Titan International, Inc. (TWI)

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Titan International Inc. (TWI)

Q2 2008 Earnings Call

July 30 2008 9:00 am ET


Morry Taylor - Chairman and CEO

Kent Hackamack- VP Finance and Treasurer


Saul Ludwig - KeyBanc Capital Markets

Charlie Rentschler - Wall Street Access

Alex Blanton – Ingalls & Snyder

Ian Zaffino - Oppenheimer & Co

Phil Volpicelli - Goldman Sachs

Wayne Smith

Joe Collin



Ladies and gentlemen, welcome to the Titan International Incorporated second 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, 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-Q and Form 10-K filed with the Securities and Exchange Commission extend to this conference call and any forward-looking statements involve risks and uncertainties as detailed therein.

At this time, I would like to introduce Titan's Chairman and CEO, Morry Taylor.

Morry Taylor

Good morning everyone and there must be a few open lines there because I'm getting feedback. Good morning everyone and I see most of you in this call probably have all the numbers and everything. We had a good quarter and as you can see, I believe everything is improving. The unique thing about this quarter is that all of this was done as we were bringing the 63 into production this month. And in the future we have a chance to, we believe, do better in the second half due to the 63-inch.

The third quarter will be the toughest of course. Why? That's because we'll shutdown for one or two weeks in July for our maintenance and most of our customers will also shut down. But we are looking at going into the future with a very exciting second half and then going into the next couple of years. I mean, everyone can see what's happening in the agricultural side especially with our [brand set] there CNH and AGCO, all of this scheduled for the future are up. In fact Deere has sold out and they are still shoving things up expected and then just blowing everything out just like CNH's and so as AGCO. The farm is going to continue to grow.

And the question comes, we haven't figured it out but eventually one of my Board members (inaudible) Wall Street whoever thought we had a liquidation, liquidity problem I'll get it out certainly in the market is a little bit and should get out of the business. Simply put, we are on the move.

And with that Kent, you just level off the numbers.

Kent Hackamack

Okay. Thanks, Morry. I just had a few items here because I know everyone wants to get to the questions. As a reminder we filed with the Securities and Exchange Commission the SEC report on Form 10-Q for the second quarter ended June 30, 2008. As the release stated, we had record sales of $269 million. They were 28% higher when you compare them to the second quarter of '07. When you look at the higher sales number you can see that it was helped by, as Morry mentioned, the exceptionally strong demand in the agricultural market and when you look at it, as a percentage, it was up almost 50% with the higher sales number quarter-over-quarter.

Looking at the total sales by market you can see the agricultural market was the big mover. It was up $61 million and ended the second quarter for the three months at $185 million. Earthmoving construction was also up. It was higher by $4 million and finished the quarter at $76 million. Our consumer market was down for the quarter and it finished the three months at $7 million.

Looking at the gross profit you can see we made a big improvement there. We increased gross profit by over $14.5 million. We recorded $41.9 million of gross profit and that's up from the $27.3 million result in the second quarter of ’07. Our trend of low selling, general and administrative expenses continued in the quarter. We came in at $15.3 million and when you express that as a percentage of net sales that comes in at 5.7% in this year’s second quarter.

Moving down to the income from ops. We had over $11 million improvement in the quarter. Income from ops increased to $24.4 million up from last years second quarter of $13.2. When you look at percentage to it, it was at 85% improvement in income from ops.

Moving down to the pretax number you can see it more than doubled quarter-over-quarter. We recorded a pretax number of $22.2 million, an increase of over $11.5 million from the pretax number of $10.5 million that we recorded in the second quarter of '07. After taking into account the tax provision, Titan second quarter net income was $13.3 million or $0.48 per basic or diluted per share which comes in the same either way versus the 2007 numbers of net income of $5 million and again $0.18 of earnings per basic or diluted earnings per share.

Moving over to the balance sheet at June 30, 2008, you can see we had a large cash balance of $69 million, accounts receivable $139 million, and their inventory was $118 million. Again at the end of June '08, we had no cash borrowings on the company's $250 million revolving credit facility. Total debt at June 30, 2008 was $200 million. All of the debt is long-term, as our short-term debt remained at a zero balance. The only debt that Titan has is the five year $200 million unsecured note, which comes through January of 2012.

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