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TWI » Topics » We operate in cyclical industries and, accordingly, our business is subject to the numerous and continuing changes in the economy.This excerpt taken from the TWI 8-K filed Dec 14, 2006. We
operate in cyclical industries and, accordingly, our business is
subject to the numerous and continuing changes in the
economy.
Our sales are substantially dependent on three major industries,
the agricultural equipment industry, the
earthmoving/construction equipment industry (including military)
and the consumer products industry (including trailers and
ATVs). The business activity levels in these industries are
subject to specific industry and general economic cycles.
Accordingly, any downturn in these industries or general economy
could materially adversely affect our business.
The agricultural equipment industry is affected by crop prices,
farm income and farmland values, weather, export markets and
government policies. Recently, demand for corn has caused
significantly increased corn prices, which is generally good for
our business. However, corn prices are subject to a number of
risks and could decrease, which could have a material adverse
effect on us. Corn prices are heavily dependent on federal
legislation and new legislation is expected in 2007 or 2008,
with a new majority in both the House of Representatives and the
Senate. Any significant changes, or the expectation of
significant changes, to federal agricultural policy, could have
a material adverse effect on us. Another factor which has had
significant positive impact on corn prices recently is demand
for ethanol. This has been driven by high oil prices and federal
legislation that encourages ethanol production and imposes
limits on imported corn and ethanol. Reductions in oil prices or
changes in federal ethanol policy, or the expectation of
changes, could have a material adverse effect on our business.
In addition, the agricultural equipment industry is subject to
weather risks, including drought, flood and climate risks, any
of which could have a material adverse effect on us.
The earthmoving/construction industry is affected by commodity
prices, the levels of government and private construction
spending and replacement demand. The consumer products industry
is affected by consumer disposable income, weather, competitive
pricing, energy prices and consumer attitudes. In addition, the
performance of these industries is sensitive to interest rate
changes and varies with the overall level of economic activity.
Due to capacity constraints at our Bryan, Ohio OTR tire
facility, we are adding OTR tire capacity at our other tire
facilities. This may have an effect on our results of
operations. For example, during the end of the fourth quarter of
2006, we are moving and re-tooling some of our equipment to meet
anticipated increases in demand for off the road (OTR) tires.
This may decrease our gross profit (as a percent of sales)
during this quarter, because labor costs that are normally
dedicated to making products will instead be used for re-tooling
and other purposes. As a result, this could have a negative
impact on our gross profit in the fourth quarter of 2006.
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