Titan International, Inc. (TWI) Q4 2011 Earnings Report, Transcript and Summary

Good morning ladies and gentlemen and thank you for standing by and welcome to the 2011 Fourth Quarter Year End Conference Call. [Operator Instructions] And as a reminder, this call is being recorded today February 23, 2012. I would now like to turn the conference over to Maurice Taylor Chairman and Chief Executive Officer, please go ahead sir.

Good morning everyone. I want to just tell everyone that we appreciate you all on being on the phone this morning, we had a record great year, anyway, anyhow you roll this baby around and look at it. And there’s a lot of things, I imagine there’s some questions out, but going forward, that’s what most of you are interested, what’s happening and what’s going forward. In order to do that, I got to take it back a little bit. The situation is that as everyone knows, we actually did a little bit better than what we thought we would do. And the reason for that is because the training has gotten much faster, it’s been a lot easier where the tire plants are located to get a real good supply of labor, and they’ve been very studious in trying to learn, which is a great thing. And we’ve got a long way to go in reference to ramping up. One of my comments in the press release is that looking forward, we know that farm, from one of my friends at Deere, CNH and [indiscernible] is on a holy tear, so we know we’re going to have double digits going forward there. But the big situation is what we’re going to do reference to the OPR mining and construction equipment of which I’ve put in the press release we’re looking at triple digits. And so we have seen this coming, and we have put some various programs in place to achieve this, and it’s going to be a real achievement when you look at what we went from 2010 and where we ended up at the end of 2011. The big situation that we’ve got going right now is that in this process, we’ve improved our margins, our margins are going to continue to improve as we go forward. And we -- in fact if we can do it as well as we have seen in certain test areas, we’re going to, on the bottom line have a little bit of an explosion. That’s all the good news. The situation is that last week, I was at the TIA Convention which is the off-highway tire convention, I was a keynote speaker. And it’s interesting what we found out. Number one, we’re considered right at this moment, third player in the world, and we’re considered the most innovative, fastest moving player in the world. And a lot of this goes to the situation that we laid the seed work all the way back into the 2006, 2007 when we went into the super giants. And even though we have almost 5 years under our belt, that’s a little short time in the time of tires to build and design in what we do. And everybody’s been impressed with it. And as this past year went, as we announced, we came from an agreement with Caterpillar. We believe that the new products will come in, our hit referenced to all the new product, but the biggest thing is that I think everyone whether it’s the end user, or whether it is the OEM, they’ve turned around and decided that no matter, up or down in the economy, they’re going to keep us in the mix of the play because we are the ones that keep everybody else on their toes. And when you turn around and look at that as -- in the world because it’s a world market, the volumes are even with a small %age, the volumes are -- for what we have, pretty large. And so that is what we found there, but 2 days before last week, it was Tuesday, I was in the oil sands, turn your TV and look to see what the price of oil is, that it’s just exploding up there, and we’ve opened up our Titan Mining service with Saskatchewan wholesale tires, and we’re going to have to expand up there because of the business we’ve already picked up there. So everything is firing away, it’s a situation where we’re just going to have to just keep increasing our capacity. Now a lot of people are wondering, well how he’s going to do that, well the unique thing about our business is that we have the equipment, we have to have -- add some more moles if we’re going to have some CapEx which is basically stated -- with that was looking at and the boards approved it, as kind of minor. When you look at the size of growth that we’re looking at, and what goals we’ve set. The other situation is that -- this is going to help us is what we did with the Tennessee acquisition of the Goodyear tire plant down there. So as time goes, that will kick in probably in sometime in April. So we’ve already had the biggest bang than we’ve ever seen in this past January, I expect this thing to get even larger after the first 6 months, so we’ve got a real full deck, and with that, I’ll turn it over -- Paul, you can go through the numbers.

Sounds good. Thanks Maury and good morning everyone, it’s summer time here from where I’m calling in from Sao Paolo this morning, and no, I didn’t get to enjoy hanging out at carnival all week. Looking back on this year it’s been a year the Titan team can really hang their hat on with pride as we accomplished strong organic growth. The successful international M&A here in Sao Paolo, we had extensive physical labor capacity, most importantly though, we expanded our margins with incremental margins of over 27 % on overall core business and 37 % in our Earthmoving/Construction segment. With all that, we still believe the fun is just beginning, we wrapped up the year just under 1.5 billion in revenue at $1.487 billion representing growth of over 605 million from last year or nearly 70 %. $330 million of that growth was from organic growth in our North American segments and 275 million of the growth came from the Goodyear Latin-America acquisition that we completed at the start of Q2. Our top 2 customers for the year remained Deere and CNH at 29 % of our revenue from 40 % last year. The reason being, our business has had a global diversification this year with more export volume, that was primarily through the giant mining players, and of course, the impact of the Latin-America acquisition. We are part of the OE, and we’ll remain that way through our distinct advantage at selling wheel tire assembly. The OE strength in 2011 did put additional demand on our production pushing our splits higher. So we do have an opportunity this year with our head count addition to get more products out to aftermarket which of course in turn is good for our overall margins. Ag boomed this year, as we all know, it was up across the board, but for us, it was up 42 %. The $961 million -- of course they went through some very good solid unit-volume gains this year that was coupled with 3 price increases throughout the year. As we discussed throughout the year, our price increases in 2011 essentially were to keep pace with the escalation of raw material cost. Our Earthmoving/Construction business brought in revenue growth of over 60 % this year as revenues are moving up over $305 million as we sold over 2800 super giant tires far surpassing the state of where we had at the beginning of the year 2000. Across the board, these are tremendous growth numbers for 2011, and the momentum is just being seen as we kick off 2012 here, you’ll see that in the strengths of our backlog and our 10K volumes that ended up at $542 million compared to $227 million of backlog last year. And Maury said, we’ve been preparing ourselves to meet this growth, we’ve hired over 450 people to increase our labor capacity, we’ll invest additional incremental $35 million in CapEx this year, to increase our plant capacity as well. So it’s all pretty good stuff as we kick off 2012. The revenue growth this year was coupled with expansion of our gross margin to 15.6 % compared to 11.8 % last year. However, if you adjust that for the Latin-America supply agreements, our gross margin for 2011 actually would have been nearly 17 %. The trading liability is eroding from the spurt of new hires we had in Q3 and Q4, so that combined with better price points for our raw materials. That puts us in a really good spot as we move forward in the start of 2012. As evident by our SG&A dropping to 5.8 % of sales compared to 6.5 % last year, our SG&A structure was leveraged effectively considering all of our U.S. organic growth and the Latin-America acquisition. As I’m sure all of you noticed, some -- the SG&A numbers this quarter, so even with this in approval for the year, there’s a few items I want to point out that were not typical in our standard SG&A. Those are related to the Brea case which you’ll see pointed out as an adjustment to our net income on the press release. That is going to be $2 million the tax effect on the press release is 1.2 million. We have a couple of items there factored in an adjusted net income that were non-cash, and those have to do with the standard TEO charge as well, we’ve got hit with some non-cash expense of about $1.5 million pertaining to discount rates, the declining discount rates on some pensions for a couple of plans that we have in place. We also took a charge for sale of equipment to China for nearly $2 million. So all told -- when you look at these items, step back and look at the big picture, our SG&A structure remained very similar to what it has been in prior quarters, and again it’s something that we’ve been able to leverage very successfully this year. Income from operations jumped up at 9 % for the year, from 3.5 % last year, this is another positive point regarding our cost structure, income improved by 5.5 % on only a 3.9 % improvement in margins. We finished the year with a healthy adjusted net income of 75.5 million, $0.51 per diluted share, up from $0.43 per diluted share last year. Again, I’ll point to you the table, the reconciliation table in our 8K filing to see the adjustments which pertains to our standard CEO contract charge, non-cash convertible debt exchange expense. And then as I mentioned the legal cost associated with the Brea case. Taking a quick look just a quarter over quarter performance, Q4 revenue was up to $403 million from $399 last quarter. As we’ve been stating all along, you see quarters are fairly similar to each other regarding production days because they both are impacted by holidays and our shutdown period. But we are able to grow the business through the additional output of the hiring which been offset about a $4 million hit due to the foreign currency translation charge -- or changes that took place in Latin-America. Good Q4 margin came in, well through to 120 basis points to 14.5 %, and again, we finished the quarter on a strong note with some good pricing and as well the training from the -- training of the new employees as they get more efficient, really puts us in a good position to the start of this year. Going through the balance sheet here quickly. Cash and investments this year is $129 million compared to $240 million last year. We did during the course of the year invest $100 million in M&A, $35 million CapEx which did include the $9 million purchase of the plant in Union City. In 2001, we’ve got about $112 million tied up in operational working capital. This primarily relates to the Latin-America acquisition, not including receivables, and our inventory across the business increasing the growth in sales and raw material cost. Our AR continue to remain strong, so you put all that together, we really see that our working capital should stabilize, and of course are flowing through the cash flow. I do want to point out, we had a $59 million increase in our other assets on our balance sheet. I just want to remind everybody that that pertains to the pre-payment of the Goodyear royalty for seven years in both North and South America, and then we did record some Goodwill in the Latin-America acquisition. And I want to again point out that the royalty expense on our income statement is all non-cash as that was included in the acquisition. Our capital structure remains very well positioned for our growth at a current net leverage of about 1.1 time. If you factor in 2012, that would put us well under one multiple for out leverage ratios. To wrap it up here, we really had a tremendous year with this drive we’ve made in building our company for the future, and we’re definitely off and running hard in 2012 to continue on our effort. So I’d like to now turn it over to your questions.

[Operator instructions] And our first question does come from the line of Ian Zaffino with Oppenheimer.

Very good quarter. Quick question with the price increases. I know with some of you upper cost coming down you have price increases previously what’s your priority to hold to that, and what can we expect the margin benefits on that?

There’s certain accounts that we have contracts with that is spelled out in there. When it goes up, it goes up, when it comes down, it comes down. The only situation that we have, it’s not going to affect us, I do not believe this first quarter because most of that comes from -- it comes as a quarter point, okay? So we will -- all of them and it -- after the first quarter if it stays that way. The reason being, it runs quarter over quarter except of Caterpillar runs every 6 months. So the next quarter we’re okay. So we’ll see what happens. If it bounces back up, if things start coming along, then we don’t have a lot to be concerned with it.

Okay, and then also on the Caterpillar deal, I know there’s $100 million kind of notional amount, what’s the potential to that to kind of outperform, and again, what are the incremental margins associated with that?

Well there’s no question that it has a lot more uptake to it. What we basically did with Caterpillar is -- they wanted another supplier. So we have agreed that minimum percentages, but Caterpillar has the ability to increase that by 50 % as we -- with 6 month notice. So technically, come May, they could notify us to raise it 6 % -- 50 %. If they do, then the percentage go up and stay for the rest of the time of the contract. We’re looking at the Caterpillar situation that it’s very, very good. But the same thing happened when I was up in the oil sands. And we had meetings just a week ago, not too many CEOs showed up in the oil sands in the middle of February. Everybody up there, not only are they pleased with where we’re going and the progress we have made. We have been informed that we will always, be at some kind of business. We can’t -- it’s impossible for us to be able to supply everybody, but what everybody has seen and what happened as I spoke earlier, everybody knows that we’re coming up with the innovations and the service to them. It’s just been a tremendous list not only to myself and all the rest of the guys and women that have -- about -- they’ve come in, but out company as a whole is pretty good. We have an opportunity within the next 18 months to end up with the Earthmover and everything to be exceeding our AG revenues and that was pretty damn impressive. Okay perfect, I just need to clarify on that idea. So thank you very much for today.

And our next question does come from the line of Schon Williams with BB&T Capital Markets.

Maurice, I wondered if you could talk a little bit about you, you mentioned in the press release may be potential for further acquisitions, I wondered if you could maybe just give us an update on where we sit with Goodyear, the Goodyear assets in Europe, and then maybe any other potential targets that you’re looking at?

Well, with Goodyear, it’s supposedly they are in a final talks with the unions over there. Both Paul and Bill Campbell a week ago, were in France. And they’ve made a number of trips since the beginning of the year over there meeting with the French government, meeting with Goodyear and meeting with the union. So I expect it to be that they’ll be successful, and if they’re successful on it, then we’re going to sit down with them and we have to reconstruct some of the agreements, so that’s what I say. I think that it will be hopefully will be completed before the end of the first quarter. Okay, thank you, that’s very helpful. And then I wanted to follow up on a separate matter that maybe given some investors some angst, the tire duty on Chinese imports, possibly into last year -- could you maybe give, maybe an insider’s view on what exactly, how you see that pulling out? It looks like there’s been some new legislation introduced in Congress to kind of solidify that duty, but could you give us an update on where you see the trends there?

And then I wanted to follow up on a separate matter, may be giving some investors some angst, the tire duty on Chinese imports, possibly in flux here, could you maybe give an insider's view on what exactly – on how you see that playing out, it looks like there has been some new legislation introduced in Congress to kind of solidify that duty, but could you give us an update on where you see the trends there?

Well yes, the situation, it’s a real simple situation. The Court -- it’s being appealed right now which I don’t know, I think they have to appeal if for the full Court, the government is appealing it, the Commerce Department I believe, the situation is that what the Court found is the gee whiz guys, Congress never passed anything, referenced a communist country. So, how can you look and try to figure out what duties and how much the government is -- in government businesses which are being subsidized by the government? So, I guess, Congress in their great wisdom of all the lawyers have never ever put anything reference to it. So, what happened is the Commerce Department decided that once you gave China favored nation and is a communist country, well, they're about the same population of India, so we will gauge them how we would gauge China. And according to the court, they can't do that because it's not a free market economy. So, you can only use, by the law, free market economy. So, all those steeled cases [indiscernible] and the paper, and you name it. Every ruling has been done on China then is basically null and void, if the Court stands or Congress passes a bill to include them because when all these trade things were written there was no China. No communist country had favored nation. And that’s what had had happened, and so, who knows. But the other point right is China in reference to the competition and everything, I don’t really see that playing out. You've got an awful lot of trade issues and there's a world of difference. So, I don’t look at it about enough at all. In '08 -- I mean '12 and '13. In fact actually, we’ve been inquired to -- we’re one of the only tire boys shipping tires to China. And so, that's -- I think it’s going to revert. We’ll start pounding them down their throat. So, that’s how I see it going. I don’t know if that answered your question.

Yes. That’s helpful, Maury. And maybe one follow up, if I could. I wonder if you could give us an update on what the labor situation looks like at across your platform. You still got two facilities that are probably pretty key to the expansion, operating without a labor contract and maybe just kind of what your thoughts are there, if you have any angst over that situation?

No. I don’t have any anxiety over the labor situation. Everybody should understand that in Freeport, Illinois and in Bryan, Ohio, those facilities have the highest wages of any factories within that area. So, when we’ve been bringing these new employees in and these other new employees. I mean, when you just put an ad in the local paper and you get thousands in a -- the people who we have hired, were not people that were out of work. It was people -- actually, the majority of them were working. But even our starting wage level and everything else was so much higher than what the wage level they were working at. So, I don’t see that. Plus, I think the Union has been asking us here to being -- a contract. I'm not going to get into negotiations on open line, but I would not be surprised if something did get hammered out in the next few months where we have a contract that none (inaudible) through November 15th of 2015.

And our next question does come from the line of Saul Ludwig with Northcoast Research.

We’re doing great. It’s really encouraging to hear your usual conservative outlook. But what’s on the -- what could go wrong with -- things certainly look great, but there's always a side of -- bad things can happen when you least expect it. So, when you look at sort of a foreign economy one hand and you look at construction markets on the other hand, what are things that could happen that could give the outlook that you have given us? What could go wrong?

Well, the thing that can -- first thing is I don’t believe the foreign economy can go down. And the reason I say this is that if you get out and you go check the big corn -- corn is such a big crop. It's probably the biggest cash crop in America. And when you go out there and you talk, which I have been. We found that a farmer -- the largest farm in Illinois, he farmed his 55,000 acres and 95 % of that has been put in corn. And he used to farm in that land now for four years, so where the yield is 200 bushel an acre. The yield was dropping to 140, you can't continue to plant corn over a corn. You keep throwing chemicals in and never -- but I know this year, he’s out to put 30 % of that land in to soybeans which we've placed different chemicals in that and then rotate that for three years. And the reason being is to double the soil backup. Now when you -- when you think about that he's -- they’re not going to try to do two crops because you take a risk there in the north part of this country. So, he's going to go with two crops. He probably -- and he's going to make money with the soybeans, bigger than he ever made too. But is he going to leave a little cash if corn stays up? Yes. But what that’s going to do is that’s going to shove the corn place as higher too, I believe. The bigger; bigger farming. And we’ve already proven that the Agriculture department has a problem figuring out what’s going on, so there’s nothing [indiscernible]. But if you get out and look, you'll find what they’re doing and we’re riding that same thing. So, like you say, what’s your insurance policy? Well, we hired 12 young engineering guys that are going through actually learning how to build the tire and everything else. Because we’re going to put six in the AG, we’ll put six in the mining, and we might have to in time take that six in the mining and double by on that, so that we can hit the big people. And actually just go right to them to what they should be doing in reference tires and who knows. And nobody knows that better than us. The mining side, the -- is an explosion. Now, I guess you could shutdown all the commodities. I mean that can drop. The cracking that’s going on for gas and everything, they use a lot of smaller construction, and that's mainly just drilling. So, that’s why you’re seeing a pickup in some of the construction. But the underground mining is going great. I really -- maybe a meteorite might hit this, but I’m not going to worry about it.

Okay. Other than meteorites, what are your plans for utilizing Union City during 2012 that will benefit your results or is that going to be a cost as you do whatever you’re going to with Union City? How is Union City work into come the end of the year your results for 2012?

Well, we bought that facility and we’ve -- we don’t want them to have a lot of people there. So, Goodyear -- the mixing facility is there, the countering is there. So -- but they took the lavatory for all the testing. And that equipment we have gone and bought all new. That should be arriving the first part of March. We're in negotiations with some custom mixer where we would lease some of that facility and they would be like a little bit of a joint venture. They would mix, we would get a certain favorable treatment on cost and then we would share on their -- if they use that facility for showing to somebody else, we would share on that. And then we’ve got another group that’s interested in the calendaring and we would do the same situation. So, I've got a lot of plans on that and I expect it to be a -- help us with our goal of sort of growth in the Earthmover business as we go forward.

And our next question does come from the line of Chris Edwards with Jefferies &Company.

Just a quick question on guidance, I guess to start with. You guys didn’t really update informal guidance that you gave us in December, but if I take double-digit growth and adding in triple-digit growth in construction, I'd come out somewhere close to $2 billion. Is that how you guys are thinking about it?

Well, I did say in the guidance. I did tell you that if things keep going, and we could do that -- the higher end was $2 billion. All right? Is the -- is the growth a little stronger right now than what I expected it to be? Yes. Okay. I'll just flat out tell you. The other situation is, as I said earlier, it's a big job to turn around and have triple-digit growth, internal growth. I mean that's really from a manufacturing standpoint. That’s really putting down the gas pedal, all right? So, we have a plan, we’ve got a great team, as I mentioned in there, we’ve strengthened the management, we’re going to continue. I think it can be done, so I've always looked at -- if you read history, it’s -- there was a guy called General Patton and it was impossible for him to get anything, certain spots. That’s what certain people thought. And they got surprised. So, I think we can. So, I don’t think I gave -- we’ll, look at from the first part of June before the half year and if we know we’re just going to blow it out, and we’ll tell you. But I'm going to stick to what I put out in December. I would always (inaudible) it down,

Yes, I understand that. Maybe, kind of, on a related note, maybe can you give us and update on how things are going in South American in both lease licensing and equipment?

Everything is -- South America is doing extremely well, as Paul mentioned. We’ve only been in there nine months. We have gotten molds in, equipment push where I've got the forms for the government, those -- there are people there right now down there with Paul and Bill Campbell and getting everything listed, so that we can start, get it into the government. The government has to review it and decide whether they're going to put a -- what %age if it's all the duty. And we’re real excited about what we’re going to be able to do in South America this next year. And so we just -- but I can’t really just tell you in this state because the Brazilian government does not move real fast, okay? So we’ve got the lawyers and they’re taking care of it. So it’s a lower slower than my pace, okay?

Sounds good. Are you still purchasing materials through Goodyear? Or do you have your own?

No, we have our own radar, okay? We got that too. So I don’t know if we’re buying anything yet or cleaning anything up, but we have our own now so that we can ship out, we can bring, import our own material and everything. So we’re still supplying Goodyear and everything on there has been working real well.

And our next question does come from the line of Larry De Maria with William Blair.

A couple of questions, Paul, you did a good job explaining the SG&A stuff. If we assume that we’ll get back down to normalized like 5 or so percent SG&A, percent of your sales for 2012, is that the number we should think about?

No -- I think just -- 5 to 7. Okay. And the reason being is that we have a lot of products we use outside reps, all right? So I know what we pay. And we have spent everything that we can generally speaking. And so when you turn around and these guys are all trading, but if I end up with 12 guys, one-quarter you might be approaching to seven and then another quarter, you’re pushing the 5. So when you look at it, that’s all from being good, okay? So I’m not to -- I don’t want to -- I know what the big number is when you get up, but that’s how we look at it, okay?

Okay, fair enough. You talked about triple-digit mining, that type of growth, that would imply at least 5600 tires...

At least what?

I think 5600 mining tires this year which you probably could sell a heck of a lot more I guess if you had the capacity up, so the question is, how soon can you get the capacity up and do we assume it just continues to grow throughout the year? Or did we think about that right?

Yes, well the first thing is, is that the -- that tends on the year -- on the contracts we signed, reference our friends at Caterpillar, and reference some big mining companies, most of the contracts have a -- we don’t have to start hitting their numbers for 6 months. Now if we can get some spare tires to go ahead of that, that’s fine, all right? But you can’t just do all of this stuff and crank it out like your turning a light switch out. So what has happened is that this thing start really, really ramping. You’re going to come out of the first quarter with all sorts of records again, but then what’s going to happen is we have got to have Tennessee and a few other things moving second and third quarter or we’re going to be short to an awful lot of people. That’s how it’s going to go.

Right, so you’ll be exiting 12 on most higher run rate obviously -- my entire sense.

It’s the reason he’s going strong we’re going to be exiting in one bad dude, okay?

Okay. And then last question Maury, you mentioned that you may need to reconstruct agreements with regards with your tire in Europe, does that mean that price were changed? Or the price is pretty steady, and then how is the pipeline beyond Goodyear in Europe at this point?

Well the -- when I say we have to reconstruct it, without doing this on the phone and everything else, because everybody is listening on this phone call, so I would say that things will get -- it’ll be more favorable treatment for Titan. All right? And that’s all I can say on that. I mean, there’s a lot of stuff I can’t talk about, so that’s one of them I can’t talk about.

Fair enough, I just wanted to make sure I wasn’t going the other way.

[Operator instructions] And our next question comes from the line of Jim Paris [ph] with Janney Montgomery Scott.

Hi, this is actually Ryan Connors with Janney. I apologize if this was addressed already, but I hopped on the call a few minutes late, but I just wanted to get your take on the past, the additions, not only on your part, but by your competitors as well, for example, this announcement by Firestone building a pretty significant plant down in South Carolina. I mean obviously, the fundamental backdrop is very positive right now, as you say, and everyone concurred with that, but with yourselves and now others adding capacity, can you kind of give us your perspective on the supply and demand equation in the industry in the intermediate term?

Well there’s no one any place in the world who can increase their capacity as fast as Titan. That’s just a pure simple fact. And the reason being, is because of the mixing capacity we picked up from Goodyear acquisition, all right? That’s number one. You’re question now, all these capacity that’s being added in reference to the situation of announcements of everybody -- everybody asks the same question when you’re strong. I don’t sit in their meetings, I don’t have their thinking. But if you construe North America, and you look out, I don’t believe any foreign owned company has been successful when they have acquired an old line unionized facility. And I think that that’s been proven by Continental and proven by Pirelli , both of them ended up buying tire companies, and today, they do not have any of those facilities, they’ve either closed them or sold them, because they could not, there’s a problem when it comes to running unionized facilities. I think the same thing is true with my friends at Goodyear. So I think Bridgestone with all those old players, the old facilities have not really made any money. I mean they didn’t show me the books, but I know a little bit about the cost, so I would assume that the facilities they have in the U.S., when they get that facility built in South America, which is going to be like 2014, that’s where another one of their -- it’s right next to their facility down there that’s non-union. I think what will happen is the other facilities will close. So I don’t think added capacity is what’s going to come on. I think it’s going to be capacity is going to shift from one location to another location, and that’s my -- I think only the Japanese, I think they’ll figure this out four or five years ago when they built great big warehouses in the Midwest what they’re going to do. So that’s what I think is going to happen and we’ll know -- I’ll tell you what I told in international steel workers, I said, guys, I’ll be willing to bet you in 5 years, the only place that will be unionized is rubber workers, they’ll be working for me. All right, so as every place else, we’re not closing because when we sit down with your at the table, we take a hammer, just like you got a hammer. We’re not real sophisticated, we’re going to meet you and here’s what we’re going to do and we run our factories, and that’s a big difference. So we paid for that back in 1998, 4 year strike. So they understand us, and we understand them. And our work is to get good benefits and they get good wages.

And our next question does come from the line of Chris Edwards with Jeffries and Company.

So you got price cost through the year -- rubber came down there a lot at the end of the year, and I just wanted to see you should be seeing some tailwinds now, how long do you think that lasts, and how much do you think it tails off over the course of the year?

Well, the problem you have, and everybody should understand this, that we don’t really have any natural rubber in the U.S. so we import it, okay? But what happened in the world is when oil goes above that $100 mark, it is much economically for the countries that rubber -- also have to grow palm trees to make palm oil. So that’s really why natural rubber used to be in the $0.30 something range. But as soon as you get up pass that a hundred dollar a barrel on oil, they just start cutting down the rubber trees and they plant palm oil trees so they’ll get more money. And the way I sort of saying, you plant out a rubber tree, it takes 5 years before you can tap it. You get to tap it for 5 years, and then it’s -- you got to cut it down, they’ll go plant more. So the situation is that I don’t know. I can’t tell you -- if I knew, I’d just sit there and play the commodity market, and I wouldn’t have to run around and yell at people. So I think you’re going to see the rubber stay up there. It’s still a [indiscernible] -- have I answered your question on that?

And at this time, there are no further questions, I’d like to turn it back for any closing comments.

Well I want to thank everybody and this old rocket ship is still moving, so -- and so with the other boys, so we’ll talk to you all, you have a great winner. Goodbye.

Thank you very much. Ladies and gentlemen, that will conclude the conference for today. We do thank you for your participation. You may now disconnect your lines at this time.