-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R2Nf468h23Fs3eeHdHJnWAfVgjD2UMZtBJT2Ez2G4OM5e7M5XohWoStxnVVvs5vN P5AJLlqnjbaEvL4RbdJTOQ== 0000950124-01-503820.txt : 20020410 0000950124-01-503820.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950124-01-503820 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TITAN INTERNATIONAL INC CENTRAL INDEX KEY: 0000899751 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 363228472 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12936 FILM NUMBER: 1779837 BUSINESS ADDRESS: STREET 1: 2701 SPRUCE ST CITY: QUINCY STATE: IL ZIP: 62301 BUSINESS PHONE: 2172286011 MAIL ADDRESS: STREET 1: 2701 SPRUCE ST CITY: QUINCY STATE: IL ZIP: 62301 FORMER COMPANY: FORMER CONFORMED NAME: TITAN WHEEL INTERNATIONAL INC DATE OF NAME CHANGE: 19930403 10-Q 1 k65870e10-q.txt FORM 10-Q FOR THE QUARTERLY PERIOD END 9/30/01 ================================================================================ 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, 2001 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, 2001 ----- --------------------- COMMON STOCK, NO PAR VALUE PER SHARE 20,690,134 ================================================================================ TITAN INTERNATIONAL, INC. TABLE OF CONTENTS
Page Number ----------- Part I. Financial Information Item 1. Financial Statements (Unaudited) Consolidated Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2001 and 2000 1 Consolidated Condensed Balance Sheets as of September 30, 2001 and December 31, 2000 2 Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000 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
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)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2001 2000 2001 2000 ---- ---- ---- ---- Net sales $ 100,519 $ 119,798 $ 356,915 $ 429,701 Cost of sales 97,678 115,472 331,750 394,045 --------- --------- --------- --------- Gross profit 2,841 4,326 25,165 35,656 Selling, general & administrative expenses 10,124 10,343 31,624 33,488 Research and development expenses 757 833 2,319 3,630 --------- --------- --------- --------- Loss from operations (8,040) (6,850) (8,778) (1,462) Interest expense 4,933 5,119 15,968 17,310 Gain on sale of assets 0 0 (1,619) (38,727) Other (income) expense (1,095) 38 (2,198) (194) --------- --------- --------- --------- (Loss) income before income taxes (11,878) (12,007) (20,929) 20,149 Provision (benefit) for income taxes (2,376) (4,562) (5,057) 7,657 --------- --------- --------- --------- (Loss) income before extraordinary item (9,502) (7,445) (15,872) 12,492 Extraordinary gain on early retirement of debt, net of taxes of $1,742 0 0 2,614 0 --------- --------- --------- --------- Net (loss) income $ (9,502) $ (7,445) $ (13,258) $ 12,492 ========= ========= ========= ========= (Loss) earnings per share before extraordinary item: Basic $ (.46) $ (.36) $ (.77) $ .60 Diluted $ (.46) $ (.36) $ (.77) $ .60 (Loss) earnings per share: Basic $ (.46) $ (.36) $ (.64) $ .60 Diluted $ (.46) $ (.36) $ (.64) $ .60 Average shares outstanding: Basic 20,676 20,693 20,644 20,685 Diluted 20,676 20,693 20,644 20,685
The accompanying notes are an integral part of the consolidated condensed financial statements. 1 TITAN INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (Amounts in thousands, except share data)
SEPTEMBER 30, DECEMBER 31, 2001 2000 ------------ ------------ ASSETS Current assets Cash and cash equivalents $ 34,237 $ 5,668 Accounts receivable (net of allowance of $3,007 and $3,764, respectively) 76,249 83,689 Inventories 120,237 160,309 Prepaid and other current assets 37,830 35,890 --------- --------- Total current assets 268,553 285,556 Property, plant and equipment, net 211,693 232,335 Other assets 53,468 54,829 Goodwill, net 18,209 18,921 --------- --------- Total assets $ 551,923 $ 591,641 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term debt (including current portion of long-term debt) $ 70,594 $ 5,377 Accounts payable 45,202 53,524 Other current liabilities 21,188 40,539 --------- --------- Total current liabilities 136,984 99,440 Deferred income taxes 20,754 20,754 Other long-term liabilities 13,696 14,767 Long-term debt 166,572 227,975 --------- --------- Total liabilities 338,006 362,936 --------- --------- Stockholders' equity Common stock, no par, 60,000,000 shares authorized, 27,555,081 issued 27 27 Additional paid-in capital 212,148 213,423 Retained earnings 105,633 119,405 Treasury stock at cost: 6,890,247 and 6,928,684 shares, respectively (91,644) (93,041) Accumulated other comprehensive loss (12,247) (11,109) --------- --------- Total stockholders' equity 213,917 228,705 --------- --------- Total liabilities and stockholders' equity $ 551,923 $ 591,641 ========= =========
The accompanying notes are an integral part of the consolidated condensed financial statements. 2 TITAN INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in thousands)
NINE MONTHS ENDED SEPTEMBER 30, 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $(13,258) $ 12,492 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 27,678 27,222 Gain on sale of assets (1,619) (38,727) Gain on early retirement of debt (4,356) 0 (Increase) decrease in current assets: Accounts receivable 6,650 (946) Inventories 39,819 (25,552) Prepaid and other current assets (2,598) 5,799 Increase (decrease) in current liabilities: Accounts payable (7,832) 8,316 Other current liabilities (18,663) 12,328 Other, net 4,402 (1,448) -------- -------- Net cash provided by (used for) operating activities 30,223 (516) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, net (9,516) (23,569) Proceeds from sale of assets 5,200 94,063 Other (4,485) 0 -------- -------- Net cash (used for) provided by investing activities (8,801) 70,494 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 17,474 0 Repayment of debt/repurchase of bonds (14,331) (20,098) Proceeds (repayments) on credit facility, net 5,000 (37,000) Repurchase of common stock (343) (468) Dividends paid (721) (930) Other, net 10 978 -------- -------- Net cash provided by (used for) financing activities 7,089 (57,518) Effect of exchange rate changes on cash 58 (735) Net increase in cash and cash equivalents 28,569 11,725 Cash and cash equivalents at beginning of period 5,668 8,606 -------- -------- Cash and cash equivalents at end of period $ 34,237 $ 20,331 ======== ========
The accompanying notes are an integral part of the consolidated condensed financial statements. 3 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, 2001, the results of operations for the three and nine months ended September 30, 2001 and 2000, and cash flows for the nine months ended September 30, 2001 and 2000. Accounting policies have continued without change and are described in the Summary of Significant Accounting Policies contained in the Company's 2000 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 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, 2000, filed in conjunction with the Company's 2000 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):
September 30, December 31, 2001 2000 ---------- ----------- Raw materials $ 36,901 $ 41,284 Work-in-process 10,989 15,919 Finished goods 66,802 100,622 ----------- ----------- 114,692 157,825 LIFO reserve 5,545 2,484 ----------- ----------- $ 120,237 $ 160,309 =========== ===========
C. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net reflects accumulated depreciation of $182.4 million and $161.0 million at September 30, 2001, and December 31, 2000, respectively. 4 TITAN INTERNATIONAL, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) D. GOODWILL Goodwill, net reflects accumulated amortization of $5.3 million and $4.7 million at September 30, 2001, and December 31, 2000, respectively. The Company recorded goodwill amortization of $0.2 million and $0.6 million for the three and nine months ended September 30, 2001, respectively. E. DEBT Debt consisted of the following (in thousands):
September 30, December 31, 2001 2000 ------------ ----------- Senior subordinated notes $ 136,750 $ 150,000 Credit facility 65,000 60,000 Notes payable to Pirelli 5,000 10,000 Industrial revenue bonds 9,500 9,500 Other 20,916 3,852 ----------- ----------- 237,166 233,352 Less: Amounts due within one year 70,594 5,377 ----------- ----------- Long-term portion of debt $ 166,572 $ 227,975 =========== ===========
Aggregate maturities of debt at September 30, 2001 are as follows (in thousands): October 1 - December 31, 2001 $ 70,254 2002 1,794 2003 9,068 2004 3,150 2005 4,490 2006 and thereafter 148,410
During the second quarter of 2001, the Company retired $13.3 million of the senior subordinated notes that were due 2007. A pretax gain of $4.4 million was recognized on this early retirement of debt. The increase in other debt consists of debt additions at the European facilities. On August 20, 2001, the Company amended its multicurrency credit agreement decreasing its availability under this credit facility from $175 million to $115 million and changed the expiration date to December 31, 2001. 5 TITAN INTERNATIONAL, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) F. SEGMENT INFORMATION The table below presents information about certain revenues and income from operations used by the chief operating decision maker of the Company for the three and nine months ended September 30, 2001 and 2000 (in thousands):
Revenues Income (loss) Three months ended from external Intersegment from September 30, 2001 customers revenues operations ------------------ --------------- --------------- ------------ Agricultural $ 54,396 $ 30,547 $ (1,131) Earthmoving/construction 37,181 12,967 631 Consumer 8,942 4,263 (1,252) Reconciling items (a) 0 0 (6,288) ---------- ---------- ---------- Consolidated totals $ 100,519 $ 47,777 $ (8,040) ========== ========== ========== Three months ended September 30, 2000 ------------------ 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) ========== ========== ==========
(a) Represents corporate expenses and depreciation and amortization expense related to property, plant and equipment and goodwill carried at the corporate level. 6 TITAN INTERNATIONAL, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) F. SEGMENT INFORMATION (CONTINUED)
Revenues Income (loss) Nine months ended from external Intersegment from September 30, 2001 customers revenues operations ------------------ --------------- --------------- ------------ Agricultural $ 198,320 $ 102,333 $ 7,614 Earthmoving/construction 122,314 42,171 5,896 Consumer 36,281 16,115 (2,189) Reconciling items (a) 0 0 (20,099) ---------- ---------- ---------- Consolidated totals $ 356,915 $ 160,619 $ (8,778) ========== ========== ========== Nine months ended September 30, 2000 ------------------ 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) ========== ========== ==========
(a) Represents corporate expenses and depreciation and amortization expense related to property, plant and equipment and goodwill carried at the corporate level. 7 TITAN INTERNATIONAL, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) F. SEGMENT INFORMATION (CONTINUED)
September 30, December 31, Total assets 2001 2000 ------------ ----------- ----------- Agricultural $ 252,841 $ 280,925 Earthmoving/construction 165,539 154,159 Consumer 57,271 87,309 Reconciling items (a) 76,272 69,248 ---------- ---------- Consolidated totals $ 551,923 $ 591,641 ========== ==========
(a) Represents property, plant and equipment and goodwill related to certain acquisitions and other corporate assets. G. COMPREHENSIVE INCOME (LOSS) Comprehensive loss, which includes net loss of $(9.5) million and the effect of foreign currency translation adjustments of $2.6 million, totaled $(6.9) million for the third quarter of 2001, compared to $(10.6) million in the third quarter of 2000. Comprehensive income (loss) for the nine months ended September 30, 2001 was $(14.4) million, compared to $6.4 million in 2000. H. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), as amended by Statements of Financial Accounting Standards Nos. 137 and 138, was adopted on January 1, 2001. The Company does not utilize derivatives to manage interest rate, commodities or currency risks, therefore, there was no material impact resulting from the adoption of SFAS 133 on its financial position, cash flows or results of operations. Statement of Financial Accounting Standards No. 142, "Goodwill & Other Intangible Assets" (SFAS 142), will be adopted in the first quarter of 2002. Under SFAS 142, goodwill will be written off when impaired as opposed to being amortized. The Company is evaluating the effect SFAS 142 will have on its financial position, cash flows, and results of operations. 8 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 eliminated $19.5 million of related 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, primarily for original equipment manufacturer (OEM) lawn and garden equipment and all terrain vehicles (ATVs). Had the transaction occurred on January 1, 2000, net sales for the three and nine months ended September 30, 2000, would have been $119.8 and $399.1 million respectively. Net loss for the three and nine months ended September 30, 2000, would have been $(7.4) and $(13.8) million respectively. Loss per share for the three and nine months ended September 30, 2000, would have been $(.36) and $(.67) respectively. There is no difference in net sales, net income and earnings per share for the three and nine months ended September 30, 2001. 9 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net sales for the quarter ended September 30, 2001, were $100.5 million, compared to 2000 third quarter net sales of $119.8 million. Net sales for the nine months ended September 30, 2001 were $356.9 million, compared to 2000 net sales of $429.7 million. Net sales decreased due to the sale of certain consumer segment operating assets in April of 2000 as discussed in Note I to the consolidated condensed financial statements. Net sales were also negatively impacted by decreased production by the Company's major customers in the agricultural and earthmoving/construction segments. Cost of sales was $97.7 and $331.8 million for the third quarter of 2001 and for the nine months ended September 30, 2001, as compared to $115.5 and $394.0 million in 2000. Gross profit for the third quarter of 2001 was $2.8 million or 2.8% of net sales, compared to $4.3 million or 3.6% of net sales for the third quarter of 2000. Gross profit for the nine months ended September 30, 2001, was $25.2 million or 7.1% of net sales, compared to $35.7 million or 8.3% of net sales for 2000. Gross profit was lower due to the reduced sales volume. Selling, general and administrative ("SG&A") and research and development ("R&D") expenses for the third quarter of 2001 were $10.9 million or 10.8% of net sales, compared to $11.2 million or 9.3% of net sales for the third quarter of 2000. SG&A and R&D expenses for the nine months ended September 30, 2001 were $33.9 million or 9.5% of net sales, compared to $37.1 million or 8.6% of net sales in 2000. The SG&A and R&D expenses have declined as a result of the Company's efforts to cut costs. However, the SG&A and R&D percentage of net sales was higher due to the reduced sales volume in 2001 as compared to 2000. Loss from operations for the third quarter of 2001 was $(8.0) million or (8.0)% of net sales, compared to $(6.9) million or (5.7)% in the third quarter of 2000. Loss from operations for the nine months ended September 30, 2001 was $(8.8) million or (2.5)% of net sales, compared to $(1.5) million or (0.3)% for 2000. Operating results were impacted by the sale of certain consumer segment operating assets in April of 2000 and by decreased sales levels. Interest expense was $4.9 million and $16.0 million for the third quarter of 2001 and for the nine months ended September 30, 2001, respectively, compared to $5.1 million and $17.3 million in 2000. The decreased interest expense for 2001 was primarily due to a decrease in the interest rate on the credit facility debt. Gain on sale of assets in 2001 of $1.6 million was attributed to the sale of an airplane during the first quarter of 2001. See Note I to the consolidated condensed financial statements for discussion of the $38.7 million gain on sale of assets in the second quarter of 2000. 10 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) Other (income) expense was $(2.2) for the nine months ended September 30, 2001 as compared to $(0.2) for the same period in 2000. Interest income accounted for $1.6 million and $1.8 million of other income for the nine months ended September 30, 2001 and 2000, respectively. The year over year change in other (income) expense was primarily attributed to currency exchange losses. For the nine months ended September 30, 2001, the Company's effective tax rate was 20% compared to 38% for the nine months ended September 30, 2000. Extraordinary after-tax gain in the second quarter of 2001 of $2.6 million resulted from the early retirement of $13.3 million of the senior subordinated notes. The pretax gain of $4.4 million was offset by taxes of $1.8 million. Net income (loss) for the third quarter of 2001 and for the nine months ended September 30, 2001 was $(9.5) and $(13.3) million respectively, compared to $(7.4) and $12.5 million in 2000. Basic and diluted earnings (loss) per share were $(.46) and $(.64) for the third quarter of 2001 and for the nine months ended September 30, 2001, compared to $(.36) and $.60 in 2000. Net income and earnings per share decreased primarily due to the effects of the sale of assets and decreased sales as noted above. Net sales in the agricultural market were $54.4 and $198.3 million for the third quarter of 2001 and the nine months ended September 30, 2001, as compared to $65.8 and $217.4 million in 2000. Income (loss) from operations in the agricultural market was $(1.1) and $7.6 million for the third quarter of 2001 and the nine months ended September 30, 2001, as compared to $0.3 and $11.6 million in 2000. Net sales and income from operations in the agricultural market decreased primarily due to decreased sales volume that resulted from a decrease in overall agricultural equipment sales. The Company's earthmoving/construction market net sales were $37.2 and $122.3 million for the third quarter of 2001 and the nine months ended September 30, 2001, as compared to $41.4 and $126.3 million for 2000. Income from operations in the earthmoving/construction market was $0.6 and $5.9 million for the third quarter of 2001 and the nine months ended September 30, 2001, as compared to $0.9 and $8.1 million for 2000. The decrease in income from operations in the earthmoving/construction market is primarily due to decreased sales volumes in the current quarter. 11 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) Consumer market net sales were $8.9 and $36.3 million for the third quarter of 2001 and the nine months ended September 30, 2001, as compared to $12.6 and $85.9 million for 2000. Consumer market income (loss) from operations was $(1.3) and $(2.2) million for the third quarter of 2001 and the nine months ended September 30, 2001, as compared to $(1.5) and $0.9 million for 2000. The decrease in consumer market sales and income from operations is primarily due to the Company exiting the OEM business for lawn and garden equipment and ATVs. The Company remains active in the ATV tire aftermarket and continues to explore new distribution channels and develop innovative ATV products. Income from operations on a segment basis does not include: corporate expenses; depreciation and amortization expense related to property, plant and equipment; and amortization expense related to goodwill carried at the corporate level, for a total of $6.3 and $20.1 million for the third quarter of 2001 and the nine months ended September 30, 2001, respectively, as compared to $6.6 and $22.1 million for 2000. LIQUIDITY AND CAPITAL RESOURCES The Company's business is subject to seasonal variations in sales that affect inventory levels and account receivable balances. Increased efficiency led Titan to alter operating schedules as a means of controlling inventory and reducing costs. In the nine months ended September 30, 2001, positive cash flows from operating activities of $30.2 million resulted largely from a decrease in inventories. The decrease in inventory is the result of a concerted effort by management to reduce inventories. The Company has invested $9.5 million in capital expenditures in the first nine months of 2001. The expenditures represent various equipment purchases and building improvements to enhance production capabilities. The Company estimates that its total capital expenditures for 2001 will range between $10 million and $15 million. The Company received $5.2 million of proceeds on the sale of an airplane in the second quarter of 2001. During the first nine months of 2001, the Company received proceeds of $5.0 million on its $115 million revolving credit facility. During the second quarter of 2001, the Company repurchased in the open market and retired $13.3 million of senior subordinated debt due 2007. The cash outlay for this early retirement of debt was $8.9 million resulting in a pretax gain of $4.4 million. 12 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) On August 20, 2001, the Company amended its multicurrency credit agreement, decreasing its availability under this credit facility from $175 million to $115 million and changed the expiration date to December 31, 2001. The Company is in the process of securing refinancing for this credit facility. The Company continually reviews its borrowing structure to best match the Company's requirements with market conditions. At September 30, 2001, the Company had cash and cash equivalents of $34.2 million. Cash on hand, anticipated internal cash flows and the securing of refinancing for the Company's credit facility are expected to meet the Company's anticipated operating cash requirements for the near term. OUTLOOK Agricultural market sales are expected to be slightly lower for the remainder of 2001 as compared to 2000 due to economic conditions and the large OEMs continuing to reduce inventory balances. Sales for the earthmoving/construction market are expected to be slightly lower than last year for the remainder of 2001 as a result of the economic slowdown in the United States. Sales in the consumer market are expected to be lower than last year based on the Company exiting the OEM wheel and tire business for lawn and garden equipment and ATVs in the second quarter of 2000. However, Titan remains active in the ATV tire aftermarket and continues to explore new distribution channels and develop innovative ATV products. The Company is developing relationships to supply private branded tires to OEMs in the agricultural and earthmoving/construction markets. As these relationships develop, Titan would expect an increase in market share in these segments. The Company expects sales of LSW assemblies to increase as development efforts continue with OEM and aftermarket customers. Titan is focusing the LSW assemblies on specialty wheels and tires, which will provide benefits to the customers and increased margins for the Company. In September of 2001, members of United Steelworkers of America (USWA) Local 164 ratified a new labor agreement for the Company's Des Moines, IA facility effective through the year 2006. The employees at this facility had been on strike for 40 months since the expiration of their collective bargaining agreement in April 1998. As a part of this agreement, Titan Tire Corporation agreed to pay a one-time transition retirement special buyout to seniority members choosing not to return to work. The total liability to Titan Tire Corporation will be determined by the number of employees choosing this retirement option. The Company currently estimates this liability to be between $0 to $2 million. The Company will incur additional costs and expenses related to the members who elect to re-enter the Company's workforce. These amounts are not determinable at this time. 13 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MARKET RISK SENSITIVE INSTRUMENTS The Company's risks related to foreign currencies, commodity prices and interest rates are consistent with those for 2000. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), as amended by Statements of Financial Accounting Standards Nos. 137 and 138, was adopted on January 1, 2001. The Company does not utilize derivatives to manage interest rate, commodities or currency risks, therefore, there was no material impact resulting from the adoption of SFAS 133 on its financial position, cash flows or results of operations. Statement of Financial Accounting Standards No. 142, "Goodwill & Other Intangible Assets" (SFAS 142), will be adopted in the first quarter of 2002. Under SFAS 142, goodwill will be written off when impaired as opposed to being amortized. The Company is evaluating the effect SFAS 142 will have on its financial position, cash flows, and results of operations. 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. 14 TITAN INTERNATIONAL, INC. PART II. OTHER INFORMATION ITEMS 1 THROUGH 4 ARE NOT APPLICABLE. ITEM 5. OTHER INFORMATION In September of 2001, members of United Steelworkers of America (USWA) Local 164 ratified a new labor agreement for the Company's Des Moines, IA facility effective through the year 2006. The employees at this facility had been on strike for 40 months since the expiration of their collective bargaining agreement in April 1998. As a part of this agreement, Titan Tire Corporation agreed to pay a one-time transition retirement special buyout to seniority members choosing not to return to work. The total liability to Titan Tire Corporation will be determined by the number of employees choosing this retirement option. The Company currently estimates this liability to be between $0 to $2 million. The Company will incur additional costs and expenses related to the members who elect to re-enter the Company's workforce. These amounts are not determinable at this time. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K In a Current Report filed on Form 8-K dated August 20, 2001, the Company reported the amendment of its multicurrency credit agreement. 15 TITAN INTERNATIONAL, INC. PART II. OTHER INFORMATION 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 9, 2001 BY: /s/ Kent W. Hackamack ------------------- ------------------------------------ Kent W. Hackamack Vice President of Finance and Treasurer (Principal Financial Officer and Principal Accounting Officer) 16 -----END PRIVACY-ENHANCED MESSAGE-----