<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED: SEPTEMBER 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-12936
TITAN INTERNATIONAL, INC.
(Exact name of Registrant as specified in its Charter)
ILLINOIS 36-3228472
(State of Incorporation) (I.R.S. Employer Identification No.)
2701 SPRUCE STREET, QUINCY, IL 62301
(Address of principal executive offices, including Zip Code)
(217) 228-6011
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. Yes X No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
SHARES OUTSTANDING AT
CLASS OCTOBER 31, 2000
----- ---------------------
COMMON STOCK, NO PAR VALUE PER SHARE 20,730,797
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TITAN INTERNATIONAL, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Statements of Operations
for the Three and Nine Months Ended
September 30, 2000 and 1999 1
Consolidated Condensed Balance Sheets as of
September 30, 2000 and December 31, 1999 2
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended September 30, 2000 and 1999 3
Notes to Consolidated Condensed Financial Statements 4-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-14
Part II. Other Information and Signature 15-16
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except earnings per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales $ 119,798 $ 135,983 $ 429,701 $ 453,638
Cost of sales 115,472 125,824 394,045 401,022
------------ ------------ ----------- ------------
Gross profit 4,326 10,159 35,656 52,616
Selling, general & administrative expenses 10,343 12,541 33,488 39,493
Research and development expenses 833 1,563 3,630 4,816
------------ ------------ ----------- ------------
Income (loss) from operations (6,850) (3,945) (1,462) 8,307
Interest expense 5,119 5,951 17,310 17,575
Gain on sale 0 0 (38,727) 0
Other expense (income) 38 (437) (194) (443)
------------ ------------ ----------- ------------
Income (loss) before income taxes (12,007) (9,459) 20,149 (8,825)
Provision (benefit) for income taxes (4,562) (3,595) 7,657 (3,354)
------------ ------------ ----------- ------------
Net income (loss) $ (7,445) $ (5,864) $ 12,492 $ (5,471)
============ ============ =========== ============
Earnings (loss) per share:
Basic $(.36) $(.28) $.60 $(.26)
Diluted $(.36) $(.28) $.60 $(.26)
Average shares outstanding:
Basic 20,693 20,647 20,685 20,859
Diluted 20,693 20,735 20,685 20,859
</TABLE>
The accompanying notes are an integral part of
the consolidated condensed financial
statements.
1
<PAGE> 4
TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 20,331 $ 8,606
Accounts receivable (net of allowance of
$5,213 and $5,863, respectively) 94,336 97,457
Inventories 148,569 133,365
Prepaid and other current assets 33,525 39,650
----------- -----------
Total current assets 296,761 279,078
Property, plant and equipment, net 235,471 267,049
Other assets 51,721 51,927
Goodwill, net 18,089 39,127
----------- -----------
Total assets $ 602,042 $ 637,181
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 5,368 $ 20,195
Accounts payable 57,039 51,363
Other current liabilities 48,952 36,737
----------- -----------
Total current liabilities 111,359 108,295
Deferred income taxes 28,090 28,421
Other long-term liabilities 14,766 16,078
Long-term debt 212,951 255,521
----------- -----------
Total liabilities 367,166 408,315
----------- -----------
Stockholders' equity
Common stock, no par, 60,000,000 shares authorized,
27,555,081 issued 27 27
Additional paid-in capital 213,731 214,846
Retained earnings 127,684 116,123
Accumulated other comprehensive loss (13,390) (7,329)
Treasury stock at cost: 6,863,447 and 6,939,101 shares,
respectively (93,176) (94,801)
----------- -----------
Total stockholders' equity 234,876 228,866
----------- -----------
Total liabilities and stockholders' equity $ 602,042 $ 637,181
=========== ===========
</TABLE>
The accompanying notes are an integral part of
the consolidated condensed financial
statements.
2
<PAGE> 5
TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 12,492 $ (5,471)
Depreciation and amortization 27,222 28,684
Gain on sale of assets (38,727) 0
(Increase)/decrease in receivables (946) 1,680
(Increase)/decrease in inventories (25,552) 13,750
Decrease in other current assets 5,799 2,170
Increase/(decrease) in accounts payable 8,316 (6,944)
Increase/(decrease) in other accrued liabilities 12,328 (16,227)
Other, net (1,448) (367)
---------- ----------
Net cash provided by/(used for) operating activities (516) 17,275
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (17,601) (28,920)
Fixed assets through like-kind exchange (5,968) 0
Proceeds from sale of assets 94,063 0
Acquisitions, net of cash acquired 0 ( 11,853)
---------- ----------
Net cash provided by/(used for) investing activities 70,494 (40,773)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 0 26,526
Payment of debt (57,098) (593)
Repurchase of common stock (468) (3,177)
Dividends paid (930) (937)
Other, net 978 816
---------- ----------
Net cash provided by/(used for) financing activities (57,518) 22,635
Effect of exchange rate changes on cash (735) (426)
Net increase (decrease) in cash and cash equivalents 11,725 (1,289)
Cash and cash equivalents at beginning of period 8,606 14,116
---------- ----------
Cash and cash equivalents at end of period $ 20,331 $ 12,827
========== ==========
</TABLE>
The accompanying notes are an integral part of
the consolidated condensed financial
statements.
3
<PAGE> 6
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. ACCOUNTING POLICIES
In the opinion of Titan 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,
2000, the results of operations for the three and nine months ended
September 30, 2000 and 1999, and cash flows for the nine months ended
September 30, 2000 and 1999.
Accounting policies have continued without change and are described in
the Summary of Significant Accounting Policies contained in the
Company's 1999 Annual Report on Form 10-K. These interim financial
statements have been prepared pursuant to the Securities and Exchange
Commission's rules for Form 10-Qs and are not a presentation in
accordance with U.S. generally accepted accounting principles. 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, 1999, filed in conjunction with the
Company's 1999 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 consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Raw materials $ 42,274 $ 35,333
Work-in-process 13,141 18,810
Finished goods 89,167 73,564
----------- -----------
144,582 127,707
LIFO reserve 3,987 5,658
----------- -----------
$ 148,569 $ 133,365
=========== ===========
</TABLE>
C. FIXED ASSETS
Property, plant and equipment, net reflects accumulated depreciation of
$151.8 million and $155.9 million at September 30, 2000, and December
31, 1999, respectively.
4
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TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
D. GOODWILL
Goodwill, net reflects accumulated amortization of $4.5 million and
$7.3 million at September 30, 2000, and December 31, 1999,
respectively.
E. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Senior subordinated notes $ 150,000 $ 150,000
Credit facility 45,000 82,000
Notes payable to Pirelli Armstrong Tire Corp. 10,000 29,743
Industrial revenue bonds and other 13,319 13,973
----------- -----------
218,319 275,716
Less: Amounts due within one year 5,368 20,195
----------- -----------
$ 212,951 $ 255,521
=========== ===========
</TABLE>
Aggregate maturities of long-term debt at September 30, 2000 are as
follows (in thousands):
<TABLE>
<S> <C>
October 1-December 31, 2000 $ 96
2001 5,363
2002 45,378
2003 6,329
2004 401
</TABLE>
5
<PAGE> 8
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
F. SEGMENT INFORMATION
The table below presents information about certain revenues and income
(loss) from operations used by the chief operating decision maker of
the Company for the three and nine months ended September 30, 2000 and
1999 (in thousands):
<TABLE>
<CAPTION>
Revenues Income (loss)
Three months ended from external Intersegment from
September 30, 2000 customers revenues operations
------------------ --------- -------- ----------
<S> <C> <C> <C>
Agricultural $ 65,768 $ 37,950 $ 329
Earthmoving/construction 41,446 17,030 876
Consumer 12,584 7,780 (1,484)
Reconciling items (a) 0 0 (6,571)
---------- ---------- -----------
Consolidated totals $ 119,798 $ 62,760 $ (6,850)
========== ========== ===========
Three months ended
September 30, 1999
-------------------
Agricultural $ 54,694 $ 18,678 $ (1,157)
Earthmoving/construction 39,089 10,121 2,055
Consumer 42,200 11,715 1,280
Reconciling items (a) 0 0 (6,123)
---------- ---------- -----------
Consolidated totals $ 135,983 $ 40,514 $ (3,945)
========== ========== ===========
</TABLE>
(a) Represents corporate expenses and depreciation and amortization expense
related to property, plant and equipment and goodwill carried at the
corporate level.
6
<PAGE> 9
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
F. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Revenues Income (loss)
Nine months ended from external Intersegment from
September 30, 2000 customers revenues operations
------------------ --------- ---------- ----------
<S> <C> <C> <C>
Agricultural $ 217,436 $ 110,088 $11,644
Earthmoving/construction 126,319 46,538 8,108
Consumer 85,946 60,771 886
Reconciling items (a) 0 0 (22,100)
---------- ---------- -----------
Consolidated totals $ 429,701 $ 217,397 $ (1,462)
========== ========== ===========
Nine months ended
September 30, 1999
------------------
Agricultural $ 196,953 $ 67,280 $ 8,334
Earthmoving/construction 121,233 31,592 12,441
Consumer 135,452 37,532 5,598
Reconciling items (a) 0 0 (18,066)
---------- ---------- -----------
Consolidated totals $ 453,638 $ 136,404 $ 8,307
========== ========== ===========
</TABLE>
(a) Represents corporate expenses and depreciation and amortization expense
related to property, plant and equipment and goodwill carried at the
corporate level.
7
<PAGE> 10
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
F. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
September 30, September 30,
Total assets(a) 2000 1999
-------------- ---- ----
<S> <C> <C>
Agricultural $ 281,764 $ 260,722
Earthmoving/construction 173,988 172,146
Consumer 68,934 139,231
Reconciling items (b) 77,356 94,512
---------- ----------
Consolidated totals $ 602,042 $ 666,611
========== ==========
</TABLE>
(a) Total assets decreased as a result of the sale of assets.
(b) Represents property, plant and equipment and goodwill related to
certain acquisitions and other corporate assets.
G. COMPREHENSIVE INCOME (LOSS)
Comprehensive loss, which includes net income (loss) and the effect of
currency translation, totaled $(10.6) million for the third quarter of
2000, compared to $(4.4) million in the third quarter of 1999.
Comprehensive income for the nine months ended September 30, 2000 was
$6.4 million, compared to a comprehensive (loss) of $(9.7) million in
1999.
H. NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133), will be
adopted on January 1, 2001. The Company expects that the effect of
adoption of SFAS 133 on its financial position, cash flows and results
of operations will be immaterial.
Effective July 1, 2000, the Company adopted Financial Accounting
Standards Board Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation," which clarifies the
accounting for modifications to stock option plans. The adoption had no
impact on the interim financial statements, cash flows and results of
operations for the period ended September 30, 2000.
8
<PAGE> 11
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
I. SALE OF ASSETS
On April 14, 2000, the Company sold certain assets (primarily raw
material inventory, work-in-process inventory, and property, plant and
equipment) of two facilities located in Clinton, Tennessee, and
Slinger, Wisconsin, to Carlisle Tire and Wheel Company, a subsidiary of
Carlisle Companies Incorporated, for approximately $94.1 million in
cash. In conjunction with this transaction the Company wrote off $19.5
million of goodwill. The Company recorded a pretax gain of $38.7
million in the second quarter of 2000. This nonrecurring gain has not
been included in the pro forma amounts described below. These two
facilities are in the business of providing wheels and tires to the
consumer market.
Had the transaction occurred on January 1, 1999, net sales for the
three and nine months ended September 30, 2000, would have been $119.8
and $399.1 million respectively, compared to $114.7 and $387.1 million
in 1999. Loss from operations for the three and nine months ended
September 30, 2000, would have been $(6.9) and $(6.2) million
respectively, compared to $(7.1) and $(2.0) million in 1999. Net loss
for the three and nine months ended September 30, 2000, would have been
$(7.4) and $(13.8) million respectively, compared to $(7.2) and $(10.0)
million in 1999. Loss per share for the three and nine months ended
September 30, 2000, would have been $(.36) and $(.67) respectively,
compared to $(.35) and (.48) in 1999. There is no difference in net
sales, loss from operations, net loss and loss per share for the three
months ended September 30, 2000.
9
<PAGE> 12
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
On April 14, 2000, the Company sold certain assets (primarily raw material
inventory, work-in-process inventory, and property, plant and equipment) of two
facilities located in Clinton, Tennessee, and Slinger, Wisconsin, to Carlisle
Tire and Wheel Company, a subsidiary of Carlisle Companies Incorporated, for
approximately $94.1 million in cash. In conjunction with this transaction the
Company wrote off $19.5 million of goodwill. The Company recorded a pretax gain
of $38.7 million in the second quarter of 2000. These two facilities are in the
business of providing wheels and tires to the consumer market. With this
transaction, Titan has exited the original equipment manufacturer ("OEM")
business for lawn and garden equipment and all terrain vehicles ("ATVs"),
concentrating instead on the agricultural and earthmoving/construction
businesses for both LSW and conventional wheel and tire assemblies to OEMs and
the aftermarket.
Had the transaction occurred on January 1, 1999, net sales for the three and
nine months ended September 30, 2000, would have been $119.8 and $399.1 million
respectively, compared to $114.7 and $387.1 million in 1999. Loss from
operations for the three and nine months ended September 30, 2000, would have
been $(6.9) and $(6.2) million respectively, compared to $(7.1) and $(2.0)
million in 1999. Net loss for the three and nine months ended September 30,
2000, would have been $(7.4) and $(13.8) million respectively, compared to
$(7.2) and $(10.0) million in 1999. Loss per share for the three and nine months
ended September 30, 2000, would have been $(.36) and $(.67) respectively,
compared to $(.35) and (.48) in 1999. There is no difference in net sales, loss
from operations, net loss and loss per share for the three months ended
September 30, 2000.
RESULTS OF OPERATIONS
Net sales for the quarter ended September 30, 2000, were $119.8 million, as
compared to 1999 third quarter net sales of $136.0 million. Net sales for the
nine months ended September 30, 2000, were $429.7 million, compared to 1999 net
sales of $453.6 million. Net sales decreased primarily due to the transaction
described above.
Cost of sales was $115.5 and $394.0 million for the third quarter of 2000 and
for the nine months ended September 30, 2000, as compared to $125.8 and $401.0
million in 1999. Gross profit for the third quarter of 2000 was $4.3 million or
3.6% of net sales, compared to $10.2 million or 7.5% of net sales for the third
quarter of 1999. Gross profit for the nine months ended September 30, 2000, was
$35.7 million or 8.3% of net sales, compared to $52.6 million or 11.6% of net
sales for 1999. Gross profit, as a percentage of net sales, was negatively
impacted by the sale of assets.
10
<PAGE> 13
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
RESULTS OF OPERATIONS (CONTINUED)
Selling, general and administrative ("SG&A") and research and development
("R&D") expenses for the third quarter of 2000 were $11.2 million or 9.3% of net
sales, compared to $14.1 million or 10.4% of net sales for 1999. SG&A and R&D
expenses for the nine months ended September 30, 2000, were $37.1 million or
8.6% of net sales, compared to $44.3 or 9.8% of net sales in 1999. The decrease
in SG&A and R&D expenses, as a percentage of net sales, is primarily attributed
to the Company's efforts to streamline costs at each of its facilities.
Loss from operations for the third quarter of 2000 was $(6.9) million, compared
to $(3.9) million in 1999. Loss from operations for the nine months
ended September 30, 2000 was $(1.5) million, compared to income from operations
of $8.3 million in 1999. Operating results were impacted by the items described
in the preceding paragraphs.
Net sales in the agricultural market were $65.8 and $217.4 million for the third
quarter of 2000 and for the nine months ended September 30, 2000 respectively,
as compared to $54.7 and $197.0 million in 1999. Earthmoving/construction market
net sales were $41.4 and $126.3 million for the third quarter of 2000 and for
the nine months ended September 30, 2000 respectively, as compared to $39.1 and
$121.2 million in 1999. The Company's consumer market net sales were $12.6 and
$85.9 million for the third quarter of 2000 and for the nine months ended
September 30, 2000 respectively, as compared to $42.2 and $135.5 million in
1999. Sales in the agricultural and earthmoving/construction market were
positively impacted by strong demand for smaller diameter wheels and tires,
which has been partially offset by a decrease in demand for large diameter
wheels and tires. Sales in the consumer market decreased primarily due to the
Company exiting the OEM business for lawn and garden equipment and ATVs,
focusing instead on the aftermarket business.
Income from operations for the third quarter of 2000 in the agricultural market
was $0.3, as compared to loss from operations of $(1.2) million in 1999. Income
from operations in the agricultural market was $11.6 million for the nine months
ended September 30, 2000, as compared to $8.3 million in 1999. The Company's
earthmoving/construction market income from operations was $0.9 and $8.1 million
for the third quarter of 2000 and for the nine months ended September 30, 2000
respectively, as compared to $2.1 and $12.4 million in 1999. Loss from
operations for the third quarter of 2000 in the consumer market was $(1.5)
million, as compared to income from operations of $1.3 million in 1999. Income
from operations in the consumer market was $0.9 million for the nine months
ended September 30, 2000, as compared to $5.6 million in 1999.
11
<PAGE> 14
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
RESULTS OF OPERATIONS (CONTINUED)
The increase in income from operations in the agricultural market for the nine
months ended September 30, 2000, was primarily attributed to improved
efficiencies due to increased sales volume. The decrease in income from
operations in the earthmoving/construction market is primarily due to a change
in product mix from larger to smaller diameter wheels and tires, which tend to
receive lower margins. The decrease in income from operations in the consumer
market is primarily due to the Company exiting the OEM business for lawn and
garden equipment and ATVs. Income from operations on a segment basis does not
include corporate expenses and depreciation and amortization expense related to
property, plant and equipment and goodwill carried at the corporate level of
$6.6 and $22.1 million for the third quarter of 2000 and for the nine months
ended September 30, 2000, respectively, as compared to $6.1 and $18.1 million in
1999.
Net interest expense was $5.1 and $17.3 million for the third quarter of 2000
and for the nine months ended September 30, 2000 respectively, compared to $6.0
and $17.6 million in 1999. The decreased interest expense for the three and nine
months ended September 30, 2000, was primarily due to a decrease in the average
debt outstanding.
Net loss for the third quarter of 2000 was $(7.4) million, as compared to $(5.9)
million in 1999. Net income was $12.5 million for the nine months ended
September 30, 2000, as compared to net loss of $(5.5) million in 1999. Basic and
diluted loss per share for the third quarter of 2000 were $(.36), as compared to
$(.28) in 1999. Basic and diluted earnings per share were $.60 for the nine
months ended September 30, 2000, as compared to loss per share of $(.26) for
1999. Net income and earnings per share were impacted by the items described in
the preceding paragraphs
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 2000, negative cash flows from operating
activities of $0.5 million resulted from an increase in inventories, mostly
offset by increases in payables and accruals and a decrease in other current
assets. The Company has built inventory to meet expected production and sales
demand in the next six months, which has also resulted in increased accounts
payable. The change in other current assets and other current liabilities is
primarily due to the impact of income taxes owed as a result of the sale of
assets.
The Company has invested $23.6 million in capital expenditures in 2000,
including $6.6 million for equipment and construction related to the
Brownsville, Texas, facility, which is in the start-up phase of operations. The
balance represents various equipment purchases and building improvements to
enhance production capabilities. Total capital expenditures include purchases
through a like-kind exchange account established for tax purposes.
12
<PAGE> 15
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
During the second quarter of 2000, the Company received proceeds from the sale
of assets of $94.1 million. Titan utilized these proceeds to reduce its total
debt to $218.3 million at September 30, 2000 from $303.7 million at March 31,
2000 ($275.7 million at December 31, 1999) and to fund a like-kind exchange
account to be used for capital expenditures.
In February 2000, the Company paid the subordinated note for $19.7 million to
Pirelli Armstrong Tire Corporation.
At September 30, 2000, the Company had cash and cash equivalents of $20.3
million. Cash on hand, anticipated internal cash flows and utilization of
available borrowing, which totals $130 million, under the Company's $175 million
credit facility are expected to provide sufficient liquidity for working capital
needs and capital expenditures for the foreseeable future.
OUTLOOK
The operating environment of the Company has not changed significantly during
the third quarter of 2000 as compared to the second quarter. The Company is
continually looking for ways to improve profitability and to reduce or
streamline costs. As indicated previously, Titan has exited the OEM wheel and
tire business for lawn and garden equipment and ATVs, concentrating instead on
the agricultural and earthmoving/construction businesses for both LSW and
conventional wheel and tire assemblies to OEMs and the aftermarket. Titan has
made the decision to market the LSW technology directly to equipment dealers in
an effort to increase sales and more effectively demonstrate the performance,
safety and productivity features of the LSW. The Company's national sales force
began actively introducing this program during the second quarter of 2000, and
gaining the hands-on knowledge that will allow Titan to further enhance wheels
and tires for ultimate equipment performance. The introduction of the LSW
assemblies and this aggressive program is expected to drive aftermarket demand
and should increase original equipment margins in the future. Overall, business
is stronger than expected with the wheel facilities operating at increased
volumes and the tire facilities showing monthly production increases.
MARKET RISK SENSITIVE INSTRUMENTS
The Company's risks related to foreign currencies, commodity prices and interest
rates are consistent with those for 1999 with one exception. At September 30,
2000, the fair value of the Company's senior subordinated notes, based upon
quoted market prices obtained through independent pricing sources for the same
or similar types of borrowing arrangements, was $95.4 million, compared to the
fair value of $120 million at December 31, 1999 and the carrying value of $150
million.
13
<PAGE> 16
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), will be adopted on January 1,
2001. The Company expects that the effect of adoption of SFAS 133 on its
financial position, cash flows and results of operations will be immaterial.
Effective July 1, 2000, the Company adopted Financial Accounting Standards Board
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation," which clarifies the accounting for modifications to stock option
plans. The adoption had no impact on the interim financial statements, cash
flows and results of operations for the period ended September 30, 2000.
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Form 10-Q contains forward-looking statements, including statements
regarding, among other items, (i) anticipated trends in the Company's business,
(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 forward-looking
statements are based partially on the Company's expectations and are subject to
a number of risks and uncertainties, certain of which are beyond the Company's
control. Actual results could differ materially from these forward-looking
statements as a result of certain factors, including, (i) changes in the
Company's end-user markets as a result of world economic or regulatory
influences, (ii) changes in the competitive marketplace, including new products
and pricing changes by the Company's competitors, or (iii) changes regarding the
effects of implementation of the Euro. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In light of these risks and
uncertainties, there can be no assurance that the forward-looking information
contained in this document will in fact transpire.
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TITAN INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 5 ARE NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K
during the quarter ended September 30, 2000.
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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 INTERNATIONAL, INC.
(REGISTRANT)
DATE: November 13, 2000 BY: /s/ Kent W. Hackamack
------------------------ ---------------------------------------
Kent W. Hackamack
Vice President of Finance and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
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