Jim (cont'd):  

Beginning of
CEO Interview
with Timothy Sullivan, CEO
Bucyrus International...


Jim:       Mr. Sullivan, welcome to Mad Money...

Timothy:    Glad to be back, Jim...

Jim:       Mr. Sullivan, you gave a speech recently at the Harvard Business School club of Wisconsin. You said something we've been saying on this show. I actually don't like to hear it from big American manufacturers. I'm always hoping that I'm going to be proven wrong about this... You talked about the idea that the United States could become a... eclipsed by China as a world power... I want to ask you about BUCY, but could you just talk about that quote for a second? Because it's pretty earth shattering...

Timothy:    Well, I think it's going to happen. I think the fact that their economy is growing at the speed it is, and ours is in the doldrums... I think that it's not in the too distant future that that's going to happen. You know, the Chinese believe it's going to happen as soon as 10 years out...

Jim:       Yeah, you know, I've been thinking... when I was down at that Washington Correspondent's Dinner last weekend, I was talking with people and I said, if we don't pull ourselves out of this tailspin, they could pass us within five years...

Timothy:    Yeah.

Jim:       So you see it, you see it, right. They have a good balance sheet... they've got the cash...

Timothy:    It does.

Jim:       Now, we were looking, at first, at your company as a way to measure... because it's bottomed ahead of it... commodity prices. Are you seeing a revival of interest from customers who had stayed away because they were afraid that commodity prices wouldn't bottom?

Timothy:    Yeah, I think there was a good reaction by the commodity producers back in the fourth quarter. They pulled back production... really put a floor on commodity pricing worldwide... and, today... it's not really backed off... they are still producing product well above their cash cost. So they're in a very good position now, as this thing starts to recover. We believe it's bottomed out. As it starts to recover, and move back up, they've got that room between their cash cost and their sell price. So they're in good shape.

Jim:       So Tim, if that's the case, then financing... which I know when we talked last, some of your customers were worried... because of your unique... and I'm going to remind our viewers about this... because of your unique way of, when you order, you have to put something down... But you were saying that this was a concern. Financing is easier now, isn't it?

Timothy:    Yeah it is. We actually... the good news is that we've been getting some good support from the U.S. Exent (?) Bank... from Hermies, and the European side... and those guarantees are allowing commercial banks now to lend for our type of equipment. So that's kept the traction going here when the overall credit markets have been in a kind of difficult position.

Jim:       Now talk about... there was one thing that seemed worriesome to me, but it could just be some sort of glitch... a delay in a drag-line order to India... I think India is our second most-important customer of the future after China... Talk about whether India is a problem...

Timothy:    India is not a problem as much as it just takes them a long time to make decisions. They've got a huge bureaucracy... they've got to work it through that bureaucracy before they make those decisions... The problem in India... they've got huge coal reserves, but yet they're importing, because they can't get our machinery working fast enough, because it's a long process to buy a piece of machinery at the value that we sell... so it's a financing decision. It's a bureaucratic situation where they've got to work these things through their process. We basically sell to the government, and you know how governments make decisions...

Jim:       Now, I think a lot of people were hoping that we would have a stimulus in this country that would involve ultimately giving orders to companies like your company. That's not happening, is it?...

Timothy:    No. Not at all.

Jim:       Ahhh... And you also, when we talked last, I wanted you to go into this... The cancellations are minimal... Isn't that because of the way you do business?

Timothy:    Yeah. We've got a very unique situation in some respects, because of the large capital intensity of one of our machines. The least expensive machine that we sell is $5 million. The most expensive is $180 million. We work off of our customers' cash flow. Basically, we have a down payment, and we stay cash neutral through the entire manufacturing process. With that money in the game, customers don't cancel. They would walk away from a huge investment if they would cancel...

Jim:       Alright, one last question... Every time I have ever seen a major company... like yours... get to the point where your market capitalization is subtantially below your book of business... actually below your orders... it's been almost impossible for that company to stay independent, because other smart companies see it, and they take advantage of it. What are you going to do with your cash to try to move the stock up or something? Because, if I were in your business, I would just go buy your company...

Timothy:    (laughs)... Well, we're making investments. We've made two acquisitions, and a JV (i.e., joint venture) in the last four months, and we're going to continue to do our business. We're going to use that cash to grow our business, especially in this market. This is the time to grow the business.

Jim:       That's exactly what I was hoping you were going to do, because this is the time to take advantage of the guys who don't have it. Tim Sullivan, you're a good man. Thank you for coming on the show.

Timothy:    Thanks Jim.

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Jim's comments AFTER the interview:     Alright... look, we've been dead right on this company... We got you about a $13-14 basis. We're up a lot on the stock, and you know what? Yes... I don't want you to be greedy... But... This is the machinery company, at this price, to own. He's a good man. Bucyrus (BUCY) is a good stock.