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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 1-12936

TITAN INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

     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 for 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 o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

     As of January 31, 2003, 20,900,728 shares of common stock of the registrant were outstanding. The aggregate market value of the shares of common stock of the registrant held by non-affiliates was $19,398,013 based upon the closing price of the common stock on the New York Stock Exchange on January 31, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the registrant’s definitive proxy statement for its annual meeting of stockholders to be held May 15, 2003.

Table of Contents

PART I

Item 1. Business

General

Titan International, Inc. (Titan or the Company) is a global manufacturer of off-highway wheels and tires for agricultural, earthmoving/construction and consumer equipment. Titan manufactures both wheels and tires for the majority of these 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.

As one of the very few companies dedicated to the off-highway wheel and tire market, Titan’s engineering and manufacturing resources are focused on addressing the real-life concerns of the end-users of our products. Titan’s commitment to product innovation is demonstrated by the development of the LSW series of wheel and tire assemblies, which considerably enhances the performance of off-highway vehicles.

In 2002, Titan’s agricultural market sales represented 60% of net sales, the earthmoving/construction market represented 31% and the consumer market represented 9%. For information concerning the revenues, certain expenses, income from operations and assets attributable to each of the segments in which the Company operates, see Note 26 to the consolidated financial statements of Titan International, Inc., included in Item 8 herein.

Agricultural Market

Titan’s agricultural wheels, rims and tires are manufactured for use on various agricultural and forestry equipment, including tractors, combines, skidders, plows, planters and irrigation equipment and are sold to OEMs and independent distributors. The wheels and rims range in diameter from 9” to 54” with the 54” diameter being the largest agricultural wheel manufactured in North America. Basic configurations are combined with distinct variations (such as different centers and a wide range of material thickness) allowing the Company to offer a broad line of product models to meet customer specifications. Titan’s agricultural tires range in diameter from 8” to 85” and in width from 4.8” to 44”. The Company offers the added value of delivering a complete wheel and tire assembly to customers. The aftermarket tires are marketed through a network of independent distributors, equipment dealers, and Titan’s own distribution centers.

Earthmoving/Construction Market

The Company manufactures wheels and rims for various types of earthmoving, mining and construction equipment, including skid steers, aerial lifts, cranes, graders and levelers, scrapers, self-propelled shovel loaders, load transporters, haul trucks and backhoe loaders. The Company provides customers with a broad range of earthmoving/construction wheels ranging in diameter from 20” to 63”, in width from 8” to 60” and in weight from 125 pounds to 7,000 pounds. The 63” diameter wheel is the largest manufactured in North America for the earthmoving/construction market. The majority of the earthmoving/ construction wheels produced by Titan are sold directly to OEMs. In addition, Titan produces a range of tires for the earthmoving/construction market. The Company offers the added value of wheel and tire assembly for many applications in the earthmoving/construction market. Also included in this market segment are the various wheels, tires and components Titan manufactures for the United States Government, primarily for certain military vehicles (i.e.; trucks, trailers, tanks and personnel carriers).

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Consumer Market

Titan builds a variety of products for all terrain vehicles (ATVs), turf, golf, and trailer applications. The Company exited the OEM business for lawn and garden equipment and ATVs in 2002, concentrating instead on the aftermarket for ATV and turf products. Consumer wheels and rims range in diameter from 4” to 16”. Likewise, Titan produces a variety of tires for the consumer market. New ATV tire tread patterns for the replacement market have been designed and introduced in the past few years. For the domestic boat, recreational and utility trailers markets, the Company produces wheels and tires, and assembles brakes, actuators and components. The Company also offers the value-added service of a wheel and tire system for the consumer market.

Market Conditions Outlook

Industry analysts are predicting that the market segments in which Titan does business will not improve dramatically during 2003. The agricultural market may strengthen somewhat during the second half of 2003, thanks in part to the stabilizing impact of the Farm Security and Rural Investment Act. The earthmoving/construction industry, however, is anticipated to experience continued adversity throughout the year. Consumer market performance is largely tied to recreational spending habits. Overall, these circumstances, combined with positive economic developments, may result in slightly improved market conditions for the Company in 2003 when compared to 2002.

Operations

Wheel Manufacturing Process

Most agricultural wheels are produced using a rim and a center disc. A rim is produced by first cutting large steel sheets to required width and length specifications. These steel sections are rolled and welded to form a circular rim, which is flared and formed in the rollform operation. The majority of discs are manufactured using presses that both blank and form the center to specifications in multiple stage operations. The Company e-coats wheels using a multi-step process prior to the final top coating.

Large earthmoving/construction steel wheels are manufactured from hot and cold rolled steel sections. Hot rolled sections are generally used to increase cross section thickness in high stress areas of large diameter wheels. A special cold forming process for 25” wheels is used to increase cross section thickness while eliminating two components. Rims are built from a series of hoops that are welded together to form a rim base. The complete rim base is made from either three or five separate parts that then lock together after the rubber tire has been fitted to the wheel and inflated.

Smaller wheels (usually 12” or less in diameter), the majority of which are produced for consumer markets, are manufactured by a process in which half-wheels are press-formed, then two half-wheel stampings are welded together to form a complete wheel. Generally, for larger wheels (12” or more in diameter) produced for the consumer market, the Company manufactures rims and centers, welds the rims to the centers and then paints the assembled product.

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Operations (continued)

Tire Manufacturing Process

The first step in tire production is the mixing of rubber, carbon black and chemicals to form various rubber compounds. These rubber compounds are then extruded and processed with textile or steel materials to make specific components. These components — beads (wire bundles that anchor the tire with the wheel), plies (layers of fabric that give the tire strength), belts (fabric or steel fabric wrapped under the tread in some tires), tread and sidewall - are then assembled into an uncured tire. The uncured tire is placed into a press that molds and vulcanizes the carcass under set time, temperature and pressure into a finished tire.

Wheel and Tire Assemblies

The Company’s position as a manufacturer of both wheels and tires allows Titan to mount and deliver one of the largest selections of off-highway assemblies in the world. Titan offers this value-added service of one-stop shopping for wheel and tire assemblies for the agricultural, earthmoving/construction and consumer markets. Customer orders are entered into the Company’s system either through electronic data interchange or manually. The appropriate wheel-tire assembly delivery schedule is formulated based on each customer’s requirements and the product is received by the customer just-in-time.

Quality Control

The Company is ISO 9000 certified at seven of its manufacturing facilities. The ISO 9000 series is a set of related and internationally recognized standards of management and quality assurance. The standards specify guidelines for establishing, documenting and maintaining a system to ensure quality. The ISO 9000 certifications are a testament to Titan’s dedication to providing quality products for its customers.

Raw Materials

Steel and rubber are the primary raw materials used by the Company in all segments. To ensure a consistent steel supply, Titan purchases raw steel from key steel mills and maintains relationships with steel processors for steel preparation. The Company is not dependent on any single producer for its steel supply. Rubber and other raw materials for tire manufacture are some of the Company’s largest commodity expenses. Titan buys rubber in markets where there are numerous supply sources. In addition to the development of key domestic suppliers, the Company’s strategic procurement plan includes international suppliers to assure competitive price and quality in the global marketplace. As is customary in the industry, the Company does not have long-term contracts for the purchase of steel or rubber and, therefore, purchases are subject to price fluctuations.

Customers

The Company’s 10 largest customers accounted for approximately 54% of net sales for the year ended December 31, 2002, compared to 51% for the year ended December 31, 2001. Net sales to Deere & Company in Titan’s agricultural, earthmoving/construction, and consumer markets represented 15% of the Company’s consolidated revenues for the year ended December 31, 2002. Net sales to CNH Global N.V. in Titan’s three markets represented 12% of the Company’s consolidated revenues for the year ended December 31, 2002. No other customer accounted for more than 10% of the Company’s net sales in 2002.

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Marketing and Distribution

The Company employees an internal sales force and utilizes several manufacturing representative firms for sales in the United States and Europe. In the United States, sales representatives are organized within geographical regions. The international sales force includes employees in France, Germany, Italy and the United Kingdom. Titan believes international sales efforts are enhanced when sales representatives sell primarily within their native countries.

Titan distributes wheels and tires directly to OEMs. The distribution of aftermarket tires occurs primarily through a network of independent and OEM dealers. The Company distributes wheel and tire assemblies directly to OEMs and aftermarket customers through its own distribution network consisting of nine facilities throughout the United States and Europe.

Research, Development and Engineering

The Company’s research, development and engineering staffs test new designs and technologies and develop new manufacturing methods to improve product performance. These services enhance the Company’s relationships with customers. The Company has spent $3.5 million, $3.1 million, and $4.7 million, on research and development for the years ended December 31, 2002, 2001 and 2000, respectively. These costs were primarily incurred in developing the LSW series of wheels and tires, which considerably enhances the performance of off-highway vehicles. The ongoing cost of research and development for the LSW has declined, although Titan continues to introduce new LSW wheel and tire assemblies for the agricultural, earthmoving/construction, and consumer markets.

The LSW wheel and tire assemblies reduce bounce, power hop, road lope and heat build-up and provide more stability and safety for operators, which in turn leads to greater productivity. The key to the success of the LSW is an increase in wheel diameter while maintaining the original outside tire diameter. This is accomplished by lowering the sidewall (LSW is an acronym for low sidewall) and increasing its strength. Maintaining the original outside diameter of the tire allows the LSW to improve the performance of agricultural, earthmoving/construction and consumer equipment without further modification.

Employees

At December 31, 2002, the Company employed approximately 2,900 people in the United States and Europe. Approximately 34% of the Company’s employees in the United States are covered by three collective bargaining agreements. The majority of employees at Titan’s foreign facilities are represented by collective bargaining agreements that are renewed from time to time depending on terms of the agreements and the laws of the foreign jurisdictions. The employees of the Company’s Walcott, Iowa, facility ratified a three-year contract in July of 2002. In September of 2001, employees of the Company’s Des Moines, Iowa, facility approved a new labor agreement effective through the year 2006. In December of 2001, former workers at the Company’s Natchez, Mississippi, facility approved a new labor agreement also effective through the year 2006. Before ratifying these contracts, the employees or former workers at the Des Moines and Natchez facilities had been on strike for 40 and 39 months, respectively. The Natchez, Mississippi, facility is not currently in operation. The strikes at these facilities had an adverse effect on the Company’s financial position, cash flows and results of operations in 2001 and 2000. The Company believes the resolution of these two strikes has improved employee relations at these facilities and that employee relations at the other facilities are generally good.

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International Operations

In addition to the Company’s facilities in the United States, Titan also operates distribution and wheel manufacturing facilities in Europe. For the year ended December 31, 2002, the Company generated $119.4 million, or 26% percent, of its net sales from foreign operations. International operations and exports to foreign markets are subject to a number of special risks, including, but not limited to, risks with respect to currency exchange rates, economic and political destabilization, other disruption of markets, and restrictive actions by foreign governments (such as restrictions on transfer of funds, export duties and quotas and foreign customs). Other risks include changes in foreign laws regarding trade and investment, difficulties in obtaining distribution and support, nationalization, reforms of laws and policies of the United States affecting trade, foreign investment and loans, and foreign tax laws. There can be no assurance that one, or a combination, of these factors will not have a material adverse effect on the Company’s ability to increase or maintain its foreign sales or on its results of operations. The Company had total aggregate export sales of approximately $81.5 million, $70.8 million, and $79.4 million, for the years ended December 31, 2002, 2001 and 2000, respectively. For financial information regarding international operations, see Note 26 to the consolidated financial statements of Titan International, Inc., included in Item 8 herein.

The Company has significant manufacturing operations in foreign countries and purchases a portion of its raw materials from foreign suppliers. The production costs, profit margins and competitive position of the Company are affected by the strength of the currencies in countries where Titan manufactures or purchases goods, relative to the strength of the currencies in countries where products are sold. The Company’s results of operations, cash flows and financial position may be adversely affected by fluctuations in foreign currencies and by translation of the financial statements of the Company’s foreign subsidiaries from local currencies into United States dollars.

Order Backlog

As of January 31, 2003, Titan estimates $149 million in firm orders compared to $110 million at February 28, 2002. Orders are considered firm if the customer would be obligated to accept the product if manufactured and delivered pursuant to the terms of such orders. The Company believes that the majority of the current order backlog will be filled during the current year.

Patents and Trademarks

The Company owns various United States and foreign patents and trademarks and continues to apply for patent protection for many new products. While patents are considered significant to the operations of the business, Titan does not consider any one of them to be of such importance that the patent’s expiration or invalidity could materially affect the Company’s business.

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Environmental Compliance

In the ordinary course of business, like other industrial companies, the Company is subject to extensive and evolving federal, state, local and foreign environmental laws and regulations, and has made provisions for the estimated financial impact of environmental cleanup. The Company’s policy is to accrue environmental cleanup-related costs of a noncapital nature when those costs are believed to be probable and can be reasonably estimated. Expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. The Company does not currently anticipate any material capital expenditures for environmental control facilities. The quantification of environmental exposures requires an assessment of many factors, including changing laws and regulations, advancements in environmental technologies, the quality of information available related to specific sites, the assessment stage of the site investigation, preliminary findings and the length of time involved in remediation or settlement. The Company does not include anticipated recoveries from insurance carriers or other third parties in its accruals for environmental liabilities. Due to the difficult nature of predicting future environmental costs, 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 under, environmental laws.

Competition

The Company competes with several domestic and international companies, some of which are larger and have greater financial and marketing resources than Titan. The Company believes it is the primary source of steel wheels and rims to the majority of its North American customers. Major competitors in the wheel market include GKN Wheels, Ltd. and Topy Industries, Ltd. Major competitors in the tire market include Goodyear Tire & Rubber Co. and Bridgestone/Firestone. The Company competes primarily on the basis of price, quality, customer service, design capability and delivery time. The Company’s ability to compete with international competitors may be adversely affected by currency fluctuations. In addition, certain of the Company’s OEM customers could, under individual circumstances, elect to manufacture the Company’s products to meet their requirements or to otherwise compete with the Company. There can be no assurance that the Company will not be adversely affected by increased competition in the markets in which it operates, or that competitors will not develop products that are more effective, less expensive, or otherwise render certain of Titan’s products less competitive. From time to time, certain competitors of the Company have reduced their prices in particular product categories, which has prompted the Company to reduce prices as well. There can be no assurance that in the future, competitors of the Company will not further reduce prices or that any such reductions would not have a material adverse effect on the Company.

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Item 2. Properties

The Company maintains 14 manufacturing and warehousing/distribution facilities in the United States with a collective floor space of approximately 8.0 million square feet. Of these facilities, one is used primarily for the manufacture of agricultural products, one is dedicated primarily to the manufacture of earthmoving/construction products and four manufacture products for all three of the Company’s market segments. The remaining eight facilities are used for the warehousing/distribution of products in all of the Company’s segments.

The Company’s facility in Natchez, Mississippi, is not currently in operation. This facility could be used for the manufacture of agricultural, earthmoving/construction and consumer tires and comprises approximately 1.2 million square feet. There are no immediate plans to reopen this facility; however, this facility may be reopened in the future if the Company requires additional production capacity to meet demand. The Company’s facility in Greenwood, South Carolina, is not currently in operation. This facility encompasses approximately 0.1 million square feet. The Company is currently exploring strategies for this facility. The Company has assessed that the net realizable value of these facilities exceeds the net book value and, therefore, the Company believes the facilities are fairly stated. The Company has reorganized its distribution network and, as a part of this reorganization, several distribution facilities have been closed. The Company accrued $0.7 million for future minimum lease payments due on noncancellable leases for closed distribution facilities.

In Europe, Titan maintains six manufacturing and warehousing/distribution facilities with a collective floor space of approximately 1.5 million square feet. These facilities are located in Italy, the United Kingdom, France, and Germany. Of these facilities, one is used for the manufacture of earthmoving/construction products, four are used for the manufacture of agricultural, earthmoving/construction and consumer products, and one is used for warehousing and distribution of products for all of the Company’s segments.

Several of the Company’s facilities are leased through operating lease agreements. For information on these operating leases, see Note 23 to the consolidated financial statements of Titan International, Inc., included in Item 8 herein. The Company considers each of its facilities to be in good operating condition and adequate for present use. Management believes that the Company has sufficient capacity to meet current market demand.

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Item 3. Legal Proceedings

The Company is a party to routine legal proceedings arising out of the normal course of business. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss, the Company believes that none of these actions, individually or in the aggregate, will have a material adverse affect on the financial condition or results of operations of the Company.

Item 4. Submission of Matter to a Vote of Security Holders

Not applicable.

Item 4a. Executive Officers of the Registrant

The names, ages and positions of all executive officers of the Company are listed below, followed by a brief account of their business experience during the past five years. Officers are normally appointed annually by the Board of Directors at a meeting immediately following the Annual Meeting of Stockholders. The President and Secretary are brother and sister. There is no arrangement or understanding between any officer and any other person pursuant to which an officer was selected.

Maurice M. Taylor Jr., 58, has been President, Chief Executive Officer and a Director of the Company since 1990, when Titan was acquired in a management-led buyout by investors, including Mr. Taylor.

J.Michael A. Akers, 59, began organizing the start-up of Titan’s European Operations in 1990 and became a member of the management team in 1995. Mr. Akers was appointed Vice President in 1999.

Kent W. Hackamack, 44, served as Corporate Controller of the Company from 1994 to 1996. Mr. Hackamack was appointed Vice President of Finance and Treasurer in 1996.

Cheri T. Holley, 55, joined the Company in 1994 as General Counsel and Secretary. Ms. Holley was appointed Vice President in 1996.

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PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

The Company’s common stock is traded on the New York Stock Exchange (NYSE) under the symbol TWI. The following table sets forth the high and low sales prices per share of common stock as reported on the NYSE and information concerning per share dividends declared for the periods indicated.

On January 31, 2003, there were 1,036 holders of record of Titan common stock.

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Item 6. Selected Financial Data

The selected financial data presented below, as of and for the years ended December 31, 2002, 2001, 2000, 1999, and 1998, are derived from the Company’s consolidated financial statements, as audited by PricewaterhouseCoopers LLP, independent accountants, and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations

Results of Operations

The following table sets forth the Company’s statement of operations expressed as a percentage of net sales for the periods indicated. This table and subsequent discussions should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto.

In addition, the following table sets forth components of the Company’s net sales classified by segment for the periods indicated (in thousands):

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies

Preparation of the financial statements and related disclosures in compliance with generally accepted accounting principles requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The Company’s application of these policies involves judgments regarding many factors, which, in and of themselves, could materially impact the financial statements and disclosures. A future change in the assumptions or judgments applied in determining the following matters, among others, could have a material impact on future financial results.

Revenue Recognition

The Company records sales revenue and cost of sales when products are shipped to customers and both title and the risks and rewards of ownership are transferred. Provisions are established for sales returns and uncollectible accounts based on historical experience. Should these trends change, adjustments to the estimated provisions would be necessary.

Product Costing

Inventories are valued at the lower of cost or market. For operations in the United States, cost is determined using the last-in, first-out (LIFO) method for approximately 56% of inventories and the first-in, first-out (FIFO) method for the remainder of inventories. Inventory of foreign subsidiaries is valued using the FIFO method. Market is estimated based on current selling prices. Estimated provisions are established for excess and obsolete inventory, as well as inventory carried above market price based on historical experience. Should this experience change, adjustments to the estimated provisions would be necessary.

Impairment of Fixed Assets

The Company reviews fixed assets to assess recoverability from future operations whenever events and circumstances indicate that the carrying values may not be recoverable. Impairment losses are recognized in operating results when expected undiscounted future cash flows are less than the carrying value of the asset. Impairment losses are measured as the excess of the carrying value of the asset over the discounted expected future cash flows, or the fair value of the asset. Significant assumptions relating to future operations must be made when estimating future cash flows. Should unforeseen events occur or should operating trends change significantly, impairment losses could occur.

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 values may not be recoverable. Investment write-downs, if necessary, are recognized in operating results when expected undiscounted future cash flows are less than the carrying value of the asset. Any such write-downs are measured as the excess of the carrying value of the asset over the discounted expected future cash flows or the fair value of the asset. Significant assumptions relating to future investment results must be made when estimating the future cash flows associated with these investments. Should unforeseen events occur or should investment trends change significantly, impairment losses could occur.

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Impairment of Goodwill

The Company reviews goodwill to assess recoverability from future operations during the fourth quarter of each annual reporting period, and whenever events and circumstances indicate that the carrying values may not be recoverable. Significant assumptions relating to future operations must be made when estimating future cash flows in analyzing goodwill for impairment. Should unforeseen events occur or should operating trends change significantly, impairment losses could occur.

Retirement Benefit Obligations

Pension benefit obligations are based on various assumptions used by the Company’s actuaries in calculating these amounts. These assumptions include discount rates, expected return on plan assets, mortality rates and other factors. Revisions in assumptions and actual results that differ from the assumptions affect future expenses, cash funding requirements and obligations. For more information concerning these costs and obligations, see the additional discussion of the “Pensions” and Note 21 to the Company’s financial statements.

Strike Settlement

The cumulative impact of the 1998 through 2001 strikes at the Company’s Des Moines, Iowa, and Natchez, Mississippi, facilities, combined with a general downturn in the Company’s markets, resulted in costly and disruptive consequences for Titan. The employees and/or former workers at these facilities were on strike for 40 and 39 months, respectively. The strikes at these facilities had an adverse effect on the Company’s 2001 and 2000 financial position, cash flows and results of operations.

The Company recorded union strike settlement and other costs of $6.8 million for the year ended December 31, 2001. This amount is attributed to the union settlement with the Company’s Des Moines, Iowa, and Natchez, Mississippi, facilities as well as other costs to which the strike contributed. Included in these costs were union settlement payments, retraining costs, goodwill and prepaid write-downs of $4.9 million. These items of $4.9 million are presented in the selling, general and administrative line on the Consolidated Statements of Operations. The remaining $1.9 million in the union strike settlement and other costs were for inventory write-downs, which have been reclassified as a component of cost of sales.

In September of 2001, employees of the Company’s Des Moines, Iowa, facility approved a new labor agreement effective through the year 2006. In December of 2001, former workers at the Company’s Natchez, Mississippi, facility approved a new labor agreement also effective through the year 2006. Titan believes that the terms of the strike settlements are favorable and that competitive ongoing labor rates have been established. With the strikes settled, the Company is now concentrating its resources on accommodating an increased demand for the Titan product line when the markets recover.

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Sale of Assets

On April 14, 2000, the Company sold certain assets (primarily raw material inventory, work-in-process inventory, and property, plant and equipment) of two facilities located in Clinton, Tennessee, and Slinger, Wisconsin, to Carlisle Tire and Wheel Company, a subsidiary of Carlisle Companies Incorporated, for approximately $94.1 million in cash. In conjunction with this transaction, the Company eliminated goodwill related to these operations totaling $19.5 million. The Company recorded a pretax gain on this transaction of $38.7 million in the second quarter of 2000. This nonrecurring gain has not been included in the pro forma amounts described below. These two facilities were in the business of providing wheels and tires to the consumer market, primarily for original equipment manufacturers’ (OEM) lawn and garden equipment and all terrain vehicles (ATVs).

Had the transaction occurred on January 1, 2000, net sales for the year ended December 31, 2000, would have been $512.4 million. Loss from operations for the year ended December 31, 2000, would have been $(13.4) million. Net loss for the year ended December 31, 2000, would have been $(21.2) million. Loss per share for the year ended December 31, 2000, would have been $(1.02). There was no effect on net sales, net income or earnings per share for the years ended December 31, 2001, and December 31, 2002, as a result of this transaction.

Investment Exposures

The Company maintains financial interests in Wheels India Limited (WIL), a wheel manufacturer located in India. The Company owns 36% of WIL common stock. This investment is accounted for using the equity method. The carrying value of this investment was $12.8 and $11.9 million at December 31, 2002 and 2001, respectively. The increase in the carrying value was due to currency exchange fluctuations. Equity income of $0.7 million was recorded in 2001. Dividends received from this investment were $0.2 million for each of 2002 and 2001. WIL is publicly traded on the National Stock Exchange of India Ltd. (NSE). Based on the NSE quoted price, the calculated value of the Company’s shares was $6.0 million at December 31, 2002, and $5.1 million at December 31, 2001. Due to the carrying value of the Company’s investment in WIL exceeding the NSE quoted market value, the Company continues to assess the net realizable value of the WIL investment. Based on the current and expected operating results of WIL factored into this assessment, the Company believes the WIL investment is fairly stated. However, in order to prevent exceeding the estimated net realizable value of the WIL investment, the Company did not record its equity share of the WIL income, which would have been $1.3 million of income for 2002.

Titan also maintains financial interests in Polymer Enterprises, Inc. in the amount of $7.3 million or 14% of common stock. Polymer is a privately held company in Greensburg, Pennsylvania, which manufactures specialty tires and various rubber-related products for industrial applications. Dividends recorded and received from this investment were $0.8 million for each of 2002 and 2001.

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Loss on Investment

The Company maintains financial interests in Fabrica Uruguaya de Neumaticos S.A. (FUNSA), a tire manufacturer located in Uruguay, South America. FUNSA is not currently producing tires, however FUNSA is working with its investors, the government of Uruguay and the union to complete a reorganization plan and resume the manufacturing of tires. These plans have been significantly hindered by the major economic crisis that occurred in Uruguay during the third quarter of 2002, including a run on banks and the temporary closing of the banking system. Due to these events and the deterioration of economic conditions, social distress and resultant unrest in the country of Uruguay, the Company reserved its investment in FUNSA of $9.6 million. The expense of $9.6 million was taken in the third quarter of 2002 and is classified in the accompanying Consolidated Statement of Operations within “Loss on investments.” On the accompanying Consolidated Statement of Cash Flows, $3.7 million is classified within “Noncash portion of loss on investments” and the remaining $5.9 million is classified as a reduction in restricted cash deposits.

In addition, the Company maintains financial interests in AII Holding, Inc. in the amount of $2.8 million of preferred stock and accrued dividends. AII Holding, Inc. is a specialist in automated welding technology equipment. The privately held company is located in Danville, Illinois. Based on Titan’s analysis of the AII Holding, Inc. financial information, Titan reserved its investment in AII Holding, Inc. The expense of $2.8 million was taken in the fourth quarter of 2002 and is classified on the accompanying Consolidated Statement of Operations within “Loss on investments.”

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Fiscal year ended December 31, 2002, compared to fiscal year ended December 31, 2001

Results of Operations

Net Sales

Net sales for the year ended December 31, 2002, were $462.8 million compared to $457.5 million for the year ended December 31, 2001.

The Company generated 26% of its net sales from foreign subsidiaries during the year ended December 31, 2002, as compared to 25% during the year ended December 31, 2001. The increase in the foreign net sales percentage during 2002 was primarily due to the fact that foreign sales increased slightly while domestic sales remained nearly constant.

Cost of Sales and Gross Profit

Cost of sales was $433.1 million for the year ended December 31, 2002, as compared to $438.8 million in 2001. Gross profit for the year 2002 was $29.7 million or 6.4% of net sales, compared to $18.7 million, or 4.1% of net sales for 2001. Gross profit, as a percentage of net sales, was positively impacted by the Company’s efforts to control costs. Cost reduction measures have included the closing of several distribution facilities as part of the Company’s reorganization of its domestic distribution network. Titan’s cost control efforts were partially offset by price increases for steel and rubber, the primary raw materials used by the Company.

The Company’s profit margins continue to be affected by the excess capacity at the idle Natchez, Mississippi facility. Depreciation on the fixed assets at this facility and minimal operating costs continue to be incurred. A third party appraisal indicates the fair value of the fixed assets of this facility is in excess of the carrying value of $20.1 million. The Company continually assesses its capacity requirements and makes necessary changes as dictated by customer demand.

Administrative Expenses

Selling, general and administrative (SG&A) and research and development (R&D) expenses were $43.8 million or 9.5% of net sales for the year ended December 31, 2002, as compared to $52.1 million or 11.4% of net sales for 2001. The decrease in SG&A and R&D expenses is primarily attributed to one-time expenses of $4.9 million incurred in 2001 attributed to the union settlement with the Company’s Des Moines, Iowa, and Natchez, Mississippi, facilities as well as other costs to which the strike contributed. Included in these costs were union settlement payments, retraining costs, goodwill and prepaid write-downs of $4.9 million. The Company also continues to streamline operations to reduce costs at each of its facilities. The Company’s streamlining efforts include headcount reductions.

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Fiscal year ended December 31, 2002, compared to fiscal year ended December 31, 2001 (continued)

Operating Results and Other

Loss from operations for the year ended December 31, 2002, was $(14.1) million, compared to $(33.5) million in 2001. Loss from operations was impacted by the items described in the preceding paragraphs.

Net interest expense for the year 2002 was $20.6 million compared to $20.9 million in 2001. The decreased interest expense was primarily due to a reduction in interest rates. Lower interest rates were partially offset by an increase in the average debt outstanding in 2002 as compared to 2001.

The $12.4 million loss on investments resulted from the Company’s decision to reserve its investment in Fabrica Uruguaya de Neumaticos S.A. (FUNSA), a tire manufacturer located in Uruguay, South America and AII Holding, Inc., a specialist in automated welding technology equipment located in Danville, Illinois.

Of the loss, $9.6 million is related to the FUNSA investment. FUNSA is not currently producing tires, however FUNSA is working with its investors, the government of Uruguay and the union to complete a reorganization plan and resume the manufacturing of tires. These plans have been significantly hindered by the major economic crisis that occurred in Uruguay during the third quarter of 2002, including a run on banks and the temporary closing of the banking system. Due to these events and the deterioration of economic conditions, social distress and resultant unrest in the country of Uruguay, the Company has reserved its investment in FUNSA of $9.6 million. The expense of $9.6 million was taken in the third quarter of 2002 and is classified in the accompanying Consolidated Statements of Operations within “Loss on investments.” On the accompanying Consolidated Statement of Cash Flows, $3.7 million is classified within “Noncash portion of loss on investments” and the remaining $5.9 million is classified as a reduction in restricted cash deposits.

The additional loss on investment of $2.8 million resulted from the Company’s decision to reserve its investment in AII Holding, Inc. Based on Titan’s analysis of the AII Holding, Inc. financial information, Titan reserved its investment in AII Holding, Inc. The expense of $2.8 million was taken in the fourth quarter of 2002 and is classified on the accompanying Consolidated Statement of Operations within “Loss on investments.”

Gain on sale of assets in 2001 of $1.6 million was attributed to the sale of an airplane during the first quarter of 2001. The gain on early retirement of debt in 2001 of $4.4 million resulted from the early retirement of $13.3 million of the Company’s senior subordinated notes due 2007.

Other income was $2.7 million for the year 2002 as compared to $2.0 million in 2001. Interest income accounted for $3.0 million and $2.4 million of other income for the years ended December 31, 2002, and 2001, respectively. As a result of operating foreign subsidiaries, the Company is subject to fluctuations in foreign currencies. During the year ended December 31, 2002, the strength of foreign currencies against the dollar benefited Titan by $2.0 million. In comparison, the currency exchange loss was $(1.1) million for the year ended December 31, 2001.

The Company’s effective tax benefit on its net loss was 19% and 25% for the years ended December 31, 2002, and December 31, 2001, respectively.

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Fiscal year ended December 31, 2002, compared to fiscal year ended December 31, 2001 (continued)

Net Loss

Net loss for the year ended December 31, 2002, was $(35.9) million, compared to $(34.8) million in 2001. Basic and diluted loss per share was $(1.73) for the year ended December 31, 2002, as compared to $(1.68) in 2001. Net loss and loss per share were impacted by the items described in the preceding paragraphs.

Agricultural Segment Results

Net sales in the agricultural market were $278.3 million for the year ended December 31, 2002, as compared to $256.2 million in 2001. Income from operations in the agricultural market was $8.1 million for the year 2002 as compared to loss from operations of $(2.2) million in 2001. The increase in net sales and income from operations in the agricultural market was primarily attributed to higher sales volumes resulting from an escalation in customer demand coupled with Titan’s efforts to expand market share. The heightened cost control efforts discussed previously also contributed to the improved operating results.

Earthmoving/Construction Segment Results

The Company’s earthmoving/construction market net sales were $144.7 million for the year ended December 31, 2002, as compared to $156.0 million in 2001. The Company’s earthmoving/construction market income from operations was $3.1 million for the year 2002 as compared to $1.2 million in 2001. The continuing economic uncertainty in 2002 negatively impacted sales in the earthmoving/construction market. Also, equipment rental agencies delayed purchases of new equipment as a result of decreased demand. Despite a decrease in sales, earthmoving/construction market income from operations was up due to increased cost control efforts.

Consumer Segment Results

Consumer market net sales were $39.8 million for the year ended December 31, 2002, as compared to $45.3 million in 2001. Consumer market income from operations was $0.1 million for the year 2002 as compared to loss from operations of $(5.5) million in 2001. Although consumer market net sales decreased, income from operations increased as a result of the Company’s previously discussed efforts to enhance efficiencies and management’s efforts to focus on the Company’s higher margin products.

Foreign Subsidiaries Sales

Net sales at foreign subsidiaries were $119.4 million for the year ended December 31, 2002, as compared to $113.7 million in 2001. Foreign sales were positively impacted by increased agricultural sales.

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 $25.4 million for the year ended December 31, 2002, as compared to $27.0 million in 2001.

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Fiscal year ended December 31, 2001, compared to fiscal year ended December 31, 2000

Results of Operations

Net Sales

Net sales for the year ended December 31, 2001, were $457.5 million compared to $543.1 million for the year ended December 31, 2000. Net sales decreased primarily due to a decrease in production by the Company’s major customers, as well as the sale of assets transaction as previously described. Many of the Company’s customers decreased production to reduce inventory as a result of decreased sales.

The Company generated 25% of its net sales from foreign subsidiaries during the year ended December 31, 2001, as compared to 22% during the year ended December 31, 2000. The increase in the foreign net sales percentage during 2001 was primarily due to the fact that while foreign sales decreased in 2001, domestic sales decreased more significantly.

Currency Fluctuation

As a result of operating foreign subsidiaries, the Company is subject to fluctuations in foreign currencies. The foreign currency fluctuations for the year ended December 31, 2001, had a minimal effect on the Company’s results of operations.

Cost of Sales and Gross Profit

Cost of sales was $438.8 million for the year ended December 31, 2001, as compared to $502.9 million in 2000. Gross profit for the year ended December 31, 2001, was $18.7 million or 4.1% of net sales, compared to $40.1 million, or 7.4% of net sales for 2000. Gross profit, as a percentage of net sales, was negatively impacted by inefficiencies related to operating at a lower capacity utilization and to merging the returning union workforce with the current workers at the Company’s Des Moines, Iowa, facility.

Administrative Expenses

Selling, general and administrative (SG&A) and research and development (R&D) expenses were $52.1 million or 11.4% of net sales for the year ended December 31, 2001, as compared to $48.8 million or 9.0% of net sales for 2000. The increase in SG&A and R&D expenses is primarily attributed to one-time expenses of $4.9 million incurred in 2001 related to the union settlement. This amount is attributed to the union settlement with the Company’s Des Moines, Iowa, and Natchez, Mississippi, facilities as well as other costs to which the strike contributed. Included in these costs were union settlement payments, retraining costs, goodwill and prepaid write-downs of $4.9 million. The Company continues to streamline operations to reduce costs at each of its facilities.

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Fiscal year ended December 31, 2001, compared to fiscal year ended December 31, 2000 (continued)

Operating Results and Other

Loss from operations for the year ended December 31, 2001, was $(33.5) million, compared to $(8.6) million in 2000. Loss from operations was impacted by the items described in the preceding paragraphs.

Net interest expense for the year ended December 31, 2001, was $20.9 million compared to $22.6 million in 2000. The decreased interest expense was primarily due to a reduction in interest rates. Lower interest rates were partially offset by an increase in the average debt outstanding in 2001 as compared to 2000.

Gain on sale of assets in 2001 of $1.6 million was attributed to the sale of an airplane during the first quarter of 2001. The gain on sale of assets in 2000 of $38.7 million resulted from the sale of certain assets in April 2000 as previously described.

Gain on early retirement of debt in 2001 of $4.4 million resulted from the early retirement of $13.3 million of the Company’s senior subordinated notes due 2007.

Other income (expense) was $2.0 million for the year ended December 31, 2001, as compared to $1.2 million in 2000. Interest income accounted for $2.4 million and $2.5 million of other income for the years ended December 31, 2001, and 2000, respectively. The increase in other income (expense) is primarily attributed to a decrease in currency exchange loss, which was $(1.1) million and $(1.7) million for the years ended December 31, 2001, and 2000, respectively.

For the year ended December 31, 2001, the Company’s effective tax benefit on its net loss was 25%, compared to 48% effective tax rate on net earnings for the year ended December 31, 2000. The lower rate is primarily due to the inability of the Company to realize an income tax benefit from certain nondeductible items including goodwill amortization, as well as the amount of income generated in various state and foreign jurisdictions.

Net (Loss) Income

Net (loss) for the year ended December 31, 2001, was $(34.8) million, compared to net income of $4.5 million in 2000. Loss per share was $(1.68) for the year ended December 31, 2001, as compared to earnings per common share of $.22 in 2000. Net (loss) income and (loss) earnings per share were impacted by the items described in the preceding paragraphs.

Agricultural Segment Results

Net sales in the agricultural market were $256.2 million for the year ended December 31, 2001, as compared to $283.1 million in 2000. Sales in the agricultural market were negatively impacted by decreased sales volume that resulted from a decrease in overall agricultural equipment sales and plant shutdowns by the major OEMs in this industry. Loss from operations in the agricultural market was $(2.2) million for the year ended December 31, 2001, as compared to income from operations of $11.7 million in 2000. The decrease in income from operations in the agricultural market was primarily attributed to decreased efficiencies due to decreased sales volume.

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Fiscal year ended December 31, 2001, compared to fiscal year ended December 31, 2000 (continued)

Earthmoving/Construction Segment Results

The Company’s earthmoving/construction market net sales were $156.0 million for the year ended December 31, 2001, as compared to $162.6 million in 2000. Sales in the earthmoving/construction market were negatively impacted by a decrease in sales caused by economic uncertainty in 2001. Also, equipment rental agencies delayed purchases of new equipment as a result of decreased demand. The Company’s earthmoving/construction market income from operations was $1.2 million for the year ended December 31, 2001, as compared to $8.9 million in 2000. The decrease in income from operations in the earthmoving/construction market was primarily due to a change in product mix from larger to smaller diameter wheels and tires, which tend to command lower margins, and to a lesser extent the lower sales volumes in this market.

Consumer Segment Results

Consumer market net sales were $45.3 million for the year ended December 31, 2001, as compared to $97.4 million in 2000. Sales in the consumer market decreased primarily due to the Company exiting the OEM business for lawn and garden equipment and ATVs in April 2000. Also, the market for trailers has undergone a downturn during this period. Consumer market loss from operations was $(5.5) million for the year ended December 31, 2001, as compared to $(0.6) million in 2000. The decrease in income from operations in the consumer market was primarily due to the Company exiting the OEM business for lawn and garden equipment and ATVs and to a lesser degree the downturn in the trailer market.

Corporate Expenses

Income from operations on a segment basis does not include: corporate expenses; depreciation and amortization expense related to property, plant and equipment; and goodwill carried at the corporate level, for a total of $27.0 million for the year ended December 31, 2001, as compared to $28.7 million in 2000.

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Liquidity and Capital Resources

Cash Flows

As of December 31, 2002, the Company had $22.0 million of unrestricted cash deposited within various bank accounts. This unrestricted cash balance increased by $12.8 million from December 31, 2001 due to the cash flows discussed below.

For the year ended December 31, 2002, positive cash flows from operating activities of $16.9 million resulted primarily from a federal income tax refund from fiscal 2001 of $16.3 million as well as depreciation and amortization of $33.6 million. The tax refund reduced deferred income tax assets, due to the reclassification of the balances to loss carryforwards, by $8.2 million and other current assets by $8.1 million. Cash inflows were partially offset by the net loss of $(35.9) million. Of this net loss, $6.5 million was a noncash item related to loss on investments previously discussed

Depreciation and amortization expenses were $33.6 million for the year ended December 31, 2002, compared to $37.3 million in 2001.

Net cash used by investing activities was $9.1 million in 2002, as compared to $16.5 million in 2001. Capital expenditures totaled $9.8 million in 2002, compared to $11.9 million in 2001. The capital expenditures represent various equipment purchases and building improvements to enhance production capabilities. Included in 2002 capital expenditures is $4.1 million used for equipment and other capital expenditures at the Company’s facilities located in Italy. The Company estimates that capital expenditures for 2003 could range between $10 million and $15 million.

The Company received proceeds of $5.2 million from the sale of an airplane in 2001. During 2000, the Company received proceeds of $94.1 million from the sale of assets. Titan utilized the majority of these proceeds to reduce its total debt to $233.4 million at December 31, 2000, from $303.7 million at March 31, 2000.

Net cash provided by financing activities in 2002 was $4.4 million. This cash inflow is primarily due to decreases in restricted cash deposits discussed below. Offsetting the inflow from restricted cash deposits was $4.8 million of principal repayments on long-term debt.

In 2001, the Company’s two $5.0 million subordinated notes to Pirelli Armstrong Tire Corporation were paid. The first $5.0 million subordinated note was paid in June 2001 and the second was paid in December 2001. In February 2000, the subordinated note for $19.7 million to Pirelli Armstrong Tire Corporation was paid.

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Liquidity and Capital Resources (continued)

Debt Funding

In December 2001, the Company replaced its former credit facility with a $99 million five-year term loan and a $20 million five-year revolving loan agreement. The term loan has an interest rate of LIBOR plus a margin that ranges from 4% to 4¹/2% and the revolving loan agreement allows Titan to borrow funds at an interest rate of LIBOR plus 2%, or at the prime rate. At December 31, 2002, $96.5 million was outstanding on the term loan. The interest rate on the term loan ranged from approximately 5.9% to 6.4% during 2002. At December 31, 2002, there were