Titan International, Inc. (TWI) Q2 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen welcome to the Titan International Incorporated Second Quarter 2013 Earnings Conference Call. During this session all lines will be muted until the question and answer session portion. (Operator Instructions). Any statements made in the course of the conference call that state the company’s or management’s intentions, hopes, believes, 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 extent to this conference call and any forward-looking statements involve risk and uncertainties that are detailed there in. At this time I’d like to introduce Titan’s Chairman and CEO Maurice Taylor.

Good morning everyone. Welcome to the second quarter. This year has been an interesting year but I think things are starting to show which way everything is going to go. But first let me take a moment and I will make a comment and I’m going to go backwards to the first quarter and the second quarter last year. Any of you that are regulars are here have been with us for long time you know that I’d advice my opinions on a lot of subjects and that a little over a year ago we’ve changed our audit firm because of the number of situations where decisions were made from our outside audit firms which really after effect turned out to be wrong. But any how I want to just last year as you know most of you should know that Titan Europe their big wheel plant in Italy they had an earthquake and there were structural damage done to the columns of the building and of course the government, no one was injured nothing like that we just thank god but the government so they could figure out what, where and how and what should be done with let no one in that plant. Well, Titan Europe made a decision and the decision was to keep their customers supplied with wheels which in that process they went out to their competitors in Europe and they also came to us in Titan U.S. and we supplied them with a lot of rims and make it to centers and etcetera. So, what happened in the fourth quarter after we brought them at the end of October, 1st of November I believe what transpired is that everything that we did reference Titan International our wheel group turned around and because we own…

No, I think that was covering all the segments and areas.

So, we do have no one is been watching we will side, we are running some synergies that we believe will increase our margins there by synchronizing it’s a things we’ll run a little different by how Titan Europe did them and we’re coming through there is a lot of things that we have learned a few things from them and they are learning a lot of things from us. So, that’s what we are trying to go with (this type). So, with that and I’ll turn it over to the numbers there go ahead Paul.

All right. Thanks, Morry. Good morning everyone. Our second quarter delivered a solid performance on revenue. It was offset by some items impacted our bottom line so let me start by breaking down our revenue and then I’ll dive into our earnings a bit further. Second quarter revenue outpaced last quarter’s record to reach $593 million, which is up 29% from $459 million last year really a solid year-over-year increase in the face of an 8% or $38 million decline in price mix and as we have been saying that’s attributable to the falling raw material primarily natural rubber. During the period, our recent acquisitions added about $154 million from Titan Europe that is down over 20% from last year but that is holding in line with our own internal forecast. So, as expected we are seeing performance out of Europe that is as solid and holding up with the expectations that we had set for the year expecting it to be down from last year’s levels. Planet Group out of Australia added ($19) million in revenue during the quarter that business is something that we added in August of last year. Being Australian based they are getting impacted by coal in China and FX those items but so they are off last year’s levels but they are up about $6 million from the first quarter coming out of Australia. In looking at our volumes by area and segment, Latin America Ag continues to move along very strong up 33% volumes this quarter. Another strong performance out of Brazil clearly the macro environment is positive for farm there but we are going to step further with our team there continues to execute very well and another solid performance out of our team in Brazil. North American Ag volumes were up…

Thank you. (Operator Instructions). Our first question today comes from the line of Ian Zaffino with Oppenheimer. Please go ahead. Ian Zaffino – Oppenheimer: Hi, great. Thank you.

Good morning Ian. Ian Zaffino – Oppenheimer: How are you?

Pretty, good, pretty good. Ian Zaffino – Oppenheimer: Good, good. The 25% down you said for the earthmoving sales, how much of that was due to other factors other than base line demand so, is base line demand down 25% or is it down less than that and you had some of these other sort of extend you in circumstances?

No its down because when the – when we got word that the tread was the tread lifting at a sight that we have to supply an awfull lot of tires too, you have to find out why we had made these changes to compounds for cutting all these other changes that within. So you just do not wish to be shipping somebody a $50,000 tire and then have it sale. So we stopped production unitl we could figure this circum out and we have to send because what was driving us badly is we had the same tire at other sites the differnt sites and it was performing well we didn’t have this problem. And then we, so we got people running around the mine sites around the world because we had these tires and we had some in Australia, we had some in South America, we had some in Africa. And then what we finally traced it back to that we had this precure which we found the tire in Chile and we got we took the treader block to tread back and analyze the tread. And the compounders and all of our engineers when they blowed up on a microscope they found that right where the part that was precured and just if you drive down the road you see a tread that comes off thats what it will do if you got a precure action that’s I used to show then from successfuly it’s the shoe the sole that didn’t put the glue there alright and that’s what happens so. Unitl we found that now that’s going and we are ramping it up Campbell was there. We ramped up that facility pretty great last year and it has nothing to do with the order deck it’s…

And Ian one thing I want to clarify about my comments. The 25% 26% decline of volume that I referenced and you’ll see in this financials is attributable to the construction market. So please don’t confuse even though report earthmoving construction together the primary driver behind the volume decrease is related to construction product. And so if you look at the mining tire sales quarter-over-quarter Q2 this year versus Q2 of last year if you were to look at just mining tire sales you would see that is actually up.

Back haul, back haul, back hauls a big volume. They’re in a construction but they’re made the back haul tires are made and report in the mining. You will also get into what you call a 20.5/25 those are all the way up through a 29.5/25 those are all used on your loaders so that you see pushing dirt around the construction side their grader is at 24-inch. All those tires we make the radials all in Bryan for that equipment that business is down that would be called our south side okay. And we put in awful lot of money into new machinery on the south side to take the labor laid out of the equipment okay and in out of the product. So we’re getting our share but that market dropped 40% from where it was you can say we can’t give you the releases I’ll bet they got hit so that it happened at another deck. So that said the biggest thing is the price the pricing a $50,000 tire has dropped to $40,000 so everybody can figure that one out. So you’re going to make the same tire but it’s flat but truthfully the same percentage had dropped your cost dropped, okay. So but at the top numbers dropped in 20 and your cost drops 20 your margins percentage will get locked up by Q2. And that’s a state that we’re in and because I’ve got customers who are buying I’m not too going to cover it by the exact but on some of that big stuff you’re still doing it well on that cost wise and compete with anybody in the world on that so that’s what’s taking place in.

Thank you. We’ll take our next question from the line of Larry DeMaria with William Blair. Larry DeMaria – William Blair: Okay, good morning. Thank you. I just want to understand the topic of the mine tires, you gave me the point that volume is up year-over-year, was it up sequentially? And I guess where do we stand now in terms of production now and then going forward should we expect sequential increases or if the market still on a kind of state reflects in terms of volume. How should we think about that towards the second half of the year? Thanks.

I think the second half of the year our shipments out will increase in the – and what we consider the mining sector. We – I told everybody that well over a year ago we had went through some testing on our 58/63 loader tire. Well what those loader tires there is not – there is a – everybody want some runoff on the trucks but on the loader tire this one coal mine they’ve run they put chains over and they’ve run to a period of approximately $6000 on the front and that’s where all the load all the damage everything goes on the front tires with the loader the rear would just have a steered as they go back we already have we’ve already passed that and we have those tires are moved to the back to back the new ones after now in the front so we are scrambling as you know Larry we have the ability to make different size tires in our moles and that leads us the in search on a 60 59/63 which is a biggest tire today in the world and where we changed that to the 58. So now we’re taking some other moles in fact just next week we’ll have the second one. And we’ve gotten some orders that have come in now that will behind them those are ready to being shipped to big mining companies why is because that tire improves the handling, reduces the cost of the chains and it’s been successful and that’s our – that’s something in the loader industry making a radial tire and that’s where we’re at and I’ve given my proposal to the OEs our French Act Care what they should do and I think everybody is a little bit surprised at it performed as well as it has either myself I’ve gotten it generally this stuff you end up little around for three years getting it going back and go off and running. We have tires that are laid in Australia in the next two weeks as they will go on earthmovers and Cat loaders. So we’re pretty excited about that okay. So as what that answer your question straight up our sales level in the mining sector should be increasing every month as we go forward.

Thank you. We’ll take our next question from the line of Steven Volkman with Jefferies.

Hi, this is actually Tom (inaudible) for Steve. I wonder if you can provide any update on OEMs on the after-market.

As you know there is a – they protected that pretty good I cannot tell you I know but under the confidential I’m not going to mention which may but our VP of Sales with a couple of the OEs they have decided that we’re not going to – they built the inventory we had to go through all that but we will help them on quite a few selections not only in helping them with our tires that we made for them but maybe some of the other people’s tires so that they can move them and without a – taking such a hit too. So there is a lot of it out but what’s happened is that business is still strong. On the mining side because it covers both the farm in North America and the covers the same thing in the mining industry, the mining industry always has an inventory there is no answer I don’t think there is one mining company that has a minimum of six months inventory and thereby the secret of it you can get on operating mines. So that’s a little harder okay we’ve known that they have their way when they want to move somehow. I think they’ve – the situation is that you if they get someone you can buy a tire the price of tires have dropped on the big mining stuff close to 20%. So that’s also driven just prudent on their part if they can get somebody who want to buy a bunch of tires and paying 50,000 a tire it leave them 45 they can replace it right now and above 40, you’ll see that with the competitors too. So we only representing that business probably with a – it’s been running a 100% we’re only representing 10% to 12% so we don’t move that market farm is different though. Did that answer your question, you must check on...

Couple of thanks. Do you think this is going to continue in the second half of the year this trend?

No, I think that trend well I can’t (inaudible) because it has not affected on the mining side okay. But I think the – I think on the farm side by I think it’s pretty well it is pretty well will be gone by the end of August because they’ve been out there I mean that’s what I see there is some tires right now on certain big sizes that’s we’re running probably cane them out to get them out there is some of the just basics that pricing is soft on them so that’s what I see there. The – I think the – I think people thought that the when residential home started coming back everybody got all excited about that. I think that was a big mistake because what actually a certain farmers are doing the same thing they’re running their tires and their running their tires hey they still got tread on them so people running them instead of go and buy a separate they can’t buy it for 5 grants. The problem with that and what’s building on tires are like anything else you take the downside of the tire on a combine we’re on a tractor and you get it running you’re going to get a 3% to 4% savings in fuel anything that (inaudible) second tires that which that they wouldn’t also farmers that they don’t believe you to give to this gentlemen’s but I think we’re and that’s what we’re going to trying to do. So that’s a big savings 3% to 4% even you do the same thing on the loaders and our trucks too.

And that will help you. Can I get a quick follow-up for…

Sure.

Paul, I guess I’m trying to think about Paul you’ve had a number of things here which feel like there is sort of temporary but it sounds clear sort of how many quarters that it was. And so I’m curious does the warranty charge higher did that continue through the second half, how do we think about raw materials in the second half some of these other temporary issues obviously I’m just trying to get some sense of how that model the second half.

Well I got a great thing going Steve and the one I don’t think the warranty that people got big enough warranties right now corporate did take anything that’s possibly that’s my opinion. Number two, since the generation one and the generation two and the excess in generation that remain we turned around and those were all written off to zero. So I got when I sell those the money I collect obviously let that sit there because I could put that back in so I’m not looking at a – any more warranty and I want to grow and throw there if I have to that’s what I’m going to come up with the cash for that so I call it an even steels in there. The other situation is on the materials I was I knew steel I don’t know I mean steel prices have gone down that’s biggest item in the world basis. But then because somebody shut too much down they’ve jumped a little bit everybody got excited about it that I think that the rubber natural rubber now is just been dropping and I appreciate that’s kind of good but I’m not we buy our natural rubber of course out of Indonesia and so they’re shipping in every thing you’ll get stuck with anywhere with three to four months of that stuff. We’re not going out any more in hedging contracts out five year in advance I mean five months in advance is long enough, I stopped that so but I still get hit a little bit on this. The aftermarket you can move you don’t like to move as fast but I rather see the personally I rather see the pricing of materials just keep dropping and then the cost – my cost will drop and I’ll just go get more market share to make it up but that’s what I look it so in fact we have Titan has the equipment in place and everything else so just for own southeast regions that’s what I like to do and I think most of the customers would love to see the price of tires come down too.

Okay. Thank you.

You’re welcome.

We’ll go next to the line of (inaudible).

Good morning Mr. Taylor.

Good morning grandfather. How are you today?

I am doing great. Thank you. I think now your bills were getting very complicated with these operations all over the world and have effects in price rising and warranties one-off just kind of put the big picture to go there. Your sort of gross margin this quarter was 14.6% if you let go what do you think you want the gross margin to get to rather at 16 17 18 whatever, where do you expect it to get to and to get there what are the three most important things that has to happen to get you from where you are to where you’d like to be?

It’s the goal I set everybody knows is 20 points, okay. Now…

You already said. You’re 5 points far away.

I understand. I have certain products, I have certain factors that do it quarter-by-quarter okay. And if you keep your SG&A 7% you turn around and you get the opportunity to streamline your business the exact way you should all right then all of those numbers are attainable. So you ask me I told you the goal, how do I get there. I have to do with all the growth and size there is pluses and there is minus. The thing is you have to turn around and you have to have a good solid management team and we’re sure they all got to be a lot hearing with what I am. Next, is you have to have enough size so that in your sales and marketing area you got a little bit of muscle for both your selling price and your purchasing power. Now what drags us down and you look at it now buying take in Europe they never seen those numbers they did see those numbers when they were just in the real business and we had those factories. But they took a big jump when they bought ITM and nothing say that they bought it and they ended up asking to dust their fannies to keep the baby from choking them when their business going off. But they – they’re number three in the world. The number two in the world is BERCO number one is Cat, BERCO by taking crop. So those still that’s what I’m trying to explain to you, you have to have the power and once you turn around and you have the acquisition I’m going to give you what to sell them by here we had seen in Brazil he was a younger guy and he kept telling him how can you compete against the big boys could you all over the world, well he told me what to do if I get all over the world there is nobody in the world that supplies the products that we do nobody and I’m making it a full 360 you do that you’ll get your 20 points.

Okay. We’ll be waiting.

Well you can’t go you’re older than me. So I expect to be out of this thing and I not too far the future and to have everything what I love so and I can tell him exactly how they got to get it there.

Okay, great Morry. Good to catch up.

Hey stay out of the summer boy. Talk to you later.

We’ll go next to the line of Alex Blanton with Clear Harbor Asset. Alex Blanton – Clear Harbor Asset: Hi, can you hear me?

I hear you Alex. Alex Blanton – Clear Harbor Asset: Okay. Good to be on this call finally. I just want to say that earlier the operator was cutting people off but the last two people we didn’t cut off. So..

It sounds like a big – everybody just tied on me. Alex Blanton – Clear Harbor Asset: Listen, Morry, I just read on the numbers, you said 20% gross margin, was that what you meant. And 7% SG&A assuming current interest cost and 37% tax rate that we expect about $5 this year and 4 if you get to the $4 billion that you’re looking for, is that correct?

You’re running your numbers okay, I’m looking at when I say that 20% I’m looking at as what we look at it as an operating margin okay. So I think that was… Alex Blanton – Clear Harbor Asset: I said the gross margin you were talking about.

I’m looking that as a gross margin you can get there pretty – if you get a good tailwind you can get to that on the big gross okay. I’m even little bit more positive still than what you’re looking at I know like if I take internally we take every factory okay. I have factories that do what we call it a manufacturing process all right and that’s what we look at it and we bring the 7% comes after that okay if that’s what you’re asking me. So that so – okay so we’re both on the same page correct? Alex Blanton – Clear Harbor Asset: Right.

All right, go ahead. Alex Blanton – Clear Harbor Asset: Now, on this Russian acquisition can you maybe disclose the size of it and how much you think?

Well we have not disclosed the size of it, okay but it has been disclosed in the Russian paper and I can repeat what the Russian paper said. The Russian paper came out that the – they’re currently doing a little over $200 million in sales. The Russian paper said it was a little over right around the $100 million deal okay. I have three partners I have two partners beside in this deal of us so it’s three of us. I have the Russian Development Investment Fund which is the government of Russia $10 billion fund they have, this is the baby of let’s just call the President (inaudible). And I have one equity presented and it’s not the Russian development for in I really it’s the only reason we start doing the buyoff 100% take me what if and that’s that in about just 20% because it’s in the Russia but if you’re dealing with the Russian government separately then hey we’re doing to – we got big brother to take your family and we have once going in price steel suffering from both. So that’s the reason we went a 100%, we are the general partner which means we run everything when that really presented because they are the ones that blocked the Russian Development Investment Fund I’ve never heard of them prior. We are the first manufacturing plant that has done this in Russia so when they had the G20 in St. Petersburg back in June we were highlighted there. We are going to for the next three years we can take we can buy them out for a 100% after three years. Alex Blanton – Clear Harbor Asset: You don’t own a 100% there?

No, no. Alex Blanton – Clear Harbor Asset: What percent?

Well we got a good chunk, I got a good chunk laid structure I got it reported off. Alex Blanton – Clear Harbor Asset: Is it going to be consolidated there and it will take it for your interest.

I think it is going to be consolidated is it or is it a positive Paul?

Yeah, yeah Alex it will be fully consolidated and then just back up through the minority JVs. Alex Blanton – Clear Harbor Asset: Got it.

And what just so everybody knows because there are some other acquisitions that we’re doing I got those two big finance boys like two big eagles sitting on each one of our shoulder okay. So anything we buy in the CIS will be owned by their only company that bought this tire plant okay. The only difference going forward because we’re doing all the work they’re just dropping around with some cash like I said with the value you guys drop but we’ll have those we can have a majority of the position (inaudible) so that’s what we did with them. Alex Blanton – Clear Harbor Asset: Thank you. Now Paul you mentioned some adjustments to the $0.24 that were in there but that were yeah I think you said $0.09 for currency?

Yeah, those were not… Alex Blanton – Clear Harbor Asset: And then what’s – what were the others I missed those.

Well the two big they’re not that the official adjustments to our earnings for… Alex Blanton – Clear Harbor Asset: I understand.

Yeah, those were the earthquake in the DCA in the Brazilian VAT the non-adjusted ones were warranty which was $0.10 a share. Alex Blanton – Clear Harbor Asset: Did that was a total warranty or is that was an increase?

Increase. Alex Blanton – Clear Harbor Asset: $0.10?

So yeah $0.10 for that and $0.09 for FX. So I’m trying to give is more of an operational perspective of how the business performed and so… Alex Blanton – Clear Harbor Asset: Exactly.

Yeah so $0.10 for warranty, $0.09 for FX. Alex Blanton – Clear Harbor Asset: So if a warranty goes back to where it was that will add $0.10 that all seem to being equal.

Yeah, yeah that was just the incremental one as yeah. Alex Blanton – Clear Harbor Asset: Currency okay so but, yeah you’ve been closer to what people were estimating in fact that happened.

The overall flavor of the business is strong. Alex Blanton – Clear Harbor Asset: I understand.

People who think that’s strong and we’re – the funny part and I’ll take the blame on the currency I mean, pricing we lost $6 million on the currency because I’m a manufacturer I’m not one that likes to start playing hedges and all this other but the boys that we acquired in Europe because they were betting at me well, hey we better do this and this and this hey, just bring me everything in U.S. dollars so we have some pretty good people there they’re pretty sophisticated and we had some bankers that are pretty sophisticated and call us too. So, I don’t think in the future we’re going to have, we’re not going to be making a lot and on reference to try and use hedging as making money but we’re sure we’re not going to lose. Alex Blanton – Clear Harbor Asset: I only have one more question and that is on this 25% decline in the construction segment and you may have answered this I might have missed this. How much of that is just due to this inventory situation we’re discussing earlier season I mean the one you announced in June that said there were excess inventories of tires, how much of your 25% would do just to that…

No, I don’t if I knew I would tell you, because you see I know what they’re shipping or they’re building okay, and if you know this CAT what are they doing, did they not build them or did they stick them out in the lot. I don’t know… Alex Blanton – Clear Harbor Asset: They have another, they have a problem that backs up to you and their dealers reduced their inventory by $1 billion in the second quarter, and their dealers are expected to reduce inventory by another $1.5 billion to $2 billion in the second half. So, that means that they are producing less than their dealers are selling right now and that affects your sales to them, so it backs up to the supply chain that way and it will be corrected next year you’ll have the reverse they’ll see your sales grow up only $0.5 billion next year just from the ending of the dealer inventory reduction?

Well I don’t disagree with you. Alex Blanton – Clear Harbor Asset: Yeah.

But the problem that there is two things that affect us different than it does that manufacturing the equipment. You see everything you said is correct, except the fact that this when it comes to the tires, the tires what happens is you got the equipment out there and how it’s being run. What happens is the aftermarket is 65% to 70% of the tire business all we set on it. So what I don’t know and I can’t tell you how much of that inventory they had, how big it was over what they got, that they banked up. I’m banking that they already blew that to get their freaking cash okay, may be they didn’t, but the best that I know they have pretty well blown it. So, we will push better in our aftermarket and our aftermarket should start to build back up to offset what they’re doing that’s what I think okay. But I don’t put that the thing on in my numbers because also all standard wheels, it makes a lot on that. Alex Blanton – Clear Harbor Asset: Yeah.

I got to go and make it in some other things. So I mean, I tell my people and I’ve tried to tell that at least I’ll show you how dump that the certain people at certain owners, but are not dump they just don’t think about it. Take John Deere, John Deere’s wheels and there are 8,000, there are 7,000, there are 6,000 series tractors 9,000 Deere makes a hub it’s a ten-ball hub of 13187 it’s standard okay. So why would you, do you ever looked at the amount of money they make in their options, but if you don’t change that wheel then a farmer is not stupid he is thinking about the next tractor, he is going to take that out the set of tools off and he is going to turn around by a new tractor and put the bolts on everything fits. Alex Blanton – Clear Harbor Asset: Yeah.

If you turn around and made a bigger if they spent and it would be better for their machinery if they just change to made the hub on their big stuff a little bit they would have all the new stuff, they would have all that new, they would make so much money. I mean I give CAT, CAT tries to follow on a motive in change at least every three to four years a small change. Well they were smart to small changes tires and wheels that’s where the money is and I’ve been trying to tell them so how do you get the tires done I’m must start making my own hubs my own everything and I’m going to make tires that help the farmers safe field. That’s I don’t know if I answered your question but I tried.

Unfortunately Mr. Blanton’s line disconnected.

Okay.

Larry DeMaria, did you have a follow up to your earlier question? Larry DeMaria – William Blair: Yes thank you. May be I missed it Maurice, but is there a new EBITDA guidance, I don’t know if you said it at the beginning but I missed it?

No, no I said because I have been trying to, I have visited awful lot of a ways. I visited some mines, I’m trying to figure out what they’re going to do if you listen down to phone I’ve told everybody. I’ve talked to some mine people, I’ve been in mines god forsaken places and it is okay. I know you got a freaking inventory how much and I know you move some tires and well they know from a corporate side they moved but as a mine we haven’t and I know they’re just lying right through their teeth okay, because they don’t want anybody to them they don’t want anybody to know what inventory of tires they have okay. That would be like they don’t tell you how much fuel oil they got around either so. So, that’s where it is. The OEs I think personally I think we’re pretty well and may be 80% positive that with us working with them that try to help them on some of their weird scientists that they made us make in a bad when we were trying to get everything out. I think they’re trying to work with us – I feel that’s pretty well going to be flushed they’re going to be flushed out by August the other I don’t know and because I don’t know that it’s pretty hard for me to forecast what in the hell is going on. I knew what Caterpillar told you I probably knew what was going on there how bad they’re going to get hit on the construction side before they even jumped up but that’s so. I think the construction thing is still going to hurt I – but I don’t, it’s not that bigger deal to us. So I am a little nervous if I come out and say can we give you new guidance here is what’s going to be and then two or three things hit then you get all picked off at me but I’m going to try to by August after I close down a couple of deals figure out what, where and how. Larry DeMaria – William Blair: Okay, got it. So, because obviously you said that you expect mining production to increase for you guys throughout the year so there is some base level that you guys are expecting I guess. Is there a number of tires that we should be modeling so just because the where you guys can help us out so we can figure out how to model the earthmoving construction obviously we agree that the construction side would be tough but the mining side is prices down but we’re trying to figure out the volume?

The volume of orders that we have right now it is strong, okay. The thing that I’m trying to do is I can only make so, I got 158/63 mould alright now that tire that’s a motor tire, that tire has done tremendous okay. Now what I’m trying to do is I’m trying to, we found the source and we’re going to make to 73.5 inch wheel and I’m going to make the 59.5 inch and those are for loaders. Those tires will be produced sometime this quarter but then I’ll probably have they’ll run those six months and at various mines if they do everything we think they’ll do then I’ll be behind the 8th ball trying to make those tires. Those tires Larry have margins in them that it’s embarrassing alright. I sold that tire to a mining company for $55,000 and it’s been the best tire they’ve had so I sell the tire for $55,000 and my margins are basically in my sense, in my mind are really obscene. My competitor sold that for $75,000 and they don’t have the margin I have. Do you understand what I am saying? Are you there? Larry DeMaria – William Blair: Yes, no – I hear you okay. So and in first CAT construction and mining goes Maurice the, a lot of their inventory adjustments on the mining side of they probably not going to get their big snapback – you’re source to Caterpillar is mostly construction right than the mining is that you’re talking about as go rig the mine right.

Right, right. Larry DeMaria – William Blair: Okay, yeah…

That combines the tire and wheels in mining. The CAT business that’s down is most of that is construction and I know what the order deck looks like but I’m under confidentialities on that. So, I can’t speak up for CAT and I can’t speak up for Deere I mean major OEs, but I do think that the construction side is just going to lift along I don’t think anything is going to really accept. You go down to South America and the construction side in South America is really, really good. So, at least business from the tire side in our business so that’s where we’re at okay.

Thank you gentlemen, at this time I’ll turn it back over to you for any closing remarks you may have.

No, we’re talked out, we’ll just let this baby move. Everybody have a great summer, long days of August is coming, talk to you all. Thank you, bye, bye.