which can vary significantly depending on
accounting methods (particularly where acquisitions are involved) or
non-operating factors such as historical cost bases. Because EBITDA is not
calculated identically by all companies, the presentation herein may not be
comparable to other similarly titled measures of other companies.
(g) EBITDA Margin means EBITDA expressed as a percentage of net sales.
(h) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary items, cumulative effect of change in
accounting principle, interest expense, taxes on income, and a portion of
rent expense representative of the interest component by the sum of interest
expense and the portion of rent expense representative of the interest
component.
(i) Earnings for 1991 were inadequate to cover fixed charges; the coverage
deficiency totaled approximately $100,000.
(j) Pro forma ratio of earnings to fixed charges is calculated by determining
the ratio of earnings to fixed charges (as calculated in footnote (h) above)
as adjusted to reflect the redemption and conversion of the 4 3/4% Notes,
repayment of certain other indebtedness, the repurchase of certain shares of
the Company's Common Stock prior to February 12, 1997, the issuance of the
Notes offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." Assuming that, pursuant to the Offer to
Purchase, the maximum number of Shares (5 million) are tendered to the
Company at the maximum tender offer price of $15.00 and not withdrawn, and
after giving effect to the redemption and conversion of the 4 3/4% Notes,
repayment of certain other indebtedness, the Company's repurchase of shares
of its Common Stock prior to February 12, 1997 (see "Capitalization") and
the sale of the Notes offered hereby and the application of the estimated
net proceeds therefrom (see "Use of Proceeds"), the pro forma ratio of
earnings to fixed charges for the year ended December 31, 1995 and the nine
months ended September 30, 1996 would have been 4.34x and 4.38x,
respectively. See "Business Summary -- Recent Developments -- Offer to
Purchase."
(k) Total debt as a percentage of total book capitalization is equal to total
debt divided by the sum of total debt plus total stockholders' equity.
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company conducts its business in a single segment, the manufacture and
sale of a full line of tires, wheels and components for the agricultural,
consumer products, earthmoving/construction, engineered product and military
markets.
Through a series of strategic acquisitions, the Company has broadened its
expertise into steel wheel and tire manufacturing, expanded both its product
lines and markets and expanded geographically into Europe. Between the beginning
of 1993 and the end of 1995, the Company made eight acquisitions and increased
its net sales from $113.2 million in 1992 to $623.2 million in 1995, improved
its ratio of debt to total capital from 85.2% in 1992 to 43.9% in 1995 and
increased its EBITDA from $12.7 million (excluding cumulative effect of change
in accounting principle and extraordinary loss related to early retirement of
debt) in 1992 to $98.8 million in 1995. For the nine months ended September 30,
the Company increased its net sales from $464.9 million in 1995 to $490.0
million in 1996, increased its EBITDA from $73.3 million in 1995 to $78.3
million in 1996, improved its EBITDA expressed as a percentage of net sales from
15.8% in 1995 to 16.0% in 1996, and reduced its ratio of total debt to total
book capitalization from 46.0% in 1995 to 45.0% in 1996. Generally, the
Company's acquisitions have allowed it to: (i) expand its market and geographic
reach; (ii) enter the market for assembled wheels and tires, a market in which
margins are greater than markets for wheels and rims alone; (iii) substantially
increase its penetration of the after-market for wheels and tires, a market
larger and less cyclical than the OEM market; (iv) improve significantly the
operating efficiencies of its acquired assets and its manufacturing facilities;
and (v) improve its ability to service its customers' needs on a timely basis.
For a further discussion of recent acquisitions by the Company, see "Business --
Business History."
While a majority of the Company's growth in net sales and earnings from
1992 to 1995 has been due to acquisitions, the Company has also experienced
compounded annual growth in excess of 7% from its existing operations during
that period. This increase in net sales is primarily attributable to increased
unit sales. Sales of agricultural products totaled $276.0 million and 44% of net
sales in 1995, compared to $65.3 million and 58% of net sales in 1992. Sales in
Titan's next largest market, consumer products, totaled $170.7 million and
represented 27% of Titan's net sales in 1995, compared to $2.6 million and 2% of
net sales in 1992. Titan's line of consumer products has significantly increased
and includes wheels, tires and brakes for lawn and garden tractors, ATVs,
recreational vehicles, boat and utility trailers and specialty automotive
wheels. Sales in Titan's third largest market, earthmoving/construction, totaled
$133.5 million and 22% of net sales in 1995 compared to $26.0 million and 23% of
net sales in 1992. For the nine months ended September 30, 1996, sales of
agricultural equipment products accounted for 47% of net sales, consumer market
products accounted for approximately 25%, earthmoving/construction products
accounted for approximately 23%, engineered and other products accounted for 4%
and military products accounted for 1%, compared to 44%, 29%, 21%, 5% and 1%
respectively, for the nine months ended September 30, 1995.
Titan has also increased its liquidity in recent years. During 1995 and
through the third quarter of 1996, the Company relied on internally-generated
cash flow for all of its liquidity needs associated with its existing
operations. The Company increased its liquidity for acquisitions through
external sources. In September 1996, Titan entered into the $175.0 million Bank
Credit Facility with Harris Trust and Savings Bank and other lenders. In March
1997 the Company amended the Bank Credit Facility in order to, among other
things, increase the availability under the Bank Credit Facility to $200.0
million. In March 1995, the Company financed its new facility in Greenwood,
South Carolina with $9.5 million in aggregate principal amount of Industrial
Revenue Bonds. The Company intends to repay an aggregate of approximately $100.0
million of outstanding indebtedness through the proceeds of the offering of the
Notes hereunder. See "Use of Proceeds."
19
<PAGE> 21
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, Titan's
statement of operations expressed as a percentage of sales. This table and
subsequent discussions should be read in conjunction with the Company's
Consolidated Financial Statements, the Company's Consolidated Condensed
Financial Statements and related notes included herein.
<TABLE>
<CAPTION>
AS A PERCENTAGE OF SALES
-------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- -------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................... 83.2 83.2 81.4 81.8 82.2
Realignment costs........................... 0.0 0.0 0.0 0.0 2.1
----- ----- ----- ----- -----
Gross profit.............................. 16.8 16.8 18.6 18.2 15.7
Selling, general and administrative
expenses.................................. 7.1 7.0 6.6 6.3 6.9
Research and development expenses........... 0.9 0.5 0.3 0.4 0.4
Gain on sale of assets...................... 0.0 0.0 0.0 0.0 (3.3)
----- ----- ----- ----- -----
Income from operations.................... 8.8 9.3 11.7 11.5 11.7
Other (income) expense:
Interest expense.......................... 2.2 2.1 1.9 1.9 1.6
Minority interest......................... 0.0 0.0 0.2 0.1 0.4
Other (income) expense.................... (0.1) (0.2) (0.6) (0.6) (0.4)
----- ----- ----- ----- -----
Income before taxes....................... 6.7 7.4 10.2 10.1 10.1
Provision for income taxes.................. 2.5 2.9 4.1 4.0 3.8
----- ----- ----- ----- -----
Net income................................ 4.2% 4.5% 6.1% 6.1% 6.3%
===== ===== ===== ===== =====
</TABLE>
In addition, the following table sets forth, for the periods indicated,
components of the Company's net sales classified by major markets. The majority
of the Company's Engineered Products divisions were divested in 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Agricultural............................. 50% 38% 44% 44% 47%
Consumer................................. 16 34 27 29 25
Earthmoving/Construction................. 22 19 22 21 23
Engineered Products...................... 4 6 6 5 4
Military................................. 8 3 1 1 1
--- --- --- --- ---
Total.................................. 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
Net sales for the nine months ended September 30, 1996, were $490.0
million, an increase of 5% compared to $464.9 million in sales for the nine
months ended September 30, 1995. The change from the equity method of accounting
to the consolidation method for the SIRMAC Group (as defined herein) beginning
July 1, 1995, accounted for the majority of the increase in sales for the
year-to-date period.
Sales in the agricultural market were $231.6 million for the nine months
ended September 30, 1996, as compared to $203.7 million in 1995. The Company's
construction market sales were $111.6 million for the nine months ended
September 30, 1996, as compared to $98.3 million in 1995. The increase in sales
in the agricultural and construction markets is primarily due to the addition of
the SIRMAC Group. Consumer product sales were $120.7 million for the nine months
ended September 30, 1996, as compared to $134.7 million in 1995. The decrease in
consumer product sales was primarily due to a $23.9 million reduction in sales
of light truck tires, which resulted from the expiration of an agreement to
produce such tires.
20
<PAGE> 22
Cost of sales was $402.7 million for the nine months ended September 30,
1996, as compared to $380.2 million in 1995. Gross profit for the nine months
ended September 30, 1996, before realignment costs was $87.3 million, or 17.8%
of net sales, compared to $84.7 million, or 18.2% of net sales for 1995.
During the third quarter of 1996, the Company recorded a pretax realignment
charge of $10.3 million. These costs consisted primarily of a write-off of
start-up costs and inventory associated with the elimination of non-core
products including automotive OEM wheels, certain rolled rims and axles. This is
part of the Company's overall strategy to concentrate its resources on tire and
wheel manufacturing, and is consistent with the sale of assets mentioned below.
On September 30, 1996, the Company sold the assets of Tractech to a joint
venture group and private investors. Tractech, which produces no-spin
differentials, contributed annual sales of approximately $25.0 million. During
the nine months ended September 30, 1996, Tractech contributed net sales of
$18.4 million, net income of $0.8 million, and fully diluted earnings per share
of $0.03. The Company has recorded a pretax gain of $15.3 million after related
expenses as a result of the transaction in the third quarter of 1996. This
follows the sale of the assets of Automation International, Inc. in the second
quarter of 1996.
Selling, general and administrative ("SG&A") and research and development
("R&D") expenses were $36.1 million and 7.4% of sales for the nine months ended
September 30, 1996 as compared to $31.1 million and 6.7% of sales for the nine
months ended September 30, 1995. The rise in SG&A expenses is primarily due to
increased tire advertising coupled with overall efforts to improve systems
resources and technology.
Amortization and depreciation expenses for the nine months ended September
30, 1996 were $21.0 million compared to $17.5 million for the same period in
1995. The difference is primarily attributable to full year depreciation on
recent capital additions.
Income from operations for the nine months ended September 30, 1996, before
realignment costs and gain on sale of assets, was $51.2 million or 10.4% of net
sales, compared to $53.6 million or 11.5% in 1995. Income from operations, as a
percentage of 1996 sales, was negatively impacted by pricing pressure in the
tire after-market, a strike at the Company's Walcott wheel facility and higher
SG&A expenses.
Net interest expense for the nine months ended September 30, 1996 was $7.8
million or 1.6% of net sales, a decrease of 11% compared to the $8.8 million
interest expense or 1.9% of net sales for the same period in 1995. The decrease
was largely due to the Company's lower revolving debt and 4 3/4% Note balances,
partially offset by interest expense related to the SIRMAC Group.
Net income for the nine months ended September 30, 1996, was $30.7 million,
compared to $28.2 million in 1995. Earnings per common share (on a fully diluted
basis) were $1.12 for the nine months ended September 30, 1996, as compared to
$1.15 in 1995. The average number of 1996 fully diluted common shares
outstanding increased 10% for the period ended September 30, 1996, due to a June
1995 Common Stock offering.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1994
Net sales for the year ended December 31, 1995 were $623.2 million, an
increase of 53% compared to 1994 sales of $407.0 million. The increase was
primarily due to the acquisition by the Company of Steel Wheels in February
1995, Titan Tire Corporation ("Titan Tire") in July 1994, and to the
consolidation of the SIRMAC Group in the second half of 1995. Sales to the
agricultural market, the Company's largest market segment, were $276.0 million
in 1995 compared to 1994 sales of $156.0 million. Agricultural sales accounted
for 44% of the Company's total sales in 1995. Sales increased primarily due to
the acquisition of Titan Tire and the SIRMAC Group. Sales in the Company's
second largest market, consumer products, increased $30.6 million in 1995
compared to 1994, and represented 27% of 1995 total sales. The increase was due
primarily to the acquisitions noted above. Earthmoving/construction sales, the
Company's third largest market in 1995 at 22% of total sales, increased $58.0
million over 1994, primarily due to the acquisition of Steel Wheels.
21
<PAGE> 23
Gross profit was $115.7 million or 18.6% of net sales in 1995, compared to
$68.4 million or 16.8% of net sales in 1994. The gross profit margin was
positively affected by strong margins from the Titan Tire acquisition as well as
strength in the Company's traditional markets.
SG&A expenses were $40.6 million, or 6.5% of net sales in 1995, compared to
$28.3 million or 7.0% of sales in 1994. The dollar increase was principally due
to the acquisitions noted above as well as increases in operations and
administrative personnel to enhance systems and controls. R&D expenses were
consistent from year to year at $2.1 million.
Interest expense for 1995 was $12.0 million or 1.9% of net sales, which
compares to $8.5 million or 2.1% of net sales in 1994. The increased interest
expense was primarily due to an increase of approximately $57.0 million in the
average debt outstanding in 1995 compared to 1994, coupled with slightly higher
average borrowing rates. The acquisition of Steel Wheels and the consolidation
of the SIRMAC Group accounted for the majority of the increase in the average
debt outstanding.
In June 1995, the Company issued 4,312,500 shares of Common Stock at a
price of $15.83 per share. Excluding fees, Titan received $64.9 million, before
related offering costs of $300,000. Titan used $17.5 million of the proceeds
from this stock offering to repurchase the convertible preferred stock and
Common Stock warrants issued to Pirelli Armstrong Tire Corporation ("PATC") in
the Titan Tire acquisition. Titan used the remaining proceeds to reduce the
amount outstanding under its revolving credit facility.
Net income for the year ended December 31, 1994 and the year ended December
31, 1995 was $18.5 million and $38.0 million, respectively. The increase was
primarily due to the 53% increase in sales noted above and improvements in the
gross profit percentage.
FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1993
Net sales for the year ended December 31, 1994, were $407.0 million, an
increase of 171% compared to 1993 sales of $150.4 million. The increase was
primarily due to the acquisitions by the Company of Dyneer Corporation
("Dyneer") and TD Wheels of Virginia, Inc. ("TD Wheel") in November 1993,
Nieman's Limited ("Nieman's") in January 1994, and Titan Tire in July 1994, as
well as strong growth in the agricultural and earthmoving/construction markets
in 1994. Net sales in the agricultural products market, Titan's largest category
in 1994 at 38% of sales, increased $81.1 million compared to 1993, primarily due
to the acquisitions noted above. Net sales in Titan's second largest market in
1994, consumer products at 34% of net sales, increased $116.4 million compared
to 1993, primarily due to the Dyneer acquisition. Earthmoving/construction
sales, Titan's third largest market in 1994 at 19% of net sales, increased $42.8
million over 1993, primarily due to the acquisitions noted above and growth in
existing markets. Excluding the effect of these acquisitions, 1994 net sales
increased by 10% compared to 1993.
Gross profit was $68.4 million, or 16.8% of net sales in 1994, compared to
$25.3 million, or 16.8% of net sales in 1993. The gross profit margin was
positively affected by strong growth in Titan's traditional markets and strong
margins from Titan Tire, but was adversely impacted by lower margins from Dyneer
and Nieman's in the consumer products market.
SG&A expenses were $28.3 million, or 7.0% of net sales in 1994, compared to
$10.7 million, or 7.1% of net sales in 1993. The dollar increase was principally
due to the acquisitions noted above as well as an increase in operations and
administrative personnel to improve systems and controls. The Company was
successful in reducing Dyneer's SG&A expenses from 9.7% in 1993 to the corporate
average in 1994 as part of Titan's corporate restructuring.
Interest expense for 1994 was $8.5 million or 2.1% of net sales, which
compares to $3.2 million and 2.2% of net sales in 1993. The increased interest
expense was primarily due to an increase of $79.0 million in the average debt
outstanding in 1994 compared to 1993, but was partially offset by lower average
borrowing rates in 1994. The issuance of $103.5 million of 4 3/4% Notes in
November 1993 increased the average debt outstanding by $88 million, but lowered
the average interest rate for 1994 since the net proceeds were used to repay
higher interest debt. Also positively affecting the rate was the $100.0 million
credit facility that provided borrowing rates approximately one and one-half
percentage points lower than the previous Titan and Dyneer credit facilities,
which were repaid in July 1994.
22
<PAGE> 24
Deferred financing costs have historically been amortized by Titan through
SG&A expenses. Beginning in 1994, the Company implemented a policy of amortizing
these costs to interest expense as a cost of borrowing. Amortization of deferred
financing costs in 1993 included in SG&A expenses totalled $263,000.
Amortization of deferred financing costs included in interest expense in 1994
was $983,000.
Net income for the year ended December 31, 1993 and the year ended December
31, 1994 was $6.4 million and $18.5 million, respectively. The increase was
primarily due to the 171% increase in sales noted above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied primarily on internally generated cash
flow, bank debt, the issuance of shares of Common Stock and the incurrence of
debt by its subsidiaries in order to fund working capital requirements, capital
expenditures, debt service, stockholder dividends and acquisitions.
On February 25, 1997, the Company commenced the Offer to Purchase up to 5
million shares of its Common Stock at a price not greater than $15.00 nor less
than $12.50 per share, for a maximum aggregate purchase price (if all 5 million
shares are purchased) of $75 million. See "Prospectus Summary--Recent
Developments--Offer to Purchase." The Company would fund such repurchase with
cash on hand and amounts available under the $200.0 million Bank Credit Facility
entered into by the Company in September 1996 (as amended).
The Bank Credit Facility, which expires on March 14, 2002, provides for
borrowings by the Company of up to $200.0 million on an unsecured, revolving
basis, either in U.S. dollars or in various European currencies, at various
interest rate options. The Bank Credit Facility also provides for standby
letters of credit. The Company and each of its U.S. subsidiaries other than
Nieman's have unconditionally guaranteed all outstanding obligations under the
Bank Credit Facility. The Bank Credit Facility contains customary financial and
other covenants and customary events of default. The Company believes that it is
currently in compliance with all terms of its outstanding indebtedness,
including all terms under the Bank Credit Facility. The Company intends to use a
portion of the proceeds of this Offering to prepay approximately $100.0 million
currently outstanding under the Bank Credit Facility. If the Offer to Purchase
is consummated, all of the proceeds of this offering will be used to repay a
portion of the amounts then outstanding under the Bank Credit Facility. See
"Description of Certain Indebtedness -- Bank Credit Facility."
In addition to the Bank Credit Facility, the Company will also issue $150.0
million of the Notes. The Notes will be subordinated to the indebtedness under
the Bank Credit Facility and to any and all other Senior Indebtedness of the
Company. The Indenture governing the Notes will impose certain restrictions on
the Company and its subsidiaries, including restrictions on the ability to incur
indebtedness, pay dividends, make investments, grant liens and engage in certain
other activities. The Notes may be required to be purchased by the Company upon
a Change of Control (as defined) and in certain circumstances with the proceeds
of asset sales. See "Description of the Notes." Upon issuance of the Notes, the
Company's interest expense will increase compared to prior years.
Net cash used for investing activities decreased from $53.7 million in 1994
to $37.3 million in 1995, primarily due to a decrease in the cost of
acquisitions (net of cash received), partially offset by an increase in capital
expenditures. Although the Company spent a total of $17.1 million on
acquisitions and $20.2 million on capital expenditures in 1995, it still
maintained a current ratio of 2.3 to 1 in 1995 compared to a current ratio of
2.7 to 1 in 1994.
Capital expenditures by the Company have increased from 1994 levels.
Capital expenditures for property, plant and equipment totaled $20.2 million in
1995 compared to $15.2 million in 1994. The Company is continuing its program of
capital expansion to modernize and improve production efficiencies. The increase
in 1995 was primarily due to an investment by the Company of an additional $5
million for its Greenwood, South Carolina facility. The Company expects total
capital expenditures in 1996 will approximate $30.0 million, of
23
<PAGE> 25
which $19.1 million was expended through September 30, 1996. The Company
believes its capital expenditures for 1997 will be approximately $60.0 million,
principally due to the construction of the new tire facility in Brownsville,
Texas.
Net cash provided by financing activities decreased from $43.5 million in
1994 to $6.8 million in 1995. In 1994, Titan Tire acquired certain PATC assets
by paying $5 million cash, issuing $10 million of warrants to purchase 2,250,000
shares of the Company's Common Stock at an exercise price of $24.44 per share,
issuing $7.5 million of the Company's Series A Convertible Preferred Stock
convertible into 281,250 shares of Common Stock and issuing a subordinated note
for approximately $19.7 million with a 7% fixed interest rate maturing February
2000. The warrants and preferred stock were repurchased in June 1995 by the
Company for $10 million and $7.5 million, respectively. Also in 1994 the Company
paid $9.5 million for a 50% interest in the SIRMAC Group, made additional
advances to the SIRMAC Group of $9.5 million, and acquired Nieman's for $1.2
million and payment of $5.3 million of Nieman's debt.
The Company received $64.9 million from the issuance of 4,312,500 shares of
Common Stock in June 1995, before related offering costs of $300,000. The
proceeds were used to reduce revolving debt and repurchase $17.5 million of the
preferred stock and stock warrants issued to PATC in the acquisition of Titan
Tire (as discussed above).
The Company received $58.1 million in proceeds from long-term debt incurred
in 1995, including $37 million under its credit facility, $9.5 million from an
Industrial Revenue Bond issued for the Greenwood facility and Steel Wheels' $8
million term loan from the Royal Bank of Scotland. The Company repaid debt
totaling $97.5 million, which includes the repayment of the $74.5 million
revolving credit balance.
At December 31, 1995, the Company had cash and cash equivalents of $14.2
million, an increase of $7.0 million as compared to the prior year, as increases
in net income and depreciation and decreases in accounts receivable and
inventory more than offset decreases in the accounts payable and other current
liabilities resulting in cash from operations of approximately $37.5 million.
Depreciation and amortization expenses were $21.9 million and $1.5 million,
respectively, in 1995 compared to $15.4 million and $2.0 million in 1994.
Net cash provided by operating activities during the nine months ended
September 30, 1996 increased to $46.8 million from $23.5 million in the nine
months ended September 30, 1995. The increase was primarily due to increased net
income before depreciation and amortization, decreases in accounts receivable
and increases in other current liabilities. These amounts were partially offset
by increases in inventory and decreases in accounts payable. Net income was also
adjusted by the gain on sale of assets and the realignment costs to arrive at
cash flows of a recurring nature.
Net cash provided by financing activities during the nine months ended
September 30, 1996 increased to $21.7 million from $12.7 million in the nine
months ended September 30, 1995. In May 1996 the Board of Directors of the
Company authorized the repurchase of up to 5 million shares of the Company's
Common Stock in the open market, and during the nine months ended September 30,
1996 the Company repurchased $5.1 million of the Common Stock pursuant to such
authorization. See Note H to the Company's Consolidated Condensed Financial
Statements.
The Company has historically paid quarterly dividends on its outstanding
shares of Common Stock. Dividend payments totaled approximately $0.4 million,
$1.0 million and $1.4 million during 1994, 1995 and 1996, respectively. The Bank
Credit Facility and the Indenture governing the Notes both generally permit the
Company to pay dividends, subject to certain limitations. The Company has funded
its payment of dividends through internally generated cash flow.
In 1993 the Company issued $103.5 million of its 4 3/4% Notes. In 1995 and
the first three quarters of 1996, $18.2 million of the Notes were converted into
shares of the Company's Common Stock. In the fourth quarter of 1996, the Company
redeemed $28.7 million principal amount of the 4 3/4% Notes and the remaining
$56.6 million principal amount were converted into 4,530,240 shares of the
Company's Common Stock. The cash redemption required a one time charge of $1.3
million related to the redemption of the 4 3/4% Notes. The Company funded the
redemption of a portion of the 4 3/4% Notes through borrowings under the Bank
Credit Facility.
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<PAGE> 26
Other than in connection with certain foreign acquisitions and other
limited circumstances, the Company generally does not engage in derivatives
activity or purchase interest rate or currency hedge agreements.
The Company is subject to various federal, state, local and foreign
environmental laws and regulations in the jurisdictions in which it operates.
The Company does not currently anticipate any material adverse effect on its
operations or financial condition as a result of its efforts to comply with, or
its liabilities under, environmental laws. The Company does not currently
anticipate any material capital expenditures for environmental control
facilities. Some risk of environmental liability is inherent in the Company's
business, including with respect to Company facilities that have been used for
industrial purposes for a period of decades, and there can be no assurance that
material environmental costs will not arise in the future. In particular, the
Company might incur capital, remediation and other costs to comply with
increasingly stringent environmental laws and enforcement policies. Although it
is difficult to predict future environmental costs, the Company does not
anticipate any material adverse effect on its operations, financial condition or
competitive position as a result of future costs of environmental compliance.
The Company expects to continue to have significant liquidity requirements.
In addition to working capital needs and capital expenditures, the Company will
have increased cash requirements for debt service. The Company expects that cash
on hand (including the anticipated proceeds of the Notes offered hereunder),
anticipated internal cash flows and utilization of available borrowing under the
Bank Credit Facility will provide sufficient liquidity for working capital
needs, debt service (including payment of interest on the Notes), capital
expenditures and acquisitions for the foreseeable future. As the Company's debt
(including debt under the Bank Credit Facility and the Notes) matures, the
Company may need to refinance such debt. There can be no assurance that such
debt will be refinanced on terms acceptable to the Company.
NEW ACCOUNTING STANDARDS
In 1996 the Company adopted the following new accounting standards:
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," effective for Titan for the year ending
December 31, 1996, establishes standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to those assets to
be held and used and those to be disposed of. SFAS 121 did not have a material
impact on Titan's financial condition or results of operations.
SFAS 123, "Accounting for Stock-based Compensation," which defines the fair
value based method of accounting for stock option, purchase and awards plans.
SFAS 123 allows companies to use the fair value method defined in the Statement
or to continue use of the intrinsic value method as outlined in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25). The Company adopted the disclosure provisions of SFAS 123; therefore, the
Statement did not have an impact on the Company's financial position or results
of operations.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements, including statements
regarding, among other items, (i) anticipated trends in the Company's
businesses, (ii) future expenditures for capital projects, (iii) the Company's
ability to continue to control costs and maintain quality, (iv) the Company's
business strategies, including its intention to introduce new products and (v)
the Company's intention to consider and pursue acquisitions. These
forwardlooking statements are based largely 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 the factors described in "Risk
Factors" including, among others, (i) changes in the Company's end-user markets
as a result of economic or regulatory influences or (ii) changes in the
competitive marketplace, including new products and pricing changes by the
Company's competitors. 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 Prospectus will in fact transpire.
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<PAGE> 27
BUSINESS
GENERAL
Titan is a leading global manufacturer of steel wheels and tires for
off-highway vehicles used in the agricultural, consumer products (including
recreational trailers, ATVs and grounds care vehicles), earthmoving/construction
and military markets. The Company generally manufactures both the wheels and
tires for these vehicles and increasingly provides the value-added service of
assembling the completed system. The Company offers a broad range of over 25,000
different products that are manufactured in relatively short production runs and
must meet OEM specifications. The Company believes, based upon current industry
revenue data, that it is the largest agricultural wheel producer and the third
largest agricultural tire manufacturer in North America. Agricultural sales in
the aggregate accounted for approximately 44% and 47% of the Company's net sales
for the year ended December 31, 1995 and the latest twelve months ended
September 30, 1996, respectively. The Company's net sales for the year ended
December 31, 1995 and the latest twelve months ended September 30, 1996 were
approximately $623.2 million and $648.3 million respectively. The Company's
EBITDA for the year ended December 31, 1995 and for the latest twelve months
ended September 30, 1996 were $98.8 million and $103.7 million, respectively.
BUSINESS HISTORY
In early 1983, Firestone Tire & Rubber Co. closed its Electric Wheel
Company subsidiary, located in Quincy, Illinois, which had been engaged in the
manufacture of steel wheel and rim products, primarily in the agricultural and
construction industries, since the 1890's. In March 1983, the assets of the then
closed Electric Wheel Company were acquired by the Company (then a newly formed
entity known as Can-Am Industries Incorporated) under the direction of Maurice
M. Taylor, the Company's current President and Chief Executive Officer.
Operations re-commenced in Quincy, Illinois two months later.
In 1986, when Goodyear Tire & Rubber Co. decided to exit its agricultural
steel wheel and rim business, Titan Proform, Ltd. ("Titan Proform") purchased
and installed the Goodyear rim line at its Toronto, Ontario facility and the
Company purchased and installed the Goodyear equipment to manufacture "power
adjust" wheels at its Quincy, Illinois facility. In 1988, the Company purchased
certain assets of the French & Hecht agricultural steel wheel and rim business
and commenced operations at the facility located in Walcott, Iowa. In 1990,
Titan was acquired in a management-led buyout by investors including Mr. Taylor
and MascoTech, Inc. Immediately thereafter, Titan purchased certain assets of
Titan Proform.
The Company completed the initial public offering of its Common Stock in
1993. Since 1993, through a series of nine strategic acquisitions, the Company
has broadened its basic steel wheel manufacturing business into tire
manufacturing and tire and wheel assemblies and has expanded geographically into
Europe. The following is a summary of these acquisitions:
<TABLE>
<CAPTION>
DATE OF ACQUISITION NAME AND PRINCIPAL BUSINESS OF ACQUIRED COMPANY
------------------- -----------------------------------------------
<S> <C>
February, 1993....................... Automotive Wheels, Inc., a manufacturer of steel and
aluminum rims which are sold to manufacturers of specialty
wheels for the automobile and light truck after-market and
wheels for sale to OEMs in the North American automobile
industry.
November, 1993....................... Dyneer Corporation, a manufacturer of wheels and tires for
lawn and garden equipment, recreational and industrial
trailers, ATVs, and farm and industrial equipment.
November, 1993....................... TD Wheels of Virginia, Inc., a manufacturer of construction
and mining equipment wheels.
January, 1994........................ Nieman's Limited, a national distributor of tires, wheels
and axle assemblies and component parts to recreational and
industrial trailer OEMs.
</TABLE>
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<PAGE> 28
<TABLE>
<CAPTION>
DATE OF ACQUISITION NAME AND PRINCIPAL BUSINESS OF ACQUIRED COMPANY
------------------- -----------------------------------------------
<S> <C>
July, 1994........................... Titan Tire, a manufacturer of tires for agricultural and
light truck vehicles, enabled the Company to offer tires and
to provide the value-added service of wheel and tire
assemblies.
November, 1994....................... 50% of SIRMAC Officine Meccaniche SpA ("SIRMAC") and Siria
Officine Meccaniche SpA ("Siria" and, together with SIRMAC,
the "SIRMAC Group") which are major European manufacturers
of steel wheels for the off-highway wheel markets and other
specialty products.
February, 1995....................... Steel Wheels, a Kidderminster, England manufacturer of steel
wheels principally for the earthmoving/construction market.
December, 1995....................... Grasdorf Titan GmbH ("Titan GmbH"), a German manufacturer of
steel wheels and rims for the earthmoving and agricultural
equipment markets.
July, 1996........................... Remaining 50% of the SIRMAC Group.
December, 1996....................... Titan France, a French manufacturer of wheels and rims for
the French and European off-highway wheel markets.
</TABLE>
In the second and third quarters of 1996, respectively, Titan sold the
assets of its subsidiary, Automation International, Inc. ("Automation"), and of
its Tractech division. These divestitures were made pursuant to Titan's strategy
to shed non-core businesses and concentrate its resources on tire and wheel
manufacturing for off-highway markets. Automation produced automated welding
equipment and had net sales in 1995 of $6.1 million; Tractech manufactured
mechanical differentials, clutches and brakes and had net sales in 1995 of $26.4
million.
Titan is currently constructing a new off-highway tire plant in
Brownsville, Texas, which will be the first new agricultural tire plant
constructed in the United States since the early 1960's. The plant, which will
significantly increase the Company's production capacity, should be operational
in late 1997 or early 1998.
COMPETITIVE STRENGTHS
Strong Market Position. The Company has achieved strong positions in both
the domestic and European markets for each of its major product categories.
Titan's ability to offer a broad range of different products has increased the
Company's visibility both in the United States and in Europe and has enhanced
the Company's ability to cross-sell its products and consolidate its market
positions. Innovative marketing programs have strengthened Titan's market image,
and the Company's widening distribution network is reaching increasing numbers
of customers in the after-market. Years of product design and engineering
experience have enabled the Company to improve existing products and develop new
ones that have been well received in the marketplace. In addition, Titan
believes that it has benefitted from significant barriers to entry, such as the
substantial investment necessary to replicate Titan's manufacturing equipment
and numerous tools and dies.
Cost-Effective Manufacturing Facilities. The Company believes it enjoys low
costs of production relative to the industry as a whole due to its workforce and
production facilities. Titan's employees receive continuing training to sharpen
their efficiency and flexibility and the Company's comprehensive maintenance
program enables it to utilize its production capabilities to maximum advantage.
Completion of Titan's new tire manufacturing facility in Brownsville, Texas will
enhance the Company's ability to shift production loads and will provide greater
flexibility in meeting output schedules to meet customer demands.
Geographic Diversity/Global Presence. The Company has established a strong
presence in North America and Europe, with manufacturing facilities in the
United States, the United Kingdom, France, Germany and Italy. International
sales for the year ended December 31, 1995 and the nine months ended September
30, 1996 accounted for 16% and 22%, respectively, of the Company's aggregate net
sales for these periods. The Company's European facilities are located in the
four countries that in the aggregate account for a significant majority of the
European market for off-highway wheels and tires. Titan believes that there will
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<PAGE> 29
be opportunities to expand sales of its agricultural wheel and tire products to
European OEMs and to Titan's existing North American OEM customers for export to
Europe and for their European operations.
Proven Track Record of Integrating Acquired Assets. The Company maintains a
highly disciplined approach in evaluating prospective acquisitions, focusing on
opportunities to improve and complement existing products, establishing a
broader market presence and consolidating its engineering, manufacturing and
market activities, while striving to acquire assets which have been
inefficiently utilized or ineffectively managed. By integrating acquired assets
with the Company's existing operations, reducing costs of operation and
achieving economies of scale, the Company has rapidly improved earnings and cash
flows of the majority of its acquired companies. Generally, the Company's
acquisitions have allowed it to: (i) expand its market and geographic reach;
(ii) enter the market for assembled wheels and tires, a market in which margins
are greater than markets for wheels and rims alone; (iii) substantially increase
its penetration of the after-market for wheels and tires (which market for tires
is larger and less cyclical than the OEM market); (iv) improve significantly the
operating efficiencies of its acquired assets and its manufacturing facilities;
and (v) improve its ability to service its customers' needs on a timely basis.
BUSINESS STRATEGY
Titan's business strategy is to increase its penetration of the
after-market for tires and wheels, increase its penetration of European and
possibly other global markets, focus on possible additional strategic
acquisitions, continue to improve its operating efficiencies and continue its
emphasis on new product development.
Increase After-Market Tire and Wheel Business. Titan has concentrated on
increasing its penetration of the tire and wheel after-markets. These
after-markets offer higher profit margins and the tire after-market is larger
and somewhat less cyclical than the OEM market. The Company estimates that sales
in the tire and wheel after-markets represented approximately 14% and 8%,
respectively, of the Company's net sales for the first nine months of 1996.
Titan intends to continue to devote its resources to future growth in the tire
and wheel after-markets.
Expand European Markets. Titan currently manufactures wheels for sale to
European OEMs in the agricultural and the earthmoving/construction off-highway
markets. The Company has established a significant presence in Europe, including
the following four markets: the United Kingdom, France, Germany and Italy. A
primary motivation for the Company's entry into European markets is its desire
to serve the worldwide needs of its major United States OEM customers, many of
which have substantial business in Europe. Additionally, the Company believes
that, due to the removal of trade barriers in the European Union and political
changes in Eastern Europe, the average size of farms in Europe is likely to
increase and, as a result, the average size of farm vehicles used in Europe will
increase. Because larger farm vehicles utilize larger and a greater number of
wheels and tires similar to those produced in the United States, Titan believes
that there will be opportunities to expand sales of its agricultural wheel and
tire products to European OEMs and to Titan's existing North American OEM
customers for export to Europe and for their European operations.
Explore Additional Strategic Acquisitions. Titan believes that its
expertise in the manufacture of steel wheels has permitted it to take advantage
of opportunities to acquire businesses in the United States and Europe that
complement this product line, including companies engaged in the tire market and
ultimately companies with wheel and tire assembly capabilities. The broadening
of Titan's business may permit it to make additional strategic acquisitions in
the future. Although the Company continuously reviews opportunities and has
discussions with various parties, it has no acquisition agreements at the
present time.
Improve Operating Efficiencies. The Company continually works to improve
the operating efficiency of its acquired assets and its manufacturing
facilities. With each acquisition, Titan integrates each facility's strengths,
often transferring equipment and business to the facilities that are best
equipped to handle the work. This provides capacity to increase utilization and
spread operating costs over a greater volume of products. Titan is also
continuing a comprehensive program to refurbish, modernize and computerize its
equipment. Titan has also centralized and streamlined its inventory controls,
instituting a "just-in-time" system of providing raw materials to its
manufacturing units. These efforts have led to improved management of order
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<PAGE> 30
backlog and have substantially improved the Company's ability to respond to
customer orders on a timely basis. The Company is continually evaluating
opportunities to improve its operating efficiency. The Company is ISO 9000
certified at two of its wheel manufacturing facilities, evidencing its
conformance to internationally recognized standards of management and quality
assurance.
Improve Design Capacity and Increase New Product Development. Equipment
manufacturers constantly face changing industry dynamics. Titan directs its
business and marketing strategy to understanding all of its markets, addressing
the needs of its customers and demonstrating the advantages of its products. In
particular, the Company often participates with its customers in the design of
new and upgraded products. Titan will from time to time recommend modified
products to its customers based on Titan's own market information and research
and development. The Company's engineering and research and development staffs
test new designs and technologies, developing new methods of manufacturing to
improve product quality and performance. These value-added services enhance the
Company's relationship with its customers. The Company has spent in excess of $2
million annually on research and development for the fiscal years ending
December 31, 1994, 1995 and 1996, and has introduced more than 2,000 new
products in those years. The Company believes that its performance orientation
provides Titan with a competitive advantage in the global marketplace.
PRODUCTS AND MARKETS
The Company's product line includes a wide range of steel wheels and rims
and agricultural, industrial and specialty tires. The Company's sales are
divided into five major markets: Agricultural Equipment, Consumer Products,
Earthmoving/Construction, Engineered Products and Military Products. The
following table sets forth, for the periods indicated, the approximate relative
contribution to Titan's net sales of the products indicated below. The majority
of the Company's Engineered Products divisions were divested in 1996.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ---------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Agricultural......................................... 50% 38% 44% 44% 47%
Consumer............................................. 16 34 27 29 25
Earthmoving/Construction............................. 22 19 22 21 23
Engineered Products.................................. 4 6 6 5 4
Military............................................. 8 3 1 1 1
--- --- --- --- ---
Total.............................................. 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
AGRICULTURAL MARKET
Titan sells agricultural wheels, rims and tires to OEMs and to after-market
distributors. These wheels, rims and tires are manufactured by Titan for
installation on various agricultural and forestry equipment, such as tractors,
combines, skidders, plows, planters and irrigation equipment. The wheels and
rims range in diameter from 4" to 54," with the 54" diameter being the largest
agricultural wheel manufactured in North America. Basic configurations are
combined with other features (such as different centers and a wide range of
material thicknesses) allowing the Company to offer the broadest line of
different product models to meet customer specifications. The agricultural tires
range in diameter from 8" to 46" and in width from 4.80" to 30.5." The Company
offers the added value of a wheel and tire assembly to many of its customers.
The after-market tires are currently marketed through a network of more than
1,500 independent distributors and twelve of its own distribution centers. The
Company is building a tire manufacturing plant in Brownsville, Texas to meet the
growing demand of the agricultural tire after-market.
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<PAGE> 31
CONSUMER MARKET
Titan's consumer products division manufactures a variety of products. The
Company held a significant share of the boat/marine trailer market in the United
States in 1995 and the first nine months of 1996, supplying wheel and tire
assemblies, brakes and actuators. Titan also supplied a substantial share of the
wheel and tire assemblies for the utility and camping trailer markets in the
United States in 1995 and the first nine months of 1996. The Company anticipates
future growth in these markets with the focus on value-added wheel and tire
assemblies. Additionally, the Company believes it will increase its market share
through the introduction of new products in 1997.
Other markets served by Titan within the consumer products division include
the trailer and lawn and garden markets. In addition, the Company currently
produces specialty automotive wheels and light truck tires. In 1996, Titan
introduced its new line of rolled rims to complement its existing wheel and tire
products for the lawn and garden and ATV markets. Titan will produce a new line
of smaller diameter rolled rims for the lawn and garden market at its new wheel
making facility in Greenwood, South Carolina.
EARTHMOVING/CONSTRUCTION MARKET
Titan manufactures wheels and rims for various types of earthmoving, mining
and construction equipment, including cranes, graders and levelers, scrapers,
self-propelled shovel loaders, load transporters and haul trucks and back-hoe
loaders. These wheels and rims range in diameter from 20" to 57" (with the 57"
diameter being the largest earthmoving/construction wheel manufactured in North
America), in width from 8" to 44", and in weight from 125 lbs. to 6,300 lbs. The
Company currently produces a limited range of tires for the
earthmoving/construction market. The Company believes that it provides its
customers with the broadest range of earthmoving/construction wheels and rims
available in the world, manufacturing a significant variety of wheels, rims and
components for earthmoving/construction applications. The majority of the
earthmoving/construction products produced by Titan are sold directly to OEMs.
The earthmoving/construction tire market is an area of expansion in which the
Company can offer the added value of a wheel and tire assembly.
ENGINEERED PRODUCTS MARKET
Assets of Automation and the Tractech division, which represented a
majority of the Company's engineered products sales, were divested in 1996 in a
continuing effort to focus on the Company's core business. The Company still
maintains some operations in the engineered products area.
MILITARY PRODUCTS MARKET
The Company manufactures various wheels and rims for the U.S. Government,
principally for certain military vehicles (such as trucks, tanks and personnel
carriers). This business is cyclical, depending largely on defense spending,
which has been cut drastically in the last few years. The current political
climate, encouraging downsizing of government spending, has caused a marked
reduction in purchasing requirements for spare parts as well as a reduction of
new programs. While the Company believes that this trend will affect Titan's
wheel sales in the military market for 1997 and beyond, the military tire market
provides modest growth opportunities in which the Company has and will continue
to offer the added value of a wheel and tire assembly.
CUSTOMERS
Titan's major OEM customers include Deere, Case, New Holland and CAT in the
agricultural and off-highway construction markets and Deere, Bayliner and
Polaris in the consumer products market. In 1995, Titan sold its products to
over 8,000 customers compared to 900 customers in 1992. Titan's ten largest
customers accounted for approximately 42% of net sales for each of the year
ended December 31, 1995 and the nine months ended September 30, 1996. For the
nine months ended September 30, 1996, Deere accounted for approximately 13% of
the Company's net sales compared to 12% for the year ended December 31, 1995.
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<PAGE> 32
No other customer represented more than 10% of the Company's net sales during
1995 or the nine months ended September 30, 1996.
The Company has supply arrangements with Deere, New Holland,
Komatsu-Dresser Co. and others. Sales pursuant to these arrangements aggregated
approximately 36%, 14% and 16% of Titan's net sales for the years ended December
31, 1993, 1994 and 1995, respectively. This trend reflects the Company's
significant increase in customer base and a broadening of the Company's markets.
The Company's supply arrangements generally provide for an adjustment in the
sale price of Titan's products based upon changes of a specified amount in the
cost of materials, provide for a sharing between Titan and the customer of any
cost reductions resulting from design or manufacturing changes and are subject
to termination provisions. The Company does not believe that these provisions in
its supply arrangements with its OEM customers or its other arrangements with
its OEM customers have had or will have a material effect on its profitability.
With the exception of certain tire arrangements, no arrangements provide for a
minimum or maximum volume requirement, except that, subject to the preceding
sentence, to the extent a product is specified and manufactured by Titan
pursuant to its arrangement with the customer, the customer is generally
obligated to purchase all of its requirements for such product from the Company.
MARKETING & DISTRIBUTION
Titan has an internal sales force comprised of approximately 25 employees,
and also utilizes several manufacturing representative firms for sales to OEMs
in the United States. European sales and marketing is led by a director with
Company sales representatives located in the countries in which Titan conducts
business. Titan believes European sales efforts are enhanced when sales
representatives sell primarily within their native countries. The sales force
includes employees in the United Kingdom, France, Germany and Italy.
Titan distributes wheels and tires directly to OEMs. In the after-market,
Titan distributes wheels and tires through its own distribution centers and
distributes tires primarily through a network of more than 1,500 independent
distributors. Titan's distribution network consists of twelve facilities which
are strategically located throughout North America and Europe. Sales made
directly to OEMs represent approximately 60% of total sales, with the balance
made to after-market distributors for sale to end-users. The majority of after-
market sales are made through its independent tire distribution network. The
Company seeks to maintain a sufficient level of work-in-progress inventory to
insure its ability to respond to customer needs in a timely manner.
OPERATIONS
Wheel Manufacturing Process. Most agricultural steel wheels are produced
using a rim and a wheel center. A rim is produced by first cutting large steel
sheets to required width and length specifications. These steel sheets are
rolled and welded to form a circular rim, which is flared and formed in the
rollform operation. The majority of wheel centers are manufactured using presses
that both blank and form the center to specifications in multiple stage
operations. The Company has the capability in each facility to paint the wheel
using an electrostatic process prior to application of the final top coating.
Earthmover/construction steel wheels are manufactured principally from hot
rolled steel sections. This process is used because the high load bearing
capacity of these wheels requires rim thicknesses which are beyond the
capability of cold-rolling. Rims are built up from a series of hoops which are
welded together to form a rim base. The complete rim is made from either three
or five separate parts which then lock together after the rubber tire has been
fitted to the wheel and inflated.
Smaller wheels (usually 12" or less in diameter), of which the majority are
manufactured for consumer markets, are manufactured by a process in which
half-wheels are press-formed, then two of these half-wheel stampings are welded
together to form a complete wheel. The wheel assembly is then painted, generally
on automated electrostatic painting equipment. Generally, for larger wheels (12"
or more in diameter) manufactured for consumer markets, the Company manufactures
rims and centers, welds the rims to the centers and paints the assembled
product.
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<PAGE> 33
Due to the wide variation of applications of the Company's products,
engineering requirements often specify wheels having as many as five separate
components. Titan manufactures each of the components specified and then
assembles them into a finished product.
Tire Manufacturing Process. Tires are produced by mixing rubber and other
raw materials and chemicals to form a rubber compound. The compound is extruded
into tread and sidewall stock, mixed with wire strands to make the bead and
mixed with steel or fabric to produce the ply. Next, the tread, sidewall, bead
and plies are assembled into a green tire (uncured). Then the green tire is put
into a press which molds the tire under temperature and pressure into a finished
cured tire.
Quality Control. During the entire production process, inspections are
performed continuously by production employees to ensure high product quality.
The Company has quality control testing capabilities, such as radial fatigue
testing, metallurgical analysis, physical property analysis, salt spray testing
and other related testing. Titan's manufacturing employees are trained in
Statistical Process Control, the periodic testing of products.
Engineering/Research & Development. Supported by computer-aided design
(CAD), computer-aided manufacturing (CAM) and finite element techniques, Titan's
engineering and research and development staff continually investigates and
tests new designs and technologies, and develops new methods of manufacturing to
improve product quality and performance. To ensure the durability and longevity
of wheel products, the Company performs radial fatigue tests that put prototypes
through a minimum of 1 million cycles at 1.6 times the rated load before they
reach the manufacturing stage.
The Company's research and development activities have resulted in new
product innovations for the wheel industry. In 1996, Titan introduced a number
of new products that expanded its product mix, including the AERO 6000(TM)
actuator, the Titan ST line of trailer wheels and tires, new lines of ATV wheels
and tires and the Powerdyne braking system.
Titan has also initiated the development and production of new tire lines,
including Skidmaster, HD2000 and Supertrac II, used on skid steer vehicles and
lawn and garden tractors, respectively. These products offer customers improved
wear, endurance, traction and reduced turf damage and have been well received in
the marketplace.
Materials. The primary raw materials used by the Company are steel and
rubber. Due to demand/capacity issues in the steel industry, steel procurement
planning and execution are paramount. To ensure a consistent steel supply, Titan
purchases basic steel from key steel mills and maintains relationships with
steel processors for steel preparation. The Company is not dependent on any
single steel producer for its supply of steel. As is customary in the industry,
the Company does not have long-term contracts for the purchase of steel and,
therefore, its purchases are subject to fluctuation in the price of steel.
Rubber and raw materials for tire manufacture are the Company's second largest
commodity expense. The Company buys rubber on the spot markets, where there are
numerous sources of supply. As the Company continues to grow, additional
commodities/services are being contracted to secure better pricing on purchased
items. Commodities or services that are significant include freight,
paints/coatings, welding materials, fasteners, systems software and hardware,
material handling equipment, tooling and manufacturing equipment. In addition to
the development of key suppliers domestically, the Company's strategic
procurement plan includes international sourcing to assure competitive price and
quality in the global marketplace.
Backlog/Firm Orders. As of December 31, 1996, Titan estimates that it had
$205.6 million in firm orders compared to $171.8 million at December 31, 1995.
Orders are considered firm if the customer would be obligated to accept products
covered thereby if manufactured and delivered pursuant to the terms of such
orders. Firm order backlog has increased due to recent acquisitions and growth
in existing operations. The Company believes that the majority of its current
backlog orders will be filled during the current fiscal year.
COMPETITION
The Company's wheel and tire businesses compete with several international
and domestic competitors, some of whom are larger and have greater financial
resources than Titan.
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In the wheel business, the Company competes primarily on the basis of
price, quality, customer service, design capability and delivery time. The
Company believes that it is the primary source of steel wheels and rims to the
majority of its North American customers in the agricultural and
earthmoving/construction markets. In North America, Titan's major competitors in
the agricultural wheel market include GKN Wheels, Ltd. ("GKN"), Armstrong Rim
and Wheel Co., and US Rim, while its major competitors in the
earthmoving/construction wheel market are GKN and Topy Industry, Ltd.
In the tire business, Titan competes primarily on the basis of price,
quality, customer service, and the added value of wheel and tire assembly
distribution. Main competitors include Goodyear Tire & Rubber Co.,
Bridgestone-Firestone, Carlisle Companies, Inc. ("Carlisle") and Chen Shin
Rubber Industries, Inc. ("Chen Shin"). The agricultural smaller diameter tire
market has become more competitive over the last few years with more foreign
competitors moving into the North American market.
While the consumer products market for both wheels and tires is price
sensitive, this sensitivity is offset by the demand for quality products. The
Company continues to increase its product base in the consumer products market
which has increased the competitiveness of its products. The top wheel
competitors in the consumer products market include Carlisle, Tredit Tire and
Wheel Company, Inc. and City Machine and Wheel Company, Inc. The top competitors
in the consumer products market for tires are Carlisle, Chen Shin and Duro. The
consumer small diameter tire market in North America is highly competitive due
to numerous foreign competitors.
EMPLOYEES
At December 31, 1996, the Company employed approximately 4,100 people in
the United States and Europe. Approximately 31% of the Company's employees in
the United States are covered by three collective bargaining agreements which
expire before the year 2000. The majority of employees at Titan's foreign
facilities are represented by collective bargaining agreements.
From time to time participants in the wheel and tire industry, including
the Company, have experienced strikes and other labor disturbances. The Company
believes that all relations with its employees are good.
PATENTS AND TRADEMARKS
The Company owns numerous United States and foreign patents and trademarks
and continues to apply for patent protection for many of its new products. While
it considers that its patents are significant to the operations of its business,
Titan does not consider any one of them to be of such importance that its
expiration could materially affect its business.
ENVIRONMENTAL REGULATION
The Company is subject to various federal, state, local and foreign
environmental laws and regulations in the jurisdictions in which it operates.
The Company does not currently anticipate any material adverse effect on its
operations or financial condition as a result of its efforts to comply with, or
its liabilities under, environmental laws. The Company does not currently
anticipate any material capital expenditures for environmental control
facilities. Some risk of environmental liability is inherent in the Company's
business, including with respect to Company facilities which have been used for
industrial purposes for a period of decades, and there can be no assurance that
material environmental costs will not arise in the future. In particular, the
Company might incur capital, remediation and other costs to comply with
increasingly stringent environmental laws and enforcement policies. Although it
is difficult to predict future environmental costs, the Company does not
anticipate any material adverse effect on its operations, financial condition or
competitive position as a result of future costs of environmental compliance.
For a description of an environmental proceeding involving a subsidiary of the
Company, see "-- Legal Proceedings."
33
<PAGE> 35
PROPERTIES
The Company and its subsidiaries maintain 36 facilities located in the
United States, United Kingdom, Italy, France and Germany for manufacturing and
warehousing/distribution. The facilities in the aggregate contain over 7.3
million square feet, 5.5 million square feet of which are used for
manufacturing, 1.7 million square feet for warehousing and distribution and the
balance for administrative and sales offices. Nineteen of the facilities are
leased and 17 are owned. The Company believes that with the addition of its
Brownsville facility, its properties will be adequate to support its operations
for the foreseeable future.
LEGAL PROCEEDINGS
Dico, Inc. EPA Matters. Dico, Inc. ("Dico"), one of the Company's
subsidiaries, and five major oil and chemical companies were named as
potentially responsible parties in connection with contaminants found at one of
Dico's facilities (the "Site"). The contaminants were found in the groundwater
and certain buildings located on the Site. Dico has constructed a groundwater
extraction and treatment system to restore use of affected groundwater.
Of the total estimated costs to be incurred in connection with the clean up
of the Site, $4.8 million was paid in 1994, $0.6 million in 1995 and $0.7
million in 1996. Management believes that the remaining accrual of $5.5 million
at December 31, 1996 is adequate for remaining costs to be incurred related to
the environmental matter. Dico is attempting to recover its costs from certain
of its insurers and other potentially responsible parties.
PATC Matter. In December 1995, PATC commenced litigation against the
Company on contractual matters relating to the purchase of Titan Tire. The
Company, in December 1995, also commenced litigation against PATC on contractual
matters related to such acquisition. Titan believes that these actions will not
have a material adverse effect on the financial condition or results of
operations of the Company.
General. The Company is also a party to several routine legal proceedings
arising out of the ordinary course of its business. Titan believes that none of
these actions, individually or in the aggregate, will have a material adverse
affect on its financial condition or results of operations.
34
<PAGE> 36
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Maurice M. Taylor, Jr. ................... 52 President and Chief Executive Officer and a
Director
Michael R. Samide......................... 52 Vice President and Chief Operating Officer
Kent W. Hackamack......................... 38 Vice President of Finance and Treasurer
Cheri T. Holley........................... 49 Vice President, Secretary and General Counsel
Erwin H. Billig........................... 70 Chairman of the Board
Edward J. Campbell........................ 69 Director
Richard M. Cashin, Jr. ................... 44 Director
Albert J. Febbo........................... 58 Director
Anthony L. Soave.......................... 57 Director
</TABLE>
Maurice M. Taylor has been the President and 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. Prior thereto, Mr. Taylor had a
significant role in the development of the Company.
Michael R. Samide, age 52, joined the Company as Vice President and Chief
Operating Officer in November of 1993, following Titan's acquisition of Dyneer
Corporation in 1993. Mr. Samide served as the President and Chief Executive
Officer of Dico, Inc., a division of Dyneer. Prior to his work with Dico, he was
President and CEO of the New Hampshire Ball Bearing Corporation for a number of
years.
Kent W. Hackamack served as Corporate Controller of the Company from May
1994 to December 1996, was appointed Treasurer in November 1994 and Vice
President of Finance in December 1996. Prior to joining the Company, Mr.
Hackamack served from 1990 to 1994 as the International Audit Manager for Pool
Energy Services Co. of Houston, Texas, addressing foreign operations accounting
and auditing issues.
Cheri T. Holley joined the Company in March 1994 as General Counsel. In
November 1994 she was named Secretary of the Company and in December 1996 she
was appointed Vice President. Before joining the Company, she was in private
practice specializing in corporate and environmental law for a number of years.
Prior to entering private practice, Ms. Holley had fifteen years of management
experience.
Erwin H. Billig has been Vice Chairman of MascoTech (a manufacturer of
transportation, architectural and other industrial products) since October 1992,
and served as the President and Chief Operating Officer of MascoTech from 1986
to September 1992. Mr. Billig is also a director of MascoTech and of Etico Ltd.
Mr. Billig has been Chairman of the Board of the Company since 1992.
Edward J. Campbell, now retired, was employed for 27 years by Tenneco. He
spent 13 of those years as President of Newport News Shipbuilding Company and 14
years at JI Case, three of those (1992-94) as President. Mr. Campbell has been a
director of Global Marine, Inc. and Zurn Industries. Mr. Campbell has been a
director of the Company since February 1995.
Richard M. Cashin, Jr. is the President of Citicorp Venture Capital, Ltd.,
and has been employed by Citicorp Venture Capital since 1980. Mr. Cashin is also
a director of Levitz Furniture Co., the Hoover Group, Cable Systems
International, and Delco Remy America. Mr. Cashin has been a director of the
Company since 1994.
Albert J. Febbo is the Vice President of Corporate Marketing for the
General Electric Corporation where he has held executive positions since March
1987. Mr. Febbo has been a director of the Company since 1993.
35
<PAGE> 37
Anthony L. Soave is the President, Chief Executive Officer and founder of
Detroit based City Management Corporation, an integrated environmental service
company operating nationwide. Mr. Soave has been a director of the Company since
1994.
The Company's Bylaws provide for three classes of directors of
approximately equal numbers designated as Class 1, Class 2 and Class 3. Each
director is elected for a three year term and the term of each class expires in
a different year. Messrs. Taylor and Campbell are Class 1 directors (whose terms
expire in 1998), Messrs. Cashin and Febbo are Class 2 directors (whose terms
expire in 1999) and Messrs. Billig and Soave are Class 3 directors (whose terms
expire in 1997).
DIRECTORS' FEES
Titan pays its non-employee directors a fee of $500 for each Board or
committee meeting attended. Titan also reimburses out-of-pocket expenses related
to the directors' attendance at such meetings. In addition, in March 1994 the
Board 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 highly qualified independent directors for the Company. No more than
225,000 shares of the Company's Common Stock may be issued under the Director
Plan. Options granted under the Director Plan totaled 36,000 during 1995 and
45,000 during 1996. The options granted in 1995 and 1996 are exercisable at a
price of $11.11 and $16.00 per share, respectively, and expire 10 years from the
date of grant. Such options vest and become exercisable immediately. In
addition, Titan pays Mr. Billig, the Chairman of the Board, an annual fee of
$100,000 to carry out his responsibilities which include significant operational
matters, as well as corporate development matters. The Company does not have any
other consulting contracts or arrangements with any of its directors.
COMMITTEES
The Board of Directors has established the following committees of the
Board: (i) Audit and Oversight Committee (consisting of Messrs. Cashin, Febbo,
Soave and Campbell), (ii) Compensation Committee (consisting of Messrs. Billig,
Cashin, Febbo, Soave and Campbell) and (iii) Executive Committee (consisting of
Messrs. Billig, Cashin, Soave and Taylor). The Company does not have a standing
nominating committee. The Board of Directors selects nominees for election as
directors.
The Audit and Oversight Committee, which met three times in 1996,
recommends to the Board independent auditors to perform audit and non-audit
services, reviews the scope and results of such services, reviews with
management and the independent auditors any recommendations of the auditors
regarding changes and improvements in the Company's accounting procedures and
controls and management's response thereto, and reports to the Board after each
Audit and Oversight Committee meeting.
The Compensation Committee, which met twice in 1996, reviews and recommends
to the Board the salaries and all other forms of compensation of the Company's
officers.
36
<PAGE> 38
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation
received by the Company's Chief Executive Officer and other executive officers
whose aggregate annual salary and bonuses exceeded $100,000 during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
---------------
NAME AND PRINCIPAL ANNUAL COMPENSATION SECURITIES
POSITION AS OF ------------------- UNDERLYING ALL OTHER
DECEMBER 31, 1996 YEAR SALARY BONUS OPTIONS/SARS(#) COMPENSATION
------------------ ---- ------ ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Maurice M. Taylor, Jr. ............... 1996 $300,000 $300,000 37,500 $26,875(a)
President and Chief 1995 300,000 0 1,844(a)
Executive Officer(b) 1994 300,000 210,000 1,500(a)
Michael R. Samide..................... 1996 $225,000 $225,000 14,070 $29,956(a)(c)
Vice President and 1995 225,000 0 9,495(a)
Chief Operating Officer 1994 225,000 100,000 7,012(a)
Cheri T. Holley....................... 1996 $125,000 $ 25,000 3,130 $18,545(a)
Secretary and 1995 100,000 25,000 7,586(a)
General Counsel(b) 1994 70,833 21,250 425(a)
Kent W. Hackamack..................... 1996 $125,000 $ 25,000 3,130 $17,742(a)
Treasurer and Controller 1995 89,025 25,000 6,475(a)
1994 40,000 10,000 400(a)
</TABLE>
- -------------------------
(a) Includes one or more of the following: 401(k) matching contribution, car
allowance, life insurance, and vacation pay.
(b) The President and Secretary are brother and sister.
(c) Includes exercise of stock option.
OPTIONS GRANTED IN 1996:
The following table summarizes options granted during 1996, and the values
of options outstanding on December 31, 1996, for the executive officers named
above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES PERCENT OF TOTAL EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS/SARS OR BASE FOR OPTION TERM(B)
OPTIONS/SARS GRANTED TO PRICE EXP. -----------------------------
NAME GRANTED(A) EMPLOYEES $/SH DATE 5% 10%
---- ------------ ---------------- -------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Maurice M. Taylor,
Jr. ............... 37,500 32.7% $16.00 Jan., 2006 $ 412,356 $ 1,013,506
Michael R. Samide.... 14,070 12.3% $16.00 Jan., 2006 154,716 380,267
Cheri T. Holley...... 3,130 2.7% $16.00 Jan., 2006 34,418 84,594
Kent W. Hackamack.... 3,130 2.7% $16.00 Jan., 2006 34,418 84,594
------ ----- ------ ---------- ------------ --------------
All Shares
Outstanding(c)..... $716,127,269 $1,141,372,024
</TABLE>
- -------------------------
(a) All options were granted on January 30, 1996. Forty percent of the options
will become exercisable on December 31, 1997 and an additional 20% will
become exercisable on each of December 31, 1998, 1999 and 2000,
respectively.
(b) Potential realizable value is based on the assumption that the Common Stock
price appreciates at the annual rate shown (compounded annually) from the
date of grant until the end of the ten-year option term. The numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission. The actual value, if any, an executive may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised (if the executive were to sell the shares on the
date of exercise) and there is no assurance that the value realized will be
at or near the potential realizable value as calculated in this table.
(c) All shares outstanding represent the increase in total Company shareholder
value if the stock price and assumed rates used in the stock option
assumptions are achieved multiplied by the number of shares outstanding at
the end of fiscal 1996 (26,526,992).
37
<PAGE> 39
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE YEAR END(#) AT FISCAL YEAR END ($)
NAME EXERCISE(#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Maurice M. Taylor, Jr.......... 0 N/A 54,000/91,500 $88,560/88,560
Michael R. Samide.............. 6,300 $28,838 11,250/32,520 $18,450/30,258
Cheri T. Holley................ 0 N/A 1,280/ 5,050 $ 2,099/ 3,149
Kent W. Hackamack.............. 0 N/A 968/ 4,582 $ 1,588/ 2,381
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company is composed of Messrs. Billig,
Cashin, Febbo, Soave and Campbell.
City Environmental Contracting, a division of City Management Corporation,
had two contracts in 1994 with Titan's Dico subsidiary to provide remediation
services with respect to the removal, transportation and disposal of pesticide
and herbicide residuals and related services at Dico's facility in Des Moines,
Iowa. Work under the contracts was completed in 1994. The cost of service was
$2.5 million. Anthony L. Soave, a director of Titan, is the sole shareholder,
president, chief executive officer and a director of City Management
Corporation.
In 1996, the Company entered into a lease transaction with the General
Electric Capital Corporation ("GECC") in connection with certain equipment
valued at $1.9 million. Albert J. Febbo is a director of the Company and is Vice
President of Corporate Marketing of General Electric Corporation, an affiliate
of GECC.
On September 30, 1996, the Company sold the assets of Tractech to a joint
venture group and private investors, including Citicorp Venture Capital, Ltd.
During the nine months ended September 30, 1996, Tractech contributed net sales
of $18.4 million and net income of $0.8 million. Richard M. Cashin, Jr., a
director of the Company, is the President of Citicorp Venture Capital, Ltd.
RELATED PARTY TRANSACTIONS
The Company sells products to companies controlled by persons related to
the Chief Executive Officer of the Company. During 1994, 1995 and 1996, combined
sales to such companies approximated $3,355,000, $4,370,000 and $4,970,000,
respectively. At December 31, 1994, 1995 and 1996 Titan had approximately
$2,170,000, $1,998,000 and $2,396,000, respectively, of accounts receivable
outstanding from those sales. Commissions paid to companies controlled by
persons related to the Chief Executive Officer of the Company approximated
$470,000, $920,000 and $1,041,000 for 1994, 1995 and 1996, respectively. These
sales and commissions were made on terms no less favorable to Titan than terms
that would have been available for comparable sales and commissions from
unaffiliated third parties.
The Company is a party to a registration rights agreement with MascoTech,
Inc., a 5% shareholder of the Company. MascoTech has the right to demand on any
one occasion that the Company register all of its shares for resale.
The Company is also a party to a registration rights agreement with 399
Venture Partners, Inc., a 5% shareholder of the Company. 399 Venture Partners
has the right to demand on any one occasion that the Company register all of its
shares for resale. On June 14, 1994 the Company entered into a letter agreement
with 399 Venture Partners whereby the Company awarded 320,535 shares of Common
Stock in exchange for the termination of certain earnout rights which were
granted in 1993 to the former shareholders of Dyneer.
38
<PAGE> 40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of February 13, 1997 by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each director and nominee for director, (iii) each
of the named executive officers and (iv) all directors and executive officers as
a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER(A) PERCENT(B)
------------------------------------ --------- ----------
<S> <C> <C>
MascoTech, Inc.............................................. 3,315,852 13.0%
21001 Van Born Road
Taylor, Michigan 48180
399 Venture Partners, Inc.,................................. 2,031,112 8.0%
399 Park Avenue
New York, New York 10043
Maurice M. Taylor, Jr....................................... 1,888,178(c,d) 7.4%
2701 Spruce Street
Quincy, Illinois 62301
Mellon Bank Corporation..................................... 1,665,000(e) 6.5%
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
Erwin H. Billig............................................. 69,975(d) *
Anthony L. Soave............................................ 69,750(d) *
Richard M. Cashin, Jr....................................... 65,179(d) *
Albert J. Febbo............................................. 24,750(d) *
Edward J. Campbell.......................................... 11,250(d) *
Michael R. Samide........................................... 11,250(d) *
Cheri T. Holley............................................. 1,280(d) *
Kent W. Hackamack........................................... 968(d) *
All Executive Officers and Directors as a Group (9
persons).................................................. 2,142,580(d) 8.4%
</TABLE>
- -------------------------
* Less than one percent.
(a) Except for voting powers held jointly with a person's spouse, represents
sole voting and investment power unless otherwise indicated.
(b) As of February 20, 1997, 25,476,082 shares were outstanding. Common Stock
not outstanding which can be acquired through the exercise of options within
60 days by a shareholder named in the table is deemed outstanding for the
purpose of computing the percentage of outstanding Common Stock owned by
such shareholder, but is not deemed outstanding for the purpose of computing
the percentage of Common Stock owned by any other shareholder.
(c) Includes, 1,798,000 shares held jointly by Mr. Taylor and his wife as to
which they share voting and dispositive power. Also includes 36,178 shares
held by Mr. Taylor as to which he has sole voting and dispositive power.
(d) Includes shares subject to options exercisable within 60 days after February
24, 1997 as follows: Mr. Taylor, 54,000 shares; Mr. Billig, 24,750 shares;
Mr. Soave, 24,750 shares; Mr. Cashin, 24,750 shares; Mr. Febbo, 24,750
shares; Mr. Samide, 11,250 shares; Mr. Campbell, 9,000 shares; Ms. Holley,
1,280 shares; Mr. Hackamack, 968 shares; all officers and directors as a
group, 175,498 shares.
(e) Based on information contained in Schedule 13G of Mellon Bank dated January
28, 1997.
39
<PAGE> 41
DESCRIPTION OF CERTAIN INDEBTEDNESS
On September 30, 1996, the Company's total consolidated debt (including
current maturities), after giving effect to the offering of the Notes and the
application of net proceeds therefrom as described under "Use of Proceeds," the
redemption of the 4 3/4% Notes and repayment of certain other indebtedness with
borrowings under the Bank Credit Facility, was approximately $183.4 million. See
"Capitalization."
BANK CREDIT FACILITY
The summary of the Bank Credit Facility contained herein does not purport
to be complete and is qualified in its entirety by reference to the provisions
of the Bank Credit Facility, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
On September 19, 1996, the Company entered into the $175.0 million Bank
Credit Facility with a group of banks. On March 14, 1997 the Company amended the
Bank Credit Facility in order to, among other things, increase the availability
under such facility to $200.0 million. The Bank Credit Facility expires on March
14, 2002 and may be earlier terminated by the banks upon the occurrence of
certain change-of-control events. Borrowings may be made in U.S. dollars or in
certain European currencies. Borrowings may be made by the Company or Titan
Tire, and all borrowings thereunder are unconditionally guaranteed by the
Company and each of its U.S. subsidiaries other than Nieman's. As of February
18, 1997, borrowings under the Bank Credit Facility aggregated approximately
$100.0 million.
Borrowings in U.S. dollars under the Bank Credit Facility will bear
interest at a floating rate based on either (at the Borrower's option) (i) the
Domestic Rate (defined as the greater of prime or the Federal Funds rate plus
one-half of one percent per annum), (ii) the Adjusted CD Rate or (iii) at
Adjusted LIBOR Rate, in each case plus the Applicable Margin. Borrowings in
certain European currencies under the Bank Credit Facility will bear interest at
the Adjusted LIBOR Rate, plus the Applicable Margin. The Applicable Margin (a)
is 0% for loans which bear interest at the Domestic Rate, (b) ranges from 0.25%
to 0.75% for loans which bear interest at the Adjusted LIBOR Rate depending on
the Company's debt to capitalization ratio and (c) ranges from 0.375% to 0.875%
for loans which bear interest at the Adjusted CD Rate, depending on the debt to
capitalization ratio. The Applicable Margin also varies based on the Interest
Coverage Ratio and the Debt to Earnings Ratio (each as defined in the Bank
Credit Facility).
The lending banks have committed to provide the Borrowers with up to $30.0
million of standby letters of credit ("L/Cs"). In addition, the Borrowers may,
at their option, invite the lending banks to bid on an uncommitted basis on
short-term borrowings, such borrowings ("Bid Loans") to bear interest at the
rate agreed to by the Borrowers and the lending banks. Aggregate amounts
outstanding at any time under Bid Loans, L/C commitments and other borrowings
may not exceed the maximum borrowings permitted under the Bank Credit Facility.
Borrowings under the Bank Credit Facility are unsecured. The Bank Credit
Facility contains covenants that, among other things, limit the Company's and
its subsidiaries' ability to incur liens; merge, consolidate or dispose of
assets; make loans and investments; incur or guarantee indebtedness; engage in
certain transactions with affiliates; or pay dividends and other distributions.
The Bank Credit Facility also requires the Company to maintain certain minimum
tangible net worth and to meet an interest coverage ratio and a debt to earnings
ratio. The lenders under the Bank Credit Facility can require that the Company
prepay indebtedness outstanding under the Bank Credit Facility if, among other
events, (i) any person or group of persons (other than Maurice M. Taylor, Jr. or
MascoTech, Inc.) acquires or has the right to acquire beneficial ownership
representing 15% or more of the combined voting power of all securities of the
Company entitled to vote in the election of directors or (ii) Maurice M. Taylor,
Jr. for a period in excess of 180 consecutive days, ceases to be a director or
executive officer of the Company for any reason, and an individual acceptable to
the lenders is not appointed.
40
<PAGE> 42
The Bank Credit Facility contains customary events of default, including,
without limitation, nonpayment of principal, interest, fees or other amounts
when due; violation of covenants; breach of any representation or warranty;
cross-default and cross-acceleration; bankruptcy events; material judgments;
certain ERISA matters; and invalidity of loan documents.
INDUSTRIAL REVENUE BONDS
In March 1995, $9.5 million principal amount of industrial revenue bonds
were issued by the South Carolina Jobs-Economic Development Authority for the
benefit of the Company, to finance the construction of a facility in Greenwood,
South Carolina. Interest on these bonds is at a variable rate, determined under
a formula reflecting current rates of tax-exempt issues in the State of South
Carolina, but may not exceed 12%. Interest rates for 1996 ranged from 3% to 5%.
These bonds are secured by a letter of credit and mature in February 2010. Under
certain circumstances the holders of these bonds have the right to tender the
bonds and receive payment prior to their maturity.
NOTE PAYABLE TO PATC
In August 1994, Titan Tire issued a $19.7 million subordinated note to PATC
in conjunction with the Titan Tire purchase. This note bears interest at a rate
of 7% per annum and matures in February 2000. The note is guaranteed by the
Company and includes standard events of default.
41
<PAGE> 43
DESCRIPTION OF THE NOTES
The Notes offered hereby will be issued under an Indenture to be dated as
of , 1997 (the "Indenture") between the Company and The First
National Bank of Chicago, as trustee (the "Trustee"). References to "(Section
)" mean the applicable Section of the Indenture. A copy of the form of
Indenture is filed as an exhibit to the Registration Statement of which this
Prospectus is a part and will be made available to prospective purchasers of the
Notes upon request.
The Indenture will be subject to and governed by the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The following summaries of the
material provisions of the Indenture do not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a part
of the Indenture by the Trust Indenture Act. For definitions of certain
capitalized terms used in the following summary, see "-- Certain Definitions."
GENERAL
The Notes will mature on , 2007, will be limited to $150
million aggregate principal amount, and will be unsecured senior subordinated
obligations of the Company. Each Note will bear interest at the rate set forth
on the cover page hereof from , 1997 or from the most recent
interest payment date to which interest has been paid, payable semiannually on
and in each year, commencing , 1997, to the Person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the or next preceding such interest
payment date. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months. (Sections 202, 301 and 307).
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Company in The City of New York maintained for such purposes (which
initially will be the corporate trust office of the Trustee); provided, however,
that payment of interest may be made at the option of the Company by check
mailed to the Person entitled thereto as shown on the security register.
(Sections 301, 305 and 1002) The Notes will be issued only in fully registered
form without coupons, in denominations of $1,000 and any integral multiple
thereof. (Section 302) No service charge will be made for any registration of
transfer, exchange or redemption of Notes, except in certain circumstances for
any tax or other governmental charge that may be imposed in connection
therewith. (Section 305)
Settlement for the Notes will be made in same day funds. All payments of
principal and interest will be made by the Company in same day funds. The Notes
will trade in the Same-Day Funds Settlement System of The Depository Trust
Company (the "Depository" or "DTC") until maturity, and secondary market trading
activity for the Notes will therefore settle in same day funds.
When issued, the Notes will be a new issue of securities with no
established trading market. No assurance can be given as to the liquidity of the
trading market for the Notes. See "Risk Factors -- Absence of a Public Market
for the Notes; Possible Volatility."
OPTIONAL REDEMPTION
The Notes will be subject to redemption at any time on or after
2002, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice in amounts of $1,000 or an
integral multiple thereof at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002..................................................... %
2003..................................................... %
2004..................................................... %
</TABLE>
42
<PAGE> 44
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed pro rata, by lot or by any other
method the Trustee shall deem fair and reasonable. (Sections 203, 1101, 1105 and
1107)
PURCHASE OF NOTES UPON A CHANGE OF CONTROL
If a Change of Control shall occur at any time, then each holder of Notes
shall have the right to require that the Company purchase such holder's Notes in
whole or in part in integral multiples of $1,000, at a purchase price (the
"Change of Control Purchase Price") in cash in an amount equal to 101% of the
principal amount of such Notes, plus accrued and unpaid interest, if any, to the
date of purchase (the "Change of Control Purchase Date"), pursuant to the offer
described below (the "Change of Control Offer") and in accordance with the other
procedures set forth in the Indenture.
Within 30 days of any Change of Control, the Company shall notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Notes, by first-class mail, postage prepaid, at his address appearing in the
security register, stating, among other things, that a Change of Control has
occurred and the date of such event, the circumstances and relevant facts
regarding such Change of Control (including, but not limited to, information
with respect to pro forma historical income, cash flow and capitalization after
giving effect to such Change of Control); the purchase price and the purchase
date which shall be fixed by the Company on a business day no earlier than 30
days nor later than 60 days from the date such notice is mailed, or such later
date as is necessary to comply with requirements under the Exchange Act; that
any Note not tendered will continue to accrue interest; that, unless the Company
defaults in the payment of the Change of Control Purchase Price, any Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date; and certain other
procedures that a holder of Notes must follow to accept a Change of Control
Offer or to withdraw such acceptance. (Section 1015)
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change of Control Offer. See "-- Ranking." The
failure of the Company to make or consummate the Change of Control Offer or pay
the Change of Control Purchase Price when due will give the Trustee and the
holders of the Notes the rights described under "Events of Default."
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York law (which is the governing law
of the Indenture) to represent a specific quantitative test. As a consequence,
in the event the holders of the Notes elected to exercise their rights under the
Indenture and the Company elected to contest such election, there could be no
assurance as to how a court interpreting New York law would interpret the
phrase.
The existence of a holder's right to require the Company to repurchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
In addition to the obligations of the Company under the Indenture with
respect to the Notes in the event of a "Change of Control," the Bank Credit
Facility also provides that upon a "Change of Control" as defined therein the
banks may require the Company to prepay amounts outstanding under the Bank
Credit Facility. Indebtedness pursuant to the Bank Credit Facility is senior in
right of payment to the Notes under the Indenture. See "Description of Other
Indebtedness -- Bank Credit Facility."
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Offer.
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<PAGE> 45
RANKING
The payment of the principal of, premium, if any, and interest on, the
Notes will be subordinated, as set forth in the Indenture, in right of payment
to the prior payment in full of all Senior Indebtedness. The Notes will be
senior subordinated indebtedness of the Company ranking pari passu with all
other existing and future senior subordinated indebtedness of the Company and
senior to all existing and future Subordinated Indebtedness of the Company.
(Sections 1301 and 1302)
Upon the occurrence of any default in the payment of any Designated Senior
Indebtedness beyond any applicable grace period and after the receipt by the
Trustee from representatives of holders of any Designated Senior Indebtedness
(collectively, a "Senior Representative") of written notice of such default, no
payment (other than payments previously made pursuant to the provisions
described under "-- Defeasance or Covenant Defeasance of Indenture") or
distribution of any assets of the Company or any Subsidiary of any kind or
character (excluding certain permitted equity interests or subordinated
securities) may be made on account of the principal of, premium, if any, or
interest on, the Notes, or on account of the purchase, redemption, defeasance or
other acquisition of or in respect of, the Notes unless and until such default
shall have been cured or waived (in each case in accordance with the provisions
of the instrument or agreement under which such Designated Senior Indebtedness
was issued) or shall have ceased to exist or such Designated Senior Indebtedness
shall have been discharged or paid in full after which the Company shall resume
making any and all required payments in respect of the Notes, including any
missed payments.
Upon the occurrence and during the continuance of any non-payment default
with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may then be accelerated immediately (a "Non-payment Default")
and after the receipt by the Trustee and the Company from a Senior
Representative of written notice of such Non-payment Default, no payment (other
than payments previously made pursuant to the provisions described under "--
Defeasance or Covenant Defeasance of Indenture") or distribution of any assets
of the Company of any kind or character (excluding certain permitted equity
interests or subordinated securities) may be made by the Company or any
Subsidiary on account of the principal of, premium, if any, or interest on, the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of or in respect of, the Notes for the period specified below (the "Payment
Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of
the Non-payment Default by the Trustee and the Company from a Senior
Representative and shall end on the earliest of (i) the 179th day after such
commencement, (ii) the date on which such Non-payment Default (and all
Non-payment Defaults as to which notice is also given after such Payment
Blockage Period is initiated) is cured, waived or ceases to exist or on which
such Designated Senior Indebtedness is discharged or paid in full or (iii) the
date on which such Payment Blockage Period (and all Non-payment Defaults as to
which notice is given after such Payment Blockage Period is initiated) shall
have been terminated by written notice to the Company or the Trustee from the
Senior Representative initiating such Payment Blockage Period, after which, in
the case of each of clauses (i), (ii) and (iii), the Company will promptly
resume making any and all required payments in respect of the Notes, including
any missed payments. In no event will a Payment Blockage Period extend beyond
179 days from the date of the receipt by the Company or the Trustee of the
notice initiating such Payment Blockage Period (such 179-day period referred to
as the "Initial Period"). Any number of notices of Non-payment Defaults may be
given during the Initial Period; provided that during any period of 365
consecutive days only one Payment Blockage Period, during which payment of
principal of, premium, if any, or interest on, the Notes may not be made, may
commence and the duration of such period may not exceed 179 days. No Non-payment
Default with respect to any Designated Senior Indebtedness that existed or was
continuing on the date of the commencement of any Payment Blockage Period will
be, or can be, made the basis for the commencement of a second Payment Blockage
Period, whether or not within a period of 365 consecutive days, unless such
default has been cured or waived for a period of not less than 90 consecutive
days. (Section 1303)
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute
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<PAGE> 46
an Event of Default under the Indenture and would enable the holders of the
Notes to accelerate the maturity thereof. See "-- Events of Default."
The Indenture will provide that in the event of any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relative to the
Company or its assets, or any liquidation, dissolution or other winding up of
the Company, whether voluntary or involuntary, or whether or not involving
insolvency or bankruptcy, or any assignment for the benefit of creditors or any
other marshaling of assets or liabilities of the Company, all Senior
Indebtedness must be paid in full before any payment or distribution (excluding
distributions of certain permitted equity interest or subordinated securities)
is made on account of the principal of, or premium, if any, or interest on the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of or in respect of, the Notes (other than payments previously made pursuant to
the provisions described under "-- Defeasance or Covenant Defeasance of
Indenture").
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and funds which would be otherwise
payable to the holders of the Notes will be paid to the holders of the Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full, and
the Company may be unable to meet its obligations fully with respect to the
Notes.
"Senior Indebtedness" under the Indenture means the principal of, premium,
if any, and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy law
whether or not allowable as a claim in such proceeding) and all other monetary
obligations on, any Indebtedness of the Company (other than as otherwise
provided in this definition), whether outstanding on the date of the Indenture
or thereafter created, incurred or assumed, and whether at any time owing,
actually or contingently, unless, in the case of any particular Indebtedness,
the instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Notes. Without limiting the generality of the foregoing,
"Senior Indebtedness" shall include the principal of, and premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceedings under any state, federal or foreign bankruptcy laws whether or
not allowable as a claim in such proceeding), and all other monetary obligations
of every kind and nature of the Company from time to time owed to the lenders
under the Bank Credit Facility; provided, however, that any Indebtedness under
any refinancing, refunding or replacement of the Bank Credit Facility shall not
constitute Senior Indebtedness to the extent the Indebtedness thereunder is by
its express terms subordinate to any other Indebtedness of the Company.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the Notes, (ii) Indebtedness that is by its terms
subordinate or junior in right of payment to any Indebtedness of the Company,
(iii) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11 United States Code, is without recourse to the
Company, (iv) Indebtedness which is represented by Redeemable Capital Stock, (v)
any liability for foreign, federal, state, local or other tax owed or owing by
the Company to the extent such liability constitutes Indebtedness, (vi)
Indebtedness of the Company to a Subsidiary or any other Affiliate of the
Company or any of such Affiliate's subsidiaries and (vii) that portion of any
Indebtedness which at the time of issuance is issued in violation of the
Indenture.
"Designated Senior Indebtedness" under the Indenture means (i) all Senior
Indebtedness under, or in respect of, the Bank Credit Facility, and (ii) any
other Senior Indebtedness which at the time of determination, has an aggregate
principal amount outstanding of at least $25 million and is specifically
designated in the instrument evidencing such Senior Indebtedness or the
agreement under which such Senior Indebtedness arises as "Designated Senior
Indebtedness" by the Company.
As of September 30, 1996, on a pro forma basis after giving effect to the
sale of the Notes and the application of the estimated net proceeds thereof, the
redemption and conversion of the Company's 4 3/4% Notes and the repayment of
certain other indebtedness, the Company would have had approximately $11.6
million of Senior Indebtedness outstanding and the Company's subsidiaries would
have had approximately $129.3 million of indebtedness outstanding (including
trade payables, current, long-term and other liabilities
45
<PAGE> 47
and excluding the guarantees by certain of the Company's subsidiaries of the
Company's obligations under the Bank Credit Facility).
The Indenture will limit, but not prohibit the incurrence by the Company
and its Restricted Subsidiaries of additional Indebtedness, and the Indenture
will prohibit the incurrence by the Company of Indebtedness that is subordinated
in right of payment to any Senior Indebtedness of the Company and senior in
right of payment to the Notes.
The Notes will be effectively subordinated to all Indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's Subsidiaries. Any right of the Company to receive assets of any
such Subsidiary upon the liquidation or reorganization of any such Subsidiary
(and the consequent right of the holders of the Notes to participate in those
assets) will be effectively subordinated to the claims of that Subsidiary's
creditors, except to the extent that the Company is itself recognized as a
creditor of such Subsidiary, in which case the claims of the Company would still
be subordinate to any security in the assets of such Subsidiary and any
Indebtedness of such Subsidiary senior to that held by the Company.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit any
of its Restricted Subsidiaries to, create, issue, incur, assume, guarantee or
otherwise in any manner become directly or indirectly liable for the payment of
or otherwise incur (collectively, "incur"), any Indebtedness (including any
Acquired Indebtedness but excluding Permitted Indebtedness), unless such
Indebtedness is incurred by the Company or constitutes Acquired Indebtedness of
a Restricted Subsidiary and, in each case, the Company's Consolidated Fixed
Charge Coverage Ratio for the four full fiscal quarters for which financial
statements are available immediately preceding the incurrence of such
Indebtedness taken as one period is at least equal to or greater than 2.25:1.
(Section 1008)
For purposes of determining the outstanding principal amount of any
particular Indebtedness Incurred pursuant to this covenant, (1) Indebtedness
Incurred pursuant to the Bank Credit Facility prior to or on the date of this
Indenture shall be treated as Incurred pursuant to clause (i) under the
definition of "Permitted Indebtedness," (2) Indebtedness permitted by this
covenant need not be permitted solely by reference to one provision permitting
such Indebtedness but may be permitted in part by one such provision and in part
by one or more other provisions of this Section permitting such Indebtedness and
(3) in the event that Indebtedness or any portion thereof meets the criteria of
more than one of the types of Indebtedness described in this covenant, the
Company, in its sole discretion, shall classify such Indebtedness and only be
required to include the amount of such Indebtedness in one of such clauses.
Accordingly, Indebtedness Incurred after the date of the Indenture, whether
Incurred as reborrowings under the Bank Credit Facility or otherwise, can be
allocated as set forth in the preceding sentence.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other than dividends
or distributions payable solely in shares of its Qualified Capital Stock or
in options, warrants or other rights to acquire shares of such Qualified
Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, the Company's Capital Stock or any Capital Stock of
any Affiliate of the Company or options, warrants or other rights to
acquire such Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness;
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<PAGE> 48
(iv) declare or pay any dividend or distribution on any Capital Stock
of any Restricted Subsidiary to any Person (other than (a) to the Company
or any of its Wholly Owned Restricted Subsidiaries or (b) to all holders of
Capital Stock of such Restricted Subsidiary on a pro rata basis); or
(v) make or permit the existence of any Investment in any Person
(other than any Permitted Investments)
(any of the foregoing actions described in clauses (i) through (v), other than
any such action that is a Permitted Payment (as defined below), collectively,
"Restricted Payments") (the amount of any such Restricted Payment, if other than
cash, as determined by the board of directors of the Company, whose
determination shall be conclusive and evidenced by a board resolution), unless
(1) immediately before and immediately after giving effect to such proposed
Restricted Payment on a pro forma basis, no Default or Event of Default shall
have occurred and be continuing and such Restricted Payment shall not be an
event which is, or after notice or lapse of time or both, would be, an "event of
default" under the terms of any Indebtedness of the Company or its Subsidiaries;
(2) immediately before and immediately after giving effect to such Restricted
Payment on a pro forma basis, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the provisions described
under "-- Limitation on Indebtedness; " and (3) after giving effect to the
proposed Restricted Payment, the aggregate amount of all such Restricted
Payments declared or made after the date of the Indenture, does not exceed the
sum of:
(A) 50% of the aggregate Consolidated Net Income of the Company
accrued on a cumulative basis during the period beginning on the first day
of the full fiscal quarter immediately preceding the date of the Indenture
and ending on the last day of the Company's last fiscal quarter ending
prior to the date of the Restricted Payment (or, if such aggregate
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss);
(B) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company either (x) as capital contributions to the Company
or (y) from the issuance or sale (other than to any of its Subsidiaries) of
Qualified Capital Stock of the Company or any options, warrants or rights
to purchase such Qualified Capital Stock of the Company (except, in each
case, to the extent such proceeds are used to purchase, redeem or otherwise
retire Capital Stock or Subordinated Indebtedness as set forth below in
clause (ii) or (iii) of paragraph (b) below);
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Subsidiaries) upon the
exercise of any options, warrants or rights to purchase Qualified Capital
Stock of the Company;
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the conversion or exchange, if any, of debt
securities or Redeemable Capital Stock of the Company or its Subsidiaries
into or for Qualified Capital Stock of the Company plus, to the extent such
debt securities or Redeemable Capital Stock were issued after the date of
the Indenture, the aggregate of Net Cash Proceeds from their original
issuance;
(E) (x) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the date of the Indenture, an
amount equal to the lesser of the return of capital with respect to such
Investment and the initial amount of such Investment, in either case, less
the cost of the disposition of such Investment and (y) an amount equal to
the net reduction in Investments resulting from the redesignation of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case
as provided in the definition of "Investments"), not to exceed in each case
the amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary; and
(F) $20 million.
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(b) Notwithstanding the foregoing, and in the case of clauses (ii) through
(ix) below, so long as there is no Default or Event of Default continuing, the
foregoing provisions shall not prohibit the following actions (each of clauses
(i) through (vi) being referred to as a "Permitted Payment"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment was
permitted by the provisions of paragraph (a) of this Section and such
payment shall have been deemed to have been paid on such date of
declaration and shall not have been deemed a "Permitted Payment" for
purposes of the calculation required by paragraph (a) of this Section;
(ii) the repurchase, redemption, or other acquisition or retirement
for value of any shares of any class of Capital Stock of the Company in
exchange for (including any such exchange pursuant to the exercise of a
conversion right or privilege in connection with which cash is paid in lieu
of the issuance of fractional shares or scrip), or out of the Net Cash
Proceeds of a substantially concurrent issue and sale for cash (other than
to any Subsidiary) of, other shares of Qualified Capital Stock of the
Company; provided that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are excluded from clause (3)(B) of
paragraph (a) of this Section;
(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness or Redeemable Capital Stock in exchange for, or in an amount
not in excess of the Net Cash Proceeds of, a substantially concurrent
issuance and sale for cash (other than to any Subsidiary) of any Qualified
Capital Stock of the Company, provided that the Net Cash Proceeds from the
issuance of such shares of Qualified Capital Stock are excluded from clause
(3)(B) of paragraph (a) of this Section;
(iv) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (a "refinancing")
through the substantially concurrent issuance of new Subordinated
Indebtedness of the Company, provided that any such new Subordinated
Indebtedness (1) shall be in a principal amount that does not exceed the
principal amount so refinanced (or, if such Subordinated Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, then such lesser amount
as of the date of determination), plus the lesser of (I) the stated amount
of any premium or other payment required to be paid in connection with such
a refinancing pursuant to the terms of the Indebtedness being refinanced or
(II) the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of
the Company incurred in connection with such refinancing; (2) has an
Average Life to Stated Maturity greater than the remaining Average Life to
Stated Maturity of the Notes; (3) has a Stated Maturity for its final
scheduled principal payment later than the Stated Maturity for the final
scheduled principal payment of the Notes; and (4) is expressly subordinated
in right of payment to the Notes at least to the same extent as the
Subordinated Indebtedness to be refinanced;
(v) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of any Redeemable Capital Stock through
the substantially concurrent issuance of new Redeemable Capital Stock of
the Company, provided that any such new Redeemable Capital Stock (1) shall
have an aggregate liquidation preference that does not exceed the aggregate
liquidation preference of the amount so refinanced; (2) has an Average Life
to Stated Maturity greater than the remaining Average Life to Stated
Maturity of the Notes; and (3) has a Stated Maturity later than the Stated
Maturity for the final scheduled principal payment of the Notes;
(vi) the repurchase by the Company of up to 5 million shares of Common
Stock pursuant to the Equity Dutch Auction, provided, however, that in the
event all such 5 million shares are not purchased pursuant to such Equity
Dutch Auction, the Company may repurchase pursuant to tender offers or open
market purchases the difference between 5 million shares of Common Stock
and the number of shares of Common Stock actually purchased in the Equity
Dutch Auction;
(vii) payments or distributions to dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger
or transfer of assets that complies with the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or substantially
all of the property and assets of the Company;
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<PAGE> 50
(viii) the repurchase of shares, or options to purchase shares, of
Capital Stock of the Company from employees, former employees, directors or
former directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors), pursuant to the terms of agreements (including employment
agreements) or plans (or amendments thereto) approved by the Board of
Directors under which such persons purchase or sell or are granted the
option to purchase or sell, shares of such stock; provided, however, that
the aggregate amount of such repurchases shall not exceed $1 million in any
calendar year (unless such repurchases are made with the proceeds of
insurance policies and the shares of Capital Stock are repurchased from the
executors, administrators, testamentary trustees, heirs, legatees or
beneficiaries) plus the aggregate Net Cash Proceeds from any reissuance
during such calendar year of Capital Stock to employees or directors of the
Company or its Subsidiaries; or
(ix) any purchase of any fractional share of Common Stock of the
Company resulting from (A) any dividend or other distribution on
outstanding shares of Common Stock of the Company that is payable in shares
of such Common Stock (including any stock split or subdivision of the
outstanding Common Stock of the Company), (B) any combination of all of the
outstanding shares of Common Stock of the Company, (C) any reorganization
or consolidation of the Company or any merger of the Company with or into
any other Person or (D) the conversion of any securities of the Company
into shares of Common Stock. (Section 1009)
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with or for the benefit of any Affiliate of the Company (other than
the Company or a Wholly Owned Restricted Subsidiary) unless such transaction or
series of related transactions is entered into in good faith and (a) such
transaction or series of related transactions is on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than those that
would be available in a comparable transaction in arm's-length dealings with an
unrelated third party, (b) with respect to any transaction or series of related
transactions involving aggregate value in excess of $1 million, the Company
delivers an officers' certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause (a) above,
and (c) with respect to any transaction or series of related transactions
involving aggregate value in excess of $5 million, such transaction or series of
related transactions has been approved by a majority of the Disinterested
Directors of the Company, or in the event there is only one Disinterested
Director, by such Disinterested Director; provided, however, that this provision
shall not apply to any transaction with (i) an officer or director of the
Company entered into in the ordinary course of business (including compensation
and employee benefit arrangements with any officer, director or employee of the
Company, including under any stock option or stock incentive plans); (ii)
pursuant to an agreement or arrangement in existence on the date of the
Indenture; or (iii) pursuant to a Permitted Agreement. (Section 1010)
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur or affirm any
Lien of any kind securing any Pari Passu Indebtedness or Subordinated
Indebtedness (including any assumption, guarantee or other liability with
respect thereto by any Restricted Subsidiary) upon any property or assets
(including any intercompany notes) of the Company or any Restricted Subsidiary
owned on the date of the Indenture or acquired after the date of the Indenture,
or any income or profits therefrom, unless the Notes are directly secured
equally and ratably with (or, in the case of Subordinated Indebtedness, prior or
senior thereto, with the same relative priority as the Notes shall have with
respect to such Subordinated Indebtedness) the obligation or liability secured
by such Lien except for Liens (A) securing any Indebtedness which became
Indebtedness pursuant to a transaction permitted under "-- Consolidation,
Merger, Sale of Assets" or securing Acquired Indebtedness which, in each case,
were created prior to (and not created in connection with, or in contemplation
of) the incurrence of such Pari Passu Indebtedness or Subordinated Indebtedness
(including any assumption, guarantee or other liability with respect thereto by
any Restricted Subsidiary) and which Indebtedness is permitted under the
provisions of "-- Limitation on Indebtedness" or (B) securing any Indebtedness
incurred in connection with any refinancing, renewal, substitutions or
replacements of any such Indebtedness described in clause (A), so long
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as the aggregate principal amount of Indebtedness represented thereby is not
increased by such refinancing plus the lesser of (i) the stated amount of any
premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced or (ii)
the amount of premium or other payment actually paid at such time to refinance
the Indebtedness, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing, provided, however, that in the
case of clauses (A) and (B), any such Lien only extends to the assets that were
subject to such Lien securing such Indebtedness prior to the related acquisition
by the Company or its Restricted Subsidiaries. (Section 1011)
Limitation on Sale of Assets. (a) The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, consummate an
Asset Sale unless (i) at least 75% of the consideration from such Asset Sale is
received in cash and (ii) the Company or such Subsidiary receives consideration
at the time of such Asset Sale at least equal to the Fair Market Value of the
shares or assets subject to such Asset Sale (as determined by the board of
directors of the Company and evidenced in a board resolution); provided,
however, that clause (i) shall not be applicable to Asset Sales during any 12
month period involving assets with an aggregate Fair Market Value of less than
10% of the Consolidated Net Tangible Assets of the Company as of the end of the
last fiscal quarter prior to the execution of the agreement for such Asset Sale.
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any Senior Indebtedness then
outstanding as required by the terms thereof, or the Company determines not to
apply such Net Cash Proceeds to the permanent prepayment of such Senior
Indebtedness, or if no such Senior Indebtedness is then outstanding, then the
Company or a Subsidiary may, within 180 days of the Asset Sale invest the Net
Cash Proceeds in properties and other assets that (as determined by the board of
directors of the Company) replace the properties and assets that were the
subject of the Asset Sale or in properties and assets that will be used in the
businesses of the Company or its Subsidiaries existing on the date of the
Indenture or in businesses reasonably related thereto. The amount of such Net
Cash Proceeds not used or invested within 180 days of the Asset Sale as set
forth in this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $15 million, the
Company will apply the Excess Proceeds to the repayment of the Notes and any
other Pari Passu Indebtedness outstanding with similar provisions requiring the
Company to make an offer to purchase such Indebtedness with the proceeds from
any Asset Sale as follows: (A) the Company will make an offer to purchase (an
"Offer") from all holders of the Notes in accordance with the procedures set
forth in the Indenture in the maximum principal amount (expressed as a multiple
of $1,000) of Notes that may be purchased out of an amount (the "Note Amount")
equal to the product of such Excess Proceeds multiplied by a fraction, the
numerator of which is the outstanding principal amount of the Notes, and the
denominator of which is the sum of the outstanding principal amount of the Notes
and such Pari Passu Indebtedness (subject to proration in the event such amount
is less than the aggregate Offered Price (as defined herein) of all Notes
tendered) and (B) to the extent required by such Pari Passu Indebtedness to
permanently reduce the principal amount of such Pari Passu Indebtedness, the
Company will make an offer to purchase or otherwise repurchase or redeem Pari
Passu Indebtedness (a "Pari Passu Offer") in an amount (the "Pari Passu Debt
Amount") equal to the excess of the Excess Proceeds over the Note Amount;
provided that in no event will the Company be required to make a Pari Passu
Offer in a Pari Passu Debt Amount exceeding the principal amount of such Pari
Passu Indebtedness plus the amount of any premium required to be paid to
repurchase such Pari Passu Indebtedness. The offer price for the Notes will be
payable in cash in an amount equal to 100% of the principal amount of the Notes
plus accrued and unpaid interest, if any, to the date (the "Offer Date") such
Offer is consummated (the "Offered Price"), in accordance with the procedures
set forth in the Indenture. To the extent that the aggregate Offered Price of
the Notes tendered pursuant to the Offer is less than the Note Amount relating
thereto or the aggregate amount of Pari Passu Indebtedness that is purchased in
a Pari Passu Offer is less than the Pari Passu Debt Amount, the Company will use
any remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes and Pari Passu Indebtedness surrendered by holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Upon the completion of the purchase
of all the Notes tendered pursuant to
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an Offer and the completion of a Pari Passu Offer, the amount of Excess
Proceeds, if any, shall be reset at zero.
(d) The Indenture will provide that, if the Company becomes obligated to
make an Offer pursuant to clause (c) above, the Notes and the Pari Passu
Indebtedness shall be purchased by the Company, at the option of the holders
thereof, in whole or in part in integral multiples of $1,000, on a date that is
not earlier than 30 days and not later than 60 days from the date the notice of
the Offer is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act.
(e) The Indenture will provide that the Company will comply with the
applicable tender offer rules, including Rule 14e-1 under the Exchange Act, and
any other applicable securities laws or regulations in connection with an Offer.
(Section 1012)
Limitation on Issuances of Guarantees of Indebtedness. (a) The Company will
not permit any Restricted Subsidiary other than the Guarantors, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Pari Passu Indebtedness or Subordinated Indebtedness of the
Company unless such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Indenture providing for a Guarantee of the Notes
on the same terms as the guarantee of such Indebtedness except that (A) such
guarantee need not be secured unless required pursuant to "-- Limitation on
Liens" and (B) if such Indebtedness is by its terms expressly subordinated to
the Notes, any such assumption, guarantee or other liability of such Restricted
Subsidiary with respect to such Indebtedness shall be subordinated to such
Restricted Subsidiary's Guarantee of the Notes at least to the same extent as
such Indebtedness is subordinated to the Notes pursuant to the terms of the
Indenture.
(b) Notwithstanding the foregoing, any Guarantee by a Restricted Subsidiary
of the Notes shall provide by its terms that it (and all Liens securing the
same) shall be automatically and unconditionally released and discharged upon
any sale, exchange or transfer, to any Person not an Affiliate of the Company,
of all of the Company's Capital Stock in, or all or substantially all the assets
of, such Subsidiary, which transaction is in compliance with the terms of the
Indenture and such Restricted Subsidiary is released from its guarantees of
other Indebtedness of the Company or any Restricted Subsidiaries. (Section 1013)
Limitation on Senior Subordinated Indebtedness. The Company will not, and
will not permit any Guarantor to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise in any manner become directly or indirectly
liable for or with respect to or otherwise permit to exist any Indebtedness that
is subordinate in right of payment to any Indebtedness of the Company or such
Guarantor, as the case may be, unless such Indebtedness is also pari passu with
the Notes or the Guarantee of such Guarantor or subordinate in right of payment
to the Notes or such Guarantee for at least to the same extent as the Notes or
such Guarantee are subordinate in right of payment to Senior Indebtedness or
Senior Indebtedness of such Guarantor, as the case may be. (Section 1014)
Limitation on Restricted Subsidiary Capital Stock. The Company will not
permit (a) any Restricted Subsidiary of the Company to issue, sell or transfer
any Capital Stock, except for (i) Capital Stock issued or sold to, held by or
transferred to the Company or a Wholly Owned Restricted Subsidiary, and (ii)
Capital Stock issued by a Person prior to the time (A) such Person becomes a
Restricted Subsidiary, (B) such Person merges with or into a Restricted
Subsidiary or (C) a Restricted Subsidiary merges with or into such Person;
provided that such Capital Stock was not issued or incurred by such Person in
anticipation of the type of transaction contemplated by subclause (A), (B) or
(C) or (b) any Person (other than the Company or a Wholly Owned Restricted
Subsidiary) to acquire Capital Stock of any Restricted Subsidiary from the
Company or any Restricted Subsidiary, except, in the case of clause (a) or (b),
upon the acquisition of all the outstanding Capital Stock of such Restricted
Subsidiary in accordance with the terms of the Indenture. (Section 1016)
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distribution on its Capital Stock, (ii) pay any Indebtedness owed
to the Company or any other Restricted Subsidiary, (iii) make any Investment in
the Company or any other Restricted Subsidiary or (iv) transfer any of its
properties or assets to the Company or any other Restricted Subsidiary, except
for:
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(a) any encumbrance or restriction pursuant to any agreement in effect on the
date of the Indenture and listed on a schedule to the Indenture; (b) any
encumbrance or restriction, with respect to a Restricted Subsidiary that is not
a Restricted Subsidiary of the Company on the date of the Indenture, in
existence at the time such Person becomes a Restricted Subsidiary of the Company
and not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary; (c) any encumbrance or restriction existing
under any agreement that extends, renews, refinances or replaces the agreements
containing the encumbrances or restrictions in the foregoing clauses (a) and
(b), or in this clause (c), provided that the terms and conditions of any such
encumbrances or restrictions are no more restrictive in any material respect
than those under or pursuant to the agreement evidencing the Indebtedness so
extended, renewed, refinanced or replaced; (d) in the case of clause (iv) of
this covenant, (A) any encumbrance or restriction that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by the Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Company or any Restricted Subsidiary in
any manner material to the Company or any Restricted Subsidiary; or (e) any
encumbrance or restriction with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or disposition
of all or substantially all of the Capital Stock of, or property and assets of,
such Restricted Subsidiary. (Section 1017)
Limitation on Unrestricted Subsidiaries. The Company will not make, and
will not permit its Restricted Subsidiaries to make, any Investment in
Unrestricted Subsidiaries if, at the time thereof, the aggregate amount of such
Investments would exceed the amount of Restricted Payments then permitted to be
made pursuant to the "-- Limitation on Restricted Payments" covenant. Any
Investments in Unrestricted Subsidiaries permitted to be made pursuant to this
covenant (i) will be treated as a Restricted Payment in calculating the amount
of Restricted Payments made by the Company and (ii) may be made in cash or
property. (Section 1018)
Provision of Financial Statements. Whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to Sections 13(a) or 15(d) if the Company
were so subject, such documents to be filed with the Commission on or prior to
the date (the "Required Filing Date") by which the Company would have been
required so to file such documents if the Company were so subject. The Company
will also in any event (x) within 15 days of each Required Filing Date (i)
transmit by mail to all holders, as their names and addresses appear in the
security register, without cost to such holders and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to
Sections 13(a) or 15(d) of the Exchange Act if the Company were subject to
either of such Sections and (y) if filing such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder at the Company's cost. If any
Guarantor's financial statements would be required to be included in the
financial statements filed or delivered pursuant to the Indenture if the Company
were subject to Section 13(a) or 15(d) of the Exchange Act, the Company shall
include such Guarantor's financial statements in any filing or delivery pursuant
to the Indenture. (Section 1019)
Additional Covenants. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in The City of New York; (iii) arrangements
regarding the handling of money held in trust; (iv) maintenance of corporate
existence; (v) payment of taxes and other claims; (vi) maintenance of
properties; and (vii) maintenance of insurance.
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CONSOLIDATION, MERGER, SALE OF ASSETS
The Company will not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into any other Person or
sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any Person or group of
affiliated Persons, or permit any of its Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company and its Subsidiaries on a Consolidated
basis to any other Person or group of affiliated Persons, unless at the time and
after giving effect thereto (i) either (a) the Company will be the continuing
corporation or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of the Company and its
Subsidiaries on a Consolidated basis (the "Surviving Entity") will be a
corporation duly organized and validly existing under the laws of the United
States of America, any state thereof or the District of Columbia and such Person
expressly assumes, by a supplemental indenture, in a form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture,
as the case may be, and the Notes and the Indenture will remain in full force
and effect as so supplemented; (ii) immediately before and immediately after
giving effect to such transaction on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or any of its
Subsidiaries which becomes the obligation of the Company or any of its
Subsidiaries as a result of such transaction as having been incurred at the time
of such transaction), no Default or Event of Default will have occurred and be
continuing; (iii) immediately after giving effect to such transaction on a pro
forma basis (and treating any Indebtedness not previously an obligation of the
Company or any of its Restricted Subsidiaries which becomes the obligation of
the Company or any of its Restricted Subsidiaries as a result of such
transaction as having been incurred at the time of such transaction), the
Consolidated Net Worth of the Company (or the Surviving Entity if the Company is
not the continuing obligor under the Indenture) is equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction;
(iv) immediately before and immediately after giving effect to such transaction
on a pro forma basis (on the assumption that the transaction occurred on the
first day of the four-quarter period for which financial statements are
available ending immediately prior to the consummation of such transaction with
the appropriate adjustments with respect to the transaction being included in
such pro forma calculation), the Company (or the Surviving Entity if the Company
is not the continuing obligor under the Indenture) could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the provisions
of "-- Certain Covenants -- Limitation on Indebtedness;" (v) at the time of the
transaction each Guarantor, if any, unless it is the other party to the
transactions described above, will have by supplemental indenture confirmed that
its Guarantees shall apply to such Person's obligations under the Indenture and
the Notes; (vi) at the time of the transaction if any of the property or assets
of the Company or any of its Subsidiaries would thereupon become subject to any
Lien, the provisions of "-- Certain Covenants -- Limitation on Liens" are
complied with; and (vii) at the time of the transaction the Company or the
Surviving Entity will have delivered, or caused to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, conveyance, transfer, lease
or other transaction and the supplemental indenture in respect thereof comply
with the Indenture and that all conditions precedent therein provided for
relating to such transaction have been complied with. (Section 801)
The Indenture will also contain a provision which limits the ability of
each Guarantor to, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person (other
than the Company or any Guarantor) or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets on a
Consolidated basis to any Person or group of affiliated Persons (other than the
Company or any Guarantor) without meeting certain exceptions.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the two immediately preceding paragraphs
in which the Company or any Guarantor, as the case may be, is not the continuing
corporation, the successor Person formed or remaining shall succeed to, and be
substituted
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for, and may exercise every right and power of, the Company, and the Company or
any Guarantor, as the case may be, would be discharged from all obligations and
covenants under the Indenture and the Notes or its Guarantee, as the case may
be. (Section 802)
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on any
Note when it becomes due and payable, and such default shall continue for a
period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Note at its Maturity (upon acceleration, optional
or mandatory redemption, required repurchase or otherwise);
(iii) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under the Indenture
or any Guarantee (other than a default in the performance, or breach, of a
covenant or agreement which is specifically dealt with in clause (i), (ii)
or (iv)) and such default or breach shall continue for a period of 30 days
after written notice has been given, by certified mail, (x) to the Company
by the Trustee or (y) to the Company and the Trustee by the holders of at
least 25% in aggregate principal amount of the outstanding Notes;
(iv) (a) there shall be a default in the performance or breach of the
provisions described in "-- Consolidation, Merger, Sale of Assets;" (b) the
Company shall have failed to make or consummate an Offer required under the
provisions of "-- Certain Covenants -- Limitation on Sale of Assets;" or
(c) the Company shall have failed to make or consummate a Change of Control
Offer required under the provisions of "Purchase of Notes Upon a Change of
Control;"
(v) one or more defaults shall have occurred under any of the
agreements, indentures or instruments under which the Company, any
Guarantor or any Subsidiary then has outstanding Indebtedness in excess of
$10 million, individually or in the aggregate, and either (a) such default
results from the failure to pay such Indebtedness at its stated final
maturity or (b) such default or defaults have resulted in the acceleration
of the maturity of such Indebtedness;
(vi) either (a) the collateral agent under the Bank Credit Facility or
(b) if the Bank Credit Facility shall no longer be in force and effect, any
holder of at least $10 million in aggregate principal amount of
Indebtedness of the Company or any Restricted Subsidiary shall commence
judicial proceedings to foreclose upon assets of the Company or any of its
Restricted Subsidiaries having an aggregate Fair Market Value, individually
or in the aggregate, in excess of $10 million or shall have exercised any
right under applicable law or applicable security documents to take
ownership of any such assets in lieu of foreclosure;
(vii) any Guarantee shall for any reason cease to be, or shall for any
reason be asserted in writing by any Guarantor or the Company not to be, in
full force and effect and enforceable in accordance with its terms except
to the extent contemplated by the Indenture and any such Guarantee;
(viii) one or more judgments, orders or decrees for the payment of
money in excess of $10 million, either individually or in the aggregate,
shall be rendered against the Company, any Guarantor or any Subsidiary or
any of their respective properties and shall not be discharged and either
(a) any creditor shall have commenced an enforcement proceeding upon such
judgment, order or decree or (b) there shall have been a period of 60
consecutive days during which a stay of enforcement of such judgment or
order, by reason of an appeal or otherwise, shall not be in effect;
(ix) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company,
any Guarantor or any Subsidiary in an involuntary case or proceeding under
any applicable Bankruptcy Law or (b) a decree or order adjudging the
Company, any Guarantor or any Subsidiary bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company, any Guarantor or any Subsidiary under any applicable federal
or state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator (or other similar
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official) of the Company, any Guarantor or any Subsidiary or of any
substantial part of their respective properties, or ordering the winding up
or liquidation of their respective affairs, and any such decree or order
for relief shall continue to be in effect, or any such other decree or
order shall be unstayed and in effect, for a period of 60 consecutive days;
or
(x) (a) the Company, any Guarantor or any Subsidiary commences a
voluntary case or proceeding under any applicable Bankruptcy Law or any
other case or proceeding to be adjudicated bankrupt or insolvent, (b) the
Company, any Guarantor or any Subsidiary consents to the entry of a decree
or order for relief in respect of the Company, such Guarantor or such
Subsidiary in an involuntary case or proceeding under any applicable
Bankruptcy Law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, (c) the Company, any Guarantor or any Subsidiary
files a petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, (d) the Company, any Guarantor
or any Subsidiary (I) consents to the filing of such petition or the
appointment of, or taking possession by, a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company, any
Guarantor or such Subsidiary or of any substantial part of their respective
properties, (II) makes an assignment for the benefit of creditors or (III)
admits in writing its inability to pay its debts generally as they become
due or (e) the Company, any Guarantor or any Subsidiary takes any corporate
action in furtherance of any such actions in this paragraph (x). (Section
501)
If an Event of Default (other than as specified in clauses (ix) and (x) of
the prior paragraph) shall occur and be continuing with respect to the
Indenture, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such holders shall, declare all unpaid principal of, premium, if any,
and accrued interest on all Notes to be due and payable, by a notice in writing
to the Company (and to the Trustee if given by the holders of the Notes) and
upon any such declaration, such principal, premium, if any, and interest shall
become due and payable immediately. If an Event of Default specified in clause
(ix) or (x) of the prior paragraph occurs with respect to the Company and is
continuing, then all the Notes shall ipso facto become and be due and payable
immediately in an amount equal to the principal amount of the Notes, together
with accrued and unpaid interest, if any, to the date the Notes become due and
payable, without any declaration or other act on the part of the Trustee or any
holder. Thereupon, the Trustee may, at its discretion, proceed to protect and
enforce the rights of the holders of Notes by appropriate judicial proceedings.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Notes outstanding by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes
then outstanding, (iii) the principal of and premium, if any, on any Notes then
outstanding which have become due otherwise than by such declaration of
acceleration and interest thereon at a rate borne by the Notes and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate borne by the Notes; and (b) all Events of Default, other than the
non-payment of principal of the Notes which have become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon. (Section 502)
If payment of the Notes is accelerated because of an Event of Default, the
Trustee shall promptly notify the agent under the Bank Credit Facility.
The holders of not less than a majority in aggregate principal amount of
the Notes outstanding may on behalf of the holders of all outstanding Notes
waive any past default under the Indenture and its consequences, except a
default in the payment of the principal of, premium, if any, or interest on any
Note or in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each Note affected
by such modification or amendment. (Section 513)
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The Company is also required to notify the Trustee within five business
days of the occurrence of any Default. (Section 501) The Company is required to
deliver to the Trustee, on or before a date not more than 60 days after the end
of each fiscal quarter and not more than 120 days after the end of each fiscal
year, a written statement as to compliance with the Indenture, including whether
or not any Default has occurred. (Section 1021) The Trustee is under no
obligation to exercise any of the rights or powers vested in it by the Indenture
at the request or direction of any of the holders of the Notes unless such
holders offer to the Trustee security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities which might be incurred thereby.
(Section 602)
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, if any, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions, provided that if it acquires any
conflicting interest it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company, any Guarantor and any other obligor upon the Notes
discharged with respect to the outstanding Notes ("defeasance"). Such defeasance
means that the Company, any such Guarantor and any other obligor under the
Indenture shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, except for (i) the rights of holders of
such outstanding Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due, (ii) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and
the maintenance of an office or agency for payment and money for security
payments held in trust, (iii) the rights, powers, trusts, duties and immunities
of the Trustee and (iv) the defeasance provisions of the Indenture. In addition,
the Company may, at its option and at any time, elect to have the obligations of
the Company and any Guarantor released with respect to certain covenants that
are described in the Indenture ("covenant defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or an
Event of Default with respect to the Notes. In the event covenant defeasance
occurs, certain events (not including non-payment, bankruptcy and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes. (Sections 401, 402 and 403)
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants or a nationally recognized investment banking
firm, to pay and discharge the principal of, premium, if any, and interest on
the outstanding Notes on the Stated Maturity (or on any date after ,
2002 (such date being referred to as the "Defeasance Redemption Date"), if at or
prior to electing either defeasance or covenant defeasance, the Company has
delivered to the Trustee an irrevocable notice to redeem all of the outstanding
Notes on the Defeasance Redemption Date); (ii) in the case of defeasance, the
Company shall have delivered to the Trustee an opinion of independent counsel in
the United States stating that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the date
of the Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
independent counsel in the United States shall confirm that, the holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred; (iii) in the case of covenant
defeasance, the Company shall have delivered to the Trustee an opinion of
independent counsel in the United States to the effect that the holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant
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defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as clauses
(ix) or (x) under the first paragraph under -- "Events of Default" are
concerned, at any time during the period ending on the 91st day after the date
of deposit; (v) such defeasance or covenant defeasance shall not cause the
Trustee for the Notes to have a conflicting interest as defined in the Indenture
and for purposes of the Trust Indenture Act with respect to any securities of
the Company or any Guarantor; (vi) such defeasance or covenant defeasance shall
not result in a breach or violation of, or constitute a Default under, the
Indenture or any other material agreement or instrument to which the Company,
any Guarantor or any Subsidiary is a party or by which it is bound; (vii) such
defeasance or covenant defeasance shall not result in the trust arising from
such deposit constituting an investment company within the meaning of the
Investment Company Act of 1940, as amended, unless such trust shall be
registered under such Act or exempt from registration thereunder; (viii) the
Company will have delivered to the Trustee an opinion of independent counsel in
the United States to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (ix) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the intent
of preferring the holders of the Notes or any Guarantee over the other creditors
of the Company or any Guarantor with the intent of defeating, hindering,
delaying or defrauding creditors of the Company, any Guarantor or others; (x) no
event or condition shall exist that would prevent the Company from making
payments of the principal of, premium, if any, and interest on the Notes on the
date of such deposit or at any time ending on the 91st day after the date of
such deposit; and (xi) the Company will have delivered to the Trustee an
officers' certificate and an opinion of independent counsel, each stating that
all conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with. (Section 404)
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes as expressly provided for in the Indenture) as to all outstanding Notes
under the Indenture when (a) either (i) all such Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid or Notes whose payment has been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the Company or discharged
from such trust as provided for in the Indenture) have been delivered to the
Trustee for cancellation or (ii) all Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable, (y) will become due
and payable at their Stated Maturity within one year, or (z) are to be called
for redemption within one year under arrangements satisfactory to the applicable
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company; and the Company or any Guarantor has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust an
amount in United States dollars sufficient to pay and discharge the entire
indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, including principal of, premium, if any, and accrued interest at
such Maturity, Stated Maturity or redemption date; (b) the Company or any
Guarantor has paid or caused to be paid all other sums payable under the
Indenture by the Company and any Guarantor; and (c) the Company has delivered to
the Trustee an officers' certificate and an opinion of independent counsel each
stating that (i) all conditions precedent under the Indenture relating to the
satisfaction and discharge of such Indenture have been complied with and (ii)
such satisfaction and discharge will not result in a breach or violation of, or
constitute a default under, the Indenture or any other material agreement or
instrument to which the Company, any Guarantor or any Subsidiary is a party or
by which the Company, any Guarantor or any Subsidiary is bound. (Section 1301)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company,
each Guarantor, if any, and the Trustee with the consent of the holders of at
least a majority of aggregate principal amount of the Notes then outstanding;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby: (i) change the
Stated Maturity of the principal of, or
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any installment of interest on, or change to an earlier date any redemption
date of, or waive a default in the payment of the principal or interest on, any
such Note or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof, or change the coin
or currency in which the principal of any such Note or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof (or, in the
case of redemption, on or after the redemption date); (ii) amend, change or
modify the obligation of the Company to make and consummate an Offer with
respect to any Asset Sale or Asset Sales in accordance with "-- Certain
Covenants -- Limitation on Sale of Assets" or the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change of
Control in accordance with "-- Purchase of Notes Upon a Change of Control,"
including, in each case, amending, changing or modifying any definitions
relating thereto; (iii) reduce the percentage in principal amount of such
outstanding Notes, the consent of whose holders is required for any such
supplemental indenture, or the consent of whose holders is required for any
waiver or compliance with certain provisions of the Indenture; (iv) modify any
of the provisions relating to supplemental indentures requiring the consent of
holders or relating to the waiver of past defaults or relating to the waiver of
certain covenants, except to increase the percentage of such outstanding Notes
required for such actions or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder of
each such Note affected thereby; (v) except as otherwise permitted under
"Consolidation, Merger, Sale of Assets," consent to the assignment or transfer
by the Company or any Guarantor of any of its rights and obligations under the
Indenture; or (vi) amend or modify any of the provisions of the Indenture
relating to the subordination of the Notes or any Guarantee thereof in any
manner adverse to the holders of the Notes or any such Guarantee. (Section 902)
Notwithstanding the foregoing, without the consent of any holders of the
Notes, the Company, any Guarantor and the Trustee may modify or amend the
Indenture: (a) to evidence the succession of another Person to the Company or a
Guarantor, and the assumption by any such successor of the covenants of the
Company or such Guarantor in the Indenture and in the Notes and in any Guarantee
in accordance with "-- Consolidation, Merger, Sale of Assets;" (b) to add to the
covenants of the Company, any Guarantor or any other obligor upon the Notes for
the benefit of the holders of the Notes or to surrender any right or power
conferred upon the Company or any Guarantor or any other obligor upon the Notes,
as applicable, in the Indenture, in the Notes or in any Guarantee; (c) to cure
any ambiguity, or to correct or supplement any provision in the Indenture, the
Notes or any Guarantee which may be defective or inconsistent with any other
provision in the Indenture, the Notes or any Guarantee or make any other
provisions with respect to matters or questions arising under the Indenture, the
Notes or any Guarantee; provided that, in each case, such provisions shall not
adversely affect the interest of the holders of the Notes; (d) to comply with
the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act; (e) to add a
Guarantor under the Indenture; (f) to evidence and provide the acceptance of the
appointment of a successor Trustee under the Indenture; or (g) to mortgage,
pledge, hypothecate or grant a security interest in favor of the Trustee for the
benefit of the holders of the Notes as additional security for the payment and
performance of the Company's and any Guarantor's obligations under the
Indenture, in any property, or assets, including any of which are required to be
mortgaged, pledged or hypothecated, or in which a security interest is required
to be granted to the Trustee pursuant to the Indenture or otherwise. (Section
901)
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1021)
GOVERNING LAW
The Indenture, the Notes and any Guarantee will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of
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any such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue as Trustee with such conflict or resign as Trustee. (Sections 608
and 611)
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs (which has not been cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any holder of Notes unless such holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense. (Section 602)
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Restricted Subsidiary or (ii) assumed in connection
with the acquisition of assets from such Person, in each case, other than
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition, as the case may be.
Acquired Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary, as the case may be.
"Affiliate" means, with respect to any specified Person: (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (ii) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any officer or director of any such specified Person or other Person
or, with respect to any natural Person, any person having a relationship with
such Person by blood, marriage or adoption not more remote than first cousin; or
(iii) any other Person 5% or more of the Voting Stock of which is beneficially
owned or held directly or indirectly by such specified Person. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of: (i) any Capital
Stock of any Restricted Subsidiary; (ii) all or substantially all of the
properties and assets of any division or line of business of the Company or its
Restricted Subsidiaries; or (iii) any other properties or assets of the Company
or any Restricted Subsidiary other than in the ordinary course of business. For
the purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties and assets (A) that is governed by the provisions
described under "-- Consolidation, Merger, Sale of Assets," (B) that is by the
Company to any Guarantor, or by any Restricted Subsidiary to the Company or any
Wholly Owned Restricted Subsidiary in accordance with the terms of the
Indenture, (C) that is of obsolete equipment in the ordinary course of business
or (D) the Fair Market Value of which in the aggregate does not exceed
$1,000,000 in any transaction or series of related transactions.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
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"Bank Credit Facility" means the Multicurrency Credit Agreement, dated as
of September 19, 1996, among the Company, the Banks Party Thereto, and Harris
Trust and Savings Bank, as Agent, as such agreement, in whole or in part, may be
amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing.
"Banks" means the lenders under the Bank Credit Facility.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or other equity interests whether now outstanding or issued after
the date of the Indenture.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of all shares
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% of the total outstanding Voting Stock of the Company; (ii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the board of directors of the Company (together with any new
directors whose election to such board or whose nomination for election by the
stockholders of the Company was approved by a vote of 66 2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved), cease
for any reason to constitute a majority of such board of directors then in
office; (iii) the Company consolidates with or merges with or into any Person or
conveys, transfers or leases all or substantially all of its assets to any
Person, or any corporation consolidates with or merges into or with the Company
in any such event pursuant to a transaction in which the outstanding Voting
Stock of the Company is changed into or exchanged for cash, securities or other
property, other than any such transaction where the outstanding Voting Stock of
the Company is not changed or exchanged at all (except to the extent necessary
to reflect a change in the jurisdiction of incorporation of the Company or where
(A) the outstanding Voting Stock of the Company is changed into or exchanged for
(x) Voting Stock of the surviving corporation which is not Redeemable Capital
Stock or (y) cash, securities and other property (other than Capital Stock of
the surviving corporation) in an amount which could be paid by the Company as a
Restricted Payment as described under "-- Certain Covenants -- Limitation on
Restricted Payments" (and such amount shall be treated as a Restricted Payment
subject to the provisions in the Indenture described under "-- Certain Covenants
- -- Limitation on Restricted Payments") and (B) no "person" or "group," other
than Permitted Holders, owns immediately after such transaction, directly or
indirectly, more than 35% of the total outstanding Voting Stock of the surviving
corporation; or (iv) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with the
provisions described under " -- Consolidation, Merger, Sale of Assets."
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act then the body performing
such duties at such time.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value which is dependent upon, fluctuations in
commodity prices.
"Common Stock" means the common stock, no par value per share, of the
Company.
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"Company" means Titan Wheel International, Inc., a corporation incorporated
under the laws of Illinois, until a successor Person shall have become such
pursuant to the applicable provisions of the Indenture, and thereafter "Company"
shall mean such successor Person.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss), Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-cash
Charges deducted in computing Consolidated Net Income (Loss) in each case, for
such period, of such Person and its Restricted Subsidiaries on a Consolidated
basis, all determined in accordance with GAAP to (b) the sum of Consolidated
Interest Expense for such period and cash and non-cash dividends paid on any
Preferred Stock and Redeemable Capital Stock of such Person during such period
in each case after giving pro forma effect to (i) the incurrence of the
Indebtedness giving rise to the need to make such calculation and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, on the first day of such period; (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company and
its Restricted Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average daily balance
of such Indebtedness during such period); (iii) in the case of Acquired
Indebtedness or any acquisition occurring at the time of the incurrence of such
Indebtedness, the related acquisition, assuming such acquisition had been
consummated on the first day of such period; and (iv) any acquisition or
disposition by the Company and its Restricted Subsidiaries of any company or any
business or any assets out of the ordinary course of business, whether by
merger, stock purchase or sale or asset purchase or sale, or any related
repayment of Indebtedness, in each case since the first day of such applicable
period, assuming such acquisition or disposition had been consummated on the
first day of such period; provided that (i) in making such computation, the
Consolidated Interest Expense attributable to interest on any Indebtedness
computed on a pro forma basis and (A) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of such Person, a fixed or floating rate of interest, shall be computed
by applying at the option of such Person either the fixed or floating rate and
(ii) in making such computation, the Consolidated Interest Expense of such
Person attributable to interest on any Indebtedness under a revolving credit
facility computed on a pro forma basis shall be computed based upon the average
daily balance of such Indebtedness during the applicable period.
"Consolidated Income Tax Expense" of any Person means, for any period, the
provision for federal, state, local and foreign income taxes of such Person and
its Consolidated Restricted Subsidiaries for such period as determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, the sum of (a) the interest expense of such Person and its
Restricted Subsidiaries for such period, on a Consolidated basis, including,
without limitation, (i) amortization of debt discount, (ii) the net costs
associated with Interest Rate Agreements, Currency Hedging Agreements and
Commodity Price Protection Agreements (including amortization of discounts),
(iii) the interest portion of any deferred payment obligation and (iv) accrued
interest, plus (b) (i) the interest component of the Capital Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period and (ii) all capitalized interest of
such Person and its Restricted Subsidiaries plus (c) the interest expense under
any Guaranteed Debt of such Person and any Restricted Subsidiary to the extent
not included under clause (a)(iv) above, in each case as determined on a
Consolidated basis in accordance with GAAP.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period on a Consolidated basis as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income (or loss), by
excluding, without duplication, (i) all extraordinary gains or losses (less all
fees and expenses relating thereto), (ii) the portion of net income (or loss) of
such Person and its Restricted Subsidiaries on a Consolidated basis allocable to
minority interests in unconsolidated Persons to the extent that cash dividends
or distributions have not actually been received by such Person or one of its
Consolidated Restricted
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Subsidiaries, (iii) net income (or loss) of any Person combined with such Person
or any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) any gain or
loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (v) net gains (or losses) (less all fees and expenses relating
thereto) in respect of dispositions of assets other than in the ordinary course
of business, (vi) the net income of any Restricted Subsidiary to the extent that
the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (vii) any restoration to income of any
contingency reserve, except to the extent provision for such reserve was made
out of income accrued at any time following the date of the Indenture, or (viii)
any gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness of such Person.
"Consolidated Net Tangible Assets" of any Person means, as of any date, (a)
all amounts that would be shown as assets on a Consolidated balance sheet of
such Person and its Subsidiaries prepared in accordance with GAAP, less (b) the
amount thereof constituting goodwill and other intangible assets as calculated
in accordance with GAAP.
"Consolidated Net Worth" of any Person, as of a date, means the
Consolidated stockholders' equity (excluding Redeemable Capital Stock) of such
Person and its Restricted Subsidiaries, as of such date, as determined in
accordance with GAAP.
"Consolidated Non-cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its subsidiaries on a Consolidated basis for such period, as determined in
accordance with GAAP (excluding any non-cash charge which requires an accrual or
reserve for cash charges for any future period).
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Currency Hedging Arrangements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar agreements
or arrangements designed to protect against the fluctuations in currency values.
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of related transactions, a member of the board of directors of the Company who
does not have any material direct or indirect financial interest in or with
respect to such transaction or series of related transactions.
"Equity Dutch Auction" shall mean the tender offer of the Company, dated
February 25, 1997, to purchase up to 5 million shares of Common Stock on the
terms described therein, as such tender offer may be supplemented or amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy. Fair Market Value shall be determined by the board
of directors of the Company acting in good faith and shall be evidenced by a
resolution of the board of directors.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, which
are in effect on the date of the Indenture.
"Guarantee" means the guarantee by any Guarantor of the Company's Indenture
Obligations.
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"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
below guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an agreement (i)
to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such Indebtedness against loss, (iii) to supply funds to, or in
any other manner invest in, the debtor (including any agreement to pay for
property or services without requiring that such property be received or such
services be rendered), (iv) to maintain working capital or equity capital of the
debtor, or otherwise to maintain the net worth, solvency or other financial
condition of the debtor or (v) otherwise to assure a creditor against loss;
provided that the term "guarantee" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"Guarantor" means any Restricted Subsidiary which is a guarantor of the
Notes, including any Person that is required after the date of the Indenture to
execute a guarantee of the Notes pursuant to the "Limitations on Liens" covenant
or the "Limitation on Issuance of Guarantees of Indebtedness" covenant until a
successor replaces such party pursuant to the applicable provisions of the
Indenture and, thereafter, shall mean such successor.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities, (ii) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments, (iii)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade payables arising in the ordinary course of business, (iv) all
obligations under Interest Rate Agreements, Currency Hedging Agreements or
Commodity Price Protection Agreements of such Person, (v) all Capital Lease
Obligations of such Person, (vi) all Indebtedness referred to in clauses (i)
through (v) above of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien, upon or
with respect to property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, (vii) all Guaranteed Debt of such
Person, (viii) all Redeemable Capital Stock issued by such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends, and (ix) any amendment, supplement, modification,
deferral, renewal, extension, refunding or refinancing of any liability of the
types referred to in clauses (i) through (viii) above. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by, the
Fair Market Value of such Redeemable Capital Stock, such Fair Market Value to be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Indenture Obligations" means the obligations of the Company and any other
obligor under the Indenture or under the Notes including any Guarantor, to pay
principal of, premium, if any, and interest when due and payable, and all other
amounts due or to become due under or in connection with the Indenture, the
Notes and the performance of all other obligations to the Trustee and the
holders under the Indenture and the Notes, according to the respective terms
thereof.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
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"Investment" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees), or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase, acquisition or ownership by such Person of any Capital Stock, bonds,
notes, debentures or other securities issued or owned by any other Person and
all other items that would be classified as investments on a balance sheet
prepared in accordance with GAAP, and shall include (i) the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the Fair Market
Value of the Capital Stock (or any other Investment), held by the Company or any
of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a
Restricted Subsidiary. For purposes of the definition of "Unrestricted
Subsidiary" and the "Limitation on Restricted Payments" covenant, (i)
"Investment" shall include the Fair Market Value of the assets (net of
liabilities (other than the liabilities to the Company or any of its Restricted
Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary, (ii) the Fair Market Value
of the assets (net of liabilities (other than liabilities to the Company or any
of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its Fair
Market Value at the time of such transfer.
"Lien" means any mortgage or deed of trust, charge, pledge, lien (statutory
or otherwise), privilege, security interest, assignment, deposit, arrangement,
easement, hypothecation, claim, preference, priority or other encumbrance upon
or with respect to any property of any kind (including any conditional sale,
capital lease or other title retention agreement, any leases in the nature
thereof, and any agreement to give any security interest), real or personal,
movable or immovable, now owned or hereafter acquired.
"Maturity" means, when used with respect to the Notes, the date on which
the principal of the Notes becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity, the Offer Date or the
redemption date and whether by declaration of acceleration, Offer in respect of
Excess Proceeds, Change of Control Offer in respect of a Change of Control, call
for redemption or otherwise.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any Person,
the proceeds thereof (without duplication in respect of all Asset Sales) in the
form of cash or Temporary Cash Investments including payments in respect of
deferred payment obligations when received in the form of, or stock or other
assets when disposed of for, cash or Temporary Cash Investments (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary) net of (i) brokerage commissions and other
reasonable fees and expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of such Asset Sale, (iv) amounts required to be paid to
any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets subject to the Asset Sale and (v) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an officers'
certificate delivered to the Trustee and (b) with respect to any issuance or
sale of Capital Stock or options, warrants or rights to purchase Capital Stock,
or debt securities or Capital Stock that have been converted into or exchanged
for Capital Stock as referred to under "-- Certain Covenants -- Limitation on
Restricted Payments," the proceeds of such issuance or sale in the form of cash
or Temporary Cash Investments including payments in respect of deferred payment
obligations when received in the form of, or stock or other assets when disposed
of for, cash or Temporary Cash Investments (except to the extent that such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary), net of attorney's fees, accountant's fees and brokerage,
consultation, underwriting and other fees and expenses actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
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"Pari Passu Indebtedness" means (a) any Indebtedness of the Company that is
pari passu in right of payment to the Notes and (b) with respect to any
Guarantee, Indebtedness which ranks pari passu in right of payment to such
Guarantee.
"Permitted Agreement" means any written agreement between a Permitted
Venture, on the one hand, and the Company or any Restricted Subsidiary, on the
other hand, pursuant to which the Company sells products produced by the Company
in the ordinary course of its business at a purchase price not less than the
Company's cost.
"Permitted Holders" means (a) Maurice M.Taylor, Jr., (b) trusts for the
benefit of Mr. Taylor or for the benefit of Mr. Taylor's spouse and children or
trusts for the benefit of any such trust, (c) entities controlled by Mr. Taylor,
(d) in the event of the death or incapacity of Taylor, his estate (and
executors, administrators, committees or other personal representatives), heirs
or testamentary legatees and (e) MascoTech, Inc. and any of its subsidiaries and
any successors of MascoTech, Inc. and such subsidiaries.
"Permitted Indebtedness" means:
(i) Indebtedness outstanding at any time incurred pursuant to the Bank
Credit Facility in an aggregate principal amount not to exceed an amount
equal to the greater of (A) $250 million, less any amount of Indebtedness
permanently repaid and (B) the sum of (x) 90% of the consolidated book
value of the accounts receivable of the Company and its Restricted
Subsidiaries plus (y) 60% of the consolidated book value of the inventory
of the Company and its Restricted Subsidiaries, in each case determined in
accordance with GAAP;
(ii) Indebtedness of the Company pursuant to the Notes and
Indebtedness of any Guarantor pursuant to a Guarantee of the Notes;
(iii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the date of the Indenture and listed on a schedule thereto;
(iv) Indebtedness of the Company owing to a Restricted Subsidiary;
provided that any Indebtedness of the Company owing to a Restricted
Subsidiary is made pursuant to an intercompany note in the form attached to
the Indenture and is subordinated in right of payment from and after such
time as the Notes shall become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the Company's
obligations under the Notes; provided, further, that any disposition,
pledge or transfer of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to a Restricted Subsidiary) shall be deemed
to be an incurrence of such Indebtedness by the Company not permitted by
this clause (iv);
(v) Indebtedness of a Wholly Owned Restricted Subsidiary owing to the
Company or another Wholly Owned Restricted Subsidiary; provided that any
such Indebtedness is made pursuant to an intercompany note in the form
attached to the Indenture; provided, further, that (a) any disposition,
pledge or transfer of any such Indebtedness to a Person shall be deemed to
be an incurrence of such Indebtedness by the obligor not permitted by this
clause (v), (other than the Company or any wholly-owned subsidiary) and (b)
any transaction pursuant to which any Wholly Owned Restricted Subsidiary,
which has Indebtedness owing to the Company or any other Wholly Owned
Restricted Subsidiary, ceases to be a Wholly Owned Restricted Subsidiary
shall be deemed to be the incurrence of Indebtedness by such Wholly Owned
Restricted Subsidiary that is not permitted by this clause (v);
(vi) guarantees of any Restricted Subsidiary made in accordance with
the provisions of "-- Certain Covenants -- Limitation on Issuances of
Guarantees of Indebtedness;"
(vii) obligations of the Company entered into in the ordinary course
of business (a) pursuant to Interest Rate Agreements designed to protect
the Company or any Restricted Subsidiary against fluctuations in interest
rates in respect of Indebtedness of the Company or any Restricted
Subsidiary as long as such obligations do not exceed the aggregate
principal amount of such Indebtedness then outstanding, (b) under any
Currency Hedging Arrangements, which if related to Indebtedness do not
increase the amount of such Indebtedness other than as a result of foreign
exchange fluctuations, or
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(c) under any Commodity Price Protection Agreements, which if related to
Indebtedness do not increase the amount of such Indebtedness other than as
a result of foreign exchange fluctuations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries
represented by Capital Lease Obligations or Purchase Money Obligations or
other Indebtedness incurred or assumed in connection with the acquisition
or development of real or personal, movable or immovable, property in each
case incurred for the purpose of financing or refinancing all or any part
of the purchase price or cost of construction or improvement of property
used in the business of the Company, in an aggregate principal amount
pursuant to this clause (viii) not to exceed $20 million outstanding at any
time; provided that the principal amount of any Indebtedness permitted
under this clause (viii) did not in each case at the time of incurrence
exceed the Fair Market Value, as determined by the Company in good faith,
of the acquired or constructed asset or improvement so financed;
(ix) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from guarantees or letters of credit, surety bonds or performance bonds
securing any obligation of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in any case incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary of the Company (other than guarantees of Indebtedness incurred
by any Person acquiring all or any portion of such business, assets or
Restricted Subsidiary of the Company for the purpose of financing such
acquisition), in a principal amount not to exceed the actual proceeds
actually received by the Company or any Restricted Subsidiary in connection
with such disposition;
(x) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (ii) and (iii) of this definition of "Permitted
Indebtedness," including any successive refinancings so long as the
borrower under such refinancing is the Company or, if not the Company, the
same as the borrower of the Indebtedness being refinanced and the aggregate
principal amount of Indebtedness represented thereby is not increased by
such refinancing plus the lesser of (I) the stated amount of any premium or
other payment required to be paid in connection with such a refinancing
pursuant to the terms of the Indebtedness being refinanced or (II) the
amount of premium or other payment actually paid at such time to refinance
the Indebtedness, plus, in either case, the amount of expenses of the
Company incurred in connection with such refinancing and (A) in the case of
any refinancing of Indebtedness that is Subordinated Indebtedness, such new
Indebtedness is made subordinated to the Notes at least to the same extent
as the Indebtedness being refinanced and (B) in the case of Pari Passu
Indebtedness or Subordinated Indebtedness, as the case may be, such
refinancing does not reduce the Average Life to Stated Maturity or the
Stated Maturity of such Indebtedness; and
(xi) Indebtedness of the Company and its Subsidiaries in addition to
that described in clauses (i) through (x) above, and any renewals,
extensions, substitutions, refinancings or replacements of such
Indebtedness, so long as the aggregate principal amount of all such
Indebtedness shall not exceed $20 million outstanding at any one time in
the aggregate.
"Permitted Investment" means (i) Investments in any Restricted Subsidiary
or any Person which, as a result of such Investment, (a) becomes a Restricted
Subsidiary or (b) is merged or consolidated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or any Restricted Subsidiary, provided, in the case of both (a) and (b), that
such Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
Investment; (ii) Indebtedness of the Company or a Restricted Subsidiary
described under clauses (iv), (v) and (vi) of the definition of "Permitted
Indebtedness;" (iii) Investments in any of the Notes; (iv) Temporary Cash
Investments; (v) Investments acquired by the Company or any Restricted
Subsidiary in connection with an Asset Sale permitted under "-- Certain
Covenants -- Limitation on Sale of Assets" to the extent such Investments are
non-cash proceeds as permitted under such covenant; (vi) Investments in
existence on the date of the Indenture; (vii) guarantees of Indebtedness of a
Wholly Owned Restricted Subsidiary given by the Company or another Wholly Owned
Restricted Subsidiary and guarantees of Indebtedness of the Company given by any
Restricted Subsidiary, in each case, in accordance with the terms of the
Indenture; (viii) Investments in a Permitted Venture in an aggregate amount
measured at the time of Investment not to
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exceed at any one time outstanding 20% of Consolidated Net Tangible Assets of
the Company at or prior to June 30, 1999 and 15% of Consolidated Net Tangible
Assets of the Company on July 1, 1999 and thereafter, in each case as of the end
of the last fiscal quarter; and (ix) Investments in an aggregate amount not to
exceed $20 million at any one time outstanding, of which up to $10 million may
consist of Capital Stock of the Company. In connection with any assets or
property contributed or transferred to any Person as an Investment, such
property and assets shall be equal to the Fair Market Value (as determined by
the Company's Board of Directors) at the time of Investment.
"Permitted Venture" means any entity (i) in which the Company or any
Restricted Subsidiary owns Capital Stock, (ii) which is not a Restricted
Subsidiary and in which no other Affiliate of the Company (other than a
Restricted Subsidiary) has an Investment and (iii) which operates in the
business of the Company or its Restricted Subsidiaries existing on the date of
the Indenture or in businesses reasonably related thereto.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, any Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company and any additions and accessions
thereto, which are purchased by at any time after the Notes are issued; provided
that (i) the security agreement or condition sales or other title retention
contract pursuant to which the Lien on such assets is created (collectively a
"Purchase Money Security Agreement") shall be entered into within 90 days after
the purchase or substantial completion of the construction of such assets and
shall at all times be confined solely to the assets so purchased or acquired,
any additions and accessions thereto and any proceeds therefrom, (ii) at no time
shall the aggregate principal amount of the outstanding Indebtedness secured
thereby be increased, except in connection with the purchase of additions and
accession thereto and except in respect of fees and other obligations in respect
of such Indebtedness and (iii) (A) the aggregate outstanding principal amount of
Indebtedness secured thereby (determined on a per asset basis is the case of any
additions and accessions) shall not at the time such Purchase Money Security
Agreement in entered into exceed 100% of the purchase price to the Company of
the assets subject thereto or (B) the Indebtedness secured thereby shall be with
recourse solely to the assets so purchased or acquired, any additions and
accessions thereto and any proceeds therefrom.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be, required to be redeemed prior to any Stated Maturity of the
principal of the Notes or is redeemable at the option of the holder thereof at
any time prior to any such Stated Maturity, or is convertible into or
exchangeable for debt securities at any time prior to any such Stated Maturity
at the option of the holder thereof.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Senior Guarantor Indebtedness" means Indebtedness of a Guarantor which
secures or guarantees any Senior Indebtedness.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the dates specified in such Indebtedness as the
fixed date on which the principal of such Indebtedness or such installment of
interest, as the case may be, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor subordinated in right of payment to the Notes or the Guarantee of such
Guarantor, as the case may be.
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"Subsidiary" means any Person, a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries; provided that any Unrestricted Subsidiary shall not be
deemed a Subsidiary under the Notes.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof, and
guaranteed fully as to principal, premium, if any, and interest by the United
States of America, (ii) any certificate of deposit (or, with respect to non-U.S.
banking institutions, similar instruments) maturing not more than one year after
the date of acquisition, issued by, or time deposit of, a commercial banking
institution that is a member of the Federal Reserve System or a commercial
banking institution organized and located in a country recognized by the United
States of America, in each case, that has combined capital and surplus and
undivided profits of not less than $500 million (or the foreign currency
equivalent thereof), whose debt has a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's Investors
Service, Inc. ("Moody's") or any successor rating agency or "A-1" (or higher)
according to Standard & Poor's Rating Group, a division of McGraw Hill, Inc.
("S&P"), or any successor rating agency, (iii) commercial paper, maturing not
more than one year after the date of acquisition, issued by a corporation (other
than an Affiliate or Subsidiary of the Company) organized and existing under the
laws of the United States of America with a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P and (iv) any money market deposit accounts issued
or offered by a domestic commercial bank or a commercial banking institution
organized and located in a country recognized by the United States of America,
in each case having capital and surplus in excess of $500 million (or the
foreign currency equivalent thereof); provided that the short term debt of such
commercial bank has a rating, at the time of Investment, of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, or
any successor statute.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary if all of the
following conditions apply: (a) neither the Company nor any of its Subsidiaries
provides credit support for Indebtedness of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (b) such
Subsidiary is not liable, directly or indirectly, with respect to any
Indebtedness other than Unrestricted Subsidiary Indebtedness, (c) any Investment
in such Subsidiary made as a result of designating such Subsidiary an
Unrestricted Subsidiary shall not violate the provisions of the "-- Certain
Covenants -- Limitation on Unrestricted Subsidiaries" covenant and such
Unrestricted Subsidiary is not party to any agreement, contract, arrangement or
understanding at such time with the Company or any Subsidiary of the Company
other than a Permitted Agreement unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company or, in the event such condition is
not satisfied, the value of such agreement, contract, arrangement or
understanding to such Subsidiary shall be deemed a Restricted Investment, and
(d) such Unrestricted Subsidiary does not own any Capital Stock in any
Subsidiary of the Company which is not simultaneously being designated an
Unrestricted Subsidiary. Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by filing with the Trustee a board
resolution giving effect to such designation and an officers' certificate
certifying that such designation complies with the foregoing conditions and
shall be deemed a Restricted Payment on the date of designation in an amount
equal to the greater of (1) the net book value of such Investment or (2) the
fair market value of such Investment as determined in good faith by the
Company's Board of Directors. The Board of Directors of the Company may
designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided that
(i) immediately after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the restrictions under "-- Certain Covenants
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- -- Limitation on Indebtedness " and (ii) all Indebtedness of such Subsidiary
shall be deemed to be incurred on the date such Subsidiary becomes a Subsidiary.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary (i) as to which neither the Company
nor any Subsidiary is directly or indirectly liable (by virtue of the Company or
any such Subsidiary being the primary obligor on, guarantor of, or otherwise
liable in any respect to, such Indebtedness), except Guaranteed Debt of the
Company or any Subsidiary to any Affiliate, in which case (unless the incurrence
of such Guaranteed Debt resulted in a Restricted Payment at the time of
incurrence) the Company shall be deemed to have made a Restricted Payment equal
to the principal amount of any such Indebtedness to the extent guaranteed at the
time such Affiliate is designated an Unrestricted Subsidiary and (ii) which,
upon the occurrence of a default with respect thereto, does not result in, or
permit any holder of any Indebtedness of the Company or any Restricted
Subsidiary to declare, a default on such Indebtedness of the Company or any
Restricted Subsidiary or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity.
"Voting Stock" means Capital Stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a corporation (irrespective of whether or not at the time Capital
Stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency).
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which
is owned by the Company or another Wholly Owned Subsidiary.
BOOK-ENTRY DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form. Except as described in the next paragraph, the Notes initially will be
represented by a single, permanent global Note, in definitive, fully registered
form without interest coupons (the "Global Note") and will be deposited with the
Trustee as custodian for DTC and registered in the name of Cede & Co. or such
other nominee as DTC may designate.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold securities
for its participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Upon the issuance of the Global Note, DTC or its custodian will credit, on
its internal system, the respective principal amount of the individual
beneficial interests represented by such Global Note to the accounts of persons
who have accounts with DTC. Such accounts initially will be designated by or on
behalf of the Initial Purchasers. Ownership of beneficial interests in the
Global Note will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
that ownership will be effected only though, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
QIBs may hold their interests in the Global Note directly through DTC if they
are participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC or its nominee is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole record owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owners of an interest
in
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the Global Note will be able to transfer that interest except in accordance with
DTC's applicable procedures in addition to those provided for under the
Indenture.
Payments of the principal of, premium, if any, and interest on the Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. Neither the Company, the Trustee, nor any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal of, premium, if any, or interest in respect of the Global Note will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial ownership interests in the principal amount of such Global
Note, as shown on the records of DTC or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Note held through such participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of customers registered in the names of nominees for such customers.
Such payments will be the responsibility of such participants.
Transfer between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a Holder requires physical delivery of
Certificated Notes for any reason, including to sell Notes to persons in states
which require such delivery of such Notes or to pledge such Notes, such holder
must transfer its interest in the Global Note, in accordance with the normal
procedures of DTC and the procedures set forth in the Indenture.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Note are credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Note
for Certificated Notes, which it will distribute to its participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). In addition, if DTC is at any time unwilling or unable to continue as
a depositary for the Global Note and a successor depositary is not appointed by
the Company within 90 days, the Company will issue Certificated Notes in
exchange for the Global Note.
70
<PAGE> 72
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") among the Company and each of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), Smith Barney Inc., Schroder
Wertheim & Co. Incorporated, Dean Witter Reynolds Inc. and A.G. Edwards & Sons,
Inc. (collectively, the "Underwriters"), the Company has agreed to sell to each
of the Underwriters and each of the Underwriters severally has agreed to
purchase from the Company the aggregate principal amount of the Notes set forth
opposite its name below. The Purchase Agreement provides that the obligations of
the Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the Notes if any are
purchased.
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
----------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $
Smith Barney Inc. ..........................................
Schroder Wertheim & Co. Incorporated........................
Dean Witter Reynolds Inc....................................
A.G. Edwards & Sons, Inc....................................
------------
Total.......................................... $150,000,000
============
</TABLE>
The Underwriters propose to offer the Notes to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of % of the principal
amount of the Notes. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of % of the principal amount of the Notes to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
There is no public trading market for the Notes and the Company does not
intend to apply for listing of the Notes on any national securities exchange or
for quotation of the Notes on any automated dealer quotation system. The Company
has been advised by the Underwriters that they presently intend to make a market
in the Notes after the consummation of the Offering contemplated hereby,
although they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. No assurance can be
given as to the liquidity of the trading market for the Notes or that an active
public market for the Notes will develop. If an active public trading market for
the Notes does not develop, the market price and liquidity of the Notes may be
adversely affected. If the Notes are traded, they may trade at a discount from
their initial offering price, depending on prevailing interest rates, the market
for similar securities, the performance of the Company and certain other
factors.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company has agreed that it will not, without the prior written consent
of Merrill Lynch, for a period of 90 days after the date of this Prospectus,
directly or indirectly, issue, sell or offer to sell, grant any option for the
sale of, or otherwise dispose of, or register for sale, any debt securities,
other than the initial sale of the Notes.
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters and certain selling group members to
bid for and purchase the Notes. As an exception to these rules, the Underwriters
are permitted to engage in certain transactions that stabilize the price of the
Notes. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
the offering, i.e., if they sell more Notes than are set forth on the cover page
of this Prospectus, the Underwriters may reduce that short position by
purchasing Notes in the open market.
71
<PAGE> 73
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Merrill Lynch, Smith Barney Inc., and Schroder Wertheim & Co. Incorporated
served as underwriters of the Company's equity offering in June 1995. The
Company has retained Smith Barney Inc. to act as Dealer Manager in connection
with the Offer to Purchase, for which services Smith Barney Inc. will receive
customary fees.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Armstrong, Teasdale, Schlafly & Davis (a partnership including
professional corporations), St. Louis, Missouri. Certain legal matters relating
to the Notes offered hereby will be passed upon for the Underwriters by Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), New York, New York. Armstrong, Teasdale, Schlafly & Davis will
rely on Fried, Frank, Harris, Shriver & Jacobson for purposes of New York law,
and Fried, Frank, Harris, Shriver & Jacobson will rely on Armstrong, Teasdale,
Schlafly & Davis for purposes of Illinois law.
EXPERTS
The consolidated financial statements of Titan Wheel International, Inc.
and subsidiaries as of December 31, 1994 and 1995 and for each of the years in
the three-year period ended December 31, 1995, included in this Prospectus, have
been so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given upon the authority of said firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy and information statements and other information
filed by the Company with the Commission may be inspected and copied at the
offices of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and the Commission's Regional Offices at 7 World Trade Center, Suite
1300, New York, New York 10048 and 500 West Madison St., Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
Titan's Common Stock is listed on the New York Stock Exchange under the
symbol "TWI." Reports, proxy and information statements and other information
concerning Titan may be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
This Prospectus, which constitutes part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act, omits certain of the information contained in the Registration
Statement. Reference is hereby made to the Registration Statement and the
exhibits thereto, which may be obtained at the public reference facilities
maintained by the Commission as provided in the preceding paragraph, for further
information with respect to the Company and the securities offered hereby.
72
<PAGE> 74
Statements contained herein concerning the provisions of such documents are
necessarily summaries of such documents, and each such statement is qualified in
its entirety by reference to the copy of the applicable document filed with the
Commission.
In accordance with the Indenture governing the Notes, Titan will furnish
the holders of the Notes with annual reports containing audited financial
information and quarterly reports containing summary financial information for
the first three quarters of each fiscal year.
73
<PAGE> 75
TITAN WHEEL INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
TITAN WHEEL INTERNATIONAL, INC.
-- CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets as of December 31, 1994 and
1995................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994
and 1995............................................... F-4
Consolidated Statements of Changes in Stockholders' Equity
as of December 31, 1993, 1994
and 1995............................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994
and 1995............................................... F-6
Notes to Consolidated Financial Statements................ F-7
-- CONDENSED INTERIM FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets (Unaudited) as of
December 31, 1995 and September 30, 1996............... F-24
Consolidated Condensed Statements of Operations
(Unaudited) for the Three and Nine-Month Periods Ended
September 30, 1995 and 1996............................ F-25
Consolidated Condensed Statements of Cash Flows
(Unaudited) for the Nine-Month Periods Ended September
30, 1995 and 1996...................................... F-26
Notes to Unaudited Consolidated Condensed Interim
Financial Statements................................... F-27
</TABLE>
F-1
<PAGE> 76
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Titan Wheel International, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of cash flows and of changes in
stockholders' equity present fairly, in all material respects, the financial
position of Titan Wheel International, Inc. and its subsidiaries at December 31,
1994 and 1995, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
St. Louis, Missouri
February 13, 1996
F-2
<PAGE> 77
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
---- ----
(ALL AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 7,241 $ 14,211
Marketable securities..................................... 31 32
Accounts receivable (net of allowance of $2,213 and
$4,970, respectively).................................. 70,179 107,137
Inventories (Note 3)...................................... 106,963 124,928
Prepaid and other current assets.......................... 7,944 18,592
-------- --------
Total current assets................................. 192,358 264,900
Property, plant and equipment, net (Note 4)................. 143,323 178,286
Other assets (Note 6)....................................... 28,429 17,701
Goodwill (Note 5)........................................... 36,350 51,248
-------- --------
Total assets......................................... $400,460 $512,135
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt (Note 7)................ $ 3,195 $ 26,419
Accounts payable.......................................... 35,989 58,592
Other current liabilities (Note 8)........................ 33,212 28,631
-------- --------
Total current liabilities............................ 72,396 113,642
Deferred income taxes (Note 11)............................. 10,778 15,704
Other long-term liabilities (Note 9)........................ 31,209 24,612
Long-term debt (Note 7)..................................... 178,341 142,305
-------- --------
Total liabilities.................................... 292,724 296,263
-------- --------
Contingencies (Notes 18 and 19)
Stockholders' equity (Note 17)
Preferred stock, Class A, no par, $7.50 stated value,
4,000,000 shares authorized, 1,000,000 and 0 issued and
outstanding, respectively.............................. 7,500 0
Common stock, no par, 60,000,000 shares authorized,
16,275,294 and 22,477,086 issued and outstanding,
respectively........................................... 16 23
Additional paid-in capital................................ 62,587 152,283
Common stock warrants..................................... 10,000 0
Retained earnings......................................... 27,220 64,142
Cumulative translation adjustment......................... 413 8
Treasury stock at cost: 0 and 78,817 shares,
respectively........................................... 0 (584)
-------- --------
Total stockholders' equity........................... 107,736 215,872
-------- --------
Total liabilities and stockholders' equity.................. $400,460 $512,135
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 78
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
---- ---- ----
(ALL AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C> <C>
Net sales (Note 10)......................................... $150,441 $407,000 $623,183
Cost of sales............................................... 125,172 338,568 507,457
-------- -------- --------
Gross profit................................................ 25,269 68,432 115,726
Selling, general and administrative expenses................ 10,722 28,343 40,615
Research and development expenses........................... 1,405 2,093 2,056
-------- -------- --------
Income from operations...................................... 13,142 37,996 73,055
Other (income) expense
Interest expense.......................................... 3,242 8,503 12,045
Minority interest......................................... 0 0 1,210
Other..................................................... (214) (614) (3,480)
-------- -------- --------
Income before income taxes.................................. 10,114 30,107 63,280
Provision for income taxes (Note 11)........................ 3,753 11,627 25,297
-------- -------- --------
Net income.................................................. $ 6,361 $ 18,480 $ 37,983
======== ======== ========
Earnings per common share (Note 16):
Primary................................................... $ .46 $ 1.14 $ 1.91
Fully diluted............................................. .46 .89 1.50
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 79
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
PREFERRED PREFERRED COMMON COMMON
SHARES STOCK SHARES STOCK
--------- --------- --------- ------
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA
<S> <C> <C> <C> <C>
BALANCE JANUARY 1, 1993............ 0 $ 0 13,688,116 $14
Net income.......................
Dividends paid on common stock...
Cancellation of pledged shares
held in escrow................. (5,475,616)
Shares issued in initial public
offering....................... 5,287,500
Shares issued in Dyneer
transaction.................... 2,317,664 2
Foreign currency translation
adjustment.....................
---------- ------- ---------- ---
BALANCE DECEMBER 31, 1993.......... 0 0 15,817,664 16
Net income.......................
Dividends paid on common stock...
Exercise of Dyneer options....... 441,392
Issuance of stock under 401(k)
Plan........................... 16,238
Preferred stock issued........... 1,000,000 7,500
Dividends on preferred stock.....
Common stock warrants issued.....
Foreign currency translation
adjustment.....................
---------- ------- ---------- ---
BALANCE DECEMBER 31, 1994.......... 1,000,000 7,500 16,275,294 16
Net income.......................
Dividends paid on common stock...
Shares issued in public
offering....................... 4,312,500 5
Conversion of subordinated
notes.......................... 1,405,120 2
Dyneer contingent
consideration.................. 426,688
Exercise of Dyneer options....... 48,391
Issuance of stock under 401(k)
plan........................... 87,910
Repurchase of preferred stock.... (1,000,000) (7,500)
Dividends on preferred stock.....
Repurchase of common stock
warrants.......................
Foreign currency translation
adjustment.....................
Treasury stock transactions...... (78,817)
---------- ------- ---------- ---
BALANCE DECEMBER 31, 1995.......... 0 $ 0 22,477,086 $23
========== ======= ========== ===
<CAPTION>
ADDITIONAL COMMON CUMULATIVE
PAID-IN STOCK RETAINED TRANSLATION TREASURY
CAPITAL WARRANTS EARNINGS ADJUSTMENT STOCK
---------- -------- -------- ----------- --------
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1993............ $ 3,588 $ 0 $ 3,036 $ 2 $ 0
Net income....................... 6,361
Dividends paid on common stock... (195)
Cancellation of pledged shares
held in escrow.................
Shares issued in initial public
offering....................... 32,206
Shares issued in Dyneer
transaction.................... 21,994
Foreign currency translation
adjustment..................... (280)
-------- -------- ------- ----- -----
BALANCE DECEMBER 31, 1993.......... 57,788 0 9,202 (278) 0
Net income....................... 18,480
Dividends paid on common stock... (432)
Exercise of Dyneer options....... 4,602
Issuance of stock under 401(k)
Plan........................... 197
Preferred stock issued...........
Dividends on preferred stock..... (30)
Common stock warrants issued..... 10,000
Foreign currency translation
adjustment..................... 691
-------- -------- ------- ----- -----
BALANCE DECEMBER 31, 1994.......... 62,587 10,000 27,220 413 0
Net income....................... 37,983
Dividends paid on common stock... (1,031)
Shares issued in public
offering....................... 64,560
Conversion of subordinated
notes.......................... 17,414
Dyneer contingent
consideration.................. 4,717
Exercise of Dyneer options....... 600
Issuance of stock under 401(k)
plan........................... 1,353
Repurchase of preferred stock....
Dividends on preferred stock..... (30)
Repurchase of common stock
warrants....................... (10,000)
Foreign currency translation
adjustment..................... (405)
Treasury stock transactions...... 1,052 (584)
-------- -------- ------- ----- -----
BALANCE DECEMBER 31, 1995.......... $152,283 $ 0 $64,142 $ 8 $(584)
======== ======== ======= ===== =====
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 80
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
---- ---- ----
(ALL AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 6,361 $ 18,480 $ 37,983
Adjustments to reconcile net income to net cash provided
by (used for) operating activities
Depreciation and amortization.......................... 5,333 17,428 23,428
(Increase) decrease in current assets, excluding the
effects of acquisitions:
Accounts receivable.................................... 1,603 (24,845) 38
Inventories............................................ (10,306) (25,493) 7,161
Prepaid and other current assets....................... 3,765 (6,423) (7,314)
Increase (decrease) in current liabilities, excluding the
effects of acquisitions:
Accounts payable....................................... (8,019) 5,830 (4,624)
Other current liabilities.............................. 290 8,251 (16,124)
Other..................................................... (5,804) (1,598) (3,057)
-------- -------- --------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES... (6,777) (8,370) 37,491
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired (Note 2)............... (3,992) (41,904) (17,143)
Capital expenditures...................................... (5,427) (15,249) (20,191)
(Purchase) sale of marketable securities.................. (3,500) 3,469 0
Other..................................................... 98 0 0
-------- -------- --------
NET CASH (USED FOR) INVESTING ACTIVITIES............... (12,821) (53,684) (37,334)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of preferred stock & warrants...... 0 17,500 0
Repurchase of preferred stock & warrants.................. 0 0 (17,500)
Proceeds from long-term borrowings........................ 1,000 54,144 58,120
Repayments on long-term debt.............................. (87,936) (27,524) (97,529)
Proceeds from stock offerings............................. 32,206 0 64,860
Proceeds from convertible note offering................... 103,500 0 0
Payments of financing fees................................ (3,448) (344) (102)
Dividends paid............................................ (90) (462) (1,061)
Other..................................................... 0 137 25
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 45,232 43,451 6,813
Net increase (decrease) in cash and cash equivalents........ 25,634 (18,603) 6,970
Cash and cash equivalents, beginning of year................ 210 25,844 7,241
-------- -------- --------
Cash and cash equivalents, end of year...................... $ 25,844 $ 7,241 $ 14,211
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 81
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITIONS OF THE COMPANY
Titan Wheel International, Inc. ("Titan" or the "Company"), which was
incorporated in 1983, grew during the 1980's through acquiring, revitalizing and
amalgamating the operations of several of the largest wheel manufacturers
serving the agricultural and off-highway construction equipment markets. In
1990, Titan was acquired in a management led buyout by investors which included
Maurice M. Taylor, Jr., the Company's Chief Executive Officer and MascoTech,
Inc. ("MascoTech"). The Company completed its initial public offering in May
1993, resulting in issuance of 5,287,500 shares and net proceeds of $32.2
million. A portion of these proceeds was used to re-pay $9 million of
subordinated debt to Runnymede Development Corporation and shares pledged to
secure the debt were returned.
Acquisitions
Each of the following acquisitions was accounted for under the purchase
method of accounting.
Automotive Wheels acquisition
Effective February 28, 1993, the Company acquired all of the outstanding
capital stock of Automotive Wheels, Inc. ("Automotive Wheels") from MascoTech
for $8.8 million. Automotive Wheels assembles steel wheels for sale to original
equipment manufacturers ("OEMs") in the North American automobile industry. It
also manufactures steel and aluminum rims which are sold to manufacturers of
wheels for the automobile and light truck after-market. Operating results of
Automotive Wheels from February 28, 1993, have been included in the Consolidated
Statement of Operations.
Dyneer Corporation acquisition
During November 1993, the Company completed its acquisition of Dyneer
Corporation ("Dyneer"), a company engaged in the manufacturing of wheels and
tires for lawn and garden equipment, golf cars, recreation and industrial
trailers, traction enhancing differential systems, mechanical transmission
components and systems used in transportation vehicles and mobile equipment.
Operating results of Dyneer from November 12, 1993, have been included in the
Consolidated Statement of Operations.
The Company exchanged 2,317,664 shares of its common stock and options to
purchase an additional 441,392 shares of its common stock for all of Dyneer's
outstanding common stock and all options and warrants to purchase Dyneer common
stock. The exchange was preliminarily valued at approximately $28.4 million and
resulted in the recording of goodwill in the amount of $23.1 million, which is
being amortized on a straight-line basis over 40 years. In 1994, goodwill was
increased by $11.2 million resulting from the reallocation of preliminary
estimates and adjustment of certain pre-acquisition contingencies, the most
significant of which related to environmental liabilities.
The purchase agreement provided for an earnout based upon the performance
of Tractech, a division of Dyneer, and an earnout based upon the extent of
environmental remediation costs incurred by Dyneer. During 1994, the Company
reached an agreement to settle both earnouts for a total of 426,688 shares of
Titan's common stock and options to purchase 82,791 shares of the Company's
common stock at an exercise price of $.31 per share. The shares of Titan common
stock and options were issued on February 1, 1995. The consideration was
recorded as a purchase price accounting adjustment based on the fair value of
the shares and options on the issuance date. The transaction discussed above
resulted in additional goodwill of $4.4 million in 1995, which is being
amortized over its remaining life.
Dotson Wheel acquisition
During November 1993, the Company completed the purchase of certain assets
of Dotson Wheel, a producer of steel wheels and rims for
earthmoving/construction equipment, for a purchase price of
F-7
<PAGE> 82
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
approximately $5.1 million. The transaction was effected through TD Wheels of
Virginia, Inc. ("TD Wheels"), a wholly-owned subsidiary of the Company.
Operating results of TD Wheels have been included from the date of acquisition
of November 24, 1993.
Nieman's Limited acquisition
On January 27, 1994, the Company purchased all of the outstanding stock of
Nieman's Limited ("Nieman's") for approximately $1.2 million and repaid $5.3
million of Nieman's debt. The purchase agreement also includes certain earnout
provisions. No purchase price adjustments were recorded during 1994 or 1995 as a
result of such earnout provisions. Nieman's is a distributor of tires, wheels,
axle assemblies and component parts to OEMs. Operating results have been
included from the date of acquisition of January 27, 1994.
Titan Tire acquisition
Effective July 16, 1994, Titan Tire Corporation ("Titan Tire") acquired the
agricultural tire business of Pirelli Armstrong Tire Corporation ("PATC"). In
the purchase, Titan Tire acquired certain assets, primarily inventory and
equipment and assumed certain liabilities. Titan Tire is engaged in engineering
and manufacturing tires for the agricultural market. Operating results of Titan
Tire have been included in the Consolidated Statement of Operations from July
16, 1994, the effective date of acquisition.
The total purchase price consisted of: (i) $10 million obtained through the
issuance to PATC of warrants to purchase 2,250,000 shares of the Company's
common stock at an exercise price of $24.44 per share (see Note 17); (ii) $7.5
million obtained through the issuance to PATC of one million shares of the
Titan's Series A preferred stock convertible into 281,250 shares of the
Company's common stock (see Note 17); (iii) $5 million obtained through the
Company's regular line of credit. In addition, Titan Tire issued a subordinated
note due February 11, 2000, to PATC for approximately $19.7 million with a 7%
fixed interest rate (see Note 7). At the time of the purchase, Titan Tire also
recorded a purchase price adjustment for a $16.8 million liability which had
been recorded by PATC for employee related benefits which were not assumed by
Titan. The purchase price was assigned to the net assets acquired based on their
fair value at the date of acquisition. The fair value of net assets acquired
initially exceeded the purchase price by approximately $11 million and the
excess was allocated to reduce the value assigned to machinery and equipment. At
December 31, 1995, the $16.8 million liability was reversed. However, the
Company estimates that its ultimate liability for matters unrelated to this
liability will not exceed $6.5 million and has accrued that amount at December
31, 1995. The net reduction in purchase price resulted in an additional
reduction in the value assigned to machinery and equipment.
Sirmac Group acquisition
On November 21, 1994, the Company acquired 50 percent of the common stock
of the Sirmac SpA and Siria SpA of Italy (the "Sirmac Group", or "Sirmac").
Under certain conditions, Titan has the option to buy the remaining stock of the
Sirmac Group from the other shareholders. The Sirmac Group is a major European
manufacturer of specialty wheels and other products for the agricultural and
earthmoving/construction markets. Titan paid cash of approximately $9.5 million
for the common stock. In addition, Titan loaned $9.5 million to the Sirmac Group
as part of the purchase. The note receivable from the Sirmac Group bears
interest at the Italian prime rate and is payable on December 31, 1997.
The Company accounted for the investment under the equity method from the
date of acquisition until June 30, 1995. 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. If Sirmac had been consolidated for the entire year, net
income and earnings per share would not have been affected.
F-8
<PAGE> 83
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Steel Wheels acquisition
On February 10, 1995, the Company acquired Lemmerz UK Limited ("Steel
Wheels"), a division of Lemmerz Holding GmbH. Steel Wheels is a Kidderminster,
England-based manufacturer of steel wheels for off-road and specialty vehicles.
The purchase price was approximately $15.2 million, obtained through Titan's
revolving credit facility. Results of operations have been included from the
date of acquisition of February 10, 1995.
Grasdorf Titan GmbH acquisition
On December 28, 1995, the Company purchased a portion of Metallbau Grasdorf
GmbH of Germany. Metallbau Grasdorf GmbH, located near Hannover, Germany, is a
manufacturer of wheels and rims for the earthmoving and agricultural equipment
markets. Titan purchased the manufacturing segment of the business for $2.3
million, and renamed it Grasdorf Titan GmbH ("Titan GmbH").
Pro forma results (unaudited)
Assuming the above acquisitions occurred on January 1, 1994, unaudited pro
forma net sales, net income and earnings per share for 1994 would have been $534
million, $23 million and $1.06, respectively. Such pro forma results are not
necessarily indicative of future results of operations or the results of
operations that would have been reported had the acquisitions been completed as
of January 1, 1994. Net sales, net income and earnings per share for 1995 would
not have been significantly different.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The policies utilized by the Company in the preparation of the financial
statements conform to generally accepted accounting principles and require
management to make estimates and assumptions 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.
Basis of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly and majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Revenue recognition
Sales revenue and cost of sales are recorded by the Company when products
are shipped to customers.
Inventories
Inventories are valued at the lower of cost or market, cost determined
using the last-in, first-out method ("LIFO"), except for 61% of inventories,
which are valued using the first-in, first-out ("FIFO") method. Inventory at
foreign divisions is valued using the FIFO method.
Foreign currency translation
Gains and losses arising from the settlement of foreign currency
transactions are charged to the related period's Consolidated Statement of
Operations. Translation adjustments arising from the translation of foreign
subsidiary financial statements are recorded as a separate component of
stockholders' equity.
F-9
<PAGE> 84
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Customer pallets
Returnable pallets are billed to customers and upon return, credit memos
are issued. The Company records a liability for the estimated pallets to be
returned.
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:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 25
Machinery and equipment..................................... 10
Tools, dies and molds....................................... 5
</TABLE>
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
other income.
Deferred financing costs
Deferred financing costs are primarily costs incurred in connection with
the Company's convertible note issuance and credit facilities. The costs
associated with the convertible note issuance are being amortized over a period
of seven years, the term of the notes. The costs associated with the credit
facilities are being amortized over their respective terms.
Start up costs
The Company capitalizes pre-operating costs that are directly related to
the construction of new plant and production facilities until the facility is
operational. Such costs are amortized over five years.
Goodwill
Goodwill for domestic and foreign divisions are amortized over 40 and 25
years respectively, on a straight-line basis. At each balance sheet date,
management reviews the carrying value of goodwill compared to undiscounted
annual cash flows to assess recoverability from future operations.
Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109 (SFAS 109). Under SFAS 109, the deferred
income tax provision is 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.
Statement of cash flows
For purposes of the Consolidated Statement of Cash Flows, the Company
considers financial investments with an original maturity of three months or
less to be cash equivalents.
F-10
<PAGE> 85
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Investing activities during 1993, including certain noncash transactions,
related to the Company's business acquisitions involved the following (in
thousands):
<TABLE>
<CAPTION>
AUTOMOTIVE DOTSON
WHEELS DYNEER WHEEL
---------- ------ ------
<S> <C> <C> <C>
Fair value of assets acquired, other than cash and
cash equivalents:
Current assets.................................... $ 6,157 $ 55,921 $ 5,208
Property, plant and equipment..................... 4,276 53,439 2,719
Other assets...................................... 800 24,121 0
Liabilities assumed................................. (2,560) (107,630) (2,958)
Notes issued........................................ (8,688) 0 0
Common stock and options issued..................... 0 (26,813) 0
------- --------- -------
Cash (acquired) paid................................ $ (15) $ (962) $ 4,969
======= ========= =======
</TABLE>
In addition, the Company issued a $1,263,000 note payable related to the
purchase of a building adjacent to its Quincy, Illinois facility.
Investing activities during 1994, including certain noncash transactions,
related to the Company's business acquisitions involved the following (in
thousands):
<TABLE>
<CAPTION>
THE
NIEMAN'S SIRMAC TITAN
DYNEER LTD. GROUP TIRE
------ -------- ------ -----
<S> <C> <C> <C> <C>
Fair value of assets acquired, other than
cash and cash equivalents:
Current assets............................ $(4,092) $ 7,318 $ 0 $ 15,170
Property, plant and equipment............. (1,860) 1,344 0 52,866
Other assets.............................. 11,152 3,612 19,000 4,000
Liabilities assumed......................... (5,830) (11,240) 0 (29,793)
Notes issued................................ 0 0 0 (19,743)
------- -------- ------- --------
Cash (acquired) paid........................ $ (630) $ 1,034 $19,000 $ 22,500
======= ======== ======= ========
</TABLE>
Investing activities during 1995, including certain noncash transactions,
related to the Company's business acquisitions involved the following (in
thousands):
<TABLE>
<CAPTION>
THE
STEEL SIRMAC TITAN TITAN
DYNEER WHEELS GROUP TIRE GMBH
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Fair value of assets acquired, other
than cash and cash equivalents:
Current assets..................... $ 311 $ 17,029 $ 54,117 $(6,000) $ 0
Property, plant and equipment 0 18,746 25,225 (9,500) 2,268
Other assets....................... 4,395 4,898 (3,440) 6,000 0
Liabilities assumed.................. 611 (25,473) (76,227) 9,500 0
Common stock and options issued...... (5,317) 0 0 0 0
------- -------- -------- ------- ------
Cash (acquired) paid................. $ 0 $ 15,200 $ (325) $ 0 $2,268
======= ======== ======== ======= ======
</TABLE>
The Company paid $5,074,000, $8,373,000 and $11,817,000 for interest and
$2,004,000, $8,357,000 and $27,141,000 for income taxes in 1993, 1994 and 1995,
respectively.
F-11
<PAGE> 86
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Fair value of financial instruments
The Company records all financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, other accruals, and notes
payable at cost which approximates fair value. The convertible subordinated
notes are the only significant financial instrument of the Company with a fair
value different than the recorded value. At December 31, 1994 and 1995, the fair
value of the convertible subordinated notes, based on quoted market values, was
approximately $109.5 million and $112.6 million respectively, compared to a
recorded value of $103.5 million and $85.9 million, respectively.
Financial instruments with off-balance sheet risk
The Sirmac Group has debt with a principal balance of approximately $6
million at December 31, 1995, which is denominated in French francs. The debt is
subject to currency fluctuations between the Italian lire and the French franc.
Foreign currency losses incurred for the year ended December 31, 1995, were
immaterial to Titan's consolidated net income. The Company's activity with
derivative financial instruments in 1995 was minimal and the impact on 1995
operations was insignificant.
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 generation are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs are reasonably
estimable.
Stock-based compensation
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation" (SFAS 123) which defines the fair value based method of accounting
for stock option, purchase and awards plans. SFAS 123 allows companies to use
the fair value method defined in the Statement or to continue use of the
intrinsic value method as outlined in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25). The Company currently
utilizes and plans to continue its use of APB 25 for accounting for employee
stock options and related instruments. In 1996, however, the Company will
provide the fair value disclosures required by SFAS 123. SFAS 123 is not
expected to have an impact on the Company's financial position or results of
operations.
Equity investment in affiliate
From November 21, 1994, through June 30, 1995, the Company recorded its
investment in the Sirmac Group at equity, adjusting its cost to recognize
Titan's share of the gain or loss of the Sirmac Group subsequent to the date of
investment and amortizing the differences between the Company's cost and the
underlying equity in net assets of the Sirmac Group at the date of investment.
Equity earnings for the six months ended June 30, 1995 approximating $1 million
have been included in other income in the Consolidated Statement of Operations.
As discussed in Note 1, Titan began consolidating Sirmac in its financial
statements, effective July 1, 1995.
Reclassification
Certain amounts from prior years have been reclassified to conform with the
current year presentation.
F-12
<PAGE> 87
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
3. INVENTORIES
Inventories at December 31, 1994 and 1995 comprised the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Raw material................................................ $ 34,735 $ 37,273
Work-in-process............................................. 13,497 19,904
Finished goods.............................................. 56,086 68,947
-------- --------
104,318 126,124
LIFO reserve................................................ 2,645 (1,196)
-------- --------
$106,963 $124,928
======== ========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1994 and 1995 comprised the
following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Land and improvements....................................... $ 4,326 $ 4,974
Buildings and improvements.................................. 25,790 39,809
Machinery and equipment..................................... 101,612 142,579
Tools, dies and molds....................................... 33,871 36,489
Construction in process..................................... 9,750 8,428
-------- --------
175,349 232,279
Less: Accumulated depreciation.............................. (32,026) (53,993)
-------- --------
$143,323 $178,286
======== ========
</TABLE>
5. GOODWILL (IN THOUSANDS):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Goodwill.................................................... $37,352 $53,554
Less: Accumulated amortization.............................. (1,002) (2,306)
------- -------
$36,350 $51,248
======= =======
</TABLE>
Amortization of goodwill for the years 1993, 1994 and 1995 totaled $72,000,
$930,000 and $1,304,000 respectively. Of the total $16.2 million increase in
goodwill in 1995, $4.7 million is from the acquisition of Steel Wheels, $7.1
million is from the acquisition of the Sirmac Group and the remaining $4.4
million is the result of additional contingent consideration paid to former
Dyneer shareholders as discussed in Note 1.
F-13
<PAGE> 88
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
6. OTHER ASSETS
Other assets at December 31, 1994 and 1995 comprised the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
PATC receivables............................................ $ 4,000 $ 9,935
Deferred financing costs.................................... 3,315 2,933
Start-up costs (Note 2)..................................... 0 2,174
Notes receivable from Sirmac (Note 1)....................... 9,656 0
Investment in Sirmac (Note 2)............................... 9,350 0
Other....................................................... 2,108 2,659
------- -------
$28,429 $17,701
======= =======
</TABLE>
7. LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1995 comprised the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Bank borrowings:
Revolving credit -- Titan................................. $ 37,500 $ 0
Revolving credit -- Sirmac................................ 0 28,677
Term loan -- Titan Tire................................... 14,464 12,322
Term loan -- Steel Wheels................................. 0 7,299
Industrial revenue bond -- Greenwood........................ 0 9,500
Note payable to PATC........................................ 19,743 19,743
Subordinated convertible notes.............................. 103,500 85,936
Other....................................................... 6,329 5,247
-------- --------
181,536 168,724
Less: Amounts due within one year........................... 3,195 26,419
-------- --------
$178,341 $142,305
======== ========
</TABLE>
In July 1994, the Company entered into a credit facility ("Facility") with
a group of banks which terminates in July 1999. The Facility provides for
unsecured revolving credit of up to $100 million, which is also available for
documentary trade and/or standby letters of credit. Debt outstanding for this
facility totalled $37.5 million and $0 respectively, at December 31, 1994 and
1995. The Facility allows Titan to borrow funds under four interest options.
Titan paid rates ranging from 5 1/2% to 9% in 1995. The Facility is subject to
dividend limitations, under which Titan may not declare dividends in the event
the declaration would cause the Company to be in default of certain financial
covenants. The Facility also contains certain financial and other less
restrictive covenants.
Included in bank borrowings at December 31, 1995, is $22.5 million of
short-term and $6.2 million of long-term debt of the Sirmac Group. The
borrowings have been financed primarily through lines of credit, for which
Sirmac Group accounts receivable are pledged to the banks as collateral. The
current rate of interest on such lines is approximately 11%.
On September 15, 1994, Titan Tire entered into a credit facility which
provides for a term loan of $15 million and a revolving line of credit of up to
$20 million. The term loan bears interest at the London Interbank Rate ("LIBOR")
plus 2 1/4% and the revolving line of credit bears interest at LIBOR plus 2%.
These rates were adjusted downward based upon an amendment to the credit
facility in 1995. The LIBOR rate was 6% and 5 3/4%, respectively, at December
31, 1994 and 1995. Payments on the term loan are due quarterly
F-14
<PAGE> 89
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
through September 30, 1999. There were minimal borrowings under the line of
credit agreement in 1994 or 1995. Substantially all assets of Titan Tire are
pledged as collateral for the credit facility. The credit facility restricts
Titan Tire, including limits on additional borrowings, operating and capital
leases and contains certain financial covenants.
In May 1995, the Company established a $14.4 million credit facility in
conjunction with the purchase of Steel Wheels (see Note 1). The facility
consists of an $8 million variable interest rate term loan and a $6.4 million
revolving line of credit. Interest rates for the term loan averaged 8 1/2% for
1995. At December 31, 1995, the line of credit balance is zero. The credit
facility contains several financial covenants.
In March 1995, the Company issued $9.5 million of industrial revenue bonds
("IRB") to finance the construction of a facility in Greenwood, South Carolina.
The bonds carry tax exempt variable interest rates based upon corresponding
tax-exempt IRB issues in the state of South Carolina. Rates for 1995 ranged from
3 1/4% to 5 1/2%. The bonds are secured by a letter of credit established by the
Company and are due in February 2010.
As discussed in Note 1, on August 11, 1994, Titan Tire issued a
subordinated note for $19.7 million with a fixed interest rate of 7% to PATC in
conjunction with the Titan Tire purchase. The note matures on February 11, 2000.
On November 18, 1993, the Company issued $103.5 million principal amount of
4 3/4% subordinated convertible notes ("Notes"). The Notes are due December 1,
2000. Each Note is convertible into common stock at a price of $12.50 per share
after January 24, 1994. See Note 17 for discussion of 1995 note conversions. The
Notes are redeemable at any time on or after December 10, 1996, at the option of
the Company in whole or in part, at certain redemption prices, together with
accrued interest.
Other debt primarily consists of loans from local and state entities,
industrial revenue bonds and various other long-term notes.
Aggregate maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
1996........................................................ $ 26,419
1997........................................................ 10,275
1998........................................................ 4,266
1999........................................................ 7,652
2000 and thereafter......................................... 120,112
--------
$168,724
========
</TABLE>
F-15
<PAGE> 90
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
8. OTHER CURRENT LIABILITIES
Other current liabilities at December 31, 1994 and 1995 comprised the
following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Accrued wages and commissions............................... $ 6,998 $ 9,585
Warranty reserves........................................... 4,309 2,828
Workers' compensation reserve............................... 975 2,535
Customer deposits/pallet reserves........................... 4,009 2,324
Accrued property and other taxes............................ 2,289 1,930
Accrued health care benefits................................ 2,502 1,740
Income taxes................................................ 5,961 0
Other....................................................... 6,169 7,689
------- -------
$33,212 $28,631
======= =======
</TABLE>
9. OTHER LONG-TERM LIABILITIES
Other long-term liabilities at December 31, 1994 and 1995 comprised the
following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
PATC reserve (Note 1)....................................... $16,830 $ 6,500
Environmental liability (Note 20)........................... 5,251 4,919
Employee benefits -- Sirmac................................. 0 4,907
Supplemental retirement liability (Note 13)................. 2,418 2,434
Long-term warranty reserve.................................. 3,000 2,262
Other....................................................... 3,710 3,590
------- -------
$31,209 $24,612
======= =======
</TABLE>
10. SALES TO MAJOR MARKETS AND CUSTOMERS
The Company's operations are conducted within one business segment, the
production, manufacture and sale primarily of a full line of wheels, rims, tires
and components for the agricultural, consumer, earthmoving/ construction,
engineered products, and military equipment markets. Sales to major markets in
1993, 1994 and 1995 comprised the following (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Agricultural........................................ $ 74,901 $156,015 $275,976
Consumer............................................ 23,703 140,073 170,717
Earthmoving/Construction............................ 32,792 75,555 133,523
Engineered Products................................. 6,172 22,511 38,920
Military............................................ 12,873 12,846 4,047
-------- -------- --------
$150,441 $407,000 $623,183
======== ======== ========
</TABLE>
Export sales from the United States represent less than ten percent of
total sales. Sales to Deere & Company represented 19%, 15% and 12% of total
sales in 1993, 1994 and 1995, respectively.
Although the Company is directly affected by the economic well-being of the
above markets and significant customers, management does not believe significant
credit risk exists at December 31, 1995. The Company performs ongoing credit
evaluations of its customers' financial condition and does not require
F-16
<PAGE> 91
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
collateral. Historically, the Company has not experienced significant losses
related to receivables from individual customers or groups of customers in any
particular industry.
11. INCOME TAXES
Income before income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Domestic............................................... $10,410 $28,203 $54,074
Foreign................................................ (296) 1,904 9,206
------- ------- -------
$10,114 $30,107 $63,280
======= ======= =======
</TABLE>
The provision for income taxes was as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Current
Federal............................................... $2,530 $ 9,789 $14,397
State................................................. 647 2,187 3,406
Foreign............................................... 2 265 1,613
------ ------- -------
3,179 12,241 19,416
------ ------- -------
Deferred
Federal............................................... 454 (367) 4,840
State................................................. 120 (247) 1,041
------ ------- -------
574 (614) 5,881
------ ------- -------
Provision for income taxes.............................. $3,753 $11,627 $25,297
====== ======= =======
</TABLE>
Deferred tax assets (liabilities) at December 31, 1994 and 1995,
respectively, are comprised of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Returnable pallets.......................................... $ 1,231 $ 673
Employee benefits and related costs......................... 2,560 3,558
EPA reserve................................................. 2,991 2,329
Postretirement benefits..................................... 5,069 730
Other....................................................... 4,735 3,827
-------- --------
Gross deferred tax assets................................... $ 16,586 $ 11,117
======== ========
Fixed assets................................................ $(20,042) $(20,739)
Inventory................................................... (630) (1,227)
Other....................................................... (1,325) (369)
-------- --------
Gross deferred tax liabilities.............................. (21,997) (22,335)
-------- --------
Net deferred tax liabilities................................ $ (5,411) $(11,218)
======== ========
</TABLE>
The tax benefits from any future recognition of deductible temporary
differences relative to recent acquisitions, present at the date of such
acquisition, will adjust the related purchase accounting and be applied to
reduce noncurrent assets.
F-17
<PAGE> 92
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
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 as a result of the following:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. federal tax rate............................. 34.0% 35.0% 35.0%
State taxes (net)........................................... 5.0 4.2 4.6
Other (net)................................................. (1.9) (0.6) 0.4
---- ----- -----
Effective tax rate.......................................... 37.1% 38.6% 40.0%
==== ===== =====
</TABLE>
Federal income taxes are provided on earnings of foreign subsidiaries
except to the extent that such earnings are expected to be indefinitely
reinvested abroad.
12. RELATED PARTY TRANSACTIONS
The Company sells products to companies controlled by persons related to
the Chief Executive Officer of the Company. During 1993, 1994 and 1995, combined
sales approximated $2,597,000, $3,355,000 and $4,370,000, respectively. At
December 31, 1994 and 1995, Titan had approximately $2,170,000 and $1,998,000,
respectively, of accounts receivable outstanding from those sales. Commissions
paid to companies controlled by persons related to the Chief Executive Officer
of the Company approximated $252,000, $470,000 and $920,000 respectively, for
1993, 1994 and 1995. These sales and commissions were made on terms no less
favorable to Titan than comparable sales and commissions to unaffiliated third
parties.
13. EMPLOYEE BENEFIT PLANS
Pension plans
The Company has a contributory defined benefits pension plan covering
certain hourly employees of its French & Hecht division ("F&H"). The plan was
frozen in July 1993. The Company also sponsors a contributory defined benefits
plan covering all eligible bargaining employees of the Des Moines, Iowa location
of Dico, Inc. ("Dico"), a wholly-owned subsidiary of Dyneer. The Dico plan was
frozen July 1995. The Company's policy is to fund pension costs as accrued,
which is consistent with the funding requirements of federal laws and
regulations.
F-18
<PAGE> 93
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The components of net periodic pension cost and the reconciliation of the
funded status of the Dico, Inc. and F&H plans, in aggregate, at December 31,
1994 and 1995, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Components of net periodic pension cost
Service cost.............................................. $ 126 $ 199
Interest cost............................................. 501 572
Actual return on assets................................... (327) (1,182)
Net amortization and deferral............................. (744) 792
------- -------
Net periodic pension cost (income).......................... $ (444) $ 381
======= =======
Reconciliation of funded status
Actuarial present value of benefit obligations
Vested benefit obligation.............................. $ 6,543 $ 6,148
Non-vested benefit obligation.......................... 376 29
------- -------
Accumulated benefit obligation.............................. $ 6,919 $ 6,177
======= =======
Projected benefit obligation................................ $ 7,333 $ 6,484
Actual plan assets at fair value............................ 5,423 5,177
------- -------
Plan assets greater (less) than projected benefit
obligation................................................ (1,910) (1,307)
Unrecognized net loss....................................... 1,376 761
Unrecognized transition liability........................... (59) (52)
Minimum liability adjustment................................ (904) (403)
------- -------
Accrued pension cost recognized in the balance sheet........ $(1,497) $(1,001)
======= =======
Major assumptions:
Discount rate............................................. 7 1/4-8%1/2 7 1/4%
Rate of return on plan assets............................. 8 1/2% 8 1/2%
</TABLE>
The Company also has an obligation to provide supplemental benefits to five
former officers/shareholders of Dyneer. The present value of the unfunded
benefit obligation accrued at December 31, 1994 and 1995, of $2,418,000 and
$2,434,000, respectively, is actuarially determined and is discounted at an
annual interest rate of 8 1/2% and 7 1/4%, respectively. Expense for the year
ended December 31, 1994 and 1995 was $163,000 and $183,000, respectively.
401(k)
The Company sponsors two 401(k) retirement savings plans (the "401(k)
Plan"), one plan for the benefit of all employees who are not covered by a
collective bargaining arrangement, and a second plan for the employees covered
by a collective bargaining arrangement. Plan participants may contribute up to
17% of their annual compensation, up to a maximum of $9,240 in 1995. Employees
are fully vested with respect to their contributions. In 1993 and the first six
months of 1994, Titan provided a 25% matching cash contribution on the
employee's contribution. Beginning on July 1, 1994, Titan amended its 401(k)
Plan to provide a 50% match in the form of the Company's common stock on the
first 6% of the employee's contribution. Titan issued 87,910 shares of common
stock in connection with the 401(k) Plan during 1995. Expenses related to the
401(k) Plan were $120,000, $917,000 and $1,468,000 for 1993, 1994 and 1995,
respectively.
14. STOCK OPTION PLAN
During 1993, the Company adopted the 1993 Stock Incentive Plan (the
"Plan"). A total of 1,125,000 shares of common stock are reserved under the
Plan. Under the Plan, stock options (both incentive and non-qualified),
restricted stock awards and performance awards may be granted to key employees
or consultants at the market price at date of grant. Options granted under the
Plan were for 0, 178,625 and
F-19
<PAGE> 94
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
165,780 shares during 1993, 1994 and 1995, respectively. There were 0, 26,865
and 17,460 shares cancelled in 1993, 1994 and 1995, respectively, leaving an
outstanding balance of 300,080 shares at December 31, 1995. No options were
exercised under the plan for 1993, 1994 and 1995. Options under the plan vest
and become exercisable at a rate of 40% on December 31 of the year following the
date of grant, and an additional 20% each year thereafter. The options are
exercisable at a price of $11.11 per share and expire ten years from date of
grant.
In 1994, the Company adopted a Non-Employee Director Stock Option Plan
("Director Plan") as of March 31, 1994, to provide for grants of stock options
as a means of attracting and retaining highly qualified independent directors
for the Company. No more than 225,000 shares of Titan's common stock may be
issued under the Director's Plan. Options granted under the Director Plan were
27,000 and 36,000 during 1994 and 1995, respectively, and were issued at
approximately the market price at the date of grant. No options have been
cancelled or exercised through December 31, 1995. Such options vest and become
exercisable immediately. The options are exercisable at a prices ranging from
$11.11 to $11.70 per share, and expire 10 years from date of grant.
15. GEOGRAPHIC SEGMENT INFORMATION
The Company's foreign operations are conducted primarily in Italy, the
United Kingdom and Ireland. A summary of Titan's operations by geographical area
for the three years ended December 31, 1995, follows (in thousands):
<TABLE>
<CAPTION>
UNITED
STATES FOREIGN ELIMINATIONS CONSOLIDATED
------ ------- ------------ ------------
<S> <C> <C> <C> <C>
1993
Revenues
Customers............................. $147,841 $ 2,600 $ 0 $150,441
Intercompany.......................... 13,108 0 (13,108) 0
-------- -------- -------- --------
Total revenues $160,949 $ 2,600 $(13,108) $150,441
======== ======== ======== ========
Income (loss) from operations........... $ 13,273 $ (131) $ 0 $ 13,142
======== ======== ======== ========
Identifiable assets..................... $255,925 $ 5,341 $ 0 $261,266
======== ======== ======== ========
1994
Revenues
Customers............................. $386,142 $ 20,858 $ 0 $407,000
Intercompany.......................... 77,834 2,661 (80,495) 0
-------- -------- -------- --------
Total revenues..................... $463,976 $ 23,519 $(80,495) $407,000
======== ======== ======== ========
Income (loss) from operations........... $ 36,170 $ 2,278 $ (452) $ 37,996
======== ======== ======== ========
Identifiable assets..................... $390,289 $ 10,171 $ 0 $400,460
======== ======== ======== ========
1995
Revenues
Customers............................. $524,233 $ 98,950 $ 0 $623,183
Intercompany.......................... 85,619 3,559 (89,178) 0
-------- -------- -------- --------
Total revenues..................... $609,852 $102,509 $(89,178) $623,183
======== ======== ======== ========
Income (loss) from operations........... $ 62,978 $ 10,087 $ (10) $ 73,055
======== ======== ======== ========
Identifiable assets..................... $395,593 $117,682 $ (1,140) $512,135
======== ======== ======== ========
</TABLE>
F-20
<PAGE> 95
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
16. EARNINGS PER SHARE
Earnings per share for 1993, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Primary earnings per share.................................. $.46 $1.14 $1.91
==== ===== =====
Fully diluted earnings per share............................ $.46 $ .89 $1.50
==== ===== =====
</TABLE>
Earnings per share are based on the weighted average common shares
outstanding after giving retroactive effect to an approximately 858-for-1 stock
split approved by the Board of Directors on March 29, 1993. As discussed in Note
17, during 1995 the Board of Directors declared two 3-for-2 stock splits, which
were paid March 15 and August 31, 1995. All share and per share data for the
periods presented in the consolidated financial statements and notes thereto
have been adjusted to reflect the splits.
Weighted average common shares used in the computation of earnings per
share for the respective years are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Primary......................................... 13,946,101 16,255,942 19,933,034
Fully diluted................................... 14,935,102 24,646,099 27,459,606
</TABLE>
Primary and fully diluted earnings per share of common stock for 1993, 1994
and 1995 assumes the exercise of common stock options for each year as they are
common stock equivalents with a dilutive effect.
Fully diluted earnings per share of common stock for 1994 and 1995 assumes
the conversion of the Company's $103.5 million and $85.9 million convertible
subordinated notes due December 1, 2000, and the elimination of the related
after-tax interest expense and amortization of deferred financing fees. The
subordinated convertible notes did not have a dilutive effect on earnings in
1993. Additionally, fully diluted earnings per share of common stock for 1994
and 1995 assumed the conversion of the Company's Class A noncumulative
convertible preferred stock. The convertible preferred stock was repurchased in
June 1995. Conversion of the common stock warrants issued in the Titan Tire
acquisition was not assumed in 1994 or 1995, as the effect was anti-dilutive.
17. STOCKHOLDERS' EQUITY
The following discusses significant transactions which occurred during
1995. Significant equity transactions which occurred during 1993 and 1994 are
discussed in Note 1.
On June 7, 1995, the Company issued 4,312,500 shares of common stock at a
price of $15.83 per share. Excluding fees, Titan received $64.9 million, before
related offering costs of $300,000. With $17.5 million of the proceeds from the
June 1995 stock offering, Titan repurchased the convertible preferred stock and
common stock warrants issued to PATC in the Titan Tire acquisition.
During the year $17.6 million of the Company's 4 3/4% subordinated
convertible notes were converted into the Company's common stock. At a
conversion price per share of $12.50, these conversions resulted in the issuance
of 1.4 million additional common shares.
As discussed in Note 1, during 1995, the Company issued 426,688 shares of
Titan common stock and options to purchase 82,791 shares. The issuance of stock
increased additional paid-in capital by $4.7 million. Former Dyneer shareholders
exercised options to purchase a total of 48,391 shares of the Company's common
stock resulting in an increase of approximately $600,000 in additional paid-in
capital including a tax benefit of approximately $52,000.
F-21
<PAGE> 96
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
During 1995, the Company repurchased 150,000 shares of Titan common stock
from the Chief Executive Officer of the Company. Subsequently, 71,183 of these
shares were issued as compensation to a former employee, resulting in an
increase of approximately $1,052,000 in additional paid-in capital, including a
tax benefit of $348,000. A portion of the remaining treasury shares were
withheld for payment of payroll taxes, the accrual of which represents the cost
basis of the treasury stock remaining at December 31, 1995.
On January 24, 1995, the Board of Directors declared a 3-for-2 stock split,
payable as a stock dividend on March 15, 1995, to shareholders of record at the
close of business on February 15, 1995. On July 14, 1995, the Board of Directors
declared a second 3-for-2 stock split payable as a stock dividend on August 31,
1995, to shareholders of record at the close of business on July 31, 1995. All
share and per share data for the periods presented in the consolidated financial
statements and notes thereto have been adjusted to reflect the splits.
In conjunction with the related stock splits noted above, the Board of
Directors authorized an increase in the annual cash dividend from $.03 to $.06
per share. The Company paid cash dividends of $.02, $.03 and $.05 per share of
common stock during 1993, 1994 and 1995, respectively.
18. LEASE COMMITMENTS
The Company leases buildings, machinery, equipment and airplanes under
operating leases. Certain lease agreements provide for renewal options and
require payment of property taxes, maintenance and insurance. Total rental
expense approximated $602,000, $1,467,000 and $1,547,000 for the years ended
December 31, 1993, 1994 and 1995, respectively.
At December 31, 1995, future minimum rental commitments under noncancelable
operating leases with initial or remaining terms in excess of one year are as
follows: $1,630,000 in 1996; $1,155,000 in 1997; $924,000 in 1998; $718,000 in
1999; and $423,000 in 2000.
19. LITIGATION
General
The Company is party to several routine legal proceedings arising out of
the normal course of business. Titan believes that none of these actions,
individually or in the aggregate, will have a material adverse effect on the
financial condition or results of operations of the Company.
In December 1995, PATC commenced litigation against the Company on
contractual matters relating to the purchase of Titan Tire. The Company, in
December 1995, also commenced litigation against PATC on contractual matters
related to such acquisition. Titan believes that these actions will not have a
material adverse effect on the financial condition or results of operations of
the Company.
20. ENVIRONMENTAL MATTERS
Dico, one of the Company's subsidiaries, and five major oil and chemical
companies were named as potentially responsible parties in connection with
contaminants found at one of Dico's facilities ("the Site"). The contaminants
were found in the ground water and certain buildings located on the Site. Dico
has constructed a groundwater extraction and treatment system to restore use of
affected groundwater.
During 1994, the Company adjusted the purchase price allocation for the
Dyneer (Dico's parent company) acquisition with respect to the EPA matter. Of
the total estimate of $10.7 million of costs to be incurred in connection with
the clean up of the Site, $4.8 million was paid in 1994, and $600,000 in 1995.
Management believes that the remaining accrual of $5.3 million at December 31,
1995 is adequate for remaining costs to be incurred related to the environmental
matter. Dico is attempting to recover its costs from certain of its insurers and
other potentially responsible parties.
F-22
<PAGE> 97
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
21. SUPPLEMENTARY DATA -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED
QUARTER ENDED: MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 DECEMBER 31
-------- ------- ------------ ----------- -----------
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
1994
Net sales........................... $ 91,873 $102,671 $ 97,827 $114,629 $407,000
Gross profit........................ 14,603 16,514 16,723 20,592 68,432
Net income.......................... 3,819 5,055 4,281 5,325 18,480
Per share amounts:
Primary.......................... $ .24 $ .31 $ .26 $ .33 $ 1.14
Fully diluted.................... .19 .24 .21 .25 .89
1995
Net sales........................... $157,732 $157,640 $149,528 $158,283 $623,183
Gross profit........................ 28,763 28,157 27,753 31,053 115,726
Net income.......................... 9,298 10,033 8,906 9,746 37,983
Per share amounts:
Primary.......................... $ .56 $ .55 $ .40 $ .43 $ 1.91
Fully diluted.................... .40 .42 .33 .35 1.50
</TABLE>
NOTE: The annual earnings per share amounts do not necessarily agree to the sum
of the quarters as a result of changes in the market prices of the
Company's common stock and the application of the treasury stock method.
F-23
<PAGE> 98
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 56,146 $ 14,211
Marketable securities..................................... 39 32
Accounts receivable (net of allowance of $5,100 and
$4,970, respectively).................................. 93,979 107,137
Inventories............................................... 126,054 124,928
Prepaid and other current assets.......................... 47,090 18,592
-------- --------
Total current assets................................... 323,308 264,900
Property, plant and equipment, net........................ 186,892 178,286
Other assets.............................................. 19,384 17,701
Goodwill.................................................. 41,626 51,248
-------- --------
Total assets........................................... $571,210 $512,135
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt......................... $ 14,009 $ 26,419
Accounts payable.......................................... 53,743 58,592
Other current liabilities................................. 38,761 28,631
-------- --------
Total current liabilities.............................. 106,513 113,642
Deferred income taxes..................................... 15,219 15,704
Other long-term liabilities............................... 25,574 24,612
Long-term debt............................................ 181,710 142,305
-------- --------
Total liabilities...................................... 329,016 296,263
-------- --------
Stockholders' equity
Common stock, no par, 60,000,000 shares authorized,
22,295,541 and 22,477,086 and outstanding,
respectively........................................... 23 23
Additional paid-in capital................................ 154,688 152,283
Retained earnings......................................... 93,823 64,142
Cumulative translation adjustments........................ (355) 8
Treasury stock at cost: 399,165 and 78,817 shares,
respectively........................................... (5,985) (584)
-------- --------
Total stockholders' equity............................. 242,194 215,872
-------- --------
Total liabilities and stockholders' equity.................. $571,210 $512,135
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
F-24
<PAGE> 99
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales........................................... $145,682 $149,528 $489,969 $464,900
Cost of sales....................................... 121,901 121,775 402,656 380,227
Realignment costs................................... 10,324 0 10,324 0
-------- -------- -------- --------
Gross profit...................................... 13,457 27,753 76,989 84,673
Selling, general and administrative expenses........ 11,754 10,767 33,930 29,488
Research and development expenses................... 720 554 2,205 1,599
Gain on sale of assets.............................. (15,332) 0 (16,330) 0
-------- -------- -------- --------
Income from operations............................ 16,315 16,432 57,184 53,586
Interest expense.................................... 2,528 2,381 7,779 8,794
Minority interest................................... 0 423 2,082 423
Other (income)...................................... (1,076) (1,215) (2,189) (2,688)
-------- -------- -------- --------
Income before income taxes........................ 14,863 14,843 49,512 47,057
Provision for income taxes.......................... 5,648 5,937 18,815 18,820
-------- -------- -------- --------
Net income.......................................... $ 9,215 $ 8,906 $ 30,697 $ 28,237
======== ======== ======== ========
Earnings per common share:
Primary........................................... $ .41 $ .40 $ 1.36 $ 1.51
Fully diluted..................................... $ .34 $ .33 $ 1.12 $ 1.15
Average common shares outstanding:
Primary........................................... 22,462 22,390 22,617 19,080
Fully diluted (See Note 1)........................ 29,315 29,346 29,480 26,824
</TABLE>
- -------------------------
(1) The computations of fully diluted earnings per share for the three and nine
months ending September 30, 1996 and 1995, assume the conversion of the
4 3/4% convertible notes, issued November, 1993, due December, 2000.
The accompanying notes are an integral part of the consolidated condensed
financial statements.
F-25
<PAGE> 100
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1995
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 30,697 $ 28,237
Depreciation and amortization............................. 20,991 17,480
Gain on sale of assets.................................... (16,330) 0
Realignment costs......................................... 10,324 0
(Increase)/decrease in receivables........................ 9,406 (17,740)
(Increase)/decrease in inventories........................ (17,695) 10,821
(Increase)/decrease in other assets....................... 4,805 (9,017)
(Decrease) in accounts payable............................ (2,960) (1,324)
Increase/(decrease) in other accrued liabilities.......... 6,802 (2,384)
Other, net................................................ 742 (2,570)
-------- --------
Net cash provided by operating activities.............. 46,782 23,503
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net................................. (19,073) (17,581)
Proceeds from sale of assets.............................. 1,896 0
Acquisitions, net of cash acquired........................ (9,415) (14,900)
-------- --------
Net cash (used for) investing activities............... (26,592) (32,481)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock offering.............................. 0 64,860
Payment of debt........................................... (32,053) (91,846)
Proceeds from long-term borrowings........................ 60,000 58,038
Repurchase of preferred stock & stock warrants............ 0 (17,500)
Repurchase of common stock................................ (5,150) 0
Dividends paid............................................ (1,014) (724)
Other, net................................................ (38) (114)
-------- --------
Net cash provided by financing activities.............. 21,745 12,714
Net increase in cash and cash equivalents................... 41,935 3,736
Cash and cash equivalents at beginning of period............ 14,211 7,241
-------- --------
Cash and cash equivalents at end of period.................. $ 56,146 $ 10,977
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
F-26
<PAGE> 101
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. ACCOUNTING POLICIES
In the opinion of Titan Wheel International, Inc. ("Titan" or 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 September 30, 1996, the
results of operations for the three and nine month periods ended September 30,
1996 and 1995, and cash flows for the nine months ended September 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>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Raw materials............................................... $ 40,489 $ 37,273
Work in process............................................. 16,321 19,904
Finished goods.............................................. 69,180 68,947
-------- --------
125,990 126,124
LIFO reserve................................................ 64 (1,196)
-------- --------
$126,054 $124,928
======== ========
</TABLE>
C. FIXED ASSETS
Property, plant and equipment, net reflects accumulated depreciation of
$70.3 million and $54.0 million at September 30, 1996, and December 31, 1995,
respectively.
F-27
<PAGE> 102
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
D. LONG-TERM DEBT:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt comprised the following:
Bank borrowings
Revolving credit -- Sirmac................................ $ 16,994 $ 28,677
Term loan -- Titan........................................ 60,000 0
Term loan -- Titan Tire................................... 0 12,322
Term loan -- Steel Wheels................................. 0 7,299
Industrial revenue bond -- Greenwood...................... 9,500 9,500
Note payable to PATC...................................... 19,743 19,743
Subordinated convertible notes............................ 85,279 85,936
Other..................................................... 4,203 5,247
-------- --------
195,719 168,724
Less -- amounts due within one year......................... 14,009 26,419
-------- --------
$181,710 $142,305
======== ========
</TABLE>
Aggregate maturities of long-term debt at September 30, 1996, are as
follows (in thousands):
<TABLE>
<S> <C> <C>
October 1 -- December 31, 1996............................ $ 13,389
1997...................................................... 777
1998...................................................... 1,045
1999...................................................... 585
2000 and thereafter....................................... 179,923
--------
$195,719
========
</TABLE>
On September 20, 1996, the Company entered into a new $175 million credit
facility with a group of banks ("Facility"). The Facility provides for an
unsecured $60 million term loan due September, 2001, and a $115 million
revolving line, which is also available for documentary trade and/or standby
letters of credit. The $60 million term loan was used, in part, to pay down debt
comprised of certain other credit facilities and term loans.
E. PURCHASE OF REMAINING INTEREST IN SIRMAC
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. The
Sirmac Group, located in Italy, is a manufacturer of specialty wheels and other
products for the agricultural and construction markets. 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. Effective July 23, 1996, the Company acquired
the remaining 50% of the Sirmac Group.
Had the acquisition of 100% of the Sirmac Group occurred on January 1,
1995, net sales for the nine month period ended September 30, 1995, would have
been $508.6 million on a proforma basis. 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 $32.2
million and $1.16 for the nine month period ended September 30, 1996, on a
proforma basis.
F-28
<PAGE> 103
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
F. SALE OF ASSETS
On September 30, 1996, the Company sold the assets of Tractech to a joint
venture group and private investors. Tractech, which produces no-spin
differentials, contributed annual sales of approximately $25 million. During the
three and nine months ended September 30, 1996, Tractech contributed net sales
of $6.1 and $18.4 million respectively, net income of $2.3 and $.8 million
respectively, and fully diluted earnings per share of $.09 and $.03
respectively. The Company has recorded a pretax gain of $15.3 million after
related expenses as a result of the transaction in the third quarter of 1996.
This follows the sale of the assets of Automation International, Inc. in the
second quarter of 1996.
G. REALIGNMENT COSTS
During the third quarter of 1996, the Company has recorded a pretax
realignment charge of $10.3 million. These costs consist primarily of a
write-off of start-up costs and inventory associated with the elimination of
non-core products including golf car assemblies, automotive Original Equipment
Manufacturers (OEM) wheels, and axles. This is part of the Company's overall
strategy to concentrate its resources on tire and wheel manufacturing, and is
consistent with the sale of assets mentioned in footnote F.
H. 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
September 30, 1996, the Company had purchased 350,000 shares under the
aforementioned program. During October 1996, the Company purchased an additional
285,500 shares under the program.
I. ENVIRONMENTAL MATTER
At September 30, 1996, the Company has an accrual of $5.6 million for
remaining costs associated with its Dico Inc. Des Moines, Iowa site.
J. SUPPLEMENTARY DATA -- 1996 QUARTERLY FINANCIAL INFORMATION
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS
------------------------------------ ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 SEPTEMBER 30
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales....................................... $177,257 $167,030 $145,682 $489,969
Gross profit.................................... 33,123 30,409 13,457 76,989
Net income...................................... 11,006 10,476 9,215 30,697
Per share amounts:
Primary....................................... $.49 $.46 $.41 $1.36
Fully diluted................................. .40 .38 .34 1.12
</TABLE>
F-29
<PAGE> 104
Photograph depicting Jayco pop-up
camper with
Titan wheels and tires
Titan entered the off-highway
tire business in 1993 with a
focus on providing complete
wheel and tire assemblies to
its customers. Through
numerous acquisitions, Titan
has become a leading global
manufacturer of steel wheels
and tires for off-highway
vehicles.
Photograph depicting AGCO tractor
with Titan wheels and tires
Photograph depicting John Deere
Gator
with Titan wheels and tires
[Titan Wheel Logo]
<PAGE> 105
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 10
Use of Proceeds....................... 15
Capitalization........................ 16
Selected Financial Information........ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 26
Management............................ 35
Executive Compensation................ 37
Related Party Transactions............ 38
Security Ownership of Certain
Beneficial Owners and Management.... 39
Description of Certain Indebtedness... 40
Description of the Notes.............. 42
Underwriting.......................... 71
Legal Matters......................... 72
Experts............................... 72
Available Information................. 72
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
$150,000,000
LOGO
TITAN WHEEL
INTERNATIONAL, INC.
% SENIOR SUBORDINATED NOTES
DUE 2007
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
SCHRODER WERTHEIM & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
, 1997
======================================================
<PAGE> 106
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities registered hereby, other than
underwriting discounts and commissions:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 45,455
NASD filing fee............................................. 15,500
Blue sky fees and expenses.................................. 25,000
Printing fees............................................... 75,000
Legal fees and expenses..................................... 60,000
Accounting fees and expenses................................ 25,000
Trustee fees................................................ 3,500
Miscellaneous............................................... 26,000
--------
Total..................................................... $275,455
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5/8.75 of the Illinois Business Corporation Act of 1983, as
amended, and Article Six of the registrant's By-laws provide for indemnification
of the registrant's directors and officers in a variety of circumstances, which
may include liabilities under the Securities Act of 1933, as amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) EXHIBITS
A list of exhibits is set forth in the Exhibit Index appearing elsewhere in
this Registration Statement and is incorporated herein by reference.
(b) FINANCIAL STATEMENT SCHEDULES*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IX -- Valuation Reserves.................................... S-1
</TABLE>
- -------------------------
* Schedules other than those listed above have been omitted because of the
absence of the conditions under which they are required or because the
required information is presented in the financial statements or the notes
thereto.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been
II-1
<PAGE> 107
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment of Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Quincy, Illinois
on March 17, 1997.
TITAN WHEEL INTERNATIONAL, INC.
By: *
------------------------------------
Maurice M. Taylor, Jr.
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
of Registration Statement has been signed by the following persons in the
capacities indicated on March 17, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Director, President and Chief Executive Officer
- --------------------------------------------------- (Principal Executive Officer)
Maurice M. Taylor, Jr.
KENT W. HACKAMACK Vice President - Finance and Treasurer
- --------------------------------------------------- (Principal Financial Officer and Principal
Kent W. Hackamack Accounting Officer)
* Director
- ---------------------------------------------------
Erwin H. Billig
* Director
- ---------------------------------------------------
Edward J. Campbell
* Director
- ---------------------------------------------------
Richard M. Cashin, Jr.
* Director
- ---------------------------------------------------
Albert J. Febbo
* Director
- ---------------------------------------------------
Anthony L. Soave
*By: CHERI T. HOLLEY
----------------------------------------------
Cheri T. Holley, Attorney-in-fact
</TABLE>
II-3
<PAGE> 109
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ---------- ----------- --------
<S> <C> <C>
1* Form of Purchase Agreement
3(a)(1) Restated Articles of Incorporation of the Company
3(b)* Amendment dated May 19, 1994 to Articles of Incorporation of
Company
3(c)(2) By-laws of the Company
4(a)(3) Registration Rights Agreement dated November 12, 1993,
between the Company and 399 Venture Partners, Inc.
4(b)* Form of Indenture between the Company and The First National
Bank of Chicago
Note: Pursuant to the provisions of paragraph (b)(4)(iii) of
Item 601 of Regulation S-K, the Company hereby undertakes to
furnish to the Commission upon request copies of the
instruments pursuant to which the Company and its combined
subsidiaries holds long-term debt of the Company, none of
which instruments governs indebtedness exceeding 10% of the
total assets of the Company on a combined basis.
4(c)(4) Multicurrency Credit Agreement dated September 19, 1996
among the Company, Harris Bank and the banks named therein
4(c)(5)** First Amendment to Credit Agreement dated as of March 14,
1997 among the Company, Titan Tire Corporation, the banks
party to the Credit Agreement and Harris Trust and Savings
Bank as agent.
5* Opinion of Armstrong, Teasdale, Schlafly & Davis as to
Legality
10(a)(5) Sublease dated June 20, 1988 between the Company and
Kelsey-Hayes Company
10(b)(6) Lease dated April 1, 1973 between Kelsey-Hayes Company and
the Town of Walcott, Iowa
10(c)(5) Indenture dated as of April 1, 1973 between Town of Walcott,
Iowa and First Trust and Savings Bank, as Trustee
10(d)(7) 1994 Non-Employee Director Stock Option Plan
10(e)(1) 1993 Stock Incentive Plan
11* Computation of Earnings per Common Share
12* Computation of Ratio of Earnings to Fixed Charges
21* Subsidiaries of the Company
23(a)* Consent of Price Waterhouse LLP
23(b)* Consent of Armstrong, Teasdale, Schlafly & Davis (included
in Exhibit 5)
24* Power of Attorney (included on Page II-3)
25* Statement of Eligibility of Trustee
</TABLE>
(footnotes on following page)
II-4
<PAGE> 110
- -------------------------
* Previously filed.
** Filed herewith.
(1) Incorporated by reference to the exhibit filed with Amendment No. 2 to the
Company's Registration Statement on Form S-1 (No. 33-60518).
(2) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-4 (No. 33-69228).
(3) Incorporated by reference to the exhibit filed with the Company's Annual
Report on Form 10-K for its year ended December 31, 1994.
(4) Incorporated by reference to exhibit 9(b)(i) filed with the Company's Issuer
Tender Offer Statement on Schedule 13E-4 on February 24, 1997.
(5) Incorporated by reference to the exhibit filed with Amendment No. 1 to the
Company's Registration Statement on Form S-1 (No. 33-60518).
(6) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-1 (No. 33-60518).
(7) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-1 (No. 33-70140).
II-5
<PAGE> 111
ITEM 16(b)
TITAN WHEEL INTERNATIONAL, INC.
SCHEDULE IX -- VALUATION RESERVES
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
----------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Year ended December 31, 1993
Reserve deducted in the balance sheet
from the assets to which it applies
Allowance for doubtful accounts...... $ 643,000 $ 542,000 $ (38,000) $1,147,000
========== ========== =========== ==========
Reserve for plant closure............ $2,417,000 $ -0- $(2,022,000)(1) $ 395,000
========== ========== =========== ==========
Year ended December 31, 1994
Reserve deducted in the balance sheet
from the assets to which it applies
Allowance for doubtful accounts...... $1,147,000 $1,449,000 $ (383,000)(2) $2,213,000
========== ========== =========== ==========
Reserve for plant closure............ $ 395,000 $ -0- $ (395,000)(1) $ -0-
========== ========== =========== ==========
Year ended December 31, 1995
Reserve deducted in the balance sheet
from the assets to which it applies
Allowance for doubtful accounts...... $2,213,000 $3,154,000 $ (397,000)(3) $4,970,000
========== ========== =========== ==========
</TABLE>
- -------------------------
(1) Represents utilization of the reserve established in 1991
(2) Net of recoveries of $84,000
(3) Net of recoveries of $28,000
S-1
<PAGE> 1
EXHIBIT 4(c)(5)
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of March 14, 1997,
by and among Titan Wheel International, Inc. (the "Company"), Titan Tire
Corporation, an Illinois corporation ("Titan Tire"), the banks party to the
Credit Agreement (as such term is hereinafter defined) and Harris Trust and
Savings Bank, as Agent (the "Agent"). Capitalized terms used herein without
definition shall have the same meanings herein as ascribed to such terms in the
Credit Agreement.
WITNESSETH THAT:
WHEREAS, the Borrowers, the Agent and the Banks are party to that
certain Credit Agreement dated as of September 19, 1996 (together with all
exhibits, schedules, attachments and appendices thereto, the "Credit
Agreement"); and
WHEREAS, the Borrowers have requested that the Credit Agreement be
amended, among other things, to (i) increase the amount of the Revolving
Commitments from $115,000,000 to $200,000,000, (ii) add Titan Tire as a joint
and several Borrower under the Credit Agreement, (iii) eliminate the Term
Credit and (iv) provide for the possibility of a Wholly-owned Domestic
Subsidiary of the Company (which Subsidiary will, among other things, act as a
holding company for the wheel related assets of the Company) to become a
Borrower under the Credit Agreement (such Domestic Subsidiary being referred to
herein as "Titan Wheel"); and
WHEREAS, the Banks are willing to so amend the Credit Agreement
pursuant to the terms and conditions of this Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Banks and the
Agent hereby agree as follows:
1. The following definitions set forth in Section 7.1 of
the Credit Agreement are hereby deleted in their entirety: "Committed
Revolving Loan", "Revolving Commitments", "Committed Revolving Note",
"Committed Term Note", "Convertible Subordinated Notes", "Leverage
Ratio", "Term Commitments", "Titan Tire Indebtedness", "Revolving Loans"
and "L/C Commitment".
2. The following definitions set forth in Section 7.1 of
the Credit Agreement are hereby amended in their entirety to be and to
read as follows:
"Committed Loans" is defined in Section 1.1 hereof.
"Commitments" is defined in Section 1.1 hereof.
<PAGE> 2
"Committed Loan Note" is defined in Section 4.5(a) hereof.
"Original Dollar Amount" means (i) the amount of any
Obligation, if such Obligation is denominated in U.S. Dollars, (ii) in
relation to any Loan, Reimbursement Obligation or Letter of Credit
denominated in an Agreement Currency, the U.S. Dollar Equivalent of such
Obligation as of the day such amount is to be computed pursuant to
Section 2.4 hereof and (iii) in relation to any other Obligation
denominated in an Agreement Currency, the U.S. Dollar Equivalent of such
Obligation on the day such amount is being computed.
"Permitted Company Redemption" shall mean the redemption by
the Company after the date of the First Amendment of not more than
8,000,000 (on a cumulative basis on and after such date) shares of the
issued and outstanding common stock which constitutes Voting Stock of
the Company on such date on a fully diluted basis provided the amount
expended on and after such date hereof for such redemptions aggregates
(on a cumulative basis after such date) not more than $100,000,000.
"Subordinated Debt" means all unsecured Debt of the Company
that is expressly subordinated and made junior to the payment and
performance in full of the obligations of the Company hereunder to the
Banks and Agent, and evidenced by a subordination agreement or other
written instrument approved by the Agent and the Required Banks in their
sole discretion, pursuant to documentation and containing interest
rates, payment terms, maturities, amortization schedules, covenants,
defaults, remedies, subordination provisions and other material terms in
each case in form and substance satisfactory to the Agent and Required
Banks in their discretion.
"Subsidiary Borrower" means Titan Wheel and/or Irish Borrower,
as the context may require.
"Termination Date" means March 14, 2002 or such earlier date on
which the Commitments are terminated in whole pursuant to Sections 4.6,
4.7, 11.2 or 11.3 hereof.
"Titan Tire" means Titan Tire Corporation, an Illinois
corporation.
3. Section 7.1 of the Credit Agrement is hereby amended by
inserting the following definitions in their proper alphabetical order:
"First Amendment" means that certain First Amendment to Credit
Agreement dated as of March 14, 1997 by and among the Borrowers, the
Agent and the Banks.
"Irish Borrower" means any one Wholly-owned Subsidiary of the
Company organized and existing under the laws of Ireland.
-2-
<PAGE> 3
"L/C Sub-Limit" means $30,000,000.
"Non-Guaranteeing Domestic Subsidiaries" means as of any time,
each Domestic Subsidiary (other than a Restricted Subsidiary) which is
not then obligated on a Subsidiary Guarantee Agreement, whether because
such Domestic Subsidiary is not required to provide a Subsidiary
Guarantee Agreement or has been released from its obligations under a
Subsidiary Guarantee Agreement it had previously delivered.
"Titan Wheel" means a direct Wholly-owned Domestic Subsidiary of the
Company to be formed which will, among other things, act as a holding
company for the wheel related assets of the Company.
"Total Assets" means, without duplication on a consolidated basis,
assets of the Company and its Subsidiaries (excluding Restricted
Subsidiaries) as determined in accordance with GAAP.
4. The definition of "Change of Control Event" appearing in
Section 7.1 of the Credit Agreement is hereby amended by inserting the
following sentence at the end of such definition:
"Notwithstanding anything in this definition to the contrary, Taylor and
Masco Tech, Inc., a Delaware corporation, may at any time own any amount
of the securities of the Company and such ownership shall not be deemed
a "Change of Control Event".
5. The definition of "Restricted Subsidiary" appearing in Section
7.1 of the Credit Agreement is hereby amended by inserting the following
sentence at the end of such definition:
"The Company shall not designate any Borrower as a Restricted
Subsidiary, and no Borrower shall be a Restricted Subsidiary."
6. The Credit Agreement is hereby amended by changing each and
every reference in the Credit Agreement (after giving effect to Section 1 of
this Amendment) to (i) "Committed Revolving Loan" and "Committed Revolving
Loans" to hereinafter be references to "Committed Loan" and "Committed
Loans", (ii) "Revolving Commitment" and "Revolving Commitments" to
hereinafter be references to "Commitment" and "Commitments", (iii) "Committed
Revolving Note", and "Committed Revolving Notes" to hereinafter be references
to "Committed Loan Note" and "Committed Loan Notes", (iv) "L/C Commitment" to
hereinafter be a reference to "L/C Sub-Limit" and (v) "Revolving Loan" and
"Revolving Loans" to hereinafter be references to "Loan" and "Loans".
7. The first paragraph of the Credit Agreement is hereby amended
in its entirety to be and to read as follows:
-3-
<PAGE> 4
The undersigned, Titan Wheel International, Inc., an Illinois
corporation (the "Company"), Titan Tire and Subsidiary Borrower (the
Company, Titan Tire and Subsidiary Borrower being hereinafter referred
to collectively as the "Borrowers" and individually as a "Borrower"),
each applies to you for your several commitments, subject to all the
terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth, to make available to each Borrower a
committed revolving facility for loans and letters of credit and a
discretionary bid facility available solely for loans, all as more fully
hereinafter set forth. Each of you is hereinafter referred to as "Bank",
all of you are hereinafter referred to collectively as the "Banks" and
Harris Trust and Savings Bank ("Harris Bank") in its capacity as agent
hereunder is hereinafter referred to as the "Agent".
8. Section 1.1 of the Credit Agreement is hereby amended by (i)
changing the amount "$115,000,000" set forth in such section to "$200,000,000";
(ii) deleting the words "on the applicable signature page hereof" in the first
sentence of such section and substituting therefor the words "on the applicable
signature page of the First Amendment" and (iii) deleting in its entirety the
last sentence of such section.
9. Section 1.2 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
Section 1.2 Internationally Omitted.
10. Section 2.1(d) of the Credit Agreement is hereby amended by
deleting in its entirety the first sentence of such section.
11. The second sentence of Section 2.3(a) of the Credit Agreement
is hereby amended in its entirety to be and read as follows:
Each such notice shall specify the date of the requested Borrowing
(which shall be a Business Day), the amount of the requested Borrowing,
the type of Loans to comprise such Borrowing, the currency in which such
Loans are to be denominated if such Borrowing is to be comprised of
Eurocurrency Loans denominated in an Alternative Currency, the name of
the Borrower on whose behalf such Borrowing is being requested and, if
such Borrowing is to be comprised of Fixed Rate Loans, the Interest
Period applicable thereto.
12. Section 4.3(a) of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
(a) Committed Loans. Each Borrower shall have the privilege of
prepaying without premium or penalty any Borrowing of Domestic Rate
Loans (i) in whole or in part (but, if in part, then in an amount not
less than $500,000 and in integral multiples of $100,000) and (ii) at
any time upon prior notice to the Agent (which shall advise each Bank
thereof promptly in writing
-4-
<PAGE> 5
thereafter), such prepayment to be made by the payment of the principal
amount to be prepaid and accrued interest thereon to the date fixed for
prepayment. The Borrower may not prepay any Fixed Rate Loan before its
maturity.
13. Section 4.5(a) and (b) of the Credit Agreement are hereby
amended in their entirety to be and to read as follows:
(a)(i) All Committed Loans made to the Company and Titan Tire
by a Bank prior to the date a Subsidiary Borrower has delivered the
documents required to become a Borrower under this Agreement shall be
evidenced by a promissory note of the Company and Titan Tire, jointly
and severally, in the form of Exhibit A-1 hereto (individually, along
with any substitute promissory note delivered pursuant to clause (a)(ii)
below, a "Committed Note" and collectively the "Committed Notes"), each
such Committed Note to be dated the date of the First Amendment, payable
to the order of the applicable Bank and otherwise in the form of Exhibit
A-1 hereto; (ii) All Committed Loans made to the Borrowers by a Bank on
and after the date a Subsidiary Borrower has delivered the documents
required to become a Borrower under this Agreement shall be evidenced by
a Committed Note of the Borrowers (including each Subsidiary Borrower
which already is, or is then becoming, a Borrower), jointly and
severally, in the form of Exhibit AA-1 hereto, each such Committed Note
to be dated and delivered the date such Subsidiary Borrower becomes a
Borrower hereunder, payable to the order of the applicable Bank and
otherwise in the form of Exhibit AA-1 hereto. Each Bank, upon its
receipt of the Committed Note to be delivered pursuant to clause (a)(ii)
above for the addition of a Subsidiary Borrower to the existing
Borrowers, shall return to the Company the Committed Note it had
previously received from such existing Borrowers pursuant to clause
(a)(i) or (a)(ii) above, as the case may be, marked canceled.
(b) Intentionally Omitted.
14. Section 4.6 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
The Company shall have the right at any time and from time to
time, upon three (3) Business Days' prior written notice to the Agent,
to terminate without premium or penalty, in whole or in part, the
Commitments, any partial termination to be made in an amount not less
than $1,000,000 or any larger amount that is an integral multiple of
$1,000,000, and to reduce ratably each Bank's Commitment; provided that
the Commitments may not be reduced to an amount less than the aggregate
Original Dollar Amount of Loans (whether Committed Loans or Bid Loans)
and L/C Obligations then outstanding. Any termination of Commitments
pursuant of this Section 4.6 may not be reinstated. No Facility Fee
shall accrue on any portion of the Commitments that has been
terminated.
-5-
<PAGE> 6
15. Section 4.7(b) of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
(b) If the aggregate Original Dollar Amount of outstanding
Loans and L/C Obligations shall at any time for any reason exceed the
Commitments then in effect, the Company shall, within three (3) Business
Days, pay the amount of such excess to the Agent for the ratable benefit
of the Banks as a prepayment of Loans (to be applied to such Loan as the
Company shall direct at the time of such payment) and, if necessary, a
prefunding of Letters of Credit. Immediately upon determining the need
to make any such prepayment the Company shall notify the Agent of such
required prepayment. Each such prepayment shall be accompanied by a
payment of all accrued and unpaid interest on the Loans prepaid and
shall be subject to Section 4.8 hereof.
16. Section 4.9(b) of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
(b) Subsidiary Borrower and Titan Tire each hereby irrevocably
appoints the Company as its agent hereunder to make any and all requests
on its behalf, including without limitation requests under Section 1, 2
or 3 hereof for Loans or Letters of Credit to be made to it, to give and
receive any and all notices under the Loan Documents, to accept amounts
on its behalf and to take any other action contemplated by the Loan
Documents with respect to credit extended to it hereunder. The Agent and
the Banks shall be entitled to conclusively presume that any action by
the Company under the Loan Documents is taken on behalf of Titan Tire
and Subsidiary Borrower, whether or not the Company so indicates and
that any notice delivered to the Company has also been delivered to
Titan Tire and Subsidiary Borrower.
17. Section 5.3 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
Section 5.3. Intentionally Omitted.
18. Section 5.5 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
The Borrowers shall pay to the Agent for the sole account of the Agent
the fees agreed to between the Agent and the Borrowers from time to time
in writing.
19. Section 6.1(c) of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
(c) third, to the payment of (i) the principal of the Notes and
(ii) after all amounts in clause (i) have been paid, to any liabilities
in respect of unpaid drawings under the Letters of Credit and to the
Agent to be held as collateral
-6-
<PAGE> 7
security for any undrawn Letters of Credit (until the Agent is holding
an amount of cash equal to the then outstanding amount of all such
Letters of Credit), the aggregate amount paid to or held as collateral
security for the Banks to be allocated pro rata as among the Banks in
accord with the then respective aggregate unpaid principal balances of
the Notes as to which such payments relate and the Letters of Credit;
20. Section 9.2(d) of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
(d) After giving effect to the Credit Event, the aggregate
Original Dollar Amount of (i) all Loans (whether Committed Loans or Bid
Loans) and L/C Obligations outstanding hereunder shall not exceed the
Commitments, (ii) all Bid Loans outstanding hereunder shall not exceed
the lesser of the unused Commitments or the Bid Loan Limit and (iii) all
L/C Obligations shall not exceed the L/C Sub-Limit;
21. Section 10.6 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
Section 10.6 Intentionally Omitted.
22. Section 10.7 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
The Company will at all times maintain its Tangible Net Worth at
not less than the Required Amount. For purposes of this Section, the
term "Required Amount" shall mean the Base Amount plus (i) 50% of
Consolidated Net Income for each fiscal year (if positive for such year)
commencing with the fiscal year beginning on January 1, 1997 and (ii)
75% of the cash proceeds from a public offering of the common capital
stock or preferred stock of the Company after the date of the First
Amendment (such proceeds to be net of seller's and underwriting
discounts, accounting, legal and printing fees and other costs directly
incurred and payable as a result of such offering and also net of
repurchases). For purposes of this Section, the term "Base Amount" shall
mean as of any time, the greater of (i) $130,000,000 or (ii) the
difference between $180,000,000 and the aggregate amount theretofore
expended (on a cumulative basis after the date of the First Amendment)
for Permitted Company Redemptions.
23. Section 10.8 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
The Company will as of the end of each fiscal quarter maintain
an Interest Coverage Ratio for the four fiscal quarters then ended of
not less than 1.75 to 1.0.
-7-
<PAGE> 8
24. Section 10.9 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
The Company will as of the end of each fiscal quarter maintain
the Debt to Earnings Ratio at not more than 3.5 to 1.0, provided, that
if the Company has as of the end of a fiscal quarter Subordinated Debt
outstanding which was issued after the date of the First Amendment in an
aggregate amount in excess of $75,000,000, then as of the end of each
such fiscal quarter the Company will maintain the Debt to Earnings Ratio
at not more than 4.0 to 1.0.
25. Section 10.11 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
Neither the Company nor any Subsidiary will create, incur,
assume, guarantee or be or remain liable, contingently or otherwise,
with respect to any Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under any
of the Loan Documents;
(b) current liabilities incurred in the ordinary course of
business not incurred through (i) the borrowing of money, or (ii) the
obtaining of credit except for credit on an open account basis customarily
extended and in fact extended in connection with normal purchases of goods
and services;
(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be
made in accordance with the provisions of Section 10.3 hereof;
(d) Indebtedness in respect of judgments or awards, provided
that in the case of such Indebtedness which in the aggregate exceed
$4,000,000, (other than any judgment for which a financially sound and
reputable insurer has admitted coverage) such judgments or awards have
been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which the
Company shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services and similar transactions, in each
case incurred in the ordinary course of business;
(f) Subordinated Debt in an aggregate amount at any one time
outstanding not to exceed $150,000,000;
-8-
<PAGE> 9
(g) unsecured Indebtedness set forth on Schedule 10.11(g)
hereof;
(h) Indebtedness of Wholly-owned Subsidiaries to the Company or
to other Wholly-owned Subsidiaries (other than Restricted Subsidiaries);
and
(i) Indebtedness not otherwise permitted by this Section
aggregating not more than $50,000,000 at any one time outstanding;
(j) Indebtedness of Restricted Subsidiaries so long as such
Indebtedness is non-recourse to the Company and any of its Subsidiaries
(other than Restricted Subsidiaries); and
(k) additional Subordinated Debt of Titan Tire to PATC in an
amount not to exceed $20,150,000 at any time outstanding.
26. The first paragraph of Section 10.14(a) of the Credit Agreement
is hereby amended in its entirety to be and to read as follows:
The Company will not, and will not permit any Subsidiary to,
sell, transfer, of or otherwise dispose of all or any substantial part
of its property, assets or business, or in any event sell or discount
(with or without recourse) any of its notes or accounts receivable or be
or become liable as lessee of any property theretofore owned by the
Company or any Subsidiary; provided, however, that this Section shall
not apply to nor prohibit:
(i) the sale by the Company or any Subsidiary of assets
no longer used or useful in the conduct of their respective
businesses or from selling inventory in the ordinary course of
its business; or
(ii) the transfer of any such assets to Titan Wheel in
exchange for all issued and outstanding securities or as an
additional contribution to capital thereof, provided that in
compliance with the provisions of this Agreement, Titan Wheel is
(or contemporaneously with such transfer becomes) a Borrower
hereunder at the time of such transfer.
27. The second sentence of Section 10.15 is hereby amended by
striking the phrase "unless the Required Banks otherwise agree" appearing
therein and substituting therefor the phrase "unless the following provisions of
this Section otherwise provide".
28. Section 10.15 to the Credit Agreement is hereby further amended
by striking the next to last sentence of such Section and inserting the
following immediately at the end thereof:
"Notwithstanding anything herein to the contrary, no Subsidiary
Guarantee Agreement shall be required from any Domestic Subsidiary if
and so long as (i)
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<PAGE> 10
such Domestic Subsidiary is not a Borrower and (ii) either (x) the
aggregate amount of assets of all the Non-Guaranteeing Domestic
Subsidiaries (including such Domestic Subsidiary) as of the time of
determining whether such guaranty is required would not exceed 5% of
Total Assets as of the close of each of the then four most recently
completed fiscal quarters of the Company or (y) (1) the Required Banks
agree in writing not to require such guaranty and (2) the aggregate
amount of assets of all the Non-Guaranteeing Domestic Subsidiaries
(including such Domestic Subsidiary) as of the time of determining
whether such guaranty is required would not exceed 10% of Total Assets
as of the close of each of the then four most recently completed fiscal
quarters of the Company (it being understood and agreed that the consent
of all the Banks is required to amend this sentence)."
29. Section 10.15 of the Credit Agreement is hereby amended by
striking the parenthetical "(other than Sirmac Officine Meccaniche SpA)"
appearing in the last sentence of such Section.
30. Section 10.16 of the Credit Agreement is hereby amended by
deleting the words "the Company will at all times remain an operating company,
and" from such section.
31. Section 15.12 of the Credit Agreement is hereby amended by
inserting the following words before the semi-colon at the end of clause (iv)
of such subsection:", provided, that so long as an Event of Default has
occurred and is continuing, the consent of each Borrower to such an assignment
shall not be required".
32. A new Section 15.13(iii) is hereby added to the Credit
Agreement to be and to read as follows.
(iii) no amendment or waiver pursuant to this Section 15.13
shall, without the prior written consent of each Bank, materially modify
Section 14 hereof or a Subsidiary Guarantee Agreement or release a
Subsidiary from its Subsidiary Guarantee Agreement or release the stock
pledged in lieu of such a guaranty; provided, however, that (i) the
Agent may upon the Company's request, without the consent of any other
Bank, release a Subsidiary from its Subsidiary Guarantee Agreement or
release the stock pledged in lieu of such a guaranty if (x) at the time
of such release and immediately after giving effect thereto, such
Subsidiary would not have been required under Section 10.15 hereof to
provide such a guaranty or pledge if one had not already been delivered,
(y) no consent from any Bank was required under Section 10.15 to waive
the requirement that such Subsidiary provide a guaranty or pledge and
(z) no Default or Event of Default would occur or be continuing, and
(ii) if the Required Banks so consent in writing, the Agent may release
a Subsidiary from its Subsidiary Guarantee Agreement or release the
stock pledged in lieu of such a guaranty if (x) the Required Banks would
in accordance with Section 10.15 hereof then have the right thereunder
to waive the requirement for such
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<PAGE> 11
Subsidiary's delivery of such guaranty or pledge had one not already
been delivered and (y) no Default or Event of Default shall occur or be
continuing at the time of such release or immediately after giving
effect thereto.
33. Exhibits A-1, AA-1, B, BB and H of the Credit Agreement are
hereby deleted in their entirety and Exhibits A-1, AA-1, B, BB and H attached to
this Amendment are hereby substituted therefor.
34. Exhibit A-2 and Exhibit AA-2 of the Credit Agreement are
hereby deleted in their entirety.
35. An amended Schedule 8.2 and a new Schedule 10.11(g) each in
the form attached to this First Amendment as Schedule 8.2 and Schedule 10.11(g),
respectively is hereby made part of the Credit Agreement.
36. The first sentence of the second paragraph of Exhibit M is
hereby amended in its entirety to be and to read as follows:
The undersigned [NAME OF APPLICABLE SUBSIDIARY BORROWER], a corporation
organized and existing under the laws of _________________, hereby
elects to be a Borrower for purposes of the Credit Agreement, effective
from the date hereof.
Simultaneously with the effectiveness of this Amendment, the Company
agrees that it will repay all Committed Loans which were outstanding immediately
prior to the effectiveness of this Amendment and that such prepayment shall be
subject to Section 4.8 of the Credit Agreement.
Except as expressly amended hereby, the Credit Agreement and all other
documents executed in connection therewith shall remain unaltered and in full
force and effect. The Credit Agreement, as amended hereby, and all rights and
powers created thereby and thereunder or under such other documents are in all
respects ratified and confirmed. From and after the date hereof, the Credit
Agreement shall be deemed to be amended and modified as herein provided, but,
except as so amended and modified, the Credit Agreement shall continue in full
force and effect and the Credit Agreement and this Amendment shall be read,
taken and construed as one and the same instrument. On and after the date
hereof the terms "Agreement" as used in the Credit Agreement and all other
references to the Credit Agreement and the documents executed in connection
therewith and/or herewith or any other instrument, document or writing executed
by the Borrowers or any other person or furnished to the Agent by the Borrowers,
or any other person in connection herewith or therewith shall mean the Credit
Agreement as hereby amended. Upon its delivery of this Amendment, Titan Tire
shall be conclusively deemed to be a direct signatory to the Credit Agreement.
Each Borrower represents and warrants to the Agent and the Banks that
(i) this Amendment has been duly authorized, executed and delivered on its
behalf, and the Credit
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<PAGE> 12
Agreement, as amended and supplemented hereby constitute its legal, valid and
binding obligation enforceable against it in accordance with its terms, except
to the extent that a remedy or default may be determined by a court of
competent jurisdiction to constitute a penalty and except to the extent that
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights or by general
principles of equity, (ii) no Default or Event of Default has occurred and is
continuing under the Credit Agreement, (iii) the representations and warranties
set forth in Section 8 of the Credit Agreement are true and correct as of the
date hereof and (iv) as of the date hereof the Company and Titan Tire are the
only Borrowers under the Credit Agreement.
This Amendment shall not be effective until:
(a) The Agent shall have received for each Bank the
favorable written opinion of Schmiedeskamp, Robertson, Neu & Mitchell,
counsel to the Company, Titan Tire and the Guarantors, in form and
substance satisfactory to the Required Banks;
(b) The Agent shall have received for each Bank (i)
certified copies of resolutions of the Board of Directors of the
Company, Titan Tire and each Guarantor authorizing the execution,
delivery and performance of, and indicating the authorized signers of,
the Loan Documents to which it is a party and all other documents
relating thereto and the specimen signatures of such signers, (ii)
copies of any amendments or revisions since September 19, 1996 to either
the Articles of Incorporation or by-laws for the Company, Titan Tire and
each Guarantor with any such amendment or revision certified to by their
Secretary or other appropriate officer, together with a certificate of
good standing certified by the appropriate governmental officer in the
jurisdiction of its incorporation and (iii) the duly executed and
delivered Loan Documents (other than Loan Documents which are not
required to be delivered until the Subsidiary Borrower elects to become
a Borrower hereunder), including the new Notes which are to be executed
in connection with this Amendment;
(c) The Agent shall have received a Guarantor's Consent in
the form of Exhibit C hereto from each Subsidiary who has executed a
guarantee;
(d) The Agent shall have received from Titan Tire a list of
its Authorized Representatives and from the Company any changes to its
list of its Authorized Representatives since September 19, 1996;
(e) The Agent shall have received for the account of each
Bank a nonrefundable amendment fee equal to 0.10% of such Bank's
Commitment; and
(f) The Agent shall have received for each Bank copies of
the Company's preliminary December 31, 1996 balance sheet.
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<PAGE> 13
Promptly after this Amendment becomes effective, each Bank shall return
to the Company the Notes, marked canceled, which were delivered to such Bank by
the Company at the closing of the Credit Agreement.
This Amendment may be signed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instruments.
Except as otherwise specified herein, this Amendment embodies the
entire agreement and understanding between the Borrowers, the Banks and the
Agent with respect to the subject matter hereof and supersedes all prior
agreements, consents and understandings relating to such subject matter.
This Amendment shall be binding upon and inure to the benefit of the
Banks and the Agent their successors and assigns and the Borrowers and their
permitted successors and assigns.
This Amendment shall be governed by the internal laws of the State of
Illinois.
[Remainder of Page Intentionally Left Blank]
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<PAGE> 14
IN WITNESS WHEREOF, the Borrowers, the Banks and the Agent have caused
this Amendment to be duly executed as of the date first hereinabove written.
TITAN WHEEL INTERNATIONAL, INC.
By KENT W. HACKAMACK
-----------------------
Name: Kent W. Hakamack
---------------------
Title: Vice President Finance/Treasurer
TITAN TIRE CORPORATION
By KENT W. HACKAMACK
------------------------
Name: Kent W. Hackamack
----------------------
Title: Vice President Finance/Treasurer
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<PAGE> 15
111 West Monroe Street HARRIS TRUST AND SAVINGS BANK,
Chicago, Illinois 60690 in its individual capacity as a
Attention: James H. Colley Bank and as Agent
Telecopy: (312) 461-2591
Telephone: (312) 461-6876
By STEPHEN J. GRAY
-----------------------
Commitment: $35,000,000 Name: Stephen J. Gray
-----------------
Title: Vice President
Lending Offices:
Domestic Rate Loans: 111 West Monroe Street
Chicago, Illinois 60690
Eurocurrency Loans: Nassau Branch
c/o 111 West Monroe Street
Chicago, Illinois 60690
Bid Loans: 111 West Monroe Street
Chicago, Illinois 60690
CD Rate Loans: 111 West Monroe Street
Chicago, Illinois 60690
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<PAGE> 16
One First National Plaza THE FIRST NATIONAL BANK OF CHICAGO
Mail Suite 0088
Chicago, Illinois 60670
Attention: Cory Olson
Telecopy: (312) 732-5161 By: CORY M. OLSEN
Telephone: (312) 732-1706 ------------------------
Name: Cory M. Olsen
Commitment: $35,000,000 ------------------
Title: Vice President
Lending Offices: ------------------
Domestic Rate Loans: One First National Plaza
Mail Suite 0088
Chicago, Illinois 60670
Eurocurrency Loans: One First National Plaza
Mail Suite 0088
Chicago, Illinois 60670
Bid Loans: One First National Plaza
Mail Suite 0088
Chicago, Illinois 60670
CD Rate Loans: One First National Plaza
Mail Suite 0088
Chicago, Illinois 60670
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<PAGE> 17
233 S. Wacker Drive, Suite 2800 NATIONSBANK, N.A.
Chicago, Illinois 60606
Attention: Matthew Walters
Telecopy: (312) 234-5601 By MARY CAROL DALY
Telephone: (312) 234-5640 -----------------------
Name: Mary Carol Daly
Commitment: $35,000,000 -------------------
Title: Vice-President
-------------------
Lending Offices:
Domestic Rate Loans: Independence Center
101 N. Tryon Street
NC 1-001-15-03
Charlotte, North Carolina 28255
Attention: Jennifer Sawdey
Eurocurrency Loans:
Independence Center
101 N. Tryon Street
NC 1-001-15-03
Charlotte, North Carolina 28255
Attention: Jennifer Sawdey
Bid Loans: Independence Center
101 N. Tryon Street
NC 1-001-15-03
Charlotte, North Carolina 28255
Attention: Jennifer Sawdey
CD Rate Loans: Independence Center
101 N. Tryon Street
NC 1-001-15-03
Charlotte, North Carolina 28255
Attention: Jennifer Sawdey
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<PAGE> 18
1 Midamerica Plaza COMERICA BANK
Suite 612
Oakbrook Terrace, Illinois 60181
Attention: Gregory Block
Telecopy: (630) 575-2164 By GREGORY N. BLOCK
Telephone: (630) 575-2160 ---------------------------
Name: Gregory N. Block
Commitment: $25,000,000 ---------------------
Title: Vice President
---------------------
Lending Offices:
Domestic Rate Loans: One MidAmerica Plaza
Suite 612
Oakbrook Terrace, Illinois 60181
Eurocurrency Loans: One MidAmerica Plaza
Suite 612
Oakbrook Terrace, Illinois 60181
Bid Loans: One MidAmerica Plaza
Suite 612
Oakbrook Terrace, Illinois 60181
CD Rate Loans: One MidAmerica Plaza
Suite 612
Oakbrook Terrace, Illinois 60181
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<PAGE> 19
25 Park Place SUNTRUST BANK, ATLANTA
26th Floor - Mail Code 118
Atlanta, Georgia 30303
Attention: Linda L. Dash
Telecopy: (404) 658-4905 By LINDA L. DASH
Telephone: (404) 658-4923 --------------------------------
Name: Linda L. Dash
Commitment: $25,000,000 --------------------------
Title: Vice President
--------------------------
By RUTH E. WHITNER
--------------------------------
Name: Ruth E. Whitner
--------------------------
Title: Assistant Vice President
--------------------------
Lending Offices:
Domestic Rate Loans: 25 Park Place
24th Floor
Atlanta, Georgia 30302
Eurocurrency Loans: 25 Park Place
24th Floor
Atlanta, Georgia 30302
Bid Loans: 25 Park Place
24th Floor
Atlanta, Georgia 30302
CD Rate Loans: 25 Park Place
24th Floor
Atlanta, Georgia 30302
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<PAGE> 20
135 South LaSalle Street ABN AMRO BANK N.V.
Chicago, Illinois 60674-9135
Attention: Amy Lauterjung
Telecopy: (312) 606-8425 By DENIS J. CAMPBELL IV
Telephone: (312) 904-2953 ---------------------------------
Name: Denis J. Campbell IV
Commitment: $25,000,000 ----------------------------
Title: Vice President - Director
---------------------------
By CHRISTINE E. HOLMES
---------------------------------
Name: Christine E. Holmes
----------------------------
Title: Vice President
---------------------------
Lending Offices:
Domestic Rate Loans: 135 South LaSalle Street
Chicago, Illinois 60674-9135
Eurocurrency Loans: 135 South LaSalle Street
Chicago, Illinois 60674-9135
Bid Loans: 135 South LaSalle Street
Chicago, Illinois 60674-9135
CD Rate Loans: 135 South LaSalle Street
Chicago, Illinois 60674-9135
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<PAGE> 21
Central Division THE BANK OF NEW YORK
1 Wall Street
New York, New York 10286
Attention: William O'Daly
Telecopy: (212) 635-1208 By: WILLIAM O'DALY
Telephone: (212) 635-1147 ----------------------------------
Name: William A. O'Daly
Commitment: $20,000,000 -----------------------------
Title: Assistant Vice President
-----------------------------
Lending Offices:
Domestic Rate Loans: 1 Wall Street
New York, New York 10286
Eurocurrency Loans: 1 Wall Street
New York, New York 10286
Bid Loans: 1 Wall Street
New York, New York 10286
CD Rates Loans: 1 Wall Street
New York, New York 10286
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