Image source: Titan International.

2015 will end up being a year to forget for Titan International Inc (TWI 2.70%). The giant-tire manufacturer was a casualty of falling commodity prices in everything from metals to agriculture products. To make matters worse, it has a large international presence, so the strong dollar exacerbated the weakness in demand.

The best thing investors can take from the year is an improved cost structure. If demand returns, and eventually it will, there should be lots of leverage in operations. Here's what we learned from Thursday's fourth-quarter earnings report.

Titan International Inc results: The raw numbers 


Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)


$307.8 million

$383.3 million


Net income

($57.4 million)

($84.3 million)






Data source: Company earnings release.

What happened with Titan International Inc this quarter?
The fourth quarter is typically a weak quarter for giant-tire demand. Just 22% of last year's sales occurred during the quarter, and more than half of the full-year loss of $93.3 million was in Q4.

  • Sales dropped $500 million in 2015 due to weak demand in agriculture, construction, and mining. This was made worse by a strong dollar, which made sales overseas look even weaker than they would have a year ago.
  • The good news is that oil, steel, and rubber costs are down, which lowers manufacturing costs. But these savings weren't enough to offset the decline in demand.
  • Overall, 2015 sales dropped 26.4%, but Q4 sales were down just 19.7%. That's maybe a small indication that the downturn is starting to slow a little.
  • 2,500 jobs have been eliminated since 2014 as a result of cost-cutting measures. SG&A expenses were down 19% during the year, and this has kept Titan from even larger potential losses.
  • Cash balance at the end of the year was $100.2 million compared to $511.6 million in debt on the balance sheet.

What management had to say
CEO Maurice Taylor was fighting an uphill battle in 2015, but he thinks the market is near its bottom. He predicted that sales of combines, large tractors, and sprayers would be flat in 2016, and small-tractor growth will improve around 15%. This should help drive sales to equipment manufacturers who buy tires from Titan.

The optimism is measured, though. No one knows if or when commodity prices will rise and drive another round of investment in large machinery. Until that happens, Titan International will be focusing on cost reductions and keeping the business as near to breakeven as possible. The hope is that this will provide a lot of leverage when demand returns.

Looking forward
There are two categories investors need to watch going forward. The first is an increase in commodity prices and underlying demand for equipment. This will do more than anything to drive the business, but it's also what management can control least.

What is in management's control is operating costs, and on that front, there was a lot of improvement in 2015. Look for that to continue in 2016, because even if the bottom is near, we don't know when demand will turn around.