Ladies and gentlemen, welcome to the Titan International Incorporated Third Quarter 2016 Earnings Conference Call. During this session, all lines will be muted until the question-and-answer portion of the call. [Operator Instructions] Any statements made in this 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 risk and uncertainties as detailed therein. At this time, I would like to introduce Titan Chairman and CEO, Maurice Taylor. Please go ahead.

Good morning, everyone. The numbers, you should have had all press release information and everything. During this part quarter, I have visited farmers, dealers and [indiscernible], all across North America. As I stated in the previous quarter’s big iron is down, it’s down about 70%. I believe it’s at the bottom and - but it’s not going to bounce up until pricing of the equipment, I’m referring to big iron, drops considerably; because in my visits when you look at the new tractors and the new combines they are a little bit like the Obamacare, you know they have everything that you can imagine electronically, and basically I believe in listening to farmers a little too much. So, the price has to I think back off because when you look at used equipment, it is moving off of dealers lots, if it is priced right. The smaller equipment at the OE level is going to stay pretty much for this next year, we believe where it is at. So, we expect that to actually move maybe just a little around 3% to 5% up. That is so real bright little spot. Construction equipment is the same as big iron. You listen to contractors, visit them, talk to them it costs a lot of money. If they can keep the other runner change tires, whatever, so be it. I think that’s going to bounce along. So, how do we increase our sales? Well, we have some great opportunities over the next 6 months. First, is our LSW. We issued a press release couple of weeks ago. What happened in Southern Missouri? A big farmer and owner of Delta New Holland did a big test using identical tractors and planters. The only differential in this was that one tractor had duals and…

Hi, sounds good. Thank you, Maurice. Good morning everybody. How about those cubs last night. Let’s start building that [indiscernible] statue. I think it’s going to be a pretty big one shining all over the city of Chicago and sure our boss is feeling about the victory last night, but certainly fun to see. Despite the continuing market challenges, I think we had some good things going on this quarter. I like to spend a few minutes talking about that this morning. You heard Maurice already talk about our LSW down in Brazil and also the test that we performed Titan has been and will remain committed to R&D, and developing the products that make us the leader in our industry for the foreseeable future. I mean that’s in the DNA of our company. We've not reduced any investment in engineering and R&D during the downturn. So we've talked about cost cuts being efficient, but we believe and continue to believe our future rests on being a leader in developing the best products in the industry. And so with that state of commitment, I want to make this an LSW infomercial, but we are big believers and what this means for our future, and we have many end users who have now experienced and seen the benefits of it. We've been introducing LSW into Brazil and I have to say, I’ve even been surprised how quickly we’ve been able to get some really good testimonials results from a few huge farmers down there. Our Grizz Squad will keep pushing LSW into Brazil and along with that we’re developing our wheel manufacturing operations in Sao Paulo. They will be right in our tire plant there. So you’re looking at a really good opportunity with LSW and the wheel business and what…

Well, thanks Paul. Let's take a look at our financial results now. As stated in the press release, sales for the quarter came in just over $306 million. This was down less than 1% or $2.6 million from a year ago. The quarter-over-quarter decrease was primarily driven by price mix. In terms of segments, earthmoving and construction volumes were higher, but offset by lower volumes in both Ag and consumer. There was virtually no impact from currency. This is a welcome change given the volatility we’ve seen over the past several quarters. Turning to geographies, our North America business continues to see lower sales volumes across each of their segments. The good news is, we’ve other geographies that have seen business improvements in both sales and gross profits. As Maurice and Paul stated, we saw both, we saw sales, but also we saw gross profit increases in our regions outside of North America, in Latin America, Europe, Russia, and Australia. So, again some positives coming out of those markets. Moving on to gross profits and margins, our gross profit dollars were up nearly $7 million for the third quarter, that’s at 26% increase from the prior year on slightly lower sales. As Paul stated, our overall gross margin performance was up 230 basis points from the prior year to 10.8%. It’s a tremendous accomplishment in our team's part to have achieved that level of margin improvements in the third quarter, given the challenges and the strong headwinds in our end markets. We have talked about our margin performance for several quarters and we're proud of what we have accomplished our one Titan team operating model along with business improvement framework have really been instrumental for us to be able to maintain and actually improve our gross margin percent, despite the…

[Operator Instructions] The first question comes from Brent Rystrom of Feltl. Please go ahead.

Thank you. Could you guys give us a sense, when you talk about LSW tires and we think about the aftermarket opportunity, how we should think about the incremental revenue and then how do margin should look on the replacement cycle?

Well, Brent good morning. Firstly, and I know you’ve travelled and you’ve seen it and you understand what’s cooking. The big thing is the OEs basically average around tractors and big iron and combines, duals on 75% of the equipment they have been producing for the last one or two years. The market out there is huge. What we’ve found out is that horsepower if you go from the duals to the super singles, you actually can use a low horsepower tractor and pull the equipment and go through the field at the same speed. So, it’s got so many big advantages and now it’s starting to float out there at the same time that farmers are getting very conscious of what their cost does. And I think that an answer to your direct question it’s - we've been, and Paul has been working real hard with the sales staff so that you got two different customers. You have to convince the farmer and show him how much he can make more and how much he is going to save and then for him to place the order. So that’s why Paul has moved the risk wide with our salespeople because when you walk into a tire dealer, which is a farmer who has kind of replace his tires, he doesn't have to replace the wheels, he just goes by the tires. So to catch the wheels, here is going to have to pay more money. So he’s going to have to see it. So, it really becomes, in the marketing side of showing what the benefits are. And when that happens, you're looking at, I would say probably everyone you sell your - from - on the margin side, you are from 20 and above, it’s pretty decent in this market and Paul probably has, all right go ahead Paul, you stepped in now, you know the number because you’ve been looking on them more than I do.

Yes, I mean what we are doing Brent is we got these guys who have been training for the last couple of years, not just understanding LSW, but understanding what the end-users want in our product and they have been doing it from a technical perspective and what we are doing is basically saying look guys you’ve done a great job with that. You have the relationships out there with end-users and it is like, more you said, it’s a different process selling LSW, so we’re combining the two with that. How we go to market is, still the same as what we’ve been doing, but now we’re going into sales mode. Going beyond just being these technical advisors, going beyond just working with the task guys, and so in that sense we have basically doubled the size of our sales force and they are going to be out there just like they have, but they will working under the direction of the territory managers as well. So if they need to cover of some of the areas where possibly we weren't as good or even a little bit weaker with making those daily contacts we now got an arsenal, a troop of people that could take care of that and they are well trained, very knowledgeable, and a good group of guys. So, we're pretty good excited about what we can do with that. It’s been well received internally and we're going to get that unleashed there and basically now and in early 2017 you combine that with what we have been doing on the pricing side. We’re going to be well-positioned.

One other thing that stepped in Brent is that we were at a big tire dealer up in Iowa he has probably moved well in excess of 500 LSW tires that is big. And when we, Paul and I met with him and of course it’s a wheel and a tire and he did not know - he knew basically about the less contraction, about the power hop going away, [indiscernible] he never knew because he never read the press release that we sent out about, you had 6 bushels of soybeans and the farmer is in Iowa - between 1000, the average farmer I believe is between 1000 and 1500 acres. So, if you got half of it in soybeans, you are at 60 bucks an acre. You really - that is 42,000 bucks. So, and then you need to check with the corn, it’s only 16 bucks at $3 a corn, but that is a - you’ve paid for the tires, the LSW tires and wheels, and just on that. Forget all the other benefits you get with it. You’ve done that in three months, four months max of what you have done in your pricing to pay the extra. And that’s where we are at.

Brent as you know, you sprinkle wins from fuel efficiency savings as well. That looks pretty good from the farmer's pocketbook perspective.

And I think all of that is helpful. I guess what I am trying to get at, it may be easy scenario, if we go back to the farm progress show. I think you guys had them on a 9460 out there and what I’m wondering is can you tell us from pricing perspective or from revenue perspective if you were to put all LSW’s on that 9460 as you had on your test drive model there versus replacing those with duals. How does that revenue look per tractor and then are the margins higher than they would on the dual types?

On an OE segment the -I’ll tell you that it is pretty, it is because you are dealing with 8 wheels and 8 tires versus 4 and 4. The revenue is going to be pretty close to the same. The margins are going to be substantial and I’m not going to stay out and call what they are because you know, as well as I do that every OE is on my phone call, okay. So, let’s just say that yes they are better. The aftermarkets are better, better.

Yes, and I made a comment about it, it was kind of vague. I mean we are doing well with our LSW performance. We are satisfied with the growth, I will say its double digits this year. Where I was vague as I said we price it as a premium product in the marketplace and that was my way of saying like Maurice said you don’t want to come on this call and blab it to everybody, but that was my way of saying. We have not discounted this product to generate sales. The margins are good on LSW. We are keeping it as positioned as a premium product in the marketplace, while growing sales. So that’s why I say it is a win, win. The farmers, the economics look good for the farmer’s perspective and it looks good from our perspective as well.

My final question on that, just a real quick thought, I’m just trying to figure out from a framers perspective on a replacement, so if the tires are comparable in cost, how much extra does this deal cost? So what’s the wheel on that 9460 going to hit the farmer?

If the farmer already has the tires and wheels on a 9620, you go to the super single, you know what are you going to do with the old one. If the OE was offering it then what would happen is that one wheel would probably come in fairly close to - he is not going to be a big premium at an OE level, that’s what I’m saying, but now on that 9620 what we are doing, and part of the reason I was in Russia is, there is no one to make a tube. We are going to take 90, like a 9620 out West and we're going to run that against a quad big singles 1400 x 46s, but because of the hills out there, which most people on this call would realize you got rolling hills, that’s all green country, most of it is out there. And then obviously you have big drop-offs. So for safety you want to put a tube into it, and you also want to put a rim. You got to make a wheel that is similar like a forestry wheel. So, we are not out there yet. We are running LSWs on sprayers et cetera, those are narrower LSWs and they are running great. We actually can make LSWs for the dual application, but that out there where we want to put out on the 9620 our big 14000/46. The smaller tractors you go from the 1250 down. So the farmer and the OEs are two different animals that we have to work with. So, right now we figure for OEs that takes them so long and so they trim up and get their bureaucracy down that we’re going to concentrate pretty much on equipment dealers tire dealers and right to the farmer. That’s what we're working on.

And then quick final question, you got $215 million in cash, you've got the sale of the track business, you’ve got the potential sale of other , you’ve got the $60 million of debt due, clearly you're going to have a lot more cash on hand if these sales go through, you need to mode out their sales, you may have a little bit too much cash on hand, can you give us a sense of what you're thinking about the balance sheet over the next say couple of quarters, how that might evolve as some of that cash is realized.

The situation is, let us just assume you have to ITM closes right after the first of the year, then what happens to you, you add that chunk on to where we have. Now originally, we had assumed our shares would be that you would be calling those bonds as they expire. So, two things we expect to happen because there is – in our bond agreement on the converts there is a little extra ticker in shares where we are going to hold those bonds, so if the stock continues to stay pretty close to where it is, I would expect those to convert to shares. So, then all of a sudden that $60 million that you are not pushing out, well. Now on demand you’ve got a tremendous amount of cash. So, then I would figure at this point and it’s all up to the board and what they wish to do, but we would probably increase our ownership a little bit in Russia and we probably look at the 2020 bonds, look at bringing those in and whatever we do, or restructure that, go for longer periods. All these things are available to us and that’s up to the board. It is just like on TPRC when you look at what's happened in Canada, we have the opportunity where it is a province of Alberta, you size to put a 10% on reclamation to the people selling the tire. At this moment in time, we are the only one who can honestly say there is zero pollution and we take it to carbon black, oil, and steel and has been running and we just - actually our friends at Suncor have said we have done such a good job. They want us to look at a bunch of other stuff. So, what happens if that takes place, you basically double the revenue of that facility. So, there are so many things that are in the air right now. That – it’s all positive. There are no negatives there. The only - and then what happens with the election. That’s only five days away. If Trump wins, I think it’s a big move for both - when everybody talks about free trade, there is only one thing people forget. There is no such thing as free trade when it comes to Ag, otherwise the American Prime Minister would be driving Rolls Royce because they would just - no one can compete with them, even Brazil who gets two crops a year. They lose too much. What happens if he takes ethanol moves in a little bit [indiscernible]. So that is the way it is. I am an extreme optimist and I always head the normal life, but I wouldn't - I couldn't tell you what’s going to happen. I don't know about that. All I know is, we have a plan, one way or the other.

Thanks guys.

Thank you.

Thanks.

[Operator Instructions] The next question comes from Alex Blanton of Clear Harbor Asset Management. Please go ahead.

Hi thank you, can you hear me?

Yes.

Okay good. You mentioned that the Russian client would be shipping Goodyear Tires for the farm sector into Europe starting in the first quarter?

Yes.

Now in the past call, I think now we are supposed to take price in the fourth quarter, so it looks like there has been some delays, could you elaborate on that?

The equipment we shipped through, we shipped over there and I was there last week. The first group of equipment arrived. The market and the radial tires, big radial tires, they are producing those as the numbers and they spoke, they are doing really well, in fact they are a little behind, also in the orders that have been coming in. So, the equipment was held up. I shouldn't call it held up, it’s just that you can't land it at the port, grab it, and ship it. You know it’s like, we had a whole team moving there. If you're even on your plane, you got to have a boarding pass to go on your own plane. I mean it’s still a slow process, okay. So [indiscernible]. Pardon.

Yes understandable.

Alright. So that's what's doing in. You can't get it done as fast as we get it done here, that is what I am saying.

You said that you are behind in filling orders, are those orders for the Russian market?

Russian market. What has happened is Putin has, there is a couple of things going on Putin has turned around and he’s put a push to help farmers and to move the Ag business forward over there, and so that’s increased demand, which is good for us. It is the same situation, our Turkish plant has been doing really well. It’s profitable. We are amongst Goodyear. We had two companies, we have decided now to go with one to make our Goodyear tires, and not only for that market in Turkey, which is we have a big demand for Goodyear brand tires in Turkey, as they used to be made at the Goodyear plant before they got out of it. This other company bought all that are equivalent. So, now it’s a very lucrative market because they slapped the 28% duty on the wheel, tire, anything coming into Turkey, to protect their industry. So, we are there and that’s what we’re excited about.

Second question is, you mentioned making wheels because you can't import them, are you importing them?

No, you can import the wheels into Russia.

No, no Brazil. I'm talking about Brazil.

Brazil. Brazil is they charge the duty. So, what we have decided to do, to speed everything up is that we are going to do the wheels in Quincy and container shipping down pay the taxes and pass it on. The farmers don't like that, the big farmers, but they are so impressed. I didn't mention this, but when you look at how doubling the speed they go across the field, and then you look that they don’t have any slippage, they are going to cross those fields now, and when you look at their savings in fuel, it’s not because, our tire is moving that tractor and they had so much slippage on the ground that their fuel use was way up, this saving 25% in fuel.

You said, you were going to make the wheels at Sao Paulo tire plant, when will that take place?

We will be making wheels there, probably between the end of the – now this is provided the government there gives us approval by the end of December. Okay, they've had this paperwork. We've had lawyers, everybody going to them. The equipment is here in the U.S. and it will be penned because we are not placing orders. Paul is down there too. We have to buy the painting system in Brazil. And we are not placing the order until the government approves. When they approve it’s a whole package of all the equipment we can send down there and then place orders. So, now - in the December that they push it you will be making wheels down there, third quarter of 2017.

That’s only about six weeks, you need to get the government approval, then you need to ship the equipment down there and you have to own the pain system and install it?

Well the paint system will be ordered. It will take you probably 90 days, if start having the equipment coming, but now you can put the power and do everything. The equipment is fitting, so it’s not going to take us long to get that going. It’s the paint system, the paint system you're looking at basically 6 months to 8 months. First part they will come in, you are going to sell that, and so you're looking towards the end of third quarter in Brazil before you make any deals [ph].

And if they are …

So, not only LSW, they are for everything.

Okay. So it is about a year from now, you would be shipping? Making wheels in Brazil.

Yes.

Alright, that’s the answer. And then one more small question, you mentioned the price being a reason sales went down, how much was the price factor? You didn’t mention how much it was?

What did you - Paul you are closer to that than I am.

What are you referencing there Alex?

Well you said that sales were down year-over-year, total sales.

Yes.

So, what I’m asking is, how many dollars was the price decline?

In our 10-Q we do talk about price volume and the impact it has on sales. So we do break…

I don’t have your 10-Q right now, what is it?

Jim, I don’t know if you have any of that information in dollar terms in front of you. We talk about it in percent terms in the 10-Q.

We don’t have the dollars, we give the percent in the Q.

What’s the percentage? What I’m trying to get is, what’s the real volume increase? That’s what I’m trying to get at.

Around 5%.

Yes, go ahead Jim, if you got the Q in front of you.

Yes, it is around 5%.

So, something around $15 million.

Correct.

So, if you take that out, your sales would have been up $9 million.

That was year-to-date number 5%.

5% year-to-date. What is the quarter?

We are down – we had 6% volume reduction in Ag and then price mix hit us for 4%. So looking at a larger segment Alex, those are the splits for the quarter, but what you got to remember when you start talking about price mix is, it is driven also buy raw material fluctuations that can be passed through the contract. So it’s not all pricing pressure within the market that drives that 4% drop in price.

All right.

And if you look at our earthmoving construction, we had an increase in volume for the quarter of 10% that was offset by a reduction of 7% in price mix. So, we don't split out price mix, but we do combine - we do split out volume versus pricing in the 10-Q.

So Ag was minus 6% volume, minus 4% price. And construction was plus 10% volume, minus 7% price and that was for the quarter, correct?

Actually, you know what I said there is a 4% price mix increase in Ag, correct Jim? So volume was down 6%. So for the quarter, we were down 1% for Ag, okay. And then roughly 5%, 6% was from volume reduction offset by a price mix.

Oh, that was a price increase.

Price mix improvement of 4% and then it does the opposite when you look at earthmoving construction where you had the volume increase in a price mix reduction. So they are opposite for Ag versus earthmoving construction.

Got you. Okay. That was for the third quarter. And there is no indication that rubber prices are going up?

In talking with our supply team last week we kind of see it, predict it to be relatively flat for visibility going early into the year kind of not much expected.

I don't think it’s going up Alex because automotives is dropping, okay. So automotive is dropping and when you look at Ag and earth mover it has no bearing on the natural rubber prices. Automotive does. So, if anything, it will have a tendency to drop.

Okay. Thank you.

Thank you.

This concludes the question-and-answer session. I would now like to turn the conference over to Mr. Taylor for closing remarks.

Congratulations to all a few company [ph] fans and congratulations to those in Cleveland. We have got a lot – that was one hell of a team you put together. So enjoy yourself for the holidays and stay safe. Thank you all. Bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.