Back to GetFilings.com
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: JUNE 30, 2003
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
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 JULY 30, 2003
----- ---------------------
COMMON STOCK, NO PAR VALUE PER SHARE 21,059,815
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 Six Months Ended June 30, 2003 and 2002 1
Consolidated Condensed Balance Sheets as of
June 30, 2003, and December 31, 2002 2
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended June 30, 2003 and 2002 3
Notes to Consolidated Condensed Financial Statements 4-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-25
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
Item 4. Controls and Procedures 26
Part II. Other Information 27
Signatures 28
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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002 2003 2002
---- ---- ---- ----
Net sales $ 131,001 $ 125,837 $ 259,985 $ 249,553
Cost of sales 124,930 110,953 243,519 222,530
--------- --------- --------- ---------
Gross profit 6,071 14,884 16,466 27,023
Selling, general and administrative expenses 10,940 10,013 22,357 20,311
Research and development expenses 716 864 1,384 1,650
--------- --------- --------- ---------
(Loss) income from operations (5,585) 4,007 (7,275) 5,062
Interest expense (5,038) (5,177) (10,013) (10,380)
Other income 2,005 1,680 2,483 2,008
--------- --------- --------- ---------
(Loss) income before income taxes (8,618) 510 (14,805) (3,310)
(Benefit) provision for income taxes (431) 127 (740) (828)
--------- --------- --------- ---------
Net (loss) income $ (8,187) $ 383 $ (14,065) $ (2,482)
========= ========= ========= =========
(Loss) earnings per common share:
Basic $ (.39) $ .02 $ (.67) $ (.12)
Diluted $ (.39) $ .02 $ (.67) $ (.12)
Average shares outstanding:
Basic 20,913 20,769 20,852 20,748
Diluted 20,913 20,774 20,852 20,748
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)
JUNE 30, DECEMBER 31,
2003 2002
--------- -----------
ASSETS
Current assets
Cash and cash equivalents $ 24,382 $ 22,049
Accounts receivable (net allowance of $3,876 and $3,172, respectively) 97,499 82,588
Inventories 106,648 109,142
Deferred income taxes 12,009 12,009
Prepaid and other current assets 21,701 28,781
--------- ---------
Total current assets 262,239 254,569
Property, plant and equipment, net 177,537 186,540
Restricted cash deposits 26,803 26,803
Other assets 46,710 46,248
Goodwill, net 18,120 17,839
--------- ---------
Total assets $ 531,409 $ 531,999
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt (including current portion of long-term debt) $ 16,319 $ 10,615
Accounts payable 47,760 49,007
Other current liabilities 28,434 24,684
--------- ---------
Total current liabilities 92,513 84,306
Deferred income taxes 12,009 12,009
Other long-term liabilities 43,415 42,538
Long-term debt 250,314 249,119
--------- ---------
Total liabilities 398,251 387,972
--------- ---------
Stockholders' equity
Common stock (no par, 60,000,000 shares authorized; 27,555,081 issued) 27 27
Additional paid-in capital 206,217 210,231
Retained earnings 33,432 47,705
Treasury stock (at cost: 6,641,639 and 6,764,199 shares, respectively) (84,820) (88,963)
Accumulated other comprehensive loss (21,698) (24,973)
--------- ---------
Total stockholders' equity 133,158 144,027
--------- ---------
Total liabilities and stockholders' equity $ 531,409 $ 531,999
========= =========
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)
SIX MONTHS ENDED JUNE 30,
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(14,065) $ (2,482)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 15,780 17,795
(Increase) decrease in current assets:
Accounts receivable (12,639) (10,604)
Inventories 3,735 15,076
Income tax refund 7,687 0
Prepaid and other current assets (56) 4,885
Increase (decrease) in current liabilities:
Accounts payable (2,964) (13,745)
Other current liabilities 2,941 2,630
Other, net (236) (8,531)
-------- --------
Net cash provided by operating activities 183 5,024
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (3,636) (4,696)
Other 63 79
-------- --------
Net cash used for investing activities (3,573) (4,617)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 20,427 0
Payment of debt (14,956) (1,131)
Decrease in restricted cash deposits 0 6,986
Repurchase of common stock (244) 0
Dividends paid (208) (207)
Other, net 373 399
-------- --------
Net cash provided by financing activities 5,392 6,047
-------- --------
Effect of exchange rate changes on cash 331 260
Net (decrease) increase in cash and cash equivalents 2,333 6,714
Cash and cash equivalents at beginning of period 22,049 9,214
-------- --------
Cash and cash equivalents at end of period $ 24,382 $ 15,928
======== ========
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 June 30, 2003,
the results of operations for the three and six months ended June 30,
2003 and 2002, and cash flows for the six months ended June 30, 2003
and 2002.
Accounting policies have continued without change and are described in
the Summary of Significant Accounting Policies contained in the
Company's 2002 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-Q's and, therefore, certain information
and footnote disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or
omitted. These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and
notes thereto included in the Company's 2002 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
hereafter.
Stock-based compensation
At June 30, 2003, the Company has two stock-based compensation plans,
which are described in Note 22 to the Company's financial statements on
Form 10-K for the fiscal year ended December 31, 2002. The Company
applies the recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for those plans.
The Company granted no stock options during the first half of 2003 and
no stock-based compensation expense was required to be recorded. The
total stock-based compensation expense determined under the fair value
method for all existing awards, net of related tax effects, for the
first half of 2003 is computed to be an immaterial amount.
4
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
B. INVENTORIES
Inventories consisted of the following (in thousands):
June 30, December 31,
2003 2002
----------- -----------
Raw materials $ 33,110 $ 32,927
Work-in-process 17,788 18,209
Finished goods 52,728 56,218
----------- -----------
103,626 107,354
LIFO reserve 3,022 1,788
----------- -----------
$ 106,648 $ 109,142
=========== ===========
The LIFO reserve changed primarily as a result of price fluctuations
within the composition of LIFO inventory layers.
C. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net reflects accumulated depreciation of
$235.5 million and $220.7 million at June 30, 2003, and December 31,
2002, respectively.
D. GOODWILL
Goodwill, net reflects accumulated amortization of $5.7 million at June
30, 2003, and $5.6 million at December 31, 2002. Goodwill amortization
was ceased in January 2002, pursuant to the adoption of Statement of
Financial Accounting Standards (SFAS) No. 142. The $0.1 million
increase in accumulated amortization is the result of currency exchange
fluctuations.
The carrying amount of goodwill by segment at June 30, 2003 was (i)
agricultural of $9.9 million, (ii) earthmoving/construction of $6.4
million, and (iii) consumer of $1.8 million. The increase in net
goodwill to $18.1 million at June 30, 2003, from $17.8 million at
December 31, 2002, is the result of currency exchange fluctuations.
The Company reviews goodwill to assess recoverability from future
operations during the fourth quarter of each annual reporting period,
and whenever events and circumstances indicate that the carrying values
may not be recoverable.
5
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
E. WARRANTY COSTS
The Company provides limited warranties on workmanship on its products
in all market segments. The Company's products have a limited warranty
that ranges from zero to ten years, with certain products being
prorated after the first year. The Company calculates a provision for
warranty expense based on past warranty experience. Warranty accruals
are included as a component of other current liabilities on the
Consolidated Condensed Balance Sheets. Changes in the warranty
liability consisted of the following (in thousands):
Warranty liability, January 1, 2003 $ 1,617
Provision for warranty liabilities for 2003 sales 928
Warranty payments made in 2003 (922)
----------
Warranty liability, June 30, 2003 $ 1,623
==========
F. INCOME TAXES
The Company's effective income tax benefit on the net loss for the
first half of 2003 was 5%, compared to 25% for the first half of 2002.
The Company's income tax benefit differs from the amount of income tax
determined by applying the statutory U.S. federal income tax rate to
pretax loss primarily as a result of income tax expense to be paid in
foreign jurisdictions and the application of a valuation allowance on
the domestic net deferred tax asset balance. As a result of several
periods of recurring losses, the Company began reserving its net
deferred tax asset position at December 31, 2002, consistent with the
Company's accounting policies. The Company continues to monitor its
income tax position and will review the necessity of the valuation
allowance at the end of each reporting period. To the extent it is
determined deferred tax assets will be realized in excess of deferred
tax liabilities, some or all of the valuation allowance will be
recorded as income.
6
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
G. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
June 30, December 31,
2003 2002
----------- -----------
Senior subordinated notes $ 136,750 $ 136,750
Term loan 94,050 96,525
Revolving loan agreement 0 0
Industrial revenue bonds and other (a) 35,833 26,459
----------- -----------
266,633 259,734
Less: Amounts due within one year 16,319 10,615
----------- -----------
$ 250,314 $ 249,119
=========== ===========
(a) The increase in other debt resulted primarily from an increase in
debt of $7.1 million at the Company's Italian subsidiary for
working capital requirements.
Aggregate maturities of long-term debt at June 30, 2003, were as
follows (in thousands):
July 1 - December 31, 2003 $ 11,895
2004 11,379
2005 14,645
2006 71,569
2007 138,915
Thereafter 18,230
-----------
$ 266,633
===========
H. COMPREHENSIVE INCOME (LOSS)
Comprehensive loss, which included net loss of $(8.2) million and the
effect of foreign currency translation adjustments of $3.3 million,
totaled $(4.9) million for the second quarter of 2003, compared to
comprehensive income of $5.2 million in the second quarter of 2002.
Comprehensive loss for the six months ended June 30, 2003 was $(10.8)
million, including net loss of $(14.1) million and the effect of
foreign currency translations of $3.3 million, compared to
comprehensive income of $1.3 million in 2002.
7
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
I. SEGMENT INFORMATION
The table below presents information about certain revenues and income
from operations for the three and six months ended June 30, 2003 and
2002 used by the chief operating decision maker of the Company (in
thousands):
Revenues Income (loss)
Three months ended from external Intersegment from
June 30, 2003 customers revenues (a) operations
------------- ------------- ------------- ------------
Agricultural $ 75,847 $ 15,473 $ 191
Earthmoving/construction 45,138 8,620 1,103
Consumer 10,016 1,527 (279)
Reconciling items (b) 0 0 (6,600)
---------- ---------- ----------
Consolidated totals $ 131,001 $ 25,620 $ (5,585)
========== ========== ==========
Three months ended
June 30, 2002
-------------
Agricultural $ 75,257 $ 39,109 $ 7,049
Earthmoving/construction 39,482 15,415 2,866
Consumer 11,098 7,166 590
Reconciling items (b) 0 0 (6,498)
---------- ---------- ----------
Consolidated totals $ 125,837 $ 61,690 $ 4,007
========== ========== ==========
(a) Intersegment revenues have declined due to the closure of
certain Company distribution facilities in 2002.
(b) Represents corporate expenses and depreciation and
amortization expense related to property, plant and equipment
carried at the corporate level.
8
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
I. SEGMENT INFORMATION (CONTINUED)
Revenues Income (loss)
Six months ended from external Intersegment from
June 30, 2003 customers revenues (a) operations
------------- ------------- ------------- ------------
Agricultural $ 153,949 $ 40,419 $ 3,578
Earthmoving/construction 86,182 19,815 2,650
Consumer 19,854 4,281 (71)
Reconciling items (b) 0 0 (13,432)
---------- ---------- ----------
Consolidated totals $ 259,985 $ 64,515 $ (7,275)
========== ========== ==========
Six months ended
June 30, 2002
-------------
Agricultural $ 150,502 $ 82,134 $ 12,154
Earthmoving/construction 76,416 29,974 4,752
Consumer 22,635 13,553 1,071
Reconciling items (b) 0 0 (12,915)
---------- ---------- ----------
Consolidated totals $ 249,553 $ 125,661 $ 5,062
========== ========== ==========
(a) Intersegment revenues have declined due to the closure of
certain Company distribution facilities in 2002.
(b) Represents corporate expenses and depreciation and
amortization expense related to property, plant and equipment
carried at the corporate level.
9
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
I. SEGMENT INFORMATION (CONTINUED)
June 30, December 31,
Total assets 2003 2002
------------ ---------- -----------
Agricultural $ 253,420 $ 258,704
Earthmoving/construction 154,957 138,811
Consumer 29,704 37,199
Reconciling items (c) 93,328 97,285
---------- ----------
Consolidated totals $ 531,409 $ 531,999
========== ==========
(c) Represents property, plant and equipment and goodwill related
to certain acquisitions and other corporate assets.
J. LEASE COMMITMENTS
The Company leases certain buildings and equipment under operating
leases, including a lease for the building in Brownsville, Texas.
Certain lease agreements provide for renewal options, fair value
purchase options, and payment of property taxes, maintenance and
insurance by the Company.
At June 30, 2003, future minimum commitments under noncancellable
operating leases with initial or remaining terms of one year were as
follows (in thousands):
July 1 - December 31, 2003 $ 2,039
2004 2,863
2005 1,039
2006 791
2007 647
Thereafter 147
-----------
$ 7,526
===========
10
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
K. NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards Number 146
In June 2002, Statement of Financial Accounting Standards (SFAS) No.
146, "Accounting for Exit or Disposal Costs," was issued. This
statement requires companies to recognize certain liabilities and costs
associated with exit or disposal activities when incurred rather than
when management commits to an exit plan. Adoption of this standard was
required for any exit or disposal activities initiated subsequent to
December 31, 2002. SFAS No. 146 was adopted in the first quarter of
2003 with no material effect on the Company's financial position, cash
flows or results of operations.
Financial Accounting Standards Board Interpretation Number 45
In November 2002, Financial Accounting Standards Board Interpretation
(FIN) No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others,"
was issued. FIN No. 45 requires a guarantor to recognize a liability,
at the inception of the guarantee, for the fair value of obligations
undertaken in issuing the guarantee and also include more detailed
disclosures with respect to guarantees. FIN No. 45 is effective for
guarantees issued or modified starting January 1, 2003. The additional
disclosures required by FIN No. 45 are required for periods ending
December 31, 2002, and after. The Company has provided additional
disclosure with respect to warranties in accordance with FIN No. 45.
The adoption of this interpretation did not have a material effect on
the Company's financial position, cash flows or results of operations.
Financial Accounting Standards Board Interpretation Number 46
In January 2003, FIN No. 46, "Consolidation of Variable Interest
Entities," was issued. FIN No. 46 requires a variable interest entity
to be consolidated by a company if that company is subject to a
majority of the risk of loss from the activities of the variable
interest entity or is entitled to receive a majority of the entity's
residual returns. The consolidation requirements of FIN No. 46 apply
immediately to variable interest entities created after January 31,
2003. For older entities, the requirements apply in the first fiscal
year or interim period beginning after June 15, 2003. Certain
disclosure requirements apply in all financial statements issued after
January 1, 2003. The Company is evaluating the effect the adoption of
this interpretation will have on its financial position, cash flows,
and results of operations.
11
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
K. NEW ACCOUNTING STANDARDS (CONTINUED)
Statement of Financial Accounting Standards Number 149
In April 2003, SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities," was issued. This statement amends
and clarifies accounting and reporting for derivative instruments and
hedging activities under SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 149 is intended to result
in more consistent reporting of contracts as either derivatives or
hybrid instruments. SFAS No. 149 is effective for contracts entered
into or modified after June 30, 2003. The Company does not expect the
adoption of this statement to have a material effect on its financial
position, cash flows or results of operations.
Statement of Financial Accounting Standards Number 150
In May 2003, SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity," was
issued. This statement establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. SFAS No. 150 requires
financial instruments that are within its scope to be classified as a
liability. Many of these instruments were previously classified as
equity. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003.
The Company did not enter into or modify any of these financial
instruments in June of 2003 and does not expect the adoption of this
statement to have a material effect on its financial position, cash
flows or results of operations.
12
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
Preparation of the financial statements and related disclosures in compliance
with generally accepted accounting principles requires the application of
appropriate technical accounting rules and guidance, as well as the use of
estimates. The Company's application of these policies involves judgments
regarding many factors, which, in and of themselves, could materially impact the
financial statements and disclosures. A future change in the assumptions or
judgments applied in determining the following matters, among others, could have
a material impact on future financial results.
Revenue Recognition
The Company records sales revenue and cost of sales when products are shipped to
customers and both title and the risks and rewards of ownership are transferred.
Provisions are established for sales returns and uncollectible accounts based on
historical experience. Should these experience trends change, adjustments to the
estimated provisions would be necessary.
Product Costing
Inventories are valued at the lower of cost or market. For operations in the
United States, cost is determined using the last-in, first-out (LIFO) method for
approximately 36% of inventories and the first-in, first-out (FIFO) method for
the remainder of inventories. Inventory of foreign subsidiaries is valued using
the FIFO method. Market is estimated based on current selling prices. Estimated
provisions are established for excess and obsolete inventory, as well as
inventory carried above market price, based on historical experience. Should
this experience change, adjustments to the estimated provisions would be
necessary.
Impairment of Fixed Assets
The Company reviews fixed assets to assess recoverability from future operations
whenever events and circumstances indicate that the carrying values may not be
recoverable. Impairment losses are recognized in operating results when expected
undiscounted future cash flows are less than the carrying value of the asset.
Impairment losses are measured as the excess of the carrying value of the asset
over the discounted expected future cash flows, or the fair value of the asset.
Significant assumptions relating to future operations must be made when
estimating future cash flows. Should unforeseen events occur or should operating
trends change significantly, impairment losses could occur. Regarding the
Brownsville location's fixed assets, management at this time believes the fair
value exceeds carrying value and no impairment exists.
13
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES (CONTINUED)
Valuation of Investments Accounted for Under the Equity Method
The Company assesses the carrying value of its equity investments whenever
events and circumstances indicate that the carrying value may not be
recoverable. Investment write-downs, if necessary, are recognized in operating
results when expected undiscounted future cash flows are less than the carrying
value of the asset. Any such write-downs are measured as the excess of the
carrying value of the asset over the discounted expected future cash flows or
the fair value of the asset. Significant assumptions relating to future
investment results must be made when estimating the future cash flows associated
with these investments. Should unforeseen events occur or should investment
trends change significantly, impairment losses could occur.
Impairment of Goodwill
The Company reviews goodwill to assess recoverability from future operations
during the fourth quarter of each annual reporting period, and whenever events
and circumstances indicate that the carrying values may not be recoverable.
Significant assumptions relating to future operations must be made when
estimating future cash flows in analyzing goodwill for impairment. Should
unforeseen events occur or should operating trends change significantly,
impairment losses could occur.
Retirement Benefit Obligations
Pension benefit obligations are based on various assumptions used by the
Company's actuaries in calculating these amounts. These assumptions include
discount rates, expected return on plan assets, mortality rates and other
factors. Revisions in assumptions and actual results that differ from the
assumptions affect future expenses, cash funding requirements and obligations.
For more information concerning these costs and obligations, see the additional
discussion of the "Pensions" and Note 21 to the Company's financial statements
on Form 10-K for the fiscal year ended December 31, 2002.
14
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
Net sales for the quarter ended June 30, 2003, were $131.0 million, compared to
2002 second quarter net sales of $125.8 million. Net sales for the six months
ended June 30, 2003 were $260.0 million, compared to 2002 net sales of $249.6
million. The increase in net sales was attributed to the Company's foreign
subsidiaries, which recorded an increase in net sales of $5.7 million and $13.5
million for the quarter and six months ended June 30, 2003, respectively. The
majority of the increase in sales at the foreign subsidiaries was due to a
favorable currency translation rate.
Cost of Sales and Gross Profit
Cost of sales were $124.9 and $243.5 million for the second quarter and for the
six months ended June 30, 2003, as compared to $111.0 and $222.5 million in
2002. Gross profit for the second quarter of 2003 was $6.1 million or 4.6% of
net sales, compared to $14.9 million or 11.8% of net sales for the second
quarter of 2002. Gross profit for the six months ended June 30, 2003, was $16.5
million or 6.3% of net sales, compared to $27.0 million or 10.8% of net sales
for 2002. Gross profit, as a percentage of net sales, was negatively impacted by
increases in raw material prices, increased employee benefits, and insurance
costs. These increases totaled approximately $4.8 and $9.1 million for the
second quarter and six months ended June 30, 2003.
The Company's profit margins were also negatively affected by the idling of
manufacturing at the Brownsville, Texas facility that occurred during the second
quarter of 2003. Second quarter costs associated with the idling of the
Brownsville manufacturing totaled approximately $3.4 million. The Brownsville
location will continue as a distribution and warehouse center for the Company,
however production will be suspended until market demand necessitates.
Depreciation on the fixed assets at this facility, along with minimal operating
costs, will continue to be incurred. The manufacturing of tires for all of the
Company's segments will be consolidated at the Des Moines, Iowa facility. The
Company is maintaining adequate capacity to meet current and future demands.
Additionally, the Company's profit margins continue to be affected by the excess
capacity at the idle Natchez, Mississippi facility. Depreciation on the fixed
assets at this facility and minimal operating costs continue to be incurred. A
recent third party appraisal indicates the fair value of the fixed assets of
this facility is in excess of the carrying value of $18.5 million.
15
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Administrative Expenses
Selling, general and administrative (SG&A) and research and development (R&D)
expenses for the second quarter of 2003 were $11.7 million or 8.9% of net sales,
compared to $10.9 million or 8.6% of net sales for 2002. SG&A and R&D expenses
for the six months ended June 30, 2003 were $23.7 million or 9.1% of net sales,
compared to $22.0 million or 8.8% of net sales in 2002. The Company continues to
incur increased costs for employee benefits, insurances and other professional
fees. The increases in these areas totaled approximately $0.4 and $1.5 million
for the quarter and six months ended June 30, 2003.
Operating Results and Other
Loss from operations for the second quarter of 2003 was $(5.6) million or (4.3)%
of net sales, compared to income from operations of $4.0 million or 3.2% in
2002. Loss from operations for the six months ended June 30, 2003 was $(7.3)
million or (2.8)% of net sales, compared to income of $5.1 million or 2.0% for
2002. Operating results were primarily impacted by increased costs as previously
discussed in the "Cost of Sales and Gross Profit" and "Administrative Expenses"
sections.
Net interest expense was $5.0 million and $10.0 million for the second quarter
and for the six months ended June 30, 2003, respectively, compared to $5.2
million and $10.4 million in 2002. The decreased interest expense in 2003 was
primarily due to an average interest rate that was approximately one-half
percent lower as compared to the first half of 2002.
The Company's effective income tax benefit on the net loss for the first six
months of 2003 was 5%, compared to 25% for the first six months of 2002. The
Company's income tax benefit differs from the amount of income tax determined by
applying the statutory U.S. federal income tax rate to pretax loss primarily as
a result of income tax expense to be paid in foreign jurisdictions and the
application of a valuation allowance on the domestic net deferred tax asset
balance. As a result of several periods of recurring losses, the Company began
reserving its net deferred tax asset position at December 31, 2002, consistent
with the Company's accounting policies. The Company continues to monitor its
income tax position and will review the necessity of the valuation allowance at
the end of each reporting period. To the extent it is determined deferred tax
assets will be realized in excess of deferred tax liabilities, some or all of
the valuation allowance will be recorded as income.
16
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Net Income (Loss)
Net loss for the second quarter and for the six months ended June 30, 2003, was
$(8.2) and $(14.1) million, respectively, compared to income (loss) of $0.4 and
$(2.5) million in 2002. Basic and diluted loss per share were $(.39) and $(.67)
for the second quarter and for the six months ended June 30, 2003, compared to
earnings (loss) per share of $.02 and $(.12) in 2002. Net loss and loss per
share increased primarily due to increased raw material prices, employee
benefits, professional fees, and insurance costs as previously discussed.
Agricultural Segment Results
Net sales in the agricultural market were $75.8 and $153.9 million for the
second quarter and the six months ended June 30, 2003, as compared to $75.3 and
$150.5 million in 2002. Income from operations in the agricultural market was
$0.2 and $3.6 million for the second quarter and the six months ended June 30,
2003, as compared to $7.0 and $12.2 million in 2002. The decrease in income from
operations in the agricultural market was primarily attributed to increased raw
material prices, employee benefits, professional fees, and insurance costs as
previously discussed, as well as the costs associated with the idling of
manufacturing at the Brownsville facility.
Earthmoving/Construction Segment Results
The Company's earthmoving/construction market net sales were $45.1 and $86.2
million for the second quarter and the six months ended June 30, 2003, as
compared to $39.5 and $76.4 million for 2002. Currency exchange translations
accounted for a large part of this sales increase, while sales to new customers
also contributed to a lesser extent. Income from operations in the earthmoving/
construction market was $1.1 and $2.7 million for the second quarter and the six
months ended June 30, 2003, versus $2.9 and $4.8 million in 2002. The decrease
in income from operations in the earthmoving/construction market was primarily
due to previously discussed increased raw material prices, employee benefits,
professional fees, insurance costs, and costs associated with the idling of
manufacturing at the Brownsville facility.
17
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Consumer Segment Results
Consumer market net sales were $10.0 and $19.9 million for the second quarter of
2003 and the six months ended June 30, 2003, as compared to $11.1 and $22.6
million for 2002. Consumer market sales decreased primarily as a result of lower
sales to boat trailer manufacturers. Consumer market loss from operations was
$(0.3) and $(0.1) million for the second quarter of 2003 and the six months
ended June 30, 2003, as compared to income from operations of $0.6 and $1.1
million for 2002. The decrease in income from operations in the consumer market
was primarily attributed to the lower sales levels, the idling of manufacturing
at the Brownsville facility, and increased raw material prices and costs for
employee benefits, professional fees, and insurance as previously discussed.
Corporate Expenses
Income from operations on a segment basis does not include corporate expenses or
depreciation and amortization expense related to property, plant and equipment
carried at the corporate level totaling $6.6 and $13.4 million for the second
quarter and the six months ended June 30, 2003, respectively, as compared to
$6.5 and $12.9 million for comparable periods in 2002.
Foreign Subsidiaries Sales
Net sales at foreign subsidiaries were $37.0 and $72.7 million for the second
quarter and six months ended June 30, 2003 as compared to $31.2 and $59.2
million in 2002. The sales increase at foreign subsidiaries was primarily due to
a favorable currency translation of approximately $6.3 million in the second
quarter and $12.1 million for the six months ended June 30, 2003. To a lesser
extent, the foreign subsidiaries have been successful in obtaining sales to new
customers.
18
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
As of June 30, 2003, the Company had $24.4 million of unrestricted cash
deposited within various bank accounts. The unrestricted cash balance increased
by $2.3 million from December 31, 2002, due to the cash flow items discussed in
the following paragraphs.
In the first half of 2003, positive cash flows from operating activities of $0.2
million resulted primarily from depreciation and amortization of $15.8 million,
an income tax refund of $7.7 million and an inventory decrease of $3.7 million.
These items were offset by the net loss of $14.1 million and an increase in
accounts receivable of $12.6 million. The increase in receivables is primarily
due to a seasonal increase in sales volume in the first half of 2003 when
compared to the fourth quarter of 2002. In comparison, in the first half of
2002, positive cash flows from operating activities of $5.0 million resulted
primarily from inventory decreases of $15.1 million and depreciation and
amortization of $17.8 million, offset partially by accounts receivable increases
of $10.6 million and accounts payable decreases of $13.7 million. The decrease
in inventory occurred primarily in the first quarter and was the result of
concerted efforts to reduce inventory levels.
The Company invested $3.6 million in capital expenditures in the first half of
2003, as compared to $4.7 million in the first half of 2002. The expenditures
represent various equipment purchases and building improvements to enhance
production capabilities. The Company estimates that its total capital
expenditures for 2003 could range between $8 million and $15 million.
Debt Funding
The Company's term loan and revolving loan agreements contain various covenants
and restrictions. The financial covenants in these loan agreements require that
the (i) Company's adjusted minimum tangible net worth be equal to or greater
than $150 million, (ii) value of equipment, accounts receivable, and inventory
be equal to or greater than three times the outstanding principal balance of the
term loan, and (iii) value of accounts receivable and inventory be equal to or
greater than $100 million. Restrictions include (i) limits on payments of
dividends and repurchases of the Company's stock, (ii) restrictions on the
ability of the Company to make additional borrowings, or to consolidate, merge
or otherwise fundamentally change the ownership of the Company, and (iii)
limitations on investments, dispositions of assets and guarantees of
indebtedness. These covenants and restrictions could limit the Company's ability
to respond to market conditions, to provide for unanticipated capital
investments, to raise additional debt or equity capital, to pay dividends or to
take advantage of business opportunities, including future acquisitions. If the
Company were unable to meet these covenants, the Company would be in default on
these loan agreements.
19
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company is in compliance with these covenants and restrictions as of June
30, 2003. The Company's adjusted minimum tangible net worth is required to be
equal to or greater than $150 million and the Company computed it to be $162.4
million at June 30, 2003. The value of the equipment, accounts receivable and
inventory are required to be equal to or greater than 3.00 times the outstanding
principal balance of the term loan and was calculated to be 4.27 times this
balance at June 30, 2003. The value of the accounts receivable and inventory
must be equal to or greater than $100 million and was computed to be $204.1
million at June 30, 2003.
Other Issues
The Company's business is subject to seasonal sales variations that affect
inventory levels and accounts receivable balances.
There have been no significant changes in interest rates, debt borrowings, or
related covenants during the first six months of 2003.
The Company had restricted cash of $26.8 million at June 30, 2003. Restricted
cash of $15.0 million was collateral on the revolving loan agreement, under
which the Company had no borrowings outstanding at June 30, 2003. The remaining
$11.8 million was collateral on outstanding letters of credit for an industrial
revenue bond of $9.6 million and another letter of credit for $2.2 million.
Liquidity Outlook
At June 30, 2003, the Company had unrestricted cash and cash equivalents of
$24.4 million and no amount was drawn on the $20 million revolving loan
agreement.
Increased raw material prices, employee benefits, professional fees, and
insurance costs are negatively impacting the profitability and the financial
ratios of the Company. Economic uncertainty makes it difficult to determine
precisely when the Company will realize significant sales increases, aside from
those attributed to favorable currency translation, to enhance Titan's gross
profit margin. Because of changes in the equity markets, interest rates and
actuarial fluctuations, the Company may be required to additionally fund the
Company's pension plans in amounts estimated to be approximately $5 million
during the remainder of year 2003. The Company has scheduled debt principal
payments due amounting to $11.9 million for the remainder of year 2003 and $16.3
million in the next twelve months.
20
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Cash on hand, anticipated internal cash flows from operations and utilization of
remaining available borrowings are expected to provide sufficient liquidity for
working capital needs, capital expenditures, and payments required on short-term
debt for the near term. However, if the Company were to exhaust all currently
available working capital sources or were not to meet the financial covenants
and conditions of its loan agreements, the Company might find it extremely
difficult to secure additional funding in order to meet working capital
requirements.
Litigation
In the matter of Vehicular Technologies v Titan Wheel, a case arising from
issues in 1992, prior to Titan's 1993 purchase of Dyneer Corporation, regarding
alleged patent infringement and other claims, Titan prevailed twice in Federal
Appellate Court regarding this case and was awarded a patent. The case was
refiled in State Court in California. Although Titan was successful in Federal
Appellate Court and a patent was awarded, these facts were disallowed by the
State Court. A judgment against Titan Wheel of approximately $16 million was
awarded. Post-trial briefs have been filed for a new trial based on judicial
error in the State Court. If a new trial is not granted, Titan will appeal this
award. Given the uncertainties of litigation, the Company is unable to predict
the outcome of this case. However, the Company has prevailed in prior litigation
in Federal Appellate Court concerning this case and management believes the
Company will ultimately prevail.
RECENT DEVELOPMENTS
On July 25, 2003, the Company amended its term loan with General Electric
Capital Corporation and its revolving loan agreement with LaSalle Bank National
Association. Major revisions contained in the amendments include changes for
increased flexibility regarding certain financial covenants, changes regarding
prepayments, and the release of liens on certain assets. As part of these two
amendments, the termination date was changed to January 14, 2005 from December
21, 2006. For further information, see the Company's Form 8-K filed on July 29,
2003.
On July 25, 2003, the Company sold its interest in Polymer Enterprises, Inc.
for $4.6 million, with cash proceeds being applied to the term loan agreement.
This sale resulted in a loss on investment of approximately $2.7 million that
will be reflected in Titan's financial statements for the third quarter of
2003. Polymer is a privately held company in Greensburg, Pennsylvania, which
manufactures specialty tires and various rubber-related products for
industrial applications.
MARKET RISK SENSITIVE INSTRUMENTS
The Company's risks related to exchange rates, commodity prices and interest
rates are consistent with those for 2002. For more information, see the "Market
Risk Sensitive Instruments" discussion in the Company's Form 10-K for the fiscal
year ended December 31, 2002.
21
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OUTLOOK
Determining precisely when the Company will realize significant sales increases,
aside from those attributed to favorable currency translation, is difficult due
to economic uncertainty. To address this issue, the Company is consolidating all
the manufacturing of tires into its principal tire facility located in Des
Moines, Iowa. The Brownsville, Texas location will continue as a distribution
and warehouse center for Titan. However, tire production at this facility will
be suspended until market demand necessitates. If current global market
conditions and higher operating costs persist, these issues will continue to
have a negative impact on the Company's margins. To combat these obstacles, the
Company continues to seek opportunities to lower costs and to pursue new
channels for increasing sales. The Company is working with equipment dealers to
offer Titan wheels and tires directly through their dealerships. Also, Titan is
cultivating relationships with many smaller companies that can benefit from the
Company's engineering expertise and commitment to the off-highway sector. Titan
is attempting to institute price increases to help offset higher operating costs
for raw materials, employee benefits, professional fees, and insurance. These
planned price increases and further efficiencies should result in improved
margins for our products. These measures, along with consolidating the Company's
tire manufacturing will help Titan withstand the economic pressure expected to
persist throughout 2003 in the Company's three market segments: agricultural,
earthmoving/construction, and consumer.
Agricultural Segment
Agricultural market sales are expected to remain stable for the rest of 2003.
Several positive factors should support the agricultural segment for the last
half of 2003, including improving cash flow for farmers, firm commodity prices,
and better soil moisture conditions. Many variables, including weather, export
markets, and future government policies and payments can greatly influence the
overall health of the agricultural economy.
Earthmoving/Construction Segment
The factors affecting the earthmoving/construction segment have been mixed.
Housing construction has remained resilient through the economic downturn.
However, capital investment at private companies is still depressed.
Governmental entities continue to curtail construction spending as they work to
balance their budgets. Sales of earthmoving/construction machinery have
increased modestly in the first half of 2003. However, the sales increase has
recently slowed. Therefore, the Company believes that sales in the
earthmoving/construction segment may remain stable or be up only slightly for
the rest of 2003.
22
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OUTLOOK (CONTINUED)
Consumer Segment
Sales in the consumer market are expected to be stable to lower for the
remainder of 2003. The all-terrain vehicle (ATV) tire aftermarket is expected to
continue to offer future growth opportunities. Many items affect the consumer
market including weather, competitive pricing, energy prices, and consumer
attitude, which has experienced a slight improvement.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards Number 146
In June 2002, Statement of Financial Accounting Standards (SFAS) No. 146,
"Accounting for Exit or Disposal Costs," was issued. This statement requires
companies to recognize certain liabilities and costs associated with exit or
disposal activities when incurred rather than when management commits to an exit
plan. Adoption of this standard was required for any exit or disposal activities
initiated subsequent to December 31, 2002. SFAS No. 146 was adopted in the first
quarter of 2003 with no material effect on the Company's financial position,
cash flows or results of operations.
Financial Accounting Standards Board Interpretation Number 45
In November 2002, Financial Accounting Standards Board Interpretation (FIN) No.
45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others," was issued. FIN No. 45
requires a guarantor to recognize a liability, at the inception of the
guarantee, for the fair value of obligations undertaken in issuing the guarantee
and also include more detailed disclosures with respect to guarantees. FIN No.
45 is effective for guarantees issued or modified starting January 1, 2003. The
additional disclosures required by FIN No. 45 are required for periods ending
December 31, 2002, and after. The Company has provided additional disclosure
with respect to warranties in accordance with FIN No. 45. The adoption of this
interpretation did not have a material effect on the Company's financial
position, cash flows or results of operations.
23
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NEW ACCOUNTING STANDARDS (CONTINUED)
Financial Accounting Standards Board Interpretation Number 46
In January 2003, FIN No. 46, "Consolidation of Variable Interest Entities," was
issued. FIN No. 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
activities of the variable interest entity or is entitled to receive a majority
of the entity's residual returns. The consolidation requirements of FIN No. 46
apply immediately to variable interest entities created after January 31, 2003.
For older entities, the requirements apply in the first fiscal year or interim
period beginning after June 15, 2003. Certain disclosure requirements apply in
all financial statements issued after January 1, 2003. The Company is evaluating
the effect the adoption of this interpretation will have on its financial
position, cash flows, and results of operations.
Statement of Financial Accounting Standards Number 149
In April 2003, SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities," was issued. This statement amends and
clarifies accounting and reporting for derivative instruments and hedging
activities under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 149 is intended to result in more consistent
reporting of contracts as either derivatives or hybrid instruments. SFAS No. 149
is effective for contracts entered into or modified after June 30, 2003. The
Company does not expect the adoption of this statement to have a material effect
on its financial position, cash flows or results of operations.
Statement of Financial Accounting Standards Number 150
In May 2003, SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity," was issued. This statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 requires financial instruments that are within its scope to be
classified as a liability. Many of these instruments were previously classified
as equity. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The Company did not enter
into or modify any of these financial instruments in June of 2003 and does not
expect the adoption of this statement to have a material effect on its financial
position, cash flows or results of operations.
24
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PENSIONS
The Company has three defined benefit pension plans. These plans are described
in Note 21 of the Company's Notes to Consolidated Financial Statements in the
2002 Form 10-K. The Company's recorded liability for pensions is based on a
number of assumptions, including discount rates, rates of return on investments,
mortality rates and other factors. Certain of these assumptions are determined
with the assistance of outside actuaries. Assumptions are based on past
experience and anticipated future trends. These assumptions are reviewed on a
regular basis and revised when appropriate. Revisions in assumptions and actual
results that differ from the assumptions affect future expenses, cash funding
requirements and the carrying value of the related obligations. Because of
changes in the equity markets, interest rates and actuarial fluctuations, the
Company may be required to additionally fund these pension plans in amounts
estimated to be approximately $5 million during the remainder of year 2003. As
interest rates have further declined during the first half of 2003, the present
value of the benefit obligation may increase and may result in additional
minimum pension liability at year-end.
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) meeting financial covenants
and conditions of loan agreements, (v) the Company's business strategies,
including its intention to introduce new products, (vi) expectations concerning
the performance and commercial success of the Company's existing and new
products and (vii) the Company's intention to consider and pursue acquisitions.
Readers of this Form 10-Q should understand that these forward-looking
statements are based 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, (iii) availability and price of raw materials, (iv)
levels of operating efficiencies, (v) actions of domestic and foreign
governments, (vi) results of investments, and (vii) ability to secure financing
at reasonable terms. Any changes in such factors could lead to significantly
different results. 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.
25
TITAN INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the Company's 2002 Annual Report filed on Form 10-K (Item 7A). There has
been no material change in this information.
ITEM 4. CONTROLS AND PROCEDURES
The Company's principal executive officer and principal financial officer
believe the Company's disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) are effective as of the end of the period
covered by this Form 10-Q. There were no changes in internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
that occurred during the second quarter that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
26
TITAN INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 3 ARE NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 15,
2003, for the purposes of electing two directors to serve for
three-year terms and approving the appointment of independent
auditors.
All the nominees for directors as listed in the proxy
statement were elected with the following vote:
Shares Shares
Voted For Withheld
--------- --------
Erwin H. Billig 19,395,764 760,987
Anthony L. Soave 19,845,535 311,216
The appointment of PricewaterhouseCoopers LLP as independent
auditors was approved by the following vote:
Shares Shares Shares
Voted For Against Abstaining
--------- ------- ----------
19,669,774 476,885 10,092
ITEM 5 IS NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification of the Principal Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
31.2 Certification of the Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
32 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
In a Current Report filed on Form 8-K dated June 2, 2003, the
Company reported the dismissal of a shareholder derivative
lawsuit.
27
TITAN INTERNATIONAL, INC.
PART II. OTHER INFORMATION
SIGNATURES
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: July 30, 2003 BY: /s/ Maurice M. Taylor Jr.
------------------ --------------------------------------
Maurice M. Taylor Jr.
President and Chief Executive Officer
BY: /s/ Kent W. Hackamack
--------------------------------------
Kent W. Hackamack
Vice President of Finance and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
28
EXHIBIT INDEX
Exhibit Description
- ------- -----------
31.1 Certification of the Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002