Titan International's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Titan International Inc (TWI)

Q2 2012 Earnings Call

July 26, 2012 9:00 am ET

Executives

Maurice M. Taylor Jr. – Chairman and Chief Executive Officer

William Campbell – Chairman and Executive Vice President

Paul Reitz – Chief Financial Officer

Analysts

Ian A. Zaffino – Oppenheimer

C. Schon Williams – BB&T Capital Markets

Saul Ludwig – Northcoast Research

Christopher Edwards – Jefferies & Co.

Lawrence DeMaria – William Blair & Company

Presentation

Operator

Ladies and gentlemen, good morning. Thank you for standing by, and welcome to the Second Quarter 2012 Earnings Conference Call. At this time, all lines are in a listen-only mode, and there will be an opportunity for your questions, and instructions will be given at that time. (Operator Instructions)

And as a reminder, this conference is being recorded. And I’d now like to turn the conference over to our host, Chairman and CEO, Mr. Maurice Taylor. Please go ahead.

Maurice M. Taylor Jr.

Thank you (Inaudible). Good morning everyone. Assuming everyone has their press releases it’s been a very active few weeks, this last few weeks. I know there will be a lot of questions, reference what’s coming out, but first I’d like to cover a few things on the quarter. This could have been just an extraordinary quarter reference to shipments et cetera. We had a number I had mentioned in the press release.

The heat was pretty strong when you get into the factory, especially the carrying and everything else and your efficiencies do drop, but we had an opportunity, we’ve been in a specialty and pre-port and into Bryan. We have been adding equipment to increase the amount of capacity and that we could move out of those facilities.

Some of the equipment that was due in March had just arrived and when you make these changes things happen to be, you know Murphy's law is that something will go wrong. So, our hourly workforce is ready and did an excellent job on my side down, I think there was some errors, but the good thing about it is that we’ll pick it all up in the second half. The order deck I’d know that most of you who have been listening to the drought everything out going on in the farming. I have just been out in the field last two and half weeks. I’ve driven to Iowa out on farms, up in Minnesota, up in North Dakota, Illinois, Ohio, and Michigan. And it’s kind of like there is no question there is a drought, but unless you are really bad at it, the reference in the farming. You’ve the situation of crop insurance and that crop insurance is going to make, it’s 85% if you insure for 50 bucks per acre. And that will insure also your pricing so when you go through there is no question in Oklahoma and people who do not have the irrigation, but there is going to be some that just make an outstanding amount this year and there is some who will do pretty good and there is some who probably won’t make it as much.

But overall, I can tell you I’ll be shocked if the net income to the farm is not pretty close or greater than when it was last year. And every dealer I went to revise stop and see the equipment dealers is marching on a record too. And since my friends at John Deere, they are kicking in, they are doing extra 5,000 tractors capacity, which kicks in starting in August, I expect them to be no different than Cat to trump what they did last year, and keep marching. I believe that even though in South America you see a – it's not as robust as it was, but I expect them to take – keep marching because that will take market share.

That was the only – South America was the only place that was not up to what we expected. But the reason for that is because in one of our press releases today, we made a deal with Goodyear to take over the light biased trucks. So we'll just pay them a commission and we'll handle it direct to the dealers that we currently have, and we will also included that into Mexico because they were not shipping much from Brazil. They were – they had supply agreements with other source that they were using. And it is our plan to add that into the Brazilian operation. There is a – when you look at the taking over and the inventory, we agreed to allow them to burn off a lot of that inventory before we started the pipeline because they had inventory in their warehouses where we ship right direct.

So we expect that to make a strongly rebound to the second half of this year, and we expect that to continue to go. We have shipped a total of 81 new part numbers down here for tires for the major OEs. They have all been to the plant and we expect that to continue to march strong and be a very strong earner in the near future.

As the situation in North America, I have a problem because number one, this deal that was announced today, are not announced, but just clarify giving you the specifics, some of the specifics. Those are planned to short time to file a 2S in England and over the takeover platform, whatever is written, is the only thing that can be stated. It’s a big huge gag order. And by their gag order because we are limited to saying anything sure until the prospectus is issued and put out.

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