TWI
#Well, the first thing, as I mentioned, if you look at the cash receipts, I spend an awful lot of time out on the road, and I've been with an awful lot of dealers, whether they're Case or Deere.
And almost all of them have been moving a lot of used equipment.
And I think you have to give the OEs a lot of credit, instead of going out and banging up the market of new stuff, they've been sitting there pretty good taking their punishment and letting the dealers sell off a lot of their trade-ins.
So the dealers have reduced the pricing of their used equipment just trying to get it down, mainly because they wish to get it down.
You've got a lot of big farmers who might trade in 10 big tractors to buy 10 of the newer ones, but that the price of the trade-ins is way down, so they're looking at, well, let's just use them for another year.
But they got the cash.
When you look at cash receipts, farmers are getting ---+ unless a farmer went out and bought an awful lot of land and mortgaged his land, they're pretty good.
Yesterday I was in Fargo, the day before, I was here in South Dakota.
And you can see they're getting all ready to plant.
So I think ---+
Well, I think what we're going to see, in ours, I think that we will probably be stronger in ag sales in quarter-wise in second quarter than we will be first quarter, because we flushed out the inventory, the OEs.
We're switching ---+ our ag sales in the second quarter will be dependent on various parts of the country and weather.
In other words, if you have a wet spring, our ag sales are just going to jump pretty good because you got to have bigger flotation tires, and that's the way ---+ and we make them.
Nobody else makes as many as we do.
And those have probably the best margins.
Then the summer will be like most summers.
But then come fall, it depends there, too.
If it's a dry fall, which it was ---+ fall last year was probably the first time in 20 years it was such a great fall, you did not have a big rush of [taking] tires out for combines and tractors because it was so nice.
If it gets to be wet, then that's going to be a real big boom.
So we are dependent on weather, <UNK>.
I would think every quarter because nobody knows, [like I said] ---+
---+ it's soft.
Yes, the order book.
I would say it's a mixed bag.
The big items are not being ordered until the last moment, okay.
I would say from 150-horsepower down, your order deck is moving up.
Above it, which is our bread and butter, it's more of the last moment.
And the same thing is going on in the aftermarket.
Now, the big kahuna for us, of course, is the lawsuit we filed on everybody from China, India, and everything, and that's going to make a big differential.
So now that the DOC has already said, hey, they're moving forward, International Trade Commission agreed on India and Sri Lanka.
You were around when I did it before, Titan did.
And we were pretty successful.
There's no doubt we'll be successful now.
We're going to try a different, because the ICT didn't touch the tire and wheel assemblies because of not enough volume there.
Has to be 3%, and it wasn't.
But our point, as my press release said is that this is nuts.
Steel, you have duties on steel and everything.
But technically, if you mix them together, there is no duty.
So I think with our friends, the steelworkers, we're going to have to do that administratively.
And I think we'll win that too.
So line up the cry towels for some people, but it's the law.
And I think the law's on our side and we will prevail.
And when that happens, you can just pull up the chart, you can figure out how many hundreds of millions of dollars, and that's not all coming to Titan.
My friends at Firestone insist that we always have to lead and pay the bill.
I think that right now everybody's been put on notice.
So if you go buy a bunch of stuff now, and we win, the duty goes back to the [time], because you've been given notice [that] the lawsuit, and they took it up.
Yes.
Okay, that's a good deal.
Good luck with that, Maury.
Last question and I'll jump off.
Could you just help us with EBITDA and ITM.
Because you said, obviously, it could be for sale.
But how do we think about maybe trailing 12-month EBITDA, something like that, just so we get a sense of value.
Thanks.
And good luck this year, Maury.
Well, I'd rather not, because we never break anything, then you set a precedent.
But let's put it this way.
It's north of nine.
I mean in the nine figures, then we would be interested in selling it.
Well, I would love to have bought a bunch of stock when it was down around three bucks, four ---+ $2.80, whatever it went to.
I would have loved to.
Only problem is, I'm restricted, Titan's restricted.
We can't do it because of the bonds, the big senior bonds, okay.
We've had enough lawyers look at it.
We've looked at it, so.
No.
I can always buy bonds back.
That we can do.
Well, you see, you have two situations.
We're the only one that has this situation.
You have the tires that have been the same tires for the last 40 years.
Now, you sell, in the aftermarket, you sell them to tire dealers, big wholesalers, et cetera.
So you've got a sales force that's out doing that.
Then you have the new, which <UNK> explained, in the LSW tires, which we have gone out, and we have like 180 farmers now who have turned around and found out that you put a set [of new] tires on your tractor, your combine, your sprayer, your implement, you can turn around and that equipment will perform better, even a freaking grain cart will perform better.
So what is happening is that in order to make that channel, we only have a couple who I would call very progressive dealers in tires who have taken the LSW, because you got a wheel and a tire.
Now, so we have gone to equipment dealers, the guys that sell the equipment, and the farmers.
So we're doing both.
So that we went to the big farmers.
The big farmers are buying.
We have made them house accounts.
We call it our R&D farms.
But what happens when other farmers see them, they want the same thing.
They go to the equipment dealer, whether it's a Deere, a Case, or whoever, AGCO, and then we sell right to that equipment dealer because you have to buy a tire and a wheel.
Once you've got yourself set up, you just have to buy tires.
So that's what we're [growing] there.
And we're doing the same thing in the construction business.
Going to the big huge construction contractors.
And that's the long term.
We're going to be our destiny of the product we make.
Do you want to touch on that <UNK> or <UNK>.
Well, what is going down, as <UNK> talked about, you go in, and what happens is you start reviewing everything that goes into a tire or everything that goes into the wheel.
I mentioned one about the scallops versus a full 360 contract.
So in our welding process, where you might have on a ---+ just think of a 46-inch size big wheel.
Well, it's got a 360 degree weld.
Well, you can put four six-inch welds, and that's all you need to keep that center if it's pressed in there in that wheel.
And you'd have some scallops on that thing.
So what you do is you're going to buy because it's a circle, and you're punching a circle out of a square, if you turn around and make your square a little smaller, you're only chopping the corners of the square off, and when you form it, those come up, and then you weld those.
Well, when you're dealing with big steel, you've got the situation where you're taking a lot of metal out.
So a lot of these items, that's for a wheel.
Now, let's get to a tire.
You get to a tire and you ---+ the large ---+ we're the largest when it comes to all these 100 horsepower and down, let's just say 40 and above, tractors.
And those are going up this year.
And we supply, whether it's Mahindra, Ellis tractor, Kioti tractor.
You just go down them all, Kubota, that come in, and they buy tire and wheel assemblies.
The same situation there, when you look at the tires, a lot of times, they just said they want this tire.
So when you look at certain equipment that's out in the world, you see that they've got various tires where you can take a lot of cost out of that tire.
That tire's [been around] for 40 years.
And so they just got used to it.
They don't need that tire on that piece of equipment.
Looking at it, you can make it so it looks the same, but you can take an awful lot of stuff inside that (inaudible).
<UNK>, to answer your question on that, <UNK>, I mean, it's really indicative of all the efforts that we've put in over the last couple years to get to this point.
We've highlighted a number of those factors that have led to this.
I mean, our scrap rates are now lower than they were last year.
Our cost of quality through our warranty continues to go down.
We have plants that have gotten more efficient as we've reduced headcount.
And what Maury's alluding to here with taking out raw materials, couple examples on that, we've put in sensors in one of our large tire plants that can take out the variability.
So as you know in finance, any time you got variation, it adds risk and decreases value.
Well, we've taken variability out, so now we're putting less material into our gauges of the [kind of] rubber.
We're able to spread our fabric better with these sensors and get more out of our fabric than we used to.
So these are incremental things.
So it's not one thing that we can sit here and say, yes, this is the holy grail that made it all happen, but there's definitely a lot of initiatives that have kind of added up to the secret sauce that has really gotten us to this year where we saw an improvement in our gross margin percent.
so I think what we will do in 2016 is see those initiatives roll forward, and then continue to build upon them.
And so the only thing we've got to do is make sure we keep getting the volume into the plants and absorb as much of the fixed cost as we can.
You're exactly right.
The $5.5 million I alluded to in the plant that I was at this week, I mean, those are permanent improvements.
They don't go away.
And like I said, it comes from stuff that certainly we have on the table now that did we have it before.
I'm not saying we didn't have it before.
But really what the last couple years has done is we've gotten the team really pushing more aggressively towards the initiatives that benefit the Company.
And so there's good things that come out of a downturn.
It's painful living through it, but there's definitely good things that will benefit us in the long term.
<UNK>, this is <UNK>.
I want to make a couple more comments on this.
During the course of 2015, we had upwards of 250 projects in play that materialized in our results.
And the comment you made, and I made it during kind of my section, was these are accumulative.
So these are permanent changes.
And by the way, it's not just cost reduction.
It's profit improvement.
We've delved into areas like pricing, attacking our invoice programs.
We have growth initiatives relative to sales, operating expense, redeployment in terms of driving more value creation.
So there's a lot going on here.
And that pipeline continues to be filled and replenished.
And so it's just a machine that continues to churn relative to contribution to the results you're seeing.
Well, the first thing is you have what you call a maintenance CapEx, okay.
Maintenance CapEx for all the factories worldwide, we probably only have to be real close to about $20 million.
That's where you ---+ all the other stuff you have to keep doing, safety, environmental, whatever.
But then it's like anything else, everybody, as both <UNK> and <UNK> have mentioned, you go to every factory.
Every factory, when they do their budget, they'll come up with big CapExes.
Hell, lot of them might even think to start building a brand-new plant.
So what the situation is, it's most of our CapEx, a great part of it, we use to either improve our efficiency, reduce our cost, or come out with new product.
And what we have, once you cross that $20 million, that's basically being put into mostly reduced cost or new product.
And you're wide open on where the top or the bottom could be in reference to that.
But your floor is $20 million, probably anywheres from $16 million to $20 million.
Did I answer your question or not.
I would say I don't know what the percentage of it is.
But you're probably between $20 million and $30 million.
And then I think it's going to just keep growing.
I don't know.
I haven't even looked at 2014, so I'd just be making something up for you.
<UNK>, it's continued to increase.
The trend lines look good.
In a recent meeting we had with our management team, our ag product manager is extremely confident that the trend line for 2016 will [get] better than what we saw when you look at (inaudible) 2014.
So it's moving very positive.
I can tell you right now that the largest farmer in Illinois who farms just soybean and corn has new tractors from [mother of] the green machine.
They came with new LSWs.
All his combines, I believe he brought, it's either 12 or 14 new combines.
And those all have our big 12-50-46 LSWs, both front and steer, the 850s on the back.
And then over in Iowa, a dealer out there has been, he's been running a program where he would switch out and if you got a used tractor, used combine, he'll switch them out and put LSWs on for the farmers.
So that's two.
Up in Canada it's moving.
Most of the equipment on the big stuff up through there, we're going to be looking at.
The big thing about the LSW is because you work at lower inflation pressure, you end up with less compaction.
Number two, you ever see all these combines with duals.
Ask yourself, well, why the hell they got duals.
They got stalk stompers on those combines and everything.
They're running duals because they think that's for flotation and they can get them out [first], be stable on a combine.
Military, for almost 20 years, has gone super singles.
Put a big super single on there, you outperform everything.
Instead of having four tires, you have two.
You get better pull, better fuel, better ride, less compaction.
Well, it's a big country.
The next show we have Ride-N-Drive, is in Arizona.
Most people don't know, but big farmers down there are dairy farmers.
So We want to keep going just like automotive, went through automotive like barnstorm.
Took about six, seven years, though.
Yes, I think what we're seeing is a steady increase, <UNK>.
The inflection point comes from many different sources.
I think what Maury talked about earlier, some of his comments with the test farms that we have, as that population base grows and the acceptance, and I read a few of the comments from those reports which are just a small subset of the positive comments we get, the inflection point comes when that population base just continues to spread the word.
And so I think our job is pretty simple from the standpoint that we have a great product that makes equipment perform better, we just got to continue to get it out there in the market, build good products, and develop new products to continue to fill out the product portfolio.
So I think we probably [made it] more complicated than we needed to at the beginning.
We approached it more of a disruptive technology that is tougher to sell.
I think we really just got to look at it as it's a sustaining technology taking wheels and tires that already exist in the marketplace and just making them better.
And so I think we really got the team focused.
We got a good group of test farms.
Like Maury said, we got equipment dealers that are pushing the product hard.
We're in the OEM books.
The market recognition of the LSW is strong, as I mentioned, 23 points higher than IF and VF.
So all the trend lines are good and positive.
Is there an inflection point.
I believe there's one coming, but I don't think there's anything that we can sit here and point to specifically right now.
Well, I don't think what's happened up in the oil sands has basically been spent.
And we've already bought the molds and everything for Goodyear.
So what you have is a factory.
It goes through ---+ you're just putting it in.
The biggest expense is, which you already have the bodies, the engineering.
In fact, our Russian plant just added in the curing side, they added another shift because of their orders.
So that's what it is.
You're not talking ---+ this is no big money for a big launch yet, okay.
I can make a couple comments there.
In terms of the tire reclamation, we don't build anything.
So we're recycling tires.
So there really shouldn't be much of effect on working capital there.
And in terms of tires, the initial tires that we sell into Europe are being sourced from North America, and I don't see that having a material impact on inventory or working capital as well.
Working capital, we fully expect to improve, as I said during my section.
Initially with the EVA framework there is a lot of emphasis on productivity and profitable growth.
In fact, the BIF, or the Business Improvement Framework that was mentioned, 75% of those initiatives I talked about, 250-some-odd that flowed through 2015, were related to the plants and productivity improvement.
So that's where our focus has been.
In 2016, we have an acute focus on working capital improvement.
So I expect working capital to contribute to cash generation in 2016.
Well, yes.
I mean, with SG&A, you had some currency impact and some one-time items.
So, no, I wouldn't think that level would be sustainable.
But with that being said, we have continued to reduce operating expenses.
And I've said on previous calls that, relatively speaking, when we're in 2013, certainly higher level of sales, our operating expenses is fairly lean.
And what we've done, even though we have reduced it, we have also looked for opportunities to redeploy it from lower-value opportunities to higher-value.
So we'll continue to do that.
I mean, at the end of the day, it's about profit dollars at the end of that P&L statement.
And sometimes we're going to have to invest to produce more profit.
And so we'll continue to look for those opportunities.
You got that there, don't you, <UNK>.
Yes, I have it.
So adjusted EBITDA for Q4 was $3.2 million, full-year adjusted EBITDA was $54 million.
Yes.
For 12 months, the year ago was $89 million.
And I don't have Q4 of last year at my fingertips.
I believe it was roughly about $8 million or $9 million.
Yes.
We're looking at, I think we put out between $30 million and $35 million, in that range.
You're welcome.
And thanks to everybody, whoever stayed on.
You have a good weekend.
