Titan International, Inc. (TWI)

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Titan International, Inc. (TWI)

Q3 2008 Earnings Call Transcript

October 29, 2008, 9:00am ET

Executives

Morry Taylor - Chairman, CEO

Kent Hackamack - Principal Financial Officer

Analysts

Alex Blanton- Ingalls & Snyder

Ian Zaffino - Oppenheimer

Greg Parcella - Freestyle Fund

Philip Volpicelli - Goldman Sachs

Saul Ludwig – KeyBanc

Charlie Rentschler - Wall Street Accesst

Randy Laufman - Imperial Capital

Brian Delaney - EnTrust

Jim Young - West Family Investments

Ken Holden - AmFund

Presentation

Operator

Ladies and gentlemen, welcome to the Titan International, Incorporated, Third Quarter Earning Call. During this session, all lines will be muted until the question-and-answer portion of the call. (Operator Instructions)

Any statements made in the course of this conference call that state the company's or management's intentions, hopes, beliefs, expectations, or predictions for the future are considered forward-looking statements.

Please note that the Safe Harbor Statement contained in the Company's latest Form 10-K and Form 10-Q filed in the Securities and Exchange Commission extend to the conference call and any forward-looking statements involve risks and uncertainties as detailed therein.

At this time, I would like to introduce Titan's and CEO, Morry Taylor. Please go ahead, sir.

Morry Taylor

Good morning America.

Operator

We've got all the lines now, sir.

Morry Taylor

Pardon?

Operator

Your line is open, sir.

Morry Taylor

Alright. Good morning, everyone. I'm assuming that all of you have the release on our earnings. And as you can see it was a very, very good quarter. I'm not going to spend a lot of time going over it. But -- because I think my statement said most of it.

The unique thing about the third quarter, as I stated, was that when you look at all the periods for maintenance and everything else, all of our plants plus our customers' facilities from the OE side, batten down the hatch and we've done fairly well.

In fact, when you look at the third quarter, the situation where the material cost and everything else were all still rising and you had all this, it was truly remarkable. We have a -- very fortunate that we have a great team.

The situation that all of you, of course, would say is, okay, third quarter's over, what are you going to do for us in the fourth quarter. Let me start off and tell you that the fourth quarter is so robust that I have talked with both group presidents and they have put together a plan to try to get out all of the orders that we have.

Contrary to the panic of everybody else running around, the situation is that large farm is still going strong and so is the big mining sector. So we're just looking at increasing and increasing and increasing as fast and rapidly as we can within what we have the power to do.

So I personally believe and we've set the goal that -- to take the fourth quarter make it the largest quarter that we've ever done. And we're on track for that the reason it will be that largest quarter, of course, is also in our super giant mining tires.

And while I'm talking about that, I should just point out, as it said in the press release, we have had tires out in the marketplace since July. There is -- and I'm not giving any specific numbers. But it is a tremendous amount of tires to go out running since July, there has not been one failure, the tires are more awesome than we thought. It's really remarkable.

So that's for the tires for all the rumors that come out, remember how they were having to be taken off and, by the way, they're running on inner and outer number two, they're not on the fronts, because under in Canada and in the mining industry, you have to run them six months on the rears before they put them to the fronts so that's just flat out how it is.

We are, by the -- this quarter, actually they're running in multiple locations: coal mines, in the oils sands. They'll be going -- there's order going to Australia. So we'll have around the world, as they say.

We are still set in our goal for our 900, I haven't changed that, by the end of the year. Needless to say, the lion's share of that quantity are going to come into the fourth quarter. And with that, we should be able to set our records.

The other situation is that everybody had a lot of concern, some people, that the capacity of the -- curing capacity would affect the outcome. Regret to put that statement buried, curing will not be our holdup we knew from the beginning we thought we could get the curing there and we have. We are cranking up the production on the other end. And the curing process and for the purpose of my competition and everything. I'm not telling everybody what's going on but the curing side is, rapidly came together and we are moving ahead right now and looking to get things out. We're still very, very positive to what we've got going.

The other thing is the rising cost of our materials, of course, has come to a little bit of a halt and so that's real good. So we expect that that will start flowing through. So of course, though in the steel side, we were informed that on the 1st of November, Mital is the big Indian concern, is going to shut down two of the rolling mills in the country, in the US. And so we're looking at the feasibilities of using someone else. And they're shutting them down because they're going to maintain the pricing.

So it will be -- to see how that transforms. I think that steel pricing will come down. I just don't think it's going to go down as far as everybody believes. The same thing, there still a shortage of synthetic rubber. I think that will start to ease up as this economy kind of goes into a little bit of a [role]. And -- but the farming is just going super and there is concern about all these mining companies. Well, it works out good in our favor, Titan's favor, that they postpone some of these new projects, because they all have plenty of cash. And that means they're going to dig into mines they have got a lot more, it means they have got to run that equipment. So that's the good point for us.

The agricultural is just pure, simple strong. We met with both -- or with all three, I met last week with Deere, AGCO, and CNH. And all of them for big Ag, big Ag is horse powered tractors over 100 horsepower and combines and etcetera, equipment that goes with them. They are all looking at double digit increases next year and they have no problem with the farmers and the financing or anything else, which I didn't think they did, farmers got a lot of cash.

So now, if you want to look at their under 100 horsepower, which now you start getting into what our friends at Kubota, we have a lot of form plus Deere plus CNH's in it plus AGCO. Most of that stuff is shipped in, those are your compact tractors, your small utility tractors. They've been down for two years and they're probably going to still slide down they will be sliding double digits. Most of those tires you don't make any money on them anyhow.

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