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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: SEPTEMBER 30, 2002
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 30, 2002
----- ----------------
COMMON STOCK, NO PAR VALUE PER SHARE 20,863,174
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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, 2002 and 2001 1
Consolidated Condensed Balance Sheets as of
September 30, 2002, and December 31, 2001 2
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended September 30, 2002 and 2001 3
Notes to Consolidated Condensed Financial Statements 4-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
Item 4. Controls and Procedures 24
Part II. Other Information 25
Signatures & Certification 26
Certification 27-28
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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
---- ---- ---- ----
Net sales $ 104,660 $ 100,519 $ 354,213 $ 356,915
Cost of sales 101,634 97,678 324,164 331,750
----------- ----------- ----------- -----------
Gross profit 3,026 2,841 30,049 25,165
Selling, general & administrative expenses 10,047 10,124 30,358 31,624
Research and development expenses 790 757 2,440 2,319
----------- ----------- ----------- -----------
Loss from operations (7,811) (8,040) (2,749) (8,778)
Interest expense 5,211 4,933 15,591 15,968
Loss on investment 9,594 0 9,594 0
Gain on sale of assets 0 0 0 (1,619)
Gain on early retirement of debt 0 0 0 (4,356)
Other income (744) (1,095) (2,752) (2,198)
----------- ----------- ----------- -----------
Loss before income taxes (21,872) (11,878) (25,182) (16,573)
Benefit for income taxes (4,208) (2,376) (5,036) (3,315)
----------- ----------- ----------- -----------
Net loss $ (17,664) $ (9,502) $ (20,146) $ (13,258)
=========== =========== =========== ===========
Loss per common share:
- ----------------------
Basic $(.85) $(.46) $(.97) $(.64)
Diluted $(.85) $(.46) $(.97) $(.64)
Average common shares outstanding:
- ----------------------------------
Basic 20,816 20,676 20,771 20,644
Diluted 20,816 20,676 20,771 20,644
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,
2002 2001
------------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 35,227 $ 9,214
Accounts receivable (net of allowance of $3,450 and $3,523, respectively) 77,343 78,144
Inventories 110,557 116,801
Deferred income taxes 13,008 21,175
Prepaid and other current assets 33,276 37,389
----------- -----------
Total current assets 269,411 262,723
Property, plant and equipment, net 190,682 205,047
Restricted cash deposits 27,409 34,661
Other assets 44,657 49,538
Goodwill, net 17,581 16,985
----------- -----------
Total assets $ 549,740 $ 568,954
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt (including current portion of long-term debt) $ 6,952 $ 4,304
Accounts payable 45,332 54,658
Other current liabilities 28,930 23,077
----------- -----------
Total current liabilities 81,214 82,039
Deferred income taxes 24,161 24,161
Other long-term liabilities 19,881 20,225
Long-term debt 254,242 256,622
----------- -----------
Total liabilities 379,498 383,047
----------- -----------
Stockholders' equity
Common stock (no par, 60,000,000 shares authorized; 27,555,081 issued) 27 27
Additional paid-in capital 210,827 211,905
Retained earnings 63,540 83,998
Treasury stock (at cost: 6,739,407 and 6,864,947 shares, respectively) (89,604) (91,270)
Accumulated other comprehensive loss (14,548) (18,753)
----------- -----------
Total stockholders' equity 170,242 185,907
----------- -----------
Total liabilities and stockholders' equity $ 549,740 $ 568,954
=========== ===========
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,
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (20,146) $ (13,258)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 25,100 27,678
Loss on investment 3,669 0
Gain on sale of assets 0 (1,619)
Gain on early retirement of debt 0 (4,356)
(Increase) decrease in current assets:
Accounts receivable 2,873 6,650
Inventories 7,121 39,819
Income tax refund 16,284 0
Prepaid and other current assets (3,907) (2,598)
Increase (decrease) in current liabilities:
Accounts payable (10,728) (7,832)
Other current liabilities 5,621 (18,663)
Other, net 575 4,402
---------- ----------
Net cash provided by operating activities 26,462 30,223
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (7,701) (9,516)
Proceeds from sale of assets 0 5,200
Other 533 (4,485)
---------- ----------
Net cash used for investing activities (7,168) (8,801)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,015 17,474
Payment of debt (2,158) (5,421)
Repurchase of bonds 0 (8,910)
Proceeds on credit facility, net 0 5,000
Restricted cash withdrawal for loss on investment 5,925 0
Restricted cash decrease 1,327 0
Repurchase of common stock 0 (343)
Dividends paid (312) (721)
Other, net 588 10
---------- ----------
Net cash provided by financing activities 6,385 7,089
Effect of exchange rate changes on cash 334 58
Net increase in cash and cash equivalents 26,013 28,569
Cash and cash equivalents at beginning of period 9,214 5,668
---------- ----------
Cash and cash equivalents at end of period $ 35,227 $ 34,237
========== ==========
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,
2002, the results of operations for the three and nine months ended
September 30, 2002 and 2001, and cash flows for the nine months ended
September 30, 2002 and 2001.
The financial statements of the Company's foreign subsidiaries are
translated in United States currency in accordance with SFAS No. 52,
"Foreign Currency Translation". Assets and liabilities are translated
to United States dollars at period-end exchange rates. Income and
expense items are translated at average rates of exchange prevailing
during the period. Translation adjustments are included in
"Accumulated other comprehensive loss" in stockholders' equity. Gains
and losses that result from foreign currency transactions are included
in the accompanying Consolidated Condensed Statements of Operations.
Except for the discontinuance of goodwill amortization as required by
Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill
and Other Intangible Assets" and the reclassification of gain on early
retirement of debt under SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections", accounting policies have continued without change and are
described in the Summary of Significant Accounting Policies contained
in the Company's 2001 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 2001 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.
B. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net reflects accumulated depreciation of
$211.0 million and $189.6 million at September 30, 2002, and December
31, 2001, respectively.
4
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
C. INVENTORIES
Inventories consisted of the following (in thousands):
September 30, December 31,
2002 2001
------------- -------------
Raw materials $ 35,315 $ 34,771
Work-in-process 16,901 11,549
Finished goods 55,869 67,647
----------- -----------
108,085 113,967
LIFO reserve 2,472 2,834
----------- -----------
$ 110,557 $ 116,801
=========== ===========
D. GOODWILL
Goodwill, net reflects accumulated amortization of $5.5 million at
September 30, 2002, and December 31, 2001. No goodwill amortization has
been recorded in 2002, pursuant to the adoption of SFAS No. 142 as
described in note H.
The carrying amount of goodwill by segment at September 30, 2002 was
(i) agricultural of $9.7 million, (ii) earthmoving/construction of $6.2
million, and (iii) consumer of $1.7 million. The increase in goodwill,
net from $17.0 million at December 31, 2001 to $17.6 million at
September 30, 2002 is the result of currency exchange fluctuations.
The table below provides comparative net earnings and earnings per
share information had the non-amortization provisions of SFAS No. 142
been adopted for all periods presented:
Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Net loss (in thousands)
-----------------------
As reported $ (17,664) $ (9,502) $ (20,146) $ (13,258)
Goodwill amortization, net of tax 0 157 0 470
---------- ----------- ---------- -----------
Adjusted net loss $ (17,664) $ (9,345) $ (20,146) $ (12,788)
========== =========== ========== ===========
Basic & diluted loss per share
------------------------------
As reported $ (.85) $(.46) $(.97) $ (.64)
Goodwill amortization, net of tax 0 .01 0 .02
---------- ----------- ---------- -----------
Adjusted net loss per share $ (.85) $(.45) $(.97) $ (.62)
========== =========== ========== ===========
5
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
E. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
September 30, December 31,
2002 2001
------------- ------------
Senior subordinated notes $ 136,750 $ 136,750
Term loan 97,350 99,000
Industrial revenue bonds and other 27,094 25,176
----------- -----------
261,194 260,926
Less amounts due within one year 6,952 4,304
----------- -----------
$ 254,242 $ 256,622
=========== ===========
Aggregate maturities of long-term debt at September 30, 2002, were as
follows (in thousands):
October 1 -- December 31, 2002 $ 2,465
2003 10,378
2004 12,766
2005 15,990
2006 71,436
Thereafter 148,159
-----------
$ 261,194
===========
F. COMPREHENSIVE INCOME (LOSS)
Comprehensive loss, which includes net loss of $(17.7) million and the
effect of foreign currency translation adjustments of $0.4 million,
totaled $(17.3) million for the third quarter of 2002, compared to
$(6.9) million in the third quarter of 2001 which includes net loss of
$(9.5) million and the effect of foreign currency translation
adjustments of $2.6 million. Comprehensive loss for the nine months
ended September 30, 2002 was $(15.9) million, resulting from net loss
of $(20.1) million and the effect of foreign currency translations of
$4.2 million, compared to $(14.4) million in 2001 which includes net
loss of $(13.3) million and the effect of foreign currency translation
adjustments of $(1.1) million.
6
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
G. 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, 2002 and 2001
(in thousands):
Revenues Income (loss)
Three months ended from external Intersegment from
September 30, 2002 customers revenues operations
------------------ --------- -------- ----------
Agricultural $ 61,523 $ 36,637 $ (879)
Earthmoving/construction 33,888 13,646 98
Consumer 9,249 5,679 (516)
Reconciling items (a) 0 0 (6,514)
---------- ---------- ----------
Consolidated totals $ 104,660 $ 55,962 $ (7,811)
========== ========== ==========
Three months ended
September 30, 2001
------------------
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)
========== ========== ==========
(a) Represents corporate expenses and depreciation expense related to
property, plant and equipment carried at the corporate level. The 2001
amounts also include amortization expense for goodwill carried at the
corporate level. No goodwill amortization has been recorded in 2002,
pursuant to the adoption of SFAS No. 142 as described in note H.
7
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
G. SEGMENT INFORMATION (CONTINUED)
Revenues Income (loss)
Nine months ended from external Intersegment from
September 30, 2002 customers revenues operations
------------------ --------- -------- ----------
Agricultural $ 212,025 $ 118,771 $ 11,275
Earthmoving/construction 110,304 43,620 4,850
Consumer 31,884 19,232 555
Reconciling items (a) 0 0 (19,429)
---------- ---------- ----------
Consolidated totals $ 354,213 $ 181,623 $ (2,749)
========== ========== ==========
Nine months ended
September 30, 2001
------------------
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)
========== ========== ==========
(a) Represents corporate expenses and depreciation expense related to
property, plant and equipment carried at the corporate level. The 2001
amounts also include amortization expense for goodwill carried at the
corporate level. No goodwill amortization has been recorded in 2002,
pursuant to the adoption of SFAS No. 142 as described in note H.
8
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
G. SEGMENT INFORMATION (CONTINUED)
September 30, December 31,
Total assets 2002 2001
------------ ------------- ------------
Agricultural $ 257,870 $ 252,213
Earthmoving/construction 141,502 151,823
Consumer 35,201 46,783
Reconciling items (b) 115,167 118,135
---------- ----------
Consolidated totals $ 549,740 $ 568,954
========== ==========
(b) Represents property, plant and equipment and goodwill related to
certain acquisitions and other corporate assets.
H. NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards Number 142
On January 1, 2002, the Company adopted the non-amortization provisions
of Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 142 eliminates the
amortization of goodwill and requires goodwill to be tested for
impairment at least annually. The Company has determined the reporting
units and has conducted transitional tests of goodwill impairment of
these units using the discounted cash flow method. The Company's
transitional tests showed no impairment of goodwill due to the
estimated discounted future cash flows exceeding the current net
carrying value of the related unit. In estimating the future cash
flows, the Company assumes sales and profitability trends, which have
declined in recent years, will return to levels previously experienced
by the Company. The Company's sales and profitability trends have been
affected by downturns in the United States and world economy and the
cumulative impact of the strikes at the Company's Des Moines, Iowa, and
Natchez, Mississippi, facilities for 40 and 39 months, respectively.
Should future information indicate such assumptions need to be revised
downward, the carrying value could be impaired. Prospectively, the
Company will evaluate goodwill for impairment in the fourth quarter of
each fiscal year or whenever events or circumstances indicate
impairment may exist.
9
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
H. NEW ACCOUNTING STANDARDS (CONTINUED)
Statement of Financial Accounting Standards Number 144
In July 2001, SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-lived Assets", was issued. This statement retains the previous
cash flow test for impairment and broadens the presentation of
discontinued operations. SFAS No. 144 was adopted by the Company in the
first quarter of 2002 and had no material effect on the Company's
financial position, cash flows or results of operations.
Statement of Financial Accounting Standards Number 145
In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44,
and 64, Amendment of FASB Statement No. 13, and Technical Corrections",
was issued. This statement eliminates the requirement that gains and
losses on the extinguishment of debt be classified as extraordinary
items on the statement of operations. The Company has elected to adopt
SFAS No. 145 early. Therefore, the gain on early retirement of debt
recorded in the second quarter of 2001 has been reclassified. See Note
I for additional information.
Statement of Financial Accounting Standards Number 146
In June, 2002, SFAS No. 146, "Accounting for Exit or Disposal Costs"
was issued. This statement provides new guidance on accounting and
reporting for costs associated with exit or disposal activities.
Adoption of this standard is required for any exit or disposal
activities initiated subsequent to December 31, 2002.
I. GAIN ON EARLY RETIREMENT OF DEBT
The Company recorded a gain on early retirement of debt of $4.4 million
in the second quarter of 2001. This gain was previously classified as
an extraordinary item in accordance with Financial Accounting Standards
Board (FASB) Statement No. 4, "Reporting Gains and Losses from
Extinguishment of Debt". In accordance with FASB Statement No. 4, the
gain was shown net of taxes of $1.8 million for a net amount of $2.6
million. In April 2002, SFAS No. 145 was issued rescinding FASB
Statement No. 4. The Company has elected to adopt SFAS No. 145 early
and has therefore reclassified the gain on early retirement of debt in
accordance with SFAS No. 145.
10
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
J. LOSS ON INVESTMENT
The Company maintains financial interests in Fabrica Uruguaya de
Neumaticos S.A. (FUNSA), a tire manufacturer located in Uruguay, South
America. FUNSA is not currently producing tires, however FUNSA is
working with its investors, the government of Uruguay and the union to
complete a reorganization plan and resume the manufacturing of tires.
These plans have been significantly hindered by the major economic
crisis that occurred in Uruguay during the third quarter of 2002,
including a run on banks and the temporary closing of the banking
system. Due to these events and the deterioration of economic
conditions, social distress and resultant unrest in the country of
Uruguay, the Company is reserving its investment in FUNSA of $9.6
million. The expense of $9.6 million was taken in the third quarter of
2002 and is classified in the accompanying Consolidated Condensed
Statements of Operations as "Loss on Investment." On the accompanying
Consolidated Condensed Statements of Cash Flows, $3.7 million is shown
as a non-cash loss on investment and the remaining $5.9 million is
shown as a reduction in restricted cash deposits.
K. 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 September 30, 2002, future minimum commitments under noncancellable
operating leases with initial or remaining terms of one year are as
follows (in thousands):
October 1 -- December 31, 2002 $ 1,382
2003 4,659
2004 1,971
2005 535
2006 388
11
TITAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
L. INCOME TAX REFUND
In July of 2002, the Company received a federal income tax refund of
approximately $16.3 million as a result of a net operating loss
carryback generated from the losses incurred by the Company in 2001.
The amount of the operating loss carryback was increased by a recent
change in the tax laws allowing for operating losses to be carried back
additional years and allowing the Company to recover additional taxes
previously paid. The Company has recorded this refund as an increase to
cash and a corresponding decrease in current deferred income taxes and
prepaid and other current assets in the accompanying Consolidated
Condensed Balance Sheets.
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 would
be necessary to the estimated provisions.
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 54% 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 would be necessary to the estimated provisions.
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.
13
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES (CONTINUED)
Valuation of Equity Investments
The Company assesses the carrying value of its equity investments whenever
events and circumstances indicate that the carrying values 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. These write-downs, if any, 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 will review goodwill to assess recoverability from future operations
during the fourth quarter of each annual reporting period, or 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 and other postretirement 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. Actual results that differ from the assumptions and
changes in assumptions affect future expenses, cash funding requirements and
obligations. For more information concerning these costs and obligations, see
the additional discussion of the "Minimum Pension Liability" and Note 14 to the
Company's financial statements on Form 10-K for the fiscal year ended December
31, 2001.
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 September 30, 2002, were $104.7 million,
compared to 2001 third quarter net sales of $100.5 million. Net sales for the
nine months ended September 30, 2002 were $354.2 million, compared to 2001 net
sales of $356.9 million. Net sales for the quarter ended September 30, 2002,
increased as the result of a small rebound in agricultural segment sales. The
decrease in net sales for the nine months ended September 30, 2002, was
primarily due to reduced production by the Company's major customers and the
continued negative economic conditions in the global earthmoving/construction
and consumer markets.
Cost of Sales and Gross Profit
Cost of sales was $101.6 and $324.2 million for the third quarter and for the
nine months ended September 30, 2002, as compared to $97.7 and $331.8 million in
2001. Gross profit for the third quarter of 2002 was $3.0 million or 2.9% of net
sales, compared to $2.8 million or 2.8% of net sales for the third quarter of
2001. Gross profit for the nine months ended September 30, 2002, was $30.0
million or 8.5% of net sales, compared to $25.2 million or 7.1% of net sales for
2001. Gross profit, as a percentage of net sales, was positively impacted by the
Company's efforts to control costs. Cost reduction measures have included the
closing of several distribution facilities as part of the Company's
reorganization of its domestic distribution network. Titan's cost control
efforts were partially offset by price increases for steel and rubber, the
primary raw materials used by the Company.
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, along with minimal operating costs, continues 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 $20.9 million. The Company
continually assesses its capacity requirements and makes necessary changes as
dictated by customer demand.
Administrative Expenses
Selling, general and administrative (SG&A) and research and development (R&D)
expenses for the third quarter of 2002 were $10.8 million or 10.4% of net sales,
compared to $10.9 million or 10.8% of net sales for 2001. SG&A and R&D expenses
for the nine months ended September 30, 2002 were $32.8 million or 9.3% of net
sales, compared to $33.9 million or 9.5% of net sales in 2001. The SG&A and R&D
percentages were lower due to the Company's efforts to streamline total SG&A
expenditures, as well as the cessation of the amortization of goodwill as
discussed in footnote D of the accompanying financial statements. The Company's
streamlining efforts included headcount reductions.
15
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Operating Results and Other
Loss from operations for the third quarter of 2002 was $(7.8) million or (7.5)%
of net sales, compared to $(8.0) million or (8.0)% in 2001. Loss from operations
for the nine months ended September 30, 2002, was $(2.7) million or (0.8)% of
net sales, compared to $(8.8) million or (2.5)% for 2001. Operating results were
primarily impacted by the Company's effort to reduce costs as discussed above.
Net interest expense was $5.2 million and $15.6 million for the third quarter
and for the nine months ended September 30, 2002, respectively, compared to $4.9
million and $16.0 million in 2001. The increased interest expense in the third
quarter of 2002 as compared to 2001 is primarily due to an increase in
outstanding debt in the third quarter of 2002 as compared to 2001.
The $9.6 million loss on investment resulted from the Company's decision to
reserve its investment in Fabrica Uruguaya de Neumaticos S.A. (FUNSA), a tire
manufacturer located in Uruguay, South America. FUNSA is not currently producing
tires, however FUNSA is working with its investors, the government of Uruguay
and the union to complete a reorganization plan and resume the manufacturing of
tires. These plans have been significantly hindered by the major economic crisis
that occurred in Uruguay during the third quarter of 2002, including a run on
banks and the temporary closing of the banking system. Due to these events and
the deterioration of economic conditions, social distress and resultant unrest
in the country of Uruguay, the Company is reserving its investment in FUNSA of
$9.6 million. The expense of $9.6 million was taken in the third quarter of 2002
and is classified in the accompanying Consolidated Condensed Statements of
Operations as "Loss on Investment." On the accompanying Consolidated Condensed
Statements of Cash Flows, $3.7 million is shown as a non-cash loss on investment
and the remaining $5.9 million is shown as a reduction in restricted cash
deposits.
The $1.6 million gain on sale of assets in 2001 was attributed to the sale of an
airplane during the first quarter of that year. A gain on early retirement of
debt of $4.4 million in the second quarter of 2001 resulted from the early
retirement of $13.3 million of the senior subordinated notes.
During the quarter and the nine months ended September 30, 2002, the strength of
foreign currencies against the dollar benefited Titan by $0.2 million and $1.4
million, respectively.
The Company's effective tax benefit on the net loss was 20% for the first nine
months of both 2001 and 2002. The effective tax benefit rate difference from the
expected domestic federal rate of 35% is the result of anticipated taxable
income in foreign jurisdictions and estimates in realizability of tax loss
carryback and carryforward amounts.
16
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Net Loss
Net loss for the third quarter and for the nine months ended September 30, 2002,
was $(17.7) and $(20.1) million, respectively, compared to $(9.5) and $(13.3)
million in 2001. Basic and diluted loss per share were $(.85) and $(.97) for the
third quarter and for the nine months ended September 30, 2002, compared to
$(.46) and $(.64) in 2001. Net loss increased as a result of the loss on
investment.
Agricultural Segment Results
Net sales in the agricultural market were $61.5 and $212.0 million for the third
quarter and the nine months ended September 30, 2002, as compared to $54.4 and
$198.3 million in 2001. (Loss) income from operations in the agricultural market
was $(0.9) and $11.3 million for the third quarter and the nine months ended
September 30, 2002, as compared to $(1.1) and $7.6 million in 2001. The increase
in net sales and income from operations in the agricultural market was primarily
attributed to higher sales volumes resulting from an escalation in customer
demand along with Titan's efforts to expand market share. Also, the heightened
cost control efforts previously discussed contributed to the increase.
Earthmoving/Construction Segment Results
The Company's earthmoving/construction market net sales were $33.9 and $110.3
million for the third quarter and the nine months ended September 30, 2002, as
compared to $37.2 and $122.3 million for 2001. Income from operations in the
earthmoving/construction market was $0.1 and $4.9 million for the third quarter
and the nine months ended September 30, 2002, versus $0.6 and $5.9 million in
2001. The year-to-date decrease in income from operations in the earthmoving/
construction market was primarily due to operating inefficiencies resulting from
a decrease in the sales volume. However, these inefficiencies were partially
offset by the increased cost control efforts previously discussed.
Consumer Segment Results
Consumer market net sales were $9.2 and $31.9 million for the third quarter of
2002 and the nine months ended September 30, 2002, as compared to $8.9 and $36.3
million for 2001. Consumer market (loss) income from operations was $(0.5) and
$0.6 million for the third quarter of 2002 and the nine months ended September
30, 2002, as compared to loss from operations of $(1.3) and $(2.2) million for
2001. Although consumer market year-to-date net sales decreased, income from
operations increased as a result of the Company's previously discussed efforts
to enhance efficiencies and management's efforts to focus on the Company's
higher margin consumer products.
17
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Foreign Subsidiaries Sales
Net sales at foreign subsidiaries for the quarter ended September 30, 2002,
were $28.8 million, compared to 2001 third quarter sales of $24.6 million. The
foreign sales were positively impacted by increased agricultural segment sales.
Net sales at foreign subsidiaries for the nine months ended September 30, 2002
were $88.1 million, compared to 2001 net sales of $87.4 million.
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 $6.5 and $19.4 million for the third
quarter and the nine months ended September 30, 2002, respectively, as compared
to $6.3 and $20.1 million for comparable periods in 2001.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
For the nine months ended September 30, 2002, positive cash flows from operating
activities of $26.5 million resulted primarily from a federal income tax refund
of $16.3 million as well as depreciation and amortization of $25.1 million. The
tax refund reduced deferred income taxes by $8.2 million and other current
assets by $8.1 million. Cash inflows were partially offset by the net loss of
$(20.1) million and accounts payable decreases of $(10.7) million.
The Company invested $7.7 million in capital expenditures in the first nine
months of 2002. The expenditures represent various equipment purchases and
building improvements to enhance production capabilities. The Company estimates
that its total capital expenditures will range from $10 million to $12 million
in 2002.
In the nine months ended September 30, 2002, positive cash flows from financing
activities of $6.4 million resulted primarily from a $7.3 million decrease in
restricted cash deposits.
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 nine months of 2002.
18
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company had restricted cash of $27.4 million at September 30, 2002.
Restricted cash of $15.0 million was held as collateral on the revolving loan
agreement. The remaining $12.4 million was collateral on outstanding letters of
credit for an industrial revenue bond of $9.6 million and another for $2.8
million. Letters of credit were previously issued under the Company's credit
facility, which was replaced in December 2001. The amount of restricted cash was
reduced by $7.3 million, primarily resulting from the $5.9 million restricted
cash reduction for FUNSA.
The Company's term loan and revolving loan agreements contain various covenants
and restrictions. The Company is in compliance with these covenants and
restrictions as of September 30, 2002. The financial covenants in these loan
agreements require 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.
Liquidity Outlook
At September 30, 2002, the Company had unrestricted cash and cash equivalents of
$35.2 million and no amount was drawn on the $20 million revolving loan
agreement. 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 or not possible to secure additional funding in
order to meet working capital requirements.
19
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OUTLOOK
Agricultural Segment
Given current economic conditions, the agricultural market sales for the
remainder of 2002 are expected to be slightly above 2001 levels. The newly
enacted farm bill in the United States and more generous depreciation rules
should eventually support an increase in farm equipment sales. However, dry
weather has pushed any expected additional sales increases into next year at the
earliest. Many variables, including weather, export markets and future
government policies and payments can greatly influence the overall health of the
agricultural economy. Many of the Company's customers in the agricultural market
schedule extended plant shutdowns near the end of the year. Therefore, sales and
profitability for the fourth quarter are expected to decline as compared to the
first three quarters of 2002. However, the Company believes enhanced
efficiencies will allow the operating results to continue to outperform those of
2001. Also, the Company expects to enact price increases in the agricultural
market to offset higher raw material costs.
Earthmoving/Construction Segment
Sales in the earthmoving/construction market for the balance of 2002 are
expected to remain lower than 2001. In response to higher raw material costs,
the Company expects to enact price increases on its products in the
earthmoving/construction market. However, these price increases are not expected
to make up for market weaknesses including a general uncertainty in the
earthmoving/construction market, which has slowed spending on new equipment.
Governmental entities have cut construction spending due to lower government
receipts. Also, weakness persists at equipment rental agencies, thereby
decreasing their demand to purchase new equipment. Many of the Company's
earthmoving/construction customers also schedule extended plant shutdowns toward
the end of the year. Therefore, sales and profitability for the remainder of
2002 will likely remain depressed.
Consumer Segment
Consumer market sales are anticipated to be lower for the remainder of 2002 when
compared to 2001. Many items affect the consumer market including weather,
competitive pricing, energy prices, and consumer attitude, which remains
cautious. However, if the enhanced efficiencies continue, along with
management's concerted effort to focus on the Company's higher margin consumer
products, the consumer market will show improved margins when compared to 2001.
20
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OUTLOOK (CONTINUED)
Market and Economic Uncertainties
Market share loss or lower demand in the markets that the Company serves could
adversely affect the Company's results of operations, financial position and
liquidity in the future. This could result in reduced levels of plant
utilization that would increase the costs of the Company's products. In
addition, increases in labor, raw material, energy, insurance and other expenses
would also result in increased product cost. Due to current pricing pressures
brought on by a highly competitive marketplace, these additional costs may not
be recoverable. The continuation of the current economic downturn in the United
States and worldwide is likely to have an unfavorable impact on the Company's
sales and earnings in subsequent periods.
MARKET RISK SENSITIVE INSTRUMENTS
The Company's risks related to foreign currencies, commodity prices and interest
rates are consistent with those for 2001.
MINIMUM PENSION LIABILITY
Due to the major decline in the equity markets during 2002, the fair value of
the Company's pension fund assets has significantly decreased since December 31,
2001. In accordance with Financial Accounting Standards Board (FASB) Statement
No. 87, "Employer's Accounting for Pensions", the Company expects to record an
additional minimum pension liability adjustment at December 31, 2002. The direct
charge to stockholders' equity would not affect net income, but would be
included in other comprehensive income (loss).
21
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards Number 142
On January 1, 2002, the Company adopted the non-amortization provisions of
Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 eliminates the amortization of goodwill and
requires goodwill to be tested for impairment at least annually. The Company has
determined the reporting units and has conducted transitional tests of goodwill
impairment of these units using the discounted cash flow method. The Company's
transitional tests showed no impairment of goodwill due to the estimated
discounted future cash flows exceeding the current net carrying value of the
related unit. In estimating the future cash flows, the Company assumes sales and
profitability trends, which have declined in recent years, will return to levels
previously experienced by the Company. The Company's sales and profitability
trends have been affected by downturns in the United States and world economy
and the cumulative impact of the strikes at the Company's Des Moines, Iowa, and
Natchez, Mississippi, facilities for 40 and 39 months, respectively. Should
future information indicate such assumptions need to be revised downward, the
carrying value could be impaired. Prospectively, the Company will evaluate
goodwill for impairment in the fourth quarter of each fiscal year or whenever
events or circumstances indicate impairment may exist.
Statement of Financial Accounting Standards Number 144
In July 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-lived Assets", was issued. This statement retains the previous cash flow
test for impairment and broadens the presentation of discontinued operations.
SFAS No. 144 was adopted by the Company in the first quarter of 2002 and had no
material effect on the Company's financial position, cash flows or results of
operations.
Statement of Financial Accounting Standards Number 145
In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections", was issued. This
statement eliminates the requirement that gains and losses on the extinguishment
of debt be classified as extraordinary items on the statement of operations. The
Company has elected to adopt SFAS No. 145 early. Therefore, the gain on early
retirement of debt recorded in the second quarter of 2001 has been reclassified.
See Note I in the Notes to Consolidated Condensed Financial Statements for
additional information.
22
TITAN INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NEW ACCOUNTING STANDARDS (CONTINUED)
Statement of Financial Accounting Standards Number 146
In June, 2002, SFAS No. 146, "Accounting for Exit or Disposal Costs" was issued.
This statement provides new guidance on accounting and reporting for costs
associated with exit or disposal activities. Adoption of this standard is
required for any exit or disposal activities initiated subsequent to December
31, 2002.
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 its 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, (vii) impairment of goodwill or fixed
assets, and (viii) 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.
23
TITAN INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the Company's most recent Annual Report filed on Form 10-K (Item 7A). There
has been no material change in this information.
ITEM 4. CONTROLS AND PROCEDURES
Based on their most recent evaluation, which was completed within 90 days of the
filing of this Form 10-Q, 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-14 and 15d-14) are effective.
There were not any significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
24
TITAN INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 5 ARE NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter ended
September 30, 2002.
25
TITAN INTERNATIONAL, INC.
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: October 30, 2002 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)
CERTIFICATION
Each of the undersigned hereby certifies that, to the best of their knowledge,
this report fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934 and that information contained in this report
fairly presents, in all material respects, the financial condition and results
of operations of the Registrant.
TITAN INTERNATIONAL, INC.
(REGISTRANT)
DATE: October 30, 2002 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)
26
TITAN INTERNATIONAL, INC.
CERTIFICATION
I, Maurice M. Taylor Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Titan International,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
DATE: October 30, 2002 BY: /s/ Maurice M. Taylor Jr.
----------------------- -----------------------------------
Maurice M. Taylor Jr.
President and Chief Executive
Officer
27
TITAN INTERNATIONAL, INC.
CERTIFICATION
I, Kent W. Hackamack, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Titan International,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
d) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
DATE: October 30, 2002 BY: /s/ Kent W. Hackamack
----------------------- -----------------------------------
Kent W. Hackamack
Vice President of Finance and
Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
28