Titan International, Inc. (TWI)

TWI 
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Titan International Inc. (TWI)

Q2 2010 Earnings Call Transcript

July 28, 2010 9:00 am ET

Executives

Morry Taylor – Chairman and CEO

Paul Reitz – CFO

Analysts

Ian Zaffino – Oppenheimer

Alex Blanton – Ingalls & Snyder

Derrick Wenger – Jefferies & Company

Philip Volpicelli – Deutsche Bank

Saul Ludwig – Northcoast Research

Charlie Rentschler – Morgan Joseph

Presentation

Operator

Ladies and gentlemen, welcome to the Titan International Incorporated second quarter earnings call. 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 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 involve risks and uncertainties as detailed herein.

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

Morry Taylor

Thank you, Mary, and good morning to all of you on the call. I'm assuming you have the press release and I'm assuming that you got the 10-Q, everything's been filed. The numbers kind of speak for themselves.

It was a very good quarter in the second quarter for a number of reasons. The business was strong in all segments. We've seen an uptake. And our management team, as I said in the press release, did an excellent job of holding down costs and gaining a little bit on our margin. And I expect that to continue. Since the quarter is over, most of you can see what those are so most of you are interested in what was coming out and what will we see.

Well, to give you a little perspective, we believe as I said in the press release that the business is going to stay very, very strong also for the foreseeable future. We believe because of the price of currency in Brazil that the American farmer is going to do real well. You can see it in a lot of the commodity pricing. If you just watch what's written in the Wall Street or the talking heads, one day we're going to have record crops, the next day the agricultural department's got it wrong and less than this.

So, I'm just going to tell you, if you fly over the whole Midwest, you get down by Quincy, you'll find that the soybeans and the corn is not going to be as good, because number one they've got too much rain and had to plant it a number of times. But you get up by the Bryan plant. I haven't seen the corn that high looking that good in years. So, I think you're going to have a hit-and-miss all across the whole Corn Belt.

And the situation is that it's going to be good for the farmers and if they ever go from that 10% to 15% ethanol (inaudible). And the equipment, I believe, our friends at here and everybody, I believe they are all taking a conservative approach.

But I believe that there's going to be a demand and that demand's going to stay out for the next number of years, until the currency switches. And actually, it looks like it's going to keep in the favor of all the U.S. employees, so we're excited about that.

Construction has picked up, the numbers show it, both in the OE side as well as in the aftermarket and that's a two-fold. Your dealers are putting on, they're still very conservative, they're not just flooding up with OTR tires. But there is a little bit of a pickup in the demand, which is good.

The mining is going strong, in fact, contrary to the price of commodities, it's like I said on the call before, when they turn around and they, the commodities get so strong, companies spend a lot more money trying to open up more mines and everything else. Whereas, when the commodity prices go down, as long as they don't crash through the bottom, they just try to dig it, dig, baby, dig. And that's real good for us.

So, right now, we're pretty content people on what's going on and we're just going to stick to what we can produce and make it at a profit and continue to try and take more and more market share.

To give you an idea, a year ago and I'm using the wheel business as a sign because the wheel business, we see things a lot quicker than you do from the tire side. And the wheel business does not shutoff as fast as the tire business can.

So, a year ago, our order – what we shipped in the month of July was in the round numbers of around $8 million in wheels, which was a low point in the wheel business. We’re going to be more than double that number this month. So, August is in strong, September's showing in really strong. So, we're looking to have this market continue much, much stronger than the second half of '09 last year when the thing just shut right down. So, that's all the good part.

Moving on to what else is the acquisition front. We've finished on buying all the stuff from Denman, which we spent about 7.5 bucks and that's – we have all the equipment everything. Some of that equipment in the next 90 days will be running at certain of our plants. We have some unique situations and we believe that our payback on that is going to be very fast.

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