TITAN INTERNATIONAL INC - Quarter Report: 2005 June (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
|
FORM
10-Q
|
|
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
Quarterly Period Ended: June 30, 2005
OR
|
o
|
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
þ
No
o
Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Rule
12b-2 of the Exchange Act).
Yes
þ
No
o
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
26, 2005
|
|
|
Common
stock, no par value per share
|
19,398,546
|
TITAN
INTERNATIONAL, INC.
TABLE
OF CONTENTS
|
Page
|
||
|
Part
I.
|
Financial
Information
|
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
|
|
Consolidated
Condensed Statements of Operations
for
the Three and Six Months Ended June 30, 2005 and 2004
|
1
|
|
|
Consolidated
Condensed Balance Sheets as of
June
30, 2005, and December 31, 2004
|
2
|
|
|
Consolidated
Condensed Statements of Cash Flows
for
the Six Months Ended June 30, 2005 and 2004
|
3
|
|
|
Notes
to Consolidated Condensed Financial Statements
|
4-14
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
|
15-26
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
27
|
|
Item
4.
|
Controls
and Procedures
|
27
|
|
Part
II.
|
Other
Information
|
|
|
Item
1.
|
Legal
Proceedings
|
28
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
28
|
|
Item
6.
|
Exhibits
|
29
|
|
Signatures
|
30
|
|
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,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net
sales
|
$
|
134,709
|
$
|
121,188
|
$
|
270,838
|
$
|
288,164
|
|||||
|
Cost
of sales
|
112,207
|
99,872
|
224,255
|
239,555
|
|||||||||
|
Gross
profit
|
22,502
|
21,316
|
46,583
|
48,609
|
|||||||||
|
Selling,
general & administrative expenses
|
8,018
|
8,260
|
16,445
|
19,972
|
|||||||||
|
Research
and development expenses
|
210
|
385
|
393
|
1,207
|
|||||||||
|
Idled
assets marketed for sale depreciation
|
1,334
|
0
|
2,680
|
0
|
|||||||||
|
Goodwill
impairment on Titan Europe
|
0
|
0
|
0
|
2,988
|
|||||||||
|
Income
from operations
|
12,940
|
12,671
|
27,065
|
24,442
|
|||||||||
|
Interest
expense
|
(2,353
|
)
|
(4,615
|
)
|
(4,942
|
)
|
(9,765
|
)
|
|||||
|
Noncash
convertible debt conversion charge
|
(7,225
|
)
|
0
|
(7,225
|
)
|
0
|
|||||||
|
Equity
income from unconsolidated affiliate
|
846
|
788
|
2,038
|
788
|
|||||||||
|
Other
(expense) income
|
(442
|
)
|
88
|
(724
|
)
|
134
|
|||||||
|
Income
before income taxes
|
3,766
|
8,932
|
16,212
|
15,599
|
|||||||||
|
(Benefit)
provision for income taxes
|
(434
|
)
|
3,289
|
811
|
4,680
|
||||||||
|
Net
income
|
$
|
4,200
|
$
|
5,643
|
$
|
15,401
|
$
|
10,919
|
|||||
|
Earnings
per common share:
|
|||||||||||||
|
Basic
|
$
|
.25
|
$
|
.32
|
$
|
.93
|
$
|
.57
|
|||||
|
Diluted
|
.23
|
.32
|
.74
|
.57
|
|||||||||
|
Average
common shares outstanding:
|
|||||||||||||
|
Basic
|
16,900
|
17,379
|
16,628
|
19,288
|
|||||||||
|
Diluted
|
25,186
|
17,436
|
25,128
|
19,317
|
|||||||||
See
accompanying Notes to Consolidated Condensed Financial
Statements.
1
TITAN
INTERNATIONAL, INC.
CONSOLIDATED
CONDENSED BALANCE SHEETS (UNAUDITED)
(Amounts
in thousands, except share data)
|
|
June
30,
|
|
|
December
31,
|
|||
|
Assets
|
2005
|
|
|
2004
|
|||
|
Current
assets
|
|||||||
|
Cash
and cash equivalents
|
$
|
542
|
$
|
1,130
|
|||
|
Accounts
receivable (net
allowance of $4,980 and $4,259, respectively)
|
69,976
|
52,781
|
|||||
|
Inventories
|
78,678
|
84,658
|
|||||
|
Deferred
income taxes
|
6,711
|
6,711
|
|||||
|
Prepaid
and other current assets
|
9,418
|
9,388
|
|||||
|
Total
current assets
|
165,325
|
154,668
|
|||||
|
Property,
plant and equipment, net
|
75,572
|
80,644
|
|||||
|
Idled
assets marketed for sale
|
28,165
|
31,245
|
|||||
|
Investment
in unconsolidated affiliate
|
29,578
|
30,040
|
|||||
|
Restricted
cash deposits
|
24,500
|
24,500
|
|||||
|
Goodwill
|
11,702
|
11,702
|
|||||
|
Other
assets
|
19,178
|
21,367
|
|||||
|
Total
assets
|
$
|
354,020
|
$
|
354,166
|
|||
|
Liabilities
and Stockholders’ Equity
|
|||||||
|
Current
liabilities
|
|||||||
|
Short-term
debt (including
current portion of long-term debt)
|
$
|
177
|
$
|
217
|
|||
|
Accounts
payable
|
29,775
|
26,733
|
|||||
|
Other
current liabilities
|
14,928
|
12,820
|
|||||
|
Total
current liabilities
|
44,880
|
39,770
|
|||||
|
Long-term
debt
|
110,911
|
169,688
|
|||||
|
Deferred
income taxes
|
9,164
|
9,164
|
|||||
|
Other
long-term liabilities
|
27,447
|
28,663
|
|||||
|
Total
liabilities
|
192,402
|
247,285
|
|||||
|
Stockholders’
equity
|
|||||||
|
Common
stock (no
par, 60,000,000 shares authorized, 30,577,356 issued)
|
30
|
27
|
|||||
|
Additional
paid-in capital
|
244,323
|
203,239
|
|||||
|
Retained
earnings
|
36,607
|
21,385
|
|||||
|
Treasury
stock (at
cost, 11,185,977 and 11,228,655 shares, respectively)
|
(100,821
|
)
|
(101,204
|
)
|
|||
|
Accumulated
other comprehensive loss
|
(18,521
|
)
|
(16,566
|
)
|
|||
|
Total
stockholders’ equity
|
161,618
|
106,881
|
|||||
|
Total
liabilities and stockholders’ equity
|
$
|
354,020
|
$
|
354,166
|
See
accompanying Notes to Consolidated Condensed Financial
Statements.
2
TITAN
INTERNATIONAL, INC.
CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts
in thousands)
|
Six
months ended
|
|||||||
|
June
30,
|
|||||||
|
2005
|
2004
|
||||||
|
Cash
flows from operating activities:
|
|||||||
|
Net
income
|
$
|
15,401
|
$
|
10,919
|
|||
|
Adjustments
to reconcile net income to net cash
|
|||||||
|
provided
by operating activities:
|
|||||||
|
Depreciation
and amortization
|
10,915
|
11,349
|
|||||
|
Noncash
convertible debt conversion charge
|
7,225
|
0
|
|||||
|
Goodwill
impairment
|
0
|
2,988
|
|||||
|
(Increase)
decrease in current assets:
|
|||||||
|
Accounts
receivable
|
(17,195
|
)
|
(24,570
|
)
|
|||
|
Inventories
|
5,980
|
7,253
|
|||||
|
Prepaid
and other current assets
|
(30
|
)
|
(1,533
|
)
|
|||
|
Increase
in current liabilities:
|
|||||||
|
Accounts
payable
|
3,042
|
6,856
|
|||||
|
Other
current liabilities
|
2,906
|
10,439
|
|||||
|
Other,
net
|
(1,755
|
)
|
(3,014
|
)
|
|||
|
Net
cash provided by operating activities
|
26,489
|
20,687
|
|||||
|
Cash
flows from investing activities:
|
|||||||
|
Capital
expenditures, net
|
(1,929
|
)
|
(3,441
|
)
|
|||
|
Proceeds
from Titan Europe sale
|
0
|
49,984
|
|||||
|
Loan
to Titan Europe Plc
|
0
|
(9,227
|
)
|
||||
|
Other
|
39
|
239
|
|||||
|
Net
cash (used for) provided by investing activities
|
(1,890
|
)
|
37,555
|
||||
|
Cash
flows from financing activities:
|
|||||||
|
Payment
on revolving credit facility, net
|
(24,900
|
)
|
0
|
||||
|
Payment
on debt
|
(117
|
)
|
(28,661
|
)
|
|||
|
Proceeds
from borrowings
|
0
|
348
|
|||||
|
Proceeds
from exercise of stock options
|
400
|
0
|
|||||
|
Repurchase
of common stock
|
0
|
(15,000
|
)
|
||||
|
Payment
of financing fees
|
(500
|
)
|
0
|
||||
|
Dividends
paid
|
(164
|
)
|
(212
|
)
|
|||
|
Other,
net
|
94
|
(50
|
)
|
||||
|
Net
cash used for financing activities
|
(25,187
|
)
|
(43,575
|
)
|
|||
|
Effect
of exchange rate changes on cash
|
0
|
(216
|
)
|
||||
|
Net
(decrease) increase in cash and cash equivalents
|
(588
|
)
|
14,451
|
||||
|
Cash
and cash equivalents at beginning of period
|
1,130
|
6,556
|
|||||
|
Cash
and cash equivalents at end of period
|
$
|
542
|
$
|
21,007
|
|||
See
accompanying Notes to Consolidated Condensed Financial Statements.
3
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Note
1. 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 and necessary to present
fairly the Company’s financial position as of June 30, 2005, the results of
operations for the three and six months ended June 30, 2005 and 2004, and cash
flows for the six months ended June 30, 2005 and 2004.
Accounting
policies have continued without significant change and are described in the
Summary of Significant Accounting Policies contained in the Company’s 2004
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 2004 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
The
Company has two expired stock-based compensation plans, which are described
in
Note 23 to the Company’s financial statements on Form 10-K for the fiscal year
ended December 31, 2004. On May 19, 2005, the stockholders approved the adoption
of the Titan International, Inc. 2005 Equity Incentive Plan (the “Incentive
Plan”). A total of 2.1 million shares of common stock are reserved for issuance
under the incentive plan. Directors, employees, consultants, and service
providers of the Company or any of its affiliates are eligible to receive awards
under the incentive plan. 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. No stock-based compensation expense has been recorded in the consolidated
financial statements as any options granted had an exercise price equal to
the
market value of the underlying common stock on the date of the grant. The
following table illustrates the effect on net income and earnings per share
if
the Company had applied the fair value recognition provisions of SFAS No. 123,
“Accounting for Stock-Based Compensation,” to stock-based compensation (amounts
in thousands, except share data):
|
Three
months ended
|
Six
months ended
|
||||||||||||
|
|
June
30,
|
June
30,
|
|||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net
income - as reported
|
$
|
4,200
|
$
|
5,643
|
$
|
15,401
|
$
|
10,919
|
|||||
|
Deduct:
Total stock-based compensation
|
|||||||||||||
|
expense
determined under fair value method
|
|||||||||||||
|
for
all awards, net of related tax effects
|
(262
|
)
|
0
|
(262
|
)
|
0
|
|||||||
|
Pro
forma net income
|
$
|
3,938
|
$
|
5,643
|
$
|
15,139
|
$
|
10,919
|
|||||
|
Earnings
per share:
|
|||||||||||||
|
Basic
- as reported
|
$
|
.25
|
$
|
.32
|
$
|
.93
|
$
|
.57
|
|||||
|
Basic
- pro forma
|
.23
|
.32
|
.91
|
.57
|
|||||||||
|
Diluted
- as reported
|
$
|
.23
|
$
|
.32
|
$
|
.74
|
$
|
.57
|
|||||
|
Diluted
- pro forma
|
.22
|
.32
|
.73
|
.57
|
|||||||||
4
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Note
2. Titan Europe sale
On
April
7, 2004, Titan Luxembourg Sarl, a wholly-owned European subsidiary of the
Company, sold 70% of the common stock of Titan Europe to the public on the
AIM
market in London. Titan Luxembourg is the largest single stockholder in Titan
Europe Plc, retaining a 29.3% interest on June 30, 2005. Titan Luxembourg’s
proceeds from the sale of Titan Europe shares were approximately $62 million,
before fees and expenses of approximately $2.8 million. The Company recorded
cash receipts of $50 million and a five-year note receivable of $9.2 million
from the newly created European public company, Titan Europe Plc.
In
the
first quarter of 2004, Titan recognized a $3.0 million goodwill impairment
on
the pending sale of Titan Europe in accordance with the Company’s goodwill
impairment policy. Net proceeds from the sale of Titan Europe were used to
reduce the Company’s debt balances and $15.0 million of the proceeds were used
to purchase the shares of Titan International common stock (approximately 4.9
million shares) held by Citicorp Venture Capital, Ltd.
The
Company is accounting for its interest in Titan Europe Plc as an equity
investment subsequent to the sale of a 70% interest in April 2004. Titan
recognized equity income on its investment in Titan Europe Plc of $0.8 million
and $2.0 million in the three and six months ended June 30, 2005. The carrying
value of the Company’s equity investment in Titan Europe Plc was $29.6 million
at June 30, 2005. Prior to the sale in April 2004, Titan Europe was consolidated
in the Company’s financial statements.
Below
is
a summary of Titan Europe results included in the Company’s historical results
(in thousands):
|
Three
months ended
|
Six
months ended
|
||||||||||||
|
June
30,
|
June
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net
sales
|
$
|
0
|
(a)
|
$
|
0
|
(a)
|
$
|
0
|
(a)
|
$
|
49,446
|
||
|
Gross
profit
|
0
|
(a)
|
0
|
(a)
|
0
|
(a)
|
8,272
|
||||||
|
Income
from operations
|
0
|
(a)
|
0
|
(a)
|
0
|
(a)
|
420
|
||||||
|
Equity
income from Titan Europe Plc
|
846
|
788
|
2,038
|
788
|
|||||||||
| (a) |
These
items are no longer included in the consolidated financial statements
due
to the April 2004 sale of Titan
Europe.
|
5
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Note
3. Inventories
Inventories
consisted of the following (in thousands):
|
June
30,
|
December
31,
|
||||||
|
2005
|
2004
|
||||||
|
Raw
materials
|
$
|
38,861
|
$
|
27,984
|
|||
|
Work-in-process
|
8,992
|
13,439
|
|||||
|
Finished
goods
|
36,828
|
51,054
|
|||||
|
84,681
|
92,477
|
||||||
|
LIFO
reserve
|
(6,003
|
)
|
(7,819
|
)
|
|||
|
$
|
78,678
|
$
|
84,658
|
||||
Inventories
were $78.7 million and $84.7 million at June 30, 2005, and December 31, 2004,
respectively. The LIFO reserve changed primarily as a result of price
fluctuations within the composition of LIFO inventory layers. Included in the
inventory balances at June 30, 2005, and December 31, 2004, were reserves for
slow-moving and obsolete inventory of $2.8 million on both dates.
Note
4. Property, plant and equipment
Property,
plant and equipment consisted of the following (in thousands):
|
June
30,
|
December
31,
|
||||||
|
2005
|
2004
|
||||||
|
Land
and improvements
|
$
|
2,003
|
$
|
2,003
|
|||
|
Buildings
and improvements
|
34,411
|
34,426
|
|||||
|
Machinery
and equipment
|
163,110
|
161,859
|
|||||
|
Tools,
dies and molds
|
48,834
|
48,714
|
|||||
|
Construction-in-process
|
1,589
|
508
|
|||||
|
249,947
|
247,510
|
||||||
|
Less
accumulated depreciation
|
(174,375
|
)
|
(166,866
|
)
|
|||
|
$
|
75,572
|
$
|
80,644
|
||||
Property,
plant and equipment, net was $75.6 million and $80.6 million at June 30, 2005,
and December 31, 2004, respectively. The property, plant and equipment balances
do not include idled assets marketed for sale of $28.2 million at June 30,
2005,
and $31.2 million at December 31, 2004.
6
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Note
5. Idled assets marketed for sale
Idled
assets marketed for sale consisted of the following (in thousands):
|
June
30,
|
December
31,
|
||||||
|
2005
|
2004
|
||||||
|
Carrying
value of idled assets
|
$
|
28,165
|
$
|
31,245
|
|||
In
December 2003, the Company’s management and Board of Directors approved the sale
of certain operating assets with a carrying value of $37.8 million at December
31, 2003. With the sales process extending more than 12 months, the remaining
idled assets were depreciated during the fourth quarter of 2004 in accordance
with SFAS No. 144 and reclassified to noncurrent.
Depreciation
on these idled assets was $1.3 million and $2.7 million for the three and six
months ended June 30, 2005. During the first half of 2005, approximately $0.4
million of idled assets were sold or placed back into service. The idled assets
marketed for sale balance at June 30, 2005, was $28.2 million. Included in
the
June 30, 2005, balance are land and buildings at the Company’s idle facilities
in Walcott, Iowa, and Greenwood, South Carolina, totaling $4.5 million.
Machinery and equipment located at the Company’s idle facilities in Brownsville,
Texas, and Natchez, Mississippi, totaling $23.7 million are also included in
idled assets marketed for sale at June 30, 2005. With the assistance of
independent appraisals, the Company has concluded that the fair market values
of
the machinery and equipment at these facilities exceed their respective carrying
values. The Company has had inquiries regarding these assets and will continue
the marketed for sale process in 2005.
Note
6. Investment in unconsolidated affiliate
Investment
in unconsolidated affiliate consisted of the following (in
thousands):
|
June
30,
|
December
31,
|
||||||
|
2005
|
2004
|
||||||
|
Investment
in Titan Europe Plc
|
$
|
29,578
|
$
|
30,040
|
|||
The
Company is accounting for its interest in Titan Europe Plc as an equity
investment subsequent to the sale of a 70% interest in April 2004. Titan
recognized equity income on its investment in Titan Europe Plc of $0.8 million
and $2.0 million in the three and six months ended June 30, 2005. The carrying
value of the Company’s equity investment in Titan Europe Plc was $29.6 million
at June 30, 2005, as compared to $30.0 million at December 31, 2004. Dividends
of $0.5 million were received from this investment in the first six months
of
2005. Titan Europe Plc is publicly traded on the AIM market in London. Based
on
the AIM quoted price of Titan Europe Plc, the market value of the Company’s
shares was $41.4 million at June 30, 2005. Prior to the sale in April 2004,
Titan Europe was consolidated in the Company’s financial
statements.
7
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Note
7. Restricted cash deposits
The
Company had restricted cash of $24.5 million at June 30, 2005, and December
31,
2004. The restricted cash of $24.5 million is on deposit for a court
appeal.
Note
8. Goodwill
Goodwill
reflects accumulated amortization of $2.9 million at June 30, 2005, and December
31, 2004. Goodwill amortization was ceased in January 2002, pursuant to the
adoption of Statement of Financial Accounting Standards (SFAS) No.
142.
The
carrying amount of goodwill by segment consisted of the following (in
thousands):
|
June
30,
|
December
31,
|
||||||
|
2005
|
2004
|
||||||
|
Agricultural
segment
|
$
|
6,912
|
$
|
6,912
|
|||
|
Earthmoving/construction
segment
|
3,552
|
3,552
|
|||||
|
Consumer
segment
|
1,238
|
1,238
|
|||||
|
$
|
11,702
|
$
|
11,702
|
||||
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. There
can be no assurance that future goodwill tests will not result in a charge
to
earnings.
Note
9. Long-term debt
Long-term
debt consisted of the following (in thousands):
|
June
30,
|
December
31,
|
||||||
|
2005
|
2004
|
||||||
|
Senior
unsecured convertible notes
|
$
|
81,200
|
$
|
115,000
|
|||
|
Revolving
credit facility
|
19,500
|
44,400
|
|||||
|
Industrial
revenue bonds and other
|
10,388
|
10,505
|
|||||
|
111,088
|
169,905
|
||||||
|
Less:
Amounts due within one year
|
177
|
217
|
|||||
|
$
|
110,911
|
$
|
169,688
|
||||
Aggregate
maturities of long-term debt at June 30, 2005, were as follows (in
thousands):
|
July
1 - December 31, 2005
|
$
|
101
|
||
|
2006
|
123
|
|||
|
2007
|
19,598
|
|||
|
2008
|
566
|
|||
|
2009
|
81,200
|
|||
|
Thereafter
|
9,500
|
|||
|
$
|
111,088
|
8
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Senior
unsecured convertible notes
The
$81.2
million of 5.25% senior unsecured convertible notes are due 2009. These notes
are convertible into shares of the Company’s stock at any time on or before
maturity at a conversion rate of 74.0741 shares per $1,000 principal amount
of
notes ($13.50 per common share), subject to adjustment. This conversion rate
would convert all of the notes into approximately 6.0 million shares of the
Company’s common stock. In June of 2005, Titan finalized a private transaction
to exchange $33.8 million of the Company’s outstanding 5.25% senior unsecured
convertible notes due 2009 for 3,022,275 shares of common stock as proposed
to
the Company by certain note holders.
Revolving
credit facility
The
Company’s $100 million revolving credit facility with agents LaSalle Bank
National Association and General Electric Capital Corporation has a 2007
termination date and is collateralized by a first priority security interest
in
certain assets of Titan and its domestic subsidiaries. The borrowings under
the
facility bear interest at a floating rate of either prime rate plus 1.5% or
LIBOR plus 3.0%. The facility contains certain financial covenants and other
customary affirmative and negative covenants.
Industrial
revenue bonds and other
Other
debt primarily consists of industrial revenue bonds, loans from local and state
entities, and other long-term notes. Maturity dates on this debt range from
one
to five years and interest rates varied from 1% to 4%.
Note
10. 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):
|
2005
|
2004
|
||||||
|
Warranty
liability, January 1
|
$
|
1,762
|
$
|
1,508
|
|||
|
Provision
for warranty liabilities
|
1,150
|
1,290
|
|||||
|
Warranty
payments made
|
(946
|
)
|
(1,071
|
)
|
|||
|
Warranty
liability, June 30
|
$
|
1,966
|
$
|
1,727
|
|||
9
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Note
11. Employee benefit plans
The
Company has two frozen defined benefit pension plans and one defined benefit
plan that purchased a final annuity settlement in 2002. The components of net
periodic pension cost consisted of the following (in thousands):
|
Three
months ended
|
Six
months ended
|
||||||||||||
|
June
30,
|
June
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Interest
cost
|
$
|
1,039
|
$
|
1,116
|
$
|
2,078
|
$
|
2,232
|
|||||
|
Expected
return on assets
|
(1,202
|
)
|
(1,098
|
)
|
(2,404
|
)
|
(2,196
|
)
|
|||||
|
Amortization
of unrecognized prior service cost
|
34
|
34
|
68
|
68
|
|||||||||
|
Amortization
of unrecognized deferred taxes
|
(14
|
)
|
(14
|
)
|
(28
|
)
|
(28
|
)
|
|||||
|
Amortization
of net unrecognized loss
|
439
|
402
|
878
|
804
|
|||||||||
|
Net
periodic pension cost
|
$
|
296
|
$
|
440
|
$
|
592
|
$
|
880
|
|||||
During
the six months ended June 30, 2005, the Company contributed $1.7 million to
the
frozen defined benefit pension plans. The Company expects to contribute
approximately $2.1 million to the pension plans during the remainder of
2005.
Note
12. Lease commitments
The
Company leases certain buildings and equipment under operating leases, including
a lease for a building in Brownsville, Texas. The Brownsville building lease
has
been renewed until September 2005. Titan maintains a purchase option for the
one
million square foot building that would be approximately $12.9 million depending
on the exercise date and other items. The Company is currently evaluating lease
and purchase options regarding the Brownsville building. In addition, certain
other lease agreements provide for renewal options, fair value purchase options,
and payment of property taxes, maintenance and insurance by the
Company.
At
June
30, 2005, future minimum commitments under noncancellable operating leases
with
initial or remaining terms of one year were as follows (in
thousands):
|
July
1 - December 31, 2005
|
$
|
1,212
|
||
|
2006
|
1,321
|
|||
|
2007
|
970
|
|||
|
2008
|
417
|
|||
|
2009
|
159
|
|||
|
Thereafter
|
46
|
|||
|
$
|
4,125
|
10
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Note
13. Noncash convertible debt conversion charge
In
June
of 2005, Titan finalized a private transaction in which the Company issued
3,022,275 shares of common stock in exchange for the cancellation of $33.8
million principal amount of the Company’s outstanding 5.25% senior convertible
notes due 2009, as proposed to the Company by certain note holders. The Company
recognized a noncash charge of $7.2 million in connection with this exchange
in
accordance with Statement of Financial Accounting Standards (SFAS) No. 84,
“Induced Conversions of Convertible Debt.” This charge does not reflect $0.8
million of interest previously accrued on the notes. The exchange resulted
in an increase to additional paid-in capital of approximately $41.0
million.
Note
14. Income taxes
The
Company recorded income tax expense of $0.8 million and $4.7 million for the
six
months ended June 30, 2005 and 2004, respectively. The Company’s income
tax expense differs from the amount of income tax determined by applying the
statutory U.S. federal income tax rate to pre-tax income primarily as a result
of the valuation allowance recorded against the Company’s domestic net deferred
tax asset balance. As a result of previous losses, the Company had reserved
its
net deferred tax asset position, consistent with the Company’s accounting
policies. As the Company records current income, this reserve against the
deferred tax asset will be released on a pro rata basis, based on the estimated
taxable income for 2005. The Company expects the valuation allowance to be
fully
released during 2005. Based on the Company’s estimated year-end tax rate, the
Company provided for income taxes at an effective rate of 5% for the six months
ending June 30, 2005. This includes a $0.4 million income tax benefit for the
three months ended June 30, 2005, as a result of the reduction in the Company’s
estimated effective tax rate. The Company will continue to evaluate the
estimated effective tax rate throughout 2005 and revise as estimates or
circumstances change.
11
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Note
15. Segment information
The
table
below presents information about certain revenues and income from operations
used by the chief operating decision maker of the Company for the three months
and six months ended June 30, 2005 and 2004 (in thousands):
|
Revenues
|
Income
(loss)
|
|||||||||
|
Three
months ended
|
from
external
|
Intersegment
|
from
|
|||||||
|
June
30, 2005
|
customers
|
revenues
|
operations
|
|||||||
|
Agricultural
|
$
|
90,819
|
$
|
10,889
|
$
|
11,605
|
||||
|
Earthmoving/construction
|
35,721
|
6,129
|
6,370
|
|||||||
|
Consumer
|
8,169
|
507
|
701
|
|||||||
|
Reconciling
items (a)
|
0
|
0
|
(5,736
|
)
|
||||||
|
Consolidated
totals
|
$
|
134,709
|
$
|
17,525
|
$
|
12,940
|
(b)
|
|||
|
Three
months ended
|
||||||||||
|
June
30, 2004
|
||||||||||
|
Agricultural
|
$
|
79,826
|
$
|
11,911
|
$
|
12,950
|
||||
|
Earthmoving/construction
|
33,662
|
5,137
|
4,856
|
|||||||
|
Consumer
|
7,700
|
516
|
636
|
|||||||
|
Reconciling
items (a)
|
0
|
0
|
(5,771
|
)
|
||||||
|
Consolidated
totals
|
$
|
121,188
|
$
|
17,564
|
$
|
12,671
|
||||
|
Revenues
|
Income
(loss)
|
|||||||||
|
Six
months ended
|
from
external
|
Intersegment
|
from
|
|||||||
|
June
30, 2005
|
customers
|
revenues
|
operations
|
|||||||
|
Agricultural
|
$
|
180,278
|
$
|
26,587
|
$
|
25,273
|
||||
|
Earthmoving/construction
|
74,862
|
13,141
|
12,508
|
|||||||
|
Consumer
|
15,698
|
1,434
|
1,556
|
|||||||
|
Reconciling
items (a)
|
0
|
0
|
(12,272
|
)
|
||||||
|
Consolidated
totals
|
$
|
270,838
|
$
|
41,162
|
$
|
27,065
|
(c)
|
|||
|
Six
months ended
|
||||||||||
|
June
30, 2004
|
||||||||||
|
Agricultural
|
$
|
183,132
|
$
|
29,279
|
$
|
25,663
|
||||
|
Earthmoving/construction
|
87,051
|
13,853
|
8,825
|
|||||||
|
Consumer
|
17,981
|
1,755
|
1,522
|
|||||||
|
Reconciling
items (a)
|
0
|
0
|
(11,568
|
)
|
||||||
|
Consolidated
totals
|
$
|
288,164
|
$
|
44,887
|
$
|
24,442
|
||||
| (a) |
Represents
corporate expenses and depreciation and amortization expense related
to
property, plant and equipment carried at the corporate
level.
|
| (b) |
Income
(loss) from operations includes $1.3 million in idled assets depreciation
not reflected in 2004.
|
| (c) |
Income
(loss) from operations includes $2.7 million in idled assets depreciation
not reflected in 2004.
|
12
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Assets
by
segment were as follows (in thousands):
|
June
30,
|
December
31,
|
||||||
|
Total
assets
|
2005
|
2004
|
|||||
|
Agricultural segment
|
$
|
189,596
|
$
|
173,335
|
|||
|
Earthmoving/construction
segment
|
77,703
|
78,116
|
|||||
|
Consumer
segment
|
16,734
|
17,211
|
|||||
|
Reconciling
items (a)
|
69,987
|
85,504
|
|||||
|
Consolidated
totals
|
$
|
354,020
|
$
|
354,166
|
|||
| (a) |
Represents
property, plant and equipment, goodwill and other corporate
assets.
|
Note
16. Earnings per Share
Earnings
per share are as follows (amounts in thousands, except per share
data):
|
Three
months ended,
|
|||||||||||||||||||
|
June
30, 2005
|
June
30, 2004
|
||||||||||||||||||
|
Net
Income
|
Weighted average
shares
|
Per
share amount
|
Net
Income
|
Weighted
average shares
|
Per
share amount
|
||||||||||||||
|
Basic EPS
|
$
|
4,200
|
16,900
|
$
|
.25
|
$
|
5,643
|
17,379
|
$
|
.32
|
|||||||||
|
Effect
of stock options
|
0
|
207
|
0
|
57
|
|||||||||||||||
|
Effect
of convertible notes
|
1,614
|
8,079
|
0
|
0
|
|||||||||||||||
|
Diluted
EPS
|
$
|
5,814
|
25,186
|
$
|
.23
|
$
|
5,643
|
17,436
|
$
|
.32
|
|||||||||
|
Six
months ended,
|
|||||||||||||||||||
|
June
30, 2005
|
June
30, 2004
|
||||||||||||||||||
|
Net
Income
|
Weighted
average shares
|
Per
share amount
|
Net
Income
|
Weighted
average shares
|
Per
share amount
|
||||||||||||||
|
Basic EPS
|
$
|
15,401
|
16,628
|
$
|
.93
|
$
|
10,919
|
19,288
|
$
|
.57
|
|||||||||
|
Effect
of stock options
|
0
|
203
|
0
|
29
|
|||||||||||||||
|
Effect
of convertible notes
|
3,140
|
8,297
|
0
|
0
|
|||||||||||||||
|
Diluted
EPS
|
$
|
18,541
|
25,128
|
$
|
.74
|
$
|
10,919
|
19,317
|
$
|
.57
|
|||||||||
The
effect of stock options with exercise prices that were greater than the average
market price of the Company’s common shares have been excluded, as the effect
would have been antidilutive.
13
TITAN
INTERNATIONAL, INC.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Note
17. Comprehensive income
Comprehensive
income, which included net income of $4.2 million and the effect of foreign
currency translation adjustments of $(1.2) million, totaled $3.0 million for
the
second quarter of 2005, compared to $3.4 million in the second quarter of 2004.
Comprehensive income for the six months ended June 30, 2005 was $13.4 million,
including net income of $15.4 million and the effect of foreign currency
translations of $(2.0) million, compared to $8.5 million in 2004.
Note
18. New accounting standards
Statement
of Financial Accounting Standards Number 151
In
November 2004, SFAS No. 151, “Inventory Costs,” was issued. This statement
amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4,
“Inventory Pricing,” to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage).
In
addition, this statement requires that allocation of fixed production overheads
to the costs of conversion be based on the normal capacity of the production
facilities. This statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. 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 123(R)
In
December 2004, SFAS No. 123, “Share-Based Payment,” was revised. This revised
statement will require that the compensation cost relating to share-based
payment transactions be recognized in financial statements. Statement 123
(revised 2004) covers a wide range of share-based compensation arrangements
including share options, restricted share plans, performance-based awards,
share
appreciation rights, and employee share purchase plans. This statement is
effective for annual periods beginning after June 15, 2005. 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 154
In
May
2005, SFAS No. 154, “Accounting Changes and Error Corrections,” was issued. This
statement applies to all voluntary changes in accounting principle and requires
retrospective application to prior periods’ financial statements of changes in
accounting principle, unless this would be impracticable. This statement also
makes a distinction between “retrospective application” of an accounting
principle and the “restatement” of financial statements to reflect the
correction of an error. This statement is effective for accounting changes
and
corrections of errors made in fiscal years beginning after December 15, 2005.
The Company is evaluating the effect the adoption of this interpretation will
have on its financial position, cash flows and results of
operations.
14
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of
Operations
Forward-looking
statements
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 and
divestitures. 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)
fluctuations in currency translations, (iii) changes in the competitive
marketplace, including new products and pricing changes by the Company’s
competitors, (iv) availability and price of raw materials, (v) levels of
operating efficiencies, (vi) actions of domestic and foreign governments, (vii)
results of investments, 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.
Overview
Titan
International, Inc. and its subsidiaries (Titan or the Company) are leading
manufacturers of wheels, tires and assemblies for off-highway vehicles used
in
the agricultural, earthmoving/construction and consumer markets. Titan’s
earthmoving/construction market also includes products supplied to the U.S.
government, while the consumer market includes products for all-terrain vehicles
(ATVs) and recreational/utility trailer applications. Titan manufactures both
wheels and tires for the majority of these market applications, allowing the
Company to provide the value-added service of delivering complete wheel and
tire
assemblies. The Company offers a broad range of products that are manufactured
in relatively short production runs to meet the specifications of original
equipment manufacturers (OEMs) and/or the requirements of aftermarket
customers.
The
Company’s major OEM customers include large manufacturers of off-highway
equipment such as Deere & Company, CNH Global N.V., Caterpillar Inc., AGCO
Corporation, and Kubota Corporation, in addition to many other off-highway
equipment manufacturers. The Company distributes products to OEMs, independent
and OEM affiliated dealers, and through a network of distribution
facilities.
The
Company recorded sales of $134.7 million for the second quarter of 2005. Second
quarter 2004 sales were $121.2 million. The $13.5 million, or 11.1%, improvement
in sales was attributed to continued strong demand in the agricultural and
earthmoving/construction markets. During second quarter 2005, the Company
recognized a noncash charge of $7.2 million in connection with an exchange
of
$33.8 million principal amount of the Company’s outstanding 5.25% senior
convertible notes due 2009 for newly issued shares of common stock. See
“Convertible Note Conversion” on page 16. Titan’s net income including the debt
charge was $4.2 million for the quarter, compared to $5.6 million in 2004.
Basic
earnings per share including the debt charge was $.25 in 2005, compared to
$.32
in 2004.
15
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
Titan
Europe Sale
On
April
7, 2004, Titan Luxembourg Sarl, a wholly-owned European subsidiary of the
Company, sold 70% of the common stock of Titan Europe to the public on the
AIM
market in London. Titan Luxembourg is the largest single stockholder in Titan
Europe Plc, retaining a 29.3% interest on June 30, 2005. Titan Luxembourg’s
proceeds from the sale of Titan Europe Plc shares were approximately $62
million, before fees and expenses of approximately $2.8 million. The Company
recorded cash receipts of $50 million and a five-year note receivable of $9.2
million from the newly created European public company, Titan Europe
Plc.
In
the
first quarter of 2004, Titan recognized a $3.0 million goodwill impairment
on
the pending sale of Titan Europe in accordance with the Company’s goodwill
impairment policy. Net proceeds from the sale of Titan Europe were used to
reduce the Company’s debt balances and $15.0 million of the proceeds were used
to purchase the shares of Titan International common stock (approximately 4.9
million shares) held by Citicorp Venture Capital, Ltd.
The
Company is accounting for its interest in Titan Europe Plc as an equity
investment subsequent to the sale of a 70% interest in April 2004. Titan
recognized equity income on its investment in Titan Europe Plc of $0.8 million
and $2.0 million in the three and six months ended June 30, 2005. The carrying
value of the Company’s equity investment in Titan Europe Plc was $29.6 million
at June 30, 2005. Based on the AIM quoted price of Titan Europe Plc, the market
value of the Company’s shares was $41.4 million at June 30, 2005. Prior to the
sale in April 2004, Titan Europe was consolidated in the Company’s financial
statements.
Below
is
a summary of Titan Europe results included in the Company’s historical results
(in thousands):
|
Three
months ended
|
Six
months ended
|
||||||||||||
|
June
30,
|
June
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net sales
|
$
|
0.0
|
(a)
|
$
|
0.0
|
(a)
|
$
|
0.0
|
(a)
|
$
|
49.4
|
||
|
Gross
profit
|
0.0
|
(a)
|
0.0
|
(a)
|
0.0
|
(a)
|
8.3
|
||||||
|
Income
from operations
|
0.0
|
(a)
|
0.0
|
(a)
|
0.0
|
(a)
|
0.4
|
||||||
|
Equity
income from Titan Europe Plc
|
0.8
|
0.8
|
2.0
|
0.8
|
|||||||||
| (a) |
These
items are no longer included in the consolidated financial statements
due
to the April 2004 sale of Titan
Europe.
|
Convertible
Note Conversion
In
June
of 2005, Titan finalized a private transaction in which the Company issued
3,022,275 shares of common stock in exchange for the cancellation of $33.8
million principal amount of the Company’s outstanding 5.25% senior convertible
notes due 2009, as proposed to the Company by certain note holders. The Company
recognized a noncash charge of $7.2 million in connection with this exchange
in
accordance with Statement of Financial Accounting Standards (SFAS) No. 84,
“Induced Conversions of Convertible Debt.”
16
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
Recent
Developments
Agreement
to Purchase the Assets of Goodyear’s North American Farm Tire
Business
Titan
Tire Corporation, a subsidiary of the Company, entered into a definitive
agreement to purchase the assets of The Goodyear Tire & Rubber Company’s
North American farm tire business on February 28, 2005. The closing is subject
to government, regulatory and union approvals. The Hart-Scott-Rodino filings
were made with the Federal Trade Commission and the mandatory waiting period
has
expired with no further requests for information and the parties are free to
consummate the transaction. The completion of the acquisition is also subject
to
an agreement being reached with the United Steelworkers of America (USWA) for
the Goodyear facility in Freeport, Illinois. At the closing, Titan will purchase
the assets of Goodyear’s farm tire business for approximately $100 million. The
termination date of the agreement has been extended to September 1, 2005, and
the transaction is anticipated to close during the third quarter of
2005.
Titan
Tire Corporation received approval from the International leadership of the
USWA
to begin negotiations with USWA Local 745 in Freeport, Illinois, on July 26,
2005. A contract must be approved by the USWA membership in Freeport for the
sale to Titan to be finalized.
Critical
Accounting Policies
Preparation
of the financial statements and related disclosures in compliance with generally
accepted accounting principles accepted in the United States 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
assumptions that require difficult subjective judgments regarding many factors,
which, in and of themselves, could materially impact the financial statements
and disclosures. A future change in the estimates, assumptions or judgments
applied in determining the following matters, among others, could have a
material impact on future financial statements and disclosures.
Revenue
Recognition
The
Company records sales revenue 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 trends change, adjustments to the estimated provisions
would be necessary.
Inventories
Inventories
are valued at the lower of cost or market. Cost is determined using the last-in,
first-out (LIFO) method for approximately 48% of inventories and the first-in,
first-out (FIFO) method for approximately 52% of inventories. Market value
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.
17
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
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. The
Company had goodwill of $11.7 million at June 30, 2005. Significant assumptions
relating to future operations must be made when estimating future cash flows
in
analyzing goodwill for impairment. Should unforeseen events occur or operating
trends change significantly, impairment losses could occur.
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.
The Company had idled assets marketed for sale of $28.2 million at June 30,
2005. With the assistance of independent appraisals, the Company has concluded
that the fair market values of the machinery and equipment at these facilities
exceed their respective carrying values. Significant assumptions relating to
future operations must be made when estimating future cash flows. Should
unforeseen events occur or operating trends change significantly, impairment
losses could occur.
Retirement
Benefit Obligations
Pension
benefit obligations are based on various assumptions used by third-party
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. The Company
has two frozen defined benefit pension plans and one defined benefit plan that
purchased a final annuity settlement in 2002. During the first half of 2005,
the
Company contributed $1.7 million to its frozen pension plans. The Company
expects to contribute approximately $2.1 million to these frozen defined benefit
pension plans during the remainder of 2005. For more information concerning
these costs and obligations, see the discussion of the “Pensions” and Note 22 to
the Company’s financial statements on Form 10-K for the fiscal year ended
December 31, 2004.
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.
The
Company had an unconsolidated equity investment in Titan Europe Plc of $29.6
million at June 30, 2005. Titan Europe Plc is publicly traded on the AIM market
in London. Based on the AIM quoted price of Titan Europe Plc, the market value
of the Company’s shares was $41.4 million at June 30, 2005. Should unforeseen
events occur or investment trends change significantly, impairment losses could
occur.
18
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
Results
of Operations
The
following table provides highlights for the three and six months ended June
30,
2005, compared to 2004 (amounts in millions, except per share
data):
|
Three
months ended
|
Six
months ended
|
||||||||||||
|
June
30,
|
June
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net
sales
|
$
|
134.7
|
$
|
121.2
|
$
|
270.8
|
$
|
288.2
|
|||||
|
Gross
profit
|
22.5
|
21.3
|
46.6
|
48.6
|
|||||||||
|
as
a percent of net sales
|
16.7
|
%
|
17.6
|
%
|
17.2
|
%
|
16.9
|
%
|
|||||
|
Income
from operations
|
$
|
12.9
|
$
|
12.7
|
$
|
27.1
|
$
|
24.4
|
|||||
|
Noncash
convertible debt conversion charge
|
7.2
|
0.0
|
7.2
|
0.0
|
|||||||||
|
Net
income
|
4.2
|
5.6
|
15.4
|
10.9
|
|||||||||
|
Basic
earnings per share
|
$
|
.25
|
$
|
.32
|
$
|
.93
|
$
|
.57
|
|||||
|
Diluted
earnings per share
|
.23
|
.32
|
.74
|
.57
|
|||||||||
Net
Sales
Net
sales
for the quarter ended June 30, 2005, were $134.7 million, compared to 2004
second quarter net sales of $121.2 million. The $13.5 million, or 11.1%,
improvement in sales was attributed to continued strong demand in the
agricultural and earthmoving/construction markets. The agricultural market
was
particularly strong with an improvement of $11.0 million. Net sales for the
six
months ended June 30, 2005, were $270.8 million, compared to 2004 net sales
of
$288.2 million. Net sales for the six months ended June 30, 2004, excluding
those of Titan Europe, which was sold in April 2004, were $238.7 million.
Cost
of Sales
Cost
of
sales were $112.2 and $224.3 million for the second quarter and for the six
months ended June 30, 2005, as compared to $99.9 and $239.6 million in 2004.
Gross profit for the second quarter of 2005 was $22.5 million or 16.7% of net
sales, compared to $21.3 million or 17.6% of net sales for the second quarter
of
2004. The lower margin in the quarter was primarily attributed to the Company’s
ever-changing product mix. Gross profit for the six months ended June 30, 2005,
was $46.6 million or 17.2% of net sales, compared to $48.6 million or 16.9%
of
net sales for 2004.
Administrative
Expenses
Selling,
general and administrative (SG&A) and research and development (R&D)
expenses for the second quarter of 2005 were $8.2 million or 6.1% of net sales,
compared to $8.6 million or 7.1% of net sales for 2004. Expenses for SG&A
and R&D for the six months ended June 30, 2005, were $16.8 million or 6.2%
of net sales, compared to $21.2 million or 7.3% of net sales in 2004. The
Company continues its initiative to control administrative
costs.
19
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
Idled
Assets Marketed for Sale
The
Company’s income from operations has been affected by the depreciation
associated with the idled assets marketed for sale. The idled assets balance
at
June 30, 2005, was $28.2 million. Included in the current balance are land
and
buildings at the Company’s idle facilities in Walcott, Iowa, and Greenwood,
South Carolina, totaling $4.5 million. Machinery and equipment located at the
Company’s idle facilities in Brownsville, Texas, and Natchez, Mississippi,
totaling $23.7 million are also included in idled assets at June 30, 2005.
Depreciation related to the idled assets totaled $1.3 million and $2.7 million
for the quarter and six months ended June 30, 2005, and Titan will continue
to
depreciate these idled assets while the marketed for sale process
continues.
Income
from Operations
Income
from operations for the second quarter of 2005 was $12.9 million or 9.6% of
net
sales, compared to $12.7 million or 10.5% in 2004. Income from operations for
the six months ended June 30, 2005, was $27.1 million or 10.0% of net sales,
compared to $24.4 million or 8.5% in 2004. Titan recognized a $3.0 million
goodwill impairment in the first quarter of 2004 on the pending sale of Titan
Europe in accordance with the Company’s goodwill impairment policy. In
comparison, the 2005 income from operations was negatively affected by idled
assets depreciation of $1.3 and $2.7 million for three and six months ended
June
30, 2005.
Interest
Expense
Interest
expense was $2.4 million and $4.9 million for the second quarter and for the
six
months ended June 30, 2005, respectively, compared to $4.6 million and $9.8
million in 2004. The reduced interest expense was due to lower average interest
rates and debt balances. The primary transactions that reduced interest expense
in the first half of 2005 were the reduction of debt balances from the proceeds
of the April 2004 Titan Europe sale and the July 2004 sale of 5.25% senior
unsecured convertible notes of $115 million. The proceeds of the convertible
notes were applied toward the redemption of all the Company’s 8.75% senior
subordinated notes of approximately $137 million. In June of 2005, convertible
notes in the principal amount of $33.8 million were cancelled in exchange for
the issuance of shares of common stock.
Noncash
Convertible Debt Conversion Charge
In
June
of 2005, Titan finalized a private transaction in which the Company issued
3,022,275 shares of common stock in exchange for the cancellation of $33.8
million principal amount of the Company’s outstanding 5.25% senior convertible
notes due 2009, as proposed to the Company by certain note holders. The Company
recognized a noncash charge of $7.2 million in connection with this exchange
in
accordance with Statement of Financial Accounting Standards (SFAS) No. 84,
“Induced Conversions of Convertible Debt.”
Income
Taxes
The
Company recorded income tax benefit of $0.4 million and income tax expense
of
$0.8 million for the second quarter and six months ended June 30, 2005, as
compared to income tax expense of $3.3 and $4.7 million in 2004. The
Company’s income tax expense differs from the amount of income tax determined by
applying the statutory U.S. federal income tax rate to pre-tax income primarily
as a result of the valuation allowance recorded against the Company’s domestic
net deferred tax asset balance. As a result of previous losses, the Company
had
reserved its net deferred tax asset position, consistent with the Company’s
accounting policies.
20
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
Net
Income
Net
income for the second quarter and for the six months ended June 30, 2005, was
$4.2 and $15.4 million, respectively, compared to $5.6 and $10.9 million in
2004. Basic earnings per share was $.25 and $.93 for the second quarter and
for
the six months ended June 30, 2005, compared to $.32 and $.57 in 2004. Diluted
earnings per share was $.23 and $.74 for the second quarter and for the six
months ended June 30, 2005, compared to $.32 and $.57 in 2004. The decreased
net
income and earnings per share were primarily a result of the $7.2 million
noncash convertible debt conversion charge recorded in June 2005.
Agricultural
Segment Results
Net
sales
in the agricultural market were $90.8 and $180.3 million for the second quarter
and the six months ended June 30, 2005, as compared to $79.8 and $183.1 million
in 2004. Excluding Titan Europe sales, net sales in the agricultural market
for
the six months ended June 30, 2004, were $158.9 million. Agricultural market
net
sales increased as a result of continued increased demand from the Company’s
customers. Income from operations in the agricultural market was $11.6 and
$25.3
million for the second quarter and the six months ended June 30, 2005, as
compared to $13.0 and $25.7 million in 2004. The margins realized in the quarter
and year to date results continue to be affected by the changing product mix.
Earthmoving/Construction
Segment Results
The
Company’s earthmoving/construction market net sales were $35.7 and $74.9 million
for the second quarter and the six months ended June 30, 2005, as compared
to
$33.7 and $87.1 million for 2004. Excluding Titan Europe sales, net sales in
the
earthmoving/construction market for the six months ended June 30, 2004, were
$63.6 million. Earthmoving/construction market net sales increased as a result
of an increase in demand from customers. Income from operations in the
earthmoving/construction market was $6.4 and $12.5 million for the second
quarter and the six months ended June 30, 2005, versus $4.9 and $8.8 million
in
2004. The increase in income from operations in the earthmoving/construction
market was due to higher sales and efficiencies gained by operating at higher
production levels.
Consumer
Segment Results
Consumer
market net sales were $8.2 and $15.7 million for the second quarter and the
six
months ended June 30, 2005, as compared to $7.7 and $18.0 million for 2004.
Excluding Titan Europe sales, net sales in the consumer market for the six
months ended June 30, 2004, were $16.3 million. Consumer market income from
operations was $0.7 and $1.6 million for the second quarter and the six months
ended June 30, 2005, as compared to $0.6 and $1.5 million in 2004. These results
reflect a relatively stable consumer market for the Company sales and income
from operations regarding our consumer products.
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 $5.7 and $12.3 million for the second
quarter and the six months ended June 30, 2005, respectively, as compared to
$5.8 and $11.6 million for comparable periods in 2004.
21
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
Foreign
Subsidiary Sales
In
April
2004, the foreign subsidiary, Titan Europe, was sold and is no longer
consolidated with the Company. Therefore, there were no foreign subsidiary
sales
for the first six months of 2005. Net sales at foreign subsidiaries were $49.4
million for the first six months of 2004.
Titan
Europe Segment Results
The
following is a summary of the Titan Europe results included in the historical
results of the Company for the six months ended June 30, 2004 (in
millions):
|
2004
|
Agricultural
|
Earthmoving/
Construction
|
Consumer
|
Reconciling
Items
|
Consolidated
Totals
|
||||||||||||
|
Revenues from external Customers
|
$
|
24.3
|
$
|
23.4
|
$
|
1.7
|
$
|
0.0
|
$
|
49.4
|
|||||||
|
Income (loss) from operations
|
0.8
|
0.5
|
(0.1
|
)
|
(0.8
|
)
|
(a) |
0.4
|
|||||||||
| (a) |
Represents
corporate expenses.
|
Market
Risk Sensitive Instruments
The
Company’s risks related to foreign currencies, commodity prices and interest
rates are consistent with those for 2004. For more information, see the “Market
Risk Sensitive Instruments” discussion in the Company’s Form 10-K for the fiscal
year ended December 31, 2004.
Liquidity
and Capital Resources
Cash
Flows
As
of
June 30, 2005, the Company had $0.5 million of unrestricted cash deposited
within various bank accounts. The unrestricted cash balance decreased by $0.6
million from December 31, 2004, due to the cash flow items discussed in the
following paragraphs.
Operating
cash flows:
In the
first six months of 2005, positive cash flows from operating activities of
$26.5
million resulted primarily from net income of $15.4 million, depreciation and
amortization of $10.9 million, a noncash convertible debt conversion charge
of
$7.2 million, and inventory decreases of $6.0 million, offset by accounts
receivable increases of $17.2 million. In comparison, in the first six months
of
2004, positive cash flows from operating activities of $20.7 million resulted
primarily from net income of $10.9 million and depreciation and amortization
of
$11.3 million. The increase in receivables in both years was primarily due
to a
seasonal increase in sales volume in the first and second quarters when compared
to the fourth quarter.
Investing
cash flows:
The
Company invested $1.9 million in capital expenditures in the first six months
of
2005, compared to $3.4 million in the first six months of 2004. The expenditures
represent various equipment purchases and improvements to enhance production
capabilities. The Company estimates that its total capital expenditures for
2005
could range up to $8 million not including the possible Goodyear farm tire
acquisition or the possible purchase of the Brownsville, Texas, building. In
the
first six months of 2004, the Company received net proceeds of $50.0 million
on
the sale of Titan Europe and recorded a $9.2 million note receivable from the
newly created public company.
22
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
Financing
cash flows:
In the
six months ended June 30, 2005, cash of $25.2 million was used for financing
activities. This use of cash was primarily the result of a net revolver payment
of $24.9 million. In comparison, in the first six months of 2004, cash of $43.6
million was used for financing activities, primarily the result of net long-term
debt payment of $28.3 million and repurchase of common stock of $15.0
million.
Debt
Covenants
The
Company’s revolving credit facility contains various covenants and restrictions.
The financial covenants in this agreement require that the (i) Company’s minimum
book value of accounts receivable and inventory be equal to or greater than
$75
million, (ii) collateral coverage be equal to or greater than 1.50 times the
outstanding revolver balance, and (iii) if the 30-day average of the outstanding
revolver balance exceeds $75 million, the fixed charge coverage ratio be equal
to or greater than a 1.0 to 1.0 ratio. 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, (iii)
limitations on investments, dispositions of assets and guarantees of
indebtedness, and (iv) other customary affirmative and negative covenants.
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.
The
Company is in compliance with these covenants and restrictions as of June 30,
2005. The Company’s adjusted minimum book value of accounts receivable and
inventory is required to be equal to or greater than $75 million and the Company
computed it to be $131.8 million at June 30, 2005. The adjusted collateral
coverage is required to be equal to or greater than 1.50 times the outstanding
revolver balance and was calculated to be 7.00 times this balance at June 30,
2005. The fixed charge coverage ratio must be equal to or greater than a 1.0
to
1.0 ratio if the 30-day average of the outstanding revolver balance exceeds
$75
million. This covenant did not apply for the quarter ended June 30, 2005. The
outstanding revolver balance was $30.4 million at June 30, 2005, including
borrowings of $19.5 million and letters of credit of $10.9 million.
Other
Issues
The
Company’s business is subject to seasonal variations in sales that affect
inventory levels and accounts receivable balances. Historically, the Company
tends to experience higher sales demand in the first and second
quarters.
Liquidity
Outlook
At
June
30, 2005, the Company had unrestricted cash and cash equivalents of $0.5 million
and $69.6 million of unused availability under the terms of its revolving credit
facility. The availability under the Company’s $100 million revolving credit
facility is reduced by $19.5 million of borrowings and $10.9 million for
outstanding letters of credit. At June 30, 2005, the Company had $28.2 million
of idled assets marketed for sale. The Company has scheduled debt principal
payments amounting to $0.1 million due for the remainder of 2005. Titan expects
to contribute approximately $2.1 million to its frozen defined benefit pension
plans during the remainder of 2005.
23
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
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. 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 difficult to secure additional
funding in order to meet working capital requirements.
Titan
Tire Corporation, a subsidiary of the Company, entered into a definitive
agreement to purchase the assets of The Goodyear Tire & Rubber Company’s
North American farm tire business on February 28, 2005. The closing is subject
to government, regulatory and union approvals. At the closing, Titan will
purchase the assets of Goodyear’s farm tire business for approximately $100
million. The termination date of the agreement has been extended to September
1,
2005, and the transaction is anticipated to close during the third quarter
of
2005. Titan plans to increase its borrowing capacity under its revolving credit
facility from up to $100 million to up to $200 million to assist in funding
the
Goodyear farm tire transaction.
Market
Conditions and Outlook
In
2004,
the Company benefited from increased demand for its products. This demand was
driven by the increase in production of new agricultural and
earthmoving/construction vehicles that use the Company’s products. This
increased demand has continued into the first half of 2005. Many of the
Company’s customers continue to have positive outlooks for the remainder of
2005. In 2004, the Company was able to offset higher raw material costs with
certain price increases. During the first half of 2005, the Company continued
to
monitor raw material costs and associated product profit margins. Higher sales
levels along with facility consolidations have allowed Titan to manufacture
its
products in a more efficient operating environment. Given these facts, the
Company is optimistic that it will continue to show improved results as compared
to the last several years. However, if the increased demand seen in 2004 and
the
first half of 2005 subsides, the Company’s operating results may deteriorate.
Many of Titan’s overhead expenses are fixed, therefore seasonal trends may cause
fluctuations in quarterly profit margins and affect the financial condition
of
the Company.
Agricultural
Market Outlook
Agricultural
market sales are expected to remain at an elevated level through 2005. If the
Goodyear farm tire transaction is consummated in the third quarter of 2005,
Titan expects its agricultural market sales to increase substantially going
forward. The healthy farm economy has supported an upturn in the sale of
agricultural equipment. Farm income has remained high as a result of bumper
crops and increasing use of grain-based ethanol and soybean-based biodiesel
fuel. Many variables, including weather, export markets, and future government
policies and payments can greatly influence the overall health of the
agricultural economy.
Earthmoving/Construction
Market Outlook
Sales
for
the earthmoving/construction market are expected to continue their strong trend
through 2005. Replacement demand from rental firms and contractors is expected
to continue. Mining sales are expected to be strong as the result of high
commodity prices. Products supplied to the U.S. government, included in this
segment, are also expected to remain strong. The earthmoving/construction
segment is affected by many variables including road construction,
infrastructure and housing starts. Many of these items are very sensitive to
interest rate fluctuations.
24
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
Consumer
Market Outlook
The
consumer market may continue to be stable to slightly lower for the remainder
of
2005 as compared to 2004. The all-terrain vehicle (ATV) wheel and tire market
is
expected to offer future growth opportunities for Titan. Looking forward, Titan
is exploring the option of re-entering the high-end lawn and garden and golf
markets. Many factors affect the consumer market including weather, competitive
pricing, energy prices and consumer attitude.
New
Accounting Standards
Statement
of Financial Accounting Standards Number 151
In
November 2004, SFAS No. 151, “Inventory Costs,” was issued. This statement
amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4,
“Inventory Pricing,” to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage).
In
addition, this statement requires that allocation of fixed production overheads
to the costs of conversion be based on the normal capacity of the production
facilities. This statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. 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 123(R)
In
December 2004, SFAS No. 123, “Share-Based Payment,” was revised. This revised
statement will require that the compensation cost relating to share-based
payment transactions be recognized in financial statements. Statement 123
(revised 2004) covers a wide range of share-based compensation arrangements
including share options, restricted share plans, performance-based awards,
share
appreciation rights, and employee share purchase plans. This statement is
effective for annual periods beginning after June 15, 2005. 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 154
In
May
2005, SFAS No. 154, “Accounting Changes and Error Corrections,” was issued. This
statement applies to all voluntary changes in accounting principle and requires
retrospective application to prior periods’ financial statements of changes in
accounting principle, unless this would be impracticable. This statement also
makes a distinction between “retrospective application” of an accounting
principle and the “restatement” of financial statements to reflect the
correction of an error. This statement is effective for accounting changes
and
corrections of errors made in fiscal years beginning after December 15, 2005.
The Company is evaluating the effect the adoption of this interpretation will
have on its financial position, cash flows and results of
operations.
25
TITAN
INTERNATIONAL, INC.
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
Pensions
The
Company has two frozen defined benefit pension plans and one defined benefit
plan that purchased a final annuity settlement in 2002. These plans are
described in Note 22 of the Company’s Notes to Consolidated Financial Statements
in the 2004 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. During
the six months ended June 30, 2005, the Company contributed $1.7 million to
the
frozen defined benefit pension plans. The Company expects to contribute
approximately $2.1 million to these frozen defined benefit pension plans during
the remainder of 2005.
26
TITAN
INTERNATIONAL, INC.
PART
I. FINANCIAL INFORMATION
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
See
the
Company’s 2004 Annual Report filed on Form 10-K (Item 7A). There has been no
material change in this information.
Item
4. Controls and Procedures
Evaluation
of Disclosure 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 based on an evaluation of the effectiveness of disclosure
controls and procedures.
Changes
in Internal Controls
There
were no material 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.
27
TITAN
INTERNATIONAL, INC.
PART
II. OTHER INFORMATION
Item
1.
Legal Proceedings
The
Dyneer appeal was denied in June 2005. The Company has continued its appeal
process and asked for reconsideration and will continue with available legal
remedies.
As
with
all legal proceedings it is difficult to predict legal claims and the Company
cannot anticipate or predict the material adverse effect on its operations,
cash
flows or financial condition as a result of efforts to comply with or its
liabilities pertaining to legal judgments.
Item
4.
Submission of Matters to a Vote of Security Holders
The
Company held its Annual Meeting of Stockholders on May 19, 2005, for the
purposes of electing three directors to serve for three-year terms, approving
the Titan International, Inc. 2005 Equity Incentive Plan and ratifying the
appointment of the independent registered public accounting firm.
The
nominees for directors as listed in the proxy statement were elected with the
following vote:
|
Shares
|
Shares
|
||||||
|
Voted
For
|
Withheld
|
||||||
|
Richard
M. Cashin Jr.
|
13,906,019
|
802,384
|
|||||
|
Albert
J. Febbo
|
13,905,793
|
802,610
|
|||||
|
Mitchell
I. Quain
|
13,906,467
|
801,936
|
|||||
The
Titan
International, Inc. 2005 Equity Incentive Plan was approved by the following
vote:
|
Shares
|
Shares
|
Shares
|
Broker
|
|||||||
|
Voted
For
|
Against
|
Abstaining
|
Non
Votes
|
|||||||
|
8,995,103
|
1,299,772
|
7,500
|
4,406,028
|
|||||||
The
appointment of PricewaterhouseCoopers LLP as the independent registered public
accounting firm was ratified by the following vote:
|
Shares
|
Shares
|
Shares
|
|||||
|
Voted
For
|
Against
|
Abstaining
|
|||||
|
14,679,724
|
26,482
|
2,197
|
|||||
28
TITAN
INTERNATIONAL, INC.
PART
II. OTHER INFORMATION
Item
6.
Exhibits
|
10
|
First
amendment to asset purchase agreement dated as of February 28, 2005,
by
and among The Goodyear Tire & Rubber Company, Goodyear Canada Inc.,
Goodyear Servicios Comerciales, S. de R.L. de C.V., and The
Kelly-Springfield Tire Corporation and Titan Tire Corporation dated
as of
June 29, 2005. (Incorporated herein by reference to Exhibit 10 to
the
Company’s Current Report on Form 8-K filed on July 1,
2005.)
|
| 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
|
29
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
27, 2005
|
By:
|
/s/
MAURICE M. TAYLOR JR.
|
|
Maurice
M. Taylor Jr.
|
|||
|
Chairman
of the Board of Directors 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)
|
30