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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: MARCH 31, 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
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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 APRIL 30, 2001
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COMMON STOCK, NO PAR VALUE PER SHARE 20,627,127
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TITAN INTERNATIONAL, INC.
TABLE OF CONTENTS
Page Number
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Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Statements of Operations
for the Three Months Ended March 31, 2001 and 2000 1
Consolidated Condensed Balance Sheets as of
March 31, 2001 and December 31, 2000 2
Consolidated Condensed Statements of Cash Flows
for the Three Months Ended March 31, 2001 and 2000 3
Notes to Consolidated Condensed Financial Statements 4-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
Part II. Other Information and Signature 13-14
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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
MARCH 31,
2001 2000
---- ----
Net sales $136,047 $164,327
Cost of sales 120,599 143,431
-------- --------
Gross profit 15,448 20,896
Selling, general & administrative expenses 10,822 11,286
Research and development expenses 801 1,550
-------- --------
Income from operations 3,825 8,060
Interest expense 5,639 6,563
Gain on sale of assets (1,619) 0
Other income (633) (216)
-------- --------
Income before income taxes 438 1,713
Provision for income taxes 210 651
-------- --------
Net income $ 228 $ 1,062
======== ========
Earnings per share:
Basic $.01 $.05
Diluted $.01 $.05
Average shares outstanding:
Basic 20,625 20,666
Diluted 20,625 20,666
The accompanying notes are an integral part of the
consolidated condensed financial statements.
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TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Amounts in thousands, except share data)
MARCH 31, DECEMBER 31,
2001 2000
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ASSETS
Current assets
Cash and cash equivalents $ 9,742 $ 5,668
Accounts receivable (net of allowance of
$3,711 and $3,764, respectively) 103,205 83,689
Inventories 160,081 160,309
Prepaid and other current assets 45,946 35,890
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Total current assets 318,974 285,556
Property, plant and equipment, net 223,167 232,335
Other assets 49,857 54,829
Goodwill, net 18,278 18,921
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Total assets $ 610,276 $ 591,641
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 5,478 $ 5,377
Accounts payable 50,998 53,524
Other current liabilities 38,970 40,539
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Total current liabilities 95,446 99,440
Deferred income taxes 20,754 20,754
Other long-term liabilities 14,305 14,767
Long-term debt 254,293 227,975
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Total liabilities 384,798 362,936
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Stockholders' equity
Common stock, no par, 60,000,000 shares authorized,
27,555,081 issued 27 27
Additional paid-in capital 213,303 213,423
Retained earnings 119,325 119,405
Treasury stock at cost: 6,932,346 and 6,928,684 shares,
respectively (92,945) (93,041)
Accumulated other comprehensive loss (14,232) (11,109)
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Total stockholders' equity 225,478 228,705
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Total liabilities and stockholders' equity $ 610,276 $ 591,641
========= =========
The accompanying notes are an integral part of the
consolidated condensed financial statements.
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TITAN INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
THREE MONTHS ENDED MARCH 31,
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 228 $ 1,062
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 9,486 10,126
Gain on sale of assets (1,619) 0
(Increase) decrease in current assets:
Accounts receivable (21,202) (35,256)
Inventories (576) (11,366)
Prepaid and other current assets (1,063) 516
Increase/(decrease) in current liabilities:
Accounts payable (1,300) 11,475
Other current liabilities (1,096) 3,917
Other, net 789 (1,527)
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Net cash used for operating activities (16,353) (21,053)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (5,217) (8,274)
Other 8 (303)
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Net cash used for investing activities (5,209) (8,577)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 1,669 0
Payment of debt (121) (19,892)
Proceeds from credit facility 25,000 48,000
Repurchase of common stock (80) 0
Dividends paid (309) (309)
Other, net (194) 327
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Net cash provided by financing activities 25,965 28,126
Effect of exchange rate changes on cash (329) (227)
Net increase (decrease) in cash and cash equivalents 4,074 (1,731)
Cash and cash equivalents at beginning of period 5,668 8,606
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Cash and cash equivalents at end of period $ 9,742 $ 6,875
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The accompanying notes are an integral part of the
consolidated condensed financial statements.
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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 March 31,
2001, the results of operations for the three months ended March 31,
2001 and 2000, and cash flows for the three months ended March 31, 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):
March 31, December 31,
2001 2000
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Raw materials $ 41,936 $ 41,284
Work-in-process 14,063 15,919
Finished goods 101,440 100,622
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157,439 157,825
LIFO reserve 2,642 2,484
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$160,081 $160,309
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C. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net reflects accumulated depreciation of
$165.2 million and $161.0 million at March 31, 2001, and December 31,
2000, respectively.
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TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
D. GOODWILL
Goodwill, net reflects accumulated amortization of $5.1 million and
$4.7 million at March 31, 2001, and December 31, 2000, respectively.
E. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
March 31, December 31,
2001 2000
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Senior subordinated notes $150,000 $150,000
Credit facility 85,000 60,000
Notes payable to Pirelli 10,000 10,000
Industrial revenue bonds and other 14,771 13,352
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259,771 233,352
Less: Amounts due within one year 5,478 5,377
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$254,293 $227,975
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Aggregate maturities of long-term debt at March 31, 2001 are as follows
(in thousands):
April 1 - December 31, 2001 $ 5,358
2002 85,504
2003 6,458
2004 539
2005 550
2006 and thereafter 161,362
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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 months ended March 31, 2001 and 2000 (in
thousands):
Revenues
from external Intersegment Income from
2001 customers revenues operations
---- --------------- --------------- ------------
Agricultural $ 76,828 $ 45,355 $ 7,069
Earthmoving/construction 42,999 17,981 3,556
Consumer 16,220 7,590 90
Reconciling items (a) 0 0 (6,890)
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Consolidated totals $ 136,047 $ 70,926 $ 3,825
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2000
Agricultural $ 72,140 $ 35,163 $ 6,535
Earthmoving/construction 41,206 13,777 4,627
Consumer 50,981 26,564 3,867
Reconciling items (a) 0 0 (6,969)
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Consolidated totals $ 164,327 $ 75,504 $ 8,060
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(a) Represents corporate expenses and depreciation and amortization expense
related to property, plant and equipment and goodwill carried at the
corporate level.
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TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
F. SEGMENT INFORMATION (CONTINUED)
March 31, December 31,
Total assets 2001 2000
------------ ---------- ------------
Agricultural $ 298,852 $ 280,925
Earthmoving/construction 166,611 154,159
Consumer 72,043 87,309
Reconciling items (a) 72,770 69,248
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Consolidated totals $ 610,276 $ 591,641
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(a) Represents property, plant and equipment and goodwill related to
certain acquisitions and other corporate assets.
G. COMPREHENSIVE LOSS
Comprehensive loss, which includes net income and the effect of foreign
currency translation adjustments, totaled $(2.5) million for the first
quarter of 2001, compared to $(1.0) million in the first quarter of
2000.
H. NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133), as amended
by Statement of Financial Accounting Standards No. 138, was adopted on
January 1, 2001. The Company does not utilize derivatives to manage
interest rate 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.
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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 months ended March 31, 2000, would have been $140.5 million. Net
loss for the quarter ended March 31, 2000, would have been $(1.0)
million. Loss per share for the quarter ended March 31, 2000, would
have been $(.05). There is no difference in net sales, net income and
earnings per share for the three months ended March 31, 2001.
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TITAN 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, 2001, were $136.0 million, compared to
2000 first quarter net sales of $164.3 million. Net sales decreased primarily
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.
Cost of sales was $120.6 million for the first quarter of 2001, compared to
$143.4 million in 2000. Gross profit for the first quarter of 2001 was $15.4
million or 11.4% of net sales, compared to $20.9 million or 12.7% of net sales
for the first quarter of 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 first quarter of 2001 were $11.6 million or 8.5% of net
sales, compared to $12.8 million or 7.8% of net sales for 2000. The SG&A and R&D
percentage was higher due to the reduced sales volume in the first quarter of
2001 as compared to the first quarter of 2000.
Income from operations for the first quarter of 2001 was $3.8 million or 2.8% of
net sales, compared to income from operations of $8.1 million or 4.9% in 2000.
Operating results were impacted by the sale of certain consumer segment
operating assets in April of 2000.
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.
Net interest expense was $5.6 million for the first quarter of 2001, compared to
$6.6 million in 2000. The decreased interest expense for the first quarter of
2001 was primarily due to a decrease in the average debt outstanding of
approximately $40 million in the first quarter of 2001 from the first quarter of
2000.
Net income for the first quarter of 2001 was $0.2 compared to $1.1 million in
2000. Basic and diluted earnings per share were $.01 for the first quarter of
2001 compared to $.05 in 2000. Net income and earnings per share decreased
primarily due to the effects of the sale of assets as noted above.
Net sales in the agricultural market were $76.8 million for the first quarter of
2001 as compared to $72.1 million in 2000. Income from operations in the
agricultural market was $7.1 million for the first quarter of 2001 as compared
to $6.5 million in 2000. Net sales and income from operations in the
agricultural market increased primarily due to increased sales volume during the
first quarter of 2001.
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TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
The Company's earthmoving/construction market net sales were $43.0 million for
the first quarter of 2001 as compared to $41.2 million for the first quarter of
2000. Income from operations in the earthmoving/construction market was $3.6
million for the first quarter of 2001 as compared to $4.6 million for the first
quarter of 2000. The decrease in income from operations in the
earthmoving/construction market is partially due to a change in product mix from
larger to smaller diameter wheels, resulting in reduced margins.
Consumer market net sales were $16.2 million for the first quarter of 2001 as
compared to $51.0 million for the first quarter of 2000. Consumer market income
from operations was $0.1 million for the first quarter of 2001 as compared to
$3.9 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 $6.9 million for the first quarter of 2001 as compared to $7.0
million for the first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is subject to seasonal variations in sales that affect
inventory levels and account receivable balances.
In the first quarter of 2001, negative cash flows from operating activities of
$16.4 million resulted largely from increases in receivables. The increase in
receivables is primarily due to higher sales volume in the first quarter of 2001
as compared the fourth quarter of 2000.
The Company has invested $5.2 million in capital expenditures in 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 $20 million and $30 million.
During the first quarter of 2001, the Company received $25.0 million in proceeds
from its $175 million revolving credit facility. These proceeds have been used
to fund operations.
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TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
At March 31, 2001, the Company had cash and cash equivalents of $9.7 million and
debt outstanding of $85.0 million under its $175 million credit facility. Cash
on hand, anticipated internal cash flows and utilization of remaining available
borrowing are expected to provide sufficient liquidity for working capital
needs, capital expenditures and acquisitions for the foreseeable future.
OUTLOOK
Although agricultural market sales were up slightly in the first quarter of
2001, they are expected to be the same or slightly lower for the remainder of
2001 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 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.
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 STANDARD
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), as amended by Statement of
Financial Accounting Standards No. 138, was adopted on January 1, 2001. The
Company does not utilize derivatives to manage interest rate 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.
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TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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.
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TITAN INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 6 ARE NOT APPLICABLE.
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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: May 11, 2001 BY: /s/ Kent W. Hackamack
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Kent W. Hackamack
Vice President of Finance and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
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