Ladies and gentlemen, welcome to the Titan International Incorporated First Quarter 2014 Earnings Conference Call. [Operator Instructions] Any statements made in the course of the 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-K and Form 10-Q 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 Chairman and CEO, Mr. Maurice Taylor. Sir, please go ahead.

Thank you, Amy. Good morning, everyone. Everyone, I believe, has gotten the release. The first quarter wasn't anything that we expected, and I imagine most of you didn't expect it that bad. But going forward, we do believe that there is a lot of good things that we found and what we're doing, but let's cover a little bit of it for the first part. Right up through the end of December, the ag market was going good. We all know where the mining market and construction was starting to come on. A couple of things, and number one, where we are and we're the big anchor in North America. Of course, the winter blast not only affects the efficiencies of the people, everybody got hit so hard, but it did have a big change in what we were and how we were and efficiencies of our plans, mainly because we didn't have the same workforce every freaking day. But needless to say, we're over that at this point. We did not move with the speed that better and different of reducing our headcount, thinking at some point, we were going to be able to see these orders coming in. The whole ag market, in our opinion, and I've been out in the field this week, especially running around, it's running slow. It's -- they're still trying to get in the fields, it got too wet, but they are going to be there, it will happen. In talking with dealers, I think everybody has realized there is going to be a shortage, they're just -- not a shortage, I mean short in sales level, but no one has got a handle, whether it's 3%, 5%, and someone thinking 10%. Personally, I've talked to farmers, I've been out there, they're still…

Okay, thanks, Morry. Good morning, everybody. Well, needless to say, Q1 was a good start for the year, continuing against the backdrop of raw material prices, weather, and cyclical downturn in mining, impacting our North America, Australia and undercarriage businesses. So let's begin by breaking down our revenue to understand the drivers behind our results. Quarter sales were $539 million, this is down 7% from Q1 of last year, and up 9% from the fourth quarter. The 7% year-over-year decrease was driven by a reduction of $42 million in North America, earthmoving and construction. Other variances to Q1 of last year include $30 million from acquisitions represented by our Voltyre-Prom acquisition in Russia. North America ag was down $18 million split between price due to raw material decreases related to rubber, and volume resulting from the slow start associated with the weather. We also got hit with FX at $12 million, greater than 100% of this impact was driven by the Brazilian real. A 9% quarter-over-quarter increase was driven primarily by North America ag at $27 million, and Voltyre-Prom Russia at $17 million. Our Latin America business continues to grow, while our undercarriage business continues to be impacted by the earthmoving slowdown that was mentioned earlier. So let's turn our attention to margin performance. We recorded a decline in gross profit performance at 10.1% for the quarter, that compared to 16.7% from Q1 of last year, and relatively flat to Q4 at 10%. This obviously represents a sizable decline to last year's performance, while we experience slight gross margin performance decreases across several areas of our business, most of the negative impact stems from mining. Again, associated with North America, Australia and our undercarriage businesses. Generally speaking, you are all very knowledgeable of the story, mining companies continue to reduce…

[Operator Instructions] Our first question is from Ian Zaffino with Oppenheimer. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: The question will be more, I know you said this kind of took you by surprise. And I wanted to drill down a little bit on that, because I think you're also talking about sort of putting in these processes to bring up margins and to kind of improve the business and sort of become more able to sort of adapt to what the market's doing. And the question is, is the matter of like systems in that, you just don't have the systems that tell you, hey, look, we're not just shipping as much and we need to bring back our labor costs and our costs. Because I'm just surprised that you were surprised by your business, and that you probably, I would imagine, everyday, get sort of the runs of what your plants are doing, what your factories are doing, and maybe that's just not the case. And just sort of what you're trying to achieve here with the business of bringing the margins up. And just sort of -- and I know that you have implemented an ERP system previously. Just kind of help us understand a little bit more, like how much work needs to be done, where are you now, and where can it go, and what's the improvements that you'll see.

All right, good question. What basically happens is we have the system to see where the order deck is. But what happens is that when you come rolling in to December, and you shut down for 2 weeks at the end of December, the order deck was, compared to in certain products was soft, the other one that was pretty firm. And then what happened, you hit the first of the year and your plant managers are looking at their deck, but what is happening is the order deck is sliding out. In other words, they're taking and they're moving, they have the order, but they slide it. Generally in the wheel business, it's -- you've got a lot more visibility. But right after the first of the, when everybody came back, you had from the middle of that month, orders being slid out into the February. But then what happens is you start off to try to run and you've got a tremendous amount of absenteeism. So you're now, efficiencies, because you got people going around trying to get what you had to get out. Now you see from over in Europe, you expected Europe to be not so. My board expected the same thing. But what happened there, they even started moving. The problem we have over there, you can't get rid of help, you can't get rid of help. You're going to bleed like hell. So that's what happened there. On the mining side, the construction was, in December, was looking pretty good. But then again, that thing just got slid out. Now when you look at the ag side, the ag side referenced the OE got slid so much, but what really got moved was the aftermarket. So they move you from middle of January orders…

Well, construction is moving. In fact, I think, everybody's telling you construction is moving. But construction, the difference between construction tires and farm and ag is there's been no change in the construction tires for 70 years, almost. So the margins there are real thin, but equipments made some changes. So it helps with your burden absorption, but it doesn't help that margin stream that great.

The next question is from Stephen Volkmann with Jefferies.

I'm wondering, if we can just, I know you've rescinded your guidance, and I guess there's some work to do in terms of managing headcount. But I'm just trying to get a sense of sort of the parameters around here. Do you think that, you guys said you had plans in place to adjust employment levels. Is that enough to get you back to a reasonable profitability level, however you might define that? Or is there actually some fixed costs that you need to get out as well?

You didn't come on that. What is it exact you want to ask me, Steve?

Yes, actually I was thinking, John might have some numbers behind this. But I'm always happy to talk with you, Morry. And the question is, is adjusting the headcount enough to get you back to a reasonable, call it double-digit EBITDA margin level, or do you have some fixed costs, 1 plant or 2, that you're going to need to take out as well over time here?

No. The -- when you look at -- it's kind of a crazy situation is that, when you take the volume on certain plants and you bring it down to a level, what you need to do, just portionately, you have got to take a lot of bodies out. And the bodies don't just come from the hourly guys. You're going to take it from some of the salaried too because what you need to do is, those facilities are meant to run really on the lean side. You do not want to start building inventory. And what happens is, let's just take our wheel plant. Our wheel plant is the gem of our whole being. But what you'll end up doing because of the margins and what they do, they turn around and at some times, they get worried about where, how much steel, everything else, so you look at it, and they bring in so much inventory. When in this market going forward, you don't want to do that. We know how, we've been it so long, how you have to manage it. So what transpires, though, you got to get the bodies and get it down to it's really lean. And you are going to get the margins and you'll improve those margins, when you do that. When you go to the tire plants, one of the big hammers that's hitting us is not only is it into the labor, but you have got to -- you have got to get that natural rubber to stabilize, and then you're not discounting on the prices because of the length of time that you've got. So that's -- I thought, we'd be done with this last year, I mean in the end of the year, but now you're below a buck to pound. I don't know where it's going. All I know is, we're not buying -- we're buying as least amount that we can, out in the future because we don't really know. And John, you got numbers. Is there some magical bullet?

I'll make a couple of comments. I referred earlier to a profit optimization framework that Paul Reitz is going to lead, and I'll partner with him on this. And we chose the words profit optimization purposefully because it's not just about headcount reduction. Obviously, that's the blocking and tackling that we'll pursue first, but what we want to explore with our businesses, how do we optimize profit, and that means raising the revenue line, certainly maximizing profitability and what we have. So if you think about the growth that has occurred over the past 3 years, and I referred to it earlier, rapid growth, we've had a lot of energy around that, the company has been very successful. I think, we have incredible opportunities now to go back to what we acquired and the growth that we've obtained and extract the value out of that. And we're doing that actively. Paul and I are both traveling pretty extensively to our international locations and working with them directly on initiatives to drive profitability improvement there. So to answer your question, there's going to be no rock that's unturned relative to profitability improvement for the company, coupled with asset management.

I would throw out, Steve though, and I'd be [indiscernible]. Misleading if I didn't tell you. There are an outside of the continental U.S., there are some facilities that we are looking to modify or change in a big way. And that means that we have to have teams over there, and it'll take 6 to 9 months before you can even start to do of a closure or to move something because of labor laws.

Okay, fair enough. Can I just switch gears a little bit more? You mentioned that you have enough cash to finish the M&A program. Can you just update us on sort of how your pipeline looks, what you think that M&A trajectory is going to look like. And then are you basically saying that after this year, we're pretty much done with all that?

Well, to take it, one piece at a time, we have been in negotiations in certain situations for a long time, okay, with some companies. They -- because of the situation, they're not here at this moment in the U.S., they're outside the U.S. and because of what's happened outside the U.S., the currencies, as well as the companies themselves, the value of them have dropped. So when you look at what we're looking to do, it's a much lower cost for us to finish those. We believe that the 3 of them, is a total of 4, but 3 of them, we believe, without a doubt should take place yet this year. But I don't govern it. But we know we have the money. We know, we've looked at them. We've negotiated certain things to them and that's where we're standing. And we're not -- we didn't just run into the closet just because everything is getting in turmoil over there, just like the situation in Russia. Things are actually, at our Voltyre-Prom plant, are long term looking more secure and better than what we were looking at 4 months ago. So we're pretty happy about that even though that market, no one really has got a handle on what's going to take effect. So we believe, as I said in the deal that with those acquisitions, they would have us in between anywhere from $3 billion to, max, probably about $3.5 billion, and that's -- and we'll be done. And everybody can see my cash, the cash Titan has on the balance sheet, and we don't have our lines. We're trying to turn around and restructure this company from a financial side, where we get pay in the same amount of taxes, as some of these big boys that are global around the world and bring our bill to Uncle Sam, down into the 30 or less. And if we do that, then it allows us still to pay out a big dividend, and that's where you have to get this thing to. And we, both John, Paul and their team under him in [indiscernible] Over in Europe, they've got some good plans, how do we get there. And like everything, it's on a piece of paper, it just takes a while to get it executed.

Next question is from Schon Williams with BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: Morry, I just wanted to maybe talk about some of the trends in the kind of monthly demand. I mean, it sounds like January and February were a bit of a slow start, March picked up a little bit. I just wondered if you can comment on kind of what you're seeing in April. Is it similar to March? Is it worse than March? Or is it better than March?

Now it's starting to pick up like, but the question is, is how much is it going to move, Schon. I mean, when you look at the first part of March and you take the whole Midwest, there weren't anybody bringing in any freaking tires. I'm talking about from the aftermarket, they all were wondering what the hell happened and then partway through it, they go nuts. They needed some tires, but then first part of April hit. And there are some people in the country, southern Illinois, they want to get in the field. But Iowa, I was up in Iowa a week ago, and they've got 3 inch -- it was 80 degrees, then it turned around 3 inches of rain, then they got 3 inches of snow. So I happened to pick the perfect day, snow day. But I was there middle of this week and everybody is just hustling. You see more tractors out in the field now, and they're running. Well, when they really start using the equipment, that's when your servicing dealers are buying tires and things are going. And we're going to have a long planning season, I believe, and that's what I believe is going to happen. So I think, it's going to last, probably, all the way into June. But I'll know because next week come up, I'll be in Canada. So I mean, it's no different, it happens. You're playing with weather, and the markets are going to be down a little bit on Ag side, I believe, but I don't think, they're going to be double digit. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay, that's helpful. And then maybe, could we spend a little bit of time just talking about the consumer segment, which is really your Brazilian piece, the industrial piece? It sounds like, you're seeing some nice pick up there. Can you just help me understand what's driving the big improvement down there? Is it kind of the macro environment? Is it -- are you taking share? Is it new products? Just help me understand what's driving the --

Okay. The Brazilian consumer is a real simple market. We make medium truck tires bias, and there are some light truck tires bias. And those are all branded Goodyear, and we pay Goodyear a royalty. And what we do is we supply those tires directly to the Goodyear dealers, and we get reimbursement from them. It's typical, if you look over the last 15 years or 20 years, you will see that the amount of biased tires used in the trucking side increases a little bit every year. If you look at the radial tires, the amount of increase in volume is much greater. So we -- that plant made the bias. So what's happening is that we concentrate on it, and we do a good job of getting the tires to the dealers and at the spots that they want them. We do it a little bit better, than probably reference our friends at Goodyear. Goodyear had a problem sometimes of having them in the wrong section. So if you start transferring around, Schon, you start costing money. And I think everybody, I think Goodyear is very happy for what we've been doing and what is taking place now, as we are starting to move up into, Goodyear has authorized us to take them into Mexico. So while the markets getting a little larger, and that's, if the currency, it's a double-edged sword. If the real drops, then we're going to add more and more and more business. But we can be adding real good, but when we put it in a piece of paper compared to the U.S. dollar, we're staying the same, or we're losing a little bit. But I want the real to keep dropping because we just keep increasing down there, okay? Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. So then I'm just wondering in terms of profitability, I mean, it's losing money on an operating income basis. I mean, I'm assuming a big piece of that is going to be the real. I mean, do you need the real to improve, though, to get that unit of profitability?

No, I wanted to go the opposite way because what we're going to do is, we're going to do a little better on the hedging of the currency. And also, at least, it becomes neutral. And if anybody, our people have been working with some people. It's not our specialty because we never used to have to. So if you look in third quarter last and fourth quarter last year, we got a hit on it. We got a hit again. So eventually, even just manufacturers in the Midwest, we only take so many punches and we get it, okay? So, that's not one of the things I'm putting all my effort into, but I believe between Paul and John, they're smart, pretty young, and they've been talking, so we're going to get that done. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. That's very helpful, Morry. And maybe one last question for John here. I wondered if you could just talk about the balance sheet flexibility. It looks like, at the current EBITDA run rate, I mean, it looks like, you're going to be running debt-to-EBITDA at somewhere around 6x. And I just wanted to see, does that concern you? And then can you talk about the flexibility, you have to maybe to lever up? If you do want to go after acquisitions, and it sounds like, you're talking about another $1 billion to $1.5 billion of acquired revenues. Could you just talk about maybe the availability that you have on existing revolvers and the ability to maybe go out for additional capacity. I just wanted to understand how that -- all that plays together.

Well, we eventually, you want to make sure that you're borrowing, where you're doing the business, all right, that way you don't get -- you don't have to hedge as much. So what we're looking at is that as we grow, whether it's South America, whether it's in Europe, John's going to be with his people, working to see what we need for operating cash or if we don't need it, what lines do you have to set up. Right now our lines are set up through U.S. banks. So when we took over Titan Europe, we pretty much paid those -- there's some still debt out there, but we paid most of that debt off. And so, you're going to start generating cash, everybody should know, it's what we said in my letter, that we're buying a manufacturing concerns that we're going to make them better and that takes a little bit of time. The working up is some of the product like, we mentioned, the LSW, we're making tire in the wheel. And our proposal to not only our friends at CAT, but our friends at Deere, here's how this can benefit you, and here's how it will benefit your customer. But you do not want it shipped direct to them because once they touch something, everybody knows, their overhead dwarfs everybody. So we want to be able to handle it right to the customer or the dealer, build big Mother Deere, build Mother Cat or CNH, Agco, whoever, and just don't get them all touching. And we're doing this in certain products today, and it works. It's just that what has happened is, Titan is basically taking the old guy himself and putting him out there with farmers, construction companies. And once I start talking and get that showing the end users, how this will help them, then what naturally happens is, they want it and so they're big guns. And when they go and say it to the Deeres or to CATs, or whoever, and then pretty soon, they don't want to do it, then I'll do it direct. But then someone wakes up and says, how are we not getting our cut in this? Well, because you guys didn't want to have a cut. Well, at a certain level, you're going to hit people who want to make money and that -- in any big organization. So I think, it's going to work out pretty good myself. That answer your question? I don't -- I'm just trying to tell you what we're doing. Christopher Schon Williams - BB&T Capital Markets, Research Division: I wanted to -- I mean, I could just get John to comment, like specifically on the debt capacity and kind of where, certainly you've got cash on hand, you've got to access to the revolver. I'm just wondering, where can debt-to-EBITDA levels go here near term? How much availability do you have out there?

Well, I mean, certainly, we're going to have to monitor our EBITDA levels as we go forward, especially in light of this earnings announcements. But you made reference to the revolver, and it's fairly sizable, and I think combined with the cash position we have at this point in time, we feel comfortable that we can cover the acquisitions, as Morry alluded to earlier. But it's certainly something, we have to monitor going forward and look at it a more granular level.

The next question is from DeForest Hinman Walthausen & Co. DeForest R. Hinman - Walthausen & Co., LLC: I would kind of mirror the previous question on the debt. For some reason, I had to remember you guys had fairly covenant debt. But I mean, can you can just refresh us on, what are the current covenants are versus our current leverage in profitability levels and then maybe talk about how those might change if we were to take on additional debt?

Well, our covenants are pretty liberal. I don't think, we don't have any covenants problem, correct, John?

Not that I'm aware. Paul probably has a little bit more knowledge on this.

He's pushing his buttons right now, he's a little slow.

Yes, no, hey. To answer that question, John is exactly right. Our covenants are very light. We will not have any covenant issues, moving forward with our plans. And just kind of echoing what John had said, when you look at the acquisitions, we have on our map, on our radar, you look at the investment, we would take both from the acquisitive purchase price and also the working capital needed to build and run that, to build and grow that business into the future. We do feel comfortable with our balance sheet position and the debt capabilities that we could leverage in the local markets. So I think we're pretty comfortable with our future plans, and we'll continue to move forward with them. But now at this time, the balance sheet is not constrained by any debt covenants at all. DeForest R. Hinman - Walthausen & Co., LLC: okay. And then another balance sheet question on accounts receivables side. Those picked up a little bit in the first quarter relative to where they -- it looks like, they've been historically, should we read into that at all? Are the customers paying slower, did we have more orders in the back of the quarter or are we getting different geographies and payment terms are different?

I don't think there's anything to read into with the introduction of Voltyre-Prom. They have longer terms than some of our other countries, certainly in the U.S., so that was an additional $30 million of revenue and the associated AR that comes along with that. I'd describe kind of the phenomenon relative to our year-end and our shutdown. And if you look historically, that has impacted our DSOs roughly about 5 days, going from Q4 to Q1, and we saw exactly that materialized in our Q1. So no, I know, we have got some programs out there, where we're incent some customers with terms, but nothing of magnitude that, I think, you need to be concerned of over. DeForest R. Hinman - Walthausen & Co., LLC: Okay. And then can we talk about the Voltyre plant more specifically? I mean, we've been in there, we're kind of running it now, we've got some sales. Can you kind of drill into, what we need to improve. And then maybe some of your initial thoughts on the timing of those improvements?

Well, the big thing with Voltyre is that, the market share it has on the ag side. The equipment that they have is very good functional equipment. What we're planning to do is that we have been bringing, not only the -- some salary, but the hourly employees over to about a week at a time to come into our factories over here, so that they can see with their own eyes, what we do, how we do it. And our plan is to get them moles [ph] . There's no reason why they should not be producing the same tires, or the same piece of equipment that Deere, CNH or Agco makes over there, that they make here. And that is what we've told the majors and we want them to since we have all the specs, everything, the blueprint is there. So we want them to build it. Our plan is that once we have certain tires being produced, we have an opportunity to modify certain equipment they have, put some other stuff that would enhance the value of the equipment. And our thoughts are that we would do that, but we do not wish to do that, until we have brought enough people through our facility, so that we catch the uptake in the productivity. We catch the -- and show them how, for an argument sake, this line, they only need 5 people instead of 15 because here's why, we're going to put a conveyor between here and here, or it's round, it rolls, okay? Put it in the trough and roll it. There are so many things that we think that we will be able to say -- save in money and make a premier first-class ag and industrial tire maker, and that's what our plans are. And I believe, so far, everybody would agree that the management over there, the people, they're hungry to do it. Well, we're just walking real slow. DeForest R. Hinman - Walthausen & Co., LLC: And then I think in the past you talked about that plant was running all on synthetic rubber, and maybe there's an opportunity to switch them over to natural rubber or some sort of blend, or am I just miss remembering?

No, you got it 100%. They probably, they were basically, 95% synthetic, 5% natural. And I believe that as we progress by this time next year, hopefully, they'll be about less than 50% synthetic, and the rest will be natural rubber. The beauty of that plant is if natural rubber ever goes back to almost $3 a pound, that they've got synthetics. And you just the opposite every place else in the world. People have got more natural and less synthetic. When you play with synthetic -- you, rubber, it's a little harder to do and your equipment's got to be much more, balance-wise, closer. So, as I said earlier, right now, where majority is, is natural, and lay down the synthetic. So it helps your costs too.

[Operator Instructions] And our next question is from Clark Orsky with Alcentra.

Yes, just circling back on the balance sheet question. I just wonder, out of the $200 million or so cash in the balance sheet now. How much of that, do you think is sort of a minimum cash level, how much would you use for acquisitions?

Well, I would -- I'm not going to use all of it, but because everybody can see what's there and all the people that are on this call are probably the people I've been dealing with, so I sure don't -- I want to use the least amount of cash, I have to, okay? I don't know which other way to tell you. That's the bad thing about having a public call.

Okay. I guess just the other question regarding, someone asked earlier about the leverage. And I'm just wondering if you guys talked to the rating agencies about kind of, where do you think this all shakes out?

I mean, we've kept in regular contact with the rating agencies, that's something, I've done historically on a regular basis and what John will do going forward. You look at our, the improvement, we've had in our overall debt rating over the last few years. They've been very aware of our acquisition strategy, what we're looking to do. So there's not any surprises out there lurking from a rating agencies standpoint.

Yes, I guess, the reason I ask is, I mean $24 million, a quarter run rate is, seems a lot worse than your guidance and a lot worse than most people were expecting.

I will also assume that, that $24 million is not the run rate going forward. So that would be how I would look at it.

All right. I appreciate everybody in the calls, but we'll wrap it up and thank all of you, and we'll move on and get to work and correct the problems that we had in the first quarter. Thank you, everybody. Bye-bye.

The conference is now concluded. Thank you for attending today's presentation. Please disconnect your lines.