<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
FOR QUARTERLY PERIOD ENDED: MARCH 31, 1997
Commission File Number: 1-12936
TITAN WHEEL INTERNATIONAL, INC.
(Exact name of Registrant as specified in its Charter)
ILLINOIS
(State of Incorporation)
36-3228472
(I.R.S. Employer Identification No.)
2701 SPRUCE STREET, QUINCY, IL 62301
(Address of principal executive offices, including Zip Code)
(217) 228-6011
(Telephone Number)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
<TABLE>
<CAPTION>
SHARES OUTSTANDING
CLASS AT APRIL 30, 1997
----- ------------------
<S> <C>
Common stock, no par value per share 21,591,632
</TABLE>
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TITAN WHEEL INTERNATIONAL, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets -- March 31, 1997 and December 31, 1996.. 1
Consolidated Condensed Statements of Operations for the Three Months Ended
March 31, 1997 and 1996......................................................... 2
Consolidated Condensed Statements of Cash Flows for the Three Months Ended
March 31, 1997 and 1996......................................................... 3
Notes to Consolidated Condensed Financial Statements............................ 4-5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................... 6-7
Part II. Other Information and Signature................................................. 8-9
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
(AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 20,237 $ 27,406
Accounts receivable (net of allowance of $4,712 and
$4,924, respectively).................................. 120,760 95,613
Inventories............................................... 137,739 138,758
Prepaid and other current assets.......................... 26,661 22,874
-------- --------
Total current assets................................... 305,397 284,651
Property, plant and equipment, net........................ 206,396 205,087
Other assets.............................................. 32,106 27,605
Goodwill.................................................. 40,580 41,249
-------- --------
Total assets........................................... $584,479 $558,592
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt......................... $ 435 $ 872
Accounts payable.......................................... 65,349 60,603
Accrued wages & commissions............................... 9,697 9,878
Income taxes payable...................................... 12,905 6,992
Other current liabilities................................. 24,903 25,291
-------- --------
Total current liabilities.............................. 113,289 103,636
Deferred income taxes....................................... 18,063 18,786
Other long-term liabilities................................. 21,786 21,893
Long-term debt.............................................. 193,014 113,096
-------- --------
Total liabilities...................................... 346,152 257,411
-------- --------
Stockholders' equity
Common stock, no par, 60,000,000 shares authorized,
21,713,863 and 26,526,992 outstanding, respectively.... 27 27
Additional paid-in capital................................ 211,071 210,677
Retained earnings......................................... 107,021 98,096
Cumulative translation adjustment......................... 415 2,673
Treasury stock at cost: 5,569,484 and 725,165 shares,
respectively........................................... (80,207) (10,292)
-------- --------
Total stockholders' equity............................. 238,327 301,181
-------- --------
Total liabilities and stockholders' equity.................. $584,479 $558,592
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
1
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TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1997 1996
---- ----
(AMOUNTS IN THOUSANDS, EXCEPT
EARNINGS PER SHARE DATA)
<S> <C> <C>
Net sales................................................... $180,208 $177,257
Cost of sales............................................... 150,970 144,134
-------- --------
Gross profit.............................................. 29,238 33,123
Selling, general and administrative expenses................ 11,711 11,657
Research and development expenses........................... 667 769
-------- --------
Income from operations.................................... 16,860 20,697
Interest expense............................................ 2,460 2,706
Minority interest........................................... 0 734
Other income................................................ (521) (494)
-------- --------
Income before income taxes................................ 14,921 17,751
Provision for income taxes.................................. 5,670 6,745
-------- --------
Net income.................................................. $ 9,251 $ 11,006
======== ========
Earnings per share:
Primary................................................... $.36 $.49
Fully diluted............................................. .36 .40
Average shares outstanding:
Primary................................................... 25,584 22,674
Fully diluted(1).......................................... 25,613 29,543
</TABLE>
- -------------------------
(1) The computations of fully diluted earnings per share for the three months
ending March 31, 1996, assumes the conversion of the Company's 4 3/4%
convertible notes, issued November, 1993, and extinguished December 30,
1996.
The accompanying notes are an integral part of the
consolidated condensed financial statements.
2
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TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1997 1996
---- ----
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 9,251 $ 11,006
Depreciation and amortization............................. 7,575 7,088
(Increase) in receivables................................. (25,147) (20,711)
(Increase)/decrease in inventories........................ 1,019 (9,274)
(Increase)/decrease in other current assets............... (3,787) 2,888
Increase in accounts payable.............................. 4,746 7,232
Increase in other accrued liabilities..................... 5,426 7,165
Other, net................................................ (1,915) 129
-------- --------
Net cash provided by/(used for) operating activities... (2,832) 5,523
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net................................. (9,051) (6,058)
Acquisitions, net of cash acquired........................ 0 (941)
-------- --------
Net cash (used for) investing activities............... (9,051) (6,999)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings, net of discount....... 149,250 3,000
Payment of debt........................................... (70,519) (6,351)
Repurchase of common stock................................ (69,916) 0
Payment of financing fees................................. (4,088) 0
Dividends paid............................................ (408) (338)
Other, net................................................ 395 115
-------- --------
Net cash provided by/(used for) financing activities... 4,714 (3,574)
Net decrease in cash and cash equivalents................... (7,169) (5,050)
Cash and cash equivalents at beginning of period............ 27,406 14,211
-------- --------
Cash and cash equivalents at end of period.................. $ 20,237 $ 9,161
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
<PAGE> 6
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
A. ACCOUNTING POLICIES
In the opinion of Titan Wheel International, Inc. ("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 March 31, 1997, the
results of operations for the three months ended March 31, 1997 and 1996, and
cash flows for the three months ended March 31, 1997 and 1996.
Accounting policies have continued without change and are described in the
Summary of Significant Accounting Policies contained in the Company's 1996
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, 1996 filed in conjunction
with the Company's 1996 Annual Report on Form 10-K. Details in those notes have
not changed significantly except as a result of normal interim transactions and
certain matters discussed below.
B. INVENTORIES
Inventories by component are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
Raw materials........................................... $ 42,830 $ 40,974
Work in progress........................................ 19,703 20,153
Finished goods.......................................... 72,688 75,199
-------- --------
135,221 136,326
LIFO reserve............................................ 2,518 2,432
-------- --------
$137,739 $138,758
======== ========
</TABLE>
C. FIXED ASSETS
Property, plant and equipment, net reflects accumulated depreciation of
$81.5 million and $75.4 million at March 31, 1997, and December 31, 1996,
respectively.
D. LONG-TERM DEBT (IN THOUSANDS):
Long-term debt comprised the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
Senior subordinated notes............................... $150,000 $ -0-
Credit facility......................................... 10,000 80,000
Note payable to PATC.................................... 19,743 19,743
Industrial revenue bond -- Greenwood.................... 9,500 9,500
Other................................................... 4,206 4,725
-------- --------
193,449 113,968
Less: Amounts due within one year....................... 435 872
-------- --------
$193,014 $113,096
======== ========
</TABLE>
4
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TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate maturities of long-term debt at March 31, 1997 are as follows (in
thousands):
<TABLE>
<S> <C>
April 1 -- December 31, 1997................................ $ 276
1998........................................................ 1,147
1999........................................................ 628
2000........................................................ 19,988
2001 and thereafter......................................... 171,410
--------
$193,449
========
</TABLE>
On February 24, 1997, the Company filed a Registration Statement on Form
S-1 (as amended on March 5, 1997 and as effective on March 18, 1997) for the
sale of $150 million principal amount of 8 3/4% senior subordinated notes,
priced to the public at 99.5 percent, due 2007. The Company received proceeds of
$145.7 million net of a discount and underwriters' fees of $4.3 million. The net
proceeds from the notes were used to repay outstanding long-term debt and for
the Offer to Purchase (see Note E).
On March 14, 1997, the Company increased its availability under its credit
facility from $175 million to $200 million. Interest rate and foreign currency
borrowing options and covenants under the new facility remain substantially
unchanged from those under the old facility.
E. STOCK REPURCHASE PROGRAM
The Company's Board of Directors has authorized the Company to repurchase
up to ten million shares of its common stock. On February 25, 1997, the Company
commenced an offer to purchase (the "Offer to Purchase") up to five million
shares of its common stock at a price of not greater than $15.00 nor less than
$12.50 per share. The Company repurchased 3.8 million shares of its common stock
at a price of $15 per share under the Offer to Purchase. As of March 31, 1997,
the Company has repurchased an additional 1.8 million shares of common stock in
the open market (1.1 million shares during the first quarter of 1997 and 0.7
million shares in 1996). The Company is authorized to repurchase an additional
4.4 million common shares.
F. NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standard No. 128 (SFAS 128), "Earnings
Per Share," issued in February 1997 and effective for the Company for the year
ending December 31, 1997, requires presentation in the income statement of basic
and diluted earnings per share, calculated as defined by SFAS 128, rather than
primary and fully diluted earnings per share as defined by APB 15, "Earnings Per
Share." Earnings per share calculated in accordance with SFAS 128 is not
expected to differ materially from earnings per share as calculated by the
Company under APB 15.
5
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ITEM 2.
TITAN WHEEL INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the quarter ended March 31, 1997, were $180.2 million, an
increase of 2% compared to $177.3 million in sales for the first quarter of
1996. Net sales were positively impacted by a strong agricultural market and the
acquisition of Titan France in December 1996. These amounts were partially
offset by the divestiture of Titan's non-core businesses during 1996. Sales in
the agricultural market were $91.7 million for the first quarter of 1997, as
compared to $86.2 million in 1996. The Company's consumer market sales were
$45.0 million for the first quarter, as compared to $42.4 million in the same
quarter of 1996. Construction market sales were $40.9 million for the first
quarter, as compared to $40.4 million in 1996.
Cost of sales was $151.0 million for the first quarter, as compared to
$144.1 million in 1996. Gross profit for the first quarter was $29.2 million, or
16.2% of net sales, compared to $33.1 million or 18.7% of net sales for the
first quarter of 1996. Gross profit was negatively impacted by European currency
fluctuations, the 1996 divestiture of Titan's non-core businesses and
inefficiencies due to customer orders without the required lead times. With the
strong agricultural product demand, the Company's customers have been placing
orders with minimal or no lead times, resulting in increased employee overtime,
additional spot market material purchases, and facility inefficiencies. To
address these issues, the Company has notified its customers that Titan will
charge an additional premium on customer orders without the required lead times.
Gross profit, as a percentage of sales, was negatively impacted by the 1996
divestiture of Titan's non-core businesses and by customers in the agricultural
product market placing orders with minimal or no lead times.
Selling, general and administrative ("SG&A") and research and development
("R&D") expenses were $12.4 million for the first quarters of 1997 and 1996.
Income from operations for the quarter was $16.9 million or 9.4% of net sales,
compared to $20.7 million or 11.7% in 1996. Income from operations, as a
percentage of sales, was negatively impacted by customers in the agricultural
product market placing orders with minimal or no lead times and the 1996
divestiture of Titan's non-core businesses.
Interest expense was $2.5 million for the first quarter, as compared to
$2.7 million in 1996. Interest expense decreased due to the Company's lower
average debt during the quarter, partially offset by higher average interest
rates.
Net income for the first quarter was $9.3 million in 1997, compared to
$11.0 million in 1996. With the extinguishment of the Company's 4 3/4%
subordinated convertible notes in December 1996, there is no longer a
significant difference between primary and fully diluted earnings per share.
Primary earnings per share were $.36 for the first quarter of 1997, as compared
to $.49 in the prior year. Fully diluted earnings per share for the first
quarter were $.36, compared to $.40 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of 1997, negative cash flows from operating activities
of $2.8 million resulted primarily from an increase in receivables. Partially
offsetting these operating cash outflows were positive cash flows from net
income before depreciation and amortization and increases in accounts payable
and other accrued liabilities.
The Company has invested $9.1 million in capital expenditures in 1997,
which represent various equipment purchases and building improvements to enhance
production capabilities.
In March 1997, the Company received $145.7 million in net proceeds from the
sale of $150 million principal amount of 8 3/4% senior subordinated notes due
2007. The net proceeds from the notes were used to repay long-term debt and for
the repurchase of shares of the Company pursuant to the Offer to Purchase as
6
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TITAN WHEEL INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
discussed below. In March 1997, the Company increased its availability under its
credit facility from $175 million to $200 million.
The Company repurchased 3.8 million shares of its common stock in March
1997, at a price of $15 per share under an Offer to Purchase up to five million
shares of common stock which was disseminated to all Company stockholders. An
additional 1.1 million shares were repurchased in the open market during the
first quarter of 1997. In the first quarter of 1997, 4.9 million common shares
were repurchased at a cost of $69.9 million.
At March 31, 1997, the Company had cash and cash equivalents of $20.2
million. Cash on hand, anticipated internal cash flows and utilization of
available borrowing under the Company's credit facilities are expected to
provide sufficient liquidity for working capital needs, capital expenditures and
acquisitions for the foreseeable future.
NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standard No. 128 (SFAS 128), "Earnings
Per Share," issued in February 1997 and effective for the Company for the year
ending December 31, 1997, requires presentation in the income statement of basic
and diluted earnings per share, calculated as defined by SFAS 128, rather than
primary and fully diluted earnings per share as defined by APB 15, "Earnings Per
Share." Earnings per share calculated in accordance with SFAS 128 is not
expected to differ materially from earnings per share as calculated by the
Company under APB 15.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Readers should note that in addition to the historical information
contained herein, this Form 10-Q contains forward-looking statements which are
inherently subject to risks and uncertainties that could cause actual results to
differ materially from those contemplated by such statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in this report, as well as in the Company's 1996 Annual Report on Form
10-K.
7
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TITAN WHEEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 6 ARE NOT APPLICABLE.
8
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TITAN WHEEL INTERNATIONAL, INC.
(Registrant)
<TABLE>
<CAPTION>
SIGNATURE DATE
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<C> <C>
By: /s/ KENT W. HACKAMACK May 9, 1997
- -----------------------------------------------------
Kent W. Hackamack
Vice President of Finance
and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
</TABLE>
9
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EXHIBIT INDEX
Exhibit
No. Description
- --------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) SEC FORM
10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 20,237
<SECURITIES> 0
<RECEIVABLES> 125,472
<ALLOWANCES> 4,712
<INVENTORY> 137,739
<CURRENT-ASSETS> 305,397
<PP&E> 287,852
<DEPRECIATION> 81,456
<TOTAL-ASSETS> 584,479
<CURRENT-LIABILITIES> 113,289
<BONDS> 193,014
0
0
<COMMON> 27
<OTHER-SE> 238,300
<TOTAL-LIABILITY-AND-EQUITY> 584,479
<SALES> 180,208
<TOTAL-REVENUES> 180,208
<CGS> 150,970
<TOTAL-COSTS> 150,970
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,460
<INCOME-PRETAX> 14,921
<INCOME-TAX> 5,670
<INCOME-CONTINUING> 9,251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,251
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
