-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AvM3T+LcAyis/60PhGTdlWMF6QB3w7cGnW7sdVT17Yw/CDE6teOZhjzaSak8lKTY 5e19tEPRAAuKCRt7zDdMBA== 0000950124-02-001674.txt : 20020510 0000950124-02-001674.hdr.sgml : 20020510 ACCESSION NUMBER: 0000950124-02-001674 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TITAN INTERNATIONAL INC CENTRAL INDEX KEY: 0000899751 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 363228472 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12936 FILM NUMBER: 02641423 BUSINESS ADDRESS: STREET 1: 2701 SPRUCE ST CITY: QUINCY STATE: IL ZIP: 62301 BUSINESS PHONE: 2172286011 MAIL ADDRESS: STREET 1: 2701 SPRUCE ST CITY: QUINCY STATE: IL ZIP: 62301 FORMER COMPANY: FORMER CONFORMED NAME: TITAN WHEEL INTERNATIONAL INC DATE OF NAME CHANGE: 19930403 10-Q 1 k69448e10-q.txt FORM 10-Q FOR QUARTER ENDED MARCH 31, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTERLY PERIOD ENDED: MARCH 31, 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 APRIL 30, 2002 ----- --------------------- COMMON STOCK, NO PAR VALUE PER SHARE 20,769,018 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 Months Ended March 31, 2002 and 2001 1 Consolidated Condensed Balance Sheets as of March 31, 2002, and December 31, 2001 2 Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001 3 Notes to Consolidated Condensed Financial Statements 4-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-15 Part II. Other Information and Signature 16 PART I. FINANCIAL INFORMATION Item 1. Financial Statements TITAN INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (Amounts in thousands, except earnings per share data)
THREE MONTHS ENDED MARCH 31, 2002 2001 ---- ---- Net sales $ 123,716 $ 136,047 Cost of sales 111,577 120,599 --------- --------- Gross profit 12,139 15,448 Selling, general & administrative expenses 10,298 10,822 Research and development expenses 786 801 --------- --------- Income from operations 1,055 3,825 Interest expense 5,203 5,639 Gain on sale of assets 0 (1,619) Other income (328) (633) --------- --------- (Loss) income before income taxes (3,820) 438 (Benefit) provision for income taxes (955) 210 --------- --------- Net (loss) income $ (2,865) $ 228 ========= ========= (Loss) earnings per share: - -------------------------- Basic $ (.14) $ .01 Diluted $ (.14) $ .01 Average shares outstanding: - --------------------------- Basic 20,727 20,625 Diluted 20,727 20,625
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)
MARCH 31, DECEMBER 31, 2002 2001 --------- ------------ ASSETS Current assets Cash and cash equivalents $ 8,616 $ 9,214 Accounts receivable (net of allowance of $3,664 and $3,523, respectively) 97,894 78,144 Inventories 104,011 116,801 Deferred income taxes 21,175 21,175 Prepaid and other current assets 37,049 37,389 ----------- ----------- Total current assets 268,745 262,723 Property, plant and equipment, net 198,129 205,047 Restricted cash deposits 33,775 34,661 Other assets 48,638 49,538 Goodwill, net 16,814 16,985 ----------- ----------- Total assets $ 566,101 $ 568,954 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term debt (including current portion of long-term debt) $ 5,102 $ 4,304 Accounts payable 50,992 54,658 Other current liabilities 27,185 23,077 ----------- ----------- Total current liabilities 83,279 82,039 Deferred income taxes 24,161 24,161 Other long-term liabilities 19,736 20,225 Long-term debt 256,865 256,622 ----------- ----------- Total liabilities 384,041 383,047 ----------- ----------- Stockholders' equity Common stock (no par, 60,000,000 shares authorized; 27,555,081 issued) 27 27 Additional paid-in capital 211,592 211,905 Retained earnings 81,029 83,998 Treasury stock (at cost: 6,828,086 and 6,864,947 shares, respectively) (90,780) (91,270) Accumulated other comprehensive loss (19,808) (18,753) ---------- ---------- Total stockholders' equity 182,060 185,907 ----------- ----------- Total liabilities and stockholders' equity $ 566,101 $ 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)
THREE MONTHS ENDED MARCH 31, 2002 2001 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (2,865) $ 228 Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities: Depreciation and amortization 8,877 9,486 Gain on sale of assets 0 (1,619) (Increase) decrease in current assets: Accounts receivable (20,213) (21,202) Inventories 12,216 (576) Prepaid and other current assets 812 (1,063) Increase (decrease) in current liabilities: Accounts payable (3,109) (1,300) Other current liabilities 4,305 (1,096) Other, net (268) 789 ---------- ---------- Net cash used for operating activities (245) (16,353) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, net (2,331) (5,217) Other 29 8 ---------- ---------- Net cash used for investing activities (2,302) (5,209) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 0 1,669 Payment of debt (134) (121) Proceeds from credit facility, net (expired December 2001) 0 25,000 Proceeds from revolving loan agreement, net 1,500 0 Decrease in restricted cash deposits 886 0 Repurchase of common stock 0 (80) Dividends paid (104) (309) Other, net 177 (194) ---------- ---------- Net cash provided by financing activities 2,325 25,965 Effect of exchange rate changes on cash (376) (329) Net (decrease) increase in cash and cash equivalents (598) 4,074 Cash and cash equivalents at beginning of period 9,214 5,668 ---------- ---------- Cash and cash equivalents at end of period $ 8,616 $ 9,742 ========== ==========
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 March 31, 2002, the results of operations for the three months ended March 31, 2002 and 2001, and cash flows for the three months ended March 31, 2002 and 2001. Except for the discontinuance of goodwill amortization as required by Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), 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-Qs and are not a presentation in accordance with generally accepted accounting principles. For additional information regarding the Company's financial condition, refer to the footnotes accompanying the financial statements as of and for the year ended December 31, 2001, filed in conjunction with 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. INVENTORIES Inventories consisted of the following (in thousands):
March 31, December 31, 2002 2001 ----------- ------------ Raw materials $ 28,793 $ 34,771 Work-in-process 13,734 11,549 Finished goods 57,154 67,647 ----------- ----------- 99,681 113,967 LIFO reserve 4,330 2,834 ----------- ----------- $ 104,011 $ 116,801 =========== ===========
The LIFO reserve changed primarily as a result of price fluctuations within the composition of LIFO inventory layers. 4 TITAN INTERNATIONAL, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) C. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net reflects accumulated depreciation of $197.0 million and $189.6 million at March 31, 2002, and December 31, 2001, respectively. D. GOODWILL Goodwill, net reflects accumulated amortization of $5.5 million at March 31, 2002, and December 31, 2001. No goodwill amortization has been recorded in 2002, pursuant to the adoption of SFAS 142 as described in note H. The table below provides comparative net earnings and earnings per share had the non-amortization provisions of SFAS 142 been adopted for all periods presented:
Three months ended March 31, 2002 2001 ------------ ----------- Net (loss) earnings (in thousands) ------------------- As reported $ (2,865) $ 228 Goodwill amortization, net of tax 0 102 ----------- ----------- Adjusted net (loss) earnings $ (2,865) $ 330 =========== =========== Basic & diluted (loss) earnings per share ----------------------------------------- As reported $ (.14) $ .01 Goodwill amortization, net of tax 0 .01 ------- ------ Adjusted net (loss) earnings per share $ (.14) $ .02 ======= ======
5 TITAN INTERNATIONAL, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) E. LONG-TERM DEBT Long-term debt consisted of the following (in thousands):
March 31, December 31, 2002 2001 ----------- ----------- Senior subordinated notes $ 136,750 $ 136,750 Term loan 99,000 99,000 Revolving loan agreement 1,500 0 Industrial revenue bonds and other 24,717 25,176 ----------- ----------- 261,967 260,926 Less: Amounts due within one year 5,102 4,304 ----------- ----------- $ 256,865 $ 256,622 =========== ===========
Aggregate maturities of long-term debt at March 31, 2001, are as follows (in thousands): April 1 -- December 31, 2002 $ 4,148 2003 9,788 2004 12,167 2005 15,452 2006 72,545 Thereafter 147,867 ----------- $ 261,967 ===========
F. COMPREHENSIVE LOSS Comprehensive loss, which includes net loss of $(2.9) million and the effect of foreign currency translation adjustments of $(1.0) million, totaled $(3.9) million for the first quarter of 2002, compared to $(2.9) million in the first quarter of 2001. 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 months ended March 31, 2002 and 2001 (in thousands):
Revenues from external Intersegment Income from 2002 customers revenues operations ---- -------------- --------------- ------------ Agricultural $ 75,245 $ 43,025 $ 5,105 Earthmoving/construction 36,934 14,559 1,886 Consumer 11,537 6,387 481 Reconciling items (a) 0 0 (6,417) ---------- ---------- ----------- Consolidated totals $ 123,716 $ 63,971 $ 1,055 ========== ========== ========== 2001 ---- Agricultural $ 76,828 $ 45,355 $ 7,069 Earthmoving/construction 42,999 17,981 3,556 Consumer 16,220 7,590 90 Reconciling items (a) 0 0 (6,890) ---------- ---------- ----------- Consolidated totals $ 136,047 $ 70,926 $ 3,825 ========== ========== ==========
(a) Represents corporate expenses and depreciation and amortization expense related to property, plant and equipment and goodwill (for 2001 only) carried at the corporate level. 7 TITAN INTERNATIONAL, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) G. SEGMENT INFORMATION (CONTINUED)
March 31, December 31, Total assets 2002 2001 ------------ ---------- ---------- Agricultural $ 267,067 $ 252,213 Earthmoving/construction 138,746 151,823 Consumer 40,304 46,783 Reconciling items (b) 119,984 118,135 ---------- ---------- Consolidated totals $ 566,101 $ 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 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 plans to analyze the fair value of the units using the discounted cash flow method. The Company is in the process of conducting transitional tests of goodwill impairment and is evaluating the effect Statement 142 will have on its financial position, cash flows, and results of operations. 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 in the first quarter of 2002 and has had no material effect on the Company's financial position, cash flows or results of operations at this time. 8 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICIES 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. 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 58% 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. 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. 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. RESULTS OF OPERATIONS Net Sales Net sales for the quarter ended March 31, 2002, were $123.7 million, compared to 2001 first quarter net sales of $136.0 million. Net sales decreased primarily due to reduced production by the Company's major customers and the continued negative economic global conditions in the agricultural, earthmoving/construction and consumer markets. 9 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) Cost of Sales and Gross Profit Cost of sales was $111.6 million for the first quarter of 2002, compared to $120.6 million in 2001. Gross profit for the first quarter of 2002 was $12.1 million or 9.8% of net sales, compared to $15.4 million or 11.4% of net sales for the first quarter of 2001. Gross profit, as a percentage of net sales, was negatively impacted by product mix changes and inefficiencies related to operating at a lower capacity utilization than in the previous year. Administrative Expenses Selling, general and administrative (SG&A) and research and development (R&D) expenses for the first quarter of 2002 were $11.1 million or 9.0% of net sales, compared to $11.6 million or 8.5% of net sales for 2001. The SG&A and R&D percentage was higher due to the reduced sales volume in the first quarter of 2002 as compared to the first quarter of 2001. However, the Company's efforts to streamline total SG&A expenditures are taking hold. Operating Results and Other Income from operations for the first quarter of 2002 was $1.1 million or 0.9% of net sales, compared to income from operations of $3.8 million or 2.8% in 2001. Operating results were primarily impacted by the reduced sales volume. Net interest expense was $5.2 million for the first quarter of 2002, compared to $5.6 million in 2001. The decreased interest expense for the first quarter of 2002 was primarily due to lower interest rates as compared to the first quarter of 2001. 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. The Company's effective tax benefit on the net loss for the first quarter of 2002 was 25%, compared to 48% effective tax rate on net earnings for the first quarter of 2001. The lower rate is primarily due to the inability of the Company to realize an income tax benefit from certain nondeductible items, as well as the amount of income generated in various state and foreign jurisdictions. 10 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) Net (Loss) Income Net loss for the first quarter of 2002 was $(2.9) million compared to net income of $0.2 million in 2001. Basic and diluted loss per share were $(.14) for the first quarter of 2002 compared to earnings per share of $.01 in 2001. Net income and earnings per share decreased primarily due to reduced sales volume and the $1.6 million pretax gain on sale of assets recorded in the first quarter of 2001. Agricultural Segment Results Net sales in the agricultural market were $75.2 million for the first quarter of 2002 as compared to $76.8 million in 2001. Income from operations in the agricultural market was $5.1 million for the first quarter of 2002 as compared to $7.1 million for the first quarter of 2001. The decrease in income from operations in the agricultural market was primarily attributed to a less profitable product mix. Earthmoving/Construction Segment Results The Company's earthmoving/construction market net sales were $36.9 million for the first quarter of 2002 as compared to $43.0 million for the first quarter of 2001. Income from operations in the earthmoving/construction market was $1.9 million for the first quarter of 2002 versus $3.6 million in 2001. The decrease in income from operations in the earthmoving/construction market was primarily due to operating inefficiencies resulting from a significant decrease in the sales volume. Consumer Segment Results Consumer market net sales were $11.5 million for the first quarter of 2002 as compared to $16.2 million for the first quarter of 2001. Consumer market income from operations was $0.5 million for the first quarter of 2002 as compared to $0.1 million for 2001. Although consumer market net sales decreased, income from operations increased as the result of a more profitable product mix. Corporate Expenses Income from operations on a segment basis does not include corporate expenses and depreciation and amortization expense related to property, plant and equipment carried at the corporate level totaling $6.4 million for the first quarter of 2002 as compared to $6.9 million for the first quarter of 2001. 11 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Cash Flows In the first quarter of 2002, negative cash flows from operating activities of $0.2 million resulted primarily from a $20.2 million increase in accounts receivable, offset by inventory decreases of $12.2 million and depreciation and amortization of $8.9 million. The increase in receivables is primarily due to a seasonal increase in sales volume in the first quarter of 2002 when compared to the fourth quarter of 2001. The decrease in inventory was the result of concerted efforts to reduce inventory levels. The Company intends to continue this effort to reduce inventory balances during fiscal 2002. The Company invested $2.3 million in capital expenditures in the first quarter of 2002. The expenditures represent various equipment purchases and building improvements to enhance production capabilities. The Company estimates that its total capital expenditures for 2002 could range between $10 million and $15 million. During the first quarter of 2002, the Company received $1.5 million in proceeds from its $20 million revolving loan agreement. These proceeds have been used to fund operations. There have been no significant changes in interest rates, debt borrowings, and related covenants during the first quarter of 2002. Other Issues The Company's business is subject to seasonal variations in sales that affect inventory levels and accounts receivable balances. The Company had restricted cash of $33.8 million at March 31, 2002. Restricted cash of $15.0 million was collateral on the revolving loan agreement. The remaining $18.8 million is collateral on outstanding letters of credit for (i) industrial revenue bond of $9.7 million, (ii) FUNSA of $6.0 million (paid in April 2002), and (iii) other letters of credit of $3.1 million. Letters of credit were previously issued under the Company's credit facility, which was replaced in December 2001. Fabrica Uraguaya de Neumaticos S.A. (FUNSA), a tire manufacturer located in Uruguay, continues to incur operating losses and is currently in the process of reorganization. As such, the Company will continue to evaluate its investments in FUNSA. 12 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) Liquidity Outlook At March 31, 2002, the Company had unrestricted cash and cash equivalents of $8.6 million and $1.5 million had been drawn on the $20 million revolving loan agreement. Due to losses sustained by the Company and a recent change in domestic tax law, Titan will file loss carryback tax returns to attempt to obtain domestic tax refunds that may total between $10 million and $15 million. However, there can be no assurance of the amount or the timing of these refunds. 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 remainder of 2002. However, if the Company were to exhaust all currently available working capital sources or were not to meet the financial covenants and conditions of its loan agreements, the Company might find it extremely difficult to secure additional funding in order to meet working capital requirements. OUTLOOK Agricultural Segment Given current economic conditions, the agricultural market sales for the remainder of 2002 are expected to fall slightly below 2001 levels. Commodity farm prices continue to remain at depressed levels. However, low interest rates and government payments have helped support the financial condition of farmers. Many variables, including weather, export markets, and future government policies and payments can greatly influence the overall health of the agricultural economy. The anticipated sales levels in the agricultural market combined with a less profitable product mix may continue to lower profitability within this segment when compared to 2001. Earthmoving/Construction Segment Sales in the earthmoving/construction market for the balance of 2002 are expected to remain lower than 2001. Although housing construction has held up well, there is a general uncertainty in the earthmoving/construction market that has slowed spending on new equipment. Governmental entities have cut construction spending due to lower government receipts. Also, equipment rental agencies continue to experience weakness, thereby decreasing their demand to purchase new equipment. The lower earthmoving/construction sales will continue to have a negative impact on margins in this segment when compared to the previous year's levels. 13 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OUTLOOK (CONTINUED) Consumer Segment Consumer market sales are anticipated to run lower for the rest of 2002 when compared to 2001. However, the decrease is not expected to be as sizable as that experienced in the first quarter. Many items affect the consumer market including weather, competitive pricing, energy prices, and consumer attitude, which remains cautious. If the favorable sales mix continues, the consumer market could show improved margins when compared to 2001. MARKET RISK SENSITIVE INSTRUMENTS The Company's risks related to foreign currencies, commodity prices and interest rates are consistent with those for 2001. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards Number 142 On January 1, 2002, the Company adopted the non-amortization provisions of 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 plans to analyze the fair value of the units using the discounted cash flow method. The Company is in the process of conducting transitional tests of goodwill impairment and is evaluating the effect Statement 142 will have on its financial position, cash flows, and results of operations. 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 in the first quarter of 2002 and has had no material effect on the Company's financial position, cash flows or results of operations at this time. 14 TITAN INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Form 10-Q contains forward-looking statements, including statements regarding, among other items, (i) anticipated trends in the Company's business, (ii) future expenditures for capital projects, (iii) the Company's ability to continue to control costs and maintain quality, (iv) 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, and (vii) ability to secure financing at reasonable terms. Any changes in such factors could lead to significantly different results. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this document will in fact transpire. 15 TITAN INTERNATIONAL, INC. PART II. OTHER INFORMATION ITEMS 1 THROUGH 6 ARE NOT APPLICABLE. 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: May 10, 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) 16 -----END PRIVACY-ENHANCED MESSAGE-----