Good morning, ladies and gentlemen, and welcome to the Titan International Inc. First Quarter 2019 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation [Operator Instructions]. It is now my pleasure to turn the floor over to Todd Shoot, Treasurer and Vice President of Investor Relations for Titan. Mr. Shoot, the floor is yours.

Thank you, Brandon. Good morning and welcome everyone to our first quarter 2019 earnings conference call. On the call with me today, I'm pleased to have our President and CEO, Paul Reitz; and David Martin, Senior Vice President and CFO. I'll begin with a reminder that the results we're about to review were presented in the earnings release issued this morning along with our Form 10-Q which was also filed with the Securities and Exchange Commission this morning. As a reminder, this morning, we will be discussing certain forward-looking information including the Company's plans and projections for the future that involve risks and uncertainties and assumptions that could cause our actual results to differ materially from the forward-looking information. Additional information concerning factors that either individually or in the aggregate could cause actual results to differ materially from those forward-looking statements can be found in the Safe Harbor statement included in today's earnings release attached to the Company's Form 8-K filed earlier today as well as our latest Form 10-Q and Form 10-K all of which have been filed with the Securities and Exchange Commission. In addition, today's remarks may refer to non-GAAP financial measures which are intended to supplement but not be a substitute for the most directly comparable GAAP measures. The earnings release, which accompanies today's call, contains financial and other quantitative information to be discussed today as well as the reconciliation of non-GAAP measures to the most comparable GAAP measures. The earnings release is available on the Company's website within the Investor Relations section under News and Events. Please note today's call is being recorded. A copy of today's call transcript will be made available within the Investor Relations portion of our website. I would now like to turn the call over to Paul.

Thanks Todd. Good morning and appreciate everybody joining the call. Let's jump right into our business and Q1. Our first quarter was not the start to the year we had planned compared to our expectations. Number of factors impacting our business really across the board there. First major factor impacting North America right now is the weather conditions. We have seen early season flooding in the parts of the Western farming area followed by late snow across much of the Midwest. Earlier this week, a levee broke in downtown Davenport, Iowa. This clearly highlights the extent of this issue. At the time, if you look at it, all major Ag states are reporting that planting is behind 5-year averages. In fact, Illinois, which is the second largest corn-producing state is at approximately 10% corn planted versus a normal pace of 43% by late April. I realized most folks on this call spend their days on the inside looking out but tough weather conditions in the spring hit farmers really hard, has an almost immediate impact on our aftermarket business as farmers are going to be spending money when they can't get into their fields and they are really looking to start pushing out some of those expenses and purchases as long as they can. Overall, our North American sales relatively flat. However, we did implement pricing related incentives targeted at certain products to combat these weather conditions and the resulting slower pace of sales. Based on all - nearly all metrics pointing to pent-up demand in Ag sector along with our own internal knowledge and the external customer information we're receiving, we'd expected higher sales to start this year and had built up the necessary trained staff ready to work along with some inventory to meet this forecasted uptick in…

Thanks Paul and good morning to everybody on the call. I'll go through some of the important points for our first quarter 2019 performance, but also spend a little bit of time talking through some of the key issues that we are managing as we progress through the next few months. Net sales for the first quarter of 2019 were $410 million, representing a decline of 3.5% from the prior year. Net sales were up on a reported basis by $47 million or 13% from the fourth quarter of 2018. It's also important to note on a constant currency basis, revenues would have been up roughly $10 million from the first quarter 2018 or 2.3%. The currency impact of $25 million or 5.8% was felt most in Latin America and Europe. Our ITM undercarriage business performed well notwithstanding some customer-directed deferrals to the second quarter that impacted the quarter in sales and profits. The North American sales were reasonably flat year-over-year while the start of the year was slow and it only picked up toward the end of the quarter. Our biggest sales challenges came in Russia, Europe and Latin America. Our sales volume on a consolidated basis were lower about 3.5% from last year with the largest declines being in Russia and Europe due to market headwinds and agriculture. We're able to pick of sales from increased price/mix in the quarter by 5.8% resulting principally from the overall rise in raw material costs over the course of last year. Our challenges were not so much in sales, but market headwinds and other temporal issues with gross margins through parts of the business globally. The reported gross profit for the first quarter was $45.3 million versus $59.6 million in the first quarter OF 2018 and our gross margin for the…

Thanks David. I've got a couple of quick closing comments. First, regarding the Titan Russia put option. We continue to have discussions pertaining to the put, but nothing has been finalized yet. As David just stated, we have sufficient capital and credit availability to settle the put without impacting the plans for Titan. In late February, we announced that we are evaluating strategic alternatives with respect to ITM, our undercarriage business. This decision was not driven by the situation with the put option, as may have been interpreted during our prior earnings call based on my response to a particular question. ITM is a well-managed business that we've been successful and making investments to spur a strong growth over the past few years. We've talked about that extensively. ITM would benefit from further investments or acquisitions to build upon these successes. However, we also believe that our wheel and tire businesses that have formed the backbone of Titan for many years have a strong future as well that would benefit from further investments or acquisitions to grow these businesses. Our current capital structure would have challenges in being able to do that for wheel, tire and undercarriage, basically all the business units of this Company. So, based on that, in early 2019, ITM CEO and myself started gathering information regarding ITM's potential valuation as a standalone enterprise. And indication were that ITM would be valued significantly higher than the bid we received in 2016. I then decided with the matter worthy for further discussion with our Board, and then as we disclosed in February, the Board approved Titan to engage Your Capital as financial advisers to carry out further evaluation on ITM. Where we sit today with the ITM process is that we've made positive progress and we continue to move through the process towards a potential public listing. Ultimately, the Board will convene at appropriate time to analyze the situation and all pertinent information to make the best decision for our shareholders. With that, Brandon, I'd like to now turn the call over to questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Steve Volkmann with Jefferies.

So a couple of topics to kick it off. Just first if we can kind of go back to the liquidity discussion, I just want to make sure I kind of have the pieces right here. You have roughly $68 million in cash at quarter end I think. How much do you need to sort of run the company on a daily basis?

We're certainly in the range of being able to do it. We manage this cash level throughout the first quarter. It's always I think our expectation that we'll continue to liquidate inventory and be able to operate at low higher level than what we have been, but we can still operate the company anywhere in the range of let's call it $60 million to $80 million.

Okay. And then that was kind of my follow-on, I'm sorry if I missed it. But do you expect to be cash positive this year?

Based on our current estimates and so forth, that will certainly be our expectation toward the end of the year. It won't necessarily happen in the first half of the year. But as we progress through the year, we believe we'll get to a full year expectation of positive cash flow.

Okay. And then on the revolver I think right now you have availability in the $40 million range, but you're going to add another $50 million, so that gives us kind of $90 million there, right?

That's right.

And then last quarter I think we talked about some kind of non-core assets other than ITM that you were thinking about as having some market value that would bring cash in. Is that still the case and where do we stand with that?

Yes, there's a variety of different things that we're looking at all of which can happen within the 3 to 4 month period. And so we're continuing to progress down that path.

If I remember correctly I think we're talking what $30 million or $40 million of potential there?

I believe I said $30 million to $50 million but yes.

Okay. And so you're still feeling good about that?

I still feel like we - some of the timing may push a little bit but all the things that we described last quarter and may perhaps maybe a few other opportunities continue to present themselves. So yes.

Okay. Great. And then on sort of the outflow side, you have not yet paid the $25 million to the Russian deal yet, is that correct?

Yes, you mean under the stock settlement - part of the settlement?

Right. And you have to pay $25 million for that?

Yes we paid the $25 million in cash. We used borrowings for that on the line. And the stock has not been issued yet. We're still awaiting final regulatory approval for the issuance of the stock.

Got it. So cash has been paid, stock not yet?

Correct.

And then on the second put, do we have any update to what's happening there?

Yes, we continue to have discussions as David has highlighted, the Board - in our press release highlighted that our Board has authorized upsizing the ABL giving us sufficient capital and availability to handle the put when those discussions do reach a conclusion.

Okay. All right. Thanks. And then just quickly on the margins side to switch gears a little bit. It sounds like a fair amount of the margin pressures you had in the quarter were kind of short term I think, but do we expect the incentives in the market to continue going forward or was that kind of a one quarter thing?

I think the biggest portion of those incentives would probably push sales in the first quarter, but that is an ongoing program. So there could be some additional amounts in the second quarter as well. The - to answer your question about most of the issues being short term, a lot of them, particularly the largest ones in the quarter were what I would consider short term, particularly with the inventory in North America tire.

Is it a leap too far to say that the gross margins should be flat to up each quarter going forward or we're not ready to say that yet?

Well, I don't to make - quarterly is a tough thing to always predict. As you know, we had pretty - a lot of volatility this quarter. But if you go back to our original guidance for the year is that the expectation we would have some marginal improvements in margin year-over-year. So inherently, we're - we believe we can continue to drive margins better as we move forward.

Okay. And then just a big picture and I'll pass it on. There's been some discussions in the press here about some impending settlement with China and maybe having some fairly positive impact on various Ag exports possibly. And I guess I'm just trying to get a sense of how you think the incremental margins can look if we actually start to see some improvement at some point finally in these end markets, I mean what should we be thinking about in terms of kind of operating leverage if we actually can get some reasonable growth here?

Yes I think we demonstrated in the past when our business gets operating leverage going and we get the volume through our plants that our contribution margins are fairly good. Like you said, we need a catalyst though to make that happen. And as we were preparing for this year and really putting our plans in place near the tail end of '18, we certainly build up a well-trained staff that was looking at some growth going into the first part of this year. Then like you said, the unsettled trade issues and then you throw the weather on top of it has pushed that back. So while sales were flat, we certainly have trained staff that are ready to go to work. So I think to answer your question, the incremental margins would be in that range of the mid-20% like we've demonstrated in the past when we get the volume running through our plants.

Our next question comes from Komal Patel with Goldman Sachs.

Just a follow-on from the earlier question. What's the upsizing of the credit facility? Does that imply the OEP settlement would more like be settled in cash at this point or it's not fair for us to draw that conclusion?

It's not fair to draw that conclusion. We obviously, as a management team, we want to be prepared for whatever settlement occurs. And so I want to maintain the right amount of flexibility in the business to run effectively and to manage that potential obligation.

Okay. Got it. That's fair. And then just second, maybe you could provide a little more color on the cadence through the quarter. You had mentioned better performance in March. What were some of the signs that you're seeing? And then also just kind of your take on April and did the positive momentum from March continue? I know there's some tough weather in April as well. So just some thoughts there.

Yes, obviously, there's a fewer working days and production days in April, but the trends are still fairly positive. March was a strong month for us. And so I believe, as we progress through the quarter, particularly in some of the areas that we saw some weakness, we believe we can get back on track.

Got it. And then you mentioned some contracts were deferred into the second quarter. Is there a way to quantify how large of a deferral that was? And is there anything to call out on canceled orders?

No canceled orders. It's just the timing is for delivery was pushed out a decent amount. I would say that looking at it on our profitability standpoint, it was about $1.5 million impact to us this quarter.

Got it. That's helpful. And then last one for me. I guess maybe can you just touch on the $25 million share repurchase program that was announced in March, I guess how should we be thinking about it? Obviously 1Q was weaker than expected and the stock is opening lower this morning, but then again you're kind of increasing your credit facility. So is it fair to be using the program right now or how you kind of balance the factors that are in motion here?

Certainly, the Board is going to take into account where the stock price is at relative to where it's been trading, and obviously, our internal cash flow among other factors, but we want to be responsive and ready to support the stock appropriately at the right levels. So this program isn't intended to be a just a one quarter thing, it's over time and we're going to manage it appropriately and do what we feel is the best use for our cash.

Our next question comes from Joe Mondillo with Sidoti & Company.

So you guys reported on March 7th your fourth quarter numbers, so you were pretty well into the first quarter. So I'm just curious when you reported and gave the guidance there in March, you must have had a pretty good picture of what the first quarter was sort of looking like. And so I'm just curious now that we have the results and you see everything and you're maintaining the guidance, what was sort of surprise, whether it was positive or negative? And just given these gross margins that we see in the first quarter, it's sort of insinuating you for maintaining the guidance that you are going to make up a lot of whatever was a negative surprise in the first quarter later in the year, and I'm just wondering where that comes from?

Yes, as we progressed through the first quarter, we obviously have seen the weakness that we saw in January and February, and we thought we could actually probably even have a better March than we actually did and there were some certainly some margin hits that we took in the quarter that ultimately presented themselves as we got to the end of the quarter versus early part of the quarter. And as we looked at the rest of the year is that we - if you look at each of the factors that presented themselves, there is certainly opportunity for us to recover. Certainly, we're going to need some cooperation in the weather category as well as the Ag markets themselves, but given what we see right now at the moment, we certainly believe we can produce the activity to be able to recover our margins and obviously our profitability. So we have to obviously going to watch it very, very carefully as we progress and update everybody as we get through the year. But -

Okay. And the sales incentive that you called out this is an ongoing program like you mentioned I think on a quarterly basis. Did you quantify sort of I guess there is an abnormal amount of sales incentive in the first quarter because I'm assuming that there was some sort of sales incentive in the first quarter last year. So was there an abnormally large amount, and if so, can you quantify how much that was?

Joe, it wasn't the sales incentives were abnormal. We definitely have planned it. And where that came from is looking at our strategic plans for North America related to aftermarkets were to introduce these sales incentives in the first quarter. Now with that we expected that to drive growth. What ended up happen instead is that the sales remain relatively stable and so we didn't get the volume and the additional margin that we expected from the incentives. So it's not like it was a unknown cause that we didn't expect it's just we didn't get the growth that we expected to go along with it. Again due to the weather events and it really weighing of purchases from farmers at this time.

Okay. And just in terms of I guess sort of related to my initial my first question. Could you talk about some factors that we see that are going to improve whether it's price-cost I'm assuming maybe you'll get back to maybe better volumes which leverages costs and could you just talk about some of the factors that are going to maybe drive better margin compared to these the margins that we saw in the first quarter?

If we talk about North American tire expectation is we'll have stronger production which is obviously going to lead to we get very good incremental margins when we hit a certain production level. The cost of the inventory that we experienced in Q1 is obviously largely behind us at this point. And the what we look at in terms of our standard cost of materials the actual raw material prices are a little bit lower than what we had in our plan. And so we certainly expect to see some incremental margin coming through on that. Now it comes over the course of the year as this doesn't happen on a one quarter. But right now where raw prices are it's certainly favorable. If you look across other parts of the business some of these things were deferrals and certainly pushing the way of the year. Volume is obviously going to be the critical factor for our ability to drive sales and then ultimately the higher margins.

Okay. And then what about sort of mix OE sales versus aftermarket in the first quarter? What were the trends sort of like as we go into May?

If you look at OE it trended higher in terms of the mix versus the aftermarket was fairly flat while we had expected increases in activity during the quarter. And as we progress through the year I think we'll get a better balance.

Okay. And on the earthmoving/construction side of the of the business the volumes continue to sort of surprised me considering what Caterpillar is talking about and you guys mentioned ITM has been strong in the mining sector overall seems to be very strong. What's going on with the volumes, that you've seen over the last two quarters relative to what seems to be a pretty positive market?

Well our international exposure certainly has not helped with the fact that currencies have impacted our overall volume. But this quarter was much more about the fact that we had some deferrals of revenues or sales in the next quarter. I think if not for that we would have seen an upmarket.

Okay. So we should expect positive trends starting in the second quarter than in that case?

Certainly no we don't continue to see any deferrals out of the quarter. I think the expectation was that we wouldn't see some incremental growth yes.

Okay. And then just on the working capital and I'll jump back in the queue. Inventory increased $55 million last year due to the strong demand that you're seeing. We are started seeing we're obviously trending slightly negative here but if we're seeing slightly positive say for the year it seems like you have opportunity to what are you expecting for working capital the contribution to cash I guess what

As I stated earlier the expectation is that we're going to get be stronger in terms of our planning cycles to be able to trend the inventory the amount of days that we have an inventory. I mean the big growth in working capital this quarter was really on AR. That's a timing thing with the majority of our billing happening at the end of the quarter. So I'd expect as we progress through year and we have seen more normal if you will trends in the market then we should be able to manage our working capital to drive cash flow. I think overall this is more of a longer term project but obviously as we continue to make appropriate changes in our planning schedule across the business we should be able to reduce the number of days that was required for inventory. And there's going to be pockets of the business that are going to be better than others given the mix between OEM aftermarket. So I do expect to see some improvement as we go through the year.

Our next question comes from Larry De Maria with William Blair.

You guys obviously talked about ITM. I just want to understand what the message is the most likely scenario a public spend as opposed to cash generating sale at this point is that right or I'm I thinking about that wrong?

I think that's right. The financial advisers that we've hired engaged clearly the look at both potential outlets and where the highest valuation. But as part of the process that we're going through right now a public offering is part of that.

That will be like a tax shareholders?

Well obviously we're the shareholder today.

Okay right. What equity to the shareholders on the call. Okay can you understand the help us understand the revenue and EBITDA size of ITM then this may come out?

Yes I mean at this point I think we've given some general indications about the performance of ITM that we've been pretty clear with that over the last couple of years. It's been successful. Business has been growing. But at this time it just gets primarily folded into our earthmoving/ construction segment. Very high percentage of it falls directly in that segment with a much smaller percent that goes into Ag. But at this point Larry that's all we can disclose.

Okay. And then OE versus aftermarkets obviously OE production was up and obviously markets little bit different given the weather especially. Have you change your production plans moving forward as we've gone through the first quarter and some hiccups obviously with the weather and farmer How do you think about OE versus end aftermarket production moving forward throughout the year have we maybe that down?

Well I think through the rest of the year it depends of the timing when you look at it. I think what David said we so March coming very strong looking to see that continuing to April. Clearly as you look at things right now the weather is tough. about legal counsel if you drove last night from Chicago where we're at plant and you just looking water everywhere. I think right now Larry it's a tough question to answer as we kind of see what the rest of the spring goes how the planting cycle takes place. But fundamental that we believe in and we continue to hear from customers whether its OE or aftermarket is that there's a lot of pent-up demand in the system. We do believe that it's a timing issue versus a structural issue. And at this point we're going to have to kind of wait and see how the first the rest of the first half of the year plays out. But I do believe that it leads into a good-looking second half of the year especially with products. The growth we saw in the first quarter was tremendous and I continue I believe that will continue on a very strong pace conditions are absolutely perfect for what Titan can deliver to our end users to help them with these tough conditions. So again we all see the OEM forecast for the rest of the year. I mean we saw some reports yesterday. I think that's all fairly accurate. But again I think the aftermarket and weather allowed we're watching closely. But again I do think there is more time than it is structural.

Okay. Maybe put it another way. The OEs are correct me if I'm wrong communicating to you any material change in production plans for you to expect?

No I think different than it was reported publicly.

Okay. Then when it comes to LSW which you guys call out again today is that mostly in the I'm assuming it's aftermarket level or are you getting some traction on the OE level

Good improvements at the OE level. I think that's been a nice movement in trend that we see here over recent months. There is primarily an aftermarket product like you stated. And I think for us it's been great about this aftermarket product is that they've done a tremendous job of handling the changeovers. If a farmer has a standard product already on their equipment they've done a great job of getting the standard assembly taken off absorbed into the marketplace and really getting upgraded to LSWs. Once you get them upgraded to LSW we feel the stickiness of that sale is really favorable. So but we are to answer your question Larry we are seeing some good trends in the OEs. We definitely want to get the OE market going on LSW. It's a different type of sale. I mean they have different things that they look at when they're putting an option on to a new piece of equipment versus what we are selling through the distribution channel and working directly more with end users.

Our next question comes from Alex Blanton with Clear Harbor Asset Management.

First do you have a slide deck with us I didn't see one on the website.

Alex we have not prepared slides in the past or today.

Okay. All right. LSW what percentage of your aftermarket is that now?

At this point Alex we aren't disclosing that I guess for a number of different reasons and part of it is definitely competitive. We have a strength with our LSW products and competitively it's not something that we are disclosing them to the market. But we are trying to give you enough color on illustrating what the growth rates have been. But at this point Alex for competitive reasons we just can't talk any further what the exact number was.

Okay. And the deferrals into the second quarter of the LTM how much was that and why didn't happen and why would it continue? You mentioned there's possibility there might be some further deferrals but what's the reason for it?

I'm not seeing any indication that they are any they were just pushing out there expectation for their own equipment deliveries.

So it had to do with the OE equipment deliveries?

I believe it's a combination. There's probably some aftermarket on that too.

Well is there a possibility with inventory they had too much and inventory and reduced their inventory of it?

They were obviously fairly these orders were firm and they just pushed out the timing of their expectation for us needing to get their plans to be able to put it on.

Well I understand it why did that happen that's what I'm asking why did that happen? why did they need to do that?

I mean it's just some the next some timing at the end of the year it was.

I understand it why was it different why did change from expectations why did they push it out?

Yes I think at this point Alex I think they were has offered a lot of much information as we can about the situation. I mean there is.

Customers made a decision about timing from one month to the next.

Right okay you don't know why they did that.

There is a variety of different reasons.

The discounts that you mentioned the sales incentives did you tell us how much that was?

We cited about what $1 million $1.5 million? That was profit in the quarter.

Okay. This weather how is it affecting the OE deliveries that you are supplying in other words you do a lot of your tires and wheels. Now there's normally build up a lot of dealer inventory in the first quarter that they usually they build up a lot of inventory in the first quarter in total in preparation for the selling season. Now what is that buildup today this year versus what normally is there a difference and how is that affecting you?

Well I think at this point there hasn't been enough market and intelligence out there to specify exactly what the dealer inventory levels are. I had some recent meetings with our OEM customers and yes there is a an issue at the weather that it's impacting some timing of these orders that needs potential shipments. But I think if you look at one of the OEMs that reported yesterday there is still holding to their outlook for the full year. And so you look at it as a timing issue driven by the weather versus kind of a structural foundation issue that is it just lost demand. Reported yesterday.

Okay. You mentioned that you're trying to improve your OEM sales in Russia what is that going to take who's your competition there what you have to do in Russia to get more OEM sales?

It goes to the basic premise of getting that product out of the Russian plant that can be put not just on the OEM equipment manufactured in Russia but also could be used as export into other Western European markets and areas that would be suitable for a good branded product. And so what my discussions have been there are a number of factors built in Russia by large OEMs that import their tires from other markets primarily Europe. And there is a desire to have local content as most countries do. There is a desire to have local content. And so what we're working towards Alex is being able to provide from our Russian plant. So we have a number of changes in that have been implemented on the compounding side to address that a number of changes that have been implemented with equipment some of it new some of it coming a lot of it coming from the U.S. We have our U.S. teams working with our Russian counterparts and again the goal is that we would be able to put if you're going to put the brand on it naturally has to be of the highest quality to support that premium label and really that's what we're looking to achieve. And when we do we think there is a good market for us again both with OEMs and for export sales into other regions.

Well the OEMs in Russia must be short of foreign currency. Why wouldn't it be to their advantage to source locally rather than the exporting tires I mean important tires from Europe that doesn't make a lot of sense.

That's what we're trying to do. I think that's exactly right what we're trying to do. We need to get the Goodyear brand on it and again that means we achieved a certain level of quality which we are working hard to do that. But when we achieve that level and put the Goodyear brand on it then exactly what we said is we believe what can happen where the local market will start taking the Goodyear tires made the right of our Titan Russia plant.

Right that makes a lot of sense. So it's the quality issue that they feel that their quality coming from Europe has been good but if you can match it you get sales is that right?

You got it Alex. It's exactly right.

Okay. Let me see here. This guidance that you mentioned you're not changing you didn't mention what it was?

I don't have everything in front of me here Alex but we say our guidance in March seven for the full year. We can go back and get that for you.

March 7?

Yes when we did our fourth quarter earnings announcement.

Okay whatever was in there has not change hasn't changed.

Yes. Glad to help you with that Alex if you want more.

Our final question it's a follow-up from Joe Mondillo with Sidoti & Company.

Just two quick follow-ups. I know we're pretty late in the call here. First question hopefully a short answer. Just I noticed in the Q you had you highlighted that your good year licensing agreement in Latin America expires in June of this year. I assume that is usually just or is there any risk to that at all?

The licensing agreement for the truck tires that we produce there. So it's not everybody is clear it's not related to the global farm licensing agreement that we have with Goodyear. That's under an automatic renewal process. So this one specifically we've again it truck tires out of Latin America only. We began those discussions with Goodyear. I don't want to Goodyear but our relationship is strong with them and I see it as extremely low risk of anything detrimental to Titan.

Okay. And then lastly your 80-20 restructuring you guys have talked about the over the last 18 months but I think there is still a lot more work to be done and I'm surprised it hasn't come up really on this call. Could you talk about where we're at in terms of everything that you're focusing on and sort of given maybe an update on sort of how we think about timing of all the improvements that you're going to be making over the next year or more?

Yes with 80-20 on tire part of the strategic targeting incentive that we're putting in place we're able to do that because of 80-20. And what we've through that process. David has talking about extensively working capital is a top priority and 80-20 is designed and will be helping us with that. But part of the rollout of 80-20 you go through the steps you get it introduced but it does take time to your customers to make the changes. You can exactly tell your customers on day one these products are gone forever just live with that. So all of our sales reps are working extensively with our customers to adopt the 80-20 premise. I would say almost universally it's been well accepted. People are clearly behind it. It streamlined their supply chain and their processes. But it takes time for them to rollout the inventory and bring in the new. But the process is moving along well at tire. And again what we've learned from it has been tremendous and help us in more ways than just of getting rid of 20% of product I mean it's helping us make strategic decisions it's helping us with working capital it's going to help us with staffing as we move forward. But I think the big one for us that we're just getting into is going to be on the wheel side where working with the OEMs and if you look at the wheel plant Joe I know chance to do that to set up on wheel line is extension. What you go through tooling to manufacture wheel. As we streamlined that operation and make our run more efficient I think we're going to see a very nice pick up and almost immediately when we do that. So what we're doing right now wheel going through the process of the analysis getting our plans put in place. We'll update you more as we move through the year but I'm really excited about what we can do with the efficiency and how we operate our wheel plant.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Reitz for any closing remarks.

Thank you Brandon. I appreciate everybody's time this morning. And will catch up with you again on the second quarter. Thank you.

Please note that a webcast replay of this presentation will be available soon within the Investor Relations section on our website under news and events. Thank you for attending today's presentation. The conference call has now concluded.