Titan International, Inc. (TWI)

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Titan International, Inc. (TWI)

Q1 2009 Earnings Call Transcript

April 29, 2009 9:00 am ET

Executives

Morry Taylor – Chairman and CEO

Analysts

Alex Blanton – Ingalls & Snyder

Ian Zaffino – Oppenheimer

Charlie Rentschler – Wall Street Access

Philip Volpicelli – Cantor Fitzgerald

Saul Ludwig – KeyBanc

Sara Hunt – Alpine

Presentation

Operator

Ladies and gentlemen, welcome to the Titan International, Inc. First Quarter Earnings 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, believes, expectations or predictions for the future are considered forward-looking statements.

Please note that the Safe Harbor statements contained in the company’s latest Form 10-K and Form 10-Q filed with the Securities and Exchange Commission extend to this conference call and any forward-looking statements involves risks and uncertainties as detailed therein.

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

Morry Taylor

Thank you, John, and good morning to everyone and to any of the internationals, since I’m over doing this from Heathrow Airport, good afternoon. I’m assuming all of you on the call have already received the announcement. The quarter was a very interesting quarter, it is a good quarter.

One thing that’s missing on there that we didn’t put in was that we probably could have trumped the record for the whole first quarter, not just the ag sales, but what happened in the quarter, you know if you went through it, the construction and earthmoving especially on the mid size and the small size, mainly just shut right down. And what transpired is that we were moving a lot of our big ag tire because that happened. We’ve been moving it into our Bryan, Ohio facility because the new mining section, new mining tires have been doing fairly well, but the other side was mainly just shut down.

So, we were moving the moles, moving everything and this process from the standpoint it’s lower cost to produce them in the Bryan facility than it is up in the Freeport, Illinois and long term, that’s where we believe between Des Moines and Bryan we should go especially with the cost factors and the situation up in Freeport. So, we shut Freeport for – because of the union contract, you can’t just make the employment level down to a certain point and then you got to shut it down. So, that’s what we did.

If we would have kept it open, I believe we would have set the record because there is still strong – very high, strong demand for the large tires and as I said in the – large agricultural tires and we see that continuing through the second quarter. What happens after that is anybody’s guess in my opinion even though corn prices are holding up and so are soybeans.

The mining side, there is no shortage of super giant tires. As I stated, I believe that would be after the first quarter and that is true. The pricing is going to continue to drop as the commodity prices are dropping very fast and we are going to be – and we have passed that on to our customer base.

The situation on covered wheels, the price of steel in less than a year has gone from $900, went to beginning of this year to $600 and something, and I believe that it will crack through $500 probably by the beginning of the third quarter of this year and who knows where it’s going. You can see the losses of the steel companies, but pricing is headed down. The same is with natural rubber, everything except nylon. Nylon has stayed pretty – if anything, it’s mainly moved a little bit on the upper side.

So, all in all, we can look out for a decent second quarter. We are going to keep our SG&A down and we are looking to – we have to go out now and sell, we have to show what’s going on, we are continuing to improve on all of our products and we expect to. The bright sides still are the large super giants and the big farm-in. Everything else has taken a big, long snooze and I don’t think anybody can tell us when that’s going to go.

But to give you a real flavor of what’s happening, if you look in the Chicago area, there was 10 quarries where they dig up the gravel, crush the gravel, et cetera, when you fly over, you can see them. And those 10 quarries less than a year ago were running seven days around the clock. So, there is three shifts, seven days. So, if you add that, you say 10 times three is 30 times seven, you are mainly doing approximately 210 shifts.

Those same quarries today, two of them are running – they are running five days and that’s it. So, what happens is those – if they have flats, they have tires that go, they just take them from the other. They do the same with the wheels and eventually they will do the same with the engines until it turns around and they can turn it on real quick.

So, we – I don’t quite think the stimulus package is going to do all that. So, we looked at that, we are banking on the other two to carry us through, the big mining, there is gold, it’s going good, copper is starting to percolate back up, and the coal so far has been holding pretty steady.

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